On Friday, Novo Nordisk's share price experienced an uplift.
In a win for Novo Nordisk and Eli Lilly, the U.S. Food and Drug Administration (FDA) announced this morning that they've resolved the shortages of semaglutide injection products, specifically Ozempic and Wegovy. This news sent Novo Nordisk's stock soaring by 3.5%, while Hims & Hers Health's stock took a hit, plummeting 22.14%.
According to the FDA, Novo Nordisk is now producing sufficient quantities of the GLP-1 drugs to satisfy the current and projected U.S. demand. This bold move puts an end to the free-riding that drug compounding companies like Hims & Hers Health have been doing, selling unofficial, FDA-approved drugs into the weight loss market.
This declaration is great news for Novo Nordisk on two fronts. First, an increase in product availability means greater sales opportunities ahead. Second, it signals a challenging environment for its competitor, Hims & Hers Health. The FDA will allow compounders leeway for 60 to 90 days before taking action, but after that, things could get tricky.
With a 26.4 price-to-earnings (P/E) ratio, Novo Nordisk stock might be a bargain. Analysts are projecting 16.6% long-term growth rates for the stock, plus a 1.9% dividend. If sales surge in response to the FDA announcement, those growth rates could spike even higher!
The FDA's resolution of semaglutide injection shortages, specifically for Wegovy, implies a favorable business environment for Novo Nordisk. This situation probably means increased investing opportunities in Novo Nordisk's stock due to anticipated growth. The company's financial situation might benefit significantly from increased sales, as the FDA announcement could lead to a surge in demand for their GLP-1 drugs.
However, the FDA's leniency towards drug compounders for 60 to 90 days might present a temporary challenge, as competitors like Hims & Hers Health could still sell unofficial versions of these drugs during this period. This implies that investors should closely monitor Novo Nordisk's competition and the immediate market response to fully understand the long-term implications of the FDA's announcement.