Novo Nordisk was already worried about the U.S., what with stepped-up competition from new rivals and hardball pricing tactics by payers. But it’s even more worried now.
Why? U.S. politics, CEO Lars Fruergaard Jørgensen said Thursday after the company reported its 2016 results—and, more importantly, put out guidance for 2017 that included negative growth (i.e., shrinkage) at the low end in constant currencies.
The company is “operating in a more uncertain environment,” Jørgensen said during the company’s earnings call to explain the forecast, which predicts sales growth in local currencies at -1% to 4% for the year, and 1% to 6% on a reported basis.
In statements to the press ahead of that call, Jørgensen called the situation “volatile,” Reuters reports. “The political environment in the U.S means that we think it is prudent to operate with a slightly broader range,” he said, referring to the 5-percentage-point spread in its revenue forecast, rather than its typical 4.
The company faces other pressures in the U.S., too. With the pharma industry under close scrutiny for its pricing policies, Novo, and its diabetes rivals Sanofi and Eli Lilly, have come in for criticism for their rising stickers on insulins. Novo last month promised that U.S. price increases would be limited to the single digits, and that it would make its products affordable for patients.
It’s obvious why the U.S. upheaval has raised Novo’s threat level. North America accounted for 53% of the company’s 2016 sales. Despite the payer pressures, that region delivered 4% growth last year, a 37% share of the company’s overall expansion. If those pressures increase—particularly if President Donald Trump works with Congress to bring drug prices “way down” as he’s demanded—that growth could turn south.
With Trump raising the prospect of a 20% border tax, Novo could take a hit on products that it makes overseas; though the drugmaker is building a major production facility in North Carolina, it will take time to start turning out drugs there, and its biggest insulin plant is now in Denmark.
There were obvious bright spots in Novo’s 2016 results, however, and Jørgensen said on the call that the company’s momentum is headed in the right direction. For instance, Novo’s U.S. business struck a deal with CVS Health on its products for 2017, and Jørgensen says he’s hopeful that arrangement will push sales in the right direction.
And some of Novo’s products did deliver some impressive growth stats for 2016. Tresiba, its latest basal insulin, plus combo products Xultophy and Ryzodeg, put up growth of 212% year-over-year. Tresiba delivered sales of 4.1 billion Danish krones, or almost $600 million at current exchange rates, the company’s earnings release stated.
Despite competition from Eli Lilly’s new GLP-1 drug Trulicity, Novo’s mainstay Victoza grew by 12%, and the company still maintains a 50% share of that newly crowded market. Growth in overall GLP-1 sales has helped keep Victoza on the up-and-up, the company says. Meanwhile, Saxenda, the obesity-focused version of Victoza’s active ingredient liraglutide, grew 245% to 1.6 billion krones, or $233 million, the company said in its earnings presentation.
Plus, sales in Asia took a big leap. China grew by 12%, while Japan and Korea expanded at a 15% rate, the company said. Overall, sales were up 4% to 111.8 billion krones, or $16.3 billion.
Of course, investors are always looking forward, and the company has a couple of challenges—and a few potential advantages—coming in 2017. Lilly and partner Boehringer Ingelheim’s SGLT2 drug Jardiance won an FDA indication for cardiovascular risk reduction, based on some impressive trial data, and though that med isn’t a head-to-head competitor like Trulicity, some analysts see the SGLT2 class drawing down GLP-1 growth as the CV benefits sink in.
On the other hand, Novo has a weekly GLP-1 med coming to directly challenge Trulicity—Victoza is taken daily—in the form of semaglutide, which was submitted to the FDA for approval last quarter; Novo expects a decision within 9-12 months, it said in its earnings presentation. Analysts have pegged that drug as one of the most promising new launches of 2017.
And in the meantime, Victoza could get a boost if the FDA approves a label update based on its own cardiovascular risk-reduction data unveiled at the American Diabetes Association meeting last June. A decision there is expected ahead of the semaglutide approval.
Meanwhile, the company’s U.S. problems aren’t limited to payer pressures and pricing heat. An investor filed a putative class action against Novo last month, alleging price-fixing in the insulin market. Just days ago, a group of patients filed a similar action against not only Novo, but Sanofi and Lilly, over “astounding” insulin price increases. That lawsuit also cited pharmacy benefits managers’ pressure on diabetes drugmakers for discounts, and the companies’ competitive pressure to win formulary placement.
The Danish drugmaker said Tuesday that it has “a longstanding commitment to supporting patients’ access to our medicines.”
“We disagree with the allegations made against the company, and are prepared to vigorously defend the company in this matter,” the company said in an emailed statement. Novo is “aware of the complaint and its characterization of the pharmaceutical supply chain.”