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Novo Nordisk (NVO) Misses Q4 Earnings, Revenues Down Y/Y

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Novo Nordisk A/S NVO reported fourth-quarter 2016 earnings of 50 cents per American Depositary Receipt (ADR), missing the Zacks Consensus Estimate of 52 cents by 3.8%. Reported earnings, however, surpassed the year ago figure of 48 cents.

Quarterly revenues were up 1.2% year over year (up 3% in local currency) to $4.29 billion. However, reported revenue figure came below the Zacks Consensus Estimate of $4.33 billion.

Novo Nordisk’s share price has declined 2.5% in the past three months, while the Zacks classified Large Cap Pharmaceuticals industry gained 2.9%.

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

Quarter in Detail

In the reported quarter, the company’s top line was driven by strong sales of Victoza, Tresiba, Saxenda and Norditropin. But it was partly offset by the softer performance of modern insulin and other biopharmaceuticals due to the launch of a generic version of Vagifem in the USA. The International Operations (16%) and China (15%) segments did well in the quarter. In the U.S., sales remained unchanged as strong Victoza and Saxenda growth as well as the sales from newly introduced Tresiba in the basal insulin segment was offset by lower sales of Vagifem.

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

The Diabetes and Obesity Care segment recorded sales growth of 5%. Modern insulin dropped 8% due to lower sales of NovoRapid (2%), NovoMix (5%) and Levemir (17%). Meanwhile, the company’s key drug, Victoza, recorded sales growth of 10%.

Sales at the Biopharmaceuticals segment inched up 2%. Norditropin sales grew 8% and hemophilia sales were up 2%.

Research and development expenses were up 11% due to higher research costs related to diabetes and obesity projects. Administrative costs increased slightly by 1% mainly due to cost control across the organization.

Sales and distribution costs decreased by 1% mainly due to cost management in the U.S. but were partially offset by promotional activities in Europe and Region Pacific.

2016 Results

For the full year earnings came in at $2.22 per ADR surpassing both the Zacks Consensus Estimate of $2.19 per ADR and $2.01 reported a year ago.

For the full year, revenues came in at $16.61 billion, slightly up from $16.06 billion in the year-ago quarter but missing the Zacks Consensus Estimates of $16.3 billion.

Pipeline Update

In the reported quarter, the company received FDA approval for the New Drug Application (NDA) for Xultophy 100/3.6 that is indicated as an adjunct to diet and exercise to improve glycaemic control in adults with type II diabetes mellitus.

While the fast acting insulin aspart (NN1218) received approval in the EU and Canada for the treatment of diabetes in adults, the resubmission of NDA for the candidate in the U.S. is planned within the next three months. The fast acting insulin aspart will be marketed under the brand name of Fiasp the EU. We remind investors, in October, the company also received a complete response letter from the FDA for its NDA for aspart.

Outlook

For 2017, Novo Nordisk expects sales growth, in local currencies, to be in the range of -1% to +4%. Operating profit is expected to be in the range of -2% to +3%.

Our Take

Novo Nordisk’s fourth-quarter results missed both earnings and revenue estimates. 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.

Softer sales and increase in distribution and research and development costs (to support continued launch and pipeline progress) is expected to pressurize profits in 2017

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 & Key Picks

Novo Nordisk currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the health care sector include Sunesis Pharmaceuticals, Inc. , Enzo Biochem, Inc. (ENZ - Free Report) ,  and Anika Therapeutics Inc. (ANIK - Free Report) . All of them carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Enz Biochem’s loss estimates for 2017 narrowed 5.88% over the past 60 days. The company recorded a positive earnings surprise in three of the last four quarters, the average being 22.50%. Its share price was up 48.7% in the past one year.

Anika’s earnings estimates for 2016 and 2017 were up 3.9% and 0.5%, respectively, over the last 60 days. The company recorded a positive earnings surprise in each of the last four quarters, the average being 33.14%. Its share price was up 32.8% in the past one year.

Sunesis’ loss estimates narrowed 5.06% and 8.80% for 2016 and 2017, respectively, over the past 60 days. The company recorded a positive earnings surprise in three of the last four quarters, the average being 0.54%.

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