Danish pharmaceutical giant Novo Nordisk AS (NVO, Financial) hopes to apply a unique drug delivery technology it acquired to enable people to take more of its drugs by mouth.
Novo obtains the know-how with the $1.8 billion purchase of Emisphere Technologies Inc. (EMIS, Financial), a New Jersey-based company that specializes in drug delivery. Emisphere trades over the counter.
Novo recently used the Emisphere technology under license to develop its diabetes drug, Rybelsus—the first and only oral type of a class of drugs called glucagon-like peptide agonists, according to an article in FiercePharma. GL-1 drugs not only improve blood sugar control, but may also lead to weight loss.
The Emisphere tool is known as Eligen SNAC, which uses a proprietary method to translate drugs into oral form, Novo said in a news release. Notably, it allows drug molecules like large peptides and proteins to move across biological membranes such as those in the gastrointestinal tract.
"We intend to apply and further develop the technology and use it on current and future pipeline assets to make more biologic medicines orally available for patients," Mads Krogsgaard Thomsen, executive vice president and chief scientific officer, said in a news release.
Novo is already pouring big money into the platform. The company has 100 scientists in its Copenhagen headquarters working on expanding its diabetes drugs in oral form.
"By further developing the technology, we hope in the future to produce the medicine cheaper than we do now, thus allowing us to penetrate more markets and give broader access to diabetes drugs," Thomsen told Reuters.
Novo shares got a nice little bump on news of the acquisition, rising to $70.71, up more than 11% from where it was just a week earlier. The stock has since eased to just over $68. Its 52-week high is $73.81, with a low of $49.24. The company's dividend yields about 1.5%.
CNN Money reported that the 23 analysts offering 12-month price forecasts for Novo have a median target of $73.31, with a high estimate of $86.86 and a low of $52.39. The shares are rated a buy.
Joel Greenblatt (Trades, Portfolio) of Gotham Capital is also high on Novo. In a mid-October GuruFocus article, Greenblatt pegged Novo as one of four health care companies worldwide with strong business quality. Others in the group were Biogen Inc. (BIIB, Financial), Illumina, Inc. (ILMN, Financial) and ResMed Inc. (RMD). Novo ranks second on the list with an earnings yield of 4.95% and a return on capital of 102.44%. The two metrics outperform over 94% of global biotech competitors, according to Greenblatt.
In the third quarter, Novo earnings were 69 cents, beating the Zacks consensus estimate by a penny. However, the company missed on revenue, reporting a 2% increase to $4.58 billion compared to the Zacks estimate of $4.75 billion.
For the full year, Novo expects 5% to 8% sales growth, based in great part on outstanding sales for its three GL-1 diabetes products. However, the company is in a tough battle with Eli Lilly and Co. (LLY, Financial) and Sanofi (SNY, Financial) in the global insulin market and with Lilly and AstraZeneca (AZN, Financial) in the worldwide GLP-1 market.
Disclosure: The author holds positions in Eli Lilly and Sanofi.
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