Some stock analysis to do over Xmas

Novo Nordisk—Europe’s largest listed company by market capitalization—saw its stock price plummet by 21% on Friday following the release of underwhelming results for its latest weight-loss drug, Cagrisema. In a late-stage trial, patients lost 22.7% of their body weight, falling short of the 25% reduction Novo Nordisk had targeted and only narrowly surpassing the results of a competing drug from Eli Lilly. This disappointment wiped out a staggering €90 billion in Novo Nordisk’s market value in just one day—equivalent to four times Philips’ entire market capitalization.

Questions linger around the trial’s design and outcomes. For example, only 57% of participants received the highest dose of Cagrisema, which may partly explain the sub-target result. A follow-up trial is set for the first half of 2025 to investigate why higher doses were not administered. If side effects are found to be the main reason, it could fundamentally shift competitive dynamics in this blockbuster market, further penalizing investors.

In the meantime, with the anti-obesity euphoria largely priced out, Novo Nordisk shares now trade at 22 times forward earnings. From a value perspective, this starts to look appealing—especially when compared to Eli Lilly’s multiple of 35 times forward earnings. Although we are not yet invested in the European Value Fund, the sharp decline in Novo Nordisk’s valuation prompts us to reassess this opportunity. Whether we ultimately decide to add it to our value strategy or not remains a suspenseful question that will be answered after Christmas.