Will Amycretin Be the Next Big Thing for Novo Nordisk?

From Diabetes To Obesity

For a long time, Novo Nordisk was a very successful “narrow” pharmaceutical company, thanks to its razor-sharp focus on diabetes. With the disease an ever-expanding problem worldwide, this was at the core of the company's success story, with its stock price going up 100x between 1991 and 2021.

This all changed with the development and approval of Wegovy (semaglutide) in January 2021. Wegovy was approved for chronic weight management for adult patients with obesity or overweight with at least one weight-related condition.

Source: Wegovy

The new drug was an instant blockbuster, and Novo Nordisk constantly struggled to produce enough to satisfy demand despite repeated increases in production capacity.

This, in turn, caused Novo Nordisk's stock price to more than quadruple between January 2021 and January 2024. However, this might be just the beginning of Novo Nordisk's success story.

Source: Yahoo Finance

Expanding Horizons for Wegovy And Amycretin

Saving Lives With Wegovy

On March 8th, Wegovy received new approval from the FDA for reducing risks of cardiovascular death, stroke, and heart attack in adults with heart disease with obesity or overweight.

Considering how correlated heart diseases are with obesity or excess weight, this would represent a massive addressable market.

Obesity now affects more than 37% of US adults and 22%-30% of other developed countries.

Source: Our World in Data

This approval also lifted a question about Wegovy's true medical efficiency. The demonstrated weight loss alone might not have changed the survival rate from heart disease and other complications of obesity, which could have been a strong limitation in getting doctors to keep prescribing Wegovy to obese patients.

Instead, the double-blind clinical trial brought great results, with almost a fifth fewer major adverse cardiovascular events when taking Wegovy:

Wegovy significantly reduced the risk of major adverse cardiovascular events (cardiovascular death, heart attack, and stroke), which occurred in 6.5% of participants who received Wegovy compared to 8% of participants who received a placebo.

Source: FDA

Being the first semaglutide-based drug approved for heart disease gives Wegovy a strong position ahead of its competitors like Ozempic. The FDA approval will likely be followed by similar approval in the UK, EU, and other regions, considering the strength of the clinical trial data.

And this is maybe not all, with other obesity-related diseases also under investigation, including:

Other studies are currently evaluating the use of semaglutide in treating other conditions. For example, on March 5th, 2024, Novo Nordisk announced that 1mg of injectable semaglutide caused a “24% reduction in the risk of kidney disease-related events in people with type 2 diabetes and chronic kidney disease”. And this could go even further, including:

• Non-alcoholic fatty liver disease
• Alzheimer’s disease
• Sleep apnea
• Polycystic ovary syndrome
• Cancer

The Promises Of Amycretin

At this stage, it is clear that Novo Nordisk is the leader in therapies for diabetes and obesity. This is not an accident but the result of decades of deepening understanding of human metabolism and the biochemistry of metabolic disorders.

This level of understanding of metabolism is now being leveraged to expand the company’s drug portfolio even further.

Novo Nordisk is now testing a new molecule, Amycretin, which targets both GLP-1 (the same target as Wegovy) and amylin, a pancreas hormone controlling hunger. In addition, Amycretin is in the form of a pill instead of an injection like Wegovy.

Initial results for Amycretin are impressive, with a phase I trial of the pill version of Amycretin showing participants lost 13.1% of their weight after 12 weeks, a bigger reduction early on than from Wegovy. The drug was also still taken voluntarily by 80% of patients after 12 weeks, showing that possible side effects were tolerable enough for most patients.

The easier-to-use pill format and the stronger results could make amycretin an even larger commercial success than Wegovy, especially considering its users' high retention rate.

The Path Toward Amycretin Approval

Amycretin is still in the early stages of clinical trials and regulatory approval. Phases 2 and 3 of the clinical trials will likely take many years, with approval expected “this decade.”

“I never commit to timelines but I would be very comfortable to say at the very least within this decade (regarding commercialization of amycretin)”

Martin Holst Lange – Novo Nordisk’s Executive vice president of Development

Source: Reuters

Despite intensifying competition, Novo Nordisk will likely remain the leader of GLP-1 / semaglutide therapy. As a first mover, it is also the first to have received approval for heart disease applications, which is of prime importance to the medical profession beyond weight loss.

It is well known in the pharmaceutical industry that an established drug tends to outperform competitors that arrive later on the market, even if they are equivalent in medical efficiency.

In any case, the obesity therapy market will be an extremely lucrative one, with the likely need to keep taking the treatment to avoid regaining weight.

Over time, the market will likely differentiate according to patient conditions and preference, with some sticking to Wegovy and some looking forward to a non-injectable option like Amycretin.

“When it comes to the efficacy … we want to see differentiated products, and that goes for both the subcutaneous and the oral in the marketplace

And what we had seen so far for amycretin brings us confidence that amycretin, in both oral and subcutaneous, when we see the data, has that potential.”

Martin Holst Lange – Novo Nordisk’s Executive vice president of Development

Source: Fierce Biotech

Novo Nordisk Investment Case And Risks

Novo Nordisk’s R&D Pipeline

Obesity

The investment case for Novo Nordisk stock is rather straightforward. The company is a pioneer in innovative diabetes therapy and further confirms its scientific and medical excellence by being the pioneer in semaglutide / GLP-1 therapies.

This pole position in the race to reduce death from obesity was further consolidated by the FDA approval for cardiovascular disease applications.

Furthermore, the company is not planning to rest on its laurels and let its competitors catch up. Amycretin is a good example of what will come next after Wegovy.

Making GLP-1-based treatment a daily oral pill is also in the works, with Oral Sema Obesity already in phase 3 of clinical trials.

Diabetes

The recent success in the obesity market has somewhat distracted investors from Novo Nordisk's leading role in diabetes therapies. But Novo Nordisk is making great progress here as well. This includes:

• Icodec: an approved long-acting basal insulin analog intended for once-weekly dosing.
• Icosema: A combination of GLP-1 analog semaglutide and insulin icodec intended for once-weekly treatment.
• GELA (Phase 2): an ultrasound non-invasive treatment for type 2 diabetes and obesity (in collaboration with GE)

Others

Obesity and diabetes are the main but not sole focus of the company. Other small molecule and immunotherapies are in the works as well:

• Mim8 (Phase 3): A next generation FVIII mimetic bispecific antibody for subcutaneous prophylaxis of haemophilia A regardless of inhibitor status.
• Ziltivekimab ASCVD (Phase 3): A novel once-monthly monoclonal antibody for atherosclerotic cardiovascular disease (ASCVD) with chronic kidney disease (CKD) and inflammation and heart failure with preserved ejection fraction (HFpEF)
• Multiple phase 1 & 2 clinical trials regarding Parkison’s Disease, MASH (Metabolic dysfunction-associated steatohepatitis), sickle cell disease, thalassemia, MyeloDysplastic Syndromes (MDS), Chronic Kidney Disease (CKD), and cardiovascular diseases.

Valuation Risks

The first ting investors will take into account with Novo Nordisk's stock is that a lot of good news is already priced in the stock. With a 3x move upward since Wegovy's approval, the company has been priced in for perfection.

This is reflected in high valuation multiples like P/E (Price-Earning ratio), price-to-sales, or price-to-free-cash-flow.

Some will say that this still does not even reflect the future sales growth of Wegovy, even less future drugs like Amycretin. And they might be right.

But expectations should be reasonable, with another x10 (and even less x100) move upward unlikely with a company already worth more than half a trillion dollars in market capitalization (a sum higher than the whole GDP of Novo Nordik's home base of Denmark).

Wegovy Risks

Another danger is that Wegovy might not be a perfect miracle drug. The history of the pharmaceutical industry is full of wonder drugs being revealed to carry larger than expected health risks and side effects.

Wegovy's strong potential in reducing obesity-linked death has been the justification for its approval. But investors should stay aware that Wegovy comes with chances of side effects, including very serious ones.

Common side effects include:

• Diarrhea (30%)
• Vomiting (24%)
• Constipation (24%)
• Stomach-area pain (20%)
• Feeling bloated (7%)
• Heartburn (5%)
• Belching or gas (6%)
• Low blood sugar (6%)

Serious side effects also include:

• Allergic Reactions
• Risk of thyroid tumors or thyroid cancer
  • To the point that Wegovy is not recommended if “you or anyone in your family have ever had a type of thyroid cancer called medullary thyroid carcinoma (MTC) or if you have an endocrine system condition called Multiple Endocrine Neoplasia syndrome type 2 (MEN 2)”.
• Acute pancreatitis (pancreas inflammation)
• Gallbladder problems
  • Gallstones (1.6%)
  • Gallbladder inflammation (0.6%).

None of these side effects are news to the FDA, other regulatory agencies, or the medical profession, so they might not threaten the drug's commercial success and continued approval.

Nevertheless, they indicate that semaglutide and other metabolism-altering drugs have a wide range of effects, but not all of them are desirable. New studies might reveal new side effects; for example, the risks of stomach paralysis are a concern.

So would the success story of Wegovy be derailed by an unexpected medical issue, this could severely hurt the company’s stock price.

Conclusion

Novo Nordisk emerges as the big winner of the pharmaceutical industry in the post-pandemic era.

The durable trend of increasing obesity and Wegovy's success in reducing weight and obesity-related deaths make GLP-1 drugs a potential blockbuster category on the scale of statins, a drug class treating another metabolic issue (cholesterol) that created more than $1T in sales in its total history.

Furthermore, the Novo Nordisk R&D pipeline is rich in further improvements for its first cash cow, diabetes therapies, as well as improvements on semaglutide therapies, and other potential novel therapies for other diseases with a large total addressable market (TAM).

This success and promise of future growth already created impressive profits for the company's shareholders. The investment case now rests on the company sticking to its remarkable track record in innovation.

This is a reasonable expectation, as long as investors realize that the 400x past performance is unlikely to be repeated, simply because the company is now very large and likely to comparatively slow down a little on its way to a trillion-dollar market capitalization.