Weight Loss Drugs - Novo Nordisk A Primary Beneficiary In Obesity Space Currently Controlled By Two Players, Says Analyst

Cantor Fitzgerald has initiated coverage on Europe's most valuable company, Novo Nordisk A/S NVO.

The analyst says the runway for obesity will remain attractive for years to come, and Novo Nordisk will be an outsized beneficiary of this trend, given its leadership in the space where it competes with only Eli Lilly And Co LLY.

The analyst also fears the Danish pharma giant's supply needs to catch up to the demand for its drugs, Wegovy and Ozempic.

The Research analysts acknowledge that many potential new competitors are coming but write that Novo Nordisk will have much more data, an established commercial infrastructure, and manufacturing capacity, creating a challenging environment for new players to catch up.

The analyst initiates with an Outperform rating and a price target of $120. 

Cantor notes that Wegovy (Semaglutide) is the only GLP-1 with positive Cardiovascular outcomes trials (CVOT), SELECT. Other companies are years behind, thus giving Wegovy a competitive advantage with payors and physicians.

NVO expects FY23 sales and operating profit growth of 32-38% and 40-46%, respectively, at constant currency. This compares favorably to its large-cap pharma peers, which Cantor expects, on average, to report 4% 2023 sales growth and 14% 2023 operating profit growth.

Novo Nordisk's CEO Lars Fruergaard Jorgensen said the company wants to buy more companies with drugs in the early- to mid-stage development through "bolt-on" deals of up to a few billion dollars.

Price Action: NVO shares are down 0.50% at $101.35 on the last check Friday.