Jefferies sees pressure on peptide manufacturers, initiates Novo with 'underperform'

Jefferies says competition in the GLP-1 space is intensifying as FDA data shows large imports of semaglutide and tirzepatide from China, lowering manufacturing barriers

The broker notes this trend poses risks for peptide-focused contract manufacturers (CDMOs), which rely heavily on a few large clients like Novo Nordisk NOVOb.CO and Eli Lilly LLY.N

Market fragmentation, with more than 150 peptide obesity assets in development, makes it harder for smaller CDMOs to secure long-term contracts, Jefferies says in a note

"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," it adds

Jefferies starts Novo with "underperform", using it as readacross for the broader peptide and obesity drug market

Also cuts Bachem Holding BANB.S to "underperform" from "hold," citing weaker outlook for growth and profitability

Expects Novo and Eli Lilly to control up to 80% of GLP-1 volumes by 2031, leaving smaller peptide manufacturers exposed to overcapacity and pricing risk