Novo Nordisk's GLP-1 Market Challenges and Strategic Resilience: Assessing the Long-Term Investment Potential Amid Competitive Dynamics

In the fiercely contested GLP-1 obesity drug sector, Novo Nordisk has faced a turbulent 2025 marked by supply constraints, aggressive competition, and market share erosion. Yet, beneath the short-term turbulence lies a company with a proven track record of innovation and resilience. For long-term investors, the key question is whether Novo can reassert its dominance in this $100 billion+ market by 2030—or if its near-term challenges signal a structural shift in the industry.

The Erosion of Market Dominance

Novo Nordisk's GLP-1 market share declined from 69% in Q2 2024 to an estimated 45–50% by Q2 2025, as Eli Lilly's Zepbound and Mounjaro surged ahead. Zepbound, in particular, has become a blockbuster, achieving 140% quarterly sales growth and securing a 21% weight loss efficacy edge over Wegovy's 15%. This performance gap has not only shifted physician prescribing habits but also patient preferences, with Lilly's lower pricing and direct-to-consumer strategies amplifying its reach.

Compounding pharmacies further exacerbated Novo's woes, flooding the market with unapproved semaglutide knockoffs. Despite the FDA's May 2025 crackdown on mass compounding, Novo's CFO admitted these alternatives continued to erode Wegovy's sales, contributing to a 13% sequential decline in Q1 2025. Meanwhile, Lilly's tirzepatide-based drugs and its upcoming oral GLP-1, orforglipron, have positioned the company to dominate the next phase of the market.

Strategic Resilience: Innovation and Production Scaling

Novo's response to these headwinds has been twofold: innovation and capacity expansion. The company submitted an FDA application for an oral Wegovy variant in February 2025, aiming to compete with Lilly's oral pipeline. Additionally, Novo's $4.1 billion U.S. manufacturing plant, expected to come online in late 2026, will significantly boost production capacity, addressing the supply bottlenecks that plagued 2024–2025.

The company has also leveraged partnerships to regain formulary access. Its collaboration with CVS Health to secure preferred status for Wegovy on the national template formulary is a critical move, as it reduces patient out-of-pocket costs and improves access. However, these efforts are playing catch-up in a market where Lilly has already established a first-mover advantage.

Long-Term Investment Considerations

For investors, the critical variables are product differentiation, regulatory tailwinds, and global obesity market expansion. Novo's Wegovy and Ozempic remain foundational assets, with Wegovy's potential MASH (metabolic dysfunction-associated steatohepatitis) indication—a $15 billion opportunity—adding long-term upside. Ozempic's diabetes segment also offers stability, with 19% YoY sales growth in Q1 2025.

However, Novo's innovation cycle lags behind Lilly's. While Lilly's tirzepatide and orforglipron are in late-stage trials, Novo's oral Wegovy faces an uncertain approval timeline. If Novo fails to match Lilly's pace in next-gen therapies, its market share could continue to slip.

Risks and Opportunities

Risks:
- Supply chain delays: The new U.S. plant's delayed ramp-up could widen the gap with Lilly.
- Regulatory hurdles: Delays in MASH or oral Wegovy approvals could stall growth.
- Pricing pressures: Intensifying competition may force Novo to further cut prices, squeezing margins.

Opportunities:
- Global obesity expansion: With 1 billion people worldwide living with obesity, Novo's international rollout of Wegovy remains untapped.
- MASH indication: Approval could unlock a new revenue stream and differentiate Wegovy from competitors.
- Oral GLP-1s: If Novo's oral Wegovy gains approval, it could recapture market share from Lilly's orforglipron.

Investment Thesis

Novo Nordisk is a high-conviction, long-term play for investors who believe in the company's ability to innovate and scale. While its 2025 challenges are real, the obesity drug market is structurally expanding, and Novo's $4.1 billion manufacturing investment and MASH pipeline provide catalysts for a rebound. However, the stock is currently undervalued relative to its peers, with a P/E ratio of 32x versus Lilly's 45x, reflecting market skepticism.

Recommendation:
- Buy for investors with a 3–5 year horizon who are comfortable with near-term volatility.
- Hold for those seeking a more defensive play, given the competitive intensity.
- Avoid if Lilly's product pipeline and market share gains accelerate beyond expectations.

In conclusion, Novo Nordisk's GLP-1 challenges are significant but not insurmountable. The company's resilience lies in its deep expertise in chronic disease management, a robust R&D pipeline, and a commitment to scaling production. For long-term investors, the key is to balance patience with vigilance, monitoring both regulatory developments and the pace of innovation in this rapidly evolving sector.