By Elsa Ohlen

Novo Nordisk stock is in a slump and UBS sees several reasons to no longer be buyers of the weight-loss drugmaker. Most importantly, knockoff versions of so-called GLP-1 drugs appear to be here to stay.

Analysts led by Matthew Weston downgraded shares of the Danish pharma giant on Tuesday to Neutral from Buy, alongside a dramatic cut of their price target to 340 Danish kroner from 600 kroner.

The practice of selling cheap, copycat versions of Semaglutide, the active ingredient in Novo's diabetes drug Ozempic and weight-loss treatment Wegovy, is having a substantial impact on the drugmaker's expected earnings.

Last week, Novo cut its full-year outlook citing, among other things, stubborn competition from knockoff versions of its drugs, so-called compounders, even after regulators have moved to shut that market down. Novo said it expects sales growth for 2025 of between 8% and 14%, down from prior expectations of between 13% and 21%.

Novo shares tumbled 20% following the guidance cut, bringing 12 month losses to over 60%.

"Significant staff reductions at the FDA under the Trump administration, combined with the limited negative health impact to the American public from compounded GLP1s, seem to imply little FDA appetite to intervene on compounding," UBS wrote in a research note. Furthermore, compounded Semaglutide is considered legitimate by physicians, according to expect checks, UBS said.

While litigation and lobbying efforts could be potential avenues for Novo to limit the sales of knockoff drugs, litigation on patent infringement might not be desirable as it risks revealing manufacturing "trade secrets" from Novo which could help other companies manufacture generic versions of the drugs when patents eventually start to expire, the analysts added.

Beyond compounding, losing market share to U.S. rival Eli Lilly and the lack of uptake in insured channels is slowing sales growth, the analysts said. UBS expects sales growth of 6% in the second half of 2025, compared with 18% in the first half of the year.

On a more upbeat note, President Donald Trump's reported proposal to reimburse obesity drugs in Medicare could significantly add to volumes. However, demand to limit drug prices for Americans to the lowest price paid in other wealthy countries may reduce the value meaningfully.

Trump also reiterated plans to unveil tariffs on the pharmaceutical in comments made early Tuesday. He said he would set an "initially small tariff" on pharmaceuticals, but added that it would scale up to 150% within the next 12 to 18 months and to 250% after that, in an interview with CNBC.

Novo Nordisk Copenhagen-listed shares slipped 2% to 306.50 kroner in midday trading in Europe. Its American depositary receipts were down 2.8% to $47.43.

The drugmaker is due to report second-quarter earnings early Wednesday.

Write to Elsa Ohlen at elsa.ohlen@barrons.com

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August 05, 2025 11:15 ET (15:15 GMT)

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