Novo's quick-selling Victoza threatened by Lilly diabetes hopeful

Novo Nordisk ($NVO) hit a big obstacle on its growth path when the FDA refused to approve its blockbuster hopeful Tresiba. But the Danish drugmaker has continued to chug ahead, partly because of its current blockbuster, Victoza, which continues to rack up impressive sales increases. The drug grew by 35% in the first quarter, in fact.

But now, more trouble is looming, or so say analysts from Bank of America Merrill Lynch. The market watchers cut their recommendation on Novo shares to "neutral" from "buy," citing data coming at the American Diabetes Association meeting. The worry: that Eli Lilly's ($LLY) experimental drug dulaglutide will prove "a real threat" to Victoza sales, Bloomberg reports.

Like Victoza, Lilly's dulaglutide is a GLP-1 drug, designed to stimulate insulin production to regulate blood sugar. Sanofi ($SNY) recently won regulatory approval for its own GLP-1 drug, Lyxumia. So, Victoza already has new head-to-head competition in that class, and Lilly's drug could win approval by 2015, market watchers say.

"Overall we believe headline data for dulaglutide suggests a profile that may be better than Victoza," BofA analyst Sachin Jain said in a note to investors (as quoted by Bloomberg). "Our forecasts now assume dulaglutide launch in 2015 and Victoza slowly declining thereafter." The bank slashed its peak sales estimate on the drug by almost half, to 12 billion kronor ($2.15 billion), from a previous 21 billion ($3.76 billion).

Plenty of diabetes data is on tap at ADA, of course, and the studies presented there will be closely watched. As Reuters reports, Novo's share of that data is fairly light, and the lack of counterbalancing presentations may be one reason the BofA report spooked investors. After the note was issued, the company's shares tumbled by as much as 1.9% in Copenhagen today.

FDA stiff-armed Tresiba in February, not only declining to approve the drug but also asking for additional safety data that will require a new study. That will take years to accomplish, and now, Novo expects Tresiba to hit the U.S. market no earlier than 2015. The company is ramping up for a rolling launch in Europe, where regulators did grant marketing approval. But Novo had been counting on U.S. sales to make up the lion's share of Tresiba's revenue.

One set of data that Novo is planning to unveil at ADA concerns Victoza as a weight-loss remedy. CEO Lars Sorensen has said that a weight-loss indication for the drug could well take up the Tresiba slack.

- see the Bloomberg story