Novo Nordisk: More Positive Semaglutide Trials Bolster Double-Digit Ozempic Growth

Key Morningstar Metrics for Novo Nordisk

• Fair Value Estimate: $70.00
• Morningstar Rating: 2 stars
• Morningstar Economic Moat Rating: Wide
• Morningstar Uncertainty Rating: Medium

Novo Nordisk NVO announced that the Flow trial testing semaglutide in patients with type 2 diabetes and chronic kidney disease will be stopped early after an independent committee concluded that efficacy reached a high enough bar to warrant the decision. While specific data won’t be available until the first half of 2024, we think this bodes well for the drug’s ability to slow the progression of renal impairment in these patients, including a potential ability to reduce the risk of death from kidney or cardiovascular disease. We expect this further improves the case for patients to take a GLP-1 therapy early in diabetes treatment, which will likely continue to drive strong double-digit growth through at least 2025 for Novo Nordisk drug Ozempic, supporting our wide moat rating for the company. However, we’re maintaining our $70 fair value estimate for Novo Nordisk, and think shares are overvalued at recent prices.

There is significant overlap between the multiple indications where Novo Nordisk is testing semaglutide. Among diabetics—the first patients approved to use this GLP-1 agonist—40% have diabetic nephropathy (kidney disease) and 50% have obesity. We expect strong data from the Flow study will delay the time until diabetic nephropathy patients need dialysis, similarly to the way the drug appears to delay the time until diabetics require insulin to control their blood sugar. Our broader forecast for GLP-1-based drugs (including those for diabetes, obesity, heart failure, nonalcoholic steatohepatitis, and Alzheimer’s disease) comes to more than $100 billion annually by the end of the decade.