Novo Nordisk Earnings: Downtrend is slowing down

The Danish pharmaceutical group published results that positively surprised the market. Initial gains reached as much as 5%, but over time the market gave back a large part of the move and limited the rise to around 2%. This may be a positive signal for the company’s operating condition, which is still waiting for a meaningful demand impulse after many months of sell-off.

Earnings

• The company’s revenue increased to DKK 79.2bn, up 6% year on year, which is significantly above the consensus of about DKK 73.5bn (DKK is the Danish krone).
• The “star” of the release, however, was adjusted operating profit. It rose 34% to DKK 31.72bn versus expectations of around DKK 28.7bn.
• Attention should be paid to net profit, which came in at DKK 16.7bn. This is a 16% year-on-year decline.

The takeaway from these data is mixed. First of all, a clear operational improvement is visible, and it is above market expectations. It is driven mainly by oral Wegovy. Sales totaled DKK 5.39bn, representing a 53% increase quarter on quarter. The entire obesity treatment segment generated DKK 26.15bn in revenue, growing 24% year on year.

However, the quality of earnings remains an issue.

• First, net profit fell, which means the improvement above is merely a slowing of the profit erosion trend.
• Second, at constant exchange rates, revenue rose 4% and adjusted operating profit rose 27%. The latter benefited from a low base, as the result a year earlier was burdened by about DKK 9bn in “transformation costs”.
• In addition, this year’s reported EBIT was burdened by DKK 8.7bn in impairments: DKK 4.6bn related to ziltivekimab and DKK 4.1bn related to adjustments to the production network. These impairments are non-cash, but they signal a loss in value of previous investments.

This means that the improvement in operating profit cannot be equated one for one with an improvement in the core business.

Guidance and outlook

More optimistic than the results themselves is management’s guidance.

• Both adjusted revenue and operating profit received an upgraded full-year outlook, from a range of -6% to 0% to a range of -2% to +2%.
• For the investment outlook, the key question remains whether the expansion of oral drugs will offset pricing pressure and competition. From January 2027, Novo plans to cut US list prices for Wegovy and Ozempic by about 50% and 35%.
• A positive catalyst that investors may be waiting for is the launch of CagriSema in the US in early 2027, subject to regulatory approval.