Novo Nordisk Earnings: Shares Remain Overvalued Despite Our $100 Billion GLP-1 Market Forecast

Novo Nordisk’s NOVO B 33% sales growth and 37% operating profit growth at constant currencies for the first nine months of 2023 were consistent with the firm’s pre-announced results in October. Management’s updated 2023 guidance from October—32%-38% top-line growth and 40%-46% operating profit growth—is slightly above our prior expectations, as U.S. GLP-1 sales are exceeding management’s expectations on both volume (diabetes drug Ozempic) and price (both Ozempic and obesity drug Wegovy). We’ve slightly raised our 2023 estimates (now at 33% top-line and 44% operating profit growth at constant currencies for the full year) and we continue to model strong double-digit growth through at least 2026, adding support to our wide moat rating for Novo Nordisk. However, we’re maintaining our DKK 475/$70 fair value estimate, as we stand by our existing long-term forecast for GLP-1 based drugs (including diabetes, obesity, heart failure, NASH, and Alzheimer’s) of more than $100 billion at the end of the decade. We think shares are overvalued at recent prices, but we continue to watch trends on patient compliance with GLP-1 therapies and pipeline development at Novo and competitors for potential catalysts to raise or lower our long-term forecast.

Overall, GLP-1 sales across diabetes and obesity care are driving growth as insulin and rare disease units decline, and 73% of third-quarter sales (and likely an even higher share of profits) are derived from GLP-1 therapies, largely semaglutide. In North America, Novo estimates that GLP-1 therapies are now 14.6% of diabetes prescriptions, up from 9.9% a year ago. In addition, roughly 50 million obese Americans have access to Wegovy now, through either private (employer-sponsored) insurance or Medicaid, an improvement from the 45 million estimate in the second quarter.