Novo Nordisk: Earnings Preannouncement With Increased Guidance Largely in Line With Our Expectations

Novo Nordisk NOVO B raised full-year 2023 guidance that runs slightly higher than our expectations, but we are not making any fair value estimate changes as the improved outlook is just slightly above our expectations. We believe the robust demand for weight loss drugs Wegovy and Ozempic (off label) is driving the increased expectations. We continue to project annual Wegovy and Ozempic sales of DKK 88 billion and DKK 136 billion by 2027, largely in line with consensus expectations. While we expect robust sales for these two leading drugs based on excellent efficacy, we continue to view the firm as overvalued with the market likely too optimistic on the weight loss market. Nevertheless, the strong innovation in weight loss and other cardiometabolic indications continues to support the firm’s wide moat.

We expect more details on the company’s third-quarter earnings call that should help better understand the evolving obesity market. In particular, updates on insurance coverage, supply capacity, and duration of drug usage will all be important in helping to project long-term sales of obesity drugs. Additionally, third-quarter earnings updates from Eli Lilly on a competitive drug Mounjaro will help frame the competitive market share outlook, as well. We see Novo and Lilly as largely splitting the market equally by 2027, with Novo benefiting from a first-mover advantage with Wegovy and Lilly supported by showing slightly stronger efficacy with Mounjaro.