Novo Nordisk A/S (NVO - Free Report) announced its plans to restructure its Research & Development (R&D) organization. Consequently, the company will lay off 400 employees from R&D roles in Denmark and China. The company is taking this step to focus in both core and new therapy areas. The company aims to speed up the expansion and diversification of its pipeline across serious chronic diseases.
In order to implement the strategic plan, the company will establish four Transformational Research Units in 2018 to pursue novel treatment modalities and platform technologies. The biotech-like units based in Denmark, the United States and the UK will operate as satellites of Novo Nordisk's central R&D function. These units will bring about innovation in priority fields like translational cardio-metabolic research and stem cell research.
Shares of the company have moved down 11.6% year to date against the industry’s growth of 6.3%.
Novo Nordisk will also considerably increase its investments in automation and digital capabilities including machine learning and artificial intelligence (AI). Such prudent investments will lead to a faster and more efficient path toward lead molecule selection and development. To increase the efficiency of the R&D organization, the company will prioritize combining laboratory infrastructure and IT systems.
The company will re-allocate and restructure resources so that it can bring novel drug candidates. To ensure this, the company will identify new therapeutic approaches based on external collaborations, which Novo Nordisk will accelerate via the establishment of a new Business Development unit in Cambridge, MA.
This year, Novo Nordisk announced a range of external agreements. These include the acquisition of the U.K.-based biotech start-up, Ziylo to develop glucose responsive insulins (GRIs), and a number of partnership agreements with universities and biotech companies in the fields of cardio-metabolic and stem cell research.
The company had also taken a similar step in 2016 to combat the challenging environment. The company had announced 1,000 job cuts in order to reduce operating costs, as the company was facing a challenging competitive environment.
Zacks Rank & Stocks to Consider
Novo Nordisk is currently a Zacks Rank #3 (Hold) stock.
Some better-ranked stocks in the same space are Roche Holding AG (RHHBY - Free Report) , Bristol-Myers Squibb Company (BMY - Free Report) and Eli Lilly and Company (LLY - Free Report) . All of these carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Roche’s earnings per share estimates have increased from $2.10 to $2.24 for 2018 and from $2.15 to $2.28 for 2019 over the past 60 days. The stock has rallied 13.2% in the past three months.
Bristol-Myers’ earnings per share estimates have increased from $3.42 to $3.62 for 2018 and from $3.66 to $3.82 for 2019 over the past 60 days. The company delivered a positive earnings surprise in three of the trailing four quarters with an average beat of 6.39%. The stock has rallied 13.3% in the past three months.
Lilly’s earnings per share estimates have increased from $5.16 to $5.47 for 2018 and from $5.54 to $5.73 for 2019 over the past 60 days. The company delivered a positive earnings surprise in all of the trailing four quarters with an average beat of 10.15%. The stock has rallied 23.8% in the past three months.
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