In 2025, a 50% crash! Novo Nordisk faces its worst year ever, as if the "weight loss drug craze" never happened

Novo Nordisk once became the highest-valued listed company in Europe due to the success of its weight loss drug Wegovy, but now it is facing its worst year ever due to poor clinical trial results, multiple profit warnings, and intense market competition.

Since the beginning of this year, Novo Nordisk's stock price has plummeted over 50%, nearly erasing the remarkable gains since Wegovy was approved for weight loss treatment in 2021. Investors are concerned that as the patent for semaglutide (the key ingredient in Wegovy and Ozempic) will expire in the U.S. in 2032, the company's future sales growth sources face uncertainty.

Analyst expectations indicate that Novo Nordisk's sales may decline by 2026, a stark contrast to the company's growth rates of 25%-30% during its prosperous period. The stock is currently trading at about 14 times expected earnings, halving compared to the average valuation level over the past five years, and is more than 10% cheaper than the MSCI World Pharmaceuticals Index.

Paul Major, portfolio manager at Bellevue Asset Management, stated, "From the current situation, their product line does not convince me that this situation is manageable from an organic perspective." Major sold his shares in Novo Nordisk earlier this year, believing that the stock may continue to decline until investors see compelling catalysts to restore confidence in Novo Nordisk's future growth.

Eli Lilly Rises, Novo Nordisk Faces Huge Challenges

The biggest threat to Novo Nordisk comes from the strong performance of its competitor Eli Lilly. Eli Lilly's stock price has soared over 28% this year, in stark contrast to Novo Nordisk's plunge.

Gregoire Biollaz, senior investment manager at Pictet Asset Management, pointed out, "Novo Nordisk's weight loss effects from its market drugs are currently not as effective as Eli Lilly's, so Eli Lilly has a stronger commercial messaging capability."

The shift in market competition is reflected in investor preferences. Sebastien Malafosse, portfolio manager at Edmond de Rothschild Asset Management, stated, "The market has chosen sides, believing that only Eli Lilly can benefit from the massive growth in the market, which I think is quite an extreme position."

Novo Nordisk is not the only European obesity concept stock to suffer a setback. Zealand Pharma's stock price has also dropped nearly 30% this year, indicating that the entire European weight loss drug sector is under pressure.

New Management Bets on Product Line Recovery

Facing difficulties, Novo Nordisk hopes to turn the situation around with the upcoming launch of new products. The company is seeking approval for a more potent version of Wegovy injection under priority review in the United States, which will expedite the review process. Meanwhile, the oral version of the drug is planned to be launched early next year.

New CEO Mike Doustdar took office in August and stated last month that Novo Nordisk has "enough" pills for the target release. The company also confirmed that it is in "preliminary" negotiations with Hims & Hers Health Inc. to sell obesity pills on its telemedicine website.

Pictet's Biollaz believes, "Assuming approval and successful launch, the high-dose injection and oral version of Wegovy could both become catalysts for a recovery in Novo Nordisk's stock price."

Malafosse stated, "I think they have learned their lesson and will do better this time, execute better. Novo Nordisk is clearly not dead." He believes the company is in a transformation period.

How much room is there for valuation recovery? Analysts remain optimistic

Despite a significant drop in stock price, the analyst community remains optimistic about Novo Nordisk. According to data tracked by Bloomberg, as of Wednesday's close, 17 out of 33 institutions rated the stock as a buy.

Berenberg analyst Kerry Holford believes the stock price has fallen too far, and a higher valuation is justified. In her research report last week, she wrote, "At current levels, the stock price hardly reflects the value of the product line. Given Novo Nordisk's strong track record of R&D returns, we are prepared to pay a higher premium for its product line."

Novo Nordisk's stock is currently trading at about 14 times expected earnings, roughly half of the average valuation over the past five years, and more than 10% cheaper than the MSCI World Pharmaceuticals Index.

However, risks cannot be ignored. The patent for the main compound semaglutide will expire in the U.S. in 2032, and analyst expectations indicate that sales may decline in 2026, contrasting sharply with the 25%-30% growth rate during prosperous times. The direct comparison trial results of Novo Nordisk's CagriSema drug with Eli Lilly's Zepbound in 2026, as well as the company's preliminary performance guidance for next year, will be the focus of market attention