Weight-loss medications are back in the headlines. In particular, Novo Nordisk (NVO 0.02%) stands to gain tremendously as the maker of instant-classic obesity therapy Wegovy as well as the type 2 diabetes treatment Ozempic.
High prescription medicine costs are doubtlessly a major impediment to reaching as much of the weight loss market as possible. But, according to the company's senior leadership, that shouldn't be much of a barrier for Wegovy specifically. Here's why.
Medicine costs matter to consumers
Amid what commentators rightly describe as an "insatiable" appetite for type 2 diabetes and weight loss therapies like Ozempic and Wegovy, Novo Nordisk, as well as its prime competitor in the space, Eli Lilly, expect to continue struggling to manufacture enough doses to meet demand for their star medicines for at least another year or so.
Wegovy alone brought in close to $1.4 billion in the third quarter, making it a significant component of Novo Nordisk's overall haul of $8.6 billion -- up 30% compared to a year prior. And there's a lot more where that came from. After all, Wegovy was only approved a little over two years ago, and it really only entered the public consciousness in the last 12 months when the company relaunched it in early 2023.
Per comments by management, around 80% of the Americans taking Wegovy get their weekly shot for $25 or less, which works out to be an annual cost burden of $1,200. That means most people aren't paying anywhere near the drug's prohibitively expensive sticker price of $1,300 per month.
It also follows that as many as 50 million people in the U.S. could theoretically get their treatments covered by insurance. Deepening its penetration of such a huge market, which now seems inevitable, could easily bring billions more revenue for Novo Nordisk. And the very wide accessibility of the therapy is excellent news for shareholders, to say the least.
The company already revised its guidance for 2023 upward in October, and it's now expecting as much as a 38% gain in its sales year over year whereas before it anticipated a max of 33%.
Hard to see things slowing from here
Wegovy sales at their current level are enough for Novo Nordisk to rightfully claim that it's the global leader in diabetes treatment. While it might face some resistance in gaining even more market share due to competition from Eli Lilly, so far all the evidence points to the market being large enough to offer plenty of growth for both.
Novo Nordisk is strongly profitable, with a profit margin in excess of 35%. In the trailing-12-month period, its sales were $31 billion. For its 2025 fiscal year, Wall Street analysts are estimating, on average, that it'll report sales of $45 billion. That's a runway of at least two years where the business will be growing very rapidly. And if one-upping of its own guidance proves to be a habit, its shares could easily keep outperforming the market.
Until demand for Wegovy is satisfied, and it probably won't be anytime soon, there isn't too much that might derail the gravy train. Of course, if previously unknown side effects or risks of treatment were come to light, the story could change. But with plans to increase manufacturing capacity ongoing, and North American market penetration only in its early stages, it makes sense to bet on Novo Nordisk by buying its stock and holding it for at least the next few years.
