諾和諾德 (NVO) 2005 Q3 法說會逐字稿

Good afternoon ladies and gentlemen and welcome to the Novo Nordisk Q3 Results Conference call.

At this time all participants are in listen only mode.

Later we will conduct a question an answer session, and instructions will follow at that time.

Please note that there will be a maximum limit of three questions per individual with the objective of allowing as many conference participants as possible to have the opportunity to ask questions. [OPERATOR INSTRUCTIONS].

I'd like to remind you that this conference is being recorded.

I'd now like to hand over to the chairperson, Mr. Lars Rebien Sorensen.

Please begin your meeting and I will be standing by.

Welcome to this Novo Nordisk conference call regarding our results for the first nine months of 2005, released earlier today.

I'm Lars Rebien Sorensen, our CEO of Novo Nordisk.

With me I have our Chief Financial Officer, Jesper Brandgaard, Mads Krogsgaard Thomsen, our Chief Science Officer, and present are also our Investor Relations Officers, Mogens Jansen, Mads Lausten and Christian Frandsen.

Today there is a release on our home page novonordisk.com, along with the slides that we'll be using for this conference call.

The conference call is as usual, scheduled to last approximately one hour.

We'll start with a presentation as outlined on slide number one.

The Q&A session will begin in about 25 minutes and 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 the 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 note that this conference call is webcasted live and the replay will be made available on Novo Nordisk website after the conference call.

I'd like to start this conference call with some highlights from the first nine months of 2005.

Slide number three.

Novo Nordisk’s strong growth momentum is very satisfying.

We continue to solidify our position as the world's leading diabetes care company and we continue to increase our insulin market share, which now is more than 50% of the global market measured in volume.

This trend is driven by the penetration of our portfolio of insulin analogue and by strong U.S. performance in general.

We continue to roll out Levemir as the world’s most predictable long acting insulin analogue, and we now have introduced this product in all of the major markets in Europe.

Outside the diabetes care area the growth in sales of NovaSeven continues.

And also our growth hormone franchise continues to show strong performance supported by the success of our leading pre filled delivery device NovoFlex.

In October the EU Commission granted marketing approval for NovoMix 50 and NovoMix 70, and Novo Nordisk is therefore the only company with a complete range of insulin analogues approved in Europe.

We've now filed NovoSeven with EMA, for marketing approval for treatment of intra-cerebral hemorrhage, ICH.

I should highlight that this filing is based on Phase IIb data.

With regards to trauma, we started to pursue a global Phase B study contingent upon obtaining waiver informed consent in the U.S. prior to including U.S. clinical site into the study.

Mads Krogsgaard will revert to this later in the call.

We're very pleased with the solid underlying financial performance.

Sales grew by 15%, as reported, and 16% in local currencies, in the first nine months.

Operating profit increased by 20% as reported, which highlights the solid earnings growth momentum.

The expectations for operating profit growth in 2005 is increased to 12% to 15% compared to 2004.

Slide number four.

In the first nine months of 2005 the diabetes care segment grew by 17% in local currencies, corresponding to 74% of Novo Nordisk’s growth.

The growth within diabetes care is driven by our portfolio insulin analogues, which accounts for 58% of overall growth.

Biopharmaceuticals grew with 14% in local currencies in the first nine months.

Sales of NovoSeven increased 17% in local currencies, and remains the key growth driver within biopharmaceuticals, while our growth hormone franchise grew by a solid 21% in local currencies in the first nine month of 2005.

Sales of other products, which are predominately HRT products, remain largely unchanged.

We are encouraged by the continued market success of our strategic products and current market trends indicate the continuation of growth for the remaining of 2005.

Turn to slide number five for an update on our insulin analogue franchise.

In the third quarter insulin analogues grew by 53% in local currencies.

The growth is driven by underlying market growth, strong market share gains for both NovoRapid and NovoMix as well as a successful roll out of Levemir.

In terms of regions, growth is driven by Europe, followed by North America.

However international operations in Japan and Oceania are increasingly adding to the overall growth of the analogue portfolio.

In the first nine months of 2005 insulin analogues constituted close to 32% of our insulin sales, compared to 23% in the same period last year.

In North America, more than 50% of insulin sales are analogues.

And the North American market constitutes more than a third of Novo Nordisk’s total analogue sales.

Turn to slide number six for the further insight into the dynamics in the insulin analogue market.

Around 40% of the global insulin market has now been converted to analogues, and the trend continues.

The conversion from human insulin to analogues takes place within all segments of the market, and is together with the ongoing conversion to pre-filled devices, driving the value growth of the insulin market.

Novo Nordisk continues to gain market share within the analogue market, maintaining a solid performance since the first quarter of 2002.

Novo Nordisk’s market share in the analogues segment is now around a third of the market, measured in volume, supported by the continued roll out of Levemir.

Novo Nordisk continues to be the only company that markets a full range of insulin analogues with short, pre-mix and long acting insulin analogues.

Please turn to slide number seven providing some further insight into the drivers of our insulin analogue market share gains.

NovoRapid is the best short acting insulin analogue, the best selling I should say, short acting insulin analogue in both Europe and Japan.

From a global perspective NovoRapid holds more than 45% of the short acting insulin analogue segment.

The global market share of NovoMix is even larger, at 55% of the pre-mix segment.

The very solid growth rates of NovoRapid and NovoMix are reflected in our overall insulin market share where Novo Nordisk commands 51% of the volume market measured by IMS in the 12 months ending in August 2005, compared to 49% in the previous 12 months.

The market share gains within the analogue segment are also reflected in our value market share, where the comparable figures are a market share value of 44% in the 12 months ending with August 2005, as compared to 42% value market share the previous 12 months.

Please turn to slide number eight which provides you with an update on the development of our analogue market share in [indiscernible] and the ongoing launch of Levemir.

Novo Nordisk continues to expand its position as market leader within the analogue segment in Europe, with a volume market share close to 42%, compared to 35% twelve months ago.

The solid growth trend is fortified by the continued European roll out of Levemir.

Levemir is now launched in 16 European countries, with the launch in France taking place late August.

The feedback from patients and clinicians continues to confirm our findings from the clinical trials, that Levemir is a very predictable insulin which reduces the risk of hypoglycemic events in the absence of weight gain.

In August, Levemir reached a market share close to 14% of the long acting analogue segment in Europe.

Turn to slide number nine for an update on the NovoSeven sales development.

NovoSeven sales increased by 23% as reported, and 22% in local currencies, in the third quarter.

The growth in NovoSeven sales were driven by all regions, but with North America and international operations having the highest growth rates.

A number of factors have contributed to sales growth of NovoSeven.

Due to the high penetration within spontaneous bleeds, for congenital inhibitor patients the predominate part of the growth within the inhibitor sector has been generated by the uses of NovoSeven in connection with elective surgery.

Treatment of spontaneous bleedings for congenital inhibitor patients remain the largest area of users though.

In addition, sales are perceived to be positively affected by increased investigational use of NovoSeven, especially within trauma and surgery.

In the U.S. the label for NovoSeven has been expanded to include surgery in patients with inhibitors, and also treatment of patients with Factor VII deficiency.

Turn to slide number 10, for an update sales by region.

North America continues to be the main growth driver and now constitutes 28% of total sales for Novo Nordisk.

During the first nine months of 2005, North America contributed with 40% of the overall growth that we have seen.

We'll revert to North America after review of the development of the other regions.

Growth in Europe during the first nine months was negatively impacted by price focused healthcare reforms in a number of countries.

The healthcare reforms are impacting both volume and value growth in the market.

However, we continue to see solid growth rates for our portfolio of insulin analogues, and Levemir contributed to the growth for the overall insulin franchise.

NovoSeven showed solid sales growth in Europe during the third quarter 2005, but growth rates for the first nine months of 2005 were negatively impacted by fewer bleeding events during the first quarter of 2005, compared to the same period in 2004.

Norditropin SimpleXx in Europe is showing solid growth in the first nine months whereas our growth hormone -- excuse me, our hormone replacement therapy sales were slightly lower than sales in the same period 2004.

In Japan and Oceania, growth is driven by the insulin analogues, growth hormone and NovoSeven with solid growth rates.

The two insulin analogues, NovoMix 30 and NovoRapid, showed strong performance and increased penetration in the growing insulin analogue market.

The conversion to pre-filled devices continues and insulin analogues sold in [indiscernible] drive growth.

During the third quarter, our NovoSeven sales continue to grow, supported by the label expansion, late last year, to include acquired hemophilia.

Sales in international operations are driven by human insulins, insulin analogues and NovoSeven and growth hormone.

The growth in insulin analogues is mainly driven by China, Russia and Turkey.

China NovoMix was launched during the second quarter 2005, and initial uptake looks promising.

Within human insulin, and insulin related products, growth is mainly driven by China, Russia, Algeria and India.

Please note that the compared to the quarterly distribution in previous years, sales in international operations are expected to be more evenly distributed across the quarters of 2005.

Now turn to slide number 11 for a more detailed update on the sales development in North America.

In the third quarter sales in North America grew by 17% both in local currencies and in Danish Kroners.

The solid growth in North America was driven by all therapy areas, with the highest growth rates seen in insulin analogues, human growth hormone and NovoSeven.

In the third quarter sales of insulin analogue in North America grew around 25% in local currencies, and constitutes more than half of the insulin sales in the region.

Novo Nordisk continues to see solid market share gains for both NovoLog and NovoLog Mix 70/30.

And according to the latest market share statistics Novo Nordisk closed some 38% of the total insulin market measured by volume.

To solidify our current strong market position, Novo Nordisk has decided to expand the U.S. diabetes care sales force to 1,200.

This increase of around 50%, compared to the size of the current sales force, is expected to be concluded at the turn of the year, and will also serve to support the upcoming launch of Levemir.

Growth hormones showed strong growth rates, and the U.S. is now the second largest market for growth hormones for Novo Nordisk.

In the third quarter, NovoSeven showed solid growth, with more than 20% driven by congenital hemophilia and also exceed higher level of investigational use, mainly within trauma and surgery.

Novo Nordisk is expected to remain the key growth driver for Novo Nordisk and all strategic products are adding to growth.

With this I'd like to hand over to Mads, who'll give you an update on the development within our pipeline.

Thank you Lars.

Please turn to slide 12.

In the third quarter the marketing approvals for the long acting insulin analogue Levemir, and the short acting insulin analogue NovoLog, where extended by the FDA to include pediatric use.

Novo Nordisk is the only company with a full portfolio of insulin analogues approved in the U.S., encompassing rapid acting NovoLog, pre mix NovoLog Mix 70/30, and recently also Levemir.

We're very pleased to communicate that Novo Nordisk, in October, received marketing approval from the European Commission for the pre mixed insulin analogues NovoMix 50 and 70, the so called high mixes used for intensified treatment of patients on pre-mix therapy.

Following these approvals Novo Nordisk has the only company a full portfolio of approved pre-mix analogue products in Europe, encompassing NovoMix 30, 50 and 70.

Still within the area of pre mixed insulin analogues, Novo Nordisk has filed an application in June with the FDA for marketing approval of NovoLog Mix 50/50 and NovoLog Mix 30/70, the U.S. trade names for NovoMix 50 and 70, respectively.

Novo Nordisk still expects to receive marketing approval for these two products mid next year.

Switching to Levemir, Japan is now the only major market where this insulin analogue is not yet approved.

Following successful Phase III studies that have now been completed, we still expect to file the Japanese NDA later this year.

At the recent annual meeting of the European Association for the Study of Diabetes, EASD, in Athens, Greece, Novo Nordisk launched NovoPen 4, the new generation of the world's most widely used insulin pen.

According to multi-national patient preference studies, NovoPen 4 further improves ease of use, and reduces training time for a fast adoption of the new pen.

NovoPen 4 is regarded by people with diabetes and healthcare professionals as superior to other durable insulin pens in the market.

Regarding the liraglutide, our once daily human GLP-1 analogue, the Phase IIb study is progressing according to plan, and treatment of the last patient has now been completed.

Scientific evaluation of non-clinical findings has also been successfully finalized.

Novo Nordisk now expects to initiate the Phase III program encompassing 3,800 patients in February 2006.

Lastly within diabetes, I note that the Phase III stop/go initiation decision for AERx is still expected around the turn of the year.

Please turn to the next slide for an update on our biopharmaceuticals pipeline.

Novo Nordisk has filed an application with the European Medicines Agency, EMA, for marketing approval of the use of NovoSeven in intra-cerebral hemorrhage, ICH.

It should be noted that the filing is based on results obtained from the Phase IIb clinical study involving 400 patients, and further safety data from two smaller studies.

Furthermore, the filing may, if requested by EMA, be supported, around the middle of 2006, by safety information generated as part of the ongoing global confirmatory Phase III study.

Novo Nordisk has recently finalized the dialogue with the FDA regarding the design of the single pivotal U.S.

Phase III clinical trial, for the use of NovoSeven in trauma.

The study protocol approved by the FDA includes mortality as a primary end point.

Before initiation of the U.S.

Phase III study, and in order to accelerate the subsequent recruitment into, and hence completion of, the study, Novo Nordisk has, however, decided to pursue an exception to the U.S. informed consent requirements which require patients or their next of kin to give to consent to being included in the clinical study.

The decision reflects the fact that informed consent is extremely challenging to obtain in a severe trauma setting where patients are brought to the emergency ward with the varying degrees of consciousness.

Pursuit of this exception takes place in an approval process involving the FDA, institutional revenue boards at the U.S. trauma centers and communities in which these centers are located.

If successful, the result would be the conduct of a Phase III study with a much more rapid recruitment, due to the use of the waiver of informed consent.

The approval process is currently expected to last up to 18 months.

As a consequence of the above, it's now possible for Novo Nordisk to merge the U.S. clinical study sites into the Phase III study currently in progress outside the U.S., with initiation of the U.S. sites contingent upon the discussed waiver of informed consent permission being granted.

The resulting global Phase III global trauma study is expected to include around 1,500 trauma patients, take close to four years to complete and will include mortality as one of the primary end points.

A significantly positive consequence of pooling of the non-U.S. and U.S. trials into one global pivotal trial is the shorter time to NDA in the U.S. as well as the improved statistical [powering] compared to the previous 1,000 patient trauma trial outside the U.S.

In August 2005, the FDA approved the use of NovoSeven in surgical procedures involving hemophilia patients with inhibitors against their existing Factor VIII or IX treatment.

Furthermore, the FDA has also approved the use of NovoSeven in patients with Factor VII deficiency, a rare hereditary hemorrhagic disease caused by the diminution or absence of this coagulation factor.

In October 2005, the first patient was dosed prophylactically with a recombinant coagulation Factor XIII in a Phase I study in patients undergoing cardiac surgery.

Factor XIII is the terminal factor in the clotting cascade, and serves the purpose of strengthening the clot formed through the interaction between Factor VIIa and tissue factor.

The study is the first of several Factor XIII studies planned by Novo Nordisk.

Now over to Jesper for an update on the financials.

Thank you Mads.

Please turn to slide 14 providing you with the details on the financial results.

We're very pleased with the overall sales growth for the first nine months at 15%, as reported, and 16% measured in local currencies.

Total operating profit increased by 20% in the first nine months, whereas underlying operating profit grew by more than 30%, thereby exceeding Novo Nordisk long-term target for operation profit growth of 15%.

Net financials showed an income of DKK382m in the first nine months of '05, compared to DKK192m in the same period in 2004.

Result from associated companies was positively impacted during the first nine months by disposal of shares in Ferrosan during the first quarter of '05, and an accounting change during the third quarter from a secondary offering of shares in ZymoGenetics.

Included in net financials are foreign exchange gains of DKK103m, compared to a gain of DKK287m in the same period last year.

Results from foreign exchange hedging activities in the nine month 2005 were negatively impacted by the general increase in the exchange rate of the U.S. dollar versus the Danish Kroner and related currencies.

In accordance with International Financial Reporting Standards, Novo Nordisk had, by the end of September 2005, deferred unrealized losses of DKK373m on forward contracts, which serve as hedging of future operational cash flows.

The result of these forward contracts will be recognized in the profit and loss statement when the operational cash flows materialize.

And around DKK200m of these unrealized losses currently relates to cash flows in 2006.

The effective tax rate for the first nine months of 2005 is slightly below 29%, mainly as a consequence of the reduction in the corporate income tax rate, from 30% to 28%, effective for the income year 2005, which was approved by the Danish Parliament in June.

Novo Nordisk has however also benefited from the tax-exempt status of the non-recurring gains from the sale of shares in Ferrosan and an accounting gain related to the share offering with ZymoGenetics.

In the third quarter of 2005 reported sales were impacted positively by around DKK100m, reflecting a reclassification of surplus sales commissions, primarily related to international operations.

The sales commission had previously been offset in the sales line and are now included in the sales and distribution costs.

Please turn to the next slide for an update on our currency exposure.

During the first nine months of 2005, the U.S. dollar increased compared to the level prevailing at the end of 2004, albeit with a high degree of volatility.

Our estimates of the expected currency impact on operating profit as the consequence of a 5% depreciation [out], compared to what we communicated in connection with the release of our results for the first half year of 2005.

We expect a negative full year impact on operating profit for 2005 of DKK300m off a 5% depreciation of the U.S. Dollar.

Furthermore a 5% depreciation of the U.S.

Dollar-related currencies is expected to decrease full year operating profit for 2005 by DKK85m.

A 5% depreciation of the Japanese Yen is expected to decrease operating profit by DKK130m.

And finally a 5% depreciation of the British Pound is expected to decrease operating profit by DKK80m.

For 2006 the sensitivity on operating profit from changes in the U.S.

Dollar as well as the U.S.

Dollar related currencies, is expected to be slightly higher compared to the sensitivities noted for 2005.

Currently Novo Nordisk has hedged future expected cash flows related to the U.S.

Dollar 10 months ahead, the Japanese Yen also 10 months, and finally the British Pound, also hedged 10 months ahead.

Please turn to slide 16, for an outlook for 2005.

For 2005 Novo Nordisk now expects sales growth of 13% to 15% in Danish Kroner and a similar level of growth as measured in local currencies.

We now expect reported operating profit to grow by around 12% to 15%, instead of the previous expectation of an operating profit growth around 10%.

This is reflecting the solid underlying business performance and also as a consequence of the improved exchange rate environment.

Our expectations for underlying operating profit growth remain unchanged at 15%, in line with Novo Nordisk long-term financial targets.

I note that the development in operating profit for the fourth quarter of 2005 will be significantly impacted by the following factors.

First, the sale of the Aventis settlement income of DKK150m realized in the final quarter of last year.

Secondly the pre-tax cost of the previously announced offering of shares to the employees is estimated to be slightly more than DKK150m and would be expensed during the fourth quarter of 2005.

And then finally, the sales force expansion in the U.S. which is expected to impact the sales and distribution cost line negatively by around DKK100m also in the fourth quarter of 2005.

For 2005 Novo Nordisk now expects a net financial income of DKK150m, compared to previous expectation of DKK200m.

This reflects higher than expected level of losses from foreign exchange hedging contracts, due to the higher level of the U.S.

Dollar and related currencies against the Danish Kroner.

As mentioned previously, and in line with IFRS, Novo Nordisk defers unrealized losses of forward contracts for P&L recognition through the future period where the underlying operational cash flows materialize.

For 2005, Novo Nordisk still expects the tax rate to be slightly below 29%.

Novo Nordisk still plans to invest close to DKK4b in fixed assets, whereas expectations for depreciation, amortization and impairment losses remains around DKK1.9b.

The free cash flow for 2005 is expected to be close to DKK4b, DKK1b higher than previously communicated.

All these financial expectations are provided the currency exchange rate remains at the current level throughout 2005.

During the remaining part of 2005 Novo still expects to complete the remaining part of the ongoing share repurchase program by repurchasing these shares equivalent to a cash value of DKK300m.

Looking ahead, I note that detailed financial guidance for 2006 will be provided on the January 27 in connection with our release of the full year results for 2005.

Given the present currency exchange environment, Novo Nordisk expectations for sales growth in 2006 is currently at least 10% and preliminary forecast for 2006 indicates an operating profit growth in the interval of 10 to 15%.

This preliminary expectation reflects an impact from the expansion of the U.S. diabetes care sales force and also the expected cost from an increased number of late stage, and thereby costly, clinical development projects.

This concludes our presentation of the financial results.

Lars Rebien Sorensen will now moderate the Q&A session.

But please note that there will be a maximum limit of two questions per individual with the objective of allowing as many conference participants as possible to have the opportunity to ask questions.

Thank you very much Jesper.

Ladies and gentlemen, please note that this conference is being taped, as I mentioned, and the replay will be made available on our website.

And please operator, we're now ready to take the first questions.

Thank you Mr. Sorensen. [OPERATOR INSTRUCTIONS].

The first question today comes from Paul [Lacour].

Please go ahead with your question and announce your company please.

Hello, this is Paul Lacour with Carnegie.

I have a few questions please.

On Levemir, how do you expect to position Levemir in the U.S. after your additional hirings?

And then on NovoSeven, why do you think that you can get this exception please?

Thank you very much.

This is Lars Rebien here.

The first question is the Levemir positioning in the United States after the hiring.

And then the second question will be dealt with with Mads Krogsgaard, why do we expect that we will be able to get this unusual waiver of informed consent.

Well the Levemir positioning will be the same as the Levemir positioning in Europe.

It's the best basal insulin, both for intensified insulin therapy, but also for starting [inaudible] Type 2 diabetes insulin therapy. [The benefits] basically.

Obviously, expanding the sales force is a reflection of us wanting to take advantage of the momentum we have in the U.S. market and also ensuring that we have a competitive share of voice in the U.S.

The voice level is increasing with Lilly currently marketing Byetta in the U.S., so consequently we believe that we will be in a very strong position once these 400 new additional reps are in and trained, so as to give Levemir the best possible push in the market.

Mads, why do you expect that we'll be able to get this exceptional waiver in the U.S.?

Yes, what it states in the FDA guidelines in this regard are that such permission will only be granted in cases where mortality constitutes a significant element of the end point hierarchy.

And the situation is that at the end of the dialogue with the Agency, the conclusion was actually that immortality became one primary end point and hence fulfilling the basic criteria for being able to apply for this kind of situation.

But to the best of my knowledge there is actually a colleague out there in the industry called Northfield who are developing in the pre-hospital setting the oxygen carrier preparation for use in trauma setting.

And to the best of my knowledge their end point situation is pretty much the same as that of our trial and they actually have, as we speak, an ongoing trial based on the waiver of informed consent.

That being said I can of course not guesstimate any more.

But there is precedence and we are fulfilling the criteria vis-à-vis mortality end point.

Thank you very much, next question please.

The next question comes from Paul Major.

Please go ahead and announce your company name.

Hi, it's Paul Major from Redfern Partners.

First question on R&D guidance.

You previously guided at the interim results that R&D as a percent of sales would be towards the higher end of the 15 to 16% of sales.

Obviously there have been some delays with regards to NovoSeven, so I was just wondering if your R&D cost guidance still stands?

And then second question, I was just wondering if you could give us a bit more background on the strong sales of human growth hormone, and whether or not you think you can maintain the strong double digit growth that we've seen over the past two quarters?

Thanks.

Thank you very much.

Jesper Brandgaard, the guidance previously was for 15/16% range of R&D spend to sales.

What's your current guidance for the remaining of the year?

Well there seems to be a little bit of a misconception.

I think the guidance I've given specifically for 2005 will be an R&D ratio in the ballpark of 15%.

And that’s where we are faring.

We will probably be a little bit stretched to get all the way to 15.0% but it will be in that ballpark.

The 15 to 16% was more our indication longer term that we wanted to be in that ballpark.

It's clear that the additional operational flexibility that we get from increased gross margin, improvement in gross margins and the lower admin costs to overall sales, that could longer term provide for an increase in the R&D ratio, and that could probably longer term take the R&D ratio above this 15 to 16% interval.

Thank you very much Jesper.

So this is reflecting our desire as a Company to take advantage of the current strong performance of our business to balance between short term and long term growth opportunities for the Company.

It's Lars Rebien Sorensen.

I'm going to answer the second question about why we do believe and what we think about the human growth hormone franchise.

Well the current outlook for that is quite positive.

We have a liquid formulation.

We have the best pre-filled device and we have a very strong label for our product and consequently we are now seeing market share gains in all regions.

In particular there's some strong market share gains in United States and we hold a relatively modest position in United States with around 8% market share.

So there's much more to go for, for us in the U.S. and with the momentum we have in our U.S. organizations, there's definitely some growth expectations there.

We are also growing strongly in Europe and we have very recently seen a regain of market share growth in Japan.

So all in all we are cautiously optimistic that we will be able to continue the strong growth rates of our growth hormone business.

Thanks.

Thank you very much, next question please.

Very quickly before the next question, again please note that there will be a maximum limit of two questions per individual with the objective of allowing as many conference participants as possible to have the opportunity to ask questions.

This question comes from the line of Matthew Weston.

Please go ahead with your question and tell us which company you represent?

Good afternoon gentleman.

It's Matthew Weston calling from Lehman Brothers.

Two questions if I could.

Firstly could you give us some indication on the quarterly run rate in SG&A we should expect in 2006, given the additional rep costs and obviously the launch costs of Levemir within the U.S.?

And just a more general question around marketing of the interim franchises in the U.S.

You said yourself Lilly is there with increasing share of voice on Byetta and clearly we have the potential for Exubera and a number of other oral products coming going forward.

Do you think we will ever see diabetes become a primary care product and if so do you anticipate that we'll see material increases in insulin sales force required at Novo going forward?

And whether or not we should expect things like increased sampling as something which will affect market share over the coming years?

Thank you very much.

The first question, this is Lars Rebien here, I'll divert to Jesper Brandgaard to give an indication of SG&A on a quarterly basis for 2006.

I know we're not giving detailed guidance on 2006 yet but some overall the indications Jesper.

And then I will talk to the marketing scene in the United States on diabetes.

The sales and distribution costs in 2005 will be in the 29% ballpark and then when we look into 2006 it will be slightly higher.

It will probably be in the 30% ballpark.

That's really coming from this increase in the U.S. sales force but also from a full year effect of expansion of our sales force in France with an additional 60 reps and 50 more reps in Germany.

So these factors will be impacting our growth rates and consequently our S&D rates.

In addition you'll also note that of course it will be costly to do a significant launch in the first half of next year of Levemir in the U.S. and that will impact the specific quarters in terms of how you'll see the cost distribution.

But on average for the year I think, a 30% ballpark is as close as I feel comfortable getting at this point in time.

Thank you very much, Jesper.

And then you in a way gave the indication that we are willing to give on what we intend to do in terms of launch costs for Levemir.

Obviously this is sensitive competitive information.

But suffice to say that we are expanding the sales force with 400 individuals.

We will give these people something to work with as well and that includes sampling obviously.

And that brings me to your point.

It is clear that some of the new products which are being introduced in the United States, Byetta and Exubera lend themselves, at least on the face level, more to GP initiation in as much as Byetta is potentially the product which could be the first injectable to be introduced in combination with oral therapy for [oral] failures in Type 2 and this is typically done by GP's rather than to transfer these to the endocrinologist.

So definitely that would be in the middle between endocrinologist and GP's.

Exubera is also, in a way, targeted at the same audience, however you have to remember that it is still an insulin and therefore in regards to Exubera, there are the issues around certain patient groups that may not lend themselves to this therapy and therefore have to be excluded on function problems.

There are significant training requirements and therefore since it's an insulin they also require BTN training.

So I would say, of the two, Byetta more likely to be GP oriented.

Exubera more likely to be more towards being endocrinology related.

Just a point.

It was just quite interesting, there was recently announced in the Center for Disease Control in the United States, that there's actually been an underestimation of the number of diabetes patients in the U.S.

We previously thought there was around 18m diabetics in the U.S.

This is now estimated to be 21m, of 6m being undiagnosed.

So of course this leads to increased activities on the part of health profession in the U.S.

It leads to increased activities on the part of the pharmaceutical companies.

So all in all it's going to be a very, very exciting and interesting and of course a fierce battle in the U.S.

Thanks very much, the next question.

The next question is from Henrik Simonsen.

Please go ahead and state your company name please.

Yes hello, Henrik Simonsen, Enskilda Securities.

Two questions also if I may?

First question on Levemir.

Could you talk a little bit about how your market shares are looking in Germany and the U.K.?

And secondly could you tell me a little bit about your design for the [Relaquatide] There are two types of Phase III studies with these 3,800 patients and will you be pursuing a mono [claim] for the [Relaquatide] as well?

Thank you very much, this is Lars Rebien here.

Mads, if you'd kindly answer the design question on [Relaquatide] then I'll deal first with the current performance of Levemir in Europe.

As we mentioned in the call and as we mentioned in the press release, we are very satisfied with the performance of Levemir.

It clearly lives up, if not exceeds, expectations on behalf of patients' experience, also health professionals.

And it largely follows our planned guidance for introduction.

If we look first at Germany, we are now talking about Levemir having approximately 16% of the basal analogue segment.

So a relatively strong performance in all markets of Sanofi Aventis.

And in the U.K. we have around 20%.

So the product progresses very nicely, and as we mentioned it's been rolled out in 16 major countries.

It's accompanied, as you know, with the finest devices, which are competitive advantage for our product.

So we are very optimistic also and excited about the pending launch in the United States.

Mads, the design of the [lira] trials?

Yes well, as you are aware Henrik, the situation is that the Phase III program will be to the tune of 3,800 patients in total.

And this means that of course a number of active comparative studies can be done.

And in regions of the world where it's relevant to have this agent introduced as immuno therapy, you should also envisage that this will take place.

So I would say, very briefly, it's a very competitive study leading to a highly competitive labeling and all the relevant combination therapies that we deem are necessary in this particular segment.

And comparative drugs I guess would be predominantly Metformin and the CCDs or?

It will be Metformin, CCDs of [inaudible] and what else we are seeing of relevance in this segment.

You should imagine that you have as late as one week ago, you saw the comparison trial between, of 500 patients, between Lantus and Exenatide.

So clearly the race is also on between the tier one class and insulin initiation in OAD failure patients.

And these are things that are all of course being given due consideration by Novo Nordisk management when we decided both the Phase IIIa trial program and the IIIb.

Thank you very much, next question please.

The next question is from Shekhar Basu.

Please go ahead and tell us which company you represent.

Basu Capital.

Thank you for taking my call.

Could you just elaborate if you would, on the initiation of Exenatide versus Lantus and your experience with the non-Exenatide.

I would really appreciate your insights as to how it is going to impact Lantus and insulin uptake in the patient who is failing the orals?

Thank you very much, this is Lars Rebien.

I don't know whether -- I mean of course it's not our product so -- what I want to give you a little bit of guidance on though is of course that one could have the concern that the launch of Exenatide would largely impact the Novo Nordisk portfolio of products.

If you take that line of questioning then of course I could feel obliged to answer.

And what we can see so far is that there is no impact at all on the Novo Nordisk product line in United States.

That means NovoRapid and NovoMix.

If you have available the INF beta on a monthly basis, which you may, then you might look into the uptake on Lantus and we don't know if there is any correlation between the latest months development of the Lantus uptake and the Byetta, we are not in a position to comment.

But I mean one could speculate obviously that patients are taking out Byetta rather than it being initiated on Lantus.

But I think you would have to ask Eli Lilly and Sanofi Aventis for more details on this.

Thank you.

Thank you, next question please.

The next question is from Martin Parkhoi.

Please go ahead and announce your company name.

Martin Parkhoi from Danske Bank.

I also have two questions.

Firstly for Mads.

What is taking you so long to make a stop-go decision on [Erics]?

What are your concerns?

If you can compare with the other inhalable insulins which has moved into Phase III?

And could you also comment on the close profile which you previously said has been inoptimal and if this said, you have ruled out that it is caused by antibodies but there is probably still a problem.

And then to Jesper, you normally, you tend to call yourself a sustainable company.

Shouldn’t you have much higher financial gearing then?

So thank you very much Martin, for those questions.

Lars Rebien here.

And Mads why don’t you take the first question on what has been taking us so long, and what are the issues we have been dealing with, are we satisfied with the glucose profile, are they caused by antibodies or what are the issues.

And Jesper how about the gearing going forward.

Yes, well Martin, very briefly on the technical side, you are aware that both vis-à-vis the device per se and also the strip with the liquid preparation that you insert and inhale, these two are areas where we seek to optimize the system such that when we move into Phase III we are in as close to a commercializable mode as possible.

As you are aware, Phase III preparations need to be very similar to the ones that you go to market with.

And this has meant that we clearly have wanted to optimize both the inhaler, the Eric IBNS system per se, and also the strip.

And we're getting very close to being there as you can imagine from the timelines.

On the blood glucose profiles, you're absolutely correct in stating that it was not the antibody formation that had a buffering or a modulating effect on the blood glucose profiles.

Now what we then see is a blood glucose profile that is at around the mealtime, inferior to an analogue and somewhat similar to that of human insulin.

Now why am I saying this?

Well I'm saying it because if you look at our studies, they've been done with an active comparative called NovoRapid and here we could clearly see an inferior kind of glucose excursion profile with inhaled insulin compared to NovoRapid.

But when you look at Exubera the file has been based on comparisons with subcutaneous regular insulin and here you see that the glucose groups are somewhat similar.

So what I'm saying is that when you take an inhaled insulin such as Exubera or such as Erics, you get similar profiles, but depending on which injectable insulin comparator you compare to, you will see either inferiority if it's an analogue on the postprandial glucose profile or a somewhat similar profile if you compare to regular insulin.

Thank you very much Mads.

Jesper Brandgaard, the gearing of the company.

Is that sustainable or is it unsustainable?

What's indicated?

I think one of the things that generate a sustainable performance is that you have the ability to invest whenever opportunities come around.

When we look at our financial profile we have historically actually matched that up against what we see in the profile of others in the industry and we've been more or less cash neutral for the last few years.

And that remains our overall capital structure strategy.

So whenever we accumulate excess cash on our balance sheet we have continuously recycled that cash back to our shareholders in terms of repurchase programs.

We currently have an ongoing DKK5b repurchase program that will be ended before the end of this year.

And looking ahead that would still be an opportunity that we have if we cannot find adequate investment opportunities for us, but we'd like to have the overall flexibility.

Yes actually, this is Lars Rebien here.

If you look at the last five years and actually calculate what has been turned back to the shareholders in terms of cash and cash dividends and share buy-back programs, it's an average accumulated growth rate of 50% in cash being returned to the shareholders when you compare back to 2000.

So we are aware of the desire for cash on the investors.

We are trying to balance that with our requirement for flexibility, to make investments to build growth for the company going forward.

Thank you very much, next question please.

The next question is from Peter Ostling.

Please go ahead and announce the name of your company please.

Yes good afternoon, this is Peter Ostling, ABG Sundal Collier in Stockholm.

I just wanted some clarification about the cost guidance for ‘06.

Is it correct to assume that you will more or less offset any increase in R&D with decreases in admin and also offset any increase in distribution -- sales and distribution costs with maybe better improvements in gross margins, so the overall effect on the EBIT level will be more or less unchanged?

Thank you very much for that question.

Jesper this is an ideal question for you.

Yes, I mean I clearly wanted to hint at the comments I made in terms of increased operational performance coming from the gross margin and from admin.

There I was guiding in the years ahead, I was not making any specific guidance for 2006.

The guidance we've made currently for 2006 is that we see our top line sales growing at least 10% and we expect in our operating profit to grow in the range of 10 to 15% and we see that S&D cost will grow slightly faster next year because of the expansion of the U.S. sales force and we expect our R&D costs to grow slightly faster as a consequence of the high number of Phase III clinical trials running next year.

Apart from that we would await making more specific guidance in 2006 to the release of the full year financial results 27 of January.

Thank you very much, next question please.

The next question is from Annette Rein Larsen.

Please go ahead and announce the name of your company please.

Yes hello.

It's Annette Rein Larsen from HSH Gudme.

I have two questions relating to the NovoSeven trauma study.

First of all could you elaborate a bit on how this fit will be on patients’ enrollment in Europe and in the U.S., and how quickly that can be done in the case that you get the exception of informed consent and in the case you don't do that?

And how quickly will it be in Europe versus in the U.S.?

Thank you very much.

Mads go for it.

Yes well, Annette, of course the non-U.S. study is already ongoing, has been initiated and this means that we are opening up more and more centers to the tune of actually when we are fully up and running, more than 100 centers.

And they are spread between, geographically Europe, South Africa, Asia and so on and so forth, but non-U.S.

So the real issue is when we have the U.S. or if and when we have the U.S. waiver of informed consent approval, then of course, contingent upon IRP approval etc. locally at the investigator sites, we will then be opening up U.S. sites.

Hence it is not exactly possible to give you a direct percentage split between the overall contributions from North America and rest of world.

But what I can say is that it is the rest of the world that will be contributing clearly, the most of the patients.

And I should also like to make the comment that we are in a situation where we are heading primarily of course, for blunt trauma, because this is where we did have the very strong data in Phase II.

But there is also an element of penetrating trauma patients in the overall trial, somewhat reminiscent of the total global distribution of the trauma patterns between blunt and penetrating.

Okay but could I then ask how many patients do you expect to be able to enroll before this clearance of whether you get this exception or not in the U.S.?

Well that's a very difficult question to answer because it basically relates to the question of when does the FDA legal department say yay or nay to our desire to have this waiver of informed consent.

If we get that answer and it's positive quickly, we can br up and running very soon thereafter, because the protocol we'll be heading for is very close to the one that we have just gotten approval from the FDA for.

Hence it will be one absent that situation whereas if it takes a year and a half, obviously the European, or non-U.S. study will already have been in the recruitment steady state for quite some time, so I actually can't give you numbers.

But it's quite clear that the sooner the U.S. gets on track the more U.S. participants and the later, the fewer.

Thank you.

Thank you very much, next question please.

The next question is from Paul Mann.

Please go ahead and announce the name of your company.

Hi, yes, Paul Mann from Deutsche Bank.

I think I might have missed something earlier but I think you mentioned something about healthcare reforms affecting both volume and value in certain regions.

Can you just highlight which regions, and can you also quantify the value and volume effects.

And also one for Mads.

Maybe you can just highlight when we should expect clinical trial data from the exciting NovoSeven program you're running and then the Phase II and NovoSeven trials?

Paul this is Lars Rebien here.

Yes it's correct, there's a course in the United States, the Medicare reform where any speculation that of course it will increase the total volume of business but it may have some impact on pricing in the U.S. overall.

I think we believe for a company like Novo Nordisk this would be a positive trend.

Also combine that with the information I gave before about the requirement for much more diagnosis and treatment of people with diabetes currently being undiagnosed in the U.S.

I should think that the U.S. environment, at least as it relates to the Medicare reform, would be positive to Novo Nordisk.

If we then look at the European scene, the European scene is of course the one where we are seeing the occasional proliferation of local health care reforms.

In France there has been reforms that are impacting hospital products.

It's primarily a price impact of around 5 to 10%.

In Germany currently there was a price reform, 16%.

That is going to be replaced in the future of a reform which would be constituting jumbo reference groups where products are going to be lumped into categories and they would be reimbursed at the same level.

As a consequence of this you might say that depending on how the categories are being made, that there could be a benefit for certain product categories and a negative because the minus 16% price reduction would be replaced by a 6% price reduction overall for the jumbo groups.

If we look to other territories, there are similar initiatives to clarify the deficits.

This applies for Italy.

It applies for Spain.

We have seen in general improvement in prices in Southern Europe.

But that then of course is subsequently reflected in serious budget deficits which leads then to subsequently general price decreases and the same applies in the U.K.

So overall the environment in Europe is one of price impact.

In some cases, Germany, and occasionally locally when we do have these reforms we see a purchasing impact which will temporarily either deplete inventories in the expectations of increased costs, or it will delay purchases in the expectation of lower cost.

When we look at Japan we have this expectation that there will be a price revision next year.

As this technicality that the ministry is looking at, the rebates that are being given to the hospitals, the distributors, the larger the rebates, the larger price reforms there will be.

We have, as a Company, been relatively modestly impacted over the years, sort of in the range of 2 to 3% previously, when every other year this has occurred.

Growth hormone having been the business which has been most severely impacted and the insulin business being less impacted than the products in general.

It's our expectations that we are going to see slightly more creative price reductions in Japan.

So we have budgeted obviously with this in our forecast for next year.

There is also of course the expectation that eventually there will be some reference price movement from Japan and this of course will change the scene in Japan.

But we have pretty good visibility.

It's primarily going to be a price effect in Japan and we have factored it into our expectations.

Thank you very much.

Oh yes there was the question about the news flow from the Phase II studies on NovoSeven.

And very briefly it's rather simple to state because they will all be reporting during next year, that is the end-life phase of these various Phase II programs will come to an end mostly within the first half and potentially around mid or soon thereafter and then of course we will wrap up the studies, get the results reported and communicate it to you as soon as possible.

In the case of [OTI] it's a repeat study compared to the one we've done previously.

And in the case of cardiac spinal and traumatic brain injury studies, these are of course a dose range finding first of Phase II studies.

Thank you very much.

Ladies and gentlemen could we ask for the last question please?

And this question is from Rachel Sledge.

Please go ahead with your question and announce your company name please.

Hi thanks, it's Rachel Sledge at UBS.

Could you just clarify the primary end point for the global trauma trial?

I know you mentioned you're now including mortality.

And also have there been any changes to the protocol that you previously announced at the half ones.

Are you still going after four units and not eight units and is the dosing the same?

And secondly could you just outline your plans if you don't get the informed consent waiver?

Thank you very much.

And this call's for trauma trials, end points and what if?

Right well Rachel first of all the dosing is exactly as you hinted at, namely the 200mcgs and a hundred plus -- potentially or 100 more leading to total dose of 400mcgs given at times zero, one and three hours.

So that is as you would expect.

It has been all along the way.

Now in terms of the end point, that also is reminiscent of what we have discussed previously, because when I say mortalities, one of the primary end points, you can discuss without going in great detail and say that it's a hierarchical situation where you start by looking at mortality, but then you move directly from there onto looking at let's say zero to 30 day complications such as respiratory failure, kidney failure and so on.

So these are hard end points that qualify in regulatory terms for a labeling.

In particular in Europe, where as you know, as long as you move from blood transfusion into something that is a quantifiable hard end point, this typically qualifies for approval.

Vis-à-vis the what if scenario, if we do not get granted the waiver situation, well then basically we'll be in a situation where the non-U.S. study will of course run as fast as possible with the aim of completion and filing.

And in the U.S. we'll have to reconsider the situation.

You could easily imagine that we will still be very interested in showing the Americans all the data we have, but also potentially looking at other clinical things we could do.

But we will not revert to doing the clinical study that we've just discussed with you, without a waiver of informed consent.

That's just no doable.

It will take too many years without a waiver of informed consent.

Thank you very much.

Ladies and gentlemen I'd like to remind you that a copy of this is found on our web page if you would like to replay this.

Also I'd encourage you to call our Investor Relations office should you have additional questions.

I would like to wish you a continued good year, merry Christmas and a happy new year.

We'll see you in connection with the full year release in January.

Bye bye.

Ladies and gentlemen this concludes your conference.

Thank you for your participation today.

Please do disconnect your lines now.