Why Novo Nordisk Stock Was Melting on Monday

Novo Nordisk (NYSE: NVO) stock was slimming down on Monday, but not in the way any investor in the Wegovy and Ozempic developer would want. An analyst's downgrade was the catalyst for some shareholders to exit the stock, and as a result, its price was down by more than 2% in mid-session trading.

A Novo Nordisk bull no more

Well before market open, Argus's John Eade changed his Novo Nordisk recommendation to hold from his previous buy. His price target on the stock is now $56 per share.

According to reports, Eade pointed out in his update that the Denmark-based pharmaceutical company has suffered declines in market share for both of its star drugs. That trend might very well continue, as it will soon have to cope with the introduction of generic products that will rival those treatments.

The analyst is also bearish on Novo Nordisk's progress in the laboratory. He wrote that the company's recent, high-profile clinical trials haven't been impressive. He specifically mentioned a pair of trials testing semaglutide, the active ingredient in Wegovy and Ozempic, as a treatment for Alzheimer's disease. The molecule, alas, did not slow the progression of the disease as hoped.

The perils of popularity

Success begets competition, and Novo Nordisk is fighting a war on several fronts. In addition to those generics makers, it has a very deep-pocketed competitor in this country, the pharmaceutical giant Eli Lilly, with its instantly popular Zepbound obesity drug.

Novo Nordisk management has demonstrated some resilience in this fight, and I believe weight-loss drugs as a category will continue to swell in popularity. That competition isn't going to get any easier, however, so caution is warranted with this stock these days.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.