Novo Nordisk: Oral Drugs Drive Short-term Optimism, Long-term Valuation Still Expensive

Overview

This report reviews Novo Nordisk (Novo Nordisk) Q1 2026 performance and updates its medium-to-long term outlook. Morgan Stanley believes that although the company's 2026 near-term fundamentals are improved by strong prescriptions of Wegovy oral tablets (Wegovy Pill) in the US, and full-year guidance is on the conservative side, it is expected to be further upgraded in coming quarters; however, in the medium-to-long term, the company faces slowing sales growth (forecast growth of only 2-4% for 2027-2029), Semaglutide patent expiration (LOE), and fierce challenges from competitors such as Eli Lilly. Given the current valuation is approximately 14 times the 2026 EPS, higher than its expected low single-digit growth and long-term uncertainty, the institution maintains an "Equal-weight" (Equal-weight) rating, target price set at 250 Danish Kroner (approximately $40 USD).

Core views

Short-term momentum and guidance: The report confirms Novo Nordisk FY2026 guidance is relatively conservative, expecting the company to fall within the upper half of the 2026 sales/EBITDA guidance. Core drivers come from the US market Wegovy oral tablets, despite facing competition from Eli Lilly Foundayo launch, Wegovy oral prescription volume showed strong performance in early launch period, and rebounded in the last two weeks. Institutions forecast 2026 Wegovy oral tablet sales in the US will reach $2.1 billion. In addition, with patients transitioning to higher doses (9mg/25mg), average selling price is expected to rise. Medium-long term growth slowdown and competitive landscape: Outlook 2027-2029, the report forecasts Novo Nordisk sales CAGR will only be 2-4%. This slow growth is mainly constrained by: 1) Continued decline in US Ozempic prescription volume, market share constantly eroded by Eli Lilly's Mounjaro/Zepbound, and new generation diabetes drug CagriSema will not launch before 2028; 2) Outside US, Zepbound will continue to dominate the injectable weight loss market, Eli Lilly Foundayo global rollout will also drag down Novo Nordisk's overseas growth; 3) Canada market has seen generic drugs (Dr Reddy's and Apotex approved), Canada region revenue in 2027 is expected to fall 17%. Valuation and long-term uncertainty: The report points out that market consensus may overestimate the tail revenue of semaglutide after patent expiration. Considering potential patent expiration risks in Europe in 2031 and US in 2032, price pressure, and brand competition from new entrants, Novo Nordisk's current valuation is not cheap. Current stock price corresponds to approximately 14 times 2026 PE ratio, while the institution's target price implies approximately 12 times PE ratio for 2026-2028, even at this level, significantly higher than peer pharmaceutical companies facing similar patent expiration (such as GSK 10x, Sanofi 8.5x).

Analysis framework

The institution adopted an analysis framework combining top-down and bottom-up. First, analyze short-term product momentum by tracking IQVIA prescription data (TRx), especially the prescription trend comparison between Wegovy oral and competitor Foundayo, as well as the proportion of patients transitioning to high doses, to correct short-term revenue forecasts. Second, use supply-demand and competitive landscape analysis to assess the potential boost in sales from the opening of US Medicare obesity coverage policy (July 2026), and the squeezing effect of new products launched by Eli Lilly on market share. Finally, at the valuation level, adopt DCF cash flow discount model (WACC 7.5%, perpetual growth rate 1%) combined with relative valuation method (P/E multiple comparison), compare Novo Nordisk's growth expectations with peers and historical valuation intervals, thus concluding that valuation is high.

Methodology notes

• Valuation MethodDCF Cash Flow Discount

  DCF Cash Flow Discount Model

  Institutions use weighted average cost of capital (WACC) 7.5% and 1% perpetual growth rate to discount future free cash flows to 2040 to calculate intrinsic value. This is a common method for evaluating mature pharma companies with stable long-term cash flows but facing distant uncertainties.

• Industry/Industrial Analysis Framework

  Patent Expiration (LOE) Impact Analysis

  For original pharmaceutical enterprises, focus on the risk of revenue cliff after the core single-product patent protection period ends. The report specifically focuses on Semaglutide patent expiration in 2031-2032, and the dual impact of generic drugs entering on price and market share. This is a life cycle risk unique to the biopharmaceutical industry.

• Event Gaming and Behavioral FinanceExpectation Gap/Expectation Management

  Guidance Conservatism and Upside Potential

  The institution points out that current company guidance is conservative, meaning there is potential to upgrade guidance later (e.g., Wegovy oral sales exceed expectations). This "low base + high elasticity" expectation gap is an important point for short-term stock trading. Investors need to watch guidance revision actions in quarterly earnings reports.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Novo Nordisk (NOVOb.CO/NVO.US)

  Report coverage subject, short-term benefit from oral drug volume increase, long-term under pressure from competition and patent expiry

  Strengths

  Strong initial performance of Wegovy oral tablets, likely to hold low-price advantage in cash-pay market; 2026 guidance is conservative, room for upgrade.

  Weaknesses

  2027-2029 growth forecast only 2-4%; Ozempic market share continues to erode in US; Canada faces generic impact; valuation relatively high vs growth prospects.

  Comparison

  Compared to Eli Lilly, Novo Nordisk faces strong Zepbound competition in injectable weight loss area, and lacks immediate blockbuster in diabetes (CagriSema later than Eli Lilly new products); valuation premium higher than other pharma facing patent expiry.

  Risks

  Volume fails to meet expectations after US Medicare coverage; Wegovy oral cannot effectively counter Foundayo competition; Semaglutide patent expiry price erosion faster than expected.

Key data

• Forecast 2026 Wegovy Oral Tablet US Sales$2.1 BillionBased on strong prescription volume and assumption of transition to high-dose
• Forecast 2027-2029 Sales CAGR2-4%Far below industry average, reflecting growth bottlenecks
• Current Valuation Multiple14x 2026E P/EInstitution considers expensive for low growth and high uncertainty
• Target Price Implied Valuation12x 2026-2028E P/EStill higher than peers facing patent expiry (GSK 10x, Sanofi 8.5x)
• Canada Market 2027 Revenue Forecast Change-17%Impacted by generic drug launch
• Wegovy Net Price (US)$444/TRxSignificant decrease from 2025 average $605, reflecting price pressure

Impact & implications

The report believes Novo Nordisk is in a transition period. In the short term, the success of Wegovy oral tablets and the opening of Medicare coverage may bring temporary support to the stock price and opportunities for guidance upgrades; however, in the medium-to-long term, investors must be vigilant about significant attenuation of growth momentum. For holders, the current valuation does not fully reflect structural challenges post-2030 (patent cliff, intensifying competition). The report implies that unless the company achieves breakthrough progress in new indications such as Alzheimer's disease or next-generation pipelines (such as CagriSema, Zenagamtide), upside stock price space is limited, and downside risks come from price wars and market share loss.

Risks

• Price erosion of US GLP-1 drugs exceeds expectations, especially in cash-pay markets and Medicare negotiation pressure.
• Novo Nordisk failed to regain market share in commercial insurance and Medicare channels, continuously losing to Eli Lilly.
• After Semaglutide patent expiration (LOE), generic competition leads to significant decline in revenue and profit margins.
• New generation pipeline products (such as CagriSema) clinical data or commercialization performance fails to meet expectations.
• Intensification of global obesity drug competition, new entrants affect pricing power and market share.

What to watch

• Comparison of prescription volume trends between US Wegovy oral tablets and Eli Lilly Foundayo in H2 2026.
• Actual contribution to sales after the start of US Medicare obesity coverage in July 2026.
• Head-to-head clinical trial (REIMAGINE-4) data between CagriSema vs tirzepatide in Q3 2026.
• Whether 2026 full-year sales and profit guidance is further upgraded in quarterly earnings reports.
• Price and market share changes after Canadian and emerging market generic drug launches.