Obesity Drug Shortages May Soon Be Resolved, Drugmaker Says

(Bloomberg) -- Danish drugmaker Novo Nordisk A/S said it’s catching up with demand for its obesity treatment Wegovy by making more of it in-house, brightening sales growth prospects for the year that were earlier dented by production issues.

After a contract manufacturer stopped filling syringes with Wegovy due to quality concerns in December, the Danish company still can’t quite keep up with demand. However, Novo can supply roughly 20,000 Wegovy doses a week using its own production, getting closer to the prescription rate of about 22,000, Chief Executive Officer Lars Fruergaard Jorgensen said Wednesday.

The shares rose 4.4% in Copenhagen after the company repeated it’s confident the situation will return to normal in the second half. A 60% gain in the stock over the past year has raised the company’s market value above that of Swiss drugmaker Novartis AG.

Novo has said it aims to more than double 2019 obesity drug sales by 2025. Wegovy is a weekly injection launched in June that dampens appetite, helping patients lose about 15% of their body weight. The Danish company also makes the weight-loss medication Saxenda, which was launched in the U.S. in 2015 and is expected to lose patent protection in the coming years. 

Obesity treatments are seen as a key avenue of growth for Novo, known primarily as a diabetes-drug maker. Sales of both weight-loss drugs rose 55% last year.

Operating profit will probably rise 4% to 8% at constant exchange rates this year, slowing from a 13% increase in 2021, the company also said Wednesday. 

More Deals?

In December, Novo bought U.S.-based biotech Dicerna Pharmaceuticals Inc. in a $3.3 billion bid to gain RNA technology that promises to yield new medicines. 

“In the past, Novo Nordisk has been strong in protein engineering, but it’s a relatively narrow technologies platform to stand on for a company of our size,” CEO Fruergaard Jorgensen said in an interview. “So now we’re building additional technology platforms.”

Chief Financial Officer Karsten Munk Knudsen said Novo Nordisk would consider further acquisitions to boost research capabilities or its pipeline, though the company isn’t interested in transformational deals.

The company, which has a market value of about $240 billion, also said it plans to buy back as much as 22 billion kroner ($3.3 billion) of shares.

A U.S. Senate finance committee said last month that it found evidence that drugmakers including Novo raised their insulin prices around the same time, a practice known as shadow pricing, largely to the benefit of pharmaceutical industry middlemen and without significant changes to the medicine itself. Fruergaard Jorgensen said Wednesday there’s no merit to such allegations and that its prices have been decreasing.

The CEO also said he believes a civil investigative demand from the U.S. Department of Justice related to Novo Nordisk’s promotion of other drugs, Ozempic and Rybelsus, has no merit. The company has pushed its products “within the realms” of what’s permissible, he said. 

What Bloomberg Intelligence Says:

Novo Nordisk faces a more challenging operating environment in 2022, yet its outlook could provide at least a low-single-digit boost to consensus sales and operating profit, assuming similar views on currency impact, and the drugmaker is often conservative with its initial guidance. Headwinds include U.S. and China price pressure, while 1H resolution of supply issues in obesity, which underperformed in 4Q, is key. Sales and EPS in 4Q modestly beat, with lower tax offsetting higher operating costs.

Novo’s 2022 Guidance Comforts; All Eyes on Obesity Supply: React

-- Michael Shah, BI pharma analyst

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