Valuation of Novo Nordisk A/S

Jesper Boelt Barslund

Student thesis: Master thesis


This thesis answers the research questions: “What is the fair value of a Novo Nordisk A/S B share (NOVO-B) as of the 5st of February 2015?” and finds it to be DKK337,2. The valuation and budget is based on an industry and company description in combination with financial and a strategic analysis at the external, industry and internal level. Key competitive elements within the industry is having efficient operations, in combination with a full product pipeline developed through extensive R&D. Where competitive elements for products is a combination of medical efficiency and patient convenience, relative to product pricing. I find Novo to be a full-service research-based pharmaceutical firm that operates on a global scale, where the key important denominator for all products is that they are protein related. Future industry profitability is expected to be high, due low threat of entry and low bargaining power of suppliers. Revenue growth is primarily expected to be driven by volume - through increased global obesity and diabetes prevalence - and not through pricing, as Novo will be facing increasing buyers bargaining power - in particular in the important US market – and increased pressure from biosimilars. Novo’s future market share development within the individual product segments is promising, as a loss of market share is only expected in a single segment, maintaining or increasing in the remaining, while also adding three new products to the portfolio. Combined strengthening Novo’s market position. A strong focus on protein related products, is a long-run competitive advantage relative to Novo peers, as it’s a more focused strategy that creates a streamlined operation that translates into higher profitability through greater usage of production of scale and production of learning. Through financial analysis the advantage is evident historically and is considered sustainable, therefore expected to continue. Justifying why Novo’s is estimated at a higher multiple than their peers. My valuation is high relative to the traded price on the valuation day, either suggesting my estimations are to optimistic or that the stock is undervalued, where sensitivity analysis showed that differences in estimated price could be explained in different methodology when selecting risk-free rate, beta and long-term growth rate. Due to the development in the share price, I consider my valuation as reasonable target price and therefore consider the stock as undervalued at the day of analysis.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2015
Number of pages119