Novo Nordisk Secures EU Approval for Higher Wegovy Dose, Yet U.S. Pricing and Share Risks Dominate Investment Case

What happened

The European Commission has approved a 7.2 mg maintenance dose of Wegovy, based on a study showing about 21% average weight loss over 1.5 years in 1,407 adults. This regulatory win expands Novo's obesity portfolio in Europe, a key growth region, but the DeepValue report underscores that the company faces severe U.S. pricing pressure, share loss to competitors, and high fixed-cost commitments. Critically, the approval does not address the near-term operational risks highlighted in the report, such as FDA advertising scrutiny for oral Wegovy and the upcoming price step-up test on April 15, 2026. While the higher dose may bolster European sales, it is unlikely to offset the guided FY2026 sales decline of -5% to -13% (CER), which is driven by U.S. headwinds like rebate increases and competitive encroachment. Thus, this news represents a marginal positive in a broader narrative where investors await proof that U.S. challenges are contained.

Implication

The approval strengthens Novo's competitive position in Europe, potentially supporting international growth to mitigate U.S. declines, but it fails to alleviate the critical issues of net price compression and market share loss in the U.S., which are central to the investment thesis. Management's guidance for FY2026 sales and operating profit declines remains unchanged, emphasizing that European gains may be insufficient to alter the near-term outlook, especially with high capex commitments of ~DKK 55 billion. Investors must still focus on upcoming catalysts, including Q1 2026 revenue recognition from 340B provisions, FDA resolution on misleading Wegovy ads, and oral Wegovy refill durability post the April 15 price hike, which will test demand sustainability. The stock's current valuation at 13.5x P/E offers limited margin of safety, as downside risks from accelerated U.S. net price erosion or under-utilized manufacturing capacity could materialize if these catalysts disappoint. Consequently, maintaining a cautious approach is prudent until clearer evidence emerges that the U.S. reset is temporary rather than indicative of a multi-year downturn.

Thesis delta

The EU approval adds a positive data point for Novo's international growth but does not shift the fundamental thesis that near-term returns depend on evidence that U.S. price-and-share erosion is contained to 2026. The core 'WAIT' rating and probability-weighted scenarios remain unchanged, as the news does not impact key risks like FDA advertising compliance or oral Wegovy persistence, which are critical for reassessing the call in the next 3-6 months.