Novo Shares Sinks Another 3%. Novo Nordisk Loses Spot Among Europe's 10 Most Valuable Firms

Novo Nordisk’s U.S.-listed shares sank another 3% in premarket trading. Shares have dropped more than 34% this week.

Just six weeks ago, things seemed to be getting better for Novo Nordisk A/S. Investors were optimistic, and the Danish drugmaker was briefly Europe’s most valuable public company again. Now, the stock — which is set for its worst week on record — is out of the top ten.

The shares have plunged 33% this week after the maker of Ozempic and Wegovy cut its forecasts for the year and named a company insider as its new chief executive officer. The stock was also hit on Friday after US President Donald Trump demanded that pharmaceutical companies lower US drug prices.

That’s taken Novo’s market capitalization to the equivalent of $206 billion — below companies including Nestle SA, AstraZeneca Plc, Shell Plc and HSBC Holdings Plc.

“We’ve long been calling Novo a ‘show me’ story,” Barclays Plc analyst Emily Field wrote in a note this week. But with Novo having a hard time competing with cheaper, copycat versions of its medicines, and a new drug pipeline that lags behind rivals, “we struggle to see what will get investors to return” to the story, Field wrote, downgrading the stock to equal-weight from overweight.

Novo’s warning on Tuesday followed a tumultuous year that’s seen the shares plunge 71% from last summer’s record high. Issues have included disappointing clinical trial results for experimental drugs, mounting competition from Eli Lilly & Co. and the ouster of its former CEO. Novo named company veteran Maziar Mike Doustdar as its new leader this week, “but this won’t be an easy fix,” warned Barclays’ Field. Novo is due to report second-quarter results on Wednesday.

One area that has been a particular headache for Novo is competition from cheaper copycat options for US patients. Compounding pharmacies are allowed to make and sell cheaper copies of a medicine when brand-name drugs are in short supply, and although they lost this permission this year, it remains an issue. Novo blamed its guidance cut on unrepentant compounders and broader competition.

Many investors and analysts were caught off guard by the warning, with the mood in June being mainly one of optimism that a turnaround was starting. On Monday, nearly two-thirds of analysts tracked by Bloomberg rated the stock a buy or equivalent. But caution is starting to seep in, with less than half keeping their buy recommendations as of Friday morning.

“We got our call on Novo wrong,” said Rajesh Kumar, an analyst at HSBC. “Our assumption that with FDA’s ban on compounding, Novo might regain market share has not played out,” he wrote in a note on Thursday, cutting the stock to hold from buy.

Still, one investor sees similarities between Novo’s current situation and another upheaval for the drugmaker in 2016 when it was better known as the world’s biggest maker of insulin. Will James, a fund manager at Guinness Global Investors, notes that back then, the company had its competitive position questioned. The guidance was cut and the CEO replaced.

“The share price fell and then recovered aggressively as Novo refocused its innovation and commercial efforts,” James said in an email. “It is now undoubtedly a bigger job for the new CEO with a sizeable mountain to climb to regain and grow market share and rebuild trust with investors.”