諾和諾德 (NVO) 2005 Q4 法說會逐字稿

Good morning ladies and gentlemen and welcome to the Novo Nordisk full year results conference call. At this time participants are in a listen only mode. Later we will conduct a question and answer session and instructions will follow at that time. [OPERATOR INSTRUCTIONS.] I would just like to remind all participants that this conference call is being recorded.

I would now like to hand over to the chairperson for today Mr. Lars Rebien Sorensen, please go ahead with your meeting and I will be standing by.

Thank you very much. Ladies and gentlemen welcome to this Novo Nordisk conference call regarding our results for the full year 2005 which was released earlier today. I'm Lars Rebien Sorensen, the CEO of Novo Nordisk. With me I have our chief financial officer Jesper Brandgaard, Mads Krogsgaard Thomsen, our chief science officer and present and also our investor relations officers, Mogens Jensen, Mads Lausten and Christian Frandsen.

Today's earnings release is available on our homepage novonordisk.com along with the slides that we will be using for this conference call. The conference call is scheduled to last approximately one hour. And as usual we'll start with the presentation as outlined on slide number 1. The Q&A session will begin in about 30 minutes. Please turn to slide number 2.

As always I need to advise you that this call will contain forward looking statements; such forward looking statements are subject to risks and uncertainties that could cause actual results to differ material from expectations. For further information on the risk factors please see the earnings release and the slides prepared for this presentation. Also please note, as was mentioned, that this conference call is webcast live and the replay will be made available on Novo Nordisk's website after the conference call.

I would like to start this conference call with some highlights from 2005. Turn to slide number 3. Novo Nordisk delivered strong growth in 2005 and we continue to solidify our position as the world's leading diabetes care company. We have increased our insulin market share which is now 51% of the global market measured in volume, driven by the successful penetration of our portfolio of insulin analogues and by the strong US performance in general. Sales of insulin analogues grew by 62% thereby maintaining the strong momentum in Novo Nordisk's insulin franchise.

The roll out of Levemir, the world's most predictable long acting insulin analogue, is progressing along the lines of our plans. And we now expect to introduce the product in the United States during the second quarter 2006.

Within the biopharmaceutical area the sales growth for NovoSeven continues and also our growth hormone franchise continues to show strong performance supported by the success of our leading prefilled delivery device NordiFlex.

In November strong clinical results were reported from a Phase 2b clinical trial with Liraglutide Novo Nordisk once daily full human GLP-1 analogue. We expect to initiate Phase 3 clinical trials with Liraglutide in February this year.

We've decided to withdraw the European filing based on Phase 2 clinical data for marketing approval of NovoSeven for the treatment of intracerebral hemorrhage, and to resubmit the application following the completion of the ongoing global Phase 3 program. This trial is recruiting patients faster than anticipated and is now expected to be completed by the end of 2006. Mads Krogsgaard will refer to the status on the clinical development program for NovoSeven later in the call.

We're also pleased with the solid underlying financial performance in 2005. Sales grew 16% as reported and 15% in local currencies while operating profit increased by 16% reported. The expectations for operating profit growth in 2006 is slightly above 10% compared to 2005.

Turn to slide number 4. In 2005 the diabetes care segment grew with 17% measured in Danish krone corresponding to 73% of Novo Nordisk's growth. The growth within diabetes care is driven by our portfolio of insulin analogues which accounts for 62% of the overall growth. Biopharmaceuticals grew with 15% measured in Danish krone; sales of NovoSeven increased 16% and remains a key growth driver within the biopharmaceutical business, while our growth hormone franchise grew a solid 20% in 2005. Novo Nordisk is now the second largest company in the growth hormone market worldwide. Sales of other products, predominantly the HRT franchise, were slightly higher compared to the year before. We are encouraged by the continued market success of our key strategic product and expect the growth to continue into 2006.

Turn to slide number 5 for an update on our insulin analogue franchise. In the fourth quarter insulin analogues grew with 61%; the growth was driven by underlying market growth, strong market share gains for both NovoRapid and NovoMix as well as successful rollout of Levemir. From a regional perspective, growth is driven by Europe and North America, however Japan and also India international operations are increasingly adding to the overall growth of the analogue portfolio.

In 2005 insulin analogues constituted 33% of our overall insulin sales compared to 24% the same period last year. In North America more than half the insulin sales are analogues, and in the North American market now constitute more than 35% of Novo Nordisk's total analogue sales. NovoRapid is the single largest insulin analogue product for Novo Nordisk with sales of 4.1 billion Danish krone. The similar figures for NovoMix and Levemir were 2.7 billion Danish krone and around 500 million Danish krone respectively.

Turn to slide number 6 for some further insight into the dynamics of the analogue market. Around 42% of the global insulin market as measured by IMS has now been converted to analogues, and the trend continues with 6 to 7% of the total insulin market being converted from human insulins to analogues per year. The conversion takes place within all segments of the market and is, together with the ongoing conversion to prefilled devices, driving the value growth in the insulin market.

Novo Nordisk continues to gain market share within the analogue market maintaining the solid performance since the first quarter of 2002. Novo Nordisk's market share of the analogue segment is more than 35% measured in volume supported by the continued rollout of Levemir. Novo Nordisk continues to be the only company that markets a full range of insulin analogues with short acting premix and long acting insulins.

Please turn to slide number 7 providing some further insight into the drivers of our analogue insulin market share gains. NovoRapid is still the best selling short acting analogue in both Europe and Japan. From a global perspective NovoRapid holds 48% of the short acting analogue segment. The global market share of NovoMix is even larger at close to 60% of the premixed analogue segment. The very solid growth rates of NovoRapid and NovoMix are reflected in our overall insulin market shares where Novo Nordisk commands 51% volume market share in IMS in the 12 months ending November 2005 compared to 50% market share in the 12 months ending November 2004. The gains in market share within the analogue segment are also reflected in our total value market share where the comparable figures are a market share of 44% in the 12 months ending November 2004 compared to 42% 12 months earlier.

Turn to slide number 8 which provides you with an update on the development of our analogue market share in Europe as well as the ongoing launch of Levemir. Novo Nordisk continues to expand the position as market leader within the analogue segment in Europe with a volume market share close to 45% compared to 39% 12 months ago. The solid growth trend is fortified by the success of the continued European rollout of Levemir which now holds 17% of the total European market for long acting insulin analogues. Levemir has now been launched in 18 European countries and in 9 countries outside of Europe. The feedback from patients and clinicians continues to confirm the findings from our clinical trials which are that Levemir is a very predictable insulin which reduces the risks of hypoglycaemic events in the absence of weight gain.

Turn to slide number 9 for an update on the NovoSeven sales development. NovoSeven sales increased by 19% reported and 13% in local currencies in the fourth quarter of 2005. The growth in NovoSeven sales was driven by all regions, but with North America and Europe having the highest growth rates. A number of factors have contributed to the sales growth of NovoSeven. Due to the high penetration within spontaneous bleedings for congenital inhibitor patients the predominant part of the growth within the inhibitor segment has been generated by the uses of NovoSeven in connection with elective surgery. Treatment of spontaneous bleedings for congenital inhibitor patients remains the largest area of use. In addition, sales [seem] to have been positively affected by increased investigational use of NovoSeven especially within trauma and surgery. In the United States the label for NovoSeven was expanded during the second half of 2005 to include surgery in patients with inhibitors and also treatment for patients with Factor 7 deficiency.

Turn to slide number 10 for an update on the sales by region. North America continues to be the main growth driver for Novo Nordisk. In 2005 North America contributed 45% of the overall growth for Novo Nordisk. We will refer to North America after a review of the development in the other regions.

Growth in Europe during 2005 was negatively impacted by the price focused healthcare reforms in a number of countries. The healthcare reforms have been impacting both the volume growth and the 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 of the overall insulin franchise. NovoSeven continued to show solid sales growth in Europe during the fourth quarter of 2004 while growth rates in the first quarter of 2005 were negatively impacted by fewer bleeding events compared to the same period in 2004. The growth hormone franchise in Europe showed solid growth rate in 2005 whereas our hormone replacement therapy sales for the full year 2005 was slightly above sales in 2004.

In Japan and Oceania growth was driven by insulin analogues, growth hormone and NovoSeven with all solid growth rates. The two insulin analogues NovoRapid 30 Mix and NovoRapid show strong performance and increased penetration in a growing insulin analogue market. The conversion to prefilled delivery devices continues and insulin analogue sold in FlexPen drive the growth. In 2005 the sales of NovoSeven continue to grow support by the label expansion in November 2004 to include acquired hemophilia. Sales in international operation has been driven by human insulin, insulin analogues, NovoSeven and growth hormone. The growth in insulin analogues was mainly driven by Turkey and Russia. In Turkey around 60% of the total insulin market has now been converted to insulin analogues and Novo Nordisk is the market leader with NovoMix, is the main driver, but also Levemir is contributing to growth. Within human insulin and insulin related products sales growth in 2005 was mainly driven by China, Russia and Brazil.

Turn to slide number 11 for a more detailed update on the sales development in North America. In the fourth quarter sales in North America grew with 48% in Danish krone or 36% in local currencies. The solid growth in North America was driven by all therapy areas with the highest growth rate seen in insulin analogue, NovoSeven and human growth hormone. In the fourth quarter sales of insulin analogues in North America grew around 80% in local currencies and constituted more than half the total insulin sales in the region. Novo Nordisk continues to see solid market share gains of both NovoLog and NovoLog Mix, and according to the latest market shares statistics from November 2005, Novo Nordisk holds some 40% of the total US insulin market measured in volume and Novo Nordisk is now the market leader in United States.

Novo Nordisk has now completed the expansion of the US diabetes sales force by adding around 400 individuals thereby bringing the total sales force up to 1,200. Novo Nordisk is therefore confident they will be well positioned to launch Levemir and also continue to gain market share in the premixed and short acting insulin segments in 2006. Growth hormone sales grew by more than 80% in 2005 and US continues to be the second largest growth hormone market for North America -- for Novo Nordisk.

In the fourth quarter NovoSeven showed a solid growth rate of more than 20% driven by congenital hemophilia and also a perceived higher level of investigational use mainly within trauma and surgery. North America 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 will give you an update on the development within our pipeline.

Thank you Lars please turn to slide number 12. In November Novo Nordisk filed for marketing approval of Levemir in the final of the tried markets Japan. As is already the case in the US and Europe Novo Nordisk will, upon approval of the product, be the first and only company with both rapid acting premixed and long acting insulin analogues in Japan. In Japan Novo Nordisk has been informed by the regulatory authorities that additional data for the high mix NovoMix 50 filing will be required for approval. Novo Nordisk is currently planning the initiation of the necessary additional clinical trials.

In the US the FDA has approved a label expansion for NovoLog Mix 70/30. Key additions to the label include excellent block glucose control data showing that significantly more patients achieve the HbA1c target of 7% on the NovoLog Mix 70/30 regiment compared to treatment with a basal long acting once daily insulin analogue. This label expansion is expected to support further market share gains for NovoLog Mix 70/30 in the US market. As previously communicated the Phase 2b study with Liraglutide was successfully completed in November last year. Against the baseline HbA1c of approximately 8.5% the results from the 14 week study showed a reduction of between 1.5 and 2 HbA1c percentage points will compare to the control group. The treatment's success defined as the portion of patients achieving an A1c of 7% without hypoglycaemia was 45% which is higher than reported in the literature for any other diabetes therapy. Liraglutide was furthermore well tolerated without antibody formation or local tolerability issues occurring. Nausea was reported at a low level of 5 to 10%, there were no major cases -- no cases of major or minor hypoglycaemia in spite of the impressive glycaemic control.

[Pivotal] Phase 3 studies with Liraglutide in a state of the art needle and device will include approximately 3,800 patients and staff within the next month. The official strip and device optimization and validation in the AERx iDMS project is almost completed. Novo Nordisk now expects to confirm during the first quarter of 2006 the re-initiation of the remaining Phase 3 studies. This confirmation will be partly subject to FDA's acceptance of the final specifications for the AERx system.

In October Novo Nordisk initiated a Phase 1 study with another oral anti-diabetic compound [NN9211]. []NN9211] is the so called gluco [inaudible] activator that targets a pathway distinct from currently marketed OEDs. NN5401 the new instant analogue with improved properties has entered for clinical developed in Phase 1. This is closely in line with Novo Nordisk's innovation commitment to continuously improve our globally leading portfolio of insulin analogues and devices.

Please turn to the next slide for an update on our biopharmaceuticals pipeline. Novo Nordisk has initiated a Phase 2 clinical study in Japan with NovoSeven for the treatment of the intracerebral hemorrhage ICH. The study is expected to include around 100 patients and to be completed during 2007. In October Novo Nordisk filed in the EU for marketing approval of NovoSeven in ICH based on results of the clinical Phase 2 trials. Novo Nordisk has received EMEA feedback indicating a preference for receiving Phase 3 data. Based on this and a higher than expected recruitment rate in the ongoing global Phase 3 study, Novo Nordisk will withdraw the current file and submit regulatory dossiers in the US, EU and China as soon as the global Phase 3 has been finalized. The Phase 3 study has less restricted inclusion criteria than the Phase 2 trial published in New England Journal of Medicine will be completed ahead of schedule at the end of this year followed by submission for regulatory approval worldwide outside of Japan. The NovoSeven Phase 3 clinical study in trauma outside the US in continuing as planned. As previously communicated the study includes mortality as a primary study outcome and it's expected to include around 1,500 patients.

In the US the FDA has asked for additional data related to the feasibility of conducting a NovoSeven Phase 3 clinical study in trauma with informed consent, therefore Novo Nordisk has decided to initiate a phase 3 study without a waiver of informed consent with the same primary end point as the non-US trial in order to provide the required data to the FDA. Novo Nordisk expects this process to take at least one year, but the time line will ultimately depend on how the FDA interprets preliminary patient involvement data from the study conducted without a waiver of informed consent.

Novo Nordisk filed in December for marketing approval in the US of NovoSeven for treatment of bleeding episodes in patients with acquired hemophilia. Novo Nordisk expects to finalize four ongoing Phase 2 studies with NovoSeven within traumatic brain injury, cardiac surgery, spinal surgery and other gastro-intestinal bleeds respectively in the second half of this year. In the HRT area Novo Nordisk now expects to file in February in Europe and US for marketing approval of an ultra low dose version of Activelle also known as Activella in the US.

Now over to Jesper for an update on the financials.

Thank you Mads please turn to slide 14 providing you with details on the financial results.

We're very pleased with the overall sales growth for 2005 of 16% as reported and 15% measured in local currencies. Improvement in gross margin was 50 basis points in 2005 reflecting the continued gains from increased production efficiencies and an improvement in the product mix. While impact from currencies on gross margin was liable in 2005 there was a minor negative impact of approximately 20 basis points for the full year from the cost related to employee shares in the fourth quarter of 2005. Reported operating profit increased by 16% in 2005 whereas underlying operating profit adjusted for non-recurring elements in 2005 and 2004 respectively and eliminating a minor currency impact grew by around 20%.

Net financials showed an income of 146 million in 2005 compared to 477 million in 2004. The result from associated companies was positively impacted by approximately 450 million due to a disposal of shares in [Ferrosan] during the first quarter of 2005 and an accounting gain during the third quarter from a secondary offering of shares in ZymoGenetics. Net financials include a loss on foreign exchange of 40 million for 2005 compared to a gain of 533 million in 2004. The results from foreign exchange hedging activities in 2005 were negatively impacted by the general increase in the exchange rate of the US dollar and related currencies versus the Danish krone.

In accordance with international financial reporting standards Novo Nordisk has by the end of 2005 deferred unrealized losses of 345 million on forward contracts which serve as hedging of future operational cashflows. The result of these forward contracts will be recognized in the profit and loss statements in 2006 and '07 when the operational cashflow materialize. The effective tax rate for 2005 was 28.8% compared to 32.8% in 2004. The lower tax rate in 2005 was mainly a consequence of the reduction in the Danish corporate income tax rate from 30% to 28% effective for the income year 2005 onwards. Novo Nordisk has also benefited from the tax exempt status of the non-recurring gains from the sale of shares in [Ferrosan] and the sale and the share offerings in ZymoGenetics.

Novo Nordisk has also used the completion of 2005 to perform a review of the four long term financial targets that were communicated in early 2001 following the de-merger of Novoscience late 2000. The four targets focus on growth, profitability, financial return and generation of cash respectively. They have served to balance short and long term consideration and thereby ensuring a focus on shareholder value creation. By the end of 2005 Novo Nordisk is approaching the achievement of the long term financial targets.

We consider the four ratios to be the best way of ensuring value creation, however the current targets are no longer providing sufficient guidance on the targeted financial performance on a five year horizon and we have therefore conducted a review. The targeted growth in operating profit remains unchanged at 15% on average thereby reflecting Novo Nordisk's expectation of achieving double digit sales growth for the rest of this decade due to continued strong demand for our main products. The target for operating profit growth does, however, allow for deviation in an individual year if this is deemed necessary due to business opportunities or market conditions. The target for operating margin remains at 25% as we expect to reinvest further productivity improvement from the production and administrative areas into R&D activities.

We've decided to raise the target for return on invested capital measured post-tax from 25% to 30%. The increased target reflect the expectation of continued lower growth in invested capital compared to operating profit as well as a recurring lower effective tax rate partly due to the lowering of the Danish corporate tax rate from 30 to 28%. The target for cash to earnings ratio is raised from 60 to 70% thereby reflecting the improved ability to generate cash as to proven during the last three years. As previously this target will be pursued as an average over a three year period and performance measured by this ratio may be impacted in individual years by significant in-licensing activities or other major investments. Individually, and on a combined basis, these four financial targets are considered to be competitive compared to the overall performance of the pharmaceutical industry.

Finally it should be emphasised that the updated targets have been prepared assuming the currency exchange rates remain at the current level and given the current scope of business activities. Please turn to the next slide for an update on our currency exposure.

During 2005 the US dollar increased versus most other currencies including Danish krone compared to the levels prevailing at the end of 2004 albeit with a high degree of volatility. Based on the budget for 2006 Novo Nordisk estimates of expected currency impact on operating profit as a consequence off a 5% depreciation are as follows. We expect a negative full year impact on operating profit for 2006 of 350 million off a 5% depreciation of the US dollar. This is an increase from the estimated US dollar sensitivity of 300 million for 2005 and primarily reflects the expected strong growth momentum of our US business in 2006.

Furthermore a 5% depreciation of the US dollar related currency is expected to decrease full year operating profit for 2006 by 100 million as compared to a sensitivity of 85 million recorded for 2005. Hence on a combined basis the sensitivity for the US dollar and the sensitivity for the US dollar related currency is a total of 450 million by a 5% depreciation versus the Danish krone. A 5% depreciation of the Japanese Yen is expected to decrease operating profit by 150 million in 2006 compared to 130 million in 2005 and finally a 5% depreciation of the British pound is expected to decrease operating profit by 90 million compared to 80 million in 2005. Currently Novo Nordisk has hedged future expected cash flows related to the US dollar [13] month ahead the Japanese yen 12 month ahead and the British pound is hedged 10 month ahead.

For 2006 Novo Nordisk expects growth in sales of at least 10% in local currencies and, given the current level of exchange rate, a reported sales growth rates which is slightly higher. This is based on expectations of solid demand for Novo Nordisk strategic products including the insulin analogues NovoSeven and Norditropin SimpleXx. We expect underlying operating profit growth to increase by around 10% for 2006 reflecting the higher spending on sales and marketing activities combined with an increased number of late stage clinical development projects. Measured in Danish krone the expectation for 2006 is to increase operating profit slightly more than 10%. For 2006 Novo Nordisk expects an increase -- sorry an expense of 350 million for net financials. This reflects a net financial expense of around DKK 150 million primarily related to defer losses on foreign exchange hedging contracts and furthermore an expected negative impact from losses in associated companies of around 200 million mainly from Novo Nordisks share of the expected losses in ZymoGenetics.

Novo Nordisk expects its tax rate in 2006 to be 30%,1 percentage point higher than the realised level of 2005. This reflects the positive impact in 2005 from non-recurring gains including the gains from associated companies, as well as a positive effect in 2005 from the revaluation of the deferred tax liabilities due to the lowering of the Danish corporate income tax rate from 30 to 28%. Novo Nordisk plans to invest around 3 billion in fixed assets in 2006 whereas expectations for depreciation, amortization and impairment losses is around 2.1 billion. The free cash flow for 2006 is expected to be around 4 billion.

All these financial expectations are provided currency exchange rates remain at the current level throughout 2006. The Board of Directors has approved a new share repurchase programme of 6 billion, furthermore the Board of Directors will also propose a cancellation of B shares held by Novo Nordisk as treasury shares at the annual general meeting on March 8. If formally approved by the shareholders this cancellation will amount to a 5% reduction of the total share capital thereby allowing for additional capital structure flexibility.

This concludes our presentation of the financial results. Lars Rebien Sorensen will now moderate the Q&A session. 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. This is Lars Rebien. Please note that this conference call will be taped and a replay will be made available on our website. And operator we're now ready to take the first questions please.

Thank you. [OPERATOR INSTRUCTIONS] Our first question comes from Paul [Lacour]. Please go ahead and announce your company name and location.

Hello this is Paul [Lacour] from Carnegie in Copenhagen. Two questions please. How fast can you take the Liraglutide through Phase 3, what are the potential bottlenecks there? And also how will the Phase 3 studies in trauma and ICH affect your US sales investigation of use of NovoSeven, or where do you see the future growth coming from in NovoSeven please?

Thank you very much it's Lars Rebien here. Mads, if you'd kindly answer the question about how fast you see the performance of the Phase 3 Liraglutide trials and what, if any, bottlenecks that you are anticipating and then I'll answer the question about the impact on NovoSeven for the ongoing Phase 3 studies in United States?

Right well first of all we are starting, as I mentioned, next month. There are anticipated to be no technical bottlenecks, i.e. the supplies of the pins with the active and control compounds are available on location and so on so forth. Investigator meetings have been held etc and hence we actually expect to be able to recruit the entire amount of the 3,800 patients within this calendar year and since certain of these studies are enrolling or conducted over a 12 month period, this means that the total Phase 3 program, clinically speaking, will amount to 2 years following a period of data analysis and also a combination of the regulatory dossier and filing all within 2008 of course.

Thank you Mads, this is Lars Rebien, the next question was what are estimations of the growth of NovoSeven in 2006 and towards the end do we believe, especially in the United States, that this will be impacted by the ongoing clinical trials?

It is our belief that we have an estimated investigational use level in the United States which is the highest in our global markets; estimates are that it is above 20%. The overall growth of NovoSeven in 2006 is estimated to be above 10% reflecting especially the expansion of the label with acquired hemophilia.

If we then look at the ongoing clinical trials, as you know from our conference call, we mentioned there is particular surgery and trauma in United States which is driving investigational use, hence it is our belief that the current usage within ICH is rather limited in United States. So our estimates would be that, with regards to trauma, there will be no impact other than the general interest emerging from conducting such clinical trials in United States, however one might expect to see an increasing interest in United States on ICH where there is currently limited usage for this indication, which is of course still off the label.

Next question please.

Our next question comes from Henrik Simonsen, please go ahead.

Hello and good morning, gentlemen. A question on the Levemir launch -- upcoming Levemir launch in the US. Mads you mentioned that you had gained a very good [federal] labeling on your treat to target bases of basal insulin. So my question is how would you position Levemir in this context?

And then secondly, could you comment a little bit on your plans for entering a Super Seven or NovoSeven analogue into Phase 1 and how do you see the competitive environment with the recent agreement between [Maxigen] and Hoffmann La Roche, are there any others which you would expect coming up?

Thank you very much Henrik Simonsen this is Lars Rebien, Mads I guess both questions were to you. First Levemir launch US, what are the positioning given the recent data on the label and our treat to target findings? And what's the competitive situation in Seven analogues and when do we get into the first intro studies?

Well that is indeed a very pertinent question bearing in mind that our company will at that point have three different insulin analogue offerings in the US market. Now what characterizes those three offerings compared to, for instance, compounds outside of injectible insulin area is basically the ability to take charge of the patients glycaemiac control. So we will first of all be offering all our agents in such a way that they [health] economically are able to justify the price that they rightfully achieve and on top of that it is so that for the premixed analogue NovoLog mix 7030 you must anticipate that this is basically two insulins in one. So you're getting your HbA1c in ultimate control with the two daily injections, however this of course compared to Levemir does come at the expense of some risk of hypo and some risk of waking which Levemir is not associated with. So you must see that there's a segment of poorly controlled people who will clearly benefit from NovoLog mix 7030 whereas both in basal [bonus] therapy in Type 1 diabetes and those Type 2 diabetics who might strive for that too. Plus in OED failure patients the labeling would allow Levemir to be used aggressively to take down your A1C in the two target control.

And regarding the Factor 7 well we're just awaiting the final clearance to conduct Phase 1 trials with the Super Seven, the 1731 analog, and they are imminent.

This is Lars Rebien here, excuse me Mads for adding. With regards to Levemir, we are just receiving some very interesting data from our European predictive study where we are monitoring patients that have received Levemir and the trial and the monitoring is now up to 25,000 patients that we're following. And there are two interesting aspects to this which actually bodes well for the launch into the US market. First is that the clinical findings from our control clinical trials are being reconfirmed in actual practice so we see the same benefit in actual practice when we monitor the patients. Second, which is perhaps even more interesting is that the patients that are being switched from Lantus to Levemir actually also see an improvement on all the parameters, control [inaudible] glucose, hypos and weight. So it looks quite encouraging for the launch in the United States.

Thank you very much, we'll take the next question please.

Our next question comes from [Rachel Slater]. Please go ahead and announce your company name and location.

Hi good morning it's Rachel Slater at UBS. First of all you mention less restrictive inclusion criteria in the Phase 3 ICH trial. Could you just remind us what the criteria are for that trial and how specifically they differ from the Phase 2?

And then secondly on AERx. How confident are you that the FDA will accept the final specifications? Is this just a formality or is there a significant risk that they might not? And does your guidance assume that AERx does move into Phase 3 in Q1 '06?

Thank you very much. Mads Krogsgaard, ICH. What are the inclusion criterias which have been altered compared to the first trial, and what are your predictions? As cautious as you may have to be on FDA approval of the AERx before entering into Phase 3?

Right Rachel, regarding the Phase 2 trial you will recall that inclusion of criteria included a 023 hour time elapse from the onset of symptoms until the point of CT scanning, and then a further maximum 1 hour from CT scanning into needle injection, i.e. treatment. Now we did have the exclusion criteria of those patients who had a prior history of cardiovascular disease. Now in Phase 3 we have decided in collaboration and discussion with the regulatory agencies worldwide to exclude that criterion and basically have inclusion criteria that are very broad, plus enabling a label that does not rule out a number of patients as could have been the case based on the Phase 2 data.

So basically it's rather simple. Patients have to be, from symptom onset to diagnosis by CT scan maximum 3 hours, and time to needle from thereon maximum 1 hour, and no specific exclusions.

And then the AERx? What's your level of confidence in FDA acceptance of the current status of the device, and the strips?

Yes I have to say of course that as always with regulatory agencies you cannot really predict the future, but what we are talking about is really small technical clarifications, and hence we are expecting that very soon to fall into place.

And I can confirm that the plans and the outlook for 2006 includes the expected initiation of Phase 3 trials for AERx, so that's part of our forecast for the year.

This is Lars Rebien Sorensen here. Perhaps Mads, this would be an occasion for you to talk a little bit about recent public attention through the history of thromboembolic events on NovoSeven as a result of [inaudible] which was sort of erroneously picked up in the market as giving some fluctuations. Perhaps you'd like to correct any mistakes and misunderstandings which are out there?

Yes Lars, I think that's a good point to comment on. Because at the point of publication of this article, it basically follows up on the AERS, the adverse event reporting system, also known as Medwatch in BPA, what had happened over six years of therapy in the United States with this drug. And if you annualize the amount of thromboembolic events that might or might not have been related to NovoSeven, the annual average is 30. Now bear in mind that at the point in time of January last year, 700,000 defined daily doses of NovoSeven had been administered, of which more than 50% in the US. Hence you are in a situation where the risk of the thromboembolic event is anywhere from 0.01% to 0.1%. This is completely in line within Novo Nordisk's communicated safety database that we have on NovoSeven and is also borne into the perspective that these patients are critically ill, they are at a high risk of dying, and basically the clinical trials we are seeing that only around 1 out of 10 adverse events -- serious adverse events are related to thromboembolism. The others are related to the primary disease and in our database on clinical trials there is no significant over representation of thromboembolism overall in the NovoSeven group compared to the control groups.

Thank you very much. We hope that then clarifies that issue and let's have the next question please.

Our next question comes from Annette Rye Larsen, please go ahead.

Yes hello it's Annette Rye Larsen from Gudmer. I have two questions. First of all Levemir, you have now hired all the sales reps that you need for the US and you expect to launch in the second quarter. How come that you are not ready to launch here in the first quarter? There are still two months left.

And then my second question relates to the cancer area. You have now announced this additional share buyback program. Should this be a signal that you don’t see any acquisition opportunities within the cancer of within this year? Thank you.

Thank you this is Lars Rebien here. The first question I will deal with and then I'll ask Jesper to comment on whether there are any signals in the share buyback that we do not intend to fortify our pipeline with in-licensing being it in diabetes or biopharm for that matter in general.

First question is on Levemir; why are we not launching as we are now communicating that we have completed the recruitment of the additional 400 people? We have chosen a time which we believe is optimal in terms of balancing recruitment training district design and making sure that we have enough patients already on the product in pre-launch use, so basically in addition to that we want to have a very broad coverage for Levemir when we go to the market which means that Levemir will be introduced to all the major healthcare plans and managed care organizations. So we believe that we have chosen the right point in time, and please bear in mind that quarter two is approximately three months so there are three months to pick and you will shortly hear when we are actually going to launch.

And on the acquisition front the buyback growth, we're just ensuring that we are not holding cash onto our balance sheet where we cannot offer our shareholders a decent return. Please note that when we go through the long term financial targets we actually give this guidance assuming that there will be the current business activities we have.

The buyback program is constructed in a way which enables us to do minor acquisitions and of course as you mentioned the oncology area could be one of the areas we'd be looking at; information could be another one and as Lars Rebien was alluding to, even the diabetes areas could be an area where we could do in-licensing or acquisitions even. So we believe that the buyback program is dealing with the short term cash generation. If we should do things which are of a significant and changing nature then of course we will assess the ability to do buyback at that point in time.

Thank you Jesper, next question please.

Our next question comes from Sebastian Berthon, please go ahead and announce your company name and location.

Yes hello gentlemen, Sebastian Berthon from Exane BNP Paribas. Could you please update us on your market shares in Europe with Levemir especially in the UK, Germany and also initial feedback from your launch in France?

And also regarding your NN5401, could you just clarify we are talking about a short acting insulin, where do you see potential improvements over the existing short acting analogues please?

This is Lars Rebien here, why don't we ask Mads Krogsgaard to comment first on the last question and then I'll revert to the Levemir market shares in Europe.

Yes, NN5401 is indeed an [novel] insulin analogue and potentially a novel concept in the analogue treatment. It is of course early days, we've initiated Phase 1. What I can tell you is that the pre-clinical profile looks clearly competitive and what you try to do as early as possible in the clinics is try to validate that in human beings, preferably those with the Type 1 and Type 2 diabetes and that is what the program is aiming at.

I can tell you that pending success of this analogue of course the concept is that once there is the potential or possibility of upgrading patient therapy with such a compound it also means a patent date [exclusivity] period that adds some 15 to 20 years to that of the existing products obviously.

So that is the overall situation and this is part of overall commitment to continue to innovate in the field of insulin analogues. You will see other projects as we move along.

Thank you Mads. Levemir is doing quite well in the European market overall as we mentioned, it has a market share of 17%. The highest market shares are being achieved in the UK and in Ireland. We are having market share of around 10% in Germany and we are having a higher margin than that as I mentioned in the UK. The first reception of the launch in France is very positive.

We have additionally to the launch also expanded our sales force in the French market, so all in all we are very pleased with the performance, and as I mentioned we are very pleased with the findings from the follow up monitoring of the patients which I mentioned in the predictive study which will give further ammunition to our sales people when they go out and try to acquire patients for basal [segment]. So that's what we can say at this point in time. Thank you.

Thank you.

Next question please.

Our next question comes from Duncan Moore, please go ahead.

Yes Duncan Moore from Morgan Stanley. Two questions. Firstly can you comment on whether there are any specific things which help the gross margin in the fourth quarter or should we use that as a base for going forward?

And secondly, given that we've now had about nine months of Byetta in the US and sales do seem to be picking up despite the fact it's mainly a specialist product marketed by Lilly as that broadens out into the general market, what do you think the dynamics are going to be with regard to your insulin franchise?

Thank you very much. Jesper what are your predications going forward based on the observations on gross margin in Q4?

The gross margin in Q4 was exceeding 73% and that's actually pretty indicative of the current performance level. My expectation of the gross margin looking at 2006 will be an improvement in the ballpark of around 100 basis points which is even 50 basis points more than what you saw in the final quarter. But note in the final quarter we actually have the impact in that sole quarter of the employee share program which of course will not be repeated in the 2006. So the best guidance I can give at present will be an improvement in the gross margin for 2006 of around 100 basis points.

Thank you Jesper. In regards to the nine month observations in Byetta in the United States, I would have the following comments. Byetta is doing relatively well in the marketplace. It is extraordinarily high priced. It is positioned obviously upstream in the treatment of diabetes, consequently it will compete directly with oral anti-diabetics, but it will also be competing with the starter insulins which are being used. For Novo Nordisk at the moment that would then mean a potential competition from Byetta will be up against our premixed product, but primarily if any it will be up against Lantus which is in the marketplace. But of course also as we just talked about Levemir being launched in the United States it's a better basal, but also as a potential for starter insulin for Type 2 diabetes it will also be a competitor to those diabetics that can still retain themselves on their own pancreatic function by being stimulated by a [GOG1].

Thank you.

Thank you. Next question please.

Our next question comes from [Saatchian Jones] please go ahead and announce your company name and location.

Morning this is [Saatchian Jones] from Merrill Lynch. Two questions, firstly on your long term financial guidance. You're talking about operating margins remaining at 25% and further investments in R&D. I wonder if you could give us some color on the level of investment you are looking for and whether you have an aspirational target on R&D as a percentage of sales to match that 25% for operating margin?

And then secondly on NovoSeven Europe. I just wondered if you could give some clarity on what additional data the regulators may have been asking for. Was it just safety or where there some efficacy as well?

Thank you very much. Mads Krogsgaard will you start up will you start up with what type of dialogue we've had with the European authorities on the ICH file, whether they are safety or efficacy related and Jesper if you would care to comment on what the predictions are for the R&D percentage going forward as we are maintaining the long term operating margin target. Mads?

Yes. Well, basically the European Medicines Agency is simply saying that they feel we have achieved what we set out to achieve in the Phase 2 program, namely, to demonstrate proof of concept based on a primary point which was haematoma expansion. Now the end point that is really being dealt with as the hard end point for a classical approval in the field of stroke is the modified ranking scale. And even though the modified ranking scale actually was highly significantly improved in the Phase 2 study, it was a secondary end point. So what the agency really likes to see is what we are doing right now, a large Phase 3 program with the relevant doses where we have the modified ranking scale as the primary end point and then see the same data that we actually achieved in the first round, namely in Phase 2.

Jesper, in terms of investment, what are the potential investment levels that you are forecasting medium term and consequently by retaining the low -- the operating margin target. What do you see in terms of R&D percentage to sales?

Well, it really comes down to first of all, of course, the sale growth because getting it 50% growth of course requires us to be solid into double digit sales growth. Because we are not significantly expanding the margin, we are currently, if you take out non-recurring elements, we are at the 24%, so it is only an increase in operating margin of about 1% we are forecasting. But we are seeing a continued improvement in our performance in terms of production economy as I mentioned that we expected a 100 basis point improvement in 2006 and I also see a scope between 50 to 100 basis points looking at the years ahead.

In terms of admin costs, we have seen a continued improvement in our operating efficiency there. We are now down to 6.3% of sales for 2005 and you should continue to expect that ratio to go down. We should be aiming at maintaining a growth in our admin costs in the 5% ballpark in a normal year, so that should also be a driver.

These levels will then enable us to invest more in R&D. You should expect this year that we would probably take our R&D investments to the level of 16%. Then a little bit depending on the level of Phase 3 activity when we look into 2007 and 2008. This ratio could go slightly higher and, again, that is also why we are allowing for some flexibility on the 15% growth target. A little bit depending on the size of the Phase 3 portfolio R&D wise, but I would expect our R&D ratio to be, when we look at 2007 to 2008, higher than the 16% forecasted for 2006.

Thank you very much Jesper. Next question please. Ladies and gentlemen we are running down on time. We have three minutes left.

Our next question comes from Jo Walton. Please go ahead.

Good morning. I wonder if you would tell us a little bit more in the US about your exposure to Medicare, Medicaid and what you think the Part D reforms may do for you. And could you also give us a bit more, I am not quite sure that I understand this, the informed consent issue in the US. Given that you wanted to do a study which the FDA was happy where you had the waiver of informed consent, are you actually going to be able to get the right sort of patients that you will ultimately be selling the product to, if you actually go for an informed consent? I mean, are these people supposed to have had a trauma in, I don’t know, their big toe or something such that they are fully conscious and able to give informed consent, or what does this actually mean to the trauma studies in the US?

Thank you very much, Jo. Mads Krogsgaard would you care to comment on that. It is complicated because of negation on some of the statements so please be careful yet clear.

Right. I will try to be clear, Jo. Yes. We were negotiating with the FDA. As you will recall the clinical hold that we have been on ever since our trauma trials started out years ago has been lifted some months ago. So we are not on clinical hold in the US and this means that there is actually a clinical protocol that is approved for implementation. Now the discussion then came up with us -- between us and the FDA, that we felt with the high injury severity clause and severally traumatised patients it would not be that feasible really to, in real life, recruit patients with informed consent and hence we set out to achieve a trial with a waiver of informed consent and discussed the possibility of that with the FDA.

They have come back and actually said, well, we kind of should really demonstrate to them that we are not able to recruit patients at an adequate speed allowing for plausibility of the study. And this then means that we have now agreed that we will initiate the original study without a waiver of informed consent and then we will, over the first year or so, monitor the preliminary recruitment rates and discuss with the FDA how to proceed.

Thank you Mads. The second question related to what is our assessment of the potential Medicare reform in the US. What we do believe is that significant funds are being made available over the next 10 years where there are funds earmarked specifically for funding screening and management of diabetes with the intention to get more Americans diagnosed and put on the treatment.

This, in our estimation, would lead to an increased volume of consumption of the diabetes-related drugs. There may be a slight negative impact on price as this would impact our overall average price in the United States and consequently, also impact other government contracts which are related to the average price of the government. So diagnosis rates will go up, drug availability and consumption will go up and price slightly downwards would be our current assessment.

Thank you.

Thank you and last question please?

Last question comes from [inaudible]. Please go ahead.

Good morning gentleman. This is [inaudible] from Dresdner Kleinwort Wasserstein. Just two questions please. Briefly, could you go through the diabetes operating profit in fourth quarter? It appears to be down year on year. There must be some extra ordinaries here and perhaps the build up of the US sale force. Could you give some quantifications for those?

Then, secondly, long term cash flow on CapEx. It was slightly discussed before, but earlier you have always been guiding for 10% CapEx of sales, now it appears to be much below that in 2006. Is that something that we should expect to continue in the future as well? Thank you.

Thank you very much. Jesper Brandgaard, any guidance on diabetes operating profit in relation to the fourth quarter numbers? And then the second question which I will take is what are the guidance on CapEx going forward. It is correct that we, in the past, have had a target of 10% and you will, perhaps if you look back on the numbers, recall that for certain years actually in the beginning of this millennium, we were running at more than 10%. It is our assessment that we will be going under 10% going forward so we will see a more efficient management of funds into fixed investments for the company. So we would be looking to see efficiencies going forward, but we will take it year by year and we are not giving any long term guidance on this other than that it will be below 10%.

Okay. In terms of operating profit in Q4, of course if you look at it straight it looks like we have a declining operating margin, but do bear in mind that we last year, in the final quarter, recorded a one time income related to the settlement we did regarding Lantus with Aventis regarding Japan which provided a non-recurring income of 150 million solely allocated to the diabetes care franchise in fourth quarter of 2004.

And then furthermore of course note that in 2005, it is solely the final quarter of 2005 which are impacted by the expansion of the US sales force where the cost of hiring the employees and a proportion of the new reps actually were getting on board in the final quarter and that is why it will be slightly distorted.

Thank you very much Jesper. And ladies and gentlemen, this concludes the full year 2005 release of Novo Nordisk results. Please remember that a copy of this broadcast is available on our website and, if you have any further questions please contact our investor relations people. We are on the road over the next couple of weeks so leave a message if you don’t reach them immediately and we will get back to you. Thank you very much.