Will Novo Nordisk's Rare Disease Bets Reduce GLP-1 Reliance?

Novo Nordisk NVO has experienced remarkable growth in recent years, largely fueled by the commercial success of its blockbuster semaglutide (GLP-1 RA)-based therapies, Wegovy for obesity and Ozempic for type II diabetes (T2D). While maintaining its leadership in metabolic diseases, the company is also making significant efforts to diversify its portfolio, particularly in rare blood disorders.

NVO’s key marketed hemophilia therapies include NovoSeven and Esperoct, which generate incremental revenues for the company. NovoSeven is approved in the United States and the EU for several bleeding disorders, including hemophilia A or B with inhibitors, Factor VII deficiency, and Glanzmann’s thrombasthenia. Esperoct is approved for treating Hemophilia A in both adults and children.

Recently, Novo Nordisk’s Alhemo was approved in the EU as a once-daily subcutaneous prophylactic treatment for patients aged 12 years or older living with haemophilia A or B with inhibitors. However, the drug is not currently approved in the United States.

NVO is also currently evaluating Mim8 in a late-stage program (FRONTIER) as a prophylaxis treatment for people with hemophilia A with or without inhibitors in patients aged 12 and older. Data readouts from the program have shown superior efficacy of the candidate, along with a favorable safety profile. Based on the findings, Novo Nordisk anticipates submitting Mim8 for regulatory review in 2025. The company is also investigating semaglutide’s potential in metabolic dysfunction–associated steatohepatitis (MASH) resolution, expecting to file for regulatory approvals in the United States and the EU in 2025. Subject to approval, these candidates will further contribute to the top line.

Other Pharma Giants Diversifying Beyond Flagship Drugs

Novo Nordisk’s arch-rival, Eli Lilly LLY, generates most of its revenues from the sale of its tirzepatide medicines, Mounjaro for T2D, and Zepbound for obesity. However, Lilly also boasts a wide range of products that serve other therapeutic areas, such as neuroscience, oncology and immunology — all high-growth areas and representing significant commercial potential. Some key growth products include the oncology drug Verzenio and immunology drug Taltz, which accounted for 9% and 6% of total first-quarter sales, respectively. Over the past couple of years, LLY’s new drugs, including Omvoh and Ebglyss in immunology, Jaypirca in oncology and Kisunla in neuroscience, have all been contributing to its top-line growth. Lilly expects the potential launch of new medicines like imlunestrant for metastatic breast cancer to contribute to growth in 2025.

Another large-cap drugmaker, Merck MRK, is also making significant efforts in broadening its therapeutic reach beyond core revenue drivers. MRK’s flagship oncology drug Keytruda, which accounts for nearly half of its total revenues, is expanding its late-stage pipeline to reduce dependence on the product. We believe new products like Capvaxive (pneumococcal vaccine) and Winrevair (PAH drug) have the potential to generate significant revenues over the long term. Merck recently secured the FDA’s approval for long-acting RSV antibody Enflonsia for newborns, which is expected to launch later this month.

NVO’s Stock Price, Valuation, Estimates

Year to date, Novo Nordisk shares have lost 19.6% compared with the industry’s 0.3% decline. The company has also underperformed the sector and the S&P 500 during the same time frame, as seen in the chart below.

NVO Stock Underperforms the Industry, Sector & the S&P 500

Novo Nordisk is trading at a premium to the industry, as seen in the chart below. Going by the price/earnings ratio, the company’s shares currently trade at 16.31 forward earnings, which is higher than 15.09 for the industry. However, the stock is trading much below its five-year mean of 29.25.

NVO Stock Valuation

Earnings estimates for 2025 have improved from $3.89 to $3.93 per share over the past 60 days. During the same time frame, Novo Nordisk’s 2026 earnings per share estimates have decreased from $4.76 to $4.58.

NVO Estimate Movement

The stock’s return on equity on a trailing 12-month basis is 80.95%, which is higher than 33.55% for the large drugmaker industry, as seen in the chart below.

NVO Return on Equity

Novo Nordisk currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research