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At the start of the year, I decided I would avoid doubling down on my losing ISA investments. In other words, those holdings in my Stocks and Shares ISA that had taken a big plunge.
Specifically, I had been cut by a couple of falling knives called Diageo and Moderna. My strategy was to return to backing proven winners and companies on an upwards trajectory.
But four months into the year, I’ve just broken this plan. How so? Well, I added to my holding in healthcare giant Novo Nordisk (NYSE: NVO), which had fallen 60% in 10 months.
Here, I’ll explain why.
A still-growing business
Returning to Diageo and Moderna, these were companies I thought had exciting long-term futures (in premium spirits and mRNA technology respectively).
However, their near-term prospects looked cloudy, with weakening sales. Consequently, there was a lot of pessimism surrounding the pair, which I thought was overdone. But I underestimated the severity of their operational challenges and both stocks kept falling lower after I doubled down.
By contrast, Novo Nordisk is a leader in diabetes and GLP-1 weight-loss medicines — two areas that are still growing strongly. This year, the company’s revenue is expected to increase 18% to around $52bn, with a similar rise in earnings per share.
Looking further ahead, forecasts have revenue topping $70bn by 2028. Therefore, this doesn’t appear to be a company whose growth trajectory is in any real peril.
So why on earth did the stock plunge 60% inside one year?
Rising competition
The chief culprit is Eli Lilly, the company’s arch-rival in the lucrative GLP-1 weight-loss treatment space. While Novo Nordisk currently holds a market-leading position through its blockbuster injectable drugs Wegovy and Ozempic, Eli Lilly is winning the race to commercialise a daily weight-loss pill.
In short then, the market’s worried about rising competition. This largely explains why the stock has crashed, though uncertainty around tariffs also continues to weigh on the overall pharmaceutical sector.
Turning to telehealth platforms
To shore up its market position in the here and now, Novo recently signed deals with US digital health providers to sell Wegovy at discounted prices through their platforms.
Meanwhile, Novo Nordisk is selling the treatment at starting prices of $499 a month on its own direct-to-consumer online pharmacy (NovoCare). This should help keep sales high, though margins could take a bit of a hit due to the discounted prices.
Attractive valuation
The stock’s risen nearly 10% since I broke my ISA vow and topped up at $60. However, it’s still trading at just 14 times forecast earnings for 2026. That looks very cheap to me, despite the rising competitive threat from Eli Lilly.
According to forecasts from the World Obesity Federation, the number of obese adults will hit around 1.53bn by 2035. So the addressable market here is simply enormous. This could see sales of GLP-1 drugs for type 2 diabetes and obesity rise above $150bn in the 2030s, up from around $50bn last year. And reports say these treatments are finally set to be recommended by the World Health Organisation (WHO) in August.
Fact is, it’s unlikely Eli Lilly will totally corner this massive market. So I see Novo Nordisk stock as a cheap way for me to invest in this global mega-trend.
