諾和諾德 (NVO) 2004 Q3 法說會逐字稿

Good afternoon ladies and gentlemen. Welcome to Novo Nordisk's third quarter results 2004 conference call.

[OPERATOR INSTRUCTIONS].

And I now like to turn the conference to your host for today, Mr. Lars Rebien Sørensen, please go ahead. I'll standing by for questions.

Lars Rebien Sørensen: Thank you very much. And ladies and gentlemen welcome to this Novo Nordisk conference call regarding our results for the first nine months of 2004, which were released earlier today. I am Lars Rebien Sørensen, the CEO of Novo Nordisk, with me I have Chief Financial Officer, Jesper Brandgaard, Chief Science Officer, Mads Krogsgaard Thomsen, and present are also our Investor Relations Officers, Peter Haar and Palle Olesen, and with us on the line from the United States we have Christian Kanstrup.

Today's earnings release is available on our home page novonordisk.com along with the slides that we will be using for this conference call. The conference call scheduled last approximately one hour. As usual, we start the presentation as outlined on slide number 1. The Q & A session will begin about 25 minutes.

Turn to slide number 2, it is always unusual to assume that this call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause the actual result to differ materially from the 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 as mentioned is web cast live and a replay will be made available on the Novo Nordisk web site after the conference call. I would like to start the conference call with some highlights from the first nine months.

Slide number 3. The overall story (ph) remains unchanged. It's the insulin analogues, which are driving growth for Novo Nordisk. Within diabetes care therapeutic conversion of (inaudible) human insulin is continuing, and on top of what we are seeing a solid market share gains compared to both NovoRapid and NovoMix.

The market share gains have resulted in Novo Nordisk to come in the market leader in Europe in the analogue segment. Levemir has now been launched in ten countries in Europe, and we expect continued rollout of Levemir to underpin the very fast development of our Insulin analogue portfolio. Within biopharmaceuticals NovoSeven continues to drive growth, but our growth (inaudible) also contributed to the positive digits development.

For the regulatory consultations in Europe, Novo Nordisk now expects to file an application the marketing approval in Europe, for the use of NovoSeven in connection with intracerebral hemorrhage. Filing is expected to take place mid 2005, with an expected six months review time, because vaccines for the FDA about US regulatory pathway related to ICH, are ongoing and Novo Nordisk still expect to conclude this before the end of 2004. Novo Nordisk has then (ph) licensed the global rights to re-component factor searching from Zymo Genetics.

The known mechanism all factors are searching for stabilizing blood clots, indicates the Factor XIII alone, and in combination with other compounds such as, the compound Factor VII, might become an interesting new opportunity with immunization's management.

On October 5, Novo Nordisk held its first capital market sale, at the capital market, they end in a safer stock exchange, and also Novo Nordisk elaborated on its Biopharmaceutical business and provided insight into our research and development activities within the Biopharmaceutical segment. Mads Krogsgaard (ph) will go as more details with the news on our research and development pipeline data in the presentation.

We are pleased with the solid underlying financial performance, sales grew with 11% reported, and by 15% in local currencies in this first nine months. We started in a reported operating profit over up 10%. Despite a more challenging currency environment, compared to the time of our half-year release on August 11, we are reiterating our full year guidance of a reported operating profit (inaudible) of slightly more than 5%.

Please turn to slide number 4, the first nine months the diabetes cares have improved by 15% in local currencies, and accounted some more in two-thirds of Novo Nordisk's growth. The growth in diabetes care segment in driven by Insulin analogues, which accounts for more than half of the companies overall growth.

The Biopharmaceutical segment grew with 14%, in local currencies in the first nine months, with a local currency growth of 15% in NovoSeven is the key growth driver within the Biopharmaceutical segment, however also, our growth over franchise continues to show solid growth rate of 10% in local currencies.

Please note, that during the first nine months of 2004, the change in distribution setup for our US HRT product, has impacted overall sales growth positively by slightly less than 2 percentage points. This effect is going to decrease throughout the remaining of the year as the change in distribution setup took place in July 2003.

Turn to slide number 5 for an update on our analogue franchise. In the third quarter, Insulin analogues grew 84% in local currencies. The growth is driven by underlying market growth, as well as strong market share gains of both NovoRapid and NovoMix in all regions. In terms of regions, it is North America followed by Europe, which are driving growth.

In the third quarter, North America for the first time, became the biggest region in terms of analogues. And Novo Nordisk is benefiting from the significant value operated on analogues in that region. Japan (inaudible) as well as international operations continue to show growth rates (inaudible) of 100%, although from a relatively lower pace level.

In the third quarter, Insulin analogues constituted more than 25% of our Insulin sale. In North America, close to 50% of the Insulins sold are (ph) analogues. Continuous rollout in Levemir in Europe is expected to underpin the growth of our Insulin franchise, and we are proud to be the only company with all three types of analogues on the market.

The clinical profile of Levemir continues to strengthen, related (ph) towards the interesting data percentage of the year seen in September, on the use of Levemir in combination treatment with OADs. The data shows that a significant higher number of patients reach target Hb1ac in the absence of hypoglycemia, when using Levemir.

Turn to slide number 6, for further insight into the dynamics of the analogue market. The conversions for analogues continued steadily. And more than one-third of the market has now been converted to analogues.

The conversions to analogues is driven by all segments, and it, together with the ongoing conversion to especially disposable devices driving a solid value growth in the insulin market. Novo Nordisk is continuing to gain market share within the analogue market. Maintaining the solid performance since the first quarter of 2002 and Novo Nordisk market share of the analogue segment is approaching 30%.

Turn to slide number 7, providing some further insights into the drivers of our analogue market share gains. NovoRapid now commands close to 40% of the analogues in the short acting segments whereas NovoMix commands 12 to 45% of the analogues in the previous segment. All regions are contributed to growth.

The very solid growth rates of NovoRapid and NovoMix are reflected in our overall insulin market share where we now command 49% of the INS world in the 12 months ending June 2004 compared to 47% market share in the 12 months come to ending June 2003. The market share gains within the analogues segment are also reflected in our value market share where the comparable figures of current market share of 41% versus 40%, 12 months earlier.

Turn to slide number 8, which provides with an update on the development of our analogue market shares in Europe as well, as the ongoing Levemir launched. Novo Nordisk is now the market leader within analogues in Europe commanding a market share close to 40%.

The solid development is driven by NovoRapid and NovoMix. NovoRapid now holds 51% of the short-acting analogues in Europe up from 41% 12 months earlier. NovoMix now holds 53% of the premix analogues in Europe off from 34% 12 months earlier.

However, also the launch of Levemir in Europe is contributing to the market share gains. Levemir now has been launched in ten countries, and the initial feed backs where positive. Physicians, nurses and patients value the high predictability of the resulting reduction in the hypoglycemic events, and also very importantly the actions of regain.

Based upon the initial feedback from the market, the results from our clinical trials, seems to be confirmed from real life usage of Levemir. Initial feedback also indicate that the majority of patients are taking Levemir once daily.

Its still early days, and the role of our Levemir continues, so we are pleased with the initial uptick of Levemir in the market place. In August, despite only being launched, in Switzerland, Ireland Finland, and the UK, Levemir reached the margin of 3% of the long (ph) reacting analogues in Europe. We now look in forward for the continuous role out in Europe, and the expansion (ph) FDA approval of our midst 2005, which is on track.

Turn to slide number 9 for an update on NovoSeven. NovoSeven sales increased by 13% in local currencies and 8% in Danish Kroner in the third quarter of 2004. The growth in NovoSeven were primarily driven by North America. A number of factors contributed to NovoSeven's sales growth.

Due to the high penetration with instantaneous bleedings for congenital (ph) inhibitor patients, the predominant part of the growth within the inhibitor segments, has been generated by treatment of (inaudible) patients and usage of NovoSeven in connection with (inaudible) surgery.

Treatments of spontaneous bleedings for congenital inhibitor patients remains the largest area of use. In addition sales, are perceived to have been positively affected by increase (inaudible) use of NovoSeven, especially within trauma, and surgery. The positive development within our NovoSeven expansion program continues with the expected filing for the use of NovoSeven and into cerebral hemorrhage in Europe, but Mads will revert to this later on in his presentation.

Turn to slide number 10, for an update on sales by geography. North America continues to be the main well driver and now constitutes 27% of Novo Nordisk sales. The first nine months 2004, North America contribute was more than half, the overall growth of Novo Nordisk (ph). Growth in Europe is negatively impacted by the (inaudible) service, health care reforms in a number of countries. The health care reforms are impacted by the volume growth and the value (ph) growth, in the market.

However, we are continuing to see solid growth rates of our key strategic products. Insulin analogues and NovoSeven, despite the fact that NovoSeven had a tough comparison from third quarter last year, where we saw high number of extraordinary (inaudible). (inaudible) in Europe is showing solid growth rates of 17% (ph) driven by monitory gains, whereas our formal replacement therapy sales, continues to decline, due to the overall contraction of the line.

In Japan, (inaudible) growth has driven by the insulin analogues and NovoSeven. Novo Nordisk remains the only company with two analogues on the market in Japan following the launch of NovoRapid 30 Mix, in late 2003.

Though the analogues are showing solid penetration in Japan, for the first nine months of 2004, the growth hormone environment remained challenging however, a solid penetration of the pre-sales that delivered (inaudible), has been observed of since the launch in July 2004. Nordisk (inaudible), is fully integrated pre-sales to disposable deliver system for liquid growth hormone base of (inaudible).

Sales in international operations, operated by insulin analogues, human insulin, and NovoSeven. The growth in insulin analogues is primarily driven by solid penetration in Turkey, whereas the growth in human insulin is driven by China and Brazil. Like in Europe, Novo Nordisk is also the market leader within the analogue segment in international operations.

Slide number 11, for update on sales development in North America. In the third quarter, sales in North America improved to 39%, in local currencies and 28% in Danish Kroner. The growth in North America is driven by insulin analogues and NovoSeven. In the third, quarter sales of insulin analogues in North America proved by close to 90% in constitute close 50%, of total insulin sales.

Sales within diabetes cares had been positively impacted by increasing wholesaler, inventories in the third quarter of 2004. As changing wholesale of set up, has resulted in an additional insulin sales of some 100 million Danish Kroner for the third quarter. Nova Nordisk continues to see solid market share gains of both Novo (inaudible) and NovoMix.

Novo Nordisk now holds more than a third of the US insulin market. Sales of OADs in the third quarter, were positively impacted by an increase in wholesaler inventories as well as high prices. Within NovoSeven growth is mainly driven by increased investigational use. North America is expected to remain the key growth driver for Novo Nordisk, and all therapy areas are adding to the growth. With this I would like to hand over to Mads, who will given an opinion on the development within our pipelines.

Thank you Lars. Please turn to slide number 12. Over the past months, all clinical and non-clinical data have been further analyzed, and discussed with the regulatory agencies regarding Liraglutide. Based on this, Novo Nordisk has now decided to perform one more phase 2b study, to be initiated as soon as possible.

The benefits expected from this study, include the creation of a stronger bases for the large phase reprogram, regarding the efficiency and safety profiles of the (inaudible) in type 2 diabetes, following for long therapy, with a relevant single dose in a larger population. Further more it will ensure that non-clinical findings are of no relevance to humans, and lastly the study will provide a bit of statistical basis for power in comparative trials, based on (inaudible). The phase 2b trial, will include approximately 170 patients, receiving placebo or Liraglutide for several months.

Unfortunately, the contract of the phase 2b trial, implies that this 3,500 patients be reprogrammed, will now be initiated around the turn of 2005. It is however, as if (ph) the benefits associated with this approach, justify the delay in the phase 3 start. Novo Nordisk will provide updates on the progress of the described phase 2b study, as part of our routine in this topic.

Regarding Levemir, we have now successfully concluded all the activities related to the outstanding clinical issues, with the US filing of this analogue. Hence, Novo Nordisk expects to file the amendment to the NDA, before year-end. Implying that an approval from the US regulatory authorities would be expected around 2005, in mid 2005.

Finally in September Novo Nordisk obtained full development in manufacturing rights to the AERx iDMS program, from Aradigm Incorporation, Hayward, California. As the consequence, Novo Nordisk will assume all further responsibility for the development and the funding of the AERx iDMS program.

The ongoing pharmacokinetics and some pharmcodynamic (ph) study in Australia, will continue according to plan, and it still expected to be reported during the first half of 2005. Finally on diabetes, Novo Nordisk has decided to terminate further clinical development of (inaudible), and all (inaudible) treatment for type 2 diabetes.

The determination being because the clinical results, sorry the pre clinical results did not suggest a sufficient competitive advantage for (inaudible), compared to similar marketed products within this therapeutic category. Please turn to next slide, for an update on our biopharmaceutical pipeline. For NovoSeven in trauma, we are in track for submission of the regulatory (inaudible) in EU and for initiating in US trauma trial as earlier communicated.

We have additionally initiated in exploratory study in traumatic brain injury, which following (inaudible) is the major cause updating trauma, following regulatory consultation in Europe, Novo Nordisk now, expects to file an application for marketing approval for the use of NovoSeven in intracerebral hemorrhage, for which there's currently no proven medical or surgical therapy available. This filing is expected mid 2005 followed by the expected 6 months review time by the regulatory authorities.

The consultations with the FDA about the US regulatory path for the ICH indication are on going and we expect top conclude within this year. Also, Novo Nordisk has initiated clinical phase 2 study on the use of NovoSeven in patients undergoing cardiac surgery. As mentioned by Lars, we did last month acquired the worldwide rights to the component human Factor XIII, which is a (inaudible) stabilizing protein with an exciting potential with the haemostasis.

Factor XIII can be used alone, such as in congenital deficiency and certain other areas, but may also be combined with NovoSeven in therapeutic indications, were strengthening of the clot is warranted, due to exaggerated (inaudible).

Our first potential cancer therapeutic to (inaudible) 21 has now entered clinical development. In this regard, a dosage (inaudible) study in milgnant melonoma patients has been initiated at three different centers in Australia. Finally, in the growth hormone area, NordiFlex, which is a dedicated disposable growth hormone device based on the (inaudible) technology has been approved by the FDA. Norditropin, has also been tentatively approved by the agency, for treatment of adult patients with growth hormone deficiency, the so-called GHDA indication.

Final marketing approval is expected to file (ph) in the end of the US open drug status of this indication by the end of the October this year. Clinically, growth hormone treatment has been shown to help adults with growth hormone deficiency, in normalizing weight, body fat distribution, muscle mass and bone mineral density. And ultimately, a new US research site focussing on haemostasis and critical care research, will be established with the aim of further expanding the (inaudible) within this field.

The site will be located in New Jersey, an area known for its medical and scientific excellence within the haemostasis field. The site will serve as the center for early stage in haemostasis research, and will be staffed by approximately 75 scientists when fully operational. Now, over to Jesper for an update on the financial results.

Thank you Mads. Please go to slide 14 providing you with the details on the financial results. We're pleased with the solid growth rate of 15%, for the first nine months of 2004 in local currencies, however due to the continued weakness of our main invoicing currencies during 2004, reported sales were impacted negatively.

For the first nine months of 2004 our report sales growth was 11%, in the third quarter alone sales were by 16% local currencies and by 12% Danish Kroner. If local currency sales adjusted for the change in the HRT (ph) distribution, in the US and the wholesaler inventory build up, also in the US in the third quarter of 2004, the underline growth rate for the first nine months of 2004 is close to 13%.

Reported operating profit increased by 10% in the first nine months, whereas underlying operating profit grew by towards 20%. In the third quarter alone, operating profit grew by 5% in the reported terms, whereas underlying operating profit grew by more than 15% in local currencies.

Net financial showed a net income of 192 million Danish Kroner, in the first nine months, compared to 548 million in the same period 2003. Novo Nordisk recorded a net foreign exchange gain of 305 million Danish Kroner, primarily related to the hedging of the US dollar. This compares to a gain of 959 million in the first nine months of 2003. The tax rate for the first nine month of 2004 was 33%, down 1% percentage point from 34 in 2003.

The lower level of financial income compared to 2003, resulted in a net profit of 4%, net profit growth of 4%, despite operating profit growing by 10%. The earnings per share increase by 5%, reflecting an impact from the on going share repurchase program. Please turn to the next slide for an update on our currency exposure.

Since the release of our half-year results on the 11th of August, we have seen the further weakening of the US dollar on the British pound whereas the Japanese yen is more-or-less unchanged. Hence, a negative impact from the currency development on operating profit continues, if current levels of currencies prevail, we will also see a negative impact on operating profit from currencies into 2005.

For 2005, our preliminary estimate for the impact of currencies on operating profit is as follows. At 5% depreciation of the US dollar is expected to decrease operating profit by 280 million Danish Kroner, at 5% depreciation of the Japanese yen is expected to decrease operating profit by 130 million Danish Kroner, whereas a 5% depreciation of the British pound, is expected to decrease operating profit by 80 million Danish Kroner.

And finally, a 5% depreciation of dollar related currencies, is expected to decrease operating profit by around 70 million Danish Kroner. Hence, the solid performance in especially, in North America, but also international operation is increasing our exposure towards the US dollar and the related currencies. Currently, Novo Nordisk has hedged (ph) future expected cash flows related to the US dollar, 13 month ahead the Japanese 10 month ahead, whereas the British pounds is hedged 7 a month ahead.

Please turn to slide 16 for an outlook for 2004, despite the slight weakening of currencies, since the time of our half year earnings release in August, Novo Nordisk reiterates its full year guidance for 2004, we still expect the sales growth for 2004 of around 10%, and the reported operating profit growth, of slightly more than 5%. Measured in local currencies, we now expect sales growth of some 12%-to-14%, while we now expect the growth in underlying operating profit to be close to 20%.

The expectations to operating profit growth in 2004, reflects a continued solid development in sales, supported by a sound overall development costs. The spend level for research and development costs, still reflects the changed facing for some development projects, which will result in research and development costs growing at a somewhat lower rate then forecasted for reported sales.

Given the weakening of the US dollar on the British pound, since the outlook provided in connection with our half year release in August, Novo Nordisk now expects net financial income for 2004, of 300 million, this also includes a gain of close to 100 million, related to the initiation of a new R&D alliance by (inaudible) in September 2004.

For 2004, Novo Nordisk expects the tax rate to be 33%, 1 percentage point lower than the tax rate realized in 2003. Novo Nordisk still plans to invest around 3 billion Danish Kroner in based (ph) assets, whereas depreciation and amortization are expected to be around 1.9 billion Danish Kroner.

The pre-cash flow is now expected to be more than 3 billion Danish Kroner. These expectations, do not include an effect from the expected completion around the turn of the year of the restructuring of the AERx iDMS program, which will then involve Novo Nordisk investment of 55 million US.

Looking at 2005, Nova Nordisk expects that the underlying growth in operating profit will be broadly inline with our long term financial objective, of growing operating profit by 15%. However, a number of factors will impact the reported growth.

Currently, Nova Nordisk does not expect any non-recurring income in 2005, compared to the level of 250 million Danish Kroner in non-recurring income for 2004. This is equivalent to approximately 3.5% point impact on growth in 2005. Secondly, assuming the currencies remain at current levels, the negative impacts from currencies on operating profit is expected to be more than 300 million Danish Kroner in 2005.

This is equivalent to approximately 5% points impact on growth in operating profit for 2005. All these numbers are based on our guidance for 2004, 2005 currency impacts, which I just reviewed before. All of the expectations provided above, assuming the currency exchange rates remain at the current level, for the remaining part of 2004, and also throughout 2005.

This concludes our presentation of the financial results. Lars Rebien Sorensen will now moderate the Q & A session.

Thank you --

-- Thank you Jesper, please notice that ladies and gentlemen that this conference will be taped, and the replay will be made available on our web page. And then, I would like to invite the operator to start the Q & A session.

[OPERATOR INSTRUCTIONS].

Thank you our first question comes from Paul Lychensfel (ph) from ABN AMRO in Copenhagen please go ahead with your question.

Thank you very much Paul Lychensfel of ABN AMRO Bank from Copenhagen. On NN2211, can you specify the type of adverse events, I believe you have seen in pre animal testing. And secondly, a more broader question related to the (inaudible) analogues and (inaudible) B4 inhibitor drug (inaudible).

In the late 90's, we saw a reduction of growth rate, in the insulin growth rate, due to the launch of the insulin synthesizers (ph). In the mid 90's, we also the same phenomenon due to (inaudible). Do you think we're likely to see the same periodical reduction in insulin growth rates, following the expected launch of (inaudible) next year and the (inaudible) in '06, '07?

And also, could you provide, from standards -- time duration timetables or the likely - approval in filing of NN22 if it goes according to plans? That was relating to 2211. On (inaudible) in light of the current success of (inaudible) in EU, what is your latest estimates regarding a US launch? You have earlier alluded to the possibility of the delay of the US launch for capacity reasons, if the European launch went quite well, what are your comments on that?

Thank you very much Paul, this is Lars Sorensen here, and I think the first quick questions will go to Mads Krogsgaard. This deals with the (inaudible), what can you comment so far on the adverse of (inaudible) in the clinical work, and what is our expectations on the impact of the class (ph) of drug on the growth rate of insulin going forward, once these drugs becomes - (inaudible) in the market, and what's your expectations for the timing -- . (Inaudible) the US launch.

Thank you Lars. In any drug development program, Paul, one would inevitably encounter (ph) observations from animal experiments that need further clarification, and as you know present state is of the atmosphere -- (audio break)

-- It means that, even though we are quite convinced that these observations have no relevance to humans, we will need to build further our safety information step by step, which is what we are doing, by gathering information on this new trial.

Now since we believe, that the findings are not of relevance to humans, and also that Liraglutide offers unique features for people with type 2 diabetes, we do not think this will prohibit us by any means from moving ahead with the program, and hence we will not be communicating the details about the findings.

But what I can say is, that in the species that are most close to humans. there are absolutely no findings whatsoever. So it's a question of getting further solid ground on our feet, in terms of making it even more likely, that we have proven and that this is of absolutely no human relevance.

So that is the first one, but what you can say, in terms of the (inaudible) growth rates, of course it will depend on a lot of things, including a what pricing regiment are we going to see for the (inaudible) class, what is the labeling going to look like, i.e. how broad, and how a good is it from a marketing prospective. And we must of course, regard this that there will be somewhat effect on the (inaudible) market, but it depends on among other things, those two (ph) effect us.

I should mention in this context, that the Beta Cell restoration effect, which is something that Novo Nordisk has been communicating a lot about, is something that is high scientifically attractive, but it will be somewhat of a nightmare to do the clinical studies that actually prove, that (inaudible) human beings have the Beta Cell restoration that we have seen in the animals.

So, this is not something that you should expect initially for the (inaudible) class of compounds. And that of course, has a positive impact you can say, in terms of less effecting the (inaudible) class, than it would have done if there was a Beta cell (inaudible) onto the drugs.

Finally, in regards to timing of this we are now seeing that the phase 3 program will be initiated around the turn of next year. And that means that you should imagine that a phase 3 program, of the 3500 patients takes around two years to conduct, following which one has to put together or the expert reports in the regulatory dossier, so you can kind of make your own calculations based on that. So that's it (inaudible).

Thank you very much Mads. On to Levemir the situation is regarding US launch that, of course we need an approval in United States first, and we believe that all the investigations which we have conducted up until now are on track for filing towards the end of this year, in the US, and then giving an expected review time of our six months.

We would be looking at a potential approval for Levemir in the US market in the third quarter of 2005. Then the next issues becomes capacity, we are having a new facility, which is being built at the moment and are being (inaudible), and so we expect that we will be ready to launch Levemir in the US market somewhat after the approval. I will prefer for competitive reasons not to be very specific here, because we would like to of course, prepare our launch without disclosing the actual timing to competition.

Thank you. Next question please.

Thank you. Your next question comes from Rachael Sledge from UBS in London please go ahead with your question.

Hi Rachael Sledge from UBS. Two questions please. First, could you quantify the size of the impairment charge taken to (ph) sales and distribution in the third quarter. And secondly, may we talk a little bit about the diabetes care margin, it seemed slightly on the lower side in Q3?

Lars Rebien Sørensen: Thank you. Two questions, one size of the impairment charge due to distribution in the third quarter, and then seemingly, relatively sluggish third quarter for in (inaudible). Jesper the first question.

The impairment charge taken in the third quarter is slightly more than a 100 million, which have been deducted from the sales and distribution cost, and is related to previous a acquisition in Brazil.

Yes -- with regard to the insulin sales in third quarter, we actually see a quite a nice growth when we compare the third quarter to third quarter of 2003. We are looking at underlying performance of about 18% insulin business when we compare that cause the third quarter 2003, but it is correct when we compare to the second quarter of 2004, we see a relatively modest development of our insulin business, we are looking at our performance of around 4% to 5% and that is especially the insulin market growth in United States we are seeing at the moment as the growth in volume of the US market that has been coming down over the last couple of quarters.

We believe that this has been a traceable to successful launch of Glucophage ER expended relief which is treating a portion of the patient that has insulin resistance as a consequence as we have seen some amount of repeat that's on the original introduction of the insulin better times of insulin US market. It's our expectations that we will be seeing the resumption of growth significant growth in the US insulin market and volume terms in the beginning of next year. So those will be the comments relative to Q3, so nice open comparing to last year of relatively large growth in compared to the previous quarter.

Thanks.

Next question please.

Thank you. Your next question comes from Martin Parkhoi from Danske Bank in Copenhagen please go ahead with your question.

Hello, as mentioned this is Martin Parkhoi from Danske Bank. I would like to stay at the insulin market, if you could level a bit about the dynamics in the market. I will call that Lars gave in the couple of years ago mentioned that he expected that the NovoMix would be become the last insulin product in Nordic and account for one third of the sales by 2010 insulin sales, but it seems like if you look at the data that you see in the market from specific markets that it seems like that the launch of lenses have stopped the decline in the (inaudible) and this has been on the account of premix market.

So could it be that you actually seems like that you have always to made the potential of NovoMix but then may be it was estimated potential of (inaudible) and then the second question that's respect to the stocking in US, you said that there was a insulin stocking figure of 100 million, can you split that on human insulin and animal often the case that will be reversed in the fourth quarter?

Lars Rebien Sørensen: Thank you very much, this is Lars Rebien and I will be with your question that you ask such a deal with a taking question on how the stocking effect was on human insulin and animals. It is correct that when we preciously announced that we would be expecting our NovoMix already lower lot mix product to be a better product in ten years, I think this is still contribute the case because we have a very strong positions in that segment and we are also expecting that segment will remain one of the most attractive segments in the insulin business but you are also correct in saying that as we seeing now is seeing a relatively slower penetration of analogues in to the premix segment then we have seen of conversion of analogues in the base of segment.

We believe this is something to do with the fact that in this segment the premix segment is the primarily type two segment and these patients are less likely and less frequent to see their positions and therefore being adopted to a new and improved therapies. But its still our expectation that we will see the premix product has been the biggest products of Novo Nordisk because we believe that the premix product is going to be better than the base of therapies of Type 2 Diabetes and if the Type 2 Diabetes segment is the bigger segment over the interim market that should also for the future as well

Can I follow up on that?

Lars Rebien Sørensen: Sure

It was a - there is no doubt that the conversion is slow on the premix segment than you see in the long acquire segment but what you also seen the actually not only the slow conversion but also seems like that the long acquit segment have taken some share of the (inaudible) some share of the total premix segment. Then the second thing is that there is no doubt that from a physiological view point is started to take two injections of NovoMix and then want to take some (inaudible) but is that really what the market wants?

Well, I think the market and this is certainly something that we are promoting if the market wants better control and if you want better control of course you may have to trade some convenience and then go through more than one injection a day. When we look at - the fact that you mentioned that there may have been a (inaudible) in conversion within the premix statement this is primarily release to affect that we have seen (inaudible) has been well success in United States.

And this has in some ways impacted a conversion gradual conversions of the US market to premix and codified the procedure of (inaudible) in the US line. We expect that we will continue the education, we continue promotion of our strong that (inaudible) and educated doctors that we will eventually see a conversion of the US market would be more similar to that of Europe meaning a ethic sign of the basic segment all the time. But you are correct, except in US (inaudible).

Thank you.

Lars Rebien Sørensen: And then Martin coming back on the question on the stocking in the US the wholesaler movement we have seen of around 100 million, I think in the US roughly half of the sales are human insulin and roughly half of the sales is insulin analogue. It will probably be slightly more which I related both use 60, 40 (inaudible) on the stocking between the analogue segment and Human insulin so probably around 60 analogues and 40 human insulin that will be reverted expected in the fourth quarter so it neutralized when we get in to the New year.

OK. Thank you very much. Next question please.

Thank you, your question comes from Annette Lykke from Carnegie in Copenhagen. Please go ahead with your question.

Yes, thank you very much Annette Lykke from Carnegie in Copenhagen. My first question will be to (inaudible) in respect to your trials on Liraglutide and why are you first starting this small phase 2b trail now and what has that been the initiated earlier that's one question is that capacity reasons or any other good explanations. And can you some how make me or other and more confident in the way your handling this project telling us or so we get more sure that you will not (inaudible) or other kinds of surprises and that is my third question and my fourth question would be in respect to the full year outlook for 2005 as Jesper saying that it will be hard to reach 15% which is your target or you will not reach the 15%.

Thank you very much Miss Annette, you have two questions related to the Liraglutide why is it that taken us time to get started on the phase 2b (inaudible) started and what can you tell us in terms of building confidence that we have seen (inaudible) lead to our further delays, then I will be able to give the full year outlook.

Lars Rebien Sørensen: Yes, but first of all when your saying about the cost supply situation that there is a truth to it that we as you are ware have only done one short term five week these two study on the full clinical dose which is the one we communicated Q2 last year. That is the only study we started up to 2mg the two first works we start only up to 0.75mg per patients. Now obviously overall this is not good news then you might ask yourself as you are doing why is it that we cannot make this decision now?

Now here you have to bear in mind that the regulatory and advisory processes between stage 2 and 3 are very extended and they take into account all aspects of the drugging development namely their production, the pre-clinical and non-clinical data as well as clinical data and we have actually had inter phase 2 meetings and other regulatory meetings including so called scientific advisory meetings right up until and including this very month.

So this means that of course this is your continuum of discussions in a very (inaudible) process between on one had the regulatory bodies and the company on the other this means basically that we now comes to the conclusion that we will have a stronger basis for a full (inaudible) three program with a very strong labor on both the various combination therapy you approaches that you can (inaudible) in all the sub segments of Type 2 Diabetes that are relevant.

I actually think that we are taking a risk minimizing approach in making certain that the phase 3 program once we launch it we will have all the right combinations of doses hence the program will be on a more firm basis albeit bigger leader so you should not be more worried about the program for say but of course we understand fully that you are worried about the today, which is highly unfortunate. I should say then that is the phase 3 program would have taken most of the risk out of it because we have looked in to a lot of these aspects already in the years started to be initiated now.

And then its (inaudible) here with regard to the full year what we are saying about the full year is that right now working on our operational plans from next year and as we are indicating we have has an ambition that these plans are leaving up to our long term financial target that growing the operating profit all other things been 15% per year and then we are highlighting some specific issues which we need in to consideration which is that these had not been concluded yet and that still remains to be finalized and then we are highlighting some specific issues which we need to take in to consideration which is seriously impact of our operating profit levels (inaudible).

One thing is the factor we can't see any non-recurring income in 2005 compared to 250 million we had or we expecting this year and that has been in fact that it was quantified by (inaudible) then we accountancy and adverse currency environment given if the currency stay at the current level which would great to another around 5% or 300 million so and if all other things be equal and we pretended a target to our (inaudible) so giving an operating profit of 15% that would be a result in on the line full year growth in 2005 around 7%. Yes, it's going to be a difficult year next year.

Is any reason that you see on the line strong moment we have for 04' that should change during 2005 I can ask in another way.

Yes, I will ask Jesper to comment on this please.

No, I think what we seeing in the growth rate this year is close to 20% on the line growth and what you have got to bear in mind there is that we of course have this year as a benefit of having a lower growth in our research and development cost which hopefully is of an non- recurring nature. It is our ambition on a year-to-year basis to invest around 15% to 16% of our sales in R&D and we will be below that level so that's a kind of creating a kind of artificial growth this year.

When we look at next year that should not be the case and hence there shouldn't be a significant (inaudible) over then there is also this year an effect from the change in the US as our key distribution which we are benefiting from and that benefit will not be prevailing in 2005, so I think the best thing we can say is current is expect us to try to put some thing together which underlying the simple 15% but then you got to bare in mind the current situation and you got to bear in mind the situation for non-recurring income.

Thank you. I think that covers the forward-looking statement I would like to remind you that for 2005, next question please.

Thank you your next question comes from Henrik Simonsen from Enskilda Securities, from Copenhagen. Please go ahead with your questions.

Yes, hello gentlemen my name is Henrik Simonsen. Two or three questions, Lars the first question relates to your diabetes pipeline over the past few years you discontinued NN622 (inaudible) little zone and that of little zone and you have delays on inhaled insulin and now I think two or three years to obvious delay on dop1 so the other question is how do you feel about your diabetes pipeline at this stage and secondly questions to Jesper, the license fee and other income line I think you have guided previously around 100 million per quarter so those in the last two quarters it has come down to 70 or 60 million should we still expect around say running rate of 400 million for 2005. And then the last question could you indicate it to us what the size of the Levemir sales and when you expect the launches in Spain, France and Italy, Italy to happen?

Lars Rebien Sørensen: Thank you Henrik I will be with the first question, which is how we feel about that diabetes pipeline then I ask Jesper to comment on the two remaining, which is the guidance the changing guidance and then the expectations for Levemir. Well of course one is never happy about post permanent and termination of projects for if you look at things from perspective of what other companies have been doing I think we have conclude that the data zone (inaudible) are difficult and we have seen the data price on that but also having the same experience.

With regard to preliminary insulin I think our competitors would agree that this is also difficult so and with regard to 22/11 I have strong confidence in our scientific team that there will be going rise the product in a reasonably improved way forward as Well. We have expectation to 22/11 all your exercise because we believe that it has a scientific and clinical merit but a drug development is difficult then that also diabetes as well and then we have of course (inaudible) in our pipeline and diabetes which we are expecting to see positive results from which were on course in to a great detail but that we expect something from ourselves. So of course I am disappointed that's the name of the game in drafted element.

First thing I will go on the license fee you have noted quiet rightly that the level of license fee have dropped little bit in the Q3, Q2 period. I think the guidance for this years just going to be below 400 in the non-recurring elements and then you got to see 250 on top of that. I think when you look to 2005 I think its probably going to be more right should be at the 350 (inaudible) levels so its slightly below 100 per quarter and the second question was on the Levemir sales caused us the absolute normal this year and after a significant in the - I think you can expect them to be say less than 100 million and we want to be more precise on at the current point in time.

In terms of launch period for France, Spain and also we want a comment on that. While France is a matter of negotiation with the French authorities for pricing issues and we would expect that in terms of sequence and I don't want to get more specific on that, that France will be first and then Spain will be second but both places we enter the negotiation process with the authorities is on price.

And you can imagine that is high priced products are more difficult to get through especially southern Europe that we expect because we have competitor in France that we have a good (inaudible) negotiations in France so the sequence would be in few France first, Spain second these are both big markets. These are market especially in Spain where we have strong competitive positions that should (inaudible) well for quantified to Levemir in Europe. Thank you next question please.

Thank you our next question comes from Paul Mann (ph) from Morgan Stanley in London. Please go ahead with your question.

Thank you I am Paul Mann from Morgan Stanley in London and I have got three questions you have answered my one of my question already so do you anticipate to recruit any additional sales reps for NovoSeven to promote the new indications are expecting June 2005 and if so how could you compare margins for your a pharmaceuticals division.

The second, if NovoSeven as approved ICH (inaudible) in 2005 in Europe, could we see a stocking effect during 2005 now could that impact margins and expertise from next year and finally the packs rate obviously related to NovoSeven sales, your track (inaudible) very well 100 basis points this year which would have touched here moving to next year and what (inaudible) over the next three years?

Lars Rebien Sørensen: Thank you very much (inaudible) I will take the first question, which is about expansion of the organization in view of the new invitations Jesper will be, dealing with the stocking and the tax rate. I think really if we have opportunity to market NovoSeven in ICH and trauma we will be recruiting new sales reps however, as you know this is a special segment where the external sales and retailing efforts are relatively modest and hence the impact on march and would modest so that's not something that we are only concerned about and this will be included in and when you gave more specific guidance on 2005

Yes, what about stocking and tax rate?

Lars Rebien Sørensen: For the ICH indication in Europe we noted that we expect to get the files together and handed in by the (inaudible) next year and hence the approval will be just at the end. I don't expect that to have any impact on the reported NovoSeven sales in terms of actually being legal sales there was of course be some impact in terms of investigational sales during the year.

Don't expect significant movement in terms of stocking effects in NovoSeven that is significantly more and a type of product which is used on demand and then finally in terms of tax rates we have indicated a 33% rate for this year. We have also noted that there are tax structure so that increased sales of NovoSeven has positive impact on our overall tax situation hence we probably should be looking at a slightly lower tax rate in 2005. We wouldn't give more specific comments on the guidance for 2005 at the current point and time.

No, this is (inaudible) you should expect of course as usual that we are giving guidance on 2005 in connection with the release of our annual results for 2004, which will be released towards the end of January 2005 and but we wanted to give you hedge upon the important non-recurring and currency's that we see them right now that will prepare your models for that.

Lars Rebien Sørensen: Thank you next question please and we are getting towards to the end, ladies and gentlemen so not going to sharpen the pencils.

Thank you, your next question comes from Mark Purcell from Deutsche Bank in London. Please go ahead with your question.

Thanks very much. Three good questions, could you tell us specifically for the non-clinical findings are on a (inaudible) side secondly, in terms of the discussions in Europe and ICH could you give us any insight as to how that's gone how (inaudible) and authorities are in (inaudible) for example in the UK so I just wanted how the regional acceptance had gone through those discussions and then lastly could you please remain what percentage your sales are in US dollar denominated or related currencies obviously we have the percentage for the remaining launching currency.

So I just wanted you to give us a long percentage for US dollar related come currency sales. Thank you very much. Can you comment further on the non-clinical issues related to the recorded time and we have some flavors about discussions with your (inaudible) and some regional comments they may getting some specific intensity which just costing you and then he has and with regard to the US related currency can give you (inaudible) number on the ratio of those about this (inaudible)

Yes, again here we have a situation where we are quiet convinced that this is of not relevance to humans we have among other things not being any findings whatsoever in species that are very close to resembling man and this is not going project that we have a good confidence in so we will not give any more specific details apart from saying that we are following a risk minimizing approach.

By doing this additional study which makes we would have been investigated this particular not in compiling we will have investigate in great detail during the next fewer study to convince ourselves that it is of no human relevance which is the (inaudible) we have right now.

So regarding the ICH we have talked to, of course numerous or several regulatory bodies in the world. And I can basically say that both for trauma and for ICH we have done studies in quick many senses spread all for the worlds so let brings up the ICH has been spread both over Canada even United States and numerous European and (inaudible) European countries.

So what I would say is that's not a problem of geography in terms of where we have done and not done the ICH trial, I will not comment specifically on the authorities response apart from saying that they have indeed allowed us to file for marketing organization based on the if is two data, which they found to be very exciting and also very convincing, and this is why we are putting to get the packet share by which next year for the ICH indication.

(inaudible) you going down to centralize the registrative program under (inaudible) but he is go option within he European community.

Yes that is how you do with these biasing products that is the case absolutely.

OK, and we wish you could (inaudible) US related current is some our sales of the other.

Yes marked at the North American share of total turnover is around 27% then you have the international operation of 16% to17% I will take it that around 10% of the 16 to 17 are related to US dollar of course it little bit depends on what you calculate in that, and then adds about that you have Australia included in Japan and (inaudible) so that will get to between 35% to 40% of the total noted revenue which are exposed to US dollar and which I included in the two estimate all currencies activity that will give for US dollar.

Thank you Jesper, and ladies and gentleman I would like to have a last question please.

Thank you, your next question comes from Vikram Sahu from Goldman Sachs from London, please go ahead with your question.

Thank you a last is a quick question on (inaudible) marketing can you give us a flavor of some of the market shares that you have for (inaudible) lake markets in Europe possibly a Germany where is been are after the longest I think after Switzerland?

Lars Rebien Sørensen: Well yes its, and if you look at the monthly market shares so we are looking at a monthly market share in Switzerland of around 10% we are looking at a monthly market share in the UK of around 4% to 5% we are looking at a monthly market share of around 3% in Germany, so we are seeing a nice penetration and it is fully meets our expectations and we are seeing growing excitement that around this product.

Can I clarify that this little pharmacy dated at this is a prescription proper prescription data?

Yes.

Thank you.

And that's it, Ladies and gentleman I would like to thank you all for participating in this telephone conference. I would like to reiterate that a replay of this conference call will be made available on our home page, and we indeed we are looking forward to hearing from you again in connection with the release of our full annual results, which take place at the end of January 2005. Thank you very much.