April 30, 2009 / 7:46 AM / 10 years ago

REFILE-UPDATE 2-Novo Q1 profit tops forecast, competition tough

(Refiles to fix headline tag to UPDATE 2, with no changes to text)

* Op profit 3.81 bln crowns ($678 mln) vs forecast 3.7 bln

* Operating margin tops recently raised long-term target

* No news in report on key new diabetes drug Victoza

* CFO says hopes to meet with FDA on Victoza in May

* Share price rises

(Adds comments by CFO, analyst; updates share price)

By Anna Ringstrom and Karin Jensen

COPENHAGEN, April 30 (Reuters) - Novo Nordisk (NOVOb.CO) (NVO.N), the world’s biggest insulin maker, posted a bigger than expected 35 percent rise in its first quarter profit on Thursday on the back of higher modern insulin sales and gross margins.

Chief Executive Jesper Brandgaard also told Reuters the Danish firm expected to meet with the U.S. Food and Drug Administration on its key new diabetes drug Victoza in May, after an advisory panel this month cast doubt on its safety.

The company made an operating profit of 3.81 billion Danish crowns ($678 million) in the first quarter, up from 2.83 billion in the same period last year and ahead of the average forecast of 3.7 billion crowns given in a Reuters poll of analysts.

The operating margin was 30.5 percent. It had in January raised its long-term margin target to 30 percent.

Sydbank analyst Rune Dahl said the numbers looked good. “The company has been able to increase efficiency more than I expected,” he said.

“They have already reached their long-term margin goal, just a quarter after they announced the target. That`s pretty impressive. But we won`t see it staying up there as they begin to roll out Victoza.”

Novo repeated it hoped to launch the drug on some European markets this summer. It expects an approval for the drug for treatment of type 2 diabetes in a couple of months’ time after the European Medicines Agency this month recommended its approval.

INTENSE COMPETITION

In the United States the drug is facing headwinds, however. Earlier this month a U.S. advisory panel cast doubt on its safety and now the final decision on approval rests with the Food and Drug Administration (FDA). Investors fear that the agency will delay or even block a U.S. launch.

“(Quarterly) growth was solid. But what I am interested in ... are the prospects for Victoza,” said John Reeve, analyst at SP Equity Research.

Victoza stimulates insulin release only when glucose levels become too high while also leading to weight loss.

Modern insulin revenues — Novo’s biggest products group by sales — rose 31 percent to 4.99 billion crowns, undershooting a forecast 5.80 billion.

Group sales rose 18 percent to 12.5 billion crowns, largely matching a forecast 12.4 billion. In local currencies, sales grew 11 percent.

Brandgaard said he expected gross margins, which were up 2.6 percent in the quarter, to grow by at least 1 percentage point this year from 2008.

Novo cut its sales growth forecast slightly for this year to see it at around 14.5 percent. Its previous outlook had been for around 15 percent. In local currencies it saw growth of about 10 percent.

“This is based on expectations of continued market penetration for Novo Nordisk’s key strategic products within diabetes care and biopharmaceuticals as well as expectations of continued intense competition during 2009,” it said.

It said it now sees operating profit increasing by at least 18 percent this year, compared with a previous forecast for around 19 percent.

Brandgaard said competition on the U.S. diabetes care market remained fierce. North America is Novo’s biggest market and Brandgaard said he expected it to remain so.

Shares in Novo were up 1.3 percent at 274 crowns at 1006 GMT, off an earlier high of 278.50 crowns.

Victoza would, if approved, compete with Amylin Pharmaceuticals Inc’s AMLN.O Byetta. French drug maker Ipsen (IPN.PA) and Roche ROG.VX are also developing a similar type of medicine. ($1=5.622 Danish crowns) (Additional reporting by Peter Levring & Martin Dahl; Editing by Jon Loades-Carter, Greg Mahlich)

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