No. of Recommendations: 10
Novo Nordisk at $86.23 at the moment pre-market. Down 42% from its 52 week high last June, despite Friday's modest pop.
Not that huge a fall, but hey, didn't you spend a bunch of the last year and a half wishing you had got in early on the weight loss drug bandwagon? The price is back where it was then, and the recent news is actually positive so maybe the cutlery has already bounced off the (relative to market) floor.
If one is interested in the outlook, it's not hard to find information. A random article today
https://finance.yahoo.com/news/nvo-stock-rises-obe...Forward P/E now about 23, which isn't nosebleed by modern standards. Softened with the 1.68% dividend yield.
Forward earnings estimates (for any given period) have been rising. This has been almost the best predictor of relative stock movements lately, other than having a trillion dollar market cap : )
I was musing about perhaps buying a couple of out-of-the-money long-dated calls as lottery tickets.
Not sure what I'd pick, but as a random example, Jan 2027 $100 calls which can probably be bought under $16 would at least triple in value if they returned to their 52 week high some time in the next 2 years. Maybe some beer money.
Jim
No. of Recommendations: 6
Forward P/E now about 23, which isn't nosebleed by modern standards. Softened with the 1.68% dividend yield.
I didn’t expect a Monaco resident to appreciate the dividend! Plus, it’s double counting. Those dividends are just part of the P.
More importantly, Novo is the owner of the Ozempic/Wegovy/Rybelsus franchise, whose USA patent protection expires in 2026 (different in each country) whereas Lilly’s dual agonist tirzepatide is probably the better drug and has many years of patent protection left, not to mention Lilly’s triple agonist retatrutide which is even better but which is not yet licensed.
So although Novo’s P/E looks reasonable, the E is going to be challenged in the next few years and the ‘bargain price’ may just be the market applying the appropriate haircut.
No. of Recommendations: 2
I didn’t expect a Monaco resident to appreciate the dividend! Plus, it’s double counting. Those dividends are just part of the P.
It's true, I don't usually consider a yield when picking a stock. It's a downside for me, really. Dividends are highly taxed for me, whereas retained earnings generally show up as lightly taxed capital gains from a rising share price.
But
(a) I know some other investors appreciate a coupon, and
(b) it really is a small defence against a stock price that languishes for a long time. This is a very old fashioned view, but then again we haven't had a secular bear market for quite a while and people forget what they're like.
So although Novo’s P/E looks reasonable, the E is going to be challenged in the next few years and the ‘bargain price’ may just be the market applying the appropriate haircut.
Opinions differ. I think they'll earn quite a bit of money...probably. 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.
I think a program of repeated cash-backed near-the-money put writing against NVO (similar to, but different from, covered calls) could do quite well in the next few years, which is my tentative plan. I very much doubt they'll disappear.
Jim
No. of Recommendations: 4
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
