BMI View: In comparison to other Western European markets, Denmark's pharmaceutical industry is relatively small. However, BMI views Denmark as a highly attractive market for multinational drugmakers as a result of the country's stringent regulations, business transparency and high public health expenditure. The country's ageing population will be a key factor in driving medicine sales over the long term, although the possibility of further drug price cuts poses a downside risk to our forecast, as the government will look to manage rising healthcare costs.
Headline Expenditure Projections
Pharmaceuticals: DKK20.87bn (USD3.75bn) in 2014 to DKK21.30bn (USD3.14bn) in 2015; +2.1% in local currency terms and -16.2% in US dollar terms. Forecast unchanged from last quarter.
Healthcare: DKK198.36bn (USD35.66bn) in 2014 to DKK201.98bn (USD29.82bn) in 2015; +1.8% in local currency terms and -16.4% in US dollar terms . Forecast in line with last quarter.
Denmark scored 68.1 out of a total 100 in our index for Q4 2015 and was positioned seventh out of the 15 markets in our Western Europe matrix, just below Finland (68.8). The country's score is boosted by a strong regulatory environment, although a major factor affecting the business environment for drugmakers is Denmark's small overall market size.
Key Trends And Developments
In August 2015, Novo Nordisk announced that it would not pursue an expanded indication for Victoza (liraglutide) as an add-on treatment to insulin for type 1 diabetes following disappointing Adjunct One study results. The study showed that giving Victoza along with insulin improved blood glucose control compared with placebo, but increased the risk of treatment-emergent hypoglycaemia.
In August 2015, Danish drugmaker Lundbeck announced it would cut 1,000 jobs and reduce costs by DKK3bn (USD447.98mn) to regain profitability. As part of the restructuring, the company reclassified previous research and development expenditure, worth DKK4.8bn (USD718.45mn), as a one-off cost in Q215. The move will lead to an operating loss of DKK4.87bn (USD729.1mn). The company's full year operating loss is expected to be approximately DKK7bn (USD1.05bn).
In August 2015, Lundbeck reported that its core revenue grew by 5.2% in Q215 to reach DKK3,629mn (USD537.8), compared with DKK3,448mn in Q214. In local currencies, revenue fell by 5%, primarily because of generic competition on Ebixa (memantine) and Cipralex (escitalopram) in Europe, and Cipralex in Canada. Sales of key products grew by 174% to DKK806mn (USD121.9mn) and contributed 22% of total revenue.
In August 2015, Genmab entered an agreement to grant Novo Nordisk commercial licences to use the DuoBody technology platform to create and develop bispecific antibody (Ab) candidates for two therapeutic programmes. The bispecific Abs will target a disease area outside of cancer therapeutics. Under the terms of the agreement, Genmab will receive an up-front payment of USD2mn from Novo Nordisk.
Novo Nordisk's second-quarter revenues grew by 25.0% in Danish kroner terms, to DKK27.06bn (USD4.00bn), and net profits rose by 19.3% to DKK8.34bn (USD1.23bn). Revenue growth was driven by sales performance in the company's diabetes care portfolio, particularly modern insulin, with a combination of price rises in the US and currency tailwinds driving outperformance.
BMI Economic View
While the forthcoming unwinding of ultra-loose monetary policy will chip away at the momentum behind the recovery in Danish domestic demand, real GDP growth will continue to be supported by a steady improvement in external demand. As such, we have revised up our real GDP growth forecast for Denmark to 1.7% in both 2015 (from 1.5%) and 2016 (from 1.6%).
BMI Political View
Denmark is poised for a period of unstable party politics with the new one-party minority government unlikely to stay in power for the duration of its term ending in 2019. The ruling centre-right Venstre party will have to seek support from either fellow right-wing parties or opposition leftist parties, making the passage of legislature a difficult and protracted process.