Novo Preempts Earnings Reveal With Preview Of Wegovy-Driven Growth
Blockbuster Obesity Treatment To Face New Rival This Year
Executive Summary
Novo Nordisk said sales increased 25% in the first quarter, driven by US demand for GLP-1 agonist Wegovy for obesity, and increased its 2023 sales growth guidance from a range of 13%-19% to 24%-30%.
Excitement about the sales potential of GLP-1 agonists for the treatment of obesity is so strong that Novo Nordisk A/S is boasting about the performance of its top-seller in the class, Wegovy (semaglutide), nearly three weeks ahead of its first quarter earnings report scheduled for 4 May. The Danish big pharma announced on 13 April that its total product sales increased 25% in Q1 versus the same period in 2022, largely due to increased US demand for Wegovy, and it now is projecting 24%-30% companywide sales growth for the year, up from prior guidance of 13%-19%.
Novo also said operating profit growth was 28% in the first quarter and the company now expects operating profit growth in 2023 should come in at 28%-34%. The first quarter growth and expected increases for all of 2023 are thanks to Novo’s ability to increase Wegovy manufacturing capacity to keep up with demand, after failing to keep pace with rapidly rising prescription growth for the weight loss drug. (Also see "Novo’s Wegovy Back On Track In Q4 But Broader Supply Issues Remain" - Scrip, 1 Feb, 2023.)
“The sales outlook for 2023 is raised, primarily reflecting Wegovy prescription trends in the first quarter and higher full-year expectations for sales of Wegovy in the US. Furthermore, a second contract manufacturer is now ready to begin production, thereby increasing Wegovy supply capacity,” the company said. “The updated sales outlook also reflects higher full-year expectations for Ozempic sales, mainly in the US, following accelerated volume growth of the GLP-1 class.”
Ozempic, Novo’s semaglutide product approved for type 2 diabetes, generated DKK59.75bn ($8.9bn) in 2022 sales, up 61% from 2021 at constant exchange rates (CER). Wegovy sales totaled DKK16.86bn ($2.5bn) last year, up 84% from the prior year at CER.
Q1 Growth Greater Than Analyst Expectations
Novo’s Q1 sales and 2023 guidance outpaced at least one analyst’s expectations for the quarter and full year.
J.P. Morgan analyst Richard Vosser said in a 3 April Q1 preview note that he expected the company to report 21% sales growth for the quarter on a CER basis, driven by the GLP-1 agonist franchise broadly, and Wegovy and Ozempic specifically. Vosser predicted in the note that Novo would boost its sales growth and operating profit growth ranges to 16%-22%, representing a jump from prior expectations but not as big of a leap as Novo has just announced.
“Following the relaunch of Wegovy in the US, and given the strength of prescriptions (154% year-over-year) as well as a year-over-year net price benefit given that 40% of prescriptions last year in [Q1 2022] benefited [from] promotional offerings, we forecast sales of DKr4.2bn in the US (180% at CER) and DKr4.39bn globally,” he wrote, noting that J.P. Morgan expects Q1 sales of Ozempic and Rybelsus (semaglutide) to increase 59% and 89%, respectively.
BofA Securities analyst Sachin Jain said in a 3 April Q1 preview note that he expected group sales growth of 28% for the quarter but did not indicate if this was on a reported or CER basis.
“We believe a guide increase is highly likely and believe the only cap at this stage is supply visibility (and clearly durability of current scrip trends),” Jain said. “Guide increase may be more conservative than our forecasts and assume 20%-25% (versus existing 13%-19%).”
Wegovy Gains Momentum Before Mounjaro Obesity Approval
Novo’s ramp up in Wegovy production is well-timed given that it may face a powerful competitor before the end of 2023, when Eli Lilly and Company’s GIP/GLP-1 agonist Mounjaro (tirzepatide), on the market for type 2 diabetes, could clear the US Food and Drug Administration for obesity. (Also see "Five-Plus-Five Equals A Focus On Execution At Lilly In 2023" - Scrip, 25 Jan, 2023.) Lilly also has struggled to meet demand for it GLP-1 agonists, including both Mounjaro and its top-selling product Trulicity (dulaglutide), and is focused on bringing more manufacturing capacity online this year and beyond. (Also see "Lilly Focuses On ‘Traditional’ Approval For Donanemab, Increased Mounjaro Production" - Scrip, 2 Feb, 2023.)
“Mounjaro weekly prescriptions have been choppy and Lilly recently noted that it doesn't specify manufacturing capacity levels but: 1) remains focused on building additional fill/finish capacity in North Carolina; and 2) all Mounjaro doses are now available at wholesalers (but the situation is dynamic), but for Trulicity high dose (3mg and 4.5mg) the FDA website continues to show that pharmacies may experience delays in receiving shipments through April,” Morgan Stanley analyst Terence Flynn said in a 10 April note. “Hence, our conclusion is that Lilly's incretin fill/finish capacity is constrained, which is likely contributing to the Mounjaro choppiness (rather than a demand issue).”
Flynn noted that both increased coverage by US payers – Mounjaro was reimbursed by only about 50% of commercial payers as of Lilly’s Q4 2022 earnings report – and upcoming data readouts should help increase uptake of GLP-1 drugs as obesity treatments. Lilly initiated a rolling new drug application submission to the FDA for Mounjaro in obesity in 2022 and will complete the NDA soon based on data from the Phase III SURMOUNT-2 clinical trial, due to read out soon. (Also see "Lilly And Novo Nordisk Shape Up For Obesity Treatment Battle Of The Heavyweights" - Scrip, 6 Apr, 2023.)
Novo expects Wegovy uptake to increase after it reports results from its cardiovascular outcomes trial (CVOT) later this year, CEO Lars Jørgensen said recently, noting that Ozempic – a lower dose of semaglutide than Wegovy – offered a 26% reduction in cardiovascular risk in its CVOT. (Also see "Wegovy CVOT Data Could Pave The Way For Broad Reimbursement, CEO Says" - Scrip, 29 Mar, 2023.)