BAGSVAERD, DENMARK--(Marketwire - August 06, 2009) - Interim financial report for the period 1 January 2009 to 30 June 2009
Novo Nordisk increased operating profit by 39% in the first six months of 2009 Raises outlook for underlying operating profit growth for the full year
* Sales increased by 17% in Danish kroner and by 11% in local currencies.
o Sales of modern insulins increased by 31% (25% in local currencies).
o Sales of NovoSeven® increased by 19% (13% in local currencies).
o Sales of Norditropin® increased by 16% (8% in local currencies).
o Sales in North America increased by 34% (18% in local currencies).
o Sales in International Operations increased by 21% (17% in local currencies).
* Gross margin improved by 2.8 percentage points to 79.9% in the first six months of 2009, primarily reflecting continued productivity improvements and a positive currency impact of around 1.3 percentage points.
* Reported operating profit increased by 39% to DKK 7,900 million. Adjusted for the impact from currencies and non-recurring costs in 2008 related to the discontinuation of all pulmonary delivery projects, underlying operating profit increased by more than 15%.
* Net profit increased by 22% to DKK 5,690 million. Earnings per share (diluted) increased by 25% to DKK 9.32.
* In a recently completed phase 3 study with approximately 650 people with type 2 diabetes comparing liraglutide (Victoza®) and sitagliptin, a DPP-IV inhibitor, blood glucose reductions and weight loss were statistically significantly higher with liraglutide 1.8 and 1.2 mg compared to sitagliptin. The safety profile of liraglutide in this study was comparable to the profile established in the previous clinical studies.
* Novo Nordisk continues the constructive dialogue with the United States Food and Drug Administration (FDA) regarding the regulatory process for liraglutide, and formal feedback from the FDA is expected later this quarter.
* For 2009, operating profit measured in local currencies is now expected to grow by 12-14% and reported operating profit growth to be around 4 percentage points higher than the operating profit growth in local currencies.
Lars Rebien Sørensen, president and CEO, said: “The performance in the first half of 2009 is encouraging and we raise our guidance for underlying operating profit growth. We are very pleased that Victoza® is now launched in the United Kingdom, Germany and Denmark and we look forward to making Victoza® available to more people with type 2 diabetes.”
Financial highlights for the first six months of 2009
The present interim financial report for the first six months of 2009 has been prepared in accordance with IAS 34 Interim Financial Reporting, as issued by IASB and adopted by the EU, and the additional Danish disclosure requirements applying to listed companies’ interim reports. The interim financial report has not been audited. See ‘Accounting policies’ in appendix 7 for further information.
Amounts in DKK million, except average number of shares outstanding, earnings per share and full-time employees.
% change H1 2008 Profit and loss H1 2009 H1 2008 to H1 2009 Sales 25,499 21,724 17% Gross profit 20,381 16,757 22% Gross margin 79.9% 77.1% Sales and distribution costs 7,681 6,153 25% Percent of sales 30.1% 28.3% Research and development costs 3,593 3,838 (6%) - hereof discontinuation costs for - 375 - pulmonary diabetes projects Percent of sales 14.1% 17.7% Percent of sales adjusted for 14.1% 15.9% pulmonary diabetes projects Administrative expenses 1,372 1,253 9% Percent of sales 5.4% 5.8% Licence fees and other operating 165 162 2% income (net) Operating profit 7,900 5,675 39% Operating margin 31.0% 26.1% Net financials (511) 444 - Profit before tax 7,389 6,119 21% Net profit 5,690 4,651 22% Net profit margin 22.3% 21.4% Other key numbers Depreciation, amortisation and 1,140 1,130 1% impairment losses Capital expenditure 970 542 79% Cash flow from operating activities 6,756 5,986 13% Free cash flow 5,688 5,384 6% Total assets 51,246 48,478 6% Equity 34,086 33,046 3% Equity ratio 66.5% 68.2% Average number of shares outstanding (million) - diluted 610.3 624.9 (2%) Diluted earnings per share (in DKK) 9.32 7.44 25% Full-time employees at the end of the 27,998 26,060 7% period
Sales development by segments
Sales increased by 17% in Danish kroner and by 11% measured in local currencies. Growth was realised within both diabetes care and biopharmaceuticals, the primary growth contribution originated from the modern insulins and NovoSeven®.
Sales Growth Growth Share of H1 2009 as in local growth DKK reported currencies in local million currencies The diabetes care segment Modern insulins 10,404 31% 25% 82% - NovoRapid® 4,739 32% 24% 36% - NovoMix® 3,203 23% 18% 20% - Levemir® 2,462 42% 36% 26% Human insulins 5,883 0% (6%) (14%) Protein-related products 976 8% 3% 1% Oral antidiabetic products 1,366 22% 14% 6% Diabetes care - total 18,629 18% 11% 75% The biopharmaceuticals segment NovoSeven® 3,679 19% 13% 17% Norditropin® 2,156 16% 8% 6% Other products 1,035 12% 5% 2% Biopharmaceuticals - total 6,870 17% 10% 25% Total sales 25,499 17% 11% 100%
Sales development by regions
In the first six months of 2009, sales growth was realised in all regions. North America was the main contributor with 50% share of growth measured in local currencies. International Operations and Europe contributed 30% and 19%, respectively, of the total sales growth.
Diabetes care
Sales of diabetes care products increased by 18% measured in Danish kroner to DKK 18,629 million and by 11% in local currencies compared with the first six months of 2008.
Modern insulins, human insulins and protein-related products In the first six months of 2009, sales of modern insulins, human insulins and protein-related products increased by 17% in Danish kroner to DKK 17,263 million and by 11% measured in local currencies compared with the same period last year, driven by North America and International Operations. Novo Nordisk continues to be the global leader with 51% of the total insulin market and 45% of the modern insulin market, both measured by volume.
The portfolio of modern insulins is the main contributor to growth and increased by 31% in Danish kroner to DKK 10,404 million and by 25% in local currencies compared with the first six months of 2008. All regions realised solid growth rates, with North America accounting for more than half of the growth followed by Europe and International Operations. Sales of modern insulins now constitute 64% of Novo Nordisk’s sales of insulin.
North America
Sales in North America increased by 41% in Danish kroner and by 24% in local currencies in the first six months of 2009, reflecting a solid penetration of the modern insulins Levemir®, NovoLog® and NovoLog® Mix 70/30. Novo Nordisk maintains its leadership position in the US insulin market with 41% of the total insulin market and 33% of the modern insulin market, both measured by volume. Currently, around 39% of Novo Nordisk’s modern insulin volume in the US is being sold in FlexPen®.
Europe
Sales in Europe decreased by 2% measured in Danish kroner and increased by 3% in local currencies, reflecting continued progress for the portfolio of modern insulins but also declining human insulin sales. Novo Nordisk holds 55% of the total insulin market and 51% of the modern insulin market, both measured by volume, and is capturing the main share of growth in the modern insulin market. The device penetration in Europe remains high with more than 95% of Novo Nordisk’s insulin volume being administered in devices, primarily NovoPen® and FlexPen®.
International Operations
Sales within International Operations increased by 21% in Danish kroner and by 16% in local currencies. The main contributor to growth in the first six months of 2009 was sales of modern insulins, primarily in China and Turkey. Furthermore, sales of human insulin, driven by China, continue to add to overall growth in the region. The device penetration in China is high with more than 90% of Novo Nordisk’s insulin volume administered in devices, primarily NovoPen®.
Japan & Oceania
Sales in Japan & Oceania increased by 19% measured in Danish kroner and decreased by 1% in local currencies. The sales development reflects sales growth for all three modern insulins, NovoRapid®, NovoRapid Mix® 30 and Levemir®, countered by pressure on the overall Novo Nordisk market share due to intense competition. Novo Nordisk holds 69% of the total insulin market in Japan and 61% of the modern insulin market, both measured by volume. The device penetration in Japan remains high with more than 95% of Novo Nordisk’s insulin volume being administered in devices, primarily NovoPen® and FlexPen®.
Oral antidiabetic products (NovoNorm®/Prandin®)
In the first six months of 2009, sales of oral antidiabetic products increased by 22% in Danish kroner to DKK 1,366 million and by 14% in local currencies compared with the same period in 2008. Sales development is positively impacted by timing of sales in 2008 in China.
Biopharmaceuticals
In the first six months of 2009, sales of biopharmaceutical products increased by 17% measured in Danish kroner to DKK 6,870 million and by 10% measured in local currencies compared with the first six months of 2008.
NovoSeven®
Sales of NovoSeven® increased by 19% in Danish kroner to DKK 3,679 million and by 13% in local currencies compared with the first six months of 2008. Sales growth for NovoSeven® was primarily realised in Europe and International Operations. The sales growth for NovoSeven® primarily reflected increased sales within the congenital bleeding disorder segments. Treatment of spontaneous bleeds for congenital inhibitor patients remains the largest area of use.
Norditropin®
Sales of Norditropin® (ie growth hormone in a liquid, ready-to-use formulation) increased by 16% measured in Danish kroner to DKK 2,156 million and by 8% measured in local currencies compared with the first six months of 2008. North America and Europe were the main contributors to growth measured in local currencies. Novo Nordisk is still the second-largest company in the global growth hormone market with 25% market share measured by volume.
Other products
Sales of other products within biopharmaceuticals, which predominantly consist of hormone replacement therapy (HRT)-related products, increased by 12% in Danish kroner to DKK 1,035 million and by 5% in local currencies. This development primarily reflects continued sales progress for Vagifem®, a topical oestrogen product, countered by generic competition in the US for Activella® (Activelle® outside the US), Novo Nordisk’s continuous-combined HRT product. The low-dose version of Activelle® was launched in Europe in April 2009 and has been available in the US since 2007.
Costs, licence fees and other operating income
The gross margin increased to 79.9% compared with 77.1% in the same period of 2008. This improvement reflects improved production efficiency, higher average selling prices in the US and a positive product mix effect. The gross margin was positively impacted by around 1.3 percentage points from a positive currency development, primarily the higher value of the US dollar and the Japanese yen versus the Danish krone compared with the first six months of 2008.
In the first six months of 2009, total non-production-related costs increased by 12% to DKK 12,646 million compared with the same period last year. Close to half of the increase in non-production-related costs, or around 6 percentage points, reflects the higher value of key currencies versus the Danish krone in the first six months of 2009 compared with the first six months of 2008. The underlying development in non-production-related costs relates to the expanded sales force in especially the US, UK, Germany and China countered by lower research and development costs, primarily reflecting the timing of phase 3 clinical trial programmes as well as the non-recurring costs of DKK 375 million in the first six months of 2008 related to the discontinuation of pulmonary diabetes projects.
Licence fees and other operating income were DKK 165 million in the first six months of 2009 compared with DKK 162 million in the same period of 2008.
Net financials
Net financials showed a net expense of DKK 511 million in the first six months of 2009 compared with a net income of DKK 444 million in the same period of 2008.
For the first six months of 2009, the foreign exchange result was an expense of DKK 501 million compared with an income of DKK 474 million in the first six months of 2008. This development reflects losses on foreign exchange hedging of especially US dollars and Japanese yen due to the significant appreciation of these currencies versus Danish kroner in the first six months of 2009 compared to the exchange rate level prevailing in 2008. The market value of foreign exchange hedging contracts for future income recognition is now positive with a loss of approximately DKK 300 million expected to be recognised as an expense in the second half of 2009, and an income of approximately DKK 500 million to be recognised in 2010.
Included in net financials is the result from associated companies with an expense of DKK 46 million, primarily related to Novo Nordisk’s share of losses in ZymoGenetics, Inc. In the same period of 2008, the result from associated companies was an expense of DKK 70 million.
Outlook 2009
The current expectations for 2009 are summarised and compared to the previous expectations in the table below (changes highlighted in bold and italic):
+-------------------------------------------------------------------+ | Expectations are as | Current | Previous | | reported, if not | expectations | expectations | | otherwise stated | 6 August 2009 | 30 April 2009 | |-----------------------+---------------------+---------------------| | Sales growth | | | | - in local | At the level of 10% | At the level of 10% | | currencies | Around 2 percentage | Around 4.5 | | - as reported | points | percentage points | | | higher | higher | |-----------------------+---------------------+---------------------| | Operating profit | | | | growth | 12-14% | At least 10% | | - in local | Around 4 percentage | Around 8 percentage | | currencies | points | points | | - as reported | higher | higher | | | | | |-----------------------+---------------------+---------------------| | Net financial expense | Around DKK 900 | Around DKK 1.5 | | | million | billion | |-----------------------+---------------------+---------------------| | Effective tax rate | Approximately 23% | Approximately 23% | |-----------------------+---------------------+---------------------| | Capital expenditure | Around DKK 3 | Around DKK 3 | | | billion | billion | |-----------------------+---------------------+---------------------| | Depreciation, | Around DKK 2.6 | Around DKK 2.6 | | amortisation and | billion | billion | | impairment losses | | | |-----------------------+---------------------+---------------------| | Free cash flow | More than DKK 10 | Around DKK 10 | | | billion | billion | +-------------------------------------------------------------------+
Novo Nordisk still expects sales growth in 2009 at the level of 10% measured in local currencies. 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. Given the current level of exchange rates versus Danish kroner, the reported sales growth is now expected to be around 2 percentage points higher than the growth rate measured in local currencies.
For 2009, growth in operating profit is now expected to be 12-14% measured in local currencies. The increase reflects a reduction in the expected level of research and development costs for 2009 due to timing of phase 3 clinical trial programmes. Furthermore, the forecast is based on assumptions of a continuous improvement of the gross margin and increased spending for sales and distribution relative to sales due to the increase in Novo Nordisk’s global sales force. Given the current level of exchange rates versus Danish kroner, the reported operating profit growth is now expected to be around 4 percentage points higher than the growth rate measured in local currencies.
For 2009, Novo Nordisk now expects a net financial expense of around DKK 900 million. The current expectation reflects significant foreign exchange hedging losses, primarily related to the US dollar and the Japanese yen.
The effective tax rate for 2009 is still expected to be around 23%.
Capital expenditure is still expected to be around DKK 3 billion in 2009. Expectations for depreciations, amortisation and impairment losses of around DKK 2.6 billion are unchanged, whereas free cash flow is now expected to be more than DKK 10 billion, reflecting slightly higher expectations for net profit.
All of the above expectations are based on the assumption that the global economic downturn will not significantly change the business environment for Novo Nordisk during the remaining part of 2009. In addition, the above expectations are provided that currency exchange rates, especially the US dollar, remain at the current level versus the Danish krone for the rest of 2009 (see appendix 6). Novo Nordisk has hedged expected net cash flows in a number of invoicing currencies and, all other things being equal, movements in key invoicing currencies will impact Novo Nordisk’s operating profit as outlined in the below table.
Key invoicing Annual impact on Novo Nordisk’s Hedging period currencies operating profit of a 5% (months) movement in currency USD DKK 530 million 15 JPY DKK 150 million 15 GBP DKK 80 million 13 CNY DKK 80 million 15* CAD DKK 40 million 7 *USD used as proxy when hedging Novo Nordisk’s CNY currency exposure
The financial impact from foreign exchange hedging is included in ‘Net financials’.
Research and development update
Diabetes care
As announced on 3 July, the European Commission has granted marketing authorisation for Victoza® for the treatment of type 2 diabetes in adults. The authorisation covers all 27 European Union member states. Victoza® is the brand name approved in Europe for liraglutide, the first once-daily human Glucagon-Like Peptide-1 (GLP-1) analogue developed for the treatment of type 2 diabetes. The marketing authorisation covers treatment in combination with metformin or a sulphonylurea in patients with insufficient glycaemic control despite maximal tolerated dose of monotherapy with these agents. Furthermore, the authorisation covers combination treatment with metformin and a sulphonylurea or metformin and a thiazolidinedione in patients with insufficient glycaemic control despite these dual therapies. In the beginning of July, Novo Nordisk launched Victoza® in the UK, Germany and Denmark and expects to launch Victoza® in more European markets during the second half of 2009 and throughout 2010.
In the US, Novo Nordisk continues the constructive dialogue with the United States Food and Drug Administration regarding the regulatory process for liraglutide. Novo Nordisk expects to receive formal feedback from the FDA for liraglutide later this quarter.
In a recently completed study, the effect of liraglutide was compared to sitagliptin, both administered as add-on to metformin in people with type 2 diabetes. The study was a 26-week, randomised, open-label, multinational trial in which daily doses of 1.2 and 1.8 mg of liraglutide were compared to 100 mg sitagliptin. The trial enrolled approximately 650 people with type 2 diabetes failing to reach an HbA1c level of below 7.5% after daily treatment with at least 1500 mg of metformin. From a baseline of around 8.5%, HbA1c decreased by approximately 1.5 percentage points in the 1.8 mg liraglutide treatment arm and 1.2 percentage points in the 1.2 mg liraglutide treatment arm, compared to 0.9 percentage points in the sitagliptin treatment arm. The ADA HbA1c target of below 7% was reached in approximately 55%, 40% and 20% of the patients in the 1.8 mg liraglutide, 1.2 mg liraglutide and sitagliptin treatment arms, respectively. In the same groups, a weight loss of approximately 3.5 kg, 3 kg and 1 kg was found, respectively. All the above differences were statistically significant, in favour of both doses of liraglutide compared to sitagliptin. The safety profile of liraglutide in this study was comparable to the profile established in the previous clinical studies.
At the annual meeting of the American Diabetes Association (ADA) held in New Orleans in June this year, Novo Nordisk presented the detailed two-year data with liraglutide in monotherapy (LEAD™ 3). The study investigated the efficacy and safety of two doses of liraglutide (1.2 mg and 1.8 mg) compared with glimepiride treatment in type 2 diabetes patients. The trial consisted of a 52-week randomised, double-blinded period followed by a one-year controlled open-label extension. Once-daily liraglutide, used as monotherapy, led to statistically significant and sustained reductions in blood glucose and body weight after two years of treatment. 58% of patients treated with liraglutide 1.8 mg once daily reached and maintained the ADA’s target of HbA1C less than 7%, versus 37% of patients treated with glimepiride 8 mg once daily. After two years of treatment with 1.8 mg of liraglutide, mean body weight decreased by 2.7 kg compared to an overall weight increase in the glimepiride group of 0.95 kg, a difference that was statistically significant. Importantly, minor hypoglycaemia was six times less frequent in the liraglutide treatment groups compared with the glimepiride group.
Furthermore, detailed results from the LEAD™ 6 study were presented at the ADA meeting and published in The Lancet in June 2009. The LEAD™ 6 study was a randomised, open-label study comparing the efficacy and safety of once-daily liraglutide 1.8 mg to exenatide 10 µg, given twice daily, for 26 weeks. The study showed that liraglutide treatment led to statistically significantly greater lowering of blood glucose than exenatide treatment and that liraglutide was associated with less persistent nausea than exenatide. In two subsequent trial extensions, of 14 and 38 weeks’ duration respectively, the efficacy and safety of longer-term treatment with liraglutide has been investigated as well as the impact of switching from exenatide to liraglutide treatment. New data from the recently completed 38-week extension showed that patients are largely able to maintain the achieved reduction in the blood glucose levels as well as body weight. Moreover, the extensions of the LEAD™ 6 study confirmed the established safety and tolerability profile of liraglutide during longer-term treatment.
With regard to the liraglutide phase 3 programme for the treatment of obesity, the first of three phase 3 trials is progressing according to plans. The remaining two phase 3 trials are not expected to be initiated before Novo Nordisk has more clarity on the US regulatory process for liraglutide for the treatment of type 2 diabetes.
In July 2009, Novo Nordisk received marketing authorisation for Levemir® in China from the Chinese regulatory authorities (SFDA). Novo Nordisk expects to launch Levemir® in China in the beginning of 2010 and will thereby become the only company with a complete portfolio of modern insulins for people with diabetes in China.
The new generation of modern insulins, SIBA (soluble insulin basal analogue, NN1250) and SIAC (soluble insulin analogue combination, NN5401), are both expected to start phase 3 clinical trials in the third quarter this year. SIBA is a neutral, soluble, long-acting basal insulin developed to provide a duration of more than 24 hours and a flat and predictable profile. SIAC is a neutral, soluble, fixed-combination of a long-acting basal insulin and a fast-acting insulin, without a need for resuspension. The trial programmes for the two insulins are named BEGIN™ and BOOST™, respectively. The large trial programme will be executed in waves and the primary endpoint will be changes in HbA1C with frequency of hypoglycaemia and other general safety measures as the most important secondary endpoints. In total, the BEGIN™ programme is expected to include around 7,000 patients whereas the BOOST™ programme is expected to include approximately 3,000 patients. The first wave of the BEGIN™ programme will include direct comparison with insulin glargine in insulin naïve type 2 diabetics as well as trials investigating the use of the new insulin in a basal-bolus treatment regimen for people with both type 1 and type 2 diabetes. For the BOOST™ programme, wave 1 will be a trial investigating the use of the new insulin compared to Levemir® in a basal-bolus treatment regimen in people with type 1 diabetes. As mentioned, the first wave of the two programmes is expected to be initiated in the third quarter of 2009, and the subsequent waves are expected to be initiated in the fourth quarter of 2009 and first half of 2010.
Biopharmaceuticals
In June 2009, at the Endocrine Society’s Annual Meeting in Washington DC, USA, results from the phase 2 study with the once-weekly growth hormone compound NNC126-0083 in adults with growth hormone deficiency (AGHD) were presented. The study included 32 patients that were randomised to one of three different doses of active treatment or placebo. The patients received weekly doses of growth hormone compound subcutaneously for three weeks. The study demonstrated a solid efficacy profile that allows for once-weekly administration of growth hormone. While the study did not involve a direct comparison to once-daily injected growth hormone, the results of the trial indicate an efficacy profile comparable to the efficacy of once-daily administered growth hormone seen in other trials, as measured by the IGF-1 blood levels achieved. IGF-1 release is a well-established biomarker of growth hormone effects. In addition, the compound was generally well tolerated. Novo Nordisk has now initiated a phase 2a single dose study in children with growth hormone deficiency (GHD) expected to enrol 32 individuals and results of this trial are expected in the beginning of 2010.
Within the area of haemostasis, Novo Nordisk has initiated a randomised, double-blinded, placebo-controlled, phase 2 trial with rFXIII in cardiac surgery. The aim of the trial is to investigate the safety and efficacy of rFXIII on transfusion needs in patients undergoing heart surgery. The trial is expected to enrol around 400 patients and results are expected early 2011.
The phase 1 trial with subcutaneous injection of rFVIIa has now been completed. While the study showed that subcutaneous dosing is possible, the bioavailability was lower than expected. Hence, Novo Nordisk has decided not to continue into phase 2 clinical development with this mode of administration for this compound and will instead focus on subcutaneous administration of a long-acting rFVIIa expected to enter clinical development this year.
In addition, Novo Nordisk expects to start phase 2 clinical development in the third quarter this year with the long-acting recombinant FVIIa derivative, NN7128, intended for prophylactic treatment of haemophilia patients with inhibitors. The phase 2 trial will involve around 24 patients and results are expected in 2011.
Furthermore, Novo Nordisk expects to start a phase 1 trial with a recombinant long-acting factor IX compound in the third quarter of 2009. The trial is expected to enrol around 20 patients in a dose-finding trial and the study is expected to be completed in mid-2010.
Finally, within the area of inflammation Novo Nordisk has initiated a phase 1 trial to evaluate the safety of single and multiple dosing of a novel monoclonal antibody in patients with rheumatoid arthritis. With this, Novo Nordisk now has a total of three projects in clinical development within inflammation.
Equity
Total equity was DKK 34,086 million at the end of the first six months of 2009, equal to 66.5% of total assets, compared with 65.2% at the end of 2008. Please refer to appendix 5 for further elaboration of changes in equity during the first six months of 2009.
Treasury shares and share repurchase programme
As per 5 August 2009, Novo Nordisk A/S and its wholly-owned affiliates owned 21,462,241 of its own B shares, corresponding to 3.5% of the total share capital. The reduced ownership of own shares reflects the cancel
