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Novo Nordisk (NVO) Beats on Q2 Earnings, Revenues Miss

Novo Nordisk A/S NVO reported second-quarter 2017 earnings of 59 cents per American Depositary Receipt (ADR) beating the Zacks Consensus Estimate of 56 cents by 5.4%. In fact, the reported earnings were in line with the year ago figure.

Quarterly revenues were up 1.6% year over year (up 3% in local currency) to $4.23 billion. However, reported revenue figure missed the Zacks Consensus Estimate of $4.29 billion.

Novo Nordisk’s share price has increased 23.1% year to date, while the Zacks classified industry’s gain of 10.1%.



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 was driven by growth in new-generation insulin, Victoza and Saxenda partly offset by Vagifem, modern insulin and human growth disorders. Sales growth in local currencies was driven by both International Operations and North America Operations, growth of 5% and 2%, respectively

The Diabetes and Obesity Care segment recorded sales growth of 8%. While, modern insulin decreased 5%, sales of NovoRapid increased 3%, NovoMix decreased 1% and Levemir  decreased 17%. Meanwhile, the company’s key drug, Victoza, witnessed sales growth of 15%. Nevertheless, sales at the Biopharmaceuticals segment declined 15%. Hemophilia sales were up 7%.

Research and development (R&D) expenses were up 2% owing to increased research costs for the early diabetes and obesity portfolio as well as increased development costs for oral semaglutide and other diabetes care development programmes. Administrative costs also declined by 3%, mainly due to cost-control initiatives.

Sales and distribution costs decreased by 2%, mainly reflecting lower promotional activities in the U.S. following the Tresiba launch in 2016 and broad cost control initiatives. Additionally, the costs were partly offset by increased sales and distribution costs in International Operations, mainly in Region AAMEO (Africa, Asia, Middle East and Oceania).

Pipeline Update

In August, Novo Nordisk completed the main phase of REAL 1, the phase III study with the long-acting recombinant growth hormone, somapacitan for treatment of Adult Growth Hormone Deficiency (AGHD). The company is also planning for the pivotal phase III somapacitan programs in GHD children as well as in children born small for gestational age (SGA).

In July, the European Commission approved an update to the Victoza European Union (EU) label that expands the indication to reflect both improving blood sugar and cardiovascular (CV) events as integral parts of type II diabetes treatment. Victoza is the only GLP-1 that is proven to prevent CV events in people with type II diabetes and high CV risk.

In June, European Commission had granted marketing authorisation for Refixia (brand name for nonacog beta pegol, N9-GP, in the EU) for the treatment of adolescents and adults with haemophilia B. In July 2017, Novo Nordisk submitted a new drug application (NDA) to the Japanese Ministry of Health, Labour and Welfare for nonacog beta pegol (N9-GP).

In June, Novo Nordisk announced that the Committee for Medicinal Products for Human Use (CHMP), under the the European Medicines Agency (EMA), had endorsed an update of the EU label for Saxenda. The update was based on the results from the LEADER trial which investigated the long-term effects of Victoza in people with type II diabetes and established cardiovascular disease.

Outlook

For 2017, Novo Nordisk expects sales growth (in local currencies) to be in the range of 1% to 3%. The growth is likely to be driven by robust performance for Victoza and Tresiba as well as a contribution from Saxenda and Xultophy.

Operating profit is expected to be in the range of -1% to +5%. This reflects modest outlook for sales growth. It also reflects a modest increase in second half of 2017 in sales and distribution costs to support product launches as well as improvement in research and development costs to support Novo Nordisk’s pipeline progress.

Our Take

Novo Nordisk’s second-quarter results topped earnings, but missed revenue estimates. We believe continued growth from Victoza and Tresiba as well as higher contributions from Saxenda and Xultophy will be partly offset by the impact of lower realized prices in the U.S., loss of exclusivity for products in hormone replacement therapy, intensifying competition within the diabetes and biopharmaceuticals markets and 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 currently carries a Zacks Rank #3 (Hold). Better-ranked pharma stocks in the same space include Aduro BioTech, Inc. ADRO, Enzo Biochem, Inc. ENZ and Sanofi SNY sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here . 

Enzo Biochem’s loss per share estimates narrowed from 12 cents to 7 cents for 2017 and from 11 cents to 3 cents for 2018, over the last 60 days. The company delivered positive earnings surprises in all the trailing four quarters, with an average beat of 55.83%. The share price of the company has increased 58.3% year to date.

Sanofi’s earnings per share estimates increased from $3.18 to $3.31 for 2017 and from $3.30 to $3.38 for 2018, over last 30 days. The company came up with positive earnings surprises in two of the trailing four quarters, with an average beat of 5.10%. The share price of the company has increased 17.2% year to date.

Aduro BioTech’s loss per share estimates narrowed from $1.46 to $1.36 for 2017 and from $1.54 to $1.26 for 2018, over the last 30 days. The company pulled off positive earnings surprise in two of the trailing four quarters, with an average beat of 2.53%.

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