Novo Nordisk (NVO) accounts for about 50% of the DKK (Danish krone currency) 19 billion global human insulin market. For biotechnology companies, the term “human insulin” refers to synthetic insulin grown in a laboratory to mimic the insulin in humans.
The above graph shows that Novo Nordisk’s human insulin revenues have gradually declined from 2012 to 2014. This is mainly attributed to the loss of a large tender contract, which resulted in fewer patients being treated by human insulin.
Least developed countries
Novo Nordisk practices a differential pricing policy for selling human insulin in least developed countries (or LDC) as defined by the United Nations. The policy offers human insulin to LDCs at prices that are 20% or more below the average prices in Europe, the United States, Canada, and Japan. Thirty-two LDCs are currently buying human insulin from Novo Nordisk according to the differential pricing policy.
With greater focus on rural markets in LDCs, Novo Nordisk’s human insulin business faces unique challenges. Since the use of human insulin is more extensive in rural markets, local manufacturers have more clout and are thus outcompeting Novo Nordisk.
The company plans to offset these revenue losses with Tresiba, its next-generation insulin therapy, approved in China. It also plans to support the market with Ryzodeg, another next-generation insulin.
Oral antidiabetics and protein-related products
Since August 2013, Novo Nordisk’s oral antidiabetic segment has been witnessing a decline in total revenues due to competition from Teva Pharmaceutical’s (TEVA) Actoplus Met, Novartis Sandoz’s (NVS) Duetact, and Merck’s (MRK) Januvia. Protein-related products are also facing a fall in total revenues.
Investors can reduce exposure to Novo Nordisk’s low growth segments by investing in the VanEck Vectors Pharmaceutical ETF (PPH). Novo Nordisk accounts for 5.05% of PPH’s total holdings.