3 Reasons to Buy Novo Nordisk Stock Right Now

Key Points

• Novo Nordisk has earned important label expansions this year.

• The company's pipeline progress should lead to more regulatory wins.

• Regulatory changes in the U.S. could also benefit the drugmaker.

• 10 stocks we like better than Novo Nordisk ›

The bigger they are, the harder they fall. That saying applies to Novo Nordisk (NYSE: NVO) and its poor performance over the past year.

The company was one of the largest healthcare stocks, and a leader in the emerging and fast-growing market for weight management medicines, coming into 2024. However, due to a series of setbacks, the stock has lost more than 40% of its value over the trailing-12-month period.

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Despite Novo Nordisk's issues, though, there remain excellent reasons to invest in the stock. Below are just three of them.

1. Recent regulatory developments are strong

In recent weeks Novo Nordisk has secured several key label expansions for some of its products, which should contribute meaningfully to the company's results. The company's most famous weight management medicine, Wegovy, gained approval in the U.S. for the treatment of metabolic dysfunction-associated steatohepatitis (MASH).

Image source: Getty Images.

Obesity is a major risk factor for this disease, which leads to severe scarring of the liver in its most serious forms. There are millions of people in the U.S. who suffer from clinically meaningful MASH, but only one therapy has been approved specifically for it: Rezdiffra, marketed by Madrigal Pharmaceuticals. Rezdiffra earned the green light just last year, but has already generated $350 million in sales in the fiscal 2025. That's a strong commercial uptake for a therapy that hasn't been on the market for long.

In other words, there's strong demand for treatments for MASH. Wegovy could also be hugely successful in this indication, potentially adding over $1 billion in sales of the medicine. Furthermore, in Europe, Novo Nordisk's Rybelsus, an oral GLP-1 medicine indicated for the treatment of type 2 diabetes, has earned a label expansion for reducing certain cardiovascular events including heart attacks and strokes. That's also an indication that could be meaningful for Novo Nordisk.

Of note, the company is expecting approval of Wegovy for MASH in Europe and of Rybelsus for cardiovascular health in the U.S.

2. The pipeline looks attractive

Pipeline setbacks have been a significant issue for Novo Nordisk over the past year. However, the company still has plenty of tricks up its sleeve. Earlier this year, it submitted an application to the U.S. Food and Drug Administration for oral semaglutide (the active ingredient in Wegovy) in weight management.

There are no oral GLP-1 medicines approved for weight loss, so, once again, Novo Nordisk might be first to market. And this opportunity could be huge. Sales of anti-obesity medications are growing rapidly, but a more flexible, convenient, and less expensive oral option could help propel the market even higher.

Meanwhile, Novo Nordisk is also preparing regulatory submissions for its next-gen GLP-1 therapy, CagriSema. While this medicine didn't perform quite as well as Wall Street expected in phase 3 studies, it still has tremendous prospects. CagriSema could generate as much as $15.2 billion in sales by 2030, according to some estimates.

Beyond that, Novo Nordisk has several candidates that are still in clinical trials. The company's amycretin is another investigational GLP-1 medicine in phase 3 studies. Novo Nordisk is developing both an oral and a subcutaneous formulation of this compound.

Thanks to licensing deals and acquisitions, it has improved its pipeline further. Novo Nordisk aims to stay competitive with its main rival, Eli Lilly. It's to that end that the company licensed out UBT251 from a China-based company, United Laboratories. UBT251, a potential weight management therapy, mimics the action of three gut hormones, including GLP-1. Typical GLP-1 medicines mimic just this single hormone; Lilly's Zepbound, which is the hottest anti-obesity drug on the market, targets an additional one on top of that.

No medicine like UBT251 that mimics three hormones is currently approved for weight loss, so this could be a significant breakthrough. That's why Novo Nordisk spent $200 million up front -- and promised up to $1.8 billion more in milestone payments -- to get its hands on it. The company could see significant pipeline progress from this or other products in the next few years.

3. Medicare coverage could be on the way

According to some reports, the U.S. Centers for Medicare and Medicaid Services is considering covering GLP-1 drugs for weight loss. Although the Trump administration initially rejected a Biden-era proposal along those lines, it's now considering launching a five-year pilot program that would allow individual states' Medicare and Medicaid programs to cover these medicines.

That would make more people eligible for third-party coverage for these therapies and significantly increase the demand for them, especially since their prices can sometimes be a serious deterrent. This proposal isn't final yet. But considering the numerous benefits of these therapies, which extend well beyond weight loss, it won't be surprising if Medicare and Medicaid eventually cover them.

Focus on the long game

Despite Novo Nordisk's setbacks over the past year, the company is slowly making progress. Clinical and regulatory milestones could help it launch new products and maintain substantial revenue and earnings growth, while increased third-party coverage will also have a beneficial effect on its financial results. Overall, the company's prospects remain attractive, and now is an especially good time to buy its shares while they're still down.

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Prosper Junior Bakiny has positions in Eli Lilly and Novo Nordisk. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.