"Are you injecting or are you still starving?" could be Novo Nordisk's advertising slogan for its "Wegovy" weight loss injection. The Danes have triggered a real hype worldwide with their anti-obesity injection. Support came from celebrities such as billionaire Elon Musk and reality starlet Kim Kardashian, who spoke highly of the product on social media.
A look at the "World Obesity Atlas 2023" shows that dieting is a big issue around the globe. According to the study, more than half of the world's population could suffer from obesity by 2034. According to the WHO, obesity has already reached "epidemic proportions. In fact, more than 5 million people die each year as a result of the chronic disease, according to the data.
The drug from the Danish pharmaceutical giant Novo Nordisk is therefore right on target. The active ingredient "semaglutide," which is actually used for the metabolic disease diabetes, not only ensures weight loss, but according to studies can also counteract the so-called yo-yo effect. Three quarters of the patients who were injected with one dose of semaglutide per week as an adjunct to lifestyle changes reduced their body mass by more than 10% after 68 weeks, and almost 35% even lost more than a fifth of their weight (see graph). With these results, it is not surprising that demand is so high that there have been repeated supply problems in recent months. Now a new market is being added - and it is by no means an insignificant one. In the EU, Novo Nordisk had already received approval for semaglutide as a pure obesity drug in January 2022, and the drug is now to be launched in Germany at the end of July. The potential in the neighboring country seems enormous; according to the RKI, around one fifth of adults and around 15% of children and adolescents aged between 3 and 17 are considered obese.
But the northerners are not satisfied with what they have achieved; after all, many overweight people shy away from repeated injections into their stomachs. That's why the Danes are currently developing a diet pill with the same effect. Research is already well advanced and the capsule is already in Phase III, i.e. in the final clinical development stage. Before the end of this year, Novo Nordisk intends to submit applications for approval to the health authorities in the U.S. and Europe, and a decision will then be made on whether to launch the product on the market.
For the pharmaceutical industry, the diet trend is a billion-dollar business. Analysts at Barclays, for example, expect the global market for obesity drugs to expand from USD 2.9 billion in 2022 to more than USD 60 billion by the end of the decade. Novo Nordisk is already doing well, with revenues in its obesity division more than doubling to the equivalent of EUR 2.26 billion last year alone.
The sum of good news caused the Novo Nordisk share to literally go through the roof recently. The share price rose by around 30% on a one-year horizon alone, peaking at a plus of 46%. However, there have been repeated setbacks in recent weeks. The consolidation could have various reasons. On the one hand, the Danes have to contend with weighty competition in the race for the weight loss tablet. The renowned US pharmaceutical companies Eli Lilly and Pfizer are also researching an anti-obesity pill. On the other hand, the market launch of the injection is proceeding more slowly than planned in many European nations due to the boom in the USA. In addition, numerous health insurers are hotly debating whether to pay for the expensive treatment - $1300 per month. Finally, possible side effects emerged this week. After reports of suicidal thoughts in patients, the European Medicines Agency EMA is investigating the two obesity drugs "Ozempic" and "Saxenda".
The hype surrounding Wegovy also ensured that the stock no longer appears cheap. The 2023 P/E ratio is over 30, and based on expected earnings for 2024, it works out to 26. By comparison, earnings growth until then is estimated at 16% p.a. on average. Although the analyst consensus still recommends a buy, the rating has increasingly approached the hold range in recent weeks.
Possibly the right moment to act with conditional partial protection in the high-flyer Novo Nordisk. The new Softcallable Barrier Reverse Convertible has an excellent risk/reward ratio: the coupon is 7.00% p.a., the risk buffer is a comfortable 31%. The CHF-denominated security has a maximum maturity of 15 months. Due to the soft callable feature, the maturity may be reduced to a minimum of six months.
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