Will Rybelsus' Updated EU Label Propel Fresh Growth Potential for NVO?

Novo Nordisk NVO has secured European approval to update the label of oral GLP-1 drug for type II diabetes (T2D), Rybelsus (oral semaglutide), to reflect cardiovascular benefits demonstrated in the phase IIIb SOUL study. The late-stage study, involving 9,650 patients with T2D and atherosclerotic cardiovascular and/or chronic kidney disease, showed that Rybelsus cut the risk of major adverse cardiovascular events ("MACE") by 14% compared with placebo. With this, Rybelsus becomes the only oral GLP-1 receptor agonist in the European Union with proven cardiovascular benefit, enhancing its competitive position in the T2D market.

The broader strategy behind these updates is clear. Novo Nordisk is working to expand semaglutide’s reach across high-value patient populations to drive growth and counter intensifying competition from arch-rival Eli Lilly LLY and compounded semaglutide alternatives in its largest market, the United States. Lilly’s tirzepatide-based drugs, Mounjaro (for T2D) and Zepbound (for obesity), have captured rapid demand and market share, pressuring NVO’s position in both obesity and diabetes markets.

In the United States, regulators are reviewing a label expansion for Rybelsus to include the cardiovascular indication, with a decision expected later this year. Lilly’s Mounjaro, a weekly injection, is yet to be approved for any cardiovascular indication, which could make Rybelsus a more preferred treatment option for T2D patients. Additionally, oral pills could boost treatment adherence over injections.

Apart from Rybelsus, Novo Nordisk also markets semaglutide as Ozempic and Wegovy injections for diabetes and obesity indications, respectively. The company has been making serious efforts to expand the label of these drugs to broaden its patient reach and drive incremental revenues. Ozempic’s label already includes treatment for diabetes patients with cardiovascular and kidney diseases, while Wegovy has secured approvals in major areas such as MACE, HFpEF, knee osteoarthritis and liver fibrosis.

Novo Nordisk has also filed a regulatory application to the FDA seeking approval of a 25 mg oral formulation of semaglutide (Wegovy pill) for obesity and cardiovascular disease, which could become the first oral GLP-1 therapy for chronic weight management, if cleared. Label expansion is also being sought for Ozempic in treating peripheral artery disease in the United States and the European Union. By broadening indications and introducing new formulations, Novo Nordisk is reinforcing semaglutide’s role as a cornerstone therapy across diabetes, obesity and cardiometabolic diseases, supporting long-term revenue expansion.

Rising Competition for NVO in the Obesity Space

Eli Lilly is Novo Nordisk’s fierce competitor in the diabetes/obesity space. Despite being on the market for less than three years, Mounjaro and Zepbound have become LLY’s key top-line drivers. In the first half of 2025, the drugs generated combined sales of $14.7 billion, accounting for 52% of Eli Lilly’s total revenues.

Several other companies, like Viking Therapeutics VKTX, are also making rapid progress in the development of GLP-1-based candidates in their clinical pipeline. Viking Therapeutics’ dual GIPR/GLP-1 receptor agonist, VK2735, is being developed both as oral and subcutaneous formulations for the treatment of obesity. VKTX recently announced mixed top-line results from a mid-stage study evaluating the safety and efficacy of the oral formulation of VK2735, which caused the stock to drop significantly. Phase III obesity studies with the subcutaneous formulation of VK2735 have also been initiated.

NVO’s Stock Price, Valuation & Estimates

Year to date, Novo Nordisk’s shares have lost 35.3% compared with the industry’s 0.1% decline. 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 13.88 forward earnings, which is lower than 14.78 for the industry. The stock is trading much below its five-year mean of 29.25.

NVO Stock Valuation

Earnings estimates for 2025 have declined from $3.98 to $3.85 per share over the past 60 days. During the same time frame, Novo Nordisk’s 2026 earnings per share estimates have deteriorated from $4.57 to $4.07.

NVO Estimate Movement

The stock’s return on equity on a trailing 12-month basis is 78.64%, which is higher than 34.32% for the large drugmaker industry, as seen in the chart below.

NVO Return on Equity

Novo Nordisk currently carries a Zacks Rank #4 (Sell).

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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