UPDATE 3-Novo offers shy outlook as diabetes drug sales miss

Thu Oct 31, 2013 1:41pm EDT

* Novo says to carry out a stock split in five-for-one ratio

* Sees high single-digit profit, sales growth next year

* Q3 EBIT rises to 7.99 bln DKK, missing forecasts

* Keeps full-year 2013 guidance unchanged

* Shares close down 7.4 pct (Adds details, analyst comment, closing price)

By Mette Fraende and Shida Chayesteh

COPENHAGEN, Oct 31 (Reuters) - Danish drugmaker Novo Nordisk missed forecasts for third-quarter profit and sales and gave a smaller than hoped growth outlook for next year, capped by a weakening dollar and slower growth of some of its best-selling drugs.

The world's biggest insulin producer, which faces intensified competition in the fast-growing diabetes market as the world faces an epidemic of type 2 diabetes tied to over-eating and lack of exercise, said it expects high single-digit percentage operating profit and sales growth next year.

Novo, up against rivals such as Sanofi SA and Eli Lilly & Co, in addition to much smaller generic producers, kept its outlook for 2013 unchanged.

"Some had expected more, and were waiting for two digit growth rates in both profit and sales for next year," Jyske Bank analyst Frank Andersen.

In a Reuters poll of analysts, the average forecast for operating profit growth in 2014 was for 9.7 percent while sales on average were seen rising 8.2 percent. A number of analysts in the poll had however forecast higher growth rates.

"The company expects sales and EBIT to grow by high single digits. This is shy of Novo's usual ambition to drive double-digit sales growth and margin expansion," Berenberg said in a note to clients.

Berenberg pointed to two significant difficulties facing Novo next year, the first being the loss of a large contract in the United States. The second was intensified competition for its diabetes Prandin drug after a U.S. appeals court in June found the patent on Prandin in combination with metformin to be invalid.

"In summary, this was a marginally disappointing set of results, with cautious guidance for 2014," Berenberg said.

In addition to competition challenges, Novo was dealt a major blow in February when the U.S. Food and Drug Administration (FDA) refused to approve the drug, called Tresiba, and instead asked for extra tests to assess potential heart risks.

MISSING FORECASTS

Novo said third-quarter sales of modern insulins rose to 9.39 billion Danish crowns, missing the average 9.74 billion forecast in a Reuters poll.

Sales of diabetes drug Victoza rose about 14 percent to 2.85 billion Danish crowns, also lagging forecasts, hurt by the U.S. Food and Drug Administration and the European Medicines Agency's investigations into whether Victoza and similar rival drugs may cause pancreatic cancer.

"At a first glance that looks critical because Victoza is one of the primary growth drivers for Novo," Andersen said.

The group's operating profit for the third quarter rose to 7.99 billion Danish crowns ($1.48 billion), compared with an average forecast for 8.19 billion crowns in the poll of analysts.

"It is particularly the diabetes sales which are weak in the third quarter," said Sydbank analyst Soren Hansen.

The sale of NovoRapid, a modern insulin and another of Novo's best selling drugs, rose 8 percent, less than expected Andersen said. "The first disappointing element is the result and the next is 2014 guidance."

Novo's shares closed down 7.4 percent to 914 Danish crowns, against a 2.5 percent fall in the Copenhagen stock exchange's benchmark index.

The company said it would split its shares to improve liquidity and bring price levels down, especially the American Depositary Receipts. The price of Novo Nordisk's shares on the New York stock exchange last traded at $181.1 per share.

The trading unit of Novo Nordisk B shares listed on the Nasdaq OMX Copenhagen exchange will be changed from 1 Danish crown to 0.20 crowns, it said.

Novo's shares have risen 3.5 percent since the start of the year, outperforming a modest 0.2 percent increase in the European Healthcare Index. ($1 = 5.4161 Danish crowns) (Editing by Elaine Hardcastle)

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