- Wegovy "a game changer in the fight against obesity"
- There are supply constraints but the company is on the right track to address them, Lewis says
Timothy Lewis, portfolio manager of JPMorgan European Growth & Income (JEGI), explains why the trust invests in pharmaceutical giant Novo Nordisk (DN:NOVO.B):
Novo Nordisk has been a long-term holding in the portfolio and one we remain very positive about. It is relatively unique in the pharma sector in that it has been almost singularly focused on insulin and diabetes for more than 100 years and it has leveraged that strength in diabetes care into a leading position in the inter-related issue of obesity.
Obesity, a pervasive and costly global health concern, has posed significant challenges to medical practitioners worldwide. Despite advances in healthcare, effective treatment options have been limited, often culminating in surgical interventions as a last resort. The introduction of Novo Nordisk's pioneering new drug, Wegovy, represents a monumental leap forward in the realm of weight-loss therapeutics. With efficacy levels comparable to surgical procedures but with significantly reduced risks, Wegovy has emerged as a game changer in the fight against obesity. Clinical trials have validated its effectiveness, demonstrating weight-loss rates nearly three times higher than existing alternatives. This transformative breakthrough has garnered widespread acclaim and support across diverse sectors, including the medical community, policymakers and healthcare payers, all advocating for expanded access to this innovative treatment.
The notable performance of Novo Nordisk's drug underscores the market's recognition of its pioneering contributions. We remain optimistic on the company’s future prospects, grounded in its unparalleled position as a global leader in the pharmaceutical landscape. The potential for further growth is underscored by the vast opportunities inherent in the anti-obesity medication market, complemented by a robust pipeline of innovative therapies currently in development. This convergence of established success and ongoing innovation positions Novo-Nordisk for sustained growth and continued value creation. The recent Select trial demonstrated that Wegovy can have a beneficial effect on patients with cardio-vascular disease as well as chronic kidney disease, potentially saving lives and strengthening the argument for cost reimbursement.
One issue for Novo Nordisk is that demand for its products are currently outstripping the availability of supply. However, the company is seeking to address this and has recently acquired three more facilities to complement the five it already has, which should ease the current supply bottleneck. The market has consistently underestimated the company’s potential and analysts have repeatedly raised their earnings forecasts. The company’s own guidance is for operating profits to grow 25 per cent in 2024 which is well ahead of the rest of the pharmaceutical sector.
Novo Nordisk was JEGI’s largest holding as of 31 January 2024 and made up 5.5 per cent of the portfolio. The company accounts for 4.5 per cent of the trust’s benchmark, the MSCI Europe ex UK.
