Shares of Novo Nordisk (NOVO-B.CO) experienced a significant decline following the announcement of an impairment charge linked to its hypertension medication ocedurenone. This financial development has led the Danish pharmaceutical powerhouse to revise its operating profit growth forecast for the entirety of the year.
While the company reported a net profit increase for the first half of the year, totaling 45.46 billion Danish kroner, up from 39.24 billion kroner year-over-year, this growth was notably tempered by the impairment charges stemming from the cessation of the phase 3 Clarion-CKD trial. The trial was halted in June after ocedurenone failed to achieve its primary endpoint, which was aimed at patients suffering from uncontrolled hypertension and advanced chronic kidney disease.
This setback resulted in a substantial impairment loss of 5.7 billion kroner. In light of these circumstances, Novo Nordisk has adjusted its expectations for operating profit growth, which is now projected to sit between 20% and 28% at constant exchange rates. This revision contrasts with previous estimates made on May 2, which had anticipated a growth trajectory between 22% and 30%.
In terms of reported earnings, growth is now expected to fall one percentage point lower than the results at constant exchange rates, aligning with earlier projections. On a more positive note, the global healthcare giant has forecasted more favorable sales figures for 2024. This optimism is propelled by robust demand for its innovative GLP-1-based treatments aimed at managing diabetes and obesity, which has resulted in a remarkable sales increase of 24% year-over-year in the first half alone.
The anticipated sales growth at constant exchange rates is now estimated to fall within the 22% to 28% range, a notable improvement from earlier projections which suggested a growth between 19% and 27%. Market analysts are watching this closely. Research from Morgan Stanley has suggested a potential revision of sales growth expectations, forecasting it to reach as high as 30%.
Meanwhile, Visible Alpha is predicting an upgrade that would bring growth estimates to 26%. Novo Nordisk remains optimistic about its prospects, particularly in the North American and international markets, where it expects growth to support its overall sales strategy for 2024. The company is seeing promising volume growth for its GLP-1-based treatments, which include the weight-loss medications Ozempic and Wegovy.
According to Morgan Stanley's research in their earnings preview, "The key drivers for Novo Nordisk include advancements in supply chain enhancements linked to Wegovy, long-term diversification into non-GLP-1 therapies (with two critical mid-stage readouts anticipated in the second half of 2024), and the emergence of new co-morbidity data concerning GLP-1 treatments." On the market front, Novo Nordisk's stock price reflected these shifts, experiencing a downturn of nearly 3% as trading commenced on Wednesday.
The stock was listed at a price of $869.30, marking a change of $-18.70, encapsulating a percent change of -2.11%. Overall, despite the challenges posed by the impairment charges and trial failure, Novo Nordisk's forward-looking approach and robust demand for its healthcare solutions suggest that it may navigate these turbulent times effectively, particularly as it continues to innovate and expand its treatment options..