Weekly Roundup 2022-11-04 – Novo Nordisk

Weekly Roundup 2022-11-04 – Novo Nordisk

Lunar Capital Weekly Roundup

Index / Fund / Rate Start of Year Last week This Week % change YTD
JSE ALSI 73 723 66 386 69 305 -5,99%
NASDAQ Composite 15 833 11 102 10 475 -33,84%
S&P 500 4 797 3 901 3 771 -21,38%
Prime Lending Rate 7.25% 9.75% 9.75% 34.48%
Lunar BCI WW Flexible Fund 165.68 146.27 142.17 -14,19%
USD/ZAR 15.96 18.15 17.91 12,22%
EUR/ZAR 17.95 18.09 17.84 -0,61%
Brent Crude 77.86 94.19 98.02 25,89%

Source: iress

Company and Market News

Novo Nordisk released their Q3 2022 results last week. Novo Nordisk is a health-care company that primarily focuses on producing treatments for diabetes, obesity and rare blood diseases. For the quarter, Novo Nordisk’s net sales increased by 28% to DKK (Danish Krone) 45,6 million compared to the same quarter last year. Net profit for the quarter was DKK 14,4 million, up 19% compared to the same quarter last year. Novo Nordisk’s Total Diabetes Care segment for the quarter accounted for 79% of their total sales. This segment also grew 26% compared to the same quarter last year. While their Total Obesity Care segment for the quarter accounted for 10% of total sales and grew by 81% compared to the same quarter last year.

On top of the solid growth metrics, Novo Nordisk remains very profitable. For the trailing twelve months (TTM), the gross margin for Novo Nordisk was 84%. This high gross margin indicates that Novo Nordisk has the ability to navigate a high-inflation environment without having to find significant ways to decrease their input costs. The net margin for Novo Nordisk was also strong. For the TTM, Novo Nordisk had a profit margin of 32%. Novo Nordisk also had a very high return on equity of 69%. This is partly due to high leverage through debt. Their debt-to-equity ratio is 217%. Their current liabilities are also greater than their current assets. If there were to be any significant impact to their operation, they could find it quite difficult to pay off their current liabilities for the year.

Another risk that Novo Nordisk faces is that they are in a highly regulated environment. Novo Nordisk also operates in multiple countries that will have their own set of regulatory requirements. The initial costs, in both time and money to develop and manufacture drugs can be quite high. There is always a possibility that a significant investment in a new treatment may not pay off.  Conversely, if they can develop a new treatment that works well and is approved by the health authorities; it can pay off handsomely. Our view is that the potential for their Total Obesity Care is quite significant.


Disclosure: Novo Nordisk is held in the Lunar BCI Worldwide Flexible Fund.
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The Lunar BCI Worldwide Flexible Fund Fact Sheet  can be read here.
This roundup is prepared for the clients of Lunar Capital (Pty) Ltd. This roundup does not constitute financial advice and is generated for information purposes only.

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