Is This Deal a Game Changer for Novo Nordisk?

Novo Nordisk (NYSE: NVO) has been a market laggard over the past two years. The company has faced clinical setbacks and market-share losses in the weight-loss space, and now it expects its sales to decline in 2026. Is there any way back for the company? While many are looking toward potential clinical and regulatory progress that could help stage a rebound (and with good reason), Novo Nordisk recently made a move that could have a measurable impact on its business over the long run. Here's what investors need to know.

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Harnessing the power of AI

On April 14, Novo Nordisk announced that it had entered into a partnership with OpenAI. The two companies will collaborate to bring cutting-edge artificial intelligence (AI) capabilities to the drug discovery and development process. Currently, it takes a lot of time and money for pharmaceutical companies to go from the first stages of research to commercialization. But AI could change that, at least, that's what Novo Nordisk is hoping for. By analyzing datasets with AI, the company could accelerate drug discovery and bring cheaper medicines to patients more quickly.

Novo Nordisk is also looking to harness the power of AI to improve other aspects of its business, including manufacturing. Of note, Novo Nordisk's CEO, Mike Doustdar, emphasized the importance of unleashing the power of AI to help develop medicines for patients with diabetes and obesity, the two areas where the Denmark-based pharmaceutical giant is a leader. The company has a vast amount of data from clinical trial successes and failures in these niches to feed its AI research program, which could help it develop even better drugs in these fields and solidify its position.

If Novo Nordisk's initiatives work and the company can cut the cost and time to develop drugs by even 5%, that could have a meaningful impact across the entire business. It will mean more money to pour back into R&D, more to return to shareholders, etc.

However, that could take some time to materialize. And in the meantime, Novo Nordisk could face increasingly more competition in diabetes and weight loss. It's also worth noting that Novo Nordisk's biggest rival, Eli Lilly, has built the largest AI supercomputer in the pharmaceutical industry and is doubling down on its efforts to use AI to improve its business.

What does all this mean for Novo Nordisk? Clinical progress should still be the company's most important catalyst over the medium term. Over the next few years, it could release data from clinical trials for products such as amycretin, a potential medicine for diabetes and obesity that is in phase 3 studies in both subcutaneous and oral formulations.

Another promising candidate in the works for Novo Nordisk is UBT251, an investigational weight-loss therapy that mimics the actions of three distinct gut hormones, potentially enhancing its efficacy. Outside of its core area, Novo Nordisk recently posted strong phase 3 study results for Etavopivat, an investigational medicine for sickle cell disease. Novo Nordisk may be going through a rough patch, but the company's leadership in its core area and deep pipeline make the stock a buy at current levels, at least for investors willing to be patient.

Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.