Investors are hesitant despite Novo Nordisk's strong performance during the year's

The Danish diabetes and obesity giant Novo Nordisk (CSE:NOVOb) continues its strong performance in the first half of the year, delivering a sales growth of 24% and reaching sales of 133.4 billion kroner. Its GLP-1 diabetes treatment Ozempic and the weight-loss treatment Wegovy continue to be front and centre of the growth, with the two blockbuster products now alone accounting for almost 60% of its revenue.

Today's results also remove concerns around Wegovy's sales stagnation, which came after last quarter's sales slowdown. With Wegovy sales now up 24% since last quarter and 74% up compared to the first half of last year, the weight loss treatment is now back on fast-track growth mode.

Management used today's results to present the second upward sales revision for the year, now expecting full 2024 sales to accelerate to 22-28, vs previously announced 19-27%. This, however, was largely anticipated by the market and followed last year's pattern of three upward revisions.

But while management expects higher sales, they are now seeing operating profit growth for 2024 cut to 20-28%, vs previously announced 22-30%. Looking under the hood, there are good reasons for this, and Novo Nordisk continues to maintain its strong gross margins at 85%. The pressure comes from higher R&D spending due to primarily a one-off 5.7 billion kroner write-off from a closed phase 3 trial, already communicated earlier in June and should not surprise the market. At the same time, additional R&D costs are related to the expensive late-stage clinical trial activities, which is a positive indication that Novo Nordisk has progressed its R&D pipeline more successfully than previously expected. 

While Novo Nordisk continues to show strong results, this hasn't translated into stock price performance this morning. Expectations are high for Novo Nordisk, and with a hefty valuation with a forward Price/Earnings at 37x, 'close to perfection' is expected from investors. While the downward adjustment to this year’s operating profit growth doesn't look great on the surface, it is happening for the right reason and does not change the overall earnings growth story for Novo Nordisk.

Jakob Westh Christensen, eToro Nordic Market Analyst