Stock of the Week: Novo Nordisk

Danish drugmaker has a dominant position in the global insulin market, a profitable niche as diabetes rises in the developed world

James Gard 9 July, 2021 | 10:12AM
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With a certain football tournament reaching its final stages this weekend, we asked our Twitter followers to select a “national champion” among the remaining teams. While the Danish football team have been knocked out of Euro 2020, our readers have selected Novo Nordisk (NOVO B) ahead of Britain’s Reckitt Benckiser (RKT). Wide-moat Novo Nordisk is a pharmacuetical company that controls 50% of the $20 bn global insulin market and is the world’s leading provider of diabetes-care products.

The wider pharma sector has been very much in favour because of the pandemic, and the company’s share price has certainly benefited from increased investor interest in the short-term. Novo Nordisk’s shares are now at all-time highs of around 550 Danish krone, a rise of 27% in a year, and this has pushed them above the Morningstar fair value of 453DKK. This puts the shares into 2-star territory, according to healthcare analyst Karen Anderson. But she says that wider social trends that were in train before the pandemic are like to sustain Novo’s competitive advantage in the long-term. Diabetes is increasing in the western world as people get older and heavier. “The prevalence of diabetes is expected to soar in the coming decades as a result of an increasingly overweight and ageing population, and we expect Novo to maintain its wide moat as it continues to dominate in diabetes and obesity therapy innovation,” Anderson says.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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James Gard  is content editor for Morningstar.co.uk