EUR 4351.14 For Business Accounts Only

Our Concerns Remain

Novo Nordisk shares performed strongly yesterday yet the underlying business is unchanged from 3mths ago. We remain concerned about the outlook for 2018 and beyond due to Victoza pricing pressures, a Tresiba slowdown, higher R&D spend and potentially lower than expected buybacks due to M&A. Data-points on our US pricing concerns will be provided at the Q2 results and preliminary 2018 guidance will be provided at Q3. If 2018 isn’t as tough as we envisage we will be forced to reassess our view. However, for us, yesterday provided no insight into our concerns.

Guidance Unchanged – Despite yesterday’s share price performance, 2017 guidance is unchanged. The mid-point for sales guidance remains the same and for EBIT has increased
by 0.5% for FY17. However, there was a 1% increase to EPS from lower FX hedging losses.

2017 Headwinds to Come – Management clearly didn’t feel confident enough to increase full year guidance and we show that this could be due to 1) Slower than expected US Victoza
performance, 2) Tresiba NRx volumes plateauing and 3) increased costs for the Sema launch, Tresiba SWITCH label expansion and PIONEER R&D programme.

Still Worried about 2018 – Our concerns for 2018 remain valid. We are worried that 1) Victoza pricing will be lower having multiple effects on gross margins and profitability (consensus assumes Victoza grows next year), 2) Tresiba volume and price will be tough, 3) R&D could grow through in-licensing or M&A and 4) buybacks are at risk from M&A.

Price Target Increased due to sector performance – We increase our PT to DKK245 (DKK220) due to the 10% sector performance since the start of the year. We continue to believe that the risks warrant a 5% discount to the sector as opposed to the current 10% premium to EU Pharma.