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Why Novo Nordisk Stock Was Tumbling on Thursday

Motley Fool - Thu Sep 21, 2023

What happened

Novo Nordisk(NYSE: NVO) might have one of the hottest products on pharmacy shelves right now, but its stock went cold on Thursday. Following a downbeat note from an analyst tracking the company, its share price was nearly 4% down in late-session trading. The gloomy S&P 500 index, meanwhile, was only 1.4% underwater at the time.

So what

The author of the note was Jefferies' Peter Welford, who reiterated his underperform (read: sell) recommendation on Novo Nordisk shares. He also maintained his price target of 425 Danish Kroner ($60.94) per share on the European pharmaceutical company.

It wasn't immediately apparent why the Jefferies analyst felt the need to reiterate his Novo Nordisk take. It doesn't seem coincidental, though, that it came a day after a negative headline about the company. Reuters published an article, based on a Food and Drug Administration (FDA) report it had obtained, stating that an inspection by the regulator found a number of deficiencies at a company production plant in North Carolina.

This has shone an uncomfortable light on Novo Nordisk's challenges in making Wegovy and its related drug Ozempic. The former in particular has been hugely popular, as it is a weight-loss treatment. Demand has understandably been high for this product in the U.S., which has a number of overweight people who might benefit from the drug. Novo Nordisk's difficulties satisfying this demand for its product have been well documented.

Now what

This, combined with a share price that has zoomed more than 83% higher in the past year, is raising concerns. While the company likely has quite a long runway with Wegovy, some pundits and not a few investors fret about its ability to meet demand for the drug of the moment.

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

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