NVO - Novo Nordisk

[DooDiligence]

NASH could be a big opportunity also & it's in their wheelhouse.

[John Hjorth]

Reuters [2018.01.29]: Sanofi trumps Novo Nordisk with agreed 3.9 billion Euros bid for Ablynx.

 

Edit:

 

Novo Nordisk Announcement [2018.01.29]: Novo Nordisk does not intend to make a revised proposal for Ablynx.

[DooDiligence]

Reuters [2018.01.29]: Sanofi trumps Novo Nordisk with agreed 3.9 billion Euros bid for Ablynx.

 

Edit:

 

Novo Nordisk Announcement [2018.01.29]: Novo Nordisk does not intend to make a revised proposal for Ablynx.

 

Maybe Lars (NVO) is Reagan, to Oliviers' (SNY) Gorbachov?

(Defense spending breaks opponent economically.)

 

Nah, but seriously, I like the fact that Novo isn't overly aggressive here...

[John Hjorth]

I have the same opinion as you, DooDiligence,

 

And the market participants today in Copenhagen seem to be of same opinion. Fine with me, that Sanofi got it - to a price I understand even less than the Novo bid!

[John Hjorth]

Novo Nordisk A/S 2017Q4 Announcement out today.

 

Looks good to me. Still basically on track based on earlier guidance.

 

Other to me very good & important messages hit the Danish press today:

 

Board Chairman Gôran Ando will step down at AGM 2018. Board proposes as new chairman Helge Lund, former CEO of Statoil and BG Group [aquired by Royal Dutch Shell].

 

CFO Jesper Brandgaard will step down as Group CFO, and focus on Pharma activities and M&A. He has held dual roles since March 2017. Honestly, he has lately looked absolutely worn out. Time to give him a break. He has publicly expressed today, that he actually wanted to continue as CFO - after now 70 quarters,-, but his CEO Lars Fruergaard and the board want it otherwise, with which he is "in".

 

- - - o 0 o - - -

 

Stock down today ~7 percent in Copenhagen. I don't even care about that.

[DooDiligence]

Novo Nordisk A/S 2017Q4 Announcement out today.

 

Looks good to me. Still basically on track based on earlier guidance.

 

Other to me very good & important messages hit the Danish press today:

 

Board Chairman Gôran Ando will step down at AGM 2018. Board proposes as new chairman Helge Lund, former CEO of Statoil and BG Group [aquired by Royal Dutch Shell].

 

CFO Jesper Brandgaard will step down as Group CFO, and focus on Pharma activities and M&A. He has held dual roles since March 2017. Honestly, he has lately looked absolutely worn out. Time to give him a break. He has publicly expressed today, that he actually wanted to continue as CFO - after now 70 quarters,-, but his CEO Lars Fruergaard and the board want it otherwise, with which he is "in".

 

- - - o 0 o - - -

 

Stock down today ~7 percent in Copenhagen. I don't even care about that.

 

I'm not bothered either.

 

Never got the final 1/3 of NVO that I wanted & I'd be OK with a larger drop (anchored to my average cost & having a hard time buying higher.)

 

Of course, they'd have to continue earning & lavishing cash on owners (a leap of faith for me since I'm honestly unqualified to evaluate them on a therapy by therapy basis.)

[John Hjorth]

Novo Nordisk A/S Annual Report 2017 is out.

[porcupine]

Expect to see Fiasp cannibalize NovoLog sales.

[DooDiligence]

Expect to see Fiasp cannibalize NovoLog sales.

 

Fiasp is a new formulation of NovoLog, with the addition of niacinamide (vitamin B3) to help increase the speed of initial insulin absorption.

[porcupine]

Expect to see Fiasp cannibalize NovoLog sales.

 

Fiasp is a new formulation of NovoLog, with the addition of niacinamide (vitamin B3) to help increase the speed of initial insulin absorption.

 

 

Right. Wasn't sure if they were still planning on manufacturing NovoLog. Fiasp will be the best type of bolus insulin on the market. Excited about the product.

[DooDiligence]

"NOVO NORDISK A/S PURCHASES B SHARES WORTH DKK 954 MILLION FROM NOVO HOLDINGS A/S UNDER THE 2018 SHARE REPURCHASE PROGRAMME"

 

http://inpublic.globenewswire.com/releaseDetails.faces?rId=2166259

[John Hjorth]

Post today by Sharad from a topic in the Berkshire forum about potential acquisition targets for Berkshire, which I choose to reply to here:

 

Novo Nordisk (though I don't want him to).

 

Fits every metric I believe Buffett looks at. The cash spit out to shareholders every year is absolutely mind boggling, relative to revenues.

 

This is never going to happen. The ridiculous part of the explanation is that the founders of the Novo Nordisk Foundation many years ago set up the Foundation with the purpose that nobody should be able to make money and get rich on the two competing predessors, that later on merged to become the company we know as Novo Nordisk A/S today.

 

Today it's a shield against any & every takeover attempt.

 

It's built in to the Foundation's Articles of Association.

 

Even if the Board at the Foundation actually wanted to sell the controlling A shares of Novo Nordisk A/S, it would be considered an act in breach of the Articles of Association, and would thus not be approved by the Danish regulatory body for foundations doing business [called Danish Business Authority].

 

If Novo Nordisk  A/S [or some competitor, for that sake] is ever to break the genetic code of diabetes, Novo Nordisk A/S will close shop [or reduce its activity level materially], and the Foundation will live on, based on the capital already allocated to other endavours [Novozymes A/S, NNIT A/S etc.]

[Sharad]

Post today by Sharad from a topic in the Berkshire forum about potential acquisition targets for Berkshire, which I choose to reply to here:

 

Novo Nordisk (though I don't want him to).

 

Fits every metric I believe Buffett looks at. The cash spit out to shareholders every year is absolutely mind boggling, relative to revenues.

 

This is never going to happen. The ridiculous part of the explanation is that the founders of the Novo Nordisk Foundation many years ago set up the Foundation with the purpose that nobody should be able to make money and get rich on the two competing predessors, that later on merged to become the company we know as Novo Nordisk A/S today.

 

Today it's a shield against any & every takeover attempt.

 

It's built in to the Foundation's Articles of Association.

 

Even if the Board at the Foundation actually wanted to sell the controlling A shares of Novo Nordisk A/S, it would be considered an act in breach of the Articles of Association, and would thus not be approved by the Danish regulatory body for foundations doing business [called Danish Business Authority].

 

If Novo Nordisk  A/S [or some competitor, for that sake] is ever to break the genetic code of diabetes, Novo Nordisk A/S will close shop [or reduce its activity level materially], and the Foundation will live on, based on the capital already allocated to other endavours [Novozymes A/S, NNIT A/S etc.]

 

Oversight on my part, until after I posted. Thanks for the reminder, John.  :)

[John Hjorth]

It's a beast of its very own breed to sit on the back of, Sharad. Long term thinking here is to me imperative. Absolutely not for everybody. I feel I'm getting better at enduring the stress over the years passed, though. It has over time been really, really hard to me.

 

[ ; - ) ]

[DooDiligence]

It's a beast of its very own bread to sit on the back of, Sharad. Long term thinking here is to me imperative. Absolutely not for everybody. I feel I'm getting better at enduring the stress over the years passed, though. It has over time been really, really hard to me.

 

[ ; - ) ]

 

Every time I see someone who is morbidly obese I think about Novo Nordisk (and Sanofi, and Eli Lilly, both of which are way to complicated for me.)

 

Doesn't BRK own Sanofi?

BRK has so little invested in healthcare (not for long though...)

[John Hjorth]

DooDiligence,

 

Yes, Berkshire still owns a bit of Sanofi, relatively.

 

- - - o 0 o - - -

 

Medwatch.dk: Novo CSO [Mads Kroghsgaard Thomsen] about new diabetes discovery: One of the most important discoveries in recent times.

BBC News - Health: Diabetes is actually five separate diseases, research suggests.

The Lancet: Novel subgroups of adult-onset diabetes and their association with outcomes: a data driven  cluster analysis of six variables.

[John Hjorth]

The Guardian [2017.01.09 - old article]: Obesity: the big, fat problem with Chinese cities.

Wikipedia: Obesity in China.

Forbes [2017.01.22 - old article]: China's Growing Obesity Problem.

[Jurgis]

The Guardian [2017.01.09 - old article]: Obesity: the big, fat problem with Chinese cities.

Wikipedia: Obesity in China.

Forbes [2017.01.22 - old article]: China's Growing Obesity Problem.

 

I don't have position in NVO and I haven't done any DD, but I'll ask: Wouldn't China have local (knock-off) diabetes drugs? And even if they bought from Western companies, wouldn't they negotiate (strong-arm) single payer very low prices?

[John Hjorth]

Jurgis,

 

Thank you for asking! Good questions, that certainly qualify. I don't know. I'll try to find out, and post about it here, it's never too late to learn something new related to an investment.

 

My post with links without any comments was based on, that there was a transmission about it on the Danish TV-Cannel called DR. I was surprised to hear about it - I haden't ever before.

 

Here in Odense, we have a lot of Asian tourists during the summers - they come here to visit the House/former home of Hans Christian Andersen, the Danish Poet. I do not recall seeing just one of these Asian tourists being obese. [i suppose a material part  of them may be Chineese.]

[DooDiligence]

I just learned that creating human analog insulin is simply cloning.

I say "simply" as though it were simple to do.

Take the genetic info which codes for the proper protein and inject it into a bacteria.

Next, start a polymer chain reaction.

Purify the results and make them ready for delivery.

Simple, huh?

[Sharad]

I just learned that creating human analog insulin is simply cloning.

I say "simply" as though it were simple to do.

Take the genetic info which codes for the proper protein and inject it into a bacteria.

Next, start a polymer chain reaction.

Purify the results and make them ready for delivery.

Simple, huh?

 

This is the very reason I have stated that (I believe I've posted it) NVO has moat. To create a generic version of a biologic rather than chemical drug is approximately 15x-100x the R&D costs. There are a couple of Indian companies attempting to do so, but maintaining a stable bacteria (DNA mutations are frequent and unpredictable) is a huge headwind. There are many other quality assurance factors that need to be addressed by any generic attempt. The risks of a mistake are massive.

 

http://www.businessinsider.com/why-is-there-no-generic-insulin-for-diabetes-2016-8

 

According to one study:

 

"Due to the tremendous costs of bringing a new medicine to market,

the protection granted to innovators through intellectual property (IP)

rights is disproportionally important for the biopharmaceutical indus-

try. Moreover, the intellectual property elements of biologic medicines

include both the chemical structure of the molecule and the process for

reliably, safely, and consistently manufacturing the molecule at scale in

living tissues. While critical to protecting the intellectual property of

biologics, neither product nor process patents are able to protect the intellectual

property of the innovator firm’s safety and efficacy data, developed

through proprietary preclinical and clinical trial results. This information

must be protected with data exclusivity provisions"

 

"The differences in the production of small molecule pharmaceuticals and

biologic medicines also generate very different economic outcomes for

generic drug and for SEBs. In the case of small molecules, the development

of a successful generic industry generated competition through

which prices dropped dramatically. Much of the debate surrounding

protection for biologics and competition from subsequent entry biologics

centers on the mistaken belief that prices would similarly drop with the

development of SEB competition. However, it is unlikely that the cost savings

achieved with generic production and competition among small molecule

drugs will be available with subsequent entry biologics. For conventional

small molecule drugs, over the requisite three to five years in which

a generic is developed, the cost to do so is approximately $1 to $5 million,

but it results in a lower-cost alternative for patients.14 In contrast, the majority

of shortcuts available to generic small molecule manufacturers will

not be available to SEB producers. Industry experts anticipate subsequent

entry biologic firms will have to invest in clinical trials as well as manufacturing

and post-approval safety monitoring programs similar to those of

the innovative biologic company. Given this, subsequent entry biologics

will likely require 8 to 10 years to develop, at a cost of $75 to $250 million

(Amgen, 2014; Kambhammettu, 2008)."

 

Source: https://www.fraserinstitute.org/sites/default/files/biologics-revolution-in-the-production-of-drugs.pdf

 

 

Only time will tell...

[Cigarbutt]

"This is the very reason I have stated that (I believe I've posted it) NVO has moat. To create a generic version of a biologic rather than chemical drug is approximately 15x-100x the R&D costs. There are a couple of Indian companies attempting to do so, but maintaining a stable bacteria (DNA mutations are frequent and unpredictable) is a huge headwind. There are many other quality assurance factors that need to be addressed by any generic attempt. The risks of a mistake are massive."

 

I agree.

But.

 

-The diabetes market is huge and will likely grow++. A LOT of money to be made. So a lot of parties will have an incentive to produce a generic "equivalent" or a substitute.

-Recombinant DNA technology is still in its infancy, in a way. Expect accelerating effects due to innovation.

-The insulin analog market is a typical example of decreasing marginal returns (drug price over clinical efficacy) just like many other specialized drugs coming to the pharma market in the last few years. Expect pressure from the payer (whoever it is).

 

With that said, regulatory barriers to entry will likely remain relatively high for some time due to concerns about clinical efficacy, safety and immunogenicity (think of what happened to erythropoietin). In effect, time will tell.

 

https://onlinelibrary.wiley.com/doi/full/10.1002/btpr.2066

http://www.ema.europa.eu/docs/en_GB/document_library/Scientific_guideline/2015/03/WC500184161.pdf

https://www.liebertpub.com/doi/full/10.1089/dia.2014.0362

 

DooDiligence,

Isn't it hard to believe that the genetic similarity between humans is 99,9%!

Difference at the margin does count. :)

[Spekulatius]

Biologic molecule generics standards are much more stringent in the US than the rest of the world . In the US, clinical trials must be completed to prove therapeutic equivalency, in the EU and the rest of the world, only the biological/chemical equivalency of the molecule has to be proven, albeit extensively in the case of the EU and much less so in India.

 

http://www.bioprocessintl.com/manufacturing/biosimilars/biosimilar-markets-regulation-countries-going/

[Cigarbutt]

Mostly agree.

 

The FDA's "progress" has been slow and sometimes confusing but I wonder if the differences between the EU and the US are not overestimated.

 

Would add:

 

-The « generic » biosimilars (including the analog insulins) are complex molecules (compared to the simple molecule generic pill) and are highly sensitive to the manufacturing process but they are not truly « new » products and this is not well reflected by regulatory pathways actually in place.

 

-If you think of the US 1984 Hatch Waxman Act which allowed sponsors to refer to the previously approved product on which the patents had expired as part of their abbreviated new drug application for generic small molecule drugs, the passage of the BPCIA (Biologics Price Competition and Innovation Act, 2009) is likely to eventually facilitate the approval process for the « newer » biologics. The Act gives authority to the FDA in terms of the necessity to complete clinical studies for comparability purposes.

 

-The FDA framework is likely to continue to converge to global standards (or vice-versa) and « abbreviated » pathways to reduce burdens on sponsors are likely to come.

 

-So, from the regulatory standpoint, the competitive landscape is likely to ease to some degree.

 

-The estimated regulatory price tag of $75–250 million per developed drug in this space will be a relative deterrent to entrants outside of the oligopoly but the regulatory hurdles will likely come down as an unusually large number of patents are expiring.

 

[DooDiligence]

I just learned that creating human analog insulin is simply cloning.

I say "simply" as though it were simple to do.

Take the genetic info which codes for the proper protein and inject it into a bacteria.

Next, start a polymer chain reaction.

Purify the results and make them ready for delivery.

Simple, huh?

 

This is the very reason I have stated that (I believe I've posted it) NVO has moat. To create a generic version of a biologic rather than chemical drug is approximately 15x-100x the R&D costs. There are a couple of Indian companies attempting to do so, but maintaining a stable bacteria (DNA mutations are frequent and unpredictable) is a huge headwind. There are many other quality assurance factors that need to be addressed by any generic attempt. The risks of a mistake are massive.

 

http://www.businessinsider.com/why-is-there-no-generic-insulin-for-diabetes-2016-8

 

According to one study:

 

"Due to the tremendous costs of bringing a new medicine to market,

the protection granted to innovators through intellectual property (IP)

rights is disproportionally important for the biopharmaceutical indus-

try. Moreover, the intellectual property elements of biologic medicines

include both the chemical structure of the molecule and the process for

reliably, safely, and consistently manufacturing the molecule at scale in

living tissues. While critical to protecting the intellectual property of

biologics, neither product nor process patents are able to protect the intellectual

property of the innovator firm’s safety and efficacy data, developed

through proprietary preclinical and clinical trial results. This information

must be protected with data exclusivity provisions"

 

"The differences in the production of small molecule pharmaceuticals and

biologic medicines also generate very different economic outcomes for

generic drug and for SEBs. In the case of small molecules, the development

of a successful generic industry generated competition through

which prices dropped dramatically. Much of the debate surrounding

protection for biologics and competition from subsequent entry biologics

centers on the mistaken belief that prices would similarly drop with the

development of SEB competition. However, it is unlikely that the cost savings

achieved with generic production and competition among small molecule

drugs will be available with subsequent entry biologics. For conventional

small molecule drugs, over the requisite three to five years in which

a generic is developed, the cost to do so is approximately $1 to $5 million,

but it results in a lower-cost alternative for patients.14 In contrast, the majority

of shortcuts available to generic small molecule manufacturers will

not be available to SEB producers. Industry experts anticipate subsequent

entry biologic firms will have to invest in clinical trials as well as manufacturing

and post-approval safety monitoring programs similar to those of

the innovative biologic company. Given this, subsequent entry biologics

will likely require 8 to 10 years to develop, at a cost of $75 to $250 million

(Amgen, 2014; Kambhammettu, 2008)."

 

Source: https://www.fraserinstitute.org/sites/default/files/biologics-revolution-in-the-production-of-drugs.pdf

 

 

Only time will tell...

 

I'm glad you pointed out the importance of the bacteria (as if the actual harvesting of DNA wasn't difficult enough for someone to do.)

 

Intro to Biology makes all of this, kind of, understandable now.

 

https://www.novozymes.com/en/biology

 

Novozymes seemed like a mundane commodities business to me before, but now, not so much.

(Why did they ever spin this business out?)

 

Does the foundation still control Novozymes like it does NVO?

I would assume that they have a lot of intertwining agreements?

or just one simple agreement; keep providing us with integral proteins that neither Eli or Sanofi has access to.

 

Spring break ends 2morrow am (bright & early) & Biology chick will be whipping some more cellular gobble-de-gook on us,

and I am delighted to attend even if it interferes, severely, with the other stuff I'm trying to learn.