Novo Nordisk, a global leader in diabetes and obesity treatments, is trading at a deep discount to both its historical multiples and intrinsic value. The ADR is now priced at $47.05, reflecting a normalized P/E ratio of just 13.4×, down from a five-year average closer to 25–30×. The stock has fallen more than 20% in the past month, largely in reaction to early-stage competitive pipeline news, a move that appears disconnected from Novo’s actual fundamentals.
What’s happened at the end of July
Novo Nordisk cut its 2025 guidance, trimming expected sales growth to 8–14% (from 13–21%) and operating profit growth to 10–16% (from 16–24%). A stronger Danish krone would shave another 4–7 percentage points from each. Shares slid about 25% this week and now sit roughly 68% below their peak, signaling investor fears of a more persistent slowdown rather than a one-off blip.
Drivers of the downgrade include softer US growth for Wegovy, slower Ozempic uptake, and tougher international competition. Semaglutide copycats from compounders continue to blunt demand despite FDA action. Eli Lilly’s Mounjaro/Zepbound outperform on both efficacy and marketing.
Additional headwinds include:
- Policy pressure: US price cuts via the IRA and executive order
- Trade risk: A proposed 15% tariff on EU goods
- Pipeline gaps: Novo’s oral GLP-1 has dosing drawbacks compared to Lilly’s orforglipron
- Patent expiry: Canadian loss of exclusivity opens generic risk
Analysts at BofA and Barclays downgraded the stock, though they still place fair value near DKK 375 (~10% above post-drop levels). The latest Seeking Alpha analysis (July 29, 2025) reinforces this long-term optimism, noting that Novo's current valuation embeds no credit for its obesity pipeline beyond Wegovy, despite robust early data from amycretin and advancing programs like oral sema. They project 15%+ annual EPS growth through 2028 driven by GLP-1 scale-up and emerging markets.
Why the market reaction is fair
The selloff reflects reasonable concern given Novo Nordisk’s concentration risk. Roughly 80% of revenue is tied to the semaglutide franchise, and the US is its largest market. Any drag on prescriptions, pricing, or access meaningfully impacts margins. Lower guidance suggests decelerating momentum in its growth engine.
Policy risk amplifies the issue. Drug pricing reforms via the Inflation Reduction Act and political executive orders could significantly reduce reimbursement levels, hitting the very GLP-1s that dominate Novo’s earnings. Combined with FX drag and potential tariffs, the market’s downward repricing looks logical. A lower multiple is consistent with heightened volatility and diminished visibility.
Why these fears are overblown
Despite near-term pressures, Novo Nordisk remains a highly profitable, capital-efficient leader in a massive and still-growing market. Gross margins exceed 84%, ROIC remains above 50%, and the company is investing aggressively in capacity and R&D to defend its moat.
The pipeline remains robust, with:
- Oral Wegovy under FDA review (decision due late 2025)
- CagriSema (next-gen GLP-1/GIP) expected to launch in 2026
- Amycretin, an early-stage GLP-1/amylin fusion drug, showing up to 24% weight loss at 36 weeks
Additionally, Novo has obtained CV label expansion for Wegovy, significantly enlarging its addressable market beyond weight management. Global demand remains supply-constrained, and long-term GLP-1 adoption trends are still in early innings. Novo’s pricing power also remains intact globally outside the US, and early uptake in Asia-Pacific and LATAM appears robust.
Why NVO is now a solid investment
Novo now trades at just 12× forward earnings, down from >30× a year ago. With clean financials, durable IP through 2032, and a clear innovation roadmap, the risk/reward profile has reset attractively.
Bull Case: 12% CAGR, pipeline optionality realized, terminal multiple of 25× → FMV: $145–160
Base Case: 10% CAGR, margins stable at 45%, terminal multiple of 17× → FMV: $120.72
Bear Case: 7% CAGR, margin compression, terminal multiple of 10× → FMV: $70–80
Updated FMV (weighted scenario): ~$120.72 per ADR
Current sentiment has swung deeply negative, but expectations are now low. If Novo delivers even moderate execution - sustaining semaglutide momentum, expanding label indications, and avoiding further policy shocks - the embedded upside is material.
Crucially, the market appears to assign little to no value to Novo’s development-stage pipeline beyond Wegovy. A sum-of-the-parts (SOTP) framework suggests that even conservatively discounting the cash flows from Ozempic/Wegovy implies that the pipeline, including oral GLP-1, amycretin, and NASH candidates, is being valued at or near zero.
A rough SOTP breakdown:
- Ozempic/Wegovy base franchise: ~$80–90 per ADR (DCF value assuming 8–10% CAGR and 17× terminal multiple)
- Oral GLP-1 (2026 launch, peak sales ~$10B): option value ≈ $10–15 per ADR
- Amycretin (high-efficacy weight-loss molecule, still Phase 2): ≈ $10–20 per ADR if successful
- CagriSema (mid-term launch): ≈ $5–10 per ADR
- Cardio/NASH/Other pipeline: combined ≈ $5–10 per ADR
Sum total: $110–145 per ADR, excluding any re-rating multiple.
These programs are effectively deep out-of-the-money real options: if even one delivers commercial success, the upside re-rating could be substantial.
With durable economics, undervalued optionality, and long-duration growth potential, Novo Nordisk stands as a high-quality compounder available at a rare discount. In a market lacking margin resilience, Novo offers both growth and ballast.
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Disclaimer
The user bactrian has a position in NYSE:NVO. Simply Wall St has no position in any of the companies mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The author of this narrative is not affiliated with, nor authorised by Simply Wall St as a sub-authorised representative. This narrative is general in nature and explores scenarios and estimates created by the author. The narrative does not reflect the opinions of Simply Wall St, and the views expressed are the opinion of the author alone, acting on their own behalf. These scenarios are not indicative of the company's future performance and are exploratory in the ideas they cover. The fair value estimates are estimations only, and does not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that the author's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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