諾和諾德 (NVO) 2012 Q1 法說會逐字稿

Good afternoon, everyone.

Welcome to the Novo Nordisk lunch after the Q1 results.

I'm Richard Vosser, pharma analyst at JPMorgan.

It's my pleasure to welcome everyone here today and it's a pleasure to welcome Novo.

Jesper Brandgaard, Mads and Lars are here and the other Lars is on his way.

So, I'll hand over without further ado to CFO Jesper Brandgaard to open.

Thanks, Richard.

We brought our first quarter presentation.

We'll try to make it really swift so that we hopefully should be able to do this in 15 to 20 minutes and then leave ample time for Q&A.

That's the ambition.

The plan is that I'll go through the introduction and give an update on sales and then Mads will give an update on R&D.

Frank will cover the financial outlook and then together we will try to deal with any questions.

Of course, this involves forward-making predictions about what happens in the future and forward-looking statements.

And also involves talking about products which are not yet approved, both Tresiba and Ryzodeg, and also talking about new indications for products like Victoza, which involves a lot of uncertainty and you have to read this information here (inaudible).

If we look at the first three months of 2012, we have delivered yet another quarter of at least 10% growth in local currency this quarter, driven again by our modern insulins and by Victoza.

We saw a growth of 76% in local currency for Victoza and we reached DKK2 billion in sales.

There is a little bit of swing in the sales between final quarter of last year and first quarter of this year, where we had DKK2.1 billion.

I will just revert to that with a few comments shortly.

Healthcare reform has continued to impact sales so we have a negative impact to the tune of 1.5 percentage points.

Out of that impact I estimate approximately 1 percentage point is related to Europe alone.

So, the key impact of the US healthcare reform is more or less reflected now in the numbers.

We have selected brand names for Degludec and DegludecPlus, Tresiba and Ryzodeg, and we have a good progress in the regulatory reviews in the triad market, US, Europe and Japan, for these important compounds for us.

Also, I think -- and basically completing the portfolio of insulin, we have in phase 1 now a new compound, a novel formulation of insulin aspart with even faster onset of action that we hopefully can move forward towards phase 3 next year.

And then, finally, we have initiated a phase 3 program for a long-acting version of our approach to non-clotting factor VIII treatment, what we call N8-GP.

That then really completes the portfolio of hemophilia products.

We have development with Vatreptacog alpha, a new faster-acting version of rFVII and a non-qt, a long-acting version of factor IX and then our N8-GP.

We've seen an 18% growth in reported operating profit and diluted earnings increasing 18%.

We have updated the forecast for 2012.

We have taken out the bottom of (inaudible) and now we say that it's about 8% to 11% growth in local currencies and we will benefit from having a tailwind on currencies so that the reported growth will be 4% higher.

Operating profit growth is expected to be at least 10% in local currencies and that level is also off a little bit where we previously said around, now we say at least 10%.

If we look at the composition of sales, then diabetes care becomes an ever-higher proportion of our total sales, now 78% of total sales.

And you can also see that diabetes care growth 15% where we had it at kind of 4% in the biopharmaceuticals.

And you would say all of the growth can be ascribed to modern insulins and Victoza.

The key factor in the growth rate is really our modern insulin franchise, which is pulling ahead.

And you can also see this from the rebound we've had in the quarter in growth rate from our insulin franchise now getting above 10%.

As I said, we are posting the full effect of the US healthcare reform, now fully reflected in the number.

And we're also seeing a better US market situation and I'll refer to that on the next slide.

And we should also note in these quarterly numbers that we are impacted by -- negatively impacted by the development in Japan, where we last year in the first quarter, as we also told the market, had a very positive impact from basically a sell-out in the distribution chain or buy-in in the distribution chain because of the earthquake in Japan.

And in the first quarter of this year we have seen a very hesitant purchasing behavior in March in advance of the lowering of prices, which occurs 1st of April.

And we have seen a significant purchasing through the system from our inventories in April of this year.

So, a swing factor of around 1.5% can actually be ascribed to Japan.

So, Japan impacting 1.5% negative on the growth rate in Q1 alone.

The drivers continue to be more patients with diabetes and more advanced forms of insulin treatment, the modern insulin offering better treatment and the biases continue to penetrate markets like, for example, US and China.

If we look at the US market situation -- and we've taken this slide along with us because, remember, last year we were challenged.

And I think it was one of the key items we discussed at our Q1 roadshow meeting last year, was the development we had in the US in our share of new scripts for both NovoLog and NovoLog Mix following the loss of the contract to United Healthcare to Eli Lilly, and where they more or less was able to -- through different status on the formulary, was able to -- basically a high proportion of patients switched to the Eli Lilly compounds.

We have then -- and we said we would take a more aggressive approach in terms of pricing.

Mid-2011 we won a significant contract from CVS Caremark.

That contract had effects from 1st of January and, as a consequence, you can actually see a similar reversal occurring here at the start of January for especially NovoLog.

So, you could say these -- we take this graph along with us to basically say we have acted upon what we said we would do.

We have seen the results occur, and now you could basically see that our new two brand scripts for both NovoLog, NovoLog Mix and Levemir, all of our three modern insulins in the US, now you have new two brand scripts, which are above the level for total scripts.

And I would also like to comment that on Levemir we're actually seeing a quite positive trend for that.

And that's really following a more active promotioning and direct-to-consumer marketing approach in the US that seems to be paying off quite well.

So, this bodes really well for our US insulin franchise.

If you look at the growth rates we've seen from the various regions, you can also see that North America is absolutely crucial, accounting for 64% of total growth, with a 17% growth in local currency and then the tailwind from the US dollar illustrated in the reported 21% growth for North America.

Europe, flattish with 26% of sales, but also a key growth driver in the first quarter international operations with 24%.

A few markets where the tender orders have fallen favorably in Q1, but still a growth level in the ballpark of 20% for the international operation's activities is probable as we move through this year.

Region China growing 9% and getting close to double-digit growth.

The first two quarters of last year was very strong and we had a very weak third and fourth quarter in China in 2011; and hence, the comparisons for China will ease up as we move through the year and, hence, I also predict that China will get into double-digit territory before we're through with the 2012.

And then here you see the very specific issues we had with Japan.

The swing factors are (inaudible).

Then getting -- zooming in on Victoza and the challenges we had.

In the final quarter of 2011 we did have some one-time adjustments occurring through the Victoza sales.

The full-year sales of Victoza in 2011 was DKK6 billion and they were (inaudible).

But, there is some movement of rebates between individual quarters.

In Q4 we had DKK150 million in reversal of rebates that widely belonged to Q2 and Q3.

And there are also an element of rebates relating to France.

So, if we look at it in total, it was probably about DKK200 million that more correctly ought to have been included in -- DKK100 million in Q2 and DKK100 million in Q3 and then DKK200 million in Q4 lower and then you get a more steady trend.

And then you also have to be aware when you look at Q1 versus Q4, in a business like ours that there is a tendency to a seasonality between Q4 and Q1 where, looking back the last four or five years, the overall NovoLog franchise has typically dropped between 1% to 4% in Q1 versus the prior Q4, even though it's in the business which, on an annual basis, is growing to the tune of 10% to 12%-13%.

So, some seasonality also (inaudible).

On this slide I also like to highlight that we have now included -- you can now see China on the Victoza sales with this chart, which is important.

Victoza is not reimbursed in China.

It's high priced.

It's about EUR4 per day for 1.2 microgram treatment, so an aggressively priced product in China; not reimbursed, but still being used in the private part of the market.

And I hope that we will see that share of the pie chart expand as we move through the year.

But overall, 76% growth in the Victoza franchise, so still progressing well and progressing quite gradually quarter by quarter.

Limited impact from the Bydureon launches in Europe.

In the US we have seen our share of new patient decline after the introduction of Bydureon in February and we are now capturing around 55%, whereas we, prior to the launch of Bydureon, were capturing about 65% of patients.

But still, it's progressing nicely and, more importantly, Bydureon seems to be able to expand the GLP-1 market.

Out of the total diabetes care market, we have in a number of European markets now reached the level of around 10%.

We predicted when we launched and introduced Victoza, we felt that 10% of the overall diabetes care market was realistic for the GLP-1s.

That has now been achieved in a market like France and we are certainly also approaching it in UK where we are today.

Mads, would you?

(Technical difficulties.)

And actually, in two (inaudible) papers from (inaudible) are also really create an awareness of the unmet need (inaudible) by the fact that both it indicates (inaudible).

That is why our faster-acting formulation (inaudible) and there we have (inaudible) contribute to (inaudible) the first round of the (inaudible).

Now, Victoza, driven by the fact that both (inaudible) to initiate (inaudible) Victoza will be (inaudible).

But also, when you add on the US, that's a very nice (inaudible) where now Victoza can be added (inaudible) Victoza.

So, we think we stand today with a GLP-1 label for Victoza.

That is unprecedented in the industry and probably (inaudible) across a platform like (inaudible) that are unlikely to interfere unless we go into longer-term future where we cover some of the long-term (inaudible) data.

So, the new trial we (inaudible) across the first (inaudible) requirements by the FDA has completed the (inaudible), which is really good news.

It's a very tough environment to recruit in.

We did that.

(Inaudible) and we're looking forward to the data that are (inaudible) to be announced by year [2015].

(Inaudible) that we have now completed the entry into the (inaudible).

And unfortunately, (inaudible) our second (inaudible) anti-NKG2D rheumatoid arthritis program failed to show the (inaudible) that we were hoping for.

But then again, on the other hand, Anti-IL-20 was very promising so, so far, particularly in phase 2 of [50%], which (inaudible) bodes well, but we are of course (inaudible) as they emerge over (inaudible).

So overall, nice progress in the pipeline and now just a couple of words on the Lancet paper.

They are what they are.

I mean, you know (inaudible) part one (inaudible) part two.

They were announced at the ADA last year.

I think what is even more exciting is the fact that (inaudible) distinguished academic clinical scientists from the UK, that's the important role, also analyzed (inaudible).

Together growth (inaudible) two papers that clearly went from the storyline of what are the unmet needs that patients need improvement of in these two therapies, namely (inaudible) hypoglycemia, more (inaudible) action profile and so on, and also how these are actually met, we can say, by this ultra-long active (inaudible).

So, I think a very nice piece.

Very supportive of the (inaudible) and we're looking extremely much forward to presenting further data (inaudible) that confirm that we have (inaudible).

Now, the ADA and the EASD joint issue is their new update, a consensus algorithm or treatment guideline (inaudible).

And indeed, I think they are more interesting because they also highlighted the unmet need for agents that are either non-hypoglycemic or minimally hypoglycemic, so that this is the barrier to good insulin or diabetes care even today.

And importantly, they (inaudible) highlight that Metformin, as the mainstay first-line agent, seems to be funneled off by add-on therapy with one of these classes up here, including basal insulin or including GLP-1.

And in particular, they emphasized that if you're a patient who's coming in with a high glucose level, (inaudible) unlikely to get to the near-normal (inaudible) by addition of a (inaudible) you should consider strongly going to basal insulin as a second line therapy.

But, they also say that if you are a patient with a strong need and desire to lose weight, the GLP-1 as a new class should strongly be considered (inaudible).

So, strongly -- or basically, the new guidelines are we believe favoring compounds that are safe and driven by efficacy.

And ultimately, which is not surprising, they end up stating that you could wait to use insulin and intensify insulin therapy over time this would almost inevitably be (inaudible) in patients who have a near-normal life expectancy.

So, without further ado, I will turn over to Lars for the financial (inaudible).

Thanks, Mads.

So, to look at the first quarter results, the top line reported through 13%, so already in the first quarter we see a benefit from the currencies, giving approximately 3 percentage points of growth.

If you look at the gross margin, we have expanded the gross margin by approximately [78-ish] points, primarily driven by a better price and also -- better prices and also a better product mix with the continued expansion of the modern insulin over the human insulin, and also with the further penetration of Victoza.

In the area of our investments and sales and distribution, we have continued to invest in this area and particularly in the emerging markets where we have expanded the sales force in China and also in the US, where we have increased our promotional efforts, as also Jesper alluded to earlier when he presented the market share data.

So, we have seen an expansion in our relative investments in those areas at the expense of other areas where we have limited increase in that field.

If you look at R&D, we have also in absolute terms increased our investment in R&D by approximately 10%.

This means that the R&D to sales ratio is more or less constant.

We have increased costs in our clinical pipeline with the phase 3b trials ongoing for Tresiba and Ryzodeg, and also for ongoing phase 3a programs in the area of obesity, Liraglutide for obesity, with IDegLira and also for the hemophilia portfolio of factor VIII and factor IX compounds, as well as in the area of inflammation with the anti-IL-20.

So, going all the way to the operating profit line, we have increased that by 18%.

Also here helped by currencies to the tune of approximately 5% in the first quarter.

And going to net profit -- sorry -- no, sorry -- operating profits increased 18%, helped by 5% currency.

And then net profit at 15% because here we have the negative impact from currency, the hedging contracts countering to some extent the positive impact on operating costs.

Earnings per share of 18% as we continued to buy back shares over the past 12 months.

Looking at the currency developments, it has been fairly flat in the first quarter of this year and, therefore also, our guidance in terms of impact on our sales and operating profit is more or less unchanged compared to three months ago.

As you look towards the remaining three quarters of the year, you will see that there is a lower comparison base in Q2 and Q3 for the US dollar and a Q4 level which is more in line with current spot rates.

So therefore, the currency impact will be different in each of the quarters but, overall, we are at the moment approximately 5% higher on the US dollar spot rate compared to the average rate of 2011.

So, in terms of the financial outlook, a small adjustment to the guidance, I just alluded to already, with an increase of the bottom of the sales business to 8% to 11% and also a bottom, you can say, under the guidance of operating profits to now at least 10% compared to around 10% as we guided three months ago.

And apart from that, only you can say adjustment of the currency, a slightly less impact on operating profit and a corresponding adjustment in our financial items.

So with that, Jesper, the conclusion and Q&A.

Thanks, Lars.

So, this is another quarter where we have demonstrated the ability to grow organically from the portfolio that we have, driven by our diabetes care market position and with a continued expansion of the prevalence of diabetes around the world.

We've now this quarter, the first time on the moving annual total profit to 25% market share in diabetes care and that's based on a 50% volume market share in insulin and 46% in modern insulin.

So, we're still not -- haven't gotten the modern insulin shares up to where (inaudible), but clearly we have some products on the way that can help that.

And in GLP-1, a clear market leader position with 62% global value market share.

We have two new insulins submitted for approval in the triad market.

We have an exciting GLP-1 portfolio that offers the expansion not only in type 2, but actually also into type 1 diabetes, as Mads alluded to.

And then we have the opportunity with Liraglutide that potentially could also be used for treatment of obesity.

The uncertainty in the regulatory environment holds for obesity (inaudible).

And then, finally, we are expanding the portfolio within hemophilia and inflammation.

That's the starting point we have and then we're over to Q&A.

And we have a microphone and I'd ask you to -- that you state your company name.

We'll start down there.

Hi, there.

Tim Race from Deutsche Bank.

The first question I think quite a few of us would want to ask is on the hemophilia side of things.

Yes.

Changing sort of the trajectory for the product, and I think some of your comments suggested this is going to continue.

Could you just detail where we're actually seeing this in the hospital segment, but also sort of on a regional basis?

Is this price effects?

Is this actual volume effects?

Really, what's going on here because it's hard to track this data?

Yes.

The prime effect is one of lower volume sales.

There's no significant price effects impacting our NovoSeven franchise in the first quarter this year compared to first quarter last year.

The key changes we are seeing is happening in Europe and US.

The biggest drop in sales have occurred in Europe, but also a slight decline in US.

If you take Europe and US together, they account for approximately 65% of the NovoSeven overall business.

Facility growth in Japan, China and international operation markets, which is one-third of it, but not enough to make up for the decline we've seen in Europe and in US.

Many of you zoom in on Europe and US and saying where are the decline occurring in these markets.

I'd say in Europe it is occurring primarily in related to surgical use.

We know pretty much how many patients we have and whom of the patients we are treating.

So, I'd say the surgical use of NovoSeven for during typically orthopedic surgery on these inhibitor (inaudible) will be what we are seeing occurring less frequently in first quarter.

There's also to me no doubt that the physicians and the administrators of hospitals are more -- in this economic environment more cautious in allowing surgeries to be done involving NovoSeven.

In the US it's also surgical use which are important.

And then, of course, there is also a marginal impact from the higher clinical trial activities involving inhibitor patients, not only from NovoSeven running the Vatreptacog alpha studies, but also from some of our competitors like Bayer and Baxter trying to develop compounds for treatment of inhibitor antibodies and that would be a second explanation.

In the US it's also surgical -- I don't know, Mads, whether you have any additional information on the -- what is the trend for surgical use in the US?

But, I think in this space need to confirm what Jesper said, that there's some cautiousness both when it comes to hospital administrators also kind of firming the grip on investigational use outside of the label combined with maybe a higher bar set for when you can do elective surgery.

And then, of course, there are always these (inaudible), so to speak.

But, the fact is that we've seen that across the board at this point.

Yes.

So, the best estimate we can give at present is one of saying we expect flattish sales for NovoSeven in 2012.

And it's also probable that that will be the case in 2013 for the fact that (inaudible).

(Inaudible) to your question, sir?

Thanks.

Just taking the pluses and minuses given NovoSeven you've just said is 0% growth, you've obviously upped your guidance.

Can you go through the pluses and minuses because I'd imagine NovoSeven's a pretty profitable product.

Yes.

If not your most profitable.

Well, if we look at the development in the first quarter, we had a better than expected development in our international operations franchise.

And I think it is really a sign of the very different level of economic activities we're seeing occurring in the number of the emerging markets compared to what you tend to have a focus on when you're based in Europe.

So, I think the -- as I said in my presentation, the 24% growth that we're seeing in local currency terms in international operations is maybe slightly on the high side because of location of where the centers are actually most affected.

But, a 20% ballpark growth level for that part of our business was higher than what we anticipated.

And the prospects, as we see them now, are quite positive.

So, that's a significant factor.

The other element, which -- and it's only a minor adjustment we've done to sales.

I mean, we've changed the local currency estimate from 7% to 8%, so in the bottom range.

Not a significant.

The other thing we know, or we think it's highly unlikely that there will be generic competition at mid-year.

That was what as in our original expectations for present in the US.

And I will say it's not likely that it will occur before into -- way into second half of 2012, and that was the other factor.

So, those two factors have been positive.

And then, of course, slightly lower effect on NovoSeven.

And overall, those were the factors that we've taken into account, giving the new estimate.

In terms of operating profit, we're quite comfortable with the development and with the development in prices that we've seen by the first four months of the year.

That overall leaves us reasonable comfortable with the overall estimate of operating profit.

We've seen 1.5% of impact from healthcare reform the first three months and our estimate for the full year is all part 2% negative impact from pricing reforms.

I think more possible that will occur in Europe.

And we're also seeing in some emerging markets, like potentially Turkey, where things could materialize.

But, all part 2% negative impact from healthcare reforms is also baked into (inaudible) for full year.

Okay, next question.

We have one in the back.

Mark, next to you.

Thanks.

Gavin MacGregor from Credit Suisse.

Just on the international growth rate.

Yes, that's quite a step up, 20%, from what you've been doing last year, so at a time when many of your peers are dialing back a little bit on that program.

Yes.

Can you give us some color as to what's changed, I guess?

Thanks.

Well, I think a key element -- the way we see our business is that we are seeing a stronger economic growth in the (inaudible) markets.

And secondly, also, as we have a higher proportion of the middle income level and those countries, are able to afford better care, that we're seeing it spilling into our business.

We're seeing a number of North African markets advancing their diabetes care treatment to our benefit.

We are seeing a positive penetration of Victoza in a number of developing markets in the Middle Eastern region and in some Latin American countries, so that is also helping out.

But, that would be some of the factors.

I'm not indicating by the estimated close to 20% growth in 2012 for international operations that this will be the steady state growth rate.

But, I'm just estimating that if you look at the specific year 2012, it looks more positive than what we've seen in prior years.

I think longer-term we think more than 15% growth is realistic for that franchise.

But, we do have a positive situation rolling out in Victoza in those markets.

I think that we'll see a bit more growth coming in 2012.

Yes.

Next question?

Sachin?

Hi.

Just two quick ones.

The origin studies now that you've talked about as coming at ADA, I was just wondering if you could if you could (inaudible) your perspective on how meaningful you think that data is, A, for the insulin market as a whole and as a growth, and then, B, the market share in the basals as you (inaudible) that launch?

Right.

Well, something should be remarked regarding the origin.

If you compare it to the UKPDS landmark study, where there was this borderline PO.052 borderline significance on the (inaudible) outcomes in recently diagnosed -- basically newly-diagnosed type II diabetic, here we have the baseline population that have a mean duration of -- I believe it was actually 4 years -- 5 years; maybe 5 years.

Moreover, there's a very high risk of TB background in this population where many, many -- more than half of them have had some prior event ongoing.

So, this is a relatively sick population, both in terms of diabetes duration, even though glucose levels are not that high.

Then at baseline they have had diabetes for several years.

They have had a history of TB then.

So, I think don't over expect -- at least I'm not over-expecting what the outcomes can be because we know from UKPDS that you need early intervention to create what I call the legacy or the UKPDS or let's call it the legacy effect of something that metabolically is remembered years down the road as the pathophysiology would normally drive the process to most myocardial infarctions.

Here, they have actually already occurred in many of the patients prior to the study.

Now, if we are lucky and there's good data coming out that actually supports insulin being a cardio protective therapy due to its metabolic controls, I think that is going to benefit the whole class of insulin agents that will essentially -- could be to argue the case for earlier use in the management of diabetes and, visa versa, if the data come out in a more untoward manner.

So, I see it, regardless of whether they're good or bad, as something that will have positive or negative repercussions on (inaudible).

You can then say that the base case may well be that it's a very blurred picture where there's trends one way or the other.

And this is the complex design with a 252 pictorial design, which is inherently the top one (inaudible) would be in particular when the average exposure is only about 7 years per (inaudible).

So, I'm just cautioning everyone to think that we will have (inaudible) data, but nobody knows and we can only hope.

And I would say good day to a spillover onto instruments in general.

That data are also running the risk of spillover into (inaudible).

Okay.

Next question.

Just a question on Victoza.

Please state your name and company.

(Inaudible.) Just a question on Victoza in obesity.

We saw recent phase 3 data where we saw very little of that people compared increase in heart rate with Victoza, which was transient as well.

And it was also accompanied by some drop in blood pressure.

That's what we saw in the recent phase 3.

However, when we look back to the phase 2 data that was published in the Lancet we see an increase in heart rate with -- as a 3 mg dose of Victoza, which was not reflected in the placebo.

I mean, how do you interpret that -- I mean, should one interpret that as saying that the phase 3 that you've just completed is in patients because this is a maintenance trial as opposed to the 3,600 patient phase 2 trial, which would be from (inaudible) patients, as I understand, to do spikes in weight before coming into the trial.

So, should one then wait for that particular trial, or do you not look at this as a disability at all?

So, I just wanted some thoughts on that.

Also, on Degludec.

So, we've seen multiple large phase 3 studies showing that Degludec has the same efficacy as Lantus, which would be to treat to target (inaudible) trial, but also had better safety in terms of lower nocturnal hypoglycemia.

Do you expect the FDA to reflect that safety benefit on Degludec's label?

That's the second question.

And just on the whole GLP-1, if you have any updates or any views on the ability of the compound or what you're seeing in terms of the ability of the compound to get to the intestine and then be absorbed in the intestine?

And just on the -- because we've seen, I think at the end of last year, where Novartis was developing a compound with a similar technology.

(Inaudible) not that development program (inaudible), so where you are with your GLP-1 (inaudible).

Okay.

Was that three questions, Mads?

Yes.

Well, first of all, if we take first the [Traceva] and Degludec story surrounding -- but the FDA guidelines actually mandating you to come out with identical degrees of glucose control, which we managed to do.

I mean, it's very critical that you treat the target and that both groups arrive at the target.

If not, you have the problem in terms of the provability.

Because what the diabetes guidelines for insulin prescribe is that you treat to the same degree of glucose control.

And then, on that backing, you see some benefits typically in the event rate of hypoglycemia.

But that, by adherence, should also mean that if the agency sees that you adhere to all of this and you actually come up with benefits on hypoglycemia profiles, then you have an insulin that is as effective as all other insulins because insulin can, by definition, bring your glucose to zero so that you die from it.

But, the limiting factor in how far down you can go is expected to (inaudible) safety.

That would then be reflected in the labeling that we have a stronger safety profile, as evidenced by hyperglycemia rates.

And indeed, we have negotiated with the FDA prior to safety initiation how to do the analysis, including the maintenance period, the (inaudible) analysis and all of that.

So, of course, this will be a really negotiation situation that we have for maybe six weeks or so when you start.

As the package insert draw from the agency, you have like six weeks to negotiate and we will do that until the very end based on very strong and robust data.

But, we'll see what comes out.

What we need is data.

It needs to be mentioned, tabularized, etc.

That is the most important, because then you can talk about hypo rates when you have your promotional material.

On -- and the safety profile on -- you reconcile in obesity?

Yes.

Well, interestingly, you're right in what you say about the pulse rate.

It is true that it was indistinguishable after one year from the baseline in the [1923] phase 3 study that was recently concluded.

Whether that is a discrepancy compared to phase 2 you can always argue.

We basically don't know the pulse rate data from the ongoing trial.

Do bear in mind, though.

Two things I'd like to mention here.

One is that all GLP-1 agonists will cause a mild and mostly transient innovation in the heart rate.

We know that from also the extension trials in the (inaudible) program, that over time it comes back to more or less the baseline; maybe a slight change, but not much, if anything at all.

So, it is something that's mostly transient, but it's easier just to acknowledge that it's there.

When you look then at the rest of the CV risk parameters with GLP-1, they're highly beneficial.

We see reduction in TFE, (inaudible), systolic blood pressure, body weight and glucose level.

So overall, when I look at -- and triglyceride.

So overall, when I look at the cardiovascular circuit markers for GLP-1, they're highly favorable.

So, I would argue that unless the pulse rate could be proven to be driven by for instance an increased synthetic outflow, that could be considered as bad news if we all bear in mind the (inaudible) and so on.

But, I think this is not the case.

It's a very long story, but I think this is not the case.

So, I think we have a very compelling story that, in particular, if the mix analysis actually suggests that you're improving the cardiovascular health, or at least not causing a deterioration, then this one signal out of many others may not even be perceived as a signal.

But, you're right.

We'll have to await and see the data and we should be able to have this discussion about a year from now.

And then, Mads, on oral GLP-1 and whether there's any risk through using Emisphere technology in -- for all GLP-1 and what portion of the drug are we able to get across into the blood circulation?

Yes.

Well, first of all, it is true that Emisphere is working to release a small molecule carrier, principles.

And basically, it consists of the Eligen technology as we call it.

Basically, it's not the same carrier, by the way, that has been used in (inaudible) as it is for (inaudible), but they are somewhat similar.

But, I would not read across anything from there because the peptides, the proteins, the (inaudible), the ones that we're putting in there, and the rest of the formulation technology is actually differing.

And that's one thing.

And then, of course, it's critically important that the safety window is well defined.

[Calcitonin] has a short half-life.

We have deliberately engineered orally stabilized versions of GLP-1 and insulin that have long half-lives.

So, even if it's a day-to-day, their ability of reduction and bioavailability, we will have it buffering by the fact that you have a circulated (inaudible) of the protein that will kind of level out differences on a day-to-day basis.

We only have, let's say, multiple exposures of the (inaudible), if you want, that to us are suggestive of this becoming a possibility.

In the future we can achieve therapeutic doses, but we need to work out how is the different -- difference in time that (inaudible) compared to the last meal or the next meal and so on to make sure we get it right in phase 2.

So, we are -- we're encouraged, but we are by no means at the end of the game and we think over the next couple of years we should be able to have the full program wrapped up such that we can do phase 2 with the right combination of carrier and (inaudible).

(Inaudible.) Okay.

(Inaudible), Goldman Sachs.

Jesper, two questions for you.

Sorry.

First, on emerging markets, kind of we have seen your peers having a similar level of confidence in long-term growth, but kind of they have views in the first quarter as disappointed.

Can you help us understand your confidence level around that 20% growth this year and 15% next year and kind of why it might lower with the (inaudible) of your peers?

And secondly, as you think about profitability across the different geographies and (inaudible), NovoSeven obviously being slightly more profitable than (inaudible) your international operations.

So, on your operating margins for the year, what is the (inaudible) that allows you to take this guidance up a little bit?

Is R&D still expected to be 14%, 15% of sales, or should we expect it to be the lower end of that range?

Thank you.

Let me deal with the first -- the last bit first.

In terms of the margin, of course, what is on the negative is NovoSeven, what is on the positive is -- it's Prandin in US and also international operation.

And the Prandin being a product that is basically not promoted to our sales -- by our sales force that actually also -- and sales in their relative (inaudible).

I think this is the shift in impact on operating margin from these is the margin (inaudible) is actually rather small.

And in terms of the individual cost items in our P&L, I would anticipate that we would be in the ballpark of -- we said for our gross margin that we expect to expand the local currency between 50 and 100 basis points.

We had 70 basis points after the first quarter, so we're tracking nicely along that.

In terms of selling and distribution costs, I think we'll be in the ballpark of 29%, swing factor really being the approval of especially Tresiba and launch US if we get an approval this year.

It's likely that we will get a pipeline fill and that pipeline fill will then be able to offset the cost you basically have of promotional activities.

We've already put into our forecast for this year that we have the expansion of sales force that we alluded to in the Company announcement.

So, we're currently hiring in the ballpark of 500-600 reps to the US in diabetes care sales force.

So, that's included in those expected 29% in (inaudible) distribution costs for 2012.

Look to R&D 14%, 15% I'd still say midrange is probable for the full year.

And on admin costs, I think we've developed quite nicely and probably going to be in the 4.5% range for admin costs.

Slightly -- a slight improvement in the third for our other operating income, maybe now estimated at say [DKK600 million] for the full year.

So, if you kind of take these elements in, then you get pretty close to above 10% operating margins -- sorry, operating profit development.

And then, in terms of international operations, (inaudible) bullish?

Well, of course most of all, as I actually also include in China and you saw that we had 9% growth in China, but 24% for the international operations, what I would refer to was, of course, our definition of a (inaudible) operation.

And it's of course easier to be confident when you've done 24% in the first quarter that the full-year number is going to be higher.

I don't think I can give you much more flavor than what I gave to Kevin in terms of basically saying pie growth in a number of markets around Middle East improved in diabetes care, more willingness to offer better products.

Good, very, very solid growth we've seen coming from Latin America.

Generally, I'd say Latin America is a market that's doing extremely well for Novo Nordisk.

Lots of opportunity for improving there.

We are expanding our footprint there.

We've established local affiliates in a number markets there, including more recently at Columbia, Peru.

So, we are expanding our footprint within from a very low base in Mexico.

We were number third diabetes care company in Mexico at least four or five years ago and we are expanding there.

So, with all these elements, I think we have very good opportunity to continue to grow.

Of course, also, when I look at the tender markets and the prices that the tender contracts are won at in human insulin, I also see a positive development over the last -- I'd say 3 to 6 months, which is also helping us specifically for the insulin franchise.

And of course, international operations has a much higher proportion of insulin included in the numbers.

The biopharma sales in that part of the business is lower than (inaudible).

So, that would be some additional element.

And just lastly, would you mind bringing up to speed with your latest thinking on pricing for Degludec in Europe and in the US, kind of how you see that?

Okay.

Yes.

Of course, I think the first comment would of course be that we have to see what's in the (inaudible); so, what claims do you have that you can come with.

I think overall we believe that the pharmacoeconomic package looks promising.

I think we have a superior basal insulin that should call for some premium.

I think it's important for us to obtain reimbursement so we should not be overly aggressive in the US.

Mads, maybe you want to comment a little bit on what we've done pharmacoeconomically (inaudible).

Yes.

I think four lines we've brought down to the outcome plan for (inaudible).

One is obviously that you need to demonstrate strong and robust efficacy.

I think we've done that, proven A1C in particular, especially on (inaudible) control and you can see the comparison, such as Januvia, which basically is the same price as basal insulin analog, but only have about half the efficacy and this is part of it all.

But more importantly, I think the way we have been able to model the role and the cost to society of hypoglycemia is really suggestive of a premium that could actually potentially be higher than the one we'll be going for, because there is a balance between what premium are you asking for and which launch trajectory in volume terms are you actually going for so that you are up here in terms of entrenchment before (inaudible) or something comes (inaudible).

Then there's also, of course, the notion of treatment adherence.

You can document that -- or at least have suggestive evidence that people will be more adherent.

And one way of doing that is if you have to take only one dose instead of two.

If you can take a dose that you forgot in the morning, take it later.

All of this we're trying to build in.

And then, finally, in the real day-to-day situation, if you can have titration (inaudible) that calls for less glucose testing strips you can save a significant cost element that then also justifies why your insulin is slightly (inaudible) with these markets.

But of course, we have a different pricing situation in different parts of the world and the world is moving lately towards, at least in this field, a more [commonized] (inaudible).

Okay?

Yes.

(Inaudible.)

Brian.

Yes.

Good afternoon.

Brian Bourdot from Barclays.

Just a couple of questions about the Far Eastern markets, please, especially Japan.

That's where you saw the non-favorable comparison because of the earthquake related destocking last June and the destocking in [Alaska] this year.

Just wondering if you can call out for us some products that may have been affected ore perhaps than others, including individual insulin lines.

From your press release I can infer that I think even growth hormone was affect, but were there any others that were particularly affected compared with some others?

And secondly, on China you've talked about sort of slow down in retail demand, yet you are optimistic on the contribution to growth going forward (inaudible) some of these price cut rolloffs.

You also mentioned, I think, that you lost some share to Eli Lilly, but it's not immediately obvious from the slides (inaudible).

Could you talk about some of the dynamics that you're seeing (inaudible)?

Thank you.

Okay.

Maybe, Lars, if you'd dig into the details of the Japanese market.

You may be able to have a little bit more detail than I have on that.

And the second part of the question, that was related to US or --?

China (inaudible).

The Chinese markets has in the first quarter of this year developed relative slowly 9% growth for us and that's really related to an impact from the healthcare reform that was done in the second half of last year, primarily related to the human insulin.

Following from that and the mandatory price reduction to the tune of 10% in China, that really brought this price down to the bidding levels of some of the provincial EDOs.

And from those biddings on human insulin we subsequently saw -- after the (inaudible) a higher rebate was offered after.

And I think in something like three provinces, including Shanghai, we actually lost our part of the human insulin sales and, subsequently, we have bid more aggressively.

So, I think the prime impact we have seen, if you compare to the development in the market in the first half of last year, has been impact occurring in the human insulin side where the prices have been lowered and I think [de facto] to the tune of 5% to 10%.

And the second element has been that Lilly has actually been able to obtain listing for Humalog in more of the provinces on the provincial block list and, hence, as they have obtained listing, they've also obtained a higher share of patients there.

And hence, it has made our NovoRapid franchise a bit under pressure.

And I'd say those two elements are some of the key factors giving us pressure.

And I think those pressures you should also anticipate would go into the second quarter and then the comparators become (inaudible) with the third quarter.

And then we can hope that the -- even though not being reimbursed, but Victoza can continue also to boost the franchise in China.

And then maybe on Japan, Lars, you want to --?

Yes.

Japan, what happened last year following the earthquake and tsunami on 11 of March last year was that as -- we were fearing running out of products for people affected by this disaster and basically filled up inventories with wholesalers to make sure they had products on stock to supply to the different pharmacies, etc.

And we don't have any indication that this was stronger or more for one product line than the other.

It was basically across the board, including both kinds of insulin, stock hormone needles, etc.

And so, I don't think there was any change between the products in that sort of a killing of inventories compared to a general product mix.

And then, we should also remember that this year the sales of Japan was negatively impacted by the price reduction taking place 1st of April.

And where, like in previous situations we see a reduction of wholesale inventories leading up to this price reduction and then expectedly a filling up of stocks again after (inaudible).

Okay.

Maybe -- no more questions?

Okay.

Well, I thank you for your interest in Novo Nordisk and we'll see you back in half a year.

Thank you very much.