Is Novo Nordisk (NVO) a Smart Long-Term Investment?

Baron Funds, an asset management firm, published its “Baron Health Care Fund” first quarter 2022 investor letter – a copy of which can be downloaded here. In the quarter ended March 31, 2022, Baron Health Care Fund (the “Fund”) declined 9.93% (Institutional Shares), compared with the 4.56% decline for the Russell 3000 Health Care Index (the “Benchmark”) and the 4.60% decline for the S&P 500 Index. Try to spend some time taking a look at the fund’s top 5 holdings to be informed about their best picks for 2022.

In its Q1 2022 investor letter, Baron Health Care Fund mentioned Novo Nordisk A/S (NYSE:NVO) and explained its insights for the company. Founded in 1923, Novo Nordisk A/S (NYSE:NVO) is a Bagsværd, Denmark-based multinational pharmaceutical company with a $250.6 billion market capitalization. Novo Nordisk A/S (NYSE:NVO) delivered a -5.24% return since the beginning of the year, while its 12-month returns are up by 25.49%. The stock closed at $106.13 per share on June 14, 2022.

Here is what Baron Health Care Fund has to say about Novo Nordisk A/S (NYSE:NVO) in its Q1 2022 investor letter:

“We initiated a position in Novo Nordisk A/S (NYSE:NVO), a leading global biopharmaceutical company headquartered in Denmark that specializes in treatments for diabetes, obesity, and other chronic diseases. Novo Nordisk and Eli Lilly, another holding in the Fund, are leaders in the GLP-1 (glucagon-like peptide 1 agonists) class of diabetes treatments, a $15 billion market that is growing rapidly but still has just 3% penetration of diabetes prescriptions globally. Diabetes drugs in the GLP-1 class include Trulicity (Eli Lilly), Ozempic (Novo Nordisk), and Rybelsus (Novo Nordisk). These drugs stimulate insulin secretion and inhibit glucagon secretion, which helps lower blood sugar levels. GLP-1s also slow stomach emptying and increase how full you feel after eating, which reduces appetite and can lead to weight loss. We believe Novo Nordisk’s diabetes franchise will continue to generate solid growth driven by Ozempic and Rybelsus. We are particularly excited about the growth prospects for Novo Nordisk’s anti-obesity franchise, which is just getting started with the launch of Wegovy. In a 68-week clinical study of adults living with obesity or excess weight with a medical problem, adults taking Wegovy lost on average 35 pounds or roughly 15% body weight. There are over 650 million people living with obesity globally and only 2% are treated with an anti-obesity medication. Even with more conservative assumptions about the addressable patient population, we think Novo Nordisk’s obesity franchise can exceed $10 billion in sales over time. Novo Nordisk launched Wegovy in June 2021 but faced supply constraints due to overwhelming demand and manufacturing constraints at a contract manufacturer. Management has indicated supply issues will ease in the second half of 2022. Novo Nordisk’s pipeline includes new diabetes and anti-obesity medications that improve upon its existing portfolio. We think Novo Nordisk can generate double-digit revenue and earnings growth for many years.”

Our calculations show that Novo Nordisk A/S (NYSE:NVO) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Novo Nordisk A/S (NYSE:NVO) was in 31 hedge fund portfolios at the end of the first quarter of 2022, compared to 28 funds in the previous quarter. Novo Nordisk A/S (NYSE:NVO) delivered a 3.59% return in the past 3 months.

In March 2022, we also shared another hedge fund’s views on Novo Nordisk A/S (NYSE:NVO) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q1 page.

Disclosure: None. This article is originally published at Insider Monkey.