Novo Nordisk: Boom → Bust → Comeback?

"The best analyst I know of is the inside of the stock market."

– Stanley Druckenmiller, Hedge Fund Legend

Obesity

The market is gigantic.

More than 900 million people worldwide are obese — and that number is expected to grow substantially (chart 1). That’s over 10% of the global population of roughly 8.3 billion people.

So, what exactly does obesity mean?

It refers to abnormal or excessive fat accumulation that poses a significant risk to health. In adults, it is generally diagnosed using the Body Mass Index (BMI) — yes, that number we’ve all heard at least once. A BMI of 30 or higher qualifies as obese. The calculation is simple: weight in kilograms divided by the square of height in meters (BMI = kg/m²).

Over the years, we’ve tried everything.

Pills. Diets. Fat-loss teas. Fasting. You name it.

And then — just a few years ago — a true breakthrough hit the market. The GLP-1 drugs.

Today, two companies dominate this space with state-of-the-art obesity drugs, forming what is effectively a duopoly. Yet only ~2.2 million people — roughly 3% of the obese population — are currently being treated.

That means over 97% of the market remains untapped. The current leader? Eli Lilly.

And the other major player — sitting right in the middle of a perfect storm?

Novo Nordisk.

Chart 1: Obesity rates are expected to rise, percentage projected to be obese by 2035

The Problems Novo Nordisk Faces

Novo Nordisk — alongside Eli Lilly — is a textbook case of why duopolies are attractive… and why even they aren’t immune to trouble.

We’ve covered the whole wonder-drug story and the diabetes & obesity markets in past arvy Weeklies, so we won’t go too deep here.

But a quick recap, why duopolies are so enticing:

• Pricing power: Duopolies can raise prices without triggering full-scale wars, keeping margins high.
• High entry barriers: Massive R&D, regulation, scale, and brand trust protect their market.
• Predictable cash flows: With only two main players, earnings are more stable and forecastable.
• Innovation-driven competition: Rivalry focuses on new products, not price cuts, expanding the market.
• Rarity premium: True duopolies are scarce, often earning higher valuations and investor attention.

But what happens if you stumble — or your competitor releases a better product?

That’s exactly what hit Novo Nordisk. The market has been brutal, hammering the stock by ~70% (chart 2).

The problems were multi-fold:

1. Production Constraints: In 2024, demand for Wegovy far outstripped supply.
2. Compounded Pharmacies: US law allowed pharmacies to make their own versions when factory supply ran dry. Compounding is when pharmacies mix their own drugs (unapproved) from raw ingredients instead of selling the factory-made version.
3. US Pricing & Access: Politicians like Senator Sanders criticized the $1,300+ price in the US vs. <$200 in Europe.
4. Competition from Eli Lilly: Zepbound (tirzepatide) emerged as a slightly more effective weight-loss drug. Novo’s GLP-1 market share fell from 59% to 50%.

The perfect storm? Novo faced empty shelves, rising use of unapproved compounded drugs, and a stronger competitor.

So, the question remains: is there a silver lining?

And is it so bad that it might be good again?

Chart 2: Eli Lilly vs Novo Nordisk over the last five years

Obesity Market: Novo Nordisk’s Ship is Still Seaworthy

Despite the stormy weather, Novo Nordisk continues to operate in a massive and still growing market. While the company has had to lower revenue and earnings forecasts multiple times, the core “Good Story” remains intact — a few holes in the ship aside, it is still seaworthy.

Over the past five years, Novo Nordisk ranks in the top 10% of our “Good Story” quality metrics and in the arvy Global Compounder Database (whole database available here). History shows that strong healthcare companies tend to stay strong: winners keep winning, as we like to say at arvy.

Fundamentals remain attractive:

• Ongoing top-line (revenue) and bottom-line (earnings) growth
• High returns on invested capital
• Robust margins

Valuation is now compelling, especially compared to its better-positioned peer (chart 3). In setups like this, catalysts often emerge, and past setbacks may matter far less than the market currently assumes.

The newest catalyst?

The Wegovy pill.

In early 2026, Novo Nordisk launched the first oral GLP-1 tablet (semaglutide) for weight loss in the US. It delivers similar efficacy to the injection (~16.6–17% weight loss), requires no refrigeration, and is taken daily. This gives Novo a first-mover advantage ahead of Eli Lilly, whose oral GLP-1 approval is expected in April 2026.

And early data confirms that demand is real. Oral Wegovy is taking off in the US. New prescriptions jumped from 4,289 to 20,371 in just the first two weeks after launch.

For comparison in week two (insured patients only):

• Wegovy injection: 1,017
• Zepbound injection (Eli Lilly): 10,026

Beyond weight loss, these drugs show promising results for heart failure, kidney disease, sleep apnea, and even alcohol addiction — opening multi-billion-dollar opportunities on their own.

So, while Novo still comes in second in a duopoly, the market remains enormous, and small differences in weight-loss percentages matter far less than access, adoption, and long-term adherence. The “Good Story” is now emerging from the storm, supported by a genuine product breakthrough.

From a fundamental perspective, Novo Nordisk appears ready to re-engage its historical winning streak. The storm is calming, and the sun is starting to break through the clouds.

That leaves two final questions: Will Mr. Market acknowledge it?

And are there signs yet?

Chart 3: Valuation of Novo Nordisk and Eli Lilly (Forward P/E)

Novo Nordisk’s Stock Price Maturation Cycle

As we know, Mr. Market is the only truly objective judge of a business and its stock price. He ultimately decides what something is worth — albeit with his usual excesses of optimism and pessimism along the way.

One truth remains: Mr. Market is the best-informed analyst, aggregating hundreds, if not thousands, of views in real time.

In Novo Nordisk’s case, the culprit was clear.

Excessive optimism gave way to excessive pessimism, culminating in what we view as a final washout — the point where the last remaining bulls capitulated and sold their shares.

What followed matters far more.

The stock strongly rejected its lows, accompanied by significant volume. That is a classic signal of institutional buying interest.

At the same time, fundamentals provided a catalyst. With the launch of the Wegovy pill, Mr. Market began to respond. Technically, the stock is attempting to transition from Stage 1 (base consolidation) back into Stage 2 (accumulation) of Stan Weinstein’s Stock Price Maturation Cycle (chart 4).

Early trend reversals are now visible. The first rays of sunlight — supported by a renewed “Good Story” — are breaking through the clouds and beginning to illuminate the “Good Chart.”

For us, that means one of our favorite setups and things to do.

Making money with old friends.

We are back in Novo Nordisk.

Chart 4: Novo Nordisk stock price maturation cycle over the last ten years and buying/selling points of arvy