NVO Stock Crashes 22% After 2025 View Cut: More Downside Ahead?

Shares of Novo Nordisk NVO plunged 21.8% on Tuesday after the company sharply lowered its 2025 outlook for both sales and operating profit growth, which will ultimately impact its earnings per share. The drugmaker now anticipates sales to rise 8-14% in 2025, down from its earlier forecast of 13-21%. Similarly, it revised its operating profit growth projection to 10-16%, down from the prior range of 16-24%.

Novo Nordisk cited weaker-than-expected momentum in key markets for its semaglutide-based obesity and diabetes drugs, Wegovy and Ozempic, as reasons for the guidance cut. The revised sales outlook reflects reduced growth expectations in the second half of 2025, largely due to ongoing challenges in the U.S. obesity market where Wegovy is facing persistent use of unsafe, compounded GLP-1 drugs. Despite the FDA’s mass compounding grace period ending in May 2025, Novo Nordisk reports that illegal sales of counterfeit semaglutide products continue under the guise of personalization, undermining Wegovy uptake. In response, the company is pursuing litigation and regulatory action to protect patients and market share.

Wegovy’s penetration in both the cash and insured channels has also lagged behind expectations due to slower market expansion and intensifying competition. While NovoCare Pharmacy and telehealth partnerships have driven some growth, uptake remains limited. Similarly, Ozempic is facing mounting competitive pressure in the U.S. GLP-1 diabetes space. Internationally, although Wegovy launches are progressing, its adoption in certain obesity markets has been slower than anticipated. On the profitability side, Novo Nordisk’s lower operating profit growth reflects the weaker sales outlook, partially offset by reduced spending. The guidance factors in a negative mid-single-digit impact on operating profit growth stemming from the acquisition of the three former Catalent manufacturing facilities.

In the same press release, Novo Nordisk reported preliminary earnings per American Depositary Receipt of 91 cents (DKK 5.96), which missed the Zacks Consensus Estimate of 94 cents. During the same period, the company’s sales increased 18% at constant exchange rate (CER). On the other hand, operating profit increased 40% at CER in the second quarter of 2025, primarily driven by the ocedurenone impairment charge recognized in the year-ago period. Novo Nordisk is slated to release detailed second-quarter results on Aug. 6.

Competition Heating Up in the Obesity Space

Eli Lilly LLY is Novo Nordisk’s fierce competitor in the obesity space, which markets its tirzepatide medicines as Mounjaro for diabetes and Zepbound for obesity. Despite being on the market for less than three years, both drugs have become Lilly’s key top-line drivers. In the first quarter of 2025, they generated combined sales of $6.15 billion, accounting for around 48% of Lilly’s total revenues. LLY is scheduled to release second-quarter earnings results on Aug. 7.

Several other companies, like Viking Therapeutics VKTX, are also making rapid progress in the development of GLP-1-based candidates in their clinical pipeline. Recently, Viking Therapeutics started two late-stage studies evaluating the subcutaneous formulation of its investigational obesity drug, VK2735. A mid-stage study is currently ongoing, evaluating an oral version of this obesity drug, with a data readout expected later this year.

NVO’s Stock Price, Valuation & Estimates

Year to date, Novo Nordisk shares have lost 37.3% against the industry’s 0.9% growth. The company has also underperformed the sector and the S&P 500 during the same time frame, as seen in the chart below.

NVO Stock Underperforms the Industry, Sector & the S&P 500

Novo Nordisk is trading at a discount to the industry, as seen in the chart below. Going by the price/earnings ratio, the company’s shares currently trade at 12.49 forward earnings, which is lower than 15.11 for the industry. The stock is also trading much below its five-year mean of 29.25.

NVO Stock Valuation

Earnings estimates for 2025 have improved from $3.84 to $3.98 per share over the past 60 days. During the same time frame, Novo Nordisk’s 2026 earnings per share estimates have declined from $4.64 to $4.56.

NVO Estimate Movement

The stock’s return on equity on a trailing 12-month basis is 80.95%, which is higher than 33.55% for the large drugmaker industry, as seen in the chart below.

NVO Return on Equity

Novo Nordisk currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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