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Novo Nordisk (NVO) Announces Stock Split to Enhance Liquidity
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Novo Nordisk’s (NVO - Free Report) board of directors has approved a split of the trading units of the company’s class B shares and American Depositary Receipts (“ADR”) listed on the Nasdaq Copenhagen and New York Stock Exchange (“NYSE”) in a two-for-one ratio.
In a two-for-one split, each share before the stock split will now turn into two shares after the split.
Novo Nordisk has already conducted a two-for-one stock split of its class B shares listed on the Nasdaq Copenhagen as of Sep 13. The split in the ADRs will take effect from Sep 20 to maintain a one-to-one relationship between the B-share and ADR.
The decision was expected as NVO had previously announced its plans for a stock split alongside its second-quarter 2023 results. This split is also the company’s first one since 2014.
A stock split is done to lower a single share's price, making the company's stock more affordable without losing value. This decision does not impact a company’s total market capitalization.
However, in Novo’s case, the stock split is hardly expected to contribute to liquidity. As of Sep 13, each ADR of the company traded under $200 per unit – a price most investors are likely to pay willingly. Lowering the price via a stock split does not guarantee bringing more investors.
In the year so far, shares of Novo Nordisk have surged 42.3% compared with the industry’s 9.0% growth.
Image Source: Zacks Investment Research
This upside in the share price is attributable to Novo Nordisk’s popular weight-loss drug, Wegovy (semaglutide).
A GLP-1 receptor agonist, Wegovy, is approved for use in individuals aged 12 years and above in the United States and Europe for weight management in people living with obesity.
Since its launch, sales of Wegovy have been gaining momentum. Wegovy sales were up 543% in second-quarter 2023.
The increasing demand trend of Wegovy is both a boon and a bane for this Danish pharma company. On the one hand, Novo Nordisk raised its full-year 2023 sales outlook and profit expectations based on the sales upside. On the other hand, the company is struggling to meet demand outside the United States, even with increased production capacity.
If the supply issues continue to prevail for an extended period, it could result in the loss of market share for the company in the presence of other pharma bigwigs like Eli Lilly (LLY - Free Report) and Pfizer (PFE - Free Report) , which have also developed their obesity drugs.
In June, Lilly announced that it had completed the regulatory submission seeking label expansion for its dual GIP/GLP-1-RA drug tirzepatide to treat obesity or overweight in adults. A final decision is expected by 2023-end. The Eli Lilly drug has also shown a superior weight-loss reduction in multiple late-stage clinical studies.
Lilly’s tirzepatide was approved in May 2022 for treating adults with type 2 diabetes mellitus (“T2DM”) and is being marketed under the brand name Mounjaro. Since its launch, Mounjaro has shown an impressive initial uptake, recording $980 million in revenues in second-quarter 2023. An expansion in the obesity indication would help Lilly rake in billions of dollars from Mounjaro sales.
Pfizer is also evaluating pipeline candidates for obesity. Pfizer is currently evaluating danuglipron in a phase II study in patients with obesity and T2DM. If this study is successful, Pfizer plans to start phase III studies by year-end.
Image: Shutterstock
Novo Nordisk (NVO) Announces Stock Split to Enhance Liquidity
Novo Nordisk’s (NVO - Free Report) board of directors has approved a split of the trading units of the company’s class B shares and American Depositary Receipts (“ADR”) listed on the Nasdaq Copenhagen and New York Stock Exchange (“NYSE”) in a two-for-one ratio.
In a two-for-one split, each share before the stock split will now turn into two shares after the split.
Novo Nordisk has already conducted a two-for-one stock split of its class B shares listed on the Nasdaq Copenhagen as of Sep 13. The split in the ADRs will take effect from Sep 20 to maintain a one-to-one relationship between the B-share and ADR.
The decision was expected as NVO had previously announced its plans for a stock split alongside its second-quarter 2023 results. This split is also the company’s first one since 2014.
A stock split is done to lower a single share's price, making the company's stock more affordable without losing value. This decision does not impact a company’s total market capitalization.
However, in Novo’s case, the stock split is hardly expected to contribute to liquidity. As of Sep 13, each ADR of the company traded under $200 per unit – a price most investors are likely to pay willingly. Lowering the price via a stock split does not guarantee bringing more investors.
In the year so far, shares of Novo Nordisk have surged 42.3% compared with the industry’s 9.0% growth.
Image Source: Zacks Investment Research
This upside in the share price is attributable to Novo Nordisk’s popular weight-loss drug, Wegovy (semaglutide).
A GLP-1 receptor agonist, Wegovy, is approved for use in individuals aged 12 years and above in the United States and Europe for weight management in people living with obesity.
Since its launch, sales of Wegovy have been gaining momentum. Wegovy sales were up 543% in second-quarter 2023.
The increasing demand trend of Wegovy is both a boon and a bane for this Danish pharma company. On the one hand, Novo Nordisk raised its full-year 2023 sales outlook and profit expectations based on the sales upside. On the other hand, the company is struggling to meet demand outside the United States, even with increased production capacity.
If the supply issues continue to prevail for an extended period, it could result in the loss of market share for the company in the presence of other pharma bigwigs like Eli Lilly (LLY - Free Report) and Pfizer (PFE - Free Report) , which have also developed their obesity drugs.
In June, Lilly announced that it had completed the regulatory submission seeking label expansion for its dual GIP/GLP-1-RA drug tirzepatide to treat obesity or overweight in adults. A final decision is expected by 2023-end. The Eli Lilly drug has also shown a superior weight-loss reduction in multiple late-stage clinical studies.
Lilly’s tirzepatide was approved in May 2022 for treating adults with type 2 diabetes mellitus (“T2DM”) and is being marketed under the brand name Mounjaro. Since its launch, Mounjaro has shown an impressive initial uptake, recording $980 million in revenues in second-quarter 2023. An expansion in the obesity indication would help Lilly rake in billions of dollars from Mounjaro sales.
Pfizer is also evaluating pipeline candidates for obesity. Pfizer is currently evaluating danuglipron in a phase II study in patients with obesity and T2DM. If this study is successful, Pfizer plans to start phase III studies by year-end.
Novo Nordisk A/S Price
Novo Nordisk A/S price | Novo Nordisk A/S Quote
Zacks Rank
Novo Nordisk currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.