Novo Nordisk Earnings: Our Raised DKK 600/$86 FVE Still a Contrast to Market Overenthusiasm

Novo Nordisk reported constant currency sales growth of 24% in the first quarter, in line with the 25% constant currency sales growth assumption we had built into our model for 2024. First-quarter growth was heavily driven by GLP-1 sales growth in diabetes (32%, mostly from Ozempic) and obesity (42%, mostly from Wegovy). Management increased constant currency sales growth guidance for 2024 by 1 percentage point (from a range of 18-26% to a range of 19-27%), and we've increased our sales growth assumption to 26%. We think operating income growth could be slightly higher at 29%, also at the high end of management's updated guidance. This increased our fair value estimate from DKK 570/$84 to DKK 600/$86, but share prices are still 45% higher than our increased valuation. While we continue to see Novo Nordisk as a wide-moat firm, with strong intangible assets surrounding its cardiometabolic business, we think the high obesity drug demand and scarcity of supply have driven share prices above their intrinsic value. We assume that Novo Nordisk is capable of growing GLP-1 sales across indications from roughly $24 billion in 2023 to nearly $75 billion by 2031, prior to the patent expiration for semaglutide, the molecule in Ozempic and Wegovy. We think current share prices do not properly account for expected price declines and competition, let alone the risk of patients discontinuing therapy due to tolerability, cost, or long-term safety issues.