E Raising Money In Canada

The press release included quarterly tables on the euro exchange rate in Swedish, Norwegian, and Danish currencies but not dollars.

Pharma

*Danish Novo Nordisk reported yesterday and beat the forecasts. However, it warned about competition and price pressure despite raising guidance for 2018. Net profit in Q2 hit Danish kroner 10.34 bn ($1.61 bn) up 4% from Q2 2017 and ahead of the consensus forecast of DKK10.22 bn. Sales fell to DKK27.41 bn, down DKK1.23 bn from Q2 2017, and below the consensus forecast of DKK27.75 bn. The stock was punished by falling 5.3% to $47.58 here, which is overdone. NVO's problems were partly from the strong kroner which hurt its US sales nipped by ~10%.

Its main drugs in the diabetes space did well in constant currencies in the first half: Victoza up 12% y/y to DKK 11.7 bn but 7% below analysts' forecasts; Saxenda, up 50% y/y to DKK 1.7 bn; Tresiba up 11% to DKK3.7 bn; Xultophy up 165% to DKK 720 mn. However, its biopharma sales fell 1% in local currencies.

While operating profits in DKK in the half were down 8% they were up 4% in constant currencies, at DKK 45.6 bn. H1 net profit was up 7%/sh to DKK 8.66/sh while overall net rose 5% to DKK 21.1 bn.

It launched in Feb.its Ozempic weekly GLP-A jab which already has captured 14% of the US market. It's phase 3 results from 4 trials of oral semaglutide, the daily oral diabetes drug cut down on blood sugar and weight vs other treatments including Victoza. It will pay a DKK 3/sh dividend later this month.

The caution was over sales growth expected to be up 3-5% this year (in local currencies) and operating profit expected to be up 2-5%. Both are below earlier estimate which were in double digits. The maker of innovative drugs uses hedges to protect against the rise of the kroner. In the conference call, the real risk was said to be stronger dollars in 2019, which I think is unlikely. Our ADRs are priced in dollars and so are our dividends, meaning (given that the US is NVO's top market) that we can ignore DKKs.

The big worry is not forex but pricing. Novo CEO Lars Fruergaard Jorgensen told FiercePharma in a post-results interview that diabetes drugs are coming from 5 competitors, and warned that US prices for basal insulin drugs would spiral down next year because of this “continuation of the dynamics we have seen for some years.” Unlike its rivals, NVO is a specialist in diabetes drugs. It prepared for the rivalry by firing 1000 members of its staff 2 years ago and may have to cut headcount by more now.

*GlaxoSmithKline hit a 12-mo high in UK trading (in sterling, not dollars.) The US price at $41.5349 right now is below the 52-wk high of $42.36.

*Ben Reynolds in Sure Dividend (quoted in Wallstreet'sbest) recommended French Sanofi as a “turnaround” with a 4.4% dividend while admitting that there is a “bumpy road ahead” after SNY reported lower revenues above all in the US because of diabetes treatment Lantus facing biogeneric competition. He also warns against the impact of exchange rates on SNY dividends. More below.

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