Novo Nordisk Surpasses $500 Billion Mark as Obesity Drug Sales Soar by 154%

The shares of Novo Nordisk rose by 4% on Wednesday, settling at 1.2% higher, placing its market value at around $500 billion.

Novo Nordisk, the Danish pharmaceutical giant, has reached a historic market value surpassing $500 billion, making it Europe’s most valuable company. The surge in market value comes on the back of soaring sales for its obesity and diabetes drugs, Wegovy and Ozempic. The demand for these drugs, reportedly used by celebrities such as Oprah Winfrey and Elon Musk, has left the company grappling to keep up with orders, prompting plans for expanding production sites.

The shares of Novo Nordisk rose by 4% on Wednesday, settling at 1.2% higher, placing its market value at around $500 billion. The notable rise in the value has positioned Novo Nordisk ahead of France’s luxury goods group LVMH, which boasts a market value of $422 billion.

The sales of obesity drugs experienced a remarkable 154% jump at constant exchange rates, amounting to 41.6 billion Danish kroner in the last year. Wegovy, a key player in this surge contributed £3.6 billion to this figure. Additionally, sales of diabetes drugs, including Ozempic, increased by 52%, bringing the total sales for obesity and diabetes drugs to nearly £25 billion.

Novo Nordisk invested $8.7 billion in 2022 to bolster its manufacturing capacity, a move indicative of the company’s commitment to meeting the heightened demand for its drugs. Despite these efforts, the sustainability of long-term sales growth faces uncertainties, hinging on factors such as competition from Eli Lilly & Co.’s Zepbound, introduced in late 2022, and the duration of patient adherence to the medication.

The remarkable performance of Novo Nordisk’s shares, gaining 60% in the past year, has been fuelled by the frenzy surrounding obesity drugs. This contrasts with the challenges faced by other pharmaceutical companies, such as Novartis AG, whose stock has seen declines amid concerns about growth prospects.

However, some analysts express skepticism about the sustainability of Novo Nordisk’s current performance. Projections suggest a potential decline of around 3% in the company’s shares over the next 12 months, reflecting concerns about valuation. Analysts caution that the current high expectations for the company may already be factored into its valuation.

Novo Nordisk acknowledges the “intensifying competition” with the entry of Eli Lilly into the market it pioneered. The competition could exert pressure on drug prices for obesity and diabetes, affecting Novo Nordisk’s market position. US insurers are reportedly pushing back against rising costs for weight-loss treatments, with potential implications for coverage and negotiations over drug prices.

Despite the challenges, Novo Nordisk remains optimistic about the future. The company’s CEO, Lars Fruergaard Jorgensen, emphasizes the significance of the volume opportunity in the US. He notes that the net price for Wegovy will likely decrease over time as more insurers cover the drug. Jorgensen anticipates more individuals opting for the treatment.

In its overall financial performance, Novo Nordisk reported a 36% increase in sales to £26.6 billion, accompanied by a 52% jump in pre-tax profits to £12 billion. Looking ahead, the company expects sales growth to slow to between 18% and 26% in the coming year, with operating profit estimated at 21% to 29%. The projections account for increased competition and ongoing supply constraints.

The success of Novo Nordisk’s obesity and diabetes drugs represents a broader trend in the pharmaceutical industry, where advancements in weight-loss treatments are gaining attention. The new generation of drugs, including Novo Nordisk’s Wegovy and Eli Lilly’s Zepbound, demonstrates the potential to address significant health concerns.

As Novo Nordisk navigates the evolving landscape of pharmaceuticals, including potential competition and pricing pressures, its focus on reaching more patients and expanding its pipeline remains central. The impact of its drugs extends beyond weight loss, with potential applications in addressing inflammation-related diseases like Alzheimer’s and Parkinson’s.

In a separate development. GlaxoSmithKline (GSK) reported positive fourth-quarter profits and sales, driven by the success of its RSV vaccine. The company’s pre-tax profit rose by 14% to £6.1 billion, with turnover increasing by 5% to £30.3 billion. GSK’s upgraded outlook envisions achieving over £38 billion in sales by 2031.

The RSV vaccine, Arexvy, launched in the US last autumn, contributed £1.2 billion in sales in four months. GSK’s CEO, Emma Walmsley, expects the vaccine to generate annual sales of at least £3 billion in the future. GSK’s positive financial results have contributed to a 3.6% rise in its share price to £15.93, marking a 15% increase in the past six months.