COPENHAGEN (Reuters) - Novo Nordisk (NOVOb.CO), the world’s top maker of diabetes drugs, reported encouraging sales of its main growth drivers on Thursday as it announced more job cuts amid a restructuring to cope with intensifying pricing pressure in the United States.
Sales of Novo’s new once-weekly Ozempic GLP-1 drug, which the Danish company hopes will take market share from Eli Lilly’s (LLY.N) Trulicity, beat forecasts for the third quarter.
Eli Lilly has been eating into Novo’s previously fast-selling Victoza - a so-called GLP-1 drug that imitates an intestinal hormone to stimulate insulin production. However, sales of Victoza, totaling 6.1 billion crowns in July-September, also beat analysts’ expectations, of 5.9 billion crowns.
Novo is counting on the GLP-1 franchise as its insulin drugs face price pressure and competition from biosimilar drugs, and its shares rose 2.6 percent in early trading on what Jefferies analysts called “a strong GLP-1 performance”.
Novo’s heyday of booming sales is over and in the past years it has seen slower growth mainly due to intense competition in the United States, which accounts for about half of group sales.
The company had already announced a restructuring of its research and development unit and around 650 job cuts, but said on Thursday that it would reduce its workforce by 1,300 in total by the end of 2018. Most of those cuts have been made already, ti said.
U.S. President Donald Trump has made lowering the cost of prescription drugs an issue for his administration and Novo Nordisk said that new U.S. legislation to rein in high drug prices will cut its 2019 sales by 1-2 percent.
“This is part of preparing for that but it is as much about investing in the business, so we don’t have any plans about doing any new measures for 2019,” Chief Executive Lars Fruergaard Jorgensen told journalists on Thursday, referring to the job cuts.
Novo narrowed its 2018 sales growth forecast to 4-5 percent from previously 3-5 percent but kept its operating profit growth outlook at 2-5 percent, both measured in local currencies.
While investors reacted favorably to Ozempic’s sales figures so far, competition in the GLP-1 field is set to heat up.
Several brokerages last month lowered Ozempic sales forecasts to account for possible competitive pressure from Lilly’s GIP/GLP-1 drug, after Novo’s rival presented strong data.
Novo said it had expanded its share buyback program by 1 billion crowns to 15 billion crowns and free cash flow this year is now seen at 29-33 billion crowns from a previous guidance of 27-32 billion crowns.
Third-quarter operating profit totaled 11.81 billion crowns, below an average forecast of 11.93 billion crowns in a Reuters poll of analysts.
($1 = 6.5768 Danish crowns)
Reporting by Stine Jacobsen; Editing by Jacob Gronholt-Pedersen and Susan Fenton