Novo Nordisk A/S (NYSE:NVO): A Strong Pipeline to Aid Recovery

We came across a bullish thesis on Novo Nordisk A/S (NYSE:NVO) on ValueInvestorsClub by cable888. In this article, we will summarize the bulls’ thesis on NVO. The company’s shares were trading at $85.30 when this thesis was published, vs. the closing price of $90.65 on Feb 28.

A pharmaceutical sales rep holding a medicine pack, highlighting the drug candidate products.

NVO engages in the research and development, manufacture, and distribution of pharmaceutical products internationally. The Diabetes and Obesity care segment focuses on diabetes, obesity, cardiovascular, and other emerging therapy areas. The Rare Disease segment offers products in the areas of rare blood disorders, rare endocrine disorders, and hormone replacement therapy.

The second largest biopharma company has been losing market share in the GLP-1 category drugs that cater to blood sugar control and obesity management. NVO’s Wegovy & Ozempi have a market share of 45% compared to 60% a year and a half back. The higher efficacy of Eli Lilly’s Mounjaro and Zepbound is the reason why NVO has been losing market share. Both companies are in the race to develop generation 3 drugs and this will decide the dominance of these companies in the near future.

Another setback has been the lower efficacy of its Gen 3 drug, CagriSema. The efficacy at 20.4% was below the expected 25% target. However, this is still better than Eli Lilly’s Wegovy which has an efficacy of 14.7%, giving NVO a competitive advantage over its peers.  NVO is also set to re-run the trial over the next 1-2 years and attributes the lower impact of its previous trial on flexible dosage.

NVO currently trades at ~29x its trailing 12-month earnings. This is a highly discounted level compared to its peer Eli Lilly which is available at ~79x its trailing EPS. The worst-case scenario would imply flat sales for 2026-2030 with zero sales for CagriSema and a DCF value of $70/share or 20% lower than its current price. However, the drug offers better efficacy and high single-digit growth in sales appears a more reasonable estimate providing a $110 price per share or 20% upside. A more optimistic scenario would generate double-digit growth in sales or a fair price of $160 which is 80% higher than its current price.

While we acknowledge the potential of NVO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. 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 the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.