Novo Nordisk: Raising Our FVE to $130/DKK 900 on Higher Obesity Expectations, Shares Still Expensive

We’re raising our Novo Nordisk fair value estimates to $130/DKK 900 from $127/DKK 860 after raising our assumed sales for the firm’s obesity portfolio and pipeline, as part of a broader, more bullish view on global obesity drug sales potential. We expect Novo’s obesity sales could peak at $23 billion by 2031, ahead of semaglutide’s 2032 patent expiration. In obesity, semaglutide forms the basis of injectable obesity medicine Wegovy as well as a potential oral, high-dose semaglutide that recently generated positive data in a phase 3 trial. In the Oasis 1 trial, oral semaglutide appeared to lead to similar weight loss (12.7%, placebo adjusted and as randomized) as Wegovy (13.9% in the Step 8 trial) over 68 weeks. While Novo is likely to prioritize production of lower-dose injectable products in the near term due to supply issues, we think this gives the firm a strong position in the midterm to bring in additional sales with a regimen that could be more appealing for some obesity patients. While the 2032 patent adds risk to Novo’s long-term growth, we’re also bullish on potential for combination product cagrisema, which is currently in phase 3 trials (data expected by the end of 2024) and has the potential to improve upon the efficacy of stand-alone semaglutide, supporting Novo’s wide moat. We expect the competitive landscape to expand over the next several years but for Novo and Eli Lilly (its diabetes drug Mounjaro is likely to receive approval in obesity by the end of 2023) to remain the key competitors.