Novo Nordisk's (NVO) Q1 Earnings and Sales Beat Estimates

Novo Nordisk A/S NVO reported first-quarter 2020 earnings of 75 cents per American Depositary Receipt (ADR), beating the Zacks Consensus Estimate of 73 cents and increasing 16% in DKK from the year-ago quarter.

Revenues grew 16% year over year in DKK (up 14% at constant exchange rate [CER]) to $5.0 billion. Revenues beat the Zacks Consensus Estimate of $4.70 billion. COVID-19-related stockpiling led to the upside.

Novo Nordisk AS Price, Consensus and EPS Surprise

 

Novo Nordisk AS Price, Consensus and EPS Surprise

 

Novo Nordisk AS price-consensus-eps-surprise-chart | Novo Nordisk AS Quote

Novo Nordisk’s shares have gained 7.1% in the year so far against the industry’s decline of 1.8%.

 

All growth rates mentioned below are on a year-over-year basis.

Quarter in Detail

Novo Nordisk operates in two segments — Diabetes and Obesity Care, and Biopharmaceuticals.

The Diabetes and Obesity Care segment sales grew 14% at CER. In Diabetes Care, fast-acting insulin (Fiasp and NovoRapid) revenues grew 1% and Human insulin revenues were up 11%. Premix insulin (Ryzodeg and NovoMix) revenues rose 7%. However, sales of long-acting insulin (Tresiba, Xultophy and Levemir) declined 3%. Ozempic had a strong launch and recorded sales of DKK 4.7 billion in the quarter.

Obesity Care (Saxenda) grew 30% at CER.

Sales at the Biopharmaceuticals segment increased 16% at CER to DKK 5.3 billion. Hemophilia sales (NovoSeven and NovoEight) were up 9% to DKK 2.8 billion.

Research and development (R&D) expenses increased 40% at CER due to the reversal of write-downs of prelaunch inventory in the year-ago quarter following the filing of oral semaglutide to the FDA.

Sales and distribution costs rose 7% at CER driven by promotional activities for Ozempic.

Other Updates

In April 2020, the European Commission (EC) granted marketing authorization to Rybelsus for the treatment of adults with insufficiently controlled type 2 diabetes to improve glycaemic control as an adjunct to diet and exercise.

Novo Nordisk submitted a new drug application to the China Center of Drug Evaluation for Ozempic in February both for treating insufficiently controlled type 2 diabetes and reducing the risk of major cardiovascular events in patients with type 2 diabetes and established cardiovascular disease.

In April, the company completed a phase II trial with subcutaneous semaglutide in non-alcoholic steatohepatitis (NASH).

2020 Outlook Maintained

Novo Nordisk maintained its outlook for 2020 amid the coronavirus pandemic. It expects 3-6% sales growth at CER. This reflects a strong performance for the glucagon-like peptide-1 (GLP-1)-based diabetes care products, Ozempic, Victoza and Rybelsus; the obesity care product, Saxenda; the portfolio of new-generation insulin; and the contribution from biopharm products, Esperoct, Refixia and NovoEight.

However, this is expected to be partly offset by intensifying global competition within the Diabetes Care and Biopharmaceuticals segments, especially for hemophilia inhibitor. We note that Novo Nordisk faces stiff competition from Eli Lilly LLY and Sanofi SNY in the global insulin market. The company also faces stiff competition from Eli Lilly and Astra Zeneca AZN in the global GLP-1 market.

Persistent pricing pressure within Diabetes Care, especially in the United States, might also negatively impact sales.

Our Take

Novo Nordisk beats on both first-quarter earnings and sales. Ryzodeg continues to gain traction and Ozempic is off to a solid start. However, the impact of COVID-19 will affect the performance in the upcoming quarters.

Novo Nordisk currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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