Sanofi, Novo Nordisk Fortunes Diverge Amid Insulin Price Slump
October 28 2016 - 08:40AM
Dow Jones News
Sanofi SA and Novo Nordisk A/S, two of Europe's health-care
companies most exposed to the falling prices for insulin products
in the all-important U.S. market, gave dramatically diverging
outlooks in the third quarter, sending their stock prices in
opposite directions.
The French pharmaceutical giant raised its full-year profit
guidance and announced a share buyback while its Danish rival
lowered expectations even though both reported lower insulin sales
in the U.S.
Sanofi's shares surged nearly 7% whereas shares in Novo Nordisk
were down 14% in morning trading.
After years of rising prices for insulin, drugmakers are being
forced to cut or flatten their prices by powerful middlemen that
buy drugs on behalf of insurers and employers. Sanofi and Novo
Nordisk, the number one and two insulin makers in the U.S., are at
the sharp end of this trend.
One difference between the two companies is different
expectations of their insulin businesses. Sanofi last year
acknowledged that revenue from its insulin franchise would dwindle.
By contrast, Novo Nordisk hoped its new insulin, dubbed Tresiba,
would drive strong growth because the treatment carries less risk
of causing low blood sugar.
But Novo Nordisk said Friday that a "significantly more
challenging" market in the U.S. would lead to it lowering prices in
the future.
Sanofi's brighter outlook also stems from the French drugmaker's
long-drawn-out efforts to cut costs and the benefit of diversity:
Its rare-disease drugs are driving revenue growth while its
portfolio includes treatments for cancer and cardiovascular
ailments, vaccines and over-the-counter drugs.
Novo Nordisk, unusual among pharmaceutical companies for its
narrow focus, is much more heavily dependent on diabetes, but now
plans to broaden its portfolio. It said Friday that it would extend
its research and development efforts to include diseases such as
fatty liver disease, known as NASH, a form of non-alcoholic fatty
liver disease, diabetic kidney disease and cardiovascular
disease.
That broadening intensifies existing efforts to undertake
riskier research in insulin, though the company said its higher
threshold for innovation meant it would shelve efforts to develop
an oral insulin. Such a product would have been more convenient for
diabetes patients by reducing reliance on needles, but wouldn't
have brought added medical benefits compared with injected
insulins.
Friday, Novo Nordisk slashed its long-term annual profit-growth
target from 10% to 5%, and narrowed its full-year outlook to the
lower end of previous guidance.
Management now expects growth this year, measured in local
currencies, of 5% to 6% for sales, trimmed from earlier guidance of
5% to 7%, and of 5% to 7% for operating profit, less optimistic
than the previous range of 5% to 8%.
In the third quarter, Novo Nordisk's operating profit rose 4% to
12.4 billion Danish kroner ($1.82 billion), while revenue climbed
3% to 27.5 billion kroner.
The preliminary outlook for 2017 indicates low single-digit
growth in sales and flat to low single-digit growth in operating
profit, in local currencies, it said.
Sanofi is relatively bullish about its prospects and it plans to
complete a €3.5 billion ($3.82 billion) share buyback by the end of
2017.
Earnings a share—excluding the impact of acquisitions and
divestments—are expected to grow between 3% and 5% in 2016 at
constant exchange rates, Sanofi said.
The French company previously said earnings a share would remain
"broadly stable" this year. In the third quarter, earnings a share
increased 12% at local currencies on a 3% rise in revenue to €9.03
billion.
--Noemie Bisserbe in Paris and Dominic Chopping in Stockholm
contributed to this article
Write to Denise Roland at Denise.Roland@wsj.com
(END) Dow Jones Newswires
October 28, 2016 08:25 ET (12:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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