Novo Nordisk’s market valuation has increased so rapidly in recent weeks that it has overtaken Elon Musk’s EV giant.
Novo Nordisk On Top
A new weight loss pill being trialed by Olympic maker Novo Nordisk has sent the company’s value soaring. Its market value has now eclipsed that of electric vehicle manufacturer Tesla.
On Thursday, shares in the Danish pharmaceutical company jumped over 8%, and its market capitalization hit almost $610 billion. This unprecedented surge has placed Novo Nordisk as the world’s 12th most valuable company, surpassing Tesla and Visa, thanks to a new drug trial.
A Double-Powered Pill
The trial was of a new weight loss oral drug called amyretin, which is said to be twice as effective as their weight loss pill Wegovy. During the trial, participants lost 13% of their body weight in just 12 weeks, compared to similar trials where patients taking Wegovy lost 6% in the same period.
While the drug trials for amyretin are still ongoing, the news of its effectiveness so far has sent investors lunging for shares in the company since its value is unlikely to drop if the eventual product lives up to expectations.
Its overtake of Tesla indicates a dramatic shift in market interests since Tesla’s market cap was four times higher than Novo Nordisk’s just two years ago at the end of 2021.
Crazy for Weight Loss Pills
According to Savita Subramanian, a top strategist for Bank of America, the market sentiment is “euphoric” over pharmaceuticals, specifically weight loss drugs, artificial intelligence, and “not much else.”
It is a huge boost for the weight loss industry across the board. While Novo shares have increased by 80% in the last 12 months, shares in its main competitor, Eli Lilly, have also gained significant value over the same period. On the other hand, the same can’t be said for EV manufacturers like Tesla. Demand for EVs has slowed, and Tesla’s shares have risen by less than 1%.
Elon Musk’s company is now also in fierce competition with Chinese manufacturers – China’s BYD overtook Tesla as the world’s largest EV manufacturer in late 2023.
The Next Big Thing
Amyretin is the next in a line of phenomenally popular weight loss medications, known as GLP-1 agonists, from Novo Nordisk. The two best-known of these products are Ozempic and Wegovy. While both contain the key ingredient semaglutide and both have gained attention as weight loss drugs, there are some differences.
The FDA has only approved Ozempic as a treatment for Type 2 diabetes. Meanwhile, Wegovy, which has a higher dose of semaglutide, has been approved for prescription as a weight loss treatment.
Over the last few years, Novo Nordisk has cemented itself as a leader in the pharmaceutical industry, creating a new generation of weight loss medications that are helping millions of Americans fight against obesity and diabetes.
Miracle for Denmark
It has also been a miracle worker for its home country of Denmark. The company’s value now exceeds Denmark’s annual output, and it even saved the country’s economy from a recession last year.
Last year, it also outperformed luxury brand conglomerate LMVH to become the most valuable listed company in Europe. According to Jens Naervig Pedersen, a senior analyst at Danish banking multinational Danske Bank, in 2023, Novo Nordisk was the “difference between whether or not the Danish economy grew.”
“We have this very large successful company that is pushing the economy higher,” Pederson said. “It’s creating jobs, it’s creating investments in new factories, jobs in the construction sector.”
Billions Invested
Novo Nordisk’s runaway success has given them plenty to work with. The company has announced an $8.7 billion investment package to expand its manufacturing capacity.
It also spent $11 billion in February to purchase three new factories.
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The content of this article is for informational purposes only and does not constitute or replace professional financial advice.