Sithembile Bopela
Novo Nordisk is a global leader in healthcare that develops, produces, and markets pharmaceutical products. The company focuses on diabetes care and obesity treatment and offers insulin delivery systems and other diabetes products. Novo Nordisk also works in rare disease areas such as haemostatis management, growth disorders, and hormone replacement therapy.
Novo Nordisk was formed by the 1989 merger of Danish insulin producers Novo and Nordisk. The company traces its roots to the founding of two Danish insulin companies, Nordisk Insulin Laboratorium and Novo Terapeutisk Laboratorium, in 1923 and 1925, respectively.
Operations and geographic reach
Novo Nordisk is engaged in the discovery, development, and manufacturing of pharmaceutical products, operating through two business segments: Diabetes and Obesity care (~95% of revenue), which covers diabetes, obesity, cardiovascular, and emerging therapy areas; and Rare disease (~5%), which covers rare blood disorders, rare endocrine disorders, and hormone replacement therapy.
Novo's global strategy of expanding into key developed and emerging markets has been a key growth driver for the group. The United States (US) is its biggest market, with North America making up ~60% of group revenue, followed by the EMEA region (~20%) and China (~5%). The rest of its revenue comes from other countries.
Portfolio
The group has a very focused portfolio, which underpins its leadership in the diabetes care market. Some of the group's best-known drugs include Ozempic (diabetes), Saxenda and Wegovy (obesity management) as well as Rybelsus (oral diabetes treatment), and other essential insulin therapies including Tresiba and NovoRapid.
Much of Novo's growth in the last decade has been fuelled by its expertise in insulin and glucagonlike peptide -1 (GLP-1) receptor agonists (semaglutide). The development of semaglutide, marketed under the brand names Ozempic and Wegovy, was originally introduced as a treatment for type 2 diabetes to help patients manage their blood sugar levels. However, a successful 2021 clinical trial revealed its potential for weight loss by suppressing appetite hormones. From there the group launched anti-obesity treatments, which have bolstered the group's performance amid insatiable demand, reflecting the group's dominant contribution to the treatment of diabetes and obesity worldwide.
Operational risk
High demand for diabetes and anti-obesity therapies, while presenting an important opportunity for the sector, have also increased pressure on Novo's supply chain. Manufacturing capacity has been a challenge across the sector due to supply and demand fundamentals being out of balance. The result being periodic constraints across its portfolio as the company strives to keep pace with an unprecedented surge in global demand. This has been a function of the global rise and the unmet need for diabetes and obesity treatment, coupled with general popularity of the group's drugs amid a swath of celebrity endorsements through the years as well as its expansion of semaglutide's indication - opening it up to more patients and heavier production pressures.
As such, leadership has warned of persistent drug shortages until this year, as unprecedented demand strains its supply chain.
Competition
The group's main competitors include Eli Lilly (direct competition with tirzepatide - Mounjaro and Zepbound), AstraZeneca (new in the obesity race) and Sanofi (a well-established presence in diabetes care).
Last year Swiss company, Roche, also joined the weight-loss drug race with its $3.1 billion acquisition of California-based Carmot Therapeutics which is in the late stages of developing a weight-loss pill (as opposed to current treatments being mainly in injectable form). Early-stage data for the experimental drug, CT-996, shows positive weight-loss results (~7% in four weeks), but with increasingly adverse side effects— including above-average elevated heart rate, with each higher dose. The company, which is also in the early stages of developing an injectable formulation (CT-388), remains confident in its ability to capture a large chunk of the weight-loss market and restore confidence in its pipeline by fast-tracking its anti-obesity treatments.
Amgen, another contender, released its much-anticipated data for its weight loss candidate Maritide in late November 2024. However, the group's Phase II readout revealed 20% weight loss at 52 weeks (at the lower end of market expectations) and discontinuation rates in line with sector, which was perceived as underwhelming.
Other competitive pressures stem from the compounding pharmacies such as American e-pharmacy Hims & Hers (HIMS US) which has offered its own version of Wegovy since May 2024. Compound pharmacies provide replicas of some brand-name drugs when there are shortages. The medications used in compounding formulas, when broken down, are virtually identical from a chemical perspective. The only real difference is that compounding pharmacies combine the ingredients in-house to meet the individual patient's needs. This, however, is still a relatively low-level competitive threat as only 1% to 3% of prescriptions in the US are for compounded drugs.
Strategic growth
The company's focus is to strengthen its leadership in diabetes and obesity, secure a leading position within rare diseases, and establish its place in cardiovascular disease (CVD). Novo also aims to build a presence in emerging therapy areas, such as metabolic dysfunction-associated steatohepatitis (MASH), chronic kidney disease, and Alzheimer's disease.
Novo has been highly acquisitive since its inception, with several key corporate actions that have shaped and formed the group into what it is today. Most recently, the proposed acquisition of US-based drug manufacturer Catalent for $16.5 billion received regulatory approval in December 2024 , and marks an important step towards enhancing Novo's production capabilities and accelerating therapy and drug innovations.
In early 2024, Novo Nordisk acquired heart disease biopharma Cardior for about €1 billion to help Novo establish a presence in cardiovascular disease. In late 2023, the group also bought clinical stage company Inversago Pharma for $800 million to further strengthen its clinical development pipeline in obesity and related disorders.
Addressable market
According to the World Health Organisation (WHO), the number of people living with diabetes has increased four-fold over the past three decades— from 200 million in 1990 to 830 million in 2022. Prevalence has been rising more rapidly in low- and middle-income countries than in high-income countries, while treatment access remains persistently low, with ~60% of all adults with diabetes remaining untreated.
While type 1 diabetes also remains a concern, more than 95% of people with diabetes have type 2. Type 2 diabetes was formerly called non-insulin dependent, or adult onset until recently, as it is now also occurring increasingly frequently in children. The projected increase in total diabetes prevalence is expected to be driven by type 2 diabetes. This market was estimated to be worth $32 billion in sales in 2022 and is expected to grow to around $70 billion by 2032.
Beyond insulin resistance
The group's focus on expanding applications for GLP1s beyond diabetes present a significant diversification and growth opportunity, specifically cardiovascular benefits such as reducing the risk of cardiovascular death, heart attack and stroke in overweight or obese patients (Wegovy) and the risk of developing Alzheimer's disease (Ozempic).
Moreso, a recent study published in the scientific journal of addiction indicates that GLP-1 drugs could cut opioid and alcohol addiction rates by up to half, given their craving-reducing properties. This is an important consideration, given the mounting global drug dependency epidemic, although addiction may not yet be a major priority for the developers. However, Novo's rival, Eli Lily, has plans to start testing the applicability of its obesity drug to treating addiction as early as 2025.
Financial performance
Over the past five years, Novo has shown a strong performance in several key areas - particularly consistent revenue growth - driven by the success of its diabetes care and the introduction of its weight loss drugs to the market. The company has maintained a strong commitment to R&D, to discover new therapeutic products and improve existing ones, investing billions annually to fuel its pipeline of future drugs. Novo continues to post sector-leading margins underpinned by its strong top-line growth, dominant market position and subsequent pricing power.
The group's recent 3Q24 results showed a beat on the bottom-line, with third quarter adjusted earnings per share rising 22.4% versus consensus of a 20% increase. While this evidently was not a particularly strong beat, it was positive news, especially since the prior quarter did disappoint. While the share popped ~8% on the results, the share price has remained under some pressure over the past six to 12 months, mainly a function of the competitive climate. An especially supportive aspect of the results was that sales of Wegovy grew 79% y/y during the third quarter - much higher than what the market had anticipated - with market share gains reported across markets, particularly in the US, which is Novo's most important market.
Overall, the group has not only maintained their market lead across both diabetes and weight loss but has outpaced its strategic aspiration of strengthening the Diabetes care leadership— specifically, reaching a global value market share of more than one-third in 2025. Current share increased to 33.9% from 33.3% over 12 months, granted a marginal uptick, but highlights the group's ability to defend market share in a mounting competitive environment. Novo Nordisk continues to be the global market leader in the GLP-1 segment with a 55.6% value market share, globally, measured by total monthly prescriptions.
Investment case summary
Risks
Consensus considerations
Valuation
The stock is trading on a PE multiple of 21 times, which seems undemanding relative to its own history and represents a smaller than average premium to peers.
