Novo Nordisk (NVO +2.38%) has become one of the most valuable healthcare stocks in the world due in large part to Ozempic, its diabetes drug that has also been effective in helping people lose weight. One challenge for investors and analysts, however, is predicting just how much revenue it could bring in at its peak. As new studies emerge involving the drug, there are new possible benefits uncovered relating to the use of Ozempic.
Recently, there was yet another study on Ozempic, which could unlock a huge opportunity for the drug. And it could mean billions more in additional revenue for the healthcare company.
NYSE: NVO
Key Data Points
Ozempic could have many positive benefits for the brain
The impact Ozempic and other glucagon-like peptide 1 (GLP-1) drugs have had in curbing appetite for people has been so effective that researchers are wondering what effects it may have on the brain.
While the GLP-1 drugs don't appear to negatively affect the brain, there's growing optimism that there may be a positive effect, particularly with Ozempic. A recent study, which analyzed electronic health records, found that there was a 48% decline in dementia when compared with Januvia, a diabetes drug from Merck. Now, it's important to note this wasn't a clinical trial but an analysis of health records. An additional indication isn't coming for Ozempic as a result of this, but it's worth nothing that Novo Nordisk does have a clinical trial (phase 3) ongoing to test the effectiveness of semaglutide as a treatment for Alzheimer's.
The brain-related benefits may not even stop at dementia or Alzheimer's, either. Scientists have even found promising trends that suggest that GLP-1 drugs like Ozempic can help reduce cravings related to alcohol, potentially being an effective treatment for substance abuse.
It's early, but investors should watch these developments
Clinical trials, especially ones involving dementia and Alzheimer's, can take a long time to track and study. While the early results and signs are promising for Ozempic and possibly other GLP-1 drugs, investors shouldn't draw any conclusions just yet.
It is, however, worth considering this when deciding to invest in Novo Nordisk. That's because while the stock's valuation may seem expensive -- it trades at more than 46 times its trailing earnings -- the potential for more indications for Ozempic and Wegovy to rack up over the years could make the stock still look like a steal of a deal in the long run. Rival Eli Lilly recently obtained approval for an early Alzheimer's drug, Kisunla -- which has the potential to generate $5 billion in revenue at its peak. If Ozempic could obtain approval for Alzheimer's, that could easily add billions to its sales.
Ozempic generated approximately $13.4 billion in revenue for Novo Nordisk last year and it grew at a rate of 60% compared to the previous year. It's still in huge demand and if it accumulates more indications, there could be much more room for it to bring in even more revenue for the company down the road.
Investors who are hesitant about buying shares of Novo Nordisk due to its valuation should consider the potential upside for the stock in the long run. If there are additional indications for Ozempic, that could trigger more upgrades from analysts, and more bullishness in the stock.
Is Novo Nordisk a no-brainer buy?
Novo Nordisk is a leader in diabetes care and weight loss, and it's precisely the type of company that could make for an excellent investment if you want exposure to the anti-obesity market.
While it may be tempting to invest in new, up-and-coming stocks that have much lower valuations and possibly more upside, there's arguably less risk going with an established healthcare company such as Novo Nordisk. Innovating new weight loss and diabetes drugs has been a core part of its business, and that's why I think it can still be one of the best healthcare stocks to buy right now. Even though it comes at a premium, it's well worth it.
