Shares in Novo Nordisk plunged as much as 20 percent Friday after the company cut both its full-year guidance and long-term financial targets due to challenges in the US market. The drugmaker noted that "the market environment in the [US] has become significantly more challenging," with chief financial officer Jesper Brandgaard noting "we're only just getting into the storm now."
For 2016, the company indicated that sales are now expected to grow between 5 percent and 6 percent in local currencies, down from prior guidance of 5 percent to 7 percent. Meanwhile, operating profit this year is estimated to grow in the range of 5 percent to 7 percent, versus an earlier prediction of 5 percent to 8 percent.
Further, Novo Nordisk said that for 2017, the outlook calls for "low single-digit" growth in sales and "flat to low single-digit" growth in operating profit, both measured in local currencies. In addition, the company noted that with regard to its long-term financial targets, it "no longer deems it achievable to reach the operating profit growth target of 10 percent set in February," cutting the estimate to 5 percent.
CEO Lars Rebien Sørensen said "we have reassessed our long-term target for operating profit growth and our R&D strategy in the light of the challenging market environment in the [US]." The executive added "as a result, we are reducing our global cost base and parting company with some of our valued employees." Last month, Novo Nordisk unveiled plans to reduce its workforce by around 1000 employees in an effort to cut costs, with about half of the layoffs expected to be in Denmark.
On Friday, Novo Nordisk indicated that measures to control costs and refocus its R&D efforts would include ending projects to create oral insulin treatments and combinations involving oral insulin.
For the quarter, profit rose 17 percent to 9.8 billion Danish kroner ($1.4 billion), topping analyst estimates of 9.5 billion kroner ($1.4 billion), while sales climbed 3 percent to 27.5 billion kroner ($4 billion), missing forecasts of 28 billion kroner ($4.1 billion).
Separately, Novo Nordisk on Friday disclosed that it received a subpoena from the US Attorney's Office for the Southern District of New York requesting information about its contracts and links to pharmacy benefits managers in regards to certain products including Levemir. The drugmaker said it is cooperating with authorities and doesn't expect the probe to have a material impact on its financial position.
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