No. of Recommendations: 8
The company famous for Ozempic is down today after announcing a failure of a long-shot trial of using the weight loss drug for Alzheimer’s. The price action brings it to almost a 4% dividend yield and a P/E of 12.15.
Novo's semaglutide (Ozempic or Wegovy marketed for diabetes or obesity, respectively) loses patent protection in about 40% of its markets next year, although it still has 5-6 years left in USA and Europe. More significantly, it is up against tough competition from Lilly's tirzepatide (Zepbound or Mounjaro), which is generally considered to be a more effective drug and has a similar price. Semaglutide is still #1 in the USA, but tirzepatide is gaining market share fast - from 2023 to 2024, semaglutide sales were up 34%, tirzepatide was up 175% from a smaller base, but they will probably catch up this year or early next year, if they haven't already. So Novo Nordisk is fighting a losing battle for market share, with generics coming soon which will likely force them to cut prices further.
If you invest in Novo Nordisk, I believe you are basically betting that the expansion of indications for use and insurance coverage will compensate for this loss in pricing power, because of these dual threats (generics and tirzepatide, and, probably in 2006, triple agonists like Lilly's retatrutide.) The other possibility is that Novo succeeds with ITS triple agonist, the as-yet unnamed UBT251, which is not as far along in terms of clinical trials but which might be approved in 2027-2028. At today's price, that seems like a reasonable bet, but not a slam dunk.
DTB
