Medicare negotiates a Wegovy price cut — market rally masks increased U.S. pricing risk for Novo Nordisk

What happened

Today’s reports say Medicare has negotiated a material price reduction for Wegovy (semaglutide), and the stock popped as investors initially treated the news as a manageable policy concession rather than a demand shock. A negotiated discount directly undermines U.S. net‑price assumptions for Novo’s highest‑growth franchise and raises the probability that commercial payers will press for steeper rebates or tighter coverage. The real economic impact hinges on the discount’s size, which products are covered, implementation timing and legal offsets—facts that remain unclear and are not yet fully reflected in short‑term market moves. Novo still brings exceptional profitability, heavy capex‑backed capacity and a broad cardiometabolic pipeline that can blunt some pricing pain, and the DeepValue work notes much of policy fear was already priced into the ~54% ADR decline. Treat today’s rally as a volatility relief move, not proof that structural payer pressure has abated; re‑test revenue and net‑price scenarios and monitor share trends against Lilly closely.

Implication

Re‑run your model with a downside case (e.g., U.S. net prices for semaglutide down 20–40%) and measure impacts on 2026–2032 FCF and intrinsic value. Track three immediate datapoints: the formal Medicare negotiation details (scope, discount and timing), payer commercial rebate moves, and weekly/monthly volume/share data versus Lilly’s tirzepatide. If the discount is limited, phased or offset by higher utilization and lower medical costs, maintain or add exposure; if it is broad, immediate and unaccompanied by volume upside, trim positions to limit policy‑driven downside. Novo’s balance sheet, margins and pipeline still justify a constructive stance for long‑term investors who can tolerate execution and policy risk, but conviction must be tied to evolving reimbursement outcomes. Escalate to WAIT or POTENTIAL SELL if negotiated terms imply sustained U.S. net‑price erosion beyond levels already embedded in guidance or if market share loss to Lilly accelerates.

Thesis delta

Our core thesis — dominant semaglutide franchise, exceptional cash generation and an attractive risk/reward after a large share‑price drawdown — remains intact, but today’s Medicare negotiation increases the probability and potential magnitude of U.S. net‑price erosion. That raises near‑term downside risk and shortens the runway for Novo to offset pricing pressure via volume, pipeline approvals or new formulations; we will downgrade stance if formal terms materially reduce long‑term net prices or if sustained share loss to Lilly appears. Valuation already discounts policy risk, so this is a material but not yet thesis‑ending development.