We recently published a list of 10 Best Pharma Stocks to Buy for Long Term Growth. In this article, we are going to take a look at where Novo Nordisk A/S (NYSE:NVO) stands against other best pharma stocks to buy for long term growth.
U.S. Pharma Turns to China for Drug Deals
With big American pharmaceutical corporations always searching for medications in China, the US pharmaceutical industry is going through a unique trend never seen before. About 30% of Big Pharma acquisitions involving at least $50 million upfront in 2024 involved Chinese corporations, according to DealForma statistics, as reported by CNBC. This was an increase from 20% the previous year and nearly 0% just five years before.
Experts cite several causes for this tendency. Some people think that Chinese pharmaceutical firms are drawing notice due to their sophisticated development skills, which enable them to produce potent compounds in large quantities. In addition to being able to start testing on human subjects more quickly, these Chinese companies can charge a lower price for these medications than the US. Buyers have developed a business strategy that enables them to import medicines through licensing agreements, according to CNBC. The dearth of venture capital in China is additional pressure on biotech companies to enter these agreements.
Experts think this situation is here to stay, even though there are several possible causes for this tendency. Although the US pharmaceutical industry is expected to be impacted, it is uncertain how these effects would manifest. If big pharmaceutical companies find a good Chinese drug at a low price, some experts think it may destroy American startups; others think the competition would benefit the sector. Tim Opler, a managing director in Stifel’s global healthcare group, stated the following regarding the circumstances:
“It’s kind of a watershed moment where the pharma industry is like, ‘We don’t really need to buy U.S. biotechs necessarily. We will if it makes sense, but we can buy perfectly good biotech assets through licensing deals with Chinese companies.”
Emily Field, Head of European Pharma Research at Barclays, spoke to CNBC on February 20 about the performance of obesity medications, the effects of US tariffs, and the dynamics of the pharmaceutical industry. According to her, at least in the first half of this year, the industry might not perform poorly. The effectiveness of obesity medications is still up for debate, though, as leading companies in the field have shown inconsistent results in the past.
Speaking about the tariffs, she stated that since some businesses assemble their products in the US after producing them overseas, their implementation raises several unanswered questions for the pharmaceutical industry. These businesses, therefore, have relatively low manufacturing costs, which is an important factor to take into account when assessing the effects of tariffs. She thought that these businesses could easily absorb the higher expense of the tariffs. The topic hasn’t come up much on earnings calls this quarter, and the market is nearing the end of the reporting season.
Our Methodology
For this article, we screened for companies that operate in the pharmaceutical industry. From that list, we identified stocks that have achieved positive revenue growth over the past five years. Then, we picked companies with a 5-year revenue growth of 10% and ranked the top 10 based on hedge fund sentiment as of Q4 2024, as per Insider Monkey’s database.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
An elderly couple receiving insulin from a pharmacist, representing healthcare company’s successful pharmaceutical products.
Novo Nordisk A/S (NYSE:NVO)
Number of Hedge Fund Holders: 64
Novo Nordisk A/S (NYSE:NVO) is a Denmark-based global healthcare company specializing in the development, manufacturing, and marketing of pharmaceutical products for chronic diseases. Its main areas of interest are managing obesity, diabetes, and uncommon illnesses such as growth abnormalities and hemophilia. With well-known medications, including Ozempic, Wegovy, and NovoRapid, the company is a world leader in insulin and GLP-1 therapy.
With a 26% increase in sales and a 26% increase in operating profit at constant exchange rates, Novo Nordisk A/S (NYSE:NVO) produced impressive financial results in 2024. More than 45 million individuals are now receiving diabetes and obesity medicines from the corporation, an increase of nearly 4 million patients over the previous year. To boost market supply beyond pre-existing CMO contracts from 2026, the company will be able to extend its worldwide fill and finish footprint from 11 to 14 sites after completing the acquisition of three Catalent production sites in December 2024. The corporation’s R&D efforts produced several noteworthy obesity treatment readouts, such as amycretin, semaglutide 7.2 milligrams, and CagriSema.
At constant exchange rates, Novo Nordisk A/S (NYSE:NVO) anticipates sales growth of 16% to 24% in 2025, mostly due to the volume increase of GLP-1-based therapies for the treatment of diabetes and obesity. At constant exchange rates, operating profit is anticipated to increase by 19% to 27%, reflecting ongoing expenditures in commercial, R&D, and other activities. Over 80% of patients pay less than $25 for a prescription, and the firm retains extensive formulary access for Wegovy in the US, covering 55 million obese individuals.
Overall, NVO ranks 5th on our list of best pharma stocks to buy for long term growth. While we acknowledge the potential of pharmaceutical companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. There is an AI stock that went up since the beginning of 2025, while popular AI stocks lost around 25%. If you are looking for an AI stock that is more promising than NVO but that trades at less than 5 times its earnings, check out our report about this cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.