Novo Nordisk Q2 Strong Yet Slightly Short Of Consensus; Credit Positive But Not A Mover

Rating: A1[P]/AA- EUR 26s/34a 1.5bp Tighter

Strong YoY figures that look to have disappointed equity analysts, but which are positive for the credit. FCF slightly lower but accompanied with increased FY guidance.

• Q2 sales +25% YoY (-1% vs. BBG consensus) driven by 36% growth in North American sales. GLP-1 sales accounted for 54% of sales in the quarter with a 32% growth which was partially weighed upon by Insulin and rare disease sales contraction.
• Op margin of 38.1% (vs. consensus of 40.8%) compared to 44% in Q223 due to a large increase in R&D costs from 13.1% of sales to 23.8% driven by increased late-stage clinical trial and research activities as well as the impairment loss related to ocedurenone of DKK 5.7bn.
• H1 FCF of DKK 41.3bn compared to DKK 45.5bn in H123 with the decrease attributed to increasing capex (PPE CapEx of DKK 18.9bn from DKK 10.6bn last year, Intangible CapEx of DKK 3.3bn from DKK 1.3bn last year) as well as acquisitions, offset by an 11% increase OCF.
• Guidance tweaked as per the below image; sales growth seen higher on GLP-1 volumes but op profit is seen lower mainly due to the ocedurenone impairment. FCF seen higher on the improved sales outlook and favourable rebates.