Novo Nordisk (NVO) Q2 Earnings & Revenues Beat Estimates

Novo Nordisk A/S NVO reported second-quarter 2019 earnings of 61 cents per American Depositary Receipt (ADR), slightly beating the Zacks Consensus Estimate of 60 cents but decreasing from the year-ago quarter’s 68 cents.

Revenues were up 4.9% year over year (up 6% at constant exchange rate [CER]) to $4.52 billion and beat the Zacks Consensus Estimate of $4.41 billion.

Year to date, Novo Nordisk’s shares have increased 11.2%, outperforming the industry’s growth of 2.5%.

 

 

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 increased 6% at CER. Sales of insulin decreased 4% at CER to DKK 14,909 million. Sales of long-acting insulin (Tresiba, Xultophy and Levemir) declined 3% to DKK 5,411 million.

Sales at the Biopharmaceuticals segment increased 6% at CER to DKK 4,800 million. Hemophilia sales were up 13% at CER.

Research and development (R&D) expenses were up 8% in DKK and 7% at CER, reflecting increasing costs for semaglutide in obesity clinical programs — STEP and SELECT — partly offset by the completion of the oral semaglutide phase IIIa development program.

Administrative costs were unchanged both in DKK and at CER compared with the same in the year-ago period.

Sales and distribution costs ascended 7% in DKK and 5% at CER, owing to resource allocation to the growth markets, promotional activities for Saxenda and launch activities for Ozempic.

Other Updates

In July 2019, Gilead Sciences GILD and Novo Nordisk initiated a phase II proof-of-concept study combining the latter’s semaglutide and the former's cilofexor (FXR agonist) and firsocostat (ACC inhibitor) for the treatment of patients with nonalcoholic steatohepatitis (NASH).

In June 2019, the European Commission granted marketing authorization to Esperoct for the treatment of patients aged 12 years or older with haemophilia A. Esperoct is the brand name for turoctocog alfa pegol, N8-GP. Esperoct is indicated for prophylaxis and on-demand treatment of bleeding and surgical procedures in patients aged 12 years and above with haemophilia A.

2019 Outlook

Novo Nordisk expects 4-6% sales growth at CER up from the previous guidance of 2-5%. 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 sales rise is expected to be partly offset by intensifying global competition within the Diabetes Care and Biopharmaceuticals segments, especially for haemophilia 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, reflecting the outlook for sales growth and an impact of cost control. Growth reported in DKK is estimated to be around 5 percentage points, higher than that at CER.

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

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 besides macroeconomic conditions in many markets under International Operations.

Zacks Rank & Stocks to Consider

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

Some better-ranked stocks from the same space are Eli Lilly and Co. LLY and Merck and Co. MRK, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lilly’s earnings per share estimates have increased from $5.66 to $5.72 for 2019 and from $6.59 to $6.60 for 2020 in the past 60 days. The company delivered a positive earnings surprise in three of the trailing four quarters, the average being 0.69%.

Merck’s earnings per share estimates have increased from $4.73 to $4.88 for 2019 and from $5.21 to $5.37 for 2020 over the past 60 days. The company came up with a positive earnings surprise in the trailing four quarters, the average being 7.96%.

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