Why Novo Nordisk stock fell while Eli Lilly and Viking Therapeutics rose today

In the pharmaceutical world, it’s never a good idea for a company to stumble into a hot therapeutic area, especially if it has strong rivals competing in the same segment.

This was the dynamic behind the developer Wegovy and Ozempic Novo Nordiskhis (NYSE: NVO) He stumbles on the stock market on Friday — following his latest news from the lab — and the gains he enjoys that day through the future Viking therapeutics (NASDAQ: VKTX) and pharmaceutical titanium Eli Lilly (NYSE: LLY). Novo Nordisk’s share price fell nearly 6% on the day, while the two winners rose 3.4% and 0.7% respectively.

Side effects reported for the experimental drug

The news from Novo Nordisk that made such an impact was reading from a clinical trial of monlunabant, an experimental treatment it is testing for obesity. In a phase 2a clinical trial involving 243 participants, the drug showed efficacy in producing weight loss with daily doses of 10 milligrams — patients who lost an average of 7.1 kilograms (15.7 pounds ), compared to just 0.7 kilograms (1.5 pounds) with a placebo.

The patients were divided into four groups, one of which was given a placebo. The other three received different doses of the drug, specifically 10 milligrams, 20 milligrams, and 50 milligrams.

However, monlunabant demonstrated some worrisome side effects in the study. Novo Nordisk said the most common of these were gastrointestinal in nature. The severity of the majority was mild to moderate and was dose-dependent. The company added that there were more frequent occurrences of neuropsychiatric side effects such as anxiety and sleep disturbances. Again, these were dose dependent.

While promoting the drug’s potential for weight loss, in its press release on the results, Novo Nordisk acknowledged that “further work is needed to determine the optimal dosage to balance safety and efficacy.”

The company said it plans to move to a phase 2b study to “further investigate the dosing and safety profile of monlunabant over a longer period of time in a global population.”

Weight loss for profit gain

No matter how effective a drug is, if it produces a series of worrisome side effects, it has a pretty slim chance of getting regulatory approval.

So with Novo Nordisk effectively “back to the drawing board” monlunabant news, investors cautiously retreated from the Denmark-based company in favor of Eli Lilly and Viking. The former already has a weight-loss drug approved and on the market, Zepbound (basically its Mounjaro diabetes treatment approved for obesity), while Viking’s weight-loss drug candidate VK2735 produced highly encouraging results in Phase 1 clinical trials and 2.

Of the two, investors should be more excited about Eli Lilly’s prospects in this segment. Not only is Zepbound widely available to qualified patients, it is sold by one of the deepest and wealthiest pharmaceutical companies in the world. Viking’s treatment, as well as the one performed in the lab, still has a long way to go before it can be considered for approval—assuming, of course, that it gets that far.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.

Why Novo Nordisk Stock Fell While Eli Lilly and Viking Therapeutics Soared Today was originally published by The Motley Fool