Will Lower GLP-1 Prices Undermine Novo Nordisk's Near-Term Outlook?

Novo Nordisk NVO is a dominant player in the cardiometabolic space, which markets its blockbuster semaglutide-based (GLP-1) drugs — Ozempic (for type II diabetes [T2D]) and Wegovy (for obesity).

Following President Trump’s comments last month on forthcoming government action to reduce the prices of Ozempic and Wegovy, Novo Nordisk disclosed last week that it has reached an agreement with the U.S. Administration to implement price reductions beginning in 2026. The agreement is designed to broaden access and improve affordability for semaglutide therapies, including Wegovy and Ozempic, across Medicare Part D, Medicaid, and the direct-to-patient cash channel.

These drugs, which currently cost over $1,000 per month, will be priced at $350 through TrumpRx, a federal government website, slated to launch in early 2026, with future oral versions offered at $150 if approved. The Medicare Part D coverage for anti-obesity medicines will be introduced through a new pilot program expected to reach most Part D beneficiaries, while Novo Nordisk will benefit from a three-year tariff exemption. Trump’s negotiated cuts will allow Medicare and Medicaid to pay $245 for Ozempic and Wegovy, enabling coverage of Wegovy and Zepbound, with Medicare patients paying a $50 monthly co-pay.

NVO emphasized that these measures will expand access through improved affordability for semaglutide therapies, particularly authentic Wegovy, within Medicare. Novo Nordisk anticipates a direct, low single-digit negative impact on global sales growth in 2026 as implementation begins, with full financial guidance for 2026 to be provided alongside full-year 2025 results, to be announced on Feb. 4, 2026. The company and the U.S. Administration will now work to finalize the agreement’s operational details.

However, there’s still room for concern. Lower prices for Ozempic and Wegovy also introduce meaningful uncertainty around the long-term economics of GLP-1 development. A mandated pricing reset in the United States, NVO’s most important obesity market, compresses the profitability of its two largest revenue contributors at a time when the company is already contending with slowing demand trends, rising competitive pressure from Eli Lilly LLY, and persistent headwinds from compounded semaglutide alternatives. Against this backdrop, the incremental volumes generated through expanded Medicare coverage may not fully offset the margin erosion expected once price reductions take effect.

These pressures also raise broader concerns about Novo Nordisk’s competitive positioning and its ability to sustain innovation within its core franchises. Following its July 2025 guidance cut and the September restructuring program targeting 9,000 job reductions, the company has already signaled a need to rebalance costs, streamline operations, and refocus capital allocation. A sharp decline in GLP-1 pricing could further strain financial flexibility and, over time, dampen incentives for continued R&D investment in next-generation therapeutics. While the new agreement may expand patient reach, it simultaneously heightens execution risk and adds another layer of uncertainty to NVO’s medium-term growth trajectory.

NVO’s Peers in the Obesity Space

Eli Lilly is Novo Nordisk’s fierce competitor in the diabetes/obesity space, which markets its tirzepatide-based drugs, Mounjaro (T2D) and Zepbound (obesity). Despite being on the market for less than three years, Mounjaro and Zepbound have become LLY’s key top-line drivers. In the first nine months of 2025, the drugs generated combined sales of $24.8 billion, accounting for 54% of Eli Lilly’s total revenues. LLY’s Mounjaro and Zepbound follow a dual mechanism of action as a GIP and GLP-1 RA.

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 RA, VK2735, is being developed both as oral and subcutaneous formulations for the treatment of obesity. In August 2025, VKTX 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. Viking Therapeutics plans to meet with the FDA before this year’s end to discuss the next steps for oral VK2735. Phase III obesity studies with the subcutaneous formulation of VK2735 are currently underway.

NVO Stock’s Price, Valuation & Estimates

Year to date, Novo Nordisk shares have lost 46.9% against the industry’s 6.4% 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 11.80 forward earnings, which is lower than 15.57 for the industry. The stock is trading much below its five-year mean of 29.25.

NVO Stock Valuation

Earnings estimates for 2025 have deteriorated from $3.85 to $3.67 per share over the past 60 days. During the same time frame, Novo Nordisk’s 2026 earnings per share estimates have declined from $3.96 to $3.91.

NVO Estimate Movement

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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