Diabetes and obesity care are two engines fueling the pharmaceutical industry right now. Novo Nordisk(NYSE: NVO) is at the forefront of these markets thanks to its red-hot blockbuster drugs Ozempic, Rybelsus, and Wegovy.
2024 has been a milestone year for Novo Nordisk, and the momentum doesn't appear to be slowing down. Let's dig into the company's latest wins and assess if now is a good time to scoop up some shares.
A big leg up for Novo Nordisk
Oftentimes, pharmaceutical companies will seek alternative uses for their most successful medications. These are known as expanded indications; they go through a separate and robust clinical-trial process with the Food and Drug Administration (FDA).
In early March, Novo Nordisk received an expanded indication grant for its obesity-care drug, Wegovy. Specifically, Wegovy is now approved to treat patients at risk of heart disease. Expanding into the cardiovascular market makes sense given heart complications such as stroke and hypertension are often highly correlated with obesity and diabetes.
While this provides Novo Nordisk with a leg up over its competition -- namely, Eli Lilly -- the Danish drug maker doesn't appear to be slowing down whatsoever.
Image source: Getty Images.
Novo Nordisk is firing on all cylinders
Developing a successful novel medication can provide some lucrative benefits for pharmaceutical businesses. Rising sales and profits are obvious byproducts. But how companies then reinvest these profits can lead to additional catalysts.
Back in February, Novo Nordisk acquiredCatalent for $16.5 billion. The rationale behind the deal was intriguing. During 2023, Novo Nordisk's management consistently told investors to taper expectations as it relates to revenue and profit growth because the company was facing some challenges fulfilling demand for Ozempic and Wegovy.
Catalent is a drug subcontractor. Therefore, this deal provides Novo Nordisk with additional factories that it can leverage to increase its manufacturing output and meet demand levels.
While this deal is pretty savvy, Novo Nordisk isn't finished. In late March, the company announced that it was acquiring Cardior Pharmaceuticals. Cardior is currently in phase 2 trials for its compound CDR132L, which it hopes will gain approval to treat heart failure.
Is now a good time to invest in Novo Nordisk?
With so much positive news coming out of Novo Nordisk, investors shouldn't be surprised to learn that shares are trading near-record highs. Yet despite the company's recent valuation surge, I still see Novo Nordisk as a compelling buy. For starters, the company's potential with Wegovy is just beginning.
While competition in obesity care is something to keep an eye on, Wegovy is now a multi-platform drug, and its growth prospects should not be discounted. Wegovy's expanded approval coupled with the acquisition of Cardior illustrates Novo Nordisk's commitment to aggressively pursue the $200 billion heart disease market.
Second, in the midst of the company's acquisition spree, you may have missed that Novo Nordisk completed a successful phase 1 trial for its oral obesity drug candidate, amycretin. Although it will likely be years before amycretin is commercialized, I'm optimistic that Novo Nordisk is already laying the foundation to bolster its presence in obesity care.
Finally, the company's crown jewels are diabetes treatments Ozempic and Rybelsus, which combine for nearly 60% of the glucagon-like peptide-1 (GLP-1) market. Research suggests that there will be approximately 1 billion adult diabetics worldwide by 2045. I see this as a major tailwind for Novo Nordisk for decades to come and am not worried about demand for Ozempic or its sibling products waning anytime soon.
Given the amount of growth opportunities within diabetes and obesity care, combined with its entrance into the cardiovascular market, I think now is as good a time as ever to buy Novo Nordisk stock. A prudent strategy is to use dollar-cost averaging and add to your position over a long-term time horizon.
Should you invest $1,000 in Novo Nordisk right now?
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Adam Spatacco has positions in Eli Lilly and Novo Nordisk. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
