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Will Morgan Stanley's NVO Downgrade Deepen Patent and Rival Woes?
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Key Takeaways
NVO fell 2.1% after Morgan Stanley downgraded the stock to Underweight, citing growth and patent risks.
Semaglutide drugs generated about 75.5% of NVO's adjusted first-half sales, heightening patent-cliff exposure.
Lilly's Mounjaro and Zepbound sales surge in H1 2026, while Foundayo pressures NVO's oral obesity strategy.
Novo (NVO - Free Report) stock declined 2.1% on Friday as a Morgan Stanley downgrade added fresh pressure. The investment bank reportedly cut NVO to “Underweight” from “Equal-weight” while retaining a $40 (DKK 250) price target, arguing that the valuation does not fully reflect muted medium-term growth and the looming semaglutide patent cliff.
Morgan Stanley’s concern reportedly centers on the durability of Novo’s growth beyond the current GLP-1 boom. It believes medium-term growth could remain subdued, while the eventual loss of exclusivity for semaglutide represents a significant longer-term risk. This matters because semaglutide is the key ingredient in Novo’s flagship Ozempic and Wegovy franchises as well as Rybelsus, leaving the company highly exposed to patent and competitive risks. NVO’s 2025 annual report showed that patent protection for semaglutide extends into the early 2030s, with key protections for Ozempic (for type II diabetes (T2D)), Rybelsus (for T2D) and Wegovy (for obesity) expiring around 2031 in Europe and 2032 in the United States. Although additional patents covering certain formulations, uses or manufacturing processes may extend protection in some markets, the risk still looms large.
Novo has been preparing for this eventual transition by investing in next-generation obesity medicines and seeking to diversify growth beyond semaglutide. However, the patent issue becomes more significant given how heavily the company’s current revenue base is concentrated in these semaglutide products. Morgan Stanley’s downgrade therefore likely reflects not only the timing of patent expirations but also whether NVO can build sufficient new growth drivers before its core franchise begins facing generic and competing-product pressure. As the early 2030s approach, the company will need its newer obesity and diabetes treatments to offset the eventual decline in the pricing power and market exclusivity of its existing semaglutide portfolio.
NVO’s first-half 2026 figures underscore the concentration risk and explain why the patent issue could become increasingly consequential for growth. Adjusted sales of Wegovy injectable, Wegovy pill, Ozempic injection and the Ozempic pill/Rybelsus franchise totaled about DKK 112.2 billion, implying that semaglutide-related products generated roughly 75.5% of total adjusted first-half sales. With such a large share of sales tied to semaglutide, NVO will need its newer obesity and diabetes medicines to deliver meaningful growth before the core franchise faces mounting competitive and exclusivity pressures, leaving the company little room for execution missteps and a formidable growth challenge ahead.
Increasing Competition From LLY Adds to NVO’s Growth Challenge
Competition from Eli Lilly (LLY - Free Report) was another important element behind Morgan Stanley’s bearish stance. Novo has been losing ground in key U.S. GLP-1 markets as Lilly’s Mounjaro (for T2D) and Zepbound (for obesity) injections gain share against Ozempic and Wegovy injections. LLY’s Zepbound has captured most Medicare patients since the Bridge program began, while tirzepatide, the active ingredient in Mounjaro and Zepbound, has also secured the majority of the U.S. GLP-1 market. Together, these trends underscore Lilly’s growing competitive advantage and raise concerns over NVO’s ability to defend market share and pricing power.
Lilly’s first-half numbers show why that pressure is difficult for NVO to dismiss. Mounjaro generated $18.6 billion during the period, up 106%, while Zepbound generated $9.1 billion, up 60%. Combined, the two drugs produced about $27.7 billion, roughly 88% above the year-ago total. By comparison, NVO’s first-half Ozempic sales declined 2% at CER, while Wegovy product sales rose a modest 7% at CER.
The competitive challenge has expanded into oral obesity treatment as well. Lilly launched Foundayo (orforglipron) in the United States in April 2026. Unlike oral Wegovy, Foundayo can be taken without food or water restrictions, giving Lilly a convenience advantage. With Morgan Stanley already expecting NVO’s market share to erode toward Lilly’s current portfolio, the rapid scaling of Mounjaro and Zepbound and the arrival of Foundayo make it harder for NVO to rely on oral semaglutide to offset the longer-term patent cliff.
NVO Faces Rising Competitive Pressure Beyond LLY in GLP-1s
While Novo and Eli Lilly currently dominate this space, smaller biotechs like Structure Therapeutics (GPCR - Free Report) and Viking Therapeutics (VKTX - Free Report) are also advancing GLP-1–based therapies for treating obesity.
Viking Therapeutics’ dual GIPR/GLP-1 receptor agonist (RA), VK2735, is being developed in both oral and subcutaneous formulations for the treatment of obesity. Viking Therapeutics plans to advance oral VK2735 into phase III development for obesity in the fourth quarter of 2026.
Structure Therapeutics’ phase II ACCESS program on its orally administered small molecule GLP-1 RA, aleniglipron, demonstrated significant weight loss across all doses. Based on such encouraging results, Structure Therapeutics has initiated dosing patients in its late-stage ACCOMPLISHprogram to evaluate aleniglipron for chronic weight management.
NVO’s Stock Price, Valuation & Estimates
Year to date, Novo shares have lost 15.3% against the industry’s 9.9% growth. The company has also underperformed the sector and the S&P 500 during the same time frame, as seen in the chart below.
NVO Stock Underperforms the Industry, Sector & the S&P 500
Image Source: Zacks Investment Research
Novo is trading at a discount to the industry, as seen in the chart below. Going by the price/earnings ratio, the company’s shares currently trade at 12.57 forward earnings, which is lower than 17.86 for the industry. The stock is trading much below its five-year mean of 29.03.
NVO Stock Valuation
Image Source: Zacks Investment Research
Earnings estimates for 2026 have increased from $3.41 per share to $3.45 per share over the past 30 days. During the same time frame, Novo’s 2027 earnings estimates have increased from $3.37 to $3.42.
View the Zacks #1 Rank List
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Will Morgan Stanley's NVO Downgrade Deepen Patent and Rival Woes?
Key Takeaways
Novo (NVO - Free Report) stock declined 2.1% on Friday as a Morgan Stanley downgrade added fresh pressure. The investment bank reportedly cut NVO to “Underweight” from “Equal-weight” while retaining a $40 (DKK 250) price target, arguing that the valuation does not fully reflect muted medium-term growth and the looming semaglutide patent cliff.
Morgan Stanley’s concern reportedly centers on the durability of Novo’s growth beyond the current GLP-1 boom. It believes medium-term growth could remain subdued, while the eventual loss of exclusivity for semaglutide represents a significant longer-term risk. This matters because semaglutide is the key ingredient in Novo’s flagship Ozempic and Wegovy franchises as well as Rybelsus, leaving the company highly exposed to patent and competitive risks. NVO’s 2025 annual report showed that patent protection for semaglutide extends into the early 2030s, with key protections for Ozempic (for type II diabetes (T2D)), Rybelsus (for T2D) and Wegovy (for obesity) expiring around 2031 in Europe and 2032 in the United States. Although additional patents covering certain formulations, uses or manufacturing processes may extend protection in some markets, the risk still looms large.
Novo has been preparing for this eventual transition by investing in next-generation obesity medicines and seeking to diversify growth beyond semaglutide. However, the patent issue becomes more significant given how heavily the company’s current revenue base is concentrated in these semaglutide products. Morgan Stanley’s downgrade therefore likely reflects not only the timing of patent expirations but also whether NVO can build sufficient new growth drivers before its core franchise begins facing generic and competing-product pressure. As the early 2030s approach, the company will need its newer obesity and diabetes treatments to offset the eventual decline in the pricing power and market exclusivity of its existing semaglutide portfolio.
NVO’s first-half 2026 figures underscore the concentration risk and explain why the patent issue could become increasingly consequential for growth. Adjusted sales of Wegovy injectable, Wegovy pill, Ozempic injection and the Ozempic pill/Rybelsus franchise totaled about DKK 112.2 billion, implying that semaglutide-related products generated roughly 75.5% of total adjusted first-half sales. With such a large share of sales tied to semaglutide, NVO will need its newer obesity and diabetes medicines to deliver meaningful growth before the core franchise faces mounting competitive and exclusivity pressures, leaving the company little room for execution missteps and a formidable growth challenge ahead.
Increasing Competition From LLY Adds to NVO’s Growth Challenge
Competition from Eli Lilly (LLY - Free Report) was another important element behind Morgan Stanley’s bearish stance. Novo has been losing ground in key U.S. GLP-1 markets as Lilly’s Mounjaro (for T2D) and Zepbound (for obesity) injections gain share against Ozempic and Wegovy injections. LLY’s Zepbound has captured most Medicare patients since the Bridge program began, while tirzepatide, the active ingredient in Mounjaro and Zepbound, has also secured the majority of the U.S. GLP-1 market. Together, these trends underscore Lilly’s growing competitive advantage and raise concerns over NVO’s ability to defend market share and pricing power.
Lilly’s first-half numbers show why that pressure is difficult for NVO to dismiss. Mounjaro generated $18.6 billion during the period, up 106%, while Zepbound generated $9.1 billion, up 60%. Combined, the two drugs produced about $27.7 billion, roughly 88% above the year-ago total. By comparison, NVO’s first-half Ozempic sales declined 2% at CER, while Wegovy product sales rose a modest 7% at CER.
The competitive challenge has expanded into oral obesity treatment as well. Lilly launched Foundayo (orforglipron) in the United States in April 2026. Unlike oral Wegovy, Foundayo can be taken without food or water restrictions, giving Lilly a convenience advantage. With Morgan Stanley already expecting NVO’s market share to erode toward Lilly’s current portfolio, the rapid scaling of Mounjaro and Zepbound and the arrival of Foundayo make it harder for NVO to rely on oral semaglutide to offset the longer-term patent cliff.
NVO Faces Rising Competitive Pressure Beyond LLY in GLP-1s
While Novo and Eli Lilly currently dominate this space, smaller biotechs like Structure Therapeutics (GPCR - Free Report) and Viking Therapeutics (VKTX - Free Report) are also advancing GLP-1–based therapies for treating obesity.
Viking Therapeutics’ dual GIPR/GLP-1 receptor agonist (RA), VK2735, is being developed in both oral and subcutaneous formulations for the treatment of obesity. Viking Therapeutics plans to advance oral VK2735 into phase III development for obesity in the fourth quarter of 2026.
Structure Therapeutics’ phase II ACCESS program on its orally administered small molecule GLP-1 RA, aleniglipron, demonstrated significant weight loss across all doses. Based on such encouraging results, Structure Therapeutics has initiated dosing patients in its late-stage ACCOMPLISHprogram to evaluate aleniglipron for chronic weight management.
NVO’s Stock Price, Valuation & Estimates
Year to date, Novo shares have lost 15.3% against the industry’s 9.9% growth. The company has also underperformed the sector and the S&P 500 during the same time frame, as seen in the chart below.
NVO Stock Underperforms the Industry, Sector & the S&P 500
Novo is trading at a discount to the industry, as seen in the chart below. Going by the price/earnings ratio, the company’s shares currently trade at 12.57 forward earnings, which is lower than 17.86 for the industry. The stock is trading much below its five-year mean of 29.03.
NVO Stock Valuation
Earnings estimates for 2026 have increased from $3.41 per share to $3.45 per share over the past 30 days. During the same time frame, Novo’s 2027 earnings estimates have increased from $3.37 to $3.42.
NVO Estimate Movement
Novo currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.