Novo Nordisk Q1 results: ‘Strong performance’ and ‘rosy outlook’ expected

Investment into weight loss and diabetes drugs Wegovy and Ozempic which are produced by Novo Nordisk have soared in popularity, resulting in record-breaking growth for the company in the last quarter of 2023.

Ahead of the Danish companies report on first-quarter 2024 results, Peter Garnry, head of strategy at investment platform Saxo said a ‘strong performance’ is expected, predicting 20% year-on-year revenue growth and 19% YoY net income growth’.

However, Peter warned that the company should ‘prepare for significant setbacks’ which could come from ‘increased competition’

Peter noted that Eli Lilly has ‘joined the race’ as Novo Nordisk’s biggest competitor after the company raised its annual sales forecast by $2 billion on Tuesday, but noted that the market is ‘big enough for both to grow at healthy rates for a long time’.

Commenting on the future of Novo Nordisk, Peter added that due to the world’s obesity problems the markets have the potential to become the ‘largest companies in the world overtaking the equity market leadership from technology companies’.

Peter Garnry, head of strategy at investment platform Saxo said, “Novo Nordisk is expected to deliver 20% year-on-year (YoY) revenue growth and 19% YoY net income growth reflecting the strong demand for its obesity drug Wegovy.

“In the previous quarter it was clear that because of production constraints, consumers got access to Ozempic (the diabetes drug using the same GLP-1 active ingredient, semaglutide, as Wegovy). Given the results from Eli Lilly this Tuesday the market expects strong performance, a rosy outlook on both demand and production capacity, and maybe a positive revision to its 2024 outlook.

The key risk is growing fast but in a profitable way that does not jeopardise Novo Nordisk’s stellar operating performance in the past. Expectations are also high so investors should prepare for significant setbacks in the share price at one point, and that will happen when Novo Nordisk disappoints. Another key risk is also that the market is wrong in the overall market potential over a 5-10-year horizon. Increased competition and alternatives may also alter the outlook from what is priced into the share price.

“Eli Lilly has joined the race to be the market leader in this new class of drugs and production capacity in addition to distribution will be critical for both companies. Other pharma companies are also trying to catch up but it is a race against time for competitors. For now, Novo Nordisk’s main competitor is Eli Lilly, and the market is big enough for both to grow at healthy rates for a long time.

“Obesity is one the world’s most critical problems and multi-dimensional disease. As a result, this market is probably one of the biggest in the world and healthcare companies tackling obesity and cancer may become the largest companies in the world in the future overtaking the equity market leadership from technology companies. There is a meaningful probability for this scenario to play out over the coming decade.”