On Wednesday, BofA Securities adjusted its outlook on shares of Novo Nordisk (NYSE:NVO), reducing the price target to $159.50 from the previous $166.00, while reaffirming a Buy rating on the stock. The adjustment comes as the analyst projects third-quarter group sales to reach approximately DKK 69.4 billion, marking an 18% year-over-year increase, and earnings before interest and taxes (EBIT) to hit around DKK 33 billion, a 23% rise from the previous year. Despite these gains, the forecasted EBIT is about 4% below the consensus.
The analyst highlighted two key factors affecting the third quarter for Novo Nordisk. Firstly, the pricing dynamics of Wegovy, the company's weight management drug, are expected to align with the first half, considering the DKK 1 billion rebate adjustment made in the second quarter. The pricing in the second quarter was lower than in the first, and the sequential price development will be closely watched. Wegovy sales are anticipated to be around DKK 16.5 billion, slightly below the Visible Alpha consensus of approximately DKK 17 billion.
Secondly, the growth of Ozempic, another prominent Novo Nordisk product for diabetes management, is predicted to decelerate, with third-quarter total prescription growth estimated at around 25%, compared to approximately 35% at the start of the year. This slowdown, coupled with the previous quarter's rebate adjustment benefit of around DKK 0.7 billion, is expected to further reduce sales growth by about 4%. Consequently, Ozempic sales are forecasted to reach DKK 27.1 billion, signifying a 13% increase.
The analyst has also revised the full-year 2024 earnings per share (EPS) downwards by roughly 2% to reflect the slower growth of Ozempic and a slightly delayed ramp-up in Wegovy supply, with a new estimated total prescription exit rate of around 280,000 compared to the previous 300,000.
For the full-year 2025, the EPS forecast has been reduced by about 5% due to these trends. The new price objective of DKK 1075 (equivalent to $159.50 for the American Depository Receipt) aligns with these EPS adjustments, positioning it just above the midpoint of the company's full-year 2024 guidance and marginally above the consensus for the full-year 2025 EBIT growth of approximately 30%.
In other recent news, Novo Nordisk has been actively mitigating the impact of ongoing U.S. port strikes on its operations by resorting to air freight for shipping its products. The Danish pharmaceutical company has been importing semaglutide, the active ingredient in its popular medications Ozempic and Wegovy, into the U.S. and aims to prevent disruptions caused by the port strikes. Meanwhile, Berenberg has maintained its Hold rating on Novo Nordisk amid concerns over the Phase 3 trial results for CagriSema, an investigational therapy by the company.
In a recent development, Novo Nordisk CEO Lars Jorgensen testified before the U.S. Senate Committee on Health, Education, Labor, and Pensions regarding the pricing of the company's weight-loss and diabetes medications, Wegovy and Ozempic. BMO Capital Markets maintained an Outperform rating on Novo Nordisk, despite mixed results from the phase 2a trial of Monlunabant, a weight loss drug.
Finally, a lawsuit against the U.S. law mandating drug price negotiations for Medicare was revived by the 5th U.S. Circuit Court of Appeals, potentially impacting Novo Nordisk as its diabetes medication, Ozempic, is under scrutiny for potential inclusion in the 2027 Medicare price negotiations.
InvestingPro Insights
To complement BofA Securities' analysis of Novo Nordisk (NYSE:NVO), recent data from InvestingPro offers additional perspective on the company's financial position and market performance. Despite the reduced price target, NVO's market capitalization stands at an impressive $519.74 billion, underscoring its significant presence in the pharmaceutical industry.
InvestingPro data reveals that Novo Nordisk's revenue growth remains robust, with a 28.15% increase in the last twelve months as of Q2 2024. This aligns with the analyst's projection of continued sales growth, albeit at a potentially slower pace for some products. The company's profitability is also noteworthy, with a gross profit margin of 84.53% and an operating income margin of 45.96% for the same period, indicating strong operational efficiency.
Two relevant InvestingPro Tips highlight that Novo Nordisk "has maintained dividend payments for 36 consecutive years" and "operates with a moderate level of debt." These factors suggest financial stability, which could be reassuring for investors in light of the adjusted growth expectations for key products like Ozempic and Wegovy.
It's worth noting that InvestingPro offers 13 additional tips for Novo Nordisk, providing a more comprehensive analysis for those seeking deeper insights into the company's financial health and market position.
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