Keytruda®, Ozempic® and the other blockbuster drugs of the 3rd quarter of 2019

The pharmaceutical companies AbbVie and Novo Nordisk presented their quarterly results today and concluded the earnings season for the major pharmaceutical companies. There are currently more than 50 blockbuster drugs in the world with annual sales exceeding a billion US dollars. Here the best selling and fastest growing medications of the third quarter of 2019 are compared. Eylea® from Regeneron and Bayer is excluded, because Regeneron reports quarterly earnings quite late, but combined sales are expected to be approximate $3B.

Best selling drugs in the world

The best selling drug in the world still remains Humira® from AbbVie with quarterly sales of $4936M (-3.7% worldwide, +9.6% in the US, -33.5% outside the US).

But Keytruda® from Merck with more than 20 indications is catching up ($3070M, +62.5%) and will most likely surpass Humira® at some point.

The table and figure below summaries the top 10 best selling drugs in the world.

Worldwide quarterly sales of top 10 best selling drugs (USDm)
Company/iesDrugMoleculeGenericATC codeTherapeutic group
AbbVieHumira®mABAdalimumabL04AB04Immunosuppresant
MerckKeytruda®mABPembrolizumabL01XC18Antineoplastic agent
BMS + PfizerEliquis®SMDApixabanB01AF02Antithrombotic agent
CelgeneRevlimid®SMDLenalidomideL04AX04Immunosuppresant
BMSOpdivo®mABNivolumabL01XC17Antineoplastic agent
RocheAvastin®mABBevacizumabL01XC07Antineoplastic agent
Amgen + PfizerEnbrel®Fusion proteinEtanerceptL04AB01Immunosuppresant
Bayer + J&JXarelto®SMDRivaroxabanB01AF01Antithrombotic agent
J&JStelara®mABUstekinumabL04AC05Immunosuppresant
RocheMabThera® + Rituxan®mABRituximabL01XC02Antineoplastic agent

Fastest growing in terms of value

Keytruda® is also the fastest growing drug in the world in terms of value. It forms a top 10 along with the anti-HIV combination drug Biktarvy® from Gilead, the anti-coagulent Eliquis® from partners Bristol-Myers Squibb and Pfizer, the drug Dupixent® from Sanofi approved for severe asthma in May, chronic rhinosinutis with nasal polyposis in June, atopic dermatitis in August and severe chronic rhinosinusitis in October, Stelara® from Janssen approved for psoriatic arthritis in 2013, Chron’s disease in 2016, psoriasis in 2017, ulcerative colitis in October, Tagrisso® approved for 1st-line treatment of EGFR-mutated non-small cell lung cancer in the US and Europe in 2018 and China in September, the anti-diabetic Ozempic® (semaglutide) from Novo Nordisk, Revlimid® from Celgene with additional approvals in May for lymphoma and multiple myeloma, Tecentriq® from Roche approved for triple-negative breast cancer in March and August, small cell lung cancer in March and September and the MS drug Ocrevus® from Roche.


Worldwide quarterly sales of top 10 fastest growing drugs by value (USDm)

Fastest growing in terms of percentage

The fastest growing blockbuster drugs in terms of percentage is the anti-diabetic drug Ozempic® from Novo Nordisk. Other drugs in the top 10 are Tremfya® from Janssen for the treatment of plaque psoriasis, Entresto® from Novartis for the treatment of heart failure and Darzalex® from Janssen in collaboration with European biotech company Genmab approved for multiple myeloma.


Worldwide quarterly sales of top 10 fastest growing drugs by percentage (USDm)

Large percentage of total revenue

It is interesting to note that some drugs make up large fractions of the total revenue. For example small molecule drug (SMD) Revlimid® makes up 61.3% (2,770 USDm) of the total revenue at Celgene, mAB drug Humira® 58.2% (4,936 USDm) at AbbVie, mAB drug Opdivo® 32.1% (1,817 USDm) at Bristol-Myers Squibb and SMD Tecfidera® 31.2% (1,112 USDm) at Biogen.

The patents on Revlimid® expire in 2027 in the US and 2024 in Europe. Celgene is to be acquired by Bristol Myers-Squibb.

The European patent on Humira® expired in 2018, and the AbbVie drug is already facing competition from the biosimilars Hadlima (Samsung Bioepsis; Samsung and Biogen joint venture), Hyrimoz (Sandoz of Novartis), Cyltezo (Boehringer-Ingelheim) and Amjevita (Amgen). The US patent expires in 2023.

The patent on Opdivo®, which has more than 10 indications, expires in 2026.

There is currently a legal dispute between Biogen and generic manufacturer Mylan, whether Tecfidera® is protected from generic competition until 2020 or 2028.

In July 2018 Mylan Pharmaceuticals Inc. filed a petition with the U.S. Patent Trial and Appeal Board (PTAB) seeking inter partes review of our U.S. Patent No. 8,399,514 (the ‘514 Patent). The ‘514 Patent includes claims covering the treatment of MS with 480 mg of dimethyl fumarate per day as provided for in our TECFIDERA label. On February 6, 2019, the PTAB instituted inter partes review of the ‘514 Patent (the “Mylan IPR”). Thereafter, the PTAB granted the petition of Sawai USA, Inc. and Sawai Pharmaceutical Co. Ltd. and joined them as petitioners in the Mylan IPR. A hearing has been scheduled for November 2019.

Biogen 10Q.

Diabetes and the third quarter of 2019

Novo Nordisk and Eli Lilly have both reported their Q3 results. Below are some of the headlines related to their diabetes business.

  • Novo Nordisk
    • OG2023SC, an oral GLP-1 analogue, has been discontinued based on encouraging results for an enhanced oral semaglutide formulation.
    • US FDA decision on cardiovascular indication for Rybelsus® is expected in the first quarter of 2020.
  • Eli Lilly
    • The European Commission approved an expansion of the Trulicity® label to include results from the REWIND cardiovascular outcomes trial

The figures below summarise sales and sales growth by product and geography for Novo Nordisk and Eli Lilly.

The diabetes market as a whole

Despite the headwinds faced by insulins such as Lantus® and DPP4 drugs such as Januvia® the overall sales of antidiabetic drugs is not declining thanks to the superior GLP1 drugs.

Sales of anti-diabetic and anti-obesity drugs within and outside the US.

If the current growth rates for GLP1 and insulin continues, then GLP1 could overtake insulin in the US at the end of the 2nd quarter of 2020. It depends on the growth of Ozempic® and Rybelsus® and the pace at which Lantus®, Levemir®, Novorapid®, Humalog® and others continue to decline as they are cannibalised by Basaglar® and Admelog®.

Sales of anti-diabetic and anti-obesity drugs by drug class.

The advantage of GLP1 drugs over insulin is that there is no hypoglycaemic risk and an added benefit is weight loss. The table below compares the different types of anti-diabetic drugs and explains the reversed fortunes of insulin and GLP1 receptor agonists.

Novo Nordisk and Eli Lilly have been leading the GLP1 revolution and have been rewarded heavily, whereas the diabetes business of Sanofi has suffered and continues to suffer within and outside the US.

Sales of anti-diabetic and anti-obesity drugs by company.

The GLP1 class of drugs have picked up steam in Europe and elsewhere outside the US, but there is still an unmet potential.

GLP1 sales by company.

The GLP1 drug Victoza® is being cannibalised by Ozempic®, which is experiencing explosive growth of more than 400% in the US and in the world, which possibly makes it the fastest growing drug in the world in the third quarter.

GLP1 sales by drug.

It is the insulin Lantus® being cannibalised by Basaglar®, which is a drag on Sanofi. Tresiba® is the only insulin other than Basaglar® experiencing growth in the US.

Insulin sales by drug.

Novo Nordisk might be experiencing increased sales for Tresiba® in the US and their insulin drugs in China, but Levemir® and all of their other insulin drugs are decling in the US, which is not offset by the small sales growth of Tresiba® in the US.

Insulin sales by company.

Eli Lilly (and their partner Boehringer-Ingelheim) have seen their diabetes sales further strengthened compared to Novo Nordisk by the presence of the SGLT2 drug Jardiance® in their portfolio, which is competing with Farxiga® from AstraZeneca and Invokana® from J&J. Cardiovascular benefits have been shown for Jardiance® in the EMPA-REG OUTCOME clinical trial and the FDA have in June also granted fast track designation for the treatment of chronic heart failure.

SGLT2 sales by company.
SGLT2 sales by drug.

DPP4 drugs are declining in the US, whereas they are experiencing growth outside the US.

DPP4 sales by company.

The DPP4 decline in the US is led by Januvia® and Janumet® from Merck, but these two drugs are actually growing slightly outside the US for the time being.

DPP4 sales by drug.

Ozempic® and Jardiance® and the ICER report

The ICER report have found that oral GLP-1 Semaglutide, at estimated net price, is less cost-effective than SGLT-2 competitor Empaglifozin as add-on therapy for type 2 diabetes. CFO Karsten Munk Knudsen and CSO Mads Krogsgaard Thomsen of Novo Nordisk had the following comments to the ICER report.

So the known legislation related to the donut hole, which we have been public about earlier. The impact is 1% on group sales in 2020. And then, of course, it’s also important to note that this will have an impact in terms of patient affordability, so the American government, they are actually pushing more cost to patients with this change.

Novo Nordisk CFO Karsten Munk Knudsen on the ICER report during the Q3 earnings call.

First of all, Jo, let’s just remind each other of the differences between a classic health economic outcome research analysis taking into account all the big landmark trial data that have emerged over time that typically predict what the societal cost of the burden of diabetic-linked complications will be over decades, 2 decades, 3 decades and so on. And those analysis are the ones that we have done with the impact — metabolic impact of Rybelsus showing that over decades, this is clearly cost effective for society to use the product.

This element is not really integrated in the ICER research, which just looks at the mere data as they are and the metabolic outcomes here and now. But as I understand the report, having not had really time to study it today, it is still the perception that I have that when it comes to sitagliptin and liraglutide, there seems to be cost effectiveness of Rybelsus®. And then it’s only when you look at the empagliflozin that they claim that not to be the case. But all that is said then, by the way, the discussions that our American team have ongoing with the PBMs, they’re ongoing, and we’ll keep you updated as they come to conclusion over time.

Novo Nordisk CSO Mads Krogsgaard Thomsen on the ICER report during the Q3 earnings call.

Pipeline and R&D updates

In addition to the discontinuation by Novo Nordisk of the GLP1 candidate OG2023SC due to improved formulation of oral semaglutide there were other updates to the pipelines.

Novo Nordisk CSO, Mads Krogsgaard Thomsen, had the following comments on the discontinuation of OG2023SC, semaglutide and other injectable incretins.

2023, that relates to the fact that we have seen really nice data. You do recall, Peter, that we had 2 ongoing trials in parallel. One was the enhanced formulations of oral semaglutide, that is completed; and the other one was the new analog 2023. And with the benefits that we’ve seen vis-à-vis the formulation’s impact on bioavailability, we see no need to further develop 2023. So we actually view this as a sign of success of the
strong collaboration between the R&D colleagues and the product supply colleagues who are able to constantly upgrade, you can say, the performance of oral semaglutide.

So on the injectable portfolio of incretin-like projects, if we
start with the most advanced first, that is obviously the combination between semaglutide and the amylin 833 compound. And those data out, as you correctly state, in the first half of next year. And based on what I know from preclinical experiments and the monotherapy over 7 weeks with amylin compound, they should be hopefully showing really
good weight loss data since this is in obese people is taking place. So we’ll get back to that next year.
Then we have two agonists, a triple and a dual agonist ongoing in multiple dosing in Phase Ib, and that is, of course, the GIP/GLP-1/glucagon triple agonist and it’s the GIP/GLP co-agonist. And those data are actually available later this year.
And then finally, we’re gearing up for using sema, which we perceive to be both the anchor drug in several diseases but also the anchor drug partner in new to-be combination products. And therefore, we are also combining that expectedly with the once-weekly human GIP to optimize the ratio between these 2 incretins in the event that GIP actually turns out to play a role in human biology. That’s still a bit uncertain at this point.

Novo Nordisk CSO, Mads Krogsgaard Thomsen, on the Novo Nordisk Q3 earnings call.

Eli Lilly president of Lilly Research Laboratories, Dan Skovronsky, had the following comments on their injectable tri-agonist and oral incretins.

Finally, I’d like to highlight two exciting diabetes programs. With our next generation injectable incretin GIP, GLP, glucagon, tri-agonist or GGG we’re testing the hypothesis that adding glucagon to GIP/GLP will have more metabolic activity and stimulate additional weight loss.

The initial Phase 1 study, to study the safety of a single injection in healthy participants and we’re now studying multiple doses including dose titration. We expect this program to enter Phase II by late 2020 or early 2021; just like the hurdle for tirzepatide to enter Phase III was a meaningful improvement over Trulicity, the bar here will be a step change over tirzepatide itself.

Additionally, our commitment to oral incretins has continued to increase as we advanced programs through development we seek to improve upon administration or efficacy. Our first oral incretin program which we licensed from Chugai last year is a small molecule non-peptide agonist of GLP-1 that entered Phase 1 earlier this year.

Our initial focus will be on pharmacokinetics with the expectation that it should be meaningfully better than a peptide as well as the pharmacodynamic response, which we should see even in Phase 1, this molecule could enter Phase 2 in early 2021; in addition to this approach, we’re also pursuing dual GIP and GLP-1 receptor agonist peptides for oral delivery. These programs, which are designed to give tirzepatide like efficacy with a once-a-day oral peptide administration are also progressing preclinically and should enter Phase 1 next year. We look forward to tracking the progress of these assets over the coming years and we’ll share additional pipeline updates on our next earnings call.

President of Lilly Research Laboratories, Dan Skovronsky, on the Eli Lilly Q3 earnings call.
Eli Lilly pipeline.

Press releases

Novo Nordisk – Novo Nordisk’s operating profit increased by 11% in Danish kroner and by 5% at constant exchange rates (CER) in the first nine months of 2019

Eli Lilly – Lilly Reports Strong Third-Quarter 2019 Financial Results, Raises 2019 EPS Guidance

Media coverage

Nightly Business Report – October 23, 2019
Eli Lilly CEO on 3Q Results, Drug-Pricing Reforms

ReutersNovo Nordisk nudges up 2019 sales outlook as new drugs excel

BloombergNovo CEO Jorgensen on Biopharma, Insulin Prices, Innovation

Reuters – Sales of Eli Lilly diabetes drug Trulicity fall short, shares drop

Kraft Heinz increases prices but experiences negative organic growth of -1.1%

Kraft Heinz issued a press release on its third quarter results before the market opened. Organic growth was -1.6% in the US and -1.1% for the whole business.

Revenue and income by geographic and product segment

Revenue growth was impacted negatively by negative organic growth, currency headwinds and divestitures.

The natural cheese business being sold contributed approximately $560 million CAD (approximately $427 million USD at current FX rates) to Kraft Heinz’s net sales in 2017.

Press release from November 2018 announcing sale of Canadian natural cheese business to Parmalat.

The Kraft Heinz Company announced today the closing of the previously announced sale of its Canadian natural cheese business to Parmalat for a purchase price of $1.62 billion CAD (approximately $1.24 billion USD at current FX rates). The agreement includes Cracker Barrel, P’tit Québec, and aMOOza! brands in the Canadian market.

Press release from July 2nd announcing closing of the sale.

Gross margins and operating margins reached lows of 32.0% and 19.5% respectively, whereas SG&A excluding impairment losses was down from $803M to $762M.

The US experienced negative organic growth of -1.6% despite price growth of 1.5% and revenue in the US for the quarter was $4,361M.

EBITDA was down in all geographic segments, but EBITDA and EBITDA margins seem to have stabilised. Except in the Rest of the World segment, where increasing supply chain costs are causing damage to the EBITDA margin.

The product segment condiments and sauces as well as infant and nutrition both saw some of the biggest declines in the quarter.

CEO Miguel Patricio had the following comment regarding the segments.

While overall performance is improving, our numbers are still negative versus the prior year, and our performance remains uneven across categories and across geographies. This includes ongoing share and distribution losses within our natural cheese, cold cuts and coffee business in the United States, lower-than-anticipated promotional lifts in Canada, ongoing infant nutrition declines in both EMEA and China as well as increasing supply chain costs in our Rest of the World segment.

Kraft Heinz CEO Miguel Patricio on the 2019 third quarter earnings call.

Growth

Organic growth was -1.1% and -1.6% in the US despite growth in price of 1.5% in the US.

Debt and interest expenses

S&P in August affirmed the credit rating but revised the outlook from stable to negative. This followed the downgrade in June. S&P commented on adjusted leverage.

The negative outlook reflects the potential for a downgrade to speculative grade by mid-2021 if we believe Kraft Heinz cannot reduce adjusted leverage to below 4x. This could result if operating performance weakens further and we come to believe the strategic plan to be announced by the new CEO in early 2020 will be unsuccessful, including a failure to stabilize and reverse EBITDA declines, or an inability or unwillingness to reduce or eliminate the dividend or conduct meaningful deleveraging asset sales.

S&P press release from August

The adjusted leverage is still above 4x, but there are small signs of improvement following the deleveraging asset sale of the Canadian natural cheese business for approximately USD1.24B.

Interest expenses were up, which further stresses the need to deleverage.

Impairment charges and the balance sheet

Unlike the previous three quarters and the disastrous fourth quarter of 2018 there were no significant impairment charges and long term debt was reduced to $28,112M following the deleveraging asset sale in Canada.

Why is the share price up in the pre-market?

That the share price is up in the pre-market is probably a combination of valuation, the return of the CFO, the absence of impairment charges. Especially the valuation was attractive following the share price collapse.

And despite all of the bad news that landed in February it still remains a fact, that Kraft Heinz has some of the lowest costs and best margins in the industry.

And unlike the share price neither the sales nor the operating income have imploded. The business is intact despite the headwinds and the mountain of debt.

Media coverage

Reuters – Kraft Heinz investors cheer profit beat, plans to boost marketing

Bloomberg – Kraft Heinz Shares Rise as Delayed Comeback Materializes at Last

CNBC – Kraft Heinz stock jumps on earnings beat

Financial Times – Kraft Heinz still struggling with changing consumer tastes as sales dip

Previous media coverage

2019-10-23 Reuters – Kraft Heinz sees potential in baby food, will keep Plasmon

2019-09-17 CNBC – 3G Capital sells over 25 million shares of Kraft Heinz

2019-09-12 Reuters – Where’s the fake beef? Not at Kraft Heinz, investors worry

2019-08-26 Reuters – Kraft Heinz brings back former CFO after accounting missteps

2019-08-23 Bloomberg – Kraft Heinz Would Be Third-Largest Junk Issuer If Ratings Cut
2019-08-08 CNBC – Nightly Business Report
2019-06-25 CNBC – Warren Buffett denies tension with Kraft Heinz partner
2019-05-06 CNBC – Warren Buffett on Kraft Heinz restating earnings
2019-04-22 CNBC – Kraft Heinz names Miguel Patricio as new CEO
2019-02-25 CNBC – Warren Buffett on what he plans to do with his Kraft Heinz shares and 3G Capital
2019-02-22 CNBC – Morningstar’s Erin Lash dissects Kraft Heinz’s earnings miss
2019-02-22 CNBC – What went wrong with Kraft Heinz?
2018-05-07 CNBC – Warren Buffett: Changing Consumer Habits Hit Coke And Kraft Heinz

AB InBev increases prices in South Korea and Brazil and sees volume decline

AB InBev issued a press release on their quarterly results before the market opened.

The two most important headlines of the quarter were probably the listing of Budweiser APAC on the HKEx and implementation of price increases in South Korea and Brazil that drove volume declines.

Quarterly (YoY) organic volume growth (%).
CNBC Television – 30sep2019 – Budweiser APAC CEO speaks about the promise of the Asia market

Whereas revenue and revenue per hectolitre were up, volume was down and EBITDA margins contracted.

TTM revenue per segment
TTM volume per segment
TTM revenue per hectolitre

The proceeds from the listing of Budweiser APAC was used to reduce debt and AB InBev is on track to reduce the debt to 4 times normalized EBITDA before the end of the year; one year earlier than the prior guidance. Deleveraging to approximately 2 times EBITDA still remains the commitment.

Comparison of breweries

AB InBev continues to have the strongest operating margins in the industry because of their strong brands and their economies of scale. For example cost synergies of USD3.2B have been realised three years after the acquisition of SABMiller.

Interbrands 2019 report

Interbrands released their report on the 100 top ranked brands in the world on the 17th of October. AB InBev is featured on the list with two of their brands; Budweiser (#32) and the rapidly growing Corona (#79).

Media coverage

Reuters – AB InBev loses $13 billion in value as beer drinking slows in Brazil and South Korea

Bloomberg – Beer Giant AB InBev Loses $20 Billion in Market Value

CNN – Budweiser brewer hit by slumping sales in China

Financial Times – AB InBev scales back annual profit target after quarterly miss 

Bloomberg – The King of Beers Is in a Bind

WSJ – Budweiser Brewer Issues Profit Warning, Sending Shares Sharply Lower

2019-10-24 Bloomberg – Budweiser APAC Posts Sharp Profit Drop

2019-10-06 CNBC – Budweiser wants to take on China, the world’s largest beer market where local brews rule

Amazon operating income drops and AWS margins contract

Amazon issued a press release on their third quarter results after the market closed.

Revenue increased by 24% to $70B, but operating income was down and margins for AWS and North America contracted.

In terms of cloud Microsoft Azure grew 59% YoY in the previous quarter. Microsoft is definitely catching up, and there might be a kink in the armour of Amazon.

Revenue from cloud (USDm)

Media coverage

Reuters – Amazon’s gloomy holiday forecast misses estimates, shares fall 7%

Bloomberg – Amazon’s One Sure Thing Starts to Look Shaky

Forbes – Why Amazon’s Costly One-Day Shipping Bet May Pay Big Dividends

New York Times – Amazon’s Profit Falls Sharply as Company Buys Growth

CNBC – Amazon clobbered after a miss on the bottom line and soft guidance

CNBC – Amazon’s cloud business reports 35% growth in the third quarter, trailing estimates

14Oct Morningstar – How Do You Value Amazon Heading Into 2020?

Chr. Hansen and Novozymes both tumble

The two Danish enzyme manufacturers Chr. Hansen and Novozymes both saw their share price tumble following third quarter earnings. Chr. Hansen released earnings on October 10th and Novozymes released earnings on October 23nd. This followed the October 9th profit warning from Novozymes. Chr. Hansen, which traded and continues to trade at higher multiples, fell from DKK 579.20 to 525.80 (-9.2%) on October 10th, whereas Novozymes didn’t budge. The figures below compare the expansion and contraction of multiples and operating margins of the two companies.

Chr. Hansen is still richly valued and might present itself as a short candidate. AQR Capital Management is one company with a short position in Chr. Hansen. Neither company seems attractively priced at current levels. Both companies suffer in similar segments and both are experiencing declining growth rates.

Novozymes

Novozymes

Chr. Hansen

Chr. Hansen

Media coverage

Oct10 Reuters – Shares in Denmark’s Chr. Hansen slump on lower sales outlook, weak demand

Oct23 JP Finans – Novozymes fastholder forventningerne til året efter nedjustering

Oct23 Børsen – Novozymes i stort kurshop: “Ansættelse af ny topchef er meget meget tæt på”

Oct15 Reuters – Novozymes’ CEO to step down as company looks to rejuvenate sales

Oct10 Bloomberg – `Credibility Problem’ at Novozymes Has CEO Explaining Next Steps

Microsoft Cloud Strength Drives First Quarter Results

Microsoft issued a press release on its 2020 first quarter results after the markets closed with the following bullet points.

  • Revenue was $33.1 billion and increased 14%
  • Operating income was $12.7 billion and increased 27%
  • Net income was $10.7 billion and increased 21%
  • Diluted earnings per share was $1.38 and increased 21%

The figures below summarise the sales, profits and margins by each business segment.

Valuation

Despite increasing sales and expanding margins Microsoft continues to be extravagantly priced. Better choices in the space might be IBM, Oracle and Cisco.

Media coverage

Reuters – Microsoft forecasts cloud sales above expectations

Reuters – Microsoft’s cloud business slows, casts shadow over results

Bloomberg – Microsoft Rallies as Results Beat ‘Virtually Every Metric’

Bloomberg – Microsoft Sales, Profit Top Estimates on Cloud; Azure Slows

P&G raises 2020 guidance amidst shining beauty and trimmed grooming

Procter & Gamble [$PG] issued a press release on its first quarter results prior to the market opening. The company raised its full year guidance. The share price jumped by 2.6% from $119.08 to a 52 week high of $122.18.

Financials

All segments except grooming displayed positive organic sales growth. The main contributors to top and bottom line growth is the beauty segment along with the fabric & home care segment.

Valuation

P&G has in 12 months gone up by more than 50% through expansion of multiples. As a consequence it is anything but cheap at current levels irrespective of having one of the best operating margins and currently displaying one of the best growth rates in the industry.

Media coverage

Reuters – P&G raises full-year forecast after beauty, healthcare brands drive profit beat

Bloomberg – P&G Gains After Posting Strong Sales Growth, Raising Outlook

Bank OZK misses revenue and earnings estimates

Bank OZK [$OZK] issued a press release after the closing bell on its quarterly results accompanied by the following comment from the CEO George Gleason.

“We are very pleased to have once again delivered financial metrics among the best in the industry for the quarter just ended.  We continue to maintain our focus on our strong credit culture and consistent discipline, which are paramount in this interest rate and competitive environment.  Our excellent team of bankers have us well positioned for continued success as we remain focused on delivering long-term value for our shareholders.”

Total interest income was down QoQ, which is unusual for Bank OZK. As a consequence the net interest income before provision for loan losses was also down QoQ and YoY.

The stock price traded lower in the after hours. Is it then time to sell Bank OZK given the recent small kinks in the armour such as the provision for loan losses in the third quarter of 2018 and the reduced net interest income in the current third quarter of 2019? Probably not.

The bank is a dwarf in terms of assets compared to other regional banks that are members of the S&P500.

But the bank has some of the best metrics in terms of key metrics such as return on assets (ROA), return on equity (ROE) and net profit margin.

And the bank has in the past grown revenue at a faster pace than other banks.

And the bank has one of the absolutely lowest efficiency ratios in the industry.

On the other hand the bank dilutes shareholders and it might be advisable, if the bank gradually shifts the free cash flow to buybacks instead of repeatedly hiking the dividend every quarter and by ever greater increments.

All taken together it’s still one of the best banks out there and it’s currently trading at a discount in terms of for example the price-to-earnings (P/E) multiple.

Netflix beats on profit but misses on number of new subscribers

Netflix issued a press release on its quarterly results after the closing bell.

In Q3, we grew to $5.2 billion in revenue, up 31% over the prior year, and operating income doubled to$1.0 billion. Paid net adds totaled 6.8m compared to our 7.0m forecast and prior year Q3 of 6.1m. As we’ve improved the variety, diversity and quality of our content slate, member engagement has grown, revenue has increased, and we’re able to further fund our content investment.

Financials

The number of memberships keeps increasing.

But the net addition of paid memberships is leveling off and so are the number of free trials.

Revenue has grown faster than the number of memberships, because the revenue per membership continues to go up for especially domestic streaming.

Profits are further boosted by the fact, that marketing expenses have mostly stayed flat. This has sent profit margins to all time highs.

Valuation

The share price of Netflix has had an incredible 10 year stint. As has the revenue and profits. But the share price might possibly have gotten ahead of itself. The multiples are not low and the stock still appears grossly overpriced in absolute and relative terms.

Media coverage

Reuters – Netflix shares jump as subscribers grow ahead of Disney, Apple attack

Bloomberg – Netflix Restores Faith Just Ahead of Offensive by Disney, Apple

Bloomberg – Netflix Approaches Critical Test of Its Viability

New York Times – ‘Stranger Things’ Helps Netflix Increase Subscribers

CNBC – Netflix to competition: Welcome! Your success will be our success