Novo Nordisk (NVO) is taking a beating on Wall Street, thanks to growing competition, a lower sales forecast, and a public breakup with a major telehealth partner.
The headlines make it look like the company’s growth story is falling apart. But beneath them, Novo still controls one of the most crucial corners of modern medicine: insulin.
The company supplies about 40% of the world’s insulin, making it part of the “big three” firms that together provide nearly all of it globally, according to the National Library of Medicine. Meanwhile, sales of its insulin products jumped 17% last year.
And that’s not its only edge. Novo also leads the fast-growing market for GLP-1 drugs originally designed for type 2 diabetes but now a favorite for weight loss.
The company controls more than half of this market, which could reach $150 billion a year by 2030, according to PwC estimates.
Even with that dominance, Novo stock trades at levels more typical of a struggling company. At 13 times earnings, “NVO is ridiculously cheap,” says contrarian investor Oguz Erkan, who notes that profits are still expected to grow 15% a year over the long run.
But Wall Street isn’t buying it yet.
NVO stock plunged last week after Novo cut its full-year sales forecast for its blockbuster weight-loss drug Wegovy from 21% growth to 14%, blaming supply disruptions and tougher competition from Eli Lilly.
That came even as Novo’s latest earnings showed 18% sales growth and a 29% jump in profits in the first half of the year.
Investors looked past strong earnings and dumped the stock, sending it down 32% in a week. It’s now trading below $49 with a $166 billion market cap, which is down about 45% this year and 62% over the past 12 months.
As InvestorsObserver reported, the trouble started when Novo abruptly ended its partnership with Hims & Hers, a telehealth service selling compounded versions of Wegovy and Ozempic.
The breakup hasn’t worked out in Novo’s favor, while Hims stock has since rebounded back to pre-split levels above $62.
Long-term investors might see the slump as an opportunity. Novo still dominates insulin and leads a weight-loss drug market that’s only getting bigger.
The near-term pain could end up being a summer sale to grab a piece of a pharmaceutical heavyweight on the cheap.
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