Novo Nordisk: Anticipating a Surge in GLP-1 Sales

Novo Nordisk A/S Today

NVO

Novo Nordisk A/S

$105.96 -2.05 (-1.90%)

(As of 05:45 PM ET)

52-Week Range $99.42

▼

$148.15

Dividend Yield 0.68%

P/E Ratio 34.29

Price Target $150.40

Recent sales of a lesser-known stock, Madrigal Pharmaceuticals (NASDAQ: MDGL), might signal good news for Novo Nordisk A/S (NYSE: NVO). This pharmaceutical giant has experienced substantial growth in sales of its GLP-1 agonist drug, semaglutide, marketed as Ozempic and Wegovy. In the first nine months of 2024, sales for these drugs soared by 32% and 76%, respectively, compared to the same period in 2023.

However, Novo Nordisk’s stock has dropped significantly from its mid-2024 peak. By December 17, it had only delivered a 5% total return for the year. This decline is largely due to new clinical results showing stronger weight loss results for Zepbound, a GLP-1 agonist drug from Novo’s main competitor, Eli Lilly (NYSE: LLY). I will explore Novo’s recent stock performance and examine other clinical and financial developments that might boost Novo’s share value.

Semaglutide Facing Challenges

In mid-2024, a study compared Novo’s semaglutide with Eli Lilly’s Zepbound (tirzepatide) to see which drug led to more weight loss. Results showed that tirzepatide users lost more weight at every check-in point. After a year, those on Lilly’s drug lost nearly 7% more weight than those on semaglutide. This news has weighed heavily on Novo’s stock, which fell 24% since the study’s release in July, up to December 17.

The market is clearly worried about Novo’s ability to sustain sales growth for its GLP-1 drugs, especially with an apparently superior alternative available. There’s also speculation about potential Medicare price negotiations for semaglutide, which could reduce its price and, consequently, Novo’s revenue per Medicare patient. On the other hand, it seems Zepbound might not face the same price scrutiny.

MASH: A New Opportunity for Semaglutide

Although Novo and Lilly’s drugs are currently approved for obesity and diabetes, both companies are exploring their use for other conditions, including metabolic dysfunction-associated steatohepatitis (MASH). This disease leads to liver fat buildup, causing scarring and cirrhosis if untreated, and differs from alcoholic steatohepatitis (ASH). Until recently, no FDA-approved treatments for MASH existed.

Madrigal Pharmaceuticals got FDA approval for its MASH treatment in March, leading to a surge in sales. The drug, Rezdiffra, saw its revenue jump over 400% from Q2 to Q3 this year, surpassing Wall Street’s expectations by 83%. Analysts now forecast its sales to exceed $500 million in 2025 and $3 billion by 2030. They estimate the entire MASH treatment market could reach $10 billion annually.

Phase 3 trial results suggest Novo might capture a significant share of this market. The trials aim to improve liver fibrosis and resolve steatohepatitis without worsening conditions in MASH patients, compared to a placebo. Semaglutide users achieved both goals 17% more often than the placebo group, compared to just 12% for Rezdiffra users, indicating a potential efficacy advantage for semaglutide.

MASH Approval Could Alter Semaglutide’s Outlook

With these promising results, Novo plans to seek regulatory approval for semaglutide to treat MASH in early 2025, targeting both Europe and the United States. If approved, Novo’s drug could become the second to enter the MASH market.

Considering Rezdiffra’s rapid sales growth, Novo might see similar success if its drug is approved. Success in this lucrative market could significantly boost Novo’s value and improve perceptions of semaglutide amid recent challenges. However, Novo must continue innovating in the weight loss sector to maintain its lead over Eli Lilly and other competitors. Currently, Novo holds a 65% share of the global GLP-1 market.

Before considering Novo Nordisk A/S, it’s worth noting MarketBeat tracks top-rated analysts and their stock recommendations. Novo Nordisk A/S didn’t make its list of top five stocks to buy now, according to these analysts.

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