Runaway obesity drug demand drives Novo Nordisk profit boost

London/Copenhagen — Novo Nordisk raised its 2024 outlook on Thursday and delivered better-than-expected first-quarter profits as the Danish drugmaker races to boost output of its Wegovy weight-loss drug and fend off competition from rival Eli Lilly.

The group’s shares were down by 2.9% at 10.04am GMT as analysts noted the performance was boosted by one-off factors. Jyske Bank said the beat and upgrade were driven by a one-off US sales adjustment, while underlying growth was a bit weaker than expected.

Novo is the most valuable company in Europe by market capitalisation, worth about €540.4bn before Thursday’s earnings, on the back of Wegovy’s popularity. The shares have risen about 260% since Wegovy’s launch in the US in June 2021.

The company is spending billions to boost its manufacturing capacity to meet runaway demand for the weekly Wegovy injection. It increased the amount of Wegovy for the US market in the first quarter, CEO Lars Fruergaard Jorgensen told a media call.

About 27,000 new patients in the US were starting on the weekly injection each week, Jorgensen said. “This is really a very nice volume ramp, as we were planning for,” he said. That is a more than five-fold increase in the US supply of starter doses since December.

A year ago, Novo began limiting the number of US patients who can start treatment by reducing the supply of the lowest three doses of the appetite-suppressing weekly injection. In January, Novo said it was more than doubling supply of lower strength or “starter” Wegovy doses in the US that month compared with recent ones. Still, shortages in the US persist.

Novo’s growth has been held back by its ability to ramp up production quickly enough to meet demand.

The company is facing fierce competition from US rival Eli Lilly as it rolls out its Zepbound therapy in new markets. It launched in the US in December and in Germany, Poland and Britain this year.

As volume and competition increased, the price of Wegovy came “slightly down” in the first three months of the year, CFO Karsten Munk Knudsen said. He declined to specify by how much.

Novo launched Wegovy on Wednesday in Spain and would launch the injection in Canada on May 6, Knudsen said.

Though Novo was gradually supplying more Wegovy doses to the US, “demand will be higher than supply for quite a period of time”, he said.

In February, the company notched a win in its effort to boost Wegovy when parent Novo Holdings said it would buy Catalent, a manufacturing subcontractor of the product, and sell three fill-finish sites to Novo Nordisk after the deal had been completed.

At that time, Novo Holdings said the deal was expected to complete by end-2024. But earlier this month, Novo Holdings said it had refiled an application to the US Federal Trade Commission for approval of the deal, raising the prospect that it may not be completed on the original timeline.

“Our best estimate is unchanged, that the deal closes towards the end of this year,” Knudsen said.

Novo said it expected sales growth this year of 19%-27% in local currencies, compared to the previously guided range for 18%-26% growth. Operating profit growth this year is now seen at 22%-30% in local currencies, slightly up from its previous forecast of 21%-29%.

The company reported first-quarter earnings before interest and taxation of 31.8-billion Danish crowns, above the 29-billion forecast by analysts in a LSEG poll this week and up 27% from a year ago.

“Considering the ongoing supply constraints, Novo delivered a decent set of numbers,” said Markus Manns, a portfolio manager at Union Investment in Germany and a Novo shareholder. “The guidance raise was only modest, but most people didn’t expect an increase so early in the year,” he said.

Reuters