諾和諾德 (NVO) 0 Q0 法說會逐字稿

Well, good afternoon everyone.

My name's Peter Verdult.

I'm a member of the Citigroup pharma research team.

It's our great pleasure to welcome the management of Novo Nordisk to this 1H '08 results investor lunch.

We have the CEO, Lars Rebien Sorensen, CFO, Jesper Brandgaard and the Chief Scientific Officer, Mads Krogsgaard Thomsen.

So, enough of me, and straight on to management.

Thanks very much.

Thank you very much and, ladies and gentlemen, also a welcome from me.

Thanks for joining us at lunchtime here.

And we have been looking forward to come over to London again.

It's always the signal that we're back working after vacation and usually half year is a good start for us, and certainly the first half of 2008 has been quite good for the Company.

In particular, anything about Liraglutide has pointed in the right direction in the first half of this year, and I'm sure it will be a main topic for discussion with yourselves later after the presentations.

I have to do -- alert you to the fact that we're doing some forward-looking statements and with the effort that that entails, please read these detailed slides or anything in our website for the risk factors associated with our business.

We'll be doing a relatively short presentation, I hope.

You know the numbers mostly so we're just going to recap those, but it'll deal with the highlight and the strategy.

I'm going to do a sales update and Mads Krogsgaard will do an R&D update, and then Jesper will close off with the financials.

The sales highlights, as you've seen them; a 30% increase in Modern Insulins.

This is the most significant growing franchise, it's also the franchise of which the Company's expecting significant growth opportunities for the next five to 10 years, in fact.

NovoSeven increased 14%, slightly impacted by once-off tender buying in some of the overseas markets in the second quarter.

So it's not an indication that we would see the similar growth rates for the full year.

Norditropin growth, 15%; a relatively strong growth but also here, again, impacted by some [sterilization] and tender buying in overseas markets.

Sales in North America 19%.

Sales in International Operations 23%.

And so, overall, very robust growth of key products and key regions for the Company.

Research and development.

Let's also talk about the approval of a combination tablet for treatment of Type 2 diabetes called PrandiMet.

Liraglutide was in a record-taking time filed in all try-out markets, the US Europe and Japan, within 53 days.

This is a first for our Company and, in fact, I think it's a world record for filing in the pharmaceutical industry in these three markets.

We've also shown that Liraglutide in a head-to-head study with Exenatide has proven better glycemic control.

And the financials, are as you've seen them, with 7% reported but underlying 13%, reflecting a 6% negative drag from the currencies.

And that -- those 6% is actually doubled when we look at the operating profit growth.

The operating margin improved 1.3 percentage points but, due to the currencies in reported terms, that was only 10 basis points.

As I mentioned, operating profit growth 11% reported, but actually underlying 25%.

And our expectations for the full year have been edged slightly upwards.

All in all, a performance, both in terms of operations, meaning sales, in manufacturing but also in development, in research and development as well as our financial areas, which we think are quite satisfactory.

No changes in the strategy.

We may come back to perhaps in the Q&A to our current view on inflammation which is the narrow focus that we have in biopharmaceuticals.

So the main priorities for the Company is diabetes, obviously expansion into obesity and pre-diabetes with proteins, further expansion from NovoSeven into general haemophilia and then inflammation outside of that.

We hold a strong position, 52% of the world market, for insulins, with number one position in North America, in Europe, in International Operations and in Japan.

We do think there are still significant growth opportunities in terms of market shares for our Company, in particular in the United States.

The underlying business case for Novo Nordisk largely has been the significant growing demand for insulin as a result of an increasing incidence and population of people in the world who have diabetes.

These numbers are the same numbers we have presented to you in the past.

Volume growth.

We have been predicted long term 5% volume growth.

You see here in the quarters represented here it's been 6.3%.

We have predicted 5% additional growth coming from product mix and introduction of new products and devices.

Here, you see in the period represented that it's being growing 11%.

So in the period here, five years back, our business case has been intact and, in fact, we view that business case to be intact also going forward.

The reason for this is, of course, an increasing and alarming trend in obesity.

Here, it's represented by United States.

And before you amuse yourself too much about America, I can tell you that there is a similar trend occurring in Europe, with notably a growing incidence of obesity in Finland, in the UK, in Germany, Italy and Spain, and my own country as well, for that matter.

It's just a matter of timing before we all catch up with America.

Here, you see that 25% of the American adult population in 2007 has a BMI of more than 30, i.e., being obese.

That increases a lot of health risks.

In particular, it's a significant [expense] at the risk of developing diabetes, cardio vascular disease, cancer and other risk factors.

If we look at the segments of the business, we've had particular interest at Novo Nordisk in the diabetes space.

We can see here that the OAD market, which we had anticipated, has started to contract based on patent expiration of certain product and you could say diet effect issues of other products, whereas, the insulin space is expanding significantly here.

The numbers we have used here is 9%.

And, in addition to that, a new area is emerging in between the OAD segment and the insulin segment, GLP-1, of which we of course hope that Lira will be an entry from Novo Nordisk within the next 12 months.

Growing strongly at 18%, but we also have to admit that the current product on the market, Exenatide, has been stagnating and it's upon Novo Nordisk to expand this segment significantly.

If we look at the sales update, no major changes from the picture that you have seen quarter after quarter; the main growth coming from Modern Insulins.

You see on the right side of the chart 71% of the growth are coming from Modern Insulins and, in fact, we've just done a review with our Board of Directors looking at the 10-year projection for the Company.

And, without going into too many details, I can say that our expectations are that, roundly speaking, over the next 10 years 70% of the growth of revenue for the Company will still come from Modern Insulins; 70%.

So this is a picture which you should expect to see for our Company going forward.

We see here -- on the chart here that NovoSeven has represented 16% of the growth.

That is slightly more than what we had anticipated and it is due to some once-off effect in second quarter.

We had to anticipate that NovoSeven, a little bit longer term, will see mid signal-digit growth rates going forward and, hence, will not be able to represent the same relative share of our business going forward, unless we develop new versions of NovoSeven or even entering more broadly into haemophilia.

73% of our business is Diabetes Care and the reported growth was 7%.

Here, you see our entries into Modern Insulins.

We have three products now.

You can also see that the share trends are steady and, notably the Levemir share, which is the green -- the smaller (inaudible) the latest introduced product is growing very steadily, gaining share throughout the world.

And relatively shortly we will have three products in Diabetes Modern Insulins space, which are all blockbusters coming next year.

The underlying situation is such that Modern Insulin is grabbing a larger and larger share of the growing Insulin market.

Now 55% has been converted and our estimations are that around 5% to 7% of the market each year will be converted to Modern Insulins.

You see there is the share for the individual competitors in the field where we were later to introduce a Modern Insulin than Eli Lilly.

Eli Lilly has been consistently losing share over the period since 2003, and we have gained number one position.

And the Sanofi-Aventis has gained number two position.

And Eli Lilly seems to be continuing to lose share, even in this Modern Insulin marketplace.

NovoSeven; you can see here why we are projecting a relatively modest growth going forward of NovoSeven.

However, that we do occasionally see very big quarters, in fact, big months.

And so the strong growth we had in the first six months of this year is likely to be preceded by a relatively modest growth in the second half, also because we had a couple of slow months in the second half of 2007.

So, all in all, we are predicting high single-digit growth for NovoSeven in 2008, and lower sales growth than that in 2009.

We are not seeing significant impact from the softening of our litigation of usage of NovoSeven within the trauma area, so we wouldn't expect to see a continuation of the use, but the largest use is of course in inhibitor treatment for haemophiliacs.

Norditropin; you can see there's a little bit more steady growth of our Growth Hormone business and, here, we are working on new indications.

And we also have an interesting pipeline here with a low-acting Growth Hormone which could significantly transform our business in the long run.

Sales by region; the picture that you are familiar with.

Strongest part of the growth, 46% of the growth in sales comes from North America, 31% coming from International Operations, 20% coming from Europe and 2% from Japan.

And so, long term, there will be a transformation of United States and North America overtaking Europe within the foreseeable future, becoming the most meaningful region for the Company.

But, still, we have to notice the fact that the profitability level of our business in Europe is significant.

Europe is still delivering a significant part of our sales growth and so, even though as challenging as the European market is for us, it is very, very important that we maintain or even expand our position in Europe as well.

But the main growth drivers from a regional perspective in the future as well is going to be North America and International Operations.

Levemir, our recent entering into the Modern Insulin market, we believe has been successful.

We have been able to solidify the profile of Levemir with increasing clinical evidence that Levemir is as long, I think, as Lantus, can be used once daily with very good control and with a weight neutral effect.

And, therefore, we also see that Levemir is increasingly being successful in us gaining share.

And you can see on the left part of the slide our share of Modern Insulins in Europe where we are dominating the market, where Eli Lilly is still dropping and where Sanofi-Aventis has stabilized in their market share of this growing segment.

Also the share that Levemir has been able to carve out of Modern Insulin's income competition with Lantus has been growing, as you can see on this chart.

If we look at the picture, the same picture in the US, you see that Novo Nordisk has been steadily building share.

We have more than 40% of the US Insulin market.

Lilly is being surpassed as we speak by Sanofi-Aventis and still declining.

And you also see here that Levemir is increasingly taking share from Lantus in the US and we're now passing the 10% share mark as we speak.

In International Operations, which is another of the growth markets for the Company going forward, you can see this is not in volume terms, but it is in sales terms, a very strong growth, plus 20% cumulative growth in the last five years.

And if we look at the market shares we can see that Novo Nordisk has a very strong strategic position to take advantage of the growing number of patients in this region.

And with the efforts and increasing economies in this region, the ability to afford treatment of diabetes, we should stand in a good position to also be able to grow our business in that area.

We also note here that Sanofi is somewhat successful based on the introduction of Lantus, even in the International Operation market, which also just signals the fact that these markets are more complicated.

They are both private markets where the most advanced product is being demanded and there are public markets, lower end, low price, high volume markets, where even local manufacturers exist.

So quite complex market where the full portfolio of products are being sold.

And, with that, Mads.

Thank you, Lars.

If I didn't know previously how to pronounce the drug candidate, Liraglutide, at least I do now.

I think there are a lot of questions in that regard and I'll also focus quite a bit of my few minutes on Liraglutide.

Before I do so, however, just one remark on PrandiMet, that's the fixed dose combination of repaglinide and metformin, which we have recently received FDA approval for and will be launched, we hope, within this year, with actually a rather interesting label.

If you look into the package insert you will see that the clinical data showing almost synergy between these two agents is pretty compelling.

Now Liraglutide is kind of, of course, on everybody's lips and minds and thoughts.

And basically it is the class that we believe we set a new record in the industry with a 53-day gap between the filing and the first and the last of the try-out markets.

We have followed up with submissions in important territories such as Australia, Canada, Turkey and elsewhere.

China, we are recruiting at least ahead of our own expectations in terms of the Phase III which is currently ongoing.

It seems very much liked out there in the clinical trial.

So we believe that we are on track with Liraglutide.

Now, interestingly, there's a lot of focus, of course, on the cardiovascular discussions at the committee hearing on July 1 and 2 of this year.

And here it suffices to say that we are in a very good dialogue with both the EMEA here in London and with the FNDA in the US.

And they have basically, as part of that dialogue, informed us that the full and substantive package that has been submitted for approval is adequate for taking us through the process.

And in the US this means towards the PDUFA action date after a standard review period of 10 months, which is going to be on March 23.

Henceforth, this implies that it's our firm belief that if and when we were to get a commitment vis-a-vis assessment of the cardiovascular outcomes in human beings, this is something that will be entertained as part of our post-approval commitment.

Obviously, the FDA, until the very day of the verdict, has the right to do what they want, but this is the belief based on the dialogue that is ongoing and the information we are receiving.

In Europe you don't have such a firm date to base your approval on, but we are expecting a one-year approval time by the European Commission from submission which was on May 23.

Now, if we then shift gear into staying with Liraglutide, just discussing obesity for 30 seconds.

We have the situation where we've got, we believe, in June of this year a very nice data, promising, encouraging data that showed that the weight loss that was associated with Liraglutide in the half-year study has now been able to stack up after one year, and it has convinced us that are sufficient to move into Phase II for obesity, looking both at weight management, potential of weight regain and also with management in Type 2 Diabetes, the two former being non-diabetic subjects, is something that we will kick off before the end of this year.

There is a need out there in the marketplace for a safe and efficacious obesity product, we believe.

If we then change to insulins, the NN1250 and 5401, our next-generation Modern Insulins in the segments called basal and premixed, or you can say, bibasic insulins.

And, there, I'm happy to say that recruitment has been very satisfactory, both in Type 1 diabetes and in Type 2 diabetes for both of these product candidates, implying that we will be around the end of this year able to provide you with proof of concept data from several of these Phase II studies.

Finally, we are also happy that we have been able to progress a patent-protected, once-weekly strongly albumen-bound, strongly DPP-4-resistant analogue of human TOP1 known as NN9535, which is currently undergoing approval concept trials with a dose response classical design in Phase II, and we'll report during the first half of next year.

Just one word on the fixed study which completed, as you will recall, just up to the official kick off the ADA meeting in San Francisco.

We started basically a head on in close to 500 patients with Type 2 diabetes with twice-daily Exenatide against once-daily Liraglutide patients per million, with an A1C slightly above eight at base line.

And we saw a decrement of more than 1.1% and less than 0.8% for Lira once daily and Exenatide twice daily respectively, meaning that we've had a highly significant and clinically meaningful difference in favor of Liraglutide.

We also saw less hypoglycemic events in the group that constitute [sublimide] urea-treated patients and we saw a trend towards less weight gain, in particular among those who were treated with monotherapy on metformin.

In terms of side effects, Liraglutide and Exenatide started out with more or less similar reporting of nausea, but interesting to note was that, as time went by after a few months, we saw a return as we had done across all these lead trials we have been entertaining towards the regulatory submission for diabetes, a drop towards baseline levels -- around baseline levels of nausea for Liraglutide, but not for nausea for Exenatide, which stayed at a weekly reported level of around 10%.

Now, moving from diabetes within the phases, unfortunately, you will recognize here that NovoSeven for trauma has been taken out of the pipeline.

The futility analysis showed that there was simply too little mortality in the study.

We were down to the 10% level and had actually hoped for 20% plus, giving us a signal from which we could reduce mortality and this was to be too low in that regard.

And we basically, according to the analysis from the Data Monitoring Committee, closed the trial and will report the result towards the end of this year.

Hoping, but not knowing what they are, we hope they can still repeat what we've seen in Phase II mainly in (inaudible) and an adequate safety profile, but the data will have to speak their own language as we receive them.

Now the NN1731 is our successor to NovoSeven.

It's, we believe, a faster-acting, potentially more convenient with less need for frequent injections because of strong clot formation and these are the assessments that will underlie the proof of concept study that we aim to report in the second half of next year.

Lars mentioned that haemophilia inhibitor market is becoming kind of stagnant and we're only having modest single-digit growth, at least into the future.

And here we hope that, at the end of the day, albeit we are still only in late Phase I, we will with our long-acting glyco (inaudible) intravenous version which can be administered either every, or every other, day be able to open up a new market, mainly that of prevention of bleeding in haemophilia patients with inhibitors; something that is well known over the last few years within sector eight and sector nine to have contributed most significantly to the growth of the market for sector eight and nine products.

I will then shift to the last slide which is really on other biopharmaceuticals, where we now have issued a positive CHMP opinion on the [Idiana] product, also known as Activelle Low Dose.

And we expect, as usual, a European Commission approval within a 60-day to 90-day frame after the issuance of the opinion.

Lars mentioned, which I think is potentially important, the notion that we have been able to enter a proprietary pegylated -- mono-specific pegylated version of Human Growth Hormone into Phase II trials, and currently we are conducting these in adult patients with Growth Hormone deficiency.

Primarily, I have to say focusing on what you always do in these trials, the surrogate marker known as ITF1, which we did see to go up in Phase I as expected but, most importantly, address the issues that have surrounded everybody's endeavor to move into long-acting Growth Hormone (inaudible).

There have been issues surrounding local tolerability and immunogenicity for several of those products all the way back to Genentech where they launched their neutral [pendipo] preparation.

So obviously we are also focusing very heavily on safety parameters in the study.

And then, finally, we are also doing a major Phase III mortality endpoint study on the Growth Hormone -- standard Growth Hormone, Norditropin, in patients on chronic dialysis.

And, with that, Jesper, over to you.

Thank you, Mads.

Going to the financial results, as Lars alluded to, we had 7% reported sales growth.

We had almost 7% negative currency impact, so the local currency was around 13%.

Gross profit growing only 0.1 percentage points, but a significant currency effect.

I'll just get back to that in one slide.

If we look at the sales and distributions costs, a decline on last year, but note that we in the first half of last year had DKK200m in expenses in relation to an anti-dumping issue in Brazil, and that has impacted the cost structure.

The research and development costs are having an impact from the discontinuation of the pulmonary diabetes project.

But do note, if you look at the first half of this year and the first half of last year, we've had pulmonary costs, including these close-down costs of roughly the same level in both of the years.

So it will only be in the second half of this year where we begin to benefit from not having to entertain costs within the area of pulmonary diabetes projects.

In terms of admin expenses, we are continuing to see that growth at a lower level of sales and in our admin expenses gradually going down, and you should also expect that going forward.

In terms of operating profit, we saw a growth of 11% and we estimate that the currency impact is roughly double that of what we saw in terms of sales of around 7%, to almost 14% negative currency impact on our operating profit, because, primarily, the lower level of the US dollar, and we can also blame a bit on the British and the British pound.

Net financials positively impacted this year by hedging gains on US dollar and British pound but -- and remember last year we had a significant gain, one-time non-recurring, from the divestment of our holding in the Danish diagnostic -- cancer diagnostic firm, Dako, which we sold to Private Equity.

And I think it's fair to state with the benefit of hindsight that that timing has turned out to be fortunate for Novo Nordisk with the price that we managed to get.

In terms of tax, the tax rate this year is a steady state at 24% and that's also the tax rate we anticipate for the full year.

And that also serves well as a guidance into the future years.

The tax rate in 2007 was significantly impacted by the non-recurring and the non-taxable status of the Dako income, and also a change in the Danish tax -- corporate tax rate which had a one-time effect.

And, as a consequence of the Dako income, we have a decline in net profit.

If you adjust for that, take that out, you'd be looking at 15% growth in our net profit.

In terms of gross margin, we have continuously over the last three years developed a steady improvement in our gross margins and we anticipate that that improvement in gross margin will continue.

We have given a guidance for 2008 which is an improvement of at least 100 basis points.

We've delivered 130 basis points in local currencies after six months, and we still feel confident that we'll deliver at least 100 basis points local currency for the full year.

When we calculate it into actual rates after the first half it is, of course, less.

We've had 120 basis points negative currency impact.

You should anticipate a significant negative currency impact on the gross margin in the third quarter, whereas, from Q4 onwards it will be more positive, as illustrated from the development in currencies.

And you can see still a relative high or challenging comparative for Novo Nordisk in Q3 of 2007 and then, from Q4 onwards, it looks slightly more positive.

And do also note that the basis for our guidance which we provided yesterday was based on the average rate of the US dollar to the kroner on Monday, which was a rate of 4.79, which is some, oh, 10 lower than where we have today with the recent development.

So we based it on the spot rate as of Monday.

The current sensitivity is unchanged.

You have the numbers stated there.

The hedging.

We have slightly taken our US dollar hedging down from previously 18 months now down to 16 months.

Apart from that, the financial hedging is roughly unchanged.

Look at the outlook.

Sales growth is also for the full year expected to be around 6% negative.

That is unchanged from the guidance we gave after Q1.

We've slightly upped the guidance on sales from previously 10% to 13%, now 11% to 13%, primarily reflecting a slightly more positive development in International Operations for Novo Nordisk.

If we look at the operating profit growth, we are seeing an underlying growth of around 25%.

Previously, we said close to zero coming from below 25%, and we have increased our reported guidance from slightly above 20% to now the range 22% to 25%.

And that's done partly because we have lowered our expectations from foreclosure costs for the pulmonary project from 500 to 400, and partly because of the higher sales that we've taken linked to International Operations, as I've just referred to.

Net financial income increased to DKK800m, increased by DKK200m, and then an effective tax rate still at the 24% level.

A slight reduction in our expectation for capital expenditure is now expected to be in the ball park DKK1.7b to DKK1.8b, and also linked to that the lower investment level a better free cash flow.

And the better free cash flow enabled us to increase our share repurchase program.

And, as you can see from this slide, we have expanded the repurchase program with DKK500m in 2008 and 2009, and that is linked to an expectation of the lower investment level to sales.

Previously, we guided 6% to 7%.

Now we're guiding 6% CapEx to sales, all broadly in line with the depreciation level, also having a long-term positive impact on our cash conversion ability.

So we expect to buy back DKK4.7b of shares and we had, when we release this result, bought back only DKK2b this year, so we have to do DKK2.7b in the remaining part of 2008.

So that ends and concludes our presentation.

We believe we have again shown that we have a unique strategic position, being number one on the global Insulin market and also being number one in the global Modern Insulin market where the key growth opportunities are and, as Lars alluded to, we have a unique opportunity now to beginning conversion of the developing markets turning into the Modern Insulin.

And we are seeing a market like China now converting at a rate of around 4% year on year and that whole new conversion process ongoing.

In terms of the haemophilia segment with NovoSeven, we continue to provide solid growth.

Probably the first half has been slightly better than we anticipated and we still hold the number one position in the inhibitor segment.

We're number two in the global Growth Hormone segment and we're number one in terms of Injection Devices.

I don't think I'll repeat the growth drivers, but we'll just basically move to the Q&A session.

For this, the final comment I'll just make before we move to the Q&A session would be that we will, in the next couple of days, issue invitations for our Capital Markets Day in Denmark on December 26, where we look forward to expand on our progress in global sales, on our progress in production economy and show you one of our production sites in Denmark.

And we will also discuss with you our development strategies within the area -- research and development strategies within the area of diabetes, haemophilia and inflammation.

So with those comments, Lars, would you moderate, or would you want me to moderate?

I'll moderate, okay.

Yes.

You're doing a good job.

Okay.

Then I'll pass all the questions onto them; that's great!

So, any questions?

Yes, hi, there.

It's Pete Verdult here, from Citi.

Just two questions; one for Mads first.

Could you supply us an update on when you expect the FDA to publish new treatment guidelines for Type 2 Diabetes?

I know the ADA are speculating it could be within the year.

I just wanted to know is there an update to that?

Secondly, just on the -- stepping away from the science of Liraglutide, assuming you get this approved, I think there's going to be a debate about just how big the commercial opportunity is for GLP-1.

I was wondering if you could address that comment.

And also is there a GLP-1 DPP-4 debate which could grow if, accidentally, [Taylor] get their DPP-4s onto the market?

Which one's going to be used as a add-on of choice to metformin failures given you have injectable weight loss versus ease of use with the Novo formulation and essentially combination formulations?

Thanks.

Okay.

Regarding the FDA guidance, or new guidelines for diabetes drug development, Peter, I think we all know that the FDA is well known not to have specific deadlines for when they actually finalize and complete and formalize the guidelines.

I think it doesn't make that big a difference when they officially adopt the guidelines because the fact of the matter is that the whole industry, including Novo Nordisk, we have had a period of 60 days to comment on it and send into the agencies.

We've not heard from them when they expect to make them formal and, hence, more, let's say, from a rigid perspective applying to all new drugs but, in reality, they do.

When you see the companies that have recently (inaudible) we -- after the issuance of the draft guidance, they are complying with the exposure rates of DKK300 to DKK500 for 18 months, DKK1,300 to DKK1,500 for 12 months, etc., etc.

So, for me, it's more interesting to enter into a dialogue with the agencies, which we will do rather soon, regarding where are the intricacies in the guidelines which are difficult to understand how to interpret, for instance, when we talk different kinds of insulin, where there are specific sections.

So those are the kind of things that we are discussing, more than whether they are formalized or not, because they, by default, already apply to all of us.

I think, on the next one, maybe I'm not the one to talk about the whole market size.

Potentially Lars and Jesper can do that.

But I'll just give my perspective on the DPP-4 versus the GLP-1 agonist, let's say, unique selling points.

And there's no doubt that Januvia is doing so well as it is and, simply, due to the sheer notion that it is a very convenient way of treating; a tablet a day.

You don't get hypoglycemia, you don't get weight gain and you get some, but not a lot, of the glucose control.

Obviously, I think if you're a patient who's coming in, failing slightly on metformin and may only have an A1C of 7.4, but you want to go below 7.

And if you're not truly morbidly obese or something, I think such a patient will candidate for Geluvia.

But many patients who are coming in and have been treated on metformin for seven years, should only have been so for, maybe, four years, they have an A1C of 8.9 or 9.2.

The doctor will know that this patient is never, ever, in his office, going to be treated below 7 with Januvia as the standalone agent.

So I think you will have a mild hypoglycemic segment and a severe hypoglycemic segment of metformin failures.

And the physicians that are into diabetes will understand the differences.

And, on top of that, it's about motivation.

If the patient is motivated to lose a lot of weight, he or she has the likelihood of accepting a daily injection.

That's important to him or her, because Liraglutide will do that, in contrast to Januvia.

On the other hand, you have needle-phobics who will only take insulins and Lira as a very last resort.

And, for such patients, Liraglutide might only be used instead of the basal insulin, maybe five, seven, eight years later than what we're talking about now.

And by saying that, Mads, you're also highlighting the difficulties of estimating the total potential of this class.

We can see that the growth currently is very modest; it's not stagnating based on Exenatide.

We believe that that should not necessarily be taken as a signal that the market for GLP-1 cannot be quite large.

We think there are deficiencies on the part of Exenatide.

Patients are probably staying on the drug too shortly and get too little efficacy out of the drug, compared to what we may be able to offer with GLP-1.

So we do believe that there is a significant potential for GLP-1.

But as I also mentioned, and you may have picked this up in my introduction, if we look at a 10-year projection for the Company and look at the sales growth, turnover growth for the Company, 70% of our growth is expected to come from Modern Insulins.

This is not to say that Liraglutide will not be a tremendous success, but for the Company it's not the only growth driver that we are foreseeing in the future.

Obviously, the extent to which we can demonstrate that Liraglutide is capable of lowering, sustainably, weight for individuals that have other risk factors and a BMI of more than 27, or a BMI of over 30, and have failed on the normal dietary consultation and management, then that, of course, expands the total potential for the drug.

We know that it -- from our limited trials, that it has an ability to correct the metabolic -- the beginning of a metabolic syndrome as indicated with pre-diabetes.

And, therefore, it's obvious that, if you just take the number of patients -- potential patients in these different categories, they are quite significant.

Now, what is going to be quite important is the pricing.

When we compare the price -- the only price benchmark we have that we can discuss publicly is, obviously, the Byetta price.

And, since we are going to be offering a product which we believe is significantly superior to Byetta's, there's no reason why we should price it lower than Byetta, I would suspect.

But if we look at the price point of Byetta, then that is a relatively high-priced therapy compared to, say, for instance, insulin therapy.

So a relatively high-priced, new, innovative product that can expand in the Type 2 space for Novo Nordisk in areas where we are currently adding very little business may even be able to expand it upstream to treat weight management in severe obese individuals with risk factors and, perhaps pre-diabetes, should obviously give us tremendous potential.

And we are intent on pursuing that opportunity, both from the perspective of clinical trials, as well as from the perspective of ensuring that we have the necessary manning in sales and marketing to go after both this opportunity and, at the same time, extract the total potential out of the Modern Insulin segment that I mentioned before.

Hi, it's Sachin Jain from Merrill.

A question for each of you, if possible.

Firstly, for Lars.

If you could just elaborate, to the extent you're willing to, on the 70% growth that you see from the Modern Insulins in terms of emerging market contribution, how important the follow-ons are and just a wrap-up on your thoughts on biosimilars on that timeframe?

And the second question, Mads, just on Lira.

We had a brief discussion on the heart rate increase at ADA.

I just wondered if you had any updated thoughts since then, on whether that's molecule-specific or class.

And then the final question, for Jesper.

You were asked yesterday on the call about the '09 sales force.

I appreciate you're not wanting to give numbers, but just any idea on the thought process on addition to Levemir versus the whole new sales force?

Thanks a lot.

Thank you.

If I just try to, in brief terms, comment on the first question.

Obviously, such a model where you make projections 10 years into the future is fraught with a lot of assumptions.

Therefore, when the assumption about new drugs entering into the setting, they're fraught with assumptions on patent exploration and the ability of the biosimilar entry, etc., etc., etc, etc.

So it can easily get quite complicated, and you can choose to believe certain of the assumptions or not.

But when I say that approximately 70% of the expected growth in our sales is coming from Modern Insulin, we have included some effects, towards the latter part of the period, of the next generation of Modern Insulins, of which we will see Phase II clinical data towards the end of this year.

But if I should give a -- just a rough estimate, out of the 70%, it's less than 20% of those 70% that's coming from the next generation.

So the bread and the butter is coming from the three products that we already have on the market today.

When we look at the biosimilar competition, we believe that the biosimilar competition is not necessarily going to come, at least in the try-out market, where the major part of the value today and in the foreseeable future, will be -- is going to come from biosimilar human insulin.

The potential long-term biosimilar threat is going to come from biosimilar Modern Insulins, as we know them today.

That's also why it's important for us to reinvent the Insulin business yet another time.

However, having said that, there are complicating factors for biosimilar competitors.

The scale of the market -- the biggest market at the moment is, obviously, the United States.

At the time, we are talking about in the middle of the next decade, also [concessional] devices in the US will be significantly larger than it is today.

So we have to have a relatively large capacity to be able to entertain an introduction into the US market.

And, so, I think it will still favor, already, in (inaudible) players who are in the insulin business, if we end up seeing more of a [genericization] of the Insulin business as we know it today.

And, hence, it's been my projection that in the future we will continue to see the three main players being dominating the insulin business, even 10, 15 years from now.

It will be Lilly, it will be Sanofi-Aventis, it will be ourselves, with a broad portfolio of products, branded generic products, if you wish, like what we see today with the branded human insulins in distinct devices and different presentations.

But also patent-protected, as we see them today, with Modern Insulins.

And perhaps, hopefully, in the future, with our next-generation patent-protected.

And then that portfolio of products will be introduced at different price points in different markets.

And this will enable these three -- us three players to leverage our manufacturing platform and our presence in the market and still extract value from, even, a market which is going generic in the future.

Not that I'm saying that it will because, hopefully, our formidable science will deliver some very good results towards the end of the year in the next-generations of insulins.

Thank you, Lars.

And, with that, I had better come up with a clever answer to the question here, which is a different one on GLP-1.

And if I can come with a text-book remark, when you look at GLP-1s, whether things are drug-specific or class-related, let me make two comments.

Everything that has to do with pharmacology and exaggerated pharmacology, which is what we call toxicology is, typically, if you can prove that the different agents truly belong to the same class and bind to the same receptors and -- in science and whatnot, a class phenomenon.

Whereas, when we talk immunology, i.e., the ability of a protein that has the size to trigger the immune system to do something in terms of antibodies and whatnot, that is compound-specific.

So pharmacology is to be the class-specific, immunology is compound-specific.

And we have actually tested on all the -- in the academic universe existing receptors' enzymes and ion channels and whatnot, all the existing GLP-1s that are relevant to test, whether they are from humans or monsters, such as the gila monster, and they behaved identically.

And when I say that, i.e., they work on the GLP-1 receptor and not much else.

These are highly selective agents, whether it's Exenatide, whether it's Liraglutide, whether it's [later] GLP-1 or others.

So the trial version is that a pharmacological action, such as glucose-lowering, is going to be class-related for all of them.

A increase in heart-rate, which we have seen in the case of Liraglutide which (inaudible) in minutes which, in its own right does no harm because we have seen only beneficial aspects on the cardiovascular system.

We see a reduction in blood pressure, we see a beneficial lipid profile on those parameters which do change.

We see a weight loss with the drug.

All of these things, you have to imagine, are simply class phenomena including, by the way, this minute heart-rate increase, so -- because they all do the same things to the same receptor.

How much they do it is a question of exposure, whether you have exposed maybe up to one receptor 24/7, other one for 14 hours and what your measuring point is.

Whether you have exposure when you measure, or whether you don't.

So I think the real difference here is more related to immunology and, i.e., whether you're using a human or a non-human source out there or --.

Jesper?

And then on the sales force in the US.

It's clear that, and we've previously stated that, it is probable that we would have to look at the [DP] reach in the US when we have to launch a product like Liraglutide, with the potential of moving already into Type 2 treatments.

We would need to have such an expansion ready at the time of launch.

And, as Mads was alluding to, our current expectation is that we will run along the lines of a duplicate 10 months approval process and then having the launch occurring shortly thereafter.

And, hence, that would require us to bring people on board probably around the turn of the year and have them trained.

We have also decided that we will be less communicative in terms of the size of that sales force expansion for competitive reasons.

I think it is likely that we will take the final decision and initiate hiring of employees in, say, two or three months' time.

At that point in time, we would also anticipate that we had a higher degree of transparency in the approval process with the FDA which would be advantageous for the initiation of such expansion of the cost structure.

Thank you.

It's Ben Yeoh at Dresdner Kleinwort.

I have two questions, if I may.

I was intrigued about your comments on the 10-year plan, just coming back to that.

I was just wondering whether you could give any further details on that.

I'd be particularly interested if there are any disagreements in the Board as to where Novo might be in 10 years' time.

Obviously, we don't always agree in everything.

And also, particularly, where you thought the strongest trends would be.

And if there's anything you'd like us to know which came out of that 10-year planning meeting.

And then, secondly, on Lira, just -- I was wondering on the obesity trials.

I know they're going to start in the second half of the year, but I was wondering if you had any details on the possible design of those trials.

I'm particularly interested in what type of population you might be going into, with a possible look into what kind of label that you might be going for further down the line?

Thank you very much.

If I heard correctly, in connection with the first question was whether there was any disagreement on the forecast for Liraglutide on the part of the three of us or --?

No, it was just more in terms of your 10-year plan.

You were saying Modern Insulins are going to be 70%.

You're going to see strong trends in places like China, emerging markets.

And [US].

And you're going to have some sort of biosimilars coming in.

But then you said there were a lot of assumptions and things, obviously, in that.

I was just wondering whether there was any strong minority views or disagreements in the Board as to what -- whether there was something that could go wrong in the next 10 years.

And whether there were any feelings of particular passion about where Novo might be in 10 years time?

Just in the overall strategy, not -- nothing really to do with Lira.

Okay.

Well, no.

I don't really believe that there was any major disagreement with our assumptions relating to potential, for instance, biosimilar competition, from the Modern Insulin similars that would come into the marketplace and our assumptions on pricing on that.

There could, of course, always be a discussion on the provability and the clinical benefit that we may be able to derive from the next generation of Modern Insulins which I spoke to, that -- where we will see the clinical data at the end of the year.

Since we haven't seen the profile yet, that's all -- obviously, always very uncertain.

But as I also mentioned, the largest part of the growth in the prognosis is still coming from the products that we have on the market today.

So, no, I think there was not disagreement.

This looks like a solid opportunity for the Company.

Thank you.

Obesity?

Well, first of all, the guidelines that are most clear, and these are real guidelines that are only less than two years old, I guess.

Obviously, an obesity drug or weight-management drugs and their provability relate to having to demonstrate either a more-than 5% from baseline improvement in body weight after a one-year period of your drug, as compared to the placebo group, and it has to be specifically significant.

Or, you have to prove that more than 35% of your patients use than more than 5%, has to be about twice as many as in the placebo group, and has to be specifically significant.

So, with those two kind of guidance, let's say, elements in terms of efficacy we have designed a trial and powered it according to the guidelines which mandate at least 3,000 subjects on your drug, and at least 1,500 on placebo.

And we are actually above that target.

So we are talking sizeable studies, totaling more than 4,500 subjects, of whom two-thirds are on Liraglutide.

We are looking at three things.

We are looking at weight management in, as Lars alluded to, people who are clinically obese, BMI above 30, or have comorbidities such as diabetes, such as hypolipodemia, hypertension and so on, that are above 27.

So we are also looking at prevention of weight regain.

This might not be an FDA-approvable claim, for instance, weight regain.

But in a healthcare reform-driven European Continent it certainly is, because people would like to see the notion that you can do something useful to the subject over prolonged periods.

And then, finally, since Liraglutide is expected to be a significant diabetes product, we obviously will do a bridging study, where we are looking at an obesity endpoint, but in a Type 2 diabetic population.

And, obviously, these trials are big and long and we can submit based on a one-year study.

Now we expect based on our Phase II program, that 20% to 30% of those who are enrolled actually are pre-diabetic.

This is what happened in the Type -- Phase II studies.

And that means that we will take advantage of the notion that Liraglutide may well bring something beneficial to these subjects in term of their diabetes disease progression.

And, henceforth, those will all be, basically, continued throughout a three-year period, to measure elements of ITT, IFT and over-[diagnosed].

Thank you.

So, are these three-year studies over 52 weeks, look at the data?

Or are there some 52 week studies, or are they just varied in length?

Yes.

So what you have to do is you have to submit one-year data on all subjects.

Now this is a problem when you have a double-blind study.

So, after 12 months, you single-blind it, meaning that you are able to un-blind it to the physicians and the people at the sites all over the world, and these are truly global.

You also asked the question about the globality of this, and it's all over the world outside of China and Japan.

And, basically, after 12 months you then have to un-blind, through one party, all the data in the patients that are going into the three-year arm, those 20% or so who have pre-diabetes.

And then they will continue single-blindedly throughout the next two years.

Okay.

Thank you.

Thanks very much.

Good afternoon.

It's Brian Bourdot from Deutsche Bank.

A question for each of you, please.

Firstly, Lars, I'd like to ask you about your expectations -- to further outline your expectations for the US Insulin market.

You mentioned that you expected Modern Insulins to be your most important force of growth, going forward.

You also mentioned that you saw scope for -- to increase share in the US market going forward, and that North America would be one of the important territories.

You also said that you expect the -- most of the growth to come from your existing bread and butter products.

I guess Levemir is still relatively in its early days still and, perhaps, you expect to gain further market share from that.

But I also wanted to ask you about some of the more mature parts of your analogue [status] in the US.

There's been new insulin devices from Lilly.

And, in fact, Lilly have talked about their KwikPen outselling your FlexPen in the rapid-acting segment last quarter.

So, despite that threat, are you still confident you can grow, or at least maintain, share there?

Sorry, that was a bit of a long question.

You're going to get a shorter answer.

Great.

Next question -- hopefully, not too short.

Next question, please, for Mads.

There has been a lot of debate and discussion about the possible requirements for cardiovascular outcome studies, either via pre or post-approval.

But I think the panel mentioned that also, if possible, they would like to see outcomes data for existing products.

Do you see, perhaps, a threat where you will get many new onerous requirements for many studies for your existing products and, perhaps, there's a real risk that your development spending could substantially increase, at least for a few years?

And the last question, Jesper, please.

You mentioned that your hedging policy has -- you've changed that from 18 months to 16 months, for US dollar forward.

Is that reflective of any kind of internal views about the US dollar?

Or is that more to do with your expected cash flow requirements?

Perhaps, maybe, it's more linked to CapEx on your Chinese selling facility?

What's behind that?

Thanks very much.

So, in terms of the US market, it's correct that I did state in my introduction that we do see the opportunity for further growth of our Business in the United States.

In particular, there's going to be growth there in terms of share.

It's going to be so much lower than the share growth that we have seen in the last three years, because the competition is getting tougher.

Lilly is back in the business, pushing their portfolio.

And you could say that Lantus is becoming increasingly important for Sanofi-Aventis as well.

So but what we do expect is that there is a significant continued opportunity for, in particular, Levemir, in the US market.

So that's where we will see the main growth and that's also what we have been re-sourcing our organization after the last couple of expansions.

With regards to devices, this is in a game where competition eventually does catch up, and it's upon us to continue our own development of devices.

Lilly would obviously say that they are having better devices than us and the net result is that Lilly is losing shares.

And so, if you look at the result, we are still highly competitive.

We have, historically, been giving very little visibility on devices and the device market is becoming more and more competitive.

So -- but when we're talking about capital requirements, we are highlighting the fact that a part of the capital in the future will have to be spent on new generations of devices.

So we are intent on staying as well ahead of the competition as we can in devices.

And that will, at least, ensure that we should be able to maintain a slower, but a steady share growth in the US.

And if I can then discuss cardiovascular.

Just, maybe, can I add one comment about [devices]?

Sure.

Because, obviously what the physician wants is a better drug and what the patient wants is more convenience, typically.

They don't think about, to the same degree as the (inaudible) as the physician does, and so on.

So our analysis actually shows that it very often is better to have a double benefit of having a new drug approved, also in a new device.

So that, rather than try to upgrade all the existing Modern Insulins with a new device, it may well pay off to have a double upgrade, both on the drug and on the device side, henceforth, favoring both the Physician and the patient at the same time.

But if we look at cardiovascular, the -- July 1 and 2 hearing was on Type 2 diabetes drug, which is one important notion.

It was not relating to so-called Type 1 diabetes drugs.

So any repercussions on insulins, per se, are highly uncertain, because insulin was not discussed at the meeting.

That being said, even if insulins were part of this, we still have 85 years of experience with insulins not doing any harm to cardiovascular's performance.

And, we have made the analysis in millions -- or at least, thousands and thousands of patients of trials, showing no harm done.

So what we are saying is that if you have a product on the marketplace with a long and proven track record, then it's highly unlikely that the FDA would ever issue guidance that you do an outcome study on such products, because they have proved themselves in the marketplace in terms of cardiovascular patients.

So then you can turn the question to repaglinide (Prandin) where we have asked to do a cardiovascular outcome survey on repaglinide.

Well, there, I think the short version is we have after all been on the market for 10 years with that product.

And I would argue the same case that we have had, clearly, millions of (inaudible) patients that have been exposed to the product.

And we are not giving (inaudible) recording of the year, as regards cardiovascular outcomes.

So I think, from the perspective of Novo Nordisk, that has not just launched a major product in this field, to be quite frank, at least non-insulin, I think the situation is that this is more a relevant discussion for the pipeline to come.

Whether that's going to be only non-insulin products or the insulin products is something we'll discuss, of course, when the time comes to do it.

And then, finally, as to the hedging, I think the key reason for Novo Nordisk deciding to do financial hedging of our currency exposure is to increase the predictability of our earnings in the short term.

And that would normally enable us getting the key exposures, US dollars, Japanese yen and British pounds, to the level of six to 12 months; maybe slightly longer for the Japanese yen because of the significant forward pickup you have with the low currencies with the low interest rates in Japan.

In terms of the US dollar, it's also clear that we now see a more balanced situation with the current level for the US dollar and, hence, we are gradually bringing it down.

The issue we have for when we want to bring down our hedging is that we have to basically realize the cash flows we have hit, and then we can only bring it down by not renewing those hedges as they mature.

And, hence, we can very rapidly bring our hedging up.

So we can only gradually bring it down, otherwise, we would be speculating in currencies and that's not what we want to pursue.

But I think it's likely that you will see that, over the next three to six months, that we will gradually bring down our US dollar exposure down to a more neutral level.

We still believe that the predictability that the forward hedging actually generates in our cash flows is to the advantage of us, and clearly has been for the last five-year period.

Okay.

Sorry, pardon me.

Sorry, just a final comment on the Chinese factory you also asked.

Clearly, when we hedged the US dollar, we include the Chinese exposure there and the expected cash flow for China.

So when we talk about what cash flow has been hit, it is net, the net cash flow that we have in the total dollar pool.

So that is taken into consideration.

Sorry, ladies and gentlemen.

I hope you bear with me if I cut the public discussion now.

We will be available for a little longer but, unfortunately, Jesper needs to leave and I don't want to agitate his wife.

That's worse than agitating you.

So I hope you bear with us as we close the public session now and then we'll be around for taking additional questions.

So thank you very much for the interest up until now.

Thank you.