Those looking to invest in stocks can sometimes seem spoiled for choices. There are all kinds of businesses in the equity markets that seem intriguing. However, upon closer inspection, many of these corporations don't actually prove worthy of investors' time or money.
On the other hand, some companies look almost too attractive to pass up, given their underlying businesses' strength and growth prospects. Let's look at two examples in the biotech industry: Novo Nordisk (NVO 1.27%) and Regeneron Pharmaceuticals (REGN 0.66%).
NYSE: NVO
Key Data Points
1. Novo Nordisk
Novo Nordisk is the company behind the now-famous drug Ozempic, whose active ingredient is semaglutide. In the weight-loss market, it's marketed as Wegovy. These two brand names helped catapult Novo Nordisk's sales higher last year. The company's revenue for 2023 came in at 232.3 billion Danish kroner ($33.6 billion), 31% higher than the previous fiscal year. Wegovy's sales skyrocketed by 407%, while Ozempic's jumped by a much less impressive, though still admirable, 60% year over year.
Novo Nordisk's position in its core therapeutic areas of diabetes and obesity care is what makes it such a strong buy. As of November, it had a 33.8% share of the global diabetes market, up from 31.9% a year before. It also held a 54.8% share of the market for GLP-1 drugs (therapies like Wegovy that help patients control hunger and appetite, and aid in weight loss), although that declined slightly by 0.1% compared to November 2022.
Still, Novo Nordisk will benefit from the projected growth in these fields. It estimates that the global obesity market experienced volume growth of 116% in 2023. Analysts say this momentum will last for years, and few companies are better equipped to profit from it than Novo Nordisk. The company's existing lineup is solid, it boasts several more exciting pipeline candidates, and it has a long track record of delivering important regulatory wins in this area.
The last factor can hardly be overstated, especially as many other drugmakers want to challenge Novo Nordisk. Pfizer is one of them, but a recent phase 2 data readout for one of its obesity drug candidates was pretty disappointing, so Pfizer didn't advance it to late-stage clinical trials. No company will have a 100% record in developing medicines, but few have been more successful at doing so in diabetes and obesity care than Novo Nordisk. The only other company that compares is Eli Lilly.
Meanwhile, Ozempic should earn significant label expansions, and Novo Nordisk will launch other brand-new products in this area and others. The drugmaker is making a conscientious effort to diversify its lineup. Novo Nordisk crushed the market last year, and it should have many more years ahead of delivering outsized returns.
NASDAQ: REGN
Key Data Points
2. Regeneron Pharmaceuticals
Last year was an important one for Regeneron. The company achieved meaningful clinical and regulatory progress. On the clinical front, it reported positive results in a phase 3 clinical trial for Dupixent, one of its main growth drivers, in treating chronic obstructive pulmonary disease (COPD).
Regeneron shares the rights to Dupixent with Sanofi. The two partners are racing toward a label expansion which, according to some analysts, could add as much as $3.5 billion in global sales of Dupixent. The medicine's peak annual revenue could hit $20 billion by the end of the decade -- few products in the industry have achieved this feat. And for reference, Dupixent reported total worldwide sales of $11.6 billion last year, 33% higher than in 2022.
Elsewhere, Regeneron earned approval for a high-dose formulation of its other main growth driver, Eylea, which treats wet age-related macular degeneration. This new formulation will help extend the medicine's patent protection while attracting patients who want fewer doses per year.
Last year, Regeneron's revenue increased by just 8% year over year to $13.1 billion. However, the biotech's declining coronavirus portfolio had a bit of a negative impact on its results. Aside from that, Regeneron's top line grew by 12% compared to 2022.
The company should have an even stronger performance this year thanks to brand-new potential approvals such as cancer medicines odronextamab and linvoseltamab, both of which are under investigation by regulators. Regeneron's ability to develop new therapies is well-established, and the biotech has an exciting pipeline that will continue to produce new gems. In the meantime, Dupixent and Eylea will keep driving revenue and earnings higher.
In recent years, Regeneron has also delivered excellent stock-market performance. And that doesn't seem likely to stop.
