Novo Nordisk: Strong Fundamentals and Analyst Upgrade Signal Potential Upside

Novo Nordisk is deeply undervalued despite stellar fundamentals: 18% sales growth, a 29% OP jump, and a rock-solid balance sheet.

Novo Nordisk Posts Robust Growth as Analysts Re-evaluate Valuation

Novo Nordisk (NVO), a dominant player in the Healthcare Sector, has reported significant financial growth for the first half of 2025, prompting an analyst upgrade that suggests the company's stock may be currently undervalued despite recent market turbulence. The Danish pharmaceutical giant demonstrated strong operational performance across key metrics, even as it navigates challenges related to market competition and supply.

First Half 2025 Performance Highlights

For the first six months of 2025, Novo Nordisk achieved an 18% sales growth at constant exchange rates (CER), with sales reaching DKK 154.9 billion. Operating profit (OP) saw an even more substantial increase of 29% at CER during the same period. Net profit rose 22% to DKK 55.5 billion, and diluted earnings per share advanced 23% to DKK 12.49. The company maintained a robust gross margin of 83.4%, while its operating margin expanded to 46.6%. Research and Development (R&D) spending, however, decreased by 11% to DKK 21.998 billion.

This growth was primarily propelled by the Diabetes and Obesity Care segment, which recorded a 16% sales increase in Danish kroner, reaching DKK 145.4 billion (18% at CER). Within this segment, Obesity care emerged as a significant driver, experiencing a 58% growth at CER, achieving DKK 38.8 billion. GLP-1 diabetes sales also contributed positively with a 10% increase at CER, and rare disease sales grew by 15% at CER. For the second quarter of 2025, Novo Nordisk reported earnings of 97 cents per American Depositary Receipt (ADR), surpassing the Zacks Consensus Estimate of 93 cents. However, total revenues of $11.68 billion, despite an 18% increase at CER, marginally missed the Zacks Consensus Estimate of $11.79 billion.

Revised Full-Year Outlook and Market Headwinds

Despite the strong performance in the first half of 2025, Novo Nordisk has adjusted its full-year outlook for 2025. Sales growth is now anticipated to be between 8-14% at CER, a reduction from the previous forecast of 13-21%. Similarly, operating profit growth is projected to be 10-16% at CER, down from the earlier estimate of 16-24%. This revision is primarily attributed to lower growth expectations for the second half of 2025, mainly due to the persistent use of compounded GLP-1 alternatives and a slower-than-expected market expansion in the U.S. Novo Nordisk CEO Lars Fruergaard Jørgensen acknowledged that the rapid expansion of compounding in the U.S. has affected the penetration of branded GLP-1 treatments. The company is actively engaged in efforts to prevent unlawful and unsafe compounding practices and to broaden patient access to its GLP-1 treatments, including pursuing litigation to protect patients from "knockoff 'semaglutide' drugs."

Analyst Upgrade Amidst Undervaluation Thesis

Investment bank Bernstein recently upgraded Novo Nordisk to an "outperform" rating from "market perform," citing the market's oversight of the Danish drugmaker's significant potential in obesity treatments. Despite the stock's notable decline of approximately 40% year-to-date relative to the pharmaceutical sector and a 60% drop from its all-time high in June 2024, Bernstein analysts believe the stock is undervalued. This re-evaluation by Bernstein, which set a new price target of DKK 540 (representing a 54% upside from its September 5 close), is predicated on several future catalysts.

Analysts attributed the prior stock decline to softer Wegovy sales, heightened competition from Eli Lilly, and two profit warnings earlier in 2025. However, Bernstein anticipates a rebound in Wegovy prescriptions in the U.S. in 2026, contingent on a ban on copycat semaglutide products from compounding pharmacies. These unauthorized products currently constitute a significant portion of the U.S. obesity market. Furthermore, the expected U.S. approval of oral semaglutide by the end of 2025 and its subsequent launch in 2026 are projected to significantly expand Novo Nordisk's product portfolio and revenue streams.

Strategic Position and Future Growth Drivers

Novo Nordisk maintains a dominant global market position, holding 51.1% of the U.S. GLP-1 drug market and 71% internationally. Wegovy, a key product in obesity care, demonstrated a 75% sales growth in Q2 2025, although its trajectory was impacted by the availability of compounded versions in the U.S. The market for GLP-1 medications is projected to reach $100 billion by 2030, with the obesity market alone potentially reaching $130 billion at peak, positioning Novo Nordisk as a central player in this expanding sector.

The company is also actively advancing its R&D pipeline, including the progression of subcutaneous and oral amycretin into phase 3 development for weight management, further diversifying its offerings beyond semaglutide-based treatments. Bernstein analysts project Novo Nordisk's earnings to grow at 12% annually between 2025 and 2030, surpassing the pharmaceutical sector average, underpinned by stronger contributions from new products like CagriSema and Amycretin, which are expected to reduce reliance on semaglutide generics post-2031/32.

Analyst Outlook

"Novo has underperformed the Pharma sector by c.40% year to date, and the shares are down 60% from the alltime high in June 2024," Bernstein analysts noted, while also stating, "Our new PT of DKK540 implies >50% upside." They further highlighted that the market for GLP-1s is poised for substantial growth and that the expected ban on copycat products could significantly boost Wegovy sales.

Key Factors for Investors

Looking ahead, investors will closely monitor several key factors. The enforcement and impact of potential bans on compounded semaglutide products in the U.S. will be crucial for Wegovy's market performance. The regulatory approval and successful launch of oral semaglutide will be another significant catalyst. Furthermore, the progress of Novo Nordisk's pipeline, particularly new products like CagriSema and Amycretin, will be vital in sustaining long-term growth and mitigating future generic competition. Despite recent headwinds, Novo Nordisk's strong fundamentals and leading position in a rapidly expanding market suggest a potential for continued appreciation as market conditions evolve and new strategies take hold. The company's efforts to combat unlawful compounding and expand patient access to its branded treatments will also be under scrutiny.

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[1] Novo Nordisk (NVO): Priced Like Best Days Are Over (Upgrade) | Seeking Alpha[2] Novo Nordisk's sales increased by 16% in Danish kroner and by 18% at constant exchange rates to DKK 154.9 billion in the first six months of 2025 - BioSpace[3] Discovery Group delivers strong annual performance as it enters a distinct new growth phase with two well defined operational composites - FAnews

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