Ozempic is a drug for adults with type 2 diabetes that may improve blood sugar levels when used in conjunction with diet and exercise. (Photo by Steve Christo – Corbis/Corbis via Getty Images)
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Novo Nordisk has had a difficult year. The drop in share price prompted the biggest management change in the company’s 100-year history, as investors turned away from the Danish drugmaker and its weight-loss business.
Investors appear to have all but given up on Novo’s ability to turn its progress as a pioneer in GLP-1 drugs into economic profit as the lucrative market attracts new entrants. But scientists say the drug still has potential.
What started as a focus on the drug’s ability to manage weight and blood sugar levels and fight related diseases such as heart disease is now expanding as interest grows in how it also affects the brain.
Semaglutide, or as it is better known, Ozempic and Wegovy, is a GLP-1 receptor agonist originally developed to manage blood sugar levels in diabetics. However, once its appetite-suppressing and weight-loss properties became known, doctors quickly started prescribing it off-label. It is currently approved for anti-obesity purposes and generates billions of dollars in annual profits for its manufacturer, Novo Nordisk.
The medical community is now discovering a growing list of additional benefits with these drugs.
“Wegovy promotes weight loss, but other mechanisms may not be fully understood,” the U.S. Food and Drug Administration said in a statement when it approved the liver disease treatment in August. Semaglutide has also been approved by regulators to reduce the risk of heart attack and stroke in overweight people with cardiovascular disease and to treat chronic kidney disease in people with diabetes.
Meanwhile, competing drugs from U.S. competitors Eli LillyTirzepatide (known as Mounjaro and Zepbound) also targets the GLP-1 hormone and another gut hormone called GIP and is approved to treat moderate to severe obstructive sleep apnea in obese adults.
But the benefits may not end there. As competition intensifies, additional indications are a new frontier for drug developers, along with new formats such as tablets.
GLP-1 and the brain
Observational studies show that because GLP-1 affects the brain’s reward pathways, it appears to quell cravings not only for food, but also for alcohol, tobacco, and recreational drugs. These drugs appear to alter dopamine signals in the brain, potentially reducing cravings and allowing individuals to be more rational when faced with attractive options.
“There is interest in understanding the potential of semaglutide for various brain functions,” Laura Niesenbaum, executive director of the Alzheimer’s Disease Drug Discovery Foundation (ADDF), told CNBC.
“Understanding inflammation and energy expenditure in the brain will be critical to our normal cognitive function,” Niesenbaum said. She added that this link recognizes that it is useful in many different neurological and neuropsychiatric indications where changes or damage to the brain affect mood, behavior and cognition.
Evolving data suggests that semaglutide, made by Eli Lilly, and its competitor tirzepatide may be the first effective “anti-consumption” agents that could potentially treat excessive appetite, obesity, alcohol consumption, nicotine addiction, recreational drug use, and even uncontrolled shopping behavior, researchers at St. Luke’s Mid-America Heart Institute and the University of Missouri found in a study.
Another small randomized clinical trial found that low-dose semaglutide reduced alcohol intake and significantly reduced craving compared with placebo in patients with alcohol use disorder during a nine-week treatment period. The researchers concluded that the results warrant large-scale clinical trials of incretin therapy for alcohol use disorder.
The disappointment of Alzheimer’s disease that wasn’t
Another potential additional benefit of this class of drugs may be how they interact with the dementia process.
Novo disappointed investors in November when it released data from a two-year clinical trial testing whether semaglutide could slow cognitive decline in Alzheimer’s patients.
Hopes were high that the drug might be able to help people suffering from the most common type of dementia, as real-world studies observed that diabetic patients taking semaglutide developed Alzheimer’s disease at lower rates than those not taking it.
However, a late-stage trial failed to meet its main goal, showing that semaglutide did not significantly impact cognition in Alzheimer’s patients. In response to the results, Novo announced that it would cancel the one-year extension of the trial.
But some scientists told CNBC this shouldn’t be seen as a failure. They say it was a well-conducted trial from which the scientific community could learn, even if the results were disappointing.
“As far as the drug is concerned with that particular population, it has only had negative consequences,” said Ivan Koychev, associate professor of neuropsychiatry at Imperial College London.
But Koichev said semaglutide affects Alzheimer’s proteins in the right way, as seen in biomarker measurements. “They affect proteins associated with Alzheimer’s disease and reduce the amount of the protein in the cerebrospinal fluid. This suggests that it is directly interacting with another condition.”
According to Novo, reductions in systemic inflammatory biomarkers were also observed. “It is thought that if this anti-inflammatory effect is introduced early enough in the disease process, it could significantly improve the risk of dementia,” Koychev said.
“The signal has always been in the prevention space, not the treatment space,” he added.
Similarly, Professor Nisenbaum said a useful next step would be to test semaglutide and other GLP-1s early in the course of the disease as preventive therapy.
Novo Nordisk said it was reviewing all the data from the trial but it was too early to speculate further about the impact semaglutide might have on people with dementia.
science and street
Many investors have turned their backs on Novo over the past 18 months as the company’s growth prospects face challenges, despite the fact that the innovations it develops could have a significant impact on public health.
Novo shares are having their worst year since listing on Nasdaq Copenhagen more than 30 years ago. At its peak in mid-2024, the stock was trading at more than DKK 1,000. It currently trades for around 320 kroner.
The company’s stock has fallen 50% since the beginning of the year, due to increased competition from U.S. rival Eli Lilly and from so-called compounding pharmacies that make cheap copycat versions of semaglutide. Adding to the pressure is the company’s failure to convince investors that its pipeline offers significant financial returns amid a wave of hopeful market entrants.
Novo Nordisk stock price since the beginning of the year
The release of Alzheimer’s disease trial data in November sent the stock down 5.8% on the day, even though analysts said it was always unexpected and Novo management itself called it a “lottery.” This highlights a highly uncertain outcome.
Two Alzheimer’s drugs currently on the market, Eli Lilly’s Kisunra and Biogen/Eisai’s Rekenbi, have been shown to slow the progression of Alzheimer’s disease by up to one-third, but they come with the risk of serious side effects.
These drugs have been studied for 15 years, and there have been many negative studies along the way, ADDF’s Niesenbaum said. “With each one, we learned something that improved our understanding of patients in clinical trials and how we measure what’s going on in them.”
“This is definitely a long-term game,” she added, hoping that semaglutide and other new drugs that target risk factors could be used in conjunction with Kisunra and Requemby.
But the market doesn’t see it that way, and there are many reasons why.
First of all, drug development often collides with the faster pace of public markets, as investors’ time horizons are much shorter than the decades-long process that typically takes to bring a drug to market. Adding a new indicator to a drug also takes time, as it needs to be supported by long-term clinical trials.
Second, semaglutide faces important patent expirations in 2031 and 2032, which will give other companies permission to manufacture generic versions of semaglutide.
Analysts at Jefferies said in late November that “we do not see a good argument for the lower bound of the valuation,” noting that Novo is entering a five-year patent expiration period with no real moat.
“While lower prices in the U.S. could stimulate additional volume demand and increase patient retention, we do not believe generics and compounded drugs cannot compete at these prices,” it added, adding that the company’s stock rating is underperform.
Pressure from the Trump administration to lower drug prices for Americans and the threat of higher import taxes have been further headwinds for Novo and many of its peers over the past year.
Goldman Sachs analysts led by James Quigley are a bit more optimistic. “We continue to rate Novo Nordisk at ‘buy’,” the companies said in a memo in late November. “While our short- and medium-term outlook has been significantly revised downward, we continue to believe that there may be some sales opportunity for Novo as the obesity market evolves.”
“While Novo is unlikely to capture top share, we believe there is still an opportunity for Wegovy, CagriSema and Oral Wegovy to deliver more value than the market currently believes, although we acknowledge this will likely take time and evidence of script upside before investors give them confidence,” they added.
