Novo Nordisk Plunges 17% in a Month: Buy, Sell or Hold the Stock?

Core Viewpoint - Novo Nordisk (NVO) has experienced a significant stock decline of 16.7% over the past month due to sector-specific developments and macroeconomic challenges, particularly following Eli Lilly's announcement of successful phase III trials for its oral GLP-1 candidate [1][2]. Company Overview - Novo Nordisk markets Rybelsus (semaglutide) as an oral medication for type II diabetes (T2D), but it has restrictions on food and water intake, unlike Eli Lilly's orforglipron [2]. - The company has a strong presence in the diabetes care market, maintaining a global diabetes value market share of 33.7% and leading the GLP-1 segment with a 55.1% market share as of the end of 2024 [6]. Financial Performance - Wegovy revenues surged 86% to DKK 58 billion in 2024, driven by strong prescription growth, contributing positively to overall revenues alongside Ozempic [7]. - Year-to-date, Novo Nordisk shares have plunged 28.7%, underperforming the industry and the S&P 500 [16]. Pipeline and Growth Potential - Novo Nordisk is actively pursuing label expansions for semaglutide, which could increase the eligible patient population and drive future revenues [8]. - The company is also developing new obesity treatments and diversifying its portfolio with candidates for hemophilia A [10]. Competitive Landscape - Competition in the obesity market is intensifying, with the market expected to expand to $100 billion by 2030, and other companies like Amgen and Viking Therapeutics making progress in GLP-1-based candidates [13][14]. - Eli Lilly's Zepbound has shown better performance than Wegovy in weight-loss studies, potentially shifting patient preference and impacting Novo Nordisk's market share [12]. Stock Valuation and Estimates - Novo Nordisk's shares currently trade at a price/earnings ratio of 15.13, slightly lower than the industry average of 15.18, but significantly below its five-year mean of 29.25 [18]. - Earnings estimates for 2025 have declined from $3.88 to $3.81 per share, and for 2026 from $4.79 to $4.66 [21]. Strategic Outlook - Despite recent setbacks, Novo Nordisk's strong fundamentals and the untapped obesity market suggest that the current stock decline may be temporary [4]. - The company is expected to benefit from the FDA's removal of semaglutide from its shortage list and recent price reductions for Wegovy, which could enhance access and support sales growth [28].