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Novo Nordisk-full year guidance met

2021 revenue adjusted for currency movements rose 14% to Danish kroner (DKK) 140.8bn.

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2021 revenue adjusted for currency movements rose 14% to Danish kroner (DKK) 140.8bn. This reflected upticks in both International Operations and North America Operations.

Operating profits excluding currency changes rose 13% to DKK 58.6bn.

In 2022, the group expects to see 6-10% sales growth and 4-8% operating profit growth, adjusting for currency movements.

The board proposed a DKK 6.90 per share, bringing the total for the year to DKK 10.4 per share. The group's share buyback programme for 2022 will be worth DKK 22bn.

The shares rose 3.3% following the announcement.

View the latest Novo-Nordisk share price and how to deal

Our View

Novo Nordisk is among the world's leading providers of diabetes treatments, and since diabetes is a chronic disease demand is very reliable. Insulin makes up almost 40% of the group's sales, but that's shrinking as it expands into higher-growth treatment areas.

One such area is GLP-1 products to treat type 2 diabetics. These drugs stimulate the body to produce more insulin after eating, avoiding having to inject insulin straight into the body and reducing the chances of complications.

Sales of this category have been impressive and growth of Ozempic has been rapid. The launch of Rybelsus, a tablet form of the treatment, has also added to Novo's growing market share within the diabetes care market.

A dominant market share and attractive end markets would be enough to attract investors' attention on their own, but Novo also runs a pretty tight ship operationally. That's allowed the group to boast operating profits well over 40%, though we should note they've been on a downward trajectory over the past 5 years. For now we're not concerned--the group's been spending more as it launches new products and grows market share.

Historically, the group's also come with a rock-solid balance sheet. This year we saw the group swing from a net cash position to net debt, due mostly to the Dicerna Pharmaceuticals acquisition. This is little more than a bugbear for now--it's not unusual for a pharmaceutical giant to operate from a net debt position. But Dicerna's smooth transition to the Novo portfolio will be an important factor to watch to help justify the impact.

There are other challenges to keep in mind as well.

Insulin pricing is under pressure in the US, while competition is heating up in the smaller haemophilia business too. So far the group's newer products and international expansion are more than offsetting those headwinds, but it's something to keep an eye on.

Governments and patients are increasingly unwilling to pay extortionate prices for lifesaving but chronic medicines. With health systems emerging from the current crisis with budgets stretched thin, that trend is only likely to continue. The valuation is some way above the long-term average, so any material pricing changes could be a disappointment.

We continue to think Novo offers something distinctive. Pharmaceutical companies with a strong balance sheet and a defensive market aren't a dime a dozen. But the stock's valuation has been rising over the longer term, pushing down the prospective dividend yield, even as the pressures mount. That could be storing up future problems if growth slows.

Novo Nordisk key facts

All ratios are sourced from Refinitiv. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn't be looked at on their own - it's important to understand the big picture.

Full Year Results (comparisons adjusted for currency movements)

Sales growth was evenly split across International Operations and North American Operations, with each division up 14%. In North America, insulin sales declined 9% as volumes and prices declined. This was offset by growth across all other product categories. Sales rose across all therapy areas within International Operations.

Sales in Diabetes and Obesity Care rose 15% to DKK 121.6bn driven by growth across all therapy areas and geographies. Obesity care sales were the strongest performer, up 55% followed by diabetes care, where sales rose 13% and market share improved from 29.3% to 30.1%. GLP-1 treatments were the main driver, offsetting weaker insulin sales growth. Operating profits rose from DKK 43.7bn to DKK 49.5bn.

Biopharm operating profits declined from DKK 10.4bn to $9,1bn, reflecting price declines in the US. Sales rose 4% to DKK 19.2bn, driven by 6% growth in rare blood disorders revenue to DKK 10.2bn as the group launched 4 new products in this category. This offset a 2% decline in rare endocrine disorders, reflecting a 12% decline in North American sales.

Sales and distribution costs rose 15%, reflecting promotional activities in North America and new product launches. Research and development costs were 16% higher as the group made process on its pipeline within cardiovascular disease and NASH.

Free cash flow rose to DKK 29.3bn from DKK 28.6bn last year, though including acquisition costs related to the acquisition of Dicerna Pharmaceuticals, that figure was lower at DKK 11bn. Free cash flow is expected to rise to between DKK 50-55bn as the Dicerna acquisition is absorbed. The group had net debt of DKK 9.2bn, up from a net cash position of DKK 2.4bn, reflecting an increase in debt obligations.

This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.

This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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Written by
Laura Hoy
Laura Hoy
ESG Analyst

Laura is part of HL's ESG analysis team, working to offer research and analysis to help with sustainable decision making. She also works with other parts of the business to help integrate ESG.

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Article history
Published: 2nd February 2022