Novo Nordisk: How Concerning Is Wegovy's Growth Come-Off?

Core Viewpoint - The recent Q2 2024 results of Novo Nordisk have led to a significant stock decline, primarily due to disappointing sales growth of its key treatment, Wegovy, despite overall healthy financial performance [2][5]. Sales Performance - Wegovy's sales growth in Q2 2024 was 53% YoY, a notable decrease from over 100% growth in Q1 2024, resulting in a first half growth of 74% YoY [3][6]. - Ozempic, another major treatment, saw a slowdown in sales growth to 30% YoY in Q2 2024 from 43% YoY in Q1 2024, attributed to supply constraints [3][6]. - Total sales for H1 2024 reached DKK 133.4 billion, a 24% increase YoY, with a gross profit margin of 84.9% [7][6]. Market Dynamics - Wegovy's sales miss was 14% below analyst forecasts, raising concerns about its growth trajectory [3]. - The US market, which accounts for 85% of Wegovy's sales, is experiencing lower realized prices due to increased usage among low-income patients under insurance [9]. - Novo Nordisk maintains a dominant 85% share in the global obesity market, with plans for further expansion, including entry into the Chinese market [11]. Competitive Landscape - Eli Lilly is emerging as a strong competitor, with its diabetes and weight loss treatments showing robust growth, including a 3.1x YoY increase for Mounjaro [10]. - Novo Nordisk has adjusted its operating profit growth guidance downwards, indicating increased competitive pressures [10]. Financial Outlook - The company's operating profit growth for H1 2024 was 19% YoY, but Q2 2024 saw a significant slowdown to 8% YoY due to impairment charges [6][5]. - The projected operating margin for the company is expected to be 44.1%, slightly below the previous year's margin [12]. Valuation Metrics - The forward GAAP price-to-earnings (P/E) ratio is currently at 37.1x, lower than previous assessments but still above the five-year average of 30.4x [13]. - Concerns regarding pricing pressures and competition may hinder future growth, impacting the stock's valuation [14].