"Utter disappointment"! Deutsche Bank downgrades Novo Nordisk AS for the first time

Novo Nordisk encountered setbacks in key clinical trials for its weight loss drug, triggering a rare wave of downgrades from Wall Street investment banks, with Deutsche Bank lowering 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, awaiting approval from the U.S. Food and Drug Administration (FDA), underperformed compared to similar products from major competitor Eli Lilly. In light of this negative development, Deutsche Bank analyst Emmanuel Papadakis downgraded his rating on Novo Nordisk from "Buy" to "Hold."

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

JP Morgan subsequently joined the downgrade ranks, significantly cutting sales expectations for the related drugs. As pessimism spread, the proportion of bullish sentiment on Wall Street for the stock has fallen to its lowest level in years, highlighting a reassessment of the company's growth prospects.

Mid-term Outlook Clouded, Investment Banks Significantly Cut Expectations

Deutsche Bank analyst Emmanuel Papadakis, while downgrading the rating, also cut the 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 expectations for a nearly double-digit revenue decline. However, he now believes that Novo Nordisk's mid-term outlook has been substantially impacted.

JP Morgan also reacted swiftly. A team led by analyst Richard Vosser downgraded Novo Nordisk's rating from "Overweight" to "Neutral." More severely, JP Morgan significantly cut its sales forecast for CagriSema by as much as 63% for the years 2027 to 2030.

As investment banks collectively turned against the stock, market consensus is undergoing a significant shift. According to data from FactSet, the proportion of analysts giving Novo Nordisk a "Buy" rating has fallen to its lowest level since the end of 2021, now only accounting for 37%.

Market Consensus and Potential Catalysts After Stock Price Plunge

Despite facing a new wave of downgrades and a sharp decline in stock price, Wall Street still retains some room for overall valuation of Novo Nordisk. Data shows that even after a series of rating cuts, the stock's current average target price is still about 38% higher than its current trading price.

As the weight loss drug pipeline faces setbacks, market focus may partially shift to the company's other research and development pipelines. JP Morgan particularly highlighted a key catalyst for Novo Nordisk outside the obesity field— the drug ziltivekimab. The Phase III clinical data for the drug is expected to be released in the third quarter of this year. The data at that time will verify whether the drug can effectively reduce the risk of cardiovascular events in patients with established atherosclerotic cardiovascular disease, chronic kidney disease, and systemic inflammation, which may become a key factor affecting Novo Nordisk's next market performance.

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