DENMARK — In a historic shift of power on the European corporate stage, Danish pharmaceutical giant Novo Nordisk has knocked luxury conglomerate LVMH off its throne as the continent’s most valuable publicly traded company, according to Reuters.
This remarkable development marks the end of LVMH’s 2.5-year reign at the top and underscores the seismic shifts occurring in the global economy.
Novo Nordisk’s ascent to the apex of Europe’s corporate hierarchy can be attributed to its exceptional performance in the pharmaceutical arena, particularly with its groundbreaking diabetes and weight-loss medications, Ozempic and Wegovy.
These drugs have witnessed a surging demand, propelling Novo Nordisk to unprecedented levels of earnings and share value.
In just a matter of weeks, Novo Nordisk’s shares soared by approximately 17% following the revelation that a comprehensive study had unveiled Wegovy’s notable cardiovascular benefits.
This discovery signaled a transformative moment for Novo Nordisk, as it shifted perceptions from a provider of lifestyle drugs to a pioneer in medical advancements.
As of the latest market close, Novo Nordisk boasted a staggering market capitalization of approximately US$424.7 billion, considering both listed and unlisted shares.
In stark contrast, the French luxury titan LVMH, known for its iconic brands like Louis Vuitton and Dior, held a market capitalization of US$420.1 billion.
This shift marked a significant departure from February 2021 when LVMH had dethroned Nestle as Europe’s corporate champion.
A tale of contrasting trajectories
Novo Nordisk’s remarkable journey over the past three years has seen its share price triple, while LVMH’s stock value merely doubled in the same period.
Marcel Stotzel, co-portfolio manager of Fidelity European Fund and Fidelity European Trust, noted, “Novo closing in on LVMH as Europe’s biggest market cap stock is a reflection of Novo’s recent product success while LVMH’s recent trends have been more mixed.”
Despite this changing of the guard, both Novo Nordisk and LVMH remain pivotal holdings for investment funds.
Novo Nordisk’s shares currently hover near all-time highs, reflecting investors’ enthusiasm for a company that has positioned itself as a trailblazer in the burgeoning market for obesity treatments.
With the weight loss drug sector poised to reach a projected US$100 billion in annual sales within the next decade, Novo Nordisk and Eli Lilly are expected to evenly divide the market share for obesity treatments.
Eli Lilly and Co. is anticipated to receive U.S. approval for its comparable drug, Mounjaro, later this year, intensifying competition in this rapidly expanding sector.
Charting a new course for healthcare
On August 8, Novo Nordisk released data from a study indicating that Wegovy could reduce the risk of major cardiovascular events, such as strokes, by a remarkable 20% in overweight or obese individuals with a history of heart disease—outperforming earlier expectations.
This outcome could pave the way for insurers and health authorities to consider covering the costs of Wegovy, priced at US$1,300 per month in the United States, for a broader range of patients.
Axelle Pinon, a member of Carmignac’s investment committee, emphasized the significance of these findings: “These results are de-risking the forward adoption curve for these drugs, justifying such a market move.”
Impact beyond markets
Novo Nordisk’s meteoric rise in share price is poised to elevate its weighting in the STOXX 600 index, potentially attracting increased investment from passive investors.
Meanwhile, LVMH’s fortunes have been tempered by concerns about China’s economic outlook, exacerbated by recent data and turmoil in the property sector. This downturn has cast a shadow over the luxury industry, heavily reliant on Chinese consumers.
Fiona Cincotta, a market analyst at City Index, noted, “There has been a series of weaker-than-expected data and the Chinese authorities’ unwillingness to inject large amounts of stimulus is knocking the outlook for these luxury retailers, which have a large amount of revenue growth coming from China.”
At the close of trading, Novo Nordisk’s shares had surged by 2.14%, while LVMH’s shares saw a decline of 0.8%.
Since reaching an all-time high in April, LVMH’s shares have plummeted by 14.2%, underperforming Europe’s broader STOXX 600, which has experienced a more modest 2.2% dip during the same timeframe.
Rival companies, such as Compagnie Financiere Richemont and Hermes, have also faced challenges, with share values declining by 17.9% and 6.4%, respectively, since their peak earlier in the year.
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