BAGSVAERD, DENMARK, Oct. 29, 2009 (Marketwire) --
BAGSVAERD, DENMARK -- (Marketwire) -- 10/29/09 -- Interim financial report for the period 1 January 2009 to 30 September 2009
Novo Nordisk increased operating profit by 30% in the first nine months of 2009
* Sales increased by 15% in Danish kroner and by 11% in local
currencies.
o Sales of modern insulins increased by 28% (24% in local
currencies).
o Sales of NovoSeven® increased by 15% (11% in local
currencies).
o Sales of Norditropin® increased by 15% (9% in local
currencies).
o Sales in North America increased by 29% (17% in local
currencies).
o Sales in International Operations increased by 18% (16% in
local currencies).
* Gross margin improved by 2.5 percentage points to 79.5% in the
first nine months of 2009, primarily reflecting continued
productivity improvements and a positive currency impact of
around 1 percentage point.
* Reported operating profit increased by 30% to DKK 11,714 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 around 15%.
* Net profit increased by 15% to DKK 8,445 million. Earnings per
share (diluted) increased by 18% to DKK 13.90.
* Novo Nordisk continues the constructive dialogue with the United
States Food and Drug Administration (FDA) regarding the
regulatory process for liraglutide. Formal feedback from the FDA
regarding liraglutide, a once-daily human GLP-1 analogue, is
still expected in the fourth quarter of 2009.
* For 2009, expectations for growth in operating profit measured in
local currencies are increased to around 15% and reported
operating profit growth is now expected to be around 3 percentage
points higher than the operating profit growth in local
currencies.
Lars Rebien Sørensen, president and CEO, said: "The robust sales growth for our portfolio of modern insulins is the key driver of the solid business performance in the first nine months of 2009. The launch of Victoza® in Europe is progressing well and we are seeing strong in-market penetration in the first-wave launch countries, Germany, the United Kingdom and Denmark."
Financial highlights for the first nine months of 2009
The present unaudited interim financial report for the first nine months of 2009 has been prepared in accordance with IAS 34 'Interim Financial Reporting' as issued by IASB and endorsed by the EU. Furthermore the interim financial report has been prepared in accordance with the additional Danish disclosure requirements for interim reports of listed companies. 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
9M 2008
Profit and loss 9M 2009 9M 2008 to 9M 2009
Sales 38,016 32,970 15%
Gross profit 30,213 25,397 19%
Gross margin 79.5% 77.0%
Sales and distribution costs 11,183 9,308 20%
Percent of sales 29.4% 28.2%
Research and development costs 5,477 5,417 1%
- hereof discontinuation costs for - 325 -
pulmonary diabetes projects
Percent of sales 14.4% 16.4%
Percent of sales adjusted for 14.4% 15.4%
pulmonary diabetes projects
Administrative expenses 2,038 1,886 8%
Percent of sales 5.4% 5.7%
Licence fees and other operating 199 213 (7%)
income (net)
Operating profit 11,714 8,999 30%
Operating margin 30.8% 27.3%
Net financials (718) 626 (215%)
Profit before tax 10,996 9,625 14%
Net profit 8,445 7,315 15%
Net profit margin 22.2% 22.2%
Other key numbers
Depreciation, amortisation and 1,797 1,690 6%
impairment losses
Capital expenditure 1,696 990 71%
Cash flow from operating activities 11,795 9,659 22%
Free cash flow 9,930 8,594 16%
Total assets 52,589 48,990 7%
Equity 34,874 32,173 8%
Equity ratio 66.3% 65.7%
Average number of shares outstanding
(million) - diluted 607.4 622.8 (2%)
Diluted earnings per share (in DKK) 13.90 11.74 18%
Full-time employees at the end of the 28,497 26,360 8%
period
Sales development by segments
Sales increased by 15% 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
9M 2009 as in local growth
DKK reported currencies in local
million currencies
The diabetes care segment
Modern insulins 15,757 28% 24% 82%
- NovoRapid® 7,178 29% 23% 36%
- NovoMix® 4,810 19% 17% 19%
- Levemir® 3,769 39% 35% 27%
Human insulins 8,630 (1%) (5%) (12%)
Protein-related products 1,495 9% 5% 2%
Oral antidiabetic products 2,016 13% 7% 4%
Diabetes care - total 27,898 15% 11% 76%
The biopharmaceuticals segment
NovoSeven® 5,330 15% 11% 14%
Norditropin® 3,230 15% 9% 7%
Other products 1,558 12% 7% 3%
Biopharmaceuticals - total 10,118 15% 10% 24%
Total sales 38,016 15% 11% 100%
Sales development by regions
In the first nine months of 2009, sales growth was realised in all regions. North America was the main contributor with 51% share of growth measured in local currencies. International Operations and Europe contributed 29% and 19%, respectively, of the total sales growth.
Diabetes care
Sales of diabetes care products increased by 15% measured in Danish kroner to DKK 27,898 million and by 11% in local currencies compared with the first nine months of 2008.
Modern insulins, human insulins and protein-related products
In the first nine months of 2009, sales of modern insulins, human insulins and protein-related products increased by 16% in Danish kroner to DKK 25,882 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 sales increased by 28% in Danish kroner to DKK 15,757 million and by 24% in local currencies compared with the first nine months of 2008. All regions realised solid growth rates, with North America accounting for 52% of the growth followed by Europe and International Operations. Sales of modern insulins now constitute 65% of Novo Nordisk's sales of insulin.
North America
Sales in North America increased by 36% in Danish kroner and by 23% in local currencies in the first nine 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 42% of the total insulin market and 34% of the modern insulin market, both measured by volume. Currently, close to 40% of Novo Nordisk's modern insulin volume in the US is being sold in FlexPen®.
Europe
Sales in Europe were largely unchanged measured in Danish kroner and increased by 4% in local currencies, reflecting continued progress for the portfolio of modern insulins but also declining human insulin sales. Novo Nordisk holds 54% 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 sold in devices, primarily NovoPen® and FlexPen®.
Victoza®, the first once-daily human GLP-1 analogue, has been launched in Germany, the United Kingdom and Denmark, as previously communicated. Launch activities are progressing well in these markets and in-market penetration is in line with best-in-class launches within diabetes care. In Germany, Victoza® has now obtained more than 1% of the total diabetes care market and more than 40% of the GLP-1 market, both measured in weekly value market shares.
International Operations
Sales within International Operations increased by 17% in Danish kroner and by 15% in local currencies. The main contributor to growth in the first nine months of 2009 was sales of modern insulins, primarily in China and Turkey. Furthermore, sales of human insulin, driven by China and India, 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 sold in devices, primarily NovoPen®.
Japan & Oceania
Sales in Japan & Oceania increased by 18% 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 68% of the total insulin market in Japan and 60% 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 sold in devices, primarily NovoPen® and FlexPen®.
Oral antidiabetic products (NovoNorm®/Prandin®)
In the first nine months of 2009, sales of oral antidiabetic products increased by 13% in Danish kroner to DKK 2,016 million and by 7% in local currencies compared with the same period in 2008.
Biopharmaceuticals
In the first nine months of 2009, sales of biopharmaceutical products increased by 15% measured in Danish kroner to DKK 10,118 million and by 10% measured in local currencies compared with the first nine months of 2008.
NovoSeven®
Sales of NovoSeven® increased by 15% in Danish kroner to DKK 5,330 million and by 11% in local currencies compared with the first nine 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 as well as within acquired haemophilia. 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 15% measured in Danish kroner to DKK 3,230 million and by 9% measured in local currencies compared with the first nine months of 2008. North America and Europe were the main contributors to growth measured in local currencies. Novo Nordisk is the second-largest company in the global growth hormone market with 23% 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 1,558 million and by 7% 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.
Development in gross margin and costs
The gross margin increased to 79.5% compared with 77.0% 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 percentage point 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 nine months of 2008.
In the first nine months of 2009, total non-production-related costs increased by 13% to DKK 18,698 million compared with the same period last year. Around one-third of the increase in non-production-related costs, or around 4 percentage points, reflects the higher value of key currencies versus the Danish krone in the first nine months of 2009 compared with the first nine months of 2008. The underlying development in non-production-related costs relates to the expanded sales force in especially the US, the UK, Germany, Japan and China countered by limited growth in research and development costs. The development in research and development costs primarily reflects the timing of phase 3 clinical trial programmes as well as the non-recurring costs of DKK 325 million in the first nine months of 2008 related to the discontinuation of pulmonary diabetes projects.
Net financials
Net financials showed a net expense of DKK 718 million in the first nine months of 2009 compared with a net income of DKK 626 million in the same period of 2008.
For the first nine months of 2009, the foreign exchange result was an expense of DKK 617 million compared with an income of DKK 671 million in the first nine months of 2008. This development reflects losses on foreign exchange hedging of especially US dollars and Japanese yen primarily due to the appreciation of these currencies versus Danish kroner in the first six months of 2009 compared to the exchange rate level prevailing in 2008.
Included in net financials is the result from associated companies with an expense of DKK 53 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 128 million.
Outlook
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 | 29 October 2009 | 6 August 2009 |
|-----------------------+---------------------+---------------------|
| Sales growth | At the level of 10% | |
| - in local | Around 1.5 | At the level of 10% |
| currencies | percentage | Around 2 percentage |
| - as reported | points higher | points |
| | | higher |
|-----------------------+---------------------+---------------------|
| Operating profit | | |
| growth | Around 15% | 12-14% |
| - in local | Around 3 percentage | Around 4 percentage |
| currencies | points | points |
| - as reported | higher | higher |
| | | |
|-----------------------+---------------------+---------------------|
| Net financial expense | Around DKK 750 | Around DKK 900 |
| | million | million |
|-----------------------+---------------------+---------------------|
| Effective tax rate | Approximately 23% | Approximately 23% |
|-----------------------+---------------------+---------------------|
| Capital expenditure | Around DKK 2.5 | Around DKK 3.0 |
| | billion | billion |
|-----------------------+---------------------+---------------------|
| Depreciation, | Around DKK 2.6 | Around DKK 2.6 |
| amortisation and | billion | billion |
| impairment losses | | |
|-----------------------+---------------------+---------------------|
| Free cash flow | At least DKK 11 | More than 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. Given the current level of exchange rates versus Danish kroner, the reported sales growth is now expected to be around 1.5 percentage points higher than the growth rate measured in local currencies.
For 2009, growth in operating profit is now expected to be around 15% measured in local currencies. The increased expectations primarily reflect further improvement of the gross margin and slightly lower expected research and development costs for 2009 due to timing of phase 3 clinical trial programmes. Given the current level of exchange rates versus Danish kroner, the reported operating profit growth is now expected to be around 3 percentage points higher than the growth rate measured in local currencies.
For 2009, Novo Nordisk now expects a net financial expense of around DKK 750 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 now expected to be around DKK 2.5 billion in 2009, primarily reflecting timing of activities in relation to the new insulin formulation and filling plant in China. Expectations for depreciations, amortisation and impairment losses of around DKK 2.6 billion are unchanged, whereas free cash flow is expected to be at least DKK 11 billion, primarily reflecting the lower level of capital expenditure.
With regard to the financial outlook for 2010 it is Novo Nordisk's intention to provide detailed guidance on expectations in connection with the full-year release of financial results for 2009 scheduled for 2 February 2010. At present, the preliminary plans for 2010 indicate 5-10% sales growth and more than 5% growth in operating profit, both measured in local currencies. Due to an expected negative currency impact following the recent significant depreciation of Novo Nordisk's main invoicing currencies the reported sales growth for 2010 is expected to be around 3.5 percentage points lower than the growth measured in local currencies, whereas the reported operating profit growth is expected to be around 7 percentage points lower than the growth measured in local currencies. The preliminary plans reflect expectations for continued solid penetration of the portfolio of modern insulins, continued global roll-out of Victoza® and progress for key products within biopharmaceuticals. The preliminary plans also reflect expected generic competition for oral antidiabetic products, impact from a potential US healthcare reform, and a continued intense competition within both diabetes care and biopharmaceuticals.
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 remainder of 2009 and in 2010. In addition, the above expectations are provided that currency exchange rates, especially the US dollar, remain at the current level versus the Danish krone during the remaining part of 2009 and in 2010 (see appendix 6).
