September 27, 2023

LONDON (Reuters) – Danish drugmaker Novo Nordisk unseated LVMH as Europe’s most dear listed firm on Friday, ending the French luxurious group’s 2-1/2 year-long reign on the high.

LVMH, the world’s greatest luxurious retailer, has been harm by rising issues concerning the outlook for the Chinese language financial system.

Novo is in the meantime driving a wave of demand for its extremely efficient diabetes and weight-loss medicine Ozempic and Wegovy, which has despatched its earnings and shares to document highs.

Its shares have risen round 17% because it introduced on Aug. 8 that a big research had proven Wegovy additionally had a transparent cardiovascular profit, boosting the corporate’s hopes of transferring past its picture as a way of life drug.

As of Friday’s shut, Novo Nordisk had a market capitalisation of round $424.7 billion together with unlisted inventory, in keeping with Refinitiv knowledge and firm disclosures of its share depend.

French-listed LVMH had a market cap of $420.1 billion, having been Europe’s greatest listed firm since February 2021 when it knocked shopper items group Nestle off the highest spot.

Novo’s share value has roughly tripled prior to now three years whereas that of LVMH, dwelling to style labels Louis Vuitton and Dior, has doubled.

“Novo closing in on LVMH as Europe’s greatest market cap inventory is a mirrored image of Novo’s latest product success whereas LVMH’s latest tendencies have been extra combined,” stated Marcel Stotzel, co-portfolio supervisor of Constancy European Fund and Constancy European Belief.

Stotzel stated each shares stay key holdings in its funds.

Novo shares are close to document highs, highlighting traders’ appreciation for a technique that has given the corporate a first-mover benefit in a surging marketplace for weight problems medicine.

The load loss drug market is anticipated to achieve $100 bln in annual gross sales inside a decade. Gross sales at the moment stand at round $6 billion, in keeping with Barclays.

“The market share ought to be cut up comparatively equally between Novo Nordisk and Eli Lilly, the 2 important firms behind weight problems remedies,” stated Axelle Pinon, a member of Carmignac’s funding committee.

Eli Lilly and Co is anticipated to obtain a U.S. weight reduction approval for its related drug, Mounjaro, later this yr.

Novo stated on Aug. 8 that research knowledge confirmed Wegovy decreased the chance of a serious cardiovascular occasion like a stroke by 20% in obese or overweight folks with a historical past of coronary heart illness, greater than had been anticipated.

That outcome might assist persuade insurers and well being authorities to cowl the price of Wegovy, which is $1,300 a month in the US, for a wider vary of sufferers.

“These outcomes are de-risking the ahead adoption curve for these medicine, justifying such a market transfer,” stated Carmignac’s Pinon.

The rally in Novo’s share value is prone to increase its weighting within the region-wide STOXX 600 index, analysts stated, which might entice extra inflows from passive traders.

Considerations about China’s weakening financial system have harm sentiment in direction of LVMH, which additionally owns Hennessy cognac and U.S. jeweller Tiffany.

European luxurious shares soared early in 2023 as traders pinned hopes on swift financial rebound after China lifted COVID-19 restrictions.

However latest knowledge and a disaster within the property sector have soured the outlook for the world’s No.2 financial system, weighing on a luxurious sector that’s closely reliant on Chinese language shoppers.

“There was a sequence of weaker than anticipated knowledge and the Chinese language authorities’ unwillingness to inject massive quantities of stimulus is knocking the outlook for these luxurious retailers, which have a considerable amount of income development coming from China,” stated Metropolis Index market analyst Fiona Cincotta.

Novo Nordisk shares ended Friday up 2.14% whereas LVMH shares have been down 0.8%. LVMH shares have fallen 14.2% from an all-time excessive hit in April, underperforming Europe’s broader STOXX 600 which is down round 2.2% in the identical time-frame.

Rival Compagnie Financiere Richemont has shed 17.9% since then and Hermes is down about 6.4% since then.

(Extra reporting by Samuel Indyk and Dhara Ranasinghe; Enhancing by Amanda Cooper and Catherine Evans)