Novo Nordisk Gains With FDA Approval of First Oral GLP-1 for Weight Management

Over the last year and a half, Novo Nordisk has faced considerable obstacles that have contributed to a substantial drop in its share price. These challenges include clinical setbacks, financial performances that fell short of expectations, and a decline in market share within its core therapeutic segment. Recently, U.S. regulatory news propelled the company’s stock price up by as much as 8% in a single trading day. This development revolves around a significant FDA approval that could signal a turning point for the pharmaceutical company. Novo Nordisk's business is heavily reliant on its GLP-1 class of products, which have earned approval for treating several conditions including diabetes, obesity, and cardiovascular risk reduction. Among its widely recognized products is Wegovy, an injectable anti-obesity medication administered by a weekly subcutaneous injection. While effective, the injection method poses a psychological hurdle for some patients, leading healthcare companies to pursue oral alternatives, which tend to be more patient-friendly. Until now, Novo Nordisk had Rybelsus, an oral GLP-1 formulation, on the market. However, this product is not indicated for weight management. The recent FDA decision, however, marks a milestone: Novo Nordisk has received approval for an oral version of Wegovy, making it the first oral GLP-1 medication sanctioned for the treatment of obesity in the United States. This regulatory approval opens new opportunities. Oral pills generally tend to attract a broader patient population since they eliminate the aversion to injections. From a production perspective, oral medications are more straightforward and less costly to manufacture at scale compared to injectables. Such factors can lead to broader patient access and potentially better reimbursement arrangements from third-party payers. These dynamics could expand the weight management market considerably. By being the first to market with this oral GLP-1, Novo Nordisk leverages its established brand recognition in the weight management space. This comes at a crucial time as the company has recently been ceding some ground to its key competitor, Eli Lilly. The addition of oral Wegovy offers a strategic tool to regain market share, drive top-line revenue growth, and push back against competitive pressures. However, despite this competitive edge, Eli Lilly poses a notable challenge. The company has submitted a regulatory application for orforglipron, an oral weight loss drug that has demonstrated promising trial results, including sustained weight loss following a switch from injectable therapies. This drug recently received a Commissioner's National Priority Review Voucher from the FDA, which significantly accelerates the review process to one or two months, compared to the normal timeline that can reach up to a year. If all goes smoothly, approval might be imminent by March. It is also important to consider market dynamics beyond regulatory firsts. Novo Nordisk introduced Wegovy more than two years before Eli Lilly entered the market with Zepbound, its weight management therapy. Yet, despite this head start, Eli Lilly’s drug has surpassed Novo Nordisk’s Wegovy in sales figures. This suggests that early market entry does not automatically guarantee dominance. Looking ahead, certain factors could bolster Novo Nordisk's recovery trajectory. The FDA’s approval of oral Wegovy is one such factor. Additionally, the company has secured other significant label expansions for Wegovy, including an indication to treat metabolic dysfunction-associated steatohepatitis—a condition projected to contribute over $1 billion in yearly sales to the medicine’s portfolio. Furthermore, Novo Nordisk has filed for regulatory approval for CagriSema, a next-generation weight loss medication that outperformed semaglutide—the active compound in Wegovy—in clinical trials. Alongside this, the company’s robust pipeline includes multiple candidates in mid and late-stage clinical development. In the context of a rapidly expanding weight management market, Novo Nordisk is positioned to retain leadership. From a valuation standpoint, its shares are currently trading at approximately 13 times forward earnings, a discount relative to the broader healthcare sector average of 18.3 times. Taken together, these factors provide a rational basis for investors considering exposure to this pharmaceutical leader at its present market level.