Novo Nordisk shares plunge – and Corbus plunges – after new weight-loss drug causes neuropsychiatric effects

Novo Nordisk (NVO) shares plummeted on Friday – Corbus Pharmaceuticals (CRBP) plunged into a steep decline after its new approach to weight loss caused neuropsychiatric side effects.

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The Denmark-based pharmaceutical company last year tested a new pill it acquired with Inversago Pharmaceuticals on patients with obesity and metabolic syndrome. The pill works differently than Novo's other weight-loss drug, semaglutide, which mimics the hormone GLP-1. That drug, called monlunabant, blocks a cannabinoid receptor. This receptor helps regulate weight and energy levels.

At the lowest dose, patients lost 7.1 kilograms (or about 16 pounds) over 16 weeks, while the placebo group lost only 0.7 kilograms (or 1.5 pounds). Patients had a baseline weight of 110.1 kilograms (242 pounds). Higher doses did not result in greater weight loss, Novo Nordisk said in a press release.

But the same gastrointestinal side effects that plague the GLP-1 class of drugs also occurred in patients receiving the cannabinoid receptor-targeting drug. In addition, monlunabant recipients suffered mild to moderate neuropsychiatric side effects, including anxiety, irritability and sleep disturbances.

Martin Holst Lange, head of development at Novo Nordisk, said the company still needs to “determine the optimal dosage to balance safety and (efficacy).” Novo Nordisk now plans to conduct a second interim study in 2025.

Shares in Novo Nordisk fell 5.5 percent to close at 127.51. Shares in Corbus, which is working on a similar weight-loss drug, fell 62.3 percent to 19.51.

At the same time, share prices of companies working on GLP-1-based drugs rose. Eli Lilly (LLY) rose 0.7% to 921.49. Shares of Viking Therapeutics (VKTX) and Structural therapeutics (GPCR) rose 3.4% and 8.2% respectively. Terns Pharma (TERN) reversed course and closed slightly lower.

Weight loss “disappointing”

The neuropsychiatric side effects are not entirely unexpected. David Risinger, analyst at Leerink Partners, notes Sanofi (SNY) had approved a weight loss drug in Europe that targets the cannabinoid receptor 1. However, it penetrated the central nervous system and caused neuropsychiatric side effects. It was later withdrawn from the market.

“Interestingly, Novo has announced plans to initiate a Phase 2b obesity trial in 2025,” he said in a report. “We believe the decision is driven by the company's interest in diversifying its obesity portfolio.”

Risinger has no rating for Novo Nordisk shares.

He also says the 6.3% difference in weight loss between monlunabant patients and placebo patients is “disappointing.” In another 16-week study, Eli Lilly's pill orforglipron led to 8% weight loss under placebo control. However, Novo managers predicted 15% weight loss under monlunabant.

Corbus' drug could be safer

But Brian Abrahams, an analyst at RBC Capital Markets, believes the drug could still find a market. It's difficult to say, since Novo Nordisk has not provided any information on the frequency or severity of side effects.

“There was no mention of suicidal ideation or depression, most events were probably irritability and anxiety, which we think may still be acceptable,” he said in a report. “Also remember that monlunabant showed a placebo-corrected increase in psychiatric side effects of about 14% in phase 1 (testing).”

He believes Corbus' drug may have an advantage in terms of safety. About a tenth of the drug ends up in the brain, he said. This could mitigate neuropsychiatric side effects while still leading to weight loss.

Abrahams has not given a rating for Novo Nordisk shares, but rates Corbus shares as “outperform”.

Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.

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