The stock's been all the rage since 2021, when the U.S. Food and Drug Administration first approved its Wegovy as a treatment for obesity. Nevertheless, Novo Nordisk (NYSE: NVO) shares are down to the tune of 7.8% as of 11:48 a.m. ET Wednesday, according to data from S&P Global Market Intelligence.
Blame weight-loss drug Wegovy's disappointing sales during the recently ended second quarter, mostly. This weakness -- along with that of diabetes treatment Ozempic -- prevented the company from meeting analysts' earnings estimates.
Weight loss and diabetes drug sales disappoint
Danish drugmaker Novo Nordisk turned nearly $10 billion in revenue into a per-share profit of $0.66 for the three-month stretch ending in June. Sales improved by 24% year over year; profits, however, fell short of the expected $0.71 per share.
Sales of semaglutide-based Ozempic and Wegovy were particularly disappointing. Numbers from FactSet suggested analyst expectations of $4.38 billion and $1.96 billion, respectively. But even if due to supply constraints, the pharmaceutical company sold only $4.26 billion worth of type 2 diabetes drug Ozempic. Wegovy's sales reached only $1.88 billion during the quarter in question.
Business isn't apt to get any easier in the foreseeable future, either. Although the company raised its revenue guidance slightly for the full year (it's now calling for growth of between 22% and 28%, driving similar but now-lowered profit growth), Novo Nordisk anticipates continued pricing pressure stemming from competitors as well as regulators.
With today's setback, Novo Nordisk shares are now down more than 19% from their June peak.
Too soon to step into Novo Nordisk stock
These quarterly results -- and the stock's response to them -- are forcing investors to ask themselves an uncomfortable question: Has the euphoria behind all the buying since 2021 obscured the inevitability that competitors would eventually start a price war? In a similar vein, Novo Nordisk also disclosed today that the average user of Wegovy uses it for only about six months. It may not be the long-term cash cow it was quite expected to be.
That's not to suggest either drug can't remain a long-term breadwinner for the pharmaceutical company. But between the stark realization that the company's semaglutide business isn't exactly bulletproof and the market's current wobbliness, interested investors might want to hold off before jumping in. If there's not more downside in store, there's at least still a good chance of uncomfortable near-term volatility.
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James Brumley has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
