Novo Nordisk's Q2 Earnings Fall Short, Guidance Downgraded, Yet Goldman Remains Optimistic

TradingKey - On Wednesday, August 6th, Danish pharmaceutical giant Novo Nordisk released its Q2 2025 earnings report, revealing a sales growth that fell short of expectations and a significant downgrade in its full-year growth guidance. 

Shares of NOVOb on the Copenhagen market dropped over 5% during intraday trading, while the US-listed NVO fell more than 4% pre-market.

The financial report showed that Q2 2025 net sales reached 76.857 billion Danish kroner, a 13% increase from the same period last year, but falling short of the market estimate of 76.99 billion Danish kroner.

CEO Lars Fruergaard Jørgensen commented that due to an anticipated slowdown in the growth of its GLP-1 drugs in the latter half of the year, the company is revising its full-year outlook for this segment downward.

Last week, the company drastically cut its full-year 2025 growth guidance, lowering both sales and profit growth expectations, and announced a change in CEO, leading to a 24% drop in share price.

This adjustment reflects Novo Nordisk's current challenges, as it faces intense competition from rivals and generic drugs, resulting in a reduced market share. 

On Wednesday, Jørgensen explained in a conference call that said the copycat market has "equal size to our business" and compounded versions of Wegovy were sold at a "much lower price point."

To counter this competition, the company has introduced NovoCare, a direct-to-consumer online pharmacy. CFO Karsten Munk Knudsen stated that through this channel, patients can purchase its popular weight-loss drugs for less than half the usual monthly cost, marking this as a crucial cash channel to regain market share.

Additionally, the company faces the impending issue of rising drug tariffs. On Tuesday, Trump announced plans to increase drug tariffs, potentially reaching up to 250%.

However, Knudsen expressed confidence in the company's ability to withstand US tariffs, as the volume of GLP-1 exports to the US exceeds imports, positioning Novo Nordisk more favorably compared to many other pharmaceutical companies.

Despite the earnings underperforming expectations overall, Goldman Sachs analyst James Quigley remains optimistic about Novo Nordisk's long-term growth potential, suggesting a disconnect between market sell-offs and the long-term opportunity in the weight-loss drug market.

According to biotechnology company IQVIA, weight-loss drug sales are projected to exceed $17 billion by 2031, with a compound annual growth rate of 15.6% from 2021 to 2031.

In the near term, with the US Food and Drug Administration banning the use of Wegovy's generic composite drugs this May, it is expected that many of the approximately 1 million US patients using generics will switch to branded drugs, which bodes well for Novo Nordisk.

Quigley believes that with the stock's sharp drop, the risk-reward balance has shifted favorably. Goldman maintains a buy rating with a target price set at 400 Danish kroner, representing about a 30% upside from the previous closing price of 305.9 Danish kroner.

JPMorgan's Richard Vosser also maintains a buy rating for Novo Nordisk, with a target price of 500 Danish kroner.