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    SAN   FR0000120578

SANOFI

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Top insulin maker Novo caught up in China's widening drug probes

08/08/2013 | 08:12am EDT

COPENHAGEN/LONDON (Reuters) - Chinese authorities have visited a site operated by Danish drugmaker Novo Nordisk A/S (>> Novo Nordisk A/S), the world's biggest maker of insulin, in the latest sign of a widening investigation into Western drugmakers.

COPENHAGEN/LONDON (Reuters) - Chinese authorities have visited a site operated by Danish drugmaker Novo Nordisk A/S (>> Novo Nordisk A/S), the world's biggest maker of insulin, in the latest sign of a widening investigation into Western drugmakers.

H. Lundbeck A/S (>> H. Lundbeck A/S), a smaller Danish drugs firm, also said its unit in Beijing had been visited by the authorities, while a Chinese newspaper reported an allegation from an unnamed person that French firm Sanofi SA (>> SANOFI) had paid around 1.7 million yuan ($276,200) in bribes to hundreds of doctors in China in 2007.

Paris-based Sanofi said it took the claim "very seriously".

Chinese investigations into bribery and over-pricing have so far centred on Britain's GlaxoSmithKline Plc (GSK) (>> GlaxoSmithKline plc) but the latest developments suggest they could have a wider impact across the pharmaceuticals industry.

Novo said on Thursday that local Administration for Industry and Commerce (AIC) officials visited a production facility in Tianjin on August 1, adding there had been no visit at the company's head office in the country.

"We were asked to provide information regarding our operations in China," Chief Financial Officer Jesper Brandgaard told reporters as he presented second-quarter results.

"Whether this was a routine check or triggered by the (GSK) case reported recently in the media is not completely clear to us. However, the local AIC hasn't accused Novo Nordisk of any wrongdoing."

Chinese police have detained four Chinese executives of GSK and questioned at least 18 other staff amid allegations that the drugmaker funnelled up to 3 billion yuan $489 million (£315.3 million) to travel agencies to facilitate bribes to doctors and officials.

At the same time, the powerful National Development and Reform Commission is examining pricing by 60 local and international pharmaceutical companies.

AstraZeneca Plc (>> AstraZeneca plc), meanwhile, has had a sales executive detained in Shanghai, while Eli Lilly & Co (>> Eli Lilly & Co.) and Belgium's UCB SA (>> UCB) have also had visits to premises in China.

Industry analysts at Wells Fargo Securities, citing the views of a China expert with law firm Ropes & Gray, said the knock-on effect would be to crimp growth for multinational pharma companies in China, where the authorities are expected to push for harsher price controls.

As a result, the rate of growth for drug sales in the country could fall to around 10 percent a year from an historical 20 percent, they wrote in a research note.

NOVO RAISES OUTLOOK

For Novo investors, the potential problems in China were offset by the company's decision on Thursday to raise its full-year results forecast for a third time in six months, after double-digit sales growth in diabetes drug Victoza and modern insulin helped lift second-quarter operating profit above forecasts.

It now expects 2013 sales growth in local currencies of between 11 and 13 percent, compared with 9 to 11 percent previously. Its forecast for operating profit growth was increased to between 12 and 15 percent from around 10 percent.

"Given the tendency of management to beat and raise throughout the year, we expect consensus to move 1 to 2 percent upwards to the higher end of the new guidance range," said Deutsche Bank analyst Tim Race.

Shares in Novo were up 0.8 percent at 969 crowns by 1134 GMT.

Profit growth was driven by a 12 percent increase in sales of modern insulins compared with the same quarter a year ago and a 25 percent rise in sales of diabetes drug Victoza.

Group sales rose 10 percent to 21.38 billion crowns, against an average market forecast of 21.26 billion given in a Reuters poll of analysts.

The company said that based on feedback from the United States Food and Drug Administration (FDA) regarding the design of a cardiovascular outcomes trial for its new long-acting insulin Tresiba, it now expected to start the trial before the end of the year.

The additional trials for the drug follow a blow in the United States in February when the FDA refused to approve Tresiba and instead asked for extra tests to assess potential heart risks.

Earnings before interest and tax (EBIT) rose to 8.59 billion Danish crowns $1.5 billion in April-June from 7.65 billion in the second quarter last year, above an average forecast of 8.27 billion crowns given in a Reuters poll.

(Additional reporting by Stine Jacobsen; Editing by David Holmes and Greg Mahlich)

By Mette Fraende and Ben Hirschler


© Reuters 2013
Stocks mentioned in the article
ChangeLast1st jan.
ASTRAZENECA PLC -0.96% 8063 Delayed Quote.10.09%
ELI LILLY AND COMPANY -0.41% 230.1 Delayed Quote.36.28%
GLAXOSMITHKLINE PLC -0.49% 1388.2 Delayed Quote.3.44%
H. LUNDBECK A/S -0.21% 170.2 Delayed Quote.-18.49%
NOVO NORDISK A/S -0.36% 643.4 Delayed Quote.50.80%
SANOFI -0.15% 81.55 Real-time Quote.3.62%
UCB -0.60% 92.3 Real-time Quote.9.26%
US DOLLAR / CHINESE YUAN RENMINBI (USD/CNY) 0.00% 6.4655 Delayed Quote.-1.05%
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Sales 2021 37 415 M 43 869 M 43 869 M
Net income 2021 6 046 M 7 089 M 7 089 M
Net Debt 2021 7 878 M 9 237 M 9 237 M
P/E ratio 2021 17,1x
Yield 2021 4,04%
Capitalization 102 B 120 B 120 B
EV / Sales 2021 2,95x
EV / Sales 2022 2,69x
Nbr of Employees 99 412
Free-Float 88,4%
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Number of Analysts 26
Last Close Price 81,55 €
Average target price 104,66 €
Spread / Average Target 28,3%
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Paul Hudson Chief Executive Officer & Director
Jean-Baptiste Chasseloup de Chatillon Chief Financial Officer & Executive Vice President
Serge Weinberg Chairman
John C. Reed EVP & Global Head-Research & Development
Nestle Frank Global Head-Immunology Therapeutic Research Area
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