1st Quarter Results

Novo Nordisk increased sales by 23% in the first quarter of 2006

 

o        Sales of insulin analogues increased by 60%

o        Sales of NovoSeven® increased by 16%

o        Sales in North America increased by 32%

o        Sales in International Operations increased by 56%

 

 

 

 

 

Lars Rebien Sørensen, president and CEO, said: "Novo Nordisk had a strong first quarter of 2006 with continuing sales growth globally. We expect 11-13% sales growth for the full year supported by the recent launch of Levemir® in the US, where Novo Nordisk is now the only company with a full portfolio of insulin analogues."

Financial statement for the first three months of 2006

This interim report has been prepared in accordance with International Financial Reporting Standards (IFRS). The accounting policies used in the interim report are consistent with those used in the Annual Report 2005. The interim report has not been audited.

Amounts in DKK million, except average number of shares outstanding, earnings per share and full-time employees.

 

Sales increased by 23% in Danish kroner and by 18% measured in local currencies. Growth was realised both within diabetes care and biopharmaceuticals - primarily driven by the portfolio of insulin products, NovoSeven® and growth hormone therapy products.

 

 

 

Sales growth, measured in local currencies, was realised in all regions, with North America, International Operations and Europe as the main growth drivers. Sales in Japan were impacted by destocking at wholesalers prior to a mandatory reduction in reimbursement prices, effective from April 2006. Mandatory price reductions take place every second year in Japan.

 

Sales of diabetes care products increased by 26% in Danish kroner to DKK 6,504 million and by 20% in local currencies compared to the first three months of 2005.

 

Sales of insulin analogues, human insulin and insulin-related products increased by 26% to DKK 6,027 million in Danish kroner and by 20% measured in local currencies. All regions contributed to growth, with North America and International Operations having the highest growth rates. Novo Nordisk is the global leader within the insulin segment, with 51% of the total insulin market and 36% of the insulin analogue market, both measured by volume.

 

Sales of insulin analogues increased by 60% in Danish kroner to DKK 2,324 million and by 54% in local currencies in the first three months of 2006. All regions realised solid growth rates, with North America and Europe as the primary growth drivers. Sales of insulin analogues contributed with 60% of the overall growth in local currencies and now constitute around 39% of Novo Nordisk's sales of insulin and insulin-related products.

 

Sales in North America increased by 43% in Danish kroner and by 30% in local currencies in the first three months of 2006, reflecting a solid penetration of the insulin analogues NovoLog® and NovoLog® Mix 70/30. Novo Nordisk now holds more than 38% of the total insulin market and over 24% of the analogue market, both measured by volume. Furthermore, sales of human insulin products also increased as a consequence of increased volume as well as higher average selling prices.

 

Novo Nordisk launched Levemir®, the long-acting insulin analogue, in the US market at the end of March 2006, and the initial sales uptake of Levemir® in the market has been in line with plans. Sales in the first three months of 2006 were positively impacted by around DKK 100 million due to prelaunch stocking by wholesalers and more than 45,000 retail pharmacies across the country.   

 

Sales in Europe increased by 13%, both measured in Danish kroner and in local currencies, reflecting continued progress for the portfolio of insulin analogues. Novo Nordisk continues to consolidate its leadership position in the European insulin market with a 58% share of the total insulin market and 44% of the insulin analogue market, both measured by volume.   

 

Sales within International Operations increased by 56% in Danish kroner and by 42% in local currencies. The sales development during the first three months of 2006 reflects the relatively low level of tender orders in the same period last year. In 2006, sales are expected to be more evenly distributed across the quarters.

 

The main growth driver in the first three months of 2006 was sales of human insulin, primarily in China, India and Brazil. Furthermore, insulin analogues continue to add to overall growth in the region.

 

Sales in Japan & Oceania were unchanged measured in Danish kroner and increased by 2% in local currencies. The sales development reflects sales growth of insulin analogues, NovoRapid® and NovoRapid® Mix 30, both of which are increasingly being sold in the leading prefilled delivery device, FlexPen®.

 

Sales of oral antidiabetic products increased, compared to the same period in 2005, by 27% in Danish kroner to DKK 477 million and by 19% in local currencies. This reflects increased sales in North America, Europe and International Operations compared to the same period last year, primarily related to a higher average sales price in the US market as well as an improved reimbursement situation in China.   

 

Biopharmaceuticals

Sales of biopharmaceutical products increased by 17% measured in Danish kroner to DKK 2,442 million and by 12% in local currencies compared to the first three months of 2005.

 

Sales of NovoSeven® increased by 16% in Danish kroner to DKK 1,265 million and by 10% in local currencies compared to the same period last year. Sales growth for NovoSeven® was primarily realised in Europe and International Operations. The sales development in North America was subdued, partly impacted by a lower number of major bleeding events during the first three months of 2006 compared to the same period last year.

 

The sales growth of NovoSeven® during the first three months of 2006 reflected increased sales within the congenital and acquired haemophilia segments as well as a perceived higher level of investigational use. Treatment of spontaneous bleeds for congenital inhibitor patients remains the largest area of use.

 

Sales of Norditropin® and Norditropin® SimpleXx® products increased by 19% measured in Danish kroner to DKK 709 million and by 16% measured in local currencies. North America, Europe and International Operations contributed to growth supported by the continued success of the prefilled easy-to-use delivery device NordiFlex®. Sales in Japan were negatively impacted by reduced wholesaler inventories prior to the mandatory reduction of reimbursement prices as of 1 April 2006 as well as changed paediatric treatment guidelines for diagnosis of growth hormone deficiency.

 

Other products

Sales of other products within biopharmaceuticals, which predominantly consist of hormone replacement therapy (HRT) related products, increased by 16% in Danish kroner to DKK 468 million and by 11% in local currencies. This development primarily reflects continued sales progress in the US market for Vagifem®, Novo Nordisk's topical oestrogen product.

 

Costs, licence fees and other operating income

The cost of goods sold increased by 16% to DKK 2,415 million, representing a gross margin of 73.0% compared to 71.3% in the first three months of 2005. This improvement reflects an improved product mix, improved production efficiency and a positive currency impact due to the higher value of US dollars versus Danish kroner compared to the same period last year.  

 

Total non-production-related costs increased by 27% to DKK 4,727 million. The increase in non-production-related costs reflects especially costs related to sales and distribution as well as research and development. Both of these cost categories increased more than sales, primarily reflecting the increase in the US diabetes care sales force implemented during the fourth quarter of 2005 as well as costs related to the US launch of Levemir® and the higher number of late-stage clinical development projects in the first three months of 2006.

 

Licence fees and other operating income in the first three months of 2006 were DKK 76 million, in line with the same period last year.

 

Net financials

Net financials showed a net expense of DKK 151 million in the first three months of 2006, compared to an income of DKK 276 million in the same period in 2005. Included in net financials is the result from associated companies with an expense of DKK 60 million, primarily related to Novo Nordisk's share of losses in ZymoGenetics Inc, compared to an income of DKK 238 million in the same period in 2005, when a non-recurring, tax-exempt income of approximately DKK 250 million from a sale of shares in Ferrosan A/S was realised.

 

The foreign exchange result was an expense of DKK 140 million compared to a gain of DKK 38 million in the same period last year. This development reflects losses on foreign exchange hedging activities due to the higher value of especially US dollars versus Danish kroner in the first three months of 2006, compared to the exchange rate level prevailing in 2005.

 

The expectation for reported sales growth in 2006 is 11-13%. This sales forecast reflects that the overall currency impact on sales for the remaining three quarters of 2006 will, given the currently prevailing exchange rates, be slightly negative, compared to a positive currency impact of 5% realised for the first quarter of 2006. Furthermore, the sales forecast reflects expectations of a more even quarterly distribution of sales in 2006 within International Operations compared to last year when less than 19% of full-year sales were realised in the first quarter.  

 

Reported operating profit is still expected to grow by slightly more than 10%, and the expectation for underlying operating profit growth, ie excluding the impact from currency movements and non-recurring items, remains unchanged around 10%.  

 

 

The effective tax rate for 2006 is still expected to be approximately 30%.

 

Capital expenditure is still expected to be around DKK 3 billion in 2006. Expectations for depreciations, amortisation and impairment losses are unchanged at around DKK 2.1 billion, whereas free cash flow is now expected to be around DKK 4.5 billion.

 

All of the above expectations are provided that currency exchange rates, especially the US dollar and related currencies, remain at the current level versus the Danish krone for the rest of 2006.

 

Novo Nordisk has hedged expected net cash flows in relation to US dollars, Japanese yen and British pounds for 15, 12 and 11 months, respectively. The financial impact from foreign exchange hedging is included in 'Net financials'.

 

 

 

The phase 3 programme for liraglutide including 3,800 patients was initiated in February 2006 and patient enrolment is progressing according to plan. Novo Nordisk expects the duration of the study to be around two years. The phase 3 programme includes monotherapy as well as combination treatment with a number of marketed oral antidiabetics.  

 

Detailed results from the liraglutide phase 2b study completed in November 2005 will be presented at the annual meeting of the American Diabetes Association which will take place from 9-13 June this year.

 

 

Novo Nordisk has received a marketing authorisation from the EU Commission for a label extension for NovoMix® 30, enabling diabetes patients in Europe to start insulin therapy with a simple once-daily injection regimen.

 

In the US, Novo Nordisk has received a Not Approvable Letter from the FDA for the company's New Drug Applications (NDAs) for the insulin analogues NovoLog® Mix 30/70 and NovoLog® Mix 50/50, which were filed for approval in June 2005. In the letter the FDA requests that Novo Nordisk addresses certain clinical issues and provides additional information. Novo Nordisk intends to work closely with the FDA to help bring these products to market.

 

Finally, Novo Nordisk has initiated a phase 1 study with NN0606, a novel oral antidiabetic compound.

 

Novo Nordisk has completed a phase 2 study for the use of NovoSeven® in spinal surgery. The objective was to evaluate the safety of NovoSeven® as an adjunct to standard haemostasis management. Large spinal surgical procedures often result in substantial blood loss, despite the use of haemostatic agents, topical haemostats and surgical haemostatic procedures.

 

The spinal surgery study included 49 patients in three treatment cohorts. Doses for the three cohorts were 30, 60 and 120 micrograms of NovoSeven® per kg bodyweight, respectively, which were administered as repeated dosing every two hours, in total three doses per patient. Serious adverse events in this spinal surgery study were independent of dose, and actively and placebo-treated groups were comparable, with no serious adverse events occurring at the highest dose. Efficacy analyses indicate that the calculated total transfused volume of blood products, including autologous transfused blood from cell-saver systems, allogeneic blood volume, platelets, fresh frozen plasma and cryoprecipitate, was significantly reduced by NovoSeven® compared to placebo for all dose levels tested.

 

As part of the expansion of the haemostasis product portfolio, Novo Nordisk has initiated a phase 1 dose-escalation study with a recombinant factor VIIa analogue that has demonstrated beneficial properties in preclinical studies, including faster onset of action, relative to the currently marketed NovoSeven® product.

 

Novo Nordisk has finalised the first phase of the phase 1/2 study for IL-21 in 29 patients with stage IV malignant melanoma. Results from the study were presented at the annual meeting of the American Association for Cancer Research held in Washington DC from 1-5 April. The results show that IL-21 is well-tolerated, that toxicities are limited and reversible and that some anti-tumour activity appears to be present. The doses to be applied in the second phase of the study have been identified and the second phase is expected to be initiated in the second quarter of 2006.

 

Finally, Novo Nordisk has filed for marketing approval with the FDA and EMEA of an ultra-low dose version of Activella® (Activelle® in Europe), a continuous-combined HRT product.

 

Total equity was DKK 27,042 million at the end of the first three months of 2006, equal to 65.5% of total assets, compared to 65.9% at the end of 2005. Please refer to appendix 5 for further elaboration of changes in equity during 2006.

 

Holding of treasury shares and share repurchase programme

As per 27 April 2006, Novo Nordisk A/S and its wholly-owned affiliates owned 31,748,746 of its own B shares, corresponding to 8.95% of the total share capital.

 

During the period from 30 January to 27 April 2006, Novo Nordisk purchased 1,050,000 B shares at a cash value of DKK 0.4 billion, as part of the DKK 6 billion share repurchase programme for 2006 and 2007.   

 

The Novo Nordisk Haemophilia Foundation, established in 2005 with an annual donation of approximately DKK 10 million with the objective to support sustainable improvement programmes in developing countries, has launched its first project, Consolidacion III, in Venezuela. The project's goal is to help the local Venezuelan haemophilia organisation expand its presence throughout the country in order to improve haemophilia care in Venezuela.  

 

 

As of 27 April 2006, Novo Nordisk Inc, as the majority of hormone therapy product manufacturers in the US, is a defendant in product liability lawsuits related to hormone therapy products. These lawsuits currently involve a total of 43 individuals who allege to have used a Novo Nordisk hormone therapy product. These products (Activella® and Vagifem®) have been sold and marketed in the US since 2000. Until July 2003, the products were sold and marketed exclusively in the US by Pharmacia & Upjohn Company (now Pfizer Inc). According to information received from Pfizer, an additional 14 individuals currently allege, in relation to similar lawsuits against Pfizer Inc, that they also have used a Novo Nordisk hormone therapy product. Currently, it is expected that the first trial against Novo Nordisk Inc as a defendant may take place during 2007; however, Novo Nordisk is not expecting the claims to impact Novo Nordisk's financial outlook.

 

On 17 February 2006, Novo Nordisk A/S received a subpoena from the United States Securities and Exchange Commission (SEC) calling for Novo Nordisk and its subsidiaries to produce documents relating to the United Nations Oil-for-Food Programme. Other companies have disclosed that they also have received subpoenas from the SEC relating to the Oil-for-Food Programme. On 3 April 2006, the Danish Public Prosecutor initiated preliminary investigatory steps against Novo Nordisk A/S in connection with the company's trading with the Iraqi authorities under the United Nations Oil-for-Food Programme. Similar steps have been taken towards a number of Danish companies. Novo Nordisk intends to comply with the subpoena and fully cooperate with the SEC's investigation, and has also approached the Danish Public Prosecutor and intends to fully cooperate to ensure a smooth and efficient procedure. At this time, Novo Nordisk cannot determine or predict the outcome of these matters. In addition, the company cannot predict how long the investigations will take or when the company will be able to provide additional information.

 

In December 2005, the office of the US Attorney for the Eastern District of New York served

Novo Nordisk Inc with a subpoena calling for the production of documents relating to the

company's US marketing and promotional practices. At this time, Novo Nordisk believes that the investigation is limited to its insulin products. The subpoena indicates that the documents are necessary for the investigation of potential criminal offences relating to healthcare benefit programmes. Novo Nordisk is cooperating with the US Attorney in this investigation.

 

At 13.00 CET today, corresponding to 7.00 am New York time, a conference call will be held. Investors will be able to listen in via a link on novonordisk.com, which can be found under 'Investors - Download centre'. Presentation material for the conference call will be made available approximately one hour before on the same page.

 

The above sections contain forward-looking statements as the term is defined in the US Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of events such as new product introductions, product approvals and financial performance.

 

Such forward-looking statements are subject to risks, uncertainties and inaccurate assumptions. This may cause actual results to differ materially from expectations. Factors that may affect future results include interest rate and currency exchange rate fluctuations, delay or failure of development projects, production problems, unexpected contract breaches or terminations, government-mandated or market-driven price decreases for Novo Nordisk's products, introduction of competing products, Novo Nordisk's ability to successfully market both new and existing products, exposure to product liability and other lawsuits, proceedings and investigations, changes in reimbursement rules and governmental laws and related interpretation thereof, and unexpected growth in costs and expenses. 

 

Risks and uncertainties are further described in reports filed by Novo Nordisk with the US Securities and Exchange Commission (SEC) including the company's Form 20-F, which was filed on 6 February 2006. Please also refer to the section 'Risk Management' in the Annual Report 2005. Novo Nordisk is under no duty to update any of the forward-looking statements or to conform such statements to actual results, unless required by law.

Management statement

Today, the Board of Directors and Executive Management reviewed and approved the interim report and accounts of Novo Nordisk A/S for the first three months of 2006.

The interim report and accounts have been prepared in accordance with International Financial Reporting Standards and the additional Danish disclosure requirements applying to listed companies' interim reports and accounts.

In our opinion the accounting policies used are appropriate and the overall presentation of the interim report and accounts is adequate. Furthermore, in our opinion the interim report and accounts give a true and fair view of the Group's assets, liabilities, financial position and of the results of the operations and consolidated cash flows for the period under review.

 

Bagsværd 28 April 2006

 

 

 

 

 

 

Further information on Novo Nordisk is available on the company's internet homepage at the address: novonordisk.com