Key Takeaways
- Novo Nordisk stock has dropped to multiyear lows due to slower obesity drug uptake, strong competition from Eli Lilly, and continued sales of alternatives.
- A revival for the stock depends on successful drug launches, curbing compounded drug sales, and expanding into new treatment areas.
- Morningstar still sees long-term strength in Novo Nordisk’s portfolio and new launches.
Novo Nordisk NOVO B, the Danish drugmaker behind weight-loss drugs Ozempic and Wegovy, has seen its share price tumble to multiyear lows after a series of setbacks shook investor confidence.
An announcement on July 29 that Novo Nordisk was cutting its 2025 sales and profit forecasts caused its stock to drop 20%. Tens of billions of dollars in market value were erased in a matter of hours after a warning that slower-than-expected uptake of the firm’s obesity treatments would weigh on growth, along with rising competition from US rival Eli Lilly LLY and cheaper copycat obesity drugs.
The plunge in Novo Nordisk’s share price marks a significant turn of events for the company, which, up until just a few months ago, was the largest stock in Europe.
Why Has Novo Nordisk Stock Fallen?
The July 29 plunge was the worst day on record for Novo Nordisk’s stock, surpassing the nearly 19% drop in December 2024 that followed drug trial setbacks. But the crash comes on the back of a long and impressive rally. During the three years leading up to its peak valuation in June 2024, the stock rose 300%, with its market capitalization overtaking the size of the Danish economy at one point.
While Novo Nordisk had a solid second quarter, with 18% top-line growth at constant currencies, investors reacted negatively to the company’s commentary on Eli Lilly’s branded drugs and the unbranded compounded versions of Novo Nordisk’s semaglutide.
“We already had stiff competition from Lilly’s Mounjaro/Zepbound factored into our view. But Lilly appears to be gaining share on Novo even faster than we expected,” says Morningstar Director of Healthcare Equity Research Karen Andersen. Making matters worse, Andersen explains that unbranded and unapproved compounded versions of semaglutide became highly popular in the United States amid shortages of Ozempic and Wegovy. Although the grace period allowing compounders to sell the drug ended on May 22, they are still being sold.
“It looks like some compounded drugs are now being sold through a personalization loophole in FDA guidance, and the timing of the FDA cracking down on these drugs—or any kind of legal wins for Novo’s numerous lawsuits—is uncertain,” explains Andersen. “Counting on growth from patients currently taking compounded semaglutide transitioning to branded semaglutide seems less reliable, particularly in the second half of 2025.”
What Could Spark a Rally in Novo Nordisk Stock?
Andersen believes the next test for Novo Nordisk will be its ability to maximize the launch of its oral semaglutide in the US in 2026. Eli Lilly has the oral drug orforglipron, but that company just announced disappointing phase 3 data for the drug in conjunction with its Aug. 7 earnings call. “With Lilly likely to launch several months behind Novo, and with oral sema’s efficacy looking slightly stronger than orforglipron’s, I think Novo could have a strong position in the new oral market for GLP-1s in obesity,” says Andersen.
However, Andersen will be closely watching Novo Nordisk’s execution, as manufacturing shortages or mispricing could weaken its positioning. She is also gauging whether Novo Nordisk can catch up to Lilly in the new direct-to-consumer channel with its NovoCare website, which she thinks could help the firm reach uninsured or underinsured patients.
Are Novo Nordisk Shares Overvalued, Undervalued, or Fairly Priced?
Barring an extreme slowdown in demand for GLP-1 therapies, which Andersen sees as unlikely, she thinks Novo Nordisk is still well-positioned for the long term in this market, especially as new indications will likely continue to be added to their labels.
Andersen has a fair value estimate of DKK 458 for Novo Nordisk stock. Closing around DKK 325.90 on Aug. 15 (near its lowest level since February 2022 and a 68% drop from its all-time high in June 2024), the stock is trading well below our fair value estimate and the average sell-side analyst estimate.
The fair value estimate has “reasonable expectations on continuing market share loss to Lilly, and we aren’t assuming any heroic gains in share from patients switching to branded Novo products from compounded semaglutide,” Andersen says. Twenty-five stock analysts surveyed by PitchBook have an average price target of DKK 500, also implying upside from current levels.
The following are highlights of Andersen’s current outlook for Novo Nordisk and its stock. The full report and more of her coverage are available here.
Key Morningstar Metrics for Novo Nordisk
- Fair value estimate: DKK 458
- Morningstar Rating: ★★★★
- Morningstar Economic Moat Rating: Wide
- Morningstar Uncertainty Rating: High
Economic Moat
Novo’s intangible assets in diabetes and related cardiometabolic diseases like obesity give the firm a wide economic moat that will shield profitability for the long run. A focused research and development strategy allows the firm to repeatedly extend patent protection through innovation. Efficient manufacturing techniques and economies of scale have allowed Novo’s insulin business to provide strong global profitability—qualities it shares with the only two other global insulin players, Sanofi and Eli Lilly.
Fair Value and Profit Drivers
We lowered our fair value estimate to DKK 458 per share from DKK 552 after factoring in a significant drop in Novo’s 2025 guidance and our expectation for continued strong competition in the near term from compounded versions of semaglutide and Lilly’s Mounjaro/Zepbound.
We expect Novo to gain USD 55 billion of a USD 200 billion global GLP-1 market in diabetes and obesity by 2031, ahead of semaglutide’s 2032 patent expiration, with Lilly standing as the firm’s key competitor. GLP-1 growth drives our overall five-year forecast for 9% top-line and 10% bottom-line growth through 2029.
Risk and Uncertainty
Novo has a broad global insulin business, but price pressure and growing reliance on the high-growth GLP-1 class add volatility to potential cash flows, and we are maintaining our Uncertainty Rating at High.
Strong competition from Lilly and potential competition from other biopharma firms add pressure on Novo to continue innovating in the cardiometabolic space. In addition, unauthorized compounded versions of semaglutide remain on the US market after the May deadline. It is unclear how long they will be available to patients before enforcement from regulators or litigation.
Novo Bulls Say
- Wegovy is significantly expanding the obesity treatment market, given its strong efficacy, and it is poised to remain a key drug in the market until patent expiration in 2032.
- With a solid portfolio of GLP-1 products, including injectable Ozempic and oral Rybelsus, Novo is well-positioned to defend its formidable diabetes market share.
- Semaglutide is also being studied in areas such as liver disease (MASH) and Alzheimer’s, and Novo could achieve a strong share in these nascent markets.
Novo Bears Say
- Tresiba’s strong profile in the long-acting insulin market hasn’t been enough to defend it from US pricing pressure, due to competition from Sanofi and Lilly, and biosimilar insulins have weighed on category pricing since 2017.
- Novo’s Victoza and Ozempic have made GLP-1 a key part of the firm’s diabetes growth, but oral GLP-1 Rybelsus has had slower uptake, and Mounjaro provides strong competition.
- Wegovy had a slow launch due to supply constraints, and Zepbound, Lilly’s obesity drug, has a superior profile.
