諾和諾德 (NVO) 2014 Q4 法說會逐字稿

Okay, I think we are just about set.

Apologies for the slight delay.

[Firstly, for me] it's Sachin Jain from Bank of America.

It's our pleasure to host Novo Nordisk for the full-year results road show.

As you can see, we have the entire senior management team.

And to kick things off, Lars Rebien, just kick off the presentation.

Thank you very much and also from us thanks for the invitation.

And thanks for sharing your time with us today.

We are going to run relatively quickly through the presentations in order for us to get as much time for the Q&A, which we think is most exciting.

And obviously I need to show you this.

Things can turn out completely different from what we predict.

Thanks the nature of things.

We'll, of course, try to be as accurate as we can.

Here are the risk factors that we have described.

I'm not really going to go through the highlights because the highlights are on the front page of our company announcement.

I'm sure you've read it several times.

So I would rather actually introduce the next speaker, which is Kare Schultz, that will go into the details, but of course we'll be covering those highlights that we have shown there in high level (spoken in Danish).

Thank you, Lars.

So sales in underlying local currencies growing 8% and the majority of sales growth coming from North America, with more than 60%, actually 61%, and one quarter of the growth coming from international operations, China also growing double digit with 13% and then very, very low growth in Europe and Japan.

And basically it's the same story as you heard before; Europe and Japan very low demographics, very low GDP growth; China and IO very high GDP growth, very high demographics, very big organic demand growth; US, good demographics, good pricing, good value share development.

If we look at the products then you could say nearly 80% of our sales are in diabetes care.

In terms of share of growth diabetes care is 84% of sales growth, meaning that its ticking up.

This will probably continue going into the future, so a slow uptick in the relative size of our business that is made up by diabetes care.

You have another 61% here that's modern insulin, so you can say 61% of sales from the US, 61% of sales growth coming from modern insulin.

And then of course Victoza carrying roughly a quarter, but also nice to see new-generation insulin, which is Tresiba, of course outside the US, now carrying 8% of growth, and also a good development in Norditropin where we keep on taking market share in the US marketplace.

If we look at Victoza in the US marketplace then a year ago we had the ESI contract loss, and that was discussed a lot back then.

Theoretically ESI covers a third of lives in the US, so we should have lost a third of our market share.

You can see it's only a small blip.

That's because most plans opted out of the closed formularies.

And a significant part of patients who were under the closed formularies stayed on Victoza simply due to medical necessity and the doctors filing out the relevant documentation for them to stay.

That's why you have this small blip on our market share curve, but it went back up to 66% where it came from before the ESI loss, which we were very happy about.

On the left panel you see the declining growth rate of the GLP-1 segment.

That's ticking up a little bit again.

I think the main reason was the pancreatic scare from the Butler data, which has been refuted by FDA, and I think indirectly has also been refuted in the form of the Saxenda approval of 3mg liraglutide in the US market for obesity.

North America drives strong Levemir performance, you can see, at 38% up, and also growing in IO and China, and dropping in Japan, but that's really due to the success of Tresiba in Japan.

If you look at the market share, then our market share gains in the US are modest, a couple of percentage points every year.

But of course if you come from 20% share then 2 percentage points are still significant from a financial point of view.

Tresiba, as we've been communicating, is doing very well in the markets where it has been launched and where it has reimbursement.

You can see the first markets where we launched, such as in Japan and in Switzerland, we are above 24%.

That's less than two years after launch, so that's very, very successful.

In the markets where we have not got good reimbursement we are very low on share.

So overall we always say that 6 percentage points of a segment is a good launch.

And we are very happy to see that in most markets were doing more than 6% per annum in this very important segment for us.

Now with that over to you, Mads, and some of the R&D updates.

Thank you, Kare.

And I'll be brief as well so we have time for good discussion.

Now, I think you are all aware that the DEVOTE trial has come to the point where the unblinded team is analyzing data.

Will be teaming up with the FDA to get their view and opinion as to is this submittable to get Tresiba and Ryzodeg to the US market at an earlier point than would otherwise be the case, which is -- if we have to complete the trial which is now destined to be in the second half of 2016.

So it's exciting times and the whole of management and the Company in general has no insight into this, so it will be -- it's basically a question of us announcing whether or not the team has decided to submit based on the interim and that is something that we expect to do during this first half of the year.

Now, you know the label for Saxenda in the US, so what you don't know is the European label.

But obviously, albeit all the data are the same from the scale whether it's US or Europe, the European label will be broader in terms of the claims that [OP] mentioned as what you -- compared to what you can see in the US.

We are expecting a commission approval over the next couple of months and rollout in the first markets during the second half.

US launch is destined to take place in the first half.

Now I'm going to show you very briefly two slides, one demonstrating the new paradigm as to how people can optimize their basal insulin therapy when just a basal daily injection can no longer take the A1c to 7% or below.

And that's this one here, where in the DUAL V trial we have indeed taken people failing on insulin glargine and either optimized them by further titration of the insulin or randomized them to a group that is switching them glargine to Xultophy.

And Xultophy is then titrated in the way that we've seen many times.

So what you basically see is a confirmation of the notion that this new treatment paradigm, whereby GLP-1 is used to intensify basal insulin therapy, not only provides excellent glucose control.

It does so in the face of reductions in hypoglycaemia and reductions in body weight as compared to increases that will follow sustained or continued dialing up of the insulin dose alone.

Now the old and more traditional way of intensifying people who are failing on basal insulin therapy is the one shown here, where you basically go from basal to basal-bolus therapy.

And what we've done here is actually shown that fast-acting insulin aspart, when added to the pre-existing basal insulin that is also optimized during the run-in period, is actually able to get people to a very nice level of around 6.8% hemoglobin A1c.

And, as expected when you intensify an insulin with a further insulin, obviously, you see the expected increases in hypoglycemia and more weight gain.

When that is said, the post-prandial glucose control seen in this trial bodes well in terms of, as a minimum, that this is a highly-efficacious prandial insulin to be used in basal-bolus treatment.

Now these key development milestones are all listed in the Company announcement, so I will not read them out loud, but, rather, take questions later on in that regard.

I'd like, though, to highlight that we are for the first time in many, many years, if not decades, we are active now in the phase 3 development of the once-weekly growth hormone analogue called NN8640, initially in adults with growth hormone deficiency.

The last slide is actually an exciting one, because it is what makes us feel that what is going to happen during the course of this year is probably second to none in terms of news flow from the R&D pipeline.

You can imagine that the first quarter will basically be about oral Semaglutide, it will be about the remaining trials in the [VS] program, the onset 1 and 2 that will define the differentiation of this product against NovoRapid/NovoLog.

In the first half we will be in the DEVOTE situation of either submitting or not submitting based on the interim.

We are going to have the three-year full data set from those who were pre-diabetic at the onset of the big obesity trial with Saxenda, the study 1839.

We will during the next six to nine months have both of the pivotal trials for Victoza used in type 1 diabetes, the so-called LATIN trial will report, and throughout the rest of the year and into the beginning of the next year would have the reporting of the entire Semaglutide phase 3 program, known as SUSTAIN.

And ultimately as we move in 2016 the LEADER trial -- the much-awaited LEADER trial for Victoza [cardiovascular comes] -- will report.

So without further ado over to Jesper for the financials.

Thanks, Mads.

And on this rather German slide with a lot of numbers you can of course easily depict that the currency momentum for Novo Nordisk is changing.

The growth in sales for the full year ended up reported at 6%.

In local currency terms it was 8.3%, so well within the range that we actually started out the year with predicting of 8% to 11%.

But the 2% negative currency we had for the full year actually swung around in the final quarter.

And in the final quarter we actually saw a 3% positive currency impact.

And that basically is a good predictor of how 2015 is going to look in terms of currency impact on our results.

The gross profit rose slightly faster, with a 50 basis-point reported improvement in our gross margin, partly coming from US prices and partly from a better product mix.

In terms of sales and distribution, here we have made a significant improvement in our cost ratio in 2014 basically based on a prudent approach to costs in especially Europe and US as the key driver.

Research and development costs have, on the other hand, increased significantly partly because of this wide portfolio of late-stage development projects within diabetes care, as Mads just illustrated, but also because of a one-time, non-recurring cost of DKK600m related -- or equivalent to around 0.8% of R&D cost related to closedown of our information franchise.

In terms of administrative costs continue to drop slightly, a 20 basis-point improvement in our admin costs there.

Operating profit then growing 10% as reported.

And also note the impact on currencies happening in the fourth quarter, whereas, local currency growth on the 10% sales growth we had in local currency in fourth quarter was around 18%, in reported terms it was about 24% growth in the final quarter of the year.

The net financials swung to became -- to become negative for the full year, primarily reflecting losses in relating -- relating to non-hedged currencies where we suffered a loss on our balances in those currencies.

Tax rate relatively stable, a slight improvement coming from the gradual lowering of the Danish corporate tax, which is the most significant element in our overall tax mix.

So in total we ended up having diluted earnings per share of just over DKK10, growing 8% for the year.

If we look at the currencies, they are of significance.

The latest movement we've had you can see that 2013 for the US dollar and the CNY for all practical purposes were unchanged.

But when we look at 2015 we are now looking at an appreciation of -- to the tune of 17%, so a very substantial positive impact.

We have been hedged for the period of around 11 months, so only in the fourth quarter will we get the full positive P&L effect from the movement of the US dollar, but still it will be very substantial.

And you can also see that we have updated the sensitivity of a 5% move on this slide.

Also just highlighting that where we have suffered a bit in terms of currencies in 2014 has been the Argentinean peso.

And also especially lately the Russian ruble are not -- we are not different from others in that respect, but we've indicated the magnitude here.

In terms of the outlook, the outlook for 2015 is similar to what we guided in connection with the Q3 preliminary guidance, where we said a local currency growth of high single digit.

We have now put it out into numbers in a growth level of 6% to 9% and that we will turn it into an operating profit growth in local currency terms of around 10%.

With the US dollar we are looking at currently, and, as stated on the previous slide for the basis for our prediction, would give us approximately 12 percentage point's higher growth in sales.

And for operating profit we are going to see a 19% impact.

So in total we will be looking at a reported growth of close to 30% in operating profit.

Net financial, on the other hand, will reflect this hedging of US dollar and CNY with a significant loss of around DKK5b.

But to keep it really simple the positive impact from currencies on operating profit in 2015 is to the tune of DK6.5b, and the hedging cost is about DKK5b, so there is a net DKK1.5b positive impact from this movement of currencies.

And of course when we get into 2016 everything, else being equal, the full effect of the currency movement should then [phase] through our numbers.

We've also guided that the growth in our pre-tax profit, if we use the numbers stated here, will be equivalent to a growth of around 16%.

So even after hedging we will have a positive momentum in our profitability.

We are keeping the tax rate around 22%, capital expenditure of DKK5b and a free cash flow where we have learned a little bit from our experiences in 2014 and now working with a range instead of a single number, because we weren't very successful in hitting that single number very precisely.

So now we'll try a range and see whether that will get better.

The use of cash -- how -- what are we doing?

We are basically returning the cash to the shareholders.

And the prediction for 2015 is a payout ratio of around 49% -- 48%, 49% and that will -- with equivalent of a DKK5 payout that will basically be equivalent to DKK13b.

On top of that we'll do a repurchase program of DKK15b.

So you can keep it really simple.

You could say from a DKK10 earnings per share we pay back DKK5 and the other is being returned in the form of share repurchases.

And we are very consistent in making sure that the shares we repurchase are actually a permanent return of cash to our shareholders in a steady reduction in the share capital, as illustrated on the chart to the right.

And with that over to you, Lars.

Or if you want me to cover that --

No, why don't you come and sit here.

Okay.

Then I will take the concluding slides from here.

Then we can open up for questions.

So, if not through this presentation, but for those of you that have followed us during the quarters and years I hope that we have been able to convince you that we are present in a market which is highly interesting, which is growing double digit, that we have solid market positions in some of the key therapeutic areas that are of interest to treat diabetes.

We are market leader in insulin.

We are market leaders in the modern types of insulins, the high-priced, high-growth segments of the market, and also market leader in GLP-1, which is a new category of hormones being used to treat diabetes.

And also you've got a little bit from Mads an idea on the strong pipeline we feel we have, an unprecedented number of read outs in 2015 and we are the only company, by the way, that has a full portfolio of modern insulin analogues.

We have the GLP-1 portfolio that you see emerging now with both a once-daily, once- weekly and potentially even an oral entry.

You have the ability to combine these powerful proteins to create some of the best medication ever developed for a type 2 diabetes, a chance to advance into obesity which, the way we see it, is prevention of diabetes, but also dealing with serious medical conditions, and also, we didn't talk much about it, but our pipeline within growth disorders and hemophilia.

So with that I'd like to thank you for your attention and open up for questions.

There are two nice young gentlemen there that are ready to run over with a microphone and then we'll see how it goes.

Vincent Meunier here from Morgan Stanley.

I have a couple of questions, the first is on Semaglutide.

Tell me if I'm wrong, but the guidance of the Company is to file after the completion of the CV outcome studies.

Is it an FDA requirement?

And is it possible for you to file as soon as you get the result in H2 2015 in the combination therapies?

Also I have a question around the obesity franchise.

Are you already planning combination trials of Saxenda and Tresiba.

And also are you already thinking about Semaglutide in obesity?

Thank you very much.

I guess, Mads, this is largely in your camp, Semaglutide.

Will you be able to file based on the trials that is outlined here, or would you have to await the CV trials?

And how does that then stack up time wise?

Yes, so what you saw is that the SUSTAIN 6 trial, which is the cardiovascular outcome trial in around 3,200 patients for two years, that is supposed to be sufficient to rule out the free approval FDA requirement of a reassuring point estimate with an upper bound of the confidence interval no higher than 1.79.

And that's what that trial is destined to do, which is also why once we have that trial, which is on the critical path towards the NDA submission, we will move speedily towards going into the submission mode.

And that is estimated also to happen later in 2016, but not in the first half.

As regards -- and the CV data are indeed required.

It is actually the first product that Novo Nordisk has deliberately and specifically followed the 2008 guidance from the agency.

In regards to obesity combos, those of you who follow closely the clinicaltrials.gov website will realize that, for instance, the first compound, G530L, which is actually a Glucagon analogue, that is indeed intended to be used as a combo with Saxenda, or, for that matter, Semaglutide in a fixed ratio that has to be defined in human beings, because rats, mice, pigs and humans are quite different, I believe, as regards these receptor susceptibilities.

Semaglutide is indeed interesting from an obesity perspective, which is why management is willing to invest into going into phase 2 also in obesity for Semaglutide.

I think that was the last question.

Yes, excellent.

Thank you very much, up here in the front.

Sachin Jain, Bank of America.

Firstly, a clarification on some comments on the call last week, Mads, on the phase 3 Tresiba MACE analyses, which you said was reverting to the [mean].

I wonder if you could just clarify that given the initial FDA analysis.

They were very stressed about the extension phase and there was a debate about the Lantus event rate falling off as a particular driver of that.

So any color on that extension phase and what you're seeing?

And can that give the FDA comfort, given that was their main objection first time around?

The second question on Saxenda; we've talked about building a market here.

Just any soft metrics outside of sales that you're tracking that will dictate or give you color as to how successful this is in terms of reimbursement targets, acceptance within your target position population.

And, as you're having the reimbursement discussions, you've talked about a strong label.

There is no A1c data on the label.

Has that impacted your debate with payers at all?

So, Mads, your discussion and clarification on the comments you made earlier on the CV events as related to Tresiba trials, and then, Kare, if you would comment on your initial experience in the United States with Saxenda.

Okay.

So Sachin, first of all there is no doubt the FDA, giving us a complete response letter on February 8, 2013, was inclined to think there was a signal, cardiovascular wise, on Tresiba, which is why we got the CRL.

The thing about the residual phase 3b trials, which are quite many by the way, is that most of them are actually comparing Tresiba against Tresiba in different titration regimes, those in regimes [U200], what have you.

So what I can say is that the MACE rates we are seeing in those trials are actually looking steady and reassuring and not taking it up, if anything, taking it down.

But the comparisons are typically not there, because in 3b you do not do glargine comparisons the way you do in 3a because they are done for a different regulatory purpose.

So I think the value of that part of the dose shift which constitutes all the pharma-covigilance, all the safety database from maybe 150,000 patients currently on Tresiba is more that the agency will not see any new signals of anything.

But what they will be looking at is DEVOTE, and DEVOTE as the sole source of whether to approve or not.

They also want to see, however, that there is nothing else they should be worried about.

Thank you very much.

Then, Kare, it is early days on Saxenda and we've just gotten the approval and the label, so I guess it's limited [what] you can say, but whatever you can, please.

It is, as you say, very early days and we are of course in negotiation right now with employers, health plans, PBMs and so on.

But we were not allowed to start this until we had the actual approval on December 23, so therefore we don't have any firm data on that yet.

What we can say is how we will try to position it and, as you know, the label is a general FDA obesity label covering about 130m Americans.

We will not try to target that group.

We will try to target the group where you could say it is clearly a disease, so if you are morbidly obese, BMI 35 and above, then you have very serious health issues linked to your obesity.

And that's the group we try to negotiate with employers and health plans about giving reimbursement, because that's where the cost benefit of the therapy is clearly positive and where you can get [held out] comps that clearly justify putting people on this therapy.

It's too early, unfortunately, to say to what extent it will be successful.

The potential is enormous, but the reimbursement hurdle is also high.

So given this is the first effective biologic for treatment of obesity I think we just have to bear -- or you have to bear with us for a few more months before we can give you some clear indications as to how big the uptick will be.

So I guess you could say that we are not focusing on weight management.

We are focusing on dealing with the co-morbidities of overweight, because this is an area where our hormone treatment offers benefits for the patients and where the other market entries cannot follow us.

So thank you very much for that.

We have a question over here and then we have in the middle afterwards.

Thank you.

Hi, thanks, Olivia from Barclays.

A little change in direction.

So Sanofi has given us mid-term diabetes guidance which suggests they have some visibility on the arrival of a biosimilar glargine.

So I guess my question is where do you think that visibility comes from and what visibility do you have right now?

I must say I -- I think -- I guess it's you, Kare.

Yes, the way I heard the question is as to whether we have any visibility on the timing of biosimilar glargine from Eli Lilly and when it might get to the US marketplace.

Okay.

Information on any positioning, plus any visibility you have on the arrival.

Yes, I think actually you have to ask Sanofi and Lilly, because they're in a legal fight about biosimilar glargine which I can't comment on, because I'm not really a part of that.

And with that goes also that I can only speculate on the positioning that Lilly might do, and I won't do that.

What I will share with you is the result of our own analyses over many years of the biosimilar space for any injectable protein.

And it's quite clear that the chance of having a profitable launch of a biosimilar product, if you go for a low-price discounting strategy, is very limited.

It hasn't really been done by anybody.

And what seems to be more the going strategy, as we've seen also in growth hormone, is that you have to position your product together with a sales force and make it more of a me-too, get some market share at a reasonable margin and that way try to make some money.

We've seen reversals of initial heavy discount pricing strategies reversed back to more normal pricing, and that seems to be the case in the insulin space, with the third player, such as Apidra.

We've also seen that it doesn't really work that you can wriggle your way in through contracting if you're number three and you don't have a good market share to start out with.

And maybe just one additional comment on the patent dispute from my side.

From my understanding, there was a Markman hearing on this patent case last month in the US.

And I think that, to one listening in, would indicate that it's a very complicated patent situation which leaves it from our perspective likely that it will go the full stay period until a biosimilar version comes up to market.

But of course it's up to the two companies who are involved in the trial.

And you can -- second, as an example, our own trend in the oral anti-diabetic, where we had a legal dispute for five years, I think, before that was resolved, these things tend to drag out.

In the front and then --

(Inaudible).

Yes.

Thanks, Pete Verdult here from Citi.

Kare, just two for you, thinking about contracting for 2016 and then, if we may dream, 2017 in the event that that does get approved.

Today exclusivity in the US basal insulin segment has not been a feature as it has elsewhere, be it respiratory or other areas of diabetes.

I just want to get a sense from you how much -- how should we be thinking about that being a distinct possibility next year, exclusivity arriving or competition on exclusivity arriving in the US basal (multiple speakers) on Levemir on the basals.

That's number one.

And then, you don't want to comment on Sanofi's strategy, they don't want to comment on yours, but it's pretty clear if you're reading between the lines that to effect a good switch from Lantus to Toujeo, and given the fact that you need more Toujeo to get the equivalent glycemic control, that the per-unit price of Toujeo is probably going to come in at a discount.

So again, if we dream that they receive approval, how should we think about premium pricing for degludec?

Do you really think that's feasible in the current climate?

Thanks.

Thank you very much.

So should I go first on the basal thing on the contract and then (multiple speakers)?

And then -- yes, and then more -- and later on on the expected pricing.

Yes.

But be careful on the last one.

Yes.

So exclusivity is of course an option for all drug classes, including basal insulins.

As a company, in general we believe in freedom of choice also of insulin therapies, so it's not something that we're pushing.

We think it's better for the physicians together with the patients to decide what is the optimum therapy, whether that's with an insulin or a GLP-1.

That doesn't mean that it can't happen, and it does happen, but it's not something that we are pursuing because we think from a patient's point of view it's better to have freedom of choice.

Right now it's a limited part of the basal segment that is covered by exclusive contracts.

And right now I'm not seeing any move in that direction.

It's difficult to predict the future, but that's how it looks right now.

So when it comes to 2015 it's a pretty stable situation.

My guess is that 2016 will probably not be significantly different.

Then, when Toujeo gets introduced, you have to ask them how they will do it, but the natural way to introduce a new insulin is to go with a list price that's similar to the current market price, but lower discount levels.

That's how it's traditionally been done.

And that would indicate that you would see a Toujeo introduction at close to the current pricing level, but with a contracting strategy that would try to optimize that product.

From our point of view we see Tresiba as having a clearly superior clinical profile, which means it's basically a next-generation insulin.

It has a 42-hour duration versus a 24-hour duration, so it has clear benefits on its flexibility on the reduced hypos.

So we'll be launching that most likely also at the current list price level, maybe a slight premium, but with lower discounting than what we see on Levemir.

Thank you very much.

That was very specific.

In the back.

Hi, it's Andy Kocen at Redburn.

Two questions for Mads, one general one on the oral GLP pipeline.

You've got a number of formulations and you've actually got quite a lot of data in house, I think, now.

When are you going to share that with us?

And could you give us an overview of what you're seeing form that whole program?

And then a very specific one on DEVOTE.

I think the final statistical analysis is to exclude the 1.3 relative risk increase with 90% power to detect that as a real effect?

Could you give us some idea, with 150 events or whatever you're going to see at the interim stage, what sort of power do you have to exclude a 1.8% increase in risk with that top end of the confidence interval?

Is there some sort of analogous statistic that you've got a two-thirds chance or a three-quarters chance of excluding that kind of increased risk?

Thank you very much.

Asking Mads Krogsgaard to share with you in short our experience with oral GLP-1s after having invested significant resources, that's a little bit hazardous, I would say.

But, nonetheless, we will try to hear the current stage on oral GLP-1.

So -- yes, I'll be brief.

And what you can say is that the Semaglutide in the SNAC formulation, i.e., the one that will report phase 2 data during this first half, that sets the standard, the threshold, for any other product that is to serve either as a backup to oral sema in SNAC or as a next-generation product.

And when we discontinued the OG217GT, i.e., the [gyped] version, then that is because the exposure levels we saw in the phase 1 trials did not match what we saw for the oral Semaglutide that we today have in phase 2. Henceforth, there was no raison d'etre for that project to stay in the pipeline neither as a backup nor as a new generation with a, let's say, higher potency.

So what you can say is we know today that we can, based on multiple phase 1 studies, actually match the weight-lowering effect, because that you can study in healthy volunteers.

But even in the very limited, few numbers of diabetics we've looked at we have been able to also, at a certain dose range or dose level, match the subcutaneous counterpart, i.e., a 1mg Semaglutide.

But those have been in very limited settings with very few subjects.

So the big question is can we get hundreds of people to behave in phase 2, take their tablet, wait 30 minutes until they ingest their breakfast and so on and so forth such that we mimic the data we have in phase 1?

And the jury is out.

It will be very exciting and we will get back to you on that.

We are investigating new carriers, new analogs, one called 987, it's also in phase 1. And they have different pros and cons, each of them, so we are continuing to invest, but next time we'll get back on the phase 2.

Then --

Then on the DEVOTE?

On the DEVOTE, well, basically the power is also in terms of, at the interim, pretty good to rule out the 1.8 upper bound of the 95% confidence interval if you're living under the assumption that the true hazard ratio is 1.0.

Now, the issue is that the FDA may well not only be looking at the upper bound and say it's 1.7-something, that's fine.

They will also be looking at the point estimate, because they think we have some heritage, so to speak, from phase 3a.

So if you want me to speculate on which hazard ratio is acceptable to them, at this interim I have no clue.

And if I did I probably wouldn't say it, but in fact, I don't.

It's their privilege.

They're the referees.

They set the standard.

It's a review issue.

And just as a final comment on oral GLP-1, so you have one issue which is the compliance, which is going to drive the clinical data for the phase 2 trial that we will be reporting.

But then even though if that clinical results are similar to injectable Semaglutide then there's still a commercial validation, because if you compare the dose range which is being used for the oral tablet versus the injectable we're talking 100 to 300 in the worst case, if it's the highest dose that succeeds.

And therefore there needs to be a little bit of calculation on can one make a commercial project out of this by producing 300 times as much the active ingredient.

And could that compensate by the fact that we're not going to have aseptic filling and devices and stuff like that?

So it is -- it's a complex project, needless to say.

[But] on that point just a really quick follow up.

Could you -- in terms of the cost of goods of an injected GLP-1 what proportion of that is active and what proportion of that is everything else, the pen and the -- all of that stuff, because obviously your cost of goods isn't just for the active material?

No, for the injectable we also have a significant cost into the actual filling -- aseptic filling into the device.

I'm not going to disclose how we distribute this.

But the main challenge here is if we were to go up, say, 300 times in active ingredient amount that would mean slightly different manufacturing setup.

And we need to reassure ourselves that we, long term, can get a yield out of that which is going to make it a viable business also.

But you'll hear more about it approximately to the middle of the year, where we will be coming back with our half-year result, and we'll also have made some decisions based on that.

Yes?

It's Keyur Parekh from Goldman.

Two questions, please.

One, just given the evolving profile for ACE910 and the timings for your long-acting factor VIII, from a commercial perspective does it still make sense to build that facility and to go ahead with that project?

And, just linked to that, how do you see that market evolving?

Secondly, Jesper, if I can just -- I know you won't give exact numbers, but just give us a flavor for what the pressure on the price part of it was between commercial versus Medicare managed Medicaid Medicare in the fourth quarter.

So if I was thinking across the portfolio what's the differential level of rebates between the two customers, if you will?

Thanks.

Okay.

Mads, I think you need to comment on the ACE910 and how that relates to our portfolio and whether it has implications for the further development of our portfolio in hemophilia.

And then we need some comments on the rebate level and it's -- I guess it's between Jesper and Kare.

We need some clarification perhaps on what the question was, but that -- we'll get back to that.

So for those of you who are not so familiar with ACE910, it's a Japanese compound from Chugai, now developed by Roche, that essentially is a factor VIII-mimicking antibody that is able to first activate factor IX and then subsequently factor X, so that it actually mimics what factor VIII would normally have done in the body.

And what we can say is, yes, it's early days, it's looking promising, but 18 patients can give you science of efficacy, but rarely science of side effects, because there you need bigger populations.

So the jury is still out, but this is absolutely a project that is scientifically exciting and holds promise if it goes to market.

Now, two comments.

Novo Nordisk has another target.

It's an antibody just like ACE910.

It's called concizumab.

It will move into multiple-dosing studies in human beings later this year.

And that has a different target in that it bypasses the tissue factor pathway inhibitor route so that you actually get more coagulation in a different way than the ACE910.

But in principle this agent can be used for hemophilia A, hemophilia B and inhibitor treatment, whereas, the ACE910 can be used for hemophilia A and inhibitor treatment, but not hemophilia B, because there's a pre-requisite for factor IX to be present on the surface of the platelet.

So we're there.

We could even consider can you make subcutaneous versions of existing coagulation factors such as N8-GP and, if so, could that be a replacement therapy that offered the same convenience as an antibody, albeit it was still a clotting factor.

So there are many considerations.

And if you were a hemophilia doctor, and when you do talk to the hemophilia specialists, they tend to shy on behalf of being slightly cautious and conservative for their patients.

They've been through HIV and hepatitis scandals, drug shortage periods and whatnot, so they will in all likelihood take a cautious stance towards a completely novel medication, at least from the get go.

So don't foresee that the entire market is switching away from replacement therapy onto this antibody therapy, but it would be more of an ongoing thing where you have to imagine that Novo Nordisk is not lying down and preparing to die.

So, A, we'll develop the products we have and we will obviously come up with the compounds that are as good as or better than the Roche-Chugai compound in the event that it makes sense.

And if the -- sorry.

Yes, go ahead (multiple speakers).

An additional comment on the facility that we have acquired in New Hampshire.

That facility will be able to produce factor VIII as we currently have on the market.

And then N8-GP, it's the same active substance we use, so it will have double potential usage.

So we're very confident in bringing that facility on stream.

And then probably we need some clarification, because I didn't get the --

Yes, your second question, if you could kindly reformulate it or repeat it at least.

I'm just trying to get a sense for what the differential rebating environment is between the commercial payers versus Medicare Medicaid.

And, as we saw the fourth quarter a larger proportion of discounting into Medicare Medicaid, just trying to get a sense for what that disconnect is.

Kare?

Yes, I think I can try and address it to the best of my ability.

If you look at the rebating environment in the US and the contracting space then, as you say, there's a big component with Medicaid.

Medicaid of course gets very high rebates due to the CPI penalties, so older products have -- extraordinarily high.

We were happy with the Affordable Care Act when they limited the rebates on human insulin to 100%, because we were actually above 100%, and that's kind of a bad business.

So very high rebates to Medicaid, of course, is the poor people, so we don't mind giving those rebates.

Medicare, there, it's the retired people, and there's been some increase in the population both due to demographics, but also due to what we call [equal wraparounds], where people who were ensured by their employer, retired employees, could modify their health plan to cover the same conditions as a Medicare plan and then they would also get the donut hole rebate and so on.

So if you look at all of these rebates over the last four years then you will see pretty steady development in the Medicaid rebates increasing, pretty steady development in the Medicare rebates increasing, in our case.

But also of course you have to remember the gross sales, the list price sales are growing significantly due to the list price increases.

There is no specific quarterly effect on Medicare rebates and Medicaid rebates as such.

There's no real big swing.

If you see swings in some of our quarterly numbers then I'll always warn you don't put too much attention to the quarterly swings, because all our diabetes care therapeutics are chronic therapeutics.

That means that the volume consumption on a monthly basis is pretty steady.

And that means when you see swings in actual numbers it will often be specific shipments to specific customers, true-ups on differing types of contracts, rebates levels and so on, and changes like that, more than it is really a change in the underlying trending for the different elements of the contracting.

Thank you very much.

Where do we have the next indication?

In the back, yes.

Just on US promotional spend your competitors have suggested that they're going to step up their sales force in the basal segment.

You obviously stepped it up with Tresiba and then obviously put it onto Levemir, but what are your thoughts going forward if Sanofi is going to be more aggressive on the sales force?

Kare, again, a slightly controversial question --

Yes, I think --

-- given the two-player nature.

I would say that we will be watching the space closely, as we always do, and we will be reacting fast if we have to.

But what we've seen over the last, let's say, four or five years is basically a reduction in big pharma sales forces overall.

So we have not really seen strong growth in Sanofi's or Lilly's insulin sales forces the last couple of years.

That might happen, that might not happen, but we will watch it and react once we see it.

Yes, that was good.

In the front here, please?

Thank you.

Mine is a bit of a general question.

We've seen the PBMs that they've consolidated and, beginning with the exclusion criteria, they've been able to exert significant pressure.

Can you comment on the -- what you think the dynamics are going to be going forward?

And do you think pricing pressure will be concentrated on the primary care segment only, or it may all spill over into the specialty as well?

Thank you very much.

Kare, that's straight down your alley.

Yes, it's a nice hot topic politically and financially.

And if we -- I will try to put some perspective to it by a couple of examples rather than predict what's going to happen, because I think that's difficult.

And the one example is the one I showed you, the PBM pressure from ESI on the GLP-1 segment, where they decided to put a competitive product, Byetta, Bydureon, exclusive in their GLP-1 category and, thereby, block Victoza.

And, as I tried to illustrate, that of course did not have a negative pricing impact on Victoza, because we did not go along with some high rebate for it.

On the contrary, you saw a positive price development of Victoza last year.

It did not have a significant impact on the market share basically because out of the lives that they are contracting they have many different categories of customers, and within each customer there are many different plans and types of plans.

And the end result in this situation is that less than 25% of the lives under some kind of ESI influence on the plan went into a plan that had Victoza blocked.

And out of those maybe a third of them actually didn't -- the block wasn't effective, because they had a doctor fill out a medical necessity form or something like that happened.

So the net loss was actually not significant from our point of view and the pricing remained strong, the Victoza pricing.

If you then switch and look at what's happening in the basal segment then you can say that the last four years I guess it's fair to say that the net pricing on basal insulin has gone up 100% in four years.

So of course looking from a pricing power point of view you would say that that's at least pretty good pricing power from the supplier's point of view.

Now there's been a correction last year in some contracts and we are seeing that the price increases this year will be very modest.

But if you look at it in a bigger perspective you've still got to say it seems like the suppliers have pretty good pricing power.

So that's just two examples to inspire you to think about the future.

I won't try to predict it.

So the issue of whether it's exclusive or co-preferred it's very much a matter of the maturity of the product.

So if you take the short-acting insulins they've been on the market for 10 years, 15 years, many of the contracts are exclusive today.

And there's very little -- and high -- deep rebates, whereas, when we talk about innovative products like the basal segment or GLP-1s it's co-preferred, it's open formularies, because the supply side has a strength over the demand side.

So it's classic supply and demand.

Yes, one more question.

And who dies to be the last one?

Nobody.

Nobody wants to die.

Okay, all right.

No.

Apologies.

My name's Thomas Brown from Mitsubishi UFJ, and I'm a generalist, so a very general question.

I still don't understand why at the Q3 numbers your competitor had to say the US outlook looks terrible from pricing and you were able to say we see no problems at all.

Can you just explain that?

Well, of course it's difficult for us because we don't sit in the inside of our competitors.

But the contracting environment and the negotiation on contracts for 2015 which took place in the second half of 2014 is a poker game.

And so you will be contracting based on the demand that will be put on you from the buyer, your anticipation as to whether or not it's important for you to maintain share over profitability and so if -- I'm only speculating.

So if you believe that there might be generic competition to your compound maybe you're willing to defensively protect your market position and accept lower profitability as a result of that.

And so it is not necessarily because of competitive pressures from the opponent, the real opponent, which is the other supplier.

But we will see this year what happens, because we will eventually know about the volumes and the prices that Sanofi will be taking home in 2015 and what we will be taking home, and then we can see what went on.

To give a little bit of flavor to why we can predict what we can predict, and that's nothing to do with competition, that's just our own predictions, of course, we can trend the market shares, we know what major contract changes have been negotiated, because all the contracts have been negotiated.

We know what dramatic changes there might be, if any.

And you can say a year ago, when we had some pretty big changes with ESI and Victoza and with ESI and NovoLog, this year we don't have any big changes.

So we have -- if some of you buy the weekly -- or monthly market shares you will see we have pretty steady market share development on fast acting, on long acting and so on, modest market share tick-ups on both.

So it's a pretty steady situation we have and, therefore, we didn't feel it was so hard to predict that we had a pretty stable situation for 2015.

Then maybe just adding that we already at half year highlighted that we saw that the basal segment will require higher rebates in 2015.

And if you look to our guidance for 2015 we are saying 6% to 9%.

And at the same time noting that we in the US in 2014 had specific issues both with ESI and also with a brand and patent expiry.

So in our numbers this year is a lower impact from prices than what we had in 2014, exactly reflecting that more competitive pricing environment.

So the lower 6% to 9% organic growth rate that we are forecasting is assuming that our US sales will be slightly lower than what we saw in 2014.

Okay.

With that, ladies and gentlemen, thank you very much.

We will be hanging around still for a little while if you have some individual questions that you will like to pose to any of these gentlemen.

So thank you very much.

Can I just clarify what Jesper said was sales growth (multiple speakers)?