Novo Nordisk's remarkable ascent, driven by its revolutionary weight-loss drug Wegovy, has led to a surge in market value and positive analyst outlook.
ADVERTISEMENTDanish pharmaceutical powerhouse Novo Nordisk has emerged as one of the standout performers among European mega-cap stocks in the early months of this year, boasting a robust 25% surge year to date.
This performance further cemented Novo Nordisk's status as the largest European company by market capitalisation, reaching almost €550 billion and outpacing the market value of Tesla.
Over the past year, the Danish pharma titan has seen its price jump by 80%, a rate of increase unmatched by any other European company valued at €100 billion or more.
Novo Nordisk's growth driver: Weight-loss drug Wegovy
The spectacular market performance of Novo Nordisk is attributed to its revolutionary weight-loss drug, Wegovy, the brand name for semaglutide. This glucagon-like peptide-1 (GLP-1) agonists drug, initially designed to treat type 2 diabetes, has shown side effects such as reducing food cravings and slowing stomach emptying, making it effective for weight loss. In 2023, revenue from sales of Wegovy rose by 154%.
According to trials, people treated with Novo Nordisk's drug show a 10.5% reduction in body weight after 20 weeks of treatment, and 18.2% after 68 weeks.
Wegovy's use in cardiovascular diseases
Wegovy's exceptional results has led the US Food and Drug Administration to approve the drug for uses beyond weight loss.
Weekly Wegovy injections have been shown to reduce the overall risk of heart attack, stroke, and death from cardiovascular causes by 20%, according to a landmark late-stage trial.
"Wegovy is now the first weight-loss medication to also be approved to help prevent life-threatening cardiovascular events in adults with cardiovascular disease and either obesity or overweight," stated last week John Sharretts, MD of the FDA's Center for Drug Evaluation and Research.
So far, Wegovy has been launched in the US, Denmark, Norway, Germany, the UK, Iceland, Switzerland and the United Arab Emirates. With the drug's application widening to include cardiovascular diseases on top of diabetes and obesity, more countries are now looking into approving it. Japan approved Wegovy in February, becoming the first Asian country to do so, with expectations for approval in China within the year.
A vast market potential for a dominant player
The potential market for Novo Nordisk is enormous.
As the company reported, the number of people living with obesity has almost tripled since 1975 and is set to reach more than 1.2 billion adults globally by 2030. The diabetic population is expected to increase to 784 million by 2045.
The global market for anti-obesity medications is poised for a significant expansion, potentially growing more than 16-fold to $100 billion (approximately €90.9 billion) by 2030, according to Goldman Sachs Research.
Similarly, the market for diabetes drugs, already substantial at $66 billion (about €60 billion) in 2023, is predicted to swell to $118 billion (roughly €107.3 billion) by 2032, as outlined by Precedence Research. Furthermore, the global market for cardiovascular disease treatments is on track to exceed $500 billion (approximately €454.5 billion) by 2028, per Statista Market Insights.
Novo Nordisk holds a leading position in the diabetes and obesity care markets, with market shares of about 45% and 93%, respectively. With Wegovy's expanded usage to combat cardiovascular diseases and approval in new markets, analysts project further revenue growth in the coming quarters.
Analyst consensus and forecasts
Analyst opinions on Novo Nordisk are positive. Eighteen recommend a 'Strong Buy,' two suggest a 'Buy,' eight advise to 'Hold,' and three recommend a 'Sell.' The one-year price forecast for Novo Nordisk B A/S averages DKK 890 (€119.6), aligning closely with the current market price. The maximum estimate reaches DKK 1,100.0 (€147.7), with a minimum at DKK 530.0 (€71.1).
Analysts are bullish on the company's revenue outlook, forecasting significant growth across 2024. The expected revenue is to ascend to DKK 65.23 billion (€8.73 billion) in Q1, DKK 67.94 billion (€9.09 billion) in Q2, DKK 72.33 billion (€9.68 billion) in Q3, and DKK 78.01 billion (€10.44 billion) in Q4. Such growth would culminate in a 25% surge by Q4 2024 compared to the revenue generated in the final quarter of 2023.
In conclusion, while Novo Nordisk has already achieved strong performances in recent years, its revenue and profits are expected to continue growing from here.
The expanded indication for cardiovascular disease could be a game changer, and Wegovy's approval in new countries could lead analysts to revise this growth story to the upside in the coming months.
