Novo Nordisk A/S takes the plunge and we’re there to swim in it too.
On Monday, Novo Nordisk released an announcement that it had received a Complete Response Letter from the FDA for its Tresiba and Ryzodeg drugs stating that the application cannot be approved in its current form. Basically, the FDA requested more information relating to cardiovascular effects of the drugs before approval.
NVO had been trading way up, presumably as investors believed that the FDA would approve the drugs. For example, on November 15, 2012, NVO closed at $152.30/share and went as high as $194.30 on February 6.
On Friday, February 8, NVO closed at 192.29 with a market cap of about $108 billion. On Monday, NVO opened in the mid-$160’s and trailed down. We took notice of the news since the market cap had dropped about $15 billion over the course of the morning.
A little research showed us that the market where Tresiba and Ryzodeg would compete was worth about $5 billion in sales to Sanofi (SNY), the manufacturer of their primary competing products.
Even if the stock was overvalued before the FDA letter, was this a $15 billion miscalculation? We thought not, believed that the market overreacted to the FDA warning and bought in at $163.76. We are now up 3.188% over the course of 1 ½ trading days! Oooh, yeah!