Market Shift: Retail Investors Flock to Novo Nordisk Amid Obesity Drug Setback
A surprising surge in retail investor fund flows into Novo Nordisk has caught attention, as the Danish drugmaker’s underwhelming obesity drug data presented a rare buying opportunity. According to Vanda Research, daily net flows skyrocketed to $15.6 million on Friday, a 32-fold increase from the previous day.
A Rare Dip-Buying Opportunity
Novo Nordisk’s experimental drug, CagriSema, showed promising results, with patients losing 22.7% of their weight. Although this fell short of the anticipated 25%, retail investors saw an attractive entry point. The company competes with Eli Lilly in the burgeoning market for weight-loss treatments, projected to exceed $150 billion in revenue within the next decade.
Retail Investors’ Buying Bias
“Retail investors love to buy dips, especially in popular stocks…and do so, until that doesn’t work anymore,” noted Marco Iachini, senior vice president of research at Vanda. This buying bias was evident as shares of Novo Nordisk plummeted 27% on Friday, erasing over $100 billion in market value. Its U.S.-listed shares tumbled 21% to $81.50, their lowest level since August 2023.
Institutional Investors Take Exit
The retail flows on Friday likely provided an exit for institutional investors. Interestingly, funds from retail investors touched a one-day high of $23.5 million on March 7, following Novo’s amycretin drug study, which showed obese patients losing 13% of their weight.
Healthcare Sector Revival
The success of Novo’s Wegovy and Lilly’s Zepbound weight-loss drugs has revived retail interest in the healthcare sector. “With their GLP-1 product in the market and Eli Lilly being a lot in the news…a lot of retail investors know about Lilly,” said Sel Hardy, vice president of equity research at CFRA. She suggested that a sell-off, like Lilly’s stock dip in October and mid-November, could provide an attractive entry point for retail investors.
Lilly Leads in Retail Flows
Net retail flows into Lilly have outpaced Novo in the second half of 2024, according to Vanda. For Lilly, net retail purchases peaked in August after its weight-loss drug sales surpassed $1 billion for the quarter, prompting a $3 billion forecast increase. However, retail activity in these stocks lags behind tech giants such as Nvidia and Tesla, where activity often reaches the high teens.
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