Novo Nordisk stock is Thursday's IBD Stock Of The Day. Shares bounded above their 50-day line within a flat base, giving investors a new entry.
In afternoon trades on today's stock market, Novo shares jumped 2.65% to 164.48. Shares generally have trended higher this year on enthusiasm for Novo's efforts in weight-loss drugs.
Though the official buy point is 172.97, shares of the pharmaceutical giant definitively retook their 50-day moving average for the first time since May, according to MarketSmith.com. Novo Nordisk stock also popped above its Monday high point at 161.85 as the stock rose above a trendline traced inside its flat base.
The move occurred on a relatively strong day for health care stocks. Johnson & Johnson and Abbott Laboratories popped on their second-quarter earnings beats. Shares of Eli Lilly, a key Novo rival, also extended a recent push, while Tech Leader Vertex Pharmaceuticals edged higher within a buy zone.
Novo Nordisk Stock And Weight-Loss Drugs
Novo Nordisk sells two weight-loss drugs, Wegovy and Saxenda. It's also working on next-generation approaches to obesity treatment involving semaglutide. Semaglutide is the chemical behind Wegovy and Novo's diabetes treatments Ozempic and Rybelsus.
In May, Novo Nordisk unveiled the results of a once-daily, 50-milligram pill of semaglutide. Over 68 weeks, patients lost an average 17.4% of their body weight compared with a 1.8% weight loss for placebo recipients. More than 89% of patients lost at least 5% of their body weight compared with 24.5% of the placebo group, Novo Nordisk said.
The results bode well for Novo Nordisk stock and its future in weight-loss drugs. Novo already sells a pill form of semaglutide called Rybelsus at 7- and 14-milligram dosages. But Rybelsus uptake has been slow. Pills could offer an alternative for patients wary of needles — Wegovy is an injection — but they must be timed out with food and water consumption to ensure proper absorption.
Novo is facing off with Eli Lilly in this segment. Lilly sells Mounjaro, a diabetes treatment that, in part, uses the same mechanism as Wegovy, Ozempic and Rybelsus. Lilly is hoping the Food and Drug Administration will approve Mounjaro as a weight-loss drug later this year.
To stay competitive, Novo is also testing a combination using semaglutide and another drug that targets the hormone amylin. Amylin delays stomach emptying and decreases blood sugar. That drug, cagrisema, led to 16% weight loss over 32 weeks.
Diabetes Treatments Are Still Key
Novo Nordisk stock analysts expect weight-loss drugs accounted for more than 18% of the company's second-quarter sales. Diabetes treatments Ozempic, Victoza and Rybelsus are expected to generate almost 60% of sales. It's important to note that diabetes treatments have widespread insurance coverage, while obesity treatments don't.
Overall, analysts call for adjusted earnings of $1.34 per share on $8.19 billion in sales. Earnings would grow 67.5% as sales surge almost 46% year over year. Novo is on deck to report its June-quarter sales on Aug. 10.
Bullishly, Novo Nordisk stock has a strong EPS Rating of 94, putting its recent profitability in the top 6% of all stocks, according to IBD Digital. Shares also have a strong 95 Composite Rating, which weighs a stock's fundamental and technical measures on a 1-99 scale.
The Relative Strength Rating is lower at 83, reflecting a recent pullback below the 50-day line. But Novo Nordisk stock was still up more than 18% year-to-date as of Wednesday's close.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
