諾和諾德 (NVO) 2012 Q3 法說會逐字稿

So, good afternoon, everyone.

My name is Pete Verdult.

On behalf of Morgan Stanley we have the pleasure of introducing the senior management team from Novo Nordisk.

In terms of agenda, we're going to have a short presentation and then straight into Q&A.

So, without further ado, Jesper.

I'm going to hand over the mic straight to Lars Sorensen to make some opening comments on the quarter, and also what's the hope we get over the second half of this year.

Lars, all yours.

Thanks, Peter, and welcome to this Q3 roadshow event for Novo Nordisk.

I know that a lot of you will be very concerned about what will happen next week in the US, but we will actually try at this event to also focus on how the business has been fairing the first 9 months of the year and the other pipeline issues that we have ongoing.

With me here in London on the podium I have Mads Krogsgaard Thomsen, our Chief Science Officer, and Lars Green, who is Corporate Vice President, or Senior Vice President responsible for Corporate Finance.

I will have the pleasure of giving you the introduction then give you an update on sales, and then I will hand over to Mads to give you review of the R&D issues currently ongoing.

And then, Lars Green will handle the financials and the outlook and then I will try to steer the Q&A session.

And as Peter said, we hopefully should be able to do this in about -- the presentation in about 20 minutes.

This will -- the presentation will include forward-looking statements.

Making predictions about the future involves great uncertainty.

Being in front of a US Advisory Panel certainly also holds a bit of uncertainty in it.

We've noted on the bottom of this slide, also, that we are talking about two new products which we intend to brand, Tresiba and Ryzodeg, but none of these products have yet been launched on the market, although they have been approved, Tresiba in Japan and Mexico and Ryzodeg in Mexico as the first market.

Victoza we currently are also trying as liraglutide to develop to -- for obesity is currently only approved for management of type II diabetes.

During the first 9 months we had a steady increase in our turnover at 11%.

I think 42 quarters now in a row with double-digit sales growth in organic terms, local currency terms for Novo Nordisk.

18% in Danish kroner.

So, we have significant tailwind from currencies and that will probably last into the final quarter of this year.

At the -- if we look at the average level for 2012, they are roughly where we have the current spot rate.

So, assuming quite limited currency impact at the current levels for Novo Nordisk in 2013.

If we look at the growth drivers, then it was primarily North America growing 19% and international operations growing 16%.

Victoza remains a significant growth driver.

In absolute terms the growth rates come down, but still growing substantially and adding 64% in local currency to sales from last year.

Modern insulin growing 14%, driven by both NovoRapid but, also, Levemir continues to be a significant growth contributor.

In terms of the research and development, as I mentioned we have the approval now in Japan for Tresiba.

I think it's a very impressive speed.

The Japanese authorities have approved the product with obtaining an approval in Japan in something like 9 months' time.

I think is almost unprecedented.

In Europe we have seen CHMP adopting positive opinions for both Tresiba and Ryzodeg and doing that just over a year after filing for approval of the products.

And that's very reassuring and shows that both files have -- fulfills the requirement of an international approval agency.

In the US we are in front of an advisory committee meeting with the uncertainty that involves.

They have announced that the advisory committee will focus on the benefits that entailed in having a low risk of hypoglycemia and also the risk profile in cardiovascular terms for both Tresiba and Ryzodeg.

On the financial front we saw a significant positive development as the 11% growth in local currency was converted into 21% growth in operating profit in local currencies.

The 7% tailwind we had on currencies on top line was converted into a 13% tailwind on operating profit, leaving us growing operating profit by 34%.

In terms of the outlook, we have upped the guidance, or you can say we have narrowed the guidance on sales growth to now be in the range of 10% to 12%, where we previously said 9% to 12%.

And then, we've increased our growth guidance for operating profit where we now expect it to be 16% to 18% versus previously around 15%.

The outlook for '13 indicates a high single-digit growth in percentage points both for sales and operating profit, and both in local currency.

But, as I mentioned in my review of currencies, basically currencies are more or less at the average level of 2012.

If we look at the growth provided the first 9 months of 2012, a substantial proportion, almost two-thirds of our growth coming from North America and 30% growth in reported terms taking North America to 43%.

Also worth noting is the significant growth contribution that we have from international operations, with 20% of growth growing 16% in Region China, growing 17% and contributing 12% of growth.

So, if you add the three fast-growing regions together, you are now getting to approximately two-thirds of Novo Nordisk turnover occurring in regions with relative high growth.

Do be a little bit cautious in reading the growth pattern for China if you compare third quarter as the comparative number we had from last year.

It was very low because of a change in the reimbursement price for human insulins in China and that made sales almost at a standstill in third quarter last year.

So, don't read too much into the third quarter alone.

But, I think a growth level of around 15% for China is certainly reassuring and I think it's reasonably reflecting the growth opportunities in the market.

If we look at it by therapy area, it's diabetes care that provides the predominant part of the growth, 97%.

And if we basically just take the modern insulins and Victoza, we can explain the entire growth in Novo Nordisk.

But, still adding a bit a growth also for our growth hormone franchise with a 14% reported growth.

If we look at the insulin market, we are seeing a compounded annual volume growth currently at around 7% for the 5-year period.

But, if we zoom in at the last year, so we are seeing a global growth only at the 5% level.

So, this is the compounded annual growth for the last 5 years at around 7%.

And we are seeing a gradual conversion towards the modern insulin and also getting an ever-higher proportion of patients onto devices.

And for the device side, it predominantly the US that still holds significant upgrade opportunity in terms of moving patients to devices.

The market share situation is remarkably stable.

Novo Nordisk has stabilized the situation.

We are gaining a bit of share in the US and we are losing a bit of share in Japan and in China as the main movement.

Other markets are relatively stable.

Victoza sales.

We've continued to show this slide as we have discussed with the market previously regarding Q4 of 2011, where we had DKK200 million in sales, which more rightly belonged in Q2 and Q3 of 2011.

But, at that point in time, we said to the market that we anticipated a growth of around DKK200 million per quarter and we have been tracking along those growth lines.

And on the distribution of sales you can see that a proportion of the sales are now beginning to be visible, both for international operation and Region China.

Although it's still small numbers, I do feel that especially the Chinese markets for GLP-1 treatment holds good potential for Novo Nordisk.

If we look at -- zoom in on the US market, we can see that the market continued to grow.

You can see an impact on the evolution of our competitor product, Exenatide, since the launch of their once-weekly version of the product Bydureon.

So, the decline in that Exenatide segment has stopped and now it is, together with our product Victoza, expanding the overall share of GLP-1s out of the total market where we've now come north of the 6% mark of the chosen market.

And you could also see that we are still working on ensuring that Victoza can safely be prescribed without having to do prior authorization for the physician, and now we have more than 75% of the insured lives covered without restriction.

The 6% I mentioned is, of course, the value term of what share of the diabetes care market we cover.

But, if we look at it in terms of patients, we have retained a quite substantial part of the market that could still be offered the GLP-1 treatment.

And if we compare this 6% share of the value in the US with the European markets, we can see that in markets like UK and France we are getting very close to the 10% patient level that Novo Nordisk stated when we launched the GLP-1s back in 2009, 2010.

That seemed to be a realistic level.

You can see in Germany that it's growing slower and that's because of reimbursement restrictions that are put on the GPs in terms of how big a proportion of their total prescription can be used for GLP-1 prescription, and that's the prime reason for the relative slower increase in value in Germany.

But, what I think is also really important is that we are seeing a gradual increase in the franchise in all markets and, hence, there's no stagnation or risk of patients in significant terms dropping out of Victoza treatment.

So, with those comments, over to you, Mads.

So, moving directly on to the regulatory status for Tresiba and Ryzodeg, Jesper has already mentioned a big part of this.

And obviously, we're all looking forward to next Thursday where we will indeed be having the whole benefit/risk discussion at the advisory committee.

And then, pending the outcomes of that, and hoping that it's a good outcome, it will take anywhere from 2 to whatever months to wrap up the PI discussions, the legal discussions and get an approval.

Now, in EU we are already onto an approval, i.e., we got the positive opinion on both products in October.

And that is with a very, very we believe strong label that I'll get back to on the next slide.

In Japan this was, as Jesper alluded to, highly unusual that the sequence of events has kind of been reversed such that Japan came in first, then Europe and, hopefully soon to come, United States.

And we're happy with the fact that Tresiba is approved and that Ryzodeg is looking towards an approval, maybe even within the realm of this year.

Mexico somewhat also, you can argue, positively surprisingly approved just a few days ago, both Tresiba and Ryzodeg, with a very strong label with a number of claims as relates to hypoglycemia, flexibility of dosing and so on and so forth.

Now, without further ado, I now discuss the European label.

I have to make the disclaimer that it is the expected label, but it is basically what has been discussed and agreed with the CHMP, so there should be no changes to that.

In terms of pharmacology, we are both in Europe and Japan the very nice and prolonged action profile, as well as the strong reduction in variability shown in the label, both in wording and also even depicted in such a way that we can claim a strong reduction in variability and the smooth, long-action profile as the basis for what has been documented in the Phase 3 program; namely, the reductions in overall hypoglycemia and nocturnal hypoglycemia across the pool of the trials in type 1 and type 2 diabetes; i.e., the meta analysis is in the European label, but not in the Japanese label.

And I think that relates to the Japanese often seeking to have Japanese data to base their clinical claims upon.

And they will then cross-reference more on the safety side to the global trial population.

This is how the [PMDA] typically does behave.

So, if we look at convenience, it's also unlike Japan where the style is not to allow people to behave too erratically from day to day, so to speak; at least not on purpose.

Then, in Europe we have a very nice flexibility section discussing the ability to alternate or change the timing of the insulin as per need from day to day.

And the European medicines agency even issued a separate press release, as some of you will be aware, on the notion that this is the first insulin ever to offer a new 200 formulation in prefilled devices and they have a discussion about why there's an unmet need there, but also how you should avoid medication errors and educate physicians and patients.

So, it's looking very good.

We're happy about this.

No predictions about US label because those discussions have not started and will not start until there is a passing through the November 8 advisory committee.

I'm mentioning this particular trial, that's the [Study 35SM29] for the shear reason that, A, it's published and, B, it is the one that has formed the basis for some very nice update in terms of our ability to co-treat with insulin and Victoza.

You will recall, many of you, that we have both studied in all anti-diabetic failure setting how IDegLira in the 201 trial performed very, very well indeed compared to its competitors, Tresiba and Victoza.

You'll also recall how Victoza, in a loose combination with Levemir, our current modern insulin in the basal segment, has done very well in the setting of people who were failing on Victoza therapy and who needed intensification.

So, this is in reality the first time that Novo Nordisk goes out and shows data, or at least releases data, in patients who are failing to reach their ADA target on insulin therapy.

And then the GLP-1 is used for intensification of the basal insulin.

So now, you can argue we have actually started the co-therapy between a basal insulin and a long-acting GLP-1 agonist in all three segments; the OAD segment, the GLP-1 failure segment and the basal insulin failure segment.

And in each case we provide very strong data on the efficacy side with absolute productions and statistical reductions in hypoglycemia and a weight reduction to accompany the results.

Other key events.

Well, in terms of diabetes, we now have a fourth and [in total] three active ongoing all GLP-1 agonist trials where we are tweaking the analogue towards resistance against enzyme, enzymatic degradation and also favoring the uptake of the gut barrier into the circulation by addition of certain carriers into the tablets.

This is an exercise that hopefully will lend itself to selection of at least one Phase 2 candidate in the all GLP-1 space before the end of next year.

In terms of biopharmaceuticals, we have a hemophilia update that NovoThirteen is now approved and will be rolled out towards the end of the year in Europe, Canada and elsewhere.

Turoctocog alfa, our novel factor VIII derivative, a betamine truncated version of factor VIII, has been submitted in the US and Europe, whereas the vatreptacog alfa, as you are already aware, has been discontinued due to the anti-drug antibody formation.

Finally, as we move into the inflammatory disorder area, we've taken the somewhat surprising approach of trying to use the wound healing and tissue regenerative power of factor XIII for the purpose of healing up the ulcerative colitis gut barrier that is also associated with the reductions in endogenous factor XIII, so there's even a replacement rational, you can say, in this condition and, hence, we've started a Phase 2 trial.

Likewise for Anti-IL-21.

We are now onto not only one, not only two, but a full-blown three indication area that include rheumatoid arthritis, systemic lupus erythematosus and inflammatory bowel disease as defined by Crohn's Disease.

So with that, over to you, Lars, for an update on the financials.

Thank you, Mads.

And Jesper has already explained the drivers behind the 18% growth in the top line.

We have transformed that into a 21% growth in gross profit, driven by an expansion of the gross margin by 1.5 percentage points.

Organically, this is driven by an improved pricing environment.

So, we have a positive impact from pricing in the US, where there's still possibilities for taking price increases.

That is more than outweighing the negative pricing environment we see in other parts of the world.

We're also seeing a positive contribution from product mix, where the growth of modern insulins and Victoza is contributing positively to the gross margin.

Further, the gross margin is positively impacted by currency.

Since we have still a majority of our production costs denominated in Danish kroner, we have a positive impact from currencies when we have an appreciation of the US dollar and related currencies.

So, a contribution here from around 0.8% on the gross margin.

Non-production related costs increased by 11%; 7% adjusted for currency.

And in the area of sales and distribution costs we've seen an increase in costs driven by the expansion of our salesforce in the US, in China and a number of international operations' markets as well.

We have seen a -- there's a non-recurring positive impact in the first 9 months of this year because we have reversed certain provisions related to legal cases.

That has reduced the growth rates of our sales and distribution costs in 2012.

R&D was increased by a reported 12%.

And underlying is growing more or less in line with the growth in sales.

We are spending, if we can say, across the whole R&D portfolio, but we can say the significant absolute amounts are related to the late-stage clinical trials in obesity, as well as IDegLira.

But also, some of the earlier projects in the pipeline has been developing and, therefore, we have been spending on those projects as well, illustrated on the slide that Mads showed just previously.

So, admin costs were unusually low in the first 9 months.

There are a number of elements of a non-recurring nature.

The underlying development in our admin costs is still in line with the low single-digit growth that we have seen also in the past.

So, (inaudible) report a growth in operational profit, 21% underlying, so we have had some tailwinds on the currency side there.

We do record our hedging impact in the financial line; so therefore, you see negative financial items.

But on total and aggregate, when you combine the positive effect on operating profit and the negative effect from financial items, there's still a positive contribution from currencies in 2012, which translates, then, into a net profit growth of 26%.

And since we have continued to buy back shares over the past year, the earnings per share growth is up to 31% in the first 9 months.

If we look at the currency environment since our last release three months ago, the US dollar has come down a little bit, but we're still looking at an increase in the US dollar compared to the average of last year of around 8% or so; more or less the same for the Japanese yen, increasing maybe 9%.

The spot rate at the moment is more or less the same as the average for the year.

So, looking at the preliminary guidance that Jesper gave for 2013, in reported terms this will be very much aligned with the underlying terms that -- with the local currency terms that Jesper explained.

So, in terms of the guidance, we have upgraded or narrowed the sales guidance to 10% to 12%, the operating profit guidance up to 16% to 18%.

The small changes in the currency has -- we have sort of made a small adjustment to that and a corresponding adjustment of the expectations to financial items.

The -- can say the lower impact on operating profit is more or less corresponding to the change in financial items.

Cash flow unchanged at around DKK19 billion.

And also, the other items here are more or less unchanged.

So, with those words, Jesper, concluding remarks and Q&A?

Thank you, Lars.

Yes, just on the slide, it has actually been updated.

There's a few new numbers to the left in terms of the actual percentages.

Especially, I'd like to highlight now that we cover a 25% market share in diabetes care and with the gradually expanding leadership position, especially pushed by our Victoza franchise.

And if we look at the pipeline side, we remain the only company with two new generation insulins approaching the market.

This has been changed to now we have approval it the first markets now.

And we have a GLP-1 portfolio that offers expansion opportunity, both in type 1 and type 2 diabetes.

We have IDegLira as a combination product that really provides great opportunity for hitting the market in-between the two.

And then, the opportunity that Liraglutide itself holds for the treatment of obesity and where we expect to report on those trials in the first half of next year.

And then, finally, an expanding pipeline within hemophilia with the filing now of turoctocog alfa, our factor VIII product.

And then later, hopefully also a meaningful pipeline in inflammation.

So, with those comments, we will move to the Q&A.

And I think I'll do it from down here.

(Inaudible.) And please state your company name.

Yes, thanks.

It's Peter Verdult from Morgan Stanley.

Just a few questions.

Lots of discussion over (inaudible) versus Degludec, Jesper, but can we just talk about Levemir and assume that US approval does come through next week.

But, you've now got two (inaudible) in the back, so to speak.

Can you give us some insight as it relates to Japan and Europe, how you're basically going to proceed going forward?

Do the reps -- the Novo reps start talking about Levemir?

Are you going to do something with the pricing of Levemir?

Just some thoughts there would be helpful.

The second question is on pricing.

In China, is the review just purely on analogues or are we going to see another review of human insulin pricing?

And then, as it relates to the US, you've always talked, even since the last capital markets day in Denmark, quite conservatively about US pricing, but both you and your competitors continue to surprise on the upside.

So, I'm just wondering what is your sense now, how that can really last in the US?

And then lastly, maybe for Mads, when it comes to thinking about next year's -- or Jesper -- when it comes to thinking about 2013 guidance, has the potential need for a CV outcome study been incorporated in terms of that high single-digit EBIT growth for 2013?

Thanks.

Alright.

That was a lot.

Maybe we should -- for future questioners, we limit them to two; otherwise, it gets to be solely Peter that we will service today and that was not the intention.

If we look at the first question, what are we going to do with Levemir, I think Levemir will be handled differently in individual markets, really depending on what the situation is for Tresiba.

If we start with Japan, where it's likely we will come first, in that market, clearly the salesforces -- and given the reimbursement situation is so in Japan that, once you have reimbursement, you have reimbursement throughout the countries, then the entire detail and focus on insulin will move towards that.

The market in Japan is primarily moving in a direction where the starts in type 2 is occurring on basal insulin and, consequently, a lot of effort will be put behind Tresiba.

Also, as a precondition for later establishing Ryzodeg in the market, that you need to have an understanding of the significant improvement in risk profile that the Tresiba element of Ryzodeg involves in terms of low risk of hypoglycemia.

So, I think that's going to be the approach in Japan.

If we move to Europe, I think the reimbursement situation in Europe will be challenging.

I think we will launch it in markets where you don't need to have a prior approval at launch and that could be markets in Northern Europe and then you would see us gradually roll it out in the rest of Europe.

And you could say, speaking in broad terms, that the further south that you get, the later Tresiba probably will be rolled out.

And then, it will be on a market-by-market decision.

Until you have it approved for reimbursement, I think the prime focus would still be holding on Levemir.

And likewise, I would actually anticipate with the gradual rollout of Tresiba in the international operations markets and knowing that we haven't yet started the Phase 3 trials for Tresiba in China, that you would actually in the coming year still see a Levemir franchise (inaudible) growing, noting that it was actually the fastest growing of our modern insulins the first 9 months of this year with a growth of around 20%.

So, we still believe in Levemir.

We still think it can do a lot of good for patients with diabetes.

We just think that Tresiba is a superior basal insulin and that will change our marketing focus.

Jesper, you could just add to all of that that of course it's also nice for us to have the luxury of having a modern insulin as our second tier insulin, because it will enable even in the more price-sensitive markets that we have something we can leverage, which is indeed an analogue and not just human insulin.

And so -- sorry, thanks for reminding me, Mads, because I didn't reply specifically to does the launch of Tresiba immediately have implication for the pricing points chosen for Levemir and I don't anticipate that will be the case.

It would more be an assessment of how is the overall situation and is there specific accounts we can hit with and use some flexibility on pricing on Levemir to hit on those accounts.

But, no immediate (inaudible) market-wide implication.

I think that's (inaudible).

In terms of pricing in China, I think there is a risk that the modern insulins will come up for review on pricing and adjustment of pricing in China on molecules which have been on the market for quite a while have been quite significant in terms of reductions.

So, it could be reductions in the magnitude of 10 percentage points.

Could there be additional adjustments to the human segment?

That's possible.

I think there is already in the Chinese market intense competition based on the revised price level for the various provinces and who bids for the -- would get a share of the hospital contracts.

So, you could see part of the price erosion is already occurring because of intense competition on various hospitals and accounts in provinces.

So, I think it's fair to say that, overall, the insulin franchise in China should be anticipated to be under some price pressure in 2013.

As for the US and pricing in the US, I have been proven wrong now for something like five years, where I've been predicting that I would see the US market come down to a price adjustment level which would be more attuned to the inflationary level we saw in the economy.

I think if I look at the broad pharmaceutical market, there seems to be some element of actually growing back part of the significant cost there has been for an implementation of the US Healthcare Reform through additional price increases.

But, you always have to be a little bit careful in reading the price increases in the US market because one thing is less price increase; another thing is what actual home-take effect does it have?

But, I would say as a rule of thumb, approximately half of the list price increase actually turns out to be positive revenue increase for Novo Nordisk.

I think it would be foolhardy of me to try to predict what's going to be the outcome of the US election.

But, I think it is highly likely that you will end up in a situation where there are not going to be a clear majority in both the senate and the house in terms of president (inaudible) decide and that will have a tendency to kind of gridlock things a bit for another four-year period.

So, I wouldn't anticipate any significant changes occurring in '13; gradual changes probably more occurring in '14.

And then, finally, on 2013, and you asked whether we had anticipated that there could be a post-approval cardiovascular risk study done in the US.

That could certainly be contained within the guidance we have.

If we look to Victoza for reference on cost levels, that was a 10,000-patient study over a 5-year period.

It's still ongoing.

And that involves a ballpark figure of $40 million, $50 million year.

And of course, if we were going down that track, I mean, it wouldn't even hit us with that full number in 2013 given that the trial first would have to be designed, approved, etc., so no major indication on guidance from short-term post-approval study.

And I think our experience with actually running the current LEADER trial is actually quite positive.

We think it actually provides good opportunities for having a dialogue with some key opinion leaders in terms of how the product's going to be used anyway.

So, I wouldn't be overly concerned about such a thing, if that was going to be the outcome of an advisory committee.

Next question, please.

Richard?

Thanks, Jesper.

Richard Vosser from JPMorgan.

Just one question.

I'm just wondering your thoughts on the perspective the FDA is taking in terms of whether they're looking at the two NDAs together or separately, particularly, I suppose, with cardiovascular risk in mind, but in other elements of safety, obviously not efficacy, but safety would be useful given, obviously, they contain Degludec, but all separate products.

Yes.

Well, I think, Richard, the short version is that they will look at these together and separately; i.e., together from a safety perspective.

That's also how the pre-specified analyses have been because Degludec in present in both products.

And NovoRapid or (inaudible), which is the partner, so to speak, in Ryzodeg has a well-established safety profile.

And that, then, can be (inaudible) out, so to speak, in the Victoza preparation.

So, you would expect if there were anything untoward or adverse in that preparation, which we do not believe there is, then that could be ascribed to the Degludec component and this gives a stronger base of exposure in the human body by combining the two.

When you look at the merits, i.e., for instance hypoglycemic benefits, it is quite clear that they have to be looked at separately.

Because in the case of Ryzodeg, hypos A (inaudible) different compound, namely a NovoMix.

And you may recall that those benefits even -- an almost blind man would be able to see them because they are to the tune of 70% plus reductions in hypoglycemia.

So Ryzodeg, I think, when given on a twice-daily basis, is the quite clear cut case.

However, it is much less clear cut up against the basal insulin because that's apples and pears.

So, Tresiba is more a basal versus basal, whereas you should look at, in my view, Ryzodeg more as a combo versus premix or premix versus premix.

And I think the agency will do that, too.

Okay.

Brian?

Brian, here.

Yes.

Thanks very much.

Brian Bourdot from Barclays.

A couple of questions, please.

Firstly, on the factor XIII.

That seems like quite a novel approach to treating ulcerative colitis.

And I was just wondering how much -- how often are you planning to use the drug in that setting, because I think we know that clotting factors have a reputation for being fairly costly treatments, although for patients who take them tend to need them.

And the second thing I'd like to ask you about is the new injection device in hemostasis and whether that is the -- how that compares with current offerings and also with -- that is the same device that you have used or submitted to the authorities for your factor VIII turoctocog alfa.

Thank you.

Mads, that goes to you.

Yes.

Well, Brian, thank you for those questions.

I don't get them so often, so I'm really happy about that.

Factor XIII; it's actually an interesting protein.

It's the A-subunit.

And for those of you who are not experts in hemophilia or hematology, this is so-called [heterotitramia] and that means that you have A-sub units that couple with the B-subunits.

And what people with factor XIII deficiency are lacking is the A-subunit and that's the one we're producing.

And the reason why that is important is that it gives a very long half life.

So, we only have to infuse this on a once-monthly basis.

So, the treatment is once monthly and the basis for us doing this is that we, in relevantly, genetically modulated or modified animals, we have seen that replacement of their endogenously lost factor XIII actually improves the ability to heal gut (inaudible) barriers.

And we know from ulcerative colitis patients that they actually have reduction of up to plus 50% in endogenous circulating levels of factor XIII, probably related to the fact that there's been an ongoing consumption as part of the wound healing process in the colon.

So, that's the reason and this is actually quite interesting.

In terms of the hemophilia device, the DBO-297 as the connoisseurs call it, to be honest, it is more of a pre-fill syringe kind absolution, so it's not rocket science, but it's very nice because essentially today when you administer NovoSeven, you have different vials with a (inaudible) powder that has to be reconstituted and then, via the butterfly system, infused intravenously.

You're cutting out quite a number of steps by having now the diluent in a prefilled syringe that is just entered into the vial and then you have the solution ready for use.

I think it's a small advancement in NovoSeven there, but important.

Really, I think, Brian, you should see it as a first step that we will utilize some of the device capability for build up in diabetes and gradually see us applying that in an IV setting.

And so, this is -- see this as the first step and expect us to make more moves in the years to come and, through that, basically ease the convenience for hemophilia patients.

Tim?

Hi.

Tim Race here from Deutsche Bank.

Two questions.

The first one, just looking at competitors in the obesity space.

(Inaudible) have obviously launched very early days, but what are you learning from those launches in terms of uptake, reimbursement, acceptance and implications for Victoza or liraglutide?

And then the second one, you talked about challenging reimbursement in Europe.

Obviously, that depends on how much you want to price it at.

Basically, given what Lily are talking about in terms of generic (inaudible) sort of a data (inaudible) in house at the moment, what timeframe do you think you have before you get potentially copies of Lantus and how much do you need to speed up take up versus the pricing here?

Okay.

Mads, if you deal with the competition in obesity, then I'll deal with the pricing for Tresiba in Europe.

Yes.

Well, I think considering the notion that, as you know, Tim, that Qsymia from the Vivus Company actually came up or came out with some relatively severe restrictions because -- these things about monthly pregnancy test for women of childbearing age.

There has to be mail-order pharmacists and very -- you can say restricted channel of distribution and so on and so forth.

We actually see the uptake as positive.

I think that the first numbers we -- all of us have seen come out the first few weeks have been positive in view of the fast that this is a somewhat restricted agent in terms of how to prescribe it and so on.

You should also see it as somewhat different from liraglutide 3 milligram because, of course, Novo Nordisk is a company with a completely different reach, so to speak, than Vivus in terms of salesforce and our breadth in for instance the United States.

And also, we would not expect a restricted, you can say, program for liraglutide in the way we have seen it for Qsymia.

When that is said, though, their price is much lower than ours will be.

So, that works in volume terms, of course, against liraglutide just exploding in the US market overnight because there will, of course, be pressures for using anti-obese agents.

And our view is not to ride on that wave and say, hey, this is where everybody -- as I think we've spoken about many times, we perceive this as a BMI 35 plus comorbidities agent that really will go hand in hand --.

It's actually so that when you talk to the clinics who do this, they will tell you that above 35, more and more of them are stating to advocate even bariatric surgery.

But, every time you ask 100 questions to do bariatric surgery, only 10 of them will vouch to go for it and another 10 will have their arm bent and twisted until they agree to it.

So, you will have a total of around 20% of those in the liraglutide target group in terms of marketing proposition that will actually lend themselves to accept that their bodies limit themselves to bariatric surgery.

The rest will have to go hand in hand between behavior modification and pharmacotherapy with (inaudible).

Thanks, Mads.

Then on the pricing of Tresiba in Europe, I think Novo's contention is to -- with the significant innovation we come in the product, we think that we should obtain a premium.

It's also our belief that the price for diabetes care treatment in form of insulin and advanced devices in Europe is at a level which is unsustainable.

To look at it and compare it up against the US level, we're looking at the modern insulin being priced at a third per unit compared to the US.

And consequently, we think this is one of the opportunities to try to rectify some of that difference.

You cannot do that in (inaudible), but you can certainly take out a premium.

And all experience in the European market also show that, if you don't take the opportunity of rectifying that situation at launch, you will never have the opportunity again.

So, we will pursue that.

That will have then the implication that the reimbursement will be slow.

And as I said, the -- and the rollout will be gradual in Europe.

But, you do also have to bear in mind that a high proportion of the international operations markets, which holds ever greater potential for a next generation insulin, will very typically in their local reimbursement use our home European market as the reference price for setting the pricing points out there.

So, the pricing points chosen for Europe and de facto, and very often in instances Denmark, will actually be guiding for a number of prices around the world.

And hence, I think it would be short sighted of Novo Nordisk to pursue near-term gains with a benefit -- or with the potential of eroding the long-term price precision for a new generation of insulins.

And then, you specifically asked about would we see competition in Europe from generic versions of glargine occurring and I think that's very likely.

I think there is reasonable clarity on what regulatory pathway they have to take.

And according to my recollection, you will have a patent expiree occurring sometime in '14; US, '15.

And hence, I would anticipate that in the timeframe of '14, '15 you should anticipate that there would be more providers of glargine on the European markets.

Okay?

Yes.

Keyur.

It's Keyur Parekh from Goldman.

Two questions.

If you -- when you spoke, Jesper, about kind of the volume growth from a 5-year perspective and 7% with the last 12 months being kind of 5%, can you help us understand what's driving that lower volume growth?

And kind of how do you see volume growth from a 12-24 month perspective going forward?

And secondly, you kind of kindly provided us a breakdown between volume versus value and price in the US over the last 12 months, value and price being 18% of your growth.

Can you help us split that between -- kind of shift to analogue insulins, what is actual price increases and how should we think about that?

I'll probably need a little bit of help from Investor Relations on the last bit to get that -- to get those details.

But, the first bit on the volume growth, it is -- it's correct that we are currently seeing a global insulin volume growth down at the 5% level.

And that has to do with a number of factors.

Let me take the three key elements one by one.

First, we're seeing in Europe a very modest growth level of around 2%, 2.5%.

We don't believe so much it has to do with a lower economic growth as basically insulin treatment in Europe (inaudible) wide is offered full reimbursement.

So, it's not the restriction -- or it's not restrictions in reimbursement.

There are some co-pays in markets like Poland, etc., but it more tends to have an implication on what kind of brand issues, whether it's the modern insulin versus humans, but not having a direct implication on volume.

We ascribe mostly the low growth in Europe to the quite successful rollout of the DPP-4s.

And we would then, based on previous experiences with a kind of slowdown in insulin volume growth when prior OIDs was rolled out, to being a temporary effect that will probably reverse within, let's say a 2 or 3-year period.

So, I'd expect Europe to get back to what I would say a normal growth level, which is between 3% to 5%.

I don't see any significant changes in terms of lifestyle, prevalence of obesity that should have a significant implication on type 2 prevalence and longer-term insulin growth levels occurring in Europe.

So, that was the first market.

The second market, which is important, I think is international operations, where you actually have a marked decline in the reported volume growth.

And international operations is different from the other markets in the sense that there's a high element of patient own-pay in those markets.

And hence, there is a clear correlation between the level of economic activity and the ability of patients to afford insulin.

And here, we're seeing that the reduction in expected growth and the reductions in trade, etc., is having the implication that a number of markets, like for example India, is seeing lower growth levels and, consequently, also lower insulin volume levels.

So, that would be a second element.

And if you then ask me to make predictions about how that will evolve on 12 to 24 months, I don't think it's going to change materially.

I think -- I don't see any significant boost in growth occurring near term.

But, that's -- you probably came make as good a call yourself as I can do on that one.

And then the final market where we have seen a slowdown in growth is the US market.

And where we are currently at the 5% growth level in the US, but actually coming down from a level which was, in a historic perspective, very high in the US, growing 7%, 8% the previous two years.

And I read that more as a return to norm.

There is a potential opportunity in the US when you look towards '14, '15 in some of the uninsured patients which got -- which should be getting in on the medical coverage from '14 onward under the Affordable Care Act; that that could lead to increased diagnosis of diabetes patients and, with that, an increased flow of insulin volumes.

But, so far let's say, that's mostly a hope.

I don't think you would -- I wouldn't put too much into that yet.

I don't know, the second -- (inaudible).

Have you got the bit on the second element?

Yes.

So, on the split of the growth in the US insulin sales, approximately 25% is -- of that is driven by volume growth.

About 25% is driven by price increases and the remaining 50% is driven by the upgrade from human insulin to modern insulins and from vial to devices.

Right.

Yes.

Thank you.

It's Matthew Weston from Credit Suisse.

Two questions, if I can.

The first following on from Tim with respect to the oral obesity drugs we're seeing.

As I understand it, they are self-pay products in the US market.

Do you expect a similar funding for Liraglutide in obesity or are you hoping with the morbid-mortality benefit you may show that you will see it as a reimbursement?

And then, secondly, another question you probably don't get often.

Can you give us an update on your oral insulin program?

(Inaudible.)

Okay.

So, well, first of all, it will always be difficult to have broad coverage in reimbursement status and their formulary status in the United States for an agent against obesity for the sheer reason that they would be worried as if there were no tomorrow about the amount of patients who would be eligible for such therapy.

It is true, as you really hint at, that we are seeking to go out and position this rather narrowly.

So, in terms of absolute numbers of patients who are BMI above 35, have comorbidities, in particular pre-diabetes we're thinking, but it could also be sleep apnea and certain other comorbidities.

We are not speaking 117 million, but a high single-digit million of potential patients.

We will, actually, be striving to get some formulary coverage for those.

That's not going to happen overnight because this is going to be a pricy product and we will have to use a lot of pharmacoeconomic outcomes and so on.

And they do pertain to the notion that, really, what happens when you're very, very obese and have these comorbidities is either that you develop diabetes, which is costly to society, or you have a lot of absenteeism.

Some very obese people basically also have absenteeism, either -- well, either due to disease, but also just absenteeism.

So in general, we will try to build that argument, but it's not going to be an overnight thing.

We respect that and we also expect some of the sales to come in as probably private cash-paying customers.

And I think in terms of reimbursement, I think it's highly likely that it will be under prior authorizations standards and in the higher end of the managed care plans that we can get some reimbursement up front.

But, I think there will be both a significant co-pay and I think there will be prior authorization.

So, thinking of kind of Pan -- sort of Pan-US-wide reimbursement, I think that that's very (inaudible).

Oral insulin.

Well, again here we are -- just like in the GLP-1 space, we are working on different analogues of insulin.

And there is a challenge that, whereas our GLP-1 analogue, semaglutide being the example (inaudible), have documented that by very strong albumin binding you can actually achieve a once-a-week or a 7-day half life in the circulation.

This is not so for the insulins, where even Tresiba has only half life in the circulation of around 5 hours.

So, we've had to work around the notion that we need to treat the body's clearance mechanism.

And the clearance mechanism is actually the insulin receptor, per se, which when it binds insulin, it takes it into the cell and degrades the darn thing, which is good because it gives you very tight regulation of blood sugar.

Now, here we've actually had to not only penetrate the gut barrier after you -- in a very robust manner have passed the gut without being degraded, you also have to have a longer circulation half life; much longer.

And I think we've achieved this for different classes of agents.

We've done that by engineering the protein backbone, i.e., putting in 1, 2, maximum of 3 (inaudible) substitutions at very hotspot-like areas of the molecule where the enzymes love chewing it up.

And then, on the other hand, we've attached 1, up to 2 fatty acids that will allow for albumen binding.

They will also change receptability and they may even provide hindrance for the enzymes that want to chew up the protein.

So, we actually have, I would say, 1, 2, up to 3 molecules that are either in the clinic or entering the clinic almost as we speak with different pharmacological properties.

And they're then being tested also in different carrier systems, either like the (inaudible) from the [Miriam Company] that is, as you -- some of you may know, medium chain sodium caprate that allows for a para-cellular, i.e., between the cells uptake of the insulin, or using the Emisphere technology known as SNAC, where you actually have a transcellular -- believe it or not, a transcellular uptake of the insulin molecules.

So, we also have some nanotechnology in-house that we are deploying.

So actually, we're using up to three different analogues in up to three different versions to really use humans as guinea pigs in an innocent way, so to speak, because there's nothing dangerous about doing single-dose studies with tablets in man.

But, I think that is the best species to do this.

And that's why you're seeing more analogues and more project names and we all get very confused when we see them.

But, it is really just making the right drug selection.

And the more you see, I would take that as good news; not as a bad news, that all the others have failed, but that we are iterating and then selecting once we've done that.

But, you probably have to be a bit patient there.

We'll take the last one from Sam.

I hope you don't mind, in that case, if I ask three questions.

No, that's okay.

Thank you.

So, just the first one is, looking at [Once Long], which is a really nice, clean data set, doesn't that essentially set the scene up to suggest that we should be pushing back short-acting insulin use and, hence, impacting how NovoLog and Humalog grow going forward?

And the second one is on the difference between UK and France.

You've commented on Germany as regards to GLP-1s, but France looks a little bit more like the US behavior in terms of volumes of the two competing franchises, whereas UK doesn't.

Is there something in there that we can learn from in terms of understanding how that comes about?

And lastly, in terms of gross margin development as Tresiba comes along, not knowing what price it is but knowing that it's a slightly more complex product in terms of manufacturing relative to Levemir, I'm assuming.

And what level of revenue do you need from Tresiba to be at the same gross margin level as Levemir is?

Okay.

Mads, if you deal with the first one on the Once Long study and then I'll deal with the GLP-1 and Tresiba growth margin questions.

Okay.

So, Sam, you do have -- you raise a very important question.

The Once Long study where in the -- and for those who didn't follow us yesterday, what we are actually showing is that in a extension of those patients who fail to achieve their EDA target after two years of therapy, they were randomized to either add a prandial mealtime NovoRapid insulin or a -- the injection of Victoza.

And you can say this is now -- not the first time, but it's the first time that Novo Nordisk goes out and directly documents that you get glycemic benefits, you get weight benefits and you get hypoglycemia benefits by going down the Victoza route.

So, I think if Victoza was like tap water, that it was for free and everybody could and should have a right to it, then I think there would be am emerging paradigm shift very, very soon to come because the physicians agree with your notion that these are quite powerful data.

And we've discussed with them as late as last week and actually on this particular topic.

But, there is, of course, the issue that Victoza and any other GLP-1 analogue, they don't come for free.

They are more expensive; actually, twice the price of insulin.

And then, there's also something habituary that doctors use to intensify with the mealtime insulin and so on.

But, I do expect personally to see a gradual, over time, transition towards a scenario where GLP-1 agonists, and in particular the good ones such as Victoza and semaglutide, but the ones that have these benefits, okay, because they're not all created alike, that they will be used also in the later parts of the disease where you actually would have expected that the beta cells were not really good enough, powerful enough to respond to GLP-1.

But it seems up to 13 years after diagnosis -- these were 60 year old on average, the ones we presented yesterday.

There's still a lot of bang for the buck, so to speak.

So, I think there will be a gradual paradigm shift and Novo Nordisk will reap the benefits of that via IDegLira, via Victoza, via semaglutide.

And who knows, one day maybe be an (inaudible).

Thanks, Mads.

And then on the GPL-1 market, the difference is really in relation to the reimbursement situation in the two markets and the comparative situation.

In France we have not yet seen Bydureon being launched and, as a consequence, there's limited competition in the market.

So, that's the first comment.

The other comment for France is that you've seen full reimbursement, more or less, unrestricted nationwide for the 1.2 microgram of Victoza.

Whereas, if you look at the way the US market worked was, first, that there was some very gradual reimbursement by the primary care trust.

Secondly, there was an opinion then by NICE that said for the 1.2 microgram that you had to fail on certain other therapies before you were allowed to move on.

So, let's say the access for the GPs to move onto Victoza treatment was slightly more difficult in the UK compared to France.

And secondly, you've had in the UK, to my recollection since July last year, you've also had Bydureon on the market.

So, I'd say that ought to describe the prime differences to those facts.

In terms of Tresiba and gross margin, it's always difficult to make predictions, especially about the future.

And the problem you have about Tresiba is that I'm yet quite certain on how the mix is going to be in terms of what markets we're going to be on.

And remember, I said on the current modern insulins you were looking at per unit A factor III price in the US compared to Europe.

So, in terms of what gross margin I'm going to end up on, you have to make some assumption about what mix of market you're on.

But, let's use the assumption that we have the same mix as we have in terms of market distribution for the product -- for Tresiba compared to what we have today with Levemir, then it -- I would say that it on an approximately 2-year horizon holds the promise of actually being a product with a better gross margin than Levemir.

The production process for the API is slightly less complex.

On the other hand, we are offering a clear superior, but also more costly device in the form of the new device that basically offers auto-injection.

And I would say it would take us at least two years to get the production up into volumes where the margin would be similar.

But, from there on, I see it as a potential margin improvement for Novo Nordisk.

So, that basically ends this investor session.

Thanks very much for your interest in Novo Nordisk.

As we alluded to yesterday on our conference call, we anticipate to hold a conference call on Friday morning, the 9th, where we will update you on how much more we have learned from the US advisory panel.

So, thank you very much for your interest today.

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