Novo Nordisk: Capital Markets Day Highlights Obesity Pipeline and Margin Expansion

At its capital markets day on March 7, Novo Nordisk outlined its pipeline strategy across multiple therapeutic areas, gave directional guidance on improving operating margins beyond 2024, and revealed early phase 1 data on a novel obesity program. We’re slightly raising our fair value estimate to DKK 570/$84 from DKK 540/$80 after adjusting our margin assumptions and slightly increasing our sales estimates. We’re encouraged by the progress the firm is making beyond the semaglutide molecule used in key diabetes and obesity drugs, which is vulnerable to Medicare negotiation in 2027 and generic pressure starting in 2031. We continue to think that Novo Nordisk’s innovative track record and investment in its pipeline continue to warrant a wide moat, but we also struggle to match recent share prices in our discounted cash flow-based valuation model. Our valuation will continue to depend on advancement of competitors in obesity, and whether this is balanced by advancement of Novo’s internal pipeline beyond semaglutide, including cagrisema and amycretin.