NVO

Prediction: This Could Be This Company's Next Billion-Dollar Product

Denmark-based biotech Novo Nordisk (NYSE: NVO) is a longtime leader in the diabetes drug market. Some of the company's products in this area, such as Rybelsus and Ozempic, continue to be successful. However, one of Novo Nordisk's strengths beyond its solid lineup is its ability to innovate. The company's pipeline is full of exciting programs.

One in particular, icodec, looks destined to become a major growth driver for Novo Nordisk. Let's look at icodec's recent results from clinical trials and what they may mean for Novo Nordisk's future.

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A potential once-weekly insulin product

Novo Nordisk held a 47.1% share of the worldwide insulin market as of May. But the company's revenue from this segment has been declining lately. During the first half of the year, Novo Nordisk's insulin sales dropped by 3% year over year in Danish Kroner (DKK) to 27.3 billion DKK, or roughly $3.6 billion.

The decline is partly due to government-imposed pricing pressures in various countries, including China, a market of about 120 million diabetes patients. These issues have impacted other major players in the insulin market, including Eli Lilly and Sanofi. A brand-new and innovative insulin product could help Novo Nordisk increase its market share in this area.

That's where icodec comes in. It is a potential once-weekly insulin option for people with diabetes. Novo Nordisk has been running clinical trials for icodec under a program named ONWARDS. And it recently released data from a phase 3a study in the fifth clinical trial of that program. It enrolled 1,085 insulin-naive type 2 diabetes patients -- that is, those who have never received insulin regularly before -- and some received once-daily basal insulin while others received icodec once a week for 52 weeks.

Icodec achieved its primary endpoint by demonstrating a non-inferior reduction in blood glucose levels during the trial. The investigational medicine also seemed to have a reasonable safety profile during the trial. These latest results add one more piece of evidence that shows the potential of icodec; it has demonstrated solid results in previous late-stage trials conducted under the ONWARDS banner.

Solid long-term prospects

Roughly 37.3 million people in the U.S. have diabetes. Of those, 90% to 95% are of the type 2 variety. While those with type 1 diabetes need insulin, only a fraction of patients with type 2 also do. According to some estimates, 14% of adults with diabetes use insulin, and another 13% use insulin and oral medicine to control blood sugar levels.

Still, there is a market of millions of people who typically take insulin daily. A once-weekly option would almost certainly attract many of them. But that doesn't tell the whole story. The prevalence of diabetes is on the rise in the U.S. as a result of higher obesity rates and an aging population. By 2050, 33% of the U.S. population could be diabetic.

Innovative products to help improve the lives of these patients will only be in even higher demand. That's right up Novo Nordisk's alley. The company plans to issue regulatory submissions in the U.S., China, and Europe for icodec in the first half of 2023. Given the results it has produced in clinical trials, icodec looks very likely to earn approval and become a notable product in the insulin market.

If approved, it will almost certainly generate more than $1 billion in annual sales at its peak. With about eight other programs in its pipeline targeting diabetes, Novo Nordisk will continue developing novel therapies in this area. The company is also looking to diversify its lineup, with various candidates for conditions like Alzheimer's disease and rare illnesses such as sickle cell disease.

Diversifying beyond diabetes will be important because the competition is getting ever more intense in diabetes. For instance, Eli Lilly's newly approved diabetes medicine Mounjaro looks highly promising. Further, Eli Lilly is working on its own once-weekly insulin product. Novo Nordisk's revenue and earnings have continued to grow even as its insulin segment has struggled.

In the first half of the year, the company's top line jumped by 25% year over year to 83.3 billion DKK. Meanwhile, net income jumped by 11.2% to 27.5 billion DKK. The addition of icodec should help strengthen the company's lineup. What does that mean for Novo Nordisk's future? The company's long-term prospects look attractive with a solid lineup that still generates growing sales, a key pipeline product that could earn approval within two years, and a propensity to innovate.

Investors looking for solid, low-risk stocks to buy and hold for a while should look no further than this top pharma stock.

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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