MW Novo Nordisk is no longer a buy at UBS, which says compounding is here to stay

By Steve Goldstein

Novo Nordisk, the Danish maker of the wildly popular Ozempic and Wegovy drugs used for weight loss, was downgraded due to competition from compounding as well as arch rival Eli Lilly, a brokerage said on Tuesday.

UBS cut its rating on Novo to neutral from buy and lowered its price target dramatically, to 340 kroner from 600 kroner. It's now the second lowest target price among those tracked by FactSet, though half the ratings on the stock are either the equivalent of hold or sell.

Last week Novo Nordisk issued a profit warning - sending its stock down 23% - due to competition from so-called compounders like Hims and Hers, which Novo Nordisk says is illegal, as well as from Eli Lilly's rival medications.

Novo Nordisk shares (DK:NOVO.B) $(NVO.AU)$ on Tuesday drifted 0.4% lower to 311.75 kroner.

Compounders make what are copies of drugs, like Wegovy. That's legal when the Food and Drug Administration certifies that there are shortages, but Hims and Hers Health $(HIMS)$ is still doing so even though the "shortage" rationale is no longer valid. Instead, Hims and Hers is offering customized versions to get around those rules.

Related: Hims & Hers sees 'an exciting period of growth,' but stock falls

"Whilst the level of 'personal' compounding is unprecedented, our experts did not expect the situation to change as there appears to be little appetite from the FDA to step in given reduced enforcement headcount at the FDA, and limited apparent threat on safety to the American public," say UBS analysts led by Matthew Weston. "They also expected that it could be politically unfavorable to limit access to the cheaper 'semaglutide' products that are helping over 1 million Americans achieve their health/weight loss goals."

That's not Novo Nordisk's only challenge. It's losing share to Eli Lilly's line of drugs including Mounjaro, and insured channels are not taking up the medication. "Ozempic appears to have plateaued early despite strong brand awareness, which indicates a much stronger reception to Mounjaro from doctors, in our view," say the analysts.

Finally, even if the Trump administration reimburses GLP-1 drugs in Medicare, so-called most favored nation demands would be offering U.S. sales at European prices, which "could significantly reduce value," the analysts say.

-Steve Goldstein

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August 05, 2025 05:21 ET (09:21 GMT)

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