Jefferies starts Novo Nordisk coverage at 'underperform' on rising competition

Jefferies assumes coverage of Novo Nordisk NOVOb.CO with "underperform" citing rising manufacturing competition and weaker pipeline prospects as risks across the GLP-1 ecosystem

Broker says FDA data show a surge in API imports of semaglutide and tirzepatide - the active ingredients of Novo Nordisk and Eli Lilly's LLY.N diabetes and weight-loss drugs - from China, pointing to growing global capacity and lower barriers to GLP-1 manufacturing

This increases competition for peptide CDMOs like Bachem BANB.S and signals that GLP-1 drugs could become easier and cheaper to make, Jefferies says in a note

Brokerage cuts Bachem's rating to "underperform"

The shift could ultimately pressure Novo Nordisk and Eli Lilly by eroding pricing power and shortening the exclusivity of future GLP-1 products - Jefferies

"The next wave of growth for peptide CDMOs is expected to be driven by the 'next generation' of GLP-1s. But the market potential of these assets now looks more constrained than anticipated," Jefferies says

Broker expects Novo and Lilly to dominate up to 80% of GLP-1 volumes by 2031, but sees overall market expansion slowing as competition fragments and consumer willingness to pay premiums fades