Skip to Content
Morningstar

Novo Nordisk Earnings: Raised Fair Value Estimate Still a Contrast to Market Overenthusiasm

High obesity drug demand and a scarcity of supply have driven its stock above its intrinsic value.

The logo of the Danish pharmaceutical company Novo Nordisk on the facade of the new German headquarters.
Securities In This Article
Novo Nordisk A/S ADR
(NVO)

Key Morningstar Metrics for Novo Nordisk

What We Thought of Novo Nordisk’s Earnings

Novo Nordisk NVO reported constant currency sales growth of 24% in the first quarter, in line with the 25% assumption we built into our model for 2024. This was heavily driven by GLP-1 sales growth in diabetes (32%, mostly from Ozempic) and obesity (42%, mostly from Wegovy). Management increased 2024 guidance for constant currency sales growth by 1 percentage point (from 18%-26% to 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 $84 per share to $86, but prices are still 45% higher than our increased valuation. While we continue to see Novo as a wide-moat firm, with strong intangible assets surrounding its cardiometabolic business, we think high obesity drug demand and a scarcity of supply have driven share prices above their intrinsic value.

We assume Novo can grow GLP-1 sales across indications from roughly $24 billion in 2023 to nearly $75 billion by 2031, before 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.

Novo’s priority is increasing the supply of its GLP-1 therapies, and we think progress with increasing the supply of lower starter doses in the United States indicates they could be prepared to continue serving these patients at higher doses later in the year. In addition, Novo expects to complete the acquisition of three Catalent fill-finish sites by the end of 2024, which could help supplement capacity by 2026 as current contracts with other firms roll off.

Novo Nordisk A/S ADR Stock vs. Morningstar Fair Value Estimate

Source: Morningstar Direct.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

More in Stocks

About the Author

Karen Andersen

Strategist
More from Author

Karen Andersen, CFA, is a strategist for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. She is responsible for biotechnology research.

Before joining Morningstar in 2005, Andersen received a master’s degree in business administration from Rice University, where she served as senior healthcare analyst for the M.A. Wright Fund and earned the distinction of Jones Scholar. She has scientific research experience in both academia (at Rice University and the University of Queensland in Australia) and industry (at Lexicon Genetics and a subsidiary of Genzyme).

Andersen also holds a bachelor’s degree in biochemistry from Rice University, where she graduated magna cum laude. She is a member of Phi Beta Kappa and holds the Chartered Financial Analyst® designation. She ranked first in the biotechnology industry, and had the highest score overall, in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

Sponsor Center