We recently published a list of the 10 Best Drug Stocks to Buy Now. In this article, we are going to take a look at where Novo Nordisk A/S (NYSE:NVO) stands against other best drug stocks to buy now.
Is China the Next Big Thing in the Pharmaceutical Industry?
Large American pharmaceutical companies are showing a distinct trend never seen before: they are increasingly looking for medicines in China. According to data from DealForma, as reported by CNBC, around 30% of Big Pharma deals with at least $50 million upfront in 2024 included Chinese companies. This was up from 20% the year before and almost 0% only five years prior. The surge in China deals is materializing when US policymakers and President Donald Trump are pursuing protectionist policies in technology, such as semiconductors and AI.
Various reasons are being attributed to this trend. Experts believe that Chinese companies are developing more effective molecules than ever before, that too in large quantities. They are in a position to begin testing these molecules on human subjects quicker and at a lower price than the US. Buyers have devised a business model allowing them to essentially import the medicines through licensing deals, according to CNBC. Biotech companies are further pushed into making these deals due to the drying up of venture funding in China.
Despite varying opinions among experts, there is an industry-wide consensus that this unique trend is here to stay. How this trend might affect the US biotech sector remains unclear at the moment. While some people believe it could potentially ruin American startups if large pharmaceutical companies stumble upon a promising Chinese drug at low price, others believe the competition would be fruitful for the industry. Either way, this trend is anticipated to metamorphose the landscape of the American biopharma sector. CNBC reported that Tim Opler, a managing director in Stifel’s global healthcare group, said the following about the situation:
“It’s kind of a watershed moment where the pharma industry is like, ‘We don’t really need to buy U.S. biotechs necessarily. We will if it makes sense, but we can buy perfectly good biotech assets through licensing deals with Chinese companies.”
What Does the Future of the Pharmaceutical Sector Look Like?
EY believes the pharmaceutical sector is expected to see more deal activity in 2025 compared to 2024, especially if interest rates remain low. Although the industry may see an increase in larger acquisitions to address growth gaps, smaller strategic deals are expected to persist throughout the year. The policy environment in the US is undergoing changes due to political impacts on business, such as re-regulation, lower corporate taxes, continued drug pricing reforms, and the possibility of higher tariffs. Other factors that may affect the biotech and pharmaceutical industries include changes in leadership within health agencies and immigration.
A survey by Deloitte showed that drug pricing and access are the top concerns among executives in 2025. The survey also showed that the primary concerns include competition from generic drugs and biosimilars and the looming patent cliff, with over $300 billion in sales at risk due to expiring patents by 2030. Due to this trend, executives anticipate an increase in mergers and acquisitions in 2025.
“According to McKinsey, the healthcare industry is expected to continually undergo a shift in growth dynamics. Health services and technology (HST) revenue pools are anticipated to grow at a compound annual growth rate of 8% between 2023 and 2028, supported by double-digit growth in software platforms and advanced data and analytics. The sales of innovative technologies such as generative AI to payers and providers are further supporting this growth.
Our Methodology
We sifted through stock screeners, online rankings, and ETFs to compile a list of 30 drug stocks. We then selected the top 12 most popular stocks among elite hedge funds as of Q3 2024. We sourced the hedge fund sentiment data from Insider Monkey’s database. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Jim Cramer on Novo Nordisk (NVO): ‘Be Careful’ Amid Trump Impact
An elderly couple receiving insulin from a pharmacist, representing healthcare company's successful pharmaceutical products.
Novo Nordisk A/S (NYSE:NVO) is a global healthcare company specializing in diabetes care. It develops, discovers, manufactures, and markets pharmaceutical products. Its operations are divided into two business segments: biopharmaceuticals and diabetes and obesity care. The latter segment covers GLP-1, insulin, and other protein-related products. Novo Nordisk A/S (NYSE:NVO) is one of the two major pharmaceutical companies competing in the GLP-1 weight loss market, with the other being Eli Lilly.
While both companies have approved weight loss medicines leading the market with billions in revenue, Novo Nordisk A/S (NYSE:NVO) is working on a new oral weight loss pill that may transform the market if approved. Novo Nordisk CEO Lars Fruergaard Jørgensen said that the company plans to file for regulatory approval for its oral weight loss drug in the United States in the coming months. If the company gains approval, it may be able to launch the drug as early as next year, which is when Eli Lilly also plans the release of its weight loss drug.
Apart from potential optimism surrounding this oral weight loss drug, Novo Nordisk A/S (NYSE:NVO) is functioning on strong fundamentals. Fiscal 2024 was a strong year for the company, with sales climbing 25% to $40.6 billion. It also raised its total dividend per share by 21.3% to DKK 11.40, which includes an interim dividend of DKK 3.50 distributed in August. This is the 29th consecutive year of dividend growth at NVO. In 2025, Novo Nordisk A/S (NYSE:NVO) expects a free cash flow of around DKK 75 to 85 billion and sales growth of 16-24% at constant exchange rates.
Overall, NVO ranks 10th on our list of best drug stocks to buy now. While we acknowledge the potential of NVO, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
