IHS Global Insight Perspective | |
Significance | Novo Nordisk today presented their second-quarter results, highlighting that the company remains an above-average performer in the pharmaceutical industry due to a core focus on diabetes and blood products. Sales were up 17% in Danish kroner, driven by its insulin sales (up 31%) and NovoSeven (recombinant factors VII) franchise (up 19%). |
Implications | The relatively strong sales growth provides flexibility for investment in the second half of the year, as the company rolls out Victoza across Europe—although the company maintains a relatively well-managed cost-structure based on cuts in its research and development spend. |
Outlook | All eyes remain on Victoza, as the company awaits the outcome of the regulatory process in the United States. Although the treatment was approved in Europe (and, in Denmark, reimbursed), there remains significant uncertainty here, particularly on potential resubmissions that might be required. U.S. FDA feedback is expected later this quarter. |
Novo Nordisk today presented its second-quarter and first-half results for 2009, in what was primarily a scene for company management and investors to discuss the immediate future of diabetes candidate Victoza (liraglutide), which has recently been approved in Europe (and already reimbursed in Denmark) but is awaiting regulatory action in the key U.S. market. A regulatory action date is expected in 2010, but there is some scope for an earlier approval. In particular, following the U.S. FDA's unusual admonishment of its own protracted review of Eli Lilly (U.S.)'s Effient (prasugrel), there is some pressure on the organisation to expedite the evaluation of an important potential new candidate in diabetes.
The press release—available here—commented that the company "expects to receive formal feedback from the FDA… later this quarter". It also reiterated the topline clinical results of the head-to-head Phase III trial of Victoza versus Merck & Co (U.S.)'s Januvia (sitagliptin), which found that the former had a statistically significantly higher efficacy against blood-glucose reductions and weight loss. Still, there is significant uncertainty, particularly in light of emerging competition from Lilly's Byetta (exenatide) LAR and Ipsen’s (France) taspoglutide.
The actual quarterly results were a side-show to this discussion, and indeed there was little that was unexpected in the results. Novo Nordisk’s performance remains characterised by a prudent cost structure, where research and development (R&D) expenditures in particular are being carefully managed against the vagaries of the ongoing financial instability in the global markets. Also, Novo Nordisk's sales growth remains relatively stable due to the core focus on diabetes, which is relatively well-insulated against pressures on demand and affordability in other therapeutic areas.
Novo Nordisk: Financial Results, Q2 2009 | ||
H1 2009 (mil. Kroner) | % Change Y/Y | |
Net Sales | 25,499 | 17 |
Cost of Goods Sold | 5,188 | 3 |
Sales and Distribution | 7,681 | 25 |
Research and Development | 3,593 | -6 |
General Administration | 1,372 | 9 |
Group Operating Income* | 7,665 | 39 |
R&D Expenses as Percentage of Total Sales | 14.1 | 3.5 pp lower |
Operating Margin** | 30.0 | 5 pp higher |
Group Net Income | 5,690 | 22 |
Source: Novo Nordisk | ||
Outlook and Implications
Novo Nordisk also raised its outlook for underlying operating profit growth for the full year, which is now expected to be in the 12-14% range as measured in local currencies. This is largely a result of the reduced levels of R&D spending in 2009 primarily due to the impact of timing of Phase III programmes. Overarching sales growth is still expected to be in the 10% range, reflecting continued strong demand for its portfolio of diabetes treatments—this focus has enabled the company to shelter itself from greater impact from the ongoing financial turmoil. With fluctuating exchange rates, the company is expecting reported sales growth to be around 2 percentage points higher than that which is measured in local currencies. Similarly, reported operating profits are expected to be around 4 percentage points higher than local currency-reported profits.
Outlook | ||
Current Expectations (Q2) | Previous Expectations (Q1) | |
Sales growth: "local currencies" versus "as reported" | 10%; 12% | 10%; 14.5% |
Operating profit growth: "local currencies" versus "as reported" | 12-14%; 16-18% | 10%; 18% |
Net financial expense | DKK900 million | DKK1.5 billion |
Capital Expenditure | DKK3 billion | DKK2.6 billion |
Source: Novo Nordisk | ||