Novo Nordisk A/S had the biggest drop in almost four years, losing about $14.2 billion of market value, after U.S. regulators rejected its new insulin.
The Food and Drug Administration demanded a new study to assess the heart risk of taking Novo’s Tresiba, dealing the Danish company a setback in its contest with Sanofi to dominate the diabetes market. Novo’s listed B shares plunged 13 percent to close at 928.50 kroner in Copenhagen, the most since April 3, 2009.
Novo is unlikely to be able to provide the heart safety data this year or next, the Bagsvaerd, Denmark-based company said. The FDA also demanded that the drugmaker address a warning letter on one of its plants before granting approval.
“It’s not a good day for diabetes patients in the U.S., it’s not a good day for Novo Nordisk and for Novo Nordisk shareholders,” Chief Executive Officer Lars Rebien Soerensen said on a conference call with analysts today. “We will do our utmost to ensure this is solved as expediently as possible.”
Novo, the world’s largest insulin maker, needs Tresiba, also known as degludec, to wrest market share from Paris-based Sanofi’s best-selling diabetes treatment, the Lantus insulin. Novo’s older product, Levemir, has been trailing Lantus, which garnered 4.96 billion euros ($6.6 billion) in sales last year. The long-acting insulins seek to replicate the steady stream of the hormone that healthy people’s bodies produce over 24 hours.
The FDA issued a so-called complete response letter on Feb. 8, the company said in a statement. Novo executives have worked “around the clock” since they were informed of the letter, Chief Scientific Officer Mads Krogsgaard Thomsen said in a telephone interview. During the weekend, Novo executives held discussions with colleagues in both the U.S. and Denmark and reached out to the board to prepare for today’s announcement and decide how to proceed. The company believes Tresiba is safe, he said.
“We were both very surprised and very disappointed,” Thomsen said. Novo said Jan. 31 the company was making progress on talks with the FDA and expected a requirement to study cardiovascular effects only after the medicine reached the market. It expected U.S. approval in the first half.
Diabetes afflicted 366 million people worldwide in 2011, according to the International Diabetes Federation. For pharmaceutical companies, the stakes are high. The market is likely to grow to more than $58 billion in 2018 from $35 billion in 2012, Standard & Poor’s wrote in an October report.
The FDA wants another test because the agency is more risk-averse when dealing with a drug prescribed by general practitioners for mass use, Tim Anderson, an analyst at Sanford C. Bernstein & Co. in New York, said in a report today.
“The last thing FDA wants is to approve a new drug that could potentially run into a safety issue years later, especially when the benefits of degludec over Lantus are only modest,” he wrote. Anderson has an outperform rating on Sanofi.
In the best case, Tresiba may reach the market in the U.S. in 2015, he said. If a full set of data is required, approval may be delayed to 2018, Anderson wrote. It’s “not wholly unrealistic” to assume Tresiba may never be approved if the new trial confirms the drug has heart risks, he said. Sanofi rose 3.4 percent to 71.40 euros in Paris trading.
Tresiba is already approved in the European Union, Japan and Mexico.
“It’s a very significant setback for the product,” Sam Fazeli, an analyst at Bloomberg Industries in London, said in a telephone interview. The U.S. accounts for large portions of sales of diabetes medicines and “the U.S. is where you still have free pricing and bigger margins.”
The FDA last year extended the review period for Tresiba. An advisory panel recommended approval of the product on Nov. 8.
Novo shares returned 25 percent in the past year including reinvested dividends, compared with a 20 percent return for the Bloomberg Europe Pharmaceuticals Index.