Amgen Vs Novo Nordisk, Which Is Best?

Obesity is at the root of many health risks ranging from diabetes to heart disease. Now that weight-loss drugs have been approved on a wider scale, analysts are forecasting the market will explode to $100 billion by 2030.

Danish pharmaceutical company Novo Nordisk A/S (NYSE: NVO) has been at the forefront of the movement with its popular semaglutide-based drugs Ozempic and Wegovy. While the drugs have the same composition, Ozempic is used to treat diabetes and Wegovy treats weight-loss.

The popularity of the drugs has driven NVO higher by over 456% in the past five years. But the pharmaceutical industry is highly competitive, and Amgen (NASDAQ: AMGN) has emerged as a strong contender to Novo Nordisk. AMGN share price has yet to deliver the gains of NVO though but that may change soon.

That’s because Amgen’s MariTide weight-loss injections are touted to be more efficient than those of Wegovy. While still in the experimental stage, Amgen hinted at positive results from MariTide’s early trials, and NVO stock fell on the news. But Novo Nordisk is much more firmly established, and its drugs have far more brand recognition.

So which weight-loss drug stock is better, Amgen or Novo Nordisk?

Huge Catalyst Drives Amgen Higher

Amgen stock hovered around $260 per share in the middle of April, but since the company announced success in early MariTime trials, the share price is up 19.9%. MariTime is still in Phase 2 trials, but there have been indications that the drug can reduce body weight by as much as 15%.

While the weight loss percentage is on par with Wegovy, the major benefit to MariTime is patients only inject it every month, compared to weekly injections with Wegovy. Initial indications are that patients don’t immediately gain weight after discontinuing the drug, which has been an issue with Wegovy.

Investors were also pleased to hear that Amgen had begun ramping up production facilities to ensure sufficient production of MariTime to meet the projected demand.

It was positive news after an earnings release where the company reported a $113 million 1st quarter FY24 net loss after recording profits in the three prior quarters. Amgen attributed that loss to a poor equity investment and higher expenses. Earnings per share for the quarter still beat estimates by 1.83%.

Novo Nordisk On Fire But Estimates Fall Short

Novo Nordisk had a much better 1st quarter with revenue of $65.35 billion reflecting a 22.45% year-over-year gain that also beat estimates by 2.79%.

The company’s net income of $25.41 billion was a 28.2% improvement over last year. Diluted EPS of $5.68 beat analysts’ forecasts by 8.75%.

Despite the strong quarter, the stock took a dip right after the earnings release, likely due to the Amgen news, which happened to coincide with Novo Nordisk’s earnings call.

Also, NVO investors were disheartened that Wegovy sales didn’t quite match up to forecasts, though revenue from the weight-loss treatment did double year-over-year.

Even though NVO dropped briefly on the news of MariTime’s success, the stock has bounced back and is now trading near its March peak of $135 per share. Part of the reason might be the news that Novo Nordisk is testing its weight-loss drugs as possible treatments for alcoholism and liver disease.

Analysts’ Ratings For Amgen and Novo Nordisk 

Of 28 Wall Street analysts who have rated Novo Nordisk, 19 assess it to be a Buy. The highest forecast has the stock reaching $196.78 per share over the next 12 months, a 45.2% improvement.

The average forecast is for a much more modest 3.33% gain to $140.08 over the next year. Eight Hold ratings and two Sell recommendations exist with the lowest estimate forecasting a share price decline of 43.5% to $76.51 in the next 52 weeks.

For AMGN, 15 out of 30 analysts consider the stock to be a buy at this price point. The highest forecast is for a 24% climb to $380 per share. On average, a rise of 3.4% to $316.89 is expected over the next year.

There are 13 Hold recommendations and 2 Sell ratings on AMGN, and the lowest forecast predicts the stock will drop by 44.5% to $170 per share in the next 12 months.

Is Amgen Or Novo Nordisk Undervalued?

A discounted cash flow forecast analysis pegs fair value for Novo Nordisk at $106 per share, suggesting material downside risk of 20%.

Amgen also appears to be trading at a premium to cash flows with 7.8% downside risk to fair value of $281 per share.

Using price-to-sales multiples, Amgen is the clear winner. The company has a 5.7x multiple compared to Novo Nordisk’s 16.8x.

Both stocks pay dividends, and Amgen is the winner there as well. It pays shareholders a 2.94% annual dividend yield which equates to a $2.25 payout quarterly. By contrast, NVO has just a 0.38% annual dividend yield for a $0.13 per share quarterly payout.

Amgen Vs Novo Nordisk Stock, Which Is Best?

Amgen appears to be a better stock to buy than Novo Nordisk because it’s trading at a lower premium to cash flows and has a higher dividend yield.

With that said, both companies are major players in a weight loss industry that is expected to grow exponentially over the coming years. While Novo Nordisk is more established in the space, Amgen has a clear plan to steal market share with a more effective drug.

NVO share price fell after Amgen announced success with MariTime in early trials, but NVO has since rallied back.

Novo Nordisk’s drugs are highly popular and have found new applications that could expand an already healthy market share.

While Amgen hasn’t performed as well over the past few years as Novo Nordisk, it very much has the potential to outperform over the coming years by taking market share. The main question is how fast Amgen will be able to get MariTime to market.

The drug is expected to complete phase 2 trials by the end of the year, but then it will have to complete phase 3 and receive FDA approval. By that time, Novo Nordisk’s offerings is likely to have a strengthened its position in the market making it challenging for Amgen to dislodge an entrenched user base and win over new customers. 

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.