Over the past two years, Danish pharmaceutical giant Novo Nordisk (NVO) has faced multiple challenges. On one hand, the company has encountered setbacks in clinical trials and lost market share in the weight-loss drug sector to its biggest competitor, Eli Lilly. On the other hand, several online health platforms have been selling compounded versions of its blockbuster weight-loss and diabetes drug semaglutide (the active ingredient in Wegovy and Ozempic) at prices far below the market rate, with some sales practices potentially exceeding the legal bounds of the “drug shortage exemption.”
Facing this situation, Novo Nordisk has recently changed its strategy. The company announced a cooperation agreement with Hims & Hers (HIMS), one of the major digital health platforms that had previously sold compounded semaglutide. This move is interpreted by the market as a strategic shift to “turn a foe into a friend.”
According to the agreement, Novo Nordisk will sell its FDA-approved, brand-name semaglutide on the Hims & Hers platform, at prices consistent with its self-pay prices on other channels like its own platform, NovoCare. Previously, due to factors such as patent protection and pricing, many patients turned to platforms like Hims & Hers to purchase lower-cost but non-FDA-approved compounded versions of the drug, which directly impacted Novo Nordisk’s sales and revenue. To address this issue, Novo Nordisk had previously filed a patent lawsuit against Hims & Hers.
Analysts suggest that this collaboration achieves multiple goals simultaneously. First, by joining forces with a major distributor of compounded semaglutide, Novo Nordisk can effectively weaken the price advantage of cheaper compounded drugs, while redirecting market demand back to its officially approved, branded, and safe medications. Once the compounded versions lose their primary price advantage, the risks associated with their unapproved use become more prominent. This is expected to boost sales of Novo Nordisk’s products. Second, this cooperation also helps Novo Nordisk avoid a potentially lengthy, costly, and uncertain patent lawsuit.
Although the dispute with Hims & Hers has been resolved, Novo Nordisk still faces challenges. The company continues to lose market share to Eli Lilly in the weight-loss drug sector, and according to its own forecasts, its revenue will decline this year. However, positive factors are also emerging. Novo Nordisk is advancing the development of a new generation of drugs. Its next-generation GLP-1 drug, CagriSema, is expected to receive approval within 10 months, having shown superior performance compared to Wegovy in clinical trials. Additionally, the company has multiple other drug candidates in clinical stages. It is anticipated that Novo Nordisk’s product portfolio will be significantly optimized over the next three years. With the launch of new products and the expansion of Wegovy’s indications, the company’s revenue is expected to return to growth.
Against this backdrop, Novo Nordisk’s valuation appears quite attractive. Data shows that Novo Nordisk’s forward P/E ratio is only 10.8 times, well below the average of 18.5 times for healthcare stocks. Based on this, some believe that now is a good opportunity to buy Novo Nordisk shares.
Looking at the other party in the cooperation, Hims & Hers Health. This direct-to-consumer telehealth platform went public in 2019 and has seen its stock price accumulate a gain of 144% since its listing. As of Thursday’s close, Hims & Hers shares were priced at $23.84, down 7.88%. The trading volume for the day reached as high as 68 million shares, far exceeding its three-month average volume. This pullback was primarily due to traders taking profits after several consecutive days of gains. Previously, driven by multiple positive factors such as the cooperation with Novo Nordisk, the company’s strong earnings report, and analyst upgrades, the stock had surged 50% over the past five trading days. Despite its impressive performance this week, looking at a longer timeframe, Hims & Hers stock is still down 27% year-to-date and has accumulated a decline of 30% over the past twelve months.
