Novo Nordisk vs. Tesla: Which Reigns Supreme in the Market?

Novo Nordisk, the company responsible for Ozempic and Wegovy, has expanded beyond its home country of Denmark. In fact, it has now surpassed Tesla in size.

On Thursday, the pharmaceutical company's shares surged over 8%, elevating its market value to $609 billion. This is approximately $40 billion higher than Tesla's market worth.

Investors were excited about Novo Nordisk's stock following the positive results from a trial of amycretin, a new weight loss pill. In the Phase I trial, participants were able to lose 13.1% of their weight in just 12 weeks.

Grégoire Biollaz, a senior investment manager at Pictet Asset Management specializing in health improvement companies, praised the results as "very strong." He believes that Novo Nordisk (NVO) now has the potential to become a major player in the weight loss drug market.

"Some physicians believe that certain patients prefer taking an oral drug over receiving an injection," he told CNN.

Novo Nordisk, previously a lesser-known company that produced the diabetes medication Ozempic, has significantly increased in worth due to the drug being used off-label for weight loss. In 2021, the US Food and Drug Administration approved Wegovy, which shares the same active ingredient as Ozempic, as a treatment for obesity.

The company's market cap is now larger than Denmark's annual economic output of $410 billion. Its success played a significant role in helping the country avoid a recession last year. According to the Danish statistics office, the economy grew by 1.8% in 2023. If not for the thriving pharmaceutical industry, it would have shrunk by 0.1%.

According to Jens Naervig Pedersen, a senior analyst at Danske Bank, Novo Nordisk was crucial in determining whether the Danish economy grew last year. He believes that the company will continue to be the main growth driver this year.

He told CNN that there is a very large successful company that is boosting the economy. This company is creating jobs and investments in new factories, as well as jobs in the construction sector. Tesla, on the other hand, is experiencing a decline.

The excitement about weight loss drugs and their potential benefits for health and economy is similar to the buzz around electric vehicles.

However, the electric vehicle industry is facing challenges as the demand for EVs is starting to slow down. Factors such as high prices, limited public charging stations, and complicated tax credits in the US have deterred some potential buyers.

Elon Musk's Tesla (TSLA) is facing some challenges. Despite selling a record number of cars in the last three months of 2023, the company lost its position as the world's largest EV maker to China's BYD. To stay competitive, Tesla reduced prices for certain models last year.

Unfortunately, Tesla's stock has dropped by 28% this year. This decline was partly caused by an arson attack on an electricity pylon near its factory in Berlin, Germany. The attack disrupted power supply to the plant, halting production. According to Reuters, power is not expected to be restored until March 17.

The All-Electric Ford Mach-E is displayed during the 2023 Los Angeles Auto Show at the Los Angeles Convention Center on November 24, 2023 in Los Angeles, California.

The All-Electric Ford Mach-E is displayed during the 2023 Los Angeles Auto Show at the Los Angeles Convention Center on November 24, 2023 in Los Angeles, California.

Josh Lefkowitz/Getty Images

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EVs have been a huge disappointment compared to Novo Nordisk, whose shares have increased by 30% this year and nearly 80% over the past 12 months. Similarly, Eli Lilly, a US drugmaker in the same industry, has also seen significant gains this year.

The global market for weight loss drugs that mimic GLP-1, a hormone that suppresses appetite, is dominated by companies. They are facing challenges in meeting the high demand for these drugs and are investing billions to increase their manufacturing capacity.

According to Biollaz at Pictet, companies like Novo and Lilly are experiencing a situation where there is more demand for the drugs than they can supply. This trend is expected to continue into the next year.

The market for drugs targeting overweight and obesity is expected to expand as the number of affected individuals increases worldwide.

On the other hand, Tesla's future is less clear due to competition from Chinese manufacturers and a potential decrease in the adoption of electric vehicles in the United States and Europe.

It has not been an easy beginning of the year for Elon Musk. Recently, he was surpassed by Amazon's Jeff Bezos as the richest person in the world. As per the Bloomberg Billionaires Index, Musk's net worth is $198 billion, while Bezos is valued at $200 billion.

Editor's P/S:

The rise of Novo Nordisk and the challenges faced by Tesla highlight the shifting dynamics in the global pharmaceutical and automotive industries. Novo Nordisk's success in developing weight loss drugs has positioned it as a major player in a rapidly growing market, surpassing even the once-dominant Tesla in size. This shift reflects the increasing focus on health and well-being, as well as the potential of innovative treatments to address pressing health concerns.

The challenges faced by Tesla, on the other hand, underscore the competitive nature of the electric vehicle industry and the need for continued innovation and adaptation. Despite its early success, Tesla is facing competition from Chinese manufacturers and a potential slowdown in the adoption of electric vehicles. This highlights the importance of ongoing research and development, as well as the need for companies to stay ahead of the curve in order to maintain their market leadership. transition to sustainable energy continues, it will be interesting to observe how Tesla navigates this competitive landscape and whether it can regain its position as the leading EV manufacturer.