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On Thursday, BMO Capital Markets adjusted its stance on Novo Nordisk (NYSE:NVO) stock, downgrading it from ’Outperform’ to ’Market Perform’. Alongside the rating change, the firm significantly reduced the price target for the pharmaceutical company’s shares, from $105.00 to $64.00. According to InvestingPro data, the stock is currently trading near its 52-week low of $59.32, with technical indicators suggesting oversold conditions.
The downgrade by BMO Capital Markets was primarily driven by competitive pressures from Eli Lilly (NYSE:LLY), which has recently made significant progress in its commercial and clinical portfolio. This development, according to BMO Capital, has allowed Lilly to surpass Novo Nordisk’s early lead in the obesity treatment market. Despite these challenges, Novo Nordisk maintains strong fundamentals, with a 25% revenue growth and an impressive 85% gross profit margin in the last twelve months.
Evan Seigerman, the BMO Capital analyst, cited updates from Lilly’s oral GLP1 medication, orforglipron, as a potential source of pressure on Novo Nordisk’s stock. These advancements by Lilly are expected to challenge Novo Nordisk’s market position.
Additionally, Seigerman expressed concern over what he anticipates to be a softer performance in the first quarter for Novo Nordisk. While acknowledging that positive outcomes from the EVOKE/EVOKE+ clinical trials could offer some upside for the company, the analyst decided to adopt a more cautious approach until Novo Nordisk can demonstrate improved clinical and commercial capabilities. Notably, InvestingPro analysis indicates the stock is currently undervalued, with 13 additional ProTips available to subscribers, including detailed insights into the company’s financial health and growth prospects.
The revised price target of $64.00 reflects a significant decrease from the previous target of $105.00, indicating a more conservative outlook on Novo Nordisk’s future performance in light of the increased competition. BMO Capital’s decision to downgrade the stock to ’Market Perform’ suggests a neutral expectation of Novo Nordisk’s stock movement in the near term. The company maintains a strong dividend track record, having paid dividends for 37 consecutive years, with a current yield of 2.61%. For comprehensive analysis of Novo Nordisk and similar opportunities, explore the full research report available on InvestingPro.
In other recent news, Novo Nordisk reported several key developments impacting the company. The Food and Drug Administration (FDA) was alerted by Novo Nordisk about counterfeit units of its Ozempic injection circulating in the U.S. drug supply chain. The FDA has confiscated these counterfeit products and is conducting an ongoing investigation to ensure the safety of the drug supply. Additionally, Novo Nordisk entered into an exclusive licensing agreement with Lexicon Pharmaceuticals (NASDAQ:LXRX) for the developmental drug LX9851, aimed at treating obesity and related disorders. This deal includes up to $75 million in upfront and milestone payments, with the potential for up to $1 billion in total payments and tiered royalties on net sales.
In other recent developments, Pfizer (NYSE:PFE)’s decision to discontinue its obesity drug candidate has affected the competitive landscape, with Novo Nordisk seeing increased interest from investors. Meanwhile, a delay in Medicare’s decision on expanding coverage for obesity drugs has impacted Novo Nordisk’s market expectations, as the company is a significant player in the weight-loss drug market. The recent confirmation of Mehmet Oz as the new Administrator of the Centers for Medicare and Medicaid Services (CMS) could influence future regulatory decisions affecting Novo Nordisk. These developments underscore Novo Nordisk’s active role in addressing obesity and metabolic disorders through strategic partnerships and regulatory navigation.
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