Novo Nordisk Shares Rise After Stock Split

Introduction

Novo Nordisk A/S shares rose slightly on Wednesday in the first trading session following a two-for-one split aimed at increasing the liquidity of the Danish drugmaker’s soaring stock.

Increased Liquidity with Stock Split

• Novo gained 0.4% to about 684 Danish kroner after the split.
• The split will bring price levels for its Copenhagen-listed shares and American Depositary Receipts “in line with market practice.”

Rapid Rise in Novo Nordisk Shares

Novo shares have risen almost sevenfold since the company last split its stock in January 2014.

The stock hit an intraday peak of more than 1,380 Danish kroner ($198) on the day before the separation took effect.

Leadership in the Global Market for Obesity Drugs

Gains have been driven by Novo Nordisk’s leadership in the global market for obesity drugs.

Analyst Richard Vosser projects the obesity drugs market to be worth $71 billion within a decade.

Novo became Europe’s most valuable firm last month with a market capitalization of over $400 billion.

Positive Investor Outlook

Investors are optimistic about Novo Nordisk’s potential in the market.

Nicolas Domont, a fund manager at Optigestion, added to his stake in the company.

Valuation and Comparison

Novo Nordisk’s stock is trading at about 35 times forward earnings.

While this is nearly double the Stoxx 600 Health Care subindex, it is less than that of Novo’s main obesity-drug rival Eli Lilly & Co.

Eli Lilly shares trade at about 50 times forward earnings, boosted by its potential in weight-loss drugs and a successful trial for Alzheimer’s treatment.

Differing Views on Novo’s Outlook

Not everyone is positive on the outlook for Novo Nordisk.

UBS Group AG analyst Michael Leuchten believes the obesity revenue opportunity won’t be as big as Novo’s current valuation implies.

Thomas Brenier, head of equity management and research at Lazard Freres Gestions, thinks the valuation is starting to become tense.

Closing Remarks

Novo Nordisk’s stock split aims to increase liquidity and align prices with market practice.

The company’s leadership in the obesity drugs market has led to significant stock gains.

Investors have a positive outlook on Novo Nordisk’s potential in the market.

While some analysts have concerns, the majority see the strength continuing.