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Novo Nordisk’s recent financial results and clinical progress haven’t impressed Wall Street.
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However, the company can right the ship through innovation in its core specialty and elsewhere.
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The stock looks attractively valued at current levels and could beat the market over the next six years.
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10 stocks we like better than Novo Nordisk ›
Investors looking to strike while the iron is hot can buy beaten-down stocks that appear to have excellent chances of bouncing back. And that describes shares of Novo Nordisk (NYSE: NVO) very well.
The pharmaceutical leader is down by 52% over the trailing-12-month period as of July 17, but initiating a position now could double investors’ money in six years or so. Here’s why this stock is a screaming buy at its current levels.
Novo Nordisk focuses on developing diabetes treatments, an area where it has been a leader for many decades. As of February, it held a 33.3% market share for diabetes drugs.
This sort of long-term dominance doesn’t happen by accident. The company has consistently attracted top talent in the pharmaceutical industry, which, combined with its extensive experience in diabetes, has enabled it to break new ground repeatedly.
Why, then, have the company’s shares dropped by 52% over the past year? Because Novo Nordisk failed to impress the market with its financial results and clinical progress. The developments that led to the drugmaker’s share plunge would have been excellent for almost any other pharmaceutical company, but investors held it to a higher standard given its rich valuation metrics.
For instance, the company reported phase 3 results for CagriSema, an investigational weight management medicine, that proved it’s more effective than its famous semaglutide (Wegovy), reducing patients’ weight by an average of 22.7% in 68 weeks.
However, management was looking for a 25% figure in the study. Very few anti-obesity therapies in development have achieved results comparable to CagriSema, but that was not enough to please investors.
The good news: Novo Nordisk’s pipeline in diabetes and the fast-growing area of weight management remains robust. The company has several promising candidates in development, including Amycretin, for which it recently initiated late-stage studies.
And management has significantly expanded its pipeline through acquisitions. Even with mounting competition, the company should continue to be one of the leaders in its core areas of focus.
It’s been developing medicines in other fields as well, including various rare diseases (such as the blood disorders beta thalassemia and sickle cell disease), neurological disorders (including Alzheimer’s and Parkinson’s), and others. Making progress in diabetes and obesity while diversifying its lineup should work wonders for Novo Nordisk down the line.