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Morningstar | Novo’s Global Insulin Leadership and GLP-1 Portfolio in Diabetes Support a Wide Moat

As a pioneer in diabetes care, Novo has been in the business for more than 85 years and claims 28% of the more than $50 billion diabetes treatment market and roughly half of a $20 billion insulin market. The prevalence of diabetes is expected to soar in the coming decades as a result of an increasingly overweight and aging population, and we expect Novo to maintain its wide moat as it continues to dominate in diabetes and obesity therapy innovation.Insulin need will grow as more patients are diagnosed with and treated for diabetes, and as patients require more-intense regimens as their disease progresses. Demographic trends are strengthened by a market shift from human insulin toward modern insulin analogs (such as Novo's Levemir and NovoLog) and now next-generation insulin analogs (Tresiba, Fiasp), which offer improved efficacy, safety, and convenience for patients. Tresiba also appears to offer greater dosing flexibility and less risk of hypoglycemia than Sanofi's top-selling Lantus, and this should help Novo continue to gain share despite biosimilar Lantus (Lilly's Basaglar) and Sanofi's next-generation insulin, Toujeo.Novo also markets GLP-1 analogs Victoza (daily dosing) and Ozempic (weekly dosing); strong efficacy and cardiovascular benefits to treatment should lead the $8 billion GLP-1 market to double over the next 10 years. While Novo has recently lost share to Lilly's once-weekly Trulicity, we think Ozempic's recent launch and a daily oral GLP-1 semaglutide launching by 2020 will allow Novo to regain lost share. Despite pricing pressure, we are confident in the long-term strength of Novo's economic moat and positioning in the diabetes market, particularly given oral semaglutide's potential to serve earlier-stage diabetes patients as well as weekly semaglutide's potential in obesity. While Novo is also leveraging its expertise with therapeutic proteins in areas like hemophilia, we do expect some pressure on its high-margin biopharmaceutical products like NovoSeven in hemophilia (competition from Roche) and growth hormone Norditropin (pricing pressure in the field).