諾和諾德 (NVO) 2018 Q3 法說會逐字稿

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pharma, biotech analyst here at Deutsche Bank.

So it gives me great pleasure to introduce Novo Nordisk.

We've got the entire team here.

So I'm going to pass over to CFO, Karsten.

He's going to go through a few slides, and then we'll just kick straight into Q&A.

Karsten?

Thank you, Richard.

Welcome to the Q3 road show for Novo Nordisk.

Thanks for coming, and thanks for Deutsche Bank for hosting this event in a beautiful blue sky London, Friday lunchtime.

We brought a rather full team today so we should be able to address all your questions.

So with me, I have Mike Doustdar, who's our head of International Operations.

Mike would say that he's the head of most of the world, but we can come back to that, but based our commercial operations, everything outside of North America.

Then we have Camilla Sylvest, who's Head of Commercial Strategy and Commercial Affairs, so our commercial strategies and our plans going forward.

Been doing a lot of work on how to succeed on obesity going forward.

And also, one of Camilla's key priorities these days that has attracted some interest, so great capability there.

Then you would know Mads Krogsgaard Thomsen, our Chief Scientific Officer.

There could be a question on the [Lilly kit], I would presume.

And I'm sure Mads would have a perspective in that respect.

So then we have -- we only brought, I'd say, fairly few slides.

So just for you to make the most of it in terms of Q&A session.

So we have a handful of slides, and then we dive right into Q&A.

So this is just to get us going.

So 4% sales growth in the first 9 months, International Operations really being the growth driver in this year with 8% in the quarter.

So we talk about now 3 quarters of 7-plus percent growth in International Operations, so very strong performance there and continued drive.

That leads us to upgrade our outlook for the year in terms of local currency sales growth.

So we raised the floor, and our guidance is now between 4% and 5%.

Of course, that also benefits from easier Q4 comp of last year due to the rebate adjustments we had in Q4 of last year.

Then what is driving growth from a therapeutical point of view.

Our insulin sales are flattish as they are for the industry as a whole in terms of insulin sales globally.

We are taking share.

It's not gigantic, but we're taking some 20 basis points share in terms of the volume market share in insulin.

So actually, we are competitive out there.

The flattishness in insulin sales is driven by the fact that we are continuing to grow in International Operations given the growth prospects in a number of markets and value upgrade.

So the sales growth in IO is 6%.

And then in the U.S., insulin sales are down 8%, which covers that -- actually, we are taking volume market share in the U.S., but the pricing situation, as you know mostly in the basal segment, is pulling down the realized -- or the reported insulin sales in North America.

GLP-1, really the growth driver of the company these days.

So more than 80% of our growth comes from GLP-1s, be that Victoza and Ozempic.

25% growth in the quarter and we'll come back to it, but very (inaudible) by Ozempic in the markets in which we've launched.

We've now launched in 7 markets and many more to come.

So the early signs we're looking at in terms of share gains are looking promising, now 20% in direct share in the U.S. Canada, even better.

So very good there.

Saxenda, our obesity business, we haven't talked a lot about it in prior quarters.

But when you look at it now, 28% of our sales growth is actually coming from our obesity business in the form of Saxenda.

The growth is based both in North America, but actually even more so in International Operations.

So even though it's only 3% of our total sales, then the sales added in our obesity business, I think, lends a lot of promise also going forward that we have an attractive business to go back.

Then in terms of innovation, talked a lot about oral semaglutide.

Now we are at 8 PIONEER trials reported.

2 to go, PIONEER 6 being the key one that we'll report before end of this year.

We have initiated Phase I trials on next-generation oral GLP-1, which is also promising.

And then we had a small, but good, acquisition in the biopharma space in the form of the -- of Macrilen assets.

Organizationally, we announced the impact of our restructuring program.

So unfortunately, we have had to let go of -- or we'll have to let go of 1,300 colleagues in total before end of this year.

The majority has already taken place.

And then finally, on financials.

So the 4% sales growth turns into -- in local currencies, turns into 2% operating profit growth.

But adjust for restructuring, then our operating profit growth is also 4%.

We are not changing our guidance on operating profit growth.

And even though we're changing the interval on sales growth and that is simply due to the fact that we have to cover the restructuring costs within our existing guidance.

In terms of cash flow generation, we will look at the continued solid cash flow generation.

We are offering our guidance.

One thing is just the passage of time so we have more certainty for the cash flow we're generating.

And then we are increasing it due to the fact that when we look at the phasing of our U.S. rebate payments, that has been deferred slightly.

It doesn't impact the gross to net or the net realized sales, but it's purely the payment timing.

So we're looking at a higher free cash flow and, hence, we are increasing our share buyback program by DKK 1 billion to now DKK 15 billion.

So with that, I'm happy to hand over to Mike Doustdar.

That's the problem of going after the CFO because even when we give him a page filled with text, he talks about numbers and takes the thunder away from my slide.

But this is a more beautiful slide.

So...

(inaudible)

As Karsten said, the 4% local growth translates to 1% from North America and 8% from International Operations.

That's what's you see here.

You also see that the business is still half-half.

When you're looking deeper into the International Operation and see where the growth is coming from, all regions are growing, except Japan.

You might recall, beginning of the year, there was a health care reform in Japan, major pricing headwind, that will continue actually going forward.

That is giving us the decline in the Japanese business.

Europe is doing phenomenally well.

Historically, the European growth rates has been somewhere in the tune of either very low single digits or 0 and minus.

And now they are doing well with return of GLP-1 share of the growth on the back of the CV they thought that they have.

They're also doing really well with Xultophy, Tresiba.

And just across the border, I think, it's going quite good.

AAMEO, mixed bag of various different countries, most of which this year is doing really well and also practically all products, including biopharma, is going good for them.

China is the story of continuation of good performance of NovoMix, but excellent performance of Victoza on the back of the reimbursement we received late last year.

We are growing Victoza in China now, around 98% for the first 9 months of the year.

Japan, I mentioned pricing is taking a big hit on the numbers.

We're also losing quite a bit of GLP-1 to Trulicity in Victoza.

Where we are doing well actually is on market share and on the sales of Tresiba and Ryzodeg.

And in general, the budget of Japan and Korea is on more or less target, so this was expected.

But nevertheless, of course, the pricing is a big hit.

I do have to say, while I'm talking about Japan and Korea, they're doing phenomenally well in Korea on Saxenda.

It's one of latest launches of obesity.

Korea -- South Korea is the fourth-largest obesity market that exists, strange enough, and we have done phenomenally well with that launch so far.

LatAm, 35%, seems to be on the high side.

There is a tendering shipment element in there.

If you correct for that, then some 15% or so goes down, but they're doing good.

With Saxenda, they're doing very well with Tresiba and modern insulins and also biopharma in general.

So all in all, it's pretty okay.

This is now -- I have to little bit explain this slide.

It's quite easy, actually.

So if you take the 4% growth, then you see 8% of that is International Operations, 1% is North America.

If you take a look at it by product, then you could see that actually -- what Karsten was saying, insulin as a whole is de-growing by percentage points because U.S. is de-growing by 8%, but it's actually doing well in International Operations.

I mean, International Operations across the board, predominantly AAMEO, China and LatAm are the ones that are driving that growth.

It's quite flattish in Region Europe, and it's minus in Region Japan.

GLP-1, 18% of the global growth is 18% of U.S. growth, 15% for International Operations.

Obesity, going really well for both.

Now the absolute return in DKK from International Operations is larger than U.S. That's the second quarter in a row that we see this.

And in biopharm, we are declining.

IO is growing by 4%, and U.S. is going down by minus 8%.

On hemophilia, there's a good growth in International Operations, yet because the whole 8, 9, 10 HEMLIBRA is delayed in entering all markets in International Operations, while there are full-fledged now active in United States.

On growth disorder, actually, International Operations is flat, and U.S. is growing.

So that is little bit picture.

Lars?

Thank you very much, Mike.

And what I will actually -- rather than necessarily label each and every one of these points, just put a few words to PIONEER.

PIONEER, we're getting very close to the end of the Phase IIIa trial.

PIONEER 5, 8 and 10 are, each in their own rights, trials that have reported in the last quarter and interesting for different reasons.

PIONEER 5, for this year, we've seen that these were patients with really impaired function of the filtration units in the kidneys, i.e., patients that can only be treated with relatively few drug classes, including the SGLT-2 inhibitors.

However, unlike the SGLT-2 inhibitors, which will have a proportional decrease in efficacy, albeit they are renal-protective, they will have a decrease in their glycemic efficacy as kidney filtration goes down.

This was, of course, not observed for oral semaglutide that produced more than 1% A1c reduction in age population of about 70 year olds.

In PIONEER 8, which is a very long-standing diabetic population, people have had diabetes for 15 years.

They were on big amounts of insulin, consider the fact that they got about 60 units, and many of them were even Asian subjects, so that's a high dose.

Despite of that, we saw that over a half year, a 1.4% reduction in hemoglobin A1c that was maintained at the 1.2% level throughout the full year.

If you look at all the oral antidiabetic studies that have been done in long-standing diabetic populations, you see anywhere from 0.3% to 0.7% placebo-corrected reductions.

So about twice the efficacy as you would expect from a classic oral.

And then PIONEER 10, Mike, now that you mentioned Trulicity doing well in Japan, it was a real pleasure to have a Trulicity active comparison in a Japanese population and to witness that oral sema indeed did 0.5% better, 1.8% reduction over 1 year in a Japanese population and a 3-kilogram benefit of the oral GLP version -- GLP-1 version versus the ones with injectable Trulicity.

So really promising data for the Japanese population.

We are now only actually awaiting PIONEER 9, which is a small OAD basket study in Japanese subjects.

And then interestingly enough, PIONEER 6, the CV safety study that is poised to report very, very soon.

So with that, then we'll have a full-blown Phase III package.

We believe it's a -- from cradle-to-grave approach where PIONEER 1 is treatment-naïve patients and PIONEER 5 at age of patients with 15 years of diabetes duration and complications and whatnot.

And throughout the array of trials, we have seen between 1% and 2% reductions and weight reductions to the tune of 2 to 5 kilograms.

So really promising, and that will, of course, be followed by a submission of the NDA in the months to come after having pre-NDA meetings with the American regulators.

I actually will not take you through much but rather suggest that we have the discussions later on.

I will say, though, that in the obesity program for semaglutide 2.4 milligram, we have also kicked off this huge trial select, and that should be seen in the context of a program that encompasses 4, if not even 5, other Phase IIIa trials, including one in type 2 diabetes where we are comparing Ozempic 1 milligram versus 2.4 milligram in a diabetic population of 1,200 people.

I think I'll hand over to you, Karsten, to moderate the session and wrap up.

Yes.

If you don't want to do the financials, then we can try.

Someday we will.

So you've seen the financials and you heard on conference call.

So I think just nailing the main points.

So we raised the floor on our local currency sales growth, so continued strong performance compared to what we've been dialing on, on sales growth.

Slide 3 on currencies, on reported sales growth, link to a slightly stronger dollar than when we guided in conjunction with Q2.

Operating profit growth, no change given the fact that we have the restructuring cost.

No change on currencies there.

Financial items net now at the gain of DKK 0.5 billion, DKK 400 million lower than at Q2.

And then you say that doesn't jive with the unchanged OP guidance that simply lost on commercial -- primarily due to loss on commercial balances on emerging market currencies.

So it's annoying, but that's reality.

And then we have the upgrade on free cash flow.

So with this, we owe to Q&A.

So I think we should just dive right into it.

Yes, Michael.

It's Michael from UBS -- Michael Leuchten from UBS.

Two questions.

One on you mentioned yesterday, Tresiba has now reimbursement in Germany.

Maybe probably for Mike, does that change -- does that mean anything's changed in your strategy in Europe in terms of how you position the product?

And if not, how do you get to a point where it's finally reimbursed in that market?

And a question for Camilla.

Victoza continues to do really, really well.

You've moved all your support behind the Ozempic.

Let's assume REWIND is negative and Victoza is, for now, the only product with CV label claim.

Is there an argument where you have to put resources behind the product again because the bang for the buck is good enough to do that and maybe also thinking about oral -- the oral sema launch?

So Germany, I think if you take a look at Germany it's the second largest insulin market in International Operations after China.

By far, the largest basal market in International Operations and only second to U.S., so it's a very large insulin and especially basal insulin.

When we have seen the result of the DEVOTE, we felt strong enough that we need to be back with Tresiba on the back of DEVOTE for the general population.

This is 7.5 million people with diabetes, and they can really benefit from the relaunch in Germany.

And of course, we're in good dialogue with the German authorities and making sure they also fully understand the DEVOTE data.

But first and foremost, I think it was important for us, now that we have seen how beneficial the product has been across the world, to make sure that our largest market does not be denied the product.

So no, it does not change the strategy of Tresiba across the world.

I think, if anything, it resonates well with the market fit strategy we introduced some 2 years ago.

We look at market-by-market, take a look and see what the needs are, what tools do we have, and that has led us into returning back to Germany.

I was at the launch, actually, event earlier this week.

And you could just see the excitement amongst the physicians, the patients, Camilla was also there, that we are now back with it.

So I'm very happy with that decision.

Yes.

And to Victoza, in case REWIND turns out negative, well, that's an argument to put more resources behind Victoza.

We would not do so.

We would keep focusing on Ozempic.

We know from our clinical trials that Ozempic has risk reduction -- CV risk reduction of 26%.

So also, from at an ethical point of view, that's where we should put our efforts.

Going forward, you will expect, of course, Victoza losing exclusivity in 2023.

So with a 3-to 4-year stay-time on Victoza, it's our clear goal to make sure that all new patients are started on Ozempic for financial reasons, but also for clinical benefit reasons.

And then in the meantime, we would be working to try and upgrade our CV claims on Ozempic instead, and I think Mads can probably just give a short update on where we are with that.

Yes.

And very briefly, I guess you're aware, we have excellent cardiovascular data from the SUSTAIN 6 trial, both in continents like Europe, but also in countries like Brazil.

It is a U.S. phenomenon that we don't have the CV data in there.

And if you're in the very optimistic mode on a sunny Friday afternoon and the PIONEER 6 trial were to come out with a significant P value despite the fact that there are only around 130 MACE events in that population because it's a safety trial -- event-driven safety trial.

Then there would be the situation that we could be granted a CV indication even in the United States of America, but that would be the upside scenario.

As you are aware, we are planning to do the oral SOUL trial that will both allow bridging between the oral CV data in such a trial and the SUSTAIN 6 that can then at that point in time into the U.S. label, while at the same time, getting oral SOUL data into a cardiovascular indication for the oral semaglutide at that point in time.

But let's await the PIONEER 6, and then we can be much more firm in the specific guidance on CV.

But I do -- I should just mention, the ADA and ESD conjoint guidelines that came out in Berlin like 3, 4 weeks ago, they actually do single out Victoza correctly as the #1 burden of proof, so to speak, CV-protection drug, but it is accounted then by Ozempic and Vytorin and no mentioning of any other GLP-1s.

Vice versa for obesity, they have: Ozempic, one; Victoza, two; Trulicity, three.

So it's interesting.

Wimal?

Wimal Kapadia, Bernstein.

So Mads, a question for Mads.

We saw hypoglycemia for Lilly's GLP-1, GIP.

And we saw the same thing from the Phase I, specifically for Novo's drug.

Is that something that can be fixed with slower titration?

Or is the way of selecting patients that are at risk of hypo for that specific drug mechanism?

And then the second question is around basal pricing.

So on my math, it looks like Levemir is down 22% year-to-date, price per unit, versus 2017.

So I guess is that a fair reflection?

I mean, 3Q looked surprisingly weak on a price per unit.

Is that something that we would expect to continue for the rest of the year?

And then how should we think about that number moving forward?

Okay.

Thanks.

A couple of notions.

The things that can surprise you a bit about the Lilly data is, in addition to immunogenicity, the 49% that report antidrug antibodies, that has to be followed over a prolonged period as we learned from the BYDUREON data back in the Phase II to Phase III transition.

But what is overlooked is this hypoglycemia thing, which may or may not be an issue, but 9% reporting of hypoglycemia is on the high side for an incretin-based drug that normally should be nonhypoglycemic.

We'll have to see whether titration deals with it or whether it is an inherent phenomenon that, as you approach normal glycemia, the GIP component tends to boost the action of GLP-1, and that might give a bit on overshoot phenomenon where you run a certain risk of hypoglycemia.

But that is pure speculation.

We'll have to see that.

You are right.

We saw the same for Richard DiMarchi’s MAR709, a tendency towards more hypoglycemia.

I would say, though, that in a high-dose Ozempic or the 2.4 milligrams sema for the diabetes indication, I would not expect to see that kicking in for the sheer reason that we have tested, as you know, many, many patients in the obesity trials.

And we saw miniscule reporting down at the 1% level, 1% to 2% level, of any kind of nonsevere hypos.

Yes.

And in terms of your Levemir Q3 question on U.S., then just bear in mind that contracts in the U.S., they're negotiated on an annual basis.

So we don't have everything else equal quarterly fluctuation in prices in the U.S. So the swings are -- and you know all about the true-ups, and we've discussed that endlessly in prior quarters.

So don't overinterpret it on one single quarter.

But directionally, you're correct that prices are down to that magnitude.

Of course, then you have a volume component also.

So basals in the U.S., down 10% in net sales, which is basically volumes up more than 10% and prices down more than that to get to the minus 10%.

Yes, that's the math.

Good.

I think it was Jo and...

Jo Walton from Crédit Suisse.

Two questions, please.

On oral sema high dose, I wonder if you could tell us some of the timing that we could see in a diabetes situation.

And given that oral sema will be a proof product presumably, it will be a very quick approval.

Just will it be just an incremental dose?

Or will you have to -- with the 6 months of -- 6-month review, when you've got double dose versus normal dose -- sorry, for Ozempic.

And second question on obesity.

You've seen strong growth in South Korea.

Presumably, that's a market where there's reimbursement for it, rather than self-pay.

I just wonder if you could update us on the progress that you'd be making on getting payers and governments to recognize this as a medical condition that you actually have to pay for rather than a lifestyle choice.

Thanks, Jo.

Mads kicks off, and then Mike will take the reimbursement on Saxenda.

Yes.

So, Jo, the high-dose Ozempic, it's relatively -- as Jo also correctly state, it's relatively straightforward.

It's couple of trials.

It's one that's already recruited and one that can compete at the same time being in the second half of '20.

And then it's very easy to do a supplemental application.

It takes a couple months to write up and get submitted.

And whether you get a 6- or a 10-month approval, that we can always discuss.

But it's for sure not a full year approval, and that would mean that this product could be in the market '21, a couple of years, 18 to 24 months ahead of the Lilly compound.

And my best-case expectation is that Ozempic, in that scenario, will remain unbeaten.

The thing that could beat high-dose Ozempic if -- is if we were to spice up, for instance, with the ones with GIP or the likes of it or an amylin or whatever we might decide to progress into pivotal trials.

And with regards to Saxenda.

No, actually, it is completely out of pocket in South Korea, so no reimbursement whatsoever.

When you look at it from a global perspective, there's only 4 markets that have partial reimbursement.

It's U.S. and Canada that have partial reimbursement through certain formularies.

Then you have reimbursement in Israel through 2 of the health care providers and in UAE, only for those who are originally from UAE, which is probably 10 people.

So it's very little reimbursement.

Actually, the rest of the world is paying for Saxenda out of pocket.

I think it was Keyur?

Mike, 2 for you and then one for Mads.

Mike, as we think about 2019, are there any structural reasons why the international markets can't continue growing at the 7%, 8% rate that you have kind of delivered for the last 3 quarters, i.e.

are there any price adjustments that we should be keeping in mind?

Any kind of stuff that we should be aware of?

Secondly, given the changed guidelines, especially from an ESD perspective, how has your conversation with European payers changing as it relates to greater use of GLP-1 during the discrepancy in volume market share or GLP-1 in Europe versus U.S?

And then, Mads, if I remember correctly, you have a priority review voucher.

Can you just update us on your thoughts on how we should think about your using that?

Should we think of it as oral sema?

Should we think about it -- as Ozempic obesity?

And now should we also put in the Ozempic high-dose on top of that?

Good.

So I cannot give you guidance on 2019 in -- as we have all along -- certainly not in a specific.

What I can tell you is that if you take a look at the growth rate -- historical growth rates of International Operations over the last decade, it has always been around 5 to 6 percentage rates.

Underneath that 5% to 6%, there has been major deviations.

You have had China growing at 30%, and you have had China now growing at 7%, 8%.

You have had negative European growth for many years now.

You have positive single-digit growth.

And AAMEO and LatAm go up and down depending on commodity prices, frankly speaking, and tenders and what-have-you.

I see some of that dynamic continuing.

This year, I believe we have had a situation where, A, we have not lost any major tenders.

So sometimes, a big Brazilian tender or Saudi tender is gone and then go with 0.5 percentage points.

We have not seen any of those major issues.

We have also have had the benefit of our market fit strategy where we are getting quite a bit of a good growth from products like Xultophy in Europe.

I like to remind you that about a couple years ago, we would not have been launching Xultophy in Europe before having made a Tresiba launch successful.

So France, for example, we were not able to get into the market with, let's say, Tresiba due to price negotiations.

We would have waited in the old days until that is done before we launch Xultophy.

We decided to break with that historical trend, launched Xultophy in France.

It's done phenomenally well.

Equally, it's done well in Czech and Italy and Switzerland and so on, and so forth and a big part of that growth and a gap to where historical growth has been coming from that.

In historical numbers, we also have not had Saxenda sales so much.

I just -- I mentioned for the second quarter in a row, obesity in Saxenda is delivering more to the company from International Operations than U.S. If some of those trends continue, of course, we have a continuation of our market fit strategy, Xultophy, Ryzodeg, Tresiba and Saxendas of the world.

On the back of -- of course, Ozempic launches now -- gives me hopes that we could basically see a good continuation of growth rates in International Operations.

On the other hand, I'd like to be a little bit cautious because at any point of time, small, little deviations on either, again, commodity prices or a tender loss here and there can easily wipe up another 1% or 2% from the books also.

I would say 5% to 6% is what the history tells me, and we will do our utmost to try and do as much better as possible as we go forward.

With regards to the GLP-1 and the guidelines and what-have-you, we've had the CV indication of Victoza into our dialogue since about a year now.

And a lot of the countries actually changed their national guidelines over the last 12 months.

And so in Europe, we have seen a major return back of share of the growth of GLP-1 in Region Europe because we've been working quite well with the national guidelines and then changes of those.

I foresee, of course, that the EIA stand, the ADA guidelines, will further help and strengthen that message.

But I would say it's something that was already part of our dialogue so the impact is not dramatically different.

And when it comes to the policy revenue voucher, as you correctly state, the situation is as it was last time we talked about it, namely that the most promising projects for which to consider use of the voucher, include oral sema include, of course, sema obesity.

And I think we can get back to that when we have the total readout of PIONEER.

And as you are also aware, you have pre-NDA meetings where you discuss with agencies your package, et cetera.

And the rules of the game are that if you were to use it for any given project, you have to announce it 90 days in advance of the NDA submission.

So that's something that is still open for all kinds of speculation.

Okay, then I think it's Richard?

Richard Vosser from JPMorgan.

Just coming to the -- back to the high-dose sema for diabetes.

I think Saxenda is priced significantly higher than Victoza.

So what would this mean for obesity pricing if you do bring that product for -- to obesity?

Just thoughts there.

And then secondly, just going back to Tresiba in Germany.

It sounded like the reimbursement discussions is still ongoing to be had.

So is this priced at the private market level that they're sort of the normal European level and you still have to go through the AMNOG process and -- with the GBA, et cetera?

Just some thoughts.

Thanks, Richard.

So Camilla, if you will start off?

Yes.

So on -- correct that Saxenda is priced higher today than, of course, Victoza from a, you can say, milligram kind of pricing regimen.

Going forward, if we launch high-dose sema we, of course, would need to consider what's the right price level for that.

But there are lots of, you can say, other obstacles or opportunities that we need to conquer in the obesity segment before that even becomes a problem.

So what we are focused on in the moment is to make sure that we open some of the doors that are currently restricting patients to get access to obesity medication.

So if I may just mention 3 of those.

One is recognition of obesity as a disease that we are currently working on.

Second one, the number of prescribers.

We know in the U.S. today, probably just 2,500 consistent prescribers of the medicine.

That's too little to really open the volume market.

And then finally, the number of patients who actually seek treatment.

650 million patients with obesity, but only 2% getting anti-obesity medication.

But of all of those with obesity, probably only 28% of them go to the doctor to have -- to get support for this.

So the funnel for getting from the 650 million to those who actually end up with one of our prescriptions is, from our point of view, the things we have to solve.

And then when it comes to the pricing, hopefully, in a few years from now, that problem is maybe not as big if we can get a different ratio between price and volume in the obesity segment.

But technically speaking also, actually, the gap is not very big.

So we don't consider that as any issue when you compare that all against the opportunity in the diabetes segment with high-dose.

With regards to Germany, as you probably know, the German government works a little bit different than most other -- others in a way that there is no fixed date for negotiations or prices.

Many other markets that you watch rigorously from A to Z, then you make a submission, you get a price for it, the price then typically stays for another 5, 10 years, and then it gets adjusted.

The way that the Germans work view -- you agree on a price, you bring it in.

And then at any point of time, when you have better data, you can show it to them, and then they look at it based on their own AMNOG and GBA assessments.

And if they see that there's an added value, then they grant you a price increase.

And if they see not, then the answer's not.

We have seen quite a bit of benefits of Tresiba with the DEVOTE data.

So we are, as we're talking, preparing a dossier, which we will submit to the German government to see how we can actually see a benefit of that.

And we've been working up, trying and making that, of course, in the language of GBN and AMNOG.

And of course, then, it's for the German government to make assessments and see how much of that is value to them.

So that's why I mentioned it's ongoing.

(inaudible)

I think it's always difficult and challenging with the GBA and AMNOG because their comparator are often products that we have not on clinical development against.

So we don't have a Tresiba human insulin comparison.

And as such, of course, we cannot automatically just speak to their language.

But they also have seen that some of our competitors, and for that matter, outside of diabetes, there are a number of examples where you show the benefit of your drug in even a small, soft population.

And then the German government is almost black and white, sees that according to their laws and rules.

And when they say yes, this has a benefit, even on a soft population, then they grant you an according price increase.

So I feel we can show with DEVOTE that this is a product that can be differentiated with what's out there in a positive way for a good group of people.

So -- but time will tell.

I think it was Peter.

Peter Verdult, Citi.

Just 2 for you, Karsten, and then one for the team.

Just a hypothetical question.

If you were to reinvest 0s of the savings you're going to have from this unfortunate restructuring program, is that about DKK 700 million in terms of savings?

Can you repeat that?

Absolutely.

If you were not to reinvest anything from the restructuring program that you have initiated in Q3, what would the growth savings be?

DKK 700 million?

Yes.

So you take 1,300 employees at an average kickoff of DKK 0.5 million, then you will get to a number like that.

But that's not how we're doing it so...

Certainly, that's the right place, right ballpark to be in?

Yes, it's the right ballpark to be in, but that's not how -- it's not how it's planned upfront.

All right.

And I don't want to make any -- I don't want you to comment on forward looking -- that will make forward-looking statements, but can you come back to comment that the CEO made in Q1, which is in light of the ongoing pricing pressure in the U.S., the impact from the [VADT all] discounts, that Novo would do what was required to hold the margin or protect the margin.

Does that comment still hold today?

So we make a lot of comments and then you know about these forward-looking statements.

So first of all, let me remind you, we guide the market first of February on 2019.

So that's where we'll come with our formal guidance.

Now what we're doing is that we are restructuring our business, and we discussed the 1,300 employees.

And it's important to note that, that is not purely a cost-cutting program.

So the restructuring [masked] in R&D with roughly 400 employees, that was much more a resource reallocation exercise, moving resources from certain capabilities and into artificial intelligence and digital opportunities and also some business development type activities.

So what we are doing is more so than fixing one year than we're driving the company for the long term.

So you shouldn't interpret that we are running the company from a margin perspective, and that's also why we don't have operating margin as long-term financial target as we had in the old days.

For us, it's more important to drive top line than maintain margin.

And then just -- my last question for the team is on this recent deal you did on oral growth hormone, could you educate us, or me, on the technology that you used for oral delivery of the peptide.

And just this gets positioned with the existing portfolio and the pipeline you have in terms of once-weekly?

Because it just seems to me that -- are you going to be able to get a price premium for an oral delivery or oral delivery of a growth hormone when prices are falling?

So maybe I should take that one.

Basically, this is a so-called small molecule growth hormone secretagogue receptor agonist, GHSR agonist.

And these were originally developed, including by Novo Nordisk, we have Ipamorelin and several others in development as therapeutics, i.e.

stimulate the pituitary gland to release growth hormone when it was inadequate.

It all turned out, that never succeeded for anybody.

But as a diagnostic tool, i.e.

as an oral small molecule that you give and then take very few, 4 samples in total, blood samples, and measure quite accurately with high sensitivity, high specificity, the pituitary gland's ability to secrete growth hormone or not.

And then you can diagnose both adult GHD, pediatric growth hormone deficiency and even conditions such as traumatic brain injury, where we know that the pituitary hormone deficiencies that are worthy of replenishment.

So it is actually just a neat, nice, noninvasive way to orally do a test that shows if you're an adequate patient or not.

And that is, today, to be compared up against insulin tolerance test and terrible things where we are exposing people to hypoglycemia and everything to do the diagnosis.

Also, big health care cost associated with the health care professionals having to be present for hours in the room and so on.

So we think it's something that will support more professional, less invasive diagnosis of these conditions.

And that, overall, is a commitment to the growth in one's society, but it could also, long term, of course, make sure that people are accurately diagnosed and treated with the best-in-class molecule such as somapacitan.

Okay, I think it's Sachin.

It's Sachin Jain from Bank of America.

One, Mads, and then one, I guess, for Karsten -- sorry, Mike.

So on high dose, just to go back to questions on the call yesterday, you've referenced you believe it could be best-in-class efficacy.

And answered the question yesterday, you talked about the obesity data, wondering if you could reference that to the Phase II diabetes data on what level of increment the higher doses of Ozempic you think delivers on efficacy and where do you think that gets you to?

On my sort of read that the data is sort of a 1.8-ish number.

Do you think that's better than that?

Second question, if you could updated us on your device, next-gen device time lines.

And would you think about launching high doses on kind of a next-gen device?

The background for the question is, I guess, it surprised me how well Trulicity has hung in there versus Ozempic, which appears to be clearly better on both efficacy and where part of the feedback seems to be device.

So any color there.

And then a very broad question.

On the slide that you talked to Mike, on the sort of mix of growth, U.S., international and various therapeutic attributes, I was wondering if you could reference that.

How do you think that changes in the midterm?

So obviously, as it sits now international at sort of 80% of growth and one would expect U.S. to come back.

In your midterm targets, you have GLP-1 at sort of double digit, never been defined, but that's now at 30% there or thereabouts.

So how the mix of growth within your midterm of 5 is changing versus what you currently see.

Okay, if I start, Sachin.

Well, first of all, if you do the very, you can say, serious dose range finding that we did with semaglutide in Phase II, you would realize that the weight loss achieved in the obese, nondiabetic population at doses similar to that, that exists today for Ozempic are to the tune of 9%-ish.

And what we have in diabetes is typically to the tune of 6% weight reduction.

So the fact that you go from an obesity -- an obese population to a diabetic population with all the ramifications on glycemic control and how that impacts body weight and that stuff will mean that you have to deduct 3% to 3.5% out of the weight loss expected in the obese population for the high dose, the 2.4.

And there, I'm guesstimating a 15% weight loss in Phase III, and that would then mean that we go down to the level of 11-plus percent, but let's say around 11%.

And if you compare that up against the Lilly dual-agonist, they are up there in the double-digit range, but that is with a high degree of nausea, vomiting and dropouts that we actually have not seen similarly in the Phase II semaglutide high-dose obesity groups.

So I think we'll be clearly competitive on obesity or the weight phenomenon.

And since that also drives the insulin resistance in the body, that will go down and enhance the insulin sensitivity to the extent that we should see an A1c improvement, implying that we will also be matching the dual-agonist.

But again, forward-looking statements, we have the see the data from the trial.

Was it the question?

Yes, about [the length].

It depends on -- to be honest, we're still enrolling.

We are lacking a couple of hundred patients in the STEP 2 trial.

So I don't know the baseline demographics.

It all depends on how obese are they, what is the baseline A1c, what are we operating from.

But let me remind you -- and I know you know, Sachin.

So -- but still, in the SUSTAIN 7, we were at the 1.8% level for 1 milligram Ozempic.

dula was at 1.4%.

And I would expect that the difference we get from -- between dula and Ozempic 1 milligram, could be close to what we see between Ozempic 1 milligram and 2.4 milligram.

But again, it depends on how much weight loss we see, and let's take it as it comes.

But I think sema will be in the market not for everyone because many people -- I mean, we have 80% treatment target achievement in most of the trials.

So it is probably the weight phenomenon that will drive a lot of the consumption of the high dose once it hits the market.

And Camilla?

And you get...

Yes, yes, you can start, Mads.

Yes, it's an option.

We have a next-gen device, and we'll communicate which device we launch and when we are closer.

Yes.

In terms of prescriptions for Ozempic, we know that that's very clearly driven by efficacy as the first parameter and weight loss as the second and, of course, the once-weekly dosing.

And then when it comes to potential obstacles to prescriptions, we don't see device mentioned at any point in time.

So from our point of view, it's rather neutral on the device.

We're using FlexTouch that is a very well-known device and trusted by, you can say, millions.

And from that point of view, we actually don't see that as any limitation to prescriptions of Ozempic as it is now.

Yes.

And then finally on midterm growth, clearly.

GLP-1 will continue to be a key growth driver for the company with the Ozempic launch and rollout globally as a core growth driver then come oral sema, hopefully, in 2020.

So that is a cornerstone of our medium-term growth.

Again, just remind you on obesity and Saxenda growth contributions, so when you trend back in time, then actually, Saxenda has been adding on to the tune of DKK 1 billion year-on-year.

So actually, a solid growth contribution from our obesity business that we'll continue to invest in both commercially and pipeline-wise.

And then you could say on biopharm, we continue to see the HEMLIBRA erosion.

Of course, at some point, you can only lose patients once.

So that's, of course, the positive part of that story.

Initially, we're losing in the U.S. market segment [new 7] down, around 20% in the first 9 months.

So of course, erosion will be less in our U.S. business in the years to come, but then we have the global rollout and impact in Europe and Rest of World from HEMLIBRA.

So in the next kind of short, medium term, we'll continue to see a drag on HEMLIBRA, but of course, on the back of that, then that growth rate will diminish.

And maybe, Karsten, if I can add just one thing to Camilla's elegant speech about the obesity barriers a bit earlier in the talk.

There is a fourth barrier also, and that is the patient perception.

Patients always think they'll get 20-plus percent weight loss, then they come in at 6% and maybe 8%, they get disappointed and they drop off.

We can help with patient support programs, but what really helps is a more efficacious product, one where it takes more time to get to the maintenance phase, and that maintenance phase has to be at a lower body weight level and then they are more inclined to stay in therapy, and sema, of course, will help them.

Good.

Thanks, Mads.

Then we have a question up here.

[Mark Bergey] from [Pictate].

Do managed care organizations still look at individual drug line items?

Or are they looking more holistically now?

So if they're looking at growth in GLP-1, are they partially funding that through looking at getting savings and insulin?

And the genesis of the question is the ability for Lilly to not cannibalize and actually give a saving with Basaglar to drive Trulicity.

And then moving that forward, what impact DPP-IV's going generic would have on your ability to price oral sema?

So let me try and answer that one.

Somehow, if you look at Medicare organizations or PBMs, in reality, they're professional purchases.

And of course, their arguments are what suits them best in a given negotiation.

That's a job to -- it's no criticism.

So that's how it works.

So you will say one logic is -- gets one category growing rapidly.

So they are going full steam against that one counterargument.

Then of course, that's what we're playing -- look at diabetes all.

Diabetes all in the U.S. marketplace in terms of diabetes products is flat if we take company-reported numbers.

So basically, the growth in GLP-1 is funded by lower influence and lower DPP-IV.

So that's, of course, the counterclaim that it's not breaking PBM budgets.

But then you take it one step broader and then they look at -- like they had the [Sobali] and Harmony and now these days, immuno-oncology products that -- especially for us, that's driving the cost level of -- so I think there's no single truth to your question.

In the individual negotiations, they focused on individual line items.

But of course, that's a broader perspective to it also and by the end of the day, a competitive reality around what competitive prices can be applied in a given product category.

So sorry for being a little bit vague, but that's kind of the forces.

Then I think we had Richard.

Richard Parkes from Deutsche Bank.

I've got a strategic question.

Just obviously, when you look at your growth, a lot are coming from the GLP-1 franchising.

When you look at consensus forecast, most of that is obviously one molecule.

And when you think about diversifying away from that and the strategy to do that, is the deals that we've seen recently in terms of business development, is that the kind of things that we should be thinking about?

Or are there still sort of plans to do larger business development opportunities?

That's the first question.

Then the second one was, we've seen obviously the albiglutide CV outcomes study recently read out positively.

And I'm wondering, does that make the whole discussion around REWIND irrelevant?

Is that a positive for you because it helps grow the GLP-1 class and reinforces the cardiovascular outcomes?

Or is it negative in that it undermines the differentiation of your own portfolio?

Okay.

So I think on BD, Camilla, Mads -- and then, Mads, on [CAA LP] and REWIND.

Yes.

So in terms of business development opportunities, of course, we are looking at how to complement our portfolio both from an asset point of view and also from how we can enhance the utilization of the products we already have.

So Mads can talk a little bit about the assets in a minute, but what we're also looking at is, of course, partnerships when it comes to how we can utilize, for example, our connected insulin pens even better.

You may have seen we have entered into non-exclusive partnerships with some of the bigger glucose measurement -- blood glucose measurement companies to make sure that we can actually provide the individual patient and his or her doctor with a more complete overview of when was the insulin dosed, how many units, what type of insulin, combined that you can almost imagine on a graphical level with blood glucose development.

And with that, the doctor is actually able to give much better guidance to the patients.

Quite surprisingly, patients actually sometimes think that they have taken their doses of insulin but in reality, they haven't.

And we see, from clinical trials, that our products can get a lot of patients in very good control.

But in real life, in real-world evidence studies, it might not be as many.

And the difference is not the product.

The difference is just the real life comes in between.

So if we are able to complement our products with specific technical, you can say -- or technology, then we would be able to give better dose guidance, better guidance in terms of how to initiate insulin and so on.

So that's from a detailed, you can say, or technological point of view for end market products.

But also from an asset point of view, of course, we're looking at how we can complement our portfolio.

Mads?

Yes.

And to that end -- thanks, Camilla.

Look at this year, we've done 9 deals over -- that's 1 per month.

And the latest one of the day, namely today, is actually one aimed at increasing energy expenditure, which is the flip side of the coin.

When you lose weight, you tend to trim down based on metabolic weight and regain that weight.

We've done 2 such deals on different targets.

We've done deals this year where we constantly will use our molecular engineering skills in the discovery campus back in Denmark to take the best targets, most innovative targets and create the best lead candidates up against those and then develop them.

We've done deals in diabetic kidney disease.

We've done deals in general appetite reduction.

We've done deals even in sickle cell disease early this year to stimulate the biopharm franchise with the EpiDestiny and so on.

So it's different kind of deals.

Stem cells, we even how have access to pilot plant facilities that can, in principle, take us all the way through to the first launch of a regenerative medicine based out a stem cell transformational research unit.

So it's all kind of deals.

We prefer to be honest also to make the Chief Financial Officer, Karsten, happy not just to buy very late and very costly things but actually to do things early where we can add value both in the discovery phase and the development that's also cheaper, right.

And then I could do more deals rather than fewer deals.

So that...

And retain more value, right?

And retain more value because if you take a Phase III asset, you know what the royalty rates and whatnot, the milestones and so on that would be -- also, another question -- or was that it?

That was the [LP] and REWIND question.

Yes, okay.

I'm not sure you can deduct anything about REWIND from [LP] because as Professor David -- I like your question though, but as Professor David Matthews in his commentary, in his Oxford way, very elegant -- some of you must have seen [lipid products though].

He had this picture also of a person standing right at the edge of the rock almost falling into eternity.

And the LP patients were such patients.

They not only had established CVD.

They had really established CVD.

And it may be so that GLP-1s are more active once you have a vulnerable plaque that is just about to rupture and then you stabilize it with GLP-1.

That's one theory.

If that is the case, then you have the problem that REWIND has 70% of the population as being primary prevention so their plaques are innocent at this stage, and you might be many more years to show a benefit.

So I can read nothing from LP into that.

When data set the treatment guidelines, I do personally not think and I just hosted a cardiology advisory board 3 days ago, yes, with cardiologists from all over the world.

They do not see that this a GLP-1 class effect that all are created equal.

And I think the data in the treatment guideline also suggests that evidence is today strongest for Victoza followed by Ozempic and then by [drug] and then actually nothing for the rest.

And I think we'll have to witness that GLP-1s are different creatures.

And of course, the one who has the best labels and the best outcomes data and hard outcomes will win at the end.

Good.

I think we have 2 last questions over here.

Graham Doyle from Liberum.

Just one on GLP-1 pricing.

In a biosimilar Victoza world, what sort of premium do you think you can justify Ozempic based on its pure efficacy trading up versus Victoza?

And how does that change -- interchangeable biosimilar world?

And then in advance of that, last question, if we assume 2023 is that go-live date, when do you think payers start pressing you on that in terms of giving price away potentially on Ozempic in a sort of [at fair real] scenario?

Yes, I can give a few perspectives to those considerations.

So just to start with the bigger picture in mind, what we are working on right now is to make sure that most of the patients have started on Ozempic, as I just mentioned before.

There's a stay time of 3 to 4 years on Victoza, as we know already.

So in a very theoretical world, if we succeed with most patients starting on Ozempic, we would have very limited Victoza left by the time of loss of exclusivity.

That's, of course, in an ideal world.

But hopefully, we'll get as close to that as possible also because Ozempic is just a better product.

And then following that, of course, we might see a generic or biosimilar competition in the space.

And following that, there might be pressure on the prices, but it's still speculation to what extent that might be or what the actual price difference it may be.

So for us, it's very important to make sure we get a strong base with Ozempic established in advance of that, which we're already progressing very nicely towards.

But it's premature to speculate on exactly what the price pressure going to be by 4, 5 years from now.

Just a follow-up, do you think there's a price at which patients will be forced onto Victoza?

Is their price so low where you might have someone who's failed or not well-controlled on orals, whereby they will start on Victoza before they move on to Ozempic or Trulicity or [agile]?

It's difficult to speculate on if things would work out like that.

What's important to keep in mind is that there is actually a significant difference between Victoza and Ozempic when it comes to the cardiovascular risk profile, double of actually in terms of risk reduction.

And that's, of course, something that's being paid a lot of attention to.

It's a leading cause of death, as we know it.

So Ozempic also has a very strong profile when it comes to weight and compared to Victoza as well.

So we do see that those are significantly different products.

And as always, we, of course, would be challenged to document all of these with the payers, no doubt about that.

We are used to that.

We do that every day, but I think speculating on that 4, 5 years into the future is a little bit premature.

And then a last question from Michael Leuchten.

So one question, a follow-up for Camilla.

Just on the Ozempic prescription analysis you've done, if you split that endos versus GPs, is that -- does that mirror each other in terms of device response and obstacles to a prescription?

And then, Mads, if I could try to take your piece on manufacturing.

If Merck and Samsung make it very clear that they cannot make a commercially viable case for biosimilar glargine, is there any technical reason why it might be even more difficult for Victoza generics on the manufacturing side?

Yes.

So if we start with, if there any differences between endos and GPs in terms of device?

No, we don't see that.

Actually, everyone, all the prescribers we are working within the U.S. are all used to our device and they have used it quite a lot, and we don't hear or see any obstacles to that in any of the 2 groups.

And on the production side, this goes back a long time, of course, but it's quite clear that when we developed liraglutide back in the late '90s and early noughties, there, we basically witnessed that it was a true member of the so-called glucagon superfamily, namely a family of peptides that tend to be very fibrillating.

So you [click] your fingers and they fibrillate right in front of you in the cartridge.

So we had to do books on patented but also some non-patented tricks to make sure that we've got the recombinant technology and the purification to run in favor of a liquid-stable product with a good shelf life.

And I think I'll keep it at that because liraglutide was not an easy one and it's much more sophisticated than doing [easy inventions].

Good.

Thank you, Mads.

That concludes our lunch session in connection with the Q3.

We thank you for your attention and your interest in Novo Nordisk and our company.

And we hope to see you again in connection with the full year results early February.

So have a great weekend when you get there.