Novo Nordisk: Undervalued Pharma Heavyweight With Upside Potential

The GLP-1 drug market has become a battleground for pharma giants, with Novo Nordisk (NVO) facing intense pressure from Eli Lilly (LLY) and emerging threats like Roche. While Novo's U.S. market share in the weight loss segment has dipped to 43% in 2025 from 69% in 2024, the company's long-term moat—built on decades of diabetes expertise and a robust pipeline—suggests it's far from finished. For investors, the key lies in separating near-term headwinds from the enduring strengths of a company that still commands 30% of the global diabetes market.

Strategic Differentiation: Beyond Semaglutide

Novo's core strength has always been its ability to innovate within the GLP-1 space. While Eli Lilly's Zepbound (tirzepatide) has outperformed Wegovy with 21% weight loss in trials, Novo is pivoting to combination therapies to reclaim its edge. Its dual GLP-1/amylin analog, CagriSema, and unimolecular Amycretin are in late-stage trials, offering the potential for superior efficacy and reduced side effects. These next-gen therapies could differentiate Novo from competitors relying on single-hormone agonists.

Moreover, Novo's recent $16.5 billion investment in manufacturing—bolstered by the acquisition of Catalent—positions it to scale Wegovy production to 100 million doses annually by 2026. This addresses a critical weakness: supply shortages that allowed Lilly to capture market share. By 2026, Novo could regain pricing power and distribution dominance, especially as compounded semaglutide alternatives (which eroded its margins in 2025) face regulatory scrutiny.

Long-Term Moat Resilience

Novo's moat isn't just its blockbuster drugs; it's its ecosystem. Ozempic and Wegovy have become cultural touchstones, with brand loyalty that transcends clinical data. Meanwhile, its diabetes franchise remains a cash cow, generating $18 billion in annual revenue. This financial flexibility allows Novo to fund R&D and manufacturing expansions without overleveraging.

The company's pipeline also includes an oral semaglutide application submitted to the FDA in February 2025, addressing patient demand for non-injectable options. While Lilly's Mounjaro (injectable) and potential oral formulations from others are competitive, Novo's first-mover advantage in semaglutide gives it a head start in optimizing delivery methods.

Near-Term Headwinds: Patents and Pricing Pressures

The risks are real. Wegovy's U.S. patent expires in 2026, opening the door for generics. Medicare's “Most Favored Nation” pricing model could further compress margins. However, Novo's global dominance in diabetes and its expanding obesity portfolio (with 10+ GLP-1 candidates in development) provide a buffer. Even if Wegovy faces generic competition, Novo's next-gen therapies and oral options could sustain its revenue stream.

Investment Thesis: Buy the Dip, Not the Fire Sale

Despite a 13% Q1 2025 revenue decline and a revised 8–14% growth outlook, Novo's fundamentals remain intact. Its P/E ratio of 32x (as of August 2025) is a discount to Lilly's 45x, reflecting market skepticism. Yet, Novo's $16.5 billion manufacturing investment and $2.5 billion R&D budget signal confidence in long-term growth.

For investors, the key is patience. Novo's strategic moves—scaling production, advancing combination therapies, and securing oral delivery—position it to reclaim market share by 2027. While Lilly's current dominance is undeniable, Novo's moat in diabetes and its ability to iterate on GLP-1 science give it a unique edge.

Bottom Line: Novo Nordisk is a classic case of a “buy the dip” opportunity. The company's near-term challenges are well-documented, but its long-term vision—anchored in innovation and scale—makes it a compelling hold for investors with a 3–5 year horizon.