The investment arm of Novo Nordisk AS (NVO) just added to its long list of life science companies, thrusting the Danish pharma giant into the growing market for diagnostics. Novo paid $563 million to become the majority shareholder of U.K.-based BBI Group, a world leader in producing diagnostic reagents and supplies for other test makers.
With sites in seven countries and 400 employees, BBI counts Thermo Fisher Scientific Inc. (TMO, Financial), Merck & Co. Inc. (MRK, Financial) and Siemens AG (BUD: SIEMENS) among its customers. BBI’s expertise is in immunoassay development and manufacturing services, providing a wide range of products and technologies to the global diagnostic market.
BBI was part of Alere until 2015, when it was sold to Exponent Private Equity for $164 million. Alere was later acquired by Abbott Laboratories (ABT, Financial).
It appears Novo’s timing is impeccable. Covid-19 has pushed diagnostics to the forefront of health care, and many think this greater focus will alter the future of the technology. Pre-Covid, diagnostic testing was used as a tool to support medical professionals in diagnosing illness so that the patient could get further needed health care.
Patient requirements for diagnostic testing were to be able to receive timely, accurate and affordable results reported Medical Device and Diagnostics Industry. After Covid, patients are now more aware of the diagnostic industry and the benefits of testing. This awareness will change expectations and bring innovators into the market. These factors are expected to push the clinical diagnostics market from about $63 billion in 2020 to more than $93 billion by 2026, a compound annual growth rate of more than 6%.
Novo shares are having a nice year, climbing 17% since January. With a stock price of $82.64, the company has a market value of more than $190 billion. The yield on its dividend is 2.18%.
The company had first-quarter 2021 earnings of 88 cents per American depositary receipt, beating the Zacks consensus estimate of 79 cents. The company reported earnings of 75 cents in the year-ago quarter. Revenue of $5.4 billion were flat, but beat the Zacks estimate by $0.4 billion. Sales were negatively impacted by Covid issues.
For the year, Novo expects sales to expand by 6% to10%, thanks in great part to increases in its international business and growth in diabetes and obesity products. Revenue is expected to be affected by competition from several formidable diabetes competitors-- Eli Lilly and Co. (LLY, Financial), Sanofi (SNY) and AstraZeneca PLC (AZN).
According to CNN Business, the 25 analysts offering 12-month price forecasts for Novo have a median target of $81.78, with a high estimate of $91.59 and a low estimate of $55.81. They rate the stock a buy.
