Novo Nordisk shares recovered after the collapse. What will happen to the company next?

Shares of Novo Nordisk, the Danish maker of popular drugs Ozempic and Wegovy, have risen by more than 27% from the low for the last few years reached in April. Analysts believe that the peak of market pessimism about the company has passed, but warn about strong competition, price regulation and the consequences of a CEO change.

Novo Nordisk shares have surged since hitting multi-year lows in April and could freshly challenge German developer SAP for the title of Europe's most valuable company, wrote Bloomberg.

The jump comes after a roughly 10-month slump that has seen Novo Nordisk's market value drop nearly $400 billion from its June 2024 high. And much of the drop came after disappointing results from experimental results of Novo's experimental obesity injection CagriSema in December, the agency noted.

What has changed in market sentiment and what to expect from the company's shares next?

«A lot of the things that could go wrong have already happened. We've reached the point of peak pessimism,» said Lydia Norman, deputy fund manager at EdenTree Investment Management. She was quoted by Bloomberg as saying.

Investors are keeping a close eye on competitors in an attempt to see if the worst is really over for Novo, Bloomberg notes. Novo's main rival in the weight-loss market is US-based Eli Lilly. It has surpassed Novo in number of prescriptions written in the US. In addition, Eli's prospects for the near future look better thanks to the development of a new easy-to-take pill, which could appear on the market as early as 2026, Bloomberg writes.

However, Novo Nordisk has data showing that its weight-loss drug can also reduce the risk of heart attacks, and it has had some success with a new experimental drug called amicretin, which could be its trump cards, Bloomberg believes. 

«Expectations for Novo Nordisk are pretty low right now, and expectations for Eli Lilly are pretty high. While their [development] portfolio may not be as good as Lilly's at the moment, Novo generates huge cash flow and has the financial flexibility to help with that,»  said Lydia Norman of EdenTree.  said;

Investors value Eli Lilly more expensive than Novo. The Danish company's securities are worth 18 more than its projected profit (P/E ratio), while Eli Lilly's ratio is 32, Bloomberg noted.

The size of the market for weight-loss products is also an important factor in Novo's valuation. Novo's value rose nearly 40-fold last year as investors bet on a potential $130 billion market by the end of the decade, Bloomberg writes. But analysts at Goldman Sachs Group Inc. lowered that forecast to $95 billion in April, citing potential price declines and the length of time patients take the drugs, the agency said.

«Expectations have outperformed themselves,» said Will James, fund manager at Guinness Global Investors, regarding Novo's record share gains last year. Because of the dip in 2025, Novo's business now looks undervalued, James said.

One of the main negative factors for Novo Nordisk now is U.S. President Donald Trump's attempts to reduce drug prices, as well as his threats to impose duties on imports of pharmaceutical products, according to Bloomberg. Novo, along with U.S. pharma giant Pfizer, are also waiting for the publication of drug prices under U.S. insurance Medicare - they will be announced by the end of November, said analysts Berenberg Luisa Hector and Kerry Holford.

But the main question for the company - and for the stock - remains the choice of Novo Nordisk's new CEO, Bloomberg writes. The company announced the firing of Lars Fruergaard Jorgensen in May, reducing its full-year revenue and profit growth forecast before doing so. Novo shares got a boost last week after the Financial Times reported that activist investor Parvus Asset Management was building up a stake in it and seeking to influence the selection of its new chief executive.

«Obviously, we're not the only ones who see value here,» said Ben Peters, portfolio manager at Evenlode Investment. Its Global Income fund began buying Novo shares in April, Bloomberg noted. «The potential market for weight loss drugs is huge, and it's effectively divided between just two players - Eli Lilly and Novo - so it's a great position,» Peters added. 

Most analysts tracking Novo Nordisk securities - 19 out of 31 - advise investors to buy them (Buy and Overweight ratings), followed by MarketWatch. Another nine analysts recommend holding (Hold), while three recommend selling (Sell). The Wall Street consensus target price is $98.5 per share, up 28% from current levels.