Novo Nordisk Earnings: Strong Outlook Supported by Expanding Pipeline, Maintaining Our Fair Value

Novo Nordisk reported 36% full-year constant currency sales growth for the full year, ahead of our expectations and those of consensus, although operating income growth of 44% was in line with our estimates, and we're maintaining our DKK 540/$80 fair value estimate. The sales outperformance was driven by 52% growth in the firm's GLP-1 diabetes sales (largely Ozempic), despite GLP-1 obesity sales growth of 154% (largely Wegovy) which was slightly below investors' already sky-high expectations. Novo's expectations for 2024 (18%-26% constant currency sales growth) are slightly ahead of our prior forecast, and although we have now raised our near-term estimates, another significant jump in capital expenditures expected this year countered any potential valuation impact. We now assume that Novo Nordisk will be able to grow the top line by more than 20% in each of the next three years (2024-26) as it fights to meet high demand with expanded supply and contends with new competition from Lilly. We still forecast a $170 billion global GLP-1 market by 2031, with $120 billion of this from obesity/overweight and most of the market relatively evenly split between Novo and Lilly. We expect to see key data on next-generation obesity drug candidates this year that could help diversify away from the semaglutide molecule and support Novo's wide economic moat.