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2) Novo Nordisk Rallies Due to Oral GLP-1 Results

Novo Nordisk had a capital markets day last week that was well received from investors, particularly due to the promising results for its oral GLP-1 obesity drug option. Highlights from this article include:

• Novo Nordisk is cementing its global lead in weight loss after outlining promising trial results for anti-obesity pills that would extend the Danish drugmaker’s portfolio beyond its injectable Wegovy and Ozempic bestsellers.
• Investors and analysts are looking for the next producer of “small molecule” drugs—synthetic drugs that are easily reproducible as pills—rather than the complex and usually injectable drugs made from living cells, such as Novo Nordisk’s Wegovy, which imitates a hormone called GLP-1.
• The company expects China to approve Wegovy for sale later in 2024.
• Novo also commented on the competitive landsape, suggesting new entrants faced a long road to catch up with Novo Nordisk and its US rival Eli Lilly, because of the innovation required to develop safe, effective products and the manufacturing power needed to market them.

Also last week, Novo issued a press release stating the US Food and Drug Administration (FDA) had approved a label expansion for Wegovy® for reducing risks of major adverse cardiovascular events (MACE). The approval is based on the SELECT cardiovascular outcomes trial, which demonstrated that Wegovy® reduced the risk of MACE by 20% compared to placebo when added to standard of care.

3) Is US Index Concentration Unique?

Speaking of Novo Nordisk, after strong performance over recent years, it is the most valuable company in Europe and dominates Denmark’s stock market. At the end of February, Novo made up 66% of the MSCI Denmark Index.

Concentration within the US market-cap-weighted indices is getting a lot attention. However, if you look at the 14 biggest countries, by weighting, in the MSCI AC World Index as of 2/28/2024, the US has the second lowest concentration among its top five names. But it’s worth noting that most of those 12 countries with the higher concentrations also have far fewer total securities.

Source: Artisan Partners/FactSet/MSCI. As of 2/28/2024

4) Instagram Outgrows TikTok

In 2020, Instagram introduced Reels, a feature that allowed users to share short clips, cloning TikTok’s viral video features. Fast forward a few years and Instagram has overtaken TikTok in new app downloads according to this article. 

Instagram’s total number of app downloads grew 20% in 2023, to 768 million, compared with a year earlier, according to market intelligence firm Sensor Tower, making it the most downloaded app in the world. This compares to 4% growth, to 733 million downloads, for TikTok.

However, TikTok continues to gain better engagement from its active users, who spent an average of 95 minutes on the platform in the fourth quarter of last year, compared with 62 minutes on Instagram, 30 minutes on X and 19 minutes on Snapchat.

5) The Mid-Cap Valuation Discount

There has been a good amount of talk around the record valuation discount between US large caps and small caps, including in our recent “Case for Small Cap Optimism” paper. However, the same is true for US large caps versus mid caps.

Using monthly next 12 month P/E ratios from FactSet, the Russell 1000 Index’s 20.5X is at a 16% premium relative to the Russell Mid Cap Index’s 17.7X. The valuation gap between these indices hasn’t been this this wide since 2001.

Source: Artisan Partners/FactSet/Russell. As of 2/28/2024

Looking specificially at growth index P/Es, the Russell 1000 Growth Index’s 27.7X is at a 1% premium relative to the Russell Mid Cap Growth Index’s 27.5X. Looking back over history, large caps have traded at a premium only 15% of the time.  

Source: Artisan Partners/FactSet/Russell. As of 2/28/2024

Artisan Partners Growth Team manages portfolios which held securities issued by Novo Nordisk as of 12/31/23.  Portfolio securities are subject to change.