After a brutal 52% slide this year (not helped by a surprise profit warning last week), Novo Nordisk (NYSE:NVO) is struggling to regain its footing.
Wednesday’s second-quarter results confirmed the picture: rising competition in the weight-loss market is hitting margins, with Eli Lilly’s Mounjaro and cheaper compounded copycats in the US putting the squeeze on Wegovy and Ozempic sales.
Yet Goldman Sachs believes the long-term picture may be less grim than it looks right now.
In a research note published following the earnings update, Goldman acknowledged the “intensifying competitive dynamics” in both the US and global obesity markets.
This includes not only branded rivals but also pharmacy-made versions of Novo’s GLP-1 drugs, which are gaining traction due to their lower cost.
These headwinds are real, and they’ve dented sales momentum, particularly in the US. However, Goldman stresses that these risks are “more than reflected in the current share price”.
Goldman’s bull/bear scenario analysis offers some perspective. In the bearish case, where US competition drives down market share and pricing power, fair value is around DKK 400 per share.
Let's start with the bear scenario, which is stark. Goldman says if Novo’s challenges persist and the market treats it as a ‘loss of exclusivity’ (LoE) stock, meaning minimal growth prospects, the valuation could sink to DKK 250 per share.
At a 10x price-to-earnings multiple or a 5% dividend yield, that scenario implies a further 20% downside from today’s already depressed share price levels.
But the bull scenario provides some optimism, with Goldman seeing potential upside to between DKK 425 and DKK 480 per share.
In this more favourable case, Novo successfully stabilises pricing pressure, defends market share, and executes effectively on its pipeline. That would represent a gain of between 35% and 50% from current levels.
In afternoon trading, the stock was down 2.5% at 298.30.