Novo Nordisk (NVO) pioneered the booming obesity drug market with the success of its GLP-1 agonist drugs Ozempic and Wegovy. However, the company once went through a difficult period, facing fierce competition from Eli Lilly and telehealth companies selling generic versions. During that time, its stock price fell more than 50% from its mid-2024 peak. Recently, Novo Nordisk’s stock has shown renewed vitality, and this is no coincidence—its share price could potentially achieve a 40% increase this year.
Recently, Novo Nordisk has gained attention for launching the newly FDA-approved oral version of Wegovy. Historically, Wegovy and other obesity drugs were injectables, while the new oral pill uses the same active ingredient but is provided in tablet form, offering greater convenience for patients who dislike injections. The company has prepared ample supply and partnered with consumer channels like Amazon and Costco to improve drug accessibility. Reports indicate that approximately 3,100 prescriptions were written for the drug in its first week on the market, rising to 8,000 in the second week.
As the only oral drug of its kind currently on the market, the promotion of oral Wegovy is expected to drive Novo Nordisk’s revenue growth in the coming quarters. News of the drug’s early success has already helped lift the stock price from recent lows. Previously, Wegovy faced a market gap due to supply shortages and was overtaken by Eli Lilly (LLY), but Novo Nordisk did not give up. The approval of the oral formulation directly contributed to the stock’s rise.
Although Eli Lilly’s Zepbound is expected to maintain market leadership due to superior efficacy, oral Wegovy has a vast potential market, and its counterpart drug orforglipron will also join the competition. After the stock price adjustment over the past two years, Novo Nordisk shares remain attractive. Despite slowing revenue growth, the approval of oral Wegovy and the expansion of indications for its older formulation targeting metabolic dysfunction-associated steatohepatitis (MASH) are expected to positively impact the company’s finances. Furthermore, Novo Nordisk is seeking approval for its next-generation GLP-1 weight-loss drug CagriSema and has several other drugs in clinical research stages. As the weight-loss drug market continues to grow rapidly, even if it does not claim the top spot, Novo Nordisk is well-positioned to perform strongly financially and in the stock market by riding the industry trend.
Looking back over the past decade, Novo Nordisk’s average price-to-earnings (P/E) ratio has been around 27x, while its current P/E ratio is only 18x. If market confidence recovers, a return to its long-term average valuation is not difficult to achieve. Even under a conservative assumption of a P/E ratio of 25x, combined with the Wall Street analyst consensus forecast for this year’s earnings per share of approximately $3.49, the corresponding stock price could reach $87.25, about 40% higher than current levels.
Novo Nordisk needs to rely on a strong launch for oral Wegovy to continue expanding its market share and counter future competition. Nevertheless, the path for the company to deliver substantial returns to investors by 2026 appears relatively clear.
