Novo Nordisk, a long time member of my “regrets” stock list, has become reasonably affordable lately (-48% yoy). Part of the reason being that they currently sit atop a ~$20 billion Ozempic/Wegovy franchise that faces patent expiration in 2031. That’s roughly seven years to replace their blockbuster drug. We revisit them today, since per newly published Lancet data, Novo’s lead replacement candidate—amycretin—just posted some genuinely impressive Phase 1 results. The injectable version delivered 24.3% average weight loss versus 1.1% for placebo, beating both current market leaders (Wegovy at 15% and Lilly’s Zepbound at 22.5%). Even the oral version hit 13.1% weight loss in just 12 weeks, with patients still losing weight when the trial ended.

Amycretin is very elegantly designed: It combines semaglutide (the active ingredient in Ozempic/Wegovy) with amylin, creating what’s essentially a dual-pathway satiety signal. Semaglutide activates GLP-1 receptors to slow gastric emptying and reduce appetite centrally, while amylin works through complementary mechanisms to enhance fullness signals. This way both your stomach and your brain’s “appetite control center” are getting the “stop eating” message simultaneously. One concern raised by Elaine Chen at STAT is that the results of a Phase 1/2 study include unusual findings around dosage. The full text article is behind a paywall unfortunately, so I did not have access. However, looking at the actual data from the study, I am assuming she is referring to Parts C, D, and E, which tested maintenance doses of 20 mg, 5 mg, and 1.25 mg respectively. The weight loss results were:

Part C (20 mg): -22.0% weight loss at 36 weeks
Part D (5 mg): -16.2% weight loss at 28 weeks
Part E (1.25 mg): -9.7% weight loss at 20 weeks

While there is a dose-response relationship, what’s notable is the curves in Figure 3 show relatively similar trajectories during the overlapping time periods. Typically in drug development, researchers would expect clear separation between dose groups (with higher doses producing proportionally greater effects). When weight-loss curves overlap significantly (which they do in this case), it suggests the doses may be producing similar effects despite different drug concentrations. If lower doses produce similar weight loss with potentially fewer side effects, this could favor using the lower, better-tolerated dose. Further, it might indicate that amycretin reaches maximum effect at relatively low doses. This should probably influence how future Phase 3 trials are designed, potentially focusing on the optimal dose rather than the maximum tolerated dose. Given that gastrointestinal side effects were dose-dependent but efficacy curves overlapped, this supports using the lowest effective dose. How that might be a bad thing I have yet to find out.

From a financial perspective, Novo Nordisk’s pipeline is very interesting: Amycretin’s injectable version is currently in Phase 2, suggesting Phase 3 trials around 2026-2027, with potential approval by 2031; basically right as the Ozempic patents expire. But Novo isn’t betting everything on amycretin. They’re running what appears to be a diversified pipeline strategy with multiple shots on goal: NNC-0519 (another next-gen GLP-1), NNC-0662 (details kept confidential), and cagrilintide combinations. This makes sense: you want multiple candidates because the failure rate in drug development makes even the most promising compounds statistically likely to fail. Eli Lilly’s tirzepatide (Mounjaro/Zepbound) works through a different mechanism—GLP-1 plus GIP receptor activation—and appears to be gaining market share. Lilly’s orforglipron, an oral GLP-1 that hit 14.7% weight loss in Phase 2, represents another competitive threat. Judging by LLY’s price development, investors currently seem to think that Lilly is doing a better job at architecting a portfolio than Novo (or at least providing more disclosure about their pipeline). Yet, the overall competitive landscape might actually benefit both companies. The “war” between Novo and Lilly is expanding the overall market for obesity treatments, potentially growing the pie faster than either company is losing share. Also, to analyze the financial impact of the expiring Ozempic patents, we have to look further than just Novo’s research pipeline. Manufacturing these GLP-1 compounds and their delivery devices is “pretty tough.” Complex peptides requiring specialized manufacturing capabilities, plus the injection devices themselves are patent-protected. This creates what we would call a capacity constraint moat in corporate strategy. Novo’s manufacturing capabilities/partnerships and injectable device patents are a key competitive advantage. Even when semaglutide goes generic in 2031, the entire generic pharmaceutical industry would essentially need to coordinate to build sufficient manufacturing capacity to meaningfully dent Novo’s market share. Meanwhile, Novo could potentially defend by lowering prices while maintaining manufacturing advantages in a monopoly-to-oligopoly transition.

The other day I came across Martin Shkreli’s NOVO model. Conservatively, it puts Novo’s fair value around 705 DKK (21% upside from ~585 DKK), while a failure scenario drops valuation to 385 DKK. The range reflects what you’d expect for a large-cap pharmaceutical company;the market has already incorporated most knowable information about pipeline risks and patent timelines. This also underscores the point that manufacturing capabilities and continuous innovation pipelines can potentially maintain quasi-monopolistic positions longer than traditional patent protection would suggest. Shkreli’s analysis suggests Novo Nordisk is reasonably valued with modest upside potential, contingent on successful pipeline execution. Novo Nordisk is at a critical juncture, with substantial franchise value dependent on successful pipeline execution over the next 7-8 years. While the current valuation appears reasonable, the binary nature of drug development success creates both upside potential and significant downside risk.

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