Novo Nordisk stock is Thursday's IBD Stock Of The Day. Shares are forming a fresh base after a study showed its weight-loss drug, Wegovy, cut down on heart attacks and strokes.
The Danish company studied weekly injections of Wegovy for five years in patients with obesity and established heart disease but not type 2 diabetes. Patients who received Wegovy were 73% less likely to develop diabetes. Wegovy also lowered the risk of heart attacks, strokes and death due to any cardiovascular event by a respective 28%, 7% and 15%.
These are "extraordinary health benefits, in our view," Leerink Partners analyst David Risinger said in a note. "Payers will struggle to assign arbitrary BMI (body mass index) hurdles for patients to access and remain on treatment since weight loss was not the sole drive of cardiovascular outcomes benefit."
Novo Nordisk Stock: Broadening Wegovy's Use
The study called Select could help Novo clinch approval and insurance coverage for Wegovy in a broad population of patients. Today, the Centers for Medicare and Medicaid Services doesn't reimburse for the cost of weight-loss drugs. But proving their merit in other diseases could change that.
Novo Nordisk also tested weekly semaglutide shots in patients with type 2 diabetes and chronic kidney disease. The company stopped the study about a year early after the drug showed early effectiveness. Semaglutide is the test name for Wegovy and diabetes medications Ozempic and Rybelsus.
After a recent presentation, RBC Capital Markets analyst Luca Issi said Wegovy appears to not only stoke weight loss, but also improve inflammation, glycemic control and renal function. The same could extend to Eli Lilly's rival drug tirzepatide, which now sells in diabetes treatment as Mounjaro and as a weight-loss drug called Zepbound.
"Overall, (Novo's) data were clean and the medical community is clearly enthusiastic about a safe drug that can help in tackling the global obesity epidemic (expected to reach 1 billion people by 2030)," Issi said in a report. He doesn't have a rating on Novo Nordisk stock.
The Growing Market For Weight-Loss Drugs
Now, Novo Nordisk stock is forming a flat base with a buy point at 104. MarketSmith.com shows shares slumped down to their 50-day moving average on Wednesday, but rose 3.2% to close at 99.53 on today's stock market. Investors could also look for an early entry at the downward-sloping trend line.
It will be important to keep an eye on Novo's sales and profit as the market for weight-loss drugs grows and becomes more crowded.
Analysts polled by FactSet expect adjusted earnings to grow 46% this year, but slow to just 21% growth next year. Meanwhile, sales are expected to increase 26% to $32.74 billion this year. Next year, analysts call for $39.77 billion in sales, up a smaller 21%.
Still, Novo Nordisk stock has a nearly perfect IBD Digital Composite Rating of 98. This means shares rank in the leading 2% of all stocks when it comes to fundamental and technical measures.
Follow Allison Gatlin on X, the platform formerly known as Twitter, at @IBD_AGatlin.
