Key Morningstar Metrics for Novo Nordisk
- Fair Value Estimate: DKK 595
- Morningstar Rating: ★★★★
- Economic Moat: Wide
- Morningstar Uncertainty Rating: High
Novo’s GLP-1 Sales Growth
We’re lowering our Novo Nordisk NOVO B fair value estimate to DKK 595 per share from DKK 640 after adjusting for recent foreign-exchange movements. We expect Novo to gain $65 billion of a $200 billion global GLP-1 market in diabetes and obesity by 2031, ahead of semaglutide’s 2032 patent expiration, with Lilly standing as the firm’s key competitor. GLP-1 growth drives our overall five-year forecast for 12% top-line and 14% bottom-line growth through 2029.
To factor in the potential impact of the Inflation Reduction Act, we assume Medicare negotiations for Ozempic and Rybelsus beginning in 2027, well ahead of their 2032 patent expirations. We do not include a step down from Medicare Part D redesign, as this could actually make cheaper drugs like Novo’s diabetes medicines more affordable for patients.
We convert our fair value estimate to dollars at the current spot rate of DKK 6.68 per $1. We rate the systematic risk surrounding Novo Nordisk shares as below average, and we therefore use a 7.5% cost of equity, which we believe aligns our capital cost assumptions with the returns equity investors are likely to demand over the long run. We include a placeholder for future litigation risk at roughly 2% of non-GAAP net income (high relative to the rest of the branded drug industry).
Bulls Say
Novo’s obesity therapy Wegovy is significantly expanding the obesity treatment market given its strong efficacy and is poised to remain a key drug in the market until patent expiration in 2032.
With a solid portfolio of GLP-1 products, including injectable Ozempic and oral Rybelsus, Novo is well positioned to defend its formidable diabetes market share.
Semaglutide is also being studied in areas including liver disease (NASH) and Alzheimer’s, and Novo could achieve a strong share in these nascent markets.
Bears Say
Tresiba’s strong profile in the long-acting insulin market hasn’t been enough to defend it from US pricing pressure due to competition from Sanofi and Lilly, and biosimilar insulins have weighed on category pricing since 2017.
Novo’s Victoza and Ozempic have made GLP-1 a key part of the firm’s diabetes growth, but oral GLP-1 Rybelsus has had slower uptake, and Lilly’s newly approved Mounjaro provides strong competition
Novo’s obesity drug Wegovy had a slow launch due to supply constraints, and Zepbound, which is Lilly’s obesity drug, has a superior profile.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
