Here Are 3 More Reasons To Be Bullish On Ozempic And Novo Nordisk Stock
Novo Nordisk's (NYSE: NVO) type 2 diabetes drug Ozempic is a sensation, and it's no surprise why. In the first quarter, revenue from Ozempic rose 35% year over year to reach roughly $4.3 billion, and there's no sign of a slowdown in sight.
In fact, it's very possible that sales of the medicine in its various formulations will continue to accelerate for far longer than investors suspect. So here are three new reasons why it's worth being bullish on Ozempic and, by proxy, Novo Nordisk stock.
Two studies could portend a gargantuan new market for semaglutide
Ozempic, as well as Novo's drug for weight loss called Wegovy, is based on a molecule called semaglutide. Semaglutide has many beneficial effects, most of which are still in the process of being understood or uncovered for the first time. And according to a pair of studies published in May by a group of researchers at the Case Western Reserve University School of Medicine, it could even be capable of treating addiction.
The first study looked at a pair of large health data sets describing people who had been prescribed semaglutide to treat either type 2 diabetes or obesity. Compared to patients taking older medicines for obesity, those taking semaglutide experienced a roughly 50% reduction in their risk of being diagnosed with or going through a recurrence of alcohol use disorder (AUD) during the study's 12-month follow-up period. For the patients with type 2 diabetes, the magnitude of risk reduction for a first alcoholism diagnosis was closer to 56% with semaglutide compared to the alternatives.
To be clear, these are great results, and further investigations, perhaps sponsored by Novo Nordisk, will pave the way toward formal investment in a new research and development (R&D) program testing semaglutide for AUD. As roughly 29.5 million people in the U.S. meet the criteria for AUD -- that's around 10.6% of the population -- there are great riches in store for any competitor that commercializes an effective therapy, and now that's one step closer to being within reach for Novo Nordisk.
But the second study, conducted with a similar approach of comparing the health data of people who were taking semaglutide or another medicine for type 2 diabetes or obesity, sweetens the pot even more. While it isn't as common as alcohol use disorder, cannabis use disorder (CUD) is likely to be a growing problem if marijuana legalization continues. And, per the research group at Case Western, semaglutide works to reduce the risk of developing or experiencing a recurrence of CUD almost as well as it does with AUD.
So there's a growing corpus of research suggesting that Ozempic and Wegovy could be effective at helping people to control certain substance addiction disorders. The market for therapies for those disorders is large and growing. And that's just two of the reasons to be bullish.
The pieces are already in motion
The final reason to be bullish about Ozempic, and by proxy bullish about Novo Nordisk, is that on May 20, the company launched a new phase 2 clinical trial investigating semaglutide's efficacy in treating liver damage and alcohol use in patients with alcoholism-induced liver disease.
Slated to conclude in the summer of next year, the placebo-controlled study will also investigate whether semaglutide is helpful in conjunction with another drug, cagrilintide, and it'll be testing cagrilintide in isolation as well. So even if semaglutide doesn't perform as hoped, there could still be another candidate in Novo's pipeline that has a shot at cracking into the target market.
If semaglutide proceeds to late-stage trials for this application, the program will generate even more helpful data about the drug's efficacy in the context of treating alcoholism. The next logical step would be for management to spin up a fresh program devoted solely to that indication, as individuals with liver damage derived from alcohol are likely already trying to cut down on their alcohol intake, which makes it a confounding factor for a study.
Given the molecule's fairly well-established safety profile, its status as an already-approved drug on the market, and the large population of people struggling with alcoholism, it is probable that regulators will be willing to expedite the clinical trials process by granting the program one or more special designations.
Still, under pretty much any set of assumptions, it'll be at least a few years before any anti-addiction therapy based on semaglutide will have a shot at making a single dollar of revenue, and there is a significant chance that it will never get approved.
But that doesn't detract from the investment thesis for Novo Nordisk one bit. The primary markets for semaglutide are nowhere near being tapped out, and the business cannot produce enough of the medicine to meet demand at present. In other words, it'll be making money hand over fist for at least the medium term, and the stock is worth buying today.
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Alex Carchidi has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.
