Last year and this year could easily be described as the two most innovative years for diabetes treatments, with so many novel therapies coming to the market. This is good news for diabetics, but it means increased competition for Danish company Novo Nordisk (NYSE:NVO), a stalwart in diabetes care.

Even with the competitive threats, Novo Nordisk reported respectable third-quarter revenue and earnings numbers on Friday. Sales were up 9% to $1.7 billion (using a Danish krone-to-dollar exchange rate of 1 to 0.17), and gross margins expanded 2.4 percentage points to nearly 76%. Operating income was up 8% to $425 million, but operating margins were flat at 26% due to increased research and development spending.

Based on strong sales for three of its four top areas, Novo Nordisk reiterated its guidance for overall 2006 revenues to end up 13% to 15% better than 2005 and for operating profits to grow 13%. Preliminary guidance for 2007 (full guidance will be given in January) is for sales to grow at least 10% and operating profits to increase 10% to 15%. This would be quite impressive, because Novo is facing so many new competitors.

9-month sales

Year-over-year growth**

Human insulin

$1,900

1%

Insulin analogues

$1,300

52%

NovoSeven

$710

12%

Growth hormone

$410

22%
*all sales numbers in millions, using a Danish krone-to-dollar exchange rate of 0.17
**in local currencies

Novo Nordisk is being proactive with the changing treatment paradigms for diabetes care. In 2005, it spent more than $500 million on researching improved or alternative treatments for diabetes, with two drugs in phase 3 and three in phase 1 trials. Research and development spending in the first nine months of 2006 has gone even higher, with the testing of NovoSeven in numerous additional indications.

If Novo Nordisk sales growth next year can match its predictions, then shares are trading at a very reasonable 25 times trailing-12-month earnings, considering the future sales growth of its insulin analogues and NovoSeven. The latter drug was just approved to treat acquired hemophilia in the U.S., and it stands to gain additional label expansions. If these estimates can hold, then shares of Novo Nordisk are worth a look, and its management will deserve a lot of credit for being able to thrive even in the face of strong competition.

For a fun new way to do research on stocks, check out CAPS , the Fool's new investment community. Trying to get ahead in the game? The Fool has a newsletter for almost every type of investor, including Global Gains about international companies.

Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy .