Diabetes bad for people, good for Danish equity funds
World Diabetes Day may be a reminder of the scourge of this modern disease, but for investors in certain funds it points to continued good returns from insulin maker Novo Nordisk, a key Danish equity holding.
According to figures published today by the International Diabetes Federation (IDF) today to mark World Diabetes Day 2012, some 371 million people globally are estimated to suffer diabetes. Of these about half, around 187 million, are yet to be diagnosed.
This is an increase on the figures published a year ago, and means that some 4.8 million people are statistically predicted to die from complications associated with the disease in 2012 alone, with about half those in people under the age of 60.
However, the Federation said it expects that annual figure to keep climbing in coming years, because of the huge number of estimated undiagnosed sufferers.
The fundamentals in turn raise both opportunities and challenges for investors.
The Federation estimates that:
– $471bn was spent on diabetes in 2012, compared to $465bn
– 4 out of 5 people with diabetes live in low- and middle-income countries
– 1 out of 3 adults with diabetes lives in the Western Pacific
– 1 in 4 of all diabetes deaths occur in South-East Asia
– North America spends the most healthcare dollars on diabetes
– 81% of people in Africa are undiagnosed with diabetes
As a healthcare theme, it is obviously huge. One of the most popular ways to buy into the theme is through a Danish company called Novo Nordisk.
Headquartered in Denmark, the company employs around 34,000 staff in 75 countries, and sells it products in more than 190 – including its key diabetes products. Haemophilia is its other core market area, along with growth hormone therapy and hormone replacement therapy. But diabetes has been the foundation of its business since it started up as a company in 1923 with a focus on producing insulin.
In the first nine months of 2012, the company grew its operating profit by 34%, as overall sales grew by 18% to DKK57.1bn (€7.6bn).
Gross margin over the period was 81.9%, with net profit up 26%, and earnings per share up 31%.
It is these sorts of numbers that have helped the firm’s share price move significantly higher in the past five years, despite the global financial crisis.
Of course, valuations are important, and the question for shareholders today might be what levelling off could be expected in the share price performance through 2013, given that the company said operating profit could be dented by costs associated with the launch of a new generation of insulin products, which are undergoing final healthcare regulatory checks in markets such as the US and Japan.
For fund investors, there are four Danish equity funds identified by FE data as having a 25% or greater exposure to the market, which may be of interest given their holdings in Novo Nordisk.
The Carnegie Nordic Markets, Danske Denmark Focus and JI Danish Equity all have the company as a top one or top two holding, with exposure around the 9%-10% mark.
However, for a significant exposure, then the investor ought to consider the SSgA Denmark Index Equity. The stock accounts for about 52% of the portfolio, according to FE data. In DKK terms the fund is up about 36% over on year, and up about 53% over three years.