Danish pharmaceutical company Novo Nordisk (NVO 1.13%), is bolstering its market dominance in diabetes, a disease that affects some 415 million people worldwide, with numbers growing all the time. By 2040, there will be more than half a billion patients, according to the Centers for Disease Control and Prevention.
So it comes as little surprise that in 2022, Novo Nordisk made 177 billion Danish kroner in sales ($25.8 billion), a 26% increase in its native currency, and a 16% increase at constant exchange rates (CER). Net profit was 55.5 billion kroner ($8.1 billion), up 16% in that currency.
Diabetes and weight loss treatments dominate revenues
Nearly 90% of Novo Nordisk's sales are of diabetes and obesity treatments, which increased 19% at CER. The main drivers for this obesity and diabetes sales growth was Novo Nordisk's "GLP-1" diabetes treatments (glucagon-like peptide 1 agonists), Rybelsus, Ozempic, and Victoza, sales of which rose to 83.4 million kroner ($12.2 million), up 56% or 42% at CER.
These treatments are indicated for type 2 diabetes, the kind that people develop in adulthood, and are used to improve blood sugar control, sometimes also leading to weight loss. A 2 mg dose of Ozempic received approval from the U.S. Food and Drug Administration in March 2022. In a clinical trial used to support approval of the new 2 mg dose, that higher amount yielded "a statistically significant and superior reduction" in blood sugar after 40 weeks compared to the 1 mg dose, the company said. A more effective treatment could likely lead to more revenue.
More than half the market in GLP-1 diabetes drugs are Novo Nordisk's
Novo Nordisk has a few more years of market exclusivity left for Rybelsus and Ozempic, which are administered to patients weekly by injection and are heavily advertised in the U.S. market. The patents on these drugs expire first in China, in 2026, followed by Europe and Japan in 2031 and the United States in 2032. Patents on Victoza have already expired in China and Japan, and expire this year in the United States and Europe, opening it up to generic competition, which can take a year or more to materialize.
In the meantime, Novo Nordisk controls more than half the global market for GLP-1 drugs, the company says in its 2022 annual report. Its market share was 54.9% in 2022, up from 52.7% in 2021, showing the company has what it takes to continue expanding its market lead. Competitors in this area include Eli Lilly's Trulicity and Sanofi-Aventis's Adlyxin, which exited the U.S. market at the end of 2022. Sanofi-Adventis did not provide sales figures for Adlyxin in its annual report, but international sales of a product that combines the same active ingredient with a form of insulin totaled 215 million euros ($235 million), so presumably, Novo Nordisk will enjoy a modest sales bump this year as it takes over part of the French company's U.S. market share.
For the international diabetes market as a whole from 2020 to 2022, Novo Nordisk's share rose from 29.3% to 31.9%, nearly one-third. Other products seem to be making up for the sag in sales as Victoza goes generic.
In 2023, Novo Nordisk expects its sales and operating profits both to increase in the 13% to 19% range at CER. That is in agreement with analysts' average estimate of $30.1 billion in 2023 revenues, which would be a 16.7% increase at CER.
The company isn't resting on its laurels. For example, on March 24 it announced positive results in its Phase 3b Pioneer Plus clinical trial of Rybelsus, which is indicated for type 2 diabetes patients who need more intense treatments. The trial met its primary endpoint (main goal) "by demonstrating a statistically significant and superior reduction" in the HbA1c blood test, a standard diabetes measure of the patient's average blood sugar levels over the past three months.
Novo Nordisk also has an active new drug pipeline in other therapeutic areas, announcing on Feb. 10, for example, that its Japanese partner Heartseed had successfully dosed the first patient in a Phase 1/2 clinical study of HS-001, an experimental cell therapy for heart failure.
Its pipeline has shown a history of growth that's likely to continue in the future
NVO shares have beaten the market over the past decade in growth, and it's a large-cap stock. The company's industry dominance seemingly has made it a worthwhile investment and that momentum is likely to continue.
Novo Nordisk's competitive advantage in diabetes management could help make it a great long-term investment. It has outdone diabetes drug market competitors Sanofi-Aventis and Merck, which has likely fueled the more than 250% increase in its price-to-earnings (P/E) ratio since 2013. The company's current P/E ratio of 45 looks a bit steep, but its ability to continue growing revenue and earnings shows that its strong performance likely isn't going away anytime soon. With its current portfolio and opportunities, NVO looks to be a solid growth stock as it continues to buttress its grip on the diabetes market, even if not all the company's pipeline projects pan out.
