Carlsquare/Vontobel weekly trading note: Healthy development for Pharma- time for Novo to recover?
This week, we look at Novo Nordisk, whose stock has fallen sharply in 2025 due to slower growth. Eli Lilly has gained market share in the diabetes and obesity sector with its lead drug, tirzepatide, compared to Novo's semaglutide. While we are cautious about Novo Nordisk's interim report on 4 February 2026, the company has a robust pipeline of drug candidates expected to reach the market in the next few years. At a macro level, we have noted an investor rotation out of technology and into financials and cyclical sectors, the latter of which have benefited from the Fed’s rate cut last week.
The pharmaceutical sector, as represented by the IHE ETF index comprising 47 pharmaceutical companies, has risen by almost 30 per cent in USD terms so far in 2025. At the beginning of October, the US pharmaceutical sector underwent a change when political issues surrounding pricing in the United States started to ease for 'Big Pharma'. This contrasts with the decline in the value of Novo Nordisk shares. Once the leader in diabetes and obesity drugs, the Danish company has seen its growth slow down, while its competitor Eli Lilly has proven to be more innovative and rapidly captured market share. Although Novo's growth prospects in 2026 are dim, the company has a robust pipeline of drug candidates expected to reach the market in the next few years, and its stock trades at significantly lower key ratios than those of its peers.
The US tech sector performed poorly last week following weaker-than-expected interim reports from Oracle and Broadcom. It finished the week down 1.6%, having fallen a further 1.1% on Friday, 12 December. During the same period, the Dow Jones increased by 1.1%, while the Nasdaq fell by 2.2%. Alongside the real estate and utilities sectors, the industrial sector was one of those that benefited most from the Fed's interest rate cut last week.
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