Why Morgan Stanley Downgraded Novo Nordisk to Underweight

Morgan Stanley’s downgrade of Novo Nordisk from Equal-weight to Underweight was fundamentally a growth durability and valuation call. The bank retained a DKK 250 price target—reported as implying more than 10% downside at the time—and argued that the share price did not fully reflect muted medium-term growth and the effect that a future semaglutide patent cliff could have on the company’s long-term value. 114

The central issue: Novo is highly concentrated in semaglutide

Semaglutide is the active ingredient in Novo’s major Ozempic and Wegovy franchises. Morgan Stanley expects it to account for about 75% of company sales in 2026 and still 59% in 2031, when loss-of-exclusivity effects are expected to begin. 12

That concentration leaves Novo unusually exposed to a single molecule. As protections expire across major markets in the early-to-mid 2030s, lower-cost competitors could put pressure on both prices and volumes. The question behind the downgrade is not whether the current franchise remains valuable; it is whether new products can replace enough of that profit pool quickly enough.

Eli Lilly has made the competitive risk more immediate

The longer-term patent issue is being assessed against an already harder obesity-drug market. Eli Lilly has gained a substantial lead in injectable obesity medicines, while Novo is trying to defend an early advantage in oral treatments.

Novo said in August that its Wegovy pill had about 90% of the U.S. oral GLP-1 obesity market. But Lilly said in September that its Foundayo pill had already captured more than 30% of new U.S. oral-obesity patients. Those figures are not directly equivalent—one measures overall market share and the other new-patient share—but together they show how quickly the competitive picture can change.

The oral Wegovy launch remains commercially important. Novo reported about 265,000 weekly U.S. prescriptions for Wegovy pill in its Q2 investor presentation, and later described its new-prescription market share as around 60%. Still, a narrow second-quarter sales miss for the pill overshadowed Novo’s raised outlook, suggesting investors want to see sustained execution rather than an encouraging launch alone.

CagriSema weakened confidence in the next obesity growth leg

CagriSema had been expected to reinforce Novo’s position after Wegovy. Instead, in a head-to-head trial it produced 23.0% average weight loss versus 25.5% for Lilly’s Zepbound, and it did not meet its non-inferiority objective.

The market reaction underscored the strategic significance: Novo shares fell more than 16% after the trial result, according to Reuters. The result does not mean CagriSema has no commercial future, but it makes it harder to argue that Novo will regain a clear efficacy advantage over Lilly with its next-generation obesity medicine.

Pipeline news offers both support and setbacks

Novo’s clinical news has been mixed.

On the positive side, the Phase 3 STEP Young trial found that 40.4% of children aged 6 to under 12 receiving weekly semaglutide plus lifestyle intervention fell below the obesity threshold after 68 weeks, compared with none in the placebo group. The result supports further expansion of the semaglutide franchise. 12

However, Novo also halted two additional late-stage heart-failure studies of ziltivekimab after an independent monitoring committee concluded they were unlikely to succeed. The move followed an earlier late-stage trial in which the cardiovascular candidate failed to reduce major adverse cardiovascular events versus placebo. 1719

For investors, the setback matters because ziltivekimab was one potential diversification opportunity outside diabetes and obesity. Its failure increases the importance of Novo’s ability to advance other pipeline assets and franchise extensions.

Strong financial performance softens—but does not remove—the concern

The bearish argument is not that Novo lacks resources. Its Q2 2026 presentation reported adjusted sales growth of 7% at constant exchange rates, adjusted operating-profit growth of 11%, and a raised full-year outlook. Novo’s financial workbook reported free cash flow of DKK 42.5 billion for the first half of 2026.

That cash generation can support manufacturing capacity, R&D, launches and shareholder returns. But financial resilience today does not by itself answer the post-semaglutide question: how much of Novo’s future growth can come from products that are not dependent on the molecule facing eventual loss of exclusivity?

What the “Novo” rebrand and Capital Markets Day need to clarify

Novo Nordisk has adopted “Novo” as its day-to-day company name, while Novo Nordisk A/S remains its legal global name. The company said the change is part of a broader strategy and culture update, rather than a standalone financial catalyst.

Its Capital Markets Day on September 21 in London is therefore a key opportunity to address investor concerns. The most consequential disclosures would be a clearer view of:

• the company’s plan to defend and expand the Wegovy and Ozempic franchises;
• the outlook for oral obesity medicines as Lilly gains traction;
• timelines and commercial expectations for CagriSema and other pipeline programs;
• revenue sources capable of reducing dependence on semaglutide; and
• capital-allocation priorities as competition and future patent expirations approach.

Bottom line

Morgan Stanley’s DKK 250 target reflects a view that Novo’s risk is no longer confined to a distant patent event. Semaglutide concentration, a tougher fight with Eli Lilly, a less decisive CagriSema outcome and setbacks in diversification make the company’s medium-term growth profile less certain. 12

Novo remains profitable, cash-generative and commercially relevant in obesity care. But the investment debate has shifted: durable value will depend less on the historical success of semaglutide and more on whether Novo can sustain competitiveness and establish credible successors before exclusivity begins to erode.