Market Realist By Jillian Dabney 23 hours ago
What Factors Support Novo Nordisk's Premium Valuation?
Victoza is a key product in Novo’s portfolio
Victoza is a glucagon-like peptide-1 (or GLP-1) class drug from Novo Nordisk (NVO). During fiscal 2015, the drug earned 18 billion Danish kroner for Novo. The drug was launched in the European Union (or EU) in 2009 followed by approval from the US Food and Drug Administration (or FDA) in 2010. The drug is currently available in 80 plus countries.
During 1Q16, Victoza is expected to add 4.5 billion Danish kroner to Novo’s top line. However, during the second quarter of 2016, the contribution from the drug is expected to increase to 5 billion Danish kroner. Perhaps Eli Lilly’s Trulicity hurt the sales of the drug. However, with proven cardiovascular risk reduction, sales are expected to rise in 2Q16.
The drug generated ~72% of its total sales from the US during fiscal 2015. For the drug’s quarterly geography-wise sales during fiscal 2015, please refer to, How Did Novo’s Victoza Become a Leading Diabetes Drug?
Victoza LEADER study
The successful outcome of the LEADER study would give Novo a competitive advantage over existing competitor drugs, as it is the second drug that has proved cardiovascular risk reduction in type two diabetes patients. Such efficiency was earlier established by Eli Lilly’s (LLY) Jardiance. For details on the LEADER study, please refer to, Why Investors Are Cheering the Results of Novo’s Victoza Trials.
Victoza competition
Victoza’s successful trial would further put pressure on AstraZeneca’s (AZN) onglyza and Bydureonm and Merck’s (MRK) Januvia. Volume is a major revenue driver for the diabetes franchise of the companies. With the aging population and the rising incidence of lifestyle-related diseases, the diabetes segment is experiencing pricing pressure.
With changing market dynamics along with the number of late-stage pipeline products, the share price of a biotechnology company changes. As a result, it is often risky to directly invest in a biotech company. Thus, to mitigate risk, investors can choose the PowerShares International Dividend Achievers Portfolio (PID), which holds 0.41% of its total holdings in Novo Nordisk.
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