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Failed trials tested Novo's semaglutide in Alzheimer's

patients

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Investors say result disappointing but not a major blow

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Company had described trials as a 'lottery ticket'

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Shares drop as much as 12%

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Analysts say market reaction overblown

By Maggie Fick and Jacob Gronholt-Pedersen

LONDON/COPENHAGEN, Nov 24 (Reuters) - Novo Nordisk's

closely-watched Alzehimer's trials - which failed on

Monday to show it can slow the disease's progression - were

always a long-shot, although they had offered the drugmaker a

potential win after a year of sliding shares and slowing sales.

Analysts and investors said the data setback was a blow to

the embattled Danish drugmaker, but added that a near 10% drop

in its share price, which wiped around $20 billion off its

market value, was sentiment driven and did not alter the

outlook.

Novo had repeatedly cast the Alzheimer's studies as

high-risk, with a senior executive two months ago describing

them as a "lottery ticket", but had also stoked hopes that it

could open a vast new market for GLP-1 medicines in a disease

with no cure.

"In my book, this changes nothing," said Copenhagen-based

investor Lars Hytting at Novo shareholder ArthaScope.

"It could have been the way out of the quicksand Novo has

found itself in. This was the quick, easy way out, but the

lottery ticket turned out to be worthless."

HIGH RISK NATURE OF THE STUDY

Novo said on Monday that two late-stage trials of an older

form of semaglutide - already used by millions for diabetes and

weight loss - in patients with early-stage Alzheimer's disease

failed to meet their main goal of slowing cognitive decline.

Shares plunged as much as 12% in reaction before trimming

losses slightly to trade down 9.2% at 1315 GMT. They hit their

lowest level since July 2021, a month after the company launched

its GLP-1 medicine Wegovy.

Analysts had largely expected the trials to fail. Morgan

Stanley estimated a 75% chance of failure. Barclays ( BCS ) and TD Cowen

assumed zero sales for Alzheimer's treatments in their models

based on their predictions that the trials would fail.

"The company had always been transparent about the high-risk

nature of the Evoke study," said Erik Berg-Johnsen, portfolio

manager at Novo shareholder Storebrand Asset Management.

"We shouldn't expect to see major revisions in estimates."

The potential upside, for treatment of a disease affecting

more than 55 million people globally, would have been

considerable, however, which he said may explain why investors

were quick to punish the stock.

SENTIMENT OVER FUNDAMENTALS?

Several analysts said sentiment - not fundamentals - drove

the selloff. Rothschild & Co Redburn analyst Simon Baker called

the drop a "horribly overdone knee-jerk reaction."

Others noted a positive result might not have reshaped

Novo's competitive position.

Bellevue Asset Management investor Paul Major said a

meaningful benefit from semaglutide in patients who already had

early Alzheimer's would likely have been seen as a positive

effect for the entire GLP-1 drug class, where Novo faces steep

challenges from Lilly and from cheaper copycat versions.

"The share price drop is exacerbated by the fact that many

investors were hesitant to sell or short Novo's stock before

today's news, given the massive Alzheimer opportunity," said

Markus Manns, portfolio manager at Novo shareholder Union

Investment.

"The Alzheimer opportunity was only partly discounted in

Novo's valuation, but the failure is nevertheless

disappointing."