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| Novo Nordisk CFO Jesper Brandgaard |
Danish drugmaker Novo Nordisk ($NVO) was hit by China's August devaluation of the yuan as well as domestic competition in the third quarter that poses a challenge to an otherwise strong franchise.
In an Oct. 29 release and earnings call, the company said 9-month sales in mainland China jumped 26% to DKK7.38 billion, but once the impact of a weaker yuan was tallied, the figure showed a 5% gain in local currency.
Still, the company was one of the few multinationals that saw executives discuss the impact on third quarter earnings of an August move by The People's Bank of China moved to reset its daily parity rate to the dollar, shocking markets with a weaker fixing and effectively widening the trading band.
The currency is not fully convertible on the capital account and a steady to appreciating narrow trading band has underlain expectations for years.
Jesper Brandgaard, Novo Nordisk executive vice president and chief financial officer, specified the broad foreign exchange impact to the company over a 9-month horizon and specifically commented on the yuan.
"The average U.S. dollar rate for the first nine months of 2015 was 21% higher than the average rate in the first nine months last year," Brandgaard said. "Similarly, the average exchange rate in the first nine months of the year for the Chinese yuan and the British pound were 19% and 11% higher than last year respectively."
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| Novo Nordisk's Jakob Riis |
Jakob Riis, executive vice president for China, Pacific & Marketing, noted "continued problems in China" with Lars Rebien Sørensen, president and CEO, filling in the details.
"In regards to China, we are impacted by increasing local competition. And we are impacted by a segment shift, much like we have historically experienced the same in Japan where we have a strong position in pre-mix market," Sorensen said on the call.
"China used to be a pre-mix market. Now basal market is growing. The competition has the gold standard, and local competition has a copy of the gold standard. And that means we get fewer patients when the patients shift from mix to basal. And so, we are being hit by that. The only real solution to this is of course that we get Tresiba into the Chinese market. So, that is a couple of years out. So, I think we will be facing relatively tough market conditions in China for a couple of years."
Novo has filed with the China FDA for Tresiba approval, but no word on an expected date during the call.
Rival Sanofi ($SNY), despite hard times for its overall diabetes franchise, sees Lantus (insulin glargine) strong in China, although biosimilars are already on the scene.
Elsewhere the company said sales in Japan/Korea grew 10% in Danish kroner and 5% in local currencies, with Japan driven by Victoza and Tresiba.
- here's the earnings release from Novo