First approved for treating diabetes in late 2017, Novo Nordisk's (NVO 2.05%) GLP-1 drug Ozempic didn't really take off until about 2021, with the addition of a version tailored to weight loss, called Wegovy. Novo Nordisk's stock price followed suit, gaining about 60% that year.
By 2022, the Ozempic engine was gathering steam, boosting the company's total sales growth rate to 18% (but adding only 9% to net income as Novo Nordisk invested in production capacity). The company really hit its stride in 2023 as sales soared 35%, and profits exploded 55% -- only to see the stock stumble when Eli Lilly (LLY 2.26%) arrived on the scene with Zepbound and Mounjaro in 2024.
For Novo Nordisk's stock, it's been mostly downhill since. Its share price topped out above $142 in 2024, around the same time Lilly began stealing its market share, then started sliding. At the close of trading last week, the stock was selling for around $47 per share, 67% below its peak.
Viewed from another perspective, though, it doesn't cost much more than it did back when the Ozempic craze began five years ago. Investors today have been given a second chance to buy, hold, and perhaps never sell shares in the company that invented a new way to lose weight.
I, for one, am seriously considering taking advantage of the opportunity.
Image source: Getty Images.
Ozempic: Now in pill form
One reason I'm particularly enthused about Novo Nordisk stock is that, in at least one way, history seems to be repeating itself.
Five years ago, the company started the GLP-1 craze, and monopolized the market until Eli Lilly showed up. Now Novo Nordisk once again has the market mostly to itself, as it segues from injectable Wegovy and Ozempic to new pill-based forms. The Food and Drug Administration (FDA) approved oral Wegovy in December, and oral Ozempic last month.
How long will it take Eli Lilly to catch up with its own GLP-1 pills? To be honest, probably not long: Lilly is a savvy company. It's seen already what Mounjaro and Zepbound can do for its bottom line, even with needles involved. Today it's seeing the success Novo Nordisk is enjoying now that Wegovy can be taken as a tablet. Lilly won't wait long to bring its own pills to market; indeed, an FDA decision approving a Mounjaro pill is expected in the second quarter of this year.
And that's fine. Forewarned is forearmed, and Novo Nordisk has seen this movie before, too. It knows Lilly is coming for it. And after losing round one in injectables, Novo Nordisk is certain to fight harder to retain market share in oral GLP-1 drugs.
NYSE: NVO
Key Data Points
What this means for investors
Here's the best part of all this for an investor: After coming nearly full circle on valuation, Novo Nordisk stock is trading at a below-market ratio of price to free cash flow (FCF) of less than 23. With FCF projected to grow at 17.5% annually over the next five years, and Novo Nordisk currently paying a strong 3.8% dividend yield on top of that, now's the time to buy shares -- and never sell.
