Citi Research has lowered its price target for Danish pharmaceutical company Novo Nordisk (NYSE:NVO) to DKK 296 from DKK 310, citing limited opportunities for operating margin expansion through 2030 despite improving expectations for sales of its oral obesity treatment, Wegovy.
The investment bank maintained its “neutral” rating on the stock following Novo Nordisk’s recent Capital Markets Day, where management indicated that profit margins were expected to remain “broadly stable” over the coming years.
Citi said the outlook reflected continued investment in research and development, which could restrict earnings growth even as the company expands its obesity treatment portfolio and increases production capacity.
Following the update, analysts reduced their adjusted operating profit forecasts for 2028 through 2030 by between 2% and 4%.
The bank also lowered the valuation multiple used in its price target calculation to 14 times projected 2027 earnings, compared with 15 times previously.
Citi revised its expectations for Novo Nordisk’s earnings growth following management’s indication that operating margins would remain relatively unchanged through 2030.
The bank reduced its forecast compound annual growth rate for earnings per share between 2027 and 2030 to 9% from 12%.
The adjustment reflects expectations that increased research and development expenditure will absorb part of the additional revenue generated by the company’s expanding treatment portfolio.
While Novo Nordisk continues to invest in obesity and diabetes therapies, the higher spending requirements could limit improvements in operating profitability.
Citi’s revised forecasts suggest that revenue growth alone may not be sufficient to generate the margin expansion previously anticipated.
However, the bank increased its nearer-term earnings estimates, reflecting more favourable expectations for selected products.
Despite its more cautious long-term assessment, Citi raised its adjusted operating profit forecasts for 2026 and 2027 by between 2% and 3%.
The revisions were supported by expectations of stronger international sales of the oral version of Wegovy and prescription trends for Ozempic in the United States.
Citi increased its adjusted sales forecasts by 3% for 2026 and 1% for 2027.
At its Capital Markets Day, Novo Nordisk indicated that improvements in manufacturing capacity would allow it to introduce the Wegovy pill in at least 20 countries by the end of 2027.
These markets would represent approximately two-thirds of the obesity treatment market currently served by the company.
The expansion is expected to increase the availability of the oral treatment and provide additional opportunities for revenue growth outside the United States.
Citi highlighted the product’s introduction in the United Kingdom, where approximately one million packs have been distributed since July.
Reflecting the stronger launch performance, the bank increased its peak sales forecast for the Wegovy pill to $13 billion from $10 billion.
Novo Nordisk is scheduled to report its third-quarter financial results on November 4.
Citi expects quarterly revenue to exceed the market consensus estimate by approximately 1%, supported partly by sales of the Wegovy pill.
The bank forecasts Wegovy pill revenue of DKK 5.3 billion, approximately 16% above the consensus estimate of DKK 4.5 billion.
However, Citi expects adjusted operating profit to remain broadly in line with market expectations because of pressure on margins from higher research and development expenditure.
The bank forecasts total third-quarter sales of DKK 73.5 billion, representing a decline of approximately 4% at constant exchange rates compared with the corresponding period last year.
Several factors are expected to contribute to the weaker year-on-year comparison.
These include a roughly DKK 3 billion benefit from rebate adjustments and inventory stocking in the previous year’s quarter, alongside continued pricing and prescription pressures affecting certain products.
Citi identified declining US prescriptions for Ozempic as an important factor affecting Novo Nordisk’s near-term performance.
According to the bank, US Ozempic prescription volumes have fallen approximately 15%.
The analysts also pointed to the introduction of generic competitors in Canada and Brazil, alongside declining prices for injectable Wegovy.
These developments are expected to place pressure on revenue growth despite the expanding availability of oral Wegovy.
Citi added that prescription data had not yet demonstrated a meaningful effect from expanded Medicare eligibility for GLP-1 treatments.
The bank’s forecasts therefore reflect a combination of improving sales prospects for the oral obesity treatment and continuing challenges across other parts of Novo Nordisk’s product portfolio.
Citi expects Novo Nordisk’s adjusted operating profit to increase approximately 18% at constant exchange rates in the third quarter.
However, the comparison is affected by DKK 9 billion of restructuring charges recorded in the corresponding period last year.
Excluding those charges from the comparison, Citi estimates that adjusted operating profit would decline by approximately 15%.
The distinction highlights the importance of one-off costs when assessing changes in the company’s underlying profitability.
Citi also forecasts earnings per share under International Financial Reporting Standards (IFRS) of DKK 4.15, representing an 8% decline from the previous year.
The expected reduction is primarily attributed to an impairment charge following the unsuccessful outcome of the ZEUS clinical trial involving ziltivekimab.
The impairment is expected to affect reported earnings, although it does not necessarily reflect the performance of Novo Nordisk’s commercial obesity and diabetes treatments.
Citi said stronger-than-expected sales of the Wegovy pill would be a positive development for Novo Nordisk, but several uncertainties could continue to affect investor sentiment.
The bank highlighted limited visibility over future pricing for injectable Wegovy and increasing competition from pharmaceutical companies developing alternative obesity treatments.
Potential competitors identified by Citi include Eli Lilly’s retatrutide and eloralintide, Roche’s enicepatide, Pfizer’s MET-097i and AstraZeneca’s elecoglipron.
These treatments could increase competition within the obesity market if they successfully complete development and obtain the necessary regulatory approvals.
Their potential impact will depend on clinical results, pricing, availability and patient adoption.
For Novo Nordisk, the expansion of oral Wegovy offers an opportunity to increase treatment accessibility and support sales growth, although continued investment and competitive pressures may constrain profitability.
Citi’s revised price target reflects this balance between improving near-term product expectations and a more limited outlook for margin expansion through 2030.
Novo Nordisk stock price
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