Novo Nordisk Down 15% in March: Is This a Buying Opportunity?

Novo Nordisk NVO shares have lost 15.2% so far this month compared with the industry’s decline of 4.6%. The company has also underperformed in the sector and the S&P 500 during the same time frame, as seen in the chart below. The stock is currently trading below both its 50 and 200-day moving averages.

NVO Stock Underperforms the Industry, Sector & the S&P 500

Image Source: Zacks Investment Research

The dive in Novo Nordisk's stock price in March 2025 was primarily due to a pipeline setback. Earlier this month, the company reported achieving a 15.7% weight loss in obese and type 2 diabetes (T2D) patients treated with CagriSema in the phase III REDEFINE 2 study. The reported efficacy rate failed to meet its guidance for 25% weight loss at week 68, which was provided on the third-quarter earnings call. NVO faced a major setback in December 2024, after the 22.7% weight loss observed in obese patients treated with CagriSema in the phase III REDEFINE 1 study, which also failed to meet the company’s guidance for 25% weight loss at week 68.

However, Novo Nordisk is making good progress with its pipeline, which includes several other new candidates for T2D and obesity, currently in development. In January, the company reported that patients receiving the highest dose of amycretin experienced a 22% weight loss compared with a gain in body weight of approximately 2% in those treated with placebo after 36 weeks in a mid-stage study.

NVO also has strong fundamentals, and the untapped nature of the obesity market makes us believe that the setback is temporary. Shares of Novo Nordisk have surged more than 185% in the past five years. During the same time frame, total revenues have jumped 129% on a reported basis, while the net profit margin consistently exceeded 31%, reaching a five-year high of 36% in 2023. Let’s dig deeper and understand the company’s strengths and weaknesses in greater detail to understand how to play the stock after the recent price drop.

Semaglutide - NVO’s Growth Engine

NVO’s success in the past few years is underscored by its marketed semaglutide (GLP-1 agonist) medicines.

The company has a strong presence in the Diabetes care market, with one of the broadest diabetes portfolios in the industry. It has maintained its global diabetes value market share over the past year at 33.7%, fueled by Rybelsus, Ozempic and Victoza, putting up a strong performance. In 2024, Novo Nordisk’s GLP-1 sales in diabetes increased by 21%, depicting greater patient outreach and market capture by its GLP-1 products. Novo Nordisk continues to be the global market leader in the GLP-1 segment, with around 55.1% value market share as of 2024-end.

Wegovy is a significant contributor to Novo Nordisk's revenues. Wegovy revenues grew 86% to DKK 58 billion in 2024 due to strong prescription growth, driving higher revenues and profits. Additionally, Ozempic sales are contributing positively to overall revenues, increasing 26% to DKK 120 billion in the past year. The company has also been investing heavily to expand its manufacturing capacity as part of its strategic move to entrench its diabetes and obesity care market leadership for its GLP-1 products.

The market is currently dominated by NVO and Eli Lilly LLY, with their popular obesity injections, Wegovy (semaglutide) and Zepbound (tirzepatide), respectively. Roche RHHBY also made its foray into the obesity market in March by signing a collaboration and licensing agreement with Denmark’s Zealand Pharma for an obesity candidate, petrelintide. This deal increases competition in the obesity space.  Other biotech firms, such as Amgen AMGN and Viking Therapeutics, are also making rapid progress with their GLP-1-based diabetes/obesity candidates.

NVO recently launched a new direct-to-patient online pharmacy called NovoCare, which will offer Wegovy at a discounted price of $499 per month to patients who do not have insurance coverage and pay by cash. The offer is also available to patients with insurance coverage who do not have coverage for obesity medicines. This is expected to increase patient access thereby driving the drug’s sales.

The discounted prices come on the heels of the FDA’s announcement in late February that the shortage of Wegovy is resolved and the medicine is no longer in short supply.    

NVO’s Label Expansion Plans to Boost Demand

Novo Nordisk is actively exploring additional uses for semaglutide, including evaluating Wegovy for heart failure in diabetes and obesity patients and Ozempic as a treatment for T2D and chronic kidney disease (CKD). The company is also studying semaglutide for metabolic dysfunction-associated steatohepatitis. These efforts could expand the eligible patient base for the drug, pending approval.

Wegovy’s label has been expanded in the United States and the EU to reduce the risk of serious heart problems in obese/overweight adults, which has been boosting its sales. The company is looking to further expand Wegovy’s label to treat patients with obesity-related heart failure with preserved ejection fraction in the EU and U.S. markets. Additionally, a late-stage cardiovascular outcomes study evaluating oral semaglutide (Rybelsus) as an adjunct to the standard of care for the prevention of serious heart problems in T2D patients met its primary endpoint. A regulatory filing seeking the label expansion of Ozempic to treat patients with T2D and CKD is currently under review in the EU.

Beyond diabetes and obesity, Novo Nordisk is diversifying its portfolio by developing Mim8 for hemophilia A, with plans to submit it for regulatory approval soon. Alhemo (concizumab) recently received approval in the EU for treating haemophilia A or B with inhibitors. Alhemo is not approved in the United States.

NVO’s Premium Valuation, Rising Estimates

Novo Nordisk is trading at a premium to the industry, as seen in the chart below. Going by the price/earnings ratio, the company’s shares currently trade at 18.6 forward earnings, which is higher than 16.69 for the industry.

NVO Stock Valuation

Image Source: Zacks Investment Research

Earnings estimates for 2025 have increased from $3.86 to $3.93 per share over the past 60 days. During the same time frame, Novo Nordisk’s 2026 earnings per share estimates have increased from $4.53 to $4.82.

NVO Estimate Movement

Image Source: Zacks Investment Research

The stock’s return on equity on a trailing 12-month basis is 84.69%, which is higher than 34.61% for the large drugmaker industry, as seen in the chart below.

NVO Return on Equity

Image Source: Zacks Investment Research

How to Play NVO Stock

Novo Nordisk exhibits significant growth potential in the future despite the recent pipeline setback that caused the stock price to slide temporarily. The removal of semaglutide medicines from the FDA’s drug shortage list, combined with the reduction in Wegovy prices to enhance patient access, is expected to drive growth in revenue and profit margins in the years to come, mainly fueled by higher sales of Wegovy and Ozempic.

Furthermore, the company is looking to expand the indications for Wegovy, Ozempic and Rybelsus to increase patient eligibility, which, if approved, would further boost revenues. Novo Nordisk is also developing new obesity treatments to stay competitive, especially in the U.S. market, which holds significant growth potential.

Thus, we can conclude that the temporary decline in the stock price should not bother long-term investors. In fact, potential new long-term investors are advised to capitalize on the opportunity and add NVO, carrying a Zacks Rank #2 (Buy) at present, to their portfolio. Investors who already own the stock can consider increasing their position for long-term gains.

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This article originally published on Zacks Investment Research (zacks.com).

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