諾和諾德 (NVO) 2006 Q1 法說會逐字稿

Good afternoon ladies and gentlemen, and welcome to the Novo Nordisk First Quarter Results Conference Call. [OPERATOR INSTRUCTIONS] I do need to remind you that this conference is being recorded. I’d now like to hand over to your chairperson, Mr. Lars Rebien Sorensen. Please begin your meeting, sir, and I’ll be standing by.

Thank you very much. Welcome, ladies and gentlemen, to this Novo Nordisk conference call regarding our results for the first three months of 2006 which was released earlier today. I’m Lars Rebien Sorensen, the CEO of Novo Nordisk. With me, I have our CFO, Jesper Brandgaard; Mads Krogsgaard Thomsen, our Chief Science Officer; and present are 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’ll be using for this conference call. The conference call is scheduled to last approximately one hour. As usual, we will start with a presentation as outlined on Slide #1. The Q&A session will begin in about 25 minutes, so please turn to Slide #2.

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 webcast live, and a replay is made available on our website after the conference call.

I’d like to start this conference with some highlights from the first three months of 2006. Turn to Slide #3.

Novo Nordisk has delivered strong growth in the first quarter of 2006 with insulin analogues as the main growth driver. Sales of insulin analogues grew by 60% in the first quarter, thereby maintaining the strong momentum in Novo Nordisk’s insulin franchise.

The rollout of Levemir, the world’s most predictable, long-acting insulin, is progressing in line with plans and we have introduced the product in the U.S. market at the end of March.

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 prefill delivery device, NordiFlex.

In February, Phase 3 program for Liraglutide, Novo Nordisk’s once-daily human GLP-1 analogue, was initiated. We have completed the Phase 2 dose escalation trial for NovoSeven in spinal surgery. The results are encouraging with a satisfactory safety profile, combined with a significant reduction in the volume of transfused blood products compared to placebo.

Next quarter’s call will [report] with results from the spinal surgery trials later this in call.

We are pleased with the solid performance in the first quarter. Sales grew 23% as reported and by 18% in local currencies, while operating profit increased 24% as reported. The expectation for operating profit growth for the full year remains unchanged at slightly more than 10%.

Turn to Slide #4.

In the first quarter of 2006, the diabetes care segment grew more than 26%, measured in Danish krone, corresponding to 81% of Novo Nordisk’s growth. The growth within diabetes care is driven by a portfolio of insulin analogues which accounts for 60% of the overall growth.

Biopharmaceuticals grew 17%, measured in Danish krone, in the first quarter.

Sales of NovoSeven increased 16% while the growth hormone franchise grew a solid 19%. Sales of other products, primarily the HRT franchise, also recorded a solid growth rate of 16% compared to the same period last year.

We are encouraged by the continued market success of our strategic products, and we expect the growth to continue during the rest of 2006.

Turn to Slide #5 for an update on our insulin analogue franchise.

In the first quarter, insulin analogues grew by 60%, measured in Danish krone, or 54% measured in local currencies. The growth is driven by the underlying market growth, strong market share gains for both NovoRapid and NovoMix, as well as a successful rollout of Levemir. From a regional perspective, growth is driven by North America and Europe. However, Japan, Oceania and its international operations are increasingly adding to the overall growth of the analogue portfolio.

In the first quarter, insulin analogues constituted 39% of our total insulin sales, compared to 30% the same period a year ago, emphasizing the robust momentum in the ongoing conversion from human insulins to insulin analogues.

In North America, more than half of the insulin sales are analogues and the North America market now constitute around 39% of Novo Nordisk’s total analogue sales.

NovoRapid is the single largest insulin analogue product for Novo Nordisk with sales of $1.2 billion in the first quarter. Similar figures for NovoMix and Levemir were 800 billion Danish krones and around 300 million Danish krones, respectively.

Please turn to Slide #6 for further insight into the dynamics of the analogue market.

Around 44% of the global insulin market measured by volume has now been converted to analogues, compared to 37% the same time last year. We expect this conversion to continue 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, the prefill device is driving the value of growth of 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 in the analogue segment is now 37% measured in volume, supported by the continued rollout of Levemir most recently in the important U.S. market.

Novo Nordisk continues to be the only company that markets a full range of insulin analogues with short-acting, premixed, and long-acting insulin analogues in the most advanced and user-friendly delivery system.

Turn to Slide #7 which provides some further insight into the drivers of our insulin analogue market share gains.

NovoRapid is still the best-selling, short-acting insulin analogue in both Europe and Japan. From a global perspective, NovoRapid holds 50% of the short-acting analogue segment, while the global market share for NovoMix is even larger at more than 60% of the premixed analogue segment. The gains in market share within the analogue segment are also reflected in our total value of market share, where Novo Nordisk holds the market share 44% for the twelve months ending February 2006, versus 43% twelve months earlier.

Turn to Slide #8 which provides you with an update on the development of our analogue market share in Europe as well as the rollout of Levemir.

Novo Nordisk continues to reinforce the position as the clear market leader within the analogue segment in Europe with a market share of close to 45%, compared to 38% twelve months ago. The solid leadership position is fortified by the success of the continued European rollout of Levemir which now holds close to 18% in the total European market for long-acting analogues. Levemir has now been launched in 36 countries, including most European countries and several countries outside Europe. We’ll get back to the United States later in the conference call.

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

Turn to Slide #9 for an update on NovoSeven sales.

NovoSeven sales increased 16% as reported and by 10% in local currencies in the first quarter 2006. Sales growth was primarily realized in Europe and international operations. Sales in North America were subdued in the first quarter, partly impacted by a lower number of bleeding events compared to previous quarters.

The overall sales growth for NovoSeven during the first three months reflected increased sales within the congenital and acquired hemophilia segment as well as a perceived higher level of investigational used. Treatment of spontaneous bleeds for congenital inhibitor patient remains the largest area of use.

Turn to Slide #10 for an update of sales by region.

North America continues to be one of the main growth drivers for Novo Nordisk. In the first quarter, North America contributed one-third of the overall Novo Nordisk sales growth and, for the first time, North America constitutes more than 30% of total sales for Novo Nordisk. We will revert to North America after a review of the development in other regions.

In Europe, we continue to see solid growth rates of our portfolio of insulin analogues, and Levemir contributed to the growth of the overall franchise. NovoSeven continued to show solid growth in Europe during the first quarter of 2006. However, please bear in mind that sales of NovoSeven in the first quarter of 2005 was negatively impacted by a relatively low number of bleeding events. The growth of the hormone franchise – the growth hormone franchise in Europe showed solid growth rates in the first quarter of 2006, whereas the sales of HRT products were unchanged compared to the same period last year.

Sales in international operations has primarily been driven by human insulins, insulin analogues and NovoSeven, while also growth hormone and OAD’s contributed to growth. Within human insulin, sales growth in international operations in the first quarter was mainly driven by China, India and Brazil, whereas the growth in insulin analogues were primarily driven by Turkey and Russia. The sales of NovoNorm, Prandin benefited from improved nationwide reimbursement in China. From an overall perspective, it should be noted that the strong sales development in the first quarter of 2006 in international operations was positively impacted by the low level of tender orders in the same period last year.

In Japan, [indiscernible] sales in the first quarter were negatively affected by the mandatory reduction in Japanese reimbursement prices effective the first of April, 2006. However, sales of insulin analogues increased with solid growth rates. NovoSeven also contributed to growth. The two insulin analogues, NovoRapid 30 Mix and NovoRapid, continue to show robust performance in a growing insulin analogue market. The conversion to prefill delivery devices continues, and insulin analogues sold in FlexPen drive the growth.

In addition to destocking vials wholesalers in connection with the mandatory reduction in reimbursement prices, sales of growth hormone were also negatively impacted by changed pediatric treatment guidelines for diagnosis of growth hormone deficiency.

Turn to Slide #11 for a more detailed update on the sales development in North America.

In the first quarter, sales in North America grew a solid 32% in Danish krone and 20% in local currencies. The solid growth in North America was primarily driven by the portfolio of insulin analogues, human insulin and human growth hormone.

In the first quarter, sales of insulin analogues in North America grew by close to 50% in local currencies and constitute more than half the total of insulin sales in the region.

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

The launch of Levemir, Novo Nordisk’s advanced, long-acting insulin analogue, took place at the end of the March, supported by the entire diabetes sales force of 1,200 individuals. The initial uptick of Levemir in the market progresses according to our plans.

Leading up to the U.S. launch, stocking of around 100 million Danish krone took place at both wholesaler level and more than 45,000 retail pharmacies across the country. Based on market share statistics from IMS, Novo Nordisk is now the second consecutive month the market leader in the U.S. insulin market with close to 40% of the marketplace on February data measured by volume.

Growth hormone sales grew by close to 50% in the first quarter measured in local currencies, and the U.S. continues to be the second largest growth hormone market for Novo Nordisk. In the first quarter, sales of NovoSeven in North America were subdued, partly reflecting a lower number of bleeding events compared to previous quarters.

Novo Nordisk expects that North America will remain the key growth driver supported by the recent launch of Levemir in the U.S. market where Novo Nordisk is now the only company with a full portfolio of insulin analogues.

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

Thank you, Lars. Please turn to Slide 12.

The Phase 3A program for the disposable pen based once-daily human [indiscernible] analogue, Liraglutide, includes 3,800 type 2 diabetic patients and was initiated in February. The Phase 3 program than encompasses monotherapy and combination treatment with different oral anti-diabetics has an expected duration of two years followed by compilation of the regulatory association and submission. Detailed results from the Liraglutide Phase 2B study, completed in November last year, will be presented as an oral presentation at the annual meeting of the American Diabetes Association taking place in Washington from June 9 to 13.

As previously communicated, Novo Nordisk is now ready to reinitiate [phase] redevelopment of the AERx iDMS liquid inhalable insulin. The Phase 3 program is expected to include approximately 2,200 subjects with diabetes and will take place worldwide with primary focus on Europe and the U.S. The program includes different treatment comparisons, plus long-term preliminary safety studies, and is expected to be initiated in the second quarter with a total duration of three years.

Novo Nordisk has received a marketing authorization from the EU Commission for a label expansion for NovoMix 30, enabling diabetes patients in Europe to initiate [intravenous] therapy with a convenient once-daily injection regimen followed as per need by straightforward intensification to twice-daily treatment.

In the U.S., Novo Nordisk has received a “Not Approvable” letter from the FDA for the so-called higher mixes of NovoLog 50/50, 30/70 which in these products that were filed for approval in June 2005. In the letter, the Agency requests that certain critical issues be addressed, requiring some additional information to be provided. We’ll work closely with the FDA regarding the above issue. That has no impact on U.S. expectations for insulin analogues.

Finally, within diabetes, Novo Nordisk has initiated a Phase 1 study with NN0606, a novel, oral antidiabetic compound belonging to a new class.

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

Novo Nordisk has completed a Phase 2 study for the use of NovoSeven in spinal surgery. The primary objective was to evaluate the safety of NovoSeven as an adjunct to standard hemostasis management. Large spinal surgical procedures often result in a large blood loss, despite the use of hemostatic agents, topical hemostats and surgical hemostatic procedures. This spinal surgery study includes 49 patients [inaudible] treatment cohorts. Those followed three cohorts with 30, 60 and 120 micrograms per kilogram body weight respectively which were administered a repeated dosing every two hours until three doses had been given per patient. In this study, thrombotic events were dose-independent and comparable between placebo and NovoSeven treated groups with no serious adverse events occurring at the highest dose of NovoSeven. Analysis of efficacy shows that the calculated total transfused volumes of blood products, including autonomous transfused blood from cell saver systems, [LGNA] blood volume, platelets, fresh frozen plasma and cryoprecipitate, were significantly reduced by NovoSeven compared to placebo for all dose levels tested. The study is the first orthopedic surgery study to be conducted, and it confirms the positive benefit/risk ratio [inaudible]for NovoSeven in other setings.

A new article regarding the safety of NovoSeven from agents in a number of [indiscernible] and Novo Nordisk trials was very recently published in the peer review journal, Transfusion. A total of 13 clinical trials were reviewed. Based on the aggregated results, the office conclude that there was no significant difference between placebo treatment and NovoSeven with respect to the incidence of thrombotic adverse events. As part of the extension of the hemostasis product portfolio, Novo Nordisk has initiated a Phase 1 dose escalation study with a recombinant Factor VIIa analogue named NN1731 that has demonstrated further improved properties in preclinical studies relative to the currently-marketed NovoSeven product.

Novo Nordisk had finalized within cancer the first part of Phase 1/2 study for IL21 in 29 patients with stage IV malignant melanoma. Results from the study were presented at the annual meeting of the American Association of Cancer Research held in Washington, D.C. between April 1 and 5. IL21 was well-tolerated, toxicity was limited and reversible, and finally, antitumour activity was evident. Based on all of the above, we have furthermore been allowed to conduct future trials for IL21 as first-line monotherapy treatment in malignant melanoma patients in Australia. The dosing regimens to be applied in the second phase of the study has been decided upon, and the study is expected to be initiated this quarter.

Finally, Novo Nordisk has filed for marketing approval with the FDA and EMEA of an ultra-low dose version of Activelle, a continuous combined HRT product.

Now, over to Jesper for an update on the financials.

Thanks you, Mads. Please turn to Slide 14 providing you with details on the financial results.

We’re very pleased with the overall sales growth in the first quarter of 23% as reported and 18% measured in local currencies. Improvement in gross margin was 1.7 percentage points, replacing the continued gains from increased production efficiency and improved product mix, as well as the improved level of foreign currency rates compared to the same period in 2005. The increase in sales and distribution costs was 28, primarily reflecting the increase in the U.S. diabetes sales force that took place during the fourth quarter of 2005, as well as the expenses incurred during the first quarter in relation to the launch of Levemir in the U.S. as Lars just talked about.

Research and development costs also increased by 28% in the first quarter as a consequence of the high number of ongoing late-stage clinical development projects, including the Phase 3 trials with NovoSeven and ICH in trauma, as well as the initiation of Phase 3 programs for Liraglutide. The quarter operating profit increased by 24%, whereas underlying operating profit adjusted for the currency impact grew by around 12%.

Net financials showed an expense of 151 million in the first quarter, compared to an income of 275 million in the same period last year. This includes the results from associated companies, which was an expense of 60 million compared to an income of 238 million in the first quarter of 2005, when a non-recurring tax-exempt income of approximately 250 million from sale of shares in [indiscernible] was realized.

Net financial also includes a loss on foreign exchange of 140 million, compared to a gain of 38 million in the same period last year. The results from foreign exchange hedging activities in the first quarter were negatively impacted by the higher level of especially U.S. dollar versus Danish krone compared to 2005.

The effective tax rate was 30% compared to 31% in the same period last year, partly as a consequence of the reduction in Danish corporate tax from 30% to 28% that took place in 2005.

Finally, please note that the 8% increase in the number of employees compared to the same period last year was significantly below the growth in sales and distribution costs and R&D costs and also including development in administrative costs.

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

The high levels of volatility for most major currencies, including the U.S. dollar and Japanese yen, versus the Euro and Danish krone, has continued during the first part of 2006. Based on our forecast for 2006, Novo Nordisk’s estimates of the expected currency impact on operating profit as a consequence of a 5% depreciation are as follows. We expect a negative full-year impact operating profit for 2006 of 350 million of 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 by another 100 million. Hence, on a combined basis, the sensitivity for U.S. dollar and U.S. 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 full-year operating profit by 150 million. And finally, a 5% depreciation of the British pound is expected to decrease full-year operating profit by 90 million.

Currently, Novo Nordisk has hedged future expected cash flow related to the U.S. dollar 15 months, the Japanese yen 12 months ahead and the British pound is hedged 11 months ahead.

Please turn to Slide 16 for an outlook for 2006.

The expectation for reported sales growth in 2006 is 11 to 13. The sales forecast reflects that the overall currency impact on sales for the remaining three quarters of 2006 will, given the current prevailing exchange rate, be slightly negative compared to positive currency impact more than 5% realized for the first quarter of 2006. For the first quarter of 2005, the average U.S. dollar exchange rate was 568 Danish krone compared to an average rate of 621 in the first quarter of 2006. During the last three quarters in 2005, the average U.S. dollar exchange rate was 611, i.e. higher than the currently prevailing exchange rate which the outcome is based upon.

In addition to the currency impact, the sales forecast reflects expectations of a more even quarterly distribution of sales in 2006 within international operations compared to last year, when less than 19% of full-year sales was realized in the first quarter.

We still expect underlying operation profit growth to increase by around 10% for 2006, reflecting the expected higher spending on sales and marketing activities combined with an increased number of late stage clinical development projects.

Measured in Danish krone, the expectation is still to increase the operating profits rising more than 10%. For 2006, Novo Nordisk expects an expense of 350 million on net financials, while the expectation for effective tax rate remains unchanged at 30%.

Novo Nordisk is still plans to invest around 3 billion in fixed assets in 2006 and the expectations for the depreciation, amortization and impairment losses is unchanged around 2.1 billion.

Free cash flow for 2006 is now expected to be around 4.5 billion, partly reflecting the solid level of cash flow generation during the first quarter.

All of these financial expectations are provided that currency exchange rate, especially the U.S. dollar and related currencies, remain at the current level versus the Danish krone throughout 2006.

This concludes our presentation of the financial results. Operator [indiscernible] 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. Please note as I mentioned in the introduction that the conference will be taped and the replay will be made available on our website, and operator, we are now ready to take the first question please.

Thank you, Mr. Rebien Sorensen. [OPERATOR INSTRUCTIONS.] This first question today is from the line of Paul Major. Please go ahead and please identify your affiliation.

Thanks. It’s Paul Major from Redburn Partners, and just one question. I was wondering if you could tell us a little bit more about your positioning of Levemir in the U.S. In particular, it seems from market day to [week] that Lantus is the insulin therapy of choice for OAD failure patients, followed by NovoLog Mix. So I was just wondering if, in the longer term, you foresee the success of Levemir negatively impacting NovoLog Mix and possibly cannibalizing the sales. Thanks.

Thank you very much. This is Lars Rebien here. It is correct that in the U.S., the main starter insulin, if you want, currently is Lantus. The fact is that the best possible starter insulin for people that fail on oral therapy that are type 2 diabetics is a mixed insulin. So the physiological choice is to start with NovoLog Mix 30, for instance. However, if you insist on a more convenient injection regimen with only once or perhaps twice injections, you will be able to use Levemir, and Levemir is the best basal for starting such patients. But our positioning is that the best physiological choice is mixed insulin. If you do require and do to want basal, Levemir is a better basal.

[Indiscernible]

Just to clarify then. You’re not going to pursue first-line OAD failure patients with Levemir then. You’re going to keep your focus on NovoLog Mix. Is that what you’re saying?

Hang on a minute. We’ll just ask Mads Krogsgaard to give an additional caller.

Yes. What you can say, Paul, is that we actually have both offerings for the OAD failure segment and the idea is that Levemir is the effective treatment that can bring people into guideline control, take them below 7 as you can see in the label in the absence of serious hypoglycemia and serious weight gain. However, as Lars was saying, when your A1c is around 9 or above, a basal alone cannot do the trick, and there you need kind of both [indiscernible] and passing coverage and that has been achieved by the premixed segment. So they are the most efficacious treatments, but Levemir is positioned as the one that is convenient and can bring into control providing that you’re not far down the diabetes on-slope.

The next question is from the line of Paul Lacour. Please go ahead and, once again, tell us whom you represent.

This is Paul Lacour from Carnegie in Copenhagen and good afternoon, guys, and congrats with the strong results. On NovoMix, with the extension in Europe to also being a once-daily, how will that impact your overall product positioning in Europe, especially with regard to Levemir? And secondly, on AERx, what sort of CapEx spent do you expect to see in connection with the Phase 3 program all the way through approval, please?

Thank you very much. Mads Krogsgaard, what is the positioning of Levemir versus NovoMix in Europe? And Jesper, if you would take afterwards the CapEx expectations for Phase 3 rollout of AERx.

Well, NovoMix, as you know, started out as twice-daily treatment for insulin initiation in OAD failures. What we have realized since then is that we can move both towards further intensification by actually moving towards a thrice-daily – three times daily - application and what we now have approval for is a further certification, a once-daily application, and basically, it’s based on the study where you see you get good treatment in the relatively early stage OAD patients through once-daily and the idea is – then once that [fails] to intensify to twice daily. We have then further done a study that shows you go from twice daily to three times daily, you can actually have the full range of NovoMix 30 treatments all the way down to basal [indiscernible] therapy. So what we are calling it is really the start and stay therapy where you use baby steps to intensify your therapy with one single injection and one single FlexPen.

And the positioning of Levemir?

And Levemir, it goes just like in the U.S. when you have HP1C which can be correctable with a basal insulin and that is up to 8.5, 8.70. Then Levemir is clearly the preferred option because it’s even simpler and it provides 24-hour control in diabetics. In Europe, however, you do know that this is not at this point specifically in the label where it is in the U.S. So in Europe, the primary promotion offering for OAD patients is NovoMix 30.

Thank you very much. Jesper?

In terms of AERx, of course, the AERx device is based on human insulin and so for the [bulk] insulin, we’re in a comfortable situation as one should anticipate as we get towards the end of this decade that additional capacity will become available as we convert our patients throughout the world from human insulin towards insulin analogue.

Where the prime investment is going to be for the AERx device is making the blisters that will contain the insulin for the inhaled use. The investment will probably there be in the ballpark of 1 billion Danish krone, but it’s a bit early and a little bit depends on what size of capacity we would go for, location, etc. And that position has not yet been taken. I would like to stress, however, that the investment in AERx is included in our broad investment guidelines of being in the ballpark of 10%, maybe slightly lower, of sales for the remaining part of this decade.

And the next question is from Henrik Simonsen’s line. Please go ahead and tell us which company you’re from.

Yes, hello, gentlemen. Henrik Simonsen, Enskilda. Two questions. One on the SG&A line or rather the sales and marketing. I noted, in fact, your sales and distribution costs were down from the fourth quarter, which obviously contained a little bit of stock options or employee shares. How should we expect sales and distribution costs to pan out during 2006 on a quarter-based year, so if you could comment a bit on that. And then I’m a little bit unclear as to your guidance for the top line and local currencies. You said back in the first quarter mentioned a report that it would be slightly higher than the growth you mentioned in local currencies. So how do you expect that growth to pan out in 2006?

Thank you very much, Henrik. Jesper, the first question, where do we see the SG&A line going forward, and the second question, top line guidance, if we look at it in local currency terms.

Thanks. And I guess as you noted we’ve had a very significant cost in the first quarter this year. It contains especially a percentage of sales and of course the first quarter contains all the launch costs we had in the U.S. for Levemir launch. In the subsequent quarters, on a comparative basis, it will have the effect of the expansion of the sales force in the second and the third quarter. If you look at the full year number , there we will be in the ballpark of 29.5% for full-year numbers, and that will then require of the subsequent quarters of this year to be in the 29% range. I feel that’s a pretty good guidance over all the remaining quarters of this year. In terms of top line growth, I would like to use this opportunity to just confirm that we haven’t really changed our guidance for sales. From a practical point of view, we said at full year that, with 11 months to go of 2006, that we expected more than 10% growth in our reported sales in 2006, and now we have been more precise in saying more than 10% for us is in the ballpark of 11 to 13. So the way we view the updated guidance is just a precision of what we’ve said before. In terms of currency impact on the top line, currently it looks like there will be a marginal negative difference between the local currency guidance and reported, but it’s less than half a percentage point on full year, and that’s why we’re not making any significant comments. There’s no real significant difference between local currency growth and reported growth expected for 2006. And do note the rates we’ve been using which are stated at one of the slides for the conference call.

And the next question is from the line of Rachel Sledge. Please go ahead and do announce your affiliation.

It’s Rachel Sledge from UBS. A few questions on the pipeline. First of all, on NovoSeven in spinal surgery. When will you be able to update us on the next step here? Is a Phase 2B definitely necessary, or is there any chance you could move straight to the clinical trial? And secondly, on NovoMix, the choice of this “Not Approvable” letter versus an “Approvable”, it seems quite a strong statement. Why do you think it was “Not approvable” versus potentially “Approvable”, and can you give a bit more detail on what exactly the FDA would like on that score? Thanks.

Yes. Mads Krogsgaard, spinal surgery on NovoSeven? Next steps? And what was the underlying cause of “Nonapprovable” of NovoMix and then perhaps we ought to emphasize the level of use of these high mixes and the very little impact that the actual nonapproval has on all top line development. But first, Mads, NovoSeven spinal surgery.

Well, first of all, Rachel, the NovoSeven spinal surgery, it was a dose escalation Phase 2 study implied that it was the first clinical study which prime end point was basically safety. So it was a positive surprise that we saw a statistically significant [indiscernible] result at all the doses tested. And these are very recent data, so all of the data are encouraging from a benefit/risk perspective and from a spinal surgery perspective because we saw significant decreases on all the transfusion parameters that basically we must now digest the data, discuss it with our external expert advisors, and of course, with the regulatory bodies, and then we will be able to as soon as possible provide an update on how and when and if we are proceeding. But the data certainly are encouraging.

If we then look at the NovoMix finding in the U.S., well, I have to make, first of all, a comment about the terminology used by the agency. It’s actually shown that the agency has hitherto 3 different classes, what they call “Approval”, “Approvable” and “Nonapproval”. And what they are in the process of from a, let’s say, logistical perspective doing right now is actually taking the “Approvable” and “Nonapproval” and lumping together in a new box that they call “Incomplete/Responses needed” box. And that means that there’s not the distinction between the two that you’re hinting at, and if you look at what actually it is they are asking, it is a change in their assessment of what clinical approvability means. Because originally, they had been looking for a pharmacokinetic endpoint, and now, because of the change, the management in parts of the agency which is a completely natural thing, they have shifted emphasis onto pharmacokinetic endpoints. And this we are discussing with them, and we actively are doing trials and they can or may not provide the seat for data and, depending on whether they do that or not, it will take shorter or longer time before we can come to conclusion. But we are in a constructive dialogue with the FDA.

And I should finally say that the high mix range is actually a small subsegment of the major mix segment which is dominated by the NovoMix 30, even more so now that we are actually taking NovoMix 30 all the way to once, twice or thrice daily regimens.

Yes, I guess in terms of guidance, we could say that the high mixes are around 5% or less of the whole premix segment which means that, for instance, if we should look at it in relationship to the U.S., it’s less than a percentage of the U.S. market we saw the high mixes. So basically, this is not a commercial issue. It’s a portfolio issue. We would have liked to have had this opportunity to market these if and when it proves to be the right opportunity for the company and, therefore, sold. It does not have any impact over the next couple of years on our top line.

The next question is from the line of John Murphy. Please go ahead and announce your company name.

Thanks a lot. It’s John Murphy from Goldman Sachs and two questions please. First, on NovoSeven. Just wondering if you could give us a little bit more feel for the North American dynamics, maybe the percentage of investigational use you’re seeing at the moment. And with regard to the lower growth there in the first quarter and how you view that, potentially as an aberration or, you know, should we see a definite change there the second quarter and the rest of the year? And then second, on Levemir. Wondering whether, at this early stage, you can give any feel at all for the initial formulary acceptance for the product, how the discussions are going there, and obviously how that might be positioned versus Lantus or any of the formularies which you had discussions thusfar.

Lars Rebien Sorensen. Yes. This is Lars Rebien. First of all, if we look at the NovoSeven sales in North America in the first quarter, first of all we should say, if you look back on the quarterly sales of NovoSeven, that these are rather erratic and individual quarters may not be a prediction on whether or not that’s a sustainable trend which is ongoing. We saw that in particular last year where we had a very slow start in the European NovoSeven business, but it picked up in the three quarters following first quarter of 2005. In the U.S., however, there’s been a reduced number of major bleeds which has impacted sales, and perhaps there’s also a slight reduction in the growth of investigational use following some of the publicity – negative publicity, I should add – that we have seen in some of the major journals in United States. However, we think it’s too early to say whether this is having a long-term impact on the U.S. market. And from a global perspective, I should add that we’ve seen strong growth elsewhere so that we are expecting that we’ll see healthy double-digit growth of NovoSeven in 2006. With regards to Levemir, the initial observation is that we are expecting to have same formulary access as that of Lantus. We are seeing strong recognition in terms – we’ve made market research to see awareness prior to launch, and we see strong brand awareness and recognition prior to launch. We have made market research would seem to indicate that the physicians in the U.S. have the propensity to prescribe, which is quite attractive compared to the plans we have and compared to what we see from Lantus. So basically, everything is progressing along our plans, and we are very encouraged with what we see.

Our next question comes from the line of Annette Larsen. Please go ahead and tell us your affiliation.

Yes, hello. It’s Annette Larsen from Gudmer. I have two questions. The first question relates to human insulin and the tablets which seems to be growing very nicely which surprises me. You mention that you also see some volume increases, but could you give us a feel for how much is price increases and how much is really from volume increases, and how is the trend going forward? And then my second question is, relating to this new OAD in your pipeline, could you give us an idea about how the mechanism affection is and which segment it’s going to aim at? Thanks.

Lars Rebien Sorensen. Yes, thank you very much, Annette. This is Lars Rebien here. It’s great that we’ve seen the strong growth of our human insulin franchise but also on our OAD franchise, the human insulin growth is primarily coming from international markets where we are seeing basically a strong growth of our business in China, in Brazil and in India. And when we look at pricing on Prandin which is the only place where we have been able to take out major price improvements, there has, in the beginning of 2006, been a price increase which has impacted positively the OAD business in the United States. And Mads, the next question –

Just adding on Prandin, you note that we have improved our reimbursement status in China and, as a consequence of that, we also have seen a very healthy volume growth from our Prandin franchise in China.

Yes, well, it’s a new class that’s basically based on the animal studies we’ve done. It is estimated to be a once-daily tablet that serves as a blood glucose regulator without a propensity for hypoglycemia and with the added benefit of [indiscernible] risk factor reduction.

The next question is from the line of Justin Smith. Please go ahead and announce your company name.

Actually, it’s Paul Mann here. First of all, on financial expenses and associate income. You talked about the timing of those expenses 50 million Danish krone in [year-end]. Could you just give an idea of when to expect those to come through the P&L. And I suppose my second question is on admin expenses. It did grow at a lower rate compared to the rates of growth of revenues, but in the absolute jump, the absolute number was still quite high this quarter. Should we view that as being an ongoing expense or are there any one-offs in there?

Hello. This is Lars Rebien. No, Paul, I hope the answer to the last question is definitely no. But, Jesper, financial expense predictions and then what unusual have we seen on the first quarter on that administrative costs?

The financial expenses, of course we’ve taken a significant proportion of the financial costs expected for this year in the first quarter. We have a cost in the first quarter of 150 million and expectation for full year up 350, leaving 200 million to be expensed in the remaining three quarters. And it’s really – the expenses are really divided into two elements. One is going to come evenly over the quarters as we see it. And that’s related to our share of losses in the associated companies and that’s primarily related to ZymoGenetics and we should expect that loss to come as our share of their net loss over the quarters. Of course, it changes in expectations from -- Zymo could change that and that would increase our outlook. In terms of other financial costs, primarily relating to the hedging, and of course, the hedging in costs will primarily be loaded in the second quarter as the hedging contract that carries losses, primarily our contract which was entered into in the second quarter of 2005. And from there on, it’s probably going to look slightly more positive. So that’s on the financial expenses. In terms of the administrative costs, 20% growth looks, of course, quite different from what we have reported historically. There is, given the higher – the bigger size of our U.S. operations, there is a significant currency element in the first quarter. So underlying, you’re probably more looking at something like 16% growth. That 16% growth is impacted by two elements of a non-recurring nature. One is a retirement package to a member of executive management. The other one is a cost in relation to the subpoenas that we have dealt with in the U.S. which also hits our administrative line. It is not our expectation that we will have significant costs in this respect in the remaining three quarters. That basically leaves, if you adjust for these two elements, it leaves our administrative costs in the ballpark of 10% for the first quarter. I would expect our growth for the full year for administrative costs to be below 10%.

The next question is from the line of Martin Parkhoid. Please go ahead and tell us who you’re from and tell us who you’re from.

We are losing the speaker unfortunately.

Hello. Martin Parkhoid from DanskeBank. I’ll also take the maximum dose of two questions. Firstly, with respect to growth hormones, you saw underlying growth of 16% in the first quarter year and year, and this was actually despite [indiscernible] Japan. Is this a level that you also expect for the rest of the year? And then second, with respect to one of your competitive products, Apidra, the short-acting [indiscernible] from Aventis, have that had any kind of impact in the U.S. market after its launch?

Thank you, Martin. This is Lars Rebien Sorensen here. We saw very strong growth as you already indicate, and in particular, strong growth in the U.S. and in Europe. As the Japanese market was impacted both on the price reduction but also on the change diagnostic criteria for pediatric use in Japan. So basically, we are expecting that the Japanese market will be subdued because of these events, which will, of course, prevail throughout the year in Japan, whereas we are actually expecting to see continued strong growth in Europe and a continued strong penetration in the U.S. where we still are having much more market share room to go forth. So we should expect that we’ll see growth in our growth hormone franchise of around 15% for the full year.

If we look at Apidra, it’s correct that Apidra has been launched in United States. It has what we should call perhaps some modest success. It has less than 1% of the short-acting segment in the United States. So our predictions that this being the third insulin analogue in the short-acting segment and really up against the leading device from Novo Nordisk has been an uphill battle for sanofi-aventis, and hence, a modest success the way we see it. Thank you. Next question please?

And the next question comes from the line of Saatchian Jones. Please go ahead and tell us who you represent.

Alright. Saatchian Jones from Merrill Lynch. Again, two questions. Firstly, on spinal surgery. Mads, you mentioned this was the first stage of orthopedic indication. I just wondered whether you were suggesting you would be looking at this for other orthopedic indications. And the second question is on Levemir dosing in terms of the once versus twice daily. I wonder if you have any data and from your European launch as to what percentage of physicians, patients using as a once versus twice daily and whether you’ve had any initial feedback on the dosing versus Lantus. Thank you.

Thank you very much. Mads, I guess you’re on? Spinal? Are you having any intention of going into other orthopedic areas? And Levemir, what’s the dosing experience in Europe in terms of dosing regimen, but also total dose?

Okay, right. Regarding the spinal surgery situation, one quick comment on spinal surgery per se. That is that since it’s planned surgery and you know which patients are coming in, and the doctor, the operating surgeon and anesthesiologist have a very good assessment of the volumes of blood that they expect the patient will actually bleed, this has turned out to be a very good and very robust model for assessing bleeding, from at least hard tissue such as bone. So there’s no doubt that spinal surgery results are likely to be, let’s say, applicable to other areas, such as major reconstructive surgery of the hip and knee and so on. So, of course, it’s all being taken into the big picture when we’re looking at what to do and what not to do. But there’s no doubt that spinal surgery looks like a good model, also to study new hemostatics agents in, for that matter, of which you note we have some things going on in the portfolio.

Regarding Levemir and once or twice daily and up against Lantus and so on, I think the short version is that we have seen from the predictive study in Europe where 25,000 patients in an observational study have had either type 1 or type 2 diabetes and they’ve been monitored at baseline, at 12 weeks and in some countries also at 26 weeks, that the difference is that the average type 2 diabetic uses it once daily, whereas in type 1 diabetes that are used to being on multiple daily injection regimens, we are more seeing a twice-daily application. In the U.S., it will be positioned as a once-daily, as you know, application in type 2 diabetes, and basically, I think both for Levemir and Lantus see that a certain percentage will then at a point have to shift to twice daily. We see that for Lantus already today.

And the next question is from the line of Jo Walton. Please go ahead and announce your affiliation.

Jo Walton from Lehman Brothers. A financial and a product question please. I’m a little confused as to why the financial expenses should still be 350 million when currency has moved slightly in your favor. So the beginning of the year, you were talking about if rates persisted, your underlying growth plus a little bit for currency. Now you’re saying underlying growth, perhaps minus a little bit for currency. You’re very sensitive to currency, and I would have expected the financial income – I’m sorry, the financial expense – that 350, perhaps to have gone down a bit as currency changes. And I wondered if you could also tell us which bits of the P&L, given that that hedging is to offset issues in the P&L, which bits of the P&L have been distorted by currencies? It is mainly in the SG&A? You’ve talked a bit about admin being dollar-sensitive because of your U.S. sales force. The second thing is on NovoSeven. Given that you’ve talked about the importance of major bleeds and not as many major bleeds in the first quarter, can you give us some idea of how much of your sales is in a prophylactic use where you can predict the use of patients and how much is effectively emergency use or unplanned use?

Thank you very much, Jo. This is Lars Rebien here. Jesper, would you care to give a further elaboration on the development of the financial expenses and the currency development and, if possible, where that is hitting the P&L? And then, Mads, could you give a split as to the current usage of NovoSeven. Which is planned, which is prophylactic and which is emergency?

Yes, Jo. The impact on the – if I just take how the currency is impacting the various lines in the P&L impacting operating profit, you see a sales impact of 5.5%. Then there’s a limited impact on our cost of goods. There you see an impact to the tune of 2%. So we have a positive impact on our sales of 5.5, an increasing impact on reported costs of goods of 2% primarily related to our production facility in U.S. and Brazil. And then on, of course, where we have the prime cost impact on currencies, that’s related to sales and distribution costs, and that’s, of course, primarily U.S. and the international operation markets which are currency-sensitive, also to the U.S. dollar and there you have an impact in the ballpark of 6%. We currently have a limited sensitivity to currencies on our R&D line. You should only expect around 2% impact in the first quarter. And, as I mentioned, there have been costs probably currency impact in the ballpark of 4%. As for the stages within the guidance for operating profit and the guidance for the financial line, I’d like to reiterate that we have maintained our guidance for the operating profit and we’ve maintained our guidance for the net financials, so I don’t see any need for further expanding the explanation in this area.

Okay. Thank you very much. Then over to a question of trying to split the NovoSeven usage. Of course, first of all, we overall have to say that the current estimation of overall sales is about 80% is currently in the labeled indications, and these are, of course, in the hemophilia segment, and 20% is in the investigational use. So for both areas, we have to give you a split, and so that how much of the hemophilia usage, it is planned, and how much is emergency bleed, and actually also for some of the investigational use, some of it is emergency bleed and some of it is planned to the extent that it’s being used perhaps in some surgical interventions already, but that’s probably minor. Mads, what’s your comment to these segments?

Yes. Well, first of all, you can say the inhibitor market has such a worldwide is one where you see NovoSeven holding around 70% of that market, and then within that share which we have, it is true that a major part is either on-demand treatment at home or in the hospital setting. And that on-demand treatment, which is the standard hemophilia treatment you can say, I would assess is 80%+ and the remaining being elective surgery going on in the hospitals in a planned way. But this is the part that typically gives the fluctuations from quarter to quarter. Because on-demand treatment is a relatively stable situation, but the last half, which is the elective surgery component, fluctuates from quarter to quarter because the actual numbers of reconstructive surgery in these patients are relatively small.

And so, do you have any at all – anything to comment on the investigational use as to that’s all emergencies or whether there is some planned activities there as well?

I have to say that, apart from certain very high-risk areas of surgery where I know what you’re mentioning is clearly the case, then the garden variety investigational use is basically as a last resort therapy when the patient is about to die.

And this question is from the line of Martin Hall. Please go ahead and announce your company name.

Thank you. I’d like to probe a little bit more into the performances of NovoLog and NovoSeven. If you exclude the sales of Levemir from the analogue total, there does appear to be quite a marked slowdown in the growth rate of NovoLog and very little change in absolute sales level in the last two quarters. So what I’d like to know is what you’re doing to overcome this apparent quarter-on-quarter slowdown in NovoLog. Similarly with NovoSeven, I’m really following on from Jo’s question. The quarter one was a relatively weak quarter in ’05 and yet the growth rate this year is poor. Is there really a big variance in the number of bleeds quarter on quarter? And if you look at each of the quarters from 2005, is there a quarter that we should be made aware of where there was an exceptionally high level of bleeds?

Yes. Thank you very much. First question deals with the evolution of NovoLog. Is there a slowdown in our business? I think one has to be somewhat cautious. First of all, let’s say that the contribution from Levemir is still relatively modest given the size of Levemir and in particular, of course, in the United States where it’s primarily pipeline filling. The underlying trends of our business is that Novo Nordisk is dominating the mixed segment. It is correct that the mixed segment is not growing to the same extent was we see growth in the basal segment and in the rapid-acting segment. So consequently, Novo Nordisk is growing with the market, and that market growth in the mixed segment is somewhat slower in mixed than it is in basal and short-acting. Jesper, do you have any comments on the NovoSeven evolution on sales quarter by quarter?

Sorry. I thought you wanted me to comment on the development quarter over – for the NovoLog and NovoMix. I think what we’re seeing on the quarterly distribution between final quarter 2005 and first quarter of 2006, historically there tend to be some end of year [indiscernible]. Overall, the trend we see on a quarterly-quarterly basis is a gradual development in our market share, building off our penetration both in Europe and in U.S., and I do not read any underlying [indiscernible] into the development between the final quarter of last year and this year as the underlying market growth and our market share confirms a continued penetration of our portfolio. So I would not be too worried about that. Of course, the absolute growth numbers in percentages are coming down as our absolute sales volumes are increasing, and that we’ll just have to get used to.

Okay. And then it’s Lars Rebien here again. Then on NovoSeven, when we look at the graph which shows the quarterly evolution of sales of NovoSeven, there are distinct quarterly differences, and with every three or four quarter, there is a weak quarter as we can see over the last five years. We are [flagging] however, that we have seen an unexpected slow start in United States which may or may not be a sign of a longer trend in investigational use. However, what happens is that we are seeing strong growth in the hemophilia segment in the international operations which counters that. So even though you say it’s a weak start, and then I would agree with that, it is, after all, within the guidance that we have given, that NovoSeven for the full year is expected to grow somewhere between 10 and 15%. 10%, that’s the lower part of the range if investigational use is slowing down. So I think it follows basically our expectations, and we have to be a little cautious about the U.S. investigational use situation until we get a few more quarters under our belt.

I think that covers the Q&A, ladies and gentlemen. Thank you very much for listening in and then please be aware this conference call is being webcasted live on our homepage and, if you have any additional questions, call our investor relations office. Thank you very much.