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Investing.com - The failure of Novo Nordisk’s semaglutide drug to help slow the progression of Alzheimer’s disease represents a "big missed opportunity to transform sentiment" around the stock, according to analysts at Kepler Cheuvreux.
In a note to clients, the analysts including David Evans said they previously thought that the treatment for the brain-wasting illness had "huge theoretical upside in the event" the trials proved to be successful, "combined with close to zero market expectations."
This presented a "good risk/reward despite the evidently high uncertainties and risks to the chances of the readout," they said, but added that "the outcome was a clear negative."
Still, the deep fall in Novo’s share price on Monday seemed to be "greatly excessive compared to what value had ever been included in [its] valuation for Alzheimer’s," the analysts flagged, joining a chorus of other observers who described the decline in the stock has overblown.
An Alzheimer’s drug had never represented more than 5% of Novo’s share price, the Kepler analysts said. As a result, any cuts to consensus forecasts for Novo results on the back of the failed Alzheimer’s trials is likely to be "minimal," they argued.
The comments come after Novo said the trials of an older version of its semaglutide drug, which had been closely-monitored as an indicator of a potentially expanding market for so-called GLP-1 medications beyond weight-loss, had come to an end without showing an ability to slow cognitive decline in thousands of patients suffering from mild forms of Alzheimer’s.
A positive result could have been a boon for Novo, which has been grappling with intensifying competition in obesity and diabetes drugs, a burgeoning, multi-billion dollar segment the Danish group previously dominated. Although acknowledging such a result as a long-shot, Novo and its investors had been hoping the trial could offer another source of revenue growth for the company’s blockbuster Ozempic and Wegovy, which both contain semaglutide.
However, observers will not have to wait long for the next "very significant catalyst" for Novo, the Kepler analysts said. The potential U.S. approval for, and subsequent launch of, the firm’s weight-loss tablet oral semaglutide -- dubbed by the analysts as "Wegovy in a Pill" -- may be coming by the end of 2025, they said.
"This launch is greatly underestimated by consensus in our view, and is Novo’s key near-term chance to turn around the extremely low current market sentiment," the analysts said.