Novo Nordisk's GLP-1 Price War Accelerates, Eroding Traditional Pharma Economics

What happened

WSJ reports that obesity-drug price wars are turning traditional pharma business models upside down, with GLP-1 prices falling fast. This aligns with Novo Nordisk's 20-F disclosure of 2025 U.S. average price declines and a 5-13% sales drop guidance for 2026, signaling a defensive shift amid lost market share to Eli Lilly. Novo launched oral Wegovy in early 2026 to defend volume, but faces compounded copycats priced as low as $49 per month, threatening cash-pay economics and necessitating higher ad spend. The company is in a high-capex phase with negative free cash flow in 2025, funding multi-year manufacturing expansions that increase execution risk. Investors now focus on whether oral Wegovy can offset injectable deceleration without further price cuts before Lilly's Q1 2026 oral readouts.

Implication

The accelerating price war confirms the downside risks embedded in Novo's reset valuation, emphasizing that margin compression from rebates and competition is structural rather than transient. Oral Wegovy must achieve strong uptake without extending deep intro pricing beyond March 2026 to prove it can offset volume losses from injectables. Proliferation of compounded offerings at $49-99 per month could permanently undermine branded pricing power, requiring effective legal or regulatory containment to protect cash-pay channels. Novo's capital-intensive expansion, financed by operating cash flow, adds financial strain, making stable unit economics critical to avoid further cash flow deterioration. A WAIT rating remains prudent until Q2 2026 data clarifies pricing discipline and competitive dynamics, with exit triggers if price cuts or compounded leakage persist.

Thesis delta

The WSJ article underscores the rapid price declines already anticipated in our base and bear scenarios, reinforcing that Novo's defense strategy must counter an industry-wide reset. No immediate change to the WAIT rating is warranted, but heightened vigilance on pricing actions and compounded competition is required, as these factors could accelerate the bear scenario if oral Wegovy fails to gain traction.