Exceeding Tesla in Market Value! The future of Novo Nordisk AS depends on these six key questions.

After the weight-loss drug leader Novo Nordisk AS released optimistic data on its new oral GLP-1 drug Amycretin, investors were thrilled and quickly drove its stock price to a historic high, pushing its market value to an astonishing $566 billion, surpassing Tesla and Visa.

This undoubtedly proves the market's confidence in Novo Nordisk AS's future prospects in the weight-loss drug field. However, to truly seize the investment opportunities brought by Novo Nordisk AS's weight-loss drugs, Morgan Stanley believes that investors must address the following six key questions in the future:

Can Novo Nordisk AS seize the vast opportunities in the Cardio-Kidney-Metabolic (CKM) market?

According to the American Heart Association (AHA), CKM is a systemic disease caused by the pathophysiological interactions between obesity, diabetes, chronic kidney disease, and cardiovascular diseases.

For this disease, Novo Nordisk AS has several drugs in clinical trials, including Ziltivekimab (for heart failure and chronic kidney disease) with Phase III clinical data expected to be released in the fourth quarter of 2025, Ocredurenone (for chronic kidney disease) with final Phase III clinical data expected to be announced in the first quarter of 2025; and INV-202 (an oral CB1 inverse agonist for obesity and chronic kidney disease) with Phase II clinical data expected to be released in the second half of 2024.

Morgan Stanley believes that these drugs have significant upside potential compared to market consensus.

Drawing on the important data of semaglutide in three comorbid disease scenarios (heart attack/stroke, heart failure, chronic kidney disease), we predict that Novo Nordisk AS's non-GLP-1 drugs will peak at approximately $4.3 billion in sales.

How to break through the supply chain bottleneck?

Morgan Stanley believes that the market has underestimated Novo Nordisk AS's investments in the supply chain.

Since its explosive rise, Novo Nordisk AS's weight-loss "miracle drugs" Ozempic and Wegovy have been in short supply. To address this issue, Novo Nordisk AS has started to expand its production capacity and announced last month the acquisition of three filling-finished product bases from the drug filling giant Catalent for $11 billion.

It is predicted that Novo Nordisk AS's fixed investment from 2022 to 2028 will reach $33 billion to support the mass production of its GLP-1 drugs. Morgan Stanley estimates that from 2023 to 2030, the production capacity of injectable GLP-1 will increase fivefold based on the current capacity.

To achieve this growth, by 2030, Novo Nordisk AS needs to increase the filling and packaging production lines for Wegovy, CagriSema (a fixed-dose combination of semaglutide and the long-acting amylin analog Cagrilintide), and Amycretin (a novel GLP-1 and amylin long-acting co-agonist) single-use auto-injectors from 4 lines in 2024 to 12 lines.

How do substitutes for semaglutide perform?

CagriSema and Amycretin both belong to the GLP-1 class of weight-loss drugs and are considered substitutes for semaglutide.

Morgan Stanley expects that CagriSema and Amycretin will outperform semaglutide in weight loss effects, especially showing more consistent effects in diabetic patients and having advantages in anti-inflammatory and metabolic biomarkers.

According to data released by Novo Nordisk AS on the 7th local time, Amycretin can achieve an average weight loss of 13% in the 12-week treatment period.

Preliminary key trial data for CagriSema is expected to be released in the fourth quarter of 2024.

Morgan Stanley assumes that once launched, approximately 55% of treated obese patients will switch to CagriSema, and 36% of diabetic patients will switch to CagriSema.

What is the outlook for new non-GLP-1 oral weight-loss drugs?

INV-202 is an oral CB1 inverse agonist originally designed for diabetic kidney disease, showing weight loss potential in a phase 1b trial.

Initial data shows that compared to a placebo, INV-202 can help patients lose 4.1% of their weight in 4 weeks, accompanied by significant reductions in inflammation and blood lipids.

Morgan Stanley is optimistic about the revenue prospects of INV-202, demonstrating significant growth potential before the announcement of phase 2b trial data (expected in the third quarter of 2024).

INV-202 is different from GLP-1 small molecule drugs, with a simpler chemical structure, hence stronger scalability, and is only 18 months behind Lilly's orforglipron (an oral GLP-1 weight-loss drug) in clinical development.

Will 2024 usher in a wave of data validation for obesity concepts, and how will Novo Nordisk AS perform?

Morgan Stanley predicts that facing increasingly fierce competition in the injectable GLP-1 field, Novo Nordisk AS and Lilly will maintain their leading positions in the field of diabetic obesity. This reflects the depth and breadth of their respective R&D pipelines, as well as the economic barriers they have established in active pharmaceutical ingredients, filling and packaging, clinical development, and reimbursement strategies. Despite the potential market disruption that new oral and long-acting obesity treatment methods currently under development may bring, these innovative treatments are still seen as potential acquisition or collaboration projects for pharmaceutical giants like Novo Nordisk AS and Eli Lilly in the future.

In other words, while these innovative treatment methods have the potential to shake up the market, for large pharmaceutical companies like Novo Nordisk AS and Eli Lilly, introducing these emerging treatment methods through acquisitions or collaborations can not only expand their product lines but also maintain their leading position in the competitive field of obesity treatment.

Can Greater Diversification Beyond Diabetic Obesity Be Achieved?

Morgan Stanley predicts that by 2033, non-GLP-1 drugs will account for less than 8% of Novo Nordisk AS group's revenue.

The institution points out that currently, investors have limited attention not only to Mim8's Phase III data readout expected in the second quarter of 2024 (with an estimated peak potential of $2 billion) but also to other drugs and treatment technologies, including those in Phase II or III clinical trials such as Ziltivekimab, PRX004, FGF-21, and Ocredurenone, as well as investment opportunities in early-stage research technologies like Dicerna gene silencing technology and other cell therapy technologies.

This indicates that even though some drugs show significant market potential, investor attention may still be lacking. Apart from a few drugs that receive more attention, many drugs in mid-to-late-stage clinical trials, and even early-stage research technologies with potential breakthroughs, have not yet garnered enough investor attention.