Novo Nordisk surges 10% as FDA cracks down on copycat weight-loss drugs
Regulatory action protects patent holders as compounded versions face restrictions after drug shortages declared resolved
Novo Nordisk shares surged 9.9% on Friday, while Eli Lilly climbed 3.7%, after U.S. regulators vowed to crack down on unauthorized versions of their blockbuster weight-loss drugs, delivering a significant victory for the pharmaceutical giants against low-cost competitors.
The rally recouped some of Novo Nordisk's steep losses from earlier in the week, when the Danish healthcare company's stock had plunged nearly 8% after telehealth provider Hims & Hers launched a compounded version of Wegovy priced at just $49—far cheaper than Novo Nordisk's branded medication. Eli Lilly, which sells the competing Zepbound treatment, also saw its shares pressured by the threat of copycat competition.
U.S. Food and Drug Administration Commissioner Marty Makary signaled a shift in regulatory enforcement on Thursday, stating on social media that the agency would take "swift action" against companies illegally marketing copycat weight-loss drugs. Makary emphasized that the FDA cannot verify the quality, safety, or effectiveness of these unapproved medications.
The regulatory move follows the FDA's declaration that shortages of semaglutide and tirzepatide—the active ingredients in Wegovy and Zepbound, respectively—have been resolved. Under federal law, compounding pharmacies are prohibited from mass-producing copies of commercially available FDA-approved drugs once shortages are officially over. This legal framework provides patent holders with powerful protection against generic competition.
"The FDA has consistently warned about the serious safety risks posed by unapproved GLP-1 drugs," according to agency guidance. Regulators have received reports of dosing errors requiring hospitalization, improper storage during shipping, and fraudulent products containing incorrect or harmful ingredients. Some compounded versions use unauthorized salt forms of the active ingredients whose chemical properties remain unknown to regulators.
Novo Nordisk, which commands a $242 billion market capitalization, had accused Hims & Hers of "illegal mass compounding" and deceptive advertising, signaling plans to pursue both legal and regulatory action. Eli Lilly, valued at $992 billion, has similarly opposed the proliferation of compounded versions of its diabetes and obesity treatments.
The regulatory crackdown represents a critical moment for the GLP-1 drug market, which has become one of the most lucrative segments in pharmaceuticals. With branded treatments protected from low-cost competition, both companies stand to maintain pricing power for their flagship weight-loss medications. Analysts have been closely watching the regulatory battle as a key determinant of long-term revenue potential for obesity treatments.
Despite the stock rebound, some analysts remain skeptical about the likelihood of decisive enforcement action from U.S. authorities, noting that the compounding industry has proven resilient to past regulatory challenges. The coming weeks will test whether the FDA's rhetoric translates into meaningful restrictions on the supply of unapproved weight-loss drugs that have proliferated across telehealth platforms and online pharmacies.