In the past month, Novo Nordisk NVO shares have lost 16.7%, attributable to both sector-specific developments and broader macroeconomic headwinds. A key catalyst was last week’s announcement from rival Eli Lilly LLY, which reported first phase III success for its oral GLP-1 candidate, orforglipron, in lowering blood glucose and promoting weight loss in type II diabetes (T2D) patients. Oral pills, being more convenient than injectables, tend to boost patient adherence.
Novo Nordisk also markets Rybelsus (semaglutide) as an oral medication for adults with T2D to control blood sugar levels, but unlike orforglipron, Rybelsus therapy has restrictions on food and water intake. Earlier this month, Medicare announced that it will not cover costly weight-loss drugs, such as NVO’s Wegovy (semaglutide) and Lilly’s Zepbound (tirzepatide), as obesity remains unclassified as a disease. Consequently, these medications, often viewed as cosmetic, may become less accessible to patients. This also contributed to the NVO’s stock decline.
Overall, pharma stocks are experiencing a downtrend threatened by the uncertainty surrounding the impact of Trump’s tariffs. Though pharmaceuticals have been exempted from tariffs this time around, they could well be Trump’s target in the next round, considering the President’s goal to shift pharmaceutical production back to the United States, mostly from European and Asian countries. Though the Trump administration has implemented a 90-day pause on all trading partners, excluding China, when imposed, tariffs on pharmaceutical imports can lead to potential disruptions to global supply chains and increased production costs.
However, not all is wrong at NVO. Novo Nordisk is making good progress with its pipeline, which includes several other new candidates for T2D and obesity.
NVO also has strong fundamentals, and the untapped nature of the obesity market makes us believe that the setback is temporary. Let’s dig deeper and understand the company’s strengths and weaknesses to understand how to play the stock after the recent price drop.
Semaglutide - NVO’s Growth Engine
NVO’s success in the past few years is underscored by its marketed semaglutide (GLP-1 agonist) medicines.
The company has a strong presence in the Diabetes care market, with one of the broadest diabetes portfolios in the industry. It has maintained its global diabetes value market share over the past year at 33.7%, fueled by Rybelsus, Ozempic and Victoza, putting up a strong performance. Novo Nordisk continues to be the global market leader in the GLP-1 segment, with around 55.1% value market share as of 2024-end.
Wegovy is a significant contributor to Novo Nordisk's revenues. Wegovy revenues surged 86% to DKK 58 billion in 2024 due to strong prescription growth, driving higher revenues and profits. Additionally, Ozempic sales are also contributing positively to overall revenues. The company has also been investing heavily to expand its manufacturing capacity as part of its strategic move to entrench its diabetes and obesity care market leadership for its GLP-1 products.
NVO’s Label Expansion Plans to Boost Demand
Novo Nordisk is pursuing new indications for semaglutide, including label expansions for Wegovy in additional cardiovascular conditions and for Ozempic in T2D patients with chronic kidney disease. It has also filed regulatory applications for Rybelsus to prevent serious cardiac events in T2D patients in both the United States and the EU, and is investigating semaglutide’s potential in metabolic dysfunction–associated steatohepatitis. These efforts could expand the eligible patient population for semaglutide.
Novo Nordisk and Lilly have both recently announced price cuts for their respective obesity medications, allowing cash-paying patients to purchase the drugs for a reduced price. This has increased patient access, thereby driving the drugs’ sales.
Beyond diabetes and obesity, Novo Nordisk is diversifying its portfolio by developing Mim8 for hemophilia A, with plans to submit it for regulatory approval soon. Alhemo (concizumab) has been approved in the EU for treating haemophilia A or B with inhibitors. Alhemo is not approved in the United States.
Recent Pipeline Setbacks
NVO’s recent pipeline and regulatory setbacks have resulted in the stock crashing 45% in the past six months. This has created a bearish sentiment around the stock.
The company has reported disappointing data from two late-stage studies for its next-generation subcutaneous obesity candidate, CagriSema, a follow-up drug to Wegovy. In these studies, CagriSema demonstrated a lower-than-expected reduction in body weight.
Lilly’s Zepbound had earlier outperformed Wegovy (20.2% compared with 13.7%) in a head-to-head weight-loss study. This could lead to a shift in patient preference from Wegovy to Zepbound, potentially resulting in a loss of market share.
Competition Heating Up in the Obesity Space
Competition in the obesity market is heating up as the obesity market is expected to expand to $100 billion by 2030, according to data from Goldman Sachs. Lilly and Novo presently dominate the market.
The obesity market is currently dominated by NVO and LLY. However, several other companies like Amgen AMGN and Viking Therapeutics VKTX are also making rapid progress in the development of GLP-1-based candidates in their clinical pipeline. Amgen plans to conduct a broad phase III program on its dual GIPR/GLP-1 receptor agonist, MariTide, across obesity, obesity-related conditions and T2D, with the first studies to begin in the first half of 2025. Viking Therapeutics’ dual GIPR/GLP-1 receptor agonist, VK2735, is being developed both as oral and subcutaneous formulations for the treatment of obesity.
Others like Roche, Merck and AbbVie are also looking to enter the obesity space by in-licensing obesity candidates from smaller biotechs, which could threaten Novo Nordisk and Eli Lilly’s dominance in the market.
NVO’s Stock Price, Valuation, Estimates
Year to date, Novo Nordisk shares have plunged 28.7% compared with the industry’s decline of 3%. The company has also underperformed in the sector and the S&P 500 during the same time frame, as seen in the chart below. The stock is currently trading below both its 50 and 200-day moving averages.
NVO Stock Underperforms the Industry, Sector & the S&P 500
Zacks Investment Research
Image Source: Zacks Investment Research
Novo Nordisk is trading almost at par with the industry, as seen in the chart below. Going by the price/earnings ratio, the company’s shares currently trade at 15.13 forward earnings, which is marginally lower than 15.18 for the industry. However, the stock is trading much below its five-year mean of 29.25.
NVO Stock Valuation
Zacks Investment Research
Image Source: Zacks Investment Research
Earnings estimates for 2025 have declined from $3.88 to $3.81 per share over the past 30 days. During the same time frame, Novo Nordisk’s 2026 earnings per share estimates have declined from $4.79 to $4.66.
NVO Estimate Movement
Zacks Investment Research
Image Source: Zacks Investment Research
The stock’s return on equity on a trailing 12-month basis is 84.69%, which is higher than 34.61% for the large drugmaker industry, as seen in the chart below.
NVO Return on Equity
Zacks Investment Research
Image Source: Zacks Investment Research
Here’s How to Play NVO Stock
Novo Nordisk, currently carrying a Zacks Rank #3 (Hold), exhibits potential to bounce back in the future. The recent pipeline and regulatory setbacks, coupled with macroeconomic tensions, that caused the stock price to slide are likely to be temporary, and we remain confident that NVO is a good stock to retain. The company operates in a lucrative market that is rapidly expanding. Its strong year-over-year revenue and profit growth, fueled by rising demand for Wegovy and Ozempic, suggests long-term potential.
The company is actively working to expand the approved uses of its key products, Wegovy, Ozempic, and Rybelsus, which could significantly increase the eligible patient pool and drive future revenues. The FDA's removal of semaglutide from its shortage list and recent price reductions for Wegovy are also expected to improve access and support sales growth.
However, Eli Lilly remains a formidable adversary in the obesity market space, which threatens NVO’s market share. Novo Nordisk is also developing new obesity treatments to stay competitive, especially in the U.S. market.
Hence, we can conclude that the temporary decline in the stock price should not bother far-sighted investors. Investors who already own the stock should hold their position for long-term gains. Short-term investors, on the other hand, may consider exiting due to near-term volatility and downward estimate revisions.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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