Novo Nordisk NVO announced that it plans to invest DKK 8.5 billion, translating to approximately $1.2 billion, to set up a new production facility in Odense, Denmark. Per NVO, the new site will include a state-of-the-art production facility and warehouse covering more than 40,000 m². Designed with modularity and flexibility in mind, it will support the production of various product types for rare diseases, including haemophilia, both now and in the future.

Novo Nordisk reported that construction has already begun and is expected to be completed by 2027. The project is anticipated to generate 400 permanent jobs once the facilities are operational, while up to 1,000 external employees will be involved during the construction phase.

In the past three months, shares of NVO have plunged 18.2% compared with the industry’s 15.1% decline.

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Novo Nordisk’s success in the past few years is underscored by its marketed semaglutide (GLP-1 agonist) medicines, under the brand names, Rybelsus oral tablet and Ozempic injection for type II diabetes (T2D) and Wegovy injection for chronic weight management. The company enjoys around 54% value market share in the GLP-1 segment, primarily on the back of its semaglutide medicines. Wegovy’s label has been expanded since first approval to reduce the risk of serious heart problems in obese/overweight adults and efforts to further expand its label, along with that of Rybelsus and Ozempic are currently underway.

Wegovy is a significant contributor to Novo Nordisk's revenues and continues to show strong prescription growth, driving higher revenues and profits. However, the company continues to face periodic supply constraints in the International as well as U.S. markets. To mitigate the effect of supply constraints on sales potential, NVO is making substantial investments to expand production capacity.

NVO’s Key Investments to Ramp Up Production in 2024

Novo Nordisk has also significantly stepped up its M&A activity in the past two years. In February 2024, NVO announced that Its parent company, Novo Holdings, is set to acquire Catalent CTLT, a leader in the contract development and manufacturing organization space, for $16.5 billion. Novo Holdings will then sell three manufacturing sites to Novo Nordisk for $11 billion in order to improve the manufacturing capacity for its diabetes and obesity products, which can improve supply issues in the long run as demand for Ozempic and Wegovy is expected to rise.

Despite strong opposition from unions, consumer groups and public interest organizations, Novo Nordisk recently announced that all regulatory conditions for Novo Holdings' acquisition of Catalent have been met, including the expiration of the timing agreement in the United States. Both parties have been cleared to close the transaction, as well as NVO’s subsequent acquisition of three Catalent manufacturing sites from Novo Holdings, expected soon. Earlier this month, the European Commission also approved the transaction.

In June 2024, NVO announced a significant investment of $4.1 billion (approximately DKK 27 billion) to construct a second fill and finishing manufacturing facility in Clayton, NC, representing one of the largest manufacturing expansions in the company’s history. This new facility aims to enhance its capacity to produce injectable treatments for patients with obesity and other chronic diseases. This expansion underscores Novo Nordisk’s commitment to addressing the growing global demand for its medical products.

Wegovy's significant market potential has been constrained by ongoing supply shortages. With the Catalent acquisition nearing completion, Novo Nordisk is well-positioned to substantially ramp up production of both Wegovy and Ozempic, enabling the company to meet growing demand and drive sales growth.

This will likely provide NVO an edge over its arch-rival Eli Lilly LLY, which is also facing supply issues for its popular tirzepatide medications. Lilly markets tirzepatide as Zepbound for obesity and Mounjaro for T2D. LLY is also investing heavily to open new facilities to meet rising demand. 

Novo Nordisk A/S Price and Consensus

Novo Nordisk A/S price-consensus-chart | Novo Nordisk A/S Quote

NVO’s Zacks Rank and Stock to Consider

Novo Nordisk currently carries a Zacks Rank #3 (Hold).

A better-ranked stock from the sector is Castle Biosciences CSTL, sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, 2024 estimates for Castle Biosciences have improved from a loss of 58 cents per share to earnings of 34 cents. During the same timeframe, loss per share estimates for 2025 have narrowed from $2.13 to $1.84. In the past three months, shares of Castle Biosciences have lost 5.2%.

CSTL’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 172.72%.

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Novo Nordisk A/S (NVO) : Free Stock Analysis Report

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