We came across a bullish thesis on Novo Nordisk A/S (NYSE:NVO) on Kontra Investments’ Substack by Kontra. In this article, we will summarize the bulls’ thesis on NVO. Novo Nordisk A/S (NYSE:NVO)’s share was trading at $85.73 as of Dec 30th. NVO’s trailing and forward P/E were 28.92 and 21.98 respectively according to Yahoo Finance.
A researcher in a lab coat working with a microscope, studying a biopharmaceutical drug.
Novo Nordisk’s Phase 3 REDEFINE 1 study results for CagriSema have sparked a mixed reaction, with the drug achieving a 22.7% weight loss at 68 weeks, slightly edging out Lilly’s Zepbound at 22.5%. However, the results fell short of the anticipated 25% weight loss, leading to a significant market selloff with a 26% drop in Novo’s share price. While CagriSema matches the competition in overall efficacy, challenges in tolerability at the highest dose and variability in patient adherence have emerged as critical areas of focus. Only 57.3% of patients were on the maximum dose, compared to 70.2% for Novo’s Wegovy, hinting at possible dose optimization challenges or patients reducing doses after reaching their target weight. Follow-up studies with less dose flexibility could provide more clarity and potentially deliver improved outcomes.
In the broader context, Eli Lilly’s Retatrutide shows stronger peak weight loss efficacy, with results nearing 25–30%, surpassing both CagriSema and Zepbound. While Retatrutide demonstrates a steeper initial weight loss and sustained long-term benefits, CagriSema offers a steady and balanced approach, appealing to patients prioritizing safety and stability. This positions Novo Nordisk to remain a key player in the obesity management space, even as Lilly gains an edge in certain segments. Novo’s extensive GLP-1/Amylin pipeline suggests opportunities for incremental growth and innovation, supporting its competitive stance.
Financially, Novo Nordisk remains robust, with 5-year revenue growth exceeding 100%, a 35% net margin, and impressive cash flow generation. Since 2020, free cash flow has surged by 123%, reflecting operational efficiency and pricing power. Novo’s conservative leverage and high profitability metrics, including an 85% gross margin and 27% return on assets, underscore its ability to navigate competitive pressures while maintaining scalability.
Strategically, the REDEFINE 1 results reaffirm CagriSema’s standing alongside Lilly’s offerings, with a focus on quality of weight loss, safety, and additional health benefits likely to drive long-term dynamics. Notably, patients on maximum doses consistently achieved over 25% weight loss, suggesting untapped potential for higher efficacy. The market’s reaction to the results appears overly bearish, creating an attractive opportunity for long-term investors. With a promising pipeline, operational strength, and potential to refine its obesity treatments, Novo Nordisk is well-positioned for continued growth, with expectations to trade in the 900–1000 DKK range within 12 months.
Novo Nordisk A/S (NYSE:NVO) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 61 hedge fund portfolios held NVO at the end of the third quarter which was 67 in the previous quarter. While we acknowledge the risk and potential of NVO as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.