Novo Nordisk’s full year net sales grew by 26% to DKK 290.4bn (Danish Kroner) when ignoring currency movements. Growth was slightly ahead of market forecasts, underpinned by a 27% uplift in the core Diabetes & Obesity Care division.
Operating profit grew in line with sales to DKK 128.3bn. Free cash flow fell from a DKK 68.3bn inflow to an outflow of DKK 14.7bn, as a ramp up in investment spending more than offset improved cash generation. At the year end, Novo Nordisk was carrying net debt of DKK 76.5bn.
Dividend pay outs increased 21% to DKK 50.6bn while share buybacks fell 33% to DKK 20.2bn.
For 2025, sales growth is expected to be 16-24%, and operating profit growth is expected to be 19-27%.
The shares were up 3.2% in morning trading.
Our view
Novo Nordisk has delivered yet another year of impressive double-digit growth in revenue and profit, and looks set to do the same again over 2025.
The fastest-growing products are its range of GLP-1 injections for the treatment of type 2 diabetes (Ozempic) and, as a weight-loss aid (Wegovy). But strong growth means the comparisons are getting harder and there’s more emphasis on establishing further medical use cases. The recent approval to treat chronic kidney disease in diabetics should provide a boost, and management is targeting application for approval in certain liver conditions in the first half of 2025.
The race is also on to deliver more effective and differentiated medicines in the same class. Recent clinical data from Wegovy’s stablemate Cagrisema was disappointing, and its potential launch date has been kicked down the line. We still think it has the potential to become a viable treatment but there remain regulatory and commercial hoops to jump through.
There are other next-generation products in this class to keep an eye on. The prospect of an oral formulation of semaglutide (the active ingredient in Ozempic and Wegovy) is one we’re optimistic about. And in the earlier-stage pipeline, Amycretin, is generating some excitement. But remember, all clinical trials carry a high risk of failure.
A dominant market share and attractive end markets would be enough to attract investors' attention on their own, but Novo also runs a pretty tight ship operationally. That's allowed the group to boast operating profit margins consistently over 40%.
Downwards pressure on pricing, particularly in the United States, where the private cost of Wegovy is over $1,300 per month, could impact profitability further down the line and there’s some uncertainty around the Trump administration’s stance on the subject.
Investment to overcome supply bottlenecks has put the balance sheet under some pressure. We think this was a wise use of funds but there is some added pressure to keep volume growth going. Share buybacks have been scrapped for this year even as internal investment looks set to come back down. Dividends on the other hand are expected to rise for the 29th year in a row, but no payments are guaranteed.
Novo has an exceptional track record of growth with plenty of more opportunities to go for. The valuation doesn’t look as demanding as it has done in recent times. But the reaction to recent clinical data comes as a reminder that sentiment towards the stock can be volatile, so investors need to take a long-term view.
Environmental, social and governance (ESG) risk
The pharmaceuticals sector is relatively high-risk in terms of ESG. Product governance, particularly with safety and marketing, and affordable access to treatment are the key risk drivers. Labour relations, business ethics and bribery and corruption are also contributors to ESG risk.
According to Sustainalytics, Novo Nordisk's management of ESG risks is strong.
Executive pay is linked to both financial and non-financial targets, including sustainability targets, though it's unclear exactly how the two are linked. Novo Nordisk's product quality and safety programmes are adequate. The company also addresses pricing and access to medicine in emerging markets and the US. In general, Novo Nordisk has strong policies and programmes to address business ethics issues, but fails to address anti-competitive practices and has been implicated in alleged price fixing and questionable promotional activity controversies.
Novo Nordisk key facts
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