Novo Nordisk now progresses with a limited margin of error: Stifel

Investing.com -- Novo Nordisk (NYSE:NVO) shares saw a drop in its share price following its Q2 results, which showed that both Ozempic and Wegovy did not meet expectations. 

As per analysts at Stifel, the market is debating whether these results are indicative of fundamental changes to the obesity market assumptions or simply reflect the challenges in capturing quarterly fluctuations and discount accounting.

Stifel maintains that the overall opportunity in the obesity market remains favorable. Novo Nordisk and Lilly are currently positioned as the primary beneficiaries. 

“The result of this in hard numbers is that Novo Nordisk still has the opportunity to double in size from 2023 to 2026,” said analysts at Stifel. 

“Over that period, we expect sales to grow by 80% and core EPS by 92%,” they added. 

Long-term forecasts suggest the potential for Novo Nordisk to treat approximately 5.5 million Americans and 4.9 million non-Americans for obesity by 2033, with peak sales estimated at $35 billion in this segment.

“Novo Nordisk now progresses with a limited margin of error,” analysts said. 

The management has highlighted positive trends in NBRx and TRx in the US, with a doubling increase in weekly prescriptions since the start of the year. Improvements in drug supply and the ongoing SELECT trial for Wegovy are expected to support continued growth.

The Q2 results fell short of consensus estimates due to supply challenges in the EMEA region for Ozempic and gross-to-net price adjustments for Wegovy. 

Stifel has slightly adjusted its pricing assumptions and extended the average treatment duration from 6 months to 12 months, while still considering the company’s long-term prospects to be positive.

Stifel has revised its price target to DKK955 from DKK965. Despite the recent challenges, the stock may remain an attractive option depending on future developments. Upcoming events, such as the US Senate testimony on GLP-1 drug pricing and the EASD conference, could influence the stock’s performance.

At 7:08 am (1108 GMT), Novo Nordisk was up 1.6% in pre-open trade.