A Fallen Member of Big Pharma Is Now a Bargain

Today's trade idea is around a member of Big Pharma. Specifically, a Danish biopharmaceutical concern focused on the development and marketing of therapies for weight loss, diabetes, and rare diseases. Yes, it's Novo Nordisk A/S NVO. 

Novo Nordisk is the largest supplier for global insulin and has been a major player in this market for decades. Of course, in recent years, the company has become more known for its glucagon-like peptide 1 (GLP-1) agonists Ozempic and Wegovy. Together with Eli Lilly LLY, it is one of two heavyweights in the large and burgeoning GLP-1 weight loss space. 

Novo stock is off some 60% from its highs last summer. That fall has happened thanks primarily to Lilly’s obesity and diabetes marketshares having surged ahead of Novo’s in the U.S. against a background of a tenacious and potentially illicit challenge from compounding pharmacies.

Novo's biggest asset is the once-weekly injection Ozempic (semaglutide). This drug was approved for type 2 diabetes in late 2017. It generated 2024 sales of ~$17.5 billion, making it the number-three drug worldwide behind Merck’s MRK Keytruda and blood-thinner Eliquis marketed by Bristol-Myers Squibb BMY and Pfizer PFE. Ozempic’s biggest competition is the once-weekly injectable GLP-1 agonist Mounjaro from Eli Lilly, which was approved in 2022 and accounted for sales of $11.5 billion in 2024.

Novo’s GLP-1 weight loss product is known by its brand name Wegovy. This was approved in 2021 and delivered sales of ~$8.4 billion in 2024. It is facing increasing competition from Lilly’s GLP-1 weight loss entrant Zepbound (tirzepatide). 

Lilly is also rapidly gaining market share in the U.S. in terms of prescriptions written, surpassing Novo in early 2025 and extending its lead to 57% versus 42.5% in the second quarter of 2025. This drop to the number-two spot will force Novo to ramp up its marketing spend. This is in sharp contrast to 2023 when it reduced its advertising outlays when it could not keep up with demand.

In addition, compounded GLP-1s, which were allowed to spring up when branded GLP-1s were in short supply, have taken the U.S. market by storm with an estimated one million Americans now using semaglutide and tirzepatide knock-offs. Although the FDA banned "mass" compounding of GLP-1s in May 2025, this remains a competitive force even as supply constraints have largely been resolved. Novo has launched a series of lawsuits and increased DTC marketing spend.

While Novo next generation of GLP-1 candidates have produced some disappointing results to date compared to the competition, it has some promising assets in its pipeline. In addition, Wegovy was just approved to treat MASH, another huge potential market. 

Novo should see earnings and sales growth north of 20% in 2025. The analyst community sees revenue slowing, with CAGR in the high-single digits over the next half-decade with earnings growth projected in the low teens. 

With a forward P/E multiple of just over 14 times and a recent dividend yield of 3.1%, NVO has fallen into bargain territory, in my view. This can be enhanced via the covered call strategy below.

Option Strategy

Here is how one can initiate a position in NVO utilizing a covered call strategy. As a reminder, covered-call orders involve buying an equity and simultaneously selling just out of the money call strikes against the new position.

Selecting the June $55 call strikes, fashion a covered call order with a net debit in the $46.30 to $46.40 a share range (net stock price - option premium). Liquidity is excellent with the options against this equity. 

This strategy provides downside protection of nearly 16% over the trade’s duration, which includes one semi-annual dividend payout projected to be $1.15 a share. 

This strategy also provides upside return potential of approximately 19%, including dividends, even if the stock trades flat over its option duration.

At the time of publication, Jensen was long NVO and PFE.