The hits just kept coming for beleaguered Ozempic and Wegovy maker Novo Nordisk (NVO 1.83%) on Thursday. The company, which has been slammed with investor sell-offs since cutting its guidance on Tuesday, fell by almost 6% as yet another analyst weighed in with a bearish take on its prospects. The S&P 500 index, meanwhile, traded down only slightly.
A downgrade to hold
That pundit was HSBC's Rajesh Kumar, who downgraded his recommendation on Novo Nordisk that morning.
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Kumar now believes the stock is only worthy of a hold recommendation, down from his previous assessment of buy. He also significantly lowered his price target, chopping it to 360 Danish krone ($55.49) per share from the preceding 680 krone ($104.81).
According to reports, Kumar particularly expressed concern about compounded weight-loss drugs, a form of competition that has affected Novo Nordisk's otherwise lively Ozempic and Wegovy sales. The analyst wrote that although the U.S. Food and Drug Administration (FDA) has banned compounding, rivals continue to sell such drugs illegally.
Kumar does not believe this situation will change much in the near future, so he believes current estimates for total GLP-1 drug sales might be overestimated.
Reasons to be cheerful
The HSBC pundit certainly raises valid concerns and questions, although the ultimate effect of the compounding ban on Novo Nordisk will depend on how effectively it's enforced; perhaps, in contrast to Kumar's view, the offending parties will be caught and punished.
I wouldn't be as down on the Danish company as the analyst. That hot competition only proves how popular Wegovy and its ilk are at the moment, and in a vast country like the U.S. that has a clear problem with obesity, that should continue to motor its fundamentals higher.
