Novo Nordisk has ridden the GLP 1 wave harder and longer than any other drug maker. Shares more than doubled between 2020 and late 2023 as Ozempic rewrote the diabetes playbook and Wegovy opened an obesity market that had never really existed. Then the stock pulled back: first on worries that Lilly’s tirzepatide would steal the crown, later when Washington floated Medicare price talks, and finally when compounding pharmacies siphoned away prescriptions during a U.S. supply crunch. That drawdown carved roughly one fifth off the peak, creating a fresh entry for investors who missed the boat. Can Novo keep its metabolic franchise growing at a double digit rates even as rivals, payers, and regulators circle the prize?
Obesity Demand Still Outruns Supply
The addressable market for medical weight loss looks less like a niche and more like a new therapeutic pillar. Roughly 110 million U.S. adults meet Wegovy’s label, and less than 2 % of them are on treatment. Globally the gap is even wider. Every time production expands, back orders soak up the added vials within weeks. Management thought it could solve shortages by late 2024, but demand kept racing ahead; only this spring did the FDA finally remove semaglutide from its drug shortage list, and that ruling simultaneously cut off the legal basis for most compounded knock offs. In effect, Novo inherits a larger, cleaner market just as its Catalent fill finish plants come online.
Cardiologists are helping the snowball.
In 2023 the SELECT trial showed that weekly Wegovy lowered heart attack and stroke risk by 20 % in overweight adults with prior cardiac events. U.S. labeling added that benefit in March, giving physicians a hard clinical outcome—not just shrinking waistlines—to argue for coverage. Insurers that long kept obesity drugs at arm’s length are re running their models; weight management suddenly looks cheaper than a lifetime of stents and admissions. Europe is following, though clawbacks and reference pricing will cap margins there. Even so, the pie is too big to ignore. If just 10% of eligible U.S. patients start therapy by 2030 and Wegovy keeps half the share, Novo books well above $30 billion in annual obesity revenue, compared with under $10 billion today.
Building the Second Wave
Reliance on one molecule carries risk, and Novo is attacking that with a layered pipeline. Higher dose semaglutide (7.2 mg) trimmed 21 % of body weight over 72 weeks in STEP UP, matching tirzepatide’s best real world numbers but with the safety history doctors already know. CagriSema—the fixed dose mash up of semaglutide and amylin analog cagrilintide—pushed average loss above 23 % in Phase III, approaching bariatric surgery territory while preserving lean mass. Regulatory filings start next year; if approved, the combo will reset patent clocks into the mid 2030s and give physicians a one two signal path when single agent Wegovy stalls.
Oral options are meant to widen the funnel. A 25 mg tablet achieved 16 % weight reduction in OASIS 4. That is lower than the injectables but high enough to draw needle averse patients—and easier for primary care doctors to dispense. Management expects an FDA decision around New Year’s. A daily pill that doubles as cardioprotection could be a blockbuster on its own even if it cannibalizes a slice of injectable sales.
Farther back, Novo is running two tri agonists (GLP 1/GIP/glucagon) through Phase I, plus siRNA programs that silence appetite related genes. Those exotic shots on goal matter more after 2031, when U.S. semaglutide patents begin to expire. Today’s cash is being used to fund tomorrow’s moat, and management is leaning into discovery spend: R&D climbed 19 % year over year, outpacing sales for the first time in a decade.
Competitive Heat, But A Wide Track
Eli Lilly will stay the toughest rival. Tirzepatide owns the only head to head victory over semaglutide, and Lilly’s supply lines are catching up fast. A triple agonist (retatrutide) and an oral GLP 1 (orforglipron) sit in late stage trials. Yet market math still favors both titans. Even if Lilly snags 45 % worldwide share by 2028, Wegovy’s volume can climb because total demand may quadruple. Novo’s edge outside the U.S. also should not be discounted: it knows the tender systems, it fields culturally tailored patient support programs, and it already sells injected GLP 1s in about 90 countries versus Lilly’s roughly 50.
Generic pressure arrives first in Canada and China next year when key semaglutide patents lapse. Management treats those regions as test labs: expect rapid shift to oral or combo versions that still carry protection, plus price reductions to stay competitive if copycats price aggressively. Losses in these smaller markets can be offset by richer U.S. growth and new indications such as fatty liver disease, where the ESSENCE trial put Wegovy on track for an FDA decision late this year.
Capex Surge, Balance Sheet Stays Bulletproof
First quarter numbers underline the operating muscle. Sales rose 18 % at constant currency while operating profit gained 20 %; gross margin stayed above 83 %. More revealing is cash: DKK 24.6 billion in operating inflow against DKK 13.4 billion of capex, leaving DKK 9.5 billion of free cash even during the heaviest buildout in company history.
Full year capex will approach DKK 65 billion, roughly $9.5 billion, as new facilities in Denmark, France, North Carolina, and Indiana push capacity beyond 2030 demand curves. The board suspended buybacks to fund that growth but kept an 11 % dividend hike, yielding about 2 %. Once the brick and mortar phase rolls off late next year, free cash flow should rebound above DKK 75 billion and buybacks can restart.
Novo runs with little leverage: net debt to EBITDA sits below 0.5x despite the $16 billion Catalent deal—executed through the Novo Holdings vehicle to shield corporate balance sheets. Interest coverage is north of 40x, so interest rate fluctuations are barely noticeable. That fortress balance buys room if the FDA or Europe demands post marketing cardiovascular or cancer studies, a possibility whenever weight loss drugs go mainstream.
Pricing Clouds Are Drifting, Not Storming
Political risk in the U.S. has become a ritual headline. Semaglutide landed on Medicare’s negotiation list for 2026, but only the diabetes dose qualifies under the Inflation Reduction Act; Wegovy for obesity is excluded unless legislators change rules. Ozempic’s gross to net spread already runs near 50 %, so the eventual discount may be less dramatic than the talking points suggest. Meanwhile, broader obesity coverage would enlarge revenue even at a lower price per script. Employers have begun to see real productivity gains when workers drop 15 % of their weight, and many are considering adding GLP 1s to formularies despite the sticker shock. If Congress forces Medicare to cover obesity drugs—a change backed by dozens of medical societies—volume upside could outweigh margin compression.
A Valuation That Still Has Air
At roughly 16x forward 2025 earnings Novo looks neither cheap nor stretched on absolute terms, but context matters. Growth forecasts call for a 20 % EPS compound through 2027, putting the PEG ratio at 1.3x, a discount to the S&P 500 and less than half of Lilly’s. Even assuming revenue growth slows to 12% after 2028, a terminal multiple of 20x seems reasonable. Discounting back, the current value works out to around $110 per ADR, which is about 60% higher than recent figures.
Downside looks cushioned. The stock cratered 30 % during the pandemic crash when nobody knew if patients could reach clinics; a repeat seems unlikely with telemedicine entrenched and open supply lines. A bigger threat is an unexpected safety scare, but more than 50 million patient years across diabetes and obesity make that tail risk fade each quarter. Competitive mis execution would hurt, yet CagriSema’s Phase III results de risk the pipeline in advance of tirzepatide’s follow ons.
Verdict
The market has begun to treat Novo Nordisk like a mature pharmaceutical house, but its core products are still early in the adoption S curve. Capacity expansion, label wins, and pipeline readouts form a relay that can keep top line growth running well above the industry mean into the next decade. Most valuation frameworks still anchor on a diabetes drug multiple, ignoring the structural shift that obesity creates. Because supply is only now catching up to demand, the next two years should deliver both revenue acceleration and operating leverage, resetting earnings baselines higher. That dynamic, plus a cleaned up U.S. prescription channel after the compounding crackdown, sets the stage for renewed multiple expansion.
Investors willing to ride volatility should view today’s pause as opportunity rather than warning. The story is not without risks—chiefly competitive erosion and evolving reimbursement—but none appear fatal to the thesis. On balance, the blend of growth, cash generation, and a still moderate valuation supports a Strong Buy for those comfortable with regulatory noise. Novo Nordisk remains at the heart of a medical transformation that is accelerating, and the stock price has yet to reflect the full length of that runway.