Novo Nordisk beats in Q2 even as U.S. pricing pressures bite

Novo Nordisk ($NVO) keeps on putting up sales growth, with diabetes powerhouse Victoza leading the way. Its pipeline meds are moving along. But the question is whether that pipeline can start paying off soon enough to counteract increasing pricing pressure in the U.S.--and forthcoming biosimilars in Europe.

The company's pricing power was actually a bit better for most of its products in Q2 compared with the first quarter, according to Bernstein & Co. Partly because of price increases--and despite new competition from Eli Lilly & Co.'s ($LLY) longer-acting Trulicity--Victoza slam-dunked sales growth of 22%. Its 4.5 billion kronor's worth of sales ($657 million) surpassed analyst estimates by more than 350 million kronor.

Novo CEO Lars Rebien Sørensen

But for the year so far, Novo executives admit that payer pressure took its toll on the company's numbers. "If we look at the first half, our overall portfolio is slightly negatively impacted by pricing in the U.S.," CEO Lars Rebien Sørensen said during Thursday's earnings call.

Just take a look at Levemir, which fell short of analyst estimates for the quarter at 4.52 billion kronor in sales. "The culpability lies with U.S. insulin pricing in general and Levemir in particular," Bernstein analyst Ronny Gal said in a Thursday note, adding that effective pricing for the first half of this year declined compared with the same period last year. "This is in line with what we are hearing from U.S. payers and reinforces our expectation that pricing … will continue to be weak."

All together, however, Novo's modern insulins--which include Levemir and NovoLog--grew by 6%. That's partly thanks to NovoLog and NovoRapid beating forecasts at 5.23 billion.

Overall, the Danish drugmaker put up second-quarter sales of 27 billion Danish kronor ($3.94 billion)--an increase of 25%, or 9% in local currencies--slightly ahead of analyst estimates. It delivered a stronger earnings beat at 3.23 kronor per share. Likewise, it's standing by its full-year sales growth estimates of 7% to 9% and hiking its forecast for operating profits to 19% from 17% previously, all ex-currency effects.

There are other promising signs: The company's prediction that GLP-1 market growth would make room for Victoza and Trulicity to both increase sales appears to be correct, at least for now. That might change as Sanofi ($SNY) progresses with Lyxumia, Gal points out. The weight-loss version of liraglutide, Saxenda, has delivered some "encouraging" initial uptake, Novo says, with prescription volume at 1,420 weekly; expanding insurance coverage is key to picking up that number. And some new data on Victoza and Saxenda in Type 1 and Type 2 diabetes could help as well.

Then there's Tresiba, which is on sale in Japan and Europe, grabbing share in markets where it's been able to win reimbursement on par with Sanofi's competitor, Lantus. That med could win U.S. approval by Oct. 1 after an earlier rejection, finally giving Novo a chance to launch the new drug in its biggest market.

Meanwhile, the company's longer-acting GLP-1 drug semaglutide scored some solid Phase III data, giving Novo backing for a head-to-head challenge to Trulicity. Plus, a potentially game-changing oral version of the same med succeeded in Phase II--and if it follows up in Phase III as well, that could be a nice boost for Novo in a few years.

- read the Novo release

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