Better Buy: Novo Nordisk vs. AstraZeneca

Novo Nordisk (NYSE: NVO) and AstraZeneca (NASDAQ: AZN) are among the largest companies in the pharmaceutical industry. Both have generally produced strong financial results in 2024, but one wouldn't know it by looking at their stock market performances. AstraZeneca's shares are down by 2% over the trailing-12-month period, while Novo Nordisk's shares are in the red by 14%.

It just so happens that these drugmakers have encountered issues in recent months that sank their stock prices, although there is a good chance they will recover and still deliver strong returns to patient investors. But which one is likely to perform better than the other? Let's find out.

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The case for Novo Nordisk

Novo Nordisk has been making breakthroughs in diabetes care for about 100 years. The company is still at it. As of August 2024, it had a 33.9% share of the diabetes care market, up from the 33.3% it held a year before. Novo Nordisk also boasted a 55.6% share of the GLP-1 drug space, compared to 54.4% as of August 2023. The company's most famous brands, Wegovy and Ozempic, are both GLP-1s. They have helped Novo Nordisk's financial results grow rapidly in recent years.

NVO Revenue (Quarterly) data by YCharts

The weight loss market is projected to grow rapidly through the end of the decade. Few (if any) companies have a more attractive pipeline in this field than Novo Nordisk. True, one of the drugmaker's leading candidates, CagriSema, recently failed to impress investors in a phase 3 study. Upon closer inspection, though, Novo Nordisk's "disappointing" late-stage results for CagriSema weren't bad at all.

In fact, it could be the most effective weight loss treatment yet since it performed better than Wegovy in the trial against which it went head-to-head. CagriSema's 22.7% average weight loss by the end of the 68-week study was also better than what Eli Lilly's Zepbound accomplished in a similar trial. The market reacted the way it did because Novo Nordisk's management had promised a 25% average weight loss, but this miss means little to Novo Nordisk's long-term prospects.

Further, the company has several exciting candidates in other areas, including rare diseases and neurological conditions such as Alzheimer's and Parkinson's. So, despite its recent dip, Novo Nordisk remains an excellent pharmaceutical stock to buy and hold.

The case for AstraZeneca

AstraZeneca's strategy is different from Novo Nordisk's. Whereas the latter derives most of its revenue from a few diabetes or obesity drugs, AstraZeneca has a large and diversified pipeline of medicines. The company's products span the field of oncology -- its most important and lucrative -- rare diseases; cardiovascular, renal, and metabolism; respiratory and immunology; and vaccine and immune therapies.

Though the sale of COVID-19 products has somewhat disrupted AstraZeneca's revenue growth in recent years, it has generally been strong.

AZN Revenue (Quarterly) data by YCharts

Further, AstraZeneca has plenty of exciting pipeline candidates. The company is also going after the weight loss area, with several promising candidates, though they are still in the early stages of development. Beyond that, AstraZeneca's pipeline is as diversified as its lineup with 199 programs. With strong financial results and a robust pipeline, why is AstraZeneca's stock not performing well? The company has been the subject of an insurance fraud investigation in China, one of its most important international markets.

Also, AstraZeneca's president in China, Leon Wang, was recently arrested by Chinese authorities for charges unrelated to the insurance fraud, or so the company believes. While this issue will affect AstraZeneca's sales in China and introduces some uncertainty in its short- to mid-term prospects, if it can get around this headwind, it could deliver excellent returns to long-term investors.

The verdict

Despite higher quarterly revenue, AstraZeneca's earnings per share are lower.

NVO Revenue (Quarterly) data by YCharts

Also, with Novo Nordisk's high-flying GLP-1 medicines -- and AstraZeneca's potentially lower sales in China in the coming quarters -- Novo Nordisk's revenue could grow faster than AstraZeneca's in the short to mid-term. Finally, Novo Nordisk's recent issue is less damaging to its prospects than AstraZeneca's. For all those reasons, the former looks like a far better buy than the latter right now.

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Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool recommends AstraZeneca Plc and Novo Nordisk. The Motley Fool has a disclosure policy.