COPENHAGEN (Reuters) - Top insulin maker Novo Nordisk (NOVOb.CO) slashed its long-term profit growth forecast on Friday, signaling no let-up in its struggles to crack the U.S. market to which its chief executive said its commitment would not waver.
The Danish firm’s shares fell by as much as 19 percent to a 30-month low, wiping more than $15 billion off its market value after it halved the growth guidance to 5 percent from the 10 percent it predicted as recently as February.
“The market was expecting subdued guidance for 2017, but the significant cut to long-term expectations is a disappointment and the shares will undoubtedly be weak today,” Berenberg analysts wrote in a note to clients.
Novo Nordisk makes about half its revenue in the U.S. market, a market of around 30 million diabetics which the firm said on Friday had become “significantly more challenging”.
Competition among insulin producers has increased there and prices have been squeezed by the pharmacy benefit managers (PBMs) who administer drug programs for employers and health plans.
“We have a concern that these price pressures will continue at least into 2018 and likely into 2019, which is why we have lowered our long-term growth guidance,” Chief Executive Lars Rebien Sorensen told Reuters after the company reported third quarter earnings.
“(But) we have no intentions of leaving the U.S. market, whatever it costs.”
Novo Nordisk rival Sanofi (SASY.PA), which also reported earnings, told investors a sales decline at its diabetes unit would be limited at 4-8 percent per year until 2018, helping the French drugmaker’s shares rise more than 6 percent.
Eli Lilly’s (LLY.N) cheaper knock-off version of Sanofi’s slow-release insulin Lantus has seen a much faster uptake by U.S. medical insurers than expected, weighing on other patent-protected drugs such as Novo Nordisk’s Levemir.
While Sanofi derived about 22 percent of its group 2015 sales from anti-diabetics, Novo Nordisk’s diabetes business accounted for almost 80 percent of its sales. Novo said in August it had completed most contract negotiations with PBMs for next year and that average drug prices would fall by a low- to mid-single digit percentage from this year.
“Next year will be a desert journey on earnings,” Alm. Brand analyst Michael Friis Jorgensen said. “And Novo Nordisk is saying that the price pressure isn’t isolated to ‘17, ‘18. It’s going all the way to 2020.”
In September, competition in the U.S. market prompted Novo Nordisk to announce 1,000 job cuts out of a workforce of 42,300.
The same month, long-time CEO Sorensen said he would step down by the end of 2016 in what was seen as part of a change of strategy.
The company said on Friday that Jesper Hoiland, replaced last month as head of its North American operations, was also leaving the company, and that it would not move ahead as planned with current development projects involving oral insulin.
On top of its long-term guidance cut, Novo lowered its 2016 operating profit growth forecast in local currencies to 5-7 percent from 5-8 percent, and sales growth to 5-6 percent from 5-7 percent.
Its third-quarter operating profit of 12.42 billion Danish crowns ($1.82 billion) was in line with analysts’ expectations. Revenue of 27.54 billion crowns was just below.
At 0729 ET, Novo Nordisk shares were down 15.7 percent at 235.30 crowns.
“This is not doomsday. It’s still a solid pharmaceutical company... now in line with other pharmaceuticals in the coming years earnings-wise,” Alm. Brand’s Friis Jorgensen said.
Additional reporting by Nikolaj Skydsgaard and by Ludwig Burger in Frankfurt; writing by John Stonestreet; editing by Jason Neely