Download NovoNordisk A/S (NVO – NYSE) $38.30 Note: This report contains

July 20, 2017
(NVO – NYSE)
NovoNordisk A/S
$43.55
Note: This report contains substantially new material. Subsequent report will have changes highlighted.
Reason for Report: 1Q17 Earnings Update
Prev. Ed.: May 1, 2017; 4Q16 and FY16 Earnings Update
Brokers’ Recommendations Neutral: 66.67% (2 firms); Negative: 33.33% (1); Positive: 0.00% (0) Prev: 2; 1; 0
Brokers’ Target Price: $38.85 (↔ as the last edition; 2 firms)
Brokers’ Avg. Expected Return: -10.7%
Portfolio Manager Executive Summary
Novo Nordisk, a global healthcare company, is a world leader in the field of diabetes care. The company
boasts a broad product portfolio of diabetes products. Novo Nordisk is among the leading players in the
fields of hemophilia care, growth hormone therapy and hormone replacement therapy.
Of the three firms providing ratings on Novo Nordisk, 66.7% firms (two firms) assigned a neutral rating,
33.3% (one) is negative on the stock. None of the firms were positive.
Neutral or equivalent outlook (2/3 firms): The firms expect FY 2017 results to be slightly weaker than
consensus expects, primarily due to recent adverse foreign exchange movements. However, they feel that
Novo Nordisk is poised to benefit from the growing global prevalence of diabetes & obesity. The firms are
also impressed with the comprehensive portfolio and pipeline. But sustained payer pressure to manage
diabetes drug costs and the anticipated entrance of insulin biosimilars are likely to intensify pricing/access
pressure.
Negative or equivalent outlook (1/3 firms): Reports were not available.
Positive or equivalent outlook (0/3 firms): Reports were not available.
July 20, 2017
Overview
Novo Nordisk focuses on discovering, developing, manufacturing and marketing pharmaceutical products. It
operates in two segments – Diabetes Care and Biopharmaceuticals. The Diabetes Care segment includes
insulins, glucagon-like peptide-1 (GLP-1) molecules, other protein-related offerings and projects such as
glucagon and protein-related delivery systems, obesity and oral antidiabetic drugs. The Biopharmaceuticals
segment focuses on hemophilia care, growth hormone therapy, hormone replacement therapy and
inflammation. The two segments contributed 79.3% and 20.7%, respectively, to 2015 total revenue of
DKK107.9 billion. The company, headquartered in Bagsværd, Denmark, markets its offerings in more than
180 countries across the globe. Novo Nordisk is the world leader in diabetes care with a global value market
share of 27%. The principal markets include North America, China and Japan in addition to major European
nations. Novo Nordisk’s B shares are listed on the stock exchange in Copenhagen (NASDAQ NOVOB). Its
American Depository Receipts (ADRs) are listed on the New York Stock Exchange under the symbol ‘NVO’.
The company’s website is www.novonordisk.com.
© Copyright 2017, Zacks Investment Research. All Rights Reserved
The firms identified the following factors for evaluating the investment merits of Novo Nordisk:
Key Positive Arguments
Victoza is the key growth driver at Novo Nordisk. The
drug has performed well since its launch and is
expected to keep up its strong performance.
Key Negative Arguments
Some firms believe that competition for Victoza has
intensified following the approval of Bydureon. This has
the potential to dampen its sales.
Most firms in the Digest group are pleased with the
strong sales of insulin analogues such as Levemir.
Revenue growth driven by Victoza, Tresiba and modern
insulins is expected to be partly offset by intensifying
competition for the diabetes and biopharmaceuticals
products, increased rebate levels in the U.S. and
adverse macroeconomic conditions in international
markets.
The launches of Xultophy in the EU and Saxenda in the
U.S. are encouraging, and should contribute to the top
line.
Note: Novo Nordisk’s fiscal year references coincide with the calendar year.
July 20, 2017
Long-Term Growth
Novo Nordisk boasts a strong portfolio of diabetes products. The company’s modern insulins, which include
NovoRapid, NovoMix and Levemir, are performing well. The company’s most important drug, Victoza, a
once-daily human GLP-1 analogue approved for improving blood sugar (glucose) levels in adult type II
diabetes patients, also showed promising revenue potential. Novo Nordisk expects Victoza to continue
driving growth. EU approval of Xultophy for the treatment of type II diabetes in adults and the approval of
Saxenda for obesity in the U.S. and the EU are significant boosts to the company’s top line. It is expected to
drive revenue growth in the long term.
Diabetes candidates Tresiba and Ryzodeg are also important for driving long-term growth at Novo Nordisk.
The company decided to acquire two privately held biopharmaceutical companies, Calibrium LLC and MB2
LLC. These acquisitions should help Novo Nordisk expand its portfolio of projects and intellectual property
rights within its diabetes and obesity franchise. Novo Nordisk expects sales to grow in the range of 5–9% in
2016.
For 2017, Novo Nordisk has completed the majority of its formulary negotiations in the U.S. Average prices
are expected to be moderately lower from the 2016 levels, due to a challenging pricing environment,
especially in the basal insulin and human growth hormone segments. Novo Nordisk’s key products are
anticipated to remain unchanged. Preliminary outlook for 2017 indicates low single-digit growth in sales and
flat to low single-digit improvement in operating profit due to challenging market environment in the U.S.
July 20, 2017
Target Price/Valuation
Rating Distribution
Positive
Neutral
Negative
Avg. Target Price
High
Low
No. of Analysts with Target Price/Total
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00.0%
66.67%
33.33%
$38.85
$41.00
$37.00
2/3
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Recent Events
Novo Nordisk Beats on Q1 Earnings, Revenues Down Y/Y
Novo Nordisk reported 1Q17 earnings of $0.58 per American Depositary Receipt (ADR). Reported earnings
surpassed the year ago figure of $0.55.
Quarterly revenues were up 1.4% y/y (up 3% in local currency) to $4.07 billion.
All growth rates mentioned below are on a year-over-year basis and in local currency.
Outlook
For 2017, Novo Nordisk expects sales growth (in local currencies) from flat to up 3%. The growth is likely to
be driven by robust performance for Victoza and Tresiba as well as a contribution from Saxenda and
Xultophy.
Operating profit is expected to be in the range of -1% to +3%. This reflects modest outlook on sales growth.
It also reflects a modest increase in both sales and distribution costs to support product launches as well as
improvement in research and development costs to support Novo Nordisk’s pipeline progress.
Revenue
Novo Nordisk’s 1Q17 revenues were up 1.4% y/y (up 3% in local currency) to $4.07 billion. In terms of DKK
the company’s revenues were up 3% to DKK28.4 billion in 1Q17. The company’s top line was driven by
strong sales within diabetes and obesity care with the majority of growth originating from Victoza, Tresiba,
NovoRapid and Saxenda, partly offset by declining sales of Levemir.
Sales within biopharmaceuticals declined, reflecting lower sales of human growth disorder products,
NovoSeven and Other Biopharmaceuticals.
Both International Operations and North America Operations contributed to sales growth with 66% and 34%,
respectively. Within International Operations, the main growth contributors were Region Europe, Region
China and Region Japan & Korea, partly offset by Region AAMEO (Africa, Asia, Middle East and Oceania)
and Region Latin America.
The Zacks Digest average revenues in 1Q17 were in line with the company’s report.
2017 Outlook: For 2017, Novo Nordisk expects sales growth, in local currencies, to be in the range of -1%
to +4%. Continued growth for Victoza and Tresiba as well as higher contribution from Saxenda and Xultophy
will be partly offset by an impact from lower realised prices in the U.S., especially in the basal insulin and
growth hormone segments, the loss of exclusivity for Vagifem in the U.S. This, in turn, will further intensify
competition within diabetes and biopharmaceuticals, especially in the U.S. as well as adverse
macroeconomic conditions in several markets in International Operations.
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Specific Products
Diabetes Care
Sales: Diabetes Care products improved 13% y/y to DKK23.8 billion in 1Q17. The segment holds a global
value market share of 27%.
The Diabetes and Obesity Care segment recorded sales growth of 11% in local currency.
Modern Insulins
Levemir (insulin detemir [rDNA origin] injection)
Indication: Type I and type II diabetes
Product Life Cycle Position: Marketed
Sales: The company recorded revenues of DKK4,012 million in 1Q17, down 10% y/y in local currency. The
Zacks Digest average Levemir revenues in 1Q17 were in line with the company’s report.
Competitors: Levemir faces competition from Sanofi’s Lantus.
NovoRapid
Indication: Rapid-acting insulin analogue for diabetes
Product Life Cycle Position: Marketed
Sales: The company recorded revenues of DKK5,314 million in 1Q17, up 13% y/y in local currency. The
Zacks Digest average NovoRapid revenues in 1Q17 were in line with the company’s report.
Victoza (liraglutide)
Indication: Once-daily human GLP-1 analogue for type II diabetes
Product Life Cycle Position: Marketed
Safety Issues: The U.S. prescribing information includes boxed warnings for pancreatitis and theoretical risk
of c-cell carcinogencity, having observed c-cell carcinomas in two rodent species but not in primates or
humans.
Sales: The company recorded Victoza revenues of around DKK5,750 million in 1Q17, up 22% in local
currency. Sales were mainly driven by North America Operations comprising 92% share of growth. Victoza
holds a market share of 56% in the GLP-1 segment. The Zacks Digest average Victoza revenues in 1Q17
were in line with the company’s report.
Regulaotry Issues: On Jun 23, 2017, Novo Nordisk announced that the Committee for Medicinal Products
for Human Use (CHMP), under the European Medicines Agency (EMA), issued a positive opinion on update
of the EU label for Victoza. The update was based on the results from the LEADER trial, which investigated
the long-term effects of Victoza (liraglutide up to 1.8 mg) in people with type II diabetes, at high risk of major
cardiovascular (CV) events. In fact, the CHMP recommended an update of the indication for Victoza to
reflect both glycaemic control and cardiovascular events as integral parts of type 2 diabetes treatment.
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On Jun 20, 2017, Novo Nordisk announced that the Endocrinologic and Metabolic Drugs Advisory
Committee (EMDAC) of the FDA voted 17-2 in favor of Victoza that the drug provides substantial evidence of
cardiovascular risk reduction in patients with type II diabetes. The positive panel recommendation bring Novo
Nordisk a step closer to get the cardiovascular indication included on the label of its key top-line driver
Victoza.
Advisory Committee’s favorable vote was based on data from the LEADER cardiovascular outcomes trial,
which involved more than 9,300 people with type II diabetes at high risk of major cardiovascular events. The
study evaluated the cardiovascular benefit of Victoza over a period of up to five years. Notably, the study
compared the addition of either Victoza or placebo to the standard of care, with the Victoza arm meeting the
primary endpoint of non-inferiority. The results also demonstrated superiority of Victoza in a statistically
significant reduction of cardiovascular risk.
As instances of death due to cardiovascular diseases are significantly higher in adults with diabetes
compared with those without diabetes, the addition of positive cardiovascular outcomes on the label of the
diabetes drug might give sales a boost.
The supplemental new drug application for Victoza to include the cardiovascular indication was submitted to
the FDA in Oct 2016, and regulatory feedback in the US is expected in 3Q17.
Additional Data: On Jun 13, 2017, Novo Nordisk announced positive results from the post-hoc analysis of
the cardiovascular (CV) outcomes study, LEADER on Victoza. Currently, the study is evaluating the longterm effects of Victoza compared to placebo, both in addition to standard of care, in patients with type II
diabetes at high risk of major CV events.
Notably, the study showed that the treatment with Victoza resulted in similar reductions in the risk of major
cardiovascular events in patients with type II diabetes at high CV risk, irrespective of whether they
experienced severe hypoglycaemia during the trial.
In fact, the people who experienced severe hypoglycaemic episode, had a higher chance of major
cardiovascular adverse events, CV-death or non-CV death. The risk of a CV event was much more within 60
days of occurrence of a severe hypoglycaemic episode. However, the patients who received Victoza
experienced significantly fewer episodes of severe hypoglycaemia when compared to placebo, both in
addition to standard of care.
In Oct 2016, Novo Nordisk announced that it has submitted a supplemental New Drug Application (sNDA) in
the U.S. and a Type II Variation application in the EU to include data from the LEADER study in the product
information of Victoza. The study evaluated long-term (3.5–5 years) effects of Victoza (up to 1.8 mg)
compared to placebo, both in addition to standard of care, in people with type II diabetes who are at high risk
of major cardiovascular events. Data demonstrated that Victoza statistically reduced the risk of
cardiovascular death, non-fatal myocardial infarction (heart attack) and non-fatal stroke by 13% in
comparison to placebo, when added to standard of care.
Competitors: Victoza faces competition from Sanofi’s Lantus and AstraZeneca’s Bydureon among others.
Saxenda (liraglutide 3 mg)
Indication: Once-daily human GLP-1 analogue approved as an adjunct to a reduced-calorie diet and
increased physical activity for chronic weight management.
Product Life Cycle Position: Marketed
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Sales: The company recorded Saxenda revenues of around DKK539 million in 1Q17, up 110% in local
currency. The Zacks Digest average Saxenda revenues in 1Q17 were in line with the company’s report.
New Data: On May 17, 2017, the company announced results from a post-hoc analysis of data from the
SCALE Maintenance study. In the study, adults who lost at least 5% of their initial weight during a lowcalorie run-in period were randomised to receive Saxenda or placebo. After 16 weeks of treatment with
Saxenda, participants who lost an additional 5% or more of their body weight were more likely to maintain
weight loss and achieve greater additional weight loss over 56 weeks compared with people losing less than
5% body weight after 16 weeks of Saxenda treatment.
Additional Indications: In Jan 2017, the EMA approved an updated product label for Saxenda (liraglutide
injection 3 mg), including data showing that treatment with Saxenda resulted in significant and sustained
weight loss over three years compared to placebo. In addition, data were included showing that fewer
patients on Saxenda compared to placebo developed type II diabetes over three years.
In April 2017, Novo Nordisk announced the FDA label update for Saxenda based on data showing that
approximately half of patients on Saxenda who lost more than or equal to 5% of their weight after 56 weeks
maintained their weight loss for three years.
The SCALE Obesity and Pre-diabetes three-year trial investigated the long-term efficacy of Saxenda versus
placebo in subjects diagnosed with pre-diabetes, who were overweight or had obesity.
Tresiba (insulin degludec)
Indication: Insulin analogue for the treatment of type I and type II diabetes
Product Life Cycle Position: Marketed
Sales: The company recorded Tresiba sales of DKK1,491 million in 1Q17. The product has now been
launched in 55 countries. The Zacks Digest average Tresiba revenues in 1Q17 were DKK1,558 million in
1Q17, up 178.4% y/y.
Additional Data: In Sep 2016, Novo Nordisk announced that it has submitted a sNDA in the U.S. to include
data from the two phase IIIb studies – SWITCH 1 and SWITCH 2 – in Tresiba’s label.
On Mar 24, 2017, the company announced that Committee for Medicinal Products for Human Use (CHMP),
of the European Commission has granted positive opinion suggesting an update of the label of Tresiba
(insulin degludec) to include data from the SWITCH clinical studies. The CHMP recommends the updated
label to include results reflecting the significant reductions in hypoglycaemia from both the studies.
In the SWITCH 1 study, adults with Type I diabetes and in SWITCH 2 trial adults with Type II diabetes were
treated with Tresiba versus insulin glargine U100, both in addition to meal-time insulin. In both the studies,
the patients experienced statistically significant reductions in hypoglycaemia when treated with Tresiba
compared to insulin glargine.
The CHMP positive opinion is now referred for final action to the European Commission, and the company
expects to receive the updated marketing authorisation in 2Q17.
New Data: On Jun 14, 2017, Novo Nordisk announced the submission of a Type II Variation application to
the European Medicines Agency (EMA) for including data in the label for Tresiba (insulin degludec) from the
DEVOTE trial.
On Jun 10, 2017, findings from a study showed that people with type I diabetes and type II diabetes
experienced a significant reduction in HbA1c , six months after switching to Tresiba from another basal
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insulin, primarily insulin glargine U100 and insulin detemir, in a real-world setting. These results were
sustained at 12 months.
Rates of overall hypoglycaemia were also significantly lower at six months after switching to Tresiba. In
people with type I diabetes, the rate of severe hypoglycaemia was reduced by 85%, and by 92% in people
with type II diabetes.
Further, a significant reduction in fasting plasma glucose was observed at six months and maintained for 12
months. The total daily insulin dose also decreased significantly in people with type I diabetes and type II
diabetes at six months, and remained stable at 12 months.
Additional indications: On Jun 12, 2017, Novo Nordisk announced the primary results from DEVOTE - the
event-driven trial comparing two basal insulins – Tresiba and insulin glargine U100, in adults with type II
diabetes at high risk of cardiovascular (CV) disease. The study showed that Tresiba met primary endpoint of
non-inferiority compared with insulin glargine u100 for major adverse CV events.
Additionally, the results from secondary endpoints of the study showed significant reduction in rate of severe
and nocturnal severe hypoglycaemia with Tresiba versus insulin glargine u100. In fact, Tresiba showed no
increased risk of major cardiovascular events and significant reduction in rates of severe hypoglycaemia
compared to insulin glargine.
On May 27, 2017, Novo Nordisk announced the submission of a supplemental application to the FDA for
including data in the label for Tresiba from the DEVOTE study, an event-driven study conducted to confirm
the cardiovascular safety of Tresiba compared to insulin glargine U100 when added to standard of care, in
people with type II diabetes. The study met its primary endpoint by demonstrating non-inferiority of major
adverse cardiovascular events (MACE) with Tresiba compared to insulin glargine U100.
In the study, Tresiba showed superiority on the secondary confirmatory endpoint of severe hypoglycaemia:
27% fewer patients in the Tresiba treated group experienced an episode of severe hypoglycaemia, resulting
in a 40% overall rate reduction of total episodes of adjudicated severe hypoglycaemia. Furthermore, patients
in the Tresiba treated group experienced a 53% relative reduction in the rate of nocturnal severe
hypoglycaemia. These differences were all statistically significant.
In May 2017, Novo Nordisk received an approval from the EU Commission for an update of the label for
Tresiba to include data from the SWITCH 1 and 2 studies. In the studies, Tresiba demonstrated clinically
relevant reductions in hypoglycaemia compared with insulin glargine U100 in people with type I and type II
diabetes.
Ryzodeg (degludecPlus) (fixed ratio combination of Tresiba and NovoRapid)
Indication: Insulin analogue for the treatment of type I and type II diabetes
Product Life Cycle Position: Marketed
Sales: Ryzodeg revenues in 1Q17 were DKK95 million compared with DKK34 million in 1Q16. Currently, it is
marketed in 10 countries. In fact, the Zacks Digest average Ryzodeg revenues in 1Q17 were in line with the
company’s report.
Xultophy (IDegLira) (a combination of Victoza and Tresiba)
Indication: Type II diabetes in adults
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Product Life Cycle Position: Marketed in the EU and Switzerland: Launched in the U.S. in May 2017 under
brand name Xultophy 100/3.6.
Regulatory Update: In Dec 2016, Novo Nordisk announced that the FDA has approved Xultophy (100/3.6)
as an adjunct to diet and exercise to improve glycemic control in adults with type II diabetes mellitus
inadequately controlled on basal insulin (less than 50 units daily) or liraglutide (less than or equal to 1.8 mg
daily).
Sales: Xultophy revenues in 1Q17 were DKK103 million. The Zacks Digest average Xultophy revenues in
1Q17 were in line with the company’s report
Other diabetes and obesity care (oral antidiabetic products, needles and Saxenda)
In Dec 2016, Novo Nordisk announced that the FDA has approved Xultophy (100/3.6) as an adjunct to diet
and exercise to improve glycemic control in adults with type II diabetes mellitus inadequately controlled on
basal insulin (less than 50 units daily) or liraglutide (less than or equal to 1.8 mg daily).
Fiasp (Fast -acting insulin aspart, NN1218)
Indication: Type I and Type II diabetes in adults
Product Life Cycle Position: Launched in Canada, UK and Germany: Phase III completed in 2015. The
fast acting insulin aspart will be marketed under the brand name of Fiasp in the EU.
Regulatory Update: On Mar 29, 2017, Novo Nordisk announced that the company has resubmitted the new
drug application (NDA) for fast-acting insulin aspart as a class II re-submission to the FDA.
In October 2016, Novo Nordisk announced that it had received a Complete Response Letter from the FDA
regarding the NDA for aspart. Novo Nordisk has now evaluated the content of the Complete Response Letter
and completed the End-of-Review meeting with FDA; based on this, Novo Nordisk has resubmitted the fastacting insulin aspart NDA as a class II re-submission.
The company expects to receive feedback from the FDA in the last quarter of 2017.
On Mar 27, 2017, Fiasp, was launched in Canada, following the marketing authorisation received from
Health Canada in January. The launch of Fiasp in Canada represents first new mealtime insulin in 10 years.
On Jan 9, 2017, Fiasp received marketing authorisation from the European Commission, covering all 28
European Union member states; approval was also obtained in Norway and Iceland. It is currently under
regulatory review in Australia, Switzerland, Brazil, South Africa, Argentina and Israel.
Biopharma Business
The company’s Biopharmaceuticals segment comprises hemophilia, growth hormone therapy and hormone
replacement therapy. On Sep 2, 2014, Novo Nordisk announced that it will discontinue its development
efforts targeting inflammatory disorders. The company’s decision was based on a review of its strategic
position in this field.
Sales: Sales of Biopharmaceutical products fell 25% y/y in local currency to DKK4,691 million in 1Q17. The
Zacks Digest average Biopharma revenues in 1Q17 were in line with the company’s report.
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Hemophilia (Includes NovoSeven, NovoEight and NovoThirteen)
Sales: In 1Q17, Hemophilia revenues were DKK2,576 million, down 11% y/y in local currency. The Zacks
Digest average Hemophilia revenues in 1Q17 were in line with company’s report. The sales decline was
primarily driven by lower NovoSeven sales in AAMEO and Latin America as well as North America
Operations, partly offset by a positive contribution from NovoSeven sales and the roll - out of NovoEight in
Europe.
NovoSeven (bleeding disorders therapy)
Indication: Congenital hemophilia, acquired hemophilia, Factor VII deficiency, and Glanzmann’s
thromabasthenia, hemophilia A or B with inhibitors
Product Life Cycle Position: Marketed
NovoSeven has a volatile market and is affected by budgetary controls, inhibitor patients participating in
studies and transfer of patients to an alternative treatment of immune tolerance therapy.
Sales: NovoSeven sales came in at DKK 2,311 million in 1Q17, down 13% in local currency. The Zacks
Digest average NovoSeven revenues in 1Q17 were in line with the company’s report.
NovoThirteen
Indication: Congenital FXIII A-subunit deficiency
Product Life Cycle Position: Marketed (marketed in the U.S.: Tretten)
Rebinyn (Refixia, nonacog beta pegol, N9-GP)
Indication: For on-demand treatment and control of bleeding episodes, and the perioperative management
of bleeding around the time of surgery in adults and children with haemophilia B.
Stage of Development: Completed Phase III, In May 2017, the FDA has approved the Biologics License
Application for Rebinyn for the treatment of adults and children with haemophilia. Rebinyn is the brand name
for nonacog beta pegol; N9-GP.
Regulatory Update: The efficacy and safety evaluation of Rebinyn was based on 115 patients across the
four paradigm clinical trials, and the approval follows the Blood Products Advisory Committee meeting held
Apr 4, 2017. Novo Nordisk expects to launch Rebinyn in the US in 1H18.
On Jun 6, 2017, Novo Nordisk announced that the European Commission has granted marketing
authorisation for Refixia for the treatment of adolescents and adults with haemophilia B. The authorisation
covers all 28 European Union member states.
Refixia is the brand name for nonacog beta pegol; N9-GP in the EU. The efficacy and safety evaluation was
based on 115 patients across the five paradigm clinical trials, and the marketing authorisation follows the
positive opinion from the Committee for Medicinal Products for Human Use (CHMP), under the European
Medicines Agency (EMA), provided on Mar 24, 2017. Novo Nordisk expects to launch Refixia in the first
European countries in the 4Q17.
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On Mar 24, 2017, CHMP granted positive opinion to nonacog beta pegol, N9-GP, recommending marketing
authorisation for the treatment of adolescents and adults with haemophilia B. The candidate will be marketed
by the trade name of Refixia. The CHMP recommended Refixiato be indicated for prophylaxis and ondemand treatment of bleeding as well as for surgical procedures in adolescent (>12 years of age) and adult
patients with haemophilia B (congenital factor IX deficiency). The recommendation was based on the results
from the paradigm clinical trial program where 115 previously treated children and adults with haemophilia B
were treated with Refixia.
Growth Hormone Therapy
Human growth hormone (HGH) is a biosynthetic hormone replacement therapy. It is identical to the natural
growth hormone produced by the body and must be injected in order to work properly.
Norditropin (somatropin [rDNA origin] injection)
Indication: Used to treat a wide range of indications in both children and adults.
Product Life Cycle Position: Marketed
Sales: The Zacks Digest average Norditropin revenues in 1Q17 were DKK1,646 million.
Other Products
In the Biopharmaceutical segment, Other Products primarily consist of hormone replacement therapy (HRT)related products. HRT is a system of medical treatment for women to prevent discomfort and health
problems resulting from the declining circulation of hormones.
Sales: In 1Q17, Other Products’ revenues were DKK469 million, down 51% in local currency. The Zacks
Digest average was in line with the company’s report.
Pipeline
Diabetes Pipeline
Semaglutide (NN9535)
Indication: Type II diabetes
Stage of Development: Phase III
Regulatory Update: On Feb 28, 2017, Novo Nordisk submitted a New Drug Application (NDA) to the
Japanese Ministry of Health, Labour and Welfare for semaglutide (once-weekly), for the treatment of adults
with Type II diabetes. The submission was based on results from the SUSTAIN trial. The participants were
treated with once-weekly semaglutide as monotherapy, or with oral-antidiabetic (OAD) agents or in
combination with OADs and basal insulin. Across the SUSTAIN programme, once-weekly semaglutide
demonstrated statistically significant reductions in HbA1c as well as statistically significant reductions in
mean body weight compared to sitagliptin, exenatide extended -release, once -daily insulin glargine U100
and placebo. The most common adverse event was nausea.
On Dec 5, 2016, Novo Nordisk submitted a regulatory application both in the U.S. and the EU for
semaglutide for the treatment of adults with type II diabetes.
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Ongoing Studies: Novo Nordisk is evaluating semaglutide (oral) in a phase IIIa study (PIONEER 3) using
the Emisphere Eligen SNAC enhancer technology. The randomised, double-blinded, double-dummy study
will evaluate the safety and efficacy of daily administration of oral semaglutide compared to Januvia
(sitagliptin) after 18 months of treatment in patients with Type II diabetes. The study is expected to be
complete in 2018. Novo Nordisk plans to initiate additional phase IIIa PIONEER studies shortly.
New Data: On Jun 23, 2017, Novo Nordisk announced the headline results from a 52-week double-blind
phase II study with once-daily subcutaneous semaglutide investigating safety and potential for inducing and
maintaining weight loss in people with obesity.
In the study, 957 people with obesity were randomised to treatment with doses of semaglutide between 0.05
to 0.4 mg/day or placebo. In fact, Liraglutide 3.0 mg/day was included for comparison. About 100 people
were included in each active treatment arm in combination with diet and exercise.
From a mean baseline weight of around 111 kg and a body mass index of approximately 39 kg/m2, a weight
loss up to 17.8 kg was observed after 52 weeks of treatment with semaglutide. This corresponded to an
estimated 13.8% weight loss compared to the weight loss of 2.3% achieved by diet, exercise and placebo
alone, with all treatment arms adjusted for people discontinuing treatment in the study. The results from the
liraglutide 3.0 mg treatment arm were broadly in line with previously reported data.
On Apr 3, 2017, data from a phase IIIa SUSTAIN 2–4 trials demonstrated greater mean reductions in HbA 1c
and body weight with once-weekly semaglutide treatment compared to sitagliptin, exenatide extended
release (ER) and insulin glargine U100 in adults with Type II diabetes, across multiple background oral
antidiabetic (OAD) treatment categories.
Obesity Pipeline
Tri-agonist 1706 (NN9423): In Mar 2017, Novo Nordisk initiated a phase I study in obesity with tri-agonist
1706, a triple full agonist of the native human glucagon-like peptide 1 (GLP-1), gastric inhibitory peptide
(GIP) and glucagon receptors (GCG). The trial will investigate safety, tolerability and pharmacokinetics of the
product in approximately 50 adults
Biopharmaceuticals Pipeline
Somapacitan (NN8640): In Mar 2017, Novo Nordisk initiated a multi-dose phase IIIa trial with somapacitan,
a long-acting recombinant growth hormone derivative, in previously treated Japanese people with adult
growth hormone deficiency (AGHD). In the REAL JP trial, about 60 people with AGHD will be randomised in
an open-label, active-controlled study to compare the safety of somapacitan and Norditropin in 52 weeks.
Subcutaneous N8-GP (NN7170): In Feb 2017, Novo Nordisk initiated a phase I study with a subcutaneous
formulation of N8-GP, a glycopegylated version of FVIII (turoctocog alfa pegol), for treatment of haemophilia
A. The study will investigate safety, tolerability and pharmacokinetics of single and multiple subcutaneous
doses of N8-GP in haemophilia A patients.
Margins
Gross margin was 84.3% in local currency in 1Q17 compared with 84.4% in 1Q16. The decline was due to
lower prices following the non-recurring Medicaid rebate adjustments in 2016 and the lower basal insulin
prices, both in the USA, as well as ramp-up costs for new manufacturing capacity. The gross margin was
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impacted by positive contribution from product mix due to higher Tresiba and Victoza sales, partly countered
by lower sales of Vagifem following the launch of a generic version in the USA and lower overall sales of
NovoSeven.
In 1Q17, Research and development (R&D) expenses were DKK3,289 million, down 1% y/y due to lower
research costs related to updated R&D strategy announced in Oct 2016, thereby leading to the
discontinuation of a number of research projects. Administrative costs also declined by 1% mainly due to
cost control initiatives and lower legal costs.
Sales and distribution costs decreased by 1% in 1Q17 mainly due to lower promotional activities in the
U.S. following the Tresiba launch in 2016 and broad cost control initiatives. Additionally, the costs were partly
offset by higher costs for legal cases and for sales force expansion in Region AAMEO (Africa, Asia, Middle
East and Oceania) and Region Japan & Korea.
Administrative costs were DKK913 million, down 1% y/y.
2017 Outlook: For 2017, operating profit is expected to be in the range of -1% to +3%. This reflects modest
outlook for sales growth. It also reflects a modest increase in both sales and distribution costs to support
product launches as well as improvement in research and development costs to support Novo Nordisk’s
pipeline progress.
Earnings per ADR
Novo Nordisk reported 1Q17 earnings of $0.58 per American Depositary Receipt (ADR). Reported earnings
surpassed the year ago figure of $0.55.
As per the Zacks Digest report, earnings in 1Q17 were $0.56, up 5.3% y/y.
Collaborations
On Jan 30, 2017, Novo Nordisk and University of Oxford announced a landmark research collaboration for
the treatment of type II diabetes. The partnership will enable scientists from Novo Nordisk and University of
Oxford to work together towards bringing innovative approaches for treating type II diabetes. Also, Novo
Nordisk will invest in a new research centre on the premises of the University of Oxford. Novo Nordisk is
expected to make an investment of around 1 billion DKK over a period of 10 years and employ around 100
Novo Nordisk researchers, based in an Oxford University research centre.
Additionally, the company will focus on innovation within early stage research that has potential to
substantially impact future treatment of type II diabetes and its complications.
Novo Nordisk’s expertise in the area of diabetes coupled with the expertise of leading scientists from the
University of Oxford will lead to innovative therapies and a new generation of treatments to treat people
suffering from type II diabetes.
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Research Analyst
Previous Update
Copy Editor
Content Editor
Lead Analyst
QCA
Reason for Update
Zacks Investment Research
Madhu Goyal
Madhu Goyal
Annesha Bhattacherjee
Ekta Bagri
Ekta Bagri
Kinjel Shah
1Q17 Earnings Update
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