Is Novo Nordisk's Next Generation Obesity Pipeline a Game Changer?

Novo Nordisk NVO has seen strong momentum in recent years, driven by the commercial success of its blockbuster semaglutide products, Wegovy (obesity) and Ozempic (diabetes). Building upon this success, NVO is developing several next-generation candidates in its pipeline, especially targeting the lucrative U.S. market.

The most advanced candidate in Novo Nordisk’s pipeline is CagriSema, a fixed-dose combination of a long-acting amylin analogue and Wegovy. CagriSema met the primary endpoint of statistically significant weight loss in two late-stage studies. The company is already planning its regulatory submission in 2026. Novo Nordisk is also developing an early-stage candidate, Amycretin, a unimolecular GLP-1 and amylin receptor agonist, which had outperformed Wegovy in a phase I study.

Novo Nordisk has also been pursuing licensing deals and acquisitions to further expand its obesity pipeline. In 2023, it acquired Inversago Pharmaceuticals, which added a small-molecule oral CB1 inverse agonist, monlunabant, to its pipeline. Recently, Novo Nordisk signed a $2.2 billion deal with Septerna for developing and commercializing oral small-molecule medicines for treating obesity, type II diabetes (T2D) and other cardiometabolic diseases.

Competition Heating Up in the Obesity Space

Eli Lilly LLY is NVO’s fierce competitor in the obesity space, which markets its tirzepatide medicines as Mounjaro for T2D and Zepbound for obesity. Like NVO, LLY is also evaluating several next-generation weight loss candidates. Lilly recently reported first phase III success of its oral GLP-1 candidate, orforglipron, which showed significant weight reduction potential in the late-stage study. Regulatory filings for orforglipron are planned in 2025 and 2026.

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 initiated a mid-stage study on the oral formulation of the candidate earlier this year and is on track to start the late-stage study on the subcutaneous version soon.

NVO’s Stock Price, Valuation, Estimates

Year to date, Novo Nordisk shares have plunged 15.5% compared with the industry’s decline of 2.3%. The company has also underperformed the sector and the S&P 500 during the same time frame, as seen in the chart below. The stock is currently trading above its 50-day moving average, but below its 200-day moving average.

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

Novo Nordisk is trading at a premium to the industry, as seen in the chart below. Going by the price/earnings ratio, the company’s shares currently trade at 17.37 forward earnings, which is higher than 14.95 for the industry. However, the stock is trading much below its five-year mean of 29.25.

NVO Stock Valuation

Earnings estimates for 2025 have improved from $3.80 to $3.84 per share over the past 60 days. During the same time frame, Novo Nordisk’s 2026 earnings per share estimates have improved from $4.60 to $4.64.

NVO Estimate Movement

The stock’s return on equity on a trailing 12-month basis is 80.95%, which is higher than 33.56% 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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