Shares of Novo Nordisk (NVO 0.84%) rose to a new all-time high on Thursday, March 7. The market was responding to encouraging results from a clinical trial with an experimental weight-management drug called amycretin.
Amycretin is an orally available treatment candidate, which could give it a big leg up if it eventually earns approval. Novo Nordisk's Wegovy and Eli Lilly's (LLY 1.19%) Zepbound are racking up billions in annual sales as weekly injectables.
Is Novo Nordisk a buy now? Let's look at the path ahead for amycretin to find out.
Why amycretin is exciting investors
Amycretin acts on the same GLP-1 receptors as Wegovy and Ozempic. It differentiates itself by also acting on amylin receptors in the pancreas.
Previously, Novo Nordisk reported success with CagriSema, a combination of semaglutide, the GLP-1 agonist in Wegovy, plus cagrilintide, a dual amylin and calcitonin receptor agonist. Amycretin is, in a sense, a more streamlined version of CagriSema.
In addition to an easier delivery route, amycretin's ability to reduce weight could make it a top seller. Patients randomized to receive it experienced a 12% placebo-adjusted weight reduction after 12 weeks of treatment. This compares well to Wegovy, the GLP-1 receptor agonist Novo Nordisk sells for weight management. In one of several similar studies that led to its approval, Wegovy helped patients report an 11.1% placebo-adjusted weight reduction after 68 weeks of treatment.
Why it's too early to get excited about amycretin
Investors should be cautious when applying the interesting amycretin trial results that Novo Nordisk recently reported to a global population. The 12% placebo-adjusted weight reduction at 12 weeks came from a phase 1 trial that enrolled just 36 Japanese men who were treated at the same clinic.
While amycretin's weight reduction scores so far are impressive, it doesn't compare so well to Zepbound, a dual GLP-1 and GIP agonist from Eli Lilly. Zepbound reduced weight by a placebo-adjusted 17.8% after 72 weeks in a phase 3 trial that enrolled thousands of obese men and women.
Amycretin is intended to be a long-term treatment for relatively healthy patients. If it's going to succeed in an increasingly competitive space, it needs a pristine safety profile. This could be a stumbling block because we already know that patients who received a 4.5-milligram dose of cagrilintide in a phase 2 trial were more than twice as likely to report nausea compared to patients randomized to receive a placebo.
Novo Nordisk knows how important safety and tolerability are to amycretin's future. Instead of sharing any details, though, management simply said that adverse effects in the phase 1 trial with amycretin were in line with previous trials involving GLP-1 agonists and CagriSema.
When biopharmaceutical companies communicate clinical trial results, what they don't say is often more important than what they do. Investors have to assume the company held back safety and tolerability details from the phase 1 trial because those details were unflattering.
The phase 1 results that Novo Nordisk presented for amycretin justify advancement into larger studies. That said, investors should probably temper their expectations.
Image source: Getty Images.
A buy now?
It's too early to consider amycretin a blockbuster in waiting, but Novo Nordisk doesn't need it to succeed to continue growing overall sales. The company reported total revenue that surged 31% last year, or 36% if you ignore the effects of currency exchange.
The company's lead growth driver, Wegovy, earned approval in 2021 and could still have more than a decade before it loses patent-protected exclusivity.
Unfortunately for investors who missed out on Novo Nordisk's 89% run-up over the past year, expectations are already extremely high. The stock has been trading for more than 40 times forward-looking earnings expectations.
If Novo Nordisk can continue growing total sales by more than 30% annually for a few more years, investors who buy the stock at its present valuation will come out miles ahead. But betting on a pharmaceutical company that already has over $33 billion in annual sales to continue growing so rapidly presents more risk than most investors can tolerate. It's probably best to wait for a more attractive valuation.
