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Artificial intelligence (AI) wasn’t the only big investment theme last year. The popularity of new weight monitoring treatments has sparked interest in the pharmaceutical industry.
Especially Danish pharmaceutical manufacturers novo nordisk (NVO 0.44%) received a tailwind from demand for its flagship products Ozempic, Wegovy, Rybelsus and Saxenda. His 53% return on the stock was comfortably at the top. S&P500 It named Novo Nordisk the most valuable company in Europe by market capitalization.
With such an impressive performance in 2023, some investors may be wondering if it’s time to take profits. This is certainly understandable considering that no stock generates market-beating returns forever.
Could Novo Nordisk be headed for a sale in 2024? That may be the case, but before you go into a panic sell, let’s explore why and why this might be.
Ozempitch’s magical run
Ozempic may be best known for its catchy commercial jingle, a take on the 1970s Pilot song “Magic.” Although the marketing of glucagon-like peptide-1 (GLP-1) treatments is somewhat controversial, there is no doubt that they are effective.
Through the first nine months of 2023, sales of Novo Nordisk’s GLP-1 medicines increased 49% year over year. Ozempic currently commands a whopping 46% of the GLP-1 market and is leading this growth. Additionally, the company’s other up-and-coming GLP-1, Libersus, owns an additional approximately 12% market share, making Novo Nordisk the undisputed leader among these diabetes drugs. ing.
In fact, Novo Nordisk also has significant business in the obesity market. Bariatric care sales increased 174% year over year in the first nine months of 2023. A significant portion of this growth acceleration can be attributed to Novo Nordisk’s other hit therapy, Wigovy. Wegovy’s sales grew nearly 500% year over year in the US alone
It is no exaggeration to say that the demand for Novo Nordisk’s weight management drugs is extraordinary. Given the impressive contribution these treatments have made to the company’s overall business, it’s no surprise to learn that Novo Nordisk is attracting more investor attention. As a result, stock prices have become parabolic over a relatively short time frame.
While this is good news for those who own a position in Novo Nordisk, it’s wise to suspect that the stock price could be headed lower.
Image source: Getty Images
Where is Novo Nordisk stock headed?
In theory, trying to predict an impending decline in a stock is an exercise in false accuracy. This paradigm is what makes the investing adage, “Don’t spend time in the market, time the market,” so important. At this point, he believes there are two main reasons for choosing Novo Nordisk. did it You may experience sales activity in the near future.
First, the company has a market-leading position in the diabetes treatment field, but its competitors Eli Lilly (LLY 1.13%) Steam will come out immediately. Lilly is the developer of Mounjaro, an alternative to Ozempic. Since being approved by the Food and Drug Administration (FDA) in spring 2022, Mounjaro has already become Eli Lilly’s second-largest revenue generator. Additionally, Lilly’s recent approval of Munjaro’s breakthrough sibling therapy Zepbound could transform Nordisk’s influence in diabetes and obesity treatment.
The second reason Novo Nordisk’s stock price could fall is if there is negative news regarding the company’s medicines. The number of hospitalizations due to Ozempic and Wigoby overdoses is increasing. Additionally, Ozempic is also associated with a number of side effects such as nausea, dizziness, and kidney problems.
Side effects must be closely monitored, which is a concern for any pharmaceutical company. For this reason, I don’t think we should panic about Novo Nordisk’s prospects just because of some concerns about Ozempic.
Furthermore, the entry of Eli Lilly’s competing drugs can actually be seen as a positive. According to industry research, some believe there could be one billion diabetics worldwide by 2050. No wonder some on Wall Street see the weight loss market being worth $200 billion by as early as 2030.
It’s entirely possible that Novo Nordisk’s stock price will fall this year for these reasons, but I wouldn’t count on it. Long-term tailwinds appear to be fueling demand for weight-watching drugs, and Novo Nordisk’s position is currently second to none. Lilly will continue to go from strength to strength, but I don’t think that’s a reason to leave Novo Nordisk. Rather, long-term investors may simply want to diversify their portfolio and hold positions in both drug companies as a hedge.
As an investor in both Novo Nordisk and Lilly, my plan is to hold them for the long term and adjust my positions in each accordingly. So far, I’m happy with the performance of each stock and have no intention of replacing either position.
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