Shares of Novo Nordisk NVO gained 2.8% on Wednesday likely because the analysts at UBS upgraded the company’s rating from “Neutral” to “Buy.” Novo Nordisk markets its semaglutide medicines as Ozempic pre-filled pen and Rybelsus oral tablet for type II diabetes (T2D) and Wegovy injection for weight management.

The company competes with Eli Lilly’s LLY Zepbound (tirzepatide) in the obesity market. Although Lilly’s Zepbound outperformed Novo Nordisk’s Wegovy (20.2% compared with 13.7%, respectively) in a weight-loss head-to-head study last year, UBS analysts believe that the semaglutide drugs enjoy better brand recognition being an early mover in the diabetes and obesity care market space.

Additionally, Novo Nordisk faced a massive setback last month after it announced poorer-than-expected efficacy data from a late-stage study of its next-generation subcutaneous obesity candidate, CagriSema. Per the data readout from the phase III REDEFINE 1 study, a weight loss of 22.7% was observed in patients treated with CagriSema, which missed NVO’s guidance of 25% weight loss at week 68, provided on the third-quarter earnings conference call.

UBS analysts believe the stock's decline, primarily due to disappointing CagriSema study data, has been overly steep, creating an appealing entry opportunity for potential new investors.

In the past three months, Novo Nordisk’s shares have plunged 27.1% compared with the industry’s 14% decline.

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Lilly has witnessed stupendous success with its tirzepatide medicines, Mounjaro for T2D and Zepbound for obesity. Despite a short time on the market, Mounjaro and Zepbound became key top-line drivers for Lilly in 2024, with demand rising rapidly.

Both Lilly and NVO have struggled to meet the tremendous demand for obesity medicines in the past. However, both companies have been investing heavily in ramping up production capacity for their respective weight management drugs.

NVO Expands Collaboration Agreement With Valo Health

In the last press release, Novo Nordisk announced expanding its partnership with Valo, leveraging the latter’s extensive human dataset and AI-driven computational power to discover and develop innovative treatments for obesity, T2D and cardiovascular disease.

The companies initially collaborated in September 2023 under an agreement enabling the development of up to 11 drug programs, primarily targeting cardiovascular disease. Through this partnership, Valo became eligible to receive up to $2.7 billion in milestone payments, along with R&D funding and potential royalties.

Per the terms of the expanded agreement, Valo will receive an upfront payment, an equity investment and a potential near-term milestone payment totaling $190 million from Novo Nordisk. The deal also increases the number of eligible drug programs to 20, adding nine new programs, with Valo now eligible for up to $4.6 billion in milestone payments, along with R&D funding and potential royalties.

Novo Nordisk stated that the collaboration with Valo has already resulted in the identification of several novel targets that could support unique cardiometabolic drug programs, with the companies actively advancing multiple small-molecule preclinical drug discovery efforts.

Novo Nordisk A/S Price and Consensus

Novo Nordisk A/S price-consensus-chart | Novo Nordisk A/S Quote

NVO’s Zacks Rank & Stocks to Consider

Novo Nordisk currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks from the sector are Castle Biosciences CSTL and Halozyme Therapeutics HALO, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 30 days, 2024 estimates for Castle Biosciences’ earnings per share have remained constant at 34 cents. During the same timeframe, loss per share estimates for 2025 have remained constant at $1.84. In three months, shares of Castle Biosciences have gained 15.6%.

CSTL’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 172.72%.

In the past 30 days, estimates for Halozyme Therapeutics’ 2024 earnings per share have Improved from $4.05 to $4.07. Estimates for 2025 earnings per share have increased from $4.80 to $4.81 during the same timeframe. In three months, Halozyme Therapeutics’ shares have gained 3.1%.

HALO’s earnings beat estimates in three of the trailing four quarters and matched once, delivering an average surprise of 14.86%.

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