No. of Recommendations: 3
Predicting the stock price (or earnings) of any single drug firm is a mug's game, but my expectation is that they'll do OK or quite well. The rise of competition may whack their growth, but my minimally-informed opinion is that their own business will continue to do fine, probably not below recent levels within rounding error.
My track record predicting how well drug companies are going to be able to maintain drugs going off patent protection is not good, so you may well be right. The things that would trouble me about this investment are that
(i) Novo's earnings are largely based on the one molecule, GLP-1 agonist semaglutide, representing 3/4 of Novo's revenues in 2023, and going off patent soon;
(ii) Semaglutide is no longer the anti-obesity/anti-diabetes champion, Lilly's dual agonist tirzepatide is;
(iii) Lilly's other molecule, retatrutide, is the one everyone is talking about now, better than semaglutide and tirzepatide, and Lilly has more like this in their pipeline (and Novo has one good one too, to be fair);
(iv) All the other big pharma players are hustling to provide competitors in the same field (agonists of GLP-1, GIP, GCG, amylin, etc. or some combination of these).
The way I see this playing out is that Novo will have a hard time just maintaining current sales - they will probably not have to drop their price on semaglutide very much, because the brand names (particularly Ozempic) will continue to draw well, but they will lose a lot of market share to generic semaglutide and, especially, to tirzepatide and retatrutide and whatever other drugs come onto the market in the next few years. True, it is likely to be an expanding market, as these drugs are proving to be very effective, and every month that goes by without a serious side effect becoming obvious makes it less likely that the whole field will come crashing down. But I like Lilly's prospects better, even at a much higher (87) P/E. Priced for perfection if you ask me, but I think they have much better prospects too, so it's maybe worth paying a lot more for the stock.
dtb
