4. Novo Nordisk A/S (NYSE:NVO)
Number of Hedge Fund Investors: 51
Novo Nordisk A/S (NYSE:NVO) kept making waves this year due to its potential weight loss drug Ozempic. The stock has gained about 44% year to date. Our survey of various discussion threads on Reddit WallStreetBets showed that retail investors on the social platform were piling into the stock for 2024 and beyond.
Hedge funds also loaded up on the stock. As of the end of the third quarter of 2023, 51 hedge funds out of the 910 tracked by Insider Monkey had stakes in Novo Nordisk A/S (NYSE:NVO) . The biggest stake in Novo Nordisk A/S (NYSE:NVO) is owned by Ken Fisher’s Fisher Asset Management which owns a $1.3 billion stake in Novo Nordisk A/S (NYSE:NVO).
.Polen Focus Growth Strategy made the following comment about Novo Nordisk A/S (NYSE:NVO) in its Q3 2023 investor letter:
“We added new positions in Eli Lilly and Novo Nordisk A/S (NYSE:NVO) in the third quarter. We have been monitoring Lilly and Novo Nordisk for some time, and new clinical results from a recent drug trial give us confidence in the large upside potential for GLP-1s. These results from a Novo Nordisk study showed impressive cardiovascular outcomes for its GLP-1, Wegovy. This study of over 17,000 overweight or obese people with established cardiovascular disease (but without diabetes) showed that Wegovy reduced the likelihood of major adverse cardiovascular events (heart attack, stroke, sudden cardiac death) by over 20% for up to five years. This large and well-controlled trial helps to demonstrate that the weight loss benefits of GLP-1s (likely similar for Mounjaro and Wegovy) lead to better health outcomes for patients and likely save the healthcare system significant amounts of money over the long term. In our view, this makes it very unlikely that payors and governments will deny patient access and reimbursement for these drugs for the long haul (hence the positive stock price moves for Lilly and Novo when the data was released mid-quarter).
We have started with a small 1% position in Lilly, but when paired with our new holding in Novo Nordisk at 2% (NVO is slightly larger as its valuation is lower), it represents a 3% combined position in the two companies we expect to maintain a duopoly in this large drug class over the next several years.
Novo Nordisk has a long history as the leader in diabetes pharmaceuticals. It is much more narrowly focused on diabetes than Lilly with its GLP-1 drugs, Ozempic and Wegovy (Wegovy is the same drug as Ozempic but uses a different name for obesity), driving most of the company’s revenue and earnings growth. The cardiovascular outcomes trial mentioned above is a big positive for Novo. It establishes the duopoly with Lilly in insulin management for Type 2 diabetics and weight loss for the huge number of overweight and obese people across the globe.
Novo has more legacy diabetes products that its newer drugs will cannibalize, but our research indicates that we can expect high-teens earnings per share growth from Novo over the next five years. In addition, both Novo and Lilly have next-generation diabetes and weight loss drugs in development that appear even more effective than the current offerings while also offering new treatment modalities, such as oral drugs versus today’s auto injectables.”
