Novo Nordisk Raises Outlook As H1 Sales Jump 14% Y/Y

Danish pharmaceutical company Novo Nordisk has reported strong first-half (H1) financial performance as sales of its products jumped 14% year-on-year (y/y) to 29.1 billion Danish kroner (US$5.1 billion) boosted by its newly launched diabetes drug Victoza (liraglutide), which contributed 23% to growth, generating 666 million kroner in the first half of 2010. North America was again a key market for Novo Nordisk as the region, where sales grew 21% y/y, contributed 63% to growth in the first half of 2010 while International operations and Europe respectively contributed 22% and 13% to growth. Novo Nordisk's performance was boosted by a strong second quarter during which sales grew by 18.4% y/y on an as-reported basis to 15.4 billion kroner.

On the expenses sides, research and development (R&D) expenditure were largely up, rising 27.1% y/y over the period to reach 2.4 billion kroner, reflecting the cost of the Phase III clinical trials for insulin analogues Degludec and DegludecPlus and the advancement in Phase I trial of a new oral formulation for Type 2 diabetes treatments GLP-1 analogues (NN9924). Meanwhile, the launch cost of Victoza (liraglutide) in Europe and the United States as well as the expansion of the sales force in the United States, the United Kingdom, Germany, Japan and China incurred an 8.7% y/y increase in first-half marketing and sales expenses. As a result, the company's operating income, as calculated by IHS Global Insight, grew by 16.9% y/y to 9.0 billion kroner during the first half while the group's net income increased 20.8% y/y to 6.9 billion kroner.

Novo Nordisk's diabetes care franchise contributed 86% to growth in the first half of 2010, helped by the roll-out of Victoza in Europe, the United States, Japan, and Canada. Novo Nordisk's diabetes treatments achieved sales of 21.6 billion kroner in the first half of 2010, up 16% y/y in the reported currency. Modern insulins continued to lead Novo Nordisk's diabetes portfolio with sales of 12.7 billion kroner—up 22% y/y—boosted by the North America market and international operations. In the first half of 2010, Novo Nordisk maintained its leading position on the insulin market with a 51% market share by volume of the total market and 46% of the modern insulin segment. Meanwhile, its newly launched Type 2 Diabetes drug Victoza (liraglutide) performed well as its global sales reached 666 million kroner five months after its roll-out in the United States (see Denmark: 22 February 2010: Novo Nordisk Launches Victoza in U.S. Market). The drug achieved 27% GLP-1 market share of total weekly prescription for the week ending 23 July 2010 in the United States.

Meanwhile, sales of biopharmaceuticals increased by 8% y/y in the reporting currency to 7.4 billion kroner in the first half of 2010. The leading product of the franchise, NovoSeven, achieved sales of 4.1 billion kroner, boosted by its congenital bleeding disorder indication which helped offset the loss of the main part of the federal tender for recombinant FVIIa in Russia. Meanwhile, sales of growth hormone Norditropin rose 8% y/y in the reporting currency to 2 billion kroner.

Outlook and Implications

Novo Nordisk have once again upgraded its expectations for the year 2010, raising its outlook for pharmaceutical sales growth to between 9–10% in local currencies and to 6 percentage points higher in reported currency. The group bases its forecast on expectations of continued market penetration of its key diabetes and biopharmaceutical products.

The upgraded outlook underlines Novo Nordisk is successfully coping with a large number of challenges including increased competition in the insulin market and pressure due to cost-containment reforms implemented in Europe and the United States. Novo Nordisk is surely helped by a highly innovative portfolio which has been further expanded by the approval of Victoza in key markets including Europe, United States and, more recently, Japan. The once-daily GLP1-analogue could potentially bring in an additional US$1 billion per year to Novo Nordisk's revenues and it seems to be performing well in the United States despite the boxed warning against the risk of medullary thyroid cancer required by the U.S. FDA (see Denmark: 26 January 2010: FDA Approves Novo Nordisk's Victoza in Type 2 Diabetes).

Meanwhile, Novo Nordisk is on track to bring another promising compound to the market as it reported positive Phase II data for its investigative candidate degludec (see Denmark: 29 June 2010: Novo Nordisk Says Victoza Beats Januvia in New Study, Long-Acting Insulin Degludec Helps Improve Glucose Control). The compound was shown to induce a blood sugar control similar to the one induced by insulin glargine (- 1.5%; Lantus, Sanofi-Aventis, France) but has the advantage of being an ultra-long-acting insulin with a duration of action of more than 24 hours. Degludec and DegludecPlus, currently evaluated under Phase III development programme against rival Lantus, could potentially be administrated three times a week instead of once daily. Meanwhile, Novo Nordisk today affirmed that the first Phase IIIa study of its drug candidate DegludecPlus confirms that initial results were positive for the compound.

Besides all these positive developments, the company is preparing to face potential generic competition to its oral antidiabetic products NovoNorm/Prandin, which represented 5.2% of its revenue in 2009 with sales of 2.7 billion kroner.