It has been an amazing year for Novo Nordisk (NVO).
The Major Successes of Novo Nordisk
The Danish company has witnessed tremendous success in the world of pharmaceuticals and medicine, as well as in the realm of celebrities like People magazine and E! Network, where stars like Amy Schumer and Tesla’s CEO Elon Musk have tried the company’s diabetes and weight loss drugs, Ozempic and Wegovy.
The company has become the most valuable in Europe with a market capitalization of around $445 billion, surpassing the fashion giant LVMH – known for brands like Bulgari and Dior – in the second half of the year.
It even produced an unforgettable commercial song: “Oh, Oh, Oh, Ozempic,” a remake of the classic rock band Pilot’s song “Magic.” (Do you remember them? We didn’t think so.)
This year has also been a huge success for Novo in terms of numbers. Novo’s stock has risen by 45% so far this year compared to about 19% for the S&P 500 (^GSPC), according to Yahoo Finance data. The healthcare index (XLV) has declined by nearly 3% year-to-date. (Meanwhile, shares of competitor Eli Lilly (LLY) have increased by over 60% year-to-date.)
Sales in the United States rose by 45% this year up to September 30. The company reported approximately $12 billion in sales from Wegovy and Ozempic in the first nine months of the year, representing over 50% of the total reported revenue of $22 billion for the obesity and diabetes care sector during the same period.
As for the company’s net profits? Novo has updated its guidance for Wall Street three times already this year. The company initially expected earnings growth between 13% and 19% in 2023 and has now raised that forecast between 32% and 38%.
“Novo could be considered … somewhat responsible for creating a market for weight-loss drugs, almost out of thin air, where there was nothing before – a market that now has billion-dollar potential,” according to TD Cowen Securities analyst Michael Needlekovich.
It’s no surprise that investors have fallen in love with the company. And it’s no surprise that we chose Novo Nordisk as Company of the Year for 2023 in Yahoo Finance.
How Novo Got Here
How has Novo achieved this success? How did an insulin manufacturer become a household name in such a short time?
The company traces its origins back to the 1920s (it just celebrated its 100th anniversary) when insulin was first discovered and the Danish professor August Krogh brought it from Canada to Denmark to treat his wife suffering from diabetes.
Krogh and other scientists formed the Nordisk company, contributing to making diabetes a manageable disease. Then, two former Nordisk employees founded Novo, and the two companies competed until they merged in 1989 to form the insulin powerhouse now known as Novo Nordisk. The company, in a peculiar organizational structure, controls the Novo Nordisk Foundation, which holds a 25% stake. The foundation provides funding for research and development across various sectors, as well as other nonprofit efforts in Denmark.
“Behind a fortress of financial awards, there is a company that operates more foundationally and takes its mission seriously,” according to Columbia University professor and investor Megan Fitzgerald.
What is this mission? Here’s what the company states: “Our goal is to drive change to defeat diabetes and other serious chronic diseases like obesity and other severe chronic conditions.”
Insulin has been the company’s core activity for many years, accounting for 79% of its total sales of $25 billion in 2022. However, the recent sales surge is linked to a relatively new class of drugs known as GLP-1s, which send signals to the body to produce more insulin and slow digestion.
In
In reality, these drugs have been around for nearly two decades. The very first GLP-1 ever approved for the treatment of type 2 diabetes, Byetta from Eli Lilly, was approved in 2005. Since then, numerous companies have tried to find a successful weight loss product, with many abandoning their research and development efforts about a decade ago.
But not Novo.
Nouvo’s first obesity product, Saxenda, was approved in 2014 but did not achieve significant success in the market, providing only an 8% fat loss.
“Despite Saxenda’s less than impressive commercial performance, they saw the opportunity and went for it,” according to Michael Nidelcovitch from TD Cowen.
Three years later, the type 2 diabetes treatment drug Ozempic hit the market, followed by Wegovy in 2021. Novo struggled to keep up with demand.
“We’ve been telling them in meetings for years: you have something that finally works,” according to Dr. Angela Fitch, a founder of a weight loss company based in Massachusetts called Knownwell.
Fitch, who serves as a paid spokesperson for Novo and is the president of the Obesity Medicine Association, added, “People would come into my office saying, ‘Oh my God, it has changed my life.’ We didn’t hear that from the other medications we were using.”
What’s next for Novo?
Despite all the good fortune, Novo faces challenges.
Although Novo now controls 54% of the GLP-1 market, according to Novo’s latest earnings report, others are trying to enter the GLP-1 market – or are returning after a long absence. Recent announcements include Pfizer’s (PFE) pivot and Roche’s (RHBGY) return through its acquisition of biotech Carmot.
“Other major companies in the life sciences industry … must be having board level discussions on how to potentially enter the obesity market,” analysts at Leerink Partners wrote in a recent note to clients.
Novo’s CEO, Jørgensen, stated, “There’s been a lot of discussion about … now there’s finally an effective treatment for people suffering from obesity, and then suddenly the entire market takes off. That’s really impressive, but it requires a lot of hard work because we need to scale and enhance production like we’ve never done before.”
Of course, there is not a small issue of insurance companies not covering medications used to treat obesity. For example, the cost of Ozempic and Wegovy is $963 and $1,349 a month, respectively.
The high cost actually prevents many people from using the medications.
What’s next for Novo?
Last month, the company announced plans to invest a total of $6 billion to expand manufacturing capabilities in its home country – not only to meet the demand for weight loss drugs but also to address other treatments for different diseases in its pipeline.
For years, Novo Nordisk has been a major player in diabetes, but the drug’s effectiveness in weight loss, and its ability to show positive effects in other areas like cardiovascular diseases, could push the company’s portfolio to be more diverse and valuable – which investors have been seeking for years.
In October, Novo spent $1.3 billion to acquire a late-stage company with a blood pressure medication, KBP Biosciences. There are numerous ongoing trials to determine the effects of GLP-1 on other diseases.
Novo is also looking at some mergers and acquisitions of early-stage biotech companies.
Jørgensen said, “We are now looking for assets and asset acquisitions and asset licensing in the obesity and diabetes space. [The success of semaglutide] creates a platform for us to do inorganic deals and acquire innovation from the outside and bolster our position in new therapeutic areas.”
Will
The story of Novo has only just begun? Perhaps, according to what Fitzgerald from Columbia University suggested. But there are many unknowns in the future to say that definitively.
“It’s hard to predict the great impact that the series of semaglutide products from Novo will continue to have on the market, the economy, and the vast potential in public health,” said Fitzgerald. “But we are years away from achieving a suitable model to reach more than 750 million people worldwide who are suffering from obesity and related complications and the social cost.”
Oh. Oh. Oh. Indeed.
Anjali Khemrani is the lead health reporter at Yahoo Finance, covering everything related to pharmaceuticals, insurance, healthcare services, digital health, pharmacy management companies, health policy, and politics. Follow Anjali on all social media platforms under the name @AnjKhem.
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Source: https://www.aol.com/novo-nordisk-2023-yahoo-finance-110008058.html
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