Novo Nordisk: The Hype Around Semaglutide

Novo Nordisk: The Hype Around Semaglutide

11 August 2023

Key Indicators

Index / Fund / Rate Start of Year Last week This Week % change YTD
Lunar BCI WW Flexible Fund 141.43 173.30 177.47 25.48%
JSE ALSI 73 049 76 961 76 974 5.37%
NASDAQ Composite 10 467 13 909 13 645 30.36%
S&P 500 3 840 4 478 4 464 16.25%
Prime Lending Rate 10,50% 11.75% 11.75% 11.90%
USD/ZAR 16,98 18.46 18.95 11.60%
EUR/ZAR 18,44 20.31 20.74 12.47%
Brent Crude ($’barrel) 85,95 86.10 86.72 0.90%

Source: Iress

Weekly Stocktake with Danyaal

Novo Nordisk: The Hype Around Semaglutide

Novo Nordisk, owned by Lunar Capital and its clients, is a global pharmaceutical company headquartered in Denmark. The company specialises in the treatment of diabetes, obesity, and rare blood diseases. Among their recent advancements, they introduced Semaglutide, a medication catering to type-2 diabetes and obesity. These drugs emulate the actions of the natural hormone glucagon-like-peptide-1 (GLP-1). This emulation aids in the regulation of blood sugar levels by promoting insulin production, curtailing glucagon production, and slowing down the emptying of the stomach. Last week, Novo Nordisk indicated that the recent trial for the Semaglutide 2.4mg treatment demonstrated a 20% reduction in major adverse cardiovascular events in adults suffering from obesity. This announcement pushed their share price up by approximately a 16% on the day.

The recent financial performance of Novo Nordisk can primarily be attributed to the surge in GLP-1 treatment sales. Revenue for Novo Nordisk during the first half of 2023 increased by 29% compared to the same period in the previous year, reaching Danish Kroner (DKK) 107.7 billion. Their gross margin increased from 84.4% last year to 85.1% in the current year. All contributing to a net profit increase of 43%, totalling DKK 39.2 billion for the period. The USA is their largest market, with revenue growing by 44% and contributing just under 60% of Novo Nordisk’s total revenue.

Pharmaceutical companies can enjoy robust profit margins, as seen by Novo Nordisk’s gross margin of 85% and net margin of 36%. Nonetheless, the industry itself is fraught with risks. The stringent (understandably) regulations that govern pharmaceutical companies requires a series of trials often over many years. To sustain their existence, pharmaceutical companies allocate a considerable portion of their revenue towards research and development efforts to counter the treatments in their pipeline that come off patents. For instance, during the first half of 2023, Novo Nordisk spent DKK 13.8 billion on research and development, which amounts to 12.9% of their revenue. In instances where the effectiveness of treatments fails to yield positive outcomes, the potential repercussions could lead to losses and possibly more dire long-term consequences.

Novo Nordisk is held in the Lunar BCI Worldwide Flexible Fund. It is also held by the Lunar Capital Offshore Portfolio Clients.

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Lunar Capital (Pty) Ltd is a registered Financial Services Provider. FSP (46567)
Read our full Disclosure statement: https://lunarcapital.co.za/disclosures/
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The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This stocktake is prepared for the clients of Lunar Capital (Pty) Ltd. This stocktake does not constitute financial advice and is generated for information purposes only.
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