Image source: Novo Nordisk.

What: Novo Nordisk (NYSE:NVO) is down 10% at 12:15 p.m. EDT after releasing second-quarter earnings today.

So what: Results from the first half of the year weren't so bad. Sales were up 5% when measured in the Danish kroner that the pharma reports in, or 7% when measured in local currencies. Earnings per share were up 9% to 7.63 Danish kroner per share.

But management warned that pricing pressure in the U.S. will have a negative effect on results for the second half of the year. Novo Nordisk lost a contract this year for its flagship drug NovoLog, which, when combined with the lower sale prices for other contracts, negated gains from newer insulins Tresiba and Levemir.

And the company sees more pricing pressure next year. To renew 2017 contracts and stay on insurers' and pharmacy benefit managers' formularies, Novo Nordisk had to offer discounts in low- to mid-single-digit percentages compared to this year's prices.

With rocky times ahead, management lowered the top end of 2016 sales guidance to a range of 5% to 7% growth in local currencies, compared to the previous guidance that topped out at 9% growth.

Now what: Pricing pressure only occurs when drugs are fairly interchangeable. Innovative drugs that offer better efficacy, safety, or convenience than other drugs can command premium pricing.

Fortunately Novo Nordisk has products like that in its pipeline, including an oral insulin that goes by OI338GT, which recently passed a phase 2a clinical trial. Recent data showed that already-approved Victoza decreased cardiovascular outcomes -- heart attacks, strokes, and the like -- by 13%; this could also help keep it on formularies, although payers may see the improvement as a class effect for all GLP-1 drugs.

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