The How, What and When of Semaglutide

Novo Nordisk

At the end of last week, we learned that Denmark based Novo Nordisk A/S (ADR) (NYSE:NVO) had achieved promising results in its once weekly diabetes candidate. The treatment, referred to currently as semaglutide, is the latest in a line of diabetes treatments that have come out of the Novo labs, and – according to the company – is considered critical as far as maintaining a strong lead in the diabetes space is concerned. It’s been awhile since we looked at a phase 3 treatment for a company as big as Novo, but this is not through lack of investment opportunity. While it is true that phase 3 approval would mean a lot more as far as short-term upside potential was concerned for a development stage junior biotech, an approval can translate to some upside momentum even in a company of this size. So, with this said, let’s have a look at the treatment, what it does, how it performed in the latest trials, and what potential impact it might have on Novo’s market capitalization going forward – assuming approval.

So, what is semaglutide all about? Well, it is a modern take on the traditional treatment called Glucagon-like peptide-1 agonists, or more succinctly, GLP-1 analogues. There are a number of already approved GLP-1 analogues already available for the treatment of type II diabetes, including the two most famous, Tanzeum, approved in 2014 and marketed by GlaxoSmithKline (NYSE:GSK) and Trulicity, approved in 2014 and marketed by Eli Lilly (NYSE:LLY). However, Novo’s treatment differs from these two in one key area, which we will look at once we’ve addressed its mechanism of action.

As mentioned, semaglutide is a GLP-1 analogue, which means it is an agonist of the glucagon-like peptide 1 receptor (“GLP1R”). GLP1R is a gene inside the human body expressed in pancreatic cells that – when activated – stimulates what’s called the adenylyl cyclase pathway, which is an enzyme pathway responsible for a number of key regulatory roles in pretty much every cell in the human body. One of these roles is the production of insulin. Semaglutide is an agonist, which means that (unlike inhibitors, which stop genetic expression) it promotes expression, and in this instance, boosts insulin production. An increasing so the production in the human body translates to manageable blood sugar levels, hence its efficacy in treating diabetes. Okay, so where does this treatment have an advantage over those already approved? Well, a number of the currently approved treatments require dosages of every other or every three days throughout the week. This frequent dosage can translate to some pretty nasty side-effects, including (using the example of those mentioned above) nausea, diarrhea, kidney issues and – sometimes – pancreatitis. Novo believes that through reduction of dosage and dosing, it can reduce the side-effects associated with its GLP-1 analogues when compared to those currently available. Further, Novo currently has a GLP-1 treatment on the market – Victoza – that is a once-daily treatment. The new alternative offers even larger benefits over this already approved treatment than it does those currently approved with other companies. So what did we see in the trials? In a phase 3a, we saw an improvement of 1.5% and 1.6% for doses of 0.5 mg and 1.0 mg of semaglutide respectively, in patients with baseline HbA1c reading of 8.1%. HbA1c is a type of hemoglobin they can be used to measure blood glucose levels over a period of time, and in turn, can be used to determine efficacy of a particular diabetes treatment. Further, we saw an associated weight loss with the treatment. From the mean baseline and 90 kg, individuals on the smaller dose lost 3.8 kg and those on the larger dose lost 4.6 kg in weight. This compares for weight loss of an average of 1 kg for placebo patients.

And what can we expect going forward? Well, there is a snag, but one that is not impossible to overcome. Basically, this new treatment is a combination of the one we have already mentioned Victoza, and something called degludec. The latter of these two is not yet approved in the US, although it is approved in Europe under the name Tresiba. Before we see semaglutide approved, we will likely have to see degludec approved. An application is with the FDA at the moment, having been submitted in April, but it could be the end of the year before we get the final go-ahead. Having said this, if we do get a yes, there are currently 30 million people in the US suffering from diabetes Type II, and analysts expect Novo to generate more than $1 billion in revenue from the treatment. For a company generating a little over $12 billion annually, this could be a real blockbuster move forward for Novo, and in turn, any investors looking to take a speculative position of the approval of semaglutide. One to watch, definitely.

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