-66% in one year, -30% within one week...
That's how quickly a company can go from undisputed champion to stock market loser. Unbelievable. Will Novo Nordisk $NOVO B (+4,84 %) crash even further or is there hope?
Here is an overview of the facts:
1. the new reality: from undisputed market leader to challenger
At the heart of the current uncertainty lies the changing competitive landscape. The market for diabetes and obesity drugs, although in a "gold rush" phase with enormous growth potential, has developed into a duopoly in which Novo Nordisk has lost its market leadership.
Its main competitor, Eli Lilly, has taken the lead:
- Market share: Eli Lilly has overtaken Novo Nordisk as market leader in the crucial US GLP-1 market, holding a 53% market share in early/mid-2025.
- Product superiority: Lilly's drug Zepbound (tirzepatide) shows clinically superior weight loss (approx. 22%) compared to Novo Nordisk's Wegovy (approx. 15%). Losing the title of "best-in-class" makes competition more difficult.
- Pipeline advantage: Eli Lilly's pipeline appears to be more advanced with candidates such as retatrutide and the oral pill orforglipron and could bring products to market sooner.
These developments have pushed Novo Nordisk from the position of dominant innovator to that of challenger.
2 The strategic response and underlying vulnerability
In response to increased competition, Novo Nordisk has adapted its strategy:
- Change in management: The appointment of CEO Doustdar signals a move away from a "peacetime" of innovation to a "wartime" of commercial struggle. His focus is on "urgency", "high performance" and maximizing sales of existing products.
- Massive investment in:
- Production capacity: By far the largest area, with spending and acquisitions of over DKK 129bn (€17.3bn) in 2024 alone to meet "unprecedented demand" and address supply shortages.
- Research & development: Key hopefuls are CagriSema, the dual agonist amycretin and higher-dose semaglutide to catch up with competitors' efficacy.
This strategic realignment is imperative, as the company structure is exposed to major risks:
- Product concentration: Over 93% of sales are generated with drugs for diabetes and obesity. The "Rare Disease" segment with 7% contributes only minimally to diversification.
- Geographical concentration: More than half of total sales (56.8%) are generated in North America. This creates a high susceptibility to price pressure, politics and competition in the US market.
This concentration was the source of success, but is now a significant risk.
3. weighing up the future prospects: Opportunities/risks:
Opportunities (arguments for investment):
- Huge, uncovered market: There are over one billion potential patients worldwide, of which only a small percentage are being treated to date. The market offers immense growth potential, even for a second largest player.
- Diabetes market: According to estimates, the market is set to grow by +79% to +192% by 2033. That's 8.7% to 21.3% per year!
- Obesity market: According to estimates, the market is set to grow by +300% to +900% by 2035. That's +30% to +90% per year!
- Strong brand awareness: Ozempic and Wegovy are globally recognized brand names and benefit from a first mover advantage that creates a commercial wall of protection.
- Expansion of indications: Positive data from studies demonstrating additional benefits in heart and kidney disease (SOUL, FLOW) can improve reimbursement and differentiate semaglutide from competitors.
- Production as a competitive advantage: If Novo Nordisk is able to reliably supply the market while competitors experience supply shortages, this could lead to direct market share gains.
- Attractive valuation: With a price/earnings ratio of ~11, the share is valued much more favorably than Eli Lilly (P/E ratio of over 63), which creates potential for a revaluation in the event of success.
Risks (arguments against an investment):
- Pricing and reimbursement pressure: The high cost of drugs is leading to significant resistance from governments and insurers worldwide. Political pressure in the USA is extremely high, which makes price erosion likely. Donald Trump signed a decree on July 31: He sent letters to 17 companies, asking them to lower prices within 60 days. The outcome? Unclear.
- Risk in pipeline implementation: Perceived disappointing data for hopeful CagriSema highlights risk that R&D pipeline can't keep up with Lilly's next generation of drugs.
- Risk of market growth slowdown: In its preliminary Q2 2025 quarterly results, Novo Nordisk announces that growth in the US will slow somewhat for the second half of the year.
- Generics & Compounding: Unregulated "compounding" pharmacies selling cheap imitations have been a significant headwind, undermining branded product sales and brand integrity. A regulatory crackdown on these practices from May 2025 could give branded products a boost again.
- Challenges in production: The massive and complex expansion of production poses significant implementation risks. Delays could lead to further loss of market share.
- The ticking clock of patents:
- Semaglutide (Ozempic/Wegovy): While protection in the USA and Europe extends until around 2031/2032, the core patent in China and Canada expires as early as 2026. This will serve as a "test run" for generic competition and price reductions.
- Liraglutide (Victoza/Saxenda): Patents for the predecessor drug have already expired in 2023/2024 and generic competition has begun, leading to falling prices and market share.
Conclusion:
At present, nothing has (yet) changed fundamentally at the company. The growth of +18% YoY in Q2 2025 marks the second best quarter in the company's history. The company is far from failing and offers an extremely strong long-term financial base. The company is earning more than ever before and has a dividend yield of 3.6% despite the massive investments.
But as we all know, the future is always traded on the stock market and it doesn't exactly look rosy at the moment. Characterized by uncertainty and fierce competitionand an expected price war, it is impossible to say how the market or the company will develop in the short term. In the long term, the company must change from a differentiation strategy to an economy of scale in order to retain market share. This is also likely to significantly reduce the profit margin in the future. It is therefore more than understandable that the share price has fallen so sharply.
However, the FDA decision to ban compounding "copycat" products again after the drug shortage offers a short-term ray of hope.
What should we do now?
With such a sharp fall in the share price in such a short space of time, emotions play a very big role. But:
In my opinion, many risks have been priced in as a result of this valuation correction. Nevertheless the company promises further growth for the year as a whole and stands on a stable fundamental basis.
As of August 4, 2025, Novo Nordisk has a P/E ratio of 10 and a P/E ratio of 3.5, while its competitor Eli Lilly $LLY (-2,51 %) is roughly the same size and is valued at 4.2 times (=13.75) P/E ratio to Novo Nordisk. Of course, the growth rate is better, but the two companies are in the same boat. Price cuts and slower market growth affect both companies equally, as of today.
In the long term, there are two scenarios:
1.Market growth slows or stagnates. Novo Nordisk continues to lose market share. At the same time, price pressure reduces the profit margin sharply and sales fall. This case would have a considerable negative impact and would send the share on another downward spiral.
2. the company continues to develop normally, loses slight market share and grows continuously with the market. Novo Nordisk remains in second place behind Eli Lilly, but holds a market share of +-30 percent. The share would then recover and put a normal valuation into perspective.
In the short term uncertainty is extremely high. If the stop on generics & compounding drugs can be fully enforced, the market will once again be a pure duopoly, which would have a positive effect. If Trump's demands do not materialize, another chunk should fall away. Suddenly improved study results with improved drug efficacy are unlikely. In the medium term the company can build on its current fundamental basis and develop further. The implementation of the change in strategy will be decisive. In the long term it is inconceivable that Novo Nordisk will not grow with the market.
In the short term, the disadvantages massively outweigh the advantages and there are no signs of rapid positive signals or a quick recovery. In the long term, however, now may be the perfect time to enter the market, as the share price is currently at the bottom. Personally, I also see the probability of a correction in Eli Lilly as likely because both are in the same boat. What justifies this difference in valuation?
