Finally a stock I like...this one is a real deal
Novo Nordisk
Finally, an investment idea! (after how much doom and gloom?) — Novo Nordisk.
You will all be familiar with Ozempic, the Danish company’s flagship product and the reason so many celebrities, influencers, b listers and regular schmegular Americans are suddenly skinny. I ignored the stock for most of ‘23/24, because it was so expensive. I am still a value investor (for my sins) and I just didn’t see a lot of value there — it was priced in.
Imagine my surprise as I was thinking about “megatrends” (vom) for the year ahead — AI, data, 'zempy. Novo stock has fallen 37.80% in the last six months. And you know what that means…that’s a real deal!
Why is it a real deal? (Don’t you like booze stocks Eden?)
Ozempic is not going away. At this point it is synonymous with weight loss as “Uber” is to ridesharing or Google is to search.
Note this data per Barclays, from recently issued rx data in the US — Ozempic script issuance has grown +8.4%, while WeGovy slightly trails it at 7.4% — both owned by Novo. While Eli Lilly also makes a GLP, Novo is still the leader.
Strong guidance from management on sales — +16% - 24% — roughly implies revenue of $48bn for ‘25 and $57bn for ‘26…that’s a compounder.
America and much of the western world has an obesity problem. There is a clear incentive for governments to underwrite the drug because obesity has a clear social + fiscal cost on society — per UoA, the fiscal cost of obesity in NZ is at least $2bn1.
People have an incentive to use Ozempic, because they are vain.
This is a nice hedge against the booze stocks I like so much. Benefit from both sides of the trade — buy booze at low teens multiples; buy Novo and benefit from lower drinking rates as there’s several studies that imply ‘Zempy reduces drinking.
I don’t want Ozempic, because I like to live the good life.
This does not mean the vast majority of people won’t use Ozempic. At the moment, one in eight Americans have used a GLP. That’s +334mn people. 40% of Americans are obsese.
There’s a Lollapalooza effect happening here — a bunch of incentives — vain people, governments wanting less obese people, the various side health benefits of GLPs, etc. I like when a lot of incentives are aligned because you’re relying on psychology rather than projecting numbers on an excel spreadsheet.
Novo has sold off recently due to a trial of its CagriSema drug missing expectations. Eyes on the prize, though — current GLPs, which still have plenty of market to saturate.
Eli Lilly has traded up in recent times, while Novo has traded down. The two tend to trade in lockstep so the disconnect is an opportunity to buy the world’s leading GLP maker at a good price.
Eli Lilly is the closest comp, but it trades at a 38x fwd multiple, while Novo trades at 20x — i.e. an almost 50% multiple discount. I like that too…
Note analyst recs below…
Hold on though, booze stocks —
Quick note on a couple of beer stocks. Heineken and Molson Coors both reporting better than expected numbers — both stocks up double digits on the news. This plays into my other thesis — people still drink. Hence why I am sticking to my guns with booze stocks — no, Brown Forman will probably never trade at 30x earnings again, but at 14x earnings it is a no-brainer.
NZ
NZME — Obviously legacy media is “dead”, but I had to laugh at speculation the Zuru dude would buy the co/Herald. Would it mean society features every day?!
Aus
No interest in Treasury selling their low-cost wine brands. Surprise surprise.
Thinking a lot about lithium and rare earths…we used to love Lynas. Stock hasn’t done much in a year. Noting consolidation pressure in the space (China…), could be interesting.
https://www.auckland.ac.nz/en/news/2021/12/24/cost-of-excess-weight-in-nz.html