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Novo Nordisk raises forecasts despite continued U.S. pressure
5 Min Read
* Second-quarter earnings (EBIT) beat forecasts
* Lifts 2017 outlook in local currencies, lowers in crowns
* Says prices in core business seen falling in 2018
* Says obesity drug growth „very promising“
* Shares jump more than 6 percent (Adds management comments, obesity drugs background, shares)
By Stine Jacobsen and Jacob Gronholt-Pedersen
COPENHAGEN, Aug 9 (Reuters) – Novo Nordisk, the world’s leading maker of diabetes drugs, reported better than expected profit on Wednesday driven by new diabetes and obesity drugs though it said sale prices would remain under pressure in the United States.
The Danish drugmaker shocked markets in 2016 by cutting its long-term operating profit forecasts twice on the back of price pressures in its main U.S. market, sending its shares down more than 40 percent last year.
The company said its second-quarter operating profit came in at 13.4 billion crowns ($2.1 billion), above an average estimate of 12.7 billion in a Reuters poll, and raised its forecasts for both sales and operating profit this year.
„Although the formulary negotiations in the USA reflect the tough competitive environment, we remain confident that our long-term financial growth targets are achievable,“ Chief Executive Lars Fruergaard Jorgensen said in a statement.
Novo Nordisk’s shares jumped more than 6 percent and were 5.1 percent higher at 1015 GMT, boosted by the second-quarter earnings and higher 2017 forecasts.
The company has come under pressure in the all-important U.S. market as the pharmacy benefit managers who administer drug programmes for employers and health plans demand ever bigger discounts for insulin drugs.
Jorgensen said looking ahead, average prices after rebates were expected to be lower than in 2017, mainly driven by longer-acting basal insulin treatments, but he declined to say how far prices were expected to fall.
Pressure from politicians is adding to the uncertainty though no specific initiatives have been taken yet. U.S. President Donald Trump said in January pharmaceutical companies were „getting away with murder“ in what they charge the government, and promised that would change.
Jorgensen said the political commitment to reform the U.S. healthcare system was building but changes were not imminent. „My view is that there will not be any change that will impact us significantly short term“.
With its traditional diabetes treatments in the firing line, Novo Nordisk is pinning hopes for growth on new obesity drugs.
Saxenda, launched in 2015, had second-quarter sales of $194 million, or 2 percent of Novo’s overall sales, and analysts expect it to earn more than $1 billion a year by 2023, according to Thomson Reuters data.
„The growth in Saxenda is very promising,“ Chief Financial Officer Jesper Brandgaard said, adding that the product was gaining „good traction“ not only in the United States but also in Latin America and the Middle East.
Novo’s next big hope in treating obesity is Semaglutide, a new drug in the so-called GLP-1 category which imitates an intestinal hormone that stimulates the production and absorption of insulin.
Used for patients who can produce some insulin, the drug is also being tested for both types of diabetes. Jorgensen said it could double the weight reductions of 5 percent to 10 percent seen with Saxenda and its market could grow significantly.
U.S. and European authorities are expected to decide on approval of Semaglutide as a once-weekly treatment for diabetes by the end of the year.
That would provide fierce competition to Trulicity, one of Eli Lilly’s main growth drivers, which is taking market share from Novo’s current GLP-1 drug Victoza, which accounts for almost a quarter of its total diabetes sales.
Still, some investors worry that prices for such obesity drugs will come under the same pressure as insulin treatments.
„When we look at pricing in the GLP-1 segment, we see that we are not yet having price competition, because the products are more differentiated than what we see in the basal category,“ said Jorgensen.
Novo Nordisk raised its 2017 sales growth forecast in local currencies to 1 percent to 3 percent from zero to 3 percent.
Operating profit in local currencies is now expected to rise by 1 percent to 5 percent compared with a range of minus 1 percent to plus 3 percent previously.
However, sales and operating profit in Danish crowns are now expected to come in 3 and 4 percentage points lower than the local currency levels, respectively, due to the depreciation of the U.S. dollar. ($1 = 6.3354 Danish crowns) (Reporting by Stine Jacobsen and Jacob Gronholt-Pedersen; editing by Jason Neely and David Clarke)