Novo Nordisk A/S shares plunged as much as 18% and approached a five-year low following the release of disappointing fiscal year 2026 guidance. Goldman Sachs believes the market reaction is excessive, arguing that the current share price already fully reflects the lower end of the company's FY2026 guidance, representing the most pessimistic scenario.

As previously mentioned, the core of the market panic stems from a revenue guidance figure far below expectations. The company forecasts revenue to decline by 5% to 13% in 2026 at constant exchange rates, suggesting the US obesity drug market faces more severe pricing pressure and volume bottlenecks than anticipated.

Confronted with the sharp market reaction, Goldman Sachs analyst James Quigley stated in a recent report that current market pricing appears to have fully incorporated the lower end of the guidance range, indicating that pessimism has been excessively priced in.

Although Goldman Sachs lowered its price target for Novo Nordisk by 8% from 436 Danish kroner to 400 Danish kroner, it maintained a "Buy" rating. The analyst believes investors are underestimating the potential volume growth from the expansion of Medicare coverage and the revenue potential following the launch of an oral version of Wegovy.

However, Goldman Sachs also acknowledged that the tone from the earnings call was unusually cautious, particularly regarding descriptions of pricing headwinds in the US market—expecting a mid-double-digit percentage pricing drag in 2026. This forced a significant revision to their model, including not only lowered revenue and operating profit expectations for 2026 but, more critically, a substantial reduction in growth assumptions for the US injectable Wegovy business.

The 18% intraday drop in Novo Nordisk's share price indicates the market is treating the lower end of the 2026 guidance as the most likely outcome. The company's FY2026 revenue guidance projects a decline of 5% to 13% at constant exchange rates.

Goldman Sachs noted that the guidance's lower end implies approximately 13% and 14% downside risk to consensus revenue and EBIT estimates, respectively, which aligns closely with the magnitude of the share price decline.

The guidance provided by Novo Nordisk surprised the market, with the core discrepancy lying in volume expectations. The company anticipates the revenue decline will be driven by US pricing pressure, slowing volume growth, and competition from generics. This contrasts sharply with competitor Eli Lilly, whose 2026 guidance implies a more optimistic volume outlook and only anticipates low-to-mid double-digit pricing resistance.

Consequently, Goldman Sachs significantly downgraded its outlook for the US Wegovy business. Previously, channel checks suggested volume growth of 20-25% in 2026 over 2025; this has now been revised down to approximately 5% growth. In terms of sales, Goldman Sachs now expects US injectable Wegovy sales to decline by about 25% in 2026.

This pessimistic revision stems from two main factors: a low-single-digit negative revenue impact from "Most Favored Nation" (MFN) clauses, and price concessions necessary to gain Medicaid coverage.

Goldman Sachs stated that although management highlighted volume benefits from Medicare expansion starting mid-2026 and becoming more substantial in 2027, this longer-term positive is being overshadowed by near-term pricing headwinds.

Amid the prevailing pessimism, Goldman Sachs views the early performance of oral Wegovy as a notable bright spot. Approximately 50,000 prescriptions for oral Wegovy were filled in the US in the week ending January 23, with around 170,000 patients currently using the drug.

Significantly, about 45,000 of these 50,000 prescriptions were self-pay, indicating strong underlying demand.

Novo Nordisk management expressed strong confidence in the product's supply and competitive positioning. Regarding the competing product Orforglipron, expected to launch in Q2 2026, Novo Nordisk believes magnitude of weight loss is a key factor for patient choice. Data shows oral Wegovy achieves 16.6% weight loss at 64 weeks, superior to the 12.4% weight loss observed with 36mg Orforglipron at 72 weeks.

Goldman Sachs noted that while management confirmed the oral product has a lower gross margin than the injectable version, its strategic importance lies in expanding patient reach. Insurance coverage has already increased from 1 provider at launch to 4 currently. Although uncertainties remain regarding price elasticity and seasonality in the self-pay channel, oral Wegovy is seen as a crucial lever for stabilizing the share price in the first half of 2026.

Beyond currently commercialized products, 2026 is also a critical validation period for Novo Nordisk's pipeline. Firstly, a regulatory decision from the FDA on high-dose semaglutide is expected in the first quarter of 2026. Goldman Sachs indicated that Novo Nordisk has sufficient production capacity ready for a rapid US launch upon approval.

Secondly, a regulatory decision for the highly anticipated combination therapy CagriSema in obesity is expected by the end of 2026. Regarding the upcoming REDEFINE 4 trial data readout in the first quarter, Goldman Sachs noted that management has tempered expectations, suggesting the trial may not fully capture CagriSema's weight loss potential. They indicated that the true potential will be better assessed with the REDEFINE 11 trial results in 2027, which utilizes a longer, flexible dose-escalation period.