NVO funds share

Lukasz Zych
Sep 11, 2023 01:09 PM 0 Answers
Member Since Aug 2023
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Why do you think there is such a small share of NVO (Novo Nordisk) stocks held by investment funds? According to Marketsmith, it's only 1%, and according to Gurufocus, it's 3%. What could be the reason? Are they concerned that the patent for the main drug is expiring within 3 years?

That is a good question.

Novo-Nordisk is an ADR (American Depository Receipt) and many pension and school funds are limited to the amount of ADRs they can have in a portfolio. I participated in a steering committee for a  pension fund which allowed only 5% of ADRs in a portfolio. This does limit the number and  amount of funds that can own NVO.

The stock trades roughly two million shares per day and at $200.00 that makes it a $400 million dollar volume average. That is nothing like TSLA or NVDA but it is still quite a liquid stock. It also has a $440 billion market cap and is a large and liquid stock.

The primary revenue drivers are not set to expire until 2031 and 2032. Wi the exception of China where the patents expire in 2026 for Ozempic and Wegovy. They spend quite a bit on research and development, and continue to bring new drugs to market. Although, Ozempic and Wegovy have the potential to be some of the largest revenue generating drugs this decade.

This graph shows their current offering sea down they are set to expire. Wegovy and Ozempic get much notoriety (and rightfully so). But, Rybelsus is set to have more than $2 billion in sales in 2023. They will replace drugs going off patent with newer drugs.

This next chart shows their pipeline of current drugs and potential new drugs that may be brought to market. As you can see they are going to be doing big business for along time.

This chart from Marketsmith shows the total number of funds for the past few years. We can see the funds increasing over time. But, it still only has 432 funds as of June 2023. The management does not hold any stock and that is a good thing as they cannot dump stock on shareholders.

The lack of fund ownership can be seen in two ways. The first one is that pension and school funds are limited to the amount of ADR stocks they can hold and must be in compliance. They may rather own an American company like AMGN or MRK than a drug company from Denmark. Another way to look at it is that there are many funds who are late to the party that may want to join in buying NVO stock in the coming years.

I hope this answers your question.



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