諾和諾德 (NVO) 2008 Q3 法說會逐字稿

Please stand by we're about to begin.

Good day and welcome to the Novo Nordisk Q3 2008 earnings call.

For your information, today's conference is being recorded.

At this time I would like to turn the conference over to your host today, Mr.

Lars Rebien Sorensen, president and CEO.

Please go ahead, sir.

Thank you very much and welcome ladies and gentlemen, to the Novo Nordisk conference call regarding our results for the first nine months of 2008 which we released earlier today.

I'm Lars Rebien Sorensen, the CEO of Novo Nordisk, and with me I have our Chief Financial Officer, Jesper Brandgaard, Mads Krogsgaard Thomsen, our Chief Science Officer, and present are also our investor relations officers.

Today's earnings release is available on our homepage, novonordisk.com, along with the slides that we'll be using for this conference call.

The conference call is scheduled, as usual, to last approximately one hour and will start with a presentation as outlined on slide number 1.

The Q&A session will begin in about 30 minutes.

Turn to slide number 2.

As always, I need to advise you that this call will contain forward-looking statements.

Such forward-looking statements are subject to risks and uncertainties that could cause the actual results to differ materially from expectations.

For further information on the risk factors, see the earnings release and the slides prepared for this presentation.

Also note that this conference call is being webcast live and a replay will be made available on our website after the conference call.

Turn to slide number 3.

We are pleased with the performance of the first nine months of 2008 with robust sales development for all our key products and solid progress in our pipeline, including Phase 2 results and clinical proof-of-concept for a new generation of insulins known as NN5401 and NN1250.

Our portfolio of modern insulins continues to show a strong sale growth in all key markets.

In first nine months of 2008, sales of modern instruments increased 29% in local currencies.

In the biopharmaceutical area, NovoSeven sales increased 14% in local currencies and Norditropin continued the growth pattern, with 13% sales growth in local currencies.

Geographically, sales increase is driven by North America, with sales increase of 18%, and international operations, with 21%, both measured in local currencies.

Novo Nordisk made significant progress in the development of a new generation of insulins and has recently finalized two Phase 2 studies with NN1250, a long acting basal analog with potential duration of action more than 24 hours, and two Phase 2 studies of NN2401 (sic), a neutral soluble dual acting insulin analog preparation which also has the potential duration of action of more than 24 hours.

The preliminary analysis of the data from our four clinical studies shows a very promising efficacy for both of the next generation insulins in terms of safe and long-lasting block glucose lowering.

At the annual meeting of the Canadian Diabetes Association in October, Novo Nordisk presented detailed results for the 26-week LEAD 6 Phase 3b study comparing Victoza with exenatide.

However, please note that the Victoza diabetes brand name for liraglutide is contingent on regulatory approval.

Our USA communicated the study showed that Victoza resulted in a statistically significant better block glucose control.

And further, Novo Nordisk has recently presented the headline data from a 14-week extension of the LEAD 6 study.

This study showed that patients who switch from exenatide to Victoza experience a statistically significant reduction in HbA1C of 0.3 percentage points.

Novo Nordisk has decided to discontinue the Phase 3 study with Norditropin in dialysis patients with low serum albumin, which was started in the third quarter of 2007.

The decision to discontinue the study is not due to safety concerns, however, based on an analysis of the significant delay in recruitment of patients for the study, which will potentially impact the overall outcome of the study.

Turning to the financial performance of the first nine months, it's been driven by robust sales growth of 13% in local currencies, corresponding to 7% as reported.

The solid improvements in our productivity and manufacturing have continued throughout the first nine months and contributed to an increase in the underlying gross margin of 120 basis points.

These improvements are mainly related to increased productivity in insulin [bag] manufacturing and insulin filling activities.

Operating profit increased 15% to DKK8.999 billion.

Adjusted for the impact from currencies, underlying operating profit increased by more than 25%.

The expectations for reported operating profit growth for 2008 is now increased by 10% to the range of 32% to 35% increase, primarily reflecting the positive development for Novo's key invoicing currencies as well as lower operational cost.

For 2009, Novo Nordisk expects sales growth in local currencies of around 10% and reported sales growth around 8 percentage points higher due to the recent significant appreciation of key invoicing currencies.

2009 operating profit is expected to grow around 10% in local currencies and reported operating profit growth is expected to be at least 15% higher than that.

Turn to slide number 4.

In the first nine months of 2008, the diabetes care segment grew 13% measured in local currencies and the portfolio of modern insulins was the main growth driver accounting for 75% of this growth.

Biopharmaceuticals grew 12% measured in local currencies and NovoSeven increased 14%, while the growth hormone franchise grew 13%, both measured in local currencies.

Sales of HRT increased 2% in local currencies, despite the generic competition for Activelle in United States.

Turn to slide number 5 for an update on our modern insulin franchise.

In the first nine months of 2008, sales of modern insulins grew 29% measured in local currencies.

The growth is driven by underlying market growth and market share gains for the entire portfolio of modern insulins, that is NovoRapid, NovoMix and Levemir.

Global market share continues to increase for all three products.

The market performance of all Novo Nordisk three modern insulins exhibited steady, durable penetration of the various insulin segments.

And from a regional perspective, growth is driven primarily by North America and Europe, followed by international operations.

In the first nine months of 2008, modern insulins made up 59% of our total insulin sales compared to 52% in the first nine months of 2007, emphasizing the momentum behind the ongoing conversion of human insulins to modern insulins.

NovoRapid is the single largest modern insulin product for Novo Nordisk, with sales of DKK5.5 billion in the first nine months of 2008.

Similar figures for NovoMix is DKK4 billion and Levemir continues to gain momentum with sales increase from DKK1.8 billion in the first nine months of 2007 to DKK2.7 billion in the first nine months of 2008.

Sales of Levemir increased 61% in local currencies compared to the first nine months of 2007.

Turn to slide number 6 for further insight into the dynamics of the modern insulin market.

Around 56% of the global insulin market measured in volume has now been converted to modern insulins compared to 50% at the same time last year.

And we expect this conversion trend to continue within all segments of the market.

This drives value growth in the insulin market, along with an ongoing conversion to prefilled devices.

Novo Nordisk continues to gain market share within the modern insulin market.

We now hold approximately 44% measured in volume compared to 43% 12 months ago.

Novo Nordisk continues to be the only company with -- which markets a full range of modern insulins with short acting premix and long acting modern insulins supported by the next generation FlexPen, the leading prefilled device with a low dose forms in a very high dose accuracy.

Turn to slide number 7 for update on NovoSeven sales development.

NovoSeven sales increased 14% local currencies and 6% as reported in the first nine months of 2008.

Sales was primarily realized -- sales growth was primarily realized in North America and international operations.

It was positively impacted by timing of tender sales in certain international operations countries.

Sales of NovoSeven in North America were positively impacted by a minor inventory buildup in connection with the launch of room temperature stable NovoSeven.

Sales growth of NovoSeven reflected increased sales within the congenital and acquired haemophilia segment where Novo Nordisk is the global leader.

Treatment of spontaneous bleeds for congenital inhibitor patient remains the largest area of use.

Turn to slide number 8 for an update on Norditropin.

Norditropin sales increased 13% local currencies and 8% as reported in the first nine months of 2008, thereby continuing the solid growth momentum of the growth hormone franchise.

Sales growth was primarily realized in North America and Europe, followed by international operations.

However, all regions contributed to growth, measured in local currencies.

Novo Nordisk global volume market share is now 24% and 20% in the US

Norditropin is a liquid ready-to-use heat stable growth hormone and it's increasingly sold in our prefilled delivery device NordiFlex, continues to be the most advanced offering on the market, characterized by significant convenient benefit for the patients and their families.

Turn to slide number 9 for an update on sales by region.

From a regional perspective, North America and international operations are main growth drivers for Novo Nordisk.

The first nine months of 2008, North America and international operations contributed 47% and 29% respectively to the overall growth of Novo Nordisk.

In Europe, we continue to see solid growth rates of our portfolio of modern insulins due to market share gains and underlying market growth.

Levemir contributed more than 40% of total sales growth in the first nine months of 2008.

Germany, United Kingdom, France, Italy and the Netherlands contributed together more than two-thirds of the total sales growth in Europe.

Sales in international operations in the first nine months of 2008 grew 21% in local currencies and here sales of modern insulins continued to be the significant contributor to growth in the region, led by China and Turkey.

The key contributor to growth in the region is China, accounting for close to 40% of total sales growth measured in local currencies.

Sales in Japan and Oceania increased 3% in local currencies and the sales development reflects sales growth for all three modern insulins, NovoRapid, NovoRapid 30 mix, and Levemir.

Novo Nordisk has the leading market share in insulin market in Japan, holding 73% of the total market and 64% of the modern insulin market, both measured in volume.

Levemir was launched in Japan in December of 2007 and has already reached a solid penetration, with market share in August close to 18% of the long acting insulin market in Japan.

Turn to slide number 10.

This provides you with an update on the development of our modern insulin market share in Europe, including the rollout of Levemir.

Novo Nordisk owns a clear leadership position in modern insulin segment in Europe with a volume market share of more than 50%.

The solid leadership position is reinforced by continued market share gains for Levemir reaching a volume market share of 27% of the total European market for long acting modern insulins in the second quarter of 2008.

Around two-thirds of the Levemir sales volume in Europe is in prefilled devices and around a third in durable devices.

Turn to slide number 11 for an update on the US insulin market.

Total diabetes care in North America increased 21% in local currencies in the first nine months of 2008 and by 7%, as reported, reflecting a solid penetration of the modern insulins, Levemir, NovoLog, NovoLog 70/30 mix.

In the United Sates, Novo Nordisk continues to be the market leader in the insulin market, with 42% market share of the total insulin market and 32% of the modern insulin market segment, both measured in volume.

According to the latest monthly market share data covering August, Levemir has obtained almost 12% of the total long acting modern insulin market segment measured in volume.

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

Thank you, Lars.

Please turn to slide 12 for an update on R&D.

Before I provide an update on recent progress within the diabetes care pipeline, I will elaborate on two recent developments that are considered by Novo Nordisk to be important for the future of diabetes treatment.

Firstly, Novo Nordisk applauds the recent New England Journal of Medicine publication of the 10-year follow-up data from the UKPDS study in newly diagnosed type 2 diabetes patients.

The 10-year follow-up analysis revealed a legacy effect related to the glycemic but not blood pressure control that was achieved during the original UKPDS study.

The original between intensive and conventional group HbA1C differences were lost already one year following UKPDS trial cessation a decade ago.

In spite of this, the legacy effect of good glycemic control was present 10 years later in the form of a significantly reduced number of microvascular complications, myocardial infarctions, diabetes related deaths and overall mortality.

The UKPDS follow-up analysis provides conclusive evidence in favor of the need for early and tight glycemic control aimed at reducing the prevalence of micro and macrovascular diabetes complications.

The legacy effect on metabolic memory that persisted in the UKPDS setting for at least a decade after study completion is reminiscent of that which has previously been shown to prevail in type 1 diabetes, as evidenced by the DCCT/EDIC study.

Furthermore, the new ADA and EASD guidelines for type 2 diabetes treatment were published last week, confirming my comments relating to the UKPDS outcomes.

These guidelines promote early and tight glycemic control in people with type 2 diabetes as adjunct therapy to lifestyle modification.

Importantly, the guidelines now position insulin as second line treatment in patients failing to achieve an HbA1C of less than 7% on metformin monotherapy.

Additionally, GLP-1 therapy is now recommended as second line therapy, albeit less validated, in patients failing on metformin treatment.

We view both the recent UKPDS results and consensus guidelines as a clear positive for future therapy-driven type 2 diabetes patient outcomes and hence for Novo Nordisk.

Now let me focus on some important developments in Novo Nordisk's diabetes care pipeline.

Novo Nordisk is the only company with a new generation of insulins in full clinical development.

The ambition is to further improve the treatment success rate, tolerability and convenience of insulin therapy for people with type 1 or type 2 diabetes.

Novo Nordisk has made significant progress in this area with the recent completion of two Phase 2 studies with NN1250, the long acting acylated human insulin analog with a potential duration of more than 24 hours, and two Phase 2 studies with NN5401, a soluble dual acting insulin analog preparation, likewise with a very long action profile.

In Phase 2, NN1250 was investigated in both type 1 and type 2 diabetes, whereas NN5401 was investigated in type 2 diabetes alone.

NN1250 was studied in trials where insulin glargine served as insulin comparator and NN5401 was studied in trials where either NovoMix 30 or insulin glargine served as insulin comparator.

In total, around 700 patients with a baseline HbA1C of around 8.5% were enrolled in the four randomized, open-label, parallel group treat-to-target studies and all patients were treated for 16 weeks.

The headline data from the four studies show promising proof-of-concept results for both of the new insulins in terms of safe and long-lasting blood glucose lowering.

Between one-half and two-thirds of people with type 2 diabetes treated with NN5401 achieved hemoglobin A1C levels below 7%, with no incidences of hypoglycemia during the last four weeks of treatment.

For people with type 2 diabetes treated with once daily NN1250, around half of the patients achieved HbA1C levels below 7%, without occurrence of hypoglycemia in the last four weeks of treatment.

In the type 2 diabetes trial, NN1250 was also compared to once daily basal insulin in a three times weekly dosing paradigm in which patients received treatment every Monday, Wednesday and Friday.

The blood glucose control achieved after three weekly NN1250 injections was found to be similar to that of the once daily basal insulin arm, highlighting the very long action profile of NN1250.

Importantly, both NN5401 and NN1250 appeared to be safe and well tolerated.

Based on the positive Phase 2 data, Novo Nordisk will now start a dialog with the regulatory agencies regarding the design of the Phase 3 programs.

Novo Nordisk plans to initiate Phase 3 studies with both NN1250 and NN5401 for type 1 and type 2 diabetes in the second half of 2009.

At the annual meeting of the Canadian Diabetes Association in October, Novo Nordisk furthermore presented detailed results from the 26-week LEAD 6 Phase 3b study in which the safety and efficacy of Victoza, the once daily human GLP-1 analog, was compared to twice daily exenatide in people with type 2 diabetes.

As previously communicated, the study showed that patients treated with Victoza achieved a statistically significant better blood glucose control compared to patients receiving exenatide twice daily.

At the Capital Markets Day on September 26, Novo Nordisk presented headline data from a 14-week extension of the LEAD 6 study.

After the initial 26 weeks of treatment with either Victoza or exenatide in the LEAD study, 376 patients with type 2 diabetes entered this 14-week non-re-randomized extension study where all patients received Victoza.

Patients from the initial Victoza treatment arm continued previous treatment at an unchanged dose, but patients from the initial exenatide treatment arm were switched to Victoza 1.8 mg once daily following a two-week dose escalation period.

The study showed that patients who switched from exenatide to Victoza experienced a reduction in hemoglobin A1C of 0.3 percentage points, a decrease in fasting plasma glucose of 0.9 millimolar, a weight loss of approximately 1 kilogram, as well as a reduction in systolic blood pressure of close to 4 mm mercury, all differences being statistically significant.

Furthermore, the tolerability profile of Victoza was confirmed in the extension study.

As previously communicated, the Phase 3 program for Victoza -- oh, sorry, liraglutide in obesity is expected to be initiated before the end of 2008 and will include 4,500 to 5,000 patients.

One-year data from the study is expected in early 2011.

Please turn to the next slide for an update on our hemostasis portfolio.

Novo Nordisk is finalizing the analysis of results from the Phase 3 trial of NovoSeven for the treatment of bleeding in patients with severe trauma.

As previously announced, the trial was discontinued earlier this year based on the results of an analysis for futility conducted by the independent data monitoring committee.

In total, 541 patients with severe trauma completed the trial.

The primary efficacy endpoint was 30-day mortality and the results showed that there was no statistical significance in the difference between the mortality outcome for NovoSeven treated patients and placebo.

As also seen in previous trials with critical bleeding, NovoSeven related patients in this trial received statistically significant and fewer transfusions of red blood cells, fresh frozen plasma and (inaudible) blood at 24 and 48 hours compared to placebo treatment, thereby confirming the hemostatic effect of recombinant factor 7a.

The safety profile of NovoSeven was consistent with previous trials within critical bleeding.

Novo Nordisk expects to publish detailed results from the Phase 3 trial in peer reviewed journals and at scientific conferences in 2009.

At the Capital Markets Day, Novo Nordisk provided an update of the hemostasis strategy, including plans for expanding the clinical activities into general hemophilia.

This was underpinned by the announcement that Phase 1 studies are expected to be initiated with a recombinant factor 8 compound and a long acting recombinant factor 9 compound during 2008 and 2009 respectively.

Additionally, it was announced that the long acting recombinant factor 7a derivative, NN7128, has completed Phase 1 and that a Phase 2 study is expected to be initiated in 2009.

Within hemostasis, Novo Nordisk also announced that the Phase 3 study with recombinant factor 13 in congenital factor 13 deficiency was initiated in August 2008.

In addition, it was announced that a Phase 2 study, the recombinant factor 13 within prevention of bleeding in cardiac surgery, is expected to be initiated in 2009.

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

Novo Nordisk has decided to discontinue the Phase 3 study with Norditropin in dialysis patients with low serum albumin, which was started in July of 2007.

The decision to discontinue this study is not due to safety concerns.

The discontinuation is based on an analysis of the significant delay in recruitment of patients for the study, which is expected to negatively impact the likelihood of achieving a positive outcome of the study.

Recent analysis showed that the study would not be expected to complete before 2012, or potentially later, and that actions undertaken to accelerate patient recruitment have not been successful -- sufficiently successful.

The primary endpoint in the study is mortality and the plan was to enroll around 2,500 patients.

Novo Nordisk will work diligently to ensure a smooth trial closure for the involved patients and clinical centers.

In the study, growth hormone or placebo treatment was added to existing treatment, not as a replacement for another treatment.

Novo Nordisk expects to finalize the discontinuation of the study during the first half of 2009.

Finally, at the Capital Markets Day, Novo Nordisk provided an update on the progress in the area of inflammation research and announced the progression of the two first projects Anti-IL20 and Anti-C5a Receptor to Phase 1 clinical development.

With that, over to Jesper for an update on the financials.

Thanks, Mads.

We're satisfied with the overall sales growth in the first nine months of 2008 of 13% measured in local currencies and 9% -- or 7% as reported.

The underlying improvement in gross margin was 1.2 percentage points in the first nine months of 2008, primarily reflecting improved production efficiency in both upstream and downstream manufacturing and to a certain extent higher average prices in the US.

However, as reported, improvement was an 0.3 percentage point, reflecting that these improvements are countered by a significant negative currency impact of around 0.9 percentage points, primarily reflecting the lower value of US dollar and British pound versus Danish krone compared to the first nine months of 2007.

In the first nine months of 2008, total non-production related costs increased by 3% to DKK16,611,000,000 compared to the same period last year.

Sales and distribution cost increased by 2%, reflecting the combined effect of the provision related to an anti-dumping case in Brazil recorded in the first quarter of 2007 and increased US costs in the first nine months of 2008 related to the expanded sales growth.

Research and development costs increased by 6%, reflecting an increased level of activity in late stage clinical development as well as the nonrecurring costs related to the discontinuation of AERx and other pulmonary and diabetes projects.

Reported operation profit increased by 15% and adjusted for the impact from currencies, underlying operating profit increased by more than 25%.

Net financial showed a net income of DKK626 million in the first nine months of 2008 compared to a net income of DKK1,809,000 in the same period last year, where a nonrecurring and tax exempt income of DKK1.4 billion from the divestment of the ownership of Dako's business activities was recorded.

The net effect of foreign exchange testing was an income of DKK671 million compared to an income of DKK664 million in the same period of 2007.

This development reflects gains on foreign exchange testing activities due to the lower value of especially US dollar versus Danish krone.

The effective tax rate for the first nine months of 2008 was 24%, an increase from last year where the tax rate was impacted by the tax exempt income from the divestment of the ownership of Dako's business activities as well as a nonrecurring effect linked to the revaluation of the company's deferred tax liabilities as a consequence of the reduction in the Danish corporation tax rate implemented in 2007.

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

Following years of depreciation, two of Novo Nordisk's most important invoicing currencies, namely the US dollar and the Japanese yen, have in the latest months appreciated substantially.

The appreciation of the key invoicing currencies has a long term positive impact on Novo Nordisk's financial outlook in reported terms but also near term as results -- near term also results in foreign exchange hedging losses.

The financial impact from foreign exchange hedging is included in the financials.

As of 30 September 2008, the deferred foreign exchange hedging losses were around DKK500 million based on the exchange rate prevailing at that point in time.

However, in the period from 30th of September until 29th of October, the US dollar and the Japanese yen have appreciated some 12% and 21% respectively.

Provided the currency exchange rates remain at the current level throughout 2009, it is expected that the significant positive impact on reported operating profit will be offset by a similar significant foreign exchange hedging loss.

Beyond 2009, the current hedging portfolio will have a very limited impact on net financials.

Regarding the currency assumptions used for the outlook for 2008 and 2009, at this company announcement I would like to draw your attention to Appendix 7 in the release, which outlines the exchange rates used for these forecasts.

The expected annual currency impact on operating profit for 2008 as a consequence of the 5% movement in the US dollar and the Japanese yen are in line with the previous given estimates.

However, the impact of a 5% movement of the British pound has been changed from previously DKK85 million to now DKK75 million, given the lower current value for the British pound.

For 2009, the effect of a 5% movement in the US dollar is around DKK530 million and for US dollar related currencies the effect is DKK120 million on operating profit.

Therefore, the total effect of a 5% movement in the US dollar amounts to a currency impact of around DKK650 million on operating profit.

Currently, Novo Nordisk has hedged future expected cash flows related to the US dollar 15 months ahead, the Japanese yen 14 months ahead, and the British pound is hedged 13 months ahead.

Please turn to slide 17 for an outlook for 2008.

Novo Nordisk still expects between 11% to 13% growth in sales measured in local currency for 2008.

This is based on the expectations of continued market penetration for Novo Nordisk's key strategic products within diabetes care at Bayer Pharmaceuticals, but also expectations of increased competition in both the diabetes care area and in biopharmaceuticals during 2008.

Given the current level of exchange rates versus Danish krone, the reported sales growth in 2008 is now expected to be around 3 percentage points lower than the growth rate measured in local currencies compared to previous expectations of 6 percentage point negative effect on reported sales growth.

The expectation for growth in reported operating profit for 2008 is increased by 10 percentage points from a range of 22% to 25% to now a range of 32% to 35%.

This primarily reflects a positive impact from the recent significant appreciation of Novo Nordisk main invoicing currencies, lower operational cost partly countered by costs related to the employee share program, as well as costs related to the discontinuation of the Phase 3 study with Norditropin in dialysis patients with low serum albumin.

The forecast also includes lower nonrecurring costs in relation to the discontinuation of all pulmonary diabetes projects, which, due to a successful termination of property lease commitments and the clinical studies, have been reduced from DKK400 million to DKK325 million.

Adjusted for the impact from currencies and the nonrecurring costs related to the disconsolation of all pulmonary diabetes projects in 2007 and 2008, the expectations of underlying operating profit is now increased to a growth of more than 25%.

For 2008 Novo Nordisk now expects a net financial income of DKK350 million, reflecting the significant foreign exchange hedging gains in the first nine moths of 2008 primarily related to the US dollar, partly being offset by the expected hedging losses in the fourth quarter of 2008 related to the recent significant appreciation of key invoicing currencies.

The expectations for the effective tax rate for 2008 is still 24%.

Capital expenditure is now expected to be around DKK1.5 billion in 2008, whereas depreciation, amortization and impairment losses are now expected to be around DKK2.4 billion.

Free cash flow is now expected to be around DKK9.5 billion, primarily explained by higher operating profit expectations and the expected lower level of investments.

With regards to the financial outlook for 2009, it is Novo Nordisk's intention to provide detailed guidance on expectations in connection with the full year release of financial results for 2008 scheduled for the 29th of January, 2009.

At present, the preliminary plans for 2009 indicate both sales growth and operating profit growth at the level of 10% measured in local currencies.

The reported sales growth for 2009 is expected to be at the level of 8 percentage points higher and the reported operating profit growth is expected to be at least 15 percentage points higher due to an expected positive currency impact following the recent significant appreciation of Novo Nordisk's main invoicing currencies.

These preliminary plans reflect expectations of a continued solid penetration of the portfolio of modern insulins as well as progress for the key products within biopharmaceuticals, but also an expectation of continued intense competition in both the diabetes care and biopharmaceutical areas.

The preliminary plans for growth in operating profit in 2009 also reflect a continued improvement of the gross margin as well as increased spending for sales and distribution relative to sales due to an expected high level of sales and marketing activities for primarily Victoza but also the modern insulins.

All expectations are provided that currency exchange rates, especially the US dollar and related currencies, remain at the current level versus the Danish krone for the rest of 2008 and for the entire 2009.

This concludes our presentation of the financial results.

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

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

Thank you very much, Jesper.

This is Lars Rebien Sorensen.

Ladies and gentlemen, I do apologize for this rather lengthy presentation but we had significant clinical data as well as a quite extraordinary financial and currency situation that we needed to report on.

We are ready to take the first question now and please remember that the conference is taped and the replay will be made available on our website.

First question, please, from the operator.

Thank you, sir.

(Operator Instructions)

Our first question will come from Peter Hugreffe with ABG.

Please go ahead.

Yes, hi.

It's Peter Hugreffe from ABG.

Thank you for taking my questions.

First question on the Victoza filing.

I believe that you have, at least in EMEA, you have a clock stop now and you received the first official questions.

Could you give some kind of insight to the issues EMEA has been raising and perhaps also put some flavor on how comfortable you are with the questions in the current situation?

And then secondly, I believe that you recently launched the PDS290 Phase 3 trial which presumably will be your next pen device.

Could we conclude anything from this indication in terms of launch of this pen device and also in terms of a CapEx ramp up and could you in the same context also elaborate a little bit on the CapEx level going forward?

Thank you.

Thank you very much.

Mads, the first question goes to you on the Victoza filing and anything you can or will disclose on the current level of dialog with EMEA.

And then, Jesper, can you comment on the general CapEx future and in particular whether or not the 290 development is going to have a significant impact on that?

Mads?

Okay, well, first of all, Peter, as you are aware, the process has been that the rapporteur and co-rapporteur countries have originally given us their initial assessment.

That has been circulated among the CHMP members and then the consolidated list of questions from the entirety of the 26 member states of the European Union has led to this list of questions that we have received.

So, you actually would be right in saying that this means that we have now entered into the clock stop period.

We, as a consequence of this close regulatory dialog, of course do not give any insight into the nature of that dialog.

What we can say is that we expect to be able to respond to the CHMP over the next couple of months or so, which is kind of in line with the standards of the process within EMEA and that dialog we're having is down the lines that Novo Nordisk would have expected all the way along.

So, that is about as much as we can say at this point.

Thank you, Mads.

And, Jesper, any comments on the state of development of the PDS290 and what implications that may have or in general what are the expectations for [KMX] going forward rather?

It's correct that we have the next generation disposable device, PDS290, in late stage clinical development.

We have included expectations for the rollout of this device in our long term investment levels guidance and we have historically guided that to a level of around 6%.

It's also clear that the significant appreciation of US dollar and Japanese yen, everything else being equal, will be very positive on our top line growth and is not necessarily completely to the same degree reflected in the expectations for investments.

I would like to defer a more precise guidance for 2009 and beyond on the investment to sales level but I think the current 6% may be slightly on the high side if you use that as a guidance so far, I think that will serve you well.

Thank you, Jesper.

And then I'll just remind you that we have promised to come back to you in connection with the full year results with an update on our financial targets and that'll give us an opportunity to go a little bit more into detail with how these things tie in in our P&L and our balance sheet.

So, thank you for that question, or questions I should rather say.

Next, please?

Our next question today will come from John Murphy with Goldman Sachs.

Please go ahead.

Thanks very much.

Good afternoon, gentlemen.

A couple of question, then, please.

Mads, when will we see you publish the Phase 2 data on the two insulin analogs that you mentioned?

Do we have to wait for ADA?

Will we see something published before then?

And, Jesper, just to confirm what you're saying with regard to your comments on currency, are you suggesting that for the gains that we see with regard to the top line and the operating profit line will be fully offset by negative financials?

Is that what you're saying to us?

Thank you, John.

Mads, when will you publicize these interesting data on the two insulin analogs?

Yes, well, John, what we do is that when we're in pivotal trial programs, i.e.

either Phase 3a or Phase 3b programs, there we communicate very clearly and crisply what our ambitions are for timing and location of publication.

I think for competitive reasons at this point, Novo Nordisk finds this highly exciting and we are not at this point willing to shed specific light on when publication of these data or where publication of these data will take place.

What you have been able to see, of course, is on the clinicaltrials.gov more or less what the study design and the comparators have been.

And then I have revealed some headline data today which we find very exciting inasmuch as you may recall that achieving the ADA target of below 7% without preceding hypoglycemia is typically something that is achieved in the 30%, 35% range.

And so these numbers are very high in terms of treatment success rates.

And then, Jesper, what are the short to medium term outlook for whether or not our financial instruments are able to counter or will counter the positive development we have on the top line from currencies?

Well, John, that would, to a large degree, be dependent upon how the development will be in the non-hedged currencies.

We clearly outlined which currencies we do hedge in.

What has been peculiar in the last month or so has been that to measure up against the euro or the Danish krone, the appreciation has actually primarily been in our hedged currencies and of course primarily the US dollar and the Japanese yen, whereas other currencies we do not hedge have actually not shown the same momentum.

In reality they've shown an opposite movement.

So, if you take currencies like the Australian dollars, the Polish zloty or the Turkish lira, they have actually moved to our disfavor.

So, when you look at it as -- and using the average rates from the [big international bank] as for yesterday, it was very, very -- to a very, very high degree that the positive impact we would have on operating profit has lifted to be at least 15% that which -- to a very, very large degree and that is around 90% or so be offset by a similar negative impact on the hedging results.

That of course primarily goes for the 2009 hedging results.

As you can see from the hedging period, the impact beyond 2009 will be very limited and of course if the currencies should be -- should continue to prevail, then there will be a significant positive impact then on the net financials from 2010 onwards.

I also think that there is some likelihood that some of these currencies which I mentioned will start to move against the other currencies.

And we've actually just today seen a movement in that direction.

It has been extremely volatile markets to give guidance in and that's why we have explicitly outlined based on what currency assumption have we given this guidance.

And I would highlight this Appendix 7, which is an unusual attachment we've done to our company announcement to make the market aware what was the assumption used here.

Thank you very much, Jesper.

Next question, please.

We move now to a question from Henrik Simonsen with SEB Enskilda.

Please go ahead.

Yes, hello, gentlemen.

Henrik Simonsen with SEB Enskilda.

A follow-up to Peter's question on the Victoza European filing.

I was wondering, Mads, have you any sort of feedback from the FDA regarding any requirements for cardiovascular safety data prior to approval of Victoza?

And secondly, I was wondering if Jesper would be kind to provide us with some cost ratios, further cost ratios for 2008 and probably some indicative ups or downs for those cost ratios for 2009 as well?

Thank you.

Thank you, Henrik.

Mads, Victoza, but this time perhaps with an American angle, FDA's view and any information on requirement for the safety data.

And then, Jesper, perhaps if you'd like, some details on the development of our cost ratios.

Mads?

Yes, well, Henrik, I think I'll split my answer into two because there are two elements here and one is what is ultimately needed in terms of cardiovascular profiling of new molecular entities by the agency.

And in that regard, Novo Nordisk is in a very good and proactive dialog with the agency concerning what to do to rule out the cardiovascular heartbeat onto people going forward after marketing this product.

In terms of pre-approval commitments to do, let's say, assessments of cardiovascular effects in human beings, there are systems in place which I would have thought should have provided us with such insight, if that were the case, that we needed to do things pre-approval and that I have not heard anything about.

So, it is my clear expectation that we can move to the March 2nd advisory committee meeting with the FDA and their panel in good faith and with a discussion of, among other things, what to do on cardiovascular things post-approval.

Thank you, Mads.

And, Jesper, something on 2008, the development and the cost ratios, and if you are ready at this point in time can you give a little guidance on where they are developing in 2009.

For the 2008 first, we continue to see a significant improvement in our gross margin in 2008 and we probably now see being of around 150 basis points in local currency.

And if we take it in reported terms, it looks like the currency impact will be diminished to be in the ballpark of 40 to 50 basis points.

So, a net improvement of at least 100 basis points in reported terms should hopefully be the full year results.

In terms of selling and distribution costs, it has a tendency to be highest in the fourth quarter of the year, so I would presume we'll get to around 29% in S&D ratio.

In terms of R&D, as you have noted from Mads' review, we will start large scale Phase 3 trials with liraglutide within obesity.

I would presume that would drive our R&D ratio, including the closedown costs related to the growth hormone trial for low serum albumin for patients in dialysis.

That should drive our R&D ratio to the level of around 17.5% and that of course includes the DKK325 million in [open] and closure costs in 2008.

And then for admin costs, I would hope we would get just slightly below 6% on that one.

Other operating income continues to be guided around DKK300 million.

So, that was guidance for 2008.

As for 2009, as you clearly can see from our statement, these are preliminary plans that have not formally been discussed with our board.

What you could anticipate and what we have already communicated would be that in local currency terms we would continue to see an expansion of our gross margin coming from primarily increased efficiencies in our diabetes filling facilities.

That should lead to an improvement in our gross margin between 50 to 100 basis points local currency and that could at the current rates then be even higher in reported terms.

The other margin I'd like to refer to is the selling and distribution costs where you should note that our guidance in terms of local currency growth for 2009 of 10%, that includes a significant increase in the S&D ratio to enable us to market Victoza effectively and also a continued marketing push for the modern insulins.

I would not at the current point in time like to be any more precise on any of the detailed cost ratio.

Let's get hopefully some slightly more stable currency environment and then we will expand on those guidance in connection with the full year results in January.

Thank you very much, Jesper.

And the next question, please.

Our next question will come from Poul La Cour with FIH.

Please go ahead.

Hello, gentlemen.

A couple of questions.

Firstly, what is the cost of discontinuing Norditropin in dialysis in 2008 and in 2009 perhaps?

And then secondly, looking at your 2009 guidance on sales, how much of this underlying growth will be driven by price increases?

Thank you.

Thank you very much.

Mads and/or Jesper, I don't know, we'll take Jesper first, I guess, since its cost and anything you might want to add, Mads, to clinical implications for our global development organization on the discontinuation of the low serum albumin in dialysis in 2008 and as well as 2009.

Well, I expect the cost of discontinuation will be a net effect to the tune of DKK150 million and all these costs will be taken to the P&L and have been included in our forecast for 2008, too.

So, those closure costs are included within that DKK150 million.

Thank you.

And then with regards to the price assumptions that we're currently operating with for 2009, obviously with uncertainty on the US selection and the pricing environment in the US, it is our expectations that we should be rather cautious about price developments in the US.

We are also of course having a year off in Japan from price adjustments in Japan.

So, on broad terms, stable pricing for 2009 is assumed in the budget.

Next question, please.

We'll move now to a question from Andrew Baum with Morgan Stanley.

Please go ahead.

Hi.

Good afternoon.

A couple of questions.

The first one for Lars Rebien.

You've been more -- the volume's been larger in terms of business developments that Novo's been doing for a while in terms of some of your recent interviews.

So, there's the $10 billion to $20 billion sum targeted towards M&A and then more recently I think that you said today a $2 billion sum focusing on information -- on the auto-inflammatory area.

Could you just give us some kind of sense of the opportunities you see, whether we should expect the investment to be done piecemeal or whether there is a large candidate out there that would fit well within the Novo business?

And then the second question relates to -- I guess more to Jesper.

Could you give us your sense of whether we're seeing any consumer sensitivity particularly to the modern insulins in the developed markets?

Are patients -- any indication that patients are taking their basal insulins once a day or asking to downgrade to the traditional insulin?

Any signs given the ongoing macro pressures?

Thank you very much, Andrew.

First, the -- this is Lars Rebien on the business development front.

It is not always us that is turning off the loudspeaker on the interviews.

I know that there was a reference to an article written that we had a financing capacity of between $10 billion to $20 billion in terms of acquisition, not necessarily that we would use that financing capacity.

But what I think we can say is that it's obvious, given the current situation, that there is significant development in equity value of especially the smaller biotech companies, and also larger companies for that matter.

That may present some opportunities for Novo Nordisk and therefore we continue to wish to be considerably well consolidated to be able to take advantage of such opportunities.

Most likely we are talking about in-licensing a project which could include significant milestones to be paid by the company, but then also would be including royalty deals, et cetera.

We could be interested in looking at formulation oriented technologies which would support our long term initiatives of developing even more convenient delivery routes for our patients in the future.

But we could also be looking at acquiring smaller or medium sized companies in the inflammation area.

Now, it is correct that we have been rather conservative whenever we have looked at this because we still feel there needs to be a reasonable balance between the value for us as a company and price paid.

And there still is the case there are assets available which are not as attractive as we would like to see it.

So, you should expect us to be rather conservative but opportunistic is the way opportunities are being presented to us in the next 12 months.

Then in terms of consumer sensitivity in terms of treatment given the current financial markets, Jesper, is that something that you had noticed?

And, Mads, for that matter, do you have any comments to share here, then please feel free.

I think some of the comments that we saw on the acquisition opportunities we might pursue was basically prompted by questions to me on how do we see the current financial situation impacting us.

And I think you should see more from really having that focus in the question like from the journalists and then really a significant change in our focus.

In terms of consumer sensitivity, if you actually see the trend in the growth of our portfolio of modern insulins and the gradual but relative steady decline in the human insulin franchise for Novo Nordisk, in that you see a very stable conversion towards the modern insulin.

We don't see any change to that.

In terms of financial sensitivity on behalf of the consumers, how that typically would play out would be that patients would be trying to stretch their insulin even more efficiently and spread the last dose between two pens, et cetera.

And the way that would play into the market would be through a lower insulin growth level in terms of volume.

And so far we've not seen any changes to the insulin volume levels.

We continue to see a global growth just north of 5%.

That could be where we saw trends.

I think the sensitivity could potentially be higher in the US than in Europe because of the payer systems over there.

But we have not yet seen trends to that effect.

And this is Lars Rebien here.

Just an additional comment.

It is a very astute observation because we can see in markets like Japan, which you would expect to see reasonable coverage, that they have not been feeling the pinch of public spending.

They have instituted additional copay for all the patients and since Japanese patients pay 30% of all their medical costs themselves, in that market it may have some impact on the overall consumption.

But the underlying demographics throughout the world is so strong that we are not seeing any major impact on the value case of 5.5, 5 in volume and 5 in value, going forward on our insulin business.

But it's obvious if we were to enter into a global recession, that would defer the ability of a number of developing countries to provide sufficient medical coverage for their population and hence defer treatment to a later point in time.

But you know better than us whether we will have a global recession or not.

So, far we believe that we'll be coming out of this within the next 12, 18 months and therefore we should see no major impact on Novo Nordisk business case.

Next question, please.

Thank you.

We move to Michael Novod, Handelsbanken.

Please go ahead.

Yes, hello.

It's Michael Novod from Handelsbanken.

Just two product questions.

Could you give some more flavor to the extraordinary income on NovoSeven for this quarter in terms of absolute impact?

And then also secondly, have you seen anything pointing towards an impact from the launch of Sandoz pen system for human growth hormone in the US?

Yes.

This is Lars Rebien here.

In terms of NovoSeven, yes, it is -- we have to admit that we have been sort of off face in making connections on the growth of NovoSeven.

It is -- when you look at it and when you see the quarterly takeoff of NovoSeven, it is highly impacted by center business and individual events and purchases, state purchases in several countries.

We have guided that we would see high single digits the growth rates of NovoSeven in 2008.

We are now at 14% local currencies but however 6% as reported.

We still believe that we will be shy of 10% or around 10% on the line for 2008.

And going forward, it is still our assumption that that is what we should be expecting in 2009, the single digit growth rates for NovoSeven.

In terms of Norditropin, it is correct that we are -- that we are seeing increasing competitive pressure from Santos but also from other players in the field that are positioning themselves for future market shares in the growth hormone segment.

It is a segment which is traditionally characterized by significant rebates from the list price to certain buying organizations and consequently it's a rather opaque net price market situation.

And when we see announcements from generic companies such as Sandoz and other players of significant rebates, you should bear in mind that this is rebates from the list price and the established payers already have significant rebates from our list prices.

So, we are expecting an increased competition.

This has also been flagged.

And we've had a nice nine months so far, but you should expect continued competition going forward.

Jesper?

And just an additional flavor to the NovoSeven guidance of around 10% local currency growth in 2008, I think you should note that there is a slight problem to the tune of 50 million pipeline fill in the US in relation to the new temperature stable version of NovoSeven that has added a little bit to the growth reported after nine months.

Okay, ladies and gentlemen, thank you very much for your interest this afternoon.

Thanks for calling in.

We'd like to again alert you to the fact that a replay is made available on our Web page and our investor relations officers are standing by to take your calls should you have additional question.

Thank you and have a continuation of a good year and we will see you and listen in on the end of January when we announce our full year result.

Thank you.

Ladies and gentlemen, that concludes today's conference call.

Thank you for your participation.

You may now disconnect.