Jan. 31 (Bloomberg) -- Novo Nordisk A/S, the world's biggest insulin maker, said fourth-quarter profit fell 43 percent because of costs to stop development of a new diabetes treatment. The company is stepping up its share buyback.

Net income declined to 977 million kroner ($194 million), or 1.55 kroner a share, from 1.72 billion kroner, or 2.70 kroner, a year earlier, the Bagsvaerd, Denmark-based company said in a statement distributed by Hugin today. Analysts expected profit of 808 million kroner in a Bloomberg survey. Novo Nordisk plans to spend 16.5 billion kroner repurchasing shares, increasing a previous target by 6.5 billion kroner.

Novo Nordisk spent 1.3 billion kroner last year to drop the experimental inhalable insulin called AERx, which showed little benefit over injectible products in tests. It needs new products as competition heats up between the leader and rivals Eli Lilly & Co. and Sanofi-Aventis SA on an insulin market expected to almost double in size to $14.5 billion by 2010.

``They've increased the share buyback program and that's, of course, positive,'' Rune Dahl, an analyst at Sydbank in Aabenraa, Denmark, said in a telephone interview. ``They're taking market share in the U.S. and that's very positive.''

Revenue from more profitable, bio-engineered insulins climbed 40 percent, led by gains in the U.S. where Novo Nordisk has increased the number of sales people to 1,900. Sales from conventional insulins and related products fell 2.1 percent.

Shares Rise

Novo Nordisk rose 1.5 percent Copenhagen trading, gaining 2 kroner to 312 kroner at the market close. The drugmaker's stock has gained about 27 percent in the past 12 months, compared with a 20 percent drop in the 13-member Bloomberg Europe Pharmaceutical Index.

Fourth-quarter sales rose 4.4 percent to 10.9 billion kroner, missing analysts' estimates for 11.3 billion kroner. The company lowered its sales outlook for the year, and raised its operating profit target.

Sales this year will increase ``slightly more than 10 percent'' in the currencies of the countries in which Novo products are sold, the drugmaker said. Growth in kroner will be slightly more than 6.5 percent. That compares with a previous goal of 10 percent in Danish kroner.

``That's the result of a weak currency environment,'' Chief Financial Officer Jesper Brandgaard said in a telephone interview. The exchange rate of the Danish kroner to the U.S. dollar has fallen to 5.05 kroner from 5.18 in October, he said. U.S. revenue makes up 33 percent of total sales.

Weaker Dollar

Operating profit after expenses related to AERx will rise by at least 20 percent, as revenue from more profitable designer insulins help offset the weak U.S. dollar's effects, Novo Nordisk said. In October, the company forecast growth of about 10 percent in Danish kroner.

``To our surprise, Novo Nordisk downgraded its sales expectations,'' Peter Andersen, an analyst at Jyske Bank, said in a note to analysts. Andersen maintained his ``accumulate'' rating.

The 2008 forecast doesn't include revenue from the eventual sale of cancer projects because the company is still reviewing how best to divest the program, Brandgaard said. Novo Nordisk said today it will stop work on cancer treatments to focus its biopharmaceuticals division on blood-clotting treatments and inflammation.

Work during the previous two years on cancer treatments has led the company to conclude acquiring the experience and knowledge needed to compete ``would be very challenging,'' Brandgaard said. ``We have not been able to find something we think is interesting and attractive, price-wise.''

Discontinued Development

The Danish company discontinued development of AERx after finding that the inhaled insulin, which was intended to be taken at meal times, offered little benefit over a pen- administered product and probably wouldn't appeal to insulin users. The treatment was in the final stage of testing and Morgan Stanley analysts had estimated the product would generate sales of 647 million kroner in 2013.

The insulin maker proposed a dividend of 4.50 kroner, an increase of 29 percent.

The drugmaker is continuing work on an inhaled long-acting insulin and an inhaled version of an experimental treatment that stimulates natural insulin production. Novo Nordisk today said it will apply for European and U.S. approval to market the treatment before June and for Japanese approval before October.

Late-stage clinical trials for the experimental obesity treatment liraglutide will also begin later this year, Novo Nordisk said. The company will probably also prolong that one- year test to three years to determine whether the drug helped patients who are showing signs of diabetes to avoid developing the disease, Mads Krogsgaard Thomsen, chief scientific officer, said in a telephone interview.

Diabetics lack the insulin needed to convert into energy the sugar that enters the blood as food is digested. The buildup of glucose can cause vessels to fail, leading to blindness, amputations, and kidney and heart failure. Bio- engineered insulins offer greater convenience and more closely mimic the body's own than conventional insulins.

Diabetes Increasing

The number of people with diabetes will double to 366 million people in 2030, up from 171 million in 2000, according to the World Health Organization's Web site.

Earlier this week, Indianapolis, Indiana-based Lilly reported fourth-quarter sales of the short-acting Humalog insulin rose 18 percent.

Paris-based Sanofi said in October that third-quarter revenue from its 24-hour insulin Lantus climbed 31 percent, helped by the introduction of the SoloStar needle. Novo Nordisk has sued Sanofi, accusing the French company of violating its patents in making the pre-filled, disposable pen-like needle.

To contact the reporter on this story: Frances Schwartzkopff in Copenhagen at fschwartzkop@bloomberg.net.

Last Updated: January 31, 2008 11:47 EST