Novo Nordisk shares rose over 5% in morning trade on Friday, ranking among the top gainers on the STOXX index, after investors reacted to trial results from Eli Lilly’s oral obesity drug candidate, orforglipron.
The advance followed a 7% rally on Thursday, driven by data showing that Lilly’s pill resulted in an average 12.4% reduction in body weight.
The outcome fell short of analyst expectations of about 15% and was below the 14.9% weight loss achieved by Novo’s injectable treatment, Wegovy.
The findings also compared unfavourably with Novo’s oral semaglutide, challenging earlier market sentiment that Lilly’s oral approach could outperform Novo’s established products in the obesity drug market.
Analysts say results question long on LLY and short on Novo trade
Per Hansen, an analyst at Nordnet, said Lilly’s trial results delivered a less convincing side-effect profile than anticipated, further weakening its competitive position.
He noted that the sharp swing in Novo’s share price suggested that some investors had been positioned for a different outcome, expecting to benefit from Lilly’s strength and Novo’s potential weakness.
“It seemed like an ‘easy win’ to be ‘long’ LLY and short Novo Nordisk ahead of LLY’s earnings report,” he said, adding that Thursday’s outcome caught many on the wrong side of the trade.
Broker ABG echoed that view, suggesting that investors may now reconsider whether to maintain or reverse positions across the broader obesity treatment sector.
“The share price development over the past year has been so significant that even the 21% relative movement of Novo compared to Lilly pales in comparison to the overall one-year performance,” ABG’s analyst Morten Larsen
Analysts upgrade Novo Nordisk rating
The rally marks a sharp reversal for Novo Nordisk, which had seen its shares slide by 35% over the last week and the start of this week.
The fall was triggered by a combination of factors, including a profit warning, the announcement of a leadership change, and negative investor response to second-quarter earnings.
Analysts at Intron Health said that Novo’s oral semaglutide could benefit from renewed optimism following Lilly’s results.
While orforglipron’s placebo-adjusted weight loss was only about 1% lower than Wegovy’s and slightly behind oral semaglutide, they believe the perception of Novo’s competitive position has improved.
However, they cautioned that the overall size of the obesity market might be smaller than current estimates suggest and called for lower expectations for Novo’s Ozempic diabetes drug and its profit margins.
Even so, Intron upgraded Novo Nordisk to “hold” from “sell.”
Lilly’s prospects remain intact, says Goldman Sachs
Goldman Sachs analyst Asad Haider took a more balanced view on Thursday, arguing that the market had overreacted to Lilly’s trial results.
He pointed out that orforglipron remains commercially attractive, particularly given its scalability in international markets and its manageable side-effect profile.
Haider said that with a 12.4% average weight loss and minimal gastrointestinal issues, Lilly’s pill could appeal to a broad global audience.
He added that the drop in Lilly’s share price appeared to reflect short-term investor sentiment rather than a change in the drug’s long-term potential, predicting that orforglipron would still play a significant role in the future obesity drug market.
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