Firstly, Novo Nordisk, the company behind Ozempic and Wegovy, has outgrown its native Denmark. It is now larger than Tesla.
The shares of the pharmaceutical giant rose over 8% on Thursday, pushing its market capitalization to $609 billion, approximately $40 billion more than Tesla’s valuation.
Investors rushed to buy Novo Nordisk shares after the company reported initial results from a trial of amicretin, an experimental weight loss drug that can be taken in pill form. Phase I trial data showed participants lost 13.1% of their weight after 12 weeks.
Grégoire Biollaz, senior investment manager at Pictet Asset Management focusing on companies that help improve people’s health, called the results “very solid” and said they position Novo Nordisk (NVO) to potentially dominate another corner of the weight loss drug market.
“There are some doctors who say that, for some patients, receiving an injection is something forbidden and that they would prefer to take an oral medication,” he explained to CNN.
Novo Nordisk, once the lesser-known maker of the diabetes drug Ozempic, has increased its value as the unauthorized use of the drug for weight loss has spread. Wegovy, containing the same active ingredient as Ozempic, was approved by the U.S. Food and Drug Administration as a treatment for obesity in 2021.
The company’s market capitalization is now larger than Denmark’s annual economic output of $410 billion, and its success largely contributed to the country avoiding a recession last year. The economy grew by 1.8% in 2023 but would have contracted by 0.1% if not for the pharmaceutical industry boom, according to Danish statistics.
Last year, Novo Nordisk “was the difference between whether the Danish economy grew or not,” according to Jens Naervig Pedersen, senior analyst at Danske Bank, and is likely to remain “the main driver of growth” this year.
Tesla takes a step back
The enthusiasm surrounding weight loss medications (about their potential to boost economies by improving people’s health and changing the business models of traditional food and weight loss companies) reflects some of the revolutionary rhetoric surrounding electric vehicles.
But that industry is facing challenges as the growth in demand for electric vehicles shows signs of slowing down. High prices, lack of public charging infrastructure, and a confusing array of tax credits in the United States have deterred some potential buyers.
Elon Musk’s Tesla, the heavyweight of electric vehicles, is faltering. While the company sold a record number of cars in the last three months of 2023, it lost its title as the world’s largest electric vehicle manufacturer to China’s BYD during that period. Faced with increasing competition, Tesla cut prices on some of its models last year.
Its shares have plunged 28% so far this year, dragged down in part by an incendiary attack on a power tower near its factory near Berlin, Germany, this week. The attack cut power to the plant, Tesla’s only one in Europe, halting production, and Reuters reported that power is not expected to return until March 17.
In contrast, Novo Nordisk’s shares have risen 30% this year and nearly 80% in the last 12 months. Eli Lilly (LLY), a U.S. pharmaceutical manufacturer active in the same field, has enjoyed similar gains this year.
The companies have cornered the global market for weight loss medications mimicking GLP-1, a natural hormone that suppresses appetite. They have struggled to meet the growing demand for these drugs and are funneling billions to expand their manufacturing capacity.
“Novo and Lilly are in this luxurious position where there is too much demand for drugs, and they cannot supply the market, and that will be the case next year as well,” said Pictet’s Biollaz.
As the worldwide number of people defined as overweight or obese is expected to increase, the market for these medications is likely to grow.
The outlook for Tesla is much less certain, given Chinese competition and the apparent slowdown in electric vehicle adoption in the United States and Europe.
It has been a tough start to the year for Musk, who was dethroned by Amazon founder Jeff Bezos as the world’s richest person earlier this week. According to Bloomberg’s Billionaires Index, Musk’s net worth is $198 billion, while Bezos is worth $200 billion.”
