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Novo Nordisk (NVO) Tops Q3 Earnings Estimates, Lags Sales

Novo Nordisk A/S NVO reported third-quarter 2017 earnings of 63 cents per American Depositary Receipt (ADR) beating the Zacks Consensus Estimate of 58 cents. In fact, the reported figure was ahead of 57 cents earned a year ago.

Quarterly revenues were up 1.6% year over year (up 2% in local currency) to $4.2 billion. However, the top line missed the Zacks Consensus Estimate of $4.30 billion.

So far this year, Novo Nordisk’s share price has increased 38.9% compared with the industry’s gain of 14.7%.

Notably, all growth rates mentioned below are on a year-over-year basis and in local currency.

Quarter in Detail

Novo Nordisk operates through two segments: Diabetes and obesity care, and Biopharmaceuticals.

In the reported quarter, the company’s top line improved on the back of growth in new-generation insulin, Victoza Saxenda and Novo Seven, partly offset by Vagifem, modern insulin, human growth disorders and human insulin. Sales growth in local currencies was driven by 7% growth in International Operations, partly offset by 3% sales decline in North America Operations. This downturn in North America Operations was due to lower Vagifem sales following the launch of a generic version and an impact of rebate and price adjustments in the diabetes care products in the United States.

The Diabetes and Obesity Care segment recorded sales growth of 5% in the quarter. While, sales of modern insulin and Levemir decreased a respective 5% and 23%, the same of NovoRapid and NovoMix increased 9% and 1%, respectively. Meanwhile, the company’s key drug, Victoza, witnessed sales growth of 9%.

Nevertheless, sales at the Biopharmaceuticals segment declined 12%. Hemophilia sales were up 10%.

Research and development (R&D) expenses were down  2%, due to lower research costs following the updated R&D strategy announced in October 2016 that led to the discontinuation of a number of research projects. However, development costs increased predominantly owing to the PIONEER development programme for oral semaglutide and other diabetes care development programs. The costs were partly offset by lower costs related to the completion of the cardiovascular outcomes trial DEVOTE.

Administrative costs also declined by 9%, mainly due to severance costs in third quarter of 2016 as well as general cost control initiatives.

Sales and distribution costs decreased by 1%, mainly reflecting lower promotional activities in the United States following the Tresiba launch in 2016 and broad cost control initiatives. The costs were partly offset by increased sales and distribution costs in International Operations, across all regions.

Pipeline Update

In August 2017, Novo Nordisk announced that the once-weekly GLP-1 semaglutide was superior to once-weekly dulaglutide on glucose control and weight loss in people with type II diabetes in the SUSTAIN 7 trial. In October, semaglutide received a positive 16-0 vote in favour of approval from an FDA Advisory Committee.

The company also received approval for the label expansion of Victoza in the United States for cardiovascular risk reduction in August.

In August, the label expansion for the reduced risk of severe hypoglycaemia with Tresiba was endorsed by Committee for Medicinal Products for Human Use in the EU. The label update of Tresiba should boost the sales of the company.

In September 2017, the company received approval of the new fast-acting mealtime insulin Fiasp in the United States.

Outlook

Novo Nordisk updated its guidance for 2017. The company tightened its sales guidance and expects sales growth (in local currencies) to be in the range of 2% to 3% compared with 1% to 3%, projected earlier. A negative currency impact of 2 percentage points is also expected.

Operating profit growth is now anticipated to be in the range of 3% to 6% compared with the previous range of 1% to 5%. A negative currency impact of 3 percentage points is expected as well.

Moreover, the company issued a preliminary outlook for 2018. Both sales and operating profit outlook in local currencies indicate low to mid single-digit growth.

Our Take

Novo Nordisk’s third-quarter results topped earnings, but missed revenue estimates.

Going forward, continued growth from Victoza and Tresiba as well as higher contributions from Saxenda and Xultophy are likely to be partly offset by the impact of lower realized prices in the Unites States, loss of exclusivity for products in hormone replacement therapy, intensifying competition within the diabetes and biopharmaceuticals markets, besides macroeconomic conditions in many markets under International Operations.

Novo Nordisk A/S Price, Consensus and EPS Surprise

 

Novo Nordisk A/S Price, Consensus and EPS Surprise | Novo Nordisk A/S Quote

Zacks Rank & Stocks to Consider

Novo Nordisk carries a Zacks Rank #3 (Hold). Better-ranked health care stocks in the same space include Ligand Pharmaceuticals Inc. LGND, Agenus Inc. AGEN and Adaptimmune Therapeutics plc ADAP. While Ligand sports a Zacks Rank #1 (Strong Buy), Agenus and Adaptimmune carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ligand’s earnings per share estimates have moved up $3.68 to $3.70 for 2018 over the last 30 days. The company pulled off positive earnings surprises in two of the trailing four quarters, with an average beat of 6.19%. The share price of the company has increased 43.1% year to date.

Agenus’ loss per share estimates have narrowed from $1.40 to $1.36 for 2018 over the last 30 days. The company delivered positive earnings surprises in three of the trailing four quarters, with an average beat of 4.27%.

Adaptimmune’s loss per share estimates have narrowed from $1.03 to 95 cents for 2017 and from 95 cents to 90 cents for 2018 over the last 60 days. The company came up with positive earnings surprises in three of the trailing four quarters, with an average beat of 2.56%. The share price of the company has increased 93.8% year to date.

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Novo Nordisk A/S (NVO): Free Stock Analysis Report
 
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