Novo Nordisk A/S ( NVO ) saw its stock crater nearly 20% on Friday, eyeing its worst single-day drop since April 2002, after releasing underwhelming weight-loss trial results for its much-hyped obesity drug, CagriSema.

To put the move in perspective, the only steeper plunge in the Danish pharma giant's history was a 26.2% collapse during the infamous Black Monday crash of October 1987.

Once the poster child of the obesity drug boom, Novo failed to meet the market's sky-high expectations, sparking a $20 billion wipe out in market value.

Here's what happened—and why some analysts believe Wall Street might have overreacted.

Trial Results Fall Short of High Expectations

CagriSema, a combination of cagrilintide and semaglutide, is part of Novo Nordisk's ( NVO ) REDEFINE clinical program, designed to compete in the lucrative obesity drug market.

The REDEFINE 1 Phase 3 trial, which involved 3,417 participants with obesity or overweight conditions, demonstrated a 22.7% weight loss after 68 weeks for patients taking CagriSema.

While impressive compared to the 2.3% weight loss with placebo, the result was slightly below Novo's previously teased goal of a 25% reduction.

By comparison:

CagriSema: 22.7% weight loss

Semaglutide alone: 16.1% weight loss

Cagrilintide alone: 11.8% weight loss

Placebo: 2.3% weight loss

Additionally, 40.4% of patients taking CagriSema lost at least 25% of their body weight, compared to just 16.2% with semaglutide and a negligible 0.9% with placebo.

While the trial data were statistically significant, they fell shy of the hype surrounding Novo's claims that CagriSema could deliver 25% weight loss without added side effects.

Analysts Call The Selloff ‘Overdone’

Despite the sharp decline, several industry insiders believe the market overreacted.

Maurits Pot, founder of Tema ETFs, which manages the GLP-1 Obesity & Cardiometabolic ETF , told Benzinga: "This is the latest major event in the obesity space in what has proven to be a very volatile second half of the year.”

Tema ETFs had already been underweight Novo, holding just a 3.99% stake prior to the REDEFINE 1 results.

Pot has been for long championing the case that the weight-loss market is far from being dominated by a duopoly – Novo Nordisk ( NVO ) and Ely Lilly & Co. .

“This latest readout from Novo today underscores why only betting on NOVO and LLY in the GLP-1 is very risky and has not worked in the second half of 2024,” he stated.

Despite this, he described Novo Nordisk’s sharp selloff as an “overreaction” and told Benzinga that the HRTS fund is taking advantage of Friday’s dip to add more shares.

Goldman Sachs analyst James Quigley offered a similar perspective in a note released Friday.

"While these weight loss data are lower than hoped in the market, we still believe that the product [CagriSema] will be filed and approved by the FDA,” Quigley stated.

The expert sees Novo's market position moving “from one where they had a clearly inferior product in Wegovy to one that is on par with Zepbound in terms of weight loss.”

“We see the share price move as overdone and with CagriSema offering another high efficacy option, it could still protect part of the longer term obesity franchise,” he added.

Goldman maintained a bullish stance on Novo Nordisk ( NVO ), setting a 12-month price target of $148 for the ADR—a potential 75% upside from Friday's market price.

NVO Price Action: Shares of Novo Nordisk ( NVO ) were down 18.5% to $84.25 at the time of publication Friday.

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