Let’s just say it hasn’t been a great week for Novo Nordisk.
After losing out to higher bidder Sanofi on a buyout of Ablynx, the Danish drugmaker Thursday rolled out fourth-quarter results and 2018 guidance that Oddo BHF analyst Sebastien Malafosse called “disappointing” in a note to clients.
But look out for Novo to try its hand at dealmaking again this year. With foreign exchange woes posing “a significant challenge for us, taking our growth down in negative territory,” M&A is “still on the radar,” CEO Lars Fruergaard Jørgensen said in an interview. The company already has some ideas about who it would like to pursue and is in some discussions, too, he added.
For the quarter, revenues of DKK 112 billion hit 2% below consensus estimates, with biopharma sales sinking 18% year over year. While diabetes meds did post growth of 4%, it was more than offset by U.S. generics of hormone replacement therapy Vagifem. Next-gen insulins expanded by 38%, too, but still came in 14% below forecasts.
Operating profit also hit below expectations, by 4%, at DKK 49 billion. And Novo doesn’t have very high hopes for things to improve this year: It guided to sales growth of between 2% and 5% and profit growth of between 1% and 5%, noting that a weak U.S. dollar would lop 7 percentage points off its sales haul and 10 percentage points off its profit total.
But Jørgensen was quick to highlight Novo’s strong performance in the important GLP-1 space, where both diabetes med Victoza and obesity formulation Saxenda made big gains; their sales jumped 18% and 64%, respectively.
Bernstein analyst Wimal Kapadia, for his part, had a slightly rosier take than Malafosse, calling the results “not that bad” in his own note to clients. He has a point; Novo, along with key diabetes competitors such as Sanofi, has seen worse in recent years, thanks to abundant payer pressure in the space.
But while Kapadia expects data on Novo’s closely watched oral version of GLP-1 diabetes drug semaglutide—already approved as injectable Ozempic, and crucial to the company's growth plans—to be “strong,” beyond that, “we think it will be tough going given the lack of catalysts,” he wrote.
He even has commercial concerns about oral semaglutide itself—including its 30-minute postdose fasting period and its GI tolerability. And the way he sees it, sales estimates for the product—as well as for Novo’s insulins “are too high,” he added.
That’s where some extra top-line help, in the form of an Ablynx buy, could have come in handy. The Belgian biotech is readying rare blood disorder drug caplacizumab for both U.S. and EU approvals, and Jefferies analysts have said the prospect could reach $500 million in annual sales. But earlier this week, Sanofi beat Novo to the punch, sealing the deal with a €3.9 billion offer.
“The fact that we did not succeed with Ablynx doesn’t change the strategy or intention,” Jørgensen said. “When you go into M&A, there’s no guarantee for success, so we will keep looking.”
Meanwhile, Novo will be doing so without Chairman Göran Ando, who has decided not to seek re-election in March. The company’s remaining directors have proposed that current board member and former Statoil and BG Group CEO Helge Lund take his place.