Danish pharma giant Novo Nordisk lifted its 2024 outlook on Thursday and delivered better-than-expected first quarter profits as the company races to boost the output of its Wegovy weight-loss drug and fend off rising competition from rival Eli Lilly.

Novo is currently the most valuable company in Europe by market capitalization, worth some 540.4 billion euros ($576.44 billion) before earnings on Thursday, on the back of Wegovy's popularity.

The group's shares were down 2.2% at 8:12 a.m. GMT, a small dent when they have risen around 260% since launching Wegovy in the United States in June 2021.

Sales growth in the U.S. was positively impacted by a one-off sales adjustment, the company said. Two analysts told Reuters that Thursday's share drop was likely partly explained by the perceived lower-quality earnings report given the one-off prior period adjustments. Other analysts and a Novo shareholder cited lower-than-expected Wegovy sales.

The company is spending billions to boost its manufacturing capacity to meet runaway demand for the weekly Wegovy injection. It increased the amount of Wegovy it supplied to the U.S. market in the first quarter, CEO Lars Fruergaard Jorgensen told a media call.

About 27,000 new patients in the U.S. are now starting on the weekly injection each week, Jorgensen said. "This is really a very nice volume ramp, as we were planning for," he said. That is a fourfold 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.

In January, Novo said it was more than doubling the supply of lower strength or "starter" Wegovy doses in the U.S. that month compared with recent ones. Still, shortages in the U.S. persist.

The modest increase in the outlook and forecast-beating results underscore Wegovy's success and Novo's lead in the fast-growing obesity drug market. Novo's growth has nonetheless been held back by its ability to ramp up production quickly enough to meet demand.

Competition

The company is facing fierce competition from U.S. rival Eli Lilly as it rolls out its Zepbound therapy in new markets. It launched in the United States in December and in Germany, Poland, and Britain this year.

As volume and competition have increased, the price of Wegovy came "slightly down" in the first three months of the year, Chief Financial Officer Karsten Munk Knudsen said.

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 now seen at between 22% and 30% in local currencies, slightly up from its previous forecast of 21% to 29%.

"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.

The company reported first quarter earnings before interest and taxation (EBIT) of 31.8 billion Danish crowns ($4.57 billion), above the 29 billion forecast by analysts in an LSEG poll this week and up 27% from a year ago.