Novo Nordisk's (NYSE: NVO) GLP-1 medicines, Ozempic and Wegovy, are bestsellers and household names. Whereas Ozempic is indicated for type 2 diabetes, Wegovy is prescribed for weight loss in the context of obesity. But, if some new information holds true, the company could soon see its presence in both of those markets take a hit.
Here's what was just discovered and why it matters.
This potential side effect needs urgent investigation
All medicines have side effects. Some medicines have side effects that can threaten a patient's life. Even if those side effects are thought to be rare, it behooves drug developers to characterize them and understand how frequently they occur, lest patients suffer. Severe psychiatric side effects are especially important to understand, as changes to a patient's behavior can often affect their health in other ways.
On that note, a new analysis published in the prestigious Journal of the American Medical Association (JAMA) on Aug. 20 suggests that Novo's molecule semaglutide, the active ingredient in its blockbuster drugs Ozempic and Wegovy, may be associated with patients developing suicidal ideation, or thoughts. Per the study, which was conducted using side effect data from a World Health Organization (WHO) database, another drug from the same class of medicines as semaglutide, called liraglutide, did not show as strong of an association, nor did a few other common therapies that treat type 2 diabetes. Taking antidepressants or benzodiazepine-class anti-anxiety medicines did not seem to attenuate the association between semaglutide and suicidal ideation.
Of the 30,527 side-effect reports considered by the researchers, just 107 patients, or 0.35%, met the criteria for suicidal ideation; the median patient developed the symptom after a period of 24 days. About 63% of the patients reported that their symptoms abated after they stopped being treated with semaglutide. In other words, on the basis of the analysis, suicidal ideation appears to be a fairly rare symptom that occurs most frequently within the first month of treatment, and it seems to be reversible in a majority of cases.
What should investors make of this information?
The first thing to appreciate is that these findings contradict research from earlier this year that suggested treatment with semaglutide actually lowered the risk of suicidal ideation. A different study found no association whatsoever.
Furthermore, the Food and Drug Administration (FDA) is already aware of a possible association between GLP-1 drugs and suicidal ideation but, as of late January, has not found any conclusive evidence. Its inquiry is ongoing.
So, the scientific issue here is far from settled. Don't go running to sell your shares of Novo Nordisk.
With that said, it is also now undeniably the case that Ozempic and Wegovy are now at risk of seeing their addressable market, which could be in excess of $100 billion annually by 2030, sharply curtailed if there is further research that convincingly confirms that the problem is real. If regulators insist on pre-existing depression or suicidal ideation being added as contraindications for prescribing these therapies, it will inevitably prevent many thousands or perhaps even millions of new patients from starting treatment.
That would be very bad for Novo Nordisk stock.
Competing medicines may not have the same challenges
There's another potential problem.
Competing medicines in diabetes and obesity care, especially those produced by Eli Lilly, may be found not to lead to suicidal ideation during treatment. That would give Lilly a big and possibly insurmountable advantage in securing market share. This is a very plausible outcome, as the researchers in the JAMA study did not find an association of the symptoms for patients taking liraglutide, the other GLP-1 drug they investigated alongside semaglutide.
Studies need time to be conducted on those other products before there's anything actionable. It's also possible that Lilly's therapies will prove to have the same problem and thus face the same contraction of their addressable market.
Eventually, these issues will be clarified.
Investors should start thinking about how to plan their actions in each of the possible scenarios now. Novo Nordisk is still a stock that's worth buying today because semaglutide will find a huge market even if it's ultimately a bit smaller than what was initially expected. But, if investors start to run for the door when the answers are finally published, the big question will be whether to buy the dip or to jump ship.
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
