Novo Nordisk at "heart" of weight-loss boom but hurdles remain

(Alliance News) - Novo Nordisk AS has seen its obesity and diabetes treatments transform the 100-year-old Danish company, as it taps into "one of the hottest areas in business."

"The weight-loss drug industry has become one of the hottest areas in business. Consumers are eager to use the products amid signs they have positive effects, and drug companies are seeing dollar signs in their eyes as they rush to launch new treatments," said AJ Bell's Russ Mould.

"Novo Nordisk has been at the heart of the weight-loss boom and its latest results show a business doing incredibly well. Sales across obesity care and diabetes treatments are growing fast and more than offset weakness in rare disease drugs."

On Wednesday, the Copenhagen-based pharmaceutical firm said its focus for 2024 will be on progressing and expanding its drug pipeline, together with a "significant expansion" of production capacity to keep up with demand.

Net profit was DKK83.68 billion, about USD12.15 billion, in 2023, up 51% from DKK55.53 billion. This was on net sales of DKK232.26 billion, up 31% from DKK176.95 billion. At constant currency rates, sales were up 36%.

Novo Nordisk declared a final dividend of DKK6.40 per share, making for a full-year payout of DKK9.40. The company also announced plans for a share buyback worth up to DKK20 billion.

Looking ahead to 2024, Novo Nordisk said it expects sales growth at constant exchange rates of 18% to 26%. Operating profit growth is expected to be 21% to 29% from 2023's DKK102.57 billion, which was up from DKK74.81 billion in 2022.

"We are very pleased with the strong performance in 2023 reflecting that more than 40 million people are now benefiting from our innovative diabetes and obesity treatments," said Chief Executive Officer Lars Fruergaard Jorgensen.

However, AJ Bell's Mould pointed out some potential issues which Novo might face in the coming year.

"There are two key issues to watch. First is heightened competition which means there could be pressure on drug prices. Novo Nordisk will no doubt be hoping that higher sales volumes help to make up for any drop in price if that happens. It is investing in extra production capacity to avoid supply issues experienced in 2023," Mould said.

It was just on Friday last week that US pharmaceutical company Eli Lilly & Co's said that its weight loss drug could be supplied to UK "in weeks." Mounjaro, also known as tirzepatide, is a diabetes drug that was authorised by the MHRA to help obese and overweight adults with weight management and loss in November last year.

Mould's second issue was potential backlash around weight loss products.

"Second is the growing backlash against the product where lots of people are complaining about nasty side-effects. While a lot of individuals want to use it, staying on the drug could be a tall order if they cause stomach problems."

In December, US drugmaker Pfizer Inc said it would end a clinical trial of its developmental weight loss pill after high side effect rates caused most participants to stop using it.

A twice-daily dosing of the highly anticipated drug danuglipron was found to be effective, resulting in weight reductions of between 8-13% at 32 weeks, compared to a placebo. But nearly three-quarters of trial participants experienced nausea, almost half had vomiting, and a quarter had diarrhea.

Novo Nordisk shares were up 1.6% to DKK764.70 on Wednesday afternoon in Copenhagen. It has a DKK2.56 trillion market capitalisation, making it one of the most valuable European companies.

By Sophie Rose, Alliance News senior reporter

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