Novo Nordisk A/S Continues Its Comeback

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Novo Nordisk (NYSE: NVO) released earnings for the first half of 2017, and while revenue growth wasn't spectacular, considering how last year went for the diabetes specialist, investors will take it.

Novo Nordisk results: The raw numbers

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What happened with Novo Nordisk?

  • Changes in exchange rates helped boost revenue in the first half of the year; in local currencies, sales were only up 3% year over year.
  • Diabetes and obesity drugs boosted overall sales with the segment increasing sales by 11%, or 10% in local currencies, in the first half of the year. Hemophilia drugs were down slightly, while drugs for human growth disorders and Novo's catchall "other biopharmaceuticals" were down 27% and 52% respectively. The latter was caused by the expected decline of menopause treatment Vagifem, which now faces generic competition.
  • Within diabetes, top-selling Victoza continues to lead the way with sales up 21% year over year, or 18% in local currencies. The drug is benefiting from increased use of GLP-1 drugs by doctors in the U.S., but Victoza is actually losing market share to other GLP-1 products that only have to be injected once a week.
  • In the near term, the addition of data to Victoza's label that shows better cardiovascular outcomes for patients taking the drug could help turn that trend around. EU regulators recently added the data to the drug's label, and Novo Nordisk expects to hear this quarter from the U.S. Food and Drug Administration about its request.
  • Longer-term, Novo Nordisk has a weekly GLP-1 version of its own, semaglutide, which could be approved later this year. And even longer-term, there's potential for an oral version of semaglutide, which is currently in 10 clinical trials in a program dubbed "Pioneer."
  • The launches of next-generation insulin drugs -- Tresiba, Xultophy, and Ryzodeg -- continue to progress well with sales in the first half of the year more than doubling the same period of 2016. But revenue from the drugs is still small compared to older insulins, which declined 1% as a group.

What management had to say

Last year's changed expectations were caused by insurers and pharmacy benefit managers negotiating lower prices, which CEO Lars Fruergaard Jorgensen said investors should continue to expect:

On the plus side, Jorgensen noted how the company's next-generation insulin drugs have supported each other rather than cannibalizing sales; this should be a positive for the U.S. launch of Xultophy, which began in May:

Looking forward

After the strong-enough second quarter, management increased the low end of its revenue guidance to growth of 1% to 3% in local currencies, up from previous guidance in May of 0% to 3% growth. Operating profit is now expected to grow 1% to 5% in local currencies, up from previous guidance of down 1% to up 3%.

In addition to the cardiovascular data for Victoza, Novo Nordisk also has cardiovascular data showing that Tresiba was non-inferior to Sanofi's (NYSE: SNY) Lantus -- clinical-trial speak for essentially the same, although Tresiba looked slightly better. Novo Nordisk recently submitted that data to U.S. and European regulators, which could help drive patients to switch to the next-generation insulin.

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Brian Orelli has no position in any stocks mentioned. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.