What happened

Shares of Danish pharma giant Novo Nordisk A/S (NYSE:NVO) rose 11.7% in August, according to data from S&P Global Market Intelligence. Investors were relieved to see that the sales stall the company had warned about last summer never materialized, and pleased to see hints of growth ahead.

So what 

Novo Nordisk shocked the market in August 2016 with a depressing outlook for its pricey diabetes treatments. Last month, the stock surged when the company reported an 8% operating profit increase for the first half of the year. The company also nudged its total sales forecast for the year upward, from a range of 0% to 3% growth to between 1% and 3% growth, despite continued pressure from U.S. end payers.

Hand drawing a simple yellow chart sloping upwards.

Image source: Getty Images.

Although the company expects average prices after rebates to be lower again next year, it also asserted that its innovative new treatments have what it takes to drive growth. The FDA gave some support to that claim near the end of August when it added an important line to Victoza's label that makes it the first type 2 diabetes treatment indicated to reduce the risk of strokes and heart attacks.

Now what

While the FDA adding a line to Victoza's label might not seem like a big deal, it's a huge selling point for the drug. In 2014, 1.54 million patients hospitalized for major cardiovascular disease in the U.S. were also diagnosed with diabetes. Novo's drug reduced the risk of cardiovascular death, non-fatal heart attack, or non-fatal stroke by 13% when added to standard treatment.

While injected Victoza gets a nice bump from its improved label, an oral drug that works in the same manner is awaiting an approval decision by the FDA at the moment. If approved, semaglutide should have a big edge over the competition. In a late-stage clinical trial, the experimental pills outperformed Eli Lilly's leading injectable treatment of the same class, Trulicity, with respect to blood sugar control and weight loss.

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