Last year, Denmark-based biotech giant Novo Nordisk (NVO 0.84%) couldn't stop grabbing headlines. From the company's notable work in the market for weight-loss drugs to its meaningful contribution to its country's economy, Novo Nordisk got plenty of accolades that translated to an excellent performance on the stock market.
Novo Nordisk's shares are up by 57% over the trailing-12-month period. However, some investors might feel as though they have missed the boat. Maybe it's too late to get in on Novo Nordisk. But is that the case? Let's find out whether there is some fuel left in the company's growth engine.
Weight-loss medicines will be a major tailwind
The business of developing and marketing drugs isn't exactly the most exciting around. But Novo Nordisk's obesity and weight-loss medicines, led by Ozempic, have become incredibly popular among investors and the public. Here is what's going on. Diabetes and obesity have been on the rise for years, a trend that is predicted to continue. Anti-obesity drugs will likely soar in popularity. According to some analysts, the market will be worth $44 billion by 2030, up from just $2.5 billion in 2022.
Novo Nordisk is one of the two undisputed leaders in this field along with Eli Lilly. The company's revenue and earnings could well rise rapidly through the end of the decade. In the first nine months of 2023, Novo Nordisk reported net sales of 166.4 billion Danish kroner ($24.4 billion), an increase of 29% compared to the year-ago period. For a biotech giant, growing its sales by low- to mid-double digits year over year is usually considered good, so Novo Nordisk's performance through Sept. 30 was incredible.
On the bottom line, the company's net profit of DKK$61.7 billion ($9.1 billion) soared by 47% year over year. Ozempic should continue to make significant contributions to Novo Nordisk's results, especially with several important label expansions on the way. The company should also earn approval for newer products within its main therapeutic area. Novo Nordisk is awaiting word from regulatory authorities for applications it sent last year for icodec, a once-weekly insulin product.
Novo Nordisk's track record in diabetes and obesity care is impressive, and given the company's pipeline, it won't likely end anytime soon.
Beyond Novo Nordisk's core therapeutic area
While Novo Nordisk's work in diabetes and obesity is exemplary, one issue with the company may be that it relies too much on this area. In the first nine months of 2023, Novo Nordisk generated DKK$153.8 billion ($22.6 billion) from this segment -- or roughly 92% of its total sales. Besides competition from Eli Lilly, Novo Nordisk will also have to contend with other companies in this field from here on out. Among leading drugmakers, Pfizer and AstraZeneca are looking to dip their toes in these waters, while smaller biotechs such as Viking Therapeutics are also looking to mount a challenge.
Novo Nordisk should remain a leader in this field, but the increased competition could be a problem. That's why the biotech has been looking to diversify its lineup. The company's late-stage pipeline includes programs that target sickle cell disease (SCD), hemophilia, and Alzheimer's disease (AD). Even with recent breakthroughs in SCD and AD, plenty of work remains to be done. For instance, with an aging population, the number of people with AD will only increase along with the need for effective treatment options.
There is no guarantee that Novo Nordisk's work in AD or SCD will be successful. But at least some of the company's non-obesity programs should eventually make it to the market.
Novo Nordisk is an excellent long-term option
Novo Nordisk's performance in 2023 wasn't a one-off or a fluke. The company's excellent financial results, proven innovative abilities, and leadership in the high-growth area of obesity care puts it in an excellent position to deliver outsized returns in the midterm. It's not too late to invest in this top biotech stock. Far from it.
