Novo Nordisk (NOVO B) DKK0.1 B

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Novo Nordisk’s 2025 sales before currency moves increased by 10% to DKK 309.1bn (Danish Kroner), led by a 41% uplift in sales of anti-obesity jab Wegovy.

Operating profit grew by 6% to DKK 127.7bn, in-line with guidance, and held back by restructuring costs and the integration of manufacturing sites acquired in 2024.

The timing of that transaction contributed to a positive movement in free cash flow, which moved from an outflow of DKK 14.7bn to an inflow of DKK 28.3bn. Net Debt was 37% higher at DKK 95.4bn.

Novo intends to declare a final dividend of DKK 7.95 per share and has launched a fresh share buyback of DKK 15bn.

In 2026 underlying sales and operating profit are both expected to fall 5-13%.

The shares were down 16.4% in early trading.

Our view

Novo Nordisk’s 2025 results weren’t any worse than expected, but downbeat guidance for 2026 has rattled investors in one of our Five Shares to Watch for 2026. It wasn’t all bad news however, with further strong clinical progress over the final quarter of the year, and the launch of the Wegovy pill exceeding expectations.

The weaker guidance relates to the decision to compete more aggressively on price, with the aim of widening access to a larger population group in what remains a huge and still under-penetrated market.

We think this strategy has merit, but it adds pressure on Novo to start stabilising market share and delivering meaningful volume growth in the key US market. The expected addition of obesity medications to Federal health insurance plans later this year could help in this regard. But Novo needs to put boots on the ground in order to build strong relationships with prescribers. Even then, the benefits may take time to make a difference.

With 35 new country launches made for Wegovy in 2025, overseas progress is something to watch, although that’s tempered by forthcoming patent expirations in China and India.

The strong start in oral Wegovy prescriptions is another opportunity to claw back some ground. So far, we’re impressed, but with Eli Lilly expected to field a competitor later this year, further strong execution of the roll-out will be vital. Another potential catalyst is the approval of next-generation treatment CagriSema, which could happen this year. However, as with all medical authorisations, there’s a risk of disappointment.

With the valuation under pressure, Novo’s dividend yield looks more meaningful than it has for a while. Share buybacks are back on the table too. This year total shareholder payouts are expected to rise by around 13% to $60bn, but there can be no guarantees, particularly if profit and debt levels come under further pressure.

Ahead of results, investor sentiment had been running strong, as the market tracked prescriptions for the Wegovy pill. But with revenue now set to decline for the first time since 2017, the loss of investor confidence is understandable. The valuation now significantly lags both the competition and Novo’s long-term average.

Management is taking some decisive steps to rebuild the company’s competitive position. If it’s successful, we think that will also rebuild investor trust and generate significant upside. Excellence in execution is going to be vital though. Meanwhile, fierce competition and the risks inherent with investing in the sector continue to present a challenging backdrop, so patience is needed.

Environmental, social and governance (ESG) risk

The pharmaceuticals sector is relatively high-risk in terms of ESG. Product governance, particularly with safety and marketing, and affordable access to treatment are the key risk drivers. Labour relations, business ethics and bribery and corruption are also contributors to ESG risk.

According to Sustainalytics, Novo Nordisk's management of ESG risks is strong.

Executive pay is linked to both financial and non-financial targets, including sustainability targets, though it's unclear exactly how the two are linked. Novo Nordisk's product quality and safety programmes are adequate. The company also addresses pricing and access to medicine in emerging markets and the US. In general, Novo Nordisk has strong policies and programmes to address business ethics issues, but fails to address anti-competitive practices and has been implicated in alleged price fixing and questionable promotional activity controversies.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.

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