Well — it’s a thing of beauty for those companies that produce diabetic care products, and for the shareholders, but its certainly not a beautiful thing for those poor people who suffer from the disease. Unfortunately, however, America is a growing nation, both, in terms of numbers and size; and it is the later that has created great opportunities for companies such as Novo Nordisk [Novo] (NVO) by causing a rise in Type 2 Diabetes.
Novo, with ninety years of experience, is a leading provider of diabetes care products. Headquartered in Denmark, Novo employs approximately 35,000 employees in 75 different countries, and it markets its products in 180 countries around the world. The company claims to have captured over 50 percent of the market’s share for insulin, and with the number of diabetes cases expected to rise in coming decades, that number stands to climb — possibly significantly.
Though the company’s biggest business segment lies within the treatment of diabetes, Novo also has leading positions within hemophilia care, growth hormone therapy and hormone replacement therapy. Novo’s roots in diabetic care products dates back more than eighty years ago when August Krogh, a Nobel Prize-winning professor at the University of Copenhagen, decided he wanted to start producing a revolutionary new medical preparation called insulin.
As a pioneer of many therapeutic breakthroughs in the field, Novo’s position has been further strengthened by a shift toward modern insulin analogs, such as Novo’s Levemir and NovoLog, which offer improved efficacy, safety, and convenience for patients. The newer drugs have afforded Novo the ability to charge roughly 150 percent more than human insulin products, despite similar production costs. And, in contrast to many of the world’s largest drug makers, Novo enjoys favorable patent protection for most of its key products.
Financials:
Novo’s financials appear to be in good shape. On a Y/Y basis, Revenue increased ~17.6 percent, Net Income increased 25.36 percent and EPS increased 29.54 percent. The company currently pays an annual dividend of ~1.5 percent (in U.S. Dollar terms) and its Payout Ratio sits at a very comfortable 26.3 percent.
Technically:
Technically, one could not ask for a prettier chart than this one. Though volume remained relatively flat from 1997 to 2010, the stock’s price increased in a rather nice progression from the lower left of the chart to the upper right. Since 2010, NVO has experienced a rather nice, and steady, increase in On Balance Volume, and the share price continued to rise accordingly.
Conclusion:
Novo is a company that stands to do very well in the upcoming decades due to the current diabetes epidemic. Though the company is exposed to certain currency risks and risks from generic competition, the company remains at the forefront of diabetes research, and it has a proven track record for returning value to shareholders.
Notes: Charting data provided courtesy of StockCharts.com.
Disclosure: I do not own any shares of NVO, and I have no intentions of initiating a position in NVO at any time within the next three trading sessions (i.e. before 7/11/2013).
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