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Novo Nordisk (NVO - Analyst Report) reported second quarter 2013 earnings of $2.18 per American Depository Receipt (ADR), up 30.5% from the year-ago period and above the Zacks Consensus Estimate of $1.84. Revenues in the second quarter of 2013 were $3.74 billion, up 11.3% year over year and ahead of the Zacks Consensus Estimate of $3.69 billion.
All growth rates mentioned below are on a year-over-year and local currency basis.
Total revenues grew 13%, driven by strong sales in North America (up 22%) and International Operations (up 16%). Key sales drivers were modern insulins and Victoza.
Novo Nordisk’s Diabetes Care segment recorded growth of 14%. Modern insulins generated strong revenues (up 15%) driven by NovoRapid (up 15%) and Levemir (20%). Novo Nordisk's key drug, Victoza, is a once-daily human glucagon-like peptide 1 (GLP-1) analogue approved for improving blood sugar (glucose) levels in adult type II diabetes patients. The drug witnessed sales growth of 28%. Victoza witnessed growth in the U.S. and Europe.
Geographically, North America was the largest contributor to total revenues.
Sales in Novo Nordisk’s Biopharmaceuticals segment increased 10%. Strong sales of Norditropin (up 9%), NovoSeven (up 6%) and other products (up 26%) contributed to the increase.
Novo Nordisk’s research and development (R&D) costs and administration costs each increased by 7%, while its sales and distribution costs advanced 15%. Novo Nordisk's efforts to develop its pipeline within the diabetes and biopharmaceuticals segments and global expansion of research activities drove R&D expenses. The increase in sales and distribution cost was primarily driven by the expansion of the U.S. sales force as well as marketing investments in China and a few countries in International Operations. Administration costs were driven by back office infrastructure costs.
Novo Nordisk received feedback from the U.S. Food and Drug Administration (FDA) regarding the cardiovascular outcomes study protocol for Tresiba. Thus, Novo Nordisk now expects to start the study this year.
In May 2013, Novo Nordisk submitted marketing applications to the European Medicines Agency seeking approval for its type II diabetes candidate, IDegLira.
Novo Nordisk completed all the four trials under SCALE phase IIIa studies for Victoza 3 mg as a treatment for obesity. The company expects to file for approval in the U.S. and EU at the end of this year.
In May 2013, the company announced positive data from a phase III study (of the paradigm 2 program) on its hemophilia B candidate, N9-GP. The company expects to file N9-GP for approval in 2015, after the completion of the remaining two phase III studies in the paradigm program.
Novo Nordisk received a Complete Response Letter from the FDA in Jun 2013, declining to approve a recombinant factor XIII compound for congenital factor XIII deficiency.
In local currencies, operating profit is expected to grow 12–15%, above the previous expectation of roughly 10%. This guidance was driven by costs related to the launch of Tresiba outside the U.S., investment in the modern insulins portfolio and Victoza in the U.S., the expanded U.S. sales force as well as sales and marketing investments in China.
In local currencies, sales growth is expected to be in the range of 11–13%, above the previous expectation of 9–11%. This guidance is mainly driven by robust penetration of modern insulins, steady Victoza growth and sales contribution from Tresiba. These positives are expected to be partly offset by the challenging pricing environment in major markets, generic competition for oral anti-diabetic products, intensifying competition within Diabetes Care as well as Biopharmaceuticals.
Novo Nordisk carries a Zacks Rank #3 (Hold). Currently, companies like Pharmacyclics, Inc. (PCYC - Analyst Report), Questcor Pharmaceuticals Inc. (QCOR - Analyst Report) and Actelion Ltd. (ALIOF) look well-positioned with a Zacks Rank #1 (Strong Buy).