Why Novo Nordisk Stock Popped Today

Novo Nordisk (NYSE: NVO) stock jumped 3.1% at the open Thursday morning before drifting back. As of 10:54 a.m. ET, it was still up by about 1.2%.

The stock is benefiting from an exclusive Reuters report published before the opening of trading that said the World Health Organization "plans to officially back the use of weight-loss drugs to treat obesity in adults for the first time." Specifically, the organization will endorse the use of GLP-1 receptor agonists.

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WHO's on first

This first-ever WHO endorsement of weight-loss treatments promises to boost Novo's attractiveness by increasing demand for semaglutide -- the GLP-1 receptor agonist the company markets as Zepbound for weight loss and Ozempic for diabetes. As Reuters points out, more than 1 billion people around the world suffer from obesity and are potential consumers of Novo Nordisk's drugs (as well as those marketed by rival Eli Lily). That's a total market 10x as big as the 100 million estimated U.S. adults who are obese.

The downside here -- in more ways than one -- is that a lot of those 1 billion people can't afford to pay the high prices that drugmakers are charging for such treatments: Reuters estimates that about 700 million of them live in low- and middle-income countries. Meanwhile, the price of a Wegovy prescription under Novo's recently launched direct-to-customer "discount" service comes in at $499 per month.

What does this mean for Novo Nordisk stock?

This caveat is presumably the reason why Novo Nordisk stock hasn't held onto all the gains it first received on news of the pending WHO report. But there's another catalyst on the horizon because, while the news that the report is coming is now public, its official release is still to come.

Reuters reports that the full report will be published in August as part of a larger set of guidelines on treating obesity. The WHO is also said to be considering whether to recommend GLP-1 drugs as "essential medicines" for treating diabetes, another potential catalyst that could boost Novo Nordisk's stock.

For the drugmaker, the key to exploiting the full benefits of this news will be to continue expanding the production of semaglutide, both to address a larger market than it has been supplying already and to finish developing and earn approvals for semaglutide that can be taken orally, in pill form -- a treatment option that could require dosages as much as 70 times higher than the dosages for injections.

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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.