Nordisk to downgraded by leading investment bank as growth slows and competition intensifies

UBS has downgraded Novo Nordisk (NVO) from 'buy' to 'neutral', significantly cutting its price target to DKK340 from DKK600, citing a sharp slowdown in GLP-1 growth to an anticipated 6% in the second half from 18% in the first. The downgrade reflects intensifying competition from Eli Lilly, particularly Mounjaro's market share gains in the US, plateauing Ozempic sales, and persistent pricing pressures. While UBS forecasts 6.2% annual sales growth through 2030, it warns of margin pressure from US Medicare reforms, leading to Novo Nordisk shares falling DKK1.10.

Analysis

UBS has downgraded Novo Nordisk (NVO) to 'neutral' from 'buy', executing a significant price target reduction to DKK340 from DKK600, reflecting a deteriorating outlook for its core GLP-1 franchise. The primary driver for the downgrade is a projected sharp deceleration in sales growth to just 6% in the second half of the year, a stark contrast to the 18% growth recorded in the first half. This slowdown is attributed to intensifying competition, specifically from Eli Lilly's Mounjaro, which is eroding NVO's market share in the critical US market. Furthermore, sales of the flagship diabetes drug Ozempic appear to have plateaued, while the cash-pay opportunity for the Wegovy obesity treatment is being constrained by the wide availability of compounded GLP-1 products, a situation not expected to be resolved by near-term US regulatory action. While UBS projects modest long-term growth—6.2% in annual sales and 7.3% in EPS through 2030, with the latter propped up by share buybacks—it also flags significant headwinds, including margin pressure from upcoming US Medicare reforms and uncertainty surrounding the impact of a new CEO.

Key Decisions for Investors

• Investors should re-evaluate their investment thesis, as the projected deceleration in GLP-1 sales growth and plateauing Ozempic revenue challenge the narrative of unchecked market dominance.
• Closely monitor competitive dynamics and market share data, particularly the performance of Eli Lilly's Mounjaro in the US, as this is a key driver of the revised, more cautious outlook.
• Factor in the new valuation context, as the aggressive price target cut to DKK340 suggests significantly limited upside potential and a recalibration of long-term earnings potential.
• Be aware of emerging margin pressures from US Medicare price reforms and the continued impact of compounded drugs, which represent tangible risks to future profitability.