Novo is a good growth story as far as the fundamentals are concerned. The stock has delivered decent returns for the investors. Revenues have increased by 53% since 2009, and the net income has more than doubled during the same period. Though there were some sequential declines in the last quarter, the yoy performance was not bad. The revenues and the net income increased by 8.5% and 29% respectively. Tresiba has been launched in the UK, Denmark and Japan, and progress is expected in the US as the company is in discussions with the FDA to address their concerns. Its R&D pipeline comprises of several products at the filing or the phase 3 stage. For 2013, sales growth measured in local currencies is expected to be 9-11%, whereas operating profit growth is expected to be around 10%. The trailing P/E is around 23, while the forward P/E is ~20.5, which reflects moderate expectations of growth. The price to sales and price to book are a little high at 6.3 and 15 respectively. These metrics indicate that the stock has priced in a lot of the future positives already. However, the high profit margin of 28% and liquidity position are difficult to ignore. More appreciation is possible if the company is able to beat the guidance, or deliver some positive surprises by launch of new products. Diabetes management has numerous sub-segments with several pharmaceutical giants competing for market share. Even smaller players like Chromadex Corporation (CDXC) are actively researching on innovative molecules for diabetes / obesity management. Novo Nordisk commands nearly 50% market share in the insulin market world-wide, and is expected to strengthen its strong position with new launches over the next few years. In countries like China the market share in insulin market is as high as 60%. It can leverage its commanding position to increase the growth rate. That will translate into better returns for investors.
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