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It is clear that the obesity market will be huge, with sales expected to reach $150 billion by 2030. But it will also be crowded. The premium valuations of the current duopoly – Novo Nordisk of Denmark and Eli Lilly of the US at 32.5x and 57.6x earnings in 2024, respectively – are based on the fact that their strength will allow them to be at the top to stay ahead of the competition. The Novo Nordisk crash on Friday raises doubts about this.

According to the Danish pharmaceutical company, participants in a late-stage trial for its next-generation weight-loss drug CagriSema, a combination of semaglutide and cagrilintide, lost an average of “only” 22.7 percent of their body weight. This is a wonderful result in every way – except for one thing. Novo Nordisk had aimed for a weight loss of 25 percent. Its shares lost a fifth in the early afternoon, losing 85 billion euros in market capitalization.

At first glance, this seems like a big reaction to a small mistake. This corresponds to more than the entire net present value of CagriSema’s future sales, which Berenberg analysts put at 130 DKr per share or around 75 billion euros.

It is not entirely clear why exactly the drug fell short of expectations. It may be related to dosage, as only 57 percent of patients in the study received the highest amount of the drug. Meanwhile, even with a weight loss of 22.7 percent, CagriSema is slightly ahead of Eli Lilly’s Zepbound, which reduced body weight by 22.5 percent in a recent trial.

Still, the market’s reaction to Novo Nordisk’s failure is logical. If CagriSema had managed to reduce patients’ body weight by a quarter, it would have given the company a clear lead in the next generation of drugs. As things stand, the company has not managed to close the field for upcoming active ingredients, including Eli Lilly’s retatrutide, for which study results are expected in 2026. The US pharmaceutical company’s shares rose in premarket trading.

Broadly speaking, according to IQVIA Analytics, 120 weight loss remedies are being tested by 60 companies, resulting in a crowded pipeline. This will never be a winner-take-all market as different patients have different needs and respond differently to available medications. However, a large part of Novo Nordisk’s valuation rests on the hope that the company has an edge because of its size, expertise and cash flows. This is not a race in which incumbents can afford to lose their footing.

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