Health
Why demand for Ozempic and Wegoby may rise even further
When you look at the long-term potential, Novo Nordisk's stock price may not seem so expensive.
When you hear the word “Ozempic,” many people think of weight loss. Social media is filled with posts about people losing weight thanks to the drug. However, many may be surprised to learn that the drug is not approved for weight loss. Regulators have approved it for the treatment of diabetes. People are simply taking it off-label to help them lose weight.
But it's a great example of just how diverse and broad a range of benefits can be obtained not only from Ozempic, but from other similar glucagon-like peptide-1 (GLP-1) treatments. Novo Nordisk (NGO 0.34%) The company makes Ozempic, and they also make Wegovy, another GLP-1 drug that's actually approved for weight loss.
Sales of these products have been strong recently and are likely to rise further in the future.
How to treat chronic kidney disease?
There is a great need for treatment for chronic kidney disease in the U.S., which affects one in seven adults but has no cure. Recent clinical trials using semaglutide, the compound shared by Wegovy and Ozempic, have shown promising results.
In a trial of more than 3,500 participants with type 2 diabetes and chronic kidney disease, semaglutide helped reduce the risk of death and slow the decline in kidney function. Overall, the risk of kidney disease-related events was reduced by 24%. There were also fewer adverse events compared to the placebo group.
Novo Nordisk plans to file for a label expansion for Ozempic this year to explore its potential as a treatment for chronic kidney disease. More reasons to take medicine It's not just about treating diabetes.
As additional studies with semaglutide are conducted, it is likely to be approved for more indications. Earlier this year, the Food and Drug Administration approved Wegovy for the treatment of reducing the risk of heart disease in adults who are obese or overweight.
The company is building more production capacity
Perhaps Novo Nordisk's biggest problem is a lack of manufacturing capacity. Demand for Ozempic and Vigovi has skyrocketed, and the company is working to expand its manufacturing capacity. This is a major issue because a supply shortage could lead to patients turning to other competing products, or even worse, to look-alike products on the black market, which could not only tarnish the brand but also be deadly to users.
The company is working to increase production capacity, and one way to do that is through planned acquisitions by parent company Novo Holdings. Catalent It will be acquired for $16.5 billion. The drugmaker's facilities could then be sold to Novo Nordisk. In the long term, Novo Nordisk plans to invest $6 billion to build a new facility in Denmark, but that could take until 2029. In the short term, there are contract manufacturers the company can use. Last year, the company Thermo Fisher Scientific To cooperate with Wegovy's production.
For the first three months of 2024, Novo Nordisk's net sales grew 24% at constant exchange rates to 65.3 billion Danish kroner ($9.8 billion). Wegovi led the way with revenue growth of 107%, followed by Ozempic at 43%. And with very large potential demand, these growth rates are likely to accelerate further in the coming years.
It may still be a cheap stock to buy.
As Ozempic and Vigovi gain more indications, the potential for these drugs to generate even more revenue and profits for Novo Nordisk in the coming years also increases. So while the PER47 may seem high at the moment, Healthcare stocks's current valuation may still look like a bargain in the future.
David Jagielski The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a position in and recommends Thermo Fisher Scientific. The Motley Fool recommends Novo Nordisk. The Motley Fool recommends: Disclosure Policy.
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