Ozempic and Wegovy. Those are the two drugs that are the focal point of any earnings or press release that comes out from Novo Nordisk (NVO +5.02%). The Danish company has struck gold with not just a top diabetes drug in Ozempic but an impressive weight-loss treatment in Wegovy. Both drugs actually help people lose weight, and they are the catalysts behind the company's impressive revenue growth this year. But as well as Novo Nordisk has been doing, there's room for it to perform even better, as demand for these drugs is still in its early stages.
Novo Nordisk raises guidance for 2023
Earlier this month, Novo Nordisk boosted its projections for this year as it is experiencing strong sales growth, with Ozempic and Wegovy being key catalysts for its operations. Its new guidance says that at constant exchange rates, sales will be up between 32% and 38% for the year, which is higher than its previous range of 27% to 33%. Operating profit growth will also be between 40% and 46%, which is a big improvement from an earlier forecast of 31% to 37%.
Through the first nine months of the year, the company's sales are up 33% overall. But the actual growth for Wegovy and Ozempic is likely to be much higher than that. The company will release its full and detailed results on Nov. 2.
NYSE: NVO
Key Data Points
Many more employers plan to provide coverage for GLP-1 drugs
While demand is high for Novo Nordisk's drugs, it could be even higher if people obtained coverage for them. And there appears to be progress on that front. According to a recent survey that market research company Savanta conducted of 500 medium and large businesses in the U.S., up to 40% of them plan to cover glucagon-like peptide 1 (GLP-1) drugs next year. Currently, only 25% offer coverage.
GLP-1 drugs help to lower blood sugar levels and can reduce appetite, thus leading to weight loss. Among the most popular drugs in that category are Wegovy and Ozempic. As interest in those drugs has increased, it's not surprising to see that employers are responding to that by suggesting that they will be more likely to provide coverage to their employees for these treatments in the near future.
Novo Nordisk's revenue can soar much higher
As more employers provide coverage for drugs such as Wegovy and Ozempic, that's going to ensure demand stays strong for the foreseeable future. And as the drugs become even more mainstream, that can potentially lead to even more employers following suit.
But in the bigger picture, the overall market for GLP-1 drugs is also growing as consumers see how successful these drugs are in helping people lose weight. Analysts at JPMorgan Chase project that globally, the GLP-1 market could be worth $71 billion by 2032. Novo Nordisk and rival Eli Lilly, which also has a promising drug in Mounjaro, could each have a 45% slice of the pie.
Novo Nordisk's top and bottom lines have been soaring in recent years, and with more demand coming for Wegovy and Ozempic, that trend is going to continue.
NVO Revenue (TTM) data by YCharts.
Should you buy Novo Nordisk stock?
Shares of Novo Nordisk are up 44% this year, and with so much runway still left for the company's most promising drugs, it's hard not to remain bullish on the healthcare stock in the long run. At 46 times earnings, the stock doesn't look cheap. But with the top and bottom lines expected to grow significantly, valuation is unlikely to come down much, and the stock shouldn't be perecieved as overvalued. For long-term investors, Novo Nordisk remains an excellent buy.
