Ozempic may have terrible side effects. Is Novo Nordisk in trouble? | A lot of fools

The diabetes drug Ozempic has been a veritable cash cow for Novo Nordisk (social organization -0.32%). The company’s revenue, profits and stock price have all been in decline for the past few years — and no single drug has contributed more to its performance than Ozempic.

However, several potential headwinds have surfaced that could disrupt Ozempic’s progress. One of them is competition. Novo Nordisk’s long-time enemy in the diabetes market, Eli Lillydeveloped Mounjaro, a diabetes drug whose sales are growing incredibly fast.

Elsewhere, the side effects of Novo Nordisk’s crown drug have come under increased scrutiny, and a recent study suggests Ozempic may have dangerous safety concerns. Let’s take a look at what that could mean for Novo Nordisk.

NVO revenue (quarterly) data by YCharts.

Could Ozempic Cause Suicidal Thoughts?

One of the side effects of Ozempic that has attracted considerable attention is muscle loss. However, an even more dangerous potential drawback that some researchers have warned about is the possibility that Ozempic could increase suicidal thoughts.

A recent study claims to shed more light on this topic. The study examined two drugs in the class of GLP-1 receptor agonists, to which semaglutide, the active ingredient in Ozempic, belongs. The other GLP-1 drug to emerge was liraglutide, a generic name for Victoza and Saxenda, which treat diabetes and obesity, respectively.

Liraglutide was Novo Nordisk’s second discovery. Using a World Health Organization database that tracks suspected side effects from drugs and vaccines, the researchers found that Ozempic was associated with a higher rate of reported suicidal thoughts compared to other drugs. Liraglutide did not appear to be associated with a higher rate of suicidal ideation.

What should investors make of these results? Should You Sell Your Healthcare Stock?

No reason to hit the panic button

Regulators are already aware of a potential link between Ozempic — or at least its active ingredient, semaglutide — and suicidal ideation. Wegovy, an obesity drug that shares this same active ingredient, has a warning for just that in the US

Scientists sometimes learn even more about a treatment and its side effects after years of real-world use. If research shows a strong causal link between Ozempic or Wegovy and suicidal thoughts, it could prompt regulatory action. Perhaps they would add additional warnings or, at worst, take the drug off the market. Either way, that would mean fewer (or no) sales for Novo Nordisk’s biggest growth driver, dragging down revenue, earnings and share price.

But there is no reason to believe that this research will lead to this morbid scenario. Other studies have come to a different conclusion. One published in Naturopathyone of the world’s most respected scientific journals, found that semaglutide had a lower risk of inducing suicidal ideation than other non-GLP-1 antiobesity drugs in real life. This study, unlike the previous one, compared patients based on factors that may influence suicidal behavior, including sex, socioeconomic status, ethnicity, and mental health.

It would take a lot to reverse these results. So for now, investors can continue to focus on how Novo Nordisk is doing. And on that front, there aren’t too many complaints.

Financial performance continues to be strong. In the first half of the year, the company’s net sales increased by 24% year-on-year to 133.4 billion Danish kroner ($19.8 billion). Ozempic’s sales increased by 36% year-on-year, while Wegovy’s increased by 74%. Interestingly, Novo Nordisk continues to lead the GLP-1 market — its share was 56% in May, compared to 54% a year earlier.

Ozempic may win several expanding indications, including in the exciting area of ​​nonalcoholic steatohepatitis, where it is being studied in a Phase 3 trial. Novo Nordisk has many more promising candidates. CagriSema, a next-generation GLP-1 drug, could be another billion-dollar drug. The drugmaker is also looking to diversify, with several applications in various therapeutic areas.

While various challenges to Ozempic will continue to appear, a recent study does not pose too many problems for the drug and its manufacturer. Novo Nordisk should continue to deliver strong financial and stock market performance for the foreseeable future. I believe the stock is still worth buying.