Novo Nordisk faces a "validation" moment: How to revive Wegovy's growth momentum after the U.S. ban on counterfeit drugs

Novo Nordisk is facing a "prove it moment" for investor confidence. Although the U.S. ban on generic versions of Wegovy has begun to boost the usage of this weight loss drug, the market remains cautious about whether the company can demonstrate stronger growth in the coming months.

According to IQVIA data, since the U.S. Food and Drug Administration's ban on so-called compounded versions of Wegovy took effect on May 22, new Wegovy prescriptions have increased by approximately 33%, reaching 181,200 in the week of July 18. This growth has narrowed the gap with Eli Lilly's Zepbound—during the week of May 23, U.S. Zepbound prescriptions led Wegovy by nearly 175,000, but by July 18, this gap had narrowed to about 133,000.

These early turning points come at a critical juncture for Novo Nordisk. In May of this year, the Danish company lowered its full-year sales and profit forecasts and announced the unexpected departure of CEO Lars Fruergaard Jorgensen, citing market challenges and a nearly 60% drop in stock price from its peak in 2024.

Investors are eagerly awaiting the quarterly earnings report on August 6 to verify whether management's previous expectations that the ban would boost sales in the second half of the year will come true. As analysts have noted, this has put the pharmaceutical company into a "show me" phase where it can no longer rely solely on optimistic expectations but must deliver results.

Signs of Growth Emerging, but Market Confidence Remains to Be Tested

Despite the immediate effects of the ban on counterfeit drugs, market sentiment remains cautious. Berenberg Bank analyst Kerry Holford stated:

"We previously thought that changes in prescription trajectories would drive stock prices, but that has not happened yet.

I suspect investors are now waiting for the second-quarter performance update—will they lower the guidance range? I think they will lower the upper end of the guidance."

Barclays analyst Emily Field referred to Novo Nordisk's current stage as a "prove it moment" and gave its stock an "overweight" rating. Investors and analysts pointed out that IQVIA prescription data is not complete, as it does not cover Wegovy sales through the company's consumer-facing platform, NovoCare, launched in March.

Alliance Bernstein portfolio manager Marcus Morris-Eyton stated:

"The growth achieved through the NovoCare channel may initially face lower prices due to discount offers."

He believes that given the low expectations, low valuations, and the potential acceleration of prescription data in the second half of 2025, the market is underestimating Novo Nordisk's long-term growth potential.

Regaining Lost Market Share

Novo Nordisk's current core task is to attract back patients who flowed to the counterfeit drug market during the Wegovy supply shortage.

The tremendous success of Wegovy once propelled Novo Nordisk to the position of the highest market capitalization publicly listed company in Europe, but subsequent supply disruptions and gaps in insurance coverage created space for cheaper compounded drugs. Under U.S. law, compounded drugs are permitted when a drug is in short supply With the FDA confirming in February this year that Wegovy is no longer in short supply, Novo Nordisk has quickly launched a series of new strategies to regain market share. These measures include offering limited-time discounts for first-month users, reaching better healthcare coverage agreements with insurance giant CVS Health, and launching a direct-to-consumer sales platform called NovoCare in March.

Performance Guidance Becomes the Focus, Divergence Between Bulls and Bears Intensifies

For the upcoming earnings report on August 6, the market's focus is entirely on whether Novo Nordisk will adjust its full-year performance guidance again. In May this year, the company lowered its sales growth expectation in local currency from 16-24% to 13-21%, and its operating profit growth expectation from 19-27% to 16-24%, marking the first adjustment since Wegovy's launch.

Bank of America and Guggenheim do not expect another guidance cut, while Barclays believes the likelihood is low. Marcus Morris-Eyton, a fund manager holding shares in Novo Nordisk at Alliance Bernstein, stated:

“Currently, market sentiment towards Novo Nordisk is exceptionally weak, but considering the low expectations, low valuations, and the prescription data expected to accelerate growth in the second half of 2025, we believe the market is underestimating Novo Nordisk's long-term growth potential.”