Shares of Danish pharmaceutical company Novo Nordisk A/S (NYSE:NVO) (GB:0QIU) have been trending up lately owing to the high demand and limited supply of its weight loss drug, Wegovy.
Launched in June 2021, Wegovy became an instant sensation among obese people seeking to shed kilos. The drug was touted highly on social media platforms including TikTok and Alphabet’s YouTube (NASDAQ:GOOG) (NASDAQ:GOOGL). GB:0QIU stock has gained 14.6% in the past three months vis-à-vis gaining 32.3% year to date. The stock also hit a fresh 52-week high on Friday, December 2.
Wegovy’s active ingredient, semaglutide, works similarly to the GLP-1 hormone that reduces appetite in the human body, thus, reducing food intake and weight. Novo’s trial indicated that Wegovy helps reduce body fat by 15%, which is much higher than its other older drugs, Saxenda and Ozempic.
Novo Nordisk did not expect the demand for Wegovy to surge instantly. NVO, like its other obesity drugs, planned to boost manufacturing in response to a gradual rise in demand. Analysts aren’t happy with Novo’s decline in sales due to the deficit. They also fear the entry of rival Eli Lilly’s (NYSE:LLY) anti-obesity drug, Mounjaro, to capture Novo’s market share.
Novo’s CEO, Lars Fruergaard Jørgensen, has promised to relaunch the drug with increased production in early 2023. He also does not worry about competition since the market for anti-obesity drugs is largely untapped.
Novo has partnered with Catalent (NYSE:CTLT) to fill the drug in the syringes. Novo hopes to ramp up the production of Wegovy and improve supply logistics to fulfill the demand. Remarkably, Wegovy is also covered by certain insurers, and its relaunch will be accompanied by higher insurance coverage, Jørgensen noted.
Is Novo Nordisk Stock a Good Buy?
On TipRanks, GB:0QIU stock has a Moderate Buy consensus rating. This is based on seven Buys, three Holds, and one Sell rating. Also, the average Novo Nordisk price target of kr855.64 implies 4.6% downside potential to current levels.
Moreover, Novo Nordisk pays an annual dividend of kr4.25 per share, reflecting a yield of 1.24%. The company also has a DKK 24 billion share repurchase program that will run for 12 months beginning February 2, 2022.
