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Luxury goods maker LVMH regained its crown as the largest company in Europe on Friday, after shares in drugmaker Novo Nordisk dropped on concerns it will have to cut the price of its blockbuster weight loss and diabetes drugs in the US.
Shares in LVMH, the world’s biggest luxury group, were up 7.5 per cent over the week, despite slipping on Friday. Swiss rival Richemont on Thursday reported unexpectedly strong sales growth for the final three months of 2024, igniting a rally in Europe’s luxury sector. LVMH was last the biggest company in Europe in 2023.
Cartier-owner Richemont’s strong results, boosted by demand in the US, raised hopes of a rebound in the luxury sector after a tough 2024.
Paris-based LVMH, controlled by French billionaire Bernard Arnault, is now worth €345.3bn, narrowly more than Novo Nordisk which ended the week with a market valuation of €344.5bn.
Shares in Novo Nordisk fell 4.3 per cent on Friday, after the US Centers of Medicare and Medicaid Services named Novo’s weight loss drugs Wegovy and Ozempic among 15 medications that will be subject to price negotiations by the government healthcare programmes.
The body that oversees Medicare, the state-backed insurance programme in the US for over-65s, plans to use its powers under the Inflation Reduction Act to negotiate prices on the Novo Nordisk drugs, with the new prices applying from 2027. In the first round of negotiations last year, Medicare knocked between 38 and 79 per cent off list prices.
The drop in Novo Nordisk shares comes after a disappointing trial result knocked about €90bn off its market value in one day in December. The Danish drugmaker’s next generation obesity drug CagriSema missed expectations for patients to lose an average of 25 per cent of their body weight in a late stage trial.
The luxury industry, for which LVMH is the bellwether, suffered last year amid falling demand in China as shoppers reined in spending and consumer confidence plummeted. This downturn deepened a long-expected slowdown after the Covid-era luxury boom, when sales and profits across the industry had smashed records as bored shoppers flush with savings splashed out on jewellery and handbags.
While investors are excited to see green shoots in luxury again, Richemont’s strong results may not be replicated across the industry as it is partly shielded from downturns by its jewellery brands Cartier and Van Cleef & Arpels.
LVMH, which owns Louis Vuitton and Dior, is more exposed than Cartier to aspirational middle class customers in its core fashion and leather goods business, while its drinks division Moët Hennessy is expected to have another difficult year ahead.
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