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2024.05.15 08:17
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"Weight-loss miracle drug" is making great strides, Morgan Stanley: No need to hesitate on Novo Nordisk!

Morgan Stanley expects that with strong support from Wegovy sales growth, Novo Nordisk's revenue in 2024 is expected to increase by more than 50%, with operating profit growing by over 80%

Global pharmaceutical giant Novo Nordisk is stirring up new waves in the European and American markets.

On May 13, Novo Nordisk announced the latest research results of its drug Wegovy (semaglutide) in the cardiovascular large-scale Phase III clinical SELECT study, revealing that the long-term weight loss effect of the drug can be maintained for over 4 years.

It is reported that a total of 17,604 clinical obese patients were enrolled in the project, and the results showed that the weight loss effect was basically stable after 65 weeks of treatment. After 4 years (208 weeks) of treatment, the weight loss effect remained stable, with an average weight loss of 10.2% at 208 weeks.

In addition, Novo Nordisk has also been successful in drug development in other areas.

According to media reports, Novo Nordisk is currently recruiting volunteers for a Phase II trial to examine the effects of three drugs, including semaglutide, on the liver function, degree of liver fibrosis, and alcohol intake of patients with alcohol-related liver disease.

Industry media pointed out that this may be the company's first time examining the impact of glucagon-like peptide-1 (GLP-1) drugs on addiction.

Furthermore, a trial at the end of last year has shown that Wegovy has the potential to treat cardiovascular diseases, reducing the risk of death by 18%.

Novo Nordisk is reportedly enhancing the professional reputation of its drugs by expanding use cases. In March, the U.S. Food and Drug Administration (FDA) approved Wegovy for reducing the risk of heart disease, and the drug is expected to be included in medical insurance plans covering 50 million Americans.

On May 13, the Morgan Stanley research team released a report stating that Novo Nordisk's Wegovy has far exceeded market expectations, especially in the prescription volume of its initial dose, and it is expected that its accelerated growth will significantly drive profit expectations upward (Note: The initial dose refers to the first dose of a drug applied to the human body).

The report predicts that by 2030, the group's revenue will reach $83 billion, a 232% increase from the current $25 billion.

In the report, Morgan Stanley gave Novo Nordisk an "overweight" rating with a target price of 990 Danish Kroner per share, representing a potential upside of about 8.8% from the previous day's closing price.

The report predicts that with strong support from Wegovy's sales growth, the group's revenue growth in 2024 is expected to exceed 50%, and operating profit growth to exceed 80%.

Expected increase in Wegovy production capacity and sales to support optimistic profit expectations

With strong demand for Wegovy in the market, insufficient production capacity has been a hindrance on Novo Nordisk's path to profitability.

In the [Q1 financial report earlier this year](https://wallstreetcn.com/articles/3714102? Keyword=Novo Nordisk), Novo Nordisk has announced that it will double its investment in production capacity to $6.4 billion to compete with its rival, Li Auto, for the dominant position in the weight loss drug market.

So far, the plan to increase production capacity seems to be progressing well. The report indicates that from early March 2024 to the present, the prescription volume of Wegovy's starting dose (0.25mg) has increased by more than six times, and this growth trend is accelerating.

Compared to the assumed 3% weekly growth in starting dose orders at the beginning of the year, the current weekly growth rate is 15%, which is five times higher. In addition, the prescription volume for continuous doses is also on the verge of accelerating.

Our model shows that by the end of June, Wegovy's weekly prescription volume could reach 330,000.

However, considering that various dose versions are still in short supply in the U.S. market, the report predicts that by the second half of 2024, the week-on-week growth rate of starting dose orders for Wegovy in the U.S. market will slow to 3%, with sales reaching $18 billion by the end of the year.

On a global scale, the report predicts that Wegovy's global sales in 2024 will reach 76 billion Danish Krone (approximately $11.032 billion), with revenue growth expected to be 30% and operating profit growth expected to be 38%.

If the growth trend of starting dose orders in the U.S. market aligns with Morgan Stanley's expectations (accelerating growth followed by a slowdown in the second half of the year), theoretically, the group's revenue growth expectation will increase from 30% to over 50%, and the operating profit growth expectation will also increase significantly from 38% to over 80%.

Novo Nordisk stated that it will closely monitor market dynamics and prescription trends, and will continue to manage shipments as much as possible to support the continuity of patient treatment.

Regarding drug development and other disease areas, the report believes that while the group has shown a continuous investment intention in non-GLP-1 drugs in areas such as heart failure and chronic kidney disease, the peak sales of drugs in these areas may only reach $4.7 billion.

In terms of the entire weight loss drug market, Morgan Stanley stated that Novo Nordisk and Li Auto will continue to maintain their leading position as the "twin giants," with a combined market share of up to 84% In addition, at Novo Nordisk's Capital Markets Day on March 7, 2024, the report outlined three key messages, conveying the group's long-term strategic direction:

First, the injectable GLP-1 product line will continue to be produced in the long term; second, new and diversified non-GLP-1 mechanisms have emerged in the field of diabesity (diabetes and obesity complications); third, expansion into related treatment areas and the development of new technologies