Investors Should Cheer Novo Nordisk Study Results

| About: Novo Nordisk (NVO)


Trial results meet clinically meaningful thresholds.

Novo Nordisk may seek approval for weight loss drug.

Drug can benefit people with or without diabetes.

Novo Nordisk (NYSE:NVO) has been on the fringes of discussion in the prescription anti-obesity space for quite some time now. The company is responsible for the diabetes medicine called Victoza, which carries weight loss as a side effect. This weekend, Novo Nordisk announced results of a Phase III a clinical trial on the attributes of liraglutide 3 mg for weight loss.

The study and development is important for investors in Novo Nordisk, as well as the prescription anti-obesity space as a whole. Vivus (NASDAQ:VVUS) markets the anti-obesity pill Qsymia, and has been selling its drug for about 21 months now. Arena Pharmaceuticals (NASDAQ:ARNA) is responsible for Belviq, a treatment that is approaching 1 year on the market. Orexigen (NASDAQ:OREX), the makers of Contrave, is a few weeks away from a possible approval in the United States.

The Novo Nordisk study was presented for the first time this past weekend at the 23rd Annual Congress of the American Association of Clinical Endocrinologists (AACE). Results indicate that after 56 weeks of treatment, liraglutide 3 mg, in combination with diet and exercise, provided significantly greater weight loss of 8% from baseline, compared to 2.6% with placebo. In conjunction with weight loss, treatment with liraglutide 3 mg significantly reduced waist circumference by -8.19 cm, compared to -3.94 cm with placebo. Furthermore, according to Novo Nordisk, treatment with liraglutide 3 mg improved blood glucose levels, blood pressure and lipids levels.

All treatment groups included a reduced-calorie diet and increased physical activity. The proportion of adults achieving weight loss of 5% or more of their baseline body weight was 64% for liraglutide 3 mg treatment, compared to 27% for placebo. In addition, 33% of adults treated with liraglutide 3 mg achieved weight loss greater than 10% of their baseline body weight, compared to 10% for placebo.

The results of the study demonstrate that the efficacy is as good or better than the three most oft-discussed treatments, two of which are already on the market in the United States. In December 2013, Novo Nordisk submitted a New Drug Application (NDA) to the US Food and Drug Administration (FDA) and a Marketing Authorization Application (MAA) to the European Medicines Agency (EMA) for liraglutide 3 mg for chronic weight management in adults with obesity (BMI = 30 kg/m2) and adults who are overweight (BMI = 27 kg/m2) with co-morbidities, as an adjunct to a reduced-calorie diet and increased physical activity. These applications are under review. In February, Novo Nordisk also announced plans to submit the drug for approval in Mexico.

The prescription anti-obesity space has a lot of potential, based upon the fact that obesity is a major issue with a large percentage of overweight or obese individuals. While weight loss treatments are worth billions, prescription solutions have not yet seen heavy traction in the space. Qsymia from Vivus is having a hard time eclipsing the 11,000 per week prescription rate with almost 2 years on the market. Arena's Belviq is on the cusp of testing the 9,000 weekly script mark, according to IMS Health (or 11,000, according to Symphony Health) as it approaches a year on the market. Liraglutide is a once per-day injection, while Qsymia, Belviq, and Contrave are pills. Novo Nordisk could get a leg up on competitors by gaining approval in Europe. Victoza is already approved there, and the company recently received a positive opinion from regulators on use with type 2 diabetes.

While the prescription anti-obesity space has seen its challenges, there is also headway being made. Insurance companies are beginning to offer anti-obesity benefits in the United States, with about 60% of covered lives now carrying at least some benefit. Another interesting player to watch in the space is Zafgen, with its anti-obesity drug, beloranib, a twice-weekly injection. Unlike the other entrants in the space, beloranib targets fat, rather than targeting appetite. Beloranib is in Phase II and III trials.

The bottom line here is that Novo Nordisk seems to have clinically meaningful results, and appears to be on its way to garnering approvals and entering the market. Investors in Novo can be encouraged with the trial and submission process, but should approach just how meaningful these approvals can be given what appears to be a slow uptake on the part of doctors and consumers as it relates to prescription anti-obesity products. As a well-established pharma player, Novo Nordisk has plenty of other things to be excited about. The anti-obesity space may develop into something more exciting in time, but at the moment, Novo investors are simply on the anti-obesity sidelines, waiting their turn to get into the game.

Disclosure: I am long ARNA. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I have no position in Vivus, Orexigen, or Novo Nordisk