AZN - Novo Nordisk: SOTP After Impressive FY23 And Weight Loss Going Mainstream Maintain Buy

2024-02-22 21:01:24 ET

Summary

• Novo Nordisk had a near perfect FY23. Fundamentally, FY24 should look quite similar.
• In reviewing FY23 results and commentary, we discuss key points like SELECT outcomes; CagriSema progress; and expansion into cardiovascular disease.
• Though expensive, we argue that it's somewhat reasonable given expectations.
• We continue to like the story.

In 2023, it was the Yahoo Finance ‘ Company of the Year ’; Lars Fruergaard Jørgensen was the FT ‘ CEO of the Year ’; its stock rose ~53% to become the largest company in Europe by market capitalization ; and the Danish government had to provide its official figures adjusted to exclude its impact . What a year Novo Nordisk has had. This was driven by its novel GLP-1 therapeutics, Wegovy and Ozempic, which have become household names attracting a buzz deafened only by the louder buzz for AI.

In reviewing the story, not a whole lot has changed yet a lot has. Our initial allocation in 2020 was predicated on its ability t 1o maintain its edge in diabetes. This hasn’t changed – in fact, its market share has increased. What has changed is that the Obesity Care unit ( we wrote about it in 2022 ), is now arguably the narrative driver for the stock despite, admittedly, not being core to our initial thesis. As investors, we must take a view on it – despite it being only 17.9% of sales and, bullishly, 30-40% by 2028. The appetite Mr Market has shown for this story and its reflection on valuation is the primary bear case posited by authors on Seeking Alpha. We find it not so simple....

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