POSITIONS:
Full disclosure I have 405 shares of NVO and call options in 2024.
DATA:
Attached are the numbers for PE and PEG 2025 projected out based on 38% y/y eps growth (this is the guidance they just issued during Q3 2023 ER) or about 9.5% per quarter. As you can see, the PE is less than 20 and PEG less than 1. I don’t have it here. But PE for next year is roughly 25 and the PEG still way under 1.
GUIDANCE:
NVO has a history of sandbagging guidance and being ultra conservative. They are hitting 38% right now WITH supply side constraints. So my thesis is that we will see even higher Rev and EPS in 2024 assuming they can keep production growing. Note: they increased production 5 fold in 2023 to keep up with Ozempic and Wegovy demand, and still are restricting lower doses due to demand.
These products are also protected and already defended in court once this year for patent laws. Ozempic til. 2027 and Wegovy till 2031 before legal generics can be made. So their runway is many years ahead.
OTHER Rev Streams:
Aside from the weight loss drugs everyone is crazed about. Novo controls 1/3 of the diabetes market world wide and 1/2 of the insulin market. They are no one trick pony.
SELECT trial:
Additionally they plan to release their SELECT trial data Nov 11 this week. This is for their cardiovascular indication of Wegovy. I expect this to be more good news. They are hoping to file NDA this year.
FLOW trial:
They also have a trial for CKD or kidney disease ongoing which just last month ended early because the data was so good and it hit the primary endpoint. This data will be shared Q1 2024. This will further their product line and indictions.
INSURANCE:
80% of insurers already cover their drugs. With the new indications and approvals on those. That number will be 100%. Healthy customers. Less need for insurance. Companies will agree to this because it will save them covering major medical bills.
COMPETITION:
As previously stated, no concerns about generics for a while LLY is the next closest for approvals this year. IF Mounjaro is approved, which I think it will be, the demand is so strong I think they both feast and NVO sees no impact to their bottom line. Projections for the weight loss side alone are 100B by 2030. This doesn’t factor in cardiovascular and kidney. There are other companies but they’re way behind. NVO will have a pill form before their shots are even approved. NVO is targeting 2025 for pills.
FIRST MOVER:
Think of it like TSLA in its ramping phase. NVO just lifted off on its S curve of growth. I think MC easily goes up 50% from here. And possibly doubles to 900B in 2025. It’s hard to scale with demand as it is. It takes time. Yes companies may get approvals in 2024 or 2025. But they will need time also to produce batches. Which is also very expensive. NVO will be by far the most efficient by then with their processes. Everyone else will sink in money to play catch up and that will eat into their margins and revenues. Look at the diff in LLY and NVO in Q3. LLY is trying hard to catch up and it shows in their expenses and bottom line.
TARGETS:
My price targets, if they can just hit the growth they eare seeing now for the next two years at 38% per year (assuming no more growth) are $145 by end of 2024 and $190 by 2025 EOY. This all relies on us avoiding a recession of course…
