Novo Nordisk (NYSE: NVO) is a pharmaceutical company that focuses on medications for diabetes, but are quickly expanding into other areas of interests, such as obesity, cardiovascular-related disease and rare diseases. Oral semaglutide at different strengths has been found to reduce weight in overweight and obese people. Currently oral semaglutide is used only in people with diabetes which combined with lifestyle choices could lead to better blood sugar levels but could soon be available in pill form at a higher dose that will affect weight and does not require any form of exercise or of diet-related changes. Blockbuster GLP-1 agonist injection Ozempic can be used for improvement in diabetes, weight loss and cardio-vascular issues. By increasing satiety Ozempic decreases craving of different actions, such as eating and possibly, though not established, smoking. I believe Novo Nordisk is well-placed to deliver ever-growing sales of its quality-of-life-changing products. They boast of a 0.15 beta and 88% return on equity. It has sales of roughly $38bn in the last twelve months and expects only $3.6bn in obesity sales in 2025. I wouldn’t buy into it just off of those facts, because “…supply will continue to remain limited throughout the remainder of 2024.” And “In the case of Ozempic, for example, making semaglutide involves a complex process using specialised equipment in a unique manufacturing setting”. It also sits at a pricey 44 price/earnings ratio and will lose patent protection for Ozempic and Wegovy in 2031-2032. Both drugs have been approved for weight-loss by the FDA in 2021.
Novo Nordisk guidance for 2024:
Sales growth (CER): 22% to 28%
Operating profit (CER): 20% to 28%
There is a stock out there that stands to benefit whenever a new drug is approved. McKesson is a U. S.-focused pharmaceutical distribution company that acts as a middleman between pharmaceutical companies and pharmacies by delivering brand, generic, injections, pills and infusions. McKesson recently reported higher revenues directly caused by GLP-1 injection sales.
McKesson guidance (Fiscal 2025 from prior year):
-Adjusted Operating Profit growth of 10% to 15%
-Adjusted Earnings per Diluted Share guidance range indicates 16% to 19% growth
-Adjusted GAAP revenues 13% to 15% growth
*I own and recommend shares of McKesson*
———–UPDATE————
Novo Nordisk released phase 3 trial results on CagriSema which they hoped would achieve 25% weight loss. It clocked in at around 22% causing its share price to collapse. It now seems undervalued.
“…the weight lost is fairly comparable between Zepbound and CagriSema — 25% vs. 22.7%, respectively. But the safety question weighed on shares. Drugs in the GLP-1 drug class often cause gastrointestinal side effects, including nausea, vomiting and diarrhea.”
“the highest dose of Zepbound helped patients lose up to 25% of their body weight”
Novo Nordisk might also benefit from manufacturing Ozempic that will finally keep up with demand, as it has been in shortage, which allowed third-party drug companies to fill the gap.
*I own and recommend shares of Novo Nordisk*
Devlin Demontigny 