Novo Nordisk, the pharmaceutical company renowned for its weight-loss drugs Ozempic and Wegovy, recently executed a two-for-one stock split, a move aimed at aligning the prices of its Copenhagen-listed shares and American Depositary Receipts (ADRs) with market standards.

However, this decision has had mixed consequences in the market, as a broader risk-off sentiment has dampened investor enthusiasm.

As of 11:10 a.m. CET, Novo Nordisk’s shares were down 2.3% at 665.9 Danish kroner, partially erasing some of the remarkable gains that had propelled Novo Nordisk to the position of Europe’s most valuable firm, surpassing luxury giant LVMH just last month.

It’s worth noting that Novo Nordisk’s shares have experienced an impressive sevenfold increase since the company’s last stock split in January 2014.

This meteoric rise can be attributed to the company’s dominant position in the global market for obesity drugs—a market that JPMorgan Chase & Co. analyst Richard Vosser projects to be worth a staggering $71 billion within the next decade. The consensus among analysts is that Novo Nordisk’s strength in this sector will persist.

An analyst at Barclays Plc, Emily Field, expressed her optimism by stating, “This is a once-in-a-generation type of story in that this is not just a big market, but these drugs are something that has the potential to change society in meaningful ways.” The field has an overweight rating on Novo Nordisk’s stock.

Investors are equally bullish about Novo Nordisk’s prospects. Nicolas Domont, a fund manager at Optigestion, recently increased his stake in the company, emphasizing that they are operating in a rapidly growing market, significantly outpacing the industry’s growth rate.

He described Novo Nordisk as one of Europe’s few appealing investment options. However, he acknowledged that the stock is relatively pricey, trading around 35 times forward earnings.

While this valuation multiple is nearly double that of the Stoxx 600 Health Care subindex, it remains lower than that of Novo Nordisk’s primary rival in the obesity-drug market, Eli Lilly & Co.

Eli Lilly’s shares trade at approximately 50 times forward earnings, driven not only by its weight-loss drug potential but also by the success of its late-stage trial for an experimental treatment for Alzheimer’s disease, another hot area in the pharmaceutical sector.

Despite the prevailing optimism, not everyone shares the same view of Novo Nordisk’s future. UBS Group AG analyst Michael Leuchten remains skeptical, suggesting that the revenue potential from obesity drugs might not be as substantial as Novo Nordisk’s current valuation implies.

“It’s a race to arms, and can you conclude that Novo can win? I don’t think so,” remarked Leuchten.

Thomas Brenier, head of equity management and research at Lazard Freres Gestion, echoed concerns about the company’s valuation. “It seems that we could be at a moment which is a little excessive,” he cautioned.

In conclusion, Novo Nordisk’s recent stock split has triggered a mixed response in the market. While the company’s strong position in the obesity drug market continues to attract optimism and investment, some analysts and experts caution that the stock’s valuation may be reaching elevated levels, prompting a degree of caution among investors.