諾和諾德 (NVO) 2009 Q3 法說會逐字稿

Okay, so I think we'll just get going now.

So on behalf of Credit Suisse, it's a real pleasure to have Novo Nordisk senior management in London here with us today.

From Novo, I'm sure you all know the guys here pretty well.

We've got Jesper, Chief Financial Officer, Mads, Chief Scientific Officer, Lars, Senior Vice President Finance, along with the Investor Relations team, with Mads, Kasper, and Hans.

Thanks to all of you for coming today.

I know it's a busy results day again today.

So with that, I'll hand it over to Jesper.

Thanks, Gavin.

We tried to learn a little bit from the feedback we've had on our quarterly road shows, and then we've heard from some of you that you feel that some of the slides we are showing every quarter, so we may do this presentation slightly faster.

So let's see whether we succeed with that today.

First of all, of course, I need to advise you that we will be making predictions about the future, especially making predictions about how 2010 is going to evolve, the regulatory process for Victoza, and the US healthcare reform is difficult to predict, and of course, it involves significant uncertainties which you can read a lot more about in this forward-looking statements slide.

I'm going to cover today highlights of our quarterly release, and I'm going to cover an update on sales.

Then I will request Mads to give you an update on our pipeline, and Lars Green, our Senior Vice President from Corporate Finance, will cover financials and outlook.

And then I'll be [roaming] up, and we will be doing a Q&A session, which I'll moderate from here.

And unfortunately, we only have approximately something like 50 minutes to do this, so we'll have to do it rather fast.

If you first look at the highlights of the quarter, another quarter -- in fact, the [30th] quarter in a row when Novo Nordisk delivered at least double digit growth in our top line.

We've had a lot of tailwind the first three quarters of this year.

Now we have 4%, so reported sales 15%.

But do bear in mind how it's developing over the year.

We started with 6%, 6.5% -- now we're down to 4%, and we're only predicting that for the full year, it's going to be 1.5%.

And that is intrinsically having the effect that the final quarter of the year, we'll have something like 6% negative currency impact.

So the currencies have really come around significantly.

Our portfolio continues to be driven by the modern insulins, growing 28%, and of North America, as our largest sales region, growing by 29%, reported terms.

One of the key swing factors we have is, of course, the approval process for liraglutide.

It's in the final phases.

We should anticipate that we, in the coming weeks, will get a feedback, so we will have a formal feedback from the FDA before the end of this year.

We have started the Phase 3 clinical programs for our second generation modern insulin, SIAC and SIBA.

We expect to enroll approximately 10,000 patients in these trials, and I'm sure Mads will elaborate a bit more on those trials in his section.

NovoRapid, the high mix is a NovoRapid mix, and NovoRapid 50 and NovoRapid Mix 70 have now been approved in Japan, and that was the final missing link in the first generation of modern insulin, and actually, the high mixes are rather important in the Japanese market.

Remember, mix constitute almost -- mix insulin constitute almost 50% of the Japanese insulin market, and we expect to launch these products as soon as we have reimbursement fixed, so that would be in the first half of next year.

Financials continue to show an expansion of our gross margin, 250 basis points improvement to 79.5%, 100 basis point help from currency.

But still, 150 basis point underlying improvement.

Operating profit growth reported, 30%.

Currencies helped, approximately 10%, so we had just under 20% in local currency terms.

And then we had the benefit from last year of having closed down our pulmonary insulin, so if we adjust for that, the underlying growth is just around the 15% long-term target we have for growth in operating profit.

We still also -- we are also expecting around the 15% mark for the full year 2009.

We've also given some indication as to where 2010 is going to be, and if we look, take it first in local currency terms, we have three factors which are quite important for the development in Novo Nordisk turnover next year.

If we take them one by one, I've already mentioned the first of them, which is a -- uncertainty surrounding the approval of liraglutide, or Victoza, in the US.

The second is the outcome of the US healthcare reform process, which could have a significant impact on our top line, and of course, also on the operating profit, and we could -- we preliminary estimate that it could be an impact to the tune of 1% to 2% of global sales.

Although it is very uncertain what is the precise outcome be, and what is the specific timing of the individual element -- when are they going to be [effectful] from.

And then, the final element is [re-patentize] PRANDIN in US, NovoNorm in Europe.

Our oral tablet for diabetes care treatment that has gone off patent in the US and will go off patent in Europe, in terms of the original patent, we have a combination patent that do protect us in the US that is being disputed by a generic manufacturer, and that is currently involved in litigation in the US, and we'll have to see how the courts will rule on that.

And I think we'll have more clarity on that front within the next six months.

But until then, we have not yet seen generic competition in the US.

The European patents are country-based patents, and those will begin to expire at the turn of this year, and then into 2010, 2011.

And hence, we should anticipate that some generic competition could emerge also in Europe, although in Europe, we also have a combination patent covering the combination use of Metformin and Repaglinide.

So the effect there is also uncertain.

And as a consequence of that, we decided to go for an indication of our turnover growth as a range, and not as a specific number.

In terms of operating profit, we just basically wanted to give a flow, and seeing if we are at the bottom range of the top line growth, then we will, at minimum, deliver more than 5% growth in operating profit, and of course, if we are at the more positive end of the scale, it could be much higher.

But of course, then, you have to look into -- one of the parameters I've just mentioned before was actually panning out to give the growth in top line, and then from there, estimate what the full year number is going to be.

We've also indicated that there will be a significant negative currency impact next year.

Top line, approximately 3.5% negative, and on operating profit, currently looking at around 7% negative impact from currencies on operating profit.

But do bear in mind that the hedging policies that we have leave us with an income on the same major currencies which we will record on the net financials.

So the effect we'll have on operating profit will be offset by a similar positive effect we anticipate in the net financials.

That was the comment I wanted to give on 2010, which was quite elaborate.

Then I'd like to move on, to just talk about the number of patients with diabetes.

This is the key driver of Novo Nordisk business.

And we've included this slide to illustrate to you that as we see updates from the International Diabetes Federation on the number of -- people of diabetes in the world, we each time see an increase in the estimate of how many people that actually have diabetes.

And so, if you go back to last year's -- last edition, they were estimating that there was around 245 million people with diabetes in 2007.

And now, that estimate has been upped to 285 million by 2010.

So we see a significant increase every time they [upgraded], and furthermore, we also continue to see a significant growth to the tune -- estimated over around 5% year on year in number of patients with diabetes.

If we look at the current estimate of 285 million, that is currently expected to grow, by 2030, to 400 -- almost 440 million people.

Of course, a very significant part of the growth is going to come from what Novo Nordisk refers to as International Operations, the developing countries.

And of here, of course, China and India are the two most significant ones.

Also note that healthcare costs will increase -- maybe not fully in line with the number of people with diabetes, as a significant number of these patients will be cared for in the developing countries at a lower average cost per patient.

But still, if you look at the significance of diabetes healthcare costs, it is more than 10% of global healthcare costs.

Let me move on to the sales development for Novo Nordisk.

Diabetes care remains the key part of our business.

It covered 76% of the growth.

And we saw it -- growth in reported terms, 15%, and in local currency terms, around 11%.

And you're seeing a continued switch from human insulins towards the modern insulins.

Our human insulin franchise is still growing in the International Operation markets, but in the developed countries, we are seeing a decline in the human insulin business at the expense of modern insulins.

I'd also like to highlight that we continue to show very solid growth for both our NovoSeven franchise and Norditropin, both of them growing around 10%.

In terms of the -- on a regional split, North America remains the bigger market in Novo Nordisk, covering 36% of our sales on reported terms, and it's covering half of the growth, coming from North America.

So when we also talk about Victoza and the importance of getting this product approved in the US, you can see from this distribution of growth why we do believe that US is a critical market for us.

International Operation continued to grow quite significantly, though in local currency terms, only growing 16%.

There you see a slight effect of the impact that the global recession have on the patients' abilities in these markets to actually pay for the medicine.

So we are below the trend growth, which we believe in these markets should be around 20%.

Still, they cover almost 30% of the growth in Novo Nordisk's business.

If we look at what are the expectations for growth, and you saw a modest level of growth in Europe, we believe that that really has to do with the development that we see on a regional basis in the insulin volume growth.

First, let me just give a comment on International Operations here.

Here you actually see the slight decline in insulin volumes that we've seen following the economic recession, and we believe that is linked to the lower ability by patients of handling the co-pay, and hence, we are seeing a slightly lower volume growth.

One should assume that if we have a more stable economic development, the regional growth in IO should probably move back again towards the 20% level.

Also note that the world volume growth is rather stable, and actually stays above the 5% volume growth year by year, and that's really been driven by the number of people with diabetes, as was just illustrated on one of the previous slides.

If you look at the development in Europe, part of the reason why we are seeing a rather slow development in Europe is that we have a slightly below trend growth currently in Europe.

We believe that that would revert to the 5% level, and then Europe should go back to growing in a level above 5% for Novo Nordisk.

In terms of North America, here we are seeing a quite high growth level, and it's actually one of the highest growth levels we've seen in the last decade.

So there seems to be a good movement towards diagnosis in the American market, and overall, I think to the right, you should also note that the developing markets now constitute 15% of the world market, and this will continue to increase.

If we look at our -- look at the second value driver, on top of the more insulin volumes, assume that at least 5% year on year.

The other key swing factor for us is the value upgrade that we get when we convert patients from human insulin towards the modern insulin, and as you can see from this slide, that process is going quite stably on.

All new patients seems to be started on modern insulin, and hence, we are seeing a conversion rate going on at 5% to 6% year on year.

But of course, developing markets like, for example, China, have not come this far.

They are maybe only currently at the 20% level.

And in terms of market share, Novo Nordisk continued to expand our market share within the modern insulins.

We are the only player with a full portfolio of modern insulins on the market around the world.

In terms of the individual three segments, you can also see that we are seeing a steady and positive development for each of the three brands.

Novo Nordisk was not first in the three segments, but we have steadily been able to increase our market share in all of the three segments, and you also see that illustrated in quite handsome growth rates for each of the three products.

And I think, when we get to the turn of the year, maybe early into next year, Novo Nordisk will have a portfolio of three blockbuster insulins with our modern insulins.

And then finally, I'd like to make a comment on Victoza.

We've rolled out Victoza in three countries now in Europe, following the approval at the [meeting] this year.

The first market where we are significantly active is Germany, as we have reimbursement in Germany currently.

And there, we are seeing that the launch of Victoza is enabling a significant expansion of the share of the diabetes market that GLP-1 takes.

You can see that not only are we cashing in on Byetta, but we are actually together expanding the market towards the 3% level of overall diabetes care.

There is high enthusiasm among both key opinion leaders and GPs in Germany for our drug, which enables patients to only inject themselves once a day, getting a significant HbA1c effect, getting a reduction in their blood -- sorry, in their weight, and also, have a positive effect on blood pressure.

And all this, they are doing in the absence of risk of hypoglycemia, and hence, the need to measure their blood sugar multiple times a day.

We're seeing also a very positive development here in this country, United Kingdom, although it is much more a gradual process in UK to get acceptance in terms of formulary access.

We estimate that we currently probably have access to approximately 20% of insured lives.

And in Denmark, we've actually gotten full reimbursement, and we have, in a few weeks, actually, just gotten to 40% of the GLP-1 market.

We believe that we will continue, or we will continue to roll out our products throughout Europe, and a number of northern European countries will launch at the turn of this year.

The key issue for us is to ensure that we have reimbursement when we launch, and then we will continue to bring it out in a European setting.

And with those comments, Mads, over to an R&D update.

Yes, and I'll also try to debrief, very quickly, two external events that I think are of some relevance in this audience, is that on the one hand, we have seen, around ten days ago, publication in the New England Journal of Medicine of what is the longest randomized control trial within insulin therapy, both initiation and intensification in Type 2 diabetes.

Using the Novo Nordisk modern insulins, Levemir once daily, NovoMix twice daily, or NovoRapid three times daily at mealtimes, interestingly the beta were favorable, both for the once daily basal, and for the premix approach towards initiation.

Now, moreover, there has been released from the American Academy of Clinical Endocrinology and the American College of Endocrinology of some guidelines that stress how they believe that incretin use, in particular, GLP-1 agonists, but also insulin analogues, should be a very important element in future therapy, driving glucose levels towards the target range with a very low risk of hypoglycemia.

So clearly, there's a movement towards understanding how the ACCORD trial has influenced the way of thinking, glucose being driven down in a safe, non-hypoglycemic way.

Now, Jesper has mentioned most of the highlights from the diabetes pipeline, so I will actually not say much more, apart from the fact that we are awaiting, as all of you are, the Victoza outcome from the FDA this quarter, and that SIBA and SIAC essentially are driving a very nice recruitment performance.

In Phase 3, we have initiated the second wave, and the common theme here is that we seek to improve the treatment's success rate, i.e., show that these two products have the ability to bring glucose levels below 7 in the absence of hypoglycemia to a significantly high extent than the comparator products, Lantus, NovoMix, and others.

If we look at hemophilia and hemostasis, a few phase shifts have happened.

We have been able to initiate a Phase 1 subcutaneous study for a long acting factor VIIa derivative, which could represent a paradigm shift in the management of hemophilia if the viability ends up justifying further commercial development.

Also, we have announced the advent of a long acting probably once-weekly factor IX derivative in Phase 1, and a phase shift from Phase 1 to 2 of the long acting intravenous factor VII derivative for prevention of bleedings in inhibitor patients, known as NN7128.

The final update here is that the short acting NovoSeven successor analogue, termed NN1731, will be a wee bit delayed in reporting of Phase 2.

This is not due to recruitment issues, but rather, the fact that patients who have long been on board are bleeding with a lesser frequency than we originally had hoped for.

We now expect that the [inline] phase of the trial will complete during Q2 of next year.

Finally, there's not much to say on the other biopharmaceuticals, other than we are very happy that we were able to inaugurate our latest research center, which is within cytokine biology on the US West Coast.

We think there is a great momentum over there, and the scientists we have on board.

They do bode well for our future ability to enter products into the clinical pipeline within autoimmune disease.

And with that, over to you, Lars.

Thank you, Mads.

Just a few comments on the financial results.

Jesper has covered the development in sales, with a reported growth of 15%.

Gross margin improved, and as Jesper said, one percentage point or so came from better currencies.

The 1.5% underlying improvement is a combination of still better yields in our production, both in the area of bulk, and also secondly, our production, filling and packaging.

And that has also contributed to higher prices in the US.

That is also adding part of the improvement in the gross margin in 2009.

In terms of certain distribution costs, we have increased our investments in this field, growing reported terms at 20%.

Of course, also, sort of boosted by the development in currencies.

But this should be seen also in the light of numbers on the bottom of this page, the number of full time employees, where more than half of the expansion in full time employees from last year to this is related to increased sales forces in the US, in a number of European markets, in China and a few other international markets.

So therefore, the increase here is very much related to our expansion of those sales forces to keep up with the competitive pressures, and also, in preparation for launch of Victoza.

R&D costs, fairly limited development.

But if we do take out the once-off costs last year related to the closure of the pulmonary projects, there is an underlying expansion in the R&D activities of some 5% or so.

That's still lower than where we expect to end up for the full year, as we have now started the recruitment for the significant Phase 3 programs for SIBA and SIAC.

So therefore, we do expect the fourth quarter R&D ratio to be higher.

And for the first nine months, and therefore the full year, to be somewhat above the current levels.

Admin costs, growing, 8%.

Somewhere just below 5%, when we adjust for currencies, so it's still an improvement, sort of, in the efficiency of the overall administrative areas of the Company, relative to sales.

So operating profit growing 30%, boosted by development in currencies, and we have the opposite effect on our financial lines, where we last year had income from hedging, this year expenses.

So, profit before tax 14%.

Development in the tax rate, slightly positive, and therefore, net profit, 15% growth.

And earnings per share, even 18% with the ongoing share repurchase program.

Here you see the development of the currencies over the last couple of years.

And as you'll see, this is the third quarter.

It was the last time where we would have tailwinds in terms of reported impact.

So fourth quarter, we are looking at a steep headwind, and therefore, as Jesper alluded to, there will be significant negative impact on reported numbers compared to the underlying development, both on sales and on profit.

Therefore, we have updated our financial guidance for the rest of this year, where with -- sort of unchanged expectations for full year.

Sales development of 10% in local currencies, the reported terms is now a little bit lower at 1.5% higher.

In terms of operating profit, we have upgraded the underlying expectations from before, 12% to 14% growth, to now 15% in local currencies, and then a slightly lower impact from currencies, 3% compared to previously 4%.

That negative impact from currencies is then spilling over into the financial items, where we now expect financial expenses to be around DKK750 million.

The effective tax rate, still 23%.

Our capital expenditure, we have reduced our expectations to DKK2.5 billion approximately, since we have slightly different phasing of our CapEx related to our filling facility that we are now constructing in China, primarily.

And therefore, we have also upgraded our cash flow expectations to now at least DKK11 billion.

And as Jesper alluded to, some preliminary plans for 2010, and I think I'm not going to say any more about that.

You covered that already, Jesper.

So with those words, over to you, Jesper, for a conclusion.

Lars and Mads, if I can ask you be over there, then we get it on mike.

This slide is not [innovative].

We are in exactly the same leadership position as we've been throughout the last couple of years.

We have a growing insulin market, as illustrated.

We have a promising GLP-1 compound.

We certainly also need to have it approved in the US.

We have leadership ambition for our hemophilia portfolio, and also a very strong position in emerging markets.

I think the challenging environment is just illustrated here.

We talked about the regulatory hurdles.

We've also mentioned the healthcare reform in the US, which is of significance.

And with those remarks, I will really hand it over to Q&A, so we'll take it from here.

And I think we'll spend approximately 20 minutes on Q&A.

Michael?

I'm Michael Leacock from RBS.

I had just a couple of questions.

And Jesper, just looking long term at your free cash flow before R&D, and then how you're applying that cash flow in terms of (inaudible), the R&D investment, dividends, share buyback, whatever, do you see that ratio, that's changing over the longer term?

Do you feel you will be spending enough on the R&D side of things, or too much, for that matter?

And then secondly, just a question on Japan and Oceania.

I think the senior market share seems to be moving downwards a little bit there.

If I read the chart correctly in terms of volume growth, that also seems to be going down.

Could you just tell us what's going on in that region?

Thanks.

Well, if you take the cash flow, use it -- of course, investment in R&D has a long time been a significant element of our (inaudible) structure, and I expect it to continue to be so.

In fact, when we made the long-term financial targets of mentioning that we wanted to get to an operating margin of 30%, we actually also said that we were assuming that we would do that whilst we were gradually expanding our R&D ratio to a level of around 18%, and that would still be our hope, I think.

What we're seeing currently, because of the delay in our ability to start the cardiovascular trials for Victoza and the challenges with moving on with the obesity trials for Victoza, we've almost doubled the doses compared to the insulin -- no, sorry, to the diabetes care use.

That is basically holding down the R&D ratio.

And then, of course, also, longer term also starting the Phase 3 trials for semaglutide, our once weekly compound, has also kind of been held up by the process with the FDA on Victoza.

And as a consequence, we are seeing at 15% what I would refer to as an unusually low R&D ratio.

There's no strategic ambition from our side in expanding the operating margin at the expense of R&D.

I would almost say, on the contrary.

So the 30% is certainly assuming that we'll get to 18%.

I think in terms of, could we expand it ever, even more?

It of course has to do with what are your pipeline opportunities currently.

I don't think there's a lot of things that you can buy in the area of diabetes care that would really be meaningful to us.

So I think in the near time, I think 18% is a meaningful guidance.

And if we are really successful with the early stage intubation compounds, if we can take oral and -- sort of an oral GLP-1 through the clinical pipeline, I'd love to get into challenges on that front.

But that's certainly three to four years out.

In terms of Japan and Oceania, it is rightfully noted that we have seen a slight drop in the insulin volume growth in Japan.

We're not reading any long-term pattern into that.

I think the diabetes care that we see in the Japanese population is slightly different from what you see in Caucasians, so they become quicker insulin-dependent.

And we don't have any signs in the Japanese population that there's a trend diagnosed -- trend changes in diagnosis.

In fact, on the contrary.

We actually do believe that GLP-1 could be a unique product in the Japanese setting.

To note that when you look at our Phase 3 trials for approval in Japan, which both had Japanese, Chinese and Koreans in those studies, there you were looking at HbA1c [adoptions].

From my recollection in the 1.7 to 2.0 in HbA1c points, which compares to the typical 1.3 to 1.5 which we've seen in Caucasians for the regulatory studies used in the US and Europe.

So we believe that it's actually going to be a very attractive and highly efficacious product.

And it's also interesting, for the Japanese market, that we're going to be the first with a GLP-1 there.

We were the first to file for approval, and if everything goes well there, Mads, I think we'll probably be somewhere in the first half of next year, maybe first quarter.

Let's see how it plays out on approval.

I don't know whether you can comment to that, Mads.

No, it's (multiple speakers).

Okay, good.

So I think in terms of the diabetes care situation, we were stabilizing the situation.

We have seen a slight expansion of the basal share of the Japanese market now constituting more than 20%.

It came from a level of 20% of the Japanese market, and now you're more in the 25% ballpark for basal insulin.

And of course, with two players there, and Sanofi coming from scratch with Lantus, we are losing a little bit of share in that segment.

And I don't think near term, there's any significant changes in that picture.

Yes, next question?

Down in the corner?

Yes?

Hi, Jack Scannell, Sanford Bernstein.

Just two questions.

The first, given what we see, rapid uptake of liraglutide in Germany, do you know where those patients are coming from?

Are they people who have tried Byetta, found it intolerable, and been sitting around waiting for another GLP-1?

Or are they sort of -- are they de novo patients?

And mostly related to that, do you have any sense about real world tolerability, given the experience you've had in your trials, how the differences actually work in clinical practice?

And the then the second question is around International.

Now, the UK's NICE has started exporting its expertise to countries like China and elsewhere.

Biotech manufacturing is getting a little cheaper.

I just wonder whether we should think of any special buying process.

(inaudible) might tender markets be more at risk in future, given the fact biotech, or by similar manufacturing costs coming down, and perhaps some of these countries are looking at healthy economic messages from the UK.

Okay, if I just deal first with the uptick of Victoza in Germany, and then maybe, Mads, you can comment a little bit on tolerability, and then I'll revert on how we see the process of NICE exporting their expertise around the world and how -- what implications are.

If we take Germany first, I think our experience so far is that we are seeing some patients moving from exenatide to our product, if they can get to it once they get a slightly higher (inaudible).

And you can also see that from the chart I showed, that there seemed to be a slight decline in the uptick of Byetta, and to some degree, we're recapturing some of those patients.

But on top of that, we're certainly also getting more new patients coming in there.

A significant proportion of them are oral -- patients failing on oral tablets.

And we have actually also in Germany seen a few coming from insulin.

I don't think it's a significant trend on insulin, but so far, those were the three sources.

I think what is crucial for us is that we can continue to expand the GLP-1 market share of the total market, and it's going to be -- one of the things which are interesting would be whether it will be replicated, what we saw at the launch of Byetta in the US, where the first two years when Byetta was growing quite significantly.

There was actually no impact on the insulin volume growth in the US.

And what we don't know yet in a European setting is, what is going to be the long-term implication.

Can GLP-1s grow hand in hand with the insulins?

And also, I think, interestingly, we are actually currently doing a trial which is investigating the combination use of GLP-1 and insulin, where there is a significant anecdotal experience on Byetta that seems to -- that these two products actually can go very well hand in hand for Type 2 diabetes patients.

Maybe a little bit on tolerability, Mads?

Yes, and just a few comments.

I was talking to a number of German doctors at the EASD meeting.

I guess some of you have done the same, actually.

But business, Jesper is saying no doubt that the messaging surrounding the second line position, i.e., at the advent of Metformin failure is going down well, so we are really, I think, succeeding in positioning the drug where we originally set out to do so.

But Germany is a little bit special, in that we have seen the basal insulin analogues, in particular, Lantus, take a hit there, because of the Diabetologia papers.

It's hit harder in Germany than elsewhere, and for that reason, we actually have seen some shifting from Lantus to Victoza, successfully so, that maybe you can say more than you would expect in a [static] situation.

Clearly, we want it more upfront in the treatment cascade.

In terms of tolerability, it is interesting to note that both on the efficacy side and on the safety side, doctors' feedback to us, and among themselves when they meet, is actually that both look better than the clinical trials, and there's some reasons for that.

Because in the clinical trials, you have very stringent inclusion criteria that you simply must adhere to, and henceforth, that means that you get a kind of -- both the patients that were ideal for this treatment, and also ones that just fulfill the criteria for being included.

Whereas in a real life setting, people tend to select patients who are motivated, who want the drug, and who are good candidates for the drug.

So for instance, the three kilograms weight loss we are seeing in the clinical trials, it's very often reported, at least in the physicians' anecdote, to be more in the ballpark of what they see, like five kilos in the average patient.

Again, at least it's nice to see that in a real life setting, if anything, it's going in the right direction.

With regards to tolerability, it is, from the meta-analysis of the (inaudible) program, so that one out of every seven patients experienced transient, mostly mild to moderate nausea, as all of you recall.

And in real life, we are seeing no more than that.

Actually, I think the physicians have heard so much about nausea and vomiting for the GLP-1 class, and maybe been seeing quite a bit of it for Byetta, because Byetta has this quick onset of action, which tends to immobilize the stomach completely, so that essentially, they are also positively surprised in that regard.

So at this point, I would say we haven't had any negative vibes surrounding the systemic tolerability or local tolerability of this product.

And then in terms of the question on NICE exporting their expertise, I think it's been an ongoing process, and it's not only towards the developing countries, but also to the other countries in the European Union.

And I think it's becoming an ever more important part of our late stage project phase, to basically have ever-stronger pharmacoeconomic documentation.

And I think the stress test that we're going to have on this is our ability to get reimbursement on Victoza throughout Europe.

So far, it looks positive.

We actually have a similar institute like NICE in Denmark, and whereas we didn't manage to get straight approval or reimbursement approval in Denmark for Levemir, we've actually managed to get straight reimbursement for liraglutide.

So it seems that the documentation that we are doing, early stage, seems to be working.

The [jurists] allowed -- it's a crucial part of our documentation.

In terms of increased use of tenders, I don't anticipate that that will be the near term effect in the Chinese setting, but we're certainly seeing tenders are being used in a number of developing markets.

A big one would be, for example, Brazil.

And what we're also seeing is that these tenders are used as reference prices for a number of other markets, of what level of prices will be allowed in those markets.

So I think near term, the prime implication will be extra cost in terms of documenting the pharmacoeconomic proposition of our portfolio to regulatory authorities around the world.

Next question, please?

Yes, we have one here.

My name is Jacob Thrane from Standard & Poor's.

Just a practical question on the plant delay in China.

Could you give a little more color to what the sort of shift in phasing and construction is about?

What is really behind this?

And secondly, now, Mads mentioning the Diabetologia papers on Lantus and Levemir.

And although you mentioned the situation in Germany as being perhaps, let's say, non-standard, would you expect any further sort of read through to an increased risk for rejection on Lantus?

And then creating an upside for Levemir, then.

And thirdly, on taspoglutide data.

Any requests from FDA?

Are you aware of anything the FDA is doing on that in respect of the upcoming approval or what [needs] feedback on liraglutide?

Okay, if I deal with the plant in China, and also, I can give you the straight answer on taspoglutide, which will be that, of course, on information on taspoglutide, you would have to revert to the sponsor, which is Roche and Ipsen, and ask them.

In terms of the plant in China, the -- what we're looking at here is a slight movement in our cash flow for payment of that plant, and it may be a few months, that it's going to be later.

And it's basically linked to the -- that we are not pushing the timeline on the Chinese facility, as we have high levels of efficacy on our filling plants around the world.

And in fact, the productivity level and the efficiency we're getting out of our large facility in Brazil is developing even faster than what we anticipated going into the year, and hence, we don't have a bottleneck situation for the Chinese plant, so there's no significant change.

So it's basically a shifting of a few hundred million Danish kroner in investments, some between 2009 and 2010.

We don't see any significance in that.

We're still expecting it to be completed and ready for production somewhere around 2012, so no significant change there.

Mads, comments on the Diabetologia --

Yes.

I think this, obviously, is a moving target.

We have two very different situations for Lantus and Levemir.

For Lantus, the situation is that the company has apparently committed to do three lines of research to further investigate the either lack of or presence of a correlation between a Lantus treatment and the diagnosis of cancer, in particular, mammary cancer.

And in that regard, they have committed to do further animal work, preclinical pharmacology experiments to investigate in certain animal models whether (inaudible) has such association.

They've also committed to do a coupling of certain northern European cancer registers with diabetes registers, aiming to see on a epidemiological observational study basis whether there is such correlation, and likewise, I believe a US-based health insurance database, claims database analysis.

My feel is that this is probably something they are doing in dialogue, you can say, with the relevant agencies.

Novo Nordisk has not had any communication at all with neither the FDA nor the EMEA on this topic, neither as regards to Levemir nor as regards to SIBA and SIAC.

But you can also say our situation's somewhat different, in that we have in vitro -- not only published years ago a series of cell lines, where we actually, if anything, see lower mitogenic potential for Levemir than for human insulin.

But we have also repeated those studies and expanded them in numerous cell lines, either containing or not containing IGF-1 receptors on the surface.

And quite clearly, in contrast to (inaudible) Lantus and the carcinogenic or tumorogenic [extant] analogue, we are the other side of, let's say, the human insulin mark, i.e., on the low side, whereas the others tend to increase a cell proliferation.

So if we also look at the clinical situation, our randomized controlled trial meta-analysis has revealed, actually, a statistically significantly reduced potential for cancer diagnosis among Levemir treated patients, compared to human insulin treated patients.

Now, you can say, is that absolute 100% proof that Levemir is safe?

Of course, it's not 100%, but it's very close.

I think it's pretty robust data.

Now, does that mean anything commercially?

Of course, it means that some physicians will always think on balance if they have a patient where there's a family history of cancer or they're a little bit worried, there, of course, they may be up for what they consider the safe option.

But I think what can really move the market dynamics is, if any of these lines of research that Sanofi are pursuing now end up with a less than fortunate data, that, of course, will be kind of the one-two blow to that product.

But as it stands right now, it's a relatively stable situation.

Okay, Gavin, we'll take a final question (multiple speakers) --

Gavin MacGregor, Credit Suisse.

Ah, Jesper, one question for you.

The EU market has had a tough first half, and you said that you think it's stabilizing now, it's returned, stabilizing to sort of 5%.

Can you give a bit more color what's been going on there?

And then, Jesper, a question -- Mads, so a question for you.

Mannkind are awaiting FDA decision on their inhaled insulin in January.

Thoughts on that, and remind us around the problems that we're faced with therein.

Thanks.

The EU situation, we believe that there's two factors that actually have helped the growth down in Europe.

The first one is the development in eastern Europe, where we have seen reimbursement challenges in a number of eastern European countries like Bulgaria and Romania.

And in fact, we've had almost half a year where we have not been importing the modern insulins to Romania.

I think there is now a solution to that situation, and then we'll be re-importing.

So you're basically seeing an inching of our pipeline, and you're also seeing some challenges in some of the Baltic countries.

And that has left everything else probably taking a percentage point out of our growth in Europe.

The other point, which is what we will refer to as the below trend growth of 3% in the volumes, we don't see any long-term trend shifts in diagnosis of diabetes in Europe, and consequently, we would expect it to revert to the 5% level, which would add another percentage point.

The best explanation we can see, when we go down to individual markets, seem to be that the uptick of the (inaudible) inhibitors have ensured in European markets, taking a bit of the insulin volume growth out.

We believe that that is temporary, and [you'll see] a return to 5% volume growth in Europe over the next year or so.

Mads, on Mannkind?

Yes, well, clearly, the FDA is looking at the dossier for the (inaudible), the old (inaudible) concept from Mann and his company.

I think our assessment has been that if you look into the 4-T study that was just published in the New England Journal of Medicine, not only do guidelines, but also the clinical facts, when you compare different ways of initiating insulin, they actually tend to favor that there be at least a limit of basal insulin from the onset of patient treatment, as we have witnessed by -- you can see a lower degree of both hypoglycemia and weight gain, and very good control in the 4-T study for the basal, and actually, also for the premixed treatments, with somewhat more side effects on the Prandial initiation.

So I think Prandial initiation of insulin, as such, which would have to be very convenient, and then the issue is, how convenient is it to inhale insulin?

Obviously, an oral usage tablet is convenient.

That's something that we do every day when we take our vitamins and whatnot.

But when it comes to the inhaled insulin, convenient, we were so convinced when we started (inaudible), even though it was a kind of a defensive move, we were still convinced that at least the convenience side would be perceived very highly by the patients.

The fact of the matter is that our own analysis, from the studies that have been closed down diligently and reported, tend to show otherwise.

And importantly, also, we did some market research among physicians, nurses and patients, who were among the 10,000 to 15,000 of those who actually did treat in a real life setting themselves with Exubera before it was pulled from the market.

And our experience was, actually, that it was not perceived as being convenient, because quite often, you had to take more than one puff to get that absolute correct dose you needed.

And that meant that very often, we experienced that patients would not bring their Exubera device with them to office.

So they would take it at home in the morning, and then in the evening, and then they'd either skip their insulin at lunch, or have to inject.

And once you have broken the injection barrier, it doesn't really make much sense to combine the two.

And on the other hand, it doesn't make sense to not comply with your treatment by skipping the lunch dose.

So these were some of the findings that made us move out of inhaled insulin at mealtimes.

We then said, okay, now we're going to do basal insulin.

We're going to do a basal insulin (inaudible), what's the date that's going to be convenient?

And we actually were pretty far progressed towards Phase 1, when suddenly, Pfizer announced that they have now seven cases of primary lung cancer among those with Exubera, and only one in the control groups.

And to be quite frank, on that day, we pulled the plug on all our inhaled research projects.

So I wish Mannkind the best of luck.

I would absolutely say, if and when they are to receive approval, it's not really going to compete so much up against what I perceive is the injectable insulin platform, but maybe, rather, in earlier stage disease, because you have to bear in mind that there, pharmacokinetics is very fast.

It actually only has efficacy for somewhere between two and three hours in most of the studies I've seen, so probably, you would not go into a very late stage diabetes population.

But if I were them, I'd also target somewhat earlier use of this (inaudible).

Okay, so with those very elaborate comments on pulmonary insulin, one of your former expertise areas, Mads, I thank you for your interest.

We will be back in London on the 2nd of February with our full year results -- we'll be in London one or two days later.

And I think hopefully we'll also be able to narrow in the expectations for sales growth, etc., when we get to there.

Hopefully some of the uncertainties are out of the way.

We look forward to be back.

Thank you very much.