Novo Nordisk (NVO) May 2025 Valuation Model and Risk Framework

Thesis (more updates for subscribers):
 
While competition has been growing in the GLP-1 weight loss market, and shares of NVO have fallen to 2Y lows (to very reasonable valuations of 10.5x 2026e EBITDA & 14x 2026e EPS), a recent shift in adoption by the largest pharmacy in the USA, CVS, and distribution by HIMS could result in a sharp increase in sales. More importantly, the FDA last week accepting Wegovy for review as an oral medication could supercharge sales by 4Q and give the company an edge over competition. Model showing upside scenarios to NVO attached. More on the CVS partnership below...
 
Subject to FDA approval of the company's new drug application (NDA) by 4Q25, the pill version of the popular injectable is set to become the first oral GLP-1 drug indicated for weight loss.
The Danish company has submitted the NDA to seek FDA approval for a once-daily 25 mg dose oral version of Wegovy for chronic weight management in obese and overweight adults who indicate at least one related comorbid condition.
The NDA also seeks FDA clearance for the drug to cut the risk of major adverse cardiovascular events (MACE), such as strokes, in overweight or obese adults who suffer from cardiovascular disease. 
The regulatory submission is backed by Novo’s (NVO) OASIS study, which tested oral semaglutide at a 25 mg dose level against placebo in more than 300 obese or overweight adults.
FDA review of NVO's oral Wegovy comes at a time when rival Eli Lilly (LLY) is preparing to launch its oral weight loss therapy, orforglipron, next year. 
 
Overview: 
 
Founded in 1923, NVO is a global leader in Diabetes and Obesity care. It has a broad product portfolio across Diabetes and Obesity care and Rare diseases, including a full portfolio of glucagon-like-peptide-1 (GLP-1) receptor agonists for the treatment of diabetes and obesity, and insulins. It also has products in the areas of haemophilia and hormone replacement therapy, among others. The not-for-profit Novo Nordisk Foundation controls the voting power in NVO.
 
Operations:
 
Novo Nordisk is engaged in the discovery, development, manufacturing, and marketing of pharmaceutical products and has two segments: Diabetes and Obesity care and Rare disease. 
 
The Diabetes & Obesity care segment, which accounts for 95% of its revenue, covers diabetes, obesity, cardiovascular, and emerging therapy areas. Its product offerings include Levemir and Tresiba (long-acting insulin), NovoMix/NovoLog Mix (premix insulin), NovoRapid/NovoLog (fast-acting insulin), Victoza (type 2 diabetes and weight management), and Saxenda and Wegovy (obesity delivery systems). 
 
The Rare disease segment (>5%) covers rare blood disorders, rare endocrine disorders, and hormone replacement. 
 
Geographic Reach:
 
Headquartered in Denmark, Novo Nordisk has 15 production facilities and 10 R&D centers located in Algeria, Brazil, China, Denmark, France, Iran, India, Japan, Russia, the UK, and the US. 
 
N. America accounts for ~60% of revenue, followed by EMEA with >20%, and China with >5%.  
 
TAM Still Massive:
 
The total addressable market (TAM) opportunity is $100bn by 2030E, peaking at $130bn by 2035E, for the anti-obesity market, with Novo Nordisk and Eli Lilly the clear market leaders. While Novo’s shares have de-rated on the back of Wegovy supply issues and disappointing Cagrisema data at the back end of 2024, we believe the reaction was overdone, and see a favorable risk/reward:
 
GLP-1 supply to improve over 2025 on the back of better productivity and increased utilization at Novo’s Catalent facilities. The recent removal of Wegovy from the FDA shortages list (on 2/21) is a supportive datapoint. Given demand for anti-obesity medicines is largely intact, we should see improving supply should drive an inflection in Wegovy prescription trends and this should drive better investor sentiment.
 
Several pipeline updates: While CagriSema’s REDEFINE 1 weight loss data and REDEFINE 2 (T2 Diabetes) results failed to clearly differentiate, there is still a strong product profile and we expect the drug to make it to the market. In addition, REDEFINE 4 (early 2026, CagriSema vs. tirzepatide) trials have potential to show differentiation of the asset, while lowered investor expectations somewhat derisk the outcomes of these trials. 
 
Catalysts: several pipeline catalysts for Novo this year. In Obesity: the REDEFINE 4 (2H25) data readouts, update on amycretin phase 3 acceleration strategy (communication expected 1H25), and detailed data presentations for CagriSema and amycretin (expected at ADA Conference on June 20-23). 
 
Contrarian view: Recent investor feedback suggests sentiment remains negative on Novo post 4Q'24, particularly into competitor data in the oral small molecule space (orforglipron - mid'25) which could shine a light on Novo’s lack of small molecule oral strategy in obesity. However, we believe Novo has an underappreciated oral strategy with its oral sema asset expected to launch in 2026 (positive phase 3 data), and management has discussed scope for acquisition of an external asset if it met Novo’s efficacy and safety criteria. In addition, injectables are likely to take the largest share in the global obesity market in medium term due to efficacy, and Novo multiple pipeline assets in the space.
 
CVS Partnership:
 
On 5/1, Novo Nordisk announced that CVS Caremark, the US's largest Pharmacy Benefit Manager (PBM), has decided that Wegovy 2.4mg will be the preferred GLP-1 medicine on its largest commercial template formularies, effective July 1, 2025.
 
We believe this is a significant positive, especially given concerns in the market that compounding pharmacies and competition are holding back Wegovy prescriptions from inflecting.
 
Recall that, at the FY24 results event in NYC, Novo discussed a contract loss at the start of the year, while the overall access remained unchanged. In our view, this, and compounding pharmacies are the key reason for prescriptions being largely flat YTD.
 
This was a pro-active decision made by CVS and brings the CVS infrastructure into the Novocare network for the cash pay market. Novo is working on additional ways to increase access and availability of Wegovy, which could also start to demonstrate an impact on volumes into 2H'25.
 
With recent orforglipron data clearing a key overhang, the compounding pharmacy overhang likely being lifted from May 22, and the recent CVS contract win, we believe the current valuation of Novo Nordisk is attractive, given its quality and growth profile.
 
Earnings: 1Q'25 results 5/7.
 
Long Term Risks: pricing, FDA approvals, new competitive entrants & manufacturing supply chain delays
 
Overall SSR Risk Ranking: 3.5 out of 5 (Moderate)
 
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