Novo Nordisk’s Blockbuster Drug Portfolio and Production Capacity Eyed — Earnings Preview

SALES FORECAST: A FactSet poll sees third-quarter sales rising to DKK57.78 billion from DKK45.57 billion last year. Novo Nordisk last month said sales in the quarter had risen 38% on the year in local currencies, with operating profit 47% higher.

WHAT TO WATCH:

–GLP-1 DRUGS: Sydbank senior analyst Soren Lontoft Hansen said in a note that he expects Novo Nordisk’s glucagon-like peptide-1 drugs, or GLP-1, used to treat type 2 diabetes and obesity, to have continued their strong growth in the quarter, modeling overall sales growth of 44% on the year for GLP-1 diabetes treatments to DKK32.27 billion. The strong growth in the quarter is mainly driven by diabetes drug Ozempic, which is also being used to treat obesity off-label, and Hansen expects sales of the drug to rise 54% on the year. He anticipates continued extremely high demand for obesity drug Wegovy, but Novo Nordisk’s decision to reduce the supply of low doses in the U.S. amid production capacity limitations will curb quarterly growth. Hansen models Wegovy sales of DKK8.18 billion.

–MARGINS: Sydbank expects the gross margin to be helped by the marked increase in sales and product-mix effects, while lower net prices in the U.S. and currency effects pull in the opposite direction. The bank models a gross margin of 85.7% from 84.3% last year. “Although we see increasing capacity costs, which reflects the higher level of activity, the significant top line growth gives Novo Nordisk a strong operational leverage effect, so the increase in capacity costs will be less than top line growth.”

–GUIDANCE: The company expects 2023 sales growth of 32% to 38% on year and operating profit growth of 40% to 46% in constant currencies. Sydbank thinks this guidance will be maintained. Investors will also be watching for any guidance on production challenges for the GLP-1 portfolio within diabetes and obesity.

Write to Dominic Chopping at [email protected]