By Pratik Jain and Bhanvi Satija
(Reuters) - Shares of dialysis services providers jumped between 3% and 12% on Tuesday as latest data from Novo Nordisk (NYSE:NVO)'s hugely popular diabetes drug Ozempic indicated a less-than-expected effect in chronic kidney disease patients.
Investors, concerned after the interim data in October, are betting that most of the benefits of GLP-1 drugs such as Ozempic are related to cardiac events "rather than a game-changing extension in kidney disease progression, which the market has been worried about", said Morningstar analyst Julie Utterback.
The potential for GLP-1 drugs such as Ozempic and Wegovy to treat health problems beyond diabetes and obesity has also hit shares in bariatric surgery providers, food firms and glucose-monitoring device makers.
Colorado-based DaVita (NYSE:DVA) rose 8%, while the U.S.-listed shares of rival Fresenius Medical were up 12.3% in morning trade. Baxter International (NYSE:BAX), which provides dialysis operations through its kidney care unit, gained 2.5%. DaVita and Baxter are among the top percentage gainers on the S&P 500 Healthcare index.
The late-stage data showed Ozempic delayed progression of chronic kidney disease in diabetes patients, cutting the risk of death from that and major cardiac events by 24%, which analysts said fell short of some investors' expectations.
DaVita and German rival Fresenius have downplayed concerns over GLP-1 drugs shrinking the market for kidney care.
Citi analyst Joanne Wuensch attributed the rise in kidney care stocks to high investor expectations from the study, after it was stopped almost a year ahead of schedule as an interim analysis had shown that the treatment would succeed.
The full results from the trial, expected later this year, "will prove to be the real test for dialysis stocks", said Wuensch.
U.S.-listed shares of the Danish drugmaker Novo Nordisk fell 1.7%. The stock has gained more than 20% so far this year on surging demand for its highly effective diabetes and weight-loss drugs.
(This story has been corrected following an official correction by the company to say that Ozempic cuts the risk of death from kidney disease and major cardiac events (not just kidney disease) in diabetes patients by 24%, in paragraph 5)