We’re
maintaining
our
DKK600/USD86
fair
value
estimates
for
wide-moat pharmaceutical
giant
Novo
Nordisk
(NOVO
B
)
following
second-quarter
results
that
were
slightly
below
our
very
high
expectations,
but
not
enough
to
significantly
sway
our
full-year
expectations.

• Fair
Value
Estimate
:
DKK600
• Morningstar
Rating
: ★★
• Economic
Moat
:
Wide
• Morningstar
Uncertainty
Rating
:
High


What
We
Thought
of
Novo
Nordisk’s
Earnings

Novo
Nordisk’s
revenue
grew
25%
at
constant
currencies,
with
32%
GLP-1
diabetes
growth
(largely
Ozempic)
and
37%
GLP-1
obesity
growth
(Wegovy).
Management
slightly
raised
its
expected
2024
sales
growth
by
2
percentage
points
at
the
midpoint
to
22%-28%
at
constant
exchange
rates
(from
a
prior
range
of
19%-27%).

Excluding
an
impairment
related
to
a
failed
trial
of
cardiovascular
drug
ocedurenone,
management’s
2024
operating
profit
growth
expectations
increased
by
roughly
4
percentage
points,
and
we
think
the
firm
looks
on
track
to
produce
solid
double-digit
performance
in
line
with
the
midpoint
of
guidance
in
the
second
half. 

Shares
look
overvalued

We
still
think
Novo’s
GLP-1
business
across
therapeutic
areas
will
peak
above
70
billion
USD
in
2031,
although
we
remain
less
confident
in
its
ability
to
grow
beyond
the
2032
patent
expiration
for
semaglutide,
the
molecule
in
Ozempic
and
Wegovy.

While
we
continue
to
see
Novo
Nordisk
as
a
wide-moat
firm,
with
strong
intangible
assets
surrounding
its
cardiometabolic
business,
we
think
high
obesity
drug
demand
and
supply
constraints
have
pushed
shares
above
their
intrinsic
value.
In
our
obesity
forecast,
we’re
weighing
the
upside
from
potentially
positive
data
later
this
year
for
monlunabant
and
CagriSema
against
downside
from
poor
compliance
rates
and
increased
competition
on
the
horizon.

Accelerating
price
declines
on
the
horizon

We
expect
price
declines
to
accelerate
in
the
obesity
market
as
access
expands
to
more
patients
with
private
insurance
and
Medicaid.
Recent
data
from
several
challengers
looks
competitive
with
data
for
Wegovy
and
Eli
Lilly’s
Zepbound,
and
we
think
launches
in
2027-29
could
begin
to
erode
share
and
put
further
pressure
on
price.

We’re
most
concerned
about
Novo’s
reliance
on
peptide
manufacturing,
which
requires
significant
fill-finish
capacity
and
larger
volumes
if
it
intends
to
launch
an
oral
version
of
semaglutide
(it
is
still
unclear
whether
it
will
launch
this
product
in
obesity,
despite
positive
phase
3
readouts).
Competitors
such
as
Lilly,
Roche,
Structure,
and
AstraZeneca
have
oral
small
molecule
programs
that
would
be
much
easier
to
manufacture
at
large
scale.

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