Novo Nordisk A/S (NVO - Free Report) is not only a leader in the worldwide diabetes market, but also a key player in hemophilia care, growth hormone therapy, hormone replacement therapy and obesity.
Here are five reasons to invest in the stock.
Favorable Rank, Rising Share Price and Estimates: Novo Nordisk has a Zacks Rank #2 (Buy).
Novo Nordisk’s shares have outperformed the large-cap pharma industry in the past three months. The stock has returned 14.1% in the said time frame compared with the industry’s rise of 1.1%. The company’s outperformance was backed by decent quarterly results, positive news flow and regulatory updates.
Strong Foothold in the Diabetes Market: Novo Nordisk has a strong presence in the Diabetes care market with a global value market share of 28%. Also, the company has strong presence in the total insulin market, and modern and new-generation insulin market with a global value market share of 46% and 45%, respectively. The company has one of the broadest diabetes portfolios in the industry. A solid performance from Tresiba, Victoza, Saxenda and NovoRapid boosted sales performance in the first nine months of 2018.
Per the International Diabetes Federation, nearly 592 million people are expected to be diagnosed with diabetes by 2035. We expect the company’s diabetes products to continue performing well and contribute to growth.
Diabetes Products Doing Well: Novo Nordisk’s top line is driven by strong performance of products like Victoza (liraglutide). Victoza is currently the market leader in the GLP-1 segment with a 53% share. Going forward, we expect Victoza to continue being a significant contributor to the company’s top line.
The FDA approved Ozempic (semaglutide) once-daily pre-filled pen to improve glycaemic control in type II diabetes patients in December 2017. It is also approved in Europe, Japan and Canda for the same indication.
Following the FDA's approval of the drug, Novo Nordisk engaged in a constructive dialogue with the FDA, focusing on minimizing the need for additional large cardiovascular outcomes trials (CVOTs) to obtain a cardiovascular (CV) indication for Ozempic as well as the overall number of large cardiovascular outcomes trials necessary for the semaglutide molecule in different formulations. Thus, Novo Nordisk agreed with the FDA that a bridging strategy between Ozempic and oral semaglutide could be utilized to pursue a CV indication.
Acquisitions: In August 2018, Novo Nordisk acquired all the shares of Ziylo Ltd. Ziylo is a University of Bristol spin-out company, based at Unit DX science incubator in the United Kingdom. The acquisition gives Novo Nordisk full rights to Ziylo's glucose binding molecule platform to develop glucose responsive insulins (GRIs). Novo Nordisk is focused on this technology to develop this next generation of insulin, which would lead to a safer and more effective insulin therapy.
In October 2018, Novo Nordisk announced the expansion of its biopharm business, with an agreement to acquire the U.S. and Canadian rights to Macrilen (macimorelin), the first and only FDA-approved oral growth hormone receptor indicated for the diagnosis of Adult Growth Hormone Deficiency (AGHD), which is a rare endocrine disorder, from Strongbridge Biopharma Plc. The acquisition of Macrilen is in line with Novo Nordisk’s strategy for its biopharm business, with growth being driven by both organic and bolt-on initiatives.
Restructuring Initiatives: The company announced plans to restructure the R&D organization to speed up the expansion and diversification of its pipeline, and enable increased investment in transformational biological and technological innovations. Thus, the total workforce was reduced by approximately 1,300 employees before the end of 2018. Majority of these reductions were implemented as of Nov 1, 2018.
Novo Nordisk faces its share of challenges in the form of genericization of key drugs, and patent expiry on some of the products.
Zacks Rank and Other Stocks to Consider
Novo Nordisk currently carries a Zacks Rank #2 (Buy).
Some top-ranked stocks worth considering are AbbVie Inc. (ABBV - Free Report) , Eli Lilly and Co. (LLY - Free Report) and Merck & Co., Inc. (MRK - Free Report) . All of them sport a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AbbVie’s earnings per share estimates have increased from $7.93 to $7.94 for 2018 and from $8.70 to $8.71 for 2019 over the past 60 days. The company delivered a positive earnings surprise in all the trailing four quarters, with average of 3.54%.
Lilly’s earnings per share estimates have increased from $5.55 to $5.59 for 2018 and from $5.81 to $5.92 for 2019 over the past 60 days. The company delivered a positive earnings surprise in all the trailing four quarters, with average of 10.03%.
Merck’s earnings per share estimates have increased from $4.71 to $4.72 for 2019 over the past 60 days. The company delivered a positive earnings surprise in all the trailing four quarters, with average of 3.96%.
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