Novo Nordisk

The insulin maker from Denmark

A healthy and balanced diet is the be-all and end-all. Everyone knows that, and yet it's often not easy to eat healthily. Heaps of fast food like pizza, fries, burgers and co. can trigger diseases in the long run. Unfortunately, these tasty treats contain way too much sugar and can therefore trigger diabetes.

Let's take a look at a few statistics on this topic. In a survey, 62 percent said that a healthy diet can help against diabetes. Unfortunately, more and more people are developing the sugar disease, and so, logically, drug consumption is rising too. And who is the most successful manufacturer here? The Danish company Novo Nordisk, of course ...

The origins and business model of Novo Nordisk A/S

In 1921, two Canadian researchers discovered the hormone insulin and used it to treat diabetes patients with quite promising results. You could call it pure coincidence that Nobel laureate and Copenhagen university professor August Krogh took a trip to the USA together with his wife Marie in 1922. He had been invited by colleagues at Yale University to report on his research across the country. On this trip, the couple heard about insulin treatment for the first time, and since Marie herself had type 2 diabetes, the whole thing was all the more interesting. Without further ado, they arranged an appointment at the University of Toronto to have the treatment explained in more detail. Shortly afterwards the two traveled back to Copenhagen and founded their own research laboratory called Nordisk Insulinlaboratorium.

The research went promisingly, and they were able to hire more staff. Among them were the tinkerer Harald and his brother, the pharmacist Thorvald Pedersen. Unfortunately, Thorvald didn't get along with one of the directors of Nordisk Insulinlaboratorium, which is why he and his brother quit again a little later. However, both continued their research independently and developed a special syringe for insulin treatment. Thanks to the Novo syringe, patients could conveniently inject themselves. And so Novo Terapeutisk Laboratorium was born. By 1989 the two companies merged again, now under the name we know: Novo Nordisk.

Today the Danes, with almost 50 percent market share, are the clear global market leader for diabetes treatments. However, Novo Nordisk is also very well represented in obesity, blood clotting and growth hormone therapy. Thanks to the growing lifestyle disease diabetes, revenue has been increased massively, especially in emerging markets. Novo Nordisk sells its products in over 170 countries and generates annual group revenue of almost 15 billion euros. This will continue to rise in the coming years, though not in the big steps it once did ...

What's next for Novo Nordisk?

The company still has several products in the pipeline that won't come to market until the next few years. In addition, the board is investing heavily in its own research department to always ensure patients get the best & most effective treatment.

If you look at the stock chart, you can see a substantial decline in mid-2016. What happened there? The Danes' competitors brought promising diabetes treatment drugs to market. In addition, the strong Danish currency weighed on revenue. In the meantime the stock has recovered, but it's still in a sideways trend. So there's room to the upside here again.

Can the dividend continue to be paid and raised?

The insulin maker has been paying a dividend since 1997 and has raised it every year since. It can be assumed that the board won't change this dividend policy any time soon. So it shouldn't be long before Novo Nordisk becomes a genuine Dividend Aristocrat. Currently an annual dividend yield of 2.5% is paid. That alone is decent, but if you consider the annual increase, a really attractive little sum adds up here.

Conclusion:
Novo Nordisk makes most of its money with diabetes patients. But by now it has built up several more pillars that will surely come into play even more in the future. Given the rising number of cases worldwide, I expect the stock chart to soon approach its all-time high again and keep rising. Together with the dividend, you've got a future-proof and lucrative investment here.