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Novo Nordisk's (NVO) Q2 Earnings Beat Estimates, Sales Miss

Zacks Equity Research

Novo Nordisk A/S NVO reported second-quarter 2020 earnings of 67 cents per American Depositary Receipt (ADR), beating the Zacks Consensus Estimate of 64 cents and increasing from 61 cents in the year-ago quarter.

Revenues of $4.43 billionremained unchanged both in Danish kroner and at constant exchange rate (CER). Revenues slightly missed the Zacks Consensus Estimate of $4.49 billion. Sales were negatively impacted by fewer patients initiating treatment and COVID-19-related destocking following the stocking in March 2020.

Novo Nordisk’s shares have gained 12.5% in the year so far compared with the industry’s growth of 0.2%.

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 grew 1% at CER. In Diabetes Care, fast-acting insulin (Fiasp and NovoRapid) revenues declined 8% and Human insulin revenues were up 9%. Premix insulin (Ryzodeg and NovoMix) revenues rose 7%. However, sales of long-acting insulin (Tresiba, Xultophy and Levemir) declined 22%. Ozempic had a strong launch and recorded sales of DKK 4.8 billion in the quarter.

Obesity Care (Saxenda) declined 9% at CER. 

Sales at the Biopharm segment decreased 3% at CER to DKK 4.7 billion. Hemophilia sales (NovoSeven and NovoEight) were down 10% to DKK 2.4 billion.

Research and development (R&D) expenses decreased 8% at CER due to the phasing of clinical studies and COVID-19 impacts on study recruitment and initiations.

Sales and distribution costs declined 2% at CER due to delayed promotional activities and lower general activities due to COVID-19. This is partly offset by higher distribution costs.

Other Updates

In June 2020, the Japanese Ministry of Health, Labour and Welfare approved Rybelsus for the treatment of adults with type II diabetes. The approval in Japan is based on results from the PIONEER study. Novo Nordisk and Merck MRK will be co-promoting Rybelsus in Japan.

In May and June, Novo Nordisk announced the headline results from STEP 1, 2, 3 and 4, the pivotal phase IIIa studies ononce-weekly subcutaneous semaglutide 2.4 mg in obesity.

2020 Outlook Maintained

Novo Nordisk maintained its outlook for 2020 amid the coronavirus pandemic. It expects 3-6% sales growth at CER. This reflects a strong performance for the glucagon-like peptide-1 (GLP-1)-based diabetes care products, Ozempic, Victoza and Rybelsus; the portfolio of new-generation insulin; and the contribution from biopharm products.The guidance also reflects intensifying competition within Diabetes care and Biopharm, especially the hemophilia inhibitor segment.

We note that Novo Nordisk faces stiff competition from Eli Lilly LLY and Sanofi SNY in the global insulin market. The company also faces stiff competition from Eli Lilly and Astra Zeneca in the global GLP-1 market.

The current COVID-19 pandemic leads to uncertainty regarding the number of patients initiating treatment and societal impacts such as the unemployment rate in the United States,which is impacting healthcare insurance coverage.

Our Take

Novo Nordisk missed the sales estimates but beat the earnings expectations. Ozempic is off to a solid start and the launch of Rybelsus looks good. However, the impact of COVID-19 will affect the performance in the upcoming quarters.

Novo Nordisk currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Novo Nordisk AS Price, Consensus and EPS Surprise

 

Novo Nordisk AS Price, Consensus and EPS Surprise
Novo Nordisk AS Price, Consensus and EPS Surprise

Novo Nordisk AS price-consensus-eps-surprise-chart | Novo Nordisk AS Quote

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