NovoNordisk stock falls on Roche-Zealand pact; Jefferies cuts target

Investing.com -- Novo Nordisk (CSE:NOVOb) (NYSE:NVO) shares slumped Wednesday after Roche (SIX:ROG) struck a $5.3 billion deal to acquire rights to an obesity treatment from Denmark’s Zealand Pharma A/S (CSE:ZELA).

The deal signals Roche’s push to challenge industry leaders Novo Nordisk and Eli Lilly (NYSE:LLY) in the rapidly growing obesity drug market.

Novo Nordisk’s U.S.-listed shares slumped 4.5%, while Eli Lilly lost 1.2% as of 10:57 GMT. 

Under the agreement, Roche will pay Zealand $1.65 billion upfront, with additional milestone payments potentially bringing the total to $5.3 billion, subject to the success of late-stage trials and future sales performance.

Zealand is currently conducting mid-stage trials of the drug, petrelintide, in overweight or obese individuals without type 2 diabetes.

Petrelintide is a long-acting amylin analogue, a class of drugs that mimic the hormone amylin, which is released alongside insulin.

While the first generation of obesity treatments largely targeted the gut hormone GLP-1, Novo Nordisk has been developing next-generation therapies that combine GLP-1 with amylin. Its experimental candidates, amycretin and CagriSema, aim to improve weight loss outcomes through a dual mechanism.

However, recent disappointing trial results for CagriSema have weighed on Novo Nordisk’s stock, contributing to a broader investor reassessment of amylin-based therapies.

Jefferies analysts cut their price target on Novo Nordisk’s Denmark-listed shares to DKK450.00 from DKK515.00, citing disappointing findings from its CagriSema REDEFINE 2 trial.

“REDEFINE 2 headlines for CagriSema in obese diabetics further dented belief, with weight loss of 13.7% falling short of our 15+% bar,” the analysts noted.

“We remain cautious near-term given looming Eli Lilly oral GLP-1 headlines, skepticism over uplift from the end of GLP-1 compounding, and potential risks from U.S. price negotiation,” they added.

However, they see Novo’s current valuation as “more reasonable” with potential upside from year-end results of oral semaglutide trials targeting early Alzheimer's disease.

Meanwhile, Zealand’s shares, which had fallen about 30% this year amid skepticism over its amylin approach, surged as much as 45% on the Roche announcement before paring gains.

By 09:57 GMT, the stock was up 24%, while Roche shares climbed more than 4%.