This article has been written by an expert contributor Munro Partners
Focus on Therapeutics in Metabolic Disease and Endocrinology
Novo Nordisk is a leading player in the healthcare industry, with a specific focus on metabolic disease and endocrinology. The Danish company is a market leader in diabetes, boasting the world’s most comprehensive and advanced portfolio of insulin and GLP-1s.
Dominance in the Diabetes Market
With a target of maintaining a third of the USD$55bn diabetes market, this seemingly mature segment still has a stable runway. Currently, only 15% of the world’s 537 million diabetics receive adequate treatment, and the World Health Organisation (WHO) predicts that this number will continue to rise, reaching 1/8 of the global population by 2045.
Excitement Around Novo Nordisk’s GLP-1s for Weight Loss
Recent excitement has surrounded Novo Nordisk’s GLP-1s, as they have been found to be effective in generating significant weight loss. In response, Novo Nordisk has launched Wegovy as an obesity drug capable of reducing users’ Body Mass Index (BMI) by 15-20% over several months. The company’s pipeline drug, Cargisema, also has the potential to bring about a weight reduction of 15-20%, similar to that of bariatric surgery.
The Next Blockbuster Drug Category
The market potential for GLP-1s for weight loss is enormous, with sales projections ranging from USD$30-$50bn by 2030. Currently, only 2% of the 650 million people living with obesity seek treatment using anti-obesity medications (AOMs), making GLP-1s a highly desirable solution. The market structure is also favourable, with Novo Nordisk and Eli Lilly being the only two companies selling GLP-1s for obesity in the foreseeable future.
Strong Quarterly Performance
Novo Nordisk’s stock has seen a boost due to the recommencement of supply for Wegovy and positive expectations for its results. The company faced supply issues with Wegovy after its launch in June 2021, but positive script data through December 2022 shows that capacity has been restored, and the market can now look forward to 2023 as a true expression of Novo’s potential in the obesity market.
Strong Earnings Growth Predicted
It is predicted that the uptake of diabetic GLP-1s and the success of Wegovy will enable Novo Nordisk to grow its earnings at a compound annual growth rate of 20% to 2025. This is significantly higher than the average pharmaceutical company, which is expected to grow earnings at a rate of 10% p.a. Given this, we believe that Novo Nordisk’s premium 30x multiple is well justified.
Disclaimer: The material contained in this publication has been furnished for general information purposes only as is not investment advice of any nature. The companies mentioned are for illustrative purposes only, is not a recommendation and may or may not be held by a Munro fund. There can be no guarantee that any projection, forecast or opinion in these materials will be realised. As an actively managed fund, Munro continually assesses each portfolio holding and the views expressed in this document may change at any time subsequent to the date of issue. This information has been prepared without taking account of the objectives, financial situation or needs of individuals. No representation or warranty is made concerning the accuracy of any data contained in this document.
Prior to making an investment decision, retail investors should seek advice from their financial adviser. This document is intended as general information only.
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