Key Points in This Article:
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Novo Nordisk’s (NVO) operations update reported 18% sales and 29% operating profit growth for H1 2025, but one-off adjustments inflated results.
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A slashed 2025 outlook cites weaker Wegovy and Ozempic growth, compounded GLP-1 competition, and CagriSema trial failures.
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Illegal compounding persists despite FDA action, undermining sales, with a failed Hims & Hers partnership exposing regulatory challenges.
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Danish pharmaceutical giant Novo Nordisk (NYSE:NVO) is watching its stock plummet 20% in morning trading after slashing its full-year sales and profit outlook for the second time this year. The announcement, ahead of the full Q2 2025 results due Aug. 6, reported 18% sales growth and 29% operating profit growth at constant exchange rates (CER) for the first half of 2025 but highlighted significant challenges.
While fears of Eli Lilly’s (NYSE:LLY) Mounjaro and Zepbound eroding Novo’s GLP-1 market share persist, the update points to deeper issues, including illegal compounded GLP-1 drugs and slower market expansion.
The question remains: Is this an overreaction by the market, or a warranted reset of the stock? With shares now trading where they did in late 2022, effectively wiping out all the gains made during the Ozempic mania run-up, investors are right to ask if NVO stock is just too cheap to ignore?
The Strong First Half Is Not What It Seems
Novo Nordisk’s preliminary update for the first six months of 2025 reported an 18% sales increase and 29% operating profit growth at CER, driven primarily by its GLP-1 drugs, Ozempic and Wegovy.
However, the filing notes that these results were inflated by gross-to-net sales adjustments related to prior years, which artificially boosted reported figures. Without these one-offs, underlying growth was likely weaker, signaling challenges in sustaining GLP-1 momentum.
Specific sales figures for Wegovy and Ozempic were not disclosed, but competition from Lilly’s Mounjaro, which reported $3.8 billion in Q1 sales– up 113% — likely pressured Novo’s performance.
The reliance on non-recurring adjustments raises concerns about the sustainability of Novo’s growth as it faces a fiercely competitive $150 billion GLP-1 market.
Slashed Guidance Reflects Mounting Pressures
The operational update significantly lowered Novo Nordisk’s 2025 outlook, cutting sales growth expectations from a range of 13% to 21% to a new range of 8% to 14% and operating profit growth from 16% to 24% to 10% to 16%. What was previously the floor of expected growth is now the ceiling.
The reduced forecast is driven by lower-than-expected growth for Wegovy in the U.S. obesity market, Ozempic in the U.S. GLP-1 diabetes market, and Wegovy in select international markets.
Key factors include persistent competition from compounded GLP-1 drugs, slower market expansion, and disappointing phase 3 trial results for CagriSema, Novo’s next-generation obesity drug. These headwinds have shaken investor confidence in Novo’s ability to maintain its GLP-1 dominance.
Compounding Issues and a Failed Partnership
A critical issue is the ongoing proliferation of compounded GLP-1 drugs. Despite the FDA ending the shortage-related grace period for compounding Ozempic and Wegovy on May 22, Novo reports that unsafe and illegal compounding persists, with entities marketing knockoff semaglutide under the guise of “personalization.”
This undermines branded GLP-1 sales, as compounded versions are sold at lower prices. Novo launched NovoCare Pharmacy in March and briefly partnered with Hims & Hers Health (NYSE:HIMS) to distribute branded Wegovy, but terminated the deal due to Hims’ alleged misleading marketing practices violating FDA regulations.
The FDA’s lack of aggressive enforcement has left Novo vulnerable, with compounded drugs capturing significant market share, particularly in the U.S. cash channel, where Wegovy prescriptions remain below expectations.
Key Takeaway
This marks the second time in 2025 that Novo Nordisk has lowered its guidance, reflecting persistent challenges in maintaining its GLP-1 dominance. Beyond market competition and compounding issues, the company faces scrutiny from Congress over its pricing practices, which are significantly higher in the U.S. than globally.
Additionally, Health & Human Services Secretary RFK Jr. has criticized Novo’s pricing, though his stance has softened recently. With these uncertainties — compounded by Eli Lilly’s stronger portfolio of Mounjaro and Zepbound, which offer robust efficacy — Novo Nordisk appears too risky for investment at this time, even at this lower price.
Eli Lilly’s advancements in oral GLP-1 drugs and its stronger growth make it a safer bet in the booming obesity and diabetes market.
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