On Friday, BofA Securities maintained a Buy rating on shares of Novo Nordisk (CSE:NOVOb) (NOVOB:DC) (NYSE: NYSE:NVO) with a price target of DKK1,075.00. The firm's analyst commented on the stock's recent performance, noting a significant downturn in the second half of 2024, which saw shares drop approximately 40%.
This decline was attributed to a combination of factors including disappointing results from the CagriSema weight loss treatment, safety concerns regarding the oral obesity drug Monlunabant, and minor EPS downgrades due to a slower supply ramp-up.
The analyst highlighted five key questions that could influence Novo Nordisk's share price, as detailed in their "What now?" note. These questions revolve around the efficacy of the CagriSema profile, the potential for an EPS upgrade cycle, the impact of competition from drugs like LLY's orforglipron, the positioning of Amycretin as a best-in-class treatment, and the performance of Ozempic IRA.
Further analysis by BofA Securities suggests that Novo Nordisk's valuation is attractive, with the stock trading close to a 10-year low on a P/E basis. This is despite the company's robust forward growth projections, with an estimated 12-13% sales compound annual growth rate (CAGR). BofA believes that the issues will likely resolve in Novo Nordisk's favor.
The firm also discussed the double-edged nature of Novo Nordisk's Semaglutide high dose obesity Phase III study. On one hand, it enhances the drug's efficacy as a leading obesity treatment, nearing the best-in-class profile of Zepbound.
On the other hand, it presents limited differentiation from the initial CagriSema data profile, which could become a more pressing concern as the drug reaches its loss of exclusivity (LOE) on December 31.
The efficacy of the Semaglutide 7.2mg dose, which showed approximately 3% better weight loss compared to the 2.4mg dose, is close to the 20.9% weight loss observed with Zepbound. However, with the looming LOE and the CagriSema profile still under debate, investors are anticipating further insights from the FY results, REDEFINE-2 study, or detailed REDEFINE-1 data at the American Diabetes Association (ADA) meeting in June.
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