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Should You Invest in Novo Nordisk (NVO) Ahead of Q1 Earnings?
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Danish pharma goliath, Novo Nordisk (NVO - Free Report) , is slated to report first-quarter 2024 results on May 2, before the opening bell.
The Zacks Consensus Estimate for the company’s first-quarter revenues is pegged at $9.23 billion, while the same for earnings is pinned at 77 cents per share, both indicating significant increases from the year-ago quarter.
Revenue growth in the first quarter of 2024 is expected to have been driven by strong demand for Novo Nordisk’s diabetes and obesity care medicines, especially semaglutide. Notably, semaglutide, a GLP-1 agonist, is approved as an Ozempic pre-filled pen and Rybelsus oral tablet for type II diabetes (T2D) and as a Wegovy injection for weight management.
Novo Nordisk’s revenues under the Rare Disease segment are likely to have declined in the to-be-reported quarter, mainly due to low sales of its hemophilia A products.
However, investors are advised not to make investment decisions based on the results of a single quarter. Novo Nordisk, with a market cap of more than $550 billion, has one of the broadest diabetes portfolios in the industry. In the past five years, NVO stock has skyrocketed 417.6%. During the same period, the total revenues generated by the company surged 90.3% on a reported basis.
The company improved its global diabetes value market share in 2023 from 31.9% to 33.8%, primarily due to market share gains in both North America and International operations.
In 2023, Novo Nordisk’s GLP-1 sales in diabetes jumped 52%, depicting greater patient outreach and market capture by its GLP-1 products. The GLP-1 segment is a very important class of drugs for multiple cardiometabolic diseases and is gaining significant popularity.
The company continues to be the global market leader in the GLP-1 segment with around 54% value market share, primarily on the back of its semaglutide medicines.
We believe the stock has the potential to rise further in 2024 and thereafter, with investor focus, primarily on the sales performance of Ozempic and Wegovy.
Year to date, shares of Novo Nordisk have rallied 22.8% compared with the industry’s 10.7% growth.
Image Source: Zacks Investment Research
Wegovy was approved by the FDA in 2021 and has witnessed stellar performance ever since. In 2023, Wegovy sales were up 407% to DKK 31.3 billion compared with the DKK 6.2 billion recorded in 2022 on a reported basis.
Despite supply challenges, Wegovy is seeing strong prescription trends and is generating impressive revenues and profits for Novo Nordisk. Recently, Wegovy was approved by the FDA for reducing the risk of serious heart problems in obese/overweight adults in March 2024.
The label expansion of Wegovy now reaffirms that it is not just a cosmetic drug used to improve one’s appearance. Hence, the expanded label is expected to improve insurance coverage for Wegovy, which will make it more accessible and affordable to patients. The expanded use is likely to boost the drug’s sales in 2024. Wegovy, however, faces significant competition in the obesity care market from Eli Lilly’s (LLY - Free Report) Zepbound. Notably, Zepbound was approved and launched to treat chronic weight management in adults with obesity or overweight.
To tackle Wegovy’s supply constraints and ensure market dominance, Novo Nordisk has been making serious efforts to ramp up production capacity for Wegovy.
The company is also looking to further expand Ozempic’s label as an adjunctive treatment to prevent the progression of renal impairment in T2D and chronic kidney disease patients in the United States and EU in 2024.
Novo Nordisk has also significantly stepped up its M&A activity in the past two years. Its parent company, Novo Holdings is set to acquire Catalent (CTLT - Free Report) , a leader in the contract development and manufacturing organization space, for $16.5 billion, which is expected to be completed toward the end of 2024.
Novo Holdings will then sell three manufacturing sites to Novo Nordisk in order to improve the manufacturing capacity for its diabetes and obesity products that can improve supply issues in the long run as demand for Ozempic and Wegovy is expected to rise.
NVO’s pipeline is also encouraging and exhibits serious potential in the future. The company’s new oral obesity pill, amycretin, is currently in early-stage development.
In March 2024, the company reported efficacy data from the phase I study of amycretin, which demonstrated faster weight loss than Wegovy over 12 weeks of treatment. The greater efficacy has been equated to the differences in the mechanisms of action of the drugs, where amycretin targets GLP-1, as well as a second hormone called amylin.
Novo Nordisk recently announced research collaborations with two biotechs to develop novel treatment approaches for cardiometabolic diseases.
Out of the two, the one with Omega Therapeutics (OMGA - Free Report) is particularly interesting, which involves leveraging OMGA’s proprietary platform technology to develop a potentially new treatment approach for obesity management. Such efforts play in favor of the long-term growth prospects of Novo Nordisk.
While most existing therapeutic interventions for weight management have focused on appetite regulation, Omega Therapeutics’ platform is looking to use thermogenesis to increase metabolic activity. OMGA plans to achieve that by harnessing the human body’s innate mechanisms to control cellular identity and gene expression.
These aforementioned factors reaffirm Novo Nordisk’s potential to consistently do well mainly supported by strong demand for its blockbuster diabetes and obesity medicines. The company also enjoys decent margins. In 2023, the company reported a net profit margin of 36%, which is the highest recorded in the past five years. During the same period, NVO’s net profit margin has remained above 31%, which shows consistency.
Novo Nordisk plays to its strengths by sticking to the weight loss and diabetes sectors. This helps it retain its focus by not diversifying into multiple avenues of business, which is likely to provide the company an edge over Lilly in the long run and benefit its investors.
Therefore, NVO is a good stock to hold on to, no matter how the first-quarter results pan out and the stock’s reaction to the results. In fact, any major dip in stock price can be used as an opportunity to buy the stock for long-term gains.
Image: Shutterstock
Should You Invest in Novo Nordisk (NVO) Ahead of Q1 Earnings?
Danish pharma goliath, Novo Nordisk (NVO - Free Report) , is slated to report first-quarter 2024 results on May 2, before the opening bell.
The Zacks Consensus Estimate for the company’s first-quarter revenues is pegged at $9.23 billion, while the same for earnings is pinned at 77 cents per share, both indicating significant increases from the year-ago quarter.
Revenue growth in the first quarter of 2024 is expected to have been driven by strong demand for Novo Nordisk’s diabetes and obesity care medicines, especially semaglutide. Notably, semaglutide, a GLP-1 agonist, is approved as an Ozempic pre-filled pen and Rybelsus oral tablet for type II diabetes (T2D) and as a Wegovy injection for weight management.
Novo Nordisk’s revenues under the Rare Disease segment are likely to have declined in the to-be-reported quarter, mainly due to low sales of its hemophilia A products.
However, investors are advised not to make investment decisions based on the results of a single quarter. Novo Nordisk, with a market cap of more than $550 billion, has one of the broadest diabetes portfolios in the industry. In the past five years, NVO stock has skyrocketed 417.6%. During the same period, the total revenues generated by the company surged 90.3% on a reported basis.
The company improved its global diabetes value market share in 2023 from 31.9% to 33.8%, primarily due to market share gains in both North America and International operations.
In 2023, Novo Nordisk’s GLP-1 sales in diabetes jumped 52%, depicting greater patient outreach and market capture by its GLP-1 products. The GLP-1 segment is a very important class of drugs for multiple cardiometabolic diseases and is gaining significant popularity.
The company continues to be the global market leader in the GLP-1 segment with around 54% value market share, primarily on the back of its semaglutide medicines.
We believe the stock has the potential to rise further in 2024 and thereafter, with investor focus, primarily on the sales performance of Ozempic and Wegovy.
Year to date, shares of Novo Nordisk have rallied 22.8% compared with the industry’s 10.7% growth.
Image Source: Zacks Investment Research
Wegovy was approved by the FDA in 2021 and has witnessed stellar performance ever since. In 2023, Wegovy sales were up 407% to DKK 31.3 billion compared with the DKK 6.2 billion recorded in 2022 on a reported basis.
Despite supply challenges, Wegovy is seeing strong prescription trends and is generating impressive revenues and profits for Novo Nordisk. Recently, Wegovy was approved by the FDA for reducing the risk of serious heart problems in obese/overweight adults in March 2024.
The label expansion of Wegovy now reaffirms that it is not just a cosmetic drug used to improve one’s appearance. Hence, the expanded label is expected to improve insurance coverage for Wegovy, which will make it more accessible and affordable to patients. The expanded use is likely to boost the drug’s sales in 2024. Wegovy, however, faces significant competition in the obesity care market from Eli Lilly’s (LLY - Free Report) Zepbound. Notably, Zepbound was approved and launched to treat chronic weight management in adults with obesity or overweight.
To tackle Wegovy’s supply constraints and ensure market dominance, Novo Nordisk has been making serious efforts to ramp up production capacity for Wegovy.
The company is also looking to further expand Ozempic’s label as an adjunctive treatment to prevent the progression of renal impairment in T2D and chronic kidney disease patients in the United States and EU in 2024.
Novo Nordisk has also significantly stepped up its M&A activity in the past two years. Its parent company, Novo Holdings is set to acquire Catalent (CTLT - Free Report) , a leader in the contract development and manufacturing organization space, for $16.5 billion, which is expected to be completed toward the end of 2024.
Novo Holdings will then sell three manufacturing sites to Novo Nordisk in order to improve the manufacturing capacity for its diabetes and obesity products that can improve supply issues in the long run as demand for Ozempic and Wegovy is expected to rise.
NVO’s pipeline is also encouraging and exhibits serious potential in the future. The company’s new oral obesity pill, amycretin, is currently in early-stage development.
In March 2024, the company reported efficacy data from the phase I study of amycretin, which demonstrated faster weight loss than Wegovy over 12 weeks of treatment. The greater efficacy has been equated to the differences in the mechanisms of action of the drugs, where amycretin targets GLP-1, as well as a second hormone called amylin.
Novo Nordisk A/S Price and EPS Surprise
Novo Nordisk A/S price-eps-surprise | Novo Nordisk A/S Quote
Novo Nordisk recently announced research collaborations with two biotechs to develop novel treatment approaches for cardiometabolic diseases.
Out of the two, the one with Omega Therapeutics (OMGA - Free Report) is particularly interesting, which involves leveraging OMGA’s proprietary platform technology to develop a potentially new treatment approach for obesity management. Such efforts play in favor of the long-term growth prospects of Novo Nordisk.
While most existing therapeutic interventions for weight management have focused on appetite regulation, Omega Therapeutics’ platform is looking to use thermogenesis to increase metabolic activity. OMGA plans to achieve that by harnessing the human body’s innate mechanisms to control cellular identity and gene expression.
These aforementioned factors reaffirm Novo Nordisk’s potential to consistently do well mainly supported by strong demand for its blockbuster diabetes and obesity medicines. The company also enjoys decent margins. In 2023, the company reported a net profit margin of 36%, which is the highest recorded in the past five years. During the same period, NVO’s net profit margin has remained above 31%, which shows consistency.
Novo Nordisk plays to its strengths by sticking to the weight loss and diabetes sectors. This helps it retain its focus by not diversifying into multiple avenues of business, which is likely to provide the company an edge over Lilly in the long run and benefit its investors.
Therefore, NVO is a good stock to hold on to, no matter how the first-quarter results pan out and the stock’s reaction to the results. In fact, any major dip in stock price can be used as an opportunity to buy the stock for long-term gains.
Zacks Rank
Novo Nordisk currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.