Novo Nordisk A/S NVO shares traded higher by 3.2% on Thursday morning after the insulin and diabetes care leader landed a major Wall Street upgrade.
The Analyst: Bank of America analyst Sachin Jain upgraded Novo Nordisk from Neutral to Buy and raised his price target from $100.27 to $117.04.
The Thesis: In the upgrade note, Jain said Novo Nordisk’s new obesity drug Wegovy has far exceeded his expectations in its first few weeks on the market. In fact, Jain has raised his fiscal 2022 peak sales estimate for the drug to $5.3 billion.
Jain said the company's obesity business is the primary driver of his earnings growth forecast in the years ahead.
For now, he said investors need to watch the trajectory of Wegovy prescriptions to see if it can maintain its hot start. In particular, a key metric will be the prescription-to-sales conversion rate for the drug in the second half of 2021.
Jain said payor access will be another key factor in the long-term success of Wegovy.
Finally, being launched outside of the U.S. will be critical, as it was relatively fast for the company’s Saxenda anti-diabetic drug.
Novo Nordisk shares have been hot in recent months, but Jain said there’s plenty of upside ahead.
“We acknowledge the c40% share price move since lows in March, but believe momentum can continue driven by Wegovy,” he said.
Bank of America is projecting EPS growth of 13.3% in 2021, 11.7% in 2022 and 13.3% in 2023.
Benzinga’s Take: Unfortunately, it doesn’t appear the need for obesity and diabetes treatments will be going away any time soon. In fact, a recent study found a “striking increase” in childhood obesity during the pandemic.
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