Strategic Analysis and Valuation of Novo Nordisk

Mathias Hauberg Lysgaard & Mark Meyer Poulsen

Student thesis: Master thesis


The subject of our thesis is to make a valuation of Novo Nordisk, which is one of the largest pharmaceutical companies in the World. Novo Nordisk researches, develops and manufactures products within two business segments: diabetes and obesity as well as biopharmaceuticals. The majority of their revenues comes from the diabetes and obesity segment. The insulin market is considered to be an oligopoly dominated by Novo Nordisk. Novo Nordisk is the market leader with 47 percent share of the global insulin market and 27 percent share of the overall diabetes treatments market. Its two major competitors in these markets are Sanofi and Eli Lilly. In our strategic analysis we applied four models to gain key insights that were concluded in a SWOT-analysis. On a macroeconomic level, Novo Nordisk isn’t at high risk because their products are vital for treatment of people. As a result, many investors see Novo Nordisk as a stable investment case. This is also evident in their ability to earn money through a financial crisis. Our industry and growth analyses indicated that the competition among the existing customers is hard because of the pressure to discount prices. On the other hand, there is a large potential for gaining new customers as the world population tends to gain higher BMI and requires medication to treat resulting complications. In the internal analysis, Novo Nordisk has gained a strong position. They have strong patents and good products in their pipeline that ensure future growth. We based our financial statement analysis on the 5-year period from 2013 to 2017, where Novo Nordisk has seen a positive development in their ROIC, turnover of invested capital and profit margin. They’ve also seen their NOPAT rise from 23,601m. DKK in 2013 to 35,172m. DKK in 2017. This large increase is primary due to the sales of their new generation insulin and products like Tresiba, Victoza and Saxenda. We calculated Novo Nordisk’s beta value to 1,117. We used this beta to generate a theoretical WACC value of 4,1197%, but we decided to use a more practical value of 8,9%. The value of Novo Nordisk was calculated by using the DCF-model, and the theoretical market value of the equity is estimated to be 937,031m. DKK per 2nd of May 2018. This translates to a share value of 374.81 DKK. This price is higher than the current share value of Novo Nordisk, meaning that the market assesses the price to be lower. The market price is always the correct valuation, and our thesis is performed with our subjective view of the future.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2018
Number of pages164