On Oct. 16, Novo Nordisk (NVO 0.84%) announced that it planned to buy a late-stage pharmaceutical asset called ocedurenone, which it hopes to commercialize to treat uncontrolled hypertension in the context of advanced chronic kidney disease (CKD). Now, it stands to control a key and underserved share of the CKD market, and it might eventually have additional development opportunities in the market for hypertension therapies too.
But is the pharma juggernaut extending itself too far beyond its home territory of marketing medicines for obesity and type 2 diabetes? And is it still worth buying even if CKD turns out to be a market too far? Let's map out what the new acquisition means to find out.
The near-term picture just got even better
Novo Nordisk plans to pay as much as $1.3 billion for ocedurenone. The molecule's prior developer, KBP Biosciences, already advanced it through a total of nine clinical trials, including a phase 2b trial most recently.
Unlike many of the pharmaceutical assets that companies try to offload, ocedurenone appears to be preliminarily safe and effective at lowering the high blood pressure of patients suffering from advanced kidney disease. That means there's a high chance of bringing it to market in the next few years.
Per the researchers who conducted the trial, as many as 18 million people in the U.S. suffer from advanced chronic kidney disease. Hypertension affects most CKD patients as it can contribute to developing CKD. It's also a critical pathology to address as CKD itself can also contribute to developing hypertension, in a vicious cycle.
Furthermore, it's common for patients with CKD to need more than one medicine to control their hypertension. So it's reasonable to assume that Novo Nordisk's addressable market for ocedurenone could be as large as the entire population of CKD patients.
It's also reasonable to assume that if ocedurenone is approved for sale, it won't necessarily need to steal market share from the medicines that patients are already using since clinicians are already accustomed to prescribing multiple therapies. Plus, it uses a different mechanism of action from the existing drugs on the market, which increases the chances that it can be safely co-administered with others.
According to a report by Data Bridge Market Research, the market for CKD therapies was worth a bit more than $13 billion in 2022, and it's expected to grow to reach nearly $19 billion by 2030.
So the setup is quite favorable for Novo Nordisk to rake in another few billion in annual sales from its new candidate before the end of the decade, assuming it gets approved. Considering that its trailing-12-month revenue is more than $28 billion, the acquisition could very well be a significant driver of top-line growth. That's before taking into account the revenue tailwinds from any additional indications it might pursue beyond hypertension in kidney disease, however.
In short, this latest move is something that investors should consider as a contribution toward the bull thesis for buying the stock.
Further success ahead, one way or another
It's possible that the company will fail to get its candidate out the door and onto the market. Late-stage trials still need to be conducted, and regulators will have their say on the provenance of the clinical data. But even if that happens, investors who buy shares could still come out on top. After all, the business has a bunch of successful medicines on the market already.
As of Oct. 13, management updated its expectations for how much money Novo Nordisk would bring in for 2023. Whereas before it estimated that the top line would grow by up to 33%, now they're calling for growth of up to 38%.
The driver of the better-than-anticipated year was white-hot sales of its drug Ozempic, which treats type 2 diabetes, and its sister drug Wegovy, which is used for treating obesity. As you've probably heard, Ozempic and Wegovy are both tremendously popular, and their heyday has just begun. Ozempic alone brought in nearly $6 billion in sales in the first half of 2023, up 58% year over year on a reported basis. Ongoing attempts to commercialize the drug for additional indications could easily keep a snappy pace of growth going for the foreseeable future.
Buying Novo Nordisk right now grants investors exposure to a significant amount of growth from numerous drivers, some of which are active in full force now, and some of which will hit the scene in the next few years. The stock is thus right at home in a portfolio pursuing a long-term-oriented investment strategy. And while there's always risk, the balance of risk and reward is very much skewed toward potential rewards for now.
