"Complete disappointment"! Deutsche Bank downgrades Novo Nordisk rating for the first time

Novo Nordisk faces setbacks in key weight-loss drug clinical trials, triggering an unusual wave of downgrades by Wall Street investment banks, with Deutsche Bank cutting the company’s stock rating for the first time in five years.

According to data released by Novo Nordisk on Monday, its weight-loss drug CagriSema, which is awaiting FDA approval, underperforms compared to main competitor Eli Lilly’s similar products. As a result of this negative development, Deutsche Bank analyst Emmanuel Papadakis downgraded his rating on Novo Nordisk from “Buy” to “Hold.”

This news sparked a sharp market sell-off. Novo Nordisk’s stock plummeted 16% on Monday and continued to decline by 2% in early Copenhagen trading, as investor concerns about the competitiveness of the company’s core pipeline rapidly intensified.

JPMorgan Chase also joined the downgrade wave, significantly reducing sales expectations for related drugs. With pessimism spreading, the bullish sentiment on the stock on Wall Street has fallen to its lowest level in years, highlighting a reassessment of its growth prospects.

Mid-term outlook dims as investment banks sharply cut forecasts

Deutsche Bank analyst Emmanuel Papadakis also lowered his target price by 31%. He noted that prior to this setback, considering the momentum of the oral version of Wegovy and the company’s conservative guidance, he could have accepted a near-double-digit revenue decline. However, he now believes that Novo Nordisk’s mid-term prospects have been substantially impacted.

JPMorgan quickly responded as well. Led by analyst Richard Vosser, the team downgraded Novo Nordisk from “Overweight” to “Neutral.” More severely, JPMorgan slashed its sales forecasts for CagriSema from 2027 to 2030 by up to 63%.

As the investment banks collectively turn against the stock, market consensus is shifting significantly. According to FactSet data, since the end of 2021, the proportion of analysts rating Novo Nordisk as “Buy” has fallen to its lowest level in years, at only 37%.

Market consensus and potential catalysts after sharp stock decline

Despite the wave of downgrades and the sharp drop in stock price, Wall Street’s overall valuation of Novo Nordisk still holds some room. Data shows that even after a series of rating cuts, the stock’s current average target price remains about 38% above its current trading price.

Amid setbacks in the weight-loss pipeline, market focus may shift partly to the company’s other R&D pipelines. JPMorgan particularly highlights a key catalyst outside obesity— the drug ziltivekimab.

Third-quarter clinical data for this drug is expected to be released later this year. The data will verify whether the drug can effectively reduce cardiovascular event risks in patients with established atherosclerotic cardiovascular disease, chronic kidney disease, and systemic inflammation, which could be a critical factor influencing Novo Nordisk’s future market performance.

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