Many analysts are recommending that investors hold off on buying stock in Novo Nordisk because rival Eli Lilly and Co. might encounter a smash hit with a version of its Byetta diabetes treatment that would be taken only once a week.
Nineteen of the 34 analysts who follow the Danish insulin maker have "hold" or "sell" recommendations, according to Bloomberg. The analysts say Novo Nordisk shares are too expensive, considering that the shares are priced at 22.7 times earnings compared to the 17.7-percent ratio of the Bloomberg Europe Pharmaceutical Index.
If research results on the weekly Byetta insulin treatment prove "absolutely stunning, then Novo Nordisk has got a problem," said Tim Race, an ING Financial Markets analyst based in London.
Novo Nordisk, the world's largest insulin maker, plans to ask regulators next year to approve its liraglutide, a daily treatment that, like Byetta, boosts insulin production in the body and cuts weight.
Byetta, currently taken twice a day by injection, generated $151.1 million in sales in Lilly's second quarter, a 54-percent increase from the same quarter a year earlier.