From Morningstar:

Novo Nordisk is set to release its full-year earnings on January 31. The company saw a 33% increase in sales and a 37% growth in operating profit at constant currencies in the first nine months of 2023, positioning it to meet its 2023 targets. The company’s share price has surged amidst high expectations for the upcoming report due to overwhelming demand for its diabetes and weight loss drugs, especially in the US market.

Novo Nordisk’s strong performance has pushed expectations higher with Morningstar’s assumption of 28% revenue growth and 37% operating profit growth. The challenge ahead is how the company will adapt its manufacturing scale to meet the surging demand for its blockbuster drugs, particularly in light of competition from Eli Lilly & Co.’s Mounjaro and Zepbound. Morningstar expects the obesity/overweight drugs market to exceed $100 billion by 2031, when Novo’s key patent expires.

The market is keen to know how long the average patient remains on Novo Nordisk’s weight loss therapies and whether patients continue therapy beyond the plateau point. Novo Nordisk’s pipeline may see early data for a next-generation oral obesity drug in conjunction with earnings, as well as a delayed launch of the firm’s oral semaglutide. The most important pipeline drug for Novo is cagrisema, which could be a more effective and tolerable treatment in both obesity and diabetes.

Novo Nordisk is expected to peak at $28 billion in obesity sales by 2031, ahead of semaglutide’s patent expiration in 2032. The company maintains a wide economic moat status as a pioneer in diabetes care, commanding a significant portion of the diabetes and insulin markets. Semaglutide’s potential in new indications further bolsters Morningstar’s confidence in Novo’s moat rating.

Morningstar’s key metrics for Novo Nordisk include a fair value estimate of 540 DKK, a current price of 732 DKK, a Morningstar rating of ★★, a wide economic moat rating, and a high uncertainty rating. Novo’s potential in new indications, such as non-alcoholic fatty liver disease, Alzheimer’s disease, and heart failure, have garnered confidence from Morningstar’s analyst, despite high uncertainty.



Read more: Novo Nordisk Earnings: What to Expect on Wednesday