Novo Nordisk briefly passes LVMH as Europe's most valuable company on Ozempic and Wegovy demand

On Friday, Sept. 1, 2023, Novo Nordisk briefly passed LVMH to become the most valuable listed company in Europe, as demand tied to its diabetes and weight-loss drugs pushed the Danish drugmaker's market capitalization to about $424.7 billion ^[1].

At Friday's close, Novo Nordisk's market value was around $424.7 billion including unlisted stock, according to Refinitiv data and company disclosures of its share count, while French-listed LVMH stood at $420.1 billion ^[1]. LVMH, the world's biggest luxury retailer, had held the top spot since February 2021, when it knocked consumer goods group Nestle off it ^[1]. Reuters described Novo's move to the top as a brief overtaking ^[1].

Novo's shares have risen about 17% since Aug. 8, when the company said a large study showed Wegovy, its semaglutide weight-loss drug, also had a clear cardiovascular benefit ^[1]. That study found Wegovy reduced the risk of a major cardiovascular event such as a stroke by 20% in overweight or obese people with a history of heart disease, more than had been expected ^[1]. Novo shares ended Friday up 2.14%, while LVMH fell 0.8%; LVMH is down 14.2% from an all-time high hit in April, compared with a roughly 2.2% decline in Europe's broader STOXX 600 over the same period ^[1]. Novo's share price has roughly tripled in three years, while LVMH's has doubled ^[1].

Analysts quoted by Reuters tied the shift to product performance. "Novo closing in on LVMH as Europe's biggest market cap stock is a reflection of Novo's recent product success while LVMH's recent trends have been more mixed," said Marcel Stotzel, co-portfolio manager of Fidelity European Fund and Fidelity European Trust, who said both stocks remain key holdings in its funds ^[1]. LVMH has also been hurt by concerns about China's economy. Luxury stocks rallied early in 2023 on hopes of a swift Chinese rebound after COVID-19 restrictions were lifted, but recent data and a property-sector crisis have soured that outlook ^[1]. "There has been a series of weaker than expected data and the Chinese authorities' unwillingness to inject large amounts of stimulus is knocking the outlook for these luxury retailers, which have a large amount of revenue growth coming from China," said City Index market analyst Fiona Cincotta ^[1].

The obesity drug market is expected to reach $100 billion in annual sales within a decade, up from around $6 billion now, according to Barclays ^[1]. Eli Lilly is expected to receive U.S. weight-loss approval for its similar drug Mounjaro, which contains tirzepatide, later this year ^[1]. "The market share should be split relatively equally between Novo Nordisk and Eli Lilly, the two main companies behind obesity treatments," said Axelle Pinon, a member of Carmignac's investment committee ^[1]. Pinon also said the cardiovascular results are "de-risking the forward adoption curve for these drugs, justifying such a market move" ^[1].

Why it matters for patients

Wegovy costs $1,300 a month in the United States ^[1]. Reuters reported that the cardiovascular trial result may help persuade insurers and health authorities to cover the drug for a wider range of patients ^[1]. Whether that happens, and on what timeline, has not been reported.

With Lilly expected to enter the U.S. weight-loss market, patients could eventually have more than one option, and Pinon said market share should be split relatively equally between the two companies ^[1]. How quickly any added supply would reach pharmacies was not reported.

The report also did not say whether Novo's share price or market value would change the list price of Ozempic or Wegovy, or affect insurance coverage decisions.

One analyst noted a knock-on effect for investors: the rally in Novo's share price is likely to boost its weighting in the region-wide STOXX 600 index, which could attract more inflows from passive investors ^[1]. That affects investment funds rather than patients directly.

What happens next

Eli Lilly's expected U.S. approval for weight-loss use of Mounjaro is the next dated milestone mentioned in the report, expected later in 2023 ^[1]. Novo's position at the top of the European market may be short-lived: Reuters described the overtaking as brief, and LVMH's market value remains close behind ^[1]. No date has been reported for the companies' next earnings updates or for any U.S. coverage decision on Wegovy.