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Novo Nordisk defiant despite $90,000 disclosure fine

By Fiona Barry , 19-Aug-2014

An insulin model (Picture credit: Novo Nordisk).
An insulin model (Picture credit: Novo Nordisk).

Novo Nordisk wants “a political debate” and changes to financial disclosure laws after Danish authorities fined it $90,000 for not immediately telling investors the US FDA had rejected Tresiba and Ryzodeg in 2013.

The US Food and Drug Administration (FDA) rejected the two drugs in 2013 explaining in a Complete Response Letter issued on Friday February 8 that long term studies were needed to assess the drugs’ cardiovascular risks.

Novo Nordisk waited until Sunday February 10 before informing investors arguing that analysing the financial impact of the surprise rejection – Tresiba and Ryzodeg were already approved in Japan and the EU – was the right thing to do.

This week the company accepted a 500,000 kroner ($89,500) penalty from the Danish Financial Supervisory Authority but stood by its decision, telling in-Pharmatechnologist.com it had behaved in “a diligent manner” by taking the time to evaluate the news before presenting it to investors.

‘Opposing obligations’

Mike Rulis, Novo Nordisk’s Vice President of Corporate Communications, told in-Pharmatechnologist.com the company was right to wait two days with its announcement.

Section 27 (1) of the Danish Securities Trading Act, under which the company was fined, requires firms to disclose material information as soon as possible. Another clause says the company must ensure the information is complete and allows evaluation of the news and its consequences, said Rulis.

We felt it was in shareholders’ best interests to receive a company announcement which contained our conclusions on what this Complete Response Letter would mean for the financial expectations of the company.

We had just announced our annual forecast the week before – would this mean a profit warning? Our financial people worked around the clock during the weekend to analyse the consequences. We had that picture by Sunday when we issued the announcement.

While the financial regulator says Novo Nordisk should have issued an announcement late on Friday night, “we maintain we have an obligation to provide complete information so the shareholders were best served by postponing the statement,” said Rulis. “It’s a question of how to weigh those two obligations against each other.

Legal debate

Looking to the future, Rulis said the company wants to “raise a debate with the [Danish] Ministry of Commerce over changes to this Act, and how it’s interpreted.

He claimed support from a University of Copenhagen academic who has called in national media for a political debate about interpretation of the Danish Securities Trading Act.

An investigation by the Danish Stock Exchange (NASDAQ OMX Copenhagen) in February 2013, which found the company had not violated stock exchange disclosure rules, similarly “supports our view that we actually dealt with this situation in a diligent manner,” said Rulis.

The rejection of Tresiba and Ryzodeg came as a surprise as the insulin drugs are already authorised in Europe and Japan and were expected to be big growth drivers for the company’s US market. The company’s shares plummeted the day after its investor announcement by up to 17%.

The US FDA said it rejected the drugs because it wanted longer-term studies into their cardiovascular risks.

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