There is a new crown jewel in Europe as Novo Nordisk is booming There is a new crown jewel in Europe as Novo Nordisk is booming There is a new crown jewel in Europe as Novo Nordisk is booming

There is a new crown jewel in Europe as Novo Nordisk is booming

En hurtig tanke 6 minutes to read
Peter Garnry

Head of Saxo Strats

Summary:  Novo Nordisk is now less than 5% away from becoming the most valuable company in Europe after trial data show that Wegovy reduces heart risks by 20%. This will likely open the path to broad reimbursement from US health insurer and thus significantly expand the market for Wegovy. Novo Nordisk is expected to report revenue growth of 34% y/y tomorrow's Q2 earnings release and the market will focus on its ramp up of production of Wegovy, more details on future growth, and potentially a higher revenue guidance for this year.


Key points in this equity note:

  • Novo Nordisk shares are up 15% over two trading sessions as trial data show that Wegovy reduces the risks of adverse heart events by 20%

  • Novo Nordisk reports Q2 earnings tomorrow with revenue expected to grow 34% y/y driven by the obesity care segment and investors will focus on Wegovy production ramp up and potentially higher FY23 revenue guidance.

  • Weight-loss drugs might deliver more productivity gains than AI in the short run and the long run market potential for these drugs may be much higher than currently expected.

The Novo fairytale just got better

Back in February we wrote an equity note highlighting Novo Nordisk’s obesity drug Wegovy as a game changer for the company, but Wegovy is also a game changer in fighting the obesity epidemic and it is basically creating a whole new category in the pharmaceutical industry. Demand for Wegovy has been insane and Novo Nordisk has had troubles expanding production capacity fast enough.

Yesterday, the fairytale just got better for Novo Nordisk as the company announced the headline results from the SELECT cardiovascular trial using 2.4 mg Semaglutide (Wegovy) on 17,604 adults aged 45 years or older since the trial started in 2018. The results show that Wegovy reduces the risk of major adverse cardiovascular events by 20% in adult with overweight or obesity. The results were in with some of the best-case scenarios that had been circulated among analysts and it is widely recognised that the Wegovy’s benefits likely meet the threshold for broad reimbursement. If that becomes the case, then the potential market for Wegovy will dramatically expand and the affordability for more people will do down. Consensus is expecting Wegovy revenue of DKK 92bn in FY28 which at that time would translate into roughly 23% of total revenue.

Investors were excited about the trial data and what it means for future demand sending Novo Nordisk shares 17% higher yesterday. In today’s trading session the share price is down 1.5% putting Novo Nordisk at a market value of €387.3bn making the company the second most valuable in Europe just €18bn behind the top spot LVMH. If Novo Nordisk shares gain 5% more relative to LVMH then Novo Nordisk will overtake the thrown as the most valuable company in Europe. It might be that Europe lost the battle for leadership in computer technology, but the continent has an emerging group of crown jewels each dominating their industry: LVMH, Nordisk, ASMl, and Nestle.

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