Navigating Novo Nordisk's Crossroads: Can NVO Regain Momentum in a Crowded Obesity Market?

Novo Nordisk (NVO), the global leader in obesity and diabetes treatments, faces a pivotal moment. Recent setbacks in its experimental drug CagriSema's Phase 3 trials, coupled with intensifying competition from Eli Lilly and regulatory headwinds, have clouded its near-term outlook. Yet, its entrenched position in the $100 billion obesity market and robust pipeline still offer reasons for cautious optimism. Here's how investors should weigh the risks and opportunities.

The CagriSema Stumble: Missed Targets, Market Skepticism

CagriSema, a dual GLP-1/GIP receptor agonist, was expected to deliver a 25% average weight loss in non-diabetic patients—a target it narrowly missed in the REDEFINE 1 trial (22.7% weight loss vs. placebo). Even more concerning, in REDEFINE 2 (patients with type 2 diabetes), it achieved only 15.7% weight loss, falling short of expectations. These results, combined with manufacturing complexities (its dual-chambered pen requires costly production), sparked a 7–10% stock selloff and analyst downgrades.

The disappointment contrasts sharply with Eli Lilly's Zepbound (tirzepatide), which delivered up to 25.1% weight loss in similar trials. Analysts now question whether CagriSema can differentiate itself in a market where efficacy and convenience matter most.

Competitive Pressures: Eli Lilly's Dual Threat

Lilly's Zepbound is already approved for both diabetes and obesity, while its oral GLP-1 agonist Orforglipron (Phase 3 results pending) could further erode NVO's advantage. Orforglipron's 7.9% average weight loss in trials outperformed NVO's oral semaglutide (Rybelsus), which achieved just 6.6%. The shift toward oral therapies—a preference for many patients—adds urgency for NVO to innovate.

Meanwhile, Lilly's CVS Caremark formulary deal (effective July 2025) grants Zepbound preferred access over Wegovy, tilting the competitive landscape in Lilly's favor.

Strategic Setbacks: The Hims & Hers Misstep

NVO's terminated partnership with telehealth firm Hims & Hers, which aimed to boost Wegovy sales, backfired. The collaboration drew scrutiny after reports of illicit sales of compounded generics, damaging NVO's reputation and regulatory standing. This distraction comes as compounded semaglutide, cheaper and widely available, has siphoned demand from branded products.

Valuation: A Mixed Picture Amid Uncertainty

Despite the headwinds, NVO's valuation remains moderate compared to its peak, with a forward P/E of 16.4 (vs. a five-year average of 24) and a P/B ratio of 15.4, reflecting reduced growth expectations. Its EV/EBITDA of 14.3 and strong free cash flow ($12.3 billion) underscore financial resilience.

However, peak sales forecasts for CagriSema have been slashed from $6 billion to $2.5–3 billion, while Lilly's Zepbound is projected to hit $10 billion by 2030. NVO's stock now trades at a 50% discount to its 2024 high, but investors remain wary of execution risks.

Pathways to Recovery: Key Milestones Ahead

1. CagriSema's Regulatory Fate: NVO plans to submit CagriSema for FDA approval in Q1 2026. Success hinges on demonstrating long-term safety (ongoing REDEFINE 3 cardiovascular trials) and efficacy in diabetic patients. A mid-2026 approval could salvage its launch timeline.
2. Oral Semaglutide 25 mg: NVO's NDA for this higher-dose oral formulation (submitted in Q2 2025) could address patient demand for non-injectable options, though it trails Orforglipron's development.
3. Pipeline Diversification: The Mim8 hemophilia treatment and collaborations with Septerna (for oral obesity therapies) aim to reduce reliance on GLP-1 drugs.

Investment Thesis: Hold Until Clarity Emerges

Why Hold?
- Near-Term Risks: CagriSema's uncertain FDA path and competition from Lilly's Zepbound/orforglipron warrant caution.
- Valuation: While NVO's shares are undervalued relative to their peak, the stock's 52-week decline of 50% reflects already-digested pessimism.

Why Not Sell?
- Structural Strengths: NVO's 45% market share in obesity drugs, robust diabetes franchise, and $17 billion in cash provide a safety net.
- Long-Term Market Growth: The obesity drug market is projected to hit $100 billion by 2030, and NVO's manufacturing scale and pipeline depth position it to retain a leadership role.

Final Take

Investors should maintain a hold stance on NVO until Q1 2026, when clarity on CagriSema's FDA submission and competitive dynamics emerges. A shift to buy would require:
1. Positive REDEFINE 11 trial data (testing higher doses).
2. A favorable FDA decision on oral semaglutide.
3. Evidence that NVO can defend its market share against Lilly's innovations.

For now, NVO's story remains one of resilience amid disruption—a stock to watch closely but not rush into.