Novo Nordisk Stock Plunges 20%: Challenges and Opportunities Ahead

Novo Nordisk shares have plunged 19.9% YTD due to disappointing data from its obesity candidate, CagriSema, and Medicare's decision not to cover weight-loss drugs. The company faces competition from Eli Lilly's Mounjaro and Zepbound, which have witnessed strong sales. However, Novo Nordisk has strong fundamentals and an untapped obesity market, making the setback temporary. Investors should consider the company's pipeline and fundamentals before playing the stock.

Novo Nordisk (NVO) shares have plunged 19.9% year-to-date (YTD), reflecting a series of unfavorable outcomes, both in the pipeline and regulatory domains. The company reported disappointing data from two late-stage studies for its next-generation subcutaneous obesity candidate, CagriSema, which demonstrated a lower-than-expected reduction in body weight despite meeting primary endpoints. Additionally, Medicare announced it will not cover costly weight-loss drugs, including Novo Nordisk’s Wegovy, as obesity remains unclassified as a disease. These medications, often viewed as cosmetic, may become less accessible to patients [1].

Novo Nordisk is also facing a major transition in its executive management as CEO Lars Fruergaard Jørgensen will step down due to market headwinds and a decline in the company’s stock since mid-2024. The search for his successor is currently underway. Furthermore, the company faces intense competition from its arch-rival Eli Lilly (LLY) in the diabetes and obesity care market. Lilly markets its tirzepatide injections as Mounjaro for type II diabetes (T2D) and Zepbound for obesity. Despite being on the market for less than three years, Lilly’s Mounjaro and Zepbound have witnessed strong sales driven by rapid demand. Zepbound had earlier outperformed Novo Nordisk’s Wegovy (20.2% compared with 13.7%, respectively) in a weight-loss head-to-head study. This could lead to a shift in patient preference from Wegovy to Zepbound, potentially resulting in a loss of market share [1].

Novo Nordisk is also developing several next-generation obesity candidates in its pipeline, especially targeting the lucrative U.S. market. The most advanced weight loss candidate in Novo Nordisk’s pipeline is CagriSema, a fixed-dose combination of a long-acting amylin analogue and Wegovy. The company is already planning its regulatory submission in 2026. However, not all is wrong at NVO. Novo Nordisk is making good progress with its pipeline, which includes several other new candidates for T2D and obesity. The company also has strong fundamentals, and the untapped nature of the obesity market makes us believe that the setback is temporary [1].

Despite the challenges, Novo Nordisk remains a leader in the diabetes care market with a global market share of 33.3% as of March 2025, led by Rybelsus, Ozempic, and Victoza. It also dominates the GLP-1 segment with a 54% global market share. Wegovy is a major revenue driver, with first-quarter 2025 sales up 83% to DKK 17.4 billion on strong prescription growth. Ozempic also continues to boost overall revenues. To protect its lead amid competition from Lilly, Novo Nordisk is heavily investing in its GLP-1 manufacturing capacity. As of July 1, CVS Caremark, a major pharmacy benefit manager, has designated Wegovy as its preferred GLP-1 therapy for weight loss [1].

Investors should consider the company's pipeline and fundamentals before playing the stock. Despite past pipeline and regulatory setbacks, along with the ongoing transition in leadership, we remain confident that NVO is a good stock to retain. The company operates in a lucrative market that is rapidly expanding. Its strong year-over-year revenues and profits, fueled by rising demand for Wegovy and Ozempic, suggest long-term potential [1].

References:
[1] https://finance.yahoo.com/news/novo-nordisk-plunges-20-ytd-123400273.html
[2] https://www.ndtvprofit.com/business/cipla-prepares-to-take-on-eli-lilly-novo-nordisk-with-entry-into-indias-weigh-loss-drug-sector
[3] https://www.moomoo.com/news/post/82904565/record-tr4cking-news-default