>NOVO NORDISK (EUROPEAN STOCK)

■ Insufficient upside given risks
The key to near-term share price performance remains US Victoza (GLP-1 analogue) approval timelines following concerns on thyroid safety, with a definitive decision now likely by the end of the quarter. Our valuation scenarios suggest balanced risk-reward through the process, with c10% downside to DKK290 on a 2-3-year delay (the scenario reflected in our forecasts), but c12% upside to DKK360 on a timely approval. We maintain our Neutral rating, given: 1) Investor sentiment on delay may drive share price downside below our FV estimate in this scenario; 2) There are limited other catalysts beyond Victoza near term, and 3) We see better opportunities elsewhere in the sector near term.

■ FDA decision remains tough to call
In our opinion, the FDA decision on Victoza remains tough to call. Factors suggesting a possible timely approval include clinician support for the class, given the attractive efficacy and weight-loss profile, no increase in calcitonin (a marker of thyroid safety) seen for up to 2 years, and no C cell cancers in 5,000 treated patients. However, factors that continue to drive our caution include the mixed FDA advisory committee vote on thyroid safety and concern that FDA may still request formal re-submission of data or request additional data.

■ Limited other data catalysts
We see limited other data catalysts beyond US Victoza approval short term. While the late-stage pipeline is progressing, with a number of Phase III trials due to commence shortly, data from these are not expected for over 12 months. Nearterm data is likely restricted to Phase II data for NN1731 (“SuperSeven”, haemophilia) and Phase II data for once-weekly GLP-1 analogue (semaglutide) and follow-on insulin analogues (SIBA and SIAC) at ADA 2010.

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