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Denmark based Novo Nordisk (NVO - Analyst Report) recently announced that its candidate Tresiba (insulin degludec) has received approval in Japan. The Japanese Ministry of Health, Labour and Welfare (MHLW) approved Tresiba, a next-generation once-daily basal insulin, for the treatment of type I and type II diabetes.

In August 2012, the First Committee on Drugs of Pharmaceutical Affairs, advisory body of MHLW had passed Tresiba. The company expects to launch Tresiba on the completion of price negotiations in Japan, where Tresiba will be available in Novo Nordisk’s insulin pens, FlexTouch and Penfill.

Novo Nordisk conducted a large late-stage program (BEGIN) with Tresiba. Data from the trials, which studied approximately 10,000 type I and type II diabetes patients, confirmed the safety and efficacy of the drug.

The Japanese approval marks the first approval for Tresiba, which is under regulatory review in several countries including the US, the EU, Switzerland, Canada, South Africa, India, Australia, Brazil, Mexico and Russia. We note that the US Food and Drug Administration (FDA) has scheduled an advisory panel meeting on November 8, 2012. We are encouraged by the approval of Tresiba in Japan. US approval would be a major boost for the company.

Even though Novo Nordisk has a strong portfolio of modern insulin analogues, which includes NovoRapid, NovoMix and Levemir, it is heavily banking on the approval of Tresiba and Ryzodeg (another diabetes candidate under regulatory review) for long-term growth. If approved, we expect the candidates to compete with one of the most commonly prescribed insulins, Sanofi's (SNY - Analyst Report) Lantus (insulin glargine).

Our Recommendation

We have an Outperform recommendation on Novo Nordisk. The stock carries a Zacks #1 Rank (Strong Buy rating) in the short term.

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