Here’s Why SGA U.S. Large Cap Growth Strategy Sold Novo Nordisk (NVO)

Sustainable Growth Advisers (SGA), an investment management company, released its third-quarter investor letter for its “U.S. Large Cap Growth Strategy.” A copy of the letter can be downloaded here. The portfolio returned -1.3% (Gross) and -1.4% (Net) in the third quarter, compared to a 10.5% return for the Russell 1000 Growth Index and an 8.1% return for the S&P 500 Index. SGA’s investment objective is to invest in high-quality growth businesses expected to achieve consistent mid-teens earnings growth, accompanied by stable revenue and cash flow. However, in Q3, the market leadership was adverse for SGA’s investment style as lower-quality stocks and cyclical industries outperformed. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its third-quarter 2025 investor letter, the SGA U.S. Large Cap Growth Strategy 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 6.02%, and its shares lost 41.86% of their value over the last 52 weeks. On December 31, 2025, Novo Nordisk A/S (NYSE:NVO) stock closed at $50.88 per share, with a market capitalization of $226.084 billion.

SGA U.S. Large Cap Growth Strategy stated the following regarding Novo Nordisk A/S (NYSE:NVO) in its third quarter 2025 investor letter:

“In July, we liquidated our position in Novo Nordisk A/S (NYSE:NVO) and initiated a position in Nike. We sold Novo Nordisk out of the portfolio due to two concerns that made us question the company’s ability to deliver long-term growth.

Firstly, copycatting of Novo’s drugs by direct-to-consumer retail pharmacies has continued beyond the May 22nd deadline. As background, due to a shortage earlier in 2024 and 2025, the FDA allowed legal copying of Novo’s weight loss drugs (“compounding”) to meet patient demand, with May 22nd marking the end of the authorization as the branded companies have restored sufficient supply. However, the compounders are using a loophole to continue marketing “personalized GLP-1 drugs”, which violates the spirit of the law. One of the retail pharmacies, Empower Pharmacy, is even challenging Novo competitor Eli Lilly’s composition of matter patent on its tirzepatide molecule with the PTAB (Patent Trial and Appeal Board) in an aggressive move. While there are a lot of legal actions to try to rein in the compounding pharmacies by both Novo and Lilly, it appears that this problem of intellectual theft is not likely to go away. After we exited the position, the company lowered its sales and operating profit guidance for 2025, citing slower-than-expected growth due to the persistent use of compounding…” (Click here to read the full text)

In another article, we covered Novo Nordisk A/S (NYSE:NVO) and shared Baird Chautauqua International and Global Growth Fund’s views on the company. In addition, please check out our hedge fund investor letters Q3 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.