Novo Nordisk Shares Fall After Morgan Stanley Downgrade Over Patent Cliff Concerns

Shares of Novo Nordisk (NOVOb) fell on Tuesday after Morgan Stanley downgraded the pharmaceutical giant, raising concerns about its long-term growth prospects and heavy reliance on the blockbuster drug semaglutide, the active ingredient in Ozempic and Wegovy.

Morgan Stanley's Bearish Outlook

Morgan Stanley cut its rating on Novo Nordisk to Underweight from Equal-weight, a move that sent the company's Class B shares down 2.8% to DKK 278.2 in trading. The bank's analysts, led by Thibault Boutherin, argued that the stock's valuation does not fully account for a muted mid-term growth forecast and the financial impact of the upcoming "patent cliff."

The firm highlighted Novo Nordisk's significant dependence on semaglutide, which is projected to constitute 75% of sales in 2026. The drug faces patent expirations in the U.S. and Europe in the early-to-mid 2030s. Morgan Stanley estimates that even in 2031, as patents begin to expire, semaglutide will still account for 59% of sales, posing a significant risk to the company's terminal value.

Competitive and Pipeline Pressures

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The downgrade also reflects a deteriorating competitive landscape. According to Morgan Stanley, recent prescription trends and a proprietary survey of 200 primary care physicians indicate that Novo Nordisk is losing market share in diabetes and obesity treatments to rival Eli Lilly, which markets Zepbound and Mounjaro.

Adding to investor concerns, Novo Nordisk recently halted two clinical trials for its drug ziltivekimab, creating further uncertainty around its future product pipeline. Morgan Stanley projects Novo Nordisk's revenue and EBIT compound annual growth rate (CAGR) will be 4% between 2027 and 2030, lagging the 7% EBIT CAGR forecast for the broader European pharmaceutical sector during the same period.

Contrasting Analyst Actions

The bearish view from Morgan Stanley largely overshadowed more positive sentiment elsewhere. HSBC raised its price target on Novo Nordisk to DKK 320 from DKK 300, though it maintained a Hold rating on the stock. However, the downgrade, combined with concerns about long-term exclusivity and competition, outweighed the modest target increase and the company's ongoing DKK 15 billion share buyback program.