Novo Nordisk (NVO) Q2 Earnings and Sales Miss, 2023 View Up
Novo Nordisk A/S NVO reported second-quarter 2023 earnings of $1.26 per American Depositary Receipt, which missed the Zacks Consensus Estimate of $1.34. The company had reported earnings of 84 cents in the year-ago quarter.
Revenues of $7.94 billion increased 32% in Danish kroner (DKK) and were up 36% at the constant exchange rate (CER) in the reported quarter. Revenues, however, fell short of the Zacks Consensus Estimate of $8.43 billion. The year-over-year increase in revenues was driven by higher Diabetes and Obesity care sales as GLP-1 sales increased year over year.
Shares of Novo Nordisk were down about 2% on Thursday in the pre-market hours due to the weaker-than-expected second-quarter performance. Shares of Novo Nordisk have rallied 38.6% this year compared with the industry’s rise of 7.3%.
Image Source: Zacks Investment Research
All growth rates mentioned below are on a year-over-year basis and at CER.
Quarter in Detail
Novo Nordisk operates under two segments: Diabetes and Obesity Care and the Rare disease segment.
The Diabetes and Obesity Care segment’s sales reported DKK 50.2 billion in second-quarter 2023, which represents growth of 44%. In Diabetes Care, fast-acting insulin, Fiasp’s revenues were down 9%. NovoRapid revenues were down 5%. Human insulin revenues were up 14%. Premix insulin (Ryzodeg and NovoMix) revenues increased by 3%. Also, sales of long-acting insulins (Tresiba, Xultophy and Levemir) decreased by 14%.
Ozempic, which has witnessed a strong launch and solid uptake so far, recorded sales of DKK 22.1 billion for the quarter, up 59%. Rybelsus too witnessed a strong uptake and recorded sales of DKK 3.99 billion for the quarter, up 90%. However, Victoza sales of DKK 1.84 billion declined 30% during the reported quarter.
Obesity Care (Saxenda and Wegovy) sales were up 188% year over year. Wegovy sales skyrocketed 543% to DKK 7.52 billion during the quarter, after a second contract manufacturer for Wegovy initiated production in April 2023 to meet the increasing demand for the drug.
Sales in the Rare disease segment were down 20% year over year to DKK 4.11 billion. Sales of rare blood disorder products were DKK 2.84 billion, up 1%. Sales of hemophilia A products increased by 13%. Hemophilia B products’ sales were also up 60%. Sales of NovoSeven were down 9% to DKK 1.79 billion.
Sales and distribution costs climbed 32% in DKK and increased 36% at CER year over year. This increase was due to International Operations and North America Operations reflecting promotional activities related to Ozempic and Rybelsus as well as Obesity care market development activities. Adjustments to legal provisions also contributed to increased costs.
Research and development costs were up 39% in DKK and increased 41% at CER from the year-ago quarter’s figures. Higher costs were driven by clinical activity for late-stage studies, increased research activities and impairments of intangible assets compared with the second quarter of 2022.
Administrative costs increased 8% in DKK and were up 10% at CER from the year-ago quarter’s figures.
2023 Outlook Raised
For 2023, the company now expects sales to grow by 27-33% (earlier estimate – 24-30%), while operating profit is now expected to register 31-37% growth as compared with the earlier forecast of 28-34%.
The increase in guidance primarily reflects higher full-year expectations for GLP-1 diabetes products in both North America and internationally, primarily driven by the volume growth of GLP-1-based diabetes products.
Novo Nordisk has high expectations from this segment, especially from Ozempic in the U.S. market and Wegovy in the obesity care market, post its relaunch. However, the company remains concerned about Wegovy’s limited roll-out in International Operations and continues to expect periodic supply constraints.
Our Take
Novo Nordisk's earnings and revenues missed estimates in the second quarter of 2023. However, Ozempic and Rybelsus have experienced great traction in the market since launch and are expected to drive growth in the upcoming quarters. Wegovy and Saxenda too have witnessed strong uptake so far, contributing to the top line.
NVO continues to expand its supply capacity for Wegovy, post its re-launch in the United States as well as in other geographies. The increasing demand trend for the drug is encouraging and expected to fuel higher revenue incomes in the upcoming quarters.
Other Updates
In a separate press release, NVO announced entering into an agreement to acquire Inversago Pharma, a Montreal-based private company, for an upfront payment of up to $1.075 billion. The transaction is contingent upon the achievement of certain development and commercial by Inversago.
The transaction, upon closing, will add Inversago’s lead development asset INV-202, an oral CB1 inverse agonist, to Novo Nordisk’s diabetes and obesity care portfolio. Per the company, the candidate has demonstrated weight loss potential in a phase Ib trial and is currently in a phase II trial for diabetic kidney disease. The transaction will also grant Novo Nordisk access to additional pipeline assets of Inversago that are currently under development for metabolic and fibrotic disorders.
Subject to the fulfillment of the contingencies, the acquisition is expected to be completed before the end of 2023.
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 & Other Stocks to Consider
Novo Nordisk currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the overall medical sector, worth mentioning, are J&J JNJ, ADC Therapeutics ADCT and ADMA Biologics, Inc. ADMA, each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
In the past 90 days, the Zacks Consensus Estimate for J&J’s 2023 earnings per share has increased from $10.67 to $10.75. During the same period, the estimate for JNJ’s 2024 earnings per share has increased from $11.01 to $11.29. Year to date, shares of JNJ have lost 2%.
JNJ beat estimates in each of the trailing four quarters, delivering an average earnings surprise of 5.58%.
In the past 90 days, the Zacks Consensus Estimate for ADC Therapeutics’ 2023 loss per share has narrowed from $2.84 to $2.61. During the same period, the estimate for ADC Therapeutics’ 2024 loss per share narrowed from $2.56 to $2.55. Year to date, shares of ADCT have plunged 60.9%.
ADCT beat estimates in two of the trailing four quarters, missing the mark on the other two occasions, delivering an average negative earnings surprise of 3.25%.
In the past 90 days, the Zacks Consensus Estimate for ADMA Biologics’ 2023 loss per share has narrowed from 9 cents to 8 cents. The consensus estimate for 2024 earnings is currently pegged at 7 cents per share. Year to date, shares of ADMA have gained 4.7%.
ADMA beat estimates in three of the trailing four quarters, matching estimates on one occasion, delivering an average earnings surprise of 13.57%.
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