Novo Nordisk Earnings: Raised Fair Value Estimate Still a Contrast to Market

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Key Morningstar Metrics for Novo Nordisk

What We Thought of Novo Nordisk’s Earnings

Novo Nordisk NVO reported constant currency sales growth of 24% in the first quarter, in line with the 25% assumption we built into our model for 2024. This was heavily driven by GLP-1 sales growth in diabetes (32%, mostly from Ozempic) and obesity (42%, mostly from Wegovy). Management increased 2024 guidance for constant currency sales growth by 1 percentage point (from 18%-26% to 19%-27%), and we’ve increased our sales growth assumption to 26%. We think operating income growth could be slightly higher at 29%, also at the high end of management’s updated guidance.

This increased our fair value estimate from $84 per share to $86, but prices are still 45% higher than our increased valuation. While we continue to see Novo as a wide-moat firm, with strong intangible assets surrounding its cardiometabolic business, we think high obesity drug demand and a scarcity of supply have driven share prices above their intrinsic value.

We assume Novo can grow GLP-1 sales across indications from roughly $24 billion in 2023 to nearly $75 billion by 2031, before the patent expiration for semaglutide (the molecule in Ozempic and Wegovy). We think current share prices do not properly account for expected price declines and competition, let alone the risk of patients discontinuing therapy due to tolerability, cost, or long-term safety issues.

Novo’s priority is increasing the supply of its GLP-1 therapies, and we think progress with increasing the supply of lower starter doses in the United States indicates they could be prepared to continue serving these patients at higher doses later in the year. In addition, Novo expects to complete the acquisition of three Catalent fill-finish sites by the end of 2024, which could help supplement capacity by 2026 as current contracts with other firms roll off.


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