What happened
Shares of the Danish drugmaker Novo Nordisk (NVO 0.84%) were down by 5.4% on unusually high volume as of 11:50 a.m. ET Thursday morning. The company's shares are moving southward following a better-than-expected 2023 first-quarter earnings report.
So why are Novo's shares dipping after an overall strong Q1 report? The key issue weighing on the drugmaker's shares today is the news that Novo will have to start rationing lower-strength starter doses of the popular weight loss drug Wegovy in the U.S. to meet demand. Despite a second contract manufacturer coming online in April, Novo's management expects this shortage to persist for "some months."
So what
Novo's obesity drug sales surged in the first quarter of 2023, thanks primarily to the rising popularity of Wegovy. In fact, this single drug is responsible for an outsized portion of the company's 41% share price appreciation over the last 12 months.
This supply shortage is bad news for one clear-cut reason: Eli Lilly (LLY 1.19%) is expected to grab a weight-loss indication for its type 2 diabetes medication Mounjaro from the Food and Drug Administration (FDA) later this year. Some analysts believe Mounjaro is a superior weight-loss option than Wegovy, meaning that Novo's top growth product could lose market share in the months ahead.
Now what
Is Novo's stock a buy on this weakness? Although the company sports a well-rounded portfolio of metabolic disease drugs, Eli Lilly's Mounjaro poses a serious threat to its near-term growth prospects. As such, investors may want to take a wait-and-see approach with this top-shelf pharmaceutical company for the time being.
