Here’s Why Burke Wealth Management Sold Novo Nordisk (NVO)

Burke Wealth Management, an investment management company, released its “Focused Growth Strategy” second-quarter 2025 investor letter. A copy of the letter can be downloaded here. The second quarter was marked by significant volatility. Against this backdrop, the strategy returned +15.9% in the quarter compared to +10.9% for the S&P 500 Index. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second-quarter 2025 investor letter, Burke Wealth Management highlighted stocks such as Novo Nordisk A/S (NYSE:NVO). Novo Nordisk A/S (NYSE:NVO) engages in the research and development, manufacture, and distribution of pharmaceutical products. The one-month return of Novo Nordisk A/S (NYSE:NVO) was -17.42%, and its shares lost 57.89% of their value over the last 52 weeks. On August 22, 2025, Novo Nordisk A/S (NYSE:NVO) stock closed at $56.98 per share, with a market capitalization of $246.974 billion.

Burke Wealth Management stated the following regarding Novo Nordisk A/S (NYSE:NVO) in its second quarter 2025 investor letter:

Novo Nordisk A/S (NYSE:NVO): We sold our stake in Novo-Nordisk during the second quarter. The thesis behind our purchase of Novo-Nordisk was that the global obesity market could comfortably support two successful rivals and that Novo and Eli-Lilly would leapfrog each other in terms of efficacy as new iterations of their Wegovy and Zepbound treatments became available. While the first part of this thesis remains intact, we were wrong on the second part. Lilly’s Zepbound is the most effective obesity treatment at the present time just as it was when we bought Novo. Unfortunately, Novo’s newest obesity treatment (Cagri-Sema) failed to deliver superior results to Zepbound in trials and instead appears destined to become a product with no identifiable market. As we were thinking about the impact of the Cagri-Sema disappointment to our investment rationale, the pharmaceutical industry as a whole took a couple of shots on the regulatory front. The first shot was an industry specific tariff threat. As we learned during Covid, most essential medicines are manufactured outside the United States which is not a sustainable long-term situation for a number of reasons. Hence, the Trump administration has a vested interest in forcing pharmaceutical manufacturing back to the US- whether it be by the carrot of building incentives or the stick of tariffs. The second shot was that President Trump put the entire industry on notice that the practice of the United States subsidizing the rest of the world by paying higher prices for the same drugs was going to end. The way things have worked for decades is that pharmaceutical companies set drug prices on a market by market basis. This means that government run systems negotiate a lower price while the US, which is in theory a competitive market but in reality not, pays a much higher price. Add into that the subsidies developed nations allow emerging market when it comes to drug pricing and you have a global market in which wildly different prices are paid for the same treatment. As President Trump so eloquently recounted in a press conference announcing the policy, he has a friend who told him that his “fat shot” costs $88 in the UK and $1,300 in New York and wanted to know what in the hell was going on. This seems to me to be one of those times when President Trump’s simple, common sense approach to issues hits the nail right on the head. For years, the drug companies argued that the inability to charge US citizens higher prices on drugs would hamper R&D efforts. While I am sympathetic to providing price breaks to underdeveloped nations so that they can access the best drugs, my sympathy to our friends in the developed world who have stood by while we subsidized their health care systems is lacking. I think the truth is that the drug companies simply had good lobbyists and our elected leaders in Congress chose campaign donations and steak dinners over lower priced drugs for the country as a whole for too long. As this system unwinds, I think that drug prices will have to rise globally while falling in the US until equilibrium is reached. I don’t think that this process will be perfectly orderly and I’m guessing that reaching equilibrium is going to require a reduction in the 80%+ gross margins many pharmaceutical companies earn. As a final aside, the $1,300 “fat shot” Trump’s friend was complaining about was Novo-Nordisk’s Wegovy.

Novo Nordisk A/S (NVO): "Canada's A Backdoor," Says Jim Cramer

An elderly couple receiving insulin from a pharmacist, representing healthcare company’s successful pharmaceutical products.

Novo Nordisk A/S (NYSE:NVO) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 45 hedge fund portfolios held Novo Nordisk A/S (NYSE:NVO) at the end of the second quarter, which was 60 in the previous quarter. While we acknowledge the risk and potential of Novo Nordisk A/S (NYSE:NVO) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than Novo Nordisk A/S (NYSE:NVO) and that has 10,000% upside potential, check out our report about this cheapest AI stock.

In another article, we covered Novo Nordisk A/S (NYSE:NVO) and shared the list of Jim Cramer talked about. GreensKeeper Asset Management acquired Novo Nordisk A/S (NYSE:NVO) in Q2 2025 as it believes the stock is experiencing growth primarily from its GLP-1 products. Despite facing competition from Eli Lilly (LLY), the firm believes that both companies can thrive in this expansive market. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.