Is Novo Nordisk a Buy After a Major Clinical Setback?

The recent collapse of Novo Nordisk's Alzheimer's drug trials has sent shockwaves through the biopharma sector, with shares plummeting nearly 12% in the wake of the news. The company's semaglutide-based oral drug, Rybelsus, failed to demonstrate efficacy in slowing cognitive decline in two large phase 3 trials, EVOKE and EVOKE+, which involved 3,808 patients with mild cognitive impairment or early-stage Alzheimer's. This outcome, while devastating for Novo's ambitions in neurology, raises a critical question for investors: Is this a temporary setback, or a harbinger of deeper challenges for a company that has long dominated the GLP-1 space?

The Short-Term Pain and Long-Term Promise

The Alzheimer's trial failure is emblematic of the risks inherent in translational science. As one analyst noted, "GLP-1 drugs have revolutionized diabetes and obesity care", but neurodegenerative diseases are a different beast entirely. Novo's leadership, however, has doubled down on the scientific value of the trials, emphasizing that biomarker improvements-though not clinically significant-justify continued exploration of semaglutide's potential in combination therapies alongside anti-amyloid drugs like Leqembi. This strategic pivot underscores Novo's resilience: even in the face of a high-profile miss, the company is recalibrating rather than retreating.

Yet the short-term pain is undeniable. Novo's stock has fallen to a four-year low, and its revised 2025 guidance reflects slowing sales growth for Wegovy and Ozempic, compounded by aggressive price cuts and competition from Eli Lilly's Zepbound. The U.S. GLP-1 market, once Novo's fortress, is now a contested battleground, with Lilly capturing 57% of prescriptions in Q2 2025. This erosion of market share, coupled with production bottlenecks and margin compression, has forced Novo to adopt a more frugal approach.

Pipeline Resilience: Amycretin and Beyond

Despite the Alzheimer's setback, Novo's pipeline remains a cornerstone of its long-term value proposition. The company's phase 2 results for amycretin-a dual GLP-1 and amylin agonist-have generated significant buzz. In trials, amycretin achieved a 14.5% weight loss in type 2 diabetes patients over 36 weeks, with robust glucose control and a favorable safety profile. These results position amycretin as a potential successor to semaglutide, particularly as key patents for Ozempic and Wegovy begin to expire in the early 2030s.

Novo's pipeline diversification extends beyond amycretin. The company is advancing its Wegovy oral formulation for 2026 launch and has acquired Metsera to bolster its obesity portfolio. Additionally, Novo is investing in a $2 billion licensing deal for a Chinese GLP-1 drug, a move that, while speculative, signals its commitment to maintaining growth momentum. These initiatives, combined with phase 3 trials for amycretin in diabetes and obesity, suggest a pipeline capable of sustaining Novo's leadership in its core markets.

Financial Resilience and Strategic Restructuring

Financially, Novo has responded to the Alzheimer's setback with a mix of cost-cutting and reinvestment. The company announced a 11% workforce reduction-9,000 jobs globally-to achieve DKK 8 billion in annual savings by 2026. While this restructuring has trimmed its operating profit growth forecast to 4–10% for 2025 (from 10–16%), the savings are being redirected into R&D and commercial initiatives. This "streamline and reinvest" strategy mirrors the playbook of tech companies navigating disruptive markets, prioritizing agility over short-term margin preservation.

Novo's long-term financial outlook remains cautiously optimistic. The company forecasts DKK 396.7 billion in revenue and DKK 142.5 billion in earnings by 2028, driven by its GLP-1 dominance and next-gen therapies. While these projections hinge on the success of amycretin and the Wegovy oral pill, they reflect a confidence in Novo's ability to adapt. As one industry observer put it, "The market is punishing Novo for today's headlines".

The Investment Thesis: Balancing Risk and Reward

For long-term investors, the key question is whether Novo's core strengths outweigh its recent stumbles. The company's leadership in diabetes and obesity-markets projected to grow as metabolic disorders rise globally-provides a stable foundation. Its pipeline, anchored by amycretin and a robust R&D engine, offers upside potential even if Alzheimer's remains a dead end.

However, risks persist. The GLP-1 market is becoming increasingly crowded, with Lilly's Zepbound and other next-gen therapies threatening Novo's pricing power. Regulatory headwinds, such as the Inflation Reduction Act's price caps, also loom large. Moreover, the Alzheimer's setback has exposed the limitations of Novo's pipeline diversification strategy, highlighting the need for more breakthrough innovations.

Conclusion: A Buy, But With Caution

Novo Nordisk remains a compelling long-term investment, but the path forward is fraught with challenges. The Alzheimer's trial failure is a setback, not a catastrophe, and the company's response-pivoting to combination therapies, accelerating amycretin development, and restructuring operations-demonstrates resilience. For investors with a multi-year horizon, the current stock price, trading near intrinsic value, offers an opportunity to buy into a company with a dominant market position and a pipeline poised for reinvention.

Yet caution is warranted. The GLP-1 market is no longer a blue ocean, and Novo's ability to maintain its edge will depend on the success of amycretin and its capacity to innovate in a rapidly evolving landscape. As the saying goes, "The best time to buy a stock is when it's not working." For Novo, that time may have arrived-but only for those prepared to weather the turbulence.