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Novo Nordisk's (NVO) Q3 Earnings Beat Estimates, Sales Miss

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Zacks Equity Research
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Novo Nordisk A/S NVO reported third-quarter 2020 earnings of 69 cents per American Depositary Receipt (ADR), which beat the Zacks Consensus Estimate of 68 cents and increased from 64 cents in the year-ago quarter.

Revenues of $4.58 billion increased 2% in Danish kroner and7% at constant exchange rate (CER). Revenues missed the Zacks Consensus Estimate of $4.75 billion. The increased global sales of 7% (CER) was driven by higher Diabetes and Obesity care sales owing to elevated GLP-1 sales, offset by insulin sales decline of 2% and unchanged Obesity care sales and Biopharm sales.

Sales were negatively impacted by COVID-19 due to fewer patient treatment initiations, unemployment in the United States and COVID-19-related destocking, offset by phasing of rebates and inventory changes at the wholesaler level in the United States.

Novo Nordisk’s shares have gained 12.5% in the year so far against the industry’s decline of 8.2%.

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 9% at CER. In Diabetes Care, fast-acting insulin (Fiasp and NovoRapid) revenues grew4% at CER and Human insulin revenues were up 5% at CER. Premix insulin (Ryzodeg and NovoMix) revenues rose 4%. However, sales of long-acting insulin (Tresiba, Xultophy and Levemir) declined 15%. Ozempic had a strong launch and recorded sales of DKK 5.4 billion in the quarter.

Obesity Care (Saxenda) sales were flat year over year. 

Sales in the Biopharmaceuticals segment were flat year over yearat DKK 4.5 billion. Hemophilia sales (NovoSeven and NovoEight) were down 4% to DKK 2.3 billion.

Sales and distribution costs increased 5% measured in Danish kroner and 10% at CER year over year. The increase was driven by North America Operations reflecting the launch of Rybelsus and promotional activities related to Ozempic as well as changes to provisions for legal cases.

Research and development costs increased 9% measured in Danish kroner and 10% at CER from the year-ago quarter. The costs were driven by the amortization of the priority review voucher for semaglutide in obesity, largely offset by impairments in the third quarter of 2019.

Administrative costs remained unchanged in Danish kroner and increased 3% at CER from the same period in 2019.

2020 Outlook

Novo Nordisk expects 5-8% sales growth at CER. The guidance reflects expectations for continued robust sales performance ofthe GLP-1 diabetes care products, Ozempic, Victoza and Rybelsus; the portfolio of new-generation insulin; and the biopharm products. The guidance also reflects intensifying competition in both Diabetes care and Biopharm, especially within 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 AZN in the global GLP-1 market.

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

Our Take

Novo Nordisk missed sales but beat earnings estimates in the third quarter. Ozempic is off to a solid start and the launch of Rybelsus looks good. However, the impacts of COVID-19 are likely to 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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