Novo Nordisk Trades at a Discount While Volumes Compound

Price $49.48

Dividend Holding

July 14, 2026

• 3.8% Yield
• Wegovy pill, launched January 5, 2026, has become the strongest GLP-1 volume launch in US history, with more than 2 million prescriptions written and weekly scripts above 200,000 by mid-April.
• 30th consecutive year of dividend increases and a payout ratio policy of around 50% of net profit.
• Adjusted operating margin of 46.9% and net debt to EBITDA of 0.8x

Novo Nordisk reports in Danish kroner. All figures below are converted to US dollars at a rate of 6.38 DKK per USD

Investment Thesis

Novo Nordisk (NVO) is a Danish pharmaceutical company operating in two segments, Obesity and Diabetes care, and Rare disease. It holds a 59.6% branded volume share of the global obesity market and a 30.1% value share of global diabetes, and its portfolio is anchored on a single molecule, semaglutide, marketed as Ozempic, Rybelsus and Wegovy.

The company is passing through a pricing reset. Under the Most Favoured Nations agreement reached with the US administration in November 2025, semaglutide medicines will be made broadly available through Medicare Part D, Medicaid and direct-to-patient self-pay at substantially reduced prices, with the Medicare Part D obesity pilot beginning July 1, 2026. In International Operations, the semaglutide compound patent has begun to expire, with generics already launched in India and approvals granted in Canada. Management guides to adjusted sales and adjusted operating profit each declining 4% to 12% at constant exchange rates during 2026.

The market has responded by de-rating the shares. In our view this prices the pricing reset as permanent margin destruction while assigning little value to the Wegovy pill franchise, the Wegovy HD launch, or a phase 3 pipeline that now includes 5 new flagship drugs. With free cash flow guidance, capital expenditure past its peak, and net debt to EBITDA of 0.8x, we believe the 3.75% dividend is safe, and that the combination of income, a depressed multiple and a genuine volume catalyst makes Novo Nordisk an attractive entry point for dividend investors seeking total return.

Market Conditions

The GLP-1 market remains one of the fastest-growing categories in pharmaceuticals. Global branded obesity market volumes grew 84% on a moving annual total basis through February 2026, with US volumes up 85% and International Operations up 84%. The global GLP-1 diabetes market grew 29% by volume over the same period, with International Operations at 40% against 13% in the US, reflecting how much earlier the penetration curve sits outside the United States.

What has changed is not demand but the price at which that demand is served. In 2025, total US rebates, discounts and sales returns amounted to 70% of gross US sales. That gross-to-net spread has long been the central feature of the US pharmaceutical model, and the MFN agreement effectively converts part of it into a lower list price with broader access. Novo Nordisk now sells Wegovy pill in the self-pay channel at $149 to $299 per month depending on dose, available at over 70,000 pharmacies and through nine telehealth organisations. For the week ending April 17, 2026, roughly 100,000 of the 270,000 weekly injectable Wegovy prescriptions were filled in the self-pay channel.

We believe the strategic logic is sound. Obesity is a chronic indication with a very large untreated population, and a channel that reaches patients at $149 per month reaches a fundamentally different market than one reaching them at a gross list price several times higher. The Medicare Part D pilot beginning July 1, 2026 covers a majority of beneficiaries and represents the first meaningful government reimbursement of obesity medication in the United States.

Operations

For the quarter ending March 2026, reported sales were $15.18 billion up 32%, and reported operating profit was $9.34, up 65%. Both figures are distorted by the reversal of a $4.2 billion provision for sales rebates related to the 340B Drug Pricing Program in the US, which has no cash impact. On an adjusted basis, excluding the reversal, sales were 4%, and operating profit was down 6%. Adjusted gross margin was 80.6%, a decline of 290bps a year prior, driven by lower realised prices, one-time costs and negative currency, partially offset by favourable mix as GLP-1 grew as a share of the portfolio.

Obesity care, the growth engine, delivered adjusted sales of $3.28 billion, up 22%, split between $1.84 billion in the US (up 9%) and $1.44 billion in International Operations (up 44%). Diabetes care, still the larger segment, ran in the opposite direction, with adjusted sales of $7.04 billion, down 12%. US Operations fell 19% and International Operations fell 4%. GLP-1 diabetes sales were $5.13 billion, down 11% at CER, as Ozempic fell 8% globally, comprising a 14% decline in the US on lower realised prices in the commercial channel and 6% growth in International Operations, where quarterly sales reached an all-time high driven by EU-CAN. Rybelsus fell 15% globally, with a 27% US decline reflecting both price and a deliberate reprioritisation of promotional spend toward the Wegovy portfolio, and Victoza is in terminal decline, down 70%. Insulin, the oldest part of the franchise, fell 17% to $1.83 billion with US Operations down 36% on market share losses, a shrinking insulin market and lower realised prices; it is now 16.6% of adjusted sales and we expect it to keep shrinking as a share of the business. Awiqli, the first once-weekly basal insulin for type 2 diabetes, was approved by the FDA during the quarter, and Kyinsu, a fixed-dose combination of once-weekly insulin icodec and once-weekly semaglutide, was approved in China in March for a second-half launch, though neither reverses the trajectory of the insulin book. Novo Nordisk’s global diabetes value market share fell 360bps over the trailing twelve months to 30.1%, a figure we regard with less alarm than the headline suggests, given that it is a value share in a market where the company is deliberately cutting price while its own volume share of GLP-1 continues to grow.

Rare disease, at 6.0% of adjusted sales, saw sales fall 2%, with US Operations down 16% on de-stocking following wholesaler buying patterns at the end of 2025, against 9% growth in International Operations.

Pipeline

CagriSema, the combination of cagrilintide (another T2 Diabetes drug) and semaglutide, has been submitted to the FDA for weight management with a US decision expected in the fourth quarter of 2026. The trial was head-to-head trial completed in February delivered 23% weight loss but did not achieve its primary endpoint, and a phase 3b trial at a higher dose is planned for the second quarter of 2026. We view the trail outcome as a disappointment rather than a failure, since 23% weight loss remains a competitive absolute result, but it removes the argument that CagriSema is definitively superior to competing combination drugs.

Zenagamtide, formerly amycretin, entered a broad phase 3 programme during the quarter. The trials cover both subcutaneous and oral routes across obesity, type 2 diabetes, obstructive sleep apnoea, knee osteoarthritis and weight maintenance, with trials for oral zenagamtide expected to initiate in the third quarter of 2026. Efruxifermin, the FGF21 analogue acquired with Akero Therapeutics, has phase 3 fibrosis results expected during 2026. Ziltivekimab has phase 3 results expected in the third quarter of 2026 across cardiovascular and renal indications.

Risk

The central risk is that price compression proves deeper and more persistent than the volume offset. Management has assumed a set of Wegovy pill uptake conditions, including market penetration, channel mix and the degree to which the pill cannibalises injectable growth, and we do not think those assumptions are testable from the outside. If the self-pay channel expands at the expense of the commercial channel, blended realised price falls further even as prescriptions rise. Adjusted gross margin has already contracted 290bps year over year, and a further 200 to 300bps of compression is not difficult to construct.

Competition is intensifying on both branded and generic fronts. Eli Lilly holds a commanding position in the US incretin market and its portfolio continues to expand. In International Operations, semaglutide generics are now launched in India and approved in Canada, and the Chinese exclusivity is under active legal challenge. These markets currently carry high realised prices for a mature product, and generic entry removes that revenue immediately rather than gradually.

Finally, the company is in the middle of significant organisational change. The 2025 company-wide transformation eliminated approximately 9,000 positions, headcount fell by nearly 10,000 over twelve months to around 68,000, and both the chief executive and the composition of the Board have changed. Management has delivered the targeted $1.25 billion in savings, which is being reinvested. We think that reinvestment is correct given the pipeline, though it means the cost programme does not cushion the margin decline.

Financials

For the year ending December 2025, sales grew 10% to $48.4 billion, operating profit grew 6% at CER to $20.0 billion and net income rose 1% to $16.1 billion.

For 2026, management raised guidance on May 6, moving adjusted sales growth to -4% to -12% from -5% to -13%, and adjusted operating profit growth to the same range from -5% to -13%. The raise was driven entirely by higher expected GLP-1 product sales. On a non-adjusted basis, which includes the 340B reversal, the midpoints of sales and operating profit growth would be 1% and 12% respectively.

Free cash flow guidance was raised to $5.6 to $7.2 billion. Free cash flow in the quarter ending March 2026 was $2.0 billion against $1.8 billion a year prior, with the improvement driven by lower capital expenditure. Management has stated that capital expenditure will decline in the coming years. The balance sheet carries net debt of $18.2 billion, with a net debt to EBITDA is roughly 0.8x.

On the dividend, Novo Nordisk paid an interim dividend of $0.59 per share in August 2025 and a final dividend of $1.25 per share in March 2026, for a total 2025 dividend of $1.83 per share and a payout ratio of 50.7%. That is the 30th consecutive annual increase, and the stated policy targets a payout ratio of approximately 50% of net profit benchmarked to the pharmaceutical peer group, whose 2024 average was 58.9%. The $2.35 billion share repurchase programme initiated in February 2026 is discretionary and can be reduced, and management has explicitly stated it may be cut back if business development opportunities arise. We therefore believe the dividend is safe, and that the buyback rather than the dividend is flexible.

Conclusion

Novo Nordisk is being valued as if the price reset was permanent and would not impact volumes. We believe the company has traded realised price for access across the US self-pay channel, Medicare Part D, and a set of International markets where the semaglutide patent is expiring, and it has done so at a moment when the branded obesity market is still growing 84% by volume.

We believe Novo Nordisk offers dividend investors a compelling entry point, with income through the pricing reset and meaningful capital appreciation as the 2027 comparison base clears and volume growth is allowed to reach the top line.