Novo Nordisk Posts 40% Y/Y Increase in 2008 Operating Income, Expects Liraglutide's European Approval by Mid-2009

Danish pharmaceutical company Novo Nordisk has closed its books on an encouraging set of financial results as the company met its 2008 financial guidance for both sales growth in local currencies and underlying operating profit on an as-reported basis despite a negative currency impact of 0.5 percentage point. In 2008, sales grew by 9% year-on-year (y/y) on an as-reported basis to nearly 45.6 billion Danish kroner (US$8.1 billion). Growth was again driven by the company's North American and international operations, which contributed to 48% and 29% of the sales growth respectively over the full year. In the meantime, Europe and Japan and Oceania, respectively contributed to 21% and 2% of the sales growth over the same period. In the fourth quarter of 2008, sales grew by 15% y/y on an as-reported basis to 12.6 billion kroner.

In 2008, the company's operating profit, as calculated by IHS Global Insight, grew by an impressive 40% y/y to 12.1 billion kroner thanks to sales growth momentum, lower exceptional charges and an effective cost-containment programme. On the expenses front, the cost of goods sold rose by a meagre 3% y/y to 10.1 billion kroner thanks to productivity improvements and a U.S. price increase. Research and development (R&D) expenses contracted by 8% y/y to 7.9 billion kroner thanks to lower non-recurring costs related to the discontinuation of insulin delivery system AERx iDMS and other pulmonary programmes, (see Denmark: 15 January 2008: Novo Nordisk Abandons Development of AERx Insulin Delivery System). In 2008, Novo Nordisk booked 325 million kroner in such charges, a figure that stood at 1.3 billion kroner in 2007. As the discontinuation charges were all booked in the fourth quarter of 2007, Novo Nordisk's operating profit, as calculated by IHS Global Insight, grew by a whopping 219% y/y to 3.3 billion kroner in the fourth quarter of the year. In the meantime, sales and distribution costs rose by 4% y/y to 12.9 billion kroner, partially boosted by the expansion of the company's U.S. sale force. In 2008, Novo Nordisk's operating margin, as calculated by IHS Global Insight was 5.9 percentage points higher than in 2007.

In 2008, Novo Nordisk recorded positive growth in both its diabetes care and biopharmaceuticals franchises. Nevertheless, the bulk of the company's revenues were as usual generated by its diabetes drugs as their collective sales grew by 9% y/y in the reporting currency to 33.4 billion kroner. Sales of modern insulins were up 24% y/y to 17.3 billion kroner, boosted by a 49% y/y hike in Levemir (insulin detemir)-associated revenues. In local currencies, Novo Nordisk diabetes franchise grew by 21% y/y in North America, 6% y/y in Europe, 18% y/y in international markets and 1% y/y in Japan. As a result, in 2008, Novo Nordisk retained its hold on the insulin market with a 52% market share by volume of the total market and 44% of the modern insulin segment. In the United States, the company enjoys a market share of 41% by volume of the total insulin market and a market share of 32% by volume of the modern insulin market. In Europe, the company holds a 55% market share by volume of the total insulin market and a 51% market share by volume of the modern insulin market. In Japan, Novo Nordisk holds a 72% market share by volume of the total insulin market and a 64% market share by volume of the modern insulin market.

In 2008, sales of biopharmaceuticals grew by 7% y/y in the reporting currency to 12.2 billion kroner. NovoSeven pen's sales continued to benefit from its congenital bleeding disorder indication and the launch of room temperature-stable formulation as sales grew by 9% y/y to 6.4 billion kroner. Sales of growth hormone Norditropin grew by 10% y/y in the reporting currency to 3.9 billion kroner. With regards to Novo Nordisk's other biopharmaceuticals products, their performance was hampered by U.S. generic competition on hormone-replacement therapy Activella (estradiol/norethindrone acetate tablets).

Outlook and Implications

Novo Nordisk is again expecting decent growth for the year ahead. The company foresees pharmaceutical sales growth at around 10% in local currencies and 5% in the reporting currency in 2009. Novo Nordisk has based its forecast on sustained efficiency improvements and market uptake of its products as well as on a stable business environment and currency exchange rates.