Why Novo Nordisk Stock Topped the Market on Thursday

It might be best known for its weight loss drug, but Novo Nordisk (NVO +2.38%) was a gainer on the stock market Thursday. Thanks to efforts in the legislative sphere, investors were bullish on the company, and pushed into its stock to power it to a nearly 3% gain that trading session. By contrast, the S&P 500 index could only muster a 0.2% increase.

Legislative effort

Two members of the U.S. House of Representatives, Republican Rudy Yakym and Democrat Andre Carson (both of Indiana), have introduced a bill that would impose significant limitations on the making of Food and Drug Administration (FDA)-approved drugs by compounding pharmacies (i.e., those that can produce custom medicines).

This covers the massively popular GLP-1 weight-loss drugs currently on the market, most notably Novo Nordisk’s Wegovy (Eli Lilly‘s Zepbound also falls into this category). The compounding of GLP-1 medications has been a particular headache for Novo Nordisk, as it has increased competitive pressure on its top-selling medications.

In a joint press release issued by Yakym and Carson, the congressmen wrote that “While compounding serves important individualized medical needs, some entities are exploiting it to illegally manufacture and sell untested, unapproved drugs at scale.”

“These products endanger patients, undermine trust in FDA-approved medicines, and weaken incentives to develop new treatments,” they added.

Federal protection?

It’s too soon to gauge the bill’s chances of being passed into law, especially since Congress is dealing with more weighty matters as it heads into its holiday recess for the remainder of the year.

Still, for Novo Nordisk shareholders — and investors in healthcare companies that either have obesity drugs on the market, like itself and Eli Lilly, or are developing the same — it’s an encouraging sign that lawmakers are willing to help protect their business from perceived threats.