Will Novo Nordisk Be a Trillion-Dollar Stock by 2030?

Novo Nordisk (NVO -4.02%) is the big name behind Ozempic and Wegovy, two drugs that have been helping people lose weight substantially. The drugs have already been huge catalysts for the business, with sales booming this year. And there's even more growth ahead for the company in the long run. But is there enough potential out there for Novo Nordisk to become a $1 trillion-dollar stock by the end of the decade?

The company has a lot of room to get bigger

What's promising about Novo Nordisk's business is that it focuses on diabetes and obesity care, which are two areas of healthcare that require ongoing care, and where there is a huge need for treatment. More than two-thirds of American adults are overweight or obese. And as of 2022, the obesity rate was over 35% in 17 states. Why that's concerning is because obesity can lead to many illnesses, including diabetes.

According to Wall Street analysts, the anti-obesity drug market could be worth more than $100 billion, with Novo Nordisk being one of the major players in it. A big reason to remain bullish on effective weight-loss treatments is that they can help with more than just losing weight. Novo Nordisk says Wegovy, its glucagon-like peptide-1 (GLP-1) weight-loss drug, may obtain approval as a treatment for reducing the risk of cardiovascular diseases in the U.S. That approval could come within six months. In a clinical trial, the drug showed that it decreased the risk of heart attack or stroke in adults who had heart disease and obesity by as much as 20%.

The market opportunity is significant, and even if Eli Lilly has a more effective weight-loss treatment in tirzepatide, there could still be room for Novo Nordisk to grab a significant chunk of the market, enough for it to grow its sales and profits at a high rate.

The path to $1 trillion

Novo Nordisk's market cap is around $454 billion, which is close to the halfway mark of $1 trillion already. For the healthcare stock to reach $1 trillion by 2030, shares of Novo Nordisk would need to rise by approximately 120% in the span of six years. That would mean, on average, the stock would need to rise by 14% each year until 2030.

This year, the stock has soared by 54%, and in 2022, it rose by 21%. The excitement surrounding Ozempic and Wegovy has accelerated the stock's returns. The key to the company's continued rise in value is the growth of these drugs. Wegovy's sales are up nearly 500% through the first nine months of 2023, while sales of diabetes drug Ozempic have risen by 58% (at constant exchange rates). Rybelsus, which is the oral version of Ozempic, has also been generating solid growth as its sales have risen by 82% when factoring out the impact of foreign exchange. Novo Nordisk's bottom line has also benefited from all this growth, with net income over the past three quarters totaling 61.7 billion Danish kroner ($9.3 billion), rising 47% year over year.

To continue with this growth, Novo Nordisk needs to ensure there is ample production capacity. In the past, shortages have led to people using Ozempic off-label for weight loss. By increasing capacity, Novo Nordisk can launch its products in more markets and not have to worry about limiting supply. The company says that it is going to invest $6 billion in new facilities in Denmark. While some will be completed by the end of 2025, the entire project won't be finished until 2029.

Boosting capacity is important for the company to grab market share and grow its top line. In addition, research data suggests that people who use Wegovy and other weight-loss drugs typically have to stay on them, or risk gaining the weight back should they stop.

That implies there's little margin of error for the company in future, not just with regards to growing, but also maintaining, production capacity for these medicines. In other words, focusing on increasing production capacity could set the company up for further growth in the years ahead.

Will Novo Nordisk be worth $1 trillion by 2030?

Novo Nordisk's business is in good shape with not one but multiple fast-growing assets in its portfolio. There's little doubt in my mind that the company will be worth $1 trillion by the end of the decade. There's simply too much of a need for effective treatments for weight loss and diabetes, and Novo Nordisk's treatments have been providing patients with some much-needed solutions.

Although it has generated some strong returns this year, Novo Nordisk's stock can still be an excellent buy for the long term as the business looks poised to hit the $1 trillion mark.