Novo Nordisk Downgraded by Morgan Stanley on Patent Cliff and Growth Worries

Morgan Stanley has downgraded Novo Nordisk (NOVOb) to Underweight from Equal-weight, warning that the drugmaker's valuation does not fully account for a subdued growth forecast and the long-term risk of its looming patent cliff. The bank's analysts maintained their price target of 250 Danish crowns, implying more than 10% downside from the previous closing price, which sent the company's shares down 2.6% in early Copenhagen trading.

Growth Outlook and Patent Concerns

The downgrade is rooted in concerns over the future of semaglutide, the active ingredient in Novo Nordisk's blockbuster obesity and diabetes drugs Ozempic and Wegovy. According to a note from Morgan Stanley, the bank's valuation model reflects a more cautious view on the company's mid-term growth and "the implications of the semaglutide patent cliff on Novo’s terminal value."

Key points from the analysis include:

• Semaglutide accounted for 75% of Novo's sales in 2026 and is projected to still represent 59% of sales in 2031.
• The drug faces a significant loss-of-exclusivity (LOE) event in the early-to-mid 2030s across the U.S. and Europe.
• Morgan Stanley forecasts Novo Nordisk's revenue and EBIT growth will slow to 2-3% in 2027, in line with consensus.
• From 2027-2030, the bank projects a compound annual growth rate of 4% for revenue and EBIT, lagging the 7% EBIT growth it expects for the broader European pharma sector.

Competitive Landscape and Valuation

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Morgan Stanley's analysis also pointed to increasing competitive pressure. A proprietary survey of 200 primary care physicians suggested that Novo Nordisk could lose market share over the next 18 months to rival Eli Lilly's current offerings and its anticipated drug, retatrutide, which is expected in 2027.

While the bank forecasts Novo's oral obesity franchise will reach $10 billion in sales by 2031, it stated this "will not be enough to offset pricing and competitive headwinds." From a valuation perspective, analysts noted Novo Nordisk trades at a 35% premium to global peers like Sanofi and GSK, which are also facing their own patent expirations.

Looking Ahead

Analysts see "limited scope for major announcements" at Novo Nordisk's upcoming capital markets day on September 21. However, they noted that a key upside risk to their thesis would be if oral obesity treatments capture a larger-than-expected patient share and demonstrate more resilience to competitive and generic pressures than currently modeled.