By Maggie Fick and Stine Jacobsen

LONDON/COPENHAGEN (Reuters) -Novo Nordisk raised its 2024 outlook on Thursday as the Danish drugmaker races to boost output of its Wegovy weight-loss treatment, while competition from rival Eli Lilly forced the company to cut prices of the drug, knocking its shares.

These are Novo’s second set of results since Lilly launched obesity drug Zepbound in the United States in December and highlight the fast-changing dynamics as the two companies go head to head in a market which analysts estimate could be worth as much as $100 billion by the end of the decade.

Prices for Wegovy and diabetes treatment Ozempic, which contains the same active ingredient, fell in the first quarter amid increased volumes and competition, the company’s chief financial officer Karsten Munk Knudsen told analysts on a call.

“Given increasing volume and competition, net pricing like-for-like will be down in the U.S.”, he said, adding that the trend would continue through the rest of the year.

Novo’s shares fell as much as 3.6% before briefly trading flat around 1230 GMT. They were down by 2.4% at 1400 GMT.

The company reported better-than-expected first-quarter profits, but analysts said the performance was boosted by one-off factors, while underlying growth was a bit weaker than expected and Wegovy sales came in lower than market expectations.

Before Thursday’s earnings, Novo was worth some 540.4 billion euros ($577.69 billion), on the back of Wegovy’s popularity, making it the most valuable company in Europe by market capitalisation.

The shares have risen around 260% since Wegovy’s launch in the United States in June 2021.

Novo executives said the company is gradually increasing the supply of lower strength or “starter” Wegovy doses in the U.S., after restricting supply of those doses last May to cope with demand. Shortages there persist.

About 27,000 new patients in the U.S. are now starting on the weekly injection each week, CEO Lars Fruergaard Jorgensen told a media call. “This is really a very nice volume ramp, as we were planning for,” he said. That is a more than five-fold increase in the U.S. supply of starter doses since December.

A year ago, Novo began limiting the number of U.S. patients who can start treatment by reducing the supply of the lowest three doses of the appetite-suppressing weekly injection.

Reuters reported on Thursday that online pharmacies and slimming clinics are cutting prices for Wegovy and Lilley’s Mounjaro in Britain just months after the weight-loss drugs were launched there, as initial supply shortages ease.

COMPETITION

Novo’s growth has been held back by its ability to ramp up production quickly enough to meet demand. Eli Lilly is also expanding its manufacturing capacity to roll out its Zepbound therapy in new markets.

Lilly has said it expects significant production increases in the second half for its obesity treatment and raised its annual sales forecast by $2 billion. It has so far launched Zepbound in Germany, Poland and Britain this year, after the U.S. December launch.

Novo launched Wegovy on Wednesday in Spain and will launch the injection in Canada on May 6, which will bring the total number of markets where it is available to eleven.

In February, Novo notched a win in its effort to boost Wegovy output when parent Novo Holdings said it would buy Catalent, a key manufacturing subcontractor, and sell three fill-finish sites to Novo Nordisk after the deal is completed.

At that time, Novo Holdings said the deal was expected to complete by end-2024. But earlier this month, Novo Holdings said it had refiled an application to the U.S. Federal Trade Commission for approval of the deal, raising the prospect it may not be completed on the original timeline.

Knudsen told Reuters in an interview that Novo still anticipates the deal will close “toward the end of this year”.

Novo said it now expects sales growth this year of between 19% and 27% in local currencies, compared to the previously guided range for 18% to 26% growth.

Operating profit growth this year is seen at between 22% and 30% in local currencies, slightly up from its previous forecast of 21% to 29%.

The company reported first-quarter earnings before interest and taxation (EBIT) of 31.8 billion Danish crowns ($4.56 billion), above the 29 billion forecast by analysts in a LSEG poll this week and up 27% from a year ago.

But Wegovy sales were 9.4 billion Danish crowns compared to the analyst consensus of 10.6 billion crowns.

Sales of the drug in the first quarter compared with 9.6 billion crowns in the previous quarter but they were 107% higher than the same quarter a year ago.

“Considering the ongoing supply constraints, Novo delivered a decent set of numbers,” said Markus Manns, a portfolio manager at Union Investment in Germany and a Novo shareholder.

“The guidance raise was only modest, but most people didn’t expect an increase so early in the year,” he told Reuters.

($1 = 6.9761 Danish crowns)

($1 = 0.9355 euros)

(Reporting by Maggie Fick in London and Stine Jacobsen in Copenhagen; additional reporting by Patrick Wingrove in New York; editing by Terje Solsvik, Josephine Mason and Jane Merriman)

---