Novo Nordisk growth takes a hit with China deal

Only a month after raising its 2021 outlook for both sales and profit growth, Novo Nordisk has announced that a new deal in China for its insulin portfolio will reduce global sales growth by 3%.

The company has been engaging in a tendering process with the Chinese government after the decision to bring all insulin products into the country’s centralised procurement programme in 2022.

Novo has announced that it was successful in getting all its insulin products onto the national formulary with the exception of Ryzodeg and Xultophy.

Ryzodeg contains a combination of long acting insulin degludec – which Novo markets as Tresiba – and rapid-acting insulin aspart, while Novo sells as NovoRapid. Xultophy is a combination of insulin degludec and Novo’s glucagon-like peptide-1 (GLP-1) receptor agonist, liraglutide, which it markets as Victoza.

The assumption from Novo’s announcement is that Tresibo and NovoRapid, as well as NovoMix (insulin aspart/insulin aspart protamine) have been accepted by the Chinese government, albeit at a discount.

The value-based procurement (VBP) process in China will cover all insulins supplied in hospitals and is expected to be implemented in the first half of 2022.

After strong sales in the first nine months of the year, the company has raised its sales and 2021 growth forecasts to 12-15% at CER (constant exchange rates) but now estimates the ‘negative impact’ on global sales growth due to the deal will be around 3% in 2022.

The company’s shares fell by more than 5% on the news given that insulin accounts for three-quarters of Novo’s sales in China. The Chinese market accounts for one-eighth of Novo’s total sales.

The strong sales in 2021 is being driven by GLP-1 growth of 30% (31% at CER) and by obesity care, which grew by 79% in Danish kroner (82% at CER) from the launch of Wegovy (semaglutide) in the US.

In China, which has the larger number of people with the disease in the world, Novo Nordisk has around one-third of the market for diabetes products, with $1.8bn of diabetes drugs this year so far. The Chinese insulin market is believed to be worth around $4.4bn.

Other global pharmaceutical companies involved in the Chinese insulin market, most notably Sanofi and Eli Lilly, have not released any information about the situation yet.