Shares of leading dialysis services providers, including DaVita Inc. (NYSE: DVA) and German competitor Fresenius Medical Care (NYSE: FMS), witnessed a sharp decline today. This downturn comes in response to an unexpected turn of events in Novo Nordisk A/S’s (NYSE: NVO) Ozempic trial, which has displayed early success in treating kidney failure in diabetes patients. The Danish pharmaceutical giant revealed late on Tuesday that it would stop its kidney outcomes trial almost a year ahead of schedule, following a recommendation from an independent data monitoring board overseeing the study.
As the news broke, Frankfurt-listed shares of Fresenius Medical Care took a massive hit, plummeting by 12.03% to 24.35 euros ($25.83) during regular trading hours. Simultaneously, DaVita Inc. (NYSE: DVA) experienced a significant premarket plunge of 16.42%, with their share price reaching $76.29.
Analysts suggest that the premature conclusion of the study might have adverse implications for Fresenius. Veronika Dubajova, an analyst at Citi, expressed concerns about GLP-1 drugs like Ozempic “potentially negatively impact” the size of the relevant patient population over time. She added that the study’s early halt points to a “somewhat faster effect than we had previously contemplated.”
It’s important to note that GLP-1 drugs were initially developed to regulate blood sugar levels in Type 2 diabetes patients and are also used as weight-loss treatments.
Comparing the valuations of the two prominent dialysis service providers, DaVita’s price-to-earnings ratio for the next 12 months stands at 11.91, whereas Fresenius Medical Care’s ratio is slightly higher at 14.30.
Additionally, it’s not just DaVita and Fresenius that have been impacted. Shares of U.S.-based Baxter International (NYSE: BAX), a company that manufactures products used by dialysis therapy providers, also tumbled over 9% to $33.94 in premarket trading.
As of the market’s close on Tuesday, DaVita shares had enjoyed a 22.24% increase throughout the year, while Baxter shares had struggled, down by approximately 27% thus far in 2023.