Although the earnings season is coming to a close, few companies are yet to report their results. Late last week, Novo Nordisk A/S NVO reported first-quarter 2015 earnings of 57 cents per American Depositary Receipt, beating the Zacks Consensus Estimate of 39 cents and exceeding the year-ago earnings of 45 cents.
Revenues increased 2.3% year over year to $3.8 billion. The top-line was driven by strong sales of modern insulin, Victoza and Tresiba as well as a modest sales contribution from new launches like Saxenda, Xultophy and NovoEight.
All growth rates mentioned below are on a year-over-year and local currency basis.
The Quarter in Detail
Total revenue grew 9% in local currency driven by sales growth in North America (11%), international operations (12%) and China (11%). North America accounted for 56% of growth measured in local currencies.
Novo Nordisk’s diabetes care segment recorded sales growth of 9%. Modern insulin generated strong revenues (up 8%) driven by NovoRapid (up 6%) Levemir (13%) and NovoMix (3%). The company’s key drug, Victoza, witnessed sales growth of 18%.
Sales in the biopharmaceuticals segment increased 8%. Norditropin’s sales were up 9%. Other products witnessed 14% sales growth.
Research and development expenses decreased 2% due to the discontinuation of development activities targeting inflammatory disorders in Sep 2014. Administration costs remained unchanged year over year.
2015 Revenue Outlook
Novo Nordisk increased the lower limit of its sales growth expectations for 2015 to the range of 7%−9% from 6%−9% (as reported while announcing fourth-quarter 2014 results). The company expects strong performance by modern insulin as well as Victoza and Tresiba. New launches like Saxenda, Xultophy and NovoEight are also expected to contribute to the top line.
However, Novo Nordisk expects sales to be affected by increase in rebate levels in the U.S. and intensifying competition in the diabetes and biopharmaceuticals markets coupled with macroeconomic factors in a number of markets in International Operations.
Pipeline Update
Novo Nordisk is working on strengthening its pipeline. In Mar 2015, Novo Nordisk announced that the final phase IIIa studies, Onset 1 and Onset 2, on faster-acting insulin aspart achieved their primary objectives. The company intends to submit the candidate for regulatory review in the U.S. and the EU by the end of 2015 or the beginning of 2016.
Additionally, in Feb 2015, Novo Nordisk announced that it has successfully completed a phase II study on an oral formulation of semaglutide (OG217SC) in patients suffering from type II diabetes. Based on the study results, the company intends to start discussion with regulatory authorities regarding the advancement of OG217SC into phase III development.
Meanwhile, in Mar 2015, Saxenda (liraglutide 3 mg) received approval from the European Commission for the treatment of obesity. Novo Nordisk expects to launch the drug in European markets starting 2015.
Additionally, in Apr 2015, the FDA accepted Novo Nordisk’s resubmissions of its new drug applications containing results from a pre-specified interim analysis of the DEVOTE study for Tresiba and Ryzodeg for review. The company expects the study to be completed by the second half of 2016.
Our Take
Although Novo Nordisk’s performance in the first-quarter 2015 was encouraging with modern insulins and Victoza performing well, the company faced a tough time sustaining revenue growth due to a challenging rebate and contract environment in the U.S. However, we believe that the new launches should support the top-line growth, going forward.
Novo Nordisk carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector are Bristol-Myers Squibb Co. BMY, Actelion Ltd. ALIOF and Horizon Pharma plc HZNP. While Actelion and Horizon Pharma holds a Zacks Rank #1 (Strong Buy), Bristol-Myers carry a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment