Novo Nordisk's (NYSE: NVO) success hinges on two key products: Ozempic and Wegovy. The former is a diabetes treatment, while the latter is its fast-growing weight-loss drug. Both are comparable and have been associated with helping people lose significant body weight.
The danger with these glucagon-like peptide 1 (GLP-1) agonists, however, is that they can sometimes come with concerning side effects. Some people have reportedly developed gastrointestinal issues as a result of using GLP-1s. And there have even been concerns that using these types of drugs may lead to even more significant issues, such as suicidal thoughts. But those concerns, however, appear to be put at ease thanks to a recent study.
Study finds no increased risk of suicidal thoughts due to GLP-1 use
The European Union's drug regulators have been investigating whether GLP-1s such as Wegovy and Ozempic could be linked to suicidal thoughts. But in April, they concluded that there was no evidence to support that there is an increased risk as a result of using these types of drugs. The nine-month study puts to rest one of the more alarming concerns that has been raised around these GLP-1 drugs. But it's important to note that it didn't include all GLP-1 drugs; Eli Lilly's Zepbound and Mounjaro, for example, weren't included in the study.
One of the biggest concerns relating to GLP-1s, especially as their popularity has been taking off in recent years, is that all the side effects may not be known, particularly in the long run. And it's the tolerability and safety of the drugs that can ultimately impact how successful they may prove to be versus competing products. For Novo Nordisk, which generates significant revenue from Ozempic and Wegovy, it's definitely a huge sigh of relief to know that the results of a fairly comprehensive study found no increased risk to patients when it comes to suicidal thoughts.
Novo Nordisk's sales took off last year, thanks to Ozempic and Wegovy
To truly understand the importance of these recent findings, investors just need to look at Novo Nordisk's financials for last year. In 2023, Ozempic generated revenue of 95.7 billion Danish krone ($14.4 billion), and it was the company's top product, representing 41% of Novo Nordisk's sales, which totaled 232.3 billion Danish krone ($34.8 billion). Ozempic's sales rose by 60%, and the company's top line increased by 31%.
In the second spot was Wegovy, whose sales totaled 31.3 billion Danish krone ($4.7 billion), which was more than five times what it generated in the previous year. While Wegovy accounts for a much smaller chunk, 13% of revenue, than Ozempic, the gap could shrink as the company rolls out the drug to more countries and its popularity increases.
Ozempic is the top product today, but the Food and Drug Administration (FDA) approved it for diabetes back in 2017, and many people have been using it off-label for weight loss in recent years. Wegovy, meanwhile, only obtained approval from the FDA in 2021 as a treatment for weight loss.
As concerns about side effects relating to these drugs subsides, that can clear the way for even more growth opportunities for these already impressive, fast-growing products. And as that happens, investors may be willing to pay a higher price for Novo Nordisk's stock.
Novo Nordisk may be a top growth stock to own for years
Over the past 12 months, shares of Novo Nordisk have risen by more than 50%. The stock may appear to trade at a high valuation, as its price-to-earnings multiple is 47, which is by no means cheap. But with a lot of growth potential still out there, and the company investing in more facilities and capacity, there's plenty of reason to remain optimistic that Novo Nordisk's stock hasn't peaked, nor that it will anytime soon.
Although it may not be as diversified as other healthcare companies, with some incredibly popular and successful assets in Wegovy and Ozempic, Novo Nordisk could be a top growth stock to buy for the long haul.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
