Novo Nordisk might be one of the best pharmaceutical companies that nobody knows. Unlike peers Schering-Plough
Novo Nordisk has two primary businesses -- diabetes care and biopharmaceuticals. The diabetes business is far and away the larger of the two, and the company holds roughly half of the worldwide market for insulin. Making it even more attractive, the company is aggressively taking U.S. market share away from EliLilly
Although Novo Nordisk has been hurt recently by the strength of Denmark's currency, the kroner, the company still managed to post a 20.6% return on capital for 2004 and generated more than $700 million in free cash flow.
Novo should have little trouble continuing to grow. The company, which currently has only a 20% share of the U.S. insulin analog market, is seeing growth in both the size of the market and its market share. A new insulin product should hit the U.S. market in 2005, and the company has a partnership with Medtronic
What's more, the company has a promising drug, called liraglutide, in trials for Type 2 diabetes, and it's expecting to begin at least two new U.S. studies for expanded use of its NovoSeven hemophilia/hemostasis drug.
While the stock trades at around 19 times trailing earnings and the enterprise-value-to-free-cash-flow ratio is about 22, those multiples are in line with those in the pharmaceutical industry, and Novo Nordisk has no ongoing legal disputes or patent worries. Additionally, the company has a nice economic moat -- even though the insulin market is lucrative and dependable, unusually high entry barriers help keep competitors away. The company at these levels may not be quite cheap enough to be a true value, but investors looking for a solid growth stock should see what's new with Novo Nordisk.
Fool contributor Stephen Simpson, CFA, has no financial interest in any companies mentioned.