Investing in Novo Nordisk is an uncertain bet on their research and development

This is my first attempt at DD, so please bear with me.
Novo Nordisk (NVO) produces drugs and treatments for diabetes, obesity and some rare diseases. What’s surprising is that they have very high gross profit margins of more than 80%, but this seems to be relatively common for this industry (e.g., Pfizer has 75%, Eli Lilly has 82%). NVO has consistently rising revenues and operating incomes, a large portion of which (16%) they are spending on R&D. The focus on diabetes and obesity also seems like a solid basis for business that’s not going to disappear anytime soon. Apparently 800 million people on Earth have some form of diabetes, and the number is still rising (same for obesity). NVO, despite being a Danish company, also has large manufacturing facilities on both sides of the Atlantic, which should protect them to some extent from effects of any tariffs. On paper, the fundamentals look extremely solid and the cheap stock (P/E of 4) is essentially screaming at us to buy.

So why is the NVO stock dropping? There are essentially two worries:
First, there is a feeling that NVO is falling behind Eli Lilly, their main US competitor, in drug development.
More importantly, NVO’s patent on its most important drug (Ozempic) is set to expire next year. This means that the market is likely going to be flooded with cheaper generic versions of Ozempic next year, reducing the revenue. This expectation of falling revenues is being priced into the stocks to some extent. In both cases, NVO would need to get themselves out of the hole and beat market expectations with the development of new diabetes drugs. This is not impossible, since NVO has a $7 billion R&D budget with a large pipeline, but also not something you as an investor can necessarily count on. At the moment, there is also added uncertainty since the company is looking for a new CEO, making it unclear what their medium-term strategy is.

Quick summary: NVO fundamentals look amazing at the moment but are expected to take a hit next year. You should only invest in NVO if you think their sizeable R&D department can pull a rabbit out of a hat one more time.