諾和諾德 (NVO) 2009 Q2 法說會逐字稿

Well, thank you very much, ladies and gentlemen.

Thanks for joining us in this very impressive boardroom.

We don't have anything similar to that.

But we have a set of results that I hope that you have enjoyed, and we're going to go through the results which have been published in relatively hasty tempo to allow for as many questions as possible after the presentation.

The forward-looking statements, I need not repeat this, so please study them so that you don't see me afterwards.

Highlights, sales update, R&D update, and financials and outlook, which is quite standard.

Robust top line growth; yet another quarter of double digit underlying growth for Novo Nordisk, driven by again, not surprising, the modern insulins grew underlying 25%.

North America, the largest sales region, grew 18% underlying and 34% in local currencies.

Victoza, we're going to be talking a lot about Victoza, the launch in Europe.

Also, perhaps what has been discussed less during the last 48 hours, the Phase 3 studies, they were just published, which was a comparison between Victoza and Jenuvia.

The formal feedback on the US FDA approval process I'm sure we're going to be reverting to at some length.

If we look at the financials, very strong continued margin improvements, significantly impacted by currencies in the first half.

It's going to be less so; in fact, the opposite in the second half.

Operating profits, 40% up almost, but more than 15% underlying when we deduct currencies, and when we deduct the one-off costs we had in 2008 for the closure of our pulmonary activities, expectations raised for underlying operating profit growth.

I'll go through the sales uptake.

There's nothing really new here.

The main part of the growth, diabetes care, surprisingly perhaps, very [potent] strong sales of NovoSeven, and also nice growth of Norditropin.

And finally, some contribution from HRT business, giving the results that you see here.

If you look at the geographic picture, you will see some difficulties in that Europe's only growing in report term 1%, underlying 5%.

We're struggling somewhat in Europe.

We are struggling for a couple of reasons.

The insulin market is not growing as fast in the European market as we have historically been used to.

We don't think it's a long term trend.

Currently, we have no good explanation why this should be a long term trend shift in Europe.

In the addition to this, when patients are converting from human insulin to modern insulins, our competitors are catching more customers than we would like and, therefore, we are seeing a slight pressure on our market share in Europe, all resulting in a relatively anemic underlying growth of 5%.

In Japan, same story.

In a way, we see a slightly lower market growth in Japan.

We also see a significant market share loss due to patients transferring from NPH, where we have a very, very large share in Japan to Lantus and to Levemir, but where Lantus was capturing more patients than we had anticipated, and that we had wished.

America growing strongly; its national operation's growing strongly, Japan & Oceania growing because of currencies, when we look at the [reported mobility].

Just for a [glimpse], US modern insulin market, now straight line.

You can see the conversion from human insulin (inaudible) to 70% almost.

We see a relatively light volume growth; 6% in the US, and a valuable 20% (inaudible) and growing.

The long-acting insulin market, which is certified.

Some human insulin NPH to Lantus and Levemir, but premixed slipping somewhat; fast-acting growing.

NovoLog in the modern insulin market in United States keeps gaining share, closing in on the (inaudible).

If we take a similar picture for Europe, we see the conversion rate also quite steady.

(Inaudible) [growth] accelerating 60%.

The volume growth rate, on an annualized basis, is 6% value, so 9% and (inaudible), and in recent months, we have been seeing some negative, slight negatives on our market share.

We see the same picture for China; only 20% of people have converted to modern insulin.

It is largely premix market, so Nordisk has a very, very strong market position, and we have been able to keep the competitors very, very modest, and therefore you can see here major -- local competitors have actually been declining significantly, so Novo Nordisk is in a strong position and continue to do so, in China.

Surprising sales of NovoSeven; you see here the very strong quarter for largely (inaudible) and, therefore, we have been somewhat surprised.

We think we may have underestimated the importance of our room temperature formulation, [creating] a stable formulation of NovoSeven, enabling us to see some benefits, and the underlying market share gains from (inaudible) in this market.

Still we are cautioning that we are sustaining at the second half; will be less strong than the first half, and hence you should not expect 13% growth in local currency for the full year.

Norditropin, also nice strong growth in a business which is increasingly a generic [item], which is 16% sales growth as reported, and 8% in local currency.

But we are still only number two in this market.

We were a couple of years ago close to Pfizer as the leading player, but have dropped back and now are gaining market share again.

And we are on track to overtake Pfizer within the next couple of years, hopefully.

That was the short and sweet sales (inaudible).

And I also tried to be rather brief allowing time for discussion and questions afterwards.

Essentially, this is a well known slide, just to pick the diabetes care (inaudible).

Typical pipeline.

I will not dwell on this; rather use a couple of minutes on some slides that give specific updates.

On this one, you see the well known landscape surrounding the approval process for Liraglutide, also known as Victoza in Europe.

And essentially, the European rollout is ongoing, has just been kicked off in Germany and UK, Denmark.

Right in the US, we have this well known situation where we can now provide this very simple update, but we do expect formal feedback from the Agency in the US during this quarter.

Japan, I think [the interactions] have been very fruitful and also more kind of swift than we originally thought, and hence, we are now able to provide the update.

But we do believe that the PMDA is targeting a decision in the first half of next year.

And for China, we are in the very final process of wrapping up the complete validation and trial [refolding] of the 900 patients size Phase 3 study we did there, enabling us to later this month actually submit the [MDA] to the Chinese authorities FFDA.

Now I'll just dwell on this slide for a second or two.

Essentially, it earns the fifth class of anti-diabetic agents that we have shown you that we tried to be able to surpass in terms of obesity.

This time it was the DPP-IV inhibitors in the shape and form of Sitagliptin, also known as Jenuvia, which was administered as the mass dose of 100 milligram, whereas the Victoza was given at doses of 1.2 milligrams and 1.8 milligrams, which are the two approved therapeutic doses in [the European setting.

And essentially, what we saw was a robust 1.5% reduction from a base line of around 8.5% on the chosen (inaudible), which should be compared to the 0.9% drop on Jenuvia or Sitagliptin.

So at both doses, we saw superiority on glycemic efficacy, and the absolute or the fraction of patients who achieved the target was actually from a base line of around 8.5%, 55% at 1.8 mix of the Lira, whereas it was down to about 20% for Sitagliptin.

Weight loss is -- not surprisingly, there was a 1 kilogram weight loss on Sitagliptin, which is not normally seen.

It's normally weight neutral.

But it was a small loss, but that should be compared up against the 3.5 kilograms approximate weight loss on Lira 1.8, so also here we are faring favorably.

This data, of course, we will seek to publish in the literature as soon as possible, because we have now shown superiority up against DPP-IV inhibitors, short-acting GLP-1 agonists, sulfonylureas, (inaudible), and even and even basal insulin.

Now SIBA and SIAC, I think there's not so much news here, but I'll just shed a little bit of light on the fact that this is going to be the world's biggest insulin clinical trial program ever conducted by far, namely 10,000 patients split among the two programs; the Begin, which is the insulin basal [type] or SIBA program for basal, or you can even call it ultra basal treatment; and the SIAC Boost program, which is a fixed combination of, in a soluble state, of the SIBA analog together with fast acting analog.

Now primary end-point in these major, major trials, which will explore current treatment paradigms as well as emerging ones by definition.

And coming out of these trials is, of course, A1C; and secondarily, we're looking at hypos, general safety and kind of the usual thing.

Active comparators we've selected as the golden standard products, namely those that are the best selling in that category, and they include NovoMix, Lantus and, of course, we also have Levemir in there.

Trial initiation is going to be from now on in the first week of this quarter all the way to the first half of next year.

Finally, on this slide, we've seen the biopharmaceuticals and the pipeline where I think the major update is that, on the one hand, we have initiated new factor 13 trial in cardiac surgeries, I think.

We also are on the verge of initiating clinical trials with a once-weekly Factor 9 analog, moving very soon in to Phase 2 for the long-acting Factor 7 analog.

And still recruiting [feeding] episodes in the NovoSeven successor, the 1731 analog.

So a lot of things going on in the Hemophilia space.

And finally, I'd like to mention that our long-acting growth hormone preparations, known as NN8630, essentially has provided encouraging data based on IGF-1 biomarker in the Phase 2 starting in adults with growth hormone deficiency.

With that, and on the notion that we have entered our third so far clinical project into the pipeline for anti-inflammatories, over to you, Jesper.

Thank you, Mads.

A quick run through of the numbers.

We've got them the wrong way.

There we are.

Basically, a sales growth of 17%, 6% of the currency in the first half of this year.

We're now only expecting 2% of the currency outlook for the full year.

And of a consequence of that, we will be seeing a quite negative currency impact occurring in the second half of this year.

Especially when we get to Q4, we'll have [17] comparisons.

In terms of gross profit, very positive development.

Of course, a significant proportion of this is a positive 130 basis points in positive improvement on gross margin, 150 basis underlying coming through, and most significantly from our improved production efficiency, both in bulk insulin, but also more efficient filling of our insulin.

And the second factor is a positive pricing impact from higher prices in the US, and a slight positive mix effect on the higher growth of NovoSeven, which is our highest margin product in our portfolio.

If you look at sales and distribution costs, a significant increase, reflecting the higher sales for a higher number of sales reps we have, both in the US, now more than 2,000 sales reps dedicated to diabetes in the US, and also expanding our sales force in UK with 150 people, Germany with approximately 100, and also an expansion in China.

Those numbers are reflected in the sales and distribution cost.

You should expect our sales and distribution costs to go slightly up in the second half of this year as we will be experiencing the launch cost of Victoza throughout Europe.

In terms of research and development costs, slightly disappointing all the way down at 14%, but reflecting that we have weighted the clarity on Victoza in the US for to start the large scale Victoza trials, and hence slightly low.

We will, as Mads alluded to, start the large scale SIAC and SIBA trials, and that will beef up our research and development spending in the second half of this year, also going in to 2010.

Admin expenses continue with a positive development.

Approximately half of the growth is related to the currency development.

So admin expenses in Novo Nordisk still growing at the 4% to 5% level year-on-year in local currency.

Net financials is, of course, impacted by the currency movement, but do note that when you look forward at this point in time, we now have a net positive of DKK200 million of income to be recognized.

There will be DKK300 million in currency losses to be recognized in the second half of this year, and then we carry something like DKK500 million in gains to be recognized in 2010.

Tax rate will remain at the 23% level, reflecting a slightly higher proportion of profits coming from our biopharmaceutical franchise.

The overall movement in currencies is reflected here.

No change in the sensitivity.

Do note that we use US dollars as a proxy for CNY exposure, so more than DKK600 million in sensitivity on an annual basis to a 5% movement in the US dollar.

And we've hit that 15 month ahead, as we also have for the Japanese yen.

And as you can see, the next quarter is not too challenging a comparison, but from there on, it will be a challenge for Novo Nordisk at the current level of the US dollar.

The outlook, not a lot of changes this time around, and the key ones really related to currencies.

The first one reducing our sales growth with down to 2% currency effect with previously 4.5.

And now the operating profit, local currency operating that for more than [10] to now, 14%.

And that's really reflecting that we haven't spent the level of cost on R&D as we had planned and hoped for, and we won't catch up with that in the second half.

And as a consequence, we are altering our guidance to 12% to 14% in local currencies, and still as a rule of thumb, approximately double the effect on operating profit than the currency effect we had on sales.

The effect on currencies is offset by a much lower level of net financials.

Previously, we anticipated DKK1.5 billion expense.

Now, it's down to DKK900 million.

And the other thing that changes the free cash flow, which has been increased, so we are expecting more than DKK10 billion in free cash flow, and that enables us to increase our share repurchase program with DKK500 million.

The share purchase program is now DKK19 billion, and it will be completed before the end of 2009.

And that is then continuing the positive trend in return to shareholders.

both in terms of dividend and share repurchases.

And with those comments, we are at the conclusion.

We do believe we have an interesting leadership position in our insulin franchise, and a very promising GLP-1 compound with Victoza.

Also have leadership aspirations broadly in Hemophilia, and bring a broad portfolio of Hemophilia products forward, and also working to improve our growth hormone product with a once weekly version.

And the challenging environment is illustrated well to the left on this slide.

I don't think I want to go through the individual elements.

Just to note that there's a first point that's saying that there seems to be increased regulatory hurdles, and that's certainly proved to be the case.

And with that, I think, [Lars], you will moderate the Q&A.

Thank you very much, Jesper, and ladies and gentlemen, now the presentation is open for questioning.

Maybe I could kick off with a question.

Just two very short ones.

Firstly, the NovoSeven at European label change, do you expect any changes in investigational usage in Europe?

And then secondly, you've outlined a significant R&D program over the next six months in terms of Phase 3 trial starts into analogs, Victoza.

Just any color on the extent of R&D budget increases we're looking for next year.

Thanks.

Yes, the NovoSeven (inaudible) indications for [reservational use] of any (inaudible) on the (inaudible) expectations for (inaudible).

Essentially -- this is turned on now.

The label change in Europe is nothing dramatic.

It's something that we submitted as part of the periodic safety update to the agency already early last year, and now it's come the conclusion, [state] essentially on the fact that, as we all know in the trials that were ongoing outside of the Hemophilia indication, not inside.

Outside.

such as stroke therapy, ICH, etc., there was a slight but significant over-representation of arterial thrombotic events, and that is now reflected in the European label, so it will have -- first of all, our estimation is that it will have no impact on sales in general of NovoSeven, and off label or investigational use in Europe, A, is of a limited nature, but B, it is well known by the physicians who do use Factor 7, in which patients they feel that the benefits outweigh the risks.

So there's really nothing new in the situation from that perspective.

We just like to update you on that one since it has come into the label.

And then before Jesper gives you the R&D, it is true absolutely that we will next year have a very heavy year, and that the real drivers will be SIBA, SIAC, cardiovascular program on the [closure] molecule, and if and when we progress later on both with the [BEC] the (inaudible) and hemophilia pipeline.

And then (inaudible).

If you look at the R&D spending, the second half of this year will be approaching 17% of sales.

So the full year number should be in the ballpark of 15.5% of sales.

If we look into next year, of course, the level that we're going to be at in the second half of this year is going to be more indicative.

So it will be in the 16% to 17% of sales that you'll see on this ratio next year, a little bit depending on the precise timing on the cardiovascular trials.

Sorry.

Jo Walton from Credit Suisse.

I just want to look at the basic Insulin business a bit more.

I wonder if you can give us some more color on this slowdown in Europe.

Is it across all countries?

Is it just in some countries?

Is it price pressure?

Is it actually people trading down to perhaps older forms of insulin?

If we look in the US, you've shown that you've downsized, I believe, 62% to 65% penetration of modern insulin.

Is there a ceiling to that level that you think that we should get to?

Because if we look at the growth in the US, you've got fabulous volume, great price, and then this mix effect.

I'm wondering which of those will come to an end first.

And in particular, in Japan, if I were to go to a Japanese doctor, why would he be choosing Lantus so much more frequently than Levemir?

And is it something -- you say you're having -- you have more reps, but is that something that just reps then sort out, or are you going to have to wait 'til you've got more products?

And a final question on your new molecule.

What sort of level of superiority in terms of efficacy are you expecting from your ultra long-acting?

And presumably that huge study, you're hoping to get a much higher proportion of people to goal than you would with Levemir.

I mean, that is presumably what you're after.

I was just getting some sense of what degree of superiority you might get.

Thank you very much on that line of questions there.

And, Mads, you can start working on this SIBA trial and the goals that you try to obtain with that.

And then I'll kick off with some comments on the European Insulin market; perhaps talk a little bit about the US; if there is a ceiling in terms of conversion, and give you my take on the competitive landscape between Levemir and Lantus.

First, to the European market; we see the overall growth of demand for insulin in Europe in recent quarters going down to about 3%, which is rather unusual.

We had anticipated that it would be more like in the 5%/6% range.

It is not evenly distribute between countries.

We have seen -- we have set some distribution chain changes in the UK.

We have had a very anemic development of the German market, much more volume development in Southern European markets, and that then [cooperating] with a larger loss of market share, for instance in Spain, has resulted in us feeling the pinch in the European Insulin market.

We do not anticipate that this is a long term trend.

It is still our anticipation that demographics and dynamics in diabetes care should lead to a consumption of insulin in the range of 5% to 6% in terms of volume and expansion.

We are not seeing any significant write-down to human insulins.

There is the situation in Germany where we have had the expert report on long-acting insulin analogs, and now the discussion is with the government on future reimbursement and pricing on long-acting analogs, and whether or not that will lead to a trade-down.

We did not see that when it came to short-acting analogs.

The industry ended up with pricing structures which allowed the continued conversion and continued having the patients staying on short-acting modern insulin.

So lots of different factors influencing the situation of our business in Europe but, clearly, not a satisfactory picture.

We have decided to increase our sales force, and that has been -- the decision has been taken to support Victoza launch.

In addition to that, we have had management changes in several countries.

So we're basically reanalyzing the whole setup of our European business to try and see if there is anything we can do differently.

With regard to the US, I do not see in reality any ceiling.

The US is the fastest market to convert to modern insulin.

There is great understanding of the clinical benefits, and appreciation of the clinical benefits of modern insulin in the US, so I don't really see any ceiling.

But obviously --

(Inaudible)?

Yes, well, clear.

We know from past history, that there are some very conservative [switches] at the end which may be hanging in there, and will be continuing, as we've seen with animal insulins, it will be continuing for the rest of their lives, with human insulins.

And we don't want to make any changes.

Of course, we're not going to force switches like that.

So it'll probably tail off, but there should no reason why it should not be completely converted.

When you look at Japan, Lantus got first into the market in Japan, and that first move of Lantus has certainly had an impact.

Lantus has a strong image amongst Japanese key opinion leaders, so they're getting a better share of the conversions than we -- as we actually started with capture rates of around 50% of new starts on basal insulin in Japan, and which looked quite impressive.

And we grow -- we grew market share in the basal segment very rapidly in the beginning, but somehow, our capture rate has deteriorated towards recent months.

And in Japan, we have decided also to expand our sales force to counter the detailing which we see from Sanofi-Aventis.

And we have great expectations that an approval of Victoza in Japan in the first half of 2010 will open doors for us, and will create more attention to our portfolio on the part of the physicians than what we have been able to create in recent quarters.

Maybe on US, a comments to that would be that we are seeing the pen penetration in the US picking up with all of the major competitors pushing forward disposable devices in the US, and the pen penetration now is exceeding 20% of the volume market.

And we're seeing that in the modern insulins, it's over a third of our new patients, which are starting on devices.

So I think that's longer term going to be important that the US is converting into a pen based market, and so basically having an extra cost for the patient per day of around $0.50, so that's another value driver.

And then, Mads, finally, what goals are you trying to achieve?

Obviously, because (inaudible) effect, but that's not the end of --

No, I think this is a very good question, and it needs a multitude of answers, because the question (inaudible) you were asking about, how (inaudible - technical difficulty).

That's a prerequisite.

You have do your targets.

You have fixed targets (inaudible).

But what we then do (inaudible) is that we showed benefits on (inaudible) hypoglycemia, (inaudible) treatment is successful, but (inaudible) as the fraction of patients who go beyond or below [7 percentage points] they want to see for the actions of the glycemia.

This is one element of our (inaudible) profile for these two products, but it's only one out of four elements.

Now to take that one first, typically in the (inaudible) trial of Lantus that was published in (inaudible) so the (inaudible) is somewhere from 30 to 35 (inaudible) patients, (inaudible) high dose.

(Inaudible).

If we then look at the [business], it's also about (inaudible).

Now what we have seen and announced in the Company announcement for the Phase 2 program was that it was done -- we were able to demonstrate up to 65% [success rate], i.e., due to the fact that (inaudible) reduction and a [predictable] (inaudible), we were able to see a vascular performance.

That [wasn't here], but it was also substantial effect.

Now I will not promise you that kind of (inaudible) success rate in Phase [3] for a number of reasons.

(Inaudible).

But we have seen a [depreciation] which we will build on (inaudible) on the one side, and (inaudible) on the other, and it will be pretty good (inaudible) we will have sufficient (inaudible) treatment success rate that will lead to a good label.

Now there are other aspects.

Today, you can say the paradigm has slightly (inaudible) in the Asian world, and (inaudible) prices (inaudible) in revenue.

Tomorrow, that will also be the case, but we foresee new scenarios and new treatment paradigms that will only emerge if we in Novo Nordisk (inaudible) in the right way.

And the reason for that is that we are (inaudible) making it possible for us to start issuing once daily, (inaudible) control on top of the (inaudible).

So we can do new paradigms (inaudible) that will allows us to hopefully (inaudible) while building new [initiation] paradigms (inaudible).

We should not forget that the whole (inaudible) the world's first liquid combination product.

That in its own right is convenient, but also the fact that the patient can take this (inaudible) injection any time of day, which (inaudible), because there is no treatment, in contrast to the other (inaudible) which have a (inaudible) around 12 hours, and now have extreme capability of dosing [our] patients.

Finally, of course, even though we don't need it, we believe we will, of course, wrap the product into a device that will provide novelty and superiority also in that regard.

All right, thank you, thank you very much.

Next question, please.

Feel free and encouraged.

Yes.

Thanks very much, good afternoon.

It's Brian Bourdot from Barclays Capital.

Two questions, one relating to the Liraglutide, and the other relating to the situation in Europe.

Firstly, you're developing Liraglutide in obesity, and the one study is already ongoing.

You told us that two other studies have been delayed, pending outcomes in the US.

I just wanted to ask you, is the decision to proceed or not proceed with the -- with development on obesity, contingent purely on approval or otherwise in the US?

Or would there potentially be some language on the label that could lead you to decide not to develop it?

So that's my question on Liraglutide.

My question on the situation in Europe is a follow-up to -- you mentioned you'd seen some management changes.

I just wanted to ask if those sorts of changes have been greater than what you'd normally see in the normal course of your business in terms of turnover, and whether there have been any significant departures to competitors?

And I hope you don't find this question offensive, but I believe Bayer is looking to get into this area more; they've done a deal with BioTime.

Have you seen any significant departures in your Company, to that company?

Thank you.

Well, if I should answer the last question first, and then perhaps, Mads, you could take the Victoza obesity question.

The management changes that we have seen in Europe have been more recent.

It has dealt with exchanges in management of certain major markets.

It has been not voluntary departures, so it has been management decided the changes to strengthen the local management of our business.

The Bayer/BioTime collaboration, to my knowledge, has not employed, or intended to employ any of the Novo Nordisk people, and we see this largely as a potential to support Bayer's business in China.

They have a rather strong OAT business in China, rather than building a position as such in the human insulin market which would not be very forward oriented.

So --

And a pre-condition for penetrating the Chinese market would be to get reimbursement for their version of human insulin in China before they really can begin to make any market inroad.

So that would probably -- knowing the Chinese reimbursement system, probably more be something that will impact the market in '11 than it would impact '09/first half of '10.

So, Mads, then --?

Yes, and that's why (inaudible) indeed, as you were saying, a new (inaudible) approach, because there are different elements to it.

One is, of course, approval of Victoza, which we hope to get.

Now, once we have that approval, we also have a label language and, obviously, if you're not diabetic but just obese, with maybe co-morbidities, you are at risk of getting diabetes, yet the benefits to risk is seen in a different light, because you're not having the diabetes complications associated with hypoglycemia.

So obviously, if the label language were such that it would be uphill to end up with a benefit risk profile for that treatment population, we could consider using the system study as a supported study, because I'm pretty convinced we'll get good data, or I hope we'll get good data, and not do the full [treatment] program.

What our hope is.

of course, to get a nice labeling language that supports the further exploration or -- and approval process, for obesity, non-diabetes indication.

But more about that once we can and when we can see the label, and also go into discussions with the Agency.

It may be that there are elements in the approval that also are indicative of what we should do in Phase 3, in terms of what to monitor and what not.

So I think it's prudent of us to do it this way.

Thank you.

And just one quick follow up, just on the labeling and perhaps REMS discussions.

You said you hadn't seen the labeling yet.

I just wondered how far you are with discussions with the FDA have gone.

Have you approached labeling or any REMS discussions, at this point?

Okay, we again, will not comment on specifics of our dialog with the Agency.

What I can say, as regards the REMS, is the following.

That at our meeting in early June, we, as I think we've highlighted a couple of times, we did discuss risk management plan, and in a risk management plan, one could consider a REMS.

And if you have two extremes of the REMS, one is the (inaudible) REMS, where for each individual patient, a lot of things -- it's a great product, by the way -- but a lot of things have to be fulfilled, and filled out and whatnot for any given patient to be given that product.

And the other extreme is the simple, small medication guide, that is put in as an insert to the package for the patient's sake, describing whatever it may be.

Then that will be the end of the REMS scale, so to speak, we will be discussing, not the (inaudible) at the end.

So nothing that would have a commercial impact on the viability of this product.

Yes.

Thank you, it's Andy Kocen at Redburn.

I was just thinking about the components of your long term targets, the financial targets that you set out at the start of the year.

You were talking about margins round about 30%, which is not a great expansion on what you achieved in 2008.

And yet you're also talking about 15% operating profit growth, which suggests that that growth is coming from top line, rather than margin expansion.

So -- and then looking through the portfolio, the bio-pharma bit of the business isn't growing as strongly as it has in the past.

Human insulin is declining in local currencies.

You've got problems with OADs and packing expirations.

So would I be right in assuming that your thinking that your insulin/analog portfolio, and GLP-1s are going to be growing well above 20% for the very long term actually as part of making that guidance?

Well, I don't think we expect our insulin franchise in the very long term to grow above 20%.

That probably would be in a very positive scenario.

I think we believe that the insulin franchise will remain the most significant proportions of our franchise, and we believe that the growth that we see in the next five to 10 years coming from the insulin franchise, will be 70%/80% of the growth that we will see in the business.

Victoza will come on top of that, and then leaves the diabetes care franchise to be the fastest growing part of our business.

The 15% growth will hinge on bringing our margins gradually from where we were last year, and to the 30% level.

Note that we do operate in regions of 5 percentage points in margins when we actually change.

It wouldn't be meaningful for us to talk 30.5% or whatever.

And we don't see -- we're not precise on the horizon for the achievement of our long term target, because there a huge number of factors that influence.

Victoza is clearly one of them which could defer the point in time where we realize them.

Currencies are another one.

The US healthcare reform could be another swing factor which is clearly beyond our control.

I just think that they provide reasonable guidance to the margin in terms of what our ambitions.

Clearly, we will operate the next, probably 1.5 year, assuming approval of Victoza in the US, we will operate with what we would refer to as elevated [SNP] levels, [certain] distribution levels.

Hopefully, there would be some efficiencies coming from having successfully launched them, whereas our (inaudible) level clearly should pick up some of that -- those resources released.

And then the gross margin improvements should really come -- of a gradual improvements of our gross margin, and also I think, a very stable and steady, continued improvement in our admin ratio, which also provides 10 basis points, 20 basis points, 30 basis points year-on-year.

And that together should hopefully enable us to deliver the 15% ambition that we have.

But, of course, the ambition is dependent on us getting to double digit growth in our sales, and it could be a challenge, and to some degree, we are near term dependent on growth from Victoza.

Second, a few years out, we are dependent on being able to lifecycle with the new generation of modern insulin.

If none of that were to materialize, I think it would be challenging for us.

Thank you.

Yes?

Two or three questions, please.

John Reeve of S&P Equity Research.

First, in terms of sales force, you've talked of recent expansion.

Has Q2 borne the full cost of those recent sales force numbers?

And when you talk about increased selling expenses in 2010, are you assuming more staff coming onboard, or is that just more marketing expenses (inaudible)?

Are you getting increased share of voice, or is everybody in the (inaudible) markets increasing in parallel?

That would be my first set of questions.

And then quickly, you talked yesterday about the fast-acting NovoSeven analog successor, and the failure of [subcute].

Is that product viable without the subcute?

What's the route forward for that?

And noting another monoclonal going to clinical trials yesterday, can you remind me of the hurdles you apply before progressing new molecules into the clinical trials?

Do they have to be [treated] best in class, or first in class?

Thank you very much.

In terms of sales force, we talked about expansions.

We talked about expansions in Europe to launch Victoza in Germany and UK.

Those have been planned, and have been implemented already in the beginning of 2009, so that is included in the Q2 numbers.

The Q2 numbers also do include the US expansion.

Additional expansions in Europe for more aggressive rollout of Victoza in the European countries have not been included.

And our expansion of sales force in Japan to counteract the success of Sanofi-Aventis has not been included in the Q2 numbers.

The 2010 expansion will be -- has been planned, the continued rollout.

We will see, perhaps, given a successful launch in United States, a further expansion of the US sales force some time during 2010, because in an ideal situation, we would need to continue to support Victoza in the US as well as the modern insulin segment in the US.

So that would require perhaps yet another expansion some time in 2010.

And then there will be overseas expansions for the launches that are taking place in overseas markets.

Largely, in terms of share of voice, the picture is such that the Sanofi-Aventis and us are having a fight on share of voice.

There's no indication of Sanofi-Aventis reducing marketing activities on their portfolio.

Lilly, on the other hand, has announced some gradual withdrawal with the program to retire some of their sales staff, which is also intended to impact the insulin patients.

So there the picture will be in more starkly Sanofi-Aventis versus Nova Nordisk.

That, Mads, is the hurdles for monoclonal antibodies.

What are the viability of a successor to NovoSeven in the current form, after the subcute hope?

Yes, now we have so many coagulation factor projects that it's easy to confuse them.

And the one that was the subcutaneous was actually a reformulation of the existing product, rather than an analog, okay.

And when you reformulate for subcute administrations, you don't do it for on-demand therapy, because this is a big molecule with a weight of more than 50,000 doses.

Hence, the time to peak action will always be too long for on-demand treatment, i.e., implying that it was an approach to get early into the prophylaxis market, with an easy route of administration, namely subcutaneous.

Now the fact that the good old human factor 7A did not work down this route doesn't mean that the long-acting version that we are now moving into the clinic subcutaneously will not, because the viabilities of that particular analog is actually higher in the pre-clinical species that we used to assess it, namely the monkey.

So essentially, we're just swapping good old factor 7 for a derivative of factor 7, for the subcutaneous prophylaxis indication.

However, the successor to NovoSeven, it's critically important that the analog NN1731, it will from now until eternity always have to be given by the IV route, because you want a peak thrombin burst within a matter of as few seconds as possible.

Now the benefits of that one, as I think is present in the slide and the appendix, is that it has a more massive and more swift onset of thrombin generation and hence a clotting cessation, or clotting and bleeding cessation, and that is documented both in animals and in the Phase 1 studies.

So I would say we rely heavily on that product to generate good Phase 2 data, so that we will be superseding all hemophilia patients by use of this agent, rather than NovoSeven prior to any bio-generic, bio-similar compound hitting the market, or for that matter, the bio-compound.

The hurdles for monoclonal antibodies are such that some of them are efficacy driven, some of them are safety driven.

And, obviously, in light of, let's say, the things that have [multi-genero], we typically use receptor occupancy targets using human cell systems as prerequisites for moving further so that we can target a PKPP and safety relationship that we can argue to ourselves and authorities is justifiable.

But your question was more, are we going for first in class or best in class?

And if you look at compounds such as the [NTR] 20 and the C5A, complement 5a receptor blocker, which were the first into Phase 1, these are first in class molecules.

And by the way, so is the one that has just entered the clinic.

They're all three targeting first in class.

I will not rule out that we every now and then go for a best in class molecule.

And since we are a newcomer to the field, if we would not be first in class, we would have to target best in class, or otherwise not do it.

Last question, please?

Yes.

I'm sorry.

How do I do this?

We'll take two.

We will take two.

Two last short ones, please.

Hi.

It's Michael Leacock from RBS.

I just wondered if perhaps, given these new analogs you've got coming along, particularly in the safest market where there's a large number of different products, what's the CapEx going to look like over the next few years?

Can you use the current facilities, or should we perhaps start to expect funds to build up now for the success of those products in the future?

Well, should I answer that question then?

At least initially, we had a -- and I hate to remind you, greater expectations for volumes for NovoSeven than we've been able to succeed with in selling.

So we have actually upstream capabilities to manufacture the (inaudible) in relatively nice volumes.

So there are some possibilities there.

If we get into a larger number then, of course, the sheer number of different drugs may have some implications for expansion but, Mads?

On the insulins and GLP-1s, essentially you can say that the bulk manufacturing facilities, because these new analogs, they are based on the human insulin [skiliton].

So human insulin, (inaudible), but also SIBA and SIAC, will essentially be using the same bulk facilities where as Jesper has alluded to we have massively upgraded the yield and the output of our facilities.

So don't expect a call for new facilities of that kind.

Every now and then, there will be the need to invest in a purification facility, and certainly, of course, secondary packaging, but nothing massive like we had a decade ago.

And again, here I'd hate to remind you that we build capacity for pulmonary insulin, so in a way we have taken the hump of CapEx for the upstream active ingredient manufacturer on both the mammalian side and on the insulin side.

And that comes quite handy.

And that's also why you see some of the margin flow-through and some of the nice reduction in CapEx expenditure programs.

And then we'll take the last one on this side.

It's Jeff Holford from Jefferies.

Just on -- going back to Liraglutide.

Forgetting all the near term regulatory stuff, what gives you the confidence you can build any long term growth from this product?

Obviously, next year you don't have any new filings for [23].

Large cap pharma companies are really once weekly filed.

Your once daily will seem quite inferior to a patient in terms of administration.

And your once weekly, you haven't even started the Phase 3 product yet.

So just really wondering coming last in class there, is this just a short term pop on the revenue to keep us going until you get the analogs coming in?

Or do you really actually think you've got a long term franchise there?

We'll give you two answers because we have two different answers.

I'll give you Mads Krogsgaard first, the scientific answer, because he's very excited about the long-acting (inaudible).

I'm less so, but then -- so I'll finish off.

No, I think very briefly, first of all, I must remind ourselves that according to the FDA guidelines and what Mary Parks said on April 2, neither Semaglutide nor (inaudible), nor any other future compound -- maybe (inaudible), but none of the others, will get through scrutiny of the FDA without a pre-approval CB trial.

Maybe that [Roach] is hoping to squeeze by without the conduct of that one being completed.

But that would not be as per what the FDA stated on April 2.

Now as regards to Victoza's stance against the once weeklies, I should maybe remind you of something we've said previously, that if you compare a kind of two vials and thick syringes that clog one time out of every seven you try to inject, and so on, as we have seen (inaudible), with a [D23] needle, in spite of the thickness of the needle.

And some antibody [formations], some skin nodules, etc., then our [micro switch] tells us that we can clearly stack up against (inaudible) with Victoza.

The biggest -- the threat so to speak is if we were not to grab a very strong foothold and create a patient preference with the once daily Victoza before, for instance, (inaudible) came of age, let me remind you that in the [Lead 5] study, we were able to, against once daily Lantus, which is doing decently in the market, we were actually able to show in a real life setting better control, with no need for day-to-day monitoring in the home setting of blood glucose, as you have to do with Lantus, and the absence of hypoglycemia.

So the one thing you have seen is already well accepted in the GP offices by practitioners and patents alike, even though you have to try to dose and monitor glucose values and you still get hypos, which is not the case for Victoza.

So I think the one stage are here to stay, and we don't see any real competition in that segment, which we for sure believe we can be the leader of.

I should say Semaglutide, even though it's not going to be among the first in class, has the same notion as does the Lilly (inaudible construct), but these are two molecules that have an inherently extremely long circulating half life, and do not give first release phenomena or similar things that have been somewhat dose limiting.

Also in the case of (inaudible), where you did see a 3 times peak value after each injection, causing up to 52% nausea and vomiting in the Phase 2 trial.

So these [good ones] are not all alike, and I think the best in class potential, based on a molecular basis, will probably be Semaglutide, and I guess also the Lilly construct.

But they're coming in with different timeframes some of these, of course.

One comment from me.

From experience, I have rarely seen prolonged acting drugs not coming at a cost, so to speak, even in terms of convenience or side effects.

I happen to be a very, very strong believer in the once daily.

We know what the product can do.

It's easy to remember.

I's a diabetes-like pen; very thin needle.

This is as convenient as it gets, and I think it's a very, very strong profile.

So I'll be putting my money on the once daily, and make sure that we make a success out of that.

We have an upside on the once weekly, with some additional benefits from having that very, very flat profile, we'll take it.

But I think we have the best bet right now.

With all of that, thank you very much for attending this luncheon.

We unfortunately have to move on and see if we can make other people interested in Novo Nordisk.

We thank you for your interest.

Thank you.