諾和諾德 (NVO) 2013 Q2 法說會逐字稿

Good day and welcome to the Q2 2013 Novo Nordisk A/S earnings conference call.

Today's conference is being recorded.

At this time I would like to turn the conference over to Lars Rebien Sorensen.

Please go ahead, sir.

Thank you.

And welcome to Novo Nordisk's conference call regarding our performance in the first six months of 2013 and the outlook for the full year.

I am Lars Rebien Sorensen, the CEO of Novo Nordisk.

With me, I have our Chief Financial Officer, Jesper Brandgaard and Mads Krogsgaard Thomsen, our Chief Science Officer.

Present are also our investor relation officers.

Today's earnings release and the slides used for this call are available on our web page novonordisk.com.

The conference call is scheduled to last approximately one hour.

And as usual, I'd like to start with an outline of the presentation.

A Q&A session will begin in about 25 minutes.

Turn to slide number three.

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

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

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

Please note that the conference call is being webcast live and a replay will be made available on Novo Nordisk website after the call.

Turn to slide number four.

We are pleased with the strong sales in the first six months of 2013.

Sales increased 14% in local currencies and 11% in Danish krone compared to the same period in 2012.

Sales growth was driven by strong performance in North America, International Operations and China.

Sales growth was realized within both Diabetes Care and Biopharmaceuticals with the majority of growth coming from modern insulins and Victoza.

Among the modern insulins, in particular NovoRapid and Levemir, drove growth.

The launch of Tresiba, the once-daily new-generation insulin with an ultra-long duration of action continues.

Tresiba is now also commercially launched in Mexico and Switzerland while the R&D foundry received feedback from the FDA on the clinical trial protocol for the cardiovascular outcome study for Tresiba, confirming our previously announced expectations to trial design and the trial is now expected to start before the end of the year.

Mads will elaborate on this during his presentation.

We have now successfully completed the SCALE phase 3a clinical program investigating the efficacy and safety of liraglutide 3 milligram for the treatment of obesity.

We expect to file liraglutide 3 milligram for regulatory review in the United States and Europe around the turn of the year.

In June '13, an exploratory double-blind phase 1 trial evaluating the short-term efficacy, safety and pump compatibility of continuous subcutaneous infusion of FIAsp, a novel faster-acting formulation of insulin aspart, and NovoRapid in 42 people with Type 1 diabetes.

Based on the results from this and other phase 1 studies with FIAsp we expect to initiate the phase 3a program during the third quarter of 2013.

In May, completion of the first phase 3 trial with N9-GP, a long-acting factor 9 derivative for haemophilia B patients was announced.

We are expecting to file N9-GP for regulatory approval in 2015.

Turning to financials, the reported operating profit grew 15% in the first six months and diluted earnings per share grew 30%.

The robust sales performance has led us to raise expectations for operating profit in 2013 where we measure in local currency, we now expect sales to grow 11% to 13% against previously expected growth in the range of 9% to 11%.

And for operating profit we now expect the growth in local currencies of 12% to 15%, an increase compared to previous expectations that was around 10%.

Turn to slide number five.

In the first six months of 2013, North America accounted for 70% of growth followed by international operations and China accounted for 18% and 9% respectively.

Sales growth in North America was 23% in local currencies reflecting continuous robust market penetration of the modern insulins in particular, NovoLog and Levemir.

Victoza also continues to perform well in North America.

Sales growth in Europe was 2% measured in local currencies.

The sales development reflects continued solid growth of Victoza and portfolio of biopharmaceutical products.

Insulin sales in Europe are stagnant as the sales growth of the modern insulins especially Levemir and NovoRapid is offset by declining human insulin sales.

Sales within international operations grew 17% in local currencies driven by continuous penetration of all three modern insulins, a solid contribution from human insulin sales, growth and continued expansion of the GLP-1 market.

Sales in Region China increased 16% in local currencies.

The growth was driven by all the three modern insulins, while sales of human insulins only grew modestly.

Sales in Japan and Korea declined 3% in local currencies.

The sales development in Japan and Korea however reflects the negative impact of a stagnant Japanese insulin volume market and a challenging competitive environment.

Turn to slide number six.

The modern insulins continue to exhibit strong growth in the first six months of 2013 amounting to 50% while Victoza also continues its steady growth.

In the first six months 2013 diabetes care franchise grew 14% while the biopharmaceutical franchise grew 11% both measured in local currencies.

Modern insulins were the primary growth driver accounting for 50% of growth followed by Victoza accounting for 27% of growth in local currencies.

Sales of NovoSeven increased 7% when measured in local currencies.

The market for NovoSeven remains volatile and sales growth was primarily driven by North American and International Operations.

Sales of Norditropin increased 14% measured in local currencies.

Sales growth also here is primarily driven by North American and International Operations.

We are the leading company in the global growth hormone market now with a 25% market share measured by volume.

Turn to the next slide please.

In the last 10 years the global diabetes market has grown more than 10% in value annually with injectables growing more than 15% annually.

In this period we've expanded our leadership position within diabetes care and the Company now holds 27% value share of the global diabetes care market up from 25% 12 months ago.

Turn to slide number eight.

In the last five years, the global insulin market grew 16% in value on an annual basis.

The growth in value has been driven by sustained volume growth and a gradual shift from human insulins to modern insulins as well as an increase in penetration of devices.

Novo Nordisk has been able to sustain a strong position and today commands 46% of the modern insulin market measured by volume.

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

A key driver of global insulin market growth as well as for Novo Nordisk has been the North American market.

In the first six months 2013, our sales of modern insulin increased 22% in local currencies and 21% in Danish krones in North America.

Growth was primarily driven by the US.

The performance reflects that our three modern insulins, Levemir and NovoLog, NovoLog Mix 70/30, continue to perform well in the US where these three products are gaining market share in their respective market segment as well as a favorable pricing environment.

The market share of Levemir has now increased 18% -- to 18% on the basal insulin segment whereas market share of NovoLog and NovoLog Mix has increased to 48% and 33% of the rapid-acting and the premixed insulin segments respectively.

Turn to slide number 10 for an update on Victoza.

MAT sales of Victoza reached DKK10.8b in the first six months 2013 reflecting robust sales performance driven by North America, Europe and International Operations.

North America accounts for the majority of Victoza sales with 64%, followed by Europe and International Operations.

Victoza holds a global market share -- leadership share now of 69% of the value market compared to 64% in 2012.

GLP-1 segment's value share of the total diabetes care market has increased to 6.6% compared to 5.2% in 2012.

In the US, Victoza sales growth continues, we're largely unaffected there by the 2012 launch of a competitor product.

Victoza is gradually increasing its market share and now accounts for 65% of the GLP-1 market value in the United States.

In Europe, we continue to see robust uptake of Victoza across key markets, and Victoza remains the leading GLP-1 product now with a market share of 78%.

Turn to the next slide for an update on Tresiba.

Tresiba our once-daily new-generation insulin with an ultra-long duration of action has now in addition to the UK, Denmark and Japan, also been commercially launched in Mexico and Switzerland.

In Mexico, we are pursuing access to the national insurance companies whereas Tresiba has received general reimbursement in Switzerland.

Turn to the next slide for an update on Tresiba launch performance.

Launch activities are progressing as planned in all markets.

Feedback from patients and prescribers are encouraging.

The launch of Tresiba in Japan is especially interesting because it was the first market we launched with broad reimbursement.

Here the launch of Tresiba is progressing well with an estimated 5,900 doctors having prescribed Tresiba by now and around 29,000 patients are estimated to be using Tresiba.

Tresiba is steadily gaining market share and now holds a value of market share of 6.8% of the Japanese basal insulin market 21 weeks after launch.

Now over to Mads for an update on research and development.

Thank you, Lars.

Please turn to the next slide.

The regulatory reviews of Tresiba and Ryzodeg continue around the world.

New drug applications are under review in [26] countries and approval has now also been obtained in India.

In Canada, we've informed by Health Canada that the agency requires additional data for approval.

While disappointing, especially since Tresiba is already approved in Europe, Japan and several other countries, Novo Nordisk will continue to work with Health Canada to ensure the additional data we provide will fulfill their requests.

In June, we initiated a global 26-week randomized open-label, phase 3 trial comparing the efficacy and safety of Tresiba with insulin glargine in approximately 800 people with Type 2 diabetes.

The trial is expected to recruit most of the patients from China and will provide the basis for the NDA submission to the Chinese Food and Drug Administration.

Please turn to the next slide.

We have now received feedback from FDA in the US on the clinical trial protocol for the cardiovascular outcomes trial for Tresiba.

The feedback confirms the expectations we recently communicated with regards to the trial design.

The event-driven trial will thus be double-blind, use insulin glargine as a comparator and include around 7,500 patients.

The submission of cardiovascular data to FDA is expected to be based on an interim analysis of the major adverse cardiovascular events in the trial and Novo Nordisk will subsequently continue the trial in order to meet the post-approval criteria as they are described in FDA's CV guideline for diabetes therapies.

Following the protocol agreement with the FDA, we've now submitted the clinical trial application in the United States and the trial is now expected to be initiated before the end of the year.

The interim analysis is still expected to be available two to three years after trial initiation.

Please turn to the next slide.

With the completion of the SCALE Sleep Apnoea trial, Novo Nordisk has now successfully finalized the entire SCALE phase 3a clinical program that has investigated the efficacy and safety of Liraglutide 3 milligram for the treatment of obesity and selected important comorbidities.

This 32-week trial investigated the effect of Liraglutide and placebo both in combination with lifestyle intervention on the severity of sleep apnoea in 350 obese people with moderate to severe obstructive sleep apnoea.

Obstructive sleep apnoea has a prevalence of 6% at least moderate to severe sleep apnoea has a prevalence of 6% in the United States and is commonly associated with obesity.

It is characterized by decreased or total arrest of airflow during breading when asleep.

Untreated people with severe obstructive sleep apnoea have a greatly increased risk of mortality including a fivefold increase in cardiovascular mortality according to the landmark study performed in this Wisconsin sleep cohort.

The sleep apnoea trial assesses the improvements in obstructive breathing events per hour as measured polysomnographically by the apnoea hypopneas index known as AHI.

From a mean baseline AHI score 49 corresponding to severe obstructive sleep apnoea people treated with Liraglutide 3 milligrams experienced an improvement of 12 index points compared with six points for those treated with placebo after 32 weeks of treatment.

The difference was statistically significant and the trial thus met its primary end point.

In this trial population the response was, as expected, dependent on the degree of weight loss.

And some analysis showed that subjects losing 10% or more of their weight on average experienced a reduction in AHI score of more than 20 index points.

The tolerability and safety profile was consistent with the findings from the other trials in the SCALE program.

Please turn to the next slide for a recap of the SCALE obesity and pre-diabetes data.

In May we announced the headline results of this trial.

It is the largest trial in the SCALE program and included more than 3,700 people without overt diabetes who were obese or overweight with comorbidities.

In this trial people treated with liraglutide achieved an average weight loss of 8% after 56 weeks of treatment compared to the 2.6% weight loss achieved by people treated with placebo.

The proportion of people achieving a weight loss of at least 5% was 64% for Liraglutide and 27% for placebo.

The proportion of people achieving a weight loss of at least 10% was 33% for liraglutide and 10% for placebo treatment.

Among the subjects completing one year of treatment, four out of every 10 liraglutide patients achieved a weight loss of at least 10.

All differences between liraglutide and placebo were statistically significant in favor of liraglutide and the trial thus met all co-primary endpoints as well as the FDA efficacy criteria for approval of obesity drugs.

Furthermore, among those with pre-diabetes at randomization 69% treated with liraglutide no longer showed signs of pre-diabetes after 56 weeks of treatment compared to 33% in the placebo group.

Liraglutide was, as previously communicated, generally well tolerated and the 56 week completion rate was 72% and 64% for liraglutide and placebo respectively.

Withdrawals due to adverse events were below 10% in both arms.

The most common adverse events were related to the gastrointestinal system and they diminished over time.

To summarize we have, with liraglutide 3 milligrams across the SCALE program, consistently demonstrated a placebo adjusted clinical development weight loss and improvements in obesity-related risk factors, including blood glucose, blood pressure, cardiovascular risk biomarkers, lipids and patient-reported quality of life.

Furthermore, liraglutide 3 milligrams appears to be safe and well tolerated.

No signals of increased risk of cancer, CNS or cardiovascular-related events in the studies have been found.

Numerically there has been observed a higher number of reported gallbladder disease events, however within the range expected for an obese population.

It was established that people with obesity are predisposed to gallstone formation and in addition that rapid weight loss is a known risk factor for gallstone formation.

Finally, based on the excellent results of the large SCALE program, we expect to file for approval of liraglutide 3 milligram as a treatment for obesity in the US and Europe around the turn of the year.

Please turn to the next slide.

One of the problems with the management of Type 1 diabetes patients with insulin pumps is the lag time experienced from administration of [basal] insulin at the time of the meal until the appearance and onset of action of the insulin in circulation.

FIAsp, the fast acting insulin aspart preparation, has been designed to minimize the absorption time for insulin aspart from the skin.

In June of this year we completed an exploratory double-blind phase 1 crossover trial evaluating the short-term efficacy, safety and pump compatibility of continuous subcutaneous infusion of FIAsp and NovoRapid in 42 people with Type 1 diabetes.

People were randomized to three treatment periods each of 14 days with FIAsp preparations and NovoRapid respectively.

To assess postprandial glucose control, meal tests were conducted on the last day of each treatment period and blinded continuous glucose monitoring was used routinely throughout the trial.

In the trial, the meal tests showed that people treated with FIAsp experienced statistically significantly better glucose control during the first two hours after the meal and the trial thus met its primary endpoint.

The finding of reduced postprandial glucose excursions at the meal tests were furthermore confirmed during other meals as assessed by routine continuous glucose monitoring.

The rates of documented hypoglycemia for people treated with FIAsp were furthermore numerically lower than for people treated with NovoRapid.

In the trial, both FIAsp and NovoRapid pump treatment appeared to be safe and well tolerated and with good pump compatibility.

Based on the results from the phase 1 studies with FIAsp we expect to initiate the phase 3a program known as Onset, including around 3,000 people with Type 1 or Type 2 diabetes during this quarter.

Please turn to the next slide.

In May we announced the completion of Paradigm 2, the first phase 3a trial with N9-GP, a long acting FIX derivative for haemophilia B patients.

In the trial 74 patients were treated for six months on demand or 12 months using a prophylactic regimen of 10 units or 40 units per kilogram of N9-GP once weekly respectively.

Pharmacokinetic data documented good recovery of the drug and a steady state half-life of 110 hours thus confirming the very attractive pharmacokinetics of N9-GP.

The annualized median bleeding rate for patients treated on demand was 15.6 episodes per year.

Patients on prophylactics had a median bleeding rate of 2.9 and 1.0 episodes per year when treated with weekly doses of 10 and 40 units per kilogram respectively.

Intriguingly, among patients randomized to receive 40 units per kilogram N9-GP, 99% of bleeding episodes were treated with only one infusion and two-thirds of the patients experienced complete resolution of bleeding in their target joints.

A target joint is a joint that otherwise consistently and repeatedly experiences bleeding episodes.

Patients also reported a significant and meaningful improvement in the quality of life during the trial on the 40 unit dose which is expected to be the approved dose point for prophylactic treatment of haemophilia B with N9-GP.

In the trial N9-GP had a safe and well tolerated profile.

No patients in the trial developed inhibitors and no apparent differences between the treatment groups were observed with respect to adverse events and standard safety parameters.

We expect to file N9-GP for regulatory approval in 2015 following validation of the commercial scale production and completion of the two remaining phase 3 trials in the Paradigm program covering surgery and pediatric treatment respectively.

Please turn to the next slide.

As announced in May, we've submitted the marketing authorization application for IDegLira as a once-daily treatment of Type 2 diabetes to the European Medicines Agency.

The filing of IDegLira is based on results from the DUAL clinical trial program which involved around 2,000 people with Type 2 diabetes, together with the extensive clinical data generated in the development programs of the individual substances insulin degludec and liraglutide respectively.

Since the announcement in May, IDegLira has also been filed for regulatory approval in Switzerland.

Regarding the Oral GLP-1 development portfolio, we have in May completed the last five clinical pharmacology trials for the semaglutide tablet known as OG217SC, a phase 1 program which in total comprised more than 400 healthy volunteers and 10 people with Type 2 diabetes.

In the trials, encompassing the phase 1 program, all semaglutide treatment appeared to be safe and was well tolerated.

The most frequent reported adverse events were mile or moderate in severity and in line with observations from other GLP-1 class treatments.

In a 10-week multiple-dosing phase 1 trial, oral administration of semaglutide was associated with a statistically significantly larger weight loss than placebo both in healthy volunteers and in people with Type 2 diabetes.

Furthermore, a statistically significant and clear improvement in HbA1c was observed when compared to placebo treatment in the low number of people with Type 2 diabetes included in the trial.

Thus, the efficacy of Oral GLP-1 treatment with semaglutide appears to be fully on a par with that observed for subcutaneous treatment as regards both glucose and weight control.

This warrants further exploration in a phase 2 program that Novo Nordisk expects to initiate towards the end of 2013.

We have planned for a quite extensive, approximately two years long, phase 2 program exploring the dose response effects of long term exposure as well as providing additional pharmacology studies in this pioneering area of diabetes drug development.

Further, still within the Oral GLP-1 segment we have in May initiated the first phase 1 trial for another semaglutide tablet formulation OG217GT using a different carrier technology.

The phase 1 trial will investigate safety, tolerability and pharmacokinetics of single and multiple doses of OG217GT with healthy volunteers.

Turning to biopharmaceuticals, we have in June received a complete response letter from the US FDA regarding our application to market a recombinant Factor XIII compound for congenital deficiency of the factor, a rare bleeding disorder with approximately 900 patients diagnosed globally.

In the complete response letter the FDA informed us that completion of the review of the marketing application is pending the resolution of findings from manufacturing facility inspection.

We are working closely with the FDA to address these issues.

In June we discontinued a Factor XIII trial investigating whether replenishment of Factor XIII could provide a benefit in the treatment of ulcerative colitis.

The trial was discontinued as the biological hypothesis of a relationship between a low Factor XIII level and disease activities could not be confirmed.

Within human growth hormone we've completed a phase 1 study investigating safety, tolerability, pharmacokinetics and dynamics of the long-acting growth hormone NN8640 in May.

In the trial, single and multiple doses of NN8640 were administered subcutaneously to healthy male volunteers.

While NN8640 appeared to be safe and well tolerated, the compound included a dose-dependent IGF-1 response and the IGF-1 profiles indicate that this long-acting growth hormone appears suitable for once-weekly dosing.

A multiple-dose study investigating NN8640 in adults with growth hormone deficiency is currently ongoing, and we expect to complete this trial in the second half of this year.

Finally, in the six first months of 2013, pancreatic safety of the [insulin] class has been extensively debated leading up to NIDDK/National Cancer Institute workshop on pancreatitis, diabetes and pancreatic cancer in June of this year.

Here it, among other things, was discussed that data from companies and regulatory agency researchers had failed to confirm the animal safety findings previously published by a single research group.

Later, the European Medicines Agency, (inaudible) announced in July of this year that it has concluded its extensive review of GLP-1 based therapies based on the CHMP review that included EMA and external exports.

The EMA has cleared GLP-1 based therapies stating that there is no evidence based on currently available data for potential pancreatic harm from GLP-1 based drugs.

With that, over to you.

Thank you, Mads.

Please turn to slide 20.

In the first six months of 2013 sales increased by 14% in local currencies and by 11% to DKK41.4b measured in Danish krone.

Sales growth was positively impacted by approximately 2 percentage points due to a number of non-recurring events including adjustments in the provisions for rebates in North America as well as the timing of tenders and shipments and extraordinary sales in International Operations.

The reported gross margin improved by 90 basis points to 82.6% in the first six months of 2013, primarily driven by favorable price development in North America and the positive net impact from product mix due to increased sales of modern insulins and Victoza.

The gross margin was negatively impacted from currencies by around 0.2 percentage points primarily as a result of the depreciation of the Japanese yen versus the Danish krone.

Total non-production related costs increased by 12% in local currencies and by 10% in Danish krone to DKK18.4b.

S&D costs increased by 15% in local currencies and by 13% in Danish krone to DKK11.4b.

The growth in costs is driven by the expansion of the US sales force in the second half of 2012 and sales and marketing investments in both China and in selected countries in International Operations, costs related to the launch of Tresiba in Europe and Japan as well as an impact on the [cost growth] percentage arising from the reversal of legal provisions which occurred in the first half of 2012.

R&D costs increased by 7% in local currencies and 6% measured in Danish krone to DKK5.4b.

The relative modest cost increase is impacted by timing of clinical trial activity and is primarily driven by development costs related to the completion of the phase 3a program for liraglutide 3 mgs in obesity and the ongoing phase 3a trial for the once weekly GLP-1 analog semaglutide.

Within biopharmaceuticals costs are primarily related to the continued progress of the portfolio of development projects within haemophilia and the phase 2 trial for anti-IL-20.

Operating profit increased by 19% in local currency, and 15% in -- measured in Danish krone to DKK16.1b.

Net financials showed a gain of DKK0.3b in the first six months of 2013 compared to an expense of DKK1b in 2012.

In line with Novo Nordisk's treasury policy, the most significant foreign exchange risks for the Group have been hedged primarily through foreign exchange forward contracts.

The foreign exchange result was an income of DKK368m compared to an expense of DKK963m in 2012.

This development reflects gains on foreign exchange hedging involving especially the Japanese yen and the US dollar due to their depreciation versus the Danish krone compared to the prevailing exchange rates in 2012.

This positive effect is partly offset by losses on commercial balances, primarily related to non-hedged currencies.

The effective tax rate for the first six months of 2013 was 22.7% reduced by 0.3 percentage points compared to last year due to a re-evaluation of the net deferred Danish tax liabilities following the implementation of a reform of corporate taxation in Denmark.

The new tax reform that will make it more attractive to invest in Denmark will gradually reduce the corporate tax rate in Denmark from 25% in 2013 to 22% in 2016.

Once fully implemented, we estimate the reform will result in a lowering of the global tax rate for Novo Nordisk by at least 1 percentage point.

Please turn to the next slide.

The two graphs illustrate the development of the US dollar and the Japanese yen versus the Danish krone.

These are the currencies where fluctuations in the exchange rate against the Danish krone have the largest impact on the operating profit of the company.

The table on the right shows the annual impact on operating profit of a 5% movement in each of our key invoicing currencies.

Furthermore, the current extent of hedging for the same currencies is also illustrated on the slide.

Negative impact from currencies on operating profit during the first six months of 2013 is primarily driven by the depreciation of the Japanese yen which during the first six months of 2013 on average was 17% below the average rate during the first six months of 2012.

The impact of currencies included in the updated guidance for the full year of 2013 reflects that the Japanese yen and the US dollar currently are 21% and 3% respectively below the average for 2012.

Please turn to slide 22.

We now expect sales growth in 2013 of 11% to 13% measured in local currencies.

Given the current level of exchange rate versus the Danish krone, the reported sales growth is now expected to be around 4 percentage points lower than the growth measured in local currency.

The increased expectations for local currency sales growth reflects the impact of more -- of a more favorable than expected price environment in the US, stronger in-market performance of our biopharmaceutical products primarily in Norditropin as well as the impact of favorable rebate adjustments in North America.

The favorable outlook in local currencies reflect expectations for continued robust penetration for the portfolio of modern insulins, a continued steady Victoza performance and a modest sales contribution from Tresiba.

These sales drivers are partly expected to be countered by generic competition to Prandin in the US and [NovoNorm] elsewhere and impact from the challenging pricing environment in a number of major markets, intensifying competition within diabetes care as well as biopharmaceuticals and the macroeconomic conditions in a number of markets in International Operations.

For 2013, operating profit growth is now expected to be 12% to 15% in local currencies.

This reflects the increased expectations for sales as well as costs related to the expanded sales force and sales and marketing investments in the portfolio of modern insulins and Victoza in the US, the launch of Tresiba outside US, sales and marketing investments in China and in a select number of countries in International Operations as well as significant increase in costs related to the continued progress of key development projects within diabetes and biopharmaceuticals.

Given the current level of exchange rate versus the Danish krone, the reported operating profit growth is now expected to be around 6 percentage points lower than the growth measured in local currencies.

For 2013, a net financial income of around DKK900m is still expected.

This expectation primarily reflects gains associated with foreign exchange hedges and contracts following the depreciation of the Japanese yen and the US dollar versus the Danish krone compared to the average prevailing exchange rates in 2012.

The effective tax rate for 2013 is still expected to be close to 23%.

Capital expenditure is still expected to be around DKK3.5b in 2013 primarily related to investments in filing capacity and pre-filled device production facilities and new offices in Denmark.

Depreciation, amortization and impairment losses are still expected to be around DKK3b.

Free cash flow is still expected to be around DKK22b.

All of the above expectations are based on the assumption that the global economic environment will not significantly change business conditions for Novo Nordisk during the remaining part of 2013 and that currency exchange rates, especially for the US dollar will remain at the current level versus the Danish krone.

This concludes the financial update.

Now back to you, Lars.

Thank you, Jesper, and also to you, Mads.

Please turn to slide number 23.

To summarize, we are pleased with the sustained growth of our Company, which is reflected in the strong sales growth achieved in the first six months of '13 and the revised guidance for the full year.

(Inaudible) our new generation with ultra-long-acting insulin is progressing.

And we remain encouraged by the feedback from patients and doctors.

In the US, we received feedback from the FDA on the clinical trial protocol for the cardiovascular outcome study for Tresiba.

And we're now expecting to initiate the trial before the end of the year.

We'll now move into the Q&A part, where I kindly ask all the participants to restrain themselves to two questions to allow more people to put in their questions.

Operator, we are ready to take the first question, please.

Thank you.

(Operator Instructions).

We will now take our first question from Richard Vosser of JPMorgan.

Please go ahead.

Hi.

It's Richard Vosser from JPMorgan.

Thanks for taking my couple of questions.

The first question, just on the oral GLP-1.

I was wondering if you could give us an idea of the amount of GLP-1 that's going into each tablet relative to the injectable form, an idea, maybe, how big the tablet is at this point?

And also I think, Mads, you alluded to the HbA1c drops and the weight loss are fully on a par with GLP-1.

Could you just clarify that and just confirm that that -- that my understanding is that that is the same sort of level of HbA1c drop of about 1%, and certainly larger than a DPP-4?

That would be very useful.

And then just secondly, commercially, just what you've seen so far in terms of an impact from the incremental competition on Victoza in Germany?

Thanks very much.

Thank you very much, Richard.

Mads Krogsgaard, why don't you head that out then I'll come back with in terms of competition in Germany.

Yes.

Well, Richard, first of all, just as a background, the semaglutide has, among other things, been chosen, based on a very, very long intravenous half life.

That means, basically, once it's absorbed it will have a half life of a whole week in human beings.

Yet we're administering the tablet on a daily basis to counteract the swings that there could be in bioavailability from day to day, actually allowing a surprisingly consistent profile over time.

So the size of the tablet is actually smaller, not much smaller but slightly smaller than an average painkiller tablet.

And the patients are expected to receive one, and only one, tablet on a daily basis.

In terms of the efficacy, even though the patient came in with a relatively low baseline A1c below the 8% range, both the weight loss and the A1c decrement were fully in line with some of the best that we've seen in liraglutide trials.

So clearly in excess of 1% A1c drop and a weight loss that was substantial, in particular considering the trial duration of only slightly more than two months.

Thank you very much, Mads.

Then onto competition in Germany from Lyxumia.

We have not seen any change in Novo Nordisk market share on Victoza.

It seems like Lyxumia is primarily coming from switches from exenatide and Bydureon.

And the market share so far, it depends on whether you use weekly data or monthly data, you can get any number you want, if you look at current weekly data then it's probably something in the manner of 10%.

If you use monthly data then it's back to something like 3% to 4%.

So, no major impact on Victoza in Germany.

However, the GLP-1 market in Germany is developing very -- in a very disappointing way, you might say, by not growing so substantially.

Thank you very much.

Next question, please.

Our next question comes from Michael Novod of Nordea.

Please go ahead.

Yes.

Hello.

It's Michael Novod from Nordea Markets in Copenhagen.

Just some questions to the extraordinary items, as you clarify them in Q1 and Q2.

Is there something there you say you're worried that is actually cannibalizing some of the expected sales into the second half, or is this just something that occurred on top of good performance in first half, so we shouldn't be too worried about the second half performance?

And then also regarding the GLP-1 market growth, you have said on media calls that you see some impact on the growth from the [incretin] scare.

Do you see that reverse, or how do you actually expect the market over the next six to 12 months?

Thank you very much, Michael.

Jesper, will you take care of elaborating a little bit more, if you can, on the extraordinary items, whether they are, in a way, things which will be -- have cannibalized this in the second half or if there are issues there on top and so, therefore, we're not going to get a drop off dramatically in the second half?

Yes.

The local currency sales growth for Novo Nordisk was to be very precise around 13.6%.

And the extraordinary elements we estimated about 1.6% which we rounded to 2%.

So net it was 12%, the 14% minus 2%.

The 1.6% can be divided into two elements, roughly equal in size.

The first bit was a reversal of rebates related to North America.

And the second element was related to partly extraordinary sales due to some replenishment of some stocks in the Middle East where the original drops were destroyed by being frozen and we had to replenish them but got full sales value for that replenishment.

And then there were some sales which were deferred from 2012 into 2013.

So I'd estimate out of this totality there would only be in the ballpark of DKK100m which can be related to earlier delivery of sales in international operations in Q2 originally anticipated that would be delivered in '13.

So a very limited impact.

The other point we have mentioned in terms of non-recurring events was actually relating to 2012.

And I'd just like to reiterate that we had in the ballpark of a couple of hundred -- around DKK200m or so in reversal of provisions that basically reduced our selling and distribution cost in Q1 and Q2 in 2012.

And I have previously stated that was probably related to provisions we'd established for the issues surrounding overtime pay to the sales force in the US, where a Supreme Court ruling 2012 ruled out that that would be a liability and that was the reason why this was deferred, but, actually, a very limited impact on Q3 and Q4 in 2013.

So back to pancreatic safety.

Yes, we would tend to agree that there might have been a slight impact from this first half, the negative publicity around the pancreatic safety.

And, as such, since the agencies have come out with relatively strong statements that that effect, if there was any, should be washed out.

There are, however, many moving parts.

If we look at the whole incretin space, then it seems like DPP-4s have flattened out somewhat also.

This could even -- this could be because the patient starts to fail on DPP-4 treatment and then needs something else.

It could be because SGLT2s have come into the market.

So it's going to be difficult to really assess this going forward.

But, yes, we believe that there have been some minor negative effects on the volume growth.

Thanks.

Next question, please.

Our next questions comes from Sachin Jain of Bank of America.

Please go ahead.

Hi.

Thanks for taking my questions.

Two please.

One on oral semaglutide.

It's obviously very early, but just trying to think about potential timing to market.

I wonder if you could discuss whether you would consider doing a faster phase 3 study referencing the data package for the injectable formulation.

Whether it would be a full phase-3 program including CV study?

And then the second question is on the US insulin pricing.

I understand Lantus took a roughly a 15% price increase this week.

Assuming you'd follow, could you just clarify what US pricing is assumed within the guidance for this -- for the rest of this year?

And then your broader expectations, given that US insulin pricing remains, I think, stronger than we've all thought?

Thank you.

Yes.

Mads, any speculation on whether there could be the possibility to bridge some of the injectable data into the package so that we can get faster to market on oral semaglutide?

Well let me say, first of all, we are initiating phase 2 towards the end of this year.

That means that these (inaudible) meetings with the agency as regards can you piggyback on the cardiovascular that is currently already ongoing for the phase 3 subcutaneous semaglutide or do you have to do your own kind of full or partial investigation.

That is something that remains to be discussed with the agency.

But the Company's fully dedicated to utilize as much as possible the existing safety data for the new active substance known as semaglutide.

And, in fact, I was very happy on the day that I realized that semaglutide had these promising properties due to its very stable molecular structure.

Because it does mean that there are a lot of things that do not have to be redone.

Obviously, we will seek to -- this is very pioneering.

It also means that the very shortcuts that you can try to make every now and then, as you have seen us do for PS, where we moved from phase 1 into phase 3 and so on, these are obviously not doable in this new era of protein-based tablet therapies.

However, of course, it's a priority program and that's why we will also do a comprehensive phase 3, followed by an adequately sized phase 3. But we'll do it as fast as we can.

Thank you, Mads.

Then, yes, our competitor has raised price on Lantus in the United States.

And this is a very recent event.

And we are not decided on how we're going to respond to that.

We don't intend to announce it on the call here.

But I can say that our guidance that you have just gotten did not include any significant price increases in the second half for Levemir.

So the extent to which that we will follow the trend from Sanofi then that will be an add on.

Thank you very much.

Thank you.

Our next questions comes from Michael Leuchten of Barclays.

Please go ahead.

Thank you.

Two questions, please.

On the Tresiba cardiovascular outcome study, can you just confirm that in your discussion with the FDA, has the FDA actually agreed to the submission of the interim analysis or is that a working assumption?

And then just going back to the pricing discussion just now, when you talk about pricing or more positive pricing trends, is that actually your ability to put the list prices up more than you thought or is that the retention of net prices more than you thought i.e.

is this partly related to the rebates that you have benefited from in Q2?

Thank you.

Thank you very much.

Mads, (background noise) that's the question?

Yes.

And in reality, the agreement with the FDA is somewhat reminiscent of what you can say is the case for classic, at least historically, non-insulin diabetes products in that you agree to an interim analysis that if this one falls out with a reassuring endpoint for estimate on the MACE cardiovascular events and a confidence interval that lives up to certain criteria then you basically submit on that.

If you cannot come up with such data then you run right to the very end.

And in this case, our hope is obviously to submit on the interim.

The plan is to submit on the interim and then have the definitive assessment post approval in the full, you can say, amount of MACE events that are protocol specified.

Okay.

And let me just repeat that what has happened is that our competitors have raised the list price.

What their net take-home price will be in -- is dependent on which channels they end up selling their products to and hence which kind of rebates they are offering to these different channels i.e.

where the patients come from that eventually will buy these products.

So -- and typically, of course, the list price increase is higher.

And some of it's paid back to the distribution chain in terms of rebate.

And in a way, you could say, it had nothing to do with the rebates as such that we had to reverse in the first half of this year.

This has more something to do with the fact that we got clarity on some states and some programs that allow us to recalculate the necessary rebates.

And we had apparently been more conservative in terms of rebates than what they actually ended up showing.

And hence we could reverse that as positive.

So nothing to do with the price increase that we just heard from the competition.

Thank you.

Thank you very much.

Next question, please.

Our next questions comes from Matthew Weston of Credit Suisse.

Please go ahead.

Good afternoon.

And thank you for taking my questions.

Two if I can, please?

On a number of other of your competitors' Q2 calls, they've specifically said that they are going to invest in further selling infrastructure in injectable diabetes.

And many of them have blamed you for retaining the Tresiba infrastructure which is going to lead them to require further investment to keep their share of voice.

Within your second-half assumptions have you assumed that competition is going to hot up?

And if you do see some of your competitors' ad reps are you comfortable with your current US selling infrastructure?

Or do you think that you will have to counter with some further hires of your own?

And then secondly, just to clarify some comments over the newswires around China.

It seems that comments have been attributed to Management that you've not been approached for a formal investigation in China associated with the issues around GSK and selling practices.

Can you just confirm whether or not you've been informally approached and just set out whether you remain confident that your compliance infrastructure within China is sufficient to mean that we won't see any similar problems at Novo?

Thank you very much.

This is Lars Rebien.

I'm going to attempt to answer both questions, please.

In terms of the investments and the fact that the competitive pressure in diabetes and injectables are heating up, attributable to the fact that we did not launch Tresiba and hence our current market product continues to have the support from our sales force, yes, this is correct.

And then we see the market, quite frankly, responding to that.

So that's why we will make the necessary adjustments to our sales force as we see fit.

And, obviously, this is kind of contagious to be discussing on a call like this what we intend to do tactical wise.

But I can assure you we have one of the largest sales forces in the United States.

And we want to remain competitive.

And just from the sheer point that we needed to push a portfolio product which had been on the market for some time, I think that you can assume that we will want to stay competitive whatever happens and will adjust the sales force accordingly.

In terms of China, I can confirm what has been said in the newswires because it's been me and (inaudible) that have been talking to the newswires.

We have been contacted on August 1 by the local authorities in Tianjin where we have our factory.

They do contact companies on a regular basis to enquire about the status of the business and to submit numbers for them to control the margins and such things.

And it has not been disclosed to us that we are part of a formal investigation and we have no knowledge that we should be.

Having said that, I wouldn't be too surprised if there were to be an industry-wide investigation following the GSK situation that we would be contacted.

So it's not like we would be surprised.

Let me then go back to what about our compliance programs.

We've been one of the first companies to invest significantly in China.

We were the first company to build significant biopharmaceutical manufacturing.

We're the first company to build substantial R&D capabilities.

So we've been operating in China many, many years.

I also have to sadly remind everyone that we had a situation with the Oil-for-Food Program where we were required to significantly improve our compliance programs globally because we had a deferred prosecution agreement with the DOJ in the United States.

So consequently, we have been overhauling since many years our compliance programs.

That includes our compliance programs in China.

So with the knowledge we have today, which we have to admit is very [crass], first of all no formal enquiry into our Company and the knowledge around GlaxoSmithKline still being relatively inaccurate in the sense that it's all reported through the media.

We feel confident that we have a program where we are in good control of our sales marketing practices in China.

And we welcome the authorities and we will work with them to resolve any issues they may have.

Thank you very much.

Next question, please.

The next question is from Keyur Parekh from Goldman Sachs.

Please go ahead.

Good afternoon, it's Keyur Parekh from Goldman Sachs.

And I have two questions, if I may, please.

The first one for Lars.

Lars, I realize it's perhaps slightly a quarter too early for you to start guidance for 2014 and 2015.

But just as we think about some of the changes likely in the marketplace over the next couple of years, can you help us think about the pushes and pulls as you see on the revenue line, specifically into 2014?

And then secondly, one for Mads.

Mads, as you think about the upcoming data for liraglutide, how do you think that data pans out for Victoza?

And how do you assess the odds for liraglutide probably showing superiority in the head-to-head trial versus Victoza?

Thank you.

Thank you very much.

It's Lars Rebien first here.

And you are absolutely right.

2014 is a bit early.

But, of course, as there are a number of moving parts here, there are, for instance, competitive pressures, which we just discussed, there's pricing environment.

But we see more or less 2014 as a normal year.

We will, however, draw your attention to the fact that in 2013 we will have had, perhaps, three-quarters of the year with Prandin.

And that will likely be gone the next year.

So that needs to be backed out of the US numbers.

We had good momentum behind our modern insulins.

We still need to see whether there was a short-term trend reversible negative impact from the pancreatic safety issue on Victoza and other products that are similar in that category.

So, yes, there are many moving parts.

And, as usual, we will be starting to give you some color on it when we do our Q3.

And then you'll get the more final one when we announce the annual results.

So I hope you can bear with us.

But it looks like a more business-as-usual year for 2014.

But, obviously, had we had Tresiba then the world would have been looking more rosy.

It would have been nice, but that's history.

Mads?

Yes, Lars.

And that's, of course, why we will seek to start the CV trials such that we can have Tresiba, although it will for sure not be in 2014.

But we will start the trial in the second half of this year.

Now dulaglutide is clearly, as we see it, being a human GLP-1 analog in a disposable device, clearly the one that we're looking out for.

But in terms of the head-on comparison trial that's ongoing and reporting maybe the turn of the year or so, the likelihood that we will show A1c superiority or that they will show A1c superiority is probably rather immodest.

Because my understanding is that the non-inferiority criterion for A1c that has been put into the protocol is the 0.4% cut off which is relatively (background noise) but it's clinically meaningful difference.

So the likelihood that anyone will show superiority on the primary endpoint is rather low.

My expectation as regards body weight is actually that 1.8 milligram of liraglutide, based on what I've seen from phase 2 and the limited data I've seen from phase 3 is suggesting that liraglutide seems to hold the upper hand in terms of body weight, probably related to the large molecular size, weight and hence difficult permeation via the blood vein barrier of dulaglutide as compared to liraglutide.

In terms of CV risk markers such as systolic blood pressure and so on, we know that liraglutide has a very consistent ability to lower systolic blood pressure.

It's more debated at the time for dula.

And I'm looking forward to (background noise) data.

But you're quite right in stating that dulaglutide is the one we're looking out for and looking forward to together with the [leading] colleagues to further expand this exciting market.

Thank you very much.

And, ladies and gentlemen, since we started a little late and took a very long time for the presentation, we are going to ask for two more individuals to be able pose their questions.

So let's have the next question, please.

The next question is from Peter Verdult of Morgan Stanley.

Please go ahead.

Yes.

Afternoon, everyone.

Peter Verdult, Morgan Stanley.

Two questions.

One for Mads and one for Lars.

Mads, how should we think about getting further clarity on whether the FDA requires a CV study pre-approval for Victoza and obesity?

I know we're all waiting for the guidelines to be published.

If they are published before year end, is it right to think FDA will communicate to you whether you can go ahead and file, or could we potentially have to wait until the PDUFA later next year?

And then secondly, just, Lars, you've spent a lot of time talking about the pricing environment for the US for basal insulins going forward.

Could you just maybe update us on your thoughts about how you think the outlook for the basal market has changed with the top-line data we've seen for U300 and the potential for Sanofi to be on the market with that product in 2015?

Thanks.

Thank you very much, Peter.

Mads Krogsgaard, what are your thoughts about CV requirements for Victoza 3 milligram?

Well, Peter, this has been an ongoing dialogue with pretty many, you could say, exchanges of request and discussion items with the agency that we've discussed previously.

And the notion is that a number of meta analysis, both ones where you lump together the lead trails, the phase 3b trials or the glucose regulation in type-2 diabetes with the SCALE program such that you have a grand, you can say, meta analysis of liraglutide versus all other comparators as well as more specific phase-3 SCALE orientation meta analysis across the trials there.

That is what is assessed to be part of the package and the approval criteria.

What I can inform you now that we do have all the data at hand is that we can fully confirm, as we did in diabetes, that [being a] GLP-1 agent, we are seeing [point] estimates that are, you can say, below 1.0% as you would also expect.

And that also applies to the obese population.

So on the cardiovascular side, I think we have a good proposition and we are following the delineated package put forth by the agency.

Yes.

Thank you, Mads.

Then -- it's Lars here.

Yes.

What's going to happen in 2015?

I think that, for the patients and for the suppliers, innovation is good.

And Sanofi coming out with U300 with some unique selling points which are better than Lantus will be stabilizing for the future pricing environment in the United States.

We would hope that Lily comes out with similar innovations of their own because then I think we'll have a much firmer price level than if we had a Sanofi with no U300 and Lily with a basal biosimilar glargine in the marketplace.

So I think from that perspective, it's positive.

I would say if you ask Mads Krogsgaard he would probably say that the selling benefits of U300 is not flabbergasting.

So, therefore, we believe that Tresiba would be a better product that the U300 and hence, we would be in a good position when we do hopefully finally get to the marketplace.

Thank you.

Last question, please.

Our last question today comes from Philippe Lanone of Natixis.

Please go ahead.

Good afternoon, gentlemen.

Two quick questions.

On the tax rate, you said that it will be 1% less but will it be already in 2014?

And more generally, most of your competitors have indicated or guided for the next few years for a decline in tax rate by more than 1%.

So will there be more going forward?

And one question on NovoSeven which had a very strong quarter again, despite a high base I understand it's still a rise quarter after quarter.

But do we have to fear that in the second half we might have some weak figures to compensate for that because of inventory or something?

Thank you.

Thank you very much.

Jesper, tax?

Yes.

Thanks.

That gives me the opportunity to clarify what is the actual development in the Danish corporate tax rate.

Now the current rate is 25%.

And that 25% will be lowered by 0.5 percentage points in 2014 and by another full percentage point in 2015 and then with 1.5 percentage points in 2016, thereby taking it from 25% to 22%.

Now Novo pays more than 50% of our total taxes in Denmark and hence the consequence of this, everything else being equal, should be around 1.5 percentage points.

We do, however, have a tax structure so that the biopharmaceutical products in Novo Nordisk is generally owned and managed out of Switzerland and with a lower taxation rate than what applies to the Danish and where it's the diabetes care portfolio that is growing the fastest.

So everything else being equal, there is also a mix effect in moving a high proportion of overall products towards the diabetes care space.

And, hence, everything else being equal, we estimate that the net effect will probably be at least 1% when you get to 2016.

And it will be gradual but accelerating through the period as the decline in the Danish corporate tax rate is progressive.

The change in the second quarter to 22.7% which is currently the expected full tax rate for the full year of 2013 is reflecting a revaluation of our deferred taxes.

So that's also been taking into account the new long-term Danish corporate tax rate.

Okay.

And then for final question.

And this is Lars Rebien here.

Yes.

We have -- we've been spectacularly poor at forecasting quarterly sales of NovoSeven.

And the first two quarters this year were very strong.

I think (technical difficulty) that our guidance is including numbers which are not of the same magnitude that we saw in the first quarter.

So we're, in a way, hinting then it will go back to normal in the second half.

If it doesn't, then it's an upside for our company.

But I can -- I just caution you it's very difficult to predict what happens.

Any time we're talking about individual (inaudible) we're talking about a lot of moving parts in there and so it's difficult to predict.

But we are cautious in our guidance for the second half of the year.

With that, ladies and gentlemen, thank you very much for listening in.

Our Investor Relations Officers will be available once we have completed a call to Copenhagen to talk to investors.

So you can call them all subsequently.

Thank you very much.

That will conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.