PREVIEW-Novo set for strong quarter, biosimilar threat seen

* Q3 EBIT seen up 24 pct yr/yr, sales seen up 18 pct

* Modern insulins, Victoza expected to boost result

* Setback for rival raises expectations for Victoza

* Insulin biosimilars worries threaten star status

By Anna Ringstrom

COPENHAGEN, Oct 26 (BestGrowthStock) – Danish drugmaker Novo Nordisk
(NOVOb.CO: ) is set to report yet another strong quarter, driven
mainly by rising demand for its best-selling modern insulins and
helped by its main new diabetes drug Victoza.

The world’s biggest insulin manufacturer is on a roll, its
shares outpacing those of its rivals, on hopes for Victoza and
confidence in the insulin franchise as expanding waistlines
globally have fuelled an epidemic of type-2 diabetes.

Novo’s shares are up more than 40 percent since mid-2009,
compared with a 26 percent rise in the STOXX 600 European
healthcare index (.SXDP: ).

The mean forecast in a Reuters poll of analysts is for a 24
percent year-on-year rise in third-quarter operating profits to
4.74 billion Danish crowns ($887 million). [ID:nLDE69K1H9]

Turnover was seen up 18 percent at 14.8 billion crowns,
boosted by a 26 percent rise in sales of modern insulins, or
insulin analogues, to 6.71 billion.

Sales of Victoza, a new type of natural insulin-stimulating
diabetes drug regarded as a high-margin product, were seen at
407 million crowns, up from 296 million in the second quarter.

The near future for Victoza, which Novo began rolling out
last year and which is expected to become a blockbuster,
brightened further last week. U.S. authorities unexpectedly
turned down Bydureon, a potential rival from Amylin
Pharmaceuticals (AMLN.O: ) and Eli Lilly (LLY.N: ), probably
delaying it 18 months. [ID:nLDE69J075]

When Novo opens the books on the quarter on Oct. 27,
analysts expect an update on its performance, not least in the
important U.S., French, and Italian markets.

The only other so-called GLP-1 type drug currently on the
market besides Victoza is Lilly’s and Amylin’s Byetta.

GENERICS THREAT

Although analysts expect Novo to keep flourishing in the
nearer term, there are expectations of cut-price competition in
the insulin market in a few years, following patent expiries.

The threat from so-called biosimilar insulins crystallised
last week when the world’s biggest drugmaker Pfizer’s (PFE.N: )
said it had agreed to sell versions of insulin being developed
by India’s Biocon (BION.BO: ), sending Novo’s shares tumbling.
[ID:nLDE69I0ZK] [ID:nSGE69H0I8]

“Key downside risks include the possibility of
greater competition to the insulin franchise from biosimilars
longer-term and resultant pricing pressure, compounded by
government mandated price cuts,” analysts at Citi, which has a
“hold” rating and a target price of 510 crowns on Novo’s shares,
said in a note to clients.

Novo in August raised the guidance to 9-10 percent sales
growth in local currencies, and 12-15 percent operating profit
growth in local currencies, as it posted forecast-beating
second-quarter profit (Read more your timing to make a profit.)s. [nLDE67407E]

When Novo reports its third quarter results on Wednesday,
some analysts expect it to raise its 2010 outlook, depending on
how it sees effects from U.S. healthcare reform and from the
threat of generic competition to diabetes medicine
NovoNorm/Prandin, while others expect the firm to stick to the
view.

“We do not expect a significant change to local currency
guidance for 2010 at this stage but do expect revisions to the
currency guidance and financial expense,” Citi said.
(Reporting by Anna Ringstrom, editing by Anthony Barker)

PREVIEW-Novo set for strong quarter, biosimilar threat seen