諾和諾德 (NVO) 2017 Q3 法說會逐字稿

So this is where you introduce us?

Or should I...

Vince Meunier from Morgan Stanley.

So we are very pleased hosting you today.

So we have today with us the management of Novo Nordisk with Jesper, Mads, Mike and Christian, and of course, the IR team.

I think, Jesper, you want to start with a presentation before we jump into Q&A?

Thank you.

Yes, we'll do a quick -- so thanks, Vincent.

I thank Morgan Stanley for hosting us here.

We're going to do a quick presentation.

I'm going to cover highlights, key events and the key events of sales updates.

And then Mike's going to take over and talk about the state of our IR operations, talk about his region.

Mads is going to give an update on R&D, and then I'm going to round off with the financials and outlook.

And we also have Christian Kanstrup up on the podium, current SVP of Power Pumps.

So he will be able to cover questions in that area, and as former Head of Marketing, also able to provide additional insights on the brand strategy of Novo Nordisk.

So of course, we're going to make predictions about the future.

In the past 1.5 years, has learned me that making predictions about growth levels in the future is inherently difficult.

So we have included this slide for your infotainment.

In terms of the highlights of the first 9 months.

First, we're now turning into a hostile currency environment, meaning that the reported numbers are now turning lower than the local currency numbers.

We had 3% growth, but 2% reported on sales.

And the key driver of growth the first 9 months is International Operations, with a 5% growth, and now basically accounted for almost all the growth in Novo Nordisk.

Whereas North America for various reasons, and we will refer to that, was flat in the first 9 months.

The key drivers of growth remains Tresiba and Victoza, accounting for quite a substantial part of total growth.

And on top of that, we have Saxenda within obesity, which is a key growth driver.

In terms of R&D, it's been a very solid quarter, with great results in the SUSTAIN 7. Mads will go through that in detail.

And also a positive outcome, with a 16-0 vote in favor of approval of the product.

We have the labeling now in the U.S. for Victoza in terms of reducing risk of cardiovascular events.

And for Tresiba, we have an upgrade of the label, so that it now reflects the reduced risk of severe hypoglycemia.

On the financial front, also, you see this turnaround in the currency situation, where the growth in -- reported in Danish kroner is 5%, whereas local currency growth was 6%, in line with the growth of the first half year.

The diluted earnings per share grew 5%.

Outlook now operated from 1% to 3% to 2% to 3% on sales growth environment, local currencies, and also a slightly lower expected currency effect compared to half year, really reflecting the recent depreciation of the U.S. dollar versus euro.

And for operating profit, changing it from 1% to 5% to 3% to 6% and also lowering the expected currency impact from 4% now to 3% lower reported.

We've given a glimpse of where we see 2018.

It is a bit vague, but of course, it's always hard to make predictions on something which is variable in nature, as we haven't closed 2017.

But we expect low- to mid-single digits for both sales and operating profit growth in '18.

We have a changed executive management, with the effect from 1st of October, where Camilla Sylvest has joined the executive management as Head of Commercial Strategy & Corporate Affairs.

We have -- and also, that also includes marketing.

And we have promoted Doug Langa, now also being an Executive Vice President, like my colleagues on the executive management board, and this still being presided by Lars Fruergaard.

In terms of the growth distribution, all the growth is coming from diabetes and obesity care, growing 8%; and the key drivers, the new generation of insulin, GLP-1s and obesity.

That's really accounting for the full growth in the company, partly cannibalizing our sales of modern insulin within biopharmaceuticals.

The hemophilia franchise is roughly flat, whereas the challenges we have had has been primarily in the category other biopharmaceuticals, which is the historic hormone replacement business we have globally, and where it has been exposed to biosimilar competition for Vagifem in the U.S., and that is really accounting for that decline.

Basically, that decline is related to the launch of a generic version of Vagifem in October last year.

So as we move into the final quarter, that effect should basically be completed by the end of this year.

And hence, hopefully, it shouldn't be a drag next year.

For human growth hormone, there was a rebate adjustment in the first quarter of '16 of DKK 600 million, which is a prime driver behind the decline in our Norditropin franchise.

If we look to the U.S. market first and say how are we progressing with our insulin franchise?

And the area where we have successfully retained a significant improvement opportunity in the U.S. have been basal insulin, strong market position with meal-time insulin, a strong market position with mix.

But we have not -- we've been significantly behind our French competitor on long-acting insulin.

And there, we are gradually making inroads with the combination of Levemir and our Tresiba brand.

And you can see the combined share of Novo Nordisk is now at 32%, so we're up approximately 4% compared to January 2016, as the key development.

Also, noted that it has recently been announced by CVS, that their Part D formulary from 1st of January '18 is going to exclude the glargine U300 and glargine U100 from Sanofi.

So available offerings are BASAGLAR from Eli Lilly and Levemir and Tresiba.

And that, of course, inherently means an opportunity for Novo Nordisk, as it is approximately 10% of the U.S. basal insulin volume, which is going through a CVS Part D. I think that's really the key comment to make on this one.

In terms of the U.S. GLP-1 markets, it continues to grow in size, growing at levels between 20% to 30%, as you can see on the slide to your left and a gradual expansion of the overall market of diabetes that is covered by GLP-1.

So about 13% now of total value which are GLP-1s.

You can also see that dulaglutide, the once-weekly compound from Eli Lilly, has been very successful in penetrating the market, but it has done that mostly at the expense of the other products on the market, so exenatide and albiglutide.

And albiglutide about to be withdrawn from the market, to our understanding.

And hence, Victoza is, in reality, gradually continuing the expansion of prescriptions, as you can see on the middle slide.

But the rapid rise of dulaglutide is gradually bringing down our market share.

And we have 2 responses to that.

One is that the recent labeling for cardiovascular risk protection with Victoza is now being actively marketed in the U.S., and we have launched a direct-to-consumer advertising in that respect.

And it looks -- it's going to be very exciting over the next couple of weeks to see how the progress is for our Victoza franchise following that -- the launch of that campaign and that marketing message.

The second response, of course, is the potential launch of semaglutide, our approach to once-weekly GLP-1.

Mads will basically elaborate a bit about the merits of semaglutide in a short while.

So with that, over to you, Mike, to talk about the rest of the world.

I've covered half.

I'll still say a couple of words about the U.S.

Sure.

That's fine.

They're yours.

It's on my slides.

So not much change to this part of the picture, U.S. being 50% of the business, followed by region Europe for the third place.

Region China and EMEA continue to fight their share at 11% and 10%, respectively, and then Japan and Latin America being the smaller regions.

On the right-hand side, you see some of the numbers that was talked upon, 0% growth for U.S. and 5% for international operations.

Region Europe growing faster than we have been able to see during the last number of years.

This is predominantly coming from multiples of countries, but next-generation insulin and biopharm.

We have seen actually a very good start of the year for biopharm in Europe.

Asia, Africa, Middle East and Oceania, they are having a tough period on the biopharm, so they're taking a drag of around 12% decline on the biopharm, but doing very well on diabetes and obesity, with 12% growth.

They've had a very good quarter 3 results, making some of the downsides we saw in Q1 and Q2, leveling out the level that you see here on 6% growth rates.

China continues to do exactly more or less the same as you had seen in Q1 and Q2, 6 percentage points on the back of modern insulin doing well.

Japan and Korea have had a better-than-average year.

This is, on one hand, continuation of our challenge in the GLP-1 segment with Trulicity, but doing quite well on the next-generation insulins with Tresiba and Ryzodeg, and also growth hormone.

And Latin America, 17% growth, quite good; 9% of that, however, is inflation-adjusted price increases, primarily in Argentina and Venezuela.

And they are doing also well with next-generation insulin, modern insulin.

Note that 40% of share of the growth of Latin America is Saxenda.

It's doing really, really well in that part of the world.

Now then I show you a slide that I show every quarter.

Tresiba continues to do well, very well in markets where access is on par with other products, with our own Levemir, with Lantus and BASAGLAR.

You see markets now reaching 30% and 40% market share, Japan to be specific.

But it's more of a challenge where we have less access than some of the other basal insulins.

And that's some of the product -- some of the graphs that are not saying -- not showing the same degree of curve on the uptake.

Here, in U.K., actually, we reduced the price some months ago, and you see that, slowly and surely, some more access has opened up, although the line's still not as exciting as some of the ones on the top.

On the right-hand side, what we do is we try to explain that in many markets, besides competing products in the basal segment, our own products become a bit of a competition.

And we cannibalize when we launch other basal products in the same market.

Take a look at Switzerland.

On this graph, you see that Switzerland Tresiba was plateauing.

On the other one, you see that it actually continues to go well at now 58% of the market when you mix Tresiba and Xultophy together.

And then that's how we internally look at how successful it looks like.

We basically would like, in places where we launch other members of degludec family, to show a graph, a curve like you have seen in Switzerland or Greece for that matter, and making sure that the combine of the 2 products increase the share of the basal market.

And then the other interesting one I also talked about last time is France.

In France, we did not get access with Tresiba on the price that we wanted to.

We negotiated ourselves with Xultophy and launched Xultophy instead of Tresiba, and continue to do very well with now 12% of market share in the basal segment.

So with that, Mads, I'll pass it on to you.

Thank you, Mike.

So I'll keep a brief update.

I think you're all aware of the SUSTAIN 7 data.

And the short version is that we've done the head-up comparison study versus dulaglutide: 1,200 patients, statistical hierarchy, looking for non-inferiority in A1c, followed by superiority in weight, followed by superiority on A1c.

And we did all of those endpoints with a clinically meaningful, highly meaningful HP1C improvement versus dula, dose for dose, low versus low, high versus high, and a more than doubling in the weight loss achieved after this 40-week treatment period.

Overall, very exciting data.

Very important for the launch of semaglutide and a balance between retinal events: 5 on dula and 4 on sema.

In terms of regulatory news flow, there's been a lot happening over the last quarter, actually.

You are aware that we are the first to have a broad-based major adverse cardiovascular event risk reduction label for any diabetes agent, namely Victoza in the U.S.

Also, we had fast-acting Fiasp approved after we had a hiccup in the original cycle, as you will recall.

And importantly, the Europeans have just granted us the exciting label update on severe hypoglycemia reduction, 40% and 53% overall in nocturnal, respectively, in European setting.

And we are awaiting the U.S. label update on the same matter in Q1 of next year.

Now other key development milestones.

Jesper already mentioned that we had a 16 to 0 vote in favor of sema approvability to reduce glycemia and all other kinds of things in type 2 diabetes with the FDA AdCom.

We actually have also had a commitment to do a PUP study, previously untreated patient study, with NovoEight.

And that one has completed.

And finally, within hemophilia, concizumab, which is a new class of [vacant] so-called anti-TFPI monoclonal antibodies for subcutaneous administration in both hemophilia A and B, with and without inhibitors, is undergoing 2 clinical trials that we will report next year, hopefully, paving the ground for a pivotal trial program.

Finally, I mentioned to you that already a lot has happened.

I hope you will agree, during the year in terms of regulatory news flow.

But a lot more is still to come.

We are expecting a very exciting end of the year with a U.S. regulatory decision, European regulatory decision on semaglutide, and you'll hear much more about that when it happens.

So I think without further ado, over to you, Jesper.

Yes, thanks, Mads.

And basically, a few comments on the P&L.

The first 9 months our gross margin, a 50 basis point decline, reflecting 2 factors going in a negative direction and one going in a positive direction, completely in line with what we saw at half year.

The negative direction is driven by lower prices in the U.S.A.

A significant element of that lower price is an effect from the rebate adjustment in the U.S. It's about 40% in total and about 10 basis points coming from that growth hormone price adjustment in Q1 last year.

The second factor in the negative direction is an approximately 30 basis point negative effect in relation to what we would normally label productivity.

In reality, it's about 20 basis points which are related to impairment charges in our product supply operations, partly related to new facilities coming on, and then shortening the expected lifetime of the existing facilities, as they will be wind down.

And the positive effect on the gross margin is the product mix, where we have substantially larger sales, of course, of GLP-1, which is positive for overall gross margin.

But also a positive contribution from Tresiba, which in terms of gross margin contribution, is clearly positive, and a significant improvement over the gross margin of last year.

And that's also a sign that as we get to, for example, semaglutide, it does take Novo Nordisk 2 to 3 years to bring the volumes of new products up before it is significantly contributing, for the new products, to the development of our overall gross margin.

In terms of the sales and distribution costs at 24%, gradually coming up over the year, you should expect the final quarter to be substantially higher than the previous quarter, also linked to the launch of -- or the impending launch of semaglutide in the U.S. And we'll take some of the cost in relation to the prelaunch activities in the final quarter.

Research and development costs moving in the 12% to 13% range.

I would expect that Mads and the research team should gradually ramp up the R&D costs there as we are creating the new research strategy being implemented and that gradually lifts costs.

We're happy about the development in admin costs overall, but I also have to acknowledge that there was a bit of one-time charge in last year's admin costs related to changes in the composition of executive management.

And we have not had any departures -- costly departures in 2017, so far at least.

And then other operating income.

I do note that we've had a quite significant, close to EUR 40 million in income, from the divestment of our inflammation assets to Innate Pharma.

We received from that divestment not cash, but actually, approximately 5% of the shares in Innate Pharma in France.

And we now have about 15% shareholding in Innate Pharma.

So these developments took the operating margin to the 46% level, and we are actually forecasting with the forecast we've given for full year in terms of the local currency that there will be a slight operating margin expansion.

And I think that is actually quite positive to see, given that we were looking into a clearly very challenging 2017.

But I think I can say that the cost structure in Novo Nordisk is under solid control, and we have been able to execute on our cost-containment initiatives quite well.

Financial items, negative with DKK 800 million.

It will be improving as we move to full year, as some of the loss we have on operating profit, as I alluded to in my introduction, that will be offset by '18 gains.

So estimate for full year is about DKK 300 million.

On the net financials, I wouldn't comment on the others.

There's nothing really new on those items below.

Currencies here.

You see the development of the main currencies.

And this is why we are facing with some challenges in relation to the development in 2017 and also going into 2018, and partly related to the main and hedged currencies, but also to a drop in some of the side currencies, with for example, the Turkish lira being a challenge in 2017.

In terms of guidance, I've covered most of the changes in guidance.

The only one I want to cover here is really that we have lowered our expectations for capital expenditure, and that's actually a reflection of not deferring investments to next year, but actually being able to execute what we had ongoing at a slightly lower cost level.

But of course, also inherent in that is slightly lower cost to the U.S. element of that investment, as the dollar has declined.

So that's kind of an element of that explanation, but it has helped a bit.

I also alluded to that there was a few impairment charges in the product supply cost, and that's also linked to the slight upgrading of the depreciation and amortization, now estimated at about DKK 3.5 billion.

But of course, such charges doesn't involve cash flows.

So cash flow has now improved to a range of DKK 30 billion to DKK 34 billion, and that's having the effect that we have now closed with the announcement of a safe harbor program.

For the final quarter, we have closed the repurchase program for 2017 that runs until January '18 at DKK 17 billion, where we've previously said up to DKK 16 billion.

So we're handing back an additional DKK 1 billion by that chart, you can see here, we are actually returning more to our shareholders in '17 than we are generating in free cash flow, and hence, compensating partly for the lack of return in '15 and '16, and also noting that the benefit of the last years of changes, of course, that we have been able to get quite a few number of shares for those repurchases.

And we have approximately a 3% lower number of shares outstanding, and hence, providing accretion to the EPS ratio and growth.

So that's basically it.

I don't think I will go through this one, except for just noting that the high GLP-1 volume growth and the market share and with semaglutide on the way to the market, both in terms of an injectable and oral, provides a fantastic opportunity for us, but also that Saxenda continues to be a key driver of growth.

We come from a very low base.

We have become the value leader in the medical treatment of obesity, and we have a great portfolio of assets on its way to the market.

And with that, we will go to Q&A.

(Operator Instructions)

Jesper, I just wanted to have a bit more color on your assumptions on your 2018 preliminary guidance.

I mean, your competitors are talking about deterioration of the market conditions for the insulin environment in the U.S. So you said during the call that also you want to capture that in your guidance.

But can you talk a bit more about what we should expect with regards to the U.S. insulin business?

And typically, how can Tresiba can continue to grow or not against BASAGLAR, which is now the main competitor?

It's no more Lantus, really.

And what could be the impact also on the margins from that and the investments to support the new product launches?

The second question is probably more for you, Mads.

I mean, on semaglutide and the CV landmark study to potentially be launched, is it possible to introduce in a CV landmark study endpoints which could give you the possibility to file in dedicated cardiovascular indications?

I mean, take the opportunity of the landmark CV study to get a cardiovascular approval in a CV indication.

Thanks, Vincent.

First, on the assumptions used in our preliminary guidance for '18, clearly, there is an expectation of an intensifying competitive environment in the U.S. insulin markets.

We have previously noted that we will see lower average insulin prices, driven by the competition within the basal insulin segment.

And that statement following the conclusion of the negotiations for formulary position in 2018 remains very true.

We decided, in connection with half year, to refrain from making specific percentage comments on pricing impact, because what -- from our perspective, the factors were happening is that we are gradually getting broader penetration into lower-priced segments of Tresiba.

A case -- an example is the opportunity for an improved formulary position for Tresiba in relation to CVS Part D, as recently announced by them.

And of course, getting that preferential position for Tresiba, Levemir compared to the historic market leader, comes with a price in terms of rebating, but of course, also comes with a significant volume opportunity for us.

And hence, we think that, that should be seen in combination.

If you look to -- if we think about your overall question regarding what is the implications on margin, you could say the guidance we have given preliminary for 2018 is one actually of a stable operating margin in local currencies.

I think that will probably be driven -- or that is most likely to be driven by our International Operations franchise more than it's going to be driven by -- or the positive is going to come from our International Operations franchise, whereas, the price competition in U.S. probably is going to be challenging in terms of the insulin franchise.

On the other hand, the first markets where we're going to introduce sema is likely to be U.S. And the pricing point of the GLP-1's, everything else being equal, makes that positive.

But I do not see U.S. as driving our operating margin development, but of course, very sensitive to what is the actual product distribution in 2018.

Then you also had a question on Tresiba, and to what degree we would be able to retain momentum.

I think here, some momentum will come from the change in formulary position with CVS Part D in December and first quarter.

I hope Mads and his team will be able and successful to obtain an improved labeling for Tresiba in terms of hypoglycemic risk, and maybe Mads can give a short comment to that.

And that hopefully then should provide us with ammunition for continued growth going into the subsequent quarters.

And I think that's really the comments we have as per now.

And then over to you Mads.

And you also have some questions about the potential landmarks, sorry, for sema.

Yes, thanks.

So if I understand your question correctly, Vincent, first of all, on the vote, as Jesper mentioned, we are awaiting the regulatory outcome in the U.S. We are positive about the data because they are so extremely robust and impossible to tear apart, so to speak.

In terms of cardiovascular, if I understand you correctly, a diabetes-related CVOT -- so diabetes-related CVOT, but you're thinking more broadly into cardiovascular medicine.

And there my remark would be, if we can, as we say in Danish, strike several flies with one smack, I don't know what the English is, we'd actually really like to do that.

And by that, I mean that we are lacking essentially the landmark study in the field of cardiovascular risk factors associated with, for instance, non-diabetics, such as obese people.

So if this study that could be kind of the ultimate proof to the pudding that obesity is a serious chronic disease that mandates medical intervention, that is a study we could actually do with semaglutide and have hard outcomes, such as cardiovascular, but not necessarily exclusively cardiovascular outcomes.

There are other things we can always discuss in obesity and comorbidities that are relevant to such an outcome-based study.

And it would, of course, also serve the point of strengthening the labeling for semaglutide in the obesity indication that we are striving for.

As you know, we're starting a Phase IIIa program in the first half of next year, and we are strongly considering to spice that up with the study I just mentioned.

Thanks, Vince.

Michael?

It's Michael Leuchten from UBS.

Just a question on the rebate adjustments in Q3.

I think broadly speaking, they were a bit more sizable than maybe we've seen in the past, and they also impacted Tresiba as much as they impacted Levemir.

So can you talk to channel mix in that context and what that means or may not mean for 2018?

I think my high-level comment, before I'll pass on to Peter for a more detailed comment on this, but my high-level comment is that we'd basically see Levemir gradually moving into the lower-priced channels and being more dominant in the lower-priced channels, whereas the predominant part of what we have been cannibalizing to Tresiba has been in the private -- in privately insured lives with average better prices.

The problem we have with the rebate adjustments will always be that we are basically changing between 3 to 9 months of provisions.

And of course, the more we are changing the provisions to the lower-priced channels, that's often also the channels where the reporting on the actual usage is slower compared to the commercial lives.

So it's kind of -- it's a little bit of a double-whammy for us.

So yes, I think as you bear into 2018, I think it's fair to assume that the average pricing for Levemir gradually also will be negatively impacted from a channel mix.

I don't know, Peter, whether you've got additional comments there?

Just I mean, if you look at the development of Tresiba in the first 9 months, there's been, it's fair to say some, at least some confusion over the development then.

And I think that it's fair to say the Q2 is the odd one out.

And the reasons being that there we had rebate adjustments for -- particularly for non-contracted sales.

So if you deduct that, and then include that there maybe was an inventory build in Q2, and then there was a slight inventory decline in Q3, then it's pretty obvious that it's Q2 that's the odd one out.

Underlying, Tresiba's actually on a quite steady rose.

So that -- I think that's my additional comment.

And I think that on Levemir, there's no reason to add any further.

And you can also take a little bit of comfort, Michael, in if you look at the year-to-date numbers, we actually upgraded our full year forecast based on actually a very -- a development in our franchise in the U.S., which was fully in line with our anticipation at half year.

So nothing really significant, unexpected in those numbers, okay?

Yes?

Trung Huynh, Crédit Suisse.

I wanted to ask you a little bit about DTC advertising.

Are you going to be rolling out regionally first, and then nationally?

Or is this just are you going fully hard quickly?

And then if you get your label update for Tresiba, is DTC something you're considering in the second half of the year?

You have 2 questions.

Regional or national, I'd say it depends.

One of the areas where we are testing a regional approach is for Saxenda, where we are not going nationwide, but we're trying to target areas where we have reasonable reimbursement and testing out how that's going to work.

We think that's a meaningful approach.

In terms of national DTC campaigns, I think that's highly likely, of course, for brands like Victoza and with the improved CV label, and also for a brand like Tresiba.

When you talk about Tresiba-upgraded label, that's possible, but we've not made up our minds.

But there is in the assumptions for next year, assume that we will have DTC commercials in a similar fashion as we've had in the past years.

So no significant change there, noting that for semaglutide, it will be into the second half of the year before direct-to-consumer is a realistic option.

Mads, you want to add something?

Yes, just from the perspective of Tresiba, hypoglycemia and so on, what we've come to realize, I think we knew it already, but we've consolidated our view that there is actually a gap in the dialogue among and awareness within the physicians in the general practitioners segment.

Point number one, they are very often unaware of the hypoglycemia problems that the patients are actually experiencing on insulins, because they don't talk enough about it.

And sometimes, patients also simply under-treat themselves because they're afraid of the hypo.

So I think even from a non-branded perspective, there is a raison d'être for raising the awareness and knowledge among both physicians and patients, in particular GPs in the U.S. Yes?

Sachin Jain from Bank of America.

A couple of questions, please.

One is a follow-on from yesterday.

You've talked historically about Tresiba 5% volume market share gains, I think, per year.

So the Medicare contract, do we now think about that as helping the volume share gain to be above that, and then offset by price?

Or is the Part D change within the 5% volume share gain per year?

And secondly, to understand your messaging when you get out there on Victoza CV benefit, is it as a competitive profile versus Trulicity?

Is it to move it earlier in the paradigm?

And how will you manage that messaging when sema gets approved and based on the AdCom without a potential CV label?

And then final question is on GLP-1 growth.

Obviously growing at 20% at the moment.

Consensus models, I think roughly mid- to high-teens.

Your guidance in the midterm is just framed as greater than 10%.

So I want to understand in a high level what you include within your midterm, and if it is actually at the mid- to high-teens, is that upside to the way you think about it or not?

If I start from the back, in terms of the GLP-1 growth, we have assumed that we will continue to see high growth level for the GLP-1s, but it's also fair to state that one of the factors behind our better-than-originally-anticipated growth overall for Novo Nordisk in 2017 has been higher realized volume growth in the overall GLP-1 segment.

In our assumptions for 2018, we are expecting a continuation of growth, but more in the 15% to 20% level than above that.

That would be the answer to that one.

In terms of CV messaging, maybe Christian, you can give some comment on that, with the work you've been doing on CV, rolling that out globally.

And then, finally, I might just then also -- just to finish off with the 5% on Tresiba.

It's correct.

We will be -- we're at 9% now for Tresiba market share.

U.S. will be closer to 10% as we exit the year.

There is an opportunity this year in December, January with the Part D. We think it resembles the opportunity we had in the commercial space in the first quarter of last year.

And then, of course, the development in the market share for Tresiba in 2018 will largely be dependent on the labeling upgrade that we hopefully will get.

And I think we would refrain from making very specific targets for the market share development until we know how that pans out.

So maybe in connection with the Q1 release, we can be a bit more specific on where we see our U.S. Tresiba market share faring.

Also noting that, of course, that a key focus for our sales force commercially in the first half of next year will be semaglutide.

So I would like to see that picture clear up a little bit more before we make any specific comments.

And then maybe over to you Christian on cardiovascular safety for Victoza?

Yes, Victoza, what we have been doing is, of course, we have been preparing diligently all year, and we were ready as of the label update in both EU and U.S. to go out full speed with a CV launch for Victoza.

And of course, what we are centering this messaging is around -- is, of course, being the only GLP-1 with a proven cardiovascular risk reduction.

In our European label, where we have -- we're the only GLP-1 with a prevention of CV risk.

And what we have been doing, and also what we have been learning from in the past is to ensure that we keep the messaging extremely simple.

We keep it emotional and speak to the doctor in a simple way.

Of course, it's still early days, but all countries where we have the updated label out there and ready to promote.

And Mike, you can also speak a little bit to some of the things that you're bringing from, and especially in Europe, in terms of the emotional selling.

Yes, so as Christian said, we figured out that it is quite easier for the doctors to understand the once-daily versus the once-weekly.

And when we start discussing for a very long period of time, especially with the PCPs and the GPs on MACE endpoint, that gets a little bit diluted, and the message becomes difficult.

So we've gone through the period of the summer leading into the label update in September now, making sure that the reps on the front line can, in a much simpler way, discuss the inconvenience associated with deaths associated with cardiovascular outcomes, and then make sure that the PCPs and the GPs can much better understand that they have a choice, to have a once-weekly choice.

And that brings some convenience, but they also have a choice on a product that's much better in the longer run for patients, especially who are at a CV risk.

So that is one activity.

And at the same time, we also started having a lot of dialogues with various different governments and payers and what have you to try and see how we can change national guidelines around that.

And that is coming along, and we have had a number of countries where guidelines have been changed.

I can also announce that yesterday, the German government actually announced that they will take Victoza as a comparator in the AMNOG process.

This is quite unique, because as some of you guys know, the German system, for many, many years, they have been stuck with metformin and SU as a comparator on the tablet side, with human insulin on the injectable and nothing else.

And now they are going to use Victoza as one of the comparators for diabetes as a whole.

So a lot of good things are happening, and I'm hopeful that we can make the most out of this.

Yes, and if I could add one small comment because you talked about lira versus sema.

And I would agree with everything that's been said, but do bear in mind, part of this whole campaigning is actually also unbranded, in really speaking to at-risk causes, cardiovascular disease and death and so on.

And that will help not only Victoza, but also sema, if and when we're able to talk about CV disease.

So the question is can we talk about cardiovascular risk reduction for semaglutide?

Sachin, the short answer is, let me tell you more about that once we have the label.

Keyur?

A question and a clarification piece.

The first one, just continuing on GLP-1, we saw a distinct shift in the prescription [clearance] for Jardiance after the CV label.

Is there a reason why Victoza trends should not replicate the uplift we saw on the Jardiance, kind of within the class share?

The second question is, Mads, historically, you've kind of spoken about the FDA's reluctance to include intra-class compares on the label.

In that context, how should we think about SUSTAIN 7 and how it appears on the sema label?

And then lastly, Jesper, for clarification, should we therefore assume, given your comments, should we assume that the 20-basis-point decrease in admin costs is all related to the unspecified senior management departure that you were talking about?

I'll take the last one first.

It was not fully unspecified.

Of course, when you go into the deep notes of our financial accounts, you would actually read in footnotes to the table on executive management compensation, that those amounts are fully disclosed.

And hence, you are able to back them out.

And then you will note that it's not solely the development in -- or the lack of executive compensation consideration that is driving the lower admin costs, but it's a significant element.

I hope that clarifies the situation and gives you a fantastic opportunity to go into the detail of our account, which is always exciting.

And then on the second one, in terms of Jardiance, should we expect the exact same pickup relative to other compounds?

From my perspective, I think it was a more distinct difference in the SGLT2 space compared to the situation with we have within the GLP-1s and where we -- you could say also a little bit disturbed, the status quo, potentially with the launch of semaglutide.

So I think it would surprise me if the kind of 6- to 12-months effect on Victoza will be as profound as what we saw with the Jardiance.

But that probably is going to be disturbed by a, hopefully, successful launch of semaglutide.

And it's going to be a little bit hard to watch those 2 effects out and be specific to what was the CV effect and what was the cannibalization effect on semaglutide.

So I think the jury's going to be a little bit out.

But I think making comments on our launch of the campaign in the U.S. for cardiovascular risk, we are hopeful that, that would lead to a change in the capture rate of Victoza relative to dulaglutide in the next 3 months.

And you will begin to see details of that over the next few weeks, and of course, if there's a positive uptick.

And you have 2 data points indicating that any solid marketing department will say you have a trend where it takes a bit more if it goes in the opposite direction.

So that would be my comment on that.

Then over to you, Mads.

Yes, so I think when you look at these, as you call it, intra-class comparisons, they are important for numerous reasons, good market access and discussions with payers, seeking reimbursement, getting onto formularies, getting the right price and so on.

They're important for the physician's decision, which product to prescribe in terms of efficacy, safety and so on.

And quite often, they are also important in regulatory terms of getting into the label.

And to say which of the comparisons will or will not be on the label.

As you know, SUSTAIN program has shown superiority against two: Once-weekly GLP-1s BYDUREON and Trulicity up against Januvia, up against glargine and so on and so forth, we'll do our utmost from the get-go to get as much into the label as possible.

And there might be inter-agency differences in how willing they are to do that within -- between classes, but we'll do our utmost.

And under all circumstances, with the freedom of speech, et cetera, that is prevailing in the U.S. now, once you have high-impact, peer-reviewed, journal-accepted publications, you are also able to talk to those, of course.

Inter-agency differences, I hadn't heard that before.

Any final question?

Yes?

Kerry Holford from Exane.

Three questions, please.

Firstly, on diabetes in the U.S. Sanofi is taking the move for the first time in, I think, 3 years to raise the list prices of Lantus and Toujeo.

So historically, you two have moved quite closely aligned on that.

And you haven't yet followed.

So my question is, will you, is that a tactic you intend to return to?

And if not, why not?

Secondly, on R&D, where the run rate this year is around 12% of sales.

You mentioned that this is going to increase over time.

Do you have a target in mind where we could see this ratio go to, and how quickly?

And what is driving that incremental spend?

Sorry, what ratio?

R&D.

And then lastly, just on M&A.

You talked on the call yesterday about target disease areas, looking at therapeutic attributes where you have an interest or related interest already.

I wonder if you might elaborate on some areas there.

Anything more in obesity, are you interested in NASH?

First, if I comment on price movements, and then I don't know whether it's viable for me to let Mads talk about the R&D ratio.

We'll do kind of a joint show on that one.

And then some comments, Mads, also from -- on the M&A front, where you're seeing the opportunities.

And maybe I can comment on the biopharm business.

So first, on price movements, the thinking that we have in Novo Nordisk is that we like to have a correlation between the price movements we make over and beyond what is solely compensating for inflationary pressures in the U.S., if it's linked to changes in the labeling for the products.

So basically, the value provided.

And there would be factors we would take into consideration if any price movements are made on our basal insulins in the U.S., I would anticipate.

And then in terms of the R&D ratio, we are currently operating in a level between 12% to 13%.

And we believe that if we look to near term, that would be a similar level for 2018.

But of course, there is a significant range given in the outlook we have provided.

And Mads is also bringing onboard a new SVP for external innovation.

Of course, it's a little bit hard to forecast what exactly are we going to bring in of innovation from outside, and to what degree is that something that comes onto the balance sheet, to what degree is that something that has a direct P&L effect.

And to the tune that it's something which is bringing in exciting assets in Phase II, Phase III, I think that would then justify an elevated level of R&D expenditure.

But it has to be justified by the individual compound, from my point of view.

I don't know, Mads, if you've any additional comments to that.

No, I would agree to that.

Just add a bit of kind of a spice to what is it we're looking for.

And you can say if you take an area, such as obesity, which you specifically mentioned, you can argue that we've gone from being a simple provider of one injectable drug, Saxenda, into actually wanting to build a full-fledged franchise, including a portfolio that can address also different segments within the obesity space.

So if there are things out there that are exciting, either in the clinic or in the research phase, then both our scientists and this new gentleman who's joining us in January, will be out there seeking to get access to it.

And if you look into a condition such as NASH, you should see us as understanding the full spectrum of the metabolic disturbances that cause, in particular, the early phases of NASH: F1, F2 and to some extent, F3.

Whereas if we want to move into the fibrotic aspects of liver disease, we may well want to team up with folks that are more into collagen and fibrosis research than we are.

That's examples.

And then, of course, Jesper, there are issues within biopharm that are more under your realm.

Yes, and the comments that Lars made yesterday in full year prescribe to in terms of where are the opportunity or what are the opportunities we're looking at, we are wanting to stay close to where we have our core part of the biopharm franchise within the area of hemophilia and having strong access to the hematologists around the world and having skill set not only in having access to them, but also having the development and regulatory competencies that enables us to swiftly bring new innovation in this space to market and fulfill the global potential of any compounds in that space and not solely, as most biotech companies will have a focus on getting approval in Europe and U.S. first.

So that would be some of the areas we would be looking at.

I think we would also be opportunistic in terms of whether we would do in-licensing or whether it'd be an M&A.

That really depends on where is the target hosted.

Is it in a single-purpose company, where M&A would then be the solution, or would it be a portfolio company, where we could in-license one of the compounds?

I think that's going to be a very opportunistic, seen from our side.

Mark, did you have a final question?

We'll take that.

It's Mark Purcell from Redburn.

Just a couple.

I was just going to ask on the sema launch, you talked about a new pen device, to help us understand how that device compares to Lilly's device, which has been a reason for its success, we're told.

And if there's going to be any plans to redistribute some of your sales reps into the primary care setting, which has been the market expansion opportunities for that product.

A cheeky one, if you could give us your Part D share for CVS, would be great.

And then lastly, going back to Michael's questions on mix and net price.

If we sort of look at Victoza compared to Trulicity, the price of Victoza, implied net price has gone up by 12% this year, but the list price increase has been 9%.

If you look at the average value of the volume, just through a simple calculation, it may be -- and it's using IMS data, so it may not be accurate.

But the implied fair value of Victoza is $600 compared to $500 per month for Trulicity.

So I know there's been some stocking in Victoza which has yet to work through the channels.

But just if I can understand whether that's the sort of broad region in terms of how much stocking is behind that product.

And the same thing for Tresiba as well.

If I just divide net sales into prescriptions, I'd get a net scrip value of $470 a month.

And your Levemir's around $265.

So I'm sure the price premium is not that.

But if you can give us some idea of what the price premium is on an underlying basis for Tresiba and Levemir, that'll be great.

That was 2 long questions.

I think, Mads, if you start with the new device for sema and how you see that relative to the competitive landscape.

Allocation of sales forces, I will try to deal with.

I don't know, Peter, whether you can deal -- if you've got any information on the specific shares in CVS.

I don't think I have that information.

I can give some meaningful comments on price differences on our Victoza versus Trulicity and Tresiba.

If we do it that way, is that okay?

Over to you, Mads.

Yes, it's a very short response, Mark, because it's an auto injector with the thinnest needle in the industry.

And quite frankly, semaglutide is not going to be sold on the basis of this great device.

It's going to be sold on the basis of superiority on every single clinical aspect that we've studied.

So it is an element, but the important thing is the drug profile here, and that's what we will be talking about.

And in terms of allocation of our approximately 2,000 sales reps in the U.S., my anticipation is that we will work from the same structure, so the same target calling for the -- our reps.

So no shift between endocrinologists and general practitioners, but of course, the shift towards semaglutide for the ones actually charging upon the general practitioners.

We should also note that we are currently doing a restructuring of the leadership of our U.S. sales force.

So we are assembling them in 5 geographical regions, where those 5 leaders will have more influence over both the targeting in the region, the actual marketing message and the link to market access in these individual geographies.

We believe that we can do, by basically cutting that triangle between marketing, market access and the selling, that we can get a higher bang for our buck.

And that's being implemented now as we speak.

But to be clear, we don't have any anticipation of changes to our sales force.

We are happy with the size of the sales force, with the targets we have ahead of us.

Peter, do you have any comments on share within -- yes, Christian?

For sema in the U.S., this time, we are going out also developing a dedicated PCP campaign, acknowledging the fact that, of course, the PCP segment, especially for a once-weekly class, is extremely important.

And that's also a difference compared to how we have approached this in the past.

So it's not only a matter of the deployment of reps, but also the messaging and how you approach that.

Okay, thanks, Christian.

Peter?

I think you're asking to the market share of CVS and the Part D, and we don't cover that.

Of course, you can say that -- I think it's important to state that CVS Part D is roughly 10% of the basal.

So that's the starting point.

And of course, what we've seen with the CVS in commercial is that we -- of course, with the changes in formulary, we've been able to improve our market share.

That's how close we can come, but we're not going to talk to whether CVS has an abnormal share or in the contrary.

And then...

But I think my logic would say that it would be kind of pre-Tresiba launch type of territory, give or take.

And then on the pricing side, for Victoza versus Trulicity in terms of daily treatment cost, I think it is -- of course, I'm not party to Eli Lilly's rebates, so it's going to be hard for me to know exactly what is caused by what.

But what we do know is that early in the launch of Trulicity, they deliberately decided to go for access with the ESI formulary.

We were blocked, and it would be plausible that they were applying a higher rebate into that segment to get access on top of BYDUREON.

And with that also is coming a lower average price.

So that could be part of the explanation for the difference.

But of course, there will also be a channel mix difference, which I'm a little bit uncertain about whether that's driving any differences.

And then in terms of average treatment cost for Tresiba versus Levemir, clearly, there is a challenge difference -- a channel difference, where we are more selling Levemir to the lower-priced channels.

There's also a list price difference of approximately 10% that prevails, and that's also part of the difference.

And then there is -- with the channel difference, there's also a much higher penetration into Part D for Levemir compared to Tresiba.

So that would probably ascribe to most of the differences.

And I think that, that difference you are reflecting, too, is probably a pretty accurate reflection of how the actual prices are for the 2 products, even though the difference in the same channels is much lower.

Okay.

I think that basically covers it.

Thank you for your interest in Novo Nordisk.

I hope a lot of you will have the opportunity of coming to beautiful Denmark on a gray November day.

You'll have the opportunity of seeing our new research site in Måløv and the fancy new auditorium that Mads has built for the world's best scientists within diabetes care.

So we'd hope to see you there.

And otherwise, we'll be back here in London with our financial statements for 2017.

I think it's about 4th or 5th of February or something like that.

Thank you very much.