Novo Nordisk's Wegovy Pill Just Hit 3 Million Prescriptions. Is Wall Street Missing Something With This Beaten-Down Stock?

Novo Nordisk (NVO 0.78%) kicked off a revolutionary shift in how obesity is treated. The goal, at first, was to help diabetics deal with weight loss, but the opportunity to expand beyond that one illness has proven even more attractive. The biggest recent development is Novo Nordisk's introduction of a Wegovy pill, which has been very well received. Here's what you need to consider as you evaluate Novo Nordisk and the broader GLP-1 space.

There are only two notable GLP-1 players right now

Novo Nordisk's Wegovy shot was the first GLP-1 drug on the scene. There was so much demand that the company couldn't produce enough of the medication. That was a big problem for the company because it opened the door to lower-cost generic versions in the U.S. market. And when competitor Eli Lilly (LLY 1.16%) introduced its own GLP-1 drugs (Mounjaro and Zepbound) that were more effective, Novo Nordisk quickly found itself trailing in the market it had effectively created.

That said, consumers don't really like taking injections. So a second race was taking shape between these two pharmaceutical giants. Once again, Novo Nordisk was first to market, this time with a pill version of Wegovy. It is very popular, having quickly reached three million prescriptions. Its growth has been even faster than that of the Wegovy shot, which makes logical sense. Consumers already know and trust Wegovy, so taking it in a pill form is a fairly easy step.

What's interesting is that Eli Lilly has also launched a GLP-1 pill. The pill is Foundayo, which is a different drug from Mounjaro and Zepbound. Not only does it appear to be less effective than the Wegovy pill, but as a new drug, it has a harder path as it needs to be introduced to consumers. This gives Novo Nordisk a big opening to gain market share in the GLP-1 niche.

Novo Nordisk is in a transition year

Wall Street has seemingly abandoned Novo Nordisk, with the stock down 70% from its 2024 highs even as Eli Lilly trades near its all-time highs. And there appears to be a good reason for concern over the short term, as Novo Nordisk has warned that 2026 will be a difficult year. The big story is pricing: the company has agreed to lower drug costs in the U.S. market and is facing generic competition in India.

That said, investors focused on the short term are overlooking the company's long-term opportunity. Novo Nordisk believes growth will pick up as GLP-1 volumes increase, driven by demand for pills and lower prices. Effectively, 2026 is a transition year. The quick uptake of the Wegovy pill is an early indication that this view of the situation is on target. And with a price-to-earnings ratio of 10x, Novo Nordisk is much cheaper than Eli Lilly, which has a P/E of 40x. It looks very much like investors could be missing the value opportunity and growth potential Novo Nordisk offers by focusing too much on the short term.

GLP-1 competition is going to be fierce

The complicating factor is that Eli Lilly isn't the only competitor in the GLP-1 space. Other drug makers are looking to enter the market. And innovation in this new drug category is still ongoing, as well. So there are risks to consider, even in the face of Novo Nordisk's early success with the Wegovy pill. That said, the weight-loss category is large, and there will likely be room for multiple players.

Given Novo Nordisk's valuation and its attractive, well-covered 4.1% dividend yield, income-focused investors should probably give it a close look. The company's early success with the Wegovy pill is an indication that Novo Nordisk's future isn't as bleak as Wall Street seems to believe, suggesting the market is overlooking an attractive income opportunity.