The Danish company Novo Nordisk became the second European company to reach the $500 billion in market value. This was also due to their popular obesity drug. The company experienced a massive increase on Wednesday, January 31, and surpassed a level that was only surpassed by the famous LVMH before. But is the company worth an investment now?
A milestone for Novo Nordisk
The drugmaker hit an all-time high in valuation, becoming only the second company in Europe to reach the $500 billion mark. This was thanks to its obesity drug Wegovy and another diabetes drug called Ozempic. Once these drugs were proven to work and help people lose unwanted weight, the company’s valuation soared.
The company’s earnings also made investors optimistic when it announced that sales could grow by as much as 26% this year and operating profits could grow by an even higher 29%.
Novo Nordisk’s shares have risen by around 60% in the past year alone, and on Wednesday’s trading in Copenhagen the stock was up 4.1%. This has pushed the company’s valuation past the $500 billion mark. The company’s growth contrasts with that of its Swiss rival, drugmaker Novartis AS, whose shares have suffered huge losses.
However, analysts are skeptical that the company’s performance will sustain, forecasting a decline of around 3% next year. This is due to Eli Lilly’s massive impact on the drug market and concerns about Novo Nordisk’s ability to keep up.
The profit of Novo increased by 62% to 22 billion kroner ($3.2 billion) and sales were at 9.6 billion kroner in the last quarter.
Concerns at the company
After Novo Nordisk had troubles keeping up with the demand for both drugs, Wegovy and Ozempic, because they share the same ingredient. The company now announced that it doubled the number of Wegovy starter doses it’s shipping to the US. This enables more people to get the treatment which means more revenue for the company. Novo also announced to invest $8.7 billion last year to meet the manufacturing capacity.
But if the company will actually sell more will depend on if the customers continue taking these drugs and if Novo can attract more customers. And the performance of their main competitor Eli Lilly will also be important as they take a big share of the global drug market. Especially in the field of weight loss drugs.
How high will the valuation go?
Although the company’s share price is very bullish at the moment, that doesn’t mean it will be forever. But as the second largest pharmaceutical company, it has a lot of potential. While weight-loss drugs are popular in the US, they are not as popular in other countries such as Germany. This means there is still a lot of growth potential for the next few years. But the big question is whether Novo Nordisk can keep up with the demand for its drugs. If so, the company, and especially its valuation, could rise sharply, but if not, it could be the end of the bull market. But nobody knows what is coming, so we will have to wait and see how the situation develops.
What we can say for now is that the company is going up and up. Even though it is not well known among non-investors and does not have the attention that LVMH had when it reached the $500 billion milestone. Few people know Novo Nordisk and that could be an advantage for them, but it does not have to be. The fact is that they are now worth more than the likes of Walmart, ExxonMobil and Johnson & Johnson.
We will see in the future if the company will reach the $1 trillion valuation at some point. Right now it’s worth a lot more than LVMH and other companies, and the company could increase its value even more in the future, but we don’t know. So it will be interesting to follow and if anything important happens, be sure to read about it here.
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