Novo Nordisk (NVO -3.89%) has emerged as one of the biggest names in the pharmaceutical world thanks to its robust line of glucagon-like peptide-1 (GLP-1) medicines. The Danish drugmaker develops Ozempic, Rybelsus, Saxenda, and Wegovy.
While Ozempic is approved by the Food and Drug Administration (FDA) to treat diabetes patients, its sibling medicine Wegovy is prescribed for obesity care. Just this week, Novo Nordisk received some very good news regarding Wegovy. Let's dig into the company's latest milestone and assess what it could mean for future growth.
Wegovy's latest milestone
Although Ozempic is Novo Nordisk's current crown jewel, Wegovy is quickly becoming a force on its own. Earlier this year, investors learned that sales of Wegovy rose 393% year over year in 2023. And that was just in the U.S.
On top of that, back in March Wegovy was granted an expanded indication by the FDA to treat obesity patients who are also at risk of heart disease. The good news just keeps rolling in for Wegovy. The drug is now approved in China, a market that Novo Nordisk has long had its eye on.
Image source: Getty Images.
How big could China be for Wegovy?
Novo Nordisk already has an established presence in China. But as it stands today, the company mostly generates its sales in the region (which includes Hong Kong and Taiwan) from insulin and diabetes care.
With that said, chronic weight management is very much an issue in China. According to Novo Nordisk's internal estimates, 184 million people in China are in need of obesity care. Moreover, the National Institute of Health (NIH) estimates that by 2030 there will be 540 million people in China officially categorized as overweight -- nearly half of this cohort being elder adults aged between 60 and 89.
According to the company's financials, Novo Nordisk generated about 1.3 billion Danish kroner ($189 million) from GLP-1 treatments in China during the first quarter. The majority of these sales were concentrated in Ozempic, which brought in about $133 million in revenue in China alone.
Clearly, GLP-1 medications are a big opportunity in the China region. Considering the size of the addressable market and the company's recent inroads in the Chinese obesity care market combined with Wegovy's existing popularity in the West, I am cautiously optimistic that Novo Nordisk will begin to see a new wave of growth.
Is Novo Nordisk stock a buy right now?
So far in 2024, shares of Novo Nordisk have soared 39% -- handily topping the returns of the S&P 500 and Nasdaq Composite.
NVO PE Ratio data by YCharts.
The chart above sheds some light on Novo Nordisk's valuation. Note that the company's price-to-earnings (P/E) ratio has ballooned over the last decade. With its P/E hovering around 50, Novo Nordisk stock is undeniably pricey.
Nevertheless, I still think it's a compelling buy. Right now the company owns an estimated 70% market share of the international GLP-1 market and 75% of the obesity care market.
Considering that Novo Nordisk has had virtually no presence in obesity care in China, I think the recent approval of Wegovy in the region should add to the company's international dominance and serve as a growth driver that complements Ozempic.
Moreover, as the trends explored above indicate, treating obesity and aiding in chronic weight management are immediate issues in China. I don't think it will take long for Wegovy to start seeing some momentum in the region.
While Novo Nordisk's valuation is a bit rich, I think it can grow into it, thanks to both the potential of Wegovy in new geographic regions and additional applications.
