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Is the hype about weight loss pills over? Novo Nordisk's "dead bulls" have also begun to sell stocks significantly

鹏尚思密达
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A top performing European fund manager who has long held Novo Nordisk signals that the hype about weight loss pills should come to an end. Since the beginning of this year, the stock price of Novo Nordisk (US stock) has risen by over 57%.
Niall Gallagher manages a stock fund under the global investment management company GAM Investments, which has a return rate of 14% this year. Gallagher recently stated in an interview that he has reduced his holdings of Novo Nordisk's stock by about half because the hype surrounding the Danish pharmaceutical company's weight loss pills has gone too far, leading to a significant surge in the company's stock valuation.
Gallagher said, "We have been doing Dono and Nord for a long time, but now there is a lot of hype, and not just in the stock market, you can see news about these weight loss pills everywhere."
Although he did not see any competitors between Novo Nordisk and Lilly, which also produces the weight loss drug Mounjaro, Gallagher pointed out that for a considerable period of time, pharmaceutical companies did not have permanent patents for their drugs, and patents would sometimes expire.
According to data, Gallagher's managed fund size reached 473 million euros ($518 million), outperforming 88% of its peers this year. In the latest documents submitted at the end of October, the fund's main holdings include Nestle, London Stock Exchange Group, and Linde Group. Novo Nordisk was the fund's largest holding stock at the end of July, but it has now dropped to the fifth largest holding stock.
Wegovy, a new generation of highly effective weight-loss drug, and GLP-1 (glucagon like peptide-1), a diabetes drug, have made the market imaginative. In September, Novo Nordisk surpassed LVMH, a French luxury giant, and became the listed company with the highest market value in Europe.
Due to strong market demand, Wegovy is facing a shortage of supply, and Novo Nordisk has limited the number of countries listed and the number of patients who can start treatment. Currently, Wegovy is only listed in the United States, United Kingdom, Germany, Norway, and Denmark.
At present, Novo Nordisk's 12 month expected P/E ratio is close to 33 times, much higher than the long-term average of 19 times, and the Stoke 600 Healthcare Index's P/E ratio is 17 times. Its stock price is also close to the average target price of 31 analysts tracked by Bloomberg, indicating that there is almost no room for the company's stock price to rise next year.
Although most analysts still give Novo Nordisk a buy rating, some people have become skeptical after the stock surged. UBS analyst Michael Leuchten said that the revenue opportunity for the weight loss business may not be as significant as the current valuation of Novo Nordisk suggests.
According to FactSet data, sales of Novo Nordisk's Novo Nordisk and Wegovy, as well as Lilly's Mounjaro, are expected to reach $21 billion this year and increase to $53 billion by 2028.
Gallagher claims that he remains optimistic about the medium to long term prospects of Novo Nordisk as he believes that growth remains strong despite strong demand and supply constraints.
He added that from the perspective of balancing risk and return, it is no longer as attractive. In terms of valuation multiples, the current price has reached the limit they are willing to pay.
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