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Novo Nordisk (NVO) Q3 Earnings Beat Estimates, Revenues Miss

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Novo Nordisk A/S (NVO - Free Report) reported third-quarter 2019 earnings of 64 cents per American Depositary Receipt (ADR), beating the Zacks Consensus Estimate of 62 cents and increasing 15% in DKK from the year-ago quarter.

Revenues were up 9% year over year in DKK (up 6% at constant exchange rate [CER]) to $4.51 billion but missed the Zacks Consensus Estimate of $4.55 billion.

Year to date, Novo Nordisk’s shares have rallied 22.5%, outperforming the industry’s growth of 3.5%.

 All growth rates mentioned below are on a year-over-year basis.

Quarter in Detail

Novo Nordisk operates in two segments — Diabetes and Obesity care, and Biopharmaceuticals.

The Diabetes and Obesity Care segment sales grew 5% at CER. Sales of insulin decreased 4% at CER to DKK 14,484 million. Sales of long-acting insulin (Tresiba, Xultophy and Levemir) declined 6% to DKK 5,019 million.

Sales at the Biopharmaceuticals segment rose 6% at CER to DKK 4,821 million. Hemophilia sales were up 7% at CER.

Ozempic reached blockbuster status in the quarter and recorded  sales of DKK 3,122 million in the quarter. In the United States, the new-to-brand prescription market share for Ozempic is now 37%, bringing Novo Nordisk's combined GLP-1 new-to-brand prescription market share to 54%.

Research and development (R&D) expenses declined 3% at CER, reflecting impairment of intangible assets and increasing costs for semaglutide in obesity clinical programs — STEP and SELECT.

Administrative costs grew 6% at CER from the year-ago period.

Sales and distribution costs ascended 9% in DKK and 6% at CER, owing to resource allocation to the growth markets, promotional activities for Saxenda and launch activities for Ozempic.

Other Updates

In September, the FDA approved Rybelsus (semaglutide tablets) as an adjunct to diet and exercise to improve glycaemic control in adults with type II diabetes. Rybelsus, the brand name for oral semaglutide in the United States, is the first approved glucagon-like peptide-1 (GLP-1) receptor agonist in a tablet.

In August, the European Commission adopted the CHMP recommendation that Victoza, as an adjunct to diet and exercise, is indicated for the treatment of children and adolescents (10 years and above) with insufficiently controlled type II diabetes.

2019 Outlook

Novo Nordisk expects 5-6% sales growth at CER, up from the previous guidance of 4-6%. This reflects a strong performance for the portfolio of new-generation insulin and the GLP-1 pipeline, now comprising both Victoza and Ozempic, and a solid contribution from Saxenda. However, this is expected to be partly offset by intensifying global competition within the Diabetes Care and Biopharmaceuticals segments, especially for hemophilia inhibitor.

Persistent pricing pressure within Diabetes Care, especially in the United States, might also negatively impact sales.

Operating profit growth is anticipated to be 4-6% at CER, indicating sales growth and efficient cost control.

Our Take

Continued growth from Victoza and Tresiba and higher contributions from Saxenda and Xultophy should offset the impact of lower realized prices in the United States, loss of exclusivity for products in hormone replacement therapy, and a stiff rivalry within the diabetes and biopharmaceuticals markets.

Novo Nordisk A/S Price, Consensus and EPS Surprise

 

Novo Nordisk A/S Price, Consensus and EPS Surprise

Novo Nordisk A/S price-consensus-eps-surprise-chart | Novo Nordisk A/S Quote

 

Zacks Rank & Stocks to Consider

Novo Nordisk currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks from the same space are AbbVie Inc. (ABBV - Free Report) , GlaxoSmithKline Plc. (GSK - Free Report) and Merck and Co. (MRK - Free Report) , all carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

AbbVie’s earnings per share estimates have increased from $8.87 to $8.93 for 2019 and from $9.29 to $9.36 for 2020 in the past 60 days. The company delivered a positive earnings surprise in three of the trailing four quarters, the average being 1.71%.

Glaxo’s earnings per share estimates have increased from $2.89 to $3.02 for 2019 and from $2.96 to $2.99 for 2020 in the past 60 days. The company delivered a positive earnings surprise in the trailing four quarters, the average being 17.23%.

Merck’s earnings per share estimates have increased from $4.89 to $5.02 for 2019 and from $5.35 to $5.41 for 2020 over the past 60 days. The company came up with a positive earnings surprise in the trailing four quarters, the average being 12.51%.

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