諾和諾德 (NVO) 2007 Q3 法說會逐字稿

Alright.

Good afternoon everyone.

Welcome to Merrill Lynch.

It's my pleasure to have Novo Nordisk's senior management here for the third quarter results.

I don't have a lot to say so without further ado I'll hand over to Jesper to do the presentation.

Thanks, [Hitchin].

It's great to be in London for the third quarter roadshow.

We've tried this time around to make a special focus on China and international operations.

And for that purpose I've enlisted Jesper Hoiland who is our Senior Vice President responsible for international operations and our President for China, Ron Christie, who reports to Jesper, and have them present here.

Jesper will do part of the presentation covering both international operations and China and Ron will also be on the panel after being able to respond to any questions you have on the development in the Chinese market.

And I would ask you to use this opportunity to really get more insight into our operations in China, which is currently the fifth largest country in Novo Nordisk and growing quite significantly.

Jesper will elaborate a lot on that.

Of course today we'll be going through our results from the nine months and we'll be looking into the rest of this year and also into 2008.

And we'll be making predictions about the future, which is inherently difficult so you carefully need to read this forward-looking statement section.

I'll go through the highlights.

I'll cover the sales update.

Jesper will deal with international operations and China.

Mads will deal with the R&D update and then I'll be back on financials.

If we look at the first nine months of this year.

We're continuing to see our business being driven by our diabetes care franchise and especially our modern insulins growing by 37% in local currencies.

Also note that you see a very significant currency impact in the as reported numbers.

Our NovoSeven franchise is growing 10% --[growth hormone] growing 12% and the key market growth for us is coming from North America with a 25% growth.

We had in the third quarter approval for Levemir in Japan that completes in the [trial] market our portfolio of modern insulin approvals.

This is the final one and you should expect us to launch that before the end of the year and then effectively really making sure that we can maintain our more than 70% market share in Japan for the years to come.

We have now completed four out five Phase 3 studies for liraglutide and have only one outstanding, Mads will elaborate a bit more on that and this is of course a very unique opportunity for Novo Nordisk going ahead.

NovoNorm and Metformin combination life cycle management of our NovoNorm [PrandiMet] tablet has now been filed in the US and that should hopefully ensure that we also, on a longer term horizon, can benefit from having a supplement OAD in the portfolio of diabetes care products.

And then we have in Sweden, had a local national level approval for Activelle which is a low dose version of our continuous combination.

This product has already been approved in the US and is on the market and is rapidly gaining market share in the US market.

If we look at the financials, we reported a 14% growth in local currency and a 5% negative currency impact coming primarily from the US dollar and secondly from the yen.

And that was also why we were out giving more precise reported currency guidance for 2008 because of this very significant currency impact, not only occurring in 2007, but also having an impact into 2008.

Our improvement in gross margin continued also in the third quarter and we saw in reported numbers an improvement of 1.5 percentage points.

If you take it in local currencies the improvement was more than 2 percentage points.

In terms of operating profit growth we were seeing more than 20% underlying growth and 11% as reported.

And finally our growth for the full year this year is an improvement of around 20% in operating profit in local currencies and now close to 10% as reported.

And the sole reason why we changed our guidance from previously around 10% to now close to 10% was solely because of this impact from the US dollar.

We take then the sales update.

If we look at Novo Nordisk's market position we continue to be the world market leader in insulin having a 53% market share.

We have a number one position in all of the four sales regions around the world.

We today have a 43% market share in the US that is the most recent market where we also became market leader.

And then 57%, 59% in Europe and international operations and a 74% market share in Japan and Oceania.

The growth in our insulin franchise we predict will continue when we look towards the rest of this decade for the key reason that there basically is more and more patients with diabetes around the globe.

Here we have illustrated first in terms of volume how the insulin volume is growing.

You can see that our insulin volume is growing to the tune of 6% on an annual basis.

And if you calculate in Danish kroner how much this turns into in value growth you get about 11%.

If you had done the same calculation in US dollar the picture would have looked even nicer at 19%.

This is looking the last five years back.

And the reason why we show this is we continuously try to guide our investors to accept that our insulin franchise is very likely to grow at least 5% from the volume growth that is inherent within diabetes, in insulins, and on top of that that then we can another 5% in terms of value upgrade, taking patients to more advanced insulin in Europe, US and ever more increasingly also in international operations.

We're of course also doing it in Japan and Oceania but do bear in mind that the value upgrade that we get in Japan from human insulin through the modern insulins is only in the ballpark of 5%.

If you look at the number of people with diabetes there is predicted from the International Diabetes Federation a continuation of the growth in number of people with diabetes and as you can see from this slide it's predicted by 2025 there will be 380 million people in the world with diabetes.

I should note that today we probably have in the ballpark of 300 million people who has the pre-stage of diabetes, impaired glucose tolerance, around the world.

So a continued pipeline of potential patients.

And I think the reason why we've brought our Chinese friends here today and Jesper Hoiland from international operations is to illustrate what a significant opportunity there is in these markets for growth of our diabetes care franchise.

If we look at the growth the first nine months of this year diabetes continues to be the predominant part of our business, 73% with a growth reported of around 11%.

Local currency, it would have grown 16% and as you can see it's primarily driven by our modern insulin accounting for more than 70% of our overall growth.

The second growth factor is then NovoSeven and growth hormone, both of them contributing in the ballpark of 10% of growth.

If you look at our modern insulin, let's dig a little bit more into this.

Here you see the penetration of the world markets with our modern insulins.

And as you can see for the first launched product, NovoRapid, we are today approaching 40% of the total segment of rapid insulin with NovoRapid.

We are more than 30% today on NovoMix, which was the next product which we launched around 2002.

And for Levemir which was only launched in the US in April 2006 we are gradually expanding that.

And the insulin markets are very predictable markets where a high proportion of the patients that you get onto a modern insulin will continue on that so the fight is really on what share of the new patients you're getting.

And that is what makes these curves so predictable.

If you look at the reported sales of our modern insulins you can see that the rapid acting insulins still constitute 50% but it's only growing at 20%.

The mix is growing at 25%, accounts for a third.

And Levemir is now close to 20% but do bear in mind that it's now growing at 90%.

And if you look at the growth this year it was less than 500 million in Q1 and it was more than 700 million in Q3.

So it's gradually growing quarter-on-quarter becoming ever more important in terms of overall sales.

If you look at the increase in modern insulin market share you can see that we have now converted approximately 50% of the developed markets to modern insulin and we continue to see that conversion taking place at a conversion rate of 6%, 7% year-on-year.

And as you can see as we have rolled out our portfolio of modern insulin we have gradually increased our share of the world market in modern insulins.

We'll then look at NovoSeven.

The NovoSeven franchise continued to grow at a ballpark of 10% to 11%.

We have a growth of around 10% the first nine months of this year.

You should anticipate that the growth rate will come slightly down for NovoSeven probably into the single digit territory as we have exploited the opportunities we have within the hemophilia area and congenital bleeding disorders and as it will take a while before we can further expand into critical bleeds with the trial we have in Phase 3 within trauma, which will only be completed towards 2010.

In terms of our growth hormone franchise, growth hormone continued to be a key growth driver for Novo Nordisk.

We have a very, very significant market share globally of around 26%.

We're now only approximately 3.5 percentage points behind Pfizer.

We continue to focus on this franchise and we're the only one who has a liquid growth hormone with a dedicated device that really caters well for parents with kids of short stature.

It makes it quite easy for them to inject their kids over a five, six year period.

The main contributor to growth is the North American market.

We only introduced our growth hormone in the US in 2000 and that's why it's a key contributor to growth.

We recently had approval in the US also for short stature in relation to Scheuner's Syndrome.

If we look at it by regions here you can see that the growth rates in Europe are coming down.

The price premiums are not that significant in Europe, probably around 30% price premium on modern insulin whereas the US in local currency is growing around 25% and it's now accounting for a third of our business.

And you can see overall Novo Nordisk is more and more beginning to look like a traditional pharmaceutical with the predominant part of sales coming from North America.

So in terms of growth international operations is very, very significant and in reported terms growing at the same level as North America.

Japan and Oceania dropped measured in Danish kroner, in local currencies they were growing in the ballpark of 4% and now constitute approximately 10% of our sales.

If we look at Levemir, just finishing off on that, you can see from this slide that we continue to take share in modern insulin driven by our whole portfolio.

We're the only company with a full portfolio of modern insulin on the market and the latest newcomer from Novo Nordisk is our Levemir product in Europe.

And you can see the recent data is showing that we, at the end of Q2 ,had approximately 24% of the modern insulin [basel] segment in Europe.

And if we look the US, it's a share of the overall segment that is also increasing, this is really the long haul for Novo Nordisk in terms of expansion of sales force, educating the doctors that Levemir is a very, very good option for once daily treatment of Type II patients, [failing on all] in the US, and we are gradually increase month-by-month our share of the total market, and we've now come to 7.7% of the modern acting segment of modern insulins -- in the long acting segment of modern insulins in the US.

Jesper?

Thank you very much Jesper.

Great pleasure to be here, as you can see we are a little (inaudible) international operations has -- I can see that some of you will not be too happy with what you're seeing here, that the canal has disappeared between the UK and France, so that must be the IO perspective.

Let me start out by saying, I've been 20 years with Novo Nordisk and I deeply regret that I didn't come through the so-called emerging markets only three years ago, I have spent 15 years outside of them so I'm not a true Dane any more, but I still regret that I didn't come to this beautiful part of the world where business is truly happening.

In the past the history tells us that if you want us to do business you have to go West, as it is today and in the way that I see it, if you want to do business today you have to go East and really through the far east to China and to India.

I'm also very happy that I have brought with me the President of China, [Ronald Frank Christie] has done fantastically well for the last four and half years in China and hopefully will continue to do as well, as you will see on some of the slides, I'm at least not in doubt.

I've been given five slides to present, but just to give you feel for 85% of the world's population lives here in international operations, and roughly as we're speaking 50% of the world's growth in GDP comes to this part of the world.

So no wonder that we're seeing rapidly changing towards increased diabetes but also increased affordability of pain for the product that we're providing to the marketplace.

If we're looking at how we are distributed, we have a business region or business area called Latin America, (inaudible) have a formulation and filling plant in Montes Claros and we're also having a business operations out of Sao Paolo and they basically look after the 600 million people that lives in this part of the world.

In Athens we have a region looking after Africa and the Gulf, also an area that is rapidly changing, in particular the Northern part of Africa is able to pay for the product and also developing diabetes and therefore Novo Nordisk has a strong hold there.

And by a common nominator for -- throughout the world of international operations is also one of the growth drivers for us, that is the high on increasing oil prices, that means that many of these countries can afford paying for the products.

Then we have in the Near East, Iraq and Iran, but in certainly also Turkey, really doing well where we have located the Near East office.

In the Far East office we have closed our Singaporean office and put it into Bangalore India, because of course India is hopefully going to be the next growth driver for international operations, taking over when China starts to flatten out, will hopefully happen in 20 or 30 years from now.

Russia, also a country that is doing incredibly well as we are speaking, Novo Nordisk in Russian is the seventh largest pharmaceutical company of that market, so there we're also doing very well.

And then last but not least of course we have the R&D part, but also production in the business area of China where we are doing very well.

Then talking about the business you have seen in the past, peaks and valleys, you will see a more stable picture but overall a number that I think is reasonable to look at and what is hopefully to be anticipated, that is in the high double-digit growth of the teens, in the 17%, 18% growth rate we're seeing, coming from a solid base and a more stable market.

And one of the reasons is that we have moved away from what's called tender business which used to be one of the very important income sources to IO to having reduced our dependency on tender business to only being around 12% of our business now, where just going back three or four years it was over 20% of our business.

So we are making it a more profitable business international operations by zooming in on the high cost products and those markets that can afford it because, one of the things that you have to remember when you're talking IO, it's 150 countries of the world, but in real terms it's closer to 300 markets in the world because you have the private market and the public market, and the market that we are catering through, that we are really zooming in on, is the private market where patients can afford out of their own pocket to pay for our drugs.

If we're looking from it from a volume point of view, we are doing relatively well, we're a stable market share, around 58%, and as you are seeing, if you're adding up the main competitors that we are still having is the Ely Lilli, yet Sanofi-Aventis has also really done a fantastic job, not so much in volume, but in value, they are having a much stronger value market share.

But if you add up the three companies, Novo Nordisk and the two others, we're holding around 90% of the market, it means that only 10% is left to what's called biosimilars or what we call the rest.

It means that no pharmaceutical companies that are not real pharma companies but by similar companies has been able to take any market share anywhere in the world, not in India, not in the Far East and not in Latin America where we are seeing competition from the biosimilars.

So by in large Novo Nordisk continues to drive the business, something we are very proud of.

China, I can for myself speak an hour about China, I'm sure Ronald Christie can speak a whole day about China because China is really phenomenal.

When I was sitting in Australia some eight years ago and was sending money to China, we had around 50 people there and we were losing money in China, as we are speaking today it's really one of the growth drivers for Novo Nordisk, just two years ago we passed 1 billion, this year we'll get close to 2 billion, so almost a 50% growth rate per year.

Going into the real key markets of Novo Nordisk in the top five, and hopefully continue to grow in that rank, so number one, two or three should be within reach, maybe not number one but two and three is still within reach for Novo Nordisk.

R&D, one of the real interesting things is in China they spend more money on research as a general, as they do in Japan, so China is also a country that is coming up with many new patents and many things that are happening, it's not only in the Western world that things are happening as we tend to believe.

Pen production, very important, we can reduce our cost and continue to be competitive, one of the things about China is we are really successful in the upper segment or in the more expensive segments you can say in the pen devices where we are beating the traditional vials and syringes and are really selling the core part of our business of pens.

And in particular NovoPen 3 has been very, very successful because Novo Nordisk is globally providing products with the same quality so -- and the Chinese are really quality freaks, I'm sure that's one Christie can share views on that with you, because they really are interested in paying the right prices, but they also demand good quality.

It's not second or third qualities that they are interested in.

This slide I could say is almost old, it says only 1,000 employees, it's growing as we are speaking and we are continuing to add on a number of people, we are almost double the size sales force to that of our competitors and that's of course one of the good reasons why we have been able to keep a 70% plus market share in value.

And this is -- then the slide, this is the main driver of it.

You see today China and India being the two largest markets in the world when it comes to diabetes and that market, if we're comparing China and India, in the US I think they are saying today that there are 16 million with diabetes.

Here we are almost talking double the number of people with 40 million people both in India and China, there are 40 million people suffering from diabetes.

One of the interesting things is as they are changing towards the Western lifestyle there's really a rapid, rapid growth in insulin [utilization] and in diabetes, the latest statistics that has just come out from the Chinese Government is that 80% of all Chinese die from chronicle diseases and really diabetes is growing.

So in the [main cities], there's more than 6.7% of the population has diabetes, and in the smaller cities of China, which is of course very big, at least if you're coming from a country like Denmark where the capital is 1 million people, we are talking also cities down to 1 million people, it's around half that number, so around 3%.

And in the rural areas it's even less.

But one strong sign is as people move into the cities we're seeing a strong prevalence, increase in prevalence of diabetes and it's not that surprising if we are comparing to the two most advanced markets, Singapore and Hong Kong that has Chinese population, we're seeing more than 10% of the population having diabetes, same in Taiwan for that matter.

We then are seeing on our value, we are plus 70%, round 60% in volume.

We're doing very well and as you can see, it's Lilly that is our core competitor, but one of the strong upcoming companies is Sanofi-Aventis that is fighting to get in with their (inaudible) whereas Novo Nordisk has still to launch our Levemir which hopefully will happen in 2009, that's what we're aiming for.

Then we will be competing on equal terms or on even terms.

Thus once we've put it into perspective, still premixed insulin is by far the largest product in China.

So that's the real growth driver for [that] NovoMix.

And I would also like to say that even NovoNorm is doing very, very well for Novo Nordisk and is one of the main growth drivers for Novonorm is China.

As you can see, the Chinese companies they're mainly competing in the annual segment of which is still about 20% of the Chinese market is animal insulin.

And the reason why that is that high is of course because we are talking extremely low prices.

Sorry I should speak faster?

I can see (inaudible) yes, sorry.

Modern insulins in the past we have not launched it at the same time as it was introduced in the rest of the world because of -- we need to get approval and we have also had some capacity problems in the initial phase.

Nevertheless now we have full capacity and we have introduced into more than 30 markets of IO and therefore you see strong growth for it up to the tune of representing about 10 % of Novo Nordisk's total analogue business and we now have businesses representing 18% or so.

Hopefully we can continue to see this strong growth in the modern insulins; 50% of the growth in IO is coming from the modern insulins.

Strong growth in local currencies, very strong business done in Turkey which is really taking the front lead when it comes to analogue insulins, but also China and Russia is doing very well.

In China now in more and more markets our NovoRapid and our NovoMix is reimbursed.

It takes a number of years to get on the reimbursement list in China, so this is great performance again by Ron Christie and his team.

And one of the other things is, we have a very strong pen penetration and, as a consequence of that, we're having a relatively secure business because that's what the customers, the patients are requesting.

So Mads, over to you.

Sorry, yes, I spent a little too much time.

Thanks, Jesper.

What I'll do is I'll give you the usual slides that you see i.e.

the pipeline projects, and then I'll shed a little bit more light on two of the most important growth drivers in the diabetes arena, namely Levemir and also liraglutide, not surprisingly.

If we look at the pipeline as such, the news about Levemir is that we've got the Japanese approval, allowing us to enter the market in a superior device with Levemir this quarter.

If we move down through to liraglutide the important update is that we're lacking just one trial out of the lead program namely (inaudible) monotherapy one year study in the US.

And that is also going to be completed within the next few months.

I'll get back to lira in just a minute.

And as we move down through the rest of the diabetes care pipeline, it's new I guess that we have entered Phase 1 with a once weekly human GLP-1 analogue, no strange protraction technologies, just sheer (inaudible) by a very high degree of reversible binding between this analogue and (inaudible) creating a (inaudible) enabling, [once we give] dosing via a disposable device in a FlexPen-like mode.

Also you will see that in the modern insulin field we believe that we are the only company that is trying to upgrade the penultimate generation of insulins which are today's modern insulins, Levemir, NovoMix etc., to what I would call the ultimate insulin therapies which are basically going to be insulins that can take us in a patent protected mode towards the end of not the next decade, but the decade thereafter.

And basically the last thing I should mention about lira is the notion that we are have Phase 2 proof of concept data later on this year.

Now if we look at Type 2 diabetes it's basically a question of the global endemic, so-called pandemic of obesity driven by factors mentioned by Jesper Hoiland just a minute ago, that is causing, as time goes by, the body to become not only overweight, but also producing too little insulin and too little of the other hormone that is important to homestatis i.e.

normal physiological behavior in the human body, namely GLP-1.

Thus produce too little of these hormones and they act in a too weak manner compared to in the healthy body.

Now regardless of these two hormones being the ones lacking in the disease known as Type 2 diabetes, we have for the last three quarters of a century only had insulin therapy available and for half a century certain chemicals or anti-diabetics that have either improved insulin levels such as (inaudible) or improved insulin action in the liver, for instance, such as metformin.

Only recently have we seen the emergence of the natural hormone, GLP-1 emerge as a therapy.

As we can see, it's still a virgin area; we've only had Byetta on the market for a very brief period, but our expectation is that driven by liraglutide, Byetta and, of course, also the peers in the industry, we will see these agents creep pretty much into the area of the oral anti-diabetic field because they do everything that is wrong in diabetes and they mitigate that, i.e., they tend to decrease body weight to improve insulin secretion and they even improve the liver's glucose production by suppressing it much the same way as metformin does.

So if we look at the segments worldwide, insulin will exhibit around double-digit growth as it has done for 75 years, and we expect to continue to see that growth, in particular within the Novo Nordisk insulins in the foreseeable future.

The oral anti-diabetic field in one that has been pretty much going up and down depending on -- growth-wise, depending on patent expiry etc in the case of some of the classes that we expect over the next few years to go patent including the (inaudible).

So it'll be very exciting to follow exactly where GLP-1 is going to be positioned depending on the individual compound profile.

If we look specifically at liraglutide, I mentioned that we're lacking the lead 3 data, but already at this point I think it's fair to say that, based on all trials we've done in Phase 1, 2 and 3, we are seeing glucose productions equivalent to an HbA1C decrement up to 2 percentage points.

Meaning that people come into at least the same degree of control as we have seen in major insulin studies.

In fact as you are aware, we actually did a study called the lead 5 where we saw a significant improvement over and above that which could be achieved with a once daily Lantus administration.

And in contrast to Lantus and other orals such as the (inaudible) we have seen this in the face of a significant body weight decrease and finally also in the presence of only modest side effects, mostly in terms of GI side effects.

This is important because as you are aware, within all anti-diabetic therapies such as the (inaudible) and others there are, of course, ongoing discussions about target organs that are less physiological than for instance the GI system.

So if we shift now from one slide to the Levemir situation, we're happy to announce that very recently we sent out a release in this regard, we actually got approval from the PMDA in Japan now giving us a very competitive label.

It's the best in class label for Levemir in Japan enabling once daily dosing, monotherapy, combination therapy, pediatric use, flexible timing of the dosing, a flat action profile, claims regarding less hypoglycemia and less intrasubject variability and a very nice in use time of six weeks.

In totality this is the best in class label seen for basal insulin in Japan.

And with a launch later on in this very quarter in the FlexPen disposable device we actually believe that we will be in a very strong position to resume the strong position that we already have in Japan for many, many years, but also assume some market share growth driven by Levemir.

If we move from diabetes towards the biopharmaceuticals pipeline because the rest of the diabetes projects are progressing as per plans as we speak.

If we then shift to the biopharmaceuticals pipeline I think the biggest excitement in the NovoSeven field will be soon over the next months to come to generate the approval of the very convenient and portable product known as the heat stable formulation of Factor 7 enabling the kids and the grownups to carry around the product so that they can take on demand treatment when it is truly needed and not have to go back to a hospital, their home -- house refrigerator or the likes of it to receive the treatment.

Trauma is continuing the recruitment in the Phase 3 trial.

And in the case of some of these other activities I think the most important thing to note is that the analogues of Factor 7 we believe are en route, just as are the next generation insulins, to provide us with a series of successors for the very successful blockbuster product known today as NovoSeven.

In this regard the short acting highly efficacious analogue NN1731 is in Phase 2 and is basically designed to perform better than NovoSeven in terms of rapid resolution of bleeding and only one injection as compared to several injections.

The long-acting factor VIIa analogue that has entered Phase 1 is really destined to open up a new segment, namely that of prophylactic therapy such that the patients will be able to, on a once daily or every other daily basis administer a compound and avoid bleeding from occurring and hence reducing the risk of long term complications such as the devastating arthropathy well known to hemophilia patients.

But that will be market expansion.

Finally if we look at the other biopharmaceuticals, I think Jesper has already alluded to the notion that we have, with the name [Noviana], the first approval of an ultra low dose continuous combined HRT product that we on this slide have called Activelle low-dose.

We think this is important.

It provides full efficacy in the face of pure side effects, in particular the lower risk of long term cancer etc., normally associated with HRT products.

Likewise the Vagifem low-dose is a topical product which has completed Phase 3 trials in the US and will be submitted to the US FDA later on this year for approval as the first topical low-dose product.

I should also mention that we are in the Phase 3 program with the Norditropin for adult patients undergoing chronic dialysis therapy in the midst of or in the early phase of recruiting for a large, mortality based Phase 3 study that we talked about at the capital markets day last October.

Finally in the cancer field Interleukin 21 has initiated yet another study this time within ovarian cancer.

And maybe I should mention that our colleagues and collaborators from ZymoGenetics on the US West Coast in Seattle, they announced a few days ago that in the renal cell carcinoma setting IL-21, albeit small numbers given to the first ten patients in combination with a tyrosine kinase inhibitor known as Nexavar has generated very nice data, i.e., there was a tumor shrinkage in each and every of those ten patients.

And in four of them it was to the extent that they qualify as so-called responders to the therapy.

Nexavar when given alone does not cause tumor shrinkage.

So we believe that the pipeline as such is in a very exiting phase and with that over to you Jesper for the financials.

Thanks Mads.

Here are the financial results for the first nine months; 9% sales growth but of course a significant 5% negative currency impact, gross margin expanding by 150 basis points, I'll just get back to that in a slide or two.

If we look at sales and distribution costs growing 11%, the prime factor here is the expansion of our sales force in the US taking our diabetes care sales force from 1,200 reps to 1,900 reps with effect from mid this year.

The guidance we're giving for sales and distribution costs for the full year will be a ballpark of 30% in costs, also partly impacted by the launch Levemir in Japan as Mads just alluded to.

Research and development costs are getting to the level of 17% for the full year and growing 16%.

Of course being impacted by the portfolio of Liraglutide studies, the initiation of a PCD study within growth hormone are some of the key elements driving our research and development costs.

Admin expenses getting below 6% [to] sales and that's a reasonable guidance also in the ballpark of 6% for the full year.

Operating profit growing 11% but a -- to the tune of 10% negative impact on currencies, so growing more than 20% in local currencies after nine months.

Net financials, a significant amount of that, approximately [1.4 billion], is related to our divestment of Dako to a private equity [EQT] in the Scandinavian Group.

With the benefit of hindsight we can say that our timing there probably has proven to be quite nice.

That transaction was completed in May and the financial distribution of proceeds will actually occur in the fourth quarter.

It has been distributed to the shareholders.

The shareholders are then distributing it to the individual shareholders in the final quarter of this year.

On top of that in terms of net financials I should comment that we have recorded almost 700 million in currency hedging gains in the nine months of this year so we'll actually see a return on our hedging strategy in the financial line, making up for a significant proportion of the lost operating profit we have due to the impact from -- especially the drop of the US dollar.

If we look at the tax line, it's only a tax rate of close to 22% and that's the guidance we also give for the full year this year but that's because primarily of the Dako transaction being tax exempt and on top of that we've had a lowering of the Danish tax rate.

If you take out these factors I think the guidance we should give for 2008 onwards is a tax rate of around 25%.

If we look at the net profit, that's a growth in this year of -- nine month this year of 60%.

If we look at the gross margin, getting back to that you're seeing, if you compare to the average last year, we have grown something like 140 basis points.

If we look at the nine month this year we have close to 100 basis points in negative impact from currencies.

We are selling all around the world and we're predominantly producing in the eurozone so a significant negative currency impact.

That is really accounting for why you're seeing a lower growth this year compared to last year.

But do bear in mind that we, in 2006 and 2007 have significantly benefited from the changed pricing environment in the US with the introduction of the MediCare reimbursement system for the lower part of the American markets.

And that has significantly benefited Novo Nordisk and it especially benefited us in the final quarter of last year.

It won't benefit as much in the final quarter of this year.

We're seeing the prime factor behind this improvement in gross margin which we predict should be about 130 basis points for the full year.

And we're seeing this primarily being driven by improved production economy coming from producing our modern insulins ever more efficiently.

And there I should probably take this opportunity to market an investor event we have in -- towards the end of November where we've invited our investors to come to Calembourg, which is the prime site for production of insulin in Novo Nordisk and come and see some of the insulin manufacturing facilities.

And you'll probably also get some introduction to the Liraglutide purification facility.

This is the dedicated facility we have ready for the launch of Liraglutide hopefully when we get to 2009.

On top of the productivity gains that we're getting from producing our bulk insulins more efficiently, on top of that we are filling them every more efficiently in our filling facilities around the world.

And that's the other key driver of production efficiency which probably account for some 60% of the improvement in gross margin we make.

On top of that we're making improvements in terms of our product mix.

We're converting patients from human insulin on to the more important modern insulin with a higher margin, especially in the US but also to some degree in Europe, is giving us some boost.

That's about 20% and then finally -- the final element has been the pricing effect, primarily related to US and it's solely related to US and it's probably a factor that's not going to be as important when we look at next year.

The guidance we're giving for improvement in production, a gross margin when we look to 2008, is an improvement in local currency between 50 basis points to 100 basis points and we expect another 50 basis points to 100 basis points improvement when we look towards 2009.

Look at the currency development, this is why I've talked so much about currencies.

You can see a very, very significant ballpark 10% drop in the US dollar compared to last year.

We've also on this slide -- a similar level of drop for the Japanese yen.

We've also on this slide actually given you an indication of how significant the currency impact will be for Novo Nordisk for 2008 and it's this increased sensitivity to the US dollar which is significantly impacting our guidance for 2008.

As you can see here we have an increase of 18% if you add these two numbers up in dollar sensitivity from $510 million to $600 million sensitivity.

Now that increase is really significantly impacting our reported numbers for 2008.

In local currency terms it has probably taken some -- a bit over 2% off our guidance in terms of sales growth and now we're guiding [about 10%] but if it was local currencies it would be a bit over 2% more in terms of our guidance for local currency growth.

And if you look at our operating profit growth, you can normally double the effect on operating profit from the impact on sales.

So if we have more than 2 percentage points effect on sales, you'll have an approximate 4 to 5 percentage point impact on operating profit and that's why our guidance for operating profit growth is also around 10% for 2008.

Of course we'll get back with more detailed guidance when we get -- with our results in January.

And then of course also bear in mind that we have a very significant hedging and that stretches way into 2008.

And then finally if we just finish off, I think I've covered most of the guidance.

I think the only comment I'd like to add to this one is that, we have taken down our guidance on capital expenditures, to now DKK2.5 billion for this year, and the guidance for '08 and '09 is the investment to sales level in the ballpark of 8%.

We are, at the same time of course, also then increasing our expectations for free cash flow, upping that through DKK500 million to now DKK7.5 billion.

And I've touched already on our guidance for 2008.

So, with those comments, I'm just rounding off on a very, very solid strategic position, with the leadership position within diabetes here, within the hemophilia inhibitor segment, number two currently in growth hormone, being only some 3.5% market share way from taking the leadership from Pfizer.

And continuing to pursue that with the [liquid] growth hormone dedicated device, and with the global leadership position with injection devices, I think we're well positioned to continue growth well into the rest of this decade.

So, with those comments, I would ask my colleagues to join the podium, and [Hitchin], I guess you'll take the Q&A.

Maybe I can kick off with the first question for you Jesper.

You've commented on the currency impact for EBIT next year.

I just wonder if you could give us some clarification on the timing of the hedging gain that you've deferred, about DKK485 million I think, just the timing of when you expect to release those?

And can we expect that to broadly offset the currency impact on EBIT for '08?

The hedging impact will -- in terms of [quarter], for '08, will be predominantly in the first half.

I would expect them to be roughly equally distributed between first and second quarter, but predominantly affecting the first half of next year.

(inaudible) up to the floor.

Hi, it's Ben Yeoh from Dresdner.

I just wanted to know a little bit about the -- Hi, it's Ben Yeoh from Dresdner Kleinwort.

I just wanted to know a little bit about reimbursement, in some of these emerging markets, I guess, particularly China, India and Russia.

I just -- how much of a headwind is it at the moment, and is that something which could materially improve over the next two or three years, and provide quite a big boost to the business?

Or is that something which you think is going to be continually a difficult issue for you?

I guess I will answer for the first couple of markets, and I would like to ask Christian to comment on China, because one of this Chinese expert.

If you take Russia, it's full reimbursement if you want to make considered [handicaps] on non-privileged.

So the vast majority of the diabetics will be fully covered by the DLO program in the healthcare model that Putin and the Duma has put in place.

If you take the contrast to that, that would be India, which is completely non-reimbursed.

Everything's out of pocket.

So that too contrasts, and then if you take for the rest of IO, the one [asset] that [enters] for China, is mainly in the private market, our of (inaudible).

In India, before we move to China, any significant change in that pattern (inaudible).

Jesper Hoiland Russia is very hard to predict, because there is of course the election for the Duma in December.

There is the reelection of the new President, as Putin is announced to step down March 1, 2008.

So it's very hard to predict.

In Russia, it is such that there will be expensive product reimbursement.

That was by (inaudible) people, Novo Nordisk, NovoSeven and growth hormone, and for insulin, it's highly likely to be on the local/regional tender business, or tender markets, as is announced for the rest of the pharma products for Russia.

For the other markets, I still think you won't have to rely on [other profits], but one should also say that there are many wealthy people in the international operations as well, and they will be able to afford the costs that Novo Nordisk products was having.

Okay, for China, the situation is that -- it's quite complicated, but there's a national reimbursement system, where the central government specifies which products should be reimbursed.

And that is only opened up every few years, so that is a limiting factor.

So that's a significant upside for us.

In the meantime, for modern insulins, we are allowed to get -- each province is then allowed to have 15% of the drugs, they can choose whichever drugs they like, so they can choose the newer drugs.

So we have got modern insulins in usage in many of the 28 provinces already, but again, the limit -- usage of that is limited.

So there's a significant upside in the future for the trend to move towards modern insulins.

So the majority in China at the moment is still out of pocket?

Well, even if -- yes, the government for people who live in urban areas, they still pay 50% to 60% of the cost out of pocket.

And the government is rapidly increasing the number of people covered by basic healthcare insurance and they have stated that they wish to have all urban population covered by the year 2010.

So that's a significant driver of our business at the moment.

Okay, thank you.

A question at the front here.

Hello, it's Chris Spooner at [HealthCorp].

What's the difference in the margin on an incremental dollar of sales in the Western world versus the emerging markets?

It varies, of course, significantly between individual countries in the developing world.

If you take a country like India, you will probably have among the lowest prices for insulins in the world, whereas China very much resembles the prices you see in the Southern part of Europe.

So if I take a dollar of sales in China and compare that to a dollar of sales in Europe, it would be close to adding the same level of margin to our business, and that's the higher margin end of the business.

We don't do individual margins per country, but it's a very, very positive contribution.

Of course, in China, you should expect us to continue to invest more than we do in the European business, for the [obvious] growth regions -- growth opportunities we see there.

But a very solid contribution in terms of the operating margin we get from that region.

So, just to confirm this, the average margin is lower, but also at the margin, the marginal margin is lower?

Yes, because of the higher investment, but the price -- you can read a lot from the price, and as I said, the price of human insulin is similar to the mid to lower prices in Europe.

And you have, on the modern insulins in China, you have a 50% margin, where (inaudible) in Europe only have 30% margins.

So on the marginal business of selling modern insulins in China you will have a margin which is very, very close to the European margins.

And as I say in three years time, do you think there'll be a significant difference between emerging markets and the Western world?

I still think that emerging markets will be catching up, predominantly because of the significant element of human insulin will be there.

But in the most advanced markets like Turkey, like Russia, and like China, I think you'd be approaching Europe, but you'd still see us investing more in expanding sales forces in these markets, so we'd not fully be up to European levels.

And you can read pretty much out of our overall margins what our margins are in Europe.

That's a significant impact it has on the overall business.

And what happens to the tax rate as you get increasingly higher growth from emerging markets?

It's a good question, but it's actually a very, very marginal impact.

If you look at the part of the value chain which is actually related to the activity in the market, it's quite limited.

It's typically, approximately, 5% to 7% of the value-added which is related to the sales and distribution of the product.

The prime part of the value-added is actually done in the invention and the production, and that would then primarily for the diabetes products relate to the Danish taxation which is 25%.

And then the last bit of the value chain, which is selling the product from Denmark to China, then you probably have 5% of the value-added being taxed in China.

So far, the taxation levels we have been confronted with in China have actually not been higher than the Danish and I would anticipate also with a significant new investment we are anticipating undertaking in China, that I don't foresee China having an adverse impact on our overall tax rate.

I think where you are, where we are being challenged on the tax front, is the growth in the US business, where we're seeing an approximately 40% taxation of the sales and distribution income that relates to the US market.

And also for Japan we're seeing approximately 50% applicable tax rate for the part of the value chain that relates to Japan.

Thanks very much.

[Brian Bordeaux] from Deutsche Bank.

Firstly, can I offer my gratitude that New Zealand made your world map.

You even gave us a latitude boost, so very nice, thank you!

A couple of questions on the longer acting GLP-1 that you've currently got in Phase 1 development.

I know it's very early days yet, but I was just wondering if you could talk a little bit about development requirements and timetable for that?

It's a very -- it's obviously the same molecule as liraglutides, so if you could talk about what you need to do there, and when you might file?

And also, secondly, what you think the benefits of you technology, your extended-release technology might be over the [Elcumes] microsphere approach, or the addition of zinc, which it looks like, what [Epson] had done with his.

Thank you very much.

Right.

First of all, we've done rather extensive market research looking into what are customer preferences in the field of GLP-1 therapy.

And two important observations are a) that on the one hand, people think all other things are equal, i.e., you can have the same GLP-1 administered via the same device, people in two out of three cases prefer once a week therapy compared to once a day therapy.

When we then continue to tell these patients, but this is not the case, you have the situation in the case of (inaudible) the alchemists technology, when you're using your very thick needles, T23, which in half of the cases will give you a little bleeding at the site of the injection, and b), that this has to be done in a way where you first aspire from one vial, the diluent, injected into another vial, make a lengthy re-suspension process, only to inject it in a large volume with a thick needle, at the end of this process.

Then it swings over and two-thirds in our market forecast prefer the once-daily, in this case, the liraglutide, as compared to the (inaudible) alchemist technology.

And this has led us to believe, and this is the [fruits] you're seeing emerging as we speak, that one should not really achieve a long duration of action, by all kinds of protraction technologies, but rather by engineering analogs of the human hormone that have inherently a very long half life.

So what this is, is actually a once a week, it's not an liraglutide, it's a human GLP-1 analog that has been engineered for even stronger binding, reversible binding, to be (inaudible) carrier protein, ensuring in animal studies a true once weekly profile.

So it is a system that can be delivered in whatever dedicated simple to use device, with a G-32 needle in a disposable way, the injection will take five seconds once a week.

That being said, we're only in Phase 1, so now we have to prove everything I just told you in human clinical studies.

But it actually looks rather encouraging, as you can understand.

It's quite different from the (inaudible) principle.

Thank you.

And any kind of rough timelines on development for that?

Yes, I think, there's a few that have been around for many years will recall how we've had several time related setbacks and penalty rounds, as regards Levemir and liraglutide either due to incomplete dose range finding studies, due to reformulation issues, due to upscaling capacity, constraints, etc.

Now, in that regard, when it comes to the next generation modern insulins in NN1250 and NN5401, and the NN9535 GLP-1 once weekly analog, we have overcome those constraints, and this means that we're generating full dose range of those response curves very early on.

Actually already in Phase I.

We're getting a good feel for how they behave in patients at the stage of Phase 1, but in the old days, we were into late Phase 2 or early Phase 3 before we had the full feel for the ultimate clinical profile

This means that, a) we can get the claims rights already based on Phase 1 data, b) we don't have to reformulate because we know which [dose] we're going to use, and c) that because of the leading program we're running in product supply, we had the situation where our investments, so to speak, are done at a stage where they will come by no means, be on critical path towards approval of the product.

And in totality, these benefits that prevail in all the new pipeline projects will mean that we can have -- we believe best in class timelines from Phase 1 to launch.

And there you're speaking around six years.

Thank you very much, indeed.

Just a follow-up comment on that.

On the basis of what you know in [LAR] and the feedback from your patient survey, would you believe a 50% share (inaudible) franchise would be achievable for liraglutide if not higher than that?

Are you willing to commit to that at this point?

We never give specific prediction for sale.

But what I will say is that the profile I've shown you and which is highly consistent with what we just saw in the press release on (inaudible), tells us that we believe that we have the best in class product, and with the best in class product, you should also have the highest market share.

But of course, (inaudible), I think you should think that the best product, like it is with most insulins that I don't think the prime opportunity for us will lie in the conversion of Byetta patients onto our product.

I think the prime opportunity will be to address these 15 million patients also in the US with Type 2 diabetes who are inadequately controlled in their current therapy, go for converting them from tablets onto a once a day liraglutide.

I think that's where the huge opportunity is for us, and then hopefully, (technical difficulty), I think there is a lot of that will depend on what (inaudible) we're able to make officially in terms of weight.

If we can get some additional benefit in terms of positive effect on blood pressure, I think that could also be very useful.

I think if you look at the current growth in the Byetta sales, it is developing but it's not developing rapidly, we are seeing high single digit growth quarter-on-quarter.

I think there is an opportunity for us in trying to expand the overall GLP-1 market.

That should probably be our prime focus.

And then, what's here, we will have first, Byetta, is maybe not where we should have our prime focus, but our prime focus should be immediately expanding and taking a higher proportion of the patient, which are not well treated [on or off], and where we have to convince them to inject themselves once a day, lower their weight, approve their blood sugar control.

I think it's a good chance we have here.

And finally, you can say that the differences we're seeing albeit of an historical nature between liraglutide efficacy, and how much better that is, then in the case of Byetta.

It's pretty much reminiscent of the difference that you saw in last week's release, where [LER] was compared [head on] to (inaudible).

What are you planning in terms of Phase 4 studies for liraglutide in terms of what additional data would you like to have at the time of a launch or for marketing?

You can say, what do we have in the lead program?

Leads 1 to 5 enables us to target dietary patients, i.e., immunotherapy add on to single compounds such as metformin and (inaudible), add on to combination therapy failures, i.e., either metformin plus [TCD] on the metformin plus issue.

And what we're then doing in the first week of the Phase 3 studies is doing the relevant head-on comparisons, like we've done with Lantus showing superiority.

We're targeting a study which is pretty much similar, up against Byetta to show superiority on a [1C], against Byetta, while the convenience benefit of once a day dosing, and hopefully with less nausea, but that has to be seen in that particular study.

And this study should be available at the time of launch.

I was just thinking through to the launch of liraglutide, I was just wondering if you could talk through how much an opportunity you think it is for you the problems that were seeing in the [TCD] market and the falling market share on the (inaudible), and the potential there for myocardial ischemia, label warning?

And then the offset to that being the growth you're seeing in Jenuvia and perhaps Jenuvia taking some of that second and third line market but addressing the same pathway, the GLP-1 pathway.

So how do you see those two factors balancing each other?

I think when it comes to the [TCDs], like the lead 4's that we showed, there's no doubt that we have clinical superiority over and above [TCDs] both on efficacy and on the weight profile.

And this basically means that as I see it right now, Jenuvia is going to put pressure on the TCDs, from the oral side of things, and liraglutide will definitely, of course, tap into the overweight OAD market.

How much we can tap into it (inaudible) and become first-lie therapy, that will very much depend on how strong [week] data we have.

To be quite honest, our firm position is that we have a strong case for adding liraglutide at the point of metformin failure.

So the selling benefits or the [USPs] that we will have to reconcile against Jenuvia, they will of course, be at the expense of once daily injection, but that being said, that will be the weight loss, the twice as high efficacy rate and probably also we can at least argue, based on animal studies, a much stronger (inaudible) rescuing effect than seen with the (inaudible) performing inhibitors.

Simply due to the notion that we are dosing pharmacologically effects of five to seven higher than you can achieve with a sitagliptin Jenuvia, for instance.

So I think overall, the real issue about how wide are these circles?

What's the diameter of the circle I showed you, how's that going to be?

Depends pretty much, as Jesper alluded to on the claims we get in terms of efficacy rate and so on, but consider (technical difficulty) upstream among patients who really want the weight loss effect, and all the way down through the treatment cascade up to and including (technical difficulty) because when (technical difficulty) liraglutide failing maybe after several years of therapy, the natural thing to do is not substitute [lira]with Levemir, but actually to add Levemir to liraglutide so that the patient will end up on a regime of metformin, liraglutide and when need be, (inaudible) entry.

And then, commenting on the Phase 4 program, I think it's likely that you'd see as part of the Phase 4 program that you're going to see how it compares off directly against (technical difficulty), with metformin as background, I think you need to demonstrate that as well.

And do you see enough changing for patients failing in [DP4] still to move on so you're getting higher (inaudible)?

Jesper Hoiland No doubt.

In all studies, whether you've been failing on one [secretor] such as [Amerol] (inaudible), you still can take liraglutide in such (inaudible) patients and boost (inaudible) to improve performance more than 1% HbA1c on top of the issue effect, you will see exactly the same things.

You should then mind that what Jenuvia or (inaudible) the DPP4 forecast really do is they give you back some endogenous GLP-1 that's lost during the obesity process.

But it only brings you back to a level where the healthy person would be.

But what an obese person needs is not the insulin secretion of a healthy person, it's maybe two-fold or three-fold that.

And this is not really achievable with the DPP4 inhibitor.

This is why the DPP4 inhibitor class as such is to a very large extent marketed as safe products that are weight-neutral and give you some glucose reduction.

They are not real efficacy boosters.

Jenuvia's and (inaudible) of this world are giving HbA1c reductions in the ballpark of 0.6% to 0.7%, which is roughly around half of what you would expect with a GLP-1.

And last one from me on the (inaudible).

We'll just take a question in the middle.

Michael Leacock from ABN Amro.

Mads I wonder if you could just talk a little bit about the profile of the weight loss that we see with GLP-1 inhibitors in terms of the data we've had so far, as you know at 30 weeks it's 4 kg or something, seems to be the same whether you use [LAR] or potentially liraglutide.

Could you talk about how that weight loss appears over time, and also about the receptor blockade?

Once receptors actually are being treated with the compound, and how can giving more product, or once a week product that's going to be even stronger and more potent have any greater benefit on weight loss?

Yes, well, first of all, we see predominantly two things coming into play when you treat with a GLP-1 alchemist.

One is a specific effect at the level of the hypothalamus, where you simply see a specific appetite reduction that is not associated with taste aversion, but simple appetite reduction.

And the other one is the somewhat slowing effect that GLP-1s have on gastric emptying.

Now, in the case of Byetta, because Byetta is a short-acting agent, the appetite suppressant plays a relatively-speaking smaller role, and the [immotility] of the stomach, so to speak, plays a larger role.

And we're seeing this with a lot of studies, and this means that you can say liraglutide should achieve the same thing in the presence of lower degrees of nausea.

But probably, pretty much in the same ballpark in terms of absolute weight reduction.

Interestingly, the [LAR] Phase 2 study were either 1 mg per week or 2 mg per week of [LAR] (inaudible) were given really showed that in the low dose, which had the full efficacy on or at least (inaudible) efficacy on glucose control posed no weight loss, at least it was not significant.

And this really shows you that the dose-response curves, along with studies that we've done on liraglutide, for the glucose reduction and for the weight control, they are shifted so that the obesity dose response curve is [right-shifted], you need higher doses to get into the brain to target the GLP-1 receptor in the hypothalamus.

This is why the data we generated in the Phase 2 Proof of Concept Study that you'll hear more about later this quarter, basically is designed to expose higher doses of liraglutide in non-diabetic obese people with a BMI above 30.

In terms of the time-course action of this, i.e., if you have a linear weight loss over time, as some people would argue based on the (inaudible) extension of the AMIGO studies where you do see a 5 kg weight loss after two years, and only about a 1 kg to 2 kg weight loss after six months, suggesting there's a linear relationship, which would be good news because it contrasts with all other obesity drugs, where you have a weight loss of three to six months, followed by a maintenance phase.

And during this maintenance phase, compliance goes down very much, because people basically are not having -- taking the medicine, getting all the side effects, but not feeling a continuous improvement.

We hope that with the lead 3 data after one year of therapy, we can see a similar situation to what is claimed for Byetta.

But we haven't got the one year data, and we also don't have the obesity Phase 2 trial, so hopefully, at the full year release, I can at least enlighten you on some of these important issues.

I'm afraid time's upon us and we'll have to call it a day there, but I'd like to thank you all for your attendance.

Thank you.