A new version of the weight-loss pill will hit the market next month.
The drug could re-accelerate Novo Nordisk’s revenue growth and could trigger a strong rebound in its stock price from a depressed valuation.
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Is there a more popular health trend right now than GLP-1 agonist obesity drugs like Ozempic? Probably not. But the irony is that investing in Ozempic, or rather its maker, Novo Nordisk(NYSE: NVO)not having a good year this year.
By 2025, the share price will fall by 40%. Eli Lilly and CompanyDrugs like Zepbound and telemedicine companies selling compound versions of Ozempic have put pressure on Novo Nordisk’s business, so much so that the company fired its chief executive earlier this year.
Investing in a cold stock like Novo Nordisk might feel a little scary, but things could be starting to heat up again for the pharmaceutical giant.
Image source: Novo Nordisk
Novo Nordisk shares surged on Tuesday following news that the U.S. Food and Drug Administration (FDA) has officially approved its application to sell Wegovy in pill form in the United States. Wegovy is the same drug as Ozempic, commonly known as semaglutide, but the latter is approved to treat type 2 diabetes, while Wegovy is the brand name used for weight management.
The FDA’s decision is significant for several reasons. First, the Wegovy pill will be the first oral GLP-1 drug on the market. In a Phase 3 trial of the treatment, participants lost an average of 16.6% of their body weight over 64 weeks, with one-third losing 20% or more. Second, most patients may prefer taking daily medications rather than injections.
A new version of the drug would give Novo Nordisk an important tool to counter the competitive pressure it faces. Eli Lilly is seeking FDA approval for its oral obesity drug, which could come as soon as March, but Novo Nordisk is winning the race. In the meantime, Wegovy is likely to gain traction quickly, which will help Novo Nordisk, even if it remains the only approved drug of its kind for a limited time.
The Wegovy pill will be available to patients in early January, and Novo Nordisk’s CEO said the company has built enough supply to support an aggressive product launch. “We have enough medicine this time,” he said.
Novo Nordisk’s business clearly feels the intensity of competition. Its revenue growth has slowed steadily for more than a year. However, based on the headlines and stock performance, it would be easy to believe that the business has collapsed, but that is not the case.
In fact, Novo Nordisk continues to grow, with double-digit revenue percentage growth in its most recent quarter. Its earnings per share have roughly doubled since the start of 2023.
NVO revenue (quarter-over-year growth) data provided by YCharts.
After the share price fell, Novo Nordisk was like a compressed spring – it was just waiting to release its pent-up energy. The stock currently trades at just 13 times projected 2025 earnings.
Even if its growth rate is only steady in the low double-digit percentages, that’s arguably a bargain. However, it appears that the Wegovy pill could be a significant catalyst that could re-accelerate the company’s top-line growth by mid-2026.
If Novo Nordisk can grow earnings at an annualized rate of 15% or higher in the future, the market could easily push its P/E ratio back above 20.
That means it could be a home run investment for next year. A simple rebound in the stock’s valuation to 20 times earnings would equate to a more than 50% rise in the stock price from then on, and that’s before factoring in potential double-digit earnings growth.
Additionally, at the current share price, the company’s dividend yields 3.3%, which is close to its highest yield on record. If you add it all up, Novo Nordisk has the makings to be a market-beating investment in 2026. That’s not a guaranteed outcome, but the tailwinds it should experience are reason enough to strongly consider adding the stock to your portfolio in the new year.
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
Should you invest in ozone maker Novo Nordisk in 2026? Originally posted by The Motley Fool
