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BMO Capital Markets initiated coverage on Danish drug maker Novo Nordisk A/S (NYSE:NVO) after the company garnered interest as it hit the holy grail with the next generation of famed weight loss and diabetes drugs.
The analyst writes that an in-depth analysis of the growing obesity and adjacent metabolic disease market suggests Eli Lilly And Co (NYSE:LLY) and Novo Nordisk will remain the two entrenched players in this duopoly.
While other players are just entering the obesity landscape, Novo has been established as a leader since Wegovy’s approval in 2021 (and Saxenda’s approval in 2014).
Novo Nordisk’s decision to double down in obesity assets by developing therapeutics like CagriSema, GLP-1/GIPR agonists, and the new INV-202 has strengthened its pipeline in a market expected to grow to over $130 billion.
In the near term, BMO looks to Phase 3 REDEFINE trial results for CagriSema in obesity and Phase 3 STRIDE and SOUL results for semaglutide in Peripheral arterial disease (PAD) and type-2 diabetes (T2D) with chronic kidney disease (CKD)/ cardiovascular disease (CVD), respectively, to push shares higher.
Trials in secondary indications of obesity/T2D are expected to expand revenue and provide alternate paths to Medicare access.
BMO is initiating with an Outperform rating and a price target of $163.
Novo’s growing strength is fueled by various factors, including robust manufacturing, clinical and patient data, diverse pipelines, and enhanced access support, reinforcing the optimistic outlook on Novo Nordisk.
The company, along with Eli Lilly, dominates the market for incretin therapies, with demand rising steadily, especially after the approval of Wegovy.
Capacity limitations in the market, expected to persist until at least 2026, benefit both Novo and Lilly due to their substantial manufacturing capabilities, further bolstered by Catalent Inc (NYSE:CTLT).
These constraints fortify Novo Nordisk’s competitive position, potentially impeding competitors even if they offer superior efficacy or tolerability.
Price Action: NVO shares are down 0.36% at $124.95 on the last check Friday.
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