Buy, Sell, or Hold Novo Nordisk at $46?
Key Points
The bulk of Novo Nordisk's sales come from weight-loss and diabetes treatments.
The biotech faces competition from companies like Eli Lilly and Pfizer, among others.
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Novo Nordisk (NYSE: NVO) shares have continued their underperformance -- losing 7.5% so far this year compared to the S&P 500 index's 8% gain.
Of course, that's in the past. Current and potential Novo Nordisk shareholders want to know what to do now, with the stock price at about $46. To make that determination, you need to look closer at Novo Nordisk's fundamentals.
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Analyzing the fundamentals
Novo Nordisk makes Wegovy and Ozempic, popular weight loss and diabetes treatments. They're a major source of the company's sales. Weight loss and diabetes treatments made up more than three-quarters of the company's first-quarter sales, with Wegovy and Ozempic comprising the majority. Many people have heard about the drugs, and likely know someone taking, or considering, taking them.
While these drugs have caught on with people, there have been signs that Wegovy and Ozempic have been affected by competition. For instance, the latter's first-quarter sales dropped 8% year over year on a constant-currency basis. True, Novo Nordisk began selling a Wegovy pill, but Eli Lilly (NYSE: LLY) also received FDA approval for an oral treatment, Foundayo.
Aside from Eli Lilly, Novo Nordisk also faces stiff competition from other companies. That includes Pfizer, which acquired Metsera in November based on its weight-loss drug pipeline.
Certainly, obesity and diabetes have been ongoing problems for many people. Hence, companies want to enter it to get a piece of the market. Certainly, Novo Nordisk doesn't have it all to itself. With intense competition and the company's reliance on the drug treatments for the bulk of its sales, I'd sell Novo Nordisk shares.
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Lawrence Rothman, CFA has positions in Pfizer. The Motley Fool has positions in and recommends Eli Lilly and Pfizer. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
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