Novo Nordisk (NVO 5.03%) stock ran up 3.5% through 10:05 a.m. ET Friday morning on some good news for it (and for Eli Lilly) that's also probably bad news for Hims & Hers Health (HIMS -18.26%).
This morning, the U.S. Food and Drug Administration (FDA) issued a "declaratory order" confirming the "resolution of shortages of semaglutide injection products ... Ozempic and Wegovy."
Two of Novo's biggest money-makers, injectable GLP-1 weight loss drugs Wegovy and Ozempic, have been on the FDA's official drug shortage list since March and August 2022, respectively. As a result, drug compounding companies like Hims & Hers have till now been allowed to compound drugs similar to Novo's, albeit not officially FDA-approved, and sell them into the weight loss market. They've essentially been free-riding on Novo's coattails and taking sales that would otherwise go to Novo (or Lilly).
That ends today.
Based on data provided by Novo Nordisk (and others), the FDA has determined that Novo is now producing sufficient quantities of GLP-1 drugs to satisfy the market: "Supply is currently meeting or exceeding demand," says the FDA, and "Novo Nordisk has developed ... finished product inventory ... such that supply will meet or exceed projected demand" for the foreseeable future.
This is good news for Novo for two reasons. First, it implies greater sales going forward because the company has more product to sell. Second, it implies a worsening business environment for its competitor Hims & Hers. The FDA says it "does not intend to take action against compounders" for at least 60 to 90 days. But after that, things could get increasingly difficult for Hims & Hers.
Most importantly for investors, this implies that at a 26.4 price-to-earnings (P/E) ratio, Novo Nordisk stock may be a bargain. Wall Street analysts are already forecasting 16.6% long-term earnings growth rates for the stock (plus a 1.9% dividend). If sales rise in response to the FDA declaratory order, that growth rate could be even faster.
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