Novo Nordisk raises bar on R&D after pricing pressures
- Facing pricing pressures from U.S. payers, Novo Nordisk is continuing its cost-cutting plan by raising the bar for its R&D engine.
- The Danish drug maker said during its third-quarter earnings call that it now expects low single-digit growth in sales and flat growth in operating profits in 2017. It previously had forecast double-digit sales growth.
- As part of its streamlining process, Novo Nordisk announced earlier this fall it was putting its CEO transition plan in place earlier than expected and laying off 1,000 of its employees globally.
"In order to reflect the increasingly challenging payer environment, particularly in the United States, our R&D strategy and priorities have been updated. Going forward, we will apply an even higher innovation threshold for progressing R&D projects. We will further intensify exploration of current assets in adjacent disease areas of high unmet medical need," said current Novo Nordisk CEO Lars Sorensen, who is being replaced in 2017 by Lars Jorgensen.
The company took a pessimistic tone on its earnings call, noting its long-term financial target of 10% growth is now unrealistic and it only expects growth of 5% going forward.
"We've updated our R&D strategy and priorities to reflect both increased payer demand for distinctively differentiated new drugs to enable market access and our own strong late-stage product profiles that are also raising the innovation bar for ourselves. As a consequence, we'll apply an even high innovation threshold when initiating and progressing research projects," said Chief Scientific Officer Mads Krogsgaard Thomsen.
"Going forward, there will be ramifications of the new strategy within both research and development," he said on the call. "In development, we intend to increase our focus on exploring the application of current assets, such as the long-acting GLP-1 analogue semaglutide in new adjacent areas with higher unmet need."
"In research, we'll maintain our focus on diabetes through projects with distinct differentiation or even disruptive potential. Additionally, we'll focus on disease areas adjacent to diabetes, including end organs such as the liver, kidneys and cardiovascular system," Thomsen added.
Novo Nordisk executives added that they will enhance collaborations with academia, as well as explore new strategic alliances within those adjacent disease areas.
As part of the higher R&D threshold, the company is discontinuing the development of the oral insulin OI338GT.
No late-stage projects were affected, but the company noted it will begin exploring its GLP-1 inhibitors in other disease areas.
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