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While obesity treatments dominate the current narrative, this focus risks obscuring NVO's core diabetes business and its long-standing ability to generate high returns on assets. I recognize the substantial opportunity in obesity treatments, though I question whether this aspect now receives more weight in the investment case than is warranted relative to other parts of the business. I’m sharing this to spark discussion rather than to claim certainty, and I’d be interested in hearing alternative views.
Two things that still feel underappreciated and led me to my initial investment:
1. NVO is still, in essence, a diabetes company.
2. NVO’s ROA / asset efficiency is astounding, especially for big pharma.
Note – this is financial advice. I'm just sharing what I found digging through NVO's reports.
**1) NVO is** ***still*** **a diabetes stock (and diabetes keeps getting bigger)**
The addressable market is still massive (and growing)
NVO's own reporting highlights how huge diabetes already is:
* **\~**425M people worldwide living with diabetes “today” (as cited in NVO's Annual Report 2018).
* Their diabetes projection work points to \~736M adults with diabetes by 2045.
The point is the same: diabetes is enormous and structurally growing.
Revenue check: diabetes is still the bigger engine (even after obesity exploded)
Below is a 10-year look at Diabetes vs Obesity sales (DKK, from NVO reports).
For 2015–2019, NVO reported “Diabetes & Obesity care” together; I backed out obesity using Saxenda sales (their only obesity product in those years). Saxenda sales in 2015–2016 are explicitly stated in the Annual Report 2016.
For 2017–2019, the Diabetes & Obesity segment totals + “Obesity care (Saxenda)” are shown in NVO's Annual Report 2019.
From 2020 onward NVO reports Diabetes care and Obesity care separately in the Annual Reports / key figures.
*NVO diabetes vs obesity (DKK m):*
* **2015:** Diabetes \~85,130 | Obesity \~460 → **\~99% diabetes**
* **2016:** Diabetes \~87,372 | Obesity \~1,577 → **\~98% diabetes**
* **2017:** Diabetes \~90,315 | Obesity \~2,562 → **\~97% diabetes**
* **2018:** Diabetes \~90,035 | Obesity \~3,869 → **\~96% diabetes**
* **2019:** Diabetes \~91,482 | Obesity \~5,679 → **\~94% diabetes**
* **2020:** Diabetes 102,412 | Obesity 5,608 → **\~95% diabetes**
* **2021:** Diabetes 113,197 | Obesity 8,400 → **\~93% diabetes**
* **2022:** Diabetes 139,548 | Obesity 16,864 → **\~89% diabetes**
* **2023:** Diabetes 173,466 | Obesity 41,632 → **\~81% diabetes**
* **2024:** Diabetes 206,618 | Obesity 65,146 → **\~76% diabetes**
Yes, obesity has become huge fast. But even in 2024, diabetes is still the majority of the "GLP-1 hype complex."
Diabetes portfolio growth isn’t “boring” either
Diabetes sales weren’t flat while obesity did all the work — diabetes scaled hard too:
* Diabetes care 2020 → 2024: 102,412 → 206,618 DKK m (roughly 2x in 4 years)
Framing NVO primarily as an obesity company risks overlooking the fact that diabetes remains the company’s largest revenue segment and continues to grow strongly.
A fair nuance worth calling out: a meaningful part of the diabetes care growth over the last few years has been driven by semaglutide (Ozempic), and in some countries a portion of Ozempic prescriptions were written off-label for weight loss before Wegovy was widely available. Because NVO reports Ozempic within the diabetes care segment regardless of end use, this likely means diabetes revenues somewhat overstate *pure* diabetes demand in certain geographies (notably the U.S.), while appearing much cleaner in others. That said, even allowing for this “clouding,” diabetes care remains NVO's largest revenue engine by a wide margin, and the growth of GLP-1s within diabetes reflects both genuine diabetes prevalence growth and NVO's continued dominance in that market.
**2) ROA / asset efficiency: NVO is astoundingly good at this (especially for pharma)**
*“The ideal business is one that earns very high returns on capital and that keeps using lots of capital at those high returns. That becomes a compounding machine.” -* Warren Buffett
One aspect that receives relatively little attention is NVO's long-standing ability to generate high returns on assets. Importantly, this is not a phenomenon that emerged with the recent GLP-1 or obesity boom. NVO has consistently delivered mid-to-high-teens to low-20s ROA levels over multiple cycles, including long before semaglutide meaningfully contributed to earnings.
Looking back over the past 15 years, NVO’s ROA has remained structurally high relative to large-cap pharmaceutical peers, even during periods when growth was driven primarily by insulin and earlier diabetes therapies rather than breakthrough obesity drugs. This suggests that the company’s asset efficiency reflects operational discipline, manufacturing expertise, and capital allocation, rather than temporary pricing power or a single product cycle.
My takeaway here is: NVO’s execution isn’t just molecules — it’s operations + manufacturing + capital discipline. NVO has historically been good at scaling while staying highly profitable on the asset base (even with assets scaling recently).