Despite recent stock declines, pharmaceutical giant Novo Nordisk (NYSE: NVO) maintains a secure dividend, with its strategic focus on an oral Wegovy pill poised to ignite significant growth and investor confidence in the booming obesity drug market, potentially leading to a substantial resurgence in 2026.
The past year has been a tumultuous one for investors in Novo Nordisk, with the Danish pharmaceutical giant seeing its stock price decline by over 50%. This downturn has left many questioning the future of a company that is a prominent player in the rapidly expanding obesity drug market. Yet, for the discerning long-term investor, this period of skepticism may well present a compelling opportunity, especially when examining the underlying fundamentals and strategic moves being made by the company.
Industry experts anticipate the global obesity drug market to skyrocket from a mere $15 billion last year to an astounding $150 billion by 2035, according to projections highlighted in a report by The Motley Fool. As the developer of semaglutide, the active ingredient in blockbuster drugs like Ozempic and Wegovy, Novo Nordisk is at the forefront of this burgeoning sector. However, competitive pressures and emergent challenges have dampened investor enthusiasm, creating a fascinating paradox that warrants deeper exploration.
The Paradox: Strong Financials Amidst Market Skepticism
A superficial glance at the stock chart might suggest financial instability, but a closer look at Novo Nordisk’s financials reveals a different story. The company’s revenue and profits have surged significantly since 2023, coinciding with the growing popularity of its obesity treatments. This robust financial performance provides a strong foundation, particularly for those concerned about dividend safety.
Investors can likely rest assured regarding the company’s dividend. Novo Nordisk’s dividend payout currently represents less than a quarter of its estimated 2025 earnings, indicating a healthy and sustainable payout ratio. This strong coverage suggests that even amidst market fluctuations, the company is well-positioned to continue rewarding shareholders.
Navigating the Competitive Landscape
The primary reason for the stock’s recent underperformance lies in the intensifying competition. Eli Lilly’s Zepbound (tirzepatide) has notably surpassed Novo Nordisk’s Wegovy (semaglutide) in U.S. prescriptions over the past year, with Zepbound recording an estimated 419,000 prescriptions compared to Wegovy’s 282,000. This shift in market share has undoubtedly fueled investor apprehension.
Adding another layer of complexity is the proliferation of compounded versions of semaglutide, sold by telehealth companies under an FDA loophole. Initially, these compounded drugs emerged due to supply shortages of branded treatments. However, even after supply normalized, some companies continued to market them, citing customization benefits. This “copycat” competition has been a significant drain on Novo Nordisk’s business, even leading to the ousting of its CEO earlier this year as the company grappled with the issue.
Novo Nordisk’s Strategic Counter-Move: The Wegovy Tablet
While battling compounded drugs in court is one avenue, Novo Nordisk is also pursuing a more direct and potentially faster solution: innovation. The company is in a race to launch an oral version of Wegovy. Currently, all popular weight-loss drugs and their compounded alternatives necessitate injections, a barrier for many patients.
An oral tablet form of semaglutide would offer several distinct advantages:
- Patient Appeal: Many individuals prefer pills over injections, which could significantly boost adoption.
- Ease of Use: Tablets are generally simpler to administer and more convenient for patients.
- Production & Storage: Oral medications are often easier and more cost-effective to produce and store at scale.
The clinical data for the Wegovy pill is promising. Recent phase 3 trial results announced by Novo Nordisk indicated that patients experienced an average weight reduction of 16.6% over 64 weeks. The company is actively seeking FDA approval for this oral formulation and hopes to secure it by the end of 2025. This strategic pivot could be a game-changer, drawing patients away from both injectable rivals and compounded versions by offering a superior and more convenient treatment option.
Analyst Pessimism vs. Long-Term Potential
The market’s concern over diminishing market share has prompted analysts to significantly lower their long-term growth estimates for Novo Nordisk. This pronounced shift in expectations has directly contributed to the stock’s decline, as illustrated by the chart below.
However, from a long-term investment perspective, such pessimism may be overly harsh. Projecting mid-single-digit earnings growth for a company operating in a market expected to expand tenfold over the next decade seems disproportionately low. While Eli Lilly is also developing its own oral weight-loss tablet, the sheer size and projected growth of the obesity drug market suggest there is ample room for multiple key players to thrive.
The introduction of oral tablets by both companies could even redefine the market, potentially marginalizing compounded injectables and further legitimizing the chronic weight management category. These drugs have faced supply constraints before, indicating immense underlying demand that can comfortably support more than one successful oral treatment.
The 2026 Outlook: A Catalyst for Re-evaluation
The current low expectations surrounding Novo Nordisk could set the stage for a significant upside surprise. If the Wegovy pill gains FDA approval and demonstrates strong market adoption in 2026, it could fundamentally alter the investment narrative. The catalyst would not just be the product itself, but the renewed confidence it would instill in the company’s ability to innovate, compete, and capture a substantial share of the burgeoning market.
For investors focused on long-term growth and stable dividends, Novo Nordisk presents an interesting dichotomy. Its financial health underpins a reliable dividend, while its strategic pipeline aims to address immediate competitive challenges and tap into a massive future market. The market’s current skepticism might just be the quiet before a potential storm of positive re-evaluation in the coming year.
