TipRanks Smart Value #19: Value Catalyst
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Dear Investors,
Dear Investors,
Welcome to the 19th edition of our recently launched TipRanks Smart Value Newsletter!
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This Week’s Top Value Pick: Novo Nordisk (NVO)
Novo Nordisk (NVO) is a Danish1 multinational pharmaceutical company specializing in diabetes care, obesity treatment, and other serious chronic diseases. The company develops innovative, science-driven therapies that improve patient outcomes and quality of life. With a strong focus on research and biologics, Novo Nordisk delivers advanced treatments in diabetes, obesity, rare blood, and endocrine disorders, serving patients worldwide through a commitment to sustainability, accessibility, and long-term health impact.
1 – All financial data is in USD. The pharmaceutical company’s Class B shares trade on the Copenhagen Stock Exchange, and its American Depository Receipts (ADRs) are listed on the NYSE under the ticker “NVO” with 1 ADR = 1 Class B share.
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Medical Legacy
Novo Nordisk’s roots trace back to the early 1920s, when two separate Danish companies–Nordisk Gentofte and Novo Industri – began producing insulin shortly after its discovery. Initially competitors, the two companies built parallel legacies focused on diabetes care and pharmaceutical innovation. In 1989, they merged to form Novo Nordisk A/S, combining decades of scientific expertise and international reach under a unified banner.
From its early focus on insulin therapies, Novo Nordisk gradually expanded into related areas, including treatments for obesity, hemophilia, growth hormone deficiencies, and rare endocrine disorders. Strategic investments in biotechnology positioned the company at the forefront of recombinant insulin and biologics, laying the groundwork for long-term success. Novo’s entry into the U.S. market in 1981–via an IPO through American Depositary Receipts–marked a pivotal step in its global expansion.
A defining moment in Novo’s recent history came with the 2018 launch of Ozempic, a once-weekly injectable GLP-1 therapy for type 2 diabetes. The drug’s commercial success, followed by the approval of Wegovy for obesity, sparked a surge in demand for GLP-1-based treatments. In response, Novo accelerated manufacturing investments across Denmark, the U.S., and China to expand global production capacity.
Today, Novo Nordisk stands as a global leader in diabetes and obesity care, operating in 80 countries and selling in 170. Its sustained success reflects a strategic emphasis on innovation, global scale, and disciplined investment, which continues to fuel robust earnings across its expanding therapeutic portfolio. The company currently has a market capitalization of $236 billion and trailing twelve-month revenues of $303.1 billion.
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Acquistion Drive
Between 2018 and 2024, Novo Nordisk executed a series of strategic acquisitions to expand its therapeutic pipeline, strengthen its drug delivery capabilities, and scale global production, reinforcing its leadership in chronic disease care.
The journey began in 2018 with the acquisition of Ziylo for up to $800 million, giving Novo access to glucose-responsive insulin technology. In 2020, the company expanded its cardiometabolic portfolio by acquiring Corvidia Therapeutics for $2.1 billion. That same year, it bought Emisphere Technologies for $1.8 billion, gaining proprietary oral drug delivery technology essential for advancing oral GLP-1 formulations.
In 2021, Novo Nordisk bolstered its drug development capabilities with the $3.3 billion acquisition of Dicerna Pharmaceuticals, adding RNA interference (RNAi) technology2 to its research platform. The following year, it acquired Forma Therapeutics for $1.1 billion, expanding into rare diseases with late-stage candidates for sickle cell anemia and other hematologic conditions.
Novo continued building on its obesity and metabolic disease pipeline in 2023. It acquired Inversago Pharma for up to $1.075 billion, securing promising assets for obesity and diabetes treatment, and bought Embark Biotech for up to $16 million to further enhance its early-stage obesity research.
In 2024, Novo Nordisk completed two transformative deals. It acquired Catalent in a $16.5 billion all-cash transaction, which included three major fill-finish manufacturing sites3 in Italy, Belgium, and the U.S.– a move aimed at significantly scaling production of its high-demand GLP-1 therapies, Wegovy and Ozempic. That same year, it purchased Germany-based Cardior Pharmaceuticals for up to $1.1 billion, marking a strategic expansion into cardiovascular care, particularly heart failure treatment.
Together, these acquisitions have allowed Novo Nordisk to diversify beyond diabetes, improve its R&D capabilities through RNAi and oral technologies, and strengthen its manufacturing infrastructure. This acquisition-led growth strategy positions the company to meet rising global demand for innovative treatments across obesity, diabetes, cardiovascular, and rare diseases.
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2- RNA interference (RNAi) technology is a cellular mechanism used to silence or suppress the expression of specific genes. It operates by using small RNA molecules to target and degrade messenger RNA (mRNA), preventing the production of particular proteins.
3- Fill-finish capacity refers to a pharmaceutical manufacturer’s ability to perform the final, critical steps in drug production: filling sterile drug substances into their final containers (such as vials, syringes, or cartridges) and finishing those products by sealing, labeling, inspecting, and packaging them for distribution.
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Clinical Leadership
Novo Nordisk’s business model is built around the global discovery, development, manufacturing, and commercialization of innovative therapies for chronic diseases, primarily diabetes, obesity, and rare conditions. Its operations are divided into two main segments–Diabetes & Obesity Care and Rare Disease, with the former accounting for over 90% of total revenue in 2024.
The company’s exceptional growth has been driven by its GLP-1-based therapies–Ozempic, Wegovy, and Rybelsus, which have become the standard of care amid rising global rates of type 2 diabetes and obesity. Backed by strong clinical outcomes and growing adoption, these therapies have positioned Novo as a market leader, especially in North America and Europe. The company also generates revenue from modern insulins, hemophilia drugs, and hormone therapies for rare diseases, all supported by its in-house biologics production and recent manufacturing capacity expansions.
Prescription drug sales form the core of Novo’s revenue model, strengthened by intellectual property protection, global commercial reach, and pricing power. The company benefits from broad reimbursement and limited competition in key indications. It is investing heavily in R&D, targeting next-generation GLP-1s, RNA interference therapies, and treatments for metabolic and cardiovascular diseases. The late-stage pipeline includes multiple Phase 3 trials for obesity, diabetes, and MASH (a form of fatty liver disease), supporting future revenue streams.
To address global demand, Novo has committed over $12.5 billion to new active pharmaceutical ingredient (API) and fill-finish facilities across the U.S., Europe, and China, aimed at easing supply constraints and scaling production. Despite pricing pressures, especially in the U.S., strong operational discipline and a high-margin product mix have helped maintain robust free cash flow and profitability.
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Branded Resilience
Novo Nordisk’s revenue growth in the first quarter was split between the U.S. and international markets, contributing 57% and 43%, respectively. Ozempic and Wegovy together now account for nearly two-thirds of the company’s total revenue, underscoring the growing importance of its GLP-1 portfolio. Wegovy holds a dominant 69% share of the global branded obesity drug market, with Q1 FY25 sales climbing 39% in the U.S. and soaring 392% internationally. In contrast, Saxenda sales fell 40% (CER) in international markets as patients shifted to more convenient once-a-week alternatives. Despite rising competition from Eli Lilly’s Mounjaro, Ozempic still commands a strong 64% share of the international injectable GLP-1 market.
As demand for GLP-1 therapies surges, Novo is implementing several strategies to protect its market position, expand its pipeline, and sustain growth. In response to rising use of compounded4 semaglutide in the U.S., Novo launched direct-to-patient Wegovy deliveries at $499 per month and secured exclusive coverage on CVS’s national obesity formulary5, effective from July 2025. Novo expects regulatory action against illegal compounding later this year, potentially shifting a large share of the estimated one million compounded GLP-1 users back to branded drugs. The company remains confident that Wegovy’s brand strength, clinical efficacy, and commercial execution will support continued growth.
Novo is also expanding Wegovy’s approved indications. The U.S. FDA has accepted a priority review for treating MASH, with a decision expected in the second half of 2025. The company has also filed for approval of a 25 mg oral semaglutide, which could become the first oral GLP-1 for obesity, targeting a year-end 2025 launch. Meanwhile, CagriSema, Novo’s next-generation obesity therapy, showed 15.7% average weight loss in its second Phase 3 trial and is on track for regulatory submission in Q1 2026, with additional Phase 3 trials in both injectable and oral formats expected to begin shortly.
To diversify its pipeline, Novo is licensing two early-stage candidates: a non-incretin therapy for obesity or cardiometabolic diseases and a GLP-1/GIP/glucagon triple agonist aimed at improving weight loss and metabolic control. While oral GLP-1s are expected to appeal to patients who prefer pills, injectables remain favored for their superior efficacy and weekly dosing convenience.
About 55 million Americans now have insurance coverage for Wegovy, helping reduce out-of-pocket costs. Patient adherence is also improving, with average therapy duration reaching 7.4 months. Novo is actively educating patients and healthcare providers on the risks associated with compounded products, which often lack consistent quality, insurance reimbursement, and regulatory oversight.
While concerns about U.S. drug price reform persist, Novo has downplayed the risk. Wegovy has limited Medicare exposure and is competitively priced in government programs. Though Ozempic faces more exposure, the financial impact is expected to be minimal.
Globally, competition from Eli Lilly’s $350/month Mounjaro is intensifying. Yet Novo maintains a competitive edge through its scale, brand recognition, and superior reimbursement access. Wegovy is now available in 25 countries, including India, as part of its accelerated international rollout. The company is also seeking European approval for a higher 7.2 mg Wegovy dose and is partnering with WeightWatchers and CenterWell Pharmacy to distribute the drug via its NovoCare direct-to-consumer platform, following the end of its deal with Hims & Hers in Canada.
Meanwhile, Novo continues to enhance Ozempic’s clinical profile. The European Medicines Agency has backed a label update for Ozempic to include data on peripheral artery disease, with a final EU decision expected within two months and a similar U.S. FDA decision anticipated in Q4 2025. This would make Ozempic the only GLP-1 proven to reduce cardiovascular and kidney risks while improving walking ability and quality of life in patients with type 2 diabetes and peripheral artery disease (PAD), strengthening its clinical appeal and expanding its presence in the metabolic and cardiovascular markets.
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4- Compounded GLP-1s are unbranded semaglutide versions made by pharmacies due to supply shortages and inventory fluctuations. 5 A formulary is an official list of prescription medications that are approved for use and coverage by a particular health insurance plan, hospital, or pharmacy benefit manager.
5- A formulary is an official list of prescription medications that are approved for use and coverage by a particular health insurance plan, hospital, or pharmacy benefit manager.
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Financial Momentum
Over the past five years, Novo Nordisk has delivered impressive financial growth, with revenues and earnings rising at a CAGR of 19.1% and 22.4%, respectively. This performance has been fueled by the rapid adoption and global expansion of its GLP-1-based therapies for diabetes and obesity, supported by operational scaling and continued innovation.
The company maintained this momentum in the first quarter of FY25, posting a strong financial performance across revenue, profitability, and cash flow. Total revenue rose 18% year-over-year at constant exchange rates (CER) to $12.2 billion, surpassing consensus expectations of $11.7 billion. Growth was led by robust demand for Ozempic and Wegovy across key markets. Operating profit climbed 20% to $6.1 billion, translating into an operating margin of 49.7%, driven by product mix benefits and scale efficiencies. Net income rose 14% to $4.55 billion, while diluted earnings per ADR increased 15% to $1.02, exceeding analyst estimates of $0.91.
Novo Nordisk continues to operate with a conservative financial profile that supports long-term flexibility, though its capital structure has temporarily shifted due to accelerated investments in manufacturing capacity. As of March 2025, the company’s debt-to-equity ratio stood at 0.86x, higher than the sector median of 0.26x, reflecting debt-funded investments aimed at scaling production to meet soaring demand for GLP-1 products. This is a strategic shift from its historically conservative capital structure, enabled by strong cash flows and excellent credit ratings, and is expected to normalize as investments are absorbed and cash flows continue to grow. Reinforcing its financial stability, Novo Nordisk holds solid long-term credit ratings of “AA” from S&P Global and “Aa3” from Moody’s, both with stable outlooks.
Looking ahead, Novo Nordisk revised its FY25 guidance in response to slower U.S. sales of GLP-1 drugs, impacted by increased competition from compounded alternatives and a period of distributor destocking. Management now expects sales growth between 13% and 21%, down from a prior 16% to 24%, and operating profit growth between 16% and 24%, compared to earlier guidance of 19% to 27%. Free cash flow is now forecast at $8.77–$10.3 billion, below the previous estimate of $11.8–$13.3 billion.
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Undervalued Potential
Novo Nordisk continues to demonstrate a strong commitment to shareholder value through disciplined capital allocation, backed by robust free cash flow, solid earnings, and a conservative balance sheet. The company has paid dividends on its Class A and B shares for 31 consecutive years and has increased its dividend for the past seven. Dividends are distributed semi-annually – typically in August and March/April – and have grown steadily in both Danish kroner and U.S. dollars. Over the past five years, NVO has raised its dividend payout by 25.8%. The company currently distributes 47.1% of its adjusted earnings to shareholders.
Novo Nordisk’s capital allocation strategy aims to strike a careful balance between funding future growth and returning excess capital to shareholders. A key priority is expanding internal capacity to meet surging global demand for GLP-1-based therapies used in obesity and diabetes care. This investment, combined with disciplined financial management and strong earnings growth, supports the company’s long-term goal of delivering sustained shareholder value.
Free cash flow surged 90% year-over-year to $1.5 billion in Q1 2025, driven by a 72% rise in operating cash flow. This improvement reflects higher earnings, better working capital efficiency, and improved cash conversion, despite increased capital spending to expand manufacturing capacity. Although Novo Nordisk paused share buybacks in Q1 2025 to prioritize these investments, shareholders approved a renewed buyback authorization at the March 2025 Annual General Meeting, allowing the board to resume repurchases when appropriate.
Novo Nordisk’s stock has declined nearly 50% over the past year, driven by several headwinds that have weighed on sentiment. The pullback followed underwhelming late-stage trial results for CagriSema, the company’s next-generation obesity drug, which fell short of high investor expectations. Competitive pressure has also intensified, particularly from Eli Lilly’s Mounjaro and the expanding market for compounded GLP-1 therapies. Investor concerns were further amplified by the departure of long-time CEO Lars Fruergaard Jørgensen earlier this year, with a permanent successor yet to be named.
Despite these near-term challenges, the correction comes after a period of exceptional stock performance. Novo shares surged 55% in 2023, ending the year at $100.70, and continued to rally into mid-2024, reaching an all-time high of $144.04 on June 25. This peak—more than double the previous year’s low—pushed the company’s market cap to $461 billion. However, as expectations cooled, the stock corrected, ending 2024 down 16%, with the decline continuing into early 2025.
While recent setbacks have pressured the stock, we believe the market is overreacting to short-term risks. Novo’s GLP-1 franchise remains a global leader, underpinned by strong fundamentals, brand strength, and expanding access. The current weakness offers a potential long-term entry point into a structurally growing obesity and diabetes care market, backed by Novo’s robust pipeline and proven execution.
Analysts remain optimistic about the company’s prospects, projecting a potential upside of 17%, with some analysts forecasting an upside of around 48%, citing Novo’s strategic expansion into the direct-to-consumer (DTC) channel as a timely response to compounded drug competition. Additionally, the company is advancing high-dose oral semaglutide, targeting patients who prefer non-injectable options, reinforcing its innovation-driven pipeline.
From a valuation perspective, Novo Nordisk presents an intriguing opportunity for value-focused investors. The stock currently trades at a premium to the sector median based on trailing twelve-month non-GAAP P/E, but at a slight discount on a forward non-GAAP P/E basis. Notably, NVO is trading approximately 42% below its five-year average non-GAAP P/E, indicating potential multiple expansion upside.
Relative to peers like Eli Lilly, Novo Nordisk sits at the lower end of the valuation spectrum across key metrics, including non-GAAP trailing and forward P/E ratios and forward EV/EBITDA. While its non GAAP forward PEG ratio of 1.29 is slightly higher than Eli Lilly’s 1.15, suggesting a richer valuation, it also underscores investors’ confidence in Novo’s growth durability. That optimism is supported by the company’s strong underlying performance, despite recent downward revisions to its 2025 outlook. Novo continues to post robust double-digit sales and earnings growth, driven by the rapid adoption of its GLP-1 therapies, Wegovy and Ozempic. To support and sustain this momentum, the company is investing heavily in manufacturing and supply chain expansion to expand global access and support sustained momentum.
A discounted cash flow analysis suggests the stock could be undervalued by as much as 43%, presenting a compelling long-term opportunity for value-focused investors.
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Investing Takeaway
Novo Nordisk presents an attractive opportunity for value-focused investors seeking exposure to a high-quality healthcare company with durable growth drivers. Its leadership in GLP-1 therapies, robust free cash flow generation, and strategic capital allocation reflect long-term financial strength. Despite recent stock pressure from competitive challenges and leadership transition, the company’s global scale, innovation-driven pipeline, and expanding production capacity position it to capture growing demand across chronic disease markets. With strong fundamentals, solid dividend payouts, and a valuation that appears discounted relative to historical and peer metrics, Novo Nordisk offers a compelling case for long-term value.
