A shake-up could also be brewing available in the market for GLP-1 weight-reduction plan medication Friday, and it is making itself felt all throughout the sector of corporations promoting (or hoping to promote) semaglutide and associated medication for treating diabetes and shedding weight. As of 11 a.m. ET, shares of Novo Nordisk (NVO -4.60%) are down 4.2%, and Hims & Hers Well being (HIMS -2.40%) inventory is getting walloped for a 5.8% loss. In distinction, shares of Viking Therapeutics (VKTX 4.61%) are up a modest 3.3%.
And why? As CNBC stories at the moment, the Biden administration is utilizing its previous few days in workplace so as to add 15 pharmaceuticals to the checklist of medicines on which Medicare can negotiate costs. And here is the kicker: Three weight reduction medication from Novo Nordisk prime this checklist.
Why Novo Nordisk buyers are nervous at the moment
Taking purpose on the sky-high worth of semaglutide, Medicare plans to barter costs for Novo Nordisk merchandise Ozempic (an injection to regulate diabetes), Wegovy (an injection extra designed for weight reduction), and Rybelsus (a capsule for diabetes). CNBC notes that costs for these medication have been impacted by a mix of excessive demand and low provide, in addition to diverse protection by personal insurance coverage. As soon as negotiated, the costs reimbursed by Medicare would go into impact in 2027.
Commenting on the transfer, Stephen Ubl’s PhRMA pharmaceutical trade lobbying group known as worth negotiations “harmful for thousands and thousands of People who depend on progressive therapies.” However what buyers are extra anxious about is whether or not these negotiations shall be harmful for company income.
Some 2.3 million Medicare enrollees use Ozempic, Wegovy, and Rybelsus mixed, and Medicare spent $14.3 billion shopping for them between November 2023 and October 2024, in keeping with the Facilities for Medicare and Medicaid Providers. That is a giant pile of income for Novo that are actually being put in danger.
Novo could not prefer it, however as CNBC notes, the corporate shall be required to decide on between negotiating its costs decrease, paying an excise tax of 95% of its gross sales on the medication, or not having the medication lined by Medicare and Medicaid in any respect.
Picture supply: Getty Pictures.
What this implies for Hims & Hers and Viking Therapeutics
It is much less apparent why that is making Him & Hers buyers nervous at the moment, or, for that matter, why Viking Therapeutics inventory goes up. None of their medication appear to be implicated within the Medicare worth negotiations, in spite of everything. Along with Ozempic, Wegovy, and Rybelsus, 14 different medication are named as topic to negotiation, however there’s nothing from Hims & Hers or Viking on the checklist.
Doubtlessly, although, buyers may fear that if Medicare is worried with the excessive value of semaglutide particularly, a subsequent spherical of worth negotiations may goal semaglutide compounders like Hims & Hers.
Conversely, Viking inventory could also be getting a lift as a result of, though it really works very similar to semaglutide and targets the identical hormone semaglutide targets, the GLP-1 drug it’s creating (however not but promoting), VK2735, will not be itself technically semaglutide. As a substitute, it is known as tirzepatide. That may very well be a distinction with a distinction and probably take away the Medicare crosshairs from Viking — making its inventory a greater wager than Novo Nordisk going ahead.
Extra on Novo Nordisk
In different information, Novo Nordisk introduced the outcomes from its part 3b STEP UP semaglutide trial at the moment. Particularly, the corporate stated semaglutide 7.2 milligram (mg) injections over a 72-week interval resulted in a mean weight lack of 20.7%, higher than the 17.5% weight reduction achieved in a previous trial of semaglutide 2.4 mg injections.
Novo characterised these outcomes as “superior.” Nonetheless, the outcomes seem to fall wanting the corporate’s final purpose of discovering a drug mixture that may common 25% weight reduction. Taken at the side of the Medicare information, this can be a second cause for buyers to bitter on Novo Nordisk inventory’s prospects at the moment.
That stated, it is price stating that Novo Nordisk inventory is now down an astonishing 44% from its all-time excessive hit again in July. At a price-to-earnings ratio now approaching 28, and with most analysts nonetheless forecasting long-term earnings progress of about 19%, we could also be approaching the purpose the place all of the “dangerous” information shall be “priced in,” and there is nowhere left for Novo Nordisk inventory to go however up.
Wealthy Smith has no place in any of the shares talked about. The Motley Idiot recommends Novo Nordisk and Viking Therapeutics. The Motley Idiot has a disclosure coverage.
