Chances are, if you hear the word Ozempic, you probably associate it with weight loss. It’s hard not to give all the posts on social media about users losing weight thanks to the drug. But many people may be surprised that it hasn’t actually been approved as a weight loss treatment — regulators have approved it for diabetes. People have simply taken it off the label because of its ability to help them lose weight.
But this is a great example of how varied and far-reaching the benefits can be not only from Ozempic, but also from other glucagon-like peptide 1 (GLP-1) treatments. Novo Nordisk (NYSE: NVO) makes Ozempic and has another GLP-1 drug, Wegovy, which is actually approved for weight loss.
As strong as sales of these products have been recently, they may grow even more in the future.
A possible treatment for chronic kidney disease?
There is a significant need to treat chronic kidney disease in the US, a condition that affects one in seven adults and for which there is no cure. In a recent trial involving semaglutide, the common ingredient in both Wegovy and Ozempic, there were some encouraging results.
In a trial involving more than 3,500 participants who had type 2 diabetes and chronic kidney disease, semaglutide reduced the risk of death and helped slow the decline in kidney function. Overall, it reduced the risk of kidney disease-related events by 24%. There were also fewer side effects compared to the placebo group.
Novo Nordisk plans to apply for a label extension to Ozempic this year so it can potentially treat chronic kidney disease. If approved, it would give patients more reasons to use the drug beyond treating diabetes.
As additional trials are conducted for semaglutide, there may be even more indications that are approved. Earlier this year, the Food and Drug Administration approved Wegovy as a treatment to lower the risk of heart problems in obese or overweight adults.
The company is building more capacity
Perhaps the biggest problem for Novo Nordisk is the lack of capacity. Demand has been high for Ozempic and Wegovy, and the company has been working on expanding its manufacturing capabilities. It’s an important issue because a lack of supply can lead patients to seek out other competing products — or worse, switch to the black market, where lookalike products can not only damage the brand, but be fatal to users.
The company has made efforts to increase capacity. One way is through its parent company, Novo Holdings, which it is planning to buy Katalena for 16.5 billion dollars. The drugmaker’s sites could then be sold to Novo Nordisk. In a long-term effort, Novo Nordisk plans to invest $6 billion to build new facilities in Denmark. But that could take until 2029. In the short term, there are contract manufacturers the company can tap into. Last year, she was hired Thermo Fisher Scientific to help produce Wegovy.
During the first three months of 2024, Novo Nordisk’s net sales rose 24% at constant exchange rates to 65.3 billion Danish kroner ($9.8 billion). Wegovy led the way with revenue growth of 107%, followed by Ozempic at 43%. And with so much potential demand on the horizon, these growth rates could accelerate much higher in the coming years.
It may still be a cheap stock to buy now
As more indications accumulate for Ozempic and Wegovy, so does the potential for these drugs to generate even more revenue and profits for Novo Nordisk in the years to come. This means that while its P/E ratio of 47 may seem high now, the health care stock’s current valuation could still look like a steal in the future.
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David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Thermo Fisher Scientific. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
Here’s Why Demand for Ozempic and Wegovy May Grow Even More was originally published by The Motley Fool
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