Danish drugmaker Novo Nordisk A/S (CPH: NOVO-B) lost more than 10% last week after its US rival Eli Lilly & Co (NYSE: LLY) reported encouraging Phase 3 data for its oral weight-loss treatment.
Lilly’s orforglipron demonstrated “statistically significant efficacy results and a safety profile consistent with injectable GLP-1 medicines” in the late-stage clinical trial.
Investors bailed on Novo Nordisk shares in response as Lilly’s update stretches its lead in the anti-obesity market that many believe could be worth $100 billion over the next few years.
NVO is now down nearly 35% versus its year-to-date high in early March.
Novo Nordisk stock may be fairly valued at $64
Eli Lilly’s orforglipron news also made BMO analysts downgrade NVO stock to “market perform” last week.
The investment firm slashed its price target on Novo Nordisk shares from $105 to $64 only that no longer translates to a meaningful upside from current levels.
According to BMO analysts, “key updates from Lilly’s oral GLP-1 are likely to pressure shares, only to be compounded by what we believe to be a softer 1Q.”
Note that Eli Lilly stock has already outperformed Novo Nordisk by a mile over the past 12 months. LLY is currently down just 13% versus its 52-week high while NVO has lost more than 70% since July of 2024.
NVO topped Street estimates in its fiscal Q4
BMO turned more dovish on the Danish drugmaker last week as “obesity competitor Lilly has made sizable advancements in its commercial and clinical portfolio, causing it to overtake Novo’s early lead.”
NVO shares have failed to impress in recent months even though its net profit came in well above expectations in its latest reported quarter.
In February, the pharmaceutical giant said its net profit increased by 29% on a year-over-year basis to $3.98 billion in Q4.
Concerns that it’s losing to Eli Lilly & Co in the weight-loss market have kept investors on the sidelines despite a healthy dividend yield of 2.86% that’s tied to Novo Nordisk at writing.
Should you invest in NVO shares today?
Lilly’s orforglipron news is significant for Novo Nordisk as its weight-loss drug, Wegovy, has been generating much of the strength in its financials.
In its fiscal fourth quarter, the European behemoth saw its Wegovy sales more than double to $2.76 billion.
Analysts, however, had called for north of $3.0 billion instead.
At the time, Lars Fruergaard Jørgensen, the chief executive of NVO said in a CNBC interview that “we can compete in the US market with tablet-based treatment before Lilly can launch.
Investors should also note that BMO has a bit of a contrarian view on the pharma stock.
The consensus rating on NVO still sits at “overweight” with the mean target of $108 indicating potential upside of some 80% from current levels.
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