Novo Nordisk (NYSE: NVO) It has emerged as one of the biggest names in the pharmaceutical world thanks to its strong line of glucagon-like peptide-1 (GLP-1) drugs. The Danish drugmaker develops Ozempic, Rybelsus, Saxenda, and Wegovy.
While Ozempic is approved by the Food and Drug Administration (FDA) for the treatment of diabetics, its sibling drug Wegovy is prescribed for the care of obesity. Just this week, Novo Nordisk received some very good news regarding Wegovy. Let's take a look at the company's latest milestone and evaluate what it could mean for future growth.
WeGovi's Latest Milestone
Though Ozempic is Novo Nordisk's current crown jewel, Wegovy is quickly becoming a force on its own. Earlier this year, investors learned that Ozempic's sales Wegovi grew 393% year over year in 2023And that was just in America
In addition, in March Wegovy granted expanded indication by FDA For the treatment of obese patients who are also at risk of heart disease. The good news keeps coming for Wegovy. The drug has now been approved in China, a market that Novo Nordisk has long had its eye on.
Image source: Getty Images.
How big could China be for WeGovi?
Novo Nordisk already has a strong presence in China. But as of today, the company's main source of sales in the region (which includes Hong Kong and Taiwan) is insulin and diabetes care.
At the same time, chronic weight management is a huge problem in China. According to Novo Nordisk's internal estimates, 184 million people in China need care for obesity. Furthermore, the National Institutes of Health (NIH) estimates that by 2030, 540 million people in China will be officially classified as overweight – about half of this group will be older adults aged 60 to 89.
Novo Nordisk earned about 1.3 billion Danish kroner ($189 million) from GLP-1 treatments in China during the first quarter, according to company financial data. Most of these sales were concentrated in Ozempic, which generated about $133 million in revenue in China alone.
Clearly, GLP-1 drugs are a huge opportunity in the China region. Given the size of the addressed market and the company's recent penetration of the Chinese obesity care market and the current popularity of Wegovy in the West, I'm cautiously optimistic that Novo Nordisk will start to see a new wave of growth.
Is Novo Nordisk stock a buy now?
Novo Nordisk shares are up 39% so far in 2024 — well above last year's return. S&P 500 And Nasdaq Composite,
NVO per ratio By data YCharts,
The chart above sheds some light on Novo Nordisk's valuation. Note that the company's Price-to-Earnings (P/E) ratios have risen considerably over the past decade. With a P/E around 50, Novo Nordisk's stock is undoubtedly expensive.
Nevertheless, I still think it's an attractive buy. Right now the company has an estimated 70% share of the international GLP-1 market and 75% share of the obesity care market.
Given that Novo Nordisk has virtually no presence in the obesity care space in China, I think the recent approval of Wegovy in this space will increase the company's international dominance and act as a growth driver for Ozempic.
Furthermore, as the trends mentioned above show, treating obesity and assisting with chronic weight management are urgent issues in China. I don't think it will take long for Wegovi to see some momentum in this area.
Although Novo Nordisk's valuation is a bit high, I think it could grow even further due to Wegovi's potential in new geographies and additional applications.
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Adam Spataco has positions in Novo Nordisk. The Motley Fool recommends Novo Nordisk. The Motley Fool has a Disclosure Policy,
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
