Next-generation weight loss drug Monlunabant from Novo Nordisk shows poor weight loss effects, causing a 5% drop in stock price

Novo Nordisk A/S, a Danish pharmaceutical company, reported on Friday that one of its next-generation weight-loss drugs, monlunabant, showed limited weight loss effects at higher doses and had certain side effects, leading to a decline in the company's stock price on Friday.

A mid-term trial of the drug involving 243 participants showed that compared to a placebo, monlunabant demonstrated statistically significant weight loss effects, but the weight loss effects were limited at higher doses. While no serious adverse events were reported, mild to moderate neuro-psychiatric side effects (mainly anxiety, irritability, and sleep disturbances) were more common compared to the placebo and were dose-dependent.

The company acquired monlunabant last year through an $1.1 billion acquisition of the Canadian biotechnology company Inversago Pharma, contingent on achieving development goals. Analysts believe that this result casts a shadow over Novo Nordisk's efforts to revive this drug. Monlunabant is an experimental compound that targets the type 1 cannabinoid receptor (CB1 receptor). The drug employs a similar approach to rimonabant, an obesity drug that was withdrawn from the European market twenty years ago due to concerns about suicidal ideation.

Following this news, Novo's stock price in the US fell by 5.46% on Friday, closing at $127.51. The stock prices of the US biotechnology companies Skye Bioscience Inc. and Corbus Pharmaceuticals Holdings Inc. also fell by over 45% and 65% respectively, as these companies are developing drugs using similar methods to monlunabant.

Analysts have raised doubts about the commercial viability of this class of drugs, including monlunabant, and the reported side effects are concerning. Additionally, the weight loss effects in the trial lag behind the effects of Eli Lilly & Co.'s competitor drug orforglipron.

At an investor conference in March this year, executives at Novo Nordisk believed that selectively targeting beneficial cannabinoid receptors could be done without causing the same psychiatric side effects. However, Martin Holst Lange, Executive Vice President and Head of Research and Development at Novo Nordisk, stated that today's results indicate that "further work is needed to determine the optimal dose that strikes a balance between safety and efficacy."