Novo Nordisk expects growth in 2015; posts rise in third-quarter sales, profit

Novo Nordisk announced Thursday alongside its third-quarter financial results that it expects high single-digit sales growth next year, as measured in local currencies, with operating profit increasing by around 10 percent. The company noted that the preliminary forecast assumes "continued robust performance" for its modern insulins, Tresiba and Victoza, partly tempered by the impact of higher rebate levels in the US and increased competition in the diabetes segment.

"There was particular concern that regarding the US market there would be a major slowdown in growth," commented Kepler Cheuvreux Nordic analyst Richard Koch. Sanofi recently announced that it expects sales of diabetes products to remain flat in 2015 versus this year, but Koch noted that Novo Nordisk "[is] expecting quite a lot more growth than Sanofi."

According to Novo Nordisk, health-care plans and pharmacy-benefit managers (PBMs) in the US have been agreeing one-year pricing contracts for next year, rather than the two- to three-year deals signed previously. The company said this reflects an uncertainty among payers about new product launches that are expected from 2016. "There's no real change in the pricing environment. There's always been competitive pressure in the [US]," remarked chief financial officer Jesper Brandgaard. The executive indicated that Novo Nordisk had "reasonable visibility" for 2015, as it had already concluded deals with PBMs.

Sydbank analyst Soren Hansen commented that "despite indicating a market problem on Tuesday, the trend described by Sanofi is mainly its own problem," adding "Sanofi have simply not given enough discounts considering how much they raised prices and they will need to find another level launching Toujeo in 2015." Meanwhile, Brandgaard said "we're also looking at a market where the current market leader (Sanofi's) glargine is getting closer to patent expiry with the opportunity that our similar offering can have for the purchasers of drugs."

In the third quarter, Novo Nordisk's sales climbed 8 percent year-over-year to 22.2 billion Danish kroner ($3.8 billion), boosted by growth in North America and China. Revenue from modern insulins lifted 13 percent to 10.6 billion kroner ($1.8 billion), with sales of Victoza surging 21 percent to 3.4 billion kroner ($575 million), beating analyst estimates of 3.3 billion kroner ($558 million). Meanwhile, revenue from human insulins slipped 4 percent to 2.5 billion kroner ($423 million).

Novo Nordisk added that profit for the quarter rose 1 percent to 6.5 billion kroner ($1.1 billion), meeting analyst estimates. "We are satisfied with the financial results for the first nine months of 2014," remarked CEO Lars Rebien Sørensen. "In the US, Levemir continues to perform well, and with the approval of Xultophy in Europe we now look forward to launching this product in the first half of 2015," he added. For 2014, the company said it now expects sale to grow by 7 percent to 9 percent in local currencies, with the top end of the range lowered from prior guidance of 10 percent. Novo Nordisk maintained its expectations of operating profit growth of about 10 percent for the full year.

Commenting on the results, analysts at Citi remarked "Novo [Nordisk] delivered in-line numbers and importantly reassured with respect to preliminary, full-year 2015 guidance."

Novo Nordisk said that the roll-out of Tresiba (insulin degludec) continues, noting that the therapy is now available in 22 countries following its recent launches in Brazil, Chile, Russia and Slovakia. The drugmaker stated that it has not decided whether to submit an interim analysis or full study data from the ongoing DEVOTE trial that was initiated after the FDA declined to approve the drug and asked for additional cardiovascular data. Earlier this year, the company indicated that it planned to submit an interim analysis of the study in the first half of next year in anticipation of a potential launch in 2016.

Chief science officer Mads Krogsgaard Thomsen noted that an interim analysis carries a higher level of uncertainty than a final study, as it is based on a lower number of observations. He suggested that a decision would only be made in the first half of 2015, adding "our confidence in the DEVOTE [study] and the interim analysis is completely unabated." However, Jefferies analysts said "the language around the interim analysis and potential filing of the DEVOTE study for Tresiba appears to be somewhat more cautious than previously issued, with the company warning that the interim analysis carries a higher level of uncertainty than the final results and that it may not support resubmission despite a positive final result."

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