Novo Nordisk plunges 8% as new weight loss pill faces "counterfeit" just after launch; telemedicine company Hims releases $49 generic drug

Novo Nordisk’s recently launched weight loss pills have yet to establish a foothold, but they have encountered an unexpected market challenge.

On Thursday, February 5th, Novo Nordisk’s stock price plummeted, after telemedicine company Hims & Hers Health introduced a generic version of Novo Nordisk’s Wegovy weight loss tablets, priced at only $49 for the first month and $99 thereafter, significantly lower than Novo Nordisk’s branded drug starting at $149 per month.

Novo Nordisk had hoped to reverse its decline with the new product, but the low-cost generic version launched by the telemedicine company quickly disrupted the market landscape, sparking intense debates over drug patent protection and regulatory frameworks.

Novo Nordisk issued a statement saying that Hims’ actions constitute “illegal large-scale compounding, posing significant risks to patients.” The company stated it will take legal and regulatory action to protect patients, its intellectual property, and the integrity of the U.S. drug approval framework.

Following this news, Thursday’s ADR shares of Novo Nordisk fell over 8%, with competitor Eli Lilly also dropping 7.1%.

Telemedicine companies rush into low-cost market

Hims’ generic tablets pose a threat to Novo Nordisk’s products.

According to Reuters, the generic uses a “different formulation and delivery system,” Hims spokesperson Abby Reisinger said:

The compounded semaglutide tablets offered today are not an essential replica of Wegovy.

Hims defended its product on social platform X, stating that this is not the first time a pharmaceutical company has criticized their business as “dangerous, illegal, or harmful to the market.” The company said:

This narrative is both predictable, outdated, and false.

Hims’ stock surged by 14% in early Thursday trading, then continued to decline, closing down 3.7%. The company previously seized the opportunity to sell low-cost generics during the widespread shortage of Eli Lilly and Novo Nordisk’s weight loss injections.

Although the supply shortage has ended, telemedicine companies should have stopped selling generics, but they have adjusted doses or added ingredients to make the products sufficiently different from the brand-name drugs.

Core Technology Dispute Becomes Focus

The main disagreement between the two sides concerns the drug formulation technology.

Novo Nordisk’s tablets use proprietary technology to protect the active ingredient semaglutide from stomach acid, aiding its absorption. Novo Nordisk CEO Mike Dousdar said during Thursday’s analyst call:

“Without this protection technology, it simply doesn’t work, it just doesn’t work.”

Dousdar stated:

If consumers switch to alternatives, in my view, it’s a waste of $49 because your intestinal enzymes will basically clear it out, and it won’t enter the bloodstream.

Hims claims its tablets also use a formulation that protects the active ingredient from being destroyed during digestion.

The two companies previously had a brief collaboration. Last year, Hims partnered with Novo Nordisk to offer a discounted version of the weight loss injection, but less than two months later, Novo Nordisk abruptly ended the partnership, accusing Hims of using “deceptive marketing” to sell a generic version of Wegovy.

Impact of New Product Launch Setback on Growth Expectations

This controversy has cast a shadow over Novo Nordisk’s originally strong product launch.

According to Jared Holz, healthcare analyst at Mizuho Bank, the tablet is expected to generate between $1.3 billion and $1.35 billion in revenue in its first year.

Novo Nordisk stated that over 170,000 patients had started using the drug within four weeks of its January launch. Analysts had hailed it as one of the most successful drug launches in recent times.

Novo Nordisk is gradually losing its advantage in the highly competitive obesity market, facing not only Eli Lilly’s competition but also telemedicine companies like Hims selling generics.

Analysts expect other new weight loss products to also become targets for generics, including a tablet that Eli Lilly is developing, which the company says could receive regulatory approval as early as April.

This week’s stock performance of Novo Nordisk is set to mark its largest weekly decline since August last year, and the sudden challenge from generics undoubtedly heightens investor concerns about its market position.

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