Novo Nordisk (NYSE:NVO) has made a silent splash in the anti-obesity sector with a string of approvals over the last few months. The anti-obesity drug Saxenda received U.S. approval this past December. This was followed by a positive recommendation by Europe's CHMP in January, and approval in Canada in February, and ultimately an approval in Europe in March. Within a matter of months, Novo Nordisk has accomplished something that is nothing short of stunning.
In Canada, Saxenda is the first anti-obesity drug approved in more than 2 decades. Other players in the anti-obesity space have faced numerous challenges in gaining approval. Qsymia, from Vivus (NASDAQ:VVUS) garnered U.S. approval but was rejected in Europe. Belviq, from Arena (NASDAQ:ARNA) was approved in the U.S., faced rejection in Europe, Switzerland, and Canada and was recently able to gain approval in South Korea. Contrave, from Orexigen (NASDAQ:OREX) has both U.S. and European approval. All of these competitors seem to have faced mountains of hurdles, while Novo Nordsisk seems to be winning approvals at a fast rate. Meanwhile, Novo Nordisk has yet to launch in any of these approved countries.
Perhaps the strategy in play for Novo Nordisk is a more global launch. This may fit well with the strategy to chase a specific tier of obese patients. While Saxenda is approved for people with a body mass index as low as 27, the core focus of Novo Nordisk seems to be those with a BMI of 35 or more that also have diabetes. If you consider the ingredients in Saxenda, the strategy makes perfect sense.
Saxenda is comprised of liraglutide. Liraglutide is administered through an injection pen. Liraglutide also happens to be the active ingredient in the already marketed diabetes medicine Victoza. Essentially Saxenda is a double dose of Victoza.
The advantage that Novo Nordisk has is that it has already built substantial relationships and trust with consumers, doctors, and insurance companies. Weight loss was a "side effect" of Victoza that the company saw and decided to capitalize on. Thus Saxenda was born, put through clinical trials, and approved in multiple countries.
The last 4 months for Saxenda has been something that Arena, Vivus, and Orexigen would have loved to have and investors in those companies dreamed about. What is amazing is that Arena, Vivus, and Orexigen get a wealth of attention in the sector, while Novo has quietly gone from nothing being approved to three major approvals in what equates one quarter.
Over the past few years, I have become quite familiar with this sector. I saw potential in Victoza and ultimately Saxenda, but also saw hurdles. Being an injection was not a big selling point. When I saw the targeted market of Novo Nordisk as those that would already be used to injections, I saw a smart move that was likely very beneficial for the space. What I find potentially compelling is the idea of a near simultaneous launch in the United States, Canada, and 31 European nations. In many ways, Novo Nordisk could be setting itself up for the most successful launch of an anti-obesity product in recent memory.
What I see here is the potential of a company launching a product in a very smart and controlled manner. Novo Nordisk is not in a crunch and does not need to launch as soon as possible. Instead, the company is smartly planning, and can launch Saxenda in a manner that best benefits the company. While Novo is not initially looking to compete with the likes of Vivus, Arena, or Orexigen, investors in those companies will want to pay attention to Novo Nordisk. Consider what Novo Nordisk accomplished in the last few months, and consider that the company is not rushing to the market, and you can see that this will be a well executed play by one of the most respected big pharma companies on the planet.
The secret about Novo Nordisk's anti-obesity play is out but not widely known. That dynamic will change with the launch. I am confident of that. Is Novo worth an investment because of its anti-obesity drug? No. Novo is worth your consideration because it is a successful company, offers stability, pays dividends, buys back shares, and is overall a very solid investment already. The anti-obesity segment of Novo Nordisk is simply a small part of a very bullish story. Stay Tuned!
Disclosure: The author is long ARNA, OREX.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I have no position in Vivus or Novo Nordisk. I may trim my over core position in Orexigen and Arena in the days ahead. I am seeking what I consider a good entry point on Novo Nordisk