Ozempic could have a terrible side effect. Is Novo Nordisk in trouble?

The diabetes drug Ozempic has been a real cash cow for Novo Nordisk (NYSE: NVO). The company’s revenue, earnings and stock price have all been in decline in recent years — and no drug has contributed more to its performance than Ozempic.

However, various potential headwinds have emerged that could disrupt Ozempic’s progress. One of them is competition. Novo Nordisk’s longtime nemesis in the diabetes market, Eli Lillydeveloped Mounjaro, a diabetes drug whose sales are growing incredibly fast.

Elsewhere, the side effects of Novo Nordisk’s crown jewel have come under increased scrutiny, and a recent study suggests Ozempic may have a dangerous safety problem. Let’s look at what it could mean for Novo Nordisk.

Could Ozempic cause suicidal thoughts?

One of the side effects of Ozempic that has generated quite a bit of attention is muscle loss. However, an even more dangerous potential downside that some researchers have warned about is the possibility that Ozempic may increase suicidal thoughts.

A recent study claims to shed more light on this topic. The study looked at two drugs from the class of GLP-1 receptor agonists, which includes semaglutide, the active ingredient in Ozempic. The other GLP-1 drug featured was liraglutide, the generic name for Victoza and Saxenda, which treat diabetes and obesity, respectively.

Liraglutide was another Novo Nordisk breakthrough. Through a database from the World Health Organization that tracks suspected adverse reactions from drugs and vaccines, researchers found that Ozempic was associated with a higher rate of reported suicidal thoughts compared to other drugs. Liraglutide does not appear to be associated with higher rates of suicidal ideation.

What should investors make of these findings? Should You Sell Healthcare Stock?

No reason to hit the panic button

Regulators are already aware of the potential association between Ozempic — or at least its active ingredient, semaglutide — and suicidal thoughts. Wegovy, an obesity drug that shares the same active ingredient, has a warning for just that in the US

Researchers sometimes learn even more about a therapy and its side effects after years of use in real-life settings. If studies establish a strong causal link between Ozempic or Wegovy and suicidal thoughts, it could prompt regulatory authorities to take action. Perhaps they would add additional warnings or, at worst, take the drug off the market. Either way, it would mean lower (or no) sales for Novo Nordisk’s biggest driver of growth, dragging down revenue, earnings and share price.

The story continues

But there is no reason to believe that this study will lead to that morbid scenario. Other studies have reached different conclusions. One published in Nature’s Medicineone of the most prestigious science journals in the world, found that semaglutide has a below risk of producing suicidal thoughts than other non-GLP-1 anti-obesity drugs in real-world situations. This study, unlike the previous one, compared patients based on factors that may influence suicidal behavior, including gender, socioeconomic status, ethnicity, and mental health.

It would take a lot to reverse these findings. So for now, investors can continue to focus on Novo Nordisk’s performance. And on that note, not much to complain about.

Financial results continue to be strong. In the first half of the year, the company’s net sales rose 24 percent year-on-year to 133.4 billion Danish kroner ($19.8 billion). Ozempic sales were up 36% year-on-year, while Wegovy was up 74%. In particular, Novo Nordisk continues to lead the GLP-1 market — its share was 56% in May, compared to 54% a year earlier.

Ozempic could win more label expansions, including in the exciting area of ​​nonalcoholic steatohepatitis, where it is being investigated in a phase 3 trial. Novo Nordisk has many more promising candidates. CagriSema, a next-generation GLP-1 drug, could be yet another billion-dollar drug. The drugmaker is also looking to diversify, with more programs in a number of therapeutic areas.

While various challenges will continue to arise for Ozempic, the recent study does not pose much of a problem for the drug and its maker. Novo Nordisk should continue to deliver strong financial results and stock market performance for the foreseeable future. I think the stock is still worth buying.

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Prosper Junior Bakiny has no position in any of the shares mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.

Ozempic could have a terrible side effect. Is Novo Nordisk in trouble? was originally published by The Motley Fool