Use the data in Example 1 on Novo Nordisk to answer the following questions: i. Xiaoping Wu
Question:
Use the data in Example 1 on Novo Nordisk to answer the following questions:
i. Xiaoping Wu is an equity analyst covering European pharmaceutical companies for his clients in China. Wu projects that global nominal GDP will grow 5% annually over the long run, based on 2% real growth and 3% inflation. The incidence of diabetes is escalating globally because of increasingly unhealthy diets and sedentary lifestyles. As a result, Wu believes global sales of diabetes drugs will grow 100 bps faster than nominal GDP over the long run. Wu believes the revenue growth rate of Novo Nordisk’s diabetes care segment will decline linearly over the next four years from its growth rate in 2011 to the projected long-run growth rate of the diabetes drug market.
A. Is Wu using a top-down, bottom-up, or hybrid approach to modeling Novo Nordisk’s revenue?
B. Based on Wu’s projections for revenue growth, calculate the estimated revenue growth rate for the diabetes care segment in 2013.
ii. Helga Hansen is a buy-side analyst in Denmark. In early 2011, Hansen was investigating Victoza, a recently launched compound in a new class of diabetes drugs called GLP-1 analogs. As of 2011, Victoza has only one direct competitor in its class: Byetta, a drug that is co-marketed by two US-based pharmaceutical companies, Amylin Pharmaceuticals and Eli Lilly. Victoza had a few advantages over Byetta; most notably, it is delivered by injection once a day, rather than twice a day.
Eli Lilly reported global sales of Byetta in US dollars. Hansen converted these figures to euros using the annual average USD/EUR exchange rate and compiled the following table comparing sales of Victoza with sales of Byetta, measured in millions of euros.
A. What was the growth rate in total GLP-1 analog sales in 2010?
B. What percentage of GLP-1 analog sales growth in 2010 was caused by Victoza?
C. H ansen projected that the growth rate of the GLP-1 analog market would slow to 28% in 2011. She also expected Victoza to improve its market share by 25 percentage points. What was Hansen’s estimate of 2011 Victoza sales?
How close was she to the actual result?
D. Is Hansen’s approach to modeling Novo Nordisk’s sales best described as bottom- up, top-down, or hybrid?
Step by Step Answer:
i A Wus longrun revenue projections are based on Novo Nordisks growth relative to nominal GDP growth which is a topdown approach However his estimated ...View the full answer
