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Novo Nordisk (NVO) Soars 38% YTD: How Should You Play the Stock?
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Novo Nordisk (NVO - Free Report) has rallied 38% in the year-to-date period compared with the industry’s 23.3% growth, as seen in the chart below. The stock has also outperformed the sector and the S&P 500. NVO is currently trading near the 52-week high.
Novo Nordisk Outperforms Industry, Sector & S&P 500
Image Source: Zacks Investment Research
Novo Nordisk, a leader in the worldwide diabetes and obesity care market, has been witnessing stellar performance of its GLP-1 agonist, semaglutide, which is approved as an Ozempic pre-filled pen and Rybelsus oral tablet for type II diabetes (T2D) and as a Wegovy injection for weight management. Semaglutide has been the key driver of Novo Nordisk’s stupendous growth in the past few years. Let’s dig deeper.
Semaglutide NVO’s Growth Engine
Novo Nordisk’s GLP-1 sales in diabetes jumped 52% in the last year, depicting greater patient outreach and market capture by its GLP-1 products. The GLP-1 segment is an important class of drugs for multiple cardiometabolic diseases and is gaining significant popularity. The company continues to be the global market leader in the GLP-1 segment with around 54% value market share, primarily on the back of its semaglutide medicines.
Wegovy, approved by the FDA in 2021, has become the key top-line contributor for Novo Nordisk. In 2023, Wegovy sales were up 420%. Despite supply challenges, Wegovy is seeing strong prescription trends and is generating impressive revenues and profits for Novo Nordisk. The company is investing heavily to ramp up its production capacity to meet the growing demand. Ozempic sales, on the other hand, have increased 66% in 2023, exhibiting potential to further boost the top line in the quarters ahead.
Earlier this year, Wegovy was approved by the FDA for reducing the risk of serious heart problems in obese/overweight adults. The label expansion of Wegovy now reaffirms that it is not just a cosmetic drug used to improve one’s appearance. Hence, the expanded label is expected to improve insurance coverage for Wegovy, making it more accessible and affordable to patients. The expanded use will likely further boost the drug’s sales in 2024 and beyond.
However, Novo Nordisk faces serious competition from Eli Lilly (LLY - Free Report) in this market space. Lilly has seen unparalleled success with tirzepatide, a dual GIP and GLP-1 receptor agonist, which is marketed as Mounjaro for T2D and Zepbound for obesity.
Viking Therapeutics (VKTX - Free Report) is developing its obesity candidate, VK2735, as a subcutaneous injection and as an oral pill in a mid-stage study and an early-stage study, respectively.
Amgen (AMGN - Free Report) also has a GLP-1 receptor candidate, MariTide (maridebart cafraglutide), for obesity in its pipeline, currently undergoing mid-stage development.
Novo Nordisk is also studying semaglutide for additional indications.
Novo Nordisk is evaluating Wegovy’s efficacy in phase III studies for the treatment of heart failure with preserved ejection fraction in diabetes and obesity patients.
Earlier this year, the company also reported that the FLOW study, evaluating Ozempic in T2D and chronic kidney disease (CKD) patients, achieved its primary endpoint with statistical significance. Based on such positive data, Novo Nordisk expects to file for regulatory approvals for Ozempic in the United States and EU as an adjunctive treatment to prevent the progression of renal impairment in T2D and CKD patients.
Additionally, the company is also conducting a phase III study evaluating semaglutide for nonalcoholic steatohepatitis.
Such efforts to expand the indication of semaglutide are encouraging, as they will increase the eligible patient population of the drug, subject to approval.
The company is also working on diversifying its portfolio beyond diabetes and obesity care to develop new treatments in other areas. Novo Nordisk is making serious strides in the development of Mim8 as a treatment for haemophilia A patients. Based on encouraging phase II data, NVO plans the first regulatory filing for Mim8 by 2024-end.
Rising Sales and Margins
Novo Nordisk, with a market cap of around $630 billion, has one of the broadest diabetes portfolios in the industry.The company improved its global diabetes value market share in 2023 from 31.9% to 33.8%, primarily due to market share gains in both North America and International operations.In 2023, Novo Nordisk’s GLP-1 sales in diabetes jumped 52%, depicting greater patient outreach and market.
In the past five years, the total revenues generated by the company surged 90.3% on a reported basis.In 2023, the company reported a net profit margin of 36%, which is the highest recorded in the past five years. During the same period, NVO’s net profit margin has remained above 31%, which shows consistency.
We believe the stock has the potential to rise further with consistently strong sales of Ozempic and Wegovy.
Valuation & Rising Estimates
Novo Nordisk is trading at a premium to the industry. Going by the price/earnings ratio, the company shares currently trade at 36.63 forward earnings, higher than 20.62 for the industry.
NVO Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for the company’s 2024 earnings per share (EPS) has increased from $3.40 to $3.43 over the past 60 days. During the same period, the EPS for 2025 has increased from $4.26 to $4.32.
NVO Estimate Movement
Image Source: Zacks Investment Research
The stock’s return on equity on a trailing 12-month basis is 91.7%, which is higher than 26.02% for the large drugmaker industry, as seen in the chart below.
NVO Return on Equity
Image Source: Zacks Investment Research
Conclusion
In the past five years, shares of Novo Nordisk have skyrocketed 500%. Growing market share and profit margins suggest that the company has the potential for further growth in the years to come, primarily driven by increased sales of Wegovy and Ozempic. It is also looking to further expand the indications for Wegovy and Ozempic to increase patient eligibility. Subject to approval for such indications, revenues generated from their sales will further boost the top line.
The obesity market is far from being saturated. Per research conducted by Goldman Sachs, the obesity market in the United States is expected to reach $130 billion by 2030. This is also evident from the fact that Novo Nordisk and Lilly are not only investing heavily to optimize their production capacities but have also started evaluating multiple novel obesity candidates.
Thus, we can conclude that Novo Nordisk, currently carrying a Zacks Rank #3 (Hold), is a good stock to retain in one’s portfolio. Consistently rising earnings estimates highlight analysts’ optimistic outlook for further growth. Though NVO currently trades at a premium to the industry, any major dip in the stock’s price can be used as an opportunity to buy it for long-term gains.
Image: Shutterstock
Novo Nordisk (NVO) Soars 38% YTD: How Should You Play the Stock?
Novo Nordisk (NVO - Free Report) has rallied 38% in the year-to-date period compared with the industry’s 23.3% growth, as seen in the chart below. The stock has also outperformed the sector and the S&P 500. NVO is currently trading near the 52-week high.
Novo Nordisk Outperforms Industry, Sector & S&P 500
Novo Nordisk, a leader in the worldwide diabetes and obesity care market, has been witnessing stellar performance of its GLP-1 agonist, semaglutide, which is approved as an Ozempic pre-filled pen and Rybelsus oral tablet for type II diabetes (T2D) and as a Wegovy injection for weight management. Semaglutide has been the key driver of Novo Nordisk’s stupendous growth in the past few years. Let’s dig deeper.
Semaglutide NVO’s Growth Engine
Novo Nordisk’s GLP-1 sales in diabetes jumped 52% in the last year, depicting greater patient outreach and market capture by its GLP-1 products. The GLP-1 segment is an important class of drugs for multiple cardiometabolic diseases and is gaining significant popularity. The company continues to be the global market leader in the GLP-1 segment with around 54% value market share, primarily on the back of its semaglutide medicines.
Wegovy, approved by the FDA in 2021, has become the key top-line contributor for Novo Nordisk. In 2023, Wegovy sales were up 420%. Despite supply challenges, Wegovy is seeing strong prescription trends and is generating impressive revenues and profits for Novo Nordisk. The company is investing heavily to ramp up its production capacity to meet the growing demand. Ozempic sales, on the other hand, have increased 66% in 2023, exhibiting potential to further boost the top line in the quarters ahead.
Earlier this year, Wegovy was approved by the FDA for reducing the risk of serious heart problems in obese/overweight adults. The label expansion of Wegovy now reaffirms that it is not just a cosmetic drug used to improve one’s appearance. Hence, the expanded label is expected to improve insurance coverage for Wegovy, making it more accessible and affordable to patients. The expanded use will likely further boost the drug’s sales in 2024 and beyond.
However, Novo Nordisk faces serious competition from Eli Lilly (LLY - Free Report) in this market space. Lilly has seen unparalleled success with tirzepatide, a dual GIP and GLP-1 receptor agonist, which is marketed as Mounjaro for T2D and Zepbound for obesity.
Viking Therapeutics (VKTX - Free Report) is developing its obesity candidate, VK2735, as a subcutaneous injection and as an oral pill in a mid-stage study and an early-stage study, respectively.
Amgen (AMGN - Free Report) also has a GLP-1 receptor candidate, MariTide (maridebart cafraglutide), for obesity in its pipeline, currently undergoing mid-stage development.
Novo Nordisk is also studying semaglutide for additional indications.
Novo Nordisk is evaluating Wegovy’s efficacy in phase III studies for the treatment of heart failure with preserved ejection fraction in diabetes and obesity patients.
Earlier this year, the company also reported that the FLOW study, evaluating Ozempic in T2D and chronic kidney disease (CKD) patients, achieved its primary endpoint with statistical significance. Based on such positive data, Novo Nordisk expects to file for regulatory approvals for Ozempic in the United States and EU as an adjunctive treatment to prevent the progression of renal impairment in T2D and CKD patients.
Additionally, the company is also conducting a phase III study evaluating semaglutide for nonalcoholic steatohepatitis.
Such efforts to expand the indication of semaglutide are encouraging, as they will increase the eligible patient population of the drug, subject to approval.
The company is also working on diversifying its portfolio beyond diabetes and obesity care to develop new treatments in other areas. Novo Nordisk is making serious strides in the development of Mim8 as a treatment for haemophilia A patients. Based on encouraging phase II data, NVO plans the first regulatory filing for Mim8 by 2024-end.
Rising Sales and Margins
Novo Nordisk, with a market cap of around $630 billion, has one of the broadest diabetes portfolios in the industry.The company improved its global diabetes value market share in 2023 from 31.9% to 33.8%, primarily due to market share gains in both North America and International operations.In 2023, Novo Nordisk’s GLP-1 sales in diabetes jumped 52%, depicting greater patient outreach and market.
In the past five years, the total revenues generated by the company surged 90.3% on a reported basis.In 2023, the company reported a net profit margin of 36%, which is the highest recorded in the past five years. During the same period, NVO’s net profit margin has remained above 31%, which shows consistency.
We believe the stock has the potential to rise further with consistently strong sales of Ozempic and Wegovy.
Valuation & Rising Estimates
Novo Nordisk is trading at a premium to the industry. Going by the price/earnings ratio, the company shares currently trade at 36.63 forward earnings, higher than 20.62 for the industry.
NVO Valuation
The Zacks Consensus Estimate for the company’s 2024 earnings per share (EPS) has increased from $3.40 to $3.43 over the past 60 days. During the same period, the EPS for 2025 has increased from $4.26 to $4.32.
NVO Estimate Movement
The stock’s return on equity on a trailing 12-month basis is 91.7%, which is higher than 26.02% for the large drugmaker industry, as seen in the chart below.
NVO Return on Equity
Conclusion
In the past five years, shares of Novo Nordisk have skyrocketed 500%. Growing market share and profit margins suggest that the company has the potential for further growth in the years to come, primarily driven by increased sales of Wegovy and Ozempic. It is also looking to further expand the indications for Wegovy and Ozempic to increase patient eligibility. Subject to approval for such indications, revenues generated from their sales will further boost the top line.
The obesity market is far from being saturated. Per research conducted by Goldman Sachs, the obesity market in the United States is expected to reach $130 billion by 2030. This is also evident from the fact that Novo Nordisk and Lilly are not only investing heavily to optimize their production capacities but have also started evaluating multiple novel obesity candidates.
Thus, we can conclude that Novo Nordisk, currently carrying a Zacks Rank #3 (Hold), is a good stock to retain in one’s portfolio. Consistently rising earnings estimates highlight analysts’ optimistic outlook for further growth. Though NVO currently trades at a premium to the industry, any major dip in the stock’s price can be used as an opportunity to buy it for long-term gains.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.