Novo says China price pressures may go into 2017

With approval for Tresiba in China potentially years out, Novo Nordisk ($NVO) expects continued price competition from domestic companies that will show up on the books more widely in the coming year and into 2017.

Novo executives on the Feb. 3 fourth-quarter earnings call didn't hazard a guess on an approval timeline by the China FDA for long-acting Tresiba (insulin degludec injection), with the application filed in August last year. But on the third-quarter call signaled approval is "a couple of years out."

So even as sales grew 22% in Danish kroner for the company in what the company calls "Region China" in the fourth quarter, earnings were "negatively impacted by intensified local competition as well as the decline in the growth rate of the overall diabetes care market. The decline in market growth reflects cost-containment measures in the healthcare system, including restrictions on access to healthcare professionals."

Novo Nordisk's Jakob Riis

That dynamic, said executive vice president for China Pacific and Marketing Jakob Riis, is expected to show more clearly on the company's books in the coming quarters.

"Part of the reason for the suppression of growth we are experiencing now in China is also the pricing reform that's ongoing and the impact of that is not yet seen to a large extent," Riis said. "So we'd expect this to unfold here in 2016 but also into 2017."

"So that's one indicator that we probably need to go through that before we see, could potentially see, a return. We see good volume growth. We also need to reposition ourselves vis-a-vis our position in the basal segment."

Novo lowered its profit outlook on the call to 10% from about 15% on average over more than a decade.

The company's international operations are closely watched because of a patient marketing strategy that has seen it make steady headway in emerging markets as well as developed countries such as Japan and South Korea in Asia.

Japan approved Tresiba in 2013 and sales in the fourth quarter rose 11% in Danish kroner, the company said on the earnings call, adding later that it "has reached 33% of the basal insulin market measured as monthly value market share."

As part of its geographic designations, the company said it will change the way it reports starting this year to reflect the product mixes in play.

"The U.S. will be a region of its own, while Canada will be part of Region Pacific, which also includes Japan and Korea as well as Australia," Riis said.

- here's the release