Novo Nordisk: Still Searching for a Turning Point
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Novo Nordisk’s share price had begun to recover, but a disappointing clinical trial and a mixed market reaction to its latest earnings report have renewed investor concerns. Although the company’s headline results exceeded expectations, attention focused on slightly weaker-than-anticipated sales of oral Wegovy. Investors are also increasingly questioning when Novo Nordisk will establish a meaningful growth driver beyond its core obesity and diabetes portfolio.
Earnings Report
Novo Nordisk's stock price had been recovering nicely through the end of July, but then came some negative news regarding one of its drug candidates, followed by a less-than-convincing quarterly report, which has once again left investors uncertain about the company's future.
There are a lot of one-time items weighing down the numbers, but if we look at the results adjusted for these, the picture isn't so bad. The company’s adjusted revenue exceeded the analyst consensus by about 10 percent, while its adjusted operating profit exceeded it by approximately 16 percent. On an annual basis, this represents growth of 7 percent for the former and 11 percent for the latter.
The number of weekly prescriptions for the weight loss drug Wegovy in the U.S. exceeded 265,000 in the week ending July 17, and the cumulative number of prescriptions since its launch at the beginning of the year has surpassed five million. The Wegovy product family thus remains the market leader among branded weight loss drugs in the U.S.
At the same time, sales of the Wegovy pill, at 3.22 billion DKK, fell slightly short of the 3.3 billion consensus estimate, while pricing pressure increased due to price cuts in the U.S. This slight shortfall may have taken on great significance because investors expect the oral version of Wegovy to reignite growth at the company. Furthermore, it remains to be seen whether the oral version will cannibalize the injectable market and to what extent it might potentially reduce margins.
Sales of the injectable form of Wegovy rose by 6% and exceeded the analyst consensus by approx. 2%. Novo launched the higher-dose Wegovy in the US in April and the 7.2-milligram, single-dose injectable pen in the UK in June. The launch in the EU is expected in the second half of 2026.
Management has revised its 2026 revenue and profit forecast upward. It now expects a decline of no more than 6%, compared with the previous range of 4–12%. It has also revised its forecast for adjusted operating income to a range of between -6% and 0%. Management attributed the upward revision to more favorable expectations regarding U.S. GLP-1 sales, continued growth in international markets, and the launch of new products.
At the same time, the median of the new revenue forecast is only about 2 percent higher than the current analyst consensus, while the median for operating income may be 2–3 percent higher than expectations. This explains why shareholders did not react meaningfully to this news.
On July 31, Novo’s stock price fell by more than 7% because the Phase III trial of ziltivekimab failed. The drug did not significantly reduce the risk of serious cardiovascular events. This marked another setback in Novo’s efforts to develop a major drug outside the field of obesity treatment.
In addition, the results of the CagriSema trial were another disappointment, and the company recorded a 6.3 billion DKK write-down. This does not necessarily mean that the drug is not viable, but since it is less effective than Eli Lilly’s product, it remains to be seen how large a share of the market it will be able to capture.
We'll give the company a little more time to see if it can show any positive results in the coming period, but if it doesn't, we'll remove the stock from our Equity Top Pick List because its performance isn't very convincing.
Investment story
- Following the organizational restructuring and layoffs launched last year, it will likely take several more quarters for the changes to fully feed through. The reorganization process may take some time. Sales of the Wegovy tablet, which was launched this year, have been picking up quickly so far, providing a boost to growth.
- The 7.2 mg injectable version of Wegovy, which has a higher dose, will also be launched soon in several markets, which could further increase the number of patients who have access to it. Although CagriSema’s drug did not fail, it did not produce the expected results, so it will not be a game-changing medication.
- The share buyback program may provide some support for the stock price, but it is not a major catalyst. Novo may also expand its portfolio through targeted acquisitions, which, under favorable conditions, could also improve market sentiment.
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