(Reuters) — Top insulin maker Novo Nordisk (NYSE:NVO) slashed its long-term profit growth forecast today, signaling no let-up in its struggles to crack the U.S. market to which its chief executive said its commitment would not waver.
The Danish firm’s shares fell by as much as 19% to a 30-month low, wiping more than $15 billion off its market value after it halved the growth guidance to 5% from the 10% it predicted as recently as February.
“The market was expecting subdued guidance for 2017, but the significant cut to long-term expectations is a disappointment and the shares will undoubtedly be weak today,” Berenberg analysts wrote in a note to clients.
Novo Nordisk makes about half its revenue in the U.S. market, a market of around 30 million diabetics which the firm said today had become “significantly more challenging.”
Competition among insulin producers has increased there and prices have been squeezed by the pharmacy benefit managers that administer drug programs for employers and health plans.
“We have a concern that these price pressures will continue at least into 2018 and likely into 2019, which is why we have lowered our long-term growth guidance,” CEO Lars Rebien Sorensen told Reuters after the company reported 3rd-quarter earnings. “[But] we have no intentions of leaving the U.S. market, whatever it costs.”
Novo Nordisk rival Sanofi (NYSE:SNY), which also reported earnings, told investors a sales decline at its diabetes unit would be limited at 4% to 8% per year until 2018, helping the French drugmaker’s shares rise more than 6%.
Eli Lilly‘s (NYSE:LLY) cheaper knock-off version of Sanofi’s slow-release insulin Lantus has seen a much faster uptake by U.S. medical insurers than expected, weighing on other patent-protected drugs such as Novo Nordisk’s Levemir.
While Sanofi derived about 22% of its group 2015 sales from anti-diabetics, Novo Nordisk’s diabetes business accounted for almost 80% of its sales.
Novo said in August it had completed most contract negotiations with PBMs for next year and that average drug prices would fall by a low- to mid-single digit percentage from this year.
“Next year will be a desert journey on earnings,” Alm. Brand analyst Michael Friis Jorgensen said. “And Novo Nordisk is saying that the price pressure isn’t isolated to ’17, ’18. It’s going all the way to 2020.”
“This is not Doomsday”
In September, competition in the U.S. market prompted Novo Nordisk to announce 1,000 job cuts out of a workforce of 42,300.
The same month, long-time CEO Sorensen said he would step down by the end of 2016 in what was seen as part of a change of strategy.
The company said today that Jesper Hoiland, replaced last month as head of its North American operations, was also leaving the company, and that it would not move ahead as planned with current development projects involving oral insulin.
On top of its long-term guidance cut, Novo lowered its 2016 operating profit growth forecast in local currencies to 5% to 7% from 5% to 8%, and sales growth to 5% to 6% from 5% to 7%.
Its 3rd-quarter operating profit of DKK12.42 billion ($1.83 billion) was in line with analysts’ expectations. Revenue of DKK27.54 billion ($4.05 billion) was just below.
At 11:29 GMT, Novo Nordisk shares were down -15.7% at DKK235.30 ($34.62).
“This is not doomsday. It’s still a solid pharmaceutical company… now in line with other pharmaceuticals in the coming years earnings-wise,” Alm. Brand’s Friis Jorgensen said.
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