Citi has lowered its target price for Danish pharmaceutical company Novo Nordisk from DKK 310 to DKK 296, maintaining a “neutral” rating. The main reason is that Novo Nordisk expects its profit margin to remain stable overall by 2030, and increased research and development expenditures will limit the improvement in profitability. Although Citi is optimistic about the sales prospects of the oral weight loss drug Wegovy, and has raised its forecasts for recent revenue and profits, it has still lowered its expectations for the company’s profit growth rate from 2027 to 2030 due to a lack of room for long-term profit margin growth.

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Novo Nordisk recently stated on Capital Market Day ( CMD ) that due to increased research and development investment, the company expects its profit margin to remain stable overall by 2030.

Based on this guidance, Citibank has lowered Novo Nordisk's adjusted operating profit forecast for 2028 to 2030 by 2% to 4%, and reduced the expected annual average growth rate of earnings per share from 2027 to 2030 from 12% to 9%.

At the same time, Citibank lowered Novo Nordisk's target valuation multiple from 15 times the expected price-earnings ratio for 2027 to 14 times, and accordingly reduced the target price from 310 Danish kroner to 296 Danish kroner.

However, Citibank has improved its assessment of the company's recent performance. Considering the rising sales expectations for Wegovy in markets outside the United States, as well as the changes in the prescription volume of the diabetes drug Ozempic in the U.S., Citibank has raised its adjusted operating profit forecasts for 2026 and 2027 by 2% to 3%, respectively, and its adjusted sales forecasts for the same period by 3% and 1%, respectively.

Oral Wegovy accelerates its overseas expansion, with peak sales forecast raised to $13 billion

Oral administration of Wegovy is an important reason why Citibank has raised its recent performance forecast for Novo Nordisk.

On Capital Markets Day, Novo Nordisk stated that with improved production capacity, the company plans to expand the distribution of the oral Wegovy to at least 20 countries by the end of 2027, covering approximately two-thirds of the obesity market it currently serves.

The listing performance in the UK market has also boosted Citibank's confidence in this product. Since its launch in July this year, 1 million boxes of the oral Wegovy have been distributed in the UK. As a result, Citibank has raised its peak sales forecast for this product from $10 billion to $13 billion.

Citi expects that in its upcoming third-quarter financial report, the sales of Wegovy taken orally will reach 5.3 billion Danish kroner, which is higher than the market's general expectation of 4.5 billion Danish kroner, an excess of about 16%. Citi believes that the strong performance of the product in the UK market is an important factor driving sales growth.

Third-quarter revenue is expected to decline by 4% year-on-year, with pressure on traditional product sales.

Novo Nordisk is scheduled to announce its third-quarter results on November 4th. Despite the growth in sales of the oral Wegovy, Citibank still expects the company's quarterly revenue to decline year-on-year.

Specifically, Citibank predicts that Novo Nordisk's revenue for the third quarter will be 73.5 billion Danish kroner, which is a 4% year-on-year decrease when calculated using a fixed exchange rate, but it is still about 1% higher than the general market expectations.

The decline in revenue is mainly affected by several factors:

• The base figure from the same period last year was relatively high: in the third quarter of last year, there were rebates amounting to approximately 3 billion Danish kroner and profits from channel inventory preparation, which raised the comparative base figure.
• Ozempic US Business Under Pressure: Prescription Volume and Selling Prices in the US Market Continuously Decline, with Ozempic prescription volume dropping by about 15%.
• Intensifying competition in generic drugs: Generic drugs have entered the markets of Canada and Brazil, putting pressure on the sales of existing products.
• Injection dosage form Wegovy price cut: The sales price of the injection dosage form weight loss drug Wegovy has continued to decline, offsetting some of the revenue growth brought by oral products.

In addition, Citibank noted that existing prescription data has not yet shown that the eligibility of GLP-1 class drugs to be reimbursed by the U.S. Federal Medicare (Medicare) has had a significant positive impact on sales.

In terms of profits, Citibank expects Novo Nordisk's adjusted operating profit in the third quarter to increase by 18% year-on-year at a fixed exchange rate. However, this growth is mainly due to reorganization costs of approximately 9 billion Danish kroner included in the same period last year. Excluding the low base effect caused by these costs, the adjusted operating profit is expected to decline by about 15% year-on-year.

Due to increased research and development expenses squeezing profit margins, Citibank expects that the company's adjusted operating profit for the third quarter will generally meet market expectations.

In terms of earnings per share, Citibank predicts that Novo Nordisk's earnings per share calculated in accordance with International Financial Reporting Standards (IFRS) for the third quarter will be 4.15 Danish kroner, a year-on-year decrease of 8%. The main reason is the failure of the experimental drug ziltivekimab in the ZEUS clinical trials, which led to the company making provisions for asset impairment.

Competition in the new generation of weight loss drugs intensifies, and long-term growth faces challenges

Although oral administration of Wegovy is expected to achieve better sales results than anticipated in the third quarter, Citibank believes that the growth of a single product is not sufficient to dispel investors' concerns about Novo Nordisk's long-term profitability.

On one hand, there is still significant uncertainty regarding the future pricing trend for the injectable formulation Wegovy, and price pressures may continue to affect the company's overall profit margin. On the other hand, several large pharmaceutical companies are advancing the research and development of a new generation of drugs for weight loss and metabolic diseases, leading to increasing long-term competitive pressures.

Citi specifically mentioned several potential competitive products, including Eli Lilly's retatrutide and eloralintide, Roche's enicepatide, Pfizer's MET-097i, as well as AstraZeneca's elecoglipron.

Citi believes that even if the oral sales of Wegovy exceed expectations, the price prospects for the injectable formulation Wegovy are uncertain. Coupled with competitors continuously advancing new drug research and development, this may still cause a large number of investors to remain on the sidelines.

Overall, Citibank's assessment of Novo Nordisk shows a clear distinction between the short term and the long term: The international market expansion of oral Wegovy is expected to support sales and profit performance in the next two years. However, increased R&D investment, price cuts on mature products, and intensified competition from new drugs will limit the company's medium to long-term profit growth rate and the potential for valuation improvement.