諾和諾德 (NVO) 2015 Q2 法說會逐字稿

Good afternoon, everyone.

My name is Pete Verdult from Citi, on behalf of Citi, delighted to have the Novo management team here for the Q2 road show in London.

We've got a pretty full house and a special guest appearance from the Chairman, Goeran Ando, as well.

So without further ado, Lars, over to you for the presentation.

Thanks.

Thank you very much and thanks for joining us this afternoon.

It's always lovely to come back to London and, especially where we have some good and interesting topics to discuss.

And the presenting team is up here.

And, as was presented, our Chairman, Goeran Ando, is sitting here up front.

And if you have any questions to him you have to address them to him before 12.20pm because then he will be leaving.

Okay, the agenda, and, as always, when you've had time to digest our release and heard our call we will be rather brief in our presentation to allow for more time for the Q&A between ourselves.

We'll give you the sales update, R&D update and financial outlook.

This is the forward-looking statement.

As you know, it is hazardous to make predictions about the future.

It may turn out quite differently from what you had expected due to certain risk factors.

And you are familiar with this piece of paper and you can read it at your leisure.

This are the highlights from the front page of our release, strong sales, significantly impacted by currencies, but still, after all, 9% top-line growth in local currencies, driven by North America, international operations and, on a product basis, significantly positively helped by victoza and levemir.

And tresiba, the new-generation basal insulin, is still performing nicely in the markets where we have rolled it out.

And we continue to add markets to the rollout sequence.

Mads will be talking a lot about the tremendous progress we've had in the pipeline, so I will not steal his thunder by mentioning any of that.

On the financials we're significantly helped by the currency, as I already mentioned, but also the divestiture of our IT service company, NNIT.

And when we back all of this out then we are looking at an operating profit growth in the first half of 16% and, projected for the full year of 19%, so living up to our long-term financial targets.

Composition of sales, nothing new here.

We see that the US is increasing its share of our book now more than 50%, Europe constitute 20%, international operations 40%, region China 10%.

I'm sure it'll be a topical issue when we talk about how are things going in China.

Please remember it is, after all, less than 10% of our business and, hence, any deviation short term in China is not really going to change the outlook for the Company.

Japan, you see here constituting a mere 5%.

When we look at growth rates, you have them over here, 10% in the US, 4% Europe.

That's the best numbers we've seen in Europe for a long time.

This is good for a number of reasons.

It's especially good for our staff in Europe because they have been struggling uphill for a good many quarters.

Then they're doing well now, but they also had challenges, so the full-year number is not likely to look like 4%.

It's rather going to be low single digit for the full year.

International operations, phenomenal first half for international operations.

Also some one-offs that are impacting the numbers which may not annualize for the full year, but it is a nice contribution from international operations.

China, disappointing 3%, quite disappointing, and we see especially a very weak second quarter.

I will refer to this on the next slide, so I won't talk about it now.

But also Japan first time again here is nice growth numbers in Japan after many years of very flat and stagnant sales.

So you could say the sales growth is more evenly distributed, but the main disappointment is our performance in China.

And here we have a little bit of the explanation on China and I'm sure we will come back to it in the Q&A.

I've not had one meeting yet where that was not a topic, so -- but just to say that our numbers have been influenced by a number of factors.

The general economic outlook and growth in China which is putting pressure on the authorities' funding of healthcare, slowing down the growth of healthcare in China, but then also the fact that we had extraordinary shippings of both oral anti-diabetics and insulins in the first half of 2014.

Having said that, and when we back all this out, we still have to admit that we are facing increasing competition.

We are facing increasing competition in particular from local players, local players in the human insulin space and also local players when it comes to generic versions of the branded product, lantus, manufactured by one of their major local manufacturers.

But I'm sure we will come back to our outlook for the full year and the long-term perspective for China.

But with this I'll hand over to Jesper so that he can delve into the product [performance].

Thanks, Lars.

The growth in reported numbers, as you see to the left on the slide here, quite impressive numbers, all up into the 20s and even norditropin growing 30%.

Half-year sales above DKK50b, so full-year number should be above DKK100b for the first time in Novo's history.

If you look at the growth analysis and where we take out the currency effect and look at the local currency growth, I think it's notable that for this quarter we have actually been able to grow our biopharmaceutical franchise at the same speed of the diabetes care, at 9%.

Within the diabetes care universe we are seeing overall, for the insulin, a 6% growth level, which is on the low side.

We are seeing a relative lower growth occurring, in overall volumes, growth levels just below 5% currently.

In a historic perspective that is rather low.

We would anticipate that would come up slightly.

On the other hand, we've seen a very strong growth of victoza.

I will refer to that in the slide, but basically both driven by volume growth in most of the markets around the world and, also in US, a value increase coming from higher prices.

Other diabetes and obesity care, that's basically primarily effect of selling less of our oral anti-diabetic product, novonorm.

And, secondly, we also have our needle business included there, where we are seeing a slight higher impact from competitive activities in the area of needle sales.

Saxenda sales will be in there, very small number so far, but I'll get back and talk a little bit about the status on saxenda in North America.

On the hemophilia side the growth there is not only novoseven.

Now we are also seeing a quite promising launch of novoeight.

I think here we see an example of real sales synergy where we have our reps, very knowledgeable in the area of hemophilia, having a long discussion historically with our physicians about novoseven and now having the opportunity of coming with a very interesting offering with novoeight.

And we're seeing a good market uptake in all of our major markets.

So we're both seeing favorable reaction in Japan, in Europe and since the launch in April in the US also with US physicians.

So that's quite positive.

Norditropin, driven primarily by our colleagues in the US, doing tremendously well.

In terms of value share we now have more than 50% of the North American market for norditropin, a remarkable result for us up there.

And then within other biopharmaceuticals that's primarily driven by our HRT franchise, hormone replacement therapy.

And do note in there is a high reliance on higher prices in the US to drive the growth.

And we should anticipate that that business will be exposed to biosimilar competition when we get 12 months to 18 months forward in time.

In terms of victoza, if we look at the development, I really like that we have continued to show this slide on GLP-1 market development, because this has been the slide we've been using to discuss what is going to be the growth level for the overall GLP-1 market in the US.

And you can see for the development in the growth rates of total TRXs that we have seen what we have predicted, that there would be a resumption of growth in this segment.

And we are now north of 15% in actual growth in terms of total TRX

We are benefiting from that as the clear market leader.

Of course, we are also seeing a take-up from the new once-weekly offerings, albiglutide and dulaglutide.

And you can also see that dulaglutide is growing faster than albiglutide and also that exenatide as a franchise overall is suffering from that development.

We are very comfortable with the overall situation and we expect to continue to see a solid growth in the GLP-1 franchise in the couple of years.

So more players is basically lifting the overall market and creating additional awareness.

And also we are seeing some hesitation with physicians in terms of prescribing the newer OADs for various [regimens].

In terms of the insulin market if we look, again here, zoom in on the US position and how we are faring, first of all, due note the gray shaded areas here on the chart, which is indicating the size of the relative markets.

So remember half of the US market is the basal market.

This is why tresiba is such an important product for us, because it enables us to compete in the most important of the US markets.

Currently we are competing with levemir, and we are competing well with levemir, indicated in the light-green line here.

You're seeing our capture rate of new scripts.

And you can see that we continue to grow our overall franchise, now being north -- around 27% market share overall for levemir.

In terms of novolog, here you actually see the impact clearly from how blocking a product can have significant impact, especially on the new scripts, as patients are transferred from one product to another.

This was the ESI block that hit our novolog franchise, where we decided not to compete on price with Eli Lilly, and they won that franchise.

But we've been able to -- by steady marketing in the US to get back into the game and we're seeing a relative stable development in our overall market share.

And you can argue that the first six months of this year we were actually seeing a slight increase in our total market share in -- for novolog.

Whereas the mix segment is -- in the US is relative small and gradually declining, we are seeing a quite steady situation.

Again here a block situation in this area can have significant impact on the neutral brand scripts, but not so significant on the total market share.

Moving on to our new product.

And I mentioned that tresiba is crucial for Novo Nordisk in the North American market.

And you can see why we believe that it can make a real difference in the markets where we have launched it.

And with similar reimbursement as the other modern basal insulins on the market you see in markets like Japan and Switzerland we have captured to the tune of 30% market share over a two-year period.

So it is a very, very competitive and very predictable product profile that we are having with that product.

The challenge we have in markets where we don't have reimbursement is that it's only growing very gradual as it requires prior authorizations from physicians and healthcare providers in order to get penetration.

We've unfortunately had to withdraw the product in Germany as we couldn't convince the German system that our product was significantly better than human insulin.

The producers of insulin has proven that modern insulins are significantly better than human insulins.

And we have proven that tresiba is better than glargine.

But apparently we can't from that conclude that tresiba is better than human insulin.

So that's unfortunate, but we've had to withdraw -- or cease distribution of the product in Germany.

And instead we're now offering xultophy to German patients.

Ryzodeg is being rolled out in a few countries, doing well, and xultophy doing tremendously well in Switzerland, xultophy being the combination of tresiba with victoza.

And then finally, as the last element in our product portfolio and an opportunity for Novo Nordisk to build a new market within obesity, or -- anti-obese medication, we're currently only looking at a market to the tune of $200m, but here we have together with other -- the three other new entrants in the market we have the opportunity of building a new market.

Here we are only illustrating the first 16 weeks from launch.

Of course, some of our competitors have been on the market longer, but we are saying that the launches that we have seen so far from Novo Nordisk have been quite steady and we're seeing good uptake.

What we have been particularly encouraged by the last months have been that we are now getting access to more and more patients.

We know that from January 1, 2016 we will be on tier two with CVS Caremark.

We have some access also under the ESI national formulary, so gradually we are actually able to obtain reimbursement.

And do note that our offering with saxenda is a significantly higher-priced product than the other products, which are tablet based.

So those were the key comments I would like to give on saxenda.

And then over to you, Mads, for an update on sema.

Thank you, Jesper.

And thank you for not stealing my thunder by mentioning that the saxenda study.

The pivotal trial was published last month in New England Journal of Medicine and accompanied by an editorial that actually speculated that these kind of agents might be things that in the future can open up for safe and more efficacious therapies and, hence, a real obesity and pharmacotherapeutic market.

Now, staying with GLP-1, semaglutide is something you will hear much more about as we go forward.

We have a huge global program, SUSTAIN 1 to 6, plus a few Japanese studies that is going to report within the next six to nine months, but this is the first report.

Patients who are treatment naive, my age, but with a higher BMI, around 32, were treated either in a blinded way with a placebo or two doses of semaglutide.

And basically what the study showed is a repeat of phase 2 and of the oral semaglutide study, where we also had a one-milligram comparator arm, that we document a very high treat-to-target percentage.

We get people placebo-corrected 1.5 percentage point further down, or more, and then we have a weight loss to the tune of 10 pounds at the highest dose after a treatment period of half a year.

So good data with a safety and tolerability profile that seems to be totally on par with victoza.

And this is better than in phase 2, where we basically underestimated the potency of the drug and titrated too aggressively.

So what we have now is a titration scheme that allows for only 5% or 6% adverse event-related discontinuation.

So a good start, we believe, to the SUSTAIN program revelations as of the next nine months.

Then comes something of a different nature, but still GLP-1, the speculation that GLP-1, not so much by glucose-dependent insulin secretion, because in type 1 diabetes you don't have that, but rather by glucose-dependent glucagon suppression and appetite suppression and a few other things might make a difference in type 1 diabetes.

And this is the rationale for why you are now seeing the first of two pivotal phase 3a trials in what we call the ADJUNCT program, named after the need for an adjunct therapy to the pre-existing insulin therapy in type 1 diabetes.

Now, what the study showed basically was that in people who, by the way, were overweight -- we are talking BMIs close to 29, even though it's type 1 diabetes.

We actually saw that in a blinded manner there was an A1C decrement, i.e., a statistically significantly better glucose control to the tune of 0.2 percentage points to 0.3 percentage points.

It doesn't sound like much, but it does mean that the amount of patients who were treated to target was doubled up on the high dose of liraglutide, 1.8, compared to just using insulin therapy either by pump or by injection.

Furthermore, the patients lost quite a bit of weight, up to the level of five kilograms, and since they were overweight on average this should be perceived as good news.

Unfortunately, however, we did not see a hypoglycemia reduction.

When you look at the cumulative curves, or when I look at the cumulative curves for hypoglycemia, unlike with xultophy and other studies we've done with insulin and GLP-1 co-administration in type 2 diabetes, where you both reap the benefit of A1C reduction and the benefit of hypoglycemia protection, this was not the case here.

We can always discuss why that is.

The remaining study that showed safety and tolerability as expected, the ADJUNCT ONE, is going to [be reported] to the market as soon as possible, and that is in the imminent future.

Now, this then is to elaborate a little bit on what we just discussed, mainly saxenda and weight loss.

Bear in mind that among the 60%-plus patients in the SCALE obesity and pre-diabetes study that had pre-diabetes, defined as impaired fasting glucose, impaired glucose tolerance on A1C between 5.9 and 6.4, all of those patients were asked to continue for a full three-year period.

And the primary endpoint of that three-year period was no longer weight loss.

It was the ability to retard the onset of overt type 2 diabetes.

And what we saw in that regard was a highly-significant meeting of the endpoint, in that there was an 80% reduction in progression towards overt type 2 diabetes.

And this was also evident from the 2.6 times longer period on average that it would take the patient to develop the disease, i.e., one year to develop type 2 diabetes would become 2.6 years and so on and so forth.

So we're happy about that and we'll seek that, of course, published as soon as possible and discuss with the regulators as to whether there is a route into the label in the different territories.

Finally, DEVOTE is on track.

It's on track and the robustness of the [maze] event rate estimates are now such that we can predict a completion of the [in-line] phase of the trial, the accumulation of the 600-plus events of [mazes] by mid 2016, as opposed to, previously, second half of 2016.

Now, on the oral side, while you're all waiting for us to debate further the oral semaglutide, which I have no comments to at this point, but soon we hope to, then the oral insulin is one where we are now initiating for the first analogue 338 in a [gipite] carrier formulation.

We are starting a smallish phase 2a proof-of-principle trial.

And that is then followed by the newest kid on the block, which is analogue 320, oddly enough with a lower number.

And that is one where we hope for even -- or not for even higher, but for higher bioavailability and, hence, reduced variability.

So that's where we stand.

And if you think a lot of things have happened in the last six months, at least I do, a lot will also happen in the next six months.

We are going to continue reporting on the SUSTAIN program.

We are going to complete the ADJUNCT program.

We are going to submit three more new drug applications in the United States of America, we hope, one from the degludec family and one from the aspart family, [FAIAs], and, finally, in-line GLP.

So a lot will happen.

And then we also hope to report the [rest] of trials early next year.

With that, over to Karsten Knudsen for financials.

Thank you, Mads.

You didn't want to take financials?

So I hear our Chairman laughing off seeing the CSO to do -- to do a financial presentation by the CSO, so --

Well, [he] should know, he is financials.

Let's not talk about horses.

So looking at it, I'm sure you've seen our company announcement and perhaps listened in to our teleconference, so we're just going through highlights of our financials.

Then the sales growth, as Jesper covered, 9% in the first half year.

Then add on 16% currency impact [and] reported sales growth of 25%.

Quite amazing, DKK50b plus.

How does that translate into profits?

Look at the gross margin development.

Gross margin up by 220 basis points over last year, 180 of that is currency.

That leaves 40 basis points which is driven by product mix.

And you see victoza and the victoza growth rates being a key part of driving product mix gains on gross margin.

S&D cost up 25%.

Adjust for currency impact S&D are up 10% in local currencies, driven by launch of saxenda and novoeight in the US, continued expansion in the international operations and then also adjustments of legal provisions.

R&D, you heard about all the results coming out, and actually compare that to a drop of R&D cost of 5% in local currencies in the first half.

Key driver behind that is the close down of the information activities, so we had a spend of roughly DKK600m related to information in the first half of last year that we don't have this year, so adjusted growth would be around 6% in local currencies.

R&D margin 12%, of course, impacted by currency, currency impacts by around 110 basis points.

Admin growing to 2% in local currencies.

And then we have other operating income being impacted by the partial divestment of NNIT in Q1 that we talked about there.

All that generates an OP of DKK26b, or a 50% operating margin, 57% operating profit growth.

You take out currency then we're at 30%.

Take out NNIT and then we're at 16% underlying operating profit growth.

Net financials, of course, backs away part of the currency, so we had a positive impact of DKK4.5b on OP.

Back out DKK3.3b in net financials.

And effective tax rate is unchanged.

That leaves a net profit growth of 35%.

Earnings per share 38%, given the fact that we're buying back shares, as we normally do, and, back out NNIT, EPS growth of 22% in first half.

Currencies, I covered that.

The big driver of currencies is the US dollar, as you can imagine, up more than 20% compared to last year, continues to be a big lift for the remainder of the year.

Then we have side currencies also helping us this year.

We have some of the side currencies partially correlated with the US dollar providing a lift in that respect.

How does that tie into full-year results?

Sales growth unchanged compared to prior guidance, 7% to 9%.

Then we have the currency impact slightly less, given the level we're guiding based on the US dollar, so a slightly lower impact --positive impact from currencies.

Operating profit growth now 19% compared to 17% in local currencies last time, one of the drivers being the fact that we have a one-off impact from out-licensing of information assets in the second quarter, so that enables us to lift our OP guidance in local terms.

(Inaudible) again the same, a reduction in currency impact, and then -- but also a reduction in impact from net financials, so lower loss on [netting] contracts given the change in currency assumptions.

Effective tax rate is unchanged, so is CapEx.

Free cash flow is up DKK1b, driven by the improvement in our operating activities.

And with that over to you, Lars.

Thank you.

Thank you, Karsten.

And to Mads Krogsgaard -- anybody that knows that Mads Krogsgaard is having a horse farm will know that he has a strained relationship to financials.

So that is why we didn't give him the financial presentation this morning.

It would be a new version.

Joking aside, the concluding slide here is just -- and we've used this several times.

This is describing the overall sustainable business model for Novo Nordisk.

This is not something that we could even have invented ourselves if we were starting from scratch.

This is something that has happened to us.

We have been -- if you can allow yourself to say [we're] blessed with the opportunity of helping millions and millions of people that suffer from diabetes.

And it is the only thing we are very, very good at.

And so since this disease is expanding, diabetes care market is growing significantly we have a pharmaceutical market which is driven by increased prevalence of more than 10% per year, and we have the leading position in all the categories that are significantly growing in that diabetes market.

And we have strong global position with a footprint all over the world and with leading positions in all but a very few countries.

And of course what is mostly interesting is the pipeline, the possibility of improving the therapy even further.

And I think we will be talking much more about this, not only a full pipeline of modern insulins and next-generation insulins, but also the new very exciting class of GLP-1 products, where we believe that we will be having dominance in this class for many years into the future, with the strong pipeline that Mads and his team has created.

So with this we close the presentation and open for Q&As for all of you.

And if you know who you want to address the question to, then please do it.

Then I don't have to do it for you.

So please go ahead.

Thanks.

It's Pete Verdult here from Citi.

Maybe for Lars and the broader management team, just two more strategic questions.

You've been successful for over a decade on a premium-price growth strategy, but we're seeing increasing pressure in many markets, including North America, at a time when you're about to try and launch your most important product for the Company's future.

So I just wanted to collect your thoughts on how you're thinking about the validity of this strategy given the increasing competitive marketplace.

And specifically when we think about tresiba, if we get approval this year, launching that without the outcomes data -- well, not outcome data, but data like switch, which could really help you go to the payers with a proposition.

And then, secondly, you won't be surprised where I'm going, China.

What can you realistically do to halt the recent trends, because you're relying on human and novomix?

Approval and reimbursement timelines for your new products are years off.

Local competition is not going away and the government is trying to curb healthcare spend.

So I'm just really trying to better understand what you can actually realistically do short term.

Thanks.

Thank you very much, Peter.

Yes, there has been a shift in the markets that we compete in, as you alluded to in the first part of your question.

But you will also have noticed that there's been a shift in our strategy.

If we had had this conversation five years ago we would have told you that our strategy was one of what we call value up, that we would be forcefully upgrading the market to higher value-added product and discontinuing the generic range.

We have changed that strategy three years ago in recognition of the fact that the markets in Europe and elsewhere there are different levels of ability to pay for medication.

Certain countries will face challenges and they will require and demand generic products.

So we have adopted a strategy now which is a full-line, full-portfolio strategy where we have products at all price points.

We have the most competitive pricing and unit cost on human insulins.

We have the same on modern insulins, and we have the next-generation insulins, which we are just rolling out now.

So that's the premise.

And that's also in a way how we intend to address the challenges in China.

We need to be competitive against the local manufacturers in human insulins, because we do want to have a significant position in China in the future of at least having 50% of the market.

And that will require that we have to be competitive in human insulins because the government in China is pushing, as you well know, healthcare into the rural areas.

These areas are less affluent than the coastal and major cities and, therefore, they will for a number of years into the future be requiring human insulins as opposed to the more high-end modern insulins that we are developing.

I would say, though, that we do advance our portfolio in China.

We have a clinical program which is going to yield an approval of tresiba.

We know that the regulatory process is longer in China, but this -- until we get tresiba approved we would be pushing primarily the pre-mix range.

And then we would be following on -- from tresiba we will be following on with the ryzodeg to add to the Chinese portfolio.

In regard to the US, you are absolutely right, this is a very, very interesting point in time.

Very much will depend on the label we get for tresiba, when and if we get it approved, because it is of course paramount importance for us that we have some ability to differentiate the product.

You followed the ADCOM meeting and you know the discussion that took place at the ADCOM meeting about the hypo data.

It is clear that hypo datas are much more difficult to demonstrate in type 1 diabetics, more easily so with nocturnal hypo in type 2 patients.

And the switch study, as you rightly pointed out, will be generating data in the beginning of this year, which would have been nice to have.

But given the opportunity to file on the interim, we thought that was a better option for us, so that we will have to await the results from the switch study.

And it is not likely that we can, if they are promising, see an amendment of our label in the United States until the beginning of 2017.

So pricing and positioning will be determined by the competitive landscape when we go to market.

It is likely that there will be a lantus, there will be a toujeo, there will be a biosimilar lantus and there will be tresiba and levemir, a quite crowded marketplace.

And I'm not going to disclose what the pricing strategy is in details, other than to say you should not expect that we will be overpricing the innovation, again here, all depending on what the label looks like.

Because we have an interest in also capturing new patients and potentially switch patients in the US market.

And therefore our time horizon is rather shorter than it usually is in getting into the US market.

I would like to open it up a little bit, if my colleagues have any comments at this point.

(Inaudible) comprehensive.

No, only one comment, and that is, Lars, tresiba, the intention is that towards the end of the year to be able to submit the NDA to the CFDA in China.

Yes.

And, Mads, Ryzodeg, where are you with Ryzodeg in China?

There the issue is that you have to have the mono components approved in China before you can come with a so-called combination product, so that is, as Peter Verdult correctly said, years into the future.

Good.

(Inaudible).

Okay.

It's Keyur Parekh from Goldman Sachs, Lars.

Actually, taking advantage of you being here, Goeran, [can I've] a question for you, one for Mads and then one for all of you?

If I look at the last 5 years Novo's quintupled in value from a market cap perspective.

As we look at the future 5 years to 10 years how do you see the growth opportunity?

And I'm not trying to reverse engineer a question on your long-term targets.

That isn't the objective.

But do you think from a strategy perspective, being as focused as you are today, is still the right kind of trajectory for you to be?

Or do you think adjacent areas beyond obesity makes some sense there?

Secondly, for Mads, just on oral insulin.

If you can help us think about the differential bioavailability between the two phase -- between the two assets that you're talking about.

Is it [magnitudes] different?

Is it 10%, 20% different, and, correspondingly, what the variability difference is?

And then, lastly, there has been some chatter around your competitors using their $250m priority review voucher for getting lixilan potentially on the market ahead of ideglira and them giving away the GLP-1 component to maintain market share.

If both of those things indeed work out how do you compete with the premium pricing on ideglira?

Okay, let me start giving my comment and then I'll hand over to the Chairman.

And I hope we can agree on this, that if you have -- when you have followed Novo Nordisk over as many years as you have, you have seen that we have narrowed in and narrowed in our therapeutic focus.

And that could of course create some worries.

But when you look at the total challenge in the diabetes area itself it is huge.

As we know, it is perhaps less than 10% of the patients that have diabetes in the world that get the proper outcome of their treatment.

So that gives indications, since this is a deadly disease, which is very costly for the individual and for society that there is room for improvement.

And being in the leading position with the most sophisticated drugs that historically have been injectables, but now are on the threshold of being made available orally, being the biggest manufacturer in terms of volume and lowest unit cost manufacturer I think we -- and a global footprint -- I think we have growth opportunities.

And we've discussed with the Board that we have growth opportunities in the area of diabetes for many, many years into the future.

And then we believe that obesity is closely linked with diabetes and, there, the market opportunity is even greater.

As Jesper was alluding to, it's only a $200m market and we know the co-morbidities and the mortality associated with severe obesity.

So we believe rather to build on those positions where we have product knowledge, we have technologies we can bring to bear and we have some medical and scientific understanding.

So we have no short-term ambitions of going into adjacencies.

We have smaller franchises in the area of hemophilia which we think are interesting.

But we'd have to grant you that on the big scheme of things the story of Novo Nordisk is the story of diabetes.

So no short-term initiatives.

But I don't know what my Chairman has for me long term.

I think it's fair to say that we have a robust discussion every year between the Board and the management, and it's important to have that, where you look at the future very carefully in some detail.

As you know, we've made some excursions, inflammation being the most aggressive one, where we felt, at least initially, we had enough competencies to be competitive there.

And it's also fair to say that we gave it a very good chance.

And we saw that turning that around into something that could drive our continued profitability and sales wasn't really there.

So then you better say that, cut, that didn't work.

It was a good try, but it didn't work.

As Lars says, we're very comfortable with our position in diabetes and related area.

And we see obesity as a very related disease.

We clearly have competencies all around there to be able to drive that also on the market.

I think it's very difficult, at least for me, to see how big the obesity opportunity is.

It's a non-existing market essentially.

The only thing you know there are lots of people out there.

What that will turn over to be in terms of pharmaceutical sales in due course, to me, is very difficult, so you'll follow that and be interested in.

There are other areas where -- around diabetes where we also will be exploring and continue to explore.

But in diabetes itself, at least the way I see it, we have an enormous amount of opportunities.

And the latest one, which we haven't talked about, is the oral opportunities that were coming.

And so before I give the microphone to my colleagues, then, of course, you asked -- without asking, you asked about the long-term financial targets, because -- was it possible for us to continue to grow.

And the only thing that we want to submit at this point in time is that we believe that this year we will be reaching our financial targets.

And that will lead to -- after the knowledge of the destiny and the label of tresiba that will lead to a discussion with the Boards about what should then the future ambition be.

Also taking stock of what's our, at that point in time, assessment of the situation in China, what's the assessment of the competitive situation in the United States.

And then we will give you a guidance in connection with the full year.

I'm of course ambitious.

And I think it is not inconceivable for the Company in certain years to go back to the double-digit growth rates, but it is -- given the size of the numbers, it is of course increasingly challenging.

So we'll factor all of that in and then we'll come back with -- and you should expect that the long-term financial targets would be the same that we have been communicating -- not the same numbers, but the same types of ratios.

With that let me then move on to my colleagues over here.

Mads?

Mads, [on] --

No, I --

-- oral insulins?

Yes, [there was a] specific one.

So of course at this point we only have animal data, but to make a meaningful difference you go from a low bioavailability in animals to something that is increased maybe two-fold.

And then there was a --

(Multiple speakers) difference between the two compounds?

Yes.

It would be -- there's a molecular difference, but they're both formulated in the Gipite system.

So the molecular difference accounts for an approximately two-fold increase in bioavailability in animals.

What we're doing in humans is trying to repeat that to see do we behave as [people dogs].

Just give us a sense of what those numbers are.

Are we talking 20% bioavailability?

No.

And those companies who claim 20% bioavailability that's based on very artificial rat installation studies, because we've tested everything out there.

We are much lower.

We are single digit.

Then there was a question based on two hypotheses of what our competitors would do.

I don't want to speculate on what we would do if our competitors ended up buying a voucher and if they ended up, thereby, launching earlier and if they decide to give away the GLP-1.

It would be poor business on their part.

But what we will do I'm not going to comment on right now.

Sachin?

Hi.

A couple of questions on China and then one on tresiba.

So firstly, on human insulin in China, has there been any change in the tender process that has allowed the local players to get more competitive?

And I'm guessing you're the largest-volume, lowest-cost provider, so how are you thinking about this on a price [per] volume?

Because clearly if you wanted to you could wipe them out.

So just how are you thinking about that at a high level?

Secondly, on novomix and the lantus competition in China, Mads, you've previously very eloquently talked about why pre-mix is correct for the EM market.

Why is Sanofi getting traction with basal bolus?

And are you going to compete with the basal bolus message, or going to stick with the novomix message?

And then finally, on tresiba, Lars, you've talked a couple of times yesterday and about three or four times today about the importance of the tresiba label.

So I just wondered at a high level if you could clarify that for me in terms of -- and this might appear a naive question, but the importance of data in the label versus the data you've already got in published journals.

The reason for the question is the competitor is basically saying they don't have the best label.

But they're basically saying that doesn't really hinder their marketing message, given they can use journals with liaison.

So I was just wondering if you could just talk to me from a commercial perspective the spectrum of what you can and can't say, data versus journals versus liaison and what advantage it actually gives you, given you've referenced it so many times.

Thank you.

Well, in terms of the bidding in China there has been some changes in that the regional bidding processes have occasionally opened up twice bidding, so even though you win first time you can lose the second time.

This is obviously smart on the part of the buyers' side and it's probably favoring local manufacturers.

We don't know, but at least we have lost out on a couple of contracts.

And you're of course right.

We are the lowest-cost manufacturer in the world, but I don't think it would be terribly smart to try to wipe out the Chinese insulin manufacturers.

I think we would get feedback which was not so pleasant

So I think we need to content ourselves with the fact that competition is good.

It makes you get better and there should be room for anyone around the table.

But it is clear that we cannot surrender the human insulin market, as I already stated, in China, because we want to be associated with the patient cohort when they trade up and demand our more advanced products.

Then in regards to tresiba, before I hand over to Mads, it is important what's in the label.

It is correct that you can detail based on articles and publications, but only on request.

And that reduces your ability.

So it has to be on a request from the physician and then your medical liaisons can submit this information then.

So if we want to have a forceful detailing we need to have some tabulation of benefits on hypos in the label, or a claim.

A claim has never been given.

So that is why it's so important for us to get on with the label discussion.

And before we have that we can't really see whether we can differentiate.

We all would agree that based on the clinical data the product is better, but if we are not allowed to promote that fact then that's going to prolong the penetration in the US.

Mads?

Yes, just a couple of comments on what to expect or what potentially to expect.

First of all, we do have the pharmacology and clinical pharmacology section where things like pharmacokinetics, dynamics, twice the half life, potentially much less variability and a very, very flat [statistic client] profile, things like this which are meaningful clinically, because they tell you what your everyday life is going to be.

They are things that are standard in there, so to speak, for all insulins.

Dosing flexibility, the ability to deviate from a rigid 24-hour regimen, is something that will be new if it comes in there.

We'll do our very best, because we've done the studies to show that it's both safe and efficacious and meaningful for the patients.

In terms of hypoglycemia rates, Lars is totally correct in stating that a hypo claim in the pathology has never been granted anyone.

But, aside of toujeo, other insulins do have hypo rates tabulated in the section and that can, henceforth, be detailed.

I have no comments as to whether we will achieve that, other than we'll do our best.

In terms of the switch studies, they are the ones, since they're blinded, they're living up to much more of what the FDA had asked or requested from us at the ADCOM.

So that would be the end goal to get really strong hypo claims -- or get hypo claims in there if the data warrants such.

But until then we'll do the best with what we have.

Novomix?

Yes, Lars -- maybe I can just [take this one].

It is true what Sachin is saying, that in Asia, both because of carbohydrate eating patterns, at least historically rice and whatnot, there has been more need for prandial insulin either in the form of a pre-mix, like a mixtard or novomix, or in the form of a basal bolus regimen.

And since Novo Nordisk also in China will be a strong player both with tresiba, plus novorapid, but also in particular with ryzodeg as years combine -- or go by, then we will promote that message.

But preferably where we stand strongest is clearly with ryzodeg, because there's no competitor out there.

So we -- it's in our interest to keep the intelligent notion that they need prandial insulin one way or the other.

Just to follow up, today are you coming back with novomix or competing with levemir against the loss that you're seeing to Sanofi?

So right now -- and maybe I'm not the right [one] to answer.

But we're detailing levemir in the hospitals that use a lot of basal.

Other than that, novomix, [but I don't know].

But our response in China clearly is to continue to market novomix.

It is the product that gains most new patients still with the very, very substantial overall share we have, which is saying that in relative composition there is slightly higher growth in the basal segment compared to the mix segment.

But if you look at the overall composition it's still more than half of the insulin volumes in China which are mix.

We're going to continue to drive that.

It provides excellent blood sugar regulations for the type 2 Chinese population.

Good.

Yes.

Thanks.

Richard Vosser, JPMorgan.

So on xultophy and the [eQuick] decision just wondering why -- or would you do a phase 4 trial versus NPH just to knock that on the head with the German regulator?

I know it would be only one country, but would there be a pricing issue or anything?

I don't see it.

So would you do that?

On victoza, trulicity I think got included I think on ESI as an option, so just wondering -- obviously, you've repelled bydureon quite effectively.

You are superior to bydureon, so just the thought on how the dynamics might change there going into 2016.

And then, finally, Sanofi I think this morning did some sort of diabetes deal with Evotec, looking at replacing beta cells in the very future.

So long, long term, and back to Keyur's question, where are we in terms of Novo Nordisk in future development (multiple speakers)?

Thank you very much.

That's a couple of questions to you, Mads, xultophy, phase 4 up against NPH.

First of all, let me just introduce that topic by saying this is a sliding slope to get down.

We need to resolve the German situation in a different way.

We need to perhaps accept comparative efficacy studies on a pan-European basis.

And based on that we can go to individual countries, NICE, the [Scottish] Medical Council, for the price discussion, but to start to accept various different kinds of comparators in Europe will make drugs much more expensive.

It is not in the interest of the European patient, so -- and therefore, Mads, are you planning to do a phase 4 study against NPH?

Lars, to be honest, I don't have any -- I would have said the same as you.

I totally agree.

Comparative [effects] --

That was a good answer.

I still have a job.

But I would say harmonization within Europe, maybe led by the European Medicines Agency in terms of comparative effectiveness, and then it's always an individual member state issue about the pricing per se.

But comparative effectiveness, setting a benchmark for what to do is the way to go, not doing NPH.

It's a 70 year-old product.

It shouldn't be --

May I answer the other one now that I have the mike?

Yes.

We would feel that somehow it's unethical to put the patients back on an old product.

But then, well, you have the beta cell issue.

Yes.

Maybe you want to comment on that, Mads.

We don't talk much about it, but we could because have -- ever since 1999 when Lars and I -- Lars Rebien and I, went to the Hagedorn Research Institute, we refocused our basic diabetes research institute totally onto stem cells and replenishment of beta cells.

So I could give a long lecture on it.

You're following Doug Melton at the Harvard group and Evotec and whatnot.

We have big efforts in that field, human embryonic stem cells differentiated all the way down with approved clinical-grade cell lines etc., etc., so that we're doing and we've done for ages.

We don't talk so much about it.

In Seattle we're also doing things like vaccine approaches to type 1 immune intervention and stuff like that.

A great guy called Matthias von Herrath is spearheading that effort.

You may have a chance to give part of that lecture when we close this present presentation.

The last question you had was about whether or not the current formulary access of trulicity will change the picture going forward.

We made the decision to retain our premium leadership for victoza.

We think in the future it will be between victoza and trulicity.

And then finally it will be trulicity, sema.

And then later down the road there will be oral sema.

And then it will be goodnight.

Okay, we thank you.

(Multiple speakers), Lars, maybe just a comment that I think it's good to see within the GLP-1 segment that an option really exists for the American patients.

They can choose either a once weekly in form of trulicity, or they can choose in almost all of the plans victoza.

And we hope that that situation will remain steady for 2016.

And then hopefully we can get a filing in with the semaglutide when we get to the end of 2016.

So we thank you for your interest in our Company and we shall [report] as soon as we have some exciting, hopefully, news.

Thank you.

Thanks.