Danish pharmaceutical company Novo Nordisk (NVO 0.10%) has taken the world by storm thanks to its popular diabetes and obesity medications Ozempic, Rybelsus, and Wegovy.
2023 was a milestone year for Novo Nordisk, with Ozempic and Wegovy playing lead roles in the company's growth. Just last week, Novo Nordisk received some positive news from the Food and Drug Administration (FDA), and the shares soared to new highs.
Let's break down what's going on at Novo Nordisk and assess why the company's best days may be ahead.
NYSE: NVO
Key Data Points
Let the good times roll
Most of the chatter surrounding Novo Nordisk stems from its blockbuster drug Ozempic. While losing weight can be a byproduct of taking Ozempic, the treatment itself is not FDA approved for weight loss. Instead, the FDA granted approval for chronic weight management to Wegovy. Interestingly, both Ozempic and Wegovy use the same compound -- semaglutide.
In 2023, sales of Wegovy surged 393% just in the U.S. The best part? Wegovy's sales could just be getting started. Last week the FDA approved a new indication for Wegovy. The weight-loss drug is now also available to patients with cardiovascular disease. The expanded indication opens up Novo Nordisk's base of addressable patients to those at risk of stroke or heart attacks.
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What does this mean for Novo Nordisk?
Wegovy's expanded indication opens up a lot of doors for Novo Nordisk. However, I see the approval for cardiovascular disease as particularly important.
According to Precedence Research, the addressable market for cardiovascular drugs will eclipse $200 billion by 2032. The vast size of this market isn't particularly surprising considering that data from the Centers for Disease Control and Prevention (CDC) suggest heart disease is the leading cause of death in the U.S. Moreover, the World Health Organization (WHO) estimates that ischemic heart disease and stroke were the top-two causes of death worldwide in 2019.
It's important to note that it takes years to analyze data collected by institutions such as the CDC and WHO. So while some of these health trends could change, the bigger theme is that Novo Nordisk is now operating within an enormous market with unprecedented challenges.
Is now a good time to buy Novo Nordisk stock?
Novo Nordisk stock currently has some momentum pushing it higher. The stock is up 30% already this year, and shares are hovering near all-time highs. While some of this is driven by the company's blowout fourth-quarter earnings report, combined with the latest news from the FDA, I think there is more at play here. Both the S&P 500 and Nasdaq Composite are trading at record levels as investor enthusiasm largely remains confident. Novo Nordisk stock is likely experiencing a bit of broader "melt up" as the markets at large push higher.
Nevertheless, for long-term investors, it's important to remember that spending time in the market is more important than timing the market. For now, the company's core businesses will remain in obesity and diabetes -- the latter of which is expected to grow exponentially over the next two decades.
In addition to Ozempic and Wegovy, Novo Nordisk appears to be bolstering its ambitions thanks to its latest development, amycretin, a pill version of its weight-loss medication. As such, Novo Nordisk appears well-positioned to continue dominating in two growing markets.
Now, with the expanded indication of Wegovy, Novo Nordisk has an opportunity to disrupt yet another enormous part of the healthcare spectrum. Despite its premium valuation, I think now is as good a time as ever to scoop up shares in Novo Nordisk and plan to hold long term. A prudent strategy is to use dollar-cost averaging and gradually add to your position over time as the company's long-term execution plays out.
