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Novo Nordisk (NVO) Lokesh Todi 3rd April 2008
Brief Overview • Novo Nordisk is a Danish pharmaceutical company that specializes in Diabetic care. • Novo Nordisk is headquarters in Denmark and has over 26,000 employees in 79 countries and markets its own product in 180 countries. • Novo Nordisk operates on a worldwide basis in two business segments: diabetes care (73% sales) and biopharmaceuticals (27% sales). • Biopharmaceuticals include growth hormone therapy, hormone replacement therapy, inflammation therapy and other therapy areas.
Financial Overview NVO: Novo Nordisk A/S Stock Report | Snapshot http://quicktake.morningstar.com/StockNet/Snapshot.aspx?Country=USA&Symbol=NVO
WHY NVO? • Hardly any long term debt • Leader in the Diabetes Care industry • Long term demand for the product • Self Marketing Company • Strong Pipeline especially in the Biopharmaceutical division.
Hardly any long term debt As we saw from the key ratios, Novo Nordisk has relied heavily on equity to finance itself. Novo Nordisk’s current cash on hand ($945 million) is enough to pay its long term debt over 4 times.
Leader in Diabetes Care Although Novo Nordisk grew slower than the market level in Japan, it should be noted Nordisk is the only company in Japan offering a full portfolio of modern insulin.
Vs. Competitors Novo Nordisk since going public has made tremendous gains on all its competitors and has become the number 1 in the insulin market in all the major regions.
Long Term Demand The number of diabetic people in developing countries is expected to rise dramatically and Novo Nordisk has positioned itself well to take full advantage of this opportunity. The have setup shops and R&D facilities in both India and China and have become the number one diabetic care providers in both these countries.
Pipeline • Novo Nordisk has an extremely strong pipeline of new products coming out.
Key Concerns • Investor Ratings • High Institutional Ownership • Currency Fluctuations
Investor Ratings The analysts have put NVO has neutral for the last year. In this time however NVO stock has increased by 20% the pharmaceutical average meanwhile has been -6.21% (http://www.marketwatch.com/tools/industry/focus.asp?bcind_ind=4570&bcind_sid=51&bcind_period=3mo).
High Institutional Ownership • Novo Nordisk Foundation, currently represent 25,5% of the total share capital and 68,5% of the total number of votes. This means that Novo A/S has the voting majority at the company's Annual General Meeting. • Although Novo Nordisk Foundation has never made any hostile decisions, it is a concern that the foundation has a de-facto majority vote in the company’s Annual General Meeting.
Currency Fluctuations The weakening dollar and the strengthening of other currencies has definitely helped NVO recently. Due to NVO’s international presence, currency fluctuations in the future can severely hamper NVO’s profits. The table shows what impact on NVO’s profit given a 5% movement in a particular currency.