BREAKINGVIEWS-Novo Nordisk’s falling knife is still gathering speed

By Aimee Donnellan

DUBLIN, Feb 4 (Reuters Breakingviews) - Ozempic and the other progeny of weight loss drugs offer users the promise of an end to yo-yo dieting. Unfortunately for Novo Nordisk’s NOVOb.CO investors, competition, which is driving down prices, and a lack of diversification means they will have to tolerate more painful swings in the $216 billion group’s share price.

Mike Doustdar’s first six months as CEO of Novo Nordisk have been rocky. The Iranian born executive was ushered into the top seat last August to stabilise the company that was grappling with unpredictable results and fighting a losing battle with rival Eli Lilly LLY.N for greater share of the U.S. weight loss market. A raft of controversial job cuts, and hope of a new weight loss pill had seen the Danish group’s shares recover since then. But on Tuesday Doustdar revealed, a day ahead of schedule, that sales and profits could drop as much as 13% in 2026.

The 18% share price fall on the news is down to a number of factors. Doustdar flagged “unprecedented” pricing pressure in the U.S. market where competition with Eli Lilly is already red hot. He also blamed the loss of exclusivity in markets outside of the U.S., which will allow rivals to make cheaper copycat drugs. His hope is that if Novo Nordisk slashes the price of its medications, it can grab a much larger portion of the weight loss market which analysts reckon may be worth $150 billion by 2031, offsetting the price decline.

That plan, however, will be tricky to execute. Eli Lilly is already devouring the lion’s share of the weight loss drug market. Zepbound, its obesity medication, accounted for over 70% of new U.S. prescriptions in the third quarter of last year, according to the U.S. drugmaker. And although Novo recently launched an oral version of its obesity treatment Wegovy, its $949 billion U.S. rival is preparing to launch a similar product this year. Moreover, the likes of Roche ROG.S, Pfizer PFE.N and AstraZeneca AZN.L are lining up promising drugs, which will make it hard for Novo Nordisk to gain share.

Tuesday’s profit warning also exposes Novo Nordisk’s particular weakness. Apart from a small rare disease business, it is almost entirely reliant on diabetes and weight loss medications. Both of those markets will face rising competition in the coming years. But this is not yet baked into the Danish group’s valuation.

After Wednesday’s share price fall, it is valued on 16 times 2026 earnings, as per Citigroup estimates. That’s similar to rivals Novartis NOVN.S and AstraZeneca, which trade on over 16 and 18 times respectively, but have more diversified and healthier businesses. The enduring pressure in Novo Nordisk's key markets will likely require a bigger discount, meaning its shareholders’ pain is still only beginning.

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CONTEXT NEWS

Wegovy maker Novo Nordisk warned on February 3 that profits and sales could drop as much as 13% in 2026.

Novo said its outlook was hit by lower realised prices, especially in the U.S., fierce competition, and the expiry of patents on semaglutide — the active ingredient in its Wegovy and Ozempic drugs — in some markets outside the U.S.

The group expects adjusted operating profit and adjusted sales at constant exchange rates to both fall by between 5% and 13% this year. Sales rose 10% in 2025.

Shares in Novo were down 18% by 0725 GMT on February 4.