Unless you've been living under a rock, you've probably heard of Ozempic, Novo Nordisk's (NVO 0.70%) blockbuster diabetes medicine that's sweeping the globe. The company is selling Ozempic and other medicines derived from the same molecule at such massive scale that it opted to pause marketing efforts because it simply can't manufacture enough.
And there's one big new reason to believe that it'll be selling even more Ozempic, along with related drugs, in the future.
New results could portend huge new growth
Semaglutide is the active ingredient in Novo's weight loss and diabetes drugs like Ozempic and Wegovy. In Q2 of 2023 alone, its semaglutide therapies brought in $2.6 billion, with diabetes sales up 49% from a year prior, and obesity sales rising by 158%. There's reason to believe the semaglutide gold mine is going to keep yielding even more returns.
In addition to its products already on the market, the company is developing the molecule in six phase 3 clinical trials for new indications in obesity and diabetes, as well as for Alzheimer's disease, among other purposes. And it just reported some data that could be huge in terms of enabling another lucrative opportunity for further development.
Per the results of a study of 17,604 adults published on August 8, weekly shots of semaglutide reduced the number of major adverse cardiovascular events (MACEs) by 20% compared to a placebo over the course of five years of treatment. For the purposes of the investigation, MACEs included outcomes like death due to cardiovascular events, non-fatal heart attacks, and non-fatal strokes.
The study population was composed of overweight people over the age of 45 who didn't have diabetes, which means that semaglutide is now positioned to become part of the standard of care for cardiac risk prevention. In other words, within the next few years, Novo Nordisk could be marketing a new semaglutide-based medicine to everyone who is overweight and at risk of cardiovascular disease.
That's a massive proportion of the population. Because it'd be administered with the objective of reducing severe risks, people would need to take it indefinitely. So it could be yet another vector for Novo Nordisk to continue its reign as one of the best big pharma stocks.
What's the catch?
Is there a cloud on the horizon for Novo Nordisk? Not exactly. Broadly speaking, the results of the new study are consistent with prior scientific investigations of semaglutide's impacts on cardiovascular risks. The side effect profile was moderate but well tolerated by the patients in the study, much like with the semaglutide medicines on the market, and so far there aren't signs of anything going awry in long-term follow ups with the subjects.
Investors should recognize that the benefits of the therapy are likely the largest for people who have higher risks of experiencing cardiovascular events. But there aren't really any red flags that would make for bearish prospects, at least not yet.
There's still some work to do before the company can realize revenue from selling its medicines for cardiac risk reduction. Before the end of the year, it expects to file the paperwork with regulators in the U.S. and E.U. to get Wegovy's indications expanded. They might well request additional clinical trials to be conducted to clarify their concerns, assuming they have any.
Even if regulators give the go-ahead, for the new indication to result in more sales, public and private insurers would need to agree to cover it, and their standards may be more exacting. Finally, practitioners will need to find that the benefits of the medicine are worth the costs and the risks of side effects.
Given the uptake of other semaglutide-based drugs so far, the biggest of the potential stumbling blocks is the issue with insurers, but it's too early to expect a problem.
So should investors buy shares of Novo Nordisk today in anticipation of the upcoming growth? If you can tolerate its quite high price-to-earnings (P/E) multiple of 42, yes. Between its enormous growth prospects with semaglutide and its collection of other pipeline segments and marketed medicines, this company is very likely to expand faster than its peers, and that'll remain true regardless of whether this new and potentially massive catalyst ends up paying off.
