What happened
Shares of several major dialysis stocks plunged on Wednesday after Novo Nordisk (NVO 0.84%) indicated one of its diabetes treatments could also be used to treat chronic kidney disease.
Dialysis products and services providers were broadly negative in early trading, including drops of around 19% each as of 12:00 p.m. EDT for DaVita (DVA 0.56%), Outset Medical (OM 0.84%), and Fresenius Medical (FMS -0.54%). Novo Nordisk stock was up around 4% on the news.
So what
In a press release issued after the market closed yesterday, Novo Nordisk announced the decision to stop its kidney outcomes trial FLOW nearly a year earlier than expected. The FLOW trial began in 2019 and was studying the effect of a once-weekly dose of semaglutide versus a placebo in on the progression of renal impairment in 3,500 people with type 2 diabetes and chronic kidney disease.
Semaglutide is the active ingredient in three of Novo Nordisk's products, including weight-loss drug Wegovy and diabetes drugs Ozempic and Rybelsus.
Stopping a trial early might sound like bad news at first glance. But Novo Nordisk said the decision was made after it received positive initial feedback from an independent data monitoring group on the trial's interim results. According to that feedback, semaglutide has already met certain pre-specified efficacy criteria for stopping the trial early.
Now what
This is great news for Novo Nordisk, of course, as it would expand the potential treatment applications for its already wildly successful diabetes and weight loss drugs into a massive incremental total addressable market in kidney disease. According to GlobalData, Ozempic alone should generate at least $12.5 billion in revenue for Novo Nordisk in 2023 -- up 23% YOY -- with its current approved applications.
By the same token, that incremental success could come at the expense of dialysis products and services providers that have benefited from a rise in kidney disease, which can be exacerbated by diabetes and obesity.
For perspective, DaVita's dialysis patient service revenues in the first half of 2023 grew modestly YOY to $5.65 billion, representing more than 96% of its total top line. Fresenius operates a network of over 4,000 dialysis clinics. Outset Medical is still in the early stages of its growth story and has signed agreements with a majority of U.S. midsize dialysis providers to use its Tablo in-home dialysis technology.
To be clear, we won't see an immediate negative impact to dialysis companies' operating results because of this announcement. Rather, Novo Nordisk has initiated the process of stopping the FLOW trial, and it expects to unveil its results early next year. In the meantime, to "protect the integrity of the trial," the company says it will remain "blinded to the results until trial completion."
Over the longer term, however, if Novo Nordisk can indeed use semaglutide to delay the progression of chronic kidney disease, it could mark a massive shift in healthcare industry revenue away from cumbersome dialysis treatment options and toward more palatable pharmaceutical solutions.
