This May Be the Fastest-Growing Big Pharma Next Year (Hint: It Isn't Johnson & Johnson)

Johnson & Johnson is one of the globe's biggest drugmakers. It markets a slate of billion-dollar blockbuster therapies that cuts across autoimmune disease, oncology, and infectious disease. Thanks to J&J's successful research and development program, steady leadership, and rock-solid dividend, the company is a staple in investor portfolios. Given that backdrop, it might be a bit surprising to learn that Novo Nordisk , not J&J, is most likely to be Big Pharma's fastest-growing company next year.

Big fish in a big pondJ&J's product lineup includes rheumatoid arthritis drug Remicade, anti-psychotic therapy Invega Sustenna, and prostate cancer drug Zytiga. The company also operates a multibillion-dollar consumer business and a multibillion-dollar medical device business. That diversification helps to insulate investor risk, but it also means it is much harder to move the growth needle at J&J than it is at Novo Nordisk.

Almost 80% of Novo Nordisk's sales come from diabetes-related therapies, including its modern insulin products NovoRapid, NovoMix, and Levemir. Sales of those three treatments totaled $5.06 billion (adjusted from Danish kroner to U.S. dollars) through the first three quarters of 2014. Novo Nordisk's other diabetes products include human insulin and Victoza, a top-selling GLP-1 drug that saw sales grow 12% year over year during the first nine months of this year. Overall, sales of Novo Nordisk's diabetes franchiseare up 5% year over year, to $8.46 billion year to date.

Source: Novo Nordisk.

Novo Nordisk is the global leader in diabetes therapies, with a 27% worldwide market share. As measured in volume, Novo Nordisk's share of the global insulin market is even better at 47%.

Since the global population of diabetics is climbing, and Novo Nordisk is in the pole position to treat them, it's probably not surprising to learn that analysts forecast that the company's sales will grow 9.7% next year, to $15.9 billion. In the U.S. alone, more than 1.7 million people are likely to be diagnosed with diabetes this year.

That growth is impressive for a company Novo Nordisk's size, but it could simply be the start for the company. According to the American Diabetes Association, 86 million Americans have pre-diabetes, up from 79 million in 2010. And since over 25% of seniors have diabetes, the number of aging baby boomers (10,000 of them turn 65 every day) suggests the number of cases diagnosed annually will continue to head higher. Additionally, demand in markets outside the U.S. is likely to climb as well. Forecasts estimate that the number of people with diabetes will increase from 365 million in 2010 to 552 million people by 2030. If that projection proves true, Novo Nordisk's sales will be significantly higher 20 years from now.

By the numbersNovo Nordisk's top-line growth will only carry shareholders so far without bottom-line profit. Fortunately for investors, there's plenty to like about Novo Nordisk's earnings, too.

Over the first nine months of 2014, the company's gross margin has improved to 83.6%from 82.6% last year. Despite increasing its head count to reach more doctors and boosting R&D spending by 23% this year, the company still grew its operating profit by 5% this year.

Analysts predict Novo Nordisk will deliver earnings per share of $1.95 next year, up from $1.70 this year.

The company appears to have plenty of legroom for future expansion as well. Free cash flow generated by the company grew 22% year over year through the first three quarters of 2014.

NVO Free Cash Flow (TTM) data by YCharts.

Multiple driversEven with its growth prospects, Novo Nordisk is not resting on its laurels.

In September, the company won approval in Europe for Xultophy, a drug that combines its insulin drug Tresiba with Victoza. Novo Nordisk also got a boostthat month when an Food and Drug Administration advisory panel supported approval of its higher-dose version of Victoza. If the FDA follows the advisory panel's recommendation, that formulation will be sold under the brand name Saxenda as an obesity treatment.

Additionally, while Tresiba is not yet approved for use in the U.S., Novo Nordisk is conducting a cardiovascular outcomes trial that it hopes will offer interim data in 2015 that could support an FDA filing sooner rather than later. Much further out, the company is committed to developing an oral insulin that would eliminate the need for insulin injections altogether. That is still years away, but it's a good example of why investors might want to consider owning Novo Nordisk in long-term portfolios.

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Todd Campbell has no position in any stocks mentioned. Todd owns E.B. Capital Markets, LLC. E.B. Capital's clients may or may not have positions in the companies mentioned. Todd owns Gundalow Advisors, LLC. Gundalow's clients do not have positions in the companies mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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