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It’s a good bet that, five years ago, the average American investor would not have been familiar with Novo Nordisk (NYSE: NVO). That’s because the Denmark-based company had not yet won U.S. Food and Drug Administration (FDA) approval for its star drug, weight loss treatment Wegovy.

What a difference five years and several regulatory nods can make. Novo Nordisk has rocketed to prominence on the back of Wegovy, and its stock has soared accordingly.

5x in five years

If you had slapped $1,000 down on Novo Nordisk on May 10, 2019, your investment would have grown more than five-fold to $5,320.

Novo Nordisk is Exhibit A of the philosophy of focusing on core competencies. More than a century ago, the pharmaceutical company’s most direct antecedent entered the insulin business. Ever since then, its main therapeutic area has been diabetes.

Wegovy is part of that tradition. Both it and the related medication Ozempic — developed and approved as a diabetes drug — contain the same active ingredient, semaglutide, but have different dosages.

The company earned its first, crucial FDA nod for Wegovy in 2021, and it’s never looked back. For years the drug has been a star as a weight loss treatment, particularly in the U.S. where a great many people struggle with obesity. This is a massive market eager for a product that can take the pounds away.

The numbers tell the tale. In Novo Nordisk’s first quarter of 2024, Wegovy’s sales doubled and then some to nearly 9.4 billion kronor ($1.4 billion).

Weight loss for financial gain

With that kind of success, rivals are pushing hard to get their own obesity drugs to market. One that’s received an FDA nod recently is Eli Lilly‘s Zepbound, and others are sure to get green lights before long.

That’s certainly a threat, but early mover advantage absolutely counts in this business. Besides, Novo Nordisk is busy developing semaglutide for other potential therapeutic uses. We can easily imagine semaglutide expanding into other indications. This remains a business with quite a future, and on that basis, all investors should consider owning it.

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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.

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