Pharma large Novo Nordisk (NVO 2.26%) made quite a lot of noise final 12 months. The corporate’s shares crushed the in any other case high-flying market because of its work within the anti-obesity drug area. Nevertheless, Novo Nordisk’s robust performances did not begin in 2023; the biotech has been delivering outsized returns for a while.
Let’s learn the way a lot those that put $5,000 into this inventory about 5 years in the past — in 2019 — would have at this time, and what meaning for buyers transferring ahead.
NVO Whole Return Stage information by YCharts.
It hasn’t all been clean crusing
Novo Nordisk has encountered some points since 2019. Initially, as with many different corporations, the pandemic disrupted its enterprise. Novo Nordisk had some hassle with manufacturing and distributing its medicines following the preliminary outbreak.
Past that, each the general public and authorities officers pointed the finger at Novo Nordisk, and different leaders within the insulin market, for the outrageous costs they cost for his or her merchandise. This backlash led to Novo Nordisk saying that it was reducing its insulin costs final 12 months, following the lead of its longtime rival, Eli Lilly.
Regardless of these points, Novo Nordisk has been spectacular. Its now well-known diabetes remedy, Ozempic, was first authorised within the U.S. in 2017 and helped the corporate’s gross sales develop quickly. Different medicines, resembling Rybelsus, one other diabetes drug, have additionally been important contributors.
Novo Nordisk’s monetary outcomes have been on hearth by way of most of this era, resulting in its inventory delivering a compound annual development charge (CAGR) of return of 36.8%. So, if you happen to invested $5,000 in Novo Nordisk 5 years in the past, you’d have $18,973 at this time. That’s, Novo Nordisk greater than tripled buyers’ cash over the previous half-decade.
How does this examine to the broader market? The S&P 500 produced a CAGR of 14.9%, ok to show $5,000 into $10,026. That is not dangerous, but it surely is not practically as spectacular as what Novo Nordisk completed.
Can the biotech do it once more?
Novo Nordisk’s prospects by way of the subsequent 5 years nonetheless look vivid. Ozempic remains to be on hearth, whereas Wegovy for weight reduction, first authorised within the U.S. in 2021, continues to rise in prominence. Wegovy is technically the identical scientific compound as Ozempic, however at a distinct dosage. With the anti-obesity drug market set to skyrocket by way of the subsequent 5 years and past, anticipate Novo Nordisk to profit. Ozempic also needs to earn essential label expansions, together with for treating kidney illness in diabetes sufferers.
Nevertheless, these two will not be Novo Nordisk’s solely development drivers. The biotech is near an essential approval within the insulin market: insulin icodec, a once-weekly insulin product. Insulin gross sales have been useless weight on top-line development currently, partly due to the issues talked about above, however icodec might assist reverse that pattern.
Novo Nordisk can also be engaged on a slew of different candidates. One of many firm’s targets is to broaden its lineup effectively past its core areas of diabetes and weight problems care, one thing it ought to have the ability to do within the subsequent 5 years, given its pipeline.
So, can the biotech ship a CAGR within the neighborhood of 36.8% within the subsequent 5 years? That is an extremely excessive bar, however I consider so. Its most essential merchandise ought to proceed driving wonderful top-line development whereas it earns approval for brand-new ones and information regular scientific progress. Nevertheless, even when Novo Nordisk does not accomplish this lofty feat, it ought to nonetheless produce market-beating returns.
Discover that previously 5 years, if the corporate had recorded a CAGR of half of what it did, it nonetheless would have outperformed the S&P 500 by an affordable margin. The ethical of the story: Novo Nordisk is a superb biotech inventory to purchase and maintain for some time.
