Novo Quarterly Net Misses Estimates as Victoza Slows

Novo Nordisk A/S reported profit that missed analysts’ estimates on slower-than-expected expansion for its biggest growth engine, the Victoza diabetes treatment. The stock fell the most in more than eight months.

Third-quarter net income climbed 13 percent to 6.42 billion kroner ($1.18 billion) from 5.67 billion kroner a year earlier, the Bagsvaerd, Denmark-based company said in a statement today. That lagged behind the 6.55 billion-kroner average estimate of 16 analysts surveyed by Bloomberg. Novo said today it expects “high” single-digit percentage growth in sales and operating profit next year in local currencies.

“There was a rather severe slowdown on Victoza,” Johan Unnerus, an analyst at Swedbank AB in Stockholm, said in a telephone interview today. “The health-care system is changing in the U.S. and the competition landscape is changing. There are too many question marks. They will hang around for a while.”

Victoza, a once-daily injection, mimics a hormone called GLP-1 and stimulates natural insulin production. The treatment is facing competition from new types of drugs such as New Brunswick, New Jersey-based Johnson & Johnson’s Invokana. Eli Lilly & Co., based in Indianapolis, plans to introduce its once-weekly GLP-1, dulaglutide, as soon as next year. Demand for Victoza also has been dented by safety concerns.

Unpublished Findings

Novo’s shares fell 7.4 percent, the steepest decline since Feb. 11, to close at 914 kroner in Copenhagen.

“The whole GLP-1 market has been a bit concerning of late,” Alistair Campbell, an analyst at Berenberg Bank in London who has a hold recommendation on Novo shares, said by telephone.

The U.S. Food and Drug Administration said in March it was reviewing unpublished findings by a group of researchers suggesting pre-cancerous cellular changes may be associated with Type 2 diabetes treatments known as incretin mimetics, including Victoza. Studies have linked Victoza and similar medicines to a higher risk of pancreatitis and pancreatic cancer. Novo also recently lost a contract to provide insulin and Victoza to Express Scripts Holding Co., the largest U.S. processor of prescription drug claims.

’Momentum Again’

Revenue from the drug climbed 14 percent to 2.85 billion kroner in the quarter, missing the average analyst estimate of 3.03 billion kroner. Victoza sales are coming back in the U.S., the biggest market for drugs, and the GLP-1 segment will continue to grow in the future, Chief Financial Officer Jesper Brandgaard said in an interview today.

In the U.S., Victoza sales are “beginning to have some momentum again,” he said. “There’s been a pickup ‘in the last three to four weeks in terms of prescriptions.”

To help sustain Victoza, the Danish company has begun a consumer marketing campaign in the U.S., Brandgaard said during the interview. Physicians also were reassured after a European Medicines Agency committee and a National Institutes of Health workshop earlier this year didn’t find enough evidence to support scientists’ concerns about GLP-1s, he said.

New medicines such as dulaglutide and Novo’s own once-weekly version, semaglutide, will help expand the drug class, Brandgaard said.

FDA Rejection

So far, Victoza has helped Novo weather the rejection of its new insulin Tresiba in the U.S. earlier this year. The FDA demanded a new study to assess the heart risk of the product. Novo originally aimed for approval of the treatment in the U.S. as early as 2012. It’s now targeting an introduction by 2016 or 2017. Novo said today it has started enrolling patients for the study and expects data from an interim analysis of the trial to be available within two to three years.

Tresiba, approved in the European Union, is already sold in Denmark, the U.K., Switzerland, Sweden, Mexico, Japan and India. Novo needs Tresiba to help it challenge Sanofi’s top-selling Lantus insulin, which last year amassed 4.96 billion euros ($6.8 billion) in sales.

In August, Novo raised its sales and profit forecasts on higher revenue from Victoza and it left the guidance unchanged today. Novo estimates full-year sales growth in local currencies of 11 percent to 13 percent.

Novo shares returned 8.5 percent including reinvested dividends over the past year through yesterday, compared with a 26 percent return for the Bloomberg Europe Pharmaceutical Index.

Before it's here, it's on the Bloomberg Terminal.