Novo Nordisk (NVO 0.84%) has been growing in popularity as a result of two incredibly popular drugs, Ozempic and Wegovy. Because of the company's phenomenal growth, it has been a top buy for many investors. But the business is still growing and Novo Nordisk's top and bottom lines should continue rising in the future. Here's where I see the company being five years from now.
More manufacturing capacity and sales growth
The big impediment for Novo Nordisk today is that it simply can't keep up with demand. The company currently has two contract manufacturers to help with the production of weight-loss drug Wegovy and it hasn't ruled out using a third one before the end of the year.
Investing in more capacity is something that appears to be inevitable down the road. The company's earnings have been stellar and Novo Nordisk should be in an excellent position to grow its operations. Through the first half of 2023, its net profit totaled 39.2 billion Danish kroner ($5.5 billion) and was up 43% year over year. Earlier this year, the company did announce plans to expand production in Denmark but that wasn't related to the production of Wegovy. In the future, I would expect to see more investments in expanding its manufacturing capacity, with a focus on the company's top-selling assets.
In the meantime, the company is likely to rely on contract manufacturers to further expand its products into more countries. This month, Wegovy launched in the U.K., which is the fourth European country it is in (the fifth country in total, including the U.S.). Wegovy is also available in Denmark, Norway, and Germany. As the company sorts out its manufacturing issues, there should be a much wider distribution of the company's products. Five years from now, I would be surprised if Wegovy isn't available in all major European countries. That expansion alone could set up Novo Nordisk for significant revenue growth.
Through the first six months of this year, the company's net sales growth was 29% year over year with Novo Nordisk's top line totaling 107.7 billion Danish kroner ($15.1 billion). That's a strong growth rate already for the company and what's exciting is how much higher it can go once Wegovy is available in all major markets.
An oral version of Wegovy could be the top seller
The one drawback with Wegovy is that it is an injection, so it's not the most comfortable option for patients. The company is working on a pill that can help people lose weight, and in clinical trials, it has been demonstrating that it can be as effective as Wegovy. Novo Nordisk plans to submit the oral version for approval in both Europe and the U.S. later this year. It likely won't take five years for the oral pill to hit the markets but when it does, it could put the company's revenue growth on an even higher trajectory.
In five years, the oral version of Wegovy should be the company's top-selling drug, assuming there are no production issues and the rollout goes smoothly. Currently, Novo Nordisk's top-selling drug is Ozempic, which is only approved for diabetes in the U.S. But because it has been helping people lose weight and it has been popular on social media, demand has been through the roof. That should change over time as the company increases its manufacturing capabilities and people are using its diabetes treatments for diabetes, and weight loss medications are being used for weight loss.
Should you invest in Novo Nordisk?
Novo Nordisk has some incredible growth potential and while there will be competition from other companies, the weight-loss industry is massive enough that there should be plenty of room for the company to achieve much more growth. And at 44 times its earnings, while it isn't a cheap stock, it's still trading at a fraction of the price that investors are paying for Eli Lilly (its multiple is around 80), which could also be a big name in weight loss thanks to how effective tirzepatide has been in helping people lose weight.
If you're investing for the long haul, Novo Nordisk can make for an excellent healthcare buy as the company's focus on diabetes and weight management are two areas where demand for treatments is likely to get a whole lot larger.
