"Completely disappointed"! Deutsche Bank downgrades Novo Nordisk rating for the first time

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Novo Nordisk encountered setbacks in key clinical trials for its weight loss drug, triggering a rare wave of downgrades by Wall Street investment banks, with Deutsche Bank lowering its stock rating for the first time in five years.

According to data released by Novo Nordisk on Monday, its weight loss drug CagriSema, which is awaiting approval from the U.S. Food and Drug Administration (FDA), performed less well than the leading competitor product from Eli Lilly. Due to this negative development, Deutsche Bank analyst Emmanuel Papadakis downgraded his rating on Novo Nordisk from "Buy" to "Hold."

This news triggered a sharp sell-off in the market. After plunging 16% on Monday, Novo Nordisk's share price continued to fall by another 2% in early Copenhagen trading, with investor concerns over the competitiveness of the company's core pipeline rising rapidly.

J.P. Morgan soon joined the wave of downgrades, drastically cutting sales forecasts for the related drug. As pessimism spread, the proportion of bullish ratings on the stock among Wall Street analysts has fallen to its lowest level in years, highlighting a reassessment of its growth prospects.

Mid-term Prospects Clouded, Investment Banks Slash Forecasts

Alongside the downgrade, Deutsche Bank analyst Emmanuel Papadakis lowered his target price by 31%. He noted that, before this setback, given the momentum of the oral Wegovy rollout and the company’s conservative guidance, he could have accepted an expected near double-digit revenue decline. However, he now believes that Novo Nordisk's mid-term outlook has suffered substantial damage.

J.P. Morgan also responded swiftly. The team led by analyst Richard Vosser downgraded Novo Nordisk’s rating from "Overweight" to "Neutral." More severely, J.P. Morgan cut its sales forecast for CagriSema for the years 2027 to 2030 by as much as 63%.

With investment banks collectively turning, market consensus is undergoing a significant shift. According to FactSet data, the proportion of analysts rating Novo Nordisk as "Buy" has fallen to its lowest level since the end of 2021, now only 37%.

Market Consensus and Potential Catalysts After Share Plunge

Despite a new round of rating downgrades and sharp share price declines, overall Wall Street valuation for Novo Nordisk still preserves some upside. Data shows that, even after a series of downgrades, the stock’s average target price remains about 38% higher than the current trading price.

As the weight loss drug pipeline faces setbacks, some market focus may shift to the company’s other research pipelines. J.P. Morgan particularly highlighted a key catalyst outside the obesity field—Novo Nordisk's drug ziltivekimab.

The phase III clinical results for this drug are expected to be released in the third quarter of this year. At that time, the data will verify whether the drug can effectively reduce cardiovascular event risk in patients with established atherosclerotic cardiovascular disease, chronic kidney disease, and systemic inflammation. This could become a key factor influencing Novo Nordisk’s next market performance.

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