諾和諾德 (NVO) 2003 Q4 法說會逐字稿

Good afternoon ladies and gentlemen and welcome to the Novo Nordisk Release Hour for Annual Result 2003 conference call. [OPERATOR INSTRUCTIONS]

I would now like to hand over to the Chairperson, Mr. Lars Rebien Sorensen. Please begin your meeting and I will be standing by.

Thank you very much and welcome ladies and gentlemen to this Novo Nordisk conference call regarding our results of the full year 2003, released earlier today. I'm Lars Rebien Sorensen, the CEO of Novo Nordisk. With me I have our Chief Financial Officer, Jesper Brandgaard, our Chief Science Officer, Mads Krogsgaard Thomsen and present our also, our Investor Relations Officer Peter Haahr as well as Palle Olesen and Christian Kanstrup. Today's earnings release is available on our homepage, NovoNordisk.com, along with the slides that we'll be using for this conference call. The conference call is scheduled to last approximately one hour, and as usual, we'll start with the presentation, as outlined on slide number one. The Q&A session will begin in about a half an hour. Please turn to slide number two.

As always, I need to advise you that this call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For further information on the risk factors, please see the earnings release and the slides prepared for this presentation. Also please note that this conference call is Web cast live and a replay will be made available on Novo Nordisk's Web site after the conference call.

I would like to start this conference call with some highlights from the year. Please turn to slide number three. First and foremost, the underlying market trends in the insulin market continues to be strong. In terms of Nova Nordisk's products, especially two insulin analogues, as well as NovoSeven show solid growth. However, more about those products later in the presentation. For NovoSeven, with the recent completion of study of liver transplantation we have managed to complete three of the important phase two studies in the clinical expansion program of NovoSeven. We're very pleased and proud that NovoSeven works in difficult settings like trauma and liver transplantation. Also in stem cell transplantation, results indicate a clinical effect at a relevant dose, although a statistically significant dose response was not seen.

The European regulatory process for Levemir or insulin detemir is preceding and Novo Nordisk has addressed and filed answers to the remaining questions related to the preclinical data and process documentation. Novo Nordisk expects to obtain an opinion from the Committee of Proprietary Medicinal Products or CPMP in the first quarter of 2004.

In the fourth quarter of 2003 Novo Nordisk received an approvable letter from the FDA on insulin detemir. In the letter, FDA requested Novo Nordisk to address certain clinical issues and provide additional information before a U.S. marketing approval could be granted. Subsequent discussion with the FDA had indicated that the additional clinical requirements could be addressed by conducting a short-term pharmacokinetic and pharmacodynamic study looking at ethnic differences and by submitting data from a currently ongoing study. Provided that these clinical studies are completed with the desired outcome, Novo Nordisk expects an approval of insulin detemir by midyear 2005 in the US. Novo Nordisk also lives up to the financial target for 2003, established in February last year. Novo Nordisk's sales grew by 15 percent in local currencies and five percent measured in Danish Kroner. Operating profit measured in local currencies increased close to 30 percent, but measured in Danish Kroner growth was realized at 7 percent, at 6.4 billion Danish Kroner. Our net profit increased with 19 percent, due to significant gains on currency contracts and a one percent reduction in the tax rate. The earnings per share grew by 21 percent, to Danish Kroner 1414, reflecting our recently concluded share buyback program. Bottom line is that we are quite satisfied with our solid performance throughout 2003.

Please turn to slide number four. Looking at the sales figures for the full year 2003, diabetes care was up sox percent, whereas I stated management increased by seven percent. Measured in local currencies, the growth rates were 16 percent and 20 percent respectively. These two areas constitute approximately 85 percent of total sales and I'll get back to these areas on some of the following slides.

Growth hormone therapy was up with four percent, and in local currency, the growth was 13 percent. Sales was primarily driven by underlying market growth and market share gains in Europe and North America. Since the launch of our liquid growth hormone in the United States, we've seen a steady increase in market share, now commanding around five percent of the U.S. market. Despite a solid market share performance of our low dose HRT portfolio, our HRT business continues to decline due to an overall market contraction. For the full year 2003, we saw a decline by one percent, but increased by five percent in local currencies. The positive sales development in the second half of the year reflects the changed distribution setup in the United States and Nova Nordisk now is recording the full sales value of HRT products. Adjusted for this changed distribution setup, sales in local currencies decreased by 12 percent in the fourth quarter.

Please turn to slide number five, which illustrates the significant impact currencies had on reported 2003 figures by therapy. This chart pretty well illustrates that growth in all areas has been reduced significantly in 2003 due to the unfavorable currency development. In diabetes, care growth was almost cut to a third. In the whole quarter alone, Novo Nordisk realized a growth within diabetes care in local currencies of 19 percent, which however was reduced to around 10 percent in Danish Kroner. Sales within hemostasis management for the year slightly exceeds our own expectations, but also here reported sales growth was reduced to a third, primarily due to currency impact from the important U.S. market. Looking at total sales, the currency impact was approximately 10 percentage points. Turn to slide number six for an overview of sales by region.

The local currency growth in Europe of around 10 percent is by local currency growth, and sales of around 10 percent is primarily driven by diabetes care and NovoSeven. The European insulin market continues to show volume growth in excess of 5 percent on top of that we are market share in several markets.

However, growth in Europe is negatively impacted by decline of 16 percent in our HRT business. North America continues to show strong growth rates, especially driven by our insulin franchise with increased penetration of Novolog, but also Novolog Mix is driving growth. The total analogues sales increased by some eight percent in the fourth quarter of 2003. Sales of NovoSeven was also supportive of the overall growth. Total sales in North America grew by 28 percent in local currencies. International operations continued to show strong sales growth, with a 18 percent of growth in local currencies. We continue to see solid growth in China, Brazil and in Russia. Sales was driven by insulin NovoSeven and growth hormones. Sales in Japan and also India increased nine percent in local currencies, primarily driven by insulin and NovoSeven. The growth in insulin sales as reported by the ongoing value of upgrading of patients to disposable devices. Due to the depreciation of the yen, the sales in Danish Kroner declined by one percent however.

Please turn to slide number seven, illustrating the currency impact the region. First observation is again that the sales growth in reported numbers is significantly reduced by the negative development in our main currency, as well as the Danish Kroner. As expected, one of the key growth drivers was North America, showing a growth rate of close to 30 percent in local currencies. In the fourth quarter alone, sales growth in North America was 26 percent, but this was reduced to around eight percent in reported numbers. In Japan and also India, solid underlying sales growth was realized at around nine percent.

Turn to slide number eight, which provide you with the highlights from our diabetes business in 2003. Diabetes care sales increased six percent as reported in 16 percent in local currencies in 2003. In the fourth quarter alone, diabetes care sales grew by 10 percent reported in 19 percent in local currencies. Key growth drivers were North America and Europe. As mentioned, it is Novolog and Novolog Mix driving growth rates and market share gains in the United States. In local currency, insulin and delivery systems grew 37 percent in 2003 and insulin analogues alone were up by a 172 percent. Sales in North America constitute almost 40 percent of our analogues sales. A local currency growth of 13 percent in Europe can to some extent be attributed to a weak first quarter of 2002, however we are seeing continued market growth in the European insulin market and the solid penetration of our insulin analogues is underpinning our overall market share.

Also in Europe, we are seeing solid growth of our insulin analogues, with growth just below 100 percent compared to 2002. In fourth quarter alone, our analogues sales increased by almost 90 percent compared to the fourth quarter of 2002. Sales of insulin delivery systems within international operations increased with 18 percent in local currencies compared to 2002. Strong performance we're seeing especially in China, but also Latin America and the Middle East performed nicely. Sales growth was impacted by a negative currency environment, especially the Brazilian real, the Turkish lire and the Chinese yuen. In Japan and also India, insulin delivery systems showed 11 percent growth for 2003 in local currencies.

Turn to slide number nine. This provides you with an overview of the insulin market. The slide is based on moving annual total market figures for the four quarters, ending September 2003. We're pleased to see the solid growth continuing and that Novo Nordisk still grows above the market growth driven especially by the United States. Notice that Novo Nordisk is gaining market share in all regions apart from Japan. The result has been an increase in overall volume market share to 48 percent, up from 46 percent in the four quarters ending September 2002. In the most recent market statistics, this positive development is continuing. Volume growth plays an important role for Nova Nordisk's insulin business, but it is also important to realize our fair share of the value of creative growth, in terms of upgrading patients to insulin analogues and more advanced delivery systems. Measured in terms of value, Novo Nordisk's market share is up from 39 to 40 percent in the four quarters ending September 2003.

Please turn to slide number 10, which provides you with some insight into the value upgrade process, illustrated by the analog conversion rate in the insulin market and also Novo Nordisk's performance in the analog market. All in all, the industry has now converted around 28 percent of the insulin market to analogues and no significant slowdown seems to have emerged. Nova Nordisk's continues to gain market share within the analog market, maintaining a solid performance since the first quarter of 2002. Novo Nordisk is gaining market share within all three main regions. In Japan, Nova (inaudible) and well supported by. FlexPen has been gaining significant market share. Also in the United States and Europe, where the competitive picture is different, we are satisfied with the development of our analog market share. Novo Nordisk's analog franchise increased with 79 percent to 799 million Danish Kroners in the fourth quarter of 2003, and we now hold more than 22 percent of the analog market. In the fourth quarter, insulin analogues constituted almost 17 percent of our insulin sales. In the United States, it's almost 40 percent.

Turn to slide number 11, which provides some further insight into the development of our analog market share. European -- as we can see from the left-hand chart, almost half the short acting insulin market is now converted to insulin analogues in Europe and the trend is still solid. Market share gains have been rapid, are continuing strong, now capturing 18 percent of the short action segment. Focusing on the two only analogues in the short acting segment Novo Nordisk has now more than 40 percent. The solid trend within the short acting segment is expected to continue, adding to Novo Nordisk's growth going forward.

Turn to slide number 12. In the U.S., almost 60 percent of the short acting segment is now converted to analogues in here. Novo Nordisk short acting analog Novolog continues to catch market share. Novolog had a third quarter around 13 percent of the short acting segment and close to one-fourth of the analogues sold in the total short acting segment in United States today sold by Novo Nordisk.

Turn to slide number 13, which provides a further insight into the development of our U.S. business. The continued roll out of Novo Nordisk's portfolio of insulin analogues provides significant growth opportunities. Our overall market share development is still developing favorably, and the launch of our innovative devices is really showing a positive momentum in the U.S. and the short acting premix part of the market we're seeing increases in pen penetration to 13 percent and 17 percent respectively. The business platform has further been solidified by an improved reimbursement status for strategic insulin products amongst pharmacy benefit managers and managed care organizations. On this background, Novo Nordisk has decided to increase the diabetes care sales force in the U.S. by around 150, to a total of more than 800. Focus for the sales force will be the key strategic products, such as Novolog, Novolog Mix,and FlexPen. In addition, Novo Nordisk has now partnered with a contract sales organization in the U.S., which will promote the HRT portfolio and Novo Nordisk will direct the contract sales force, comprising of more than 100 sales reps to a target audience of 18,000 physicians.

Turn to the next slide, updating you on the performance within hemostasis management. NovoSeven sales increased to 20 percent in local currencies, which was in the upper range of our own expectations of mid teens for growth on average for 2003. Sales growth in 2003 was primarily realized in North America, followed by Europe. However, all regions contributed to the growth. Focusing on the fourth quarter of 2003 alone, when NovoSeven sales measured in Danish Kroners decreased to five percent compared to the fourth quarter 2002. It should be noted that sales in the fourth quarter of 2002 were positively affected by extraordinary (inaudible) in Europe, which was not the case in the fourth quarter of 2003. For the U.S. market, NovoSeven has been impacted by a low relative level of demand, as fewer surgeries are being performed on the congenital inhibitor patients. The reason is that the backlog of joint replacement is clearing and is being performed at a slower rate. Underlying research seeing growth driven by increased awareness of the benefits of using NovoSeven in connection with acquired hemophilia and sales is also positively affected by increased investigational use of NovoSeven. With the start of the (ph) anticipated penetration of NovoSeven in 2003, we expect NovoSeven to be able to grow low double digits in local currencies in 2004. So much so about sales performance in 2003. Mads Krogsgaard Thomsen, our Chief Science Officer, will now provide you with an update on our R&D activity.

Thank you Lars. Please turn to slide 15 for an update on our pipeline within hemostasis. In year 2000 we announced the strategy for expanding the approved use of NovoSeven into a number of new therapeutic areas. We are pleased that we can now provide you with an overview of where we stand today now that phase two figures and data have been generated within the first three indications, almost simultaneously. Thus as a follow-up to trauma and stem cell data announced last month, we are now happy to inform you that Novo Nordisk has obtained clinical proof of concept for the use of NovoSeven in liver transplantation. We are pleased that NovoSeven works in this very complicated surgical setting and I'll refer to the study in a moment.

Regarding new areas of clinical investigation, Novo Nordisk has decided to expand the NovoSeven program with a phase two study in spinal surgery. The study is expected to be initiated in the first top of 2004. In addition to this, Novo Nordisk is evaluating other potential areas in which to initiate NovoSeven studies. We still expect to report from the phase two efficacy study on the use of NovoSeven in intracerebral hemorrhage in the second half of 2004. Finally, we have now received EU approval for the use of NovoSeven to treat bleeding episodes and to prevent bleeding during invasive procedures in patients with factor seven deficiency and glands man's thrombocytopenia (ph). The two new indications are strategically important for Novo Nordisk, since NovoSeven is now approved both as a substitution therapy and as a pharmacological therapy in clouding factor deficiencies, as well as in the treatment of a platelet disorder. For an update on the trauma indication, please turn to slide 16.

Trauma is the leading cause of death below age 45 in the U.S. Trauma is on the global top 10 list, both as regards cause of death and disease burden. Previously, no trauma study has ever shown any benefit of a pharmaceutical agent on bleeding, which is the single most important contributor to death in these patients. The fourth quarter of 2003 in this regard marked a breakthrough for NovoSeven, since Novo Nordisk obtained clinical proof of concept in victims of traumatic injury. The study was a randomized, double-blind parallel group placebo-controlled trial to evaluate the efficacy and safety of NovoSeven in severely injured trauma subjects. NovoSeven treatment had a significant effect on the primary endpoint, red blood cell transfusion, but was reduced when compared to the group receiving golden standard therapy. Furthermore, research from blood trauma indicate that patients treated with NovoSeven had fewer complications and spent less time in intensive care units than patients receiving conventional treatment. And also, that overall mortality was lower in the group treated with NovoSeven. However, the study was not designed to show statistical significance on all these brands and will now seek confirmation of the findings in a pivotal trial. Equally important in terms of safety, the study revealed no difference between NovoSeven and placebo regarding the number or types of thromboembolic and other serious adverse events.

Starting a month from now, all data from the study will be presented at conferences throughout the year. The first one being a light breaking news session at the World Conference on Trauma, Shock, Inflammation and Sepsis in Munich on March 5. Submission of a series of scientific papers on the efficacy, safety and methodologies of the study will also take place in the months to come. The Novo Nordisk is currently preparing for the start of a rigorous study, which will be initiated as soon as protocol preparation and discussion with the regulatory authorities has taken place. A study addressing the early intervention with NovoSeven in traumatic bleeding is also being planned for.

Please turn to slide 17 for an update on our latest set of NovoSeven data within liver transplantation. Orthotopic liver transplantation is a huge surgical procedure that can be preceded by Irithreproitin (ph) and other therapies aimed at preparing the patient for a good surgical outcome. Bleeding is often serious and varies from patient to patient. Novo Nordisk has now concluded the phase two efficacy trial investigating the effect of NovoSeven on bleeding during liver transplantation. The study was placebo-controlled just as subscribed for the trauma trial. The results showed that in patients with a normal red blood cell level NovoSeven significantly reduced the need for red blood cell transfusion. Furthermore, there was a significant difference in favor of NovoSeven treatment regarding red blood cell transfusion avoidance.

The result is a major step towards proving a role for the use of NovoSeven in critical surgical bleeding. The study did not reveal any difference in the amount of serious adverse events between NovoSeven and placebo groups. This positive safety profile is comparable to results from other studies and corroborates the notion that NovoSeven is due to its injury site selectivity, a safe biopharmaceutical agent. In terms of numbers, approximately 10,000 liver transplantations are performed worldwide each year. Currently, approximately 16,000 patients in the U.S. alone are on the waiting list for liver transplantation, and the number of liver transplantations is expected to grow within the next decade. We'll keep you updated on further development in this area and will of course without delay issue a communication of these positive data to the medical community. Overall, the recent results from the Novo Nordisk expansion program clearly support Novo Nordisk's vision of establishing NovoSeven as the preferred hemostatic agent for clinically significant bleeding. With this, I'll now handover the word to our Chief Financial Officer, Jesper Brandgaard.

Thank you Mads. Please turn to slide 18. We're very pleased with the solid underlying sales growth of 15 percent for the full year in local currencies and 16 percent for the fourth quarter alone. However, due to the continued weakness of our main invoicing currencies throughout 2003, sales and reported terms have been impacted negatively. For the full year, our reported sales growth was five percent while it was seven percent in the fourth quarter alone. In reported terms, operating profit increased by seven percent to 6.384 billion Danish Kroner in 2003. Measured in local currencies, operating profit grew by close to 30 percent for the full year. Net financials showed a net income of close to one billion in Danish Kroner compared to 321 million Danish Kroner in 2002. Novo Nordisk recorded a net foreign exchange gain of 927 million Danish Kroner, primarily related to the hedging of the U.S. dollar, the Japanese Yen in the British Pound. This compared to a gain of 311 million Danish Kroner in 2002. The tax rate for 2003 was 34 percent, down from 35 percent in 2002, that's giving a 19 percent growth in net profit and a 21 percent increase in earnings per share, reflecting an impact from our share buyback program. Based on this solid financial performance, the board of directors will propose an increase in dividends at the annual general meeting on the 16th of March of 22 percent to four Kroner, 40 Danish per share of two Danish Kroner equal to a gradual increase in the payout ratio, to a payout ratio of 30.6.

Please turn to the next slide for an update on our currency exposure. As highlighted by net profit growth of 19 percent in 2003, our hedging program has been able to partly compensate for the weakening of our main invoicing currencies. Also for 2004 we have hedged the expected cash flow for the U.S. Dollar, the Japanese Yen in the British pound, however the continued negative currency environment remains a challenge for Nova Nordisk. For 2004 the U.S. Dollar is likely to have a profound impact on the performance of Nova Nordisk with the current U.S. Dollar level versus the Euro some 10 percent below the average rate for 2003. For 2004 we estimate that a five percent weakening of the U.S. dollar will impact operating profit negatively by 210 million Danish Kroner, a five percent weakening of the Japanese Yen will impact operating profit by 130 million, whereas a five percent weakening of the British Pound will have an impact of around 75 million Danish Kroner. Moreover, note that a five percent weakening of Nova Nordisk main U.S. Dollar related currencies is estimated to have an impact of 50 million Danish Kroner on operating profit. Currently Nova Nordisk has hedged future cash flows related to the U.S. dollar 18 months ahead, the Japanese Yen one year ahead, whereas the British Pound was hedged approximately nine months ahead.

Please turn to slide 24 and outlook for 2004. Nova Nordisk will with effect from first of January 2004 prepare financial statements using international financial reporting standards. This change from the historically applied Danish generally accepted accounting principles, Danish GAP, will ensure that Nova Nordisk complies with the EU requirement for (inaudible) companies of adopting IFRS before the end of 2005. The guidance in this outlook is provided using IFRS accounting principles. The adoption of IFRS will have no significant impact on the report of operating profit growth, the balance sheet or the operating free cash flow, and the general the guidance for 2004 would have been similar if Danish GAP had been applied for 2004. For more details about the consequences of this change on the 2002 and the 2003 financial statement, I refer you to the appendices eight to 12 of the base stock exchange announcement.

But let me move on to our guidance for 2004, applying IFRS principles. The strong demand for insulin products in general, and the continued market penetration of the Nova Nordisk insulin analogue portfolio, combined with the expectation of increasing NovoSeven and Norditropin(r) SimpleXx sales underpin the expectations of a double-digit percentage point growth in sales for 2004 measured in local currencies. However, given the significant lower present levels for Novo Nordisk major currencies, the sales growth measured in Danish Kroner is expected to be high single digits. For 2004 operating profit growth measured in local currencies and excluding the impact from nonrecurring items is expected to be in line with Nova Nordisk's long-term financial target of growing operating profit by 15 percent. However, the reported operating profit for 2004 is expected to be at the level of 2003, reflecting a significant negative currency impact, but also a lower level of nonrecurring income in 2004 compared to 2003. Included in operating profits for the full year is license fees and other operating income expected to be realized at around 650 million Danish Kroner. This includes nonrecurring income of around 250 million Danish Kroner in 2004 from a patent settlement with Aventis and also income related to a recent settlement with Pfizer regarding the early termination of the Pharmacia U.S. sales and distribution agreement for Nova Nordisk HRT products.

It should be noted that the guidance for operating profit growth for 2004 would have been similar if Danish GAP had been applied for 2004. As Nova Nordisk has hit the net cash flows for 2004 in relation to the U.S. Dollar, the Japanese Yen and British Pound, the negative influence from the depreciation of those currencies versus the Danish Kroner on operating profit will partly be offset by currency hedging gains included in net financials. The hedging gains for 2004 are expected to be around 450 million Danish Kroner. With a change to IFRS, Nova Nordisk share of the net losses in associated R&D companies will be transferred from research and development costs to net financials, thus for 2004 net financials including an impact from associated companies is expected to be an income of 250 million Danish Kroner. For 2004, the tax rate is expected at 33 percent, one percentage point lower than in 2003. Accordingly, net profit is expected to be realized below the levels of net profit for 2003. Nova Nordisk plans to invest around three billion Danish Kroner in production facilities in 2004, whereas depreciation and amortization for 2004 are expected to be realized at the level of 1.8 billion Danish Kroner. The free cash flow is expected to be around three billion Danish Kroner. As usual, the expectations given are based on the assumption that currency exchange rates remain at the current levels for the rest of 2004. This concludes that presentation of the financial results. Lars Rabien Sorensen will now moderate the Q&A session.

Thank you Jesper and ladies and gentlemen, please note that this conference will be taped and the replay will be made available on our Web site. And operator, we are now ready to take the first question please.

[OPERATOR INSTRUCTIONS] First question comes from Peter Anderson (ph). Please go ahead with your question an announcer company name.

Hello, this is Peter Anderson (ph) from Uska Bank in Silderon (ph). I have three questions. First of all, could you tell me if you have a GLP 1 project under development, which require less than one injection per day? Second, could you tell me when NN 344 will enter phase two? And finally, I would like to know if you could tell me when we'll see an improved version of NovoSeven in your clinical pipeline. Thank you.

Thank you very much. Mads, I guess these are mostly for you. The first question was GLP 1. Do we have a GLP 1 with once a day injection in our pipeline? The second question is when will we see NN 344 complete phase two, and do we have an improved NovoSeven in our project portfolio?

Thank you Lars. Regarding the GLP 1, as it stands today, we are the only company that has a clinically developed once daily preparation. And if you look at market research and then obviously either the patients will prefer once daily or something like once weekly, something that is easy and convenient to remember and to do. And I will not comment specifically on what we are doing in the research basis, but obviously one thing is improving convenience for patients, and I'll not be more specific than that, but I should say one daily injection, that is perceived by patients as being very convenient because it's easy to remember. Regarding the NN 344, well, we have done the first studies in phase one, and we are progressing through phase one towards phase two, but I'll not comment specifically on when net shift of phase occurs. But so far, what we've seen looks fine and as expected. Regarding NovoSeven and improved versions, we did announce that the ISH meeting in Birmingham in July the first data on analogue that had an improved potency in terms of clot formation, and specifically where these are in the discovery and/or development phases or discovery phase, I will not comment on, but we have actually disclosed the nature of some of these analogues. And this is one means of maintaining exclusivity once NovoSeven as the DNA causal patent in 2011. We are also pursuing other avenues of innovation within the NovoSeven area.

Thank you.

Thank you Mads. Could we have the next question please?

The next question comes from Martin Ticor (ph). Please go ahead and announce your company name.

Hello, this is Martin Parkhoi, from Danske Bank. A couple of questions. The first one for Mads. I know it's early days for the data on (inaudible) but could you maybe say a bit about the statistically significant effect, was an effect - statistically significant effect in all the doses used on NovoSeven and then secondly I know that, as I remember in the trial you injected NovoSeven some 10 minutes before skin cut. Do you believe that it could be a more optimal time point to inject NovoSeven for the first time so you could use fewer doses of NovoSeven? And then secondly, with respect to Levemir this is probably for Jesper, could you maybe in broad terms elaborate a bit on the short-term and the long-term effect on Nova Nordisk from the U.S. delay of Levemir?

Thank you, Martin. This is Lars Rabien. Mads, we have the first question on ONT. Were there statistically significant effect of all the dosages and are there room for any time dose optimization in terms of when to start the injection of NovoSeven in connection with orthotopic liver transplantation. And then Jesper, finally, on what are the impacts of the delay approval of Levemir in the United States. Mads first.

OK, Martin, I understand the question because we have done one previous liver transplantation study with the outcome that we did not in that achieve clinical proof of concept. Later on, as we had communicated to the market, we were in the situation that it appeared that there was only active drug present in the circulation in the bloodstream for two to three hours out of the total exposure of surgical procedure of maybe eight to 10 hours. So I fully understand that question and hence we had decided the dosing machine so that a dose was administered, as you say, like 10 minutes before the skin incision and then every other hour during the phase, where the old liver is taken out. And then finally one shot is given when the new liver is all set and in place in the new body so to speak, in the person. The dose response per se is not something I will elaborate on at this point in time. These are very recent data and they will be announced during the spring or summertime at major conferences. I would say that the significance level is such that we did see a transfusion avoidance, the P of less than 0.05, which constitutes clinical proof of concept. And likewise, the same was seen when we look into the group of patients that the baseline had a normal RPC level. There we saw a statistically significant reduction in the need for RPC transfusions, so these are very good data and they occurred in the absence of overrepresentation of serious adverse events in either of the dose groups.

And then Jesper?

Martin, as you are aware, the short-term impact of launching a new product on the market like the U.S. is not one which is positive, so we look near-term on 2004 and 2005. It will delay the cost impact on 2004 and it into 2005. It will not in 2005 have a positive impact on earnings. Of course, it will not give us the opportunity to pursue a building up of our long-acting base in the U.S. where we have a quite limited market penetration currently. I think longer-term of course the Levemir portfolio will be very -- the Levemir addition to our portfolio will make us even more competitive in the U.S., but give us one more year to really focus very hard on our mixable analogue in the U.S., which is going to be a key focus this year. And then the final comment will probably be that it probably will allow for a more aggressive rollout in Europe and enabling a full production capacity availability when we have an aggressive launching the U.S.

Thank you Jesper. Thank you Martin. Next question please.

Yes, please go ahead with your question and announce your company name.

Hello?

Yes, yes, hello.

OK, sorry, I didn't catch it. This is Annette Lykke from Carnegie and Klevenhagen (ph). I have a couple of questions. My first question is related to the segmented information you're giving now, which are pleased to see. I'd like to hear about Bayer (ph) Pharmaceuticals and the EBIT contribution there, if you could elaborate a little bit on the trend in '03 saying 48 percent EBIT margin compared to 42 in '02. Is this a result of U.S. effect or USD effect and increased R&D costs? My second question would be in this context. Are you spending enough money on NovoSeven expansion program? Could you compromise further new margins and then invest for the future? Then I have a question for Mads in terms of the dose in your trauma study, which is representing 400 micrograms. If one looks into the case reported, this is a very high dose I think between 50 and 200 micrograms dose only once is more normal if we look to the extensive case reports. Why have you chosen such a high dose and why are you repeating the dose twice? Could you elaborate a little bit on that? You haven't commented at all on your stem cell transplantation study and talking to specialists, I'm that there may be some problematic situation clearing bleeding in hemorrhagic cystitis. Is that the reason why you're not talking about that, and should we expect you to maybe not going to further trials with this project? And my final question, I'm sorry, is to elaborate a little bit about the impact from the release of the trauma data you expect in terms of off level use but also in terms of how this will impact for example on FDA in terms of negotiation of trial design you are going to have for your phase three trial.

Thank you very much, Annet Lewter (ph), this was quite a handful. We will start out with Jesper talking about the segmented information which has now been released and the evolution of EBITA on those segments as you have in commerce to that. Then I will comment on our ability to fund and could we fund more in '07 expansion program. Mads will have to defend his selection of dosages in the trauma study on NovoSeven and is it so that there is an issue on hemorrhagic cystitis related to the stem cell transplantation studies. And finally, does the release of the trauma data give any implications for phase three planning and/or for experimental use. So let's start with Jesper. Segmented data.

Yes, the decline you're referring to primarily relates to two factors. First of all, of course, the key element in our biopharmaceutical segment is our NovoSeven franchise. And as you're also aware, we have close to 60 percent of the turnover in NovoSeven being recorded in U.S. dollar, and hence between the two years you will have a higher impact on the devaluation of the U.S. dollar versus the Euro in the biopharmaceutical segment compared to what use the for the diabetes care segment. So that's the first factor you have to take into account. The second one is a reflection of the increased investment we do in R&D. In this segment, you've heard Mads talk a lot about our efforts within NovoSeven. I probably should also mention that we are doing significant investments within our proteins strategy, and that is also reflected in the cost to research in the area of bringing new innovative proteins forward to the market. So those two factors would really be the ones that account for the major part of this development, and I see the 42 percent which we are reporting for 2003 as a better guidelines for the operating margin for the segmented going forward.

Thank you Jesper. Then that sort of naturally brings it on to could we have spent more money on the expansion program. My comment to that -- this is Lars Rabien speaking, is that this would be difficult for us. We have undertaken a long series of studies and I think right now the bottleneck is being able to manage all these trials and rather skilled -- then financial resources, and it is going to be an interesting question also as we go forward because we are now seeing the opportunity to start up additional clinical studies, regulatory studies, but also as you will know that we have additional studies in spinal surgery which are going to be started off this year. So definitely we are going to expand going forward and there's no financial limitations on what Mads and his crew can do to NovoSeven. It's their own creativity and their own skills in terms of managing all these things here that's the limitation, if any. That brings me on to you, Mads, with the dose in the trauma. Why did you select these and how do they corroborate with other anecdotal dosing, which has been used for these typical settings.

Yes, well, on that first subject obviously the anecdotes have described typically one to two doses of around 100 micrograms. They have been occasions where the investigators have been using more doses if the bleeding persisted and so on. Now here you have bear in mind the notion that first of all we're looking into a late segment of these patients, i.e. they've all received eight bags of blood, meaning that they are starting to have a delusional and consumption clog allopathy, implying that if anything you would like to dose in the higher end to make sure that you're not missing out on some of the patients, and you cannot do dose escalation trials in a trauma setting. That is logistically simply a nightmare even to consider. So this is basically the guesstimate and the analysis that we did before we kicked off, and it seems like we were successful. If you then look at the mean time to inclusion was six hours for these patients, implying that they were a little bit down the road compared to ones who are just fresh from the site of the insult. If you then look at the stem cell transplantation study, well, a couple of comments. First of all, you're right in saying that different organs in the body tend to have different propensity to respond, at least anecdotally to NovoSeven. And I would also argue that hemorrhagic cystitis would not be an obvious organ or tissue to choose as your approach when looking into NovoSeven activity because there's a high limit of so-called Fibrinolysis in this particular organ, and of course that is something that we're looking into.

But what Lars alluded to in his introductory statement was that we have not seen a classical dose response in the trial, and that's absolutely true. We did see an efficacious dose, and interestingly we are at this point in time doing a stem cell transplantation study in U.S. with exactly the same trial design, and this is the one that we will now use to hopefully confirm some of the good data that we did see in the study. Now, and then jumping back a little bit too trauma, sorry about that, you also asked to the off label situation and also the regulatory situation now that we have this proof of concept data. Well, of course the FDA, they were primarily worried about the notion that safety was not proven and that we did not have been the preclinical trauma models to choose from at the point in time. And obviously, I think with the 280 patients of whom half had received NovoSeven at a pharmacologically active dose as we can claim now, then I think we have a much better situation in order to seek a clinical dose decision from the FDA. It was actually U.S. trauma surgeons that were primarily contributing to the study protocol that was designed in the old days. At that point in time we were hoping to do it also in the U.S. Regarding off label sales, we cannot give you any guidance. What we can say is that trauma is probably the single most important entity as such in the overall group of off label usages that we have seen over time.

But I guess Mads - this is Lars Rabien here -it's fair to say that there will be sort of a little bit of a lag created in terms of release of these data and more detailed information because we also have a need to process is in a proper fashion, so if you should see an acceleration of experimental use, it's probably in the second half of this year. And also, we are alerting you to the fact that we saw a very strong growth in NovoSeven last year. As a consequence of that, we are looking at rather lower double-digit growth rate for 2004, but with the potential that towards the end of the year we start to see an effect of these excellent data which will be released. And of course, to the extent possible and legally possible, it will be marketed and brought to the attention of the relevant physicians by ourselves.

OK, thank you.

Did that cover all your questions?

I think so. Thank you.

All Right. Fantastic. Next question please.

The next question comes from Poul Lykkesfeldt. Please go ahead with your question and announce your company name.

Poul Lykkesfeldt, ABN Amro Alfred Berg and Copenhagen. Good afternoon. A few questions. Could you remind me of the stocking effect of the insulin price increase in the U.S. in the autumn? What was the effect of that? Also, could you remind me all of the current Droxicidan (ph) focus now of the U.S. diabetes sales force in the United States? And also, could you confirm that it is the one product is still on track to enter phase three in the middle of 2004? And lastly, the impact in terms of off label prescription form, there was seven ones the market has digested the data from December. How do you see the current 15 percent developed to the next year or two? Thank you.

Thank you Poul Lykkesfeldt, this is Lars Rabien. The first question was about the stocking effect of the price movement in the U.S. in the autumn of 2003. Just the will take care of that, and I'll come up with a comment about the structure of our U.S. sales force. Mads Krogsgaard will talk about whether or not we are en route for GLP 1 stock goal decision on phase three later this year. In the final question was ...

The expected development in the off label ...

Off label of NovoSeven, yes. Jesper first.

The starting effect in U.S. at the end of 2003, there was none. We had price increases of around nine percent in December '02 and there was price increases in September 03, and that has left the inventories in the U.S. unchanged, but you should know in Europe that we have had in two markets, primarily Poland and the UK, we have had incidences of stocking. In Poland, as an example, we had a reduction in the reimbursement of insulin and hence we saw a stocking in November and December for quite logical reasons from the consumers, and that has had an impact to the tune of 75 million on the European insulin sales in the fourth quarter, which we expect to be missing in the first quarter of 2004.

Thank you Jesper. Then -- this is Lars Rabien here. On the U.S. sales force, we have seen a rapid expansion of our sales force. We used to originally have, as I recall, 160, 165 sales reps until when we launched the quick acting insulin analogue in the mixes. We expanded that sales force to around 650. We are now expanding it even further, so we are talking about detailing force -- only detailing insulin of around 800 U.S. This allows us to increase the frequency with which we can visit the doctors. We already have coverage that we need in the normal territories, but the additional number of sales reps will increase the frequency. Mads (inaudible) the GLP 1.

Yes, very briefly Paul, towards the end of the summer is still on track for initiating the phase three study with Lirepticide (ph).

And then on the final question on off label use of NovoSeven, it's correct that we have previously commented that our expectations for it in off label use, particularly in the United States, is around 15 percent. I may the comment before that it's a little bit difficult to gauge what the situation would be because I'm expecting a very quick ramp up all of experimental use of NovoSeven. As I mentioned before, rather than push towards the end of the year, so we looking internally here with quarters outlook for NovoSeven in 2004, where we're saying saturation of the hemophilia market saturation of the number of elective surgeries that has been performed with this drug. And we of course expect that eventually the data that we have presented today and just prior to Christmas, will lead to an increased desire to experiment with this drug in those settings where they were conceived, these data, and as well, the good safety profile will lead others to speculate in even further areas. Also, later this year we will be announcing results from the ICH intracranial hemorrhage study, which is going to be quite interesting because that combined with the trauma setting is going to be the largest segment as we see it right now for NovoSeven.

That's perfect. Enjoy your day.

Thank you. Next question please.

Next question comes from Henrik Simonsen. Please go ahead with your question and announce your company name.

Henrik Simonsen from Nordea. A few questions as well. I was wondering if you could elaborate a little bit on the performance in the U.S. for your insulin franchise that was up 37 percent, how much is volume and how much is price there? Secondly, you mentioned a more rapid rollout of Levemir in the European region. How long should we expect the rollout to take in say major European markets, the top five markets like that? And then I was wondering if you could comment a little bit on your return on invested capital, which has been going down now for three years in a row and I think your target is 25 percent. Why we're saying is declined. And then fourthly, if you could comment just on the share of the U.S. growth hormone business compared to the total business.

Thank you very much. Henrik, this is Lars Rabien. The first question was the performance of the U.S. insulin bases, how much was volume, how much was price, and all in all, adding up to the 37 percent increase. Second one was Levemir, to what extent will we have a timing delay in terms of rolling out in Europe. Third one was how about the development in return on invested capital that's been going down. Jesper, will you comment on that? And the final one was what is the size of the U.S. growth hormone business in comparison to the other growth hormone businesses we have. Well, I think the first one Hedrick, at least a stab at it, you looking at approximately a volume increase about business in the United States of around 15 percent. And in addition to that, we looking at a value increase of around 17, 18 percent. With regard to the Levemir rollout, I think the timing more is going to be a matter of pricing negotiations with individual authorities that will determine our ability to rollout in the European segment. And it is correct, we have previously stated that, like with all drugs of this nature, there is going to be a manufacturing ramp up. And as a consequence, we actually -- you could say may be a little bit of a virtue rather than say that as were not able to launch in United States at the same time as in Europe that that will have a better match actually towards a manufacturing capacity. Jesper, on the development in return on invested capital, do you have any comments?

Yes. Of course, I guess you're aware the invested capital is calculated based on the average level for the year. And of course, the start, the opening balance for this year is significantly impacted by the large investment programs that we undertook in 2001 in 2002. In fact, the decline from 2001 to 2002 was significantly impacted by the high investment levels, and that has part -- part of that effect is also an effect on 2003, but the key factor here really is that we see significantly lower levels for the main invoicing currencies. In fact, if you look at the currencies, it has approximately effect of minus two and a half percent on our return on invested capitals. So if I'd have the currencies at the same levels as we had last year, we would actually have seen a significant increase and I would have a loved to have had the currencies at the same level when we set out the targets. It would be mighty close with the performance we have currently to the long-term target of getting to 25 percent. But that just makes the challenge little bit harder. We're definitely going forward and I think with the lower and near-normal levels of investment we're currently undertaking, we should begin to make progress on the right front when we look at 2004.

And then in addition to -- this is Lars Rabien here. In addition to the currency impact, we also had this impact from extraordinary income, which of course boost the numbers slightly, so I think from my perspective it's still a relevant target to go for, the 25, as we are still -- even if we had the currency back at the same levels, we would be slightly off the target, due to the extraordinary income that we have seen. So it's still a meaningful target for us. With regards to human growth hormone, as part of our U.S. business, this is still below the 10 percent of the business. These are high single digit portions of our U.S. business. I hope that includes those questions. Can we have a -- I think we still have time for another question, please.

Yes, a final question from Mr. Andy Courson (ph). These go ahead with your question and announce your company name.

Thank you. It's Andy Courson (ph) at UBS. Just a couple of very quick questions. Within the gross margin you talk about costs relating to one of impairments. I was wondering if you want to quantify those or let us know whether they're likely to recur in 2004 at roughly similar levels. And the second question is just a check on guidance. You mentioned 250 million Kroner of one off gains within other operating income this year, and just checking that the based in 03 was about 650 of one offs, if you could just confirm that please.

Thank you. And this is Lars Rabien. I guess, Jesper, this is for you. The gross margin -- the impairments, this is something that we're going to see going forward, and finally, can you confirm the fact that we're going from 650 to 250 on the one offs in the guidance?

Yes, the gross margin drop by approximately 1.7 percent in 2003 as a result of a currency impact, and hence it was a little bit disappointing that we did not see improve gross margin coming from the underlying business, and I refer to that as being an effect of one off impairments. The key one was actually relating to us changing the men on the threshold for when we capitalize items, and that has been changed in 2003 and I will regard that as a nonrecurring event, only occurring in 2003. It will be quite a few years before we change that again. And that had an impact to the tune of 0.5 percent. So it's pretty much in line. If you just like that adjustment then you are seeing an underlying improvement to the tune of 50 basis points year on year and I think that's a reasonable guidance. As for the second question, what are going to be the level of nonrecurring income? I mentioned the 250 million related to the Aventis income in 2004 and also to the settlement we've done with Pfizer regarding UHHRT. In 2003 you have a level of 650 million related 2500 million from Aventis and than 150 million related partly to an operating of cyber genetics and 50 million related to HRT in U.S., and that gives the total of 650. So that's the one offs.

OK thank you.

Thank you very much. And then I'd like to use the opportunity ladies and gentlemen on the part of management to thank you for your interest and your support of Nova Nordisk during 2003. We hope that we can retain your interest going forward so that we might hear from you again at the release of our first quarter results 2004. And thank you very much for listening and now.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect your lines. Thank you.