Novo continues rally on Lilly's disappointing drug data

Shares of Novo Nordisk NOVOb.CO rise 4% in morning trade to nearly top of STOXX .STOXX with analysts saying it extends gains after disappointing Eli Lilly's LLY.N Orforglipron data

Novo shares surged about 7% on Thursday after Lilly's data showed its oral weight-loss drug candidate helped patients lose 12.4% of their body weight compared to 14.9% weight loss offered by Novo's injectable treatment Wegovy

Nordnet analyst Per Hansen notes that besides showing less weight loss than anticipated, Lilly's pill had a less convincing side-effect profile, challenging prior market assumptions of its superiority

The market reaction suggests some investors may have been caught on the wrong side of their bets, Hansen says

"It seemed like an 'easy win' to be 'long' LLY and short Novo Nordisk ahead of LLY's earnings report," he adds

Broker ABG believes that some investors are beginning to question whether they need to reverse the Lilly/Novo (and other obesity stocks) trade

"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 says

Novo shares suffered significant losses last week and earlier this week, a total of -35%, triggered by profit warning, CEO change announcement, and negative reactions to the company's Q2 report

Shares of Novo's smaller rival Zealand Pharma ZELA.CO rise 2%, after being up 4% on Thursday