Pieter Slegers — Deep Dive Novo Nordisk
The full case for the portfolio's most contested holding: market share halved, revenue at record highs, the multiple down 38% while earnings rose 161% — and a reverse DCF that asks for 2.9% growth a year.
One-line take: the archive's clearest example of separating share of a market from size of a market, and the reason Novo Nordisk carries the highest rating in the January book while sitting on the second-largest loss. The damage is stated without softening — GLP-1 share down from 59% to 50%, obesity share from 74% to 53% in a single year — with three named causes: Lilly's Zepbound simply works better (20% weight loss against Wegovy's 14%), a 2024 supply shortage that left "empty shelves" while Lilly ramped, and a grey market in which "up to 30% of patients turned to compounded (unapproved) versions," which hurt Novo more because its molecule was easier to copy. Then the pivot: "None of this matters as much as you might think. The market is growing so fast that even with less market share, Novo's revenue is still hitting record highs." The sizing is what makes that credible — 934 million people have obesity and only 2.2 million take branded medication, so 97% of the market is untapped, with demand growing "more than 100% per year." The valuation case is a single chart: since 2020 the forward PE fell from 20.9x to 12.9x (−38%) while EPS rose from DKK 9 to DKK 23.5 (+161%), leaving Novo at 16.9x next year's earnings against Eli Lilly's 34.1x — "I don't think this huge valuation difference is justified." The reverse DCF is run on EPS rather than free cash flow (deliberately: "Novo Nordisk is investing heavily in future growth (high CAPEX)") and lands at 2.9% annual EPS growth required for a 10% return. Five 2026 catalysts are listed, led by oral Wegovy at 70,000+ US pharmacies at $149/month and real-world data showing 29% better cardiovascular outcomes than tirzepatide; the stock is already up 15% year to date. Note the honest wrinkle: the introduction says "3x as cheap as Eli Lilly" and the valuation section and conclusion both say more than two times — the underlying deep dive is dated 29 July 2025 and the wrapper is January 2026.
1. Stocks & names mentioned
One subject company; Eli Lilly is the comparison the entire case is built against, and CVS and Catalent appear as named counterparties in the pricing and capacity story. Research legend: QT Qualtrim · SA Seeking Alpha · STK Stock Analysis. Written post with no timestamps — the At link opens the article.
| Ticker | Name | Research | View | What he said | At |
|---|
| NVO | Novo Nordisk | QT · SA · STK · FA | Positive | "A quality stock facing problems right now" — a STRONG BUY in the same month's portfolio sheet, argued here in full. Classified as a Duopoly, at DKK 378 and a DKK 1.3trn market cap; world leader in diabetes with "over 50% of the world's insulin supply." The market: 934m people with obesity, 2.2m on branded medication, 97% untapped, demand growing "more than 100% (!) per year." The damage is conceded — GLP-1 share 59% → 50%, obesity share 74% → 53% in a year — and then reframed: "None of this matters as much as you might think. The market is growing so fast that even with less market share, Novo's revenue is still hitting record highs." Valuation: 16.9x next year's earnings against Lilly's 34.1x; since 2020 the forward PE fell 20.9x → 12.9x (−38%) while EPS rose DKK 9 → 23.5 (+161%). Reverse DCF (on EPS, because of high CAPEX): 2.9% annual EPS growth for a 10% return — "the market doesn't seem to have a lot of expectations from Novo Nordisk right now." Pipeline: CagriSema, oral semaglutide, amylin-based drugs and a licensed GLP-1/GIP/glucagon triple agonist at 24% weight loss at 48 weeks. Optionality beyond weight: "semaglutide is showing promise for heart failure, kidney disease, and even alcohol addiction." | read ↗ |
| LLY | Eli Lilly | QT · SA · STK · FA | Neutral | The other half of the duopoly, and the benchmark rather than a stance. "The biggest competitor of Novo Nordisk? Eli Lilly." Zepbound (tirzepatide) "hits 2 hormones instead of one" and delivers 20% weight loss against Wegovy's 14%; Lilly also holds "the strongest drugs (Retatrutide & Zepbound)" in the pipeline comparison. The relative-value point is the whole article: Lilly at 34.1x next year's earnings against Novo's 16.9x — "You can buy more than two shares of Novo Nordisk for 1 Eli Lilly. I don't think this huge valuation difference is justified." One 2026 setback noted: "Lilly's oral GLP-1 delayed to Q2 2026, giving Novo extra quarter of sales." No independent view on Lilly as an investment is offered here; the July 2026 Eli Lilly case scores it separately (8.2/10, and a published pass on price). | read ↗ |
| CVS | CVS Health (CVS Caremark) | QT · SA · STK · FA | Neutral | Named once, as the gatekeeper whose decision moved US volumes: "In May 2025, CVS Caremark (a large pharmacy benefit manager) made Wegovy its preferred drug over Lilly's Zepbound." Context for how the American pricing fight is actually settled — through formulary placement rather than at the pharmacy counter — not a view on CVS. | read ↗ |
| private | Catalent (manufacturing sites) | — | Neutral | Named once, as the fix for the capacity problem that cost Novo its lead: alongside "DKK 47.2 billion in 2024 to expand factories," Novo "acquired three manufacturing sites from Catalent for $11 billion." The result is dated — "as of early 2025, the FDA declared the shortage resolved." No view on Catalent, which is no longer independently listed. | read ↗ |
Two things to carry forward. (1) The dating. The general-information block is stamped "Last update: July 29th, 2025" and quotes DKK 378 / a DKK 1.3trn market cap, while the "2026" section is written in January 2026 and reports the stock up 15% year to date — so the multiples in the middle of the piece are not all struck on the same day, which is also why "3x as cheap as Eli Lilly" (intro) and "more than two times as cheap" (conclusion) disagree. (2) The thesis has one leg. Every element — the untapped 97%, the pipeline breadth, the emerging-market expansion — supports a claim about the market, not about Novo out-competing Lilly on the product. The 25 January update puts numbers on the same case (17.4x forward against a 28.3x five-year average, a reverse DCF needing 11.4% against 8.6% expected growth) and by August 2026 the name is downgraded BUY → HOLD on competition rather than price — the first time in this archive a rating moves for that reason.
2. Talking points
The market, sized before the company is discussed
- "934 million people worldwide have obesity. Only 2.2 million are currently treated with branded medication. This means over 97% of the market is still untapped."
- "Demand for obesity drugs is growing at more than 100% (!) per year."
- The order matters: establishing that the pond is growing faster than the fish is losing share is what makes the rest of the argument work.
The three problems, named and dated
- Capacity: 2024 demand outran supply — "This left the door open for competitors." Answered with DKK 47.2bn of factory spend and $11bn for three Catalent sites; "as of early 2025, the FDA declared the shortage resolved."
- Compounding pharmacies: US law let pharmacies mix their own versions during the shortage, creating "a massive grey market of unapproved, cheaper drugs." Novo filed over 130 lawsuits; "The FDA has also ruled that most compounding is illegal again."
- US pricing: attacked by politicians for "$1,300+ for Wegovy while selling it for < $200 in Europe." Answered three ways — the CVS Caremark preferred listing, direct-to-consumer cash pricing "as low as $349 per month", and a White House deal trading lower prices for Medicare/Medicaid access from 2026.
Why share was lost, stated as three causes rather than one
- A better drug: "Studies show a 20% weight loss with Zepbound compared to 14% for Novo's Wegovy. When given the choice, many new patients chose the more effective option."
- Empty shelves: doctors could not prescribe what was not in stock, and "Lilly capitalized on this by ramping up their own supply faster."
- Compounding asymmetry: "Because Novo's drug was easier to copy than Lilly's, this hurt Novo Nordisk much more than Eli Lilly." Two of the three are fixable; the first is not, and that is the open question.
The pivot: share versus size
- "None of this matters as much as you might think. The market is growing so fast that even with less market share, Novo's revenue is still hitting record highs."
- "The growth runway is still enormous and the market is big enough for both to win. Remember, 97% of people with obesity are still untreated."
- This is the load-bearing claim of the whole position, and it is a claim about the category, not about the company.
Optionality nobody is paying for
- "It's also not just about weight anymore. Semaglutide is showing promise for heart failure, kidney disease, and even alcohol addiction. Each of these is a multi-billion dollar opportunity on its own."
- Pipeline breadth is the stated strategy against Lilly's potency: "Novo is building a 'broad' portfolio with different options (CagriSema, pills, and Amylin-based drugs)," plus a licensed triple agonist at 24% weight loss after 48 weeks, "comparable to Lilly's Retatrutide."
- The pill market is where Novo is genuinely ahead — "Novo Nordisk has higher weight loss and is the first to market," against a Lilly pill that is "more convenient to take, and easier to make."
The valuation, in one chart
- "Since 2020: the Forward PE declined from 20.9x to 12.9x (−38%); EPS rose from 9 DKK to 23.5 DKK (+161%)."
- Multiple contraction against earnings expansion — the archive's cleanest picture of a derating that has nothing to do with the profit line.
- The relative version: Lilly 34.1x, Novo 16.9x next year's earnings. "You can buy more than two shares of Novo Nordisk for 1 Eli Lilly."
Why the reverse DCF runs on EPS
- "We use EPS instead of FCF because Novo Nordisk is investing heavily in future growth (high CAPEX)."
- Result: "Novo Nordisk only needs to grow its EPS by 2.9% per year to return 10% per year to shareholders. This looks very reasonable to me."
- A rare, explicit statement of when to substitute the input — worth holding against the FCF-based reverse DCFs used everywhere else in the archive.
Five catalysts already in evidence
- Oral Wegovy at "70,000+ US pharmacies at competitive $149/month pricing, combating compounders."
- Legal: "China Supreme Court upheld semaglutide patent; blocking Russian copycat exports."
- Clinical: "Real-world data showed 29% better cardiovascular outcomes vs Lilly's tirzepatide" — the one datum that argues Novo's product is not simply the weaker drug.
- Plus Lilly's oral GLP-1 slipping to Q2 2026, and the valuation gap itself. The stock is "up +15% since the beginning of the year."
Emerging markets as the volume answer
- "Novo is also expanding heavily in China, India, and Africa with local production. By 2030, they could serve millions of patients in these regions."
- "Even at lower prices, the volume creates a massive advantage (and source of revenue)."
- The unstated tension: the US price concessions and the emerging-market volume push both trade margin for reach, and no margin bridge is shown.
Sourcing
- The underlying work is a 78-page Deep Dive by Steven Van Den Burg, "an invaluable Partner of the Community," linked in full; Slegers publishes the conclusion and the verdict.
- The same structural pattern as the FICO dive (114 pages by Compound with René) and the Brookfield series (Jochen Vandenbergh) — outside research distributed under the masthead with the house decision kept in-house.
3. In plain English
A jargon-free summary of the thesis behind each argued name. (Renders on each name's consolidated page.)
NVO — Novo Nordisk Positive
Novo Nordisk is the Danish company behind Ozempic and Wegovy. It makes more than half the world's insulin, but the reason anyone talks about it now is the weight-loss injections.
The past two years went badly in a very specific way. Demand was so far ahead of what Novo could manufacture that pharmacies were allowed, under American law, to mix their own copies — and up to 30% of patients took those instead. While the shelves were empty, Eli Lilly ramped up its own drug, which happens to work better: about 20% of body weight lost against Wegovy's 14%. The result is that Novo's share of the obesity market fell from 74% to 53% in a single year.
Slegers' argument is not that this is untrue. It is that share of a market and size of a market are different things. About 934 million people are obese and only 2.2 million are on a branded medicine — so 97% of the customers have not been reached yet, and demand is more than doubling annually. In a market growing that fast, losing share and still setting revenue records is arithmetically ordinary. His phrase is "the market is big enough for both to win."
The price is what makes it a position rather than an observation. Since 2020 Novo's earnings per share have risen 161% while the multiple people will pay for them has fallen 38%. It now costs about 17 times next year's profits against Eli Lilly's 34 — you can buy two shares of one for a share of the other. And working backwards from today's price, the company only has to grow earnings 2.9% a year for the next decade to hand an owner 10% a year. That is a very low bar for a business in a category doubling annually.
The honest counter, which the piece does not press, is that everything here rests on the category rather than on Novo winning. If Lilly's better drug keeps taking new patients, Novo grows into a shrinking share of an expanding pool — which is exactly the reasoning that eventually downgrades the name in August 2026, on competition rather than on price.
Summary derived from the archived Compounding Quality post (text in transcript.txt) for personal study. The underlying 78-page investment case is the work of Steven Van Den Burg. Not investment advice. © Compounding Quality / Pieter Slegers for source material.