The stock-market’s frenzy around obesity drugs is creating a bubble, according to an analyst at Kepler Cheuvreux.
(Bloomberg) — The stock-market’s frenzy around obesity drugs is creating a bubble, according to an analyst at Kepler Cheuvreux.
Shares of Ozempic maker Novo Nordisk A/S have risen more than 50% this year, fueled by the buzz around weight-loss drugs such as the blockbuster Wegovy. Yet Kepler Cheuvreux’s David Evans says the valuation has now become “very stretched.”
“We think the obesity frenzy is a bubble, but what will pop it?” Evans wrote in a note, reiterating his hold rating on the stock. “We do not see any drivers near-term.”
The analyst’s opinion provides a note of caution toward Novo, which surpassed luxury giant LVMH as Europe’s most valuable listed company last month. Goldman Sachs Group Inc. analysts this week predicted that the market for obesity drugs could reach $100 billion by 2030.
According to Evans, the stock’s jump since August — when a study found Wegovy reduced the risk of heart attacks and strokes — suggest consensus estimates for peak sales of the drug need to double again to more than $25 billion to justify the share price move.
Novo shares trade at about 34 times expected earnings, double the average price-to-earnings ratio for stocks in the Stoxx 600 Health Care Index, according to data compiled by Bloomberg.
“Probably due to its unique appeal, Novo’s valuation has become very stretched compared to its historical average and peers,” Evans said. “Sky-high valuation requires a lot more growth.”
Some analysts tracked by Bloomberg are more pessimistic than Evans. Those at Jefferies and Societe Generale both see potential for the shares to fall about 40%.
–With assistance from Allegra Catelli.
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