Novo Nordisk (NVO) stock dropped more than 15% on Friday following an update on its obesity drug that fell short of expectations.
Headlines from the company’s press release revealed that Novo Nordisk’s CagriSema achieved superior weight loss of 22.7% after 68 weeks. This compares to 11.8% with cagrilintide 2.4 mg, 16.1% with semaglutide 2.4 mg, and 2.3% with a placebo. However, the results did not meet the company’s target of 25% effectiveness set prior to the trials.
CagriSema is a combination of semaglutide and cagrilintide. Semaglutide, a compound similar to the hunger-suppressing hormone GLP-1, is also the primary ingredient in Novo’s anti-obesity drug Wegovy.
While average weight loss with CagriSema was comparable to Eli Lilly’s (LLY) Zepbound treatment, Novo Nordisk had aimed for CagriSema to outperform its competitor. The news boosted Eli Lilly’s stock, which traded higher on Friday in response.
Friday’s decline in Novo Nordisk shares marked the worst one-day drop in more than 20 years, pushing the stock deeper into a bear market.
The company’s price chart had already shown signs of selling pressure, with the 50- and 200-day moving averages trending downward in bearish patterns. Historically, stocks with a declining 50-day trendline have a 67% chance of closing lower on any given day.
In November, NVO shares crossed into a long-term bear market as they fell below their 20-month moving average - a key indicator that distinguishes between long-term bull and bear markets. While shares may find some support at $80, a significant level during 2023, bearish momentum suggests a likely target price of $60 over the next year.
Despite Friday’s rally in Eli Lilly shares, Novo Nordisk’s outlook remains bearish, with long- and intermediate-term trends indicating further downside potential. Investors should prepare for continued weakness as the stock’s bearish setup points to a price target of $60.
