Should Investors Be Concerned About This Pharmaceutical Giant's Latest Clinical Trial?

Drug companies are granted patents on new drugs they develop for a reason. The ups and downs Novo Nordisk (NYSE: NVO) experienced in 2025 highlight exactly why.

The good news at the end of the year was that the FDA approved a pill form of the company's GLP-1 weight loss medication. The bad news was the failure of a trial to see if the same GLP-1 medication helped Alzheimer's patients.

Are either of these events as good or bad as they seem?

It takes a lot to bring a drug to market

The pharmaceutical sector is highly regulated, as it should be, given the direct impact on lives involved with medical care. The process of developing new medicines is pretty intense, as it requires companies to identify compounds with medicinal potential.

Those compounds have to be tested and developed into treatments. The treatments must be tested to assess the benefits and risks associated with the drug. If there are more positives than negatives, a drug will get approval from the FDA.

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Only after FDA approval can the drugmaker start marketing the new medication to doctors and patients. It will also need to set up the manufacturing and distribution processes to support the sale of the new drug. This is a long and expensive process, which is why drugmakers are granted patent protections for new drugs. It allows them to recoup the lofty costs involved in the development process.

That said, it is a process that unfolds over years, rather than a simple one-time event. This is important to keep in mind when considering Novo Nordisk's recent developments and failures with its GLP-1 weight loss drug.

The big "win" and the big "loss"

Novo Nordisk was the first to market with a GLP-1 drug. However, the company's weight loss shot has been overshadowed by Eli Lilly's GLP-1 offering. It is not surprising at all in the healthcare sector to see companies introduce competing products, with one emerging as the more effective, or at least desirable, treatment. It is a highly technical industry, and competition is intense.

However, at the end of 2025, Novo Nordisk got some good news. The FDA approved a pill version of the company's GLP-1 drug, making it the first to market with a GLP-1 pill. That could allow Novo Nordisk to regain some market share from Eli Lilly, as consumers tend to prefer pills to shots. The company announced on Monday that the pill is now available.

Before getting too excited about this, however, you need to keep in mind that Eli Lilly is also working on a GLP-1 pill. Meanwhile, Pfizer has its own GLP-1 drug in the works, added to its pipeline through a recent acquisition, and it has agreed to act as the distributor for a Chinese company seeking regulatory approval for a GLP-1 pill. Novo Nordisk's GLP-1 weight loss pill could be a short-term positive and still turn out to be unimportant over the long term.

Additionally, the company's research on its GLP-1 drug and Alzheimer's is noteworthy. Novo Nordisk's shares fell after the company announced a drug trial looking to treat this ailment failed to achieve its targets. That would seem like a bad thing, which to some degree it is. However, a deeper examination of the data has some in the medical community suggesting there was some good news hidden in the bad.

It appears that Novo Nordisk's GLP-1 medication impacted the disease in the desired direction. This means that it may be a question of refining the target population, perhaps by using it earlier in the disease progression.

In other words, the information gathered from this research could actually lead to success down the line. Thus, it may not be as bad an outcome as investors think.

Innovation takes time in the healthcare sector

The problem with drug patents is that they end, leading to patent cliffs. That's when cheaper generic versions of a drug take market share from the name-brand drug. However, patent cliffs also help drive innovation, as companies like Novo Nordisk continually seek new drug candidates and new indications for existing drugs.

You have to take both the good news and the bad with a grain of salt in this industry. Wall Street tends to hyper-focus on the near-term impact of developments, which sometimes play into a much longer narrative. With Novo Nordisk, the company's GLP-1 pill could be a short-term win, while its Alzheimer's failure could actually be setting the stage for a new use indication down the line.

Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Pfizer. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.