New Data: Novo Nordisk's Oral Ozempic Can Be A Game-Changer

DoctoRx
26.16K Followers

Summary

  • A stock that has gone nowhere in three years, Ozempic to replace Victoza, and other new products may leave NVO nice upside potential.
  • Significant, durable alpha might accrue to shareholders if the positive results of the first Phase 3 (pivotal) trial of oral Ozempic allow it a timely approval, say in two years.
  • The commercial importance of Victoza and Ozempic, and a different type of drug from Lilly, may come from their unique status: proven to be good for cardiovascular outcomes.
  • With NVO trading around 20X current year consensus EPS and great untapped need in its areas of diabetes and obesity, NVO may be able to resist any P/E shrinkage of the market.

Background

The diabetes times, they are a-changin'. It's time for evidence-based treatment, and Novo Nordisk (NVO), which is already leading the way with Victoza and Ozempic, along with Eli Lilly (LLY) with Jardiance, may now be poised to take another giant step with a first-in-class version of Ozempic that can be given orally.

For decades after the Danish companies Nordisk and Novo, and the US company Lilly, changed the game for juvenile onset (Type 1) diabetes mellitus, the less serious condition of maturity onset (Type 2) diabetes had few if any effective treatments. Because the main health risk from Type 2 diabetes is cardiovascular, one of the earliest drug classes, sulfonylureas, was tested in the 1970s for CV benefit - with adverse results found. Even today, four decades later, a late-generation member of that SU class, glipizide (Glucotrol), has a black box warning:

SPECIAL WARNING ON INCREASED RISK OF CARDIOVASCULAR MORTALITY

...Although only one drug in the sulfonylurea class (tolbutamide) was included in this study, it is prudent from a safety standpoint to consider that this warning may also apply to other oral hypoglycemic drugs in this class, in view of their close similarities in mode of action and chemical structure.

(See linked Glucotrol web page for more information).

It is puzzling that the FDA never required more studies on this class, given that the SUs became standard treatment for Type 2 diabetes, or T2DM, and are mainstays of treatment to this day. But it remains unknown if the drugs help or hurt diabetics.

The current gold standard as a backbone of oral therapy of T2DM is metformin. This was branded in the US as Glucophage, and has long been generic. Metformin came into vogue largely because of the now-old UKPDS clinical trial. But the prescribing information, or P.I.,

This article was written by

26.16K Followers
Over 40 years of investing in individual stocks. Retired physician (cardiologist). Also retired from various roles in the US pharmaceutical industry. Main focus is on growth stocks, mostly biotech and tech, but with fundamental value considerations. Secondary focus on macro trends driving asset allocation.

Analyst’s Disclosure:I am/we are long NVO, GILD, REGN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Not investment advice. I am not an investment adviser.

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