諾和諾德 (NVO) 2015 Q1 法說會逐字稿

Thank you, everybody, for coming here to this lunch today.

I'm very pleased to welcome Jesper Brandgaard and the rest of the Novo Nordisk management team here today.

I think all four are going to be speaking, but first up, Jesper.

Thank you very much, Tim, and thanks to Deutsche Bank for hosting this and welcome to all of investors here in London.

With me on the podium here I have my colleagues, Mads Krogsgaard Thomsen, our Chief Science Officer; our Head of Corporate Development, Lars Fruergaard Jorgensen; and our SVP for Corporate Finance, Karsten Munk Knudsen.

And together we're going to do the presentation and hopefully we'll do that in about 15, 20 minutes and then we'll spend the rest of the hour on Q&A.

I've been delegated to deal with highlights and key events and then Lark Fruergaard will deal with sales updates, Mads will deal with the R&D and Karsten will handle financials and outlook and then after I will handle the Q&A when we get to that.

Of course, this will involve making statements about the future, that involves great uncertainties and approval processes are inherently difficult to forecast so we'll ask you to read these forward-looking statement comments with great care.

And then I'll really zoom in on the highlights of the first three months of 2015.

A quite strong quarter but also a quarter that was very significantly impacted by a positive currency momentum, 15% positive impact on our top line from the strengthening, particularly of the US dollar, but also other currencies almost all going in favor of Novo Nordisk and hence local currency growth of 9%.

The key markets that were driving growth, as usual North America, international operations and China growing significantly and all of them with a local currency growth of double-digit percentage points.

From a product perspective, we had two-thirds of the growth coming from Levemir and from Victoza, as the key growth drivers.

We're seeing a rebound for Victoza in the US GLP-1 market and market growth currently in at the ballpark of 15% volume growth year on year.

In terms of Tresiba and the markets where Tresiba has been launched they continued to perform very well and capturing a high proportion of new patients.

Of course this only is the case in markets where we have reimbursement at similar level to insulin glargine.

In terms of R&D we were able to resubmit the files for Tresiba and Ryzodeg to the US FDA in March and they were accepted by the FDA for review in April.

The two phase 3 trials we had on faster-acting insulin aspart, that's our approved version of insulin aspart, was completed in the first quarter and enabled us to file for approval of NovoRapid -- or FIAsp, in the second half of 2015.

Furthermore, in the first quarter we also came out with strong results in the phase 2 trial we did with oral Semaglutide and that trial also importantly documented the strong clinical profile of once-weekly injectable Semaglutide which was used as a reference product in the trial.

And then finally, we also obtained the approval for Saxenda in Europe following the approval by the FDA just before Christmas in the US.

And then on the financial front, a 73% growth in operating profit is a very unusual number.

Of course we had a significant positive impact of 30 percentage points from NNIT and if you adjust for that and adjust for currencies of 26% we had a local currency growth of 17% coming on the base of the 9% local currency growth in sales.

The diluted earnings per share grew 56% and grew to DKK3.02 when we adjust for the divestment of NNIT.

The sales outlook has been updated and we've narrowed in the range, so now we expect the sales growth of 7% to 9% and a significant positive currency impact of around 16%.

So in reported terms it will be between 23% to 25% given the rates we used for the guidance.

And in terms of operating profit we expect a growth of around 17%, so that's a significant increase over the 10% we said in connection with the full-year results and that's primarily reflecting the impact for the NNIT divestment.

In terms of the NNIT divestment, this also enabled an increase in our share repurchase program which was up by DKK2.5b to now DKK17.5b and being initiated for the next six months now and then subsequently the final quarter will be initiated end of October.

So with those comments and a comment -- sorry, and a comment on changes in the executive management.

In connection with the Board meeting we also announced that executive management was changed, Kaare Schult,z our Chief Operating Officer who was responsible for the sales region and also for product supply decided to leave Novo Nordisk as the Board had requested Lars Rebien to stay on until towards the end of his contract to oversee the significant number of launches ahead.

And the Board had also requested to have increased transparency on additional succession candidates to Lars Rebien and as part of that they wanted to have more insight into some of the markets.

And three of the colleagues from the former operation management, Mike Doustdar, responsibility for international operation sales; Jerzy Gruhn responsible for sales in Europe; and Jesper Hoiland responsible for sales in the US was elevated to executive management and promoted to EVPs.

And also our Head of Product Supply, Henrik Wulff was elevated to EVP and member of the executive management.

And at the same time, my colleague Jakob Riis was given additional responsibility overseeing the markets in China, Japan, Korea, Australia, New Zealand and Canada, so he gets additional commercial experience.

And Lars Fruergaard Jorgensen will vice-chair a new commercial operations committee that will oversee all of the sales region and product supply together with Lars Rebien who will be chairing it.

And through that Lars Fruergaard will also get additional commercial responsibility and given that he's going to have additional commercial responsibility, we felt that it would be appropriate for Lars Fruergaard to then have the challenge of presenting the sales to you guys here today.

So over to you Lars for a review of sales for first quarter.

Thanks a lot, Jesper.

So Jesper already gave some highlights on the same performance so I'll do this relatively quickly.

So you all know that sales was driven by North America, international operations and China.

I think it's also worth to note that we actually saw region Europe returning to growth, growing by 5% here in the first quarter led by the launch of Tresiba, but also NovoEight, our hemophilia A product.

Japan and Korea comes out with 0% growth, that's actually a bit, there are some -- in 2014 we saw a VAT increase in Japan as of April 1 and that led to some hoarding of products in March.

So we had a relatively high comparative in Q1 in 2014 so that underlying growth in Japan is actually low single-digit, slightly better than what is shown on this slide and we expect also for the year to see slightly better growth coming from Japan.

In terms of key products it's still the modern insulin and Victoza that drives the growth and modern insulin is led by Levemir growing by 13%.

But we're also encouraged to see that we get a nice contribution, 20%, from the biopharm area where we see hemophilia growth being helped by NovoEight and also a continued solid performance of our growth hormone Norditropin.

If we zoom in on GLP-1, Jesper mentioned that we see growth coming back in the GLP-1 segment, so there were some safety issues around the GLP-1 class some years back.

We've also seen potential safety discussions around the DPP-4 class but probably more important is that Eli Lilly are now helping us grow the market by their launch of Trulicity.

So, as Jesper mentioned, we now see a growth of around 15% of the market which is good for us longer term as we expect to have a presence in this market for the long term.

Victoza is still holding up as the golden standard but we do see that we are slowly losing share to Eli Lilly which is, you can say, normal when you get one more competitor and we see entry of more competitive product than what we have been used to fighting against.

If we look at North America as a key driver of the Levemir performance, 21%, and I mentioned that the overall growth of Levemir is around 13%, so we still see that Levemir can drive growth in the markets where we have not yet launched Tresiba, so that is North America, China.

And in the markets where we have launched Tresiba, like Japan, Europe and in some of the IO markets we see lower growth.

And you can see on the right-hand side that we now have a market share for Levemir above 25% in the US, which we're quite pleased with.

To the Tresiba performance, it's well-known that we believe we have delivered a quite nice launch performance in markets like Japan and Switzerland where we have reimbursement on par with existing products.

So we are overall quite encouraged by the launch performance.

We have now launched in 27 countries.

And we are also starting to roll out Ryzodeg based on the establishment of Tresiba in advance of doing that.

And we have launched Xultophy in Switzerland where we see an also satisfactory uptake, on par with what we've seen for Tresiba.

So that's over to you Mads and data on the DEVOTE trial.

Thank you, Lars.

Unfortunately, not data as such because we're not privileged to have that insight.

As you are aware and, as Jesper alluded to, it is so that FDA has accepted to review the two new drug applications for Tresiba and Ryzodeg respectively with an expected action date for this Class II resubmission that gives you a six-month review period and henceforth an action date around October 1 with a launch being destined, pending approval of course, to take place very early next year.

I don't think I'll spend more time on this because I really don't have much more to say other than the notion that management, in all matters, and management is basically the whole company, in all matters related to the cardiovascular i.e.

the DEVOTE MACE results is totally innocent and has no insight and will never have until the trial completes.

Whereas I will be, together with a team involved, in other labelling discussions as this process hopefully proceeds.

This is the FIAsp trials and Jesper mentioned that we'll submit later this year and it's based on the back of some really nice data where in particular the biggest trial, Onset 1, in 1,200 type 1 diabetic patients, actually gave a post-prandial glucose improvement compared to NovoRapid that boded so well, or paved the way for actually the HbA1c being significantly reduced.

So we actually, on the primary endpoint were able to say that we have statistically significantly greater reduction in HbA1c with FIAsp as compared to NovoRapid.

On the other hand, we also had a kind of post-meal dosing arm where they got the product, [20mls], after the onset of the meal and that actually showed the same safety and efficacy profile as mealtime administration of NovoRapid, henceforth giving us the potential for dosing flexibility we hope in the label.

this is kind of, just like Tresiba followed Levemir, Ryzodeg follows NovoMix and then FIAsp follows NovoRapid.

Here is something that personally I find maybe the most exciting this year, namely that we are the first to have documented that you can actually harness the power of a biological agent in the form of a simple once-daily tablet formulation and in this case it was our long-acting once-weekly human GLP-1 Semaglutide given in a dose response all the way from 2.5 milligrams to 40 milligrams in a tablet taken in the morning, 30 minutes in advance of breakfast.

And lo and behold, not only did the subcutaneous Semaglutide provide blood glucose reduction all the way down to 6.0% A1C which I think is a little bit unheard of, but so did the higher doses of oral Semaglutide.

Likewise, weight loss was to the tune of 6.5 kilograms in these type 2 diabetic patients and at the higher dose of oral Semaglutide we could also match that.

So you will hear more about a phase 3 stop/go decision later on in the year when we've completed all the regulatory discussions including with the FDA.

Finally, this slide shows that there not only has been a very significant news flow from US even until today, but there's also destined to be more data coming initially from the SCALE obesity and pre-diabetes extension data that is coming very, very soon, and then followed up by the SUSTAIN program reporting over the next nine to 12 months, 8,000 patients in six different trials combined.

And finally with the ADJUNCT ONE and TWO, being the use of Victoza in two pivotal trials in type 1 diabetes as an adjunct, that's why we call it ADJUNCT, as an adjunct to insulin-based [dose] therapy.

And finally, SWITCH 1 and 2 are the blinded crossover study designed insulin glargine comparator trials for Tresiba that are poised, we hope, to make us have the first hypoglycemia claims of any insulin so far.

With that, and an exciting year, over to Karsten for some financial stuff.

Thanks, Mads.

And what an exciting slide to move on to.

So that's the finance and innovation [one/one] this type of slide.

But taking a look at Q1 financials and you saw that in our company announcement and also in Jesper's opening now, there's been a 24% reported sales growth, that actually is the second-highest reported sales we've had since the split of Novo Nordisk and Novozymes more than 10 years ago.

15% of that is driven by currencies, hence the 9% local currency growth rate for the quarter.

Gross profit up 26%.

In local currencies our gross margin is unchanged, so the improvement in gross margin is purely driven by currencies.

In local currencies we see slightly lower productivity and prices being offset being offset by positive product mix in the quarter.

Looking at our sales and distribution costs, then we see a growth, as you see here 21% in local currencies, 7% growth in S&D costs.

We had a one-off positive impact due to a change in accruals in Q1 of last year impacting the growth, so adjusting for that then it's actually only a 4% growth in S&D costs for the quarter.

In terms of R&D, in local currencies actually a contraction of 2% in R&D spend compared to last year, but remember last year we had our investment into the inflammation therapeutical area that we subsequently closed down in Q3.

And hence if we adjust for that then we have R&D costs expanding to the tune of 8%.

Then, as Jesper covered, moving to other operating income, then we have the divestment of NNIT impacting by close to DKK2.4b in the quarter.

And then we have some out-licensing activity also, but DKK2.4b one-off lift in the quarter resulting in a 73% growth in reported operating profits.

Then if you adjust for currency and adjust for NNIT then we come down to a local currency growth of 17% for the quarter.

Then we have a net financial loss due to hedging, I'll come back to.

And then we have a tax rate of 20.9% being impacted by the tax rate divestment of NNIT which impact full year effective tax rate which we book throughout each quarter.

All in all, diluted earnings per share DKK3.79 or 56% up, adjusted for NNIT we had 24%.

Then currencies.

Of course our major currency exposure is US dollar related through of course the US and China, and when we compare that then looking at average exchange rates between 2014 and 2015 then we see the US dollar on average at the current level being up more than 20%.

So that's the main driver.

Then we've also seen throughout Q1 a strengthening of the side currencies, so some losses we took in the latter part of last year are being softened into this year on side currencies.

So what does it mean in terms of outlook?

So we are narrowing our guidance for underlying sales from 6% to 9% to now 7% to 9% in local currencies.

Basically now we have visibility in Q1 to a lot of the uncertainties we had when we guided last time so now we're able to narrow our interval there.

Sales growth reported, so now we have a 16% impact from currencies since mostly the US dollar is up $0.05 since we guided last time.

Then in terms of OP we have the same impact from currencies of 25%.

I covered, or Jesper covered, the underlying OP growth so that time we said around 10% and we add in the impact for NNIT and then we're around 17% local currency OP growth, so that's the change there.

Effective tax rate, NNIT again.

CapEx unchanged.

And then we have free cash flow where we raise the guidance by DKK3b, so now we're between DKK32b and DKK34b, mostly driven by the divestment of NNIT and the proceeds we received there.

So what are we doing with our cash?

So basically we're converting our net profits into cash, so we're close to 100% conversion from any profit to cash generation.

And as in prior years then we're returning cash to the shareholders more or less in a 50/50 ratio between dividend payout and share repurchase.

So this year we paid out DKK12.9b in dividends and now in connection with our Q1 results we increased the share repurchase program from DKK15b to DKK17.5b ending in January 2016.

And then on the right-hand side you see that we're reducing our capital accordingly to the tune of 2% per year.

That concludes the financial section.

So closing to you, Jesper.

Thanks.

I'm not going to talk you through all the closing remarks, just noting that we continue to have our prime activity within the area of diabetes, an area that has grown in value terms of a compounded 13% over the last five years.

It's based on a solid leadership positive of 27% of the total value market in diabetes care and driven by our insulin franchise where we have around 45% of the market for the new generation of insulins and also a very strong position within GLP-1 with almost 70% market share.

So with that we'll hand over to Q&A and let Tim start and then we'll take it from there.

Thanks, Jesper, okay two questions.

First of all, maybe one for Karsten, your competitors quite kindly were transparent on their pricing impact for the basal segment this quarter, talking about a 15% net rebating situation.

Could you just talk about what that means, whether that's a surprise and what you expect that will do to your volume growth this year or not?

And perhaps a question just for Mads in terms of the Tresiba, what we should or should not expect on the label regarding hypos given what you were talking about earlier and the SWITCH studies.

Yes, so in terms of glargine and the price pressure, so just to come to Tim's question there.

So, as I'm sure you've all seen then they reported a 15% in prices in Q1 and only a 2% increase in volumes.

And to understand that then it's important to understand the US healthcare system because it's not so that in the US that if you lower prices then you get higher volumes like in normal financial theory.

So basically they have reduced prices for a more-or-less unchanged formulary access in the US, so there's, you could say, zero price elasticity in the contracting events or the price pressure by Sanofi or the reduction in price.

And then when you look at Levemir performance in the US and what it means for Levemir, then you can see if you track our [tier x] with IMS then we actually had an all-time high in tier x, 26% in the US right now and growing to the tune of 20% which is a volume-driven growth of Levemir in the US.

And then in terms of [MBRX] we've currently seen them close to 30%, so it's gaining momentum in the Tresiba franchise and, of course, the key volume growth coming in North America, coming from the Levemir brand on the insulin side.

Mads, on the SWITCH trials?

Yes, so if you look at the existing insulins such as Levemir and Lantus, what has happened for them in the US is that they have tabulated data with the hypoglycemia benefits compared to human insulin, but in the pathology, i.e.

in the text section there is a mentioning that there's no clinically meaningful or relevant difference between human insulin and these products.

But they have the data tabulated and that has allowed the companies to use that in the sales ads and so on.

With Toujeo nothing came in there, no numbers, no nothing, no anything.

Probably related to the fact that Toujeo actually was slower to treat to target and that gave a hypoglycemia advantage in the run-in phase which was artificial due to poorer control than the Lantus group.

For Tresiba, what will happen if we get approval, and I hope we get approval on around October 1, will we have tabulated hypoglycemia data?

I would love to see that, I cannot promise that by any means and measures.

We will not, in the text, I'm pretty convinced, have any claim of superior hypoglycemia reduction.

That is why we're doing the SWITCH trials, because the SWITCH trials as you know, are set to repeat in the blinded crossover design manner, both in type 1 diabetes and in type 2 diabetes, confirm the benefits that we have seen in the five trials that in each case has demonstrated benefits to glargine.

They will be submitted to upgrade the NDA, hopefully with a target of having a new and even better label during late, second half of next year.

Thanks.

Why don't we take Michael just here?

Thank you.

It's Michael Leuchten from Barclays.

One question, just pricing but not on the basal side, on NovoLog and NovoRapid.

I think there were some technicalities that depressed pricing in Q1, I was just wondering if you could elaborate on that?

And then just because Karsten mentioned it just now, on the COGS line, lower productivity in Q1, what's driving that please on the gross margin.

Okay, if you do the gross margin, Karsten, and I'll cover the COGS.

Okay, so gross margin is basically a comparator question in terms of productivity.

So in Q1 of 2014 we had an exceptionally low level of scrap in our manufacturing and hence we have a high level of scrap of Q1 of this year.

Not that it's higher than what we planned or anything like that but it's just the comparator was exceptionally low.

Oh sorry, I was referring to the NovoLog part.

Okay, so in terms of NovoLog in the US and basically the pricing impact for the first quarter then, first of all, when you look at price realization in the US by quarter, it is fairly unstable in the sense that we sign contracts with the insurance companies more normally following the calendar year, sometimes in more calendar years, so there are no major fluctuations there.

But the chance is that we sell the product to a wholesaler at list price and then five to six months later we pay the rebate.

And forecasting the product we sell to the wholesalers which channel does it go into non-federal hospitals whatever, VA or commercial Part D and so on so that forecasting and the corresponding difference in rebate rates between payers also by product that creates some flux in the forecast.

So, from time to time, we have to do a true-up or catch-up if -- when we get the final invoices in or if we have to make some adjustments to our forecast based on channel split.

So it's pure -- an adjustment to realization and forecast.

But for the full year, it's neutral to slightly positive pricing in realized pricing.

And in terms of the cost of goods sold for the full year, it's also our expectation that will be relative flat.

It's more a quarterly swing that was reflected in the first quarter.

If we look to the full year, I would anticipate that our gross margin measured in local currencies will be roughly flat and in reported terms with the current level of currencies we'll have at least 100 basis points of positive impact on the gross margin so, overall, a positive net development gross margin also anticipated for 2015.

Next question.

Richard?

Thanks.

Richard Vosser from JP Morgan.

Firstly, just on the conference call last week I think you mentioned that the Tresiba launch would wait until Q1 2016.

If you are going to get a potential approval on October 1, what's the delay?

Why delay three months there?

And then, secondly, on Victoza, I think it's been pretty resilient, the market share of Victoza, so just was that a surprise to you?

What are you seeing in the market?

And then, in the future, how are you seeing the upcoming contracting cycle now that Trulicity is also part of the decision making?

Thanks.

Thanks, Richard.

In terms of the timing of Tresiba launch, of course a lot depends on when we get the actual response from the FDA.

Assuming that will be around October 1, I think it's going to be challenging to us to get the product insert printed and the product ready and get the product out before Thanksgiving.

And if we cannot get that done before Thanksgiving, I think we would then be with a very early January timing so that's the swing factor.

If we're a bit earlier on the approval then, of course, it could move into early November in an ideal setting but let's see what we get back from them.

But I would be disappointed if we were with an October timing if we're not out in January; that would be a clear disappointment.

In terms of the development for Victoza, I think, as Lars alluded to in his comments, we're very reassured by the rebound in the volume growth of the GLP-1 segment in the US seeing it growing to the tune of 15%.

Currently, we see that some of the concerns in the US market surrounding the pancreatic cancer scare has been refuted by the very solid statement made by FDA and also EMA and hence that doesn't seem to be a significant fact.

The impact of the new once-weekly offerings in the market have, so far, had a relative modest impact on the market and hence from a contractual point of view a very limited impact.

We'll have to see when we get towards the latter half of this year whether -- how the impact will be on contracting season 16 but there's no doubt that the clear golden standard in the market is Victoza and hence we believe that we can continue to operate with a quite strong pricing position for Victoza.

Thanks.

Thank you.

Luisa Hector from Exane.

Just going back to the launch of Toujeo, because we've learned a few extra details like the patient co-pay assistance program and some of their strategy around redefining contracts in the US which we think is maybe Medicare, did any of that surprise you and is this something you might consider for Tresiba or is it anything you need to worry about for Levemir in the meantime?

And then, in Europe, what's your expectation on the Lilly biosimilar glargine, because I think the patent expires today?

And could you say anything more on Xultophy and the pricing in Switzerland, the target population around Europe and your launch plans there, please?

jThank you.

Okay, if I start out with the Toujeo, I don't know whether, Lars, you would like to comment on Lilly and biosimilar glargine in Europe; and, Mads, maybe then you can comment on Xultophy in Switzerland.

In terms of Toujeo, I think we've seen quite aggressive co-pay programs adopted by them.

This is the first of a new generation of insulins in the basal segment entering the US market.

In practice, it will a little bit be the first mover that establish a pricing point.

We're not party to the negotiation that Sanofi have had with their payers on Toujeo but I'm sure that we will be reminded of the pricing points that they have been selected when we will come with Tresiba.

It's clear from our point of view that our product Tresiba has a clear, preferential profile to theirs.

Whether that will be reflected in the list price, if it should be approved, we'll have to see.

But we'll also have to bear in mind that when you are administering Toujeo you have to use more units of insulin compared to glargine so, everything else being equal, I think they have to offer some kind of compensation for that.

But I think from our perspective we've noted the high level of co-pays; at may have implications for Tresiba, we'll have to see how the pricing (inaudible) when we know what the label are like.

Then, over to you, Lars, for a comment on Lilly in Europe.

To Lilly's entry to Europe with biosimilar glargine you're right that the patent is expiring.

We note that there are also some legal disputes outside of the US that they need to solve.

We have no insights to that but I think, in general, there is an expectation that mid this year there'll be a launch of biosimilar glargine in Europe.

We expect that Lilly will come in with a price discount; maybe some 10%, 20%.

But when you look at how this is going to impact the incumbent players, we see that this is something that will impact the originator the most so they'll be taking somehow share from glargine and we believe there'll be less of an impact on Levemir.

The prices are already low in Europe compared to the US and Japan so there is a limit for how much lower you can go and still make a decent business on it.

But they will probably come with a 10% to 20% discount and cannibalize the original glargine molecule.

And then on Xultophy we have -- thanks.

On Xultophy we have just launched in Switzerland.

Encouraging feedback, encouraging uptake, it is so that the value share we are taking in the period we've been there has corresponded totally to the same value share that Tresiba took.

Do bear in mind Tresiba has today 27% of the basal value in market terms in Switzerland.

The price is such that it's the price of Victoza plus the price of Tresiba in this particular country where both agents are totally reimbursed.

In countries where Tresiba may not be reimbursed, of course you could consider having the price of Victoza plus the price of a basal insulin such as Lantus or Levemir.

Whatever way you do the math, it is so that each dose of Xultophy will be 2.5 to 3 times the profit -- sorry, the income per patient compared to a basal insulin.

Peter?

Thanks.

Pete Verdult here, Citi.

Just a few.

To Jesper, I don't want to talk about 2016 guidance but I would be interested in one of the inputs for it in terms of net insulin pricing across the insulin portfolio in the US.

Is 2016 the first year we see that being negative for Novo?

Then in terms of biosimilars, you appear to be pursuing a full spectrum approach.

You've strongly advocated always going after innovation but with the next generation FIAsp, Ryzodeg and Tresiba, do we just -- should we be thinking about this as Novo using price on NovoLog, Levemir and NovoMix, if you have to, to blunt that threat?

And then, lastly, just coming to the Tresiba launch, you've got this data package which I checked clinicaltrials.gov SWITCH1 and 2 coming around the turn of the year, I believe; would you be happy to hold strong on price and sacrifice or accept a slower US launch initially, holding out on price in case that SWITCH data is as strong as you hope and use that for negotiations over the medium term?

Thanks.

Okay, first in terms of 2016, would that be the first year that we would experiencing a negative pricing impact in the US?

I think when we look to 2015, which is where we have a more solid footing now, it looks like it's going to be just vaguely positive but only a marginal positive impact.

The key swing factor for 2016 is going to be the pricing for the basal insulin segment.

I think it would be premature of me to speculate about that but one cannot rule out that there could be a negative impact in the basal segment in 2016 given the prospective launch of a biosimilar glargine and indication it would be likely to have on Levemir.

I think our oveeall position is that we are moving into a scenario where it would be beneficial for Novo Nordisk to have products in three segments so we have human insulin, we have Levemir and we have a new generation with Tresiba, and then the flexibility that comes from having product in each segment.

How that's going to play out, we'll just have to wait.

I wouldn't prefer giving out -- away giving any guidance as to 2016 until we are probably in Q3 where we normally will get some first in depth how we see the value growth or the sales growth going forward for the coming years.

In terms of growth and saying would we forego growth in the US on Tresiba waiting for strong data and then selecting a higher pricing point, those decisions have not been taken but I would comment that of course it is a crucial period, window of opportunity where we come with Tresiba.

We will certainly go for strong traction.

I think I've been encouraged to hear some of the data that Sanofi has been mentioned in terms of their access to patients in the managed care market and also in the Part D market we understand they have 70% and 50% access to patients and we would -- I think it also highly likely that we would go for a relative high proportion of patients to get a relative strong traction.

Also knowing that we see Tresiba in the US as [gaining] for a strong penetration subsequently with Xultophy and with the significant value that's alluded to from Switzerland and the very strong credentials]that this product has.

I think -- also thinking about the long-term opportunity with Xultophy will have to be an integral part of the decision when you call the pricing hopefully around fourth quarter of 2015 for Tresiba in the US.

I missed the second bit.

What was the second question?

Mads, do you want to comment on it?

Yes, I have a quick comment, actually, to the issue about labeling because do bear in mind that Toujeo, as a minimum we thought they'd get the claim that you can take the high insulin consumers, taking more than 80 units; they could have one injection per day instead of two.

Even that's not the case.

As you know, the product can only administer 80 units which corresponds to 70 units of Lantus.

Do bear in mind that, regardless of hypoglycemia whether we get it tabulated or not in the label, initially at least, there are a lot of other claims.

We have the claim in the pharmacology section, or will have, that the half-life is double of and that gives the patients an experience of more than 42 hours consistent glucose control and that then allows for dosing flexibility such that you can alternate your doses if you're traveling, etc.; something that you do not have with any of the other agents.

And, by the way, you can administer up to 160 units in one injection, meaning that many, maybe 25 US -- 25% US customers can go from two daily injections to one.

So there are lots of things surrounding Tresiba which are beneficial and have nothing at all to do with hypoglycemia.

But of course we'll fight to try to get the hypo data tabulated already in the first go but we'll see what happens.

Peter, was there -- were we missing one element?

Pricing on the older generation of insulins,

Okay, but I think I covered that.

That's okay.

Thanks.

Vincent?

Thank you.

Vincent Meunier from Morgan Stanley.

The first one is on Semaglutide oral.

Can you gauge the CapEx of the manufacturing and also if you decide to go for phase 3 when do you think you will have enough capacity to run the trial?

The second question is on your long-term targets.

When we look at the margin of biopharmaceuticals in Q1 you are well above 60, 66, I think.

Even if we adjust that for roughly the EUR300m of Danish kroner stands in the past [immunology], the margin is still well above what you were reporting in the previous quarters.

Is it sustainable, because the top line is sluggish?

Let's say it's a low single-digit growth for NovoSeven and you have no significant investment in terms of R&D in that part of the business so can we expect this to be stable?

Okay.

Thanks, Vincent.

First if I comment on the CapEx requirements for Semaglutide, if we should take that oral trial into phase 3 and then maybe, Mads, you can comment on when the trial could be initiated most likely.

The investment in additional GLP-1 manufacturing facilities will be driven by the decision of actually entering phase 3 with Semaglutide.

If we do so, I would anticipate that we would have to construct the facility to build the very significant volumes of GLP-1 that we needed.

We're looking at a bioavailability of about 1% so per patient a lot of GLP-1 is going to be needed.

I would anticipate that such a facility would cost in the vicinity of $1b.

It would probably be constructed over a four-year or five-year period which de facto would imply to the tune of a percentage point or so in additional investment to sales ratio.

So coming from the original range of 4% to 5% per year we would more in the coming five-year period be in the 5% to 6% range, everything else being equal.

In terms of timing on the trial, Mads.

Yes, so what we have communicated is that we expect the first and time critical trial pending a go decision, of course, to be initiated in the first half of next year.

And in order to initiate a big trial which adheres to the ICH guidelines about 18-month exposure in X number of patients, then those of you who have been in the industry will know that planning is already ongoing.

That means the product as you asked about has already to be in existence today because we need stability data, we need stability on the tablets so, to be quite frank with you, we could not have this timeline if we not at this point in time had a phase 3 trial program designed and being discussed with the agencies, tablets that are today right now undergoing stability testing for extended periods and so on and so forth.

And that basically means that the time critical trial starting in the first half of next year will then be followed by sequential initiation of a number of other trials, seeking obviously to prove that it is the best oral on earth because we're positioning for the oral segment.

And, basically, that will then be initiated also through the course of next year and into the year after.

And in terms of the biopharmaceutical franchise which you characterized as having sluggish growth, if 8% growth is sluggish growth it's pretty good sluggish growth.

I think the comment is when you look at the operating margin for the biopharm business for the first quarter of this year, you have to take two things into consideration.

Particularly in this quarter of 2015 we did have income to the tune of DKK200m in relation to out-licensing of some assets in relation to the information area that was previously expensed on for biopharm so when we out-license asset we of course also record the income under the same line, so it's an artificial, non-recurring boost to the operating margin from the biopharm business.

And also when you compare to last year, because last year we were expensing the cost of basically undertaking the venture we had with inflammatory diseases and the cost to inflammation in the first quarter of last year was close to DKK300m, that's actually a DKK500m swing when you compare quarter on quarter so do read that -- read those numbers with a great deal of care.

I think the underlying development in the recurring business within biopharm is relative stable.

But of course your comment and alluding to our long-term financial targets point to effect which is true that we are currently exceeding the 40% operating margin target that we had established as a long-term targets.

It seemed with the current level of currencies that it's highly likely that we will also be exceeding them when we get to the full year.

And, given the currencies and the whole situation, I think it is likely that we're very close to a number of our long-term targets when we get to the end of 2015, so it may be so that we will review them and then revert to the market with new guidance when we release our results for 2015.

But I'd like to remind you that our principle on those long-term targets have all along been that we would rather prefer to reach the targets we've set before we comment on where the next targets are going to be but it looks like it's going to be a topic that we're going to discuss intensively with our Board over the next six months or so.

I think those were the questions.

Yes.

Keyur?

Keyur Parekh, Goldman Sachs.

Two questions, please.

First, could you please give us some qualitative feel on the Saxenda launch, how the negotiations with the payers are going.

Anything would be very helpful.

And then, secondly, Mads, just some initial thoughts on the timelines for the IDegLira filing in the US.

Given how you're thinking about the Tresiba decision, what should we think about filing and the review period for that product?

Thanks.

Mads, if I cover the Saxenda launch and then if you want to give some comment on the timelines for IDegLira in the US.

And then, Lars, if you have additional comments to Saxenda, please add.

But I think the [feeling] is that we just launched the product.

It's a quite expensive product.

We so far have only obtained limited reimbursement.

It will be a gradual process with the payers in the US and I don't think that you'll see a substantial near-term impact.

We need to agree with the payers stopping rules, etc.

for using the products and those discussion are ongoing.

I'm not expecting to have a very significant sales impact in the second quarter of 2015.

Lars, if you have any more comments.

For what it's worth, we had a launch meeting for our sales force and then they came out really excited so it's a meaningful challenge to go out and sell a product like this into an area that is increasingly seen as an area that takes medical intervention.

So at least the sales force is ready and fired up to give it a good go.

And then finally on Xultophy, the lessons that Novo Nordisk has learned throughout decades, actually, is that you want to build the brand perception of anew brand such as Tresiba in the first year or so in the marketplace and this means that, ideally, we want to launch Tresiba as soon as we enter the next calendar years, as discussed.

And then we want it on the market during the course of 2016 and then follow up by the Xultophy launch.

So if you do the arithmetic and go backwards, that means that if we submit Xultophy for a 12-month review period in the second half of this year, whether it's PDUFA 4 or 5 then it's 10 or 12 months, that would allow us to get approval during the course of the second half of next year and be all ready to launch as we enter 2017.

And the final question from Martin.

Yes, a final two questions.

Martin Parkhoi at Danske Bank.

One for Jesper and one for Mads.

First Jesper.

You've been quite clear on your long-term target that if you can -- are able to get Tresiba in the US market then you are sticking to your 15% EBIT growth target.

Usually, you have said that if you can make double-digit on the top line you can make 15% on the EBIT line but making 10% now on the top line means you have to improve your margin by more than 2 percentage points in order to reach the 15% so would this launch on target be more top-line driven than it has been historically in order to meet the 15% on EBIT line.

And then for Mads on Semaglutide which looks very promising in Type 2 diabetes.

Could you list your priority if we look at this also in Type 1 diabetes, in obesity, in [NASH] or even as a once-daily GLP-1?

I have to praise you, Martin, for trying to get me to comment on the long-term financial targets prematurely.

I'll probably stick to my policy of meeting the old target before we basically set new targets.

I think we'll have a discussion during 2015 on that and through that process hopefully clarity will emerge on the availability of Tresiba in the US, and based on that we can provide new guidance to the market when we release the accounts for 2015.

Mads, on Semaglutide.

Yes.

Obviously the two (inaudible) for sema is getting the 1.5 milligram sema approved ASAP for subcutaneous administration, followed by the oral.

But as you correctly mentioned, the GLP-1s hold, in my view, great potential in many areas, including Type 1 diabetes and obesity.

And, as you also mentioned, it is so that Semaglutide is a once-weekly product but today we meet the once-daily class with Victoza quite clearly.

And, in reality, you could even develop a once-daily Semaglutide, such that you cover either of these and the benefit of doing so is that you would get from -- go from great efficacy to even greater efficacy because you could then up the dose because the swings would be within the 1% range from day to day.

So I wouldn't give you my personal list of priorities but the ones you mentioned, including NASH, are all interesting to speculate about.

Okay, this concludes the Q&A session.

Thank you very much for your interest in NoveNordisk.

We'll be back early August with our first half-year result.

Thank you very much.