This weight-loss drug maker’s stock is up 20% this year — and Barclays sees it going higher
Shares of Novo Nordisk , the pharmaceutical giant behind the weight-loss drug Wegovy, are expected to rally by another 20% over the next 12 months thanks to the company’s promising pipeline of medications aimed at obesity, according to Barclays. Wegovy catapulted into the spotlight thanks to its success in weight loss and the endorsement by celebrities and social media influencers, including Tesla CEO Elon Musk. The drug, administered weekly , reportedly causes a loss of 12-18% body weight over time by activating hormones that regulate blood sugar, slow stomach emptying, and decrease appetite. More than 1 billion people are clinically obese globally, according to the latest report by the World Health Organizatio n, meaning a large market for obesity treatments. However, some investors are concerned that Novo’s stock has already factored in this growth potential, as its shares have risen by 137% since the U.S. Food and Drug Administration approved the drug in June 2021. While the stock might look expensive, trading near its five-year high of 45 times price-to-earnings (P/E), Emily Field, head of European pharmaceuticals equity research at Barclays, believes it does not capture Novo’s future drug discoveries that are in the pipeline. “It feels like obesity is the story of this decade,” Field told CNBC’s “Street Signs Europe” Thursday. “So what we’re telling clients is, when you’re looking at a stock like Novo Nordisk, maybe you don’t look at this year’s P/E, maybe look at it in a few years, and then it might actually look cheap relative to some of the other pharma names.” Field expects shares of Novo Nordisk to rise by 20% to 1,350 Danish krone ($200) a share. Novo’s shares are also traded in New York Stock, London , and Frankfurt. NVO 5Y mountain According to Barclays’ Field, the market for obesity treatment drugs could be worth as much as $200 billion within the next decade. Although supply constraints during the pandemic limited the launch of Wegovy earlier, Novo this week said that it is expecting top-line growth of 24-30% from the drug’s relaunch. Additionally, Novo’s diabetes drug CagriSema is undergoing a new trial that may prove its ability to cause 25% weight loss, the Barclays analysts wrote in a note to clients on Apr. 20. While obesity is associated with hundreds of health complications, including ailments linked to the heart, previous trials for cardiovascular benefits from weight loss drugs have either failed to show significant benefits or were terminated prematurely due to safety concerns. Barclays cited Novo’s upcoming results of its “SELECT” trial as a potential breakthrough. The highly anticipated study is investigating the effects of a new drug in overweight or obese patients with established cardiovascular disease. The trial is expected to be completed on Sept. 28 this year. “So does the weight loss that comes with taking Wegovy prevent you from having a heart attack or a stroke among those that have a higher risk? … We all think this should work,” Field added.
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