Danish pharmaceutical giant Novo Nordisk This year, the stock price plummeted, even regressing to levels seen in 2021 for weight-loss drugs. The stock price is at pre-boom levels. Nevertheless, analysts remain cautiously optimistic that the company's share price will recover to reasonable levels.
As of now, Novo Nordisk's stock price has plummeted by more than 50% this year, and is about to record its worst year in the company's history.
Multiple negative factors dragged down Novo Nordisk's stock performance, including disappointing results from clinical trials of new drugs, multiple downward revisions of the company's profit forecasts, and fierce competition in the weight-loss drug market. This plunge almost wiped out all of Novo Nordisk's gains since 2021.
Novo Nordisk's stock price surged for three consecutive years from 2021 to 2023, thanks to the approval of semaglutide for weight loss, with a cumulative increase of over 200%. However, since hitting an all-time high in June 2024, Novo Nordisk's stock price has fallen by more than 60%.
Smegglutide is the active ingredient in Novo Nordisk's diabetes drug Ozempic and weight-loss drug Wegovy. It belongs to the GLP-1 (glucagon-like peptide-1) drug class, and its oral form is called Rybelsus. Both Ozempic and Wegovy are administered via injection.
Novo Nordisk's core product, Smegglutide, will have its patent expire in the United States in 2032, leading some investors to worry about where the company's future sales growth will come from.
Even now, Smegglutide is also facing challenges from Eli Lilly. The company faces competition from similar products like telpolide and generic drugs.
According to a comparative trial, telpolide is significantly more effective at weight loss than smegglutide, and has fewer side effects.
“As things stand, I don’t think they can easily handle this situation, given their internal R&D pipeline,” said Paul Major, portfolio manager at Bellevue Asset Management.
Major sold his Novo Nordisk shares earlier this year, believing the share price could continue to decline until investors see a compelling catalyst to rebuild confidence in the company's future growth.
Novo Nordisk's bulls are pinning their hopes on a high-dose injectable and oral version of Wegovy to turn the tide. Novo Nordisk has sought priority review vouchers in the US to expedite the review of the higher-dose version, with a target market launch date of early next year for the oral version.
“Assuming approval and successful market launch, higher doses of the injectable and oral versions of Wegovy could be catalysts for a rebound in Novo Nordisk’s share price,” said Gregoire Biollaz, senior investment manager at Pictet Asset Management, which holds Novo Nordisk shares through its funds.
Biollaz said, "Novo Nordisk's current weight loss drugs are less effective than Eli Lilly 's products, so Eli Lilly has an advantage in commercial promotion."
Analysts remain generally bullish.
Analysts are generally still bullish on Nord and Nord stocks, with some institutions—such as Kerry Holford of Berenberg—believing that the stock price has fallen too much and should be valued higher.
"At the current share price, the market is undervaluing its R&D pipeline," Holford wrote in a report last week. "Given Novo Nordisk's strong track record of R&D returns, we are willing to give the R&D pipeline a higher premium."
Novo Nordisk's current share price is about 14 times its expected future earnings, less than half of its average valuation over the past five years, and more than 10% lower than the MSCI World Pharmaceuticals Index. In contrast, Eli Lilly's share price has risen more than 25% this year, making it the first pharmaceutical company to surpass a market capitalization of $1 trillion.
Edmond de Rothschild's Malafosse stated, "The market has already taken sides, believing that only Eli Lilly can benefit from the huge growth in the obesity drug market, which I think is an extreme view. Currently, Eli Lilly is indeed taking away most of the new patients, but I don't think this situation will continue."
(Article source: CLS)
