Is Novo Nordisk Stock a Buy Now?

Key Points

• Novo Nordisk has recently encountered headwinds in its core therapeutic area.

• The company has implemented changes that could pay off in the long run.

• Novo Nordisk's shares look reasonably valued.

• 10 stocks we like better than Novo Nordisk ›

Two years ago, Novo Nordisk (NYSE: NVO), a Denmark-based pharmaceutical company, was performing so well that it was positively affecting the economy of its home country. However, the past 18 months have been very different. Novo Nordisk's shares have declined substantially over this period, losing 58% of their value.

With several potential catalysts on the horizon, however, Novo Nordisk is looking to bounce back from its recent woes. Can the company pull it off? Let's find out whether it's worth investing in the stock today.

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What happened to Novo Nordisk

Through the first half of the year, Novo Nordisk recorded net sales of 154.9 billion Danish kroner ($24.4 billion), 15% higher than the comparable period of the previous fiscal year. Almost 94% of that total came from its diabetes or weight management products, especially the best-known ones, Ozempic and Wegovy.

Considering Novo Nordisk's dependence on its core therapeutic area, any failure to meet expectations in that area is very likely to trigger a sell-off. And that's exactly what happened several times over the past year. It recently lowered its guidance for fiscal year 2025 partly because its GLP-1 medicines aren't generating sales as well as expected.

Image source: Getty Images.

Novo Nordisk is dealing with competition, including from compounded versions of its therapies. Additionally, it's faced some clinical setbacks in diabetes and weight management. Its CagriSema performed well in phase 3 weight loss studies, but not as well as management or analysts expected.

Meanwhile, Eli Lilly, the company's largest rival, is experiencing significant sales growth from its anti-obesity drug, Zepbound. Additionally, the drug is posting solid phase 2 or phase 3 results for other indications in this area. These factors (and others) explain Novo Nordisk's poor performance over the past 18 months.

Why the company can rebound

Novo Nordisk has made changes to try to right the ship. It appointed Maziar Mike Doustdar as the new CEO to help lead it into a new era of growth. It has also improved its pipeline through a series of deals.

The company licensed UBT251 from China-based United Biotechnology for $200 million up front, with additional milestones of up to $1.8 billion in clinical and regulatory payments. This investigational anti-obesity drug appears particularly promising since it's a triple agonist; it works by blocking the activity of three different hormones. No such medicine is currently approved for weight management, although some are in clinical trials. Lilly's Zepbound mimics two of these hormones -- that's one factor that contribute to its superior efficacy.

Going one step further could lead to the next breakthrough. In a phase 1b study, UBT251 resulted in an average weight loss of 15.1% at the highest dose after just 12 weeks, a remarkably promising outcome.

Outside of licensing deals, Novo Nordisk has also internally developed candidates that look promising. The company's amycretin recently started phase 3 studies in weight management, using both oral and subcutaneous formulations.

The Denmark-based drugmaker also requested approval for an oral version of semaglutide (the active ingredient in Wegovy) for weight loss. No oral GLP-1 therapy is currently approved for weight management. But considering that pills are cheaper to manufacture and easier for patients to use than needles, oral semaglutide could be highly successful.

Lastly, Wegovy earned a label expansion in metabolic dysfunction-associated steatohepatitis (MASH), a disease that affects millions of people in the U.S. Only a single targeted treatment option had been approved by the U.S. Food and Drug Administration before this one. Wegovy's label expansion in MASH should materially impact Novo Nordisk's results.

The price is right

Despite the issues it's faced, Novo Nordisk's results remain pretty strong. A 15% year-over-year sales increase is a strong result in the pharmaceutical industry. And through the first six months of 2025, earnings per share increased by 23% year over year to 12.49 DKK ($2). Meanwhile, Novo Nordisk's recent forward price-to-earnings ratio of 13.1 is lower than the healthcare industry's average of 16.5.

Even taking the company's headwinds into account, the stock looks attractive at current levels. Purchasing Novo Nordisk's shares today could lead to superior returns over the next five years.

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Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.