諾和諾德 (NVO) 2018 Q4 法說會逐字稿

Good afternoon, everybody.

My name is Wimal Kapadia.

I'm the European specialty pharma biotech analyst at Bernstein.

It's my great pleasure to introduce the Novo Executive management team.

And with that, Lars, I hand over to you.

Thank you, Wimal.

Thank you for hosting us today and great to see you all.

We are very pleased with our performance in 2018, both in terms of our financial performance, key launch, the clinical pipeline progressing, but also some key changes we have done in the company in terms of setting us stronger for the future.

I'll not go into a lot of details here.

I'll just set the scene, and then I'll ask my colleagues to go through the presentations and I'll go through the conclusions.

When we talk about the future, they are forward-looking statements, so we have to be aware that the future might look -- not look exactly like we preach today, so please take these forward-looking statements in mind.

We'll do a very short presentation, and then we'll allow plenty of time for having discussions with all of you.

So Camilla will start by talking through our sales performance.

So Camilla, will you go, please?

Thanks a lot, Lars.

Yes, so with a 5% growth in 2018, we see here that a big part of the growth was driven by IO, to a large extent by insulin.

Whereas in the U.S., 3% growth, to a large extent driven by GLP-1.

And when we look at details of the International Operations, all of the 5 regions contributed to growth except for Japan & Korea.

The majority of the growth coming from -- in terms of growth rate coming from AAMEO, so Africa, Asia, Middle East and Oceania.

In China, also an 8% growth and in region LatAm, a 29% growth.

Underlying growth rate is slightly lower than this due to tenders.

When we look at -- with therapy areas, the growth was coming from, you see over here, that we have a total growth of 5%.

As I mentioned before, in the therapy areas, insulin contributed minus 1% in terms of growth rate.

Quite a nice growth of 5% in international operations, driven by high-volume growth, driven by also slight or moderate increase in market share.

And then, of course, in the U.S., we also see increasing market share.

We see a slight increase in growth.

And then we have the price pressure that when we all add all of that up, we are looking at a growth rate of minus 1%.

We do gain market share in the total insulin segment across the world.

And when we look at our total diabetes market share, we also do gain slight increase in our total diabetes market share as a combination of performance in the insulin segment and in the GLP-1 segment.

The GLP-1 growth was 18%, 14% growth in International Operations, 19% growth in North America.

We have, of course, launched Ozempic in the beginning of 2018.

We now see that our market share in the GLP-1 segment is stabilizing on a monthly basis.

And we see a strong and very good uptake of Ozempic, leading to that the NBRx market share is now has increased to almost 25% and now it's bigger than the share for Victoza.

Our overall NBRx share is also increasing as a total of this.

When we look at our obesity, we see a growth of 60%.

It's coming both from International Operations and from the U.S. So we see a strong growth also outside the U.S., especially in Latin America, in the Middle East, but also in Korea.

And obesity, we expect, of course, to continue market share gains.

We see that Saxenda now has 45% value market share, and it has around 4.5% volume market share.

So still potential in the segment, but in reality here, in the future, we are more focused on growing the market than our actual share.

Then in biopharm, we see a minus 1% growth.

The growth in the biopharm area is driven primarily by NovoEight and by Norditropin.

So together, those 2 compounds account for approximately 14% of the total share growth of Novo Nordisk.

Whereas NovoSeven, due to the market share loss in terms of after the launch of HEMLIBRA has declined somewhat.

So altogether, that gets us to minus 1% in biopharm.

So that's the total of the distribution of the regional growth and the therapy area growth.

And now Mads will elaborate a little bit more on our pipeline.

Thank you, Camilla, and I'll do so by actually showing you 2 slides, one on some of the milestones that we've come through during 2018 and one on what are the expectations for 2019.

I think it comes as no surprise that the PIONEER program execution and completion was clearly one of the highlights during 2018.

We are basically almost ready for regulatory submission of the New Drug Application to the FDA.

And we also expect, by the way, as you'll hear later that Europe and Japan will follow suit over the next couple of quarters.

We have initiated Phase II program for the first once-weekly insulin, both as a stand-alone agent to assess safety and efficacy of against glargine U100, but also for the fixed ratio combination LAIsema, which explores semaglutide in combination as a once-weekly Xultophy, one might argue, and that's in Phase I.

Obesity-wise, we've entered into a new research collaboration targeting energy expenditure increases with a Copenhagen University spinout called Embark Biotech.

And biopharm-wise, actually quite a lot has happened during the course of, in particular, the later part of 2018 in that we have now completed the Phase II program for concizumab, the anti-tissue factor pathway inhibitory humanized monoclonal antibody for both hem A, B and inhibitor segment in hemophilia.

And basically, on top of that, we are awaiting the regulatory approval of an ATP in its intravenous version.

Whereas we have had to discontinue the subcutaneous counterpart driven by antidrug antibodies related to the route of administration explored.

Finally, within other serious chronic diseases, we have completed a license agreement with a Dutch company, Staten Biotechnology, enabling a anti-ApoC3 antibody development, sweeping antibody as we call it, for hypertriglyceridemia and thereby addressing a significant part of the residual risk associated with atherosclerotic cardiovascular disease.

Looking then into 2019, a lot is going to happen starting out with Tresiba.

We are awaiting the Toujeo head-on comparator study in a very big trial that is going to report during the course of Q2.

Ozempic, I think you will expect to see us leverage the fact that PIONEER 6, in our view, corroborates the cardioprotective effect observed in SUSTAIN 6 for the semaglutide molecule, meaning that we will seek a label update for Ozempic, including cardiovascular protection.

Anti-IL-21 is awaiting Phase II completion in recent onset type 1 diabetes immunometabolic intervention.

LAI287, we will actually complete the Phase II program that started very recently during the course of Q4 this year.

And then for oral semaglutide, we're actually going through both the submission and driven by the PRV, the priority review voucher, also hopefully the completion of the NDA review during the end of the third quarter this year.

And we're submitting in Europe and Japan during second and third quarters.

We are initiating an exciting Phase II program for human amylin analogue once-weekly AM833 based upon encouraging Phase Ib data with nice weight reductions in that study.

And then we have some early-stage obesity projects that are also reporting results during the course of the year.

And I did mention that when we move into biopharm, an ATP is waiting.

First, the U.S. regulatory decision, hopefully, approval very soon and EU in the quarter thereafter and then Japan towards the end of the year.

Concizumab, I mentioned that we are taking a pan-segment approach towards Phase III initiation of that project, again, towards the end of the year.

And somapacitan, 2 things are happening.

We are kickstarting the pivotal trials for growth hormone deficiency in the pediatric segment and submitting the BLA for the adult growth hormone deficiency indication during the course of the third quarter this year in the 2 major markets and in Japan in the last quarter.

And with that, over to Karsten for the financials.

Thanks, Mads.

So you've seen the financial results in our company announcement so I'll just cover the headlines in this somewhat finance-type slides.

So 5% sales growth in local currency is turning into a flat reported sales growth, most notably driven by the U.S. dollar.

And when we then look at our gross margin there, then you see a flat gross margin in reported terms.

Actually, in local currency, our gross margin is up some 20 basis points.

That you should see in the light of the fact that, as you know, we've had lower prices in the U.S. in '18 compared to 2017.

So the price pressure in U.S., of course, negatively impact our gross margin.

We have been able to compensate that through a combination of product mix, so selling predominantly more if you want and also driving productivity gains in manufacturing.

So those 2 elements have offset the negative on price impact from the U.S. on our gross margin.

R&D, up 8% in local currency.

Do bear in mind that we had the impact from the priority review voucher, which we acquired for $125 million.

So that needs to be taken into account in R&D cost.

Admin, impacted by restructuring.

So it's not like we are losing it on our administrative cost.

If adjusted for restructuring costs, then our administrative costs are up some 2%.

Financial items, a gain of $367 million reflect hedging gains from the U.S. dollar, not fully offsetting the net loss we reported in operating profit where we go from 3% local currency to negative 4% reported decline in operating profit.

The reason why we don't see here now a full offset is: one, hedging cost between Danish kroner and U.S. dollar, so the classic interest rate differential; and secondly, losses on side currencies.

So emerging market currencies that we're now taking.

Of course, we don't get the gains then on financial items.

Income taxes, down.

In terms of effective tax rate, 18.9%.

This is, I would say, artificially low or it's impacted by a couple of nonrecurring items.

So adjust for those, then we are around the 21% mark.

Hence, net profit up 1% and earnings per share with the share buyback up 4 percentage points.

Then outlook for '19.

So we see a sales growth of between 2% and 5% in local currencies.

And do bear in mind, this growth rate takes into account that we have a hit of some DKK 2 billion from the donut hole legislation that we announced earlier in '18.

So despite that, we are guiding 2% to 5% local currency sales growth.

Now the U.S. dollar has flipped around.

So now we have a positive currency impact, mainly due to the U.S. dollar which is up around 4 percentage point compared to the average 18% against the Danish kroner.

Operating profit growth, 2 to 6 percentage point and again, with the positive currency impact.

Then the positive currency impact is, of course, offset by hedging losses going into '19 with DKK 2.4 billion.

Effective tax rate is pretty much unchanged when we adjust for one-offs in '18, so between 20% and 21%.

CapEx.

We go from DKK 9.5 billion in '18 to DKK 9 billion to '19.

And from there, we should see a decline.

The, I would say, somewhat inflated CapEx level is driven by us building a API facility for diabetes, API in place in North Carolina.

So that impact '17, '18, '19.

And from there, we should see CapEx come down.

Depreciation.

Worth noting, normally not spending too much time on that, but being impacted by IFRS 16.

So then amortization of leasing debt hits this line.

So that was the change compared to prior years.

And then we've had an adjustment of our long-term financial targets.

I would say it's more of a technical nature.

It's a reflection, again, of IFRS 16, the lease accounting standard as well as the elevated CapEx level linked to the U.S. IP investment.

So we have adjusted our OPAT/NOA ratio from 125% to 80% and then our cash to earnings target from 90% to 85%.

And do bear in mind that our operating profit growth target of 5% is unchanged.

And all these 3 long-term financial targets, you will recall, we restated or revised with the base in '15.

So we said in the fall of '16 that operating profit growth would be an average based on '15.

And then normally, you would expect us to restate that or change that when we have met the target or when we can see we cannot meet the target.

So historically, that has been on a 3- to 5-year horizon just to give a feel for the duration of the target.

So with that, over to conclusions and Lars.

Thank you, Karsten.

So just to wrap it up.

Very strong position in the diabetes care space.

Strong growth in International Operations in the insulin space compensating for the price pressure in insulin in the U.S. Very strong position and exposure to the growing GLP-1 category.

When you look at obesity, a leading position in a market that's responding very well to medical intervention, growing by 60%.

We have managed to be more focused on our biopharm activities to actually compensate for the significant pressure on NovoSeven.

We have been able to compensate that last year by selling from our broad portfolio of both hemophilia and growth hormone.

And that meant that we ended up in the high range -- high end of the range we guided at the beginning of '18.

And despite a DKK 2 billion impact from the coverage gap hole, we guide 2% to 5% for this year on sales and 2% to 6% on profit.

I would like to just make one comment on drug pricing in the U.S. here towards the end.

And there's been a lot of talk about drug pricing, not only insulin pricing.

So just kind of a few facts when you read and hear about companies like Novo Nordisk taking insulin pricing up.

We believe we have a very affordable approach to insulin in the U.S. So just a few facts.

We supply free of charge insulin for 50,000 Americans each and every day.

So Americans who are below 300% of the poverty limit in the U.S., they get free insulin from Novo Nordisk.

That's 50,000 Americans each and every day.

You can buy very affordable human insulin via partnerships in the U.S., the biggest one being Walmart.

So 0.5 million Americans also each and every day buy human insulin in a vial that brings down daily treatment cost to $1 to $2 depending on the volume you consume.

So there's a lot to talk about the development in list price.

And you know, we also increased our rebate.

And for the last few years, we actually have seen a decline in the price Novo Nordisk put in our pockets.

And in 2018, we, on average, gave 6% to 8% in rebates.

So that amounts to DKK 113 billion that is given in rebates to PBMs and then shared with insurance companies.

So while we understand that there are some complexities in the U.S. health care structure, that means that patients are less in a situation where increasingly they're being charged the list price or have to pay copay because of pricing of the list price.

We do take [opportunities] very seriously.

And again, 0.5 million buy insulin, bringing daily treatment cost down to a few dollars and 50,000 get insulin free of charge.

So that was our presentation, and we would like now to start the Q&A.

And please use the microphone to make sure your question is clearly stated because this session is being webcasted.

And please also limit yourselves to 2 questions.

So Wimal, I hope to get a start.

Great.

So I guess consensus missed Saxenda growth again.

And clearly, the product is performing very, very strongly.

So how should we think about Saxenda growth in 2019 given that you're going to continue to roll out the product across the globe?

So should we see an acceleration in the Saxenda growth in '19 versus 2018?

And then my second question, possibly for Mads, is around the Trulicity CV label.

So I guess I just wanted to get your thoughts on what impact potentially for Novo and Ozempic if Trulicity was to get a broad CV claim, both in the primary and secondary population and what that will mean for Ozempic?

And then just following on from that, in terms your confidence of getting a CV claim using SUSTAIN 6 and PIONEER 6?

Thank you.

Camilla, first, on Saxenda growth?

Yes.

Like I said on Saxenda, we have now launched Saxenda in 37 countries and we are about to launch it further now this year in more countries.

So we are rolling it out across the globe.

And Saxenda is the first product that we will launch in our obesity franchise.

And with that, we are preparing for developing our support to the market in terms of education, in terms of potential for funding in the future.

So we do expect that the obesity franchise, over time, will continue to grow.

And you have now seen a steady growth rate when you look at quarter-over-quarter.

Without guiding on individual products for the future, we do expect that obesity will be a strong growth driver of ours for the future.

Thank you, Camilla.

Mads on CV for competition and ourselves.

Yes.

I think the only thing that we, all of us, I guess, know from Lilly's communication on the REWIND study is that they overall saw a statistically significant reduction in MACE event.

And my guesstimate is that we're all heading for the same type of label, so to speak, unless you were able to, for instance, in the primary prevention stand-alone cohort show statistical significance, it is, in my view, unlikely that you get a broader claim than others have in the industry being ourselves, predominantly Victoza.

And then as it comes to Ozempic, our view is that the PIONEER 6 data with a 51% significant CV mortality reduction and an overall 21% of the nonsignificant MACE reduction does really corroborate the SUSTAIN 6 data.

And when you add them together, so to speak, all 3 components of the strict MACE endpoint that drive the overall outcomes.

And that, in my book, indicates that the very high level of MACE reduction, 24% aggregated, is something that we are really expecting and hoping to get into the label after submission, as I mentioned, of a supplemental NDA in that regard.

So I think Ozempic will be competitive both as it goes for the metabolic impact and benefits as compared to other GLP-1s, but also on the CV side.

Thank you.

Michael?

It's Michael Leuchten from UBS.

Question on Ozempic.

Obviously, the product did phenomenally well this year already.

When we go back to the beginning of the year, your guidance was relatively cautious.

Could you just talk through how the product has been able to do so well given the coverage was relatively thin at the beginning of the year, what changed during the year to allow it to perform so well, outside maybe the clinical evidence that we know of?

And then just going back to the pooling of SUSTAIN 6 and PIONEER 6, Mads.

How exactly does the conversation happen with the FDA?

So they propose to you that pooling might be all right.

You've given a fairly broad window on when you may or may not see a decision from the FDA.

Like, what does it mean you talk to the FDA?

Is there a time line?

Is there a deadline or is sort of whenever they may or may not look at it?

So I'll start by some comments on Ozempic.

There is a significant number of diabetics who are not in good control, looking for better treatment.

And we here know the evidence that it doesn't take many weeks on Ozempic to really see a meaningful change in both glucose level and the weight profile is also something that's very attractive for patients.

So we took a stand from the beginning of the year that we wanted to build the access in a good way.

So we didn't rush it in any way.

We had Victoza to focus on until the individual districts could actually switch as Ozempic access came in.

So the year unfolded more or less as we had planned it through.

And yes, of course, we guided cautiously in the beginning of the year as we landed the access contracts.

And some of the contract that were landed in Q1 became live from Q2.

So that was a gradual build up.

And of course, that gives an acceleration throughout the year.

And we're very pleased with how we exited the year in terms of both establishing the product in a way where we're not just switching from existing GLP-1s, but actually going out and talking to the effectiveness of using GLP-1-based therapy because as the leader you really need to expand the market more than gaining share from others.

So we believe that GLP-1 is a very, very attractive way to treat diabetes.

And we see basically across the board that all products are more or less growing in this category and thereby fueling the growth, which we think is very attractive for the long term.

Also, to hear the feedback we get from physicians and patients is that, Ozempic is indeed a very efficacious product and a product that makes a patient very satisfied in using it.

Mads?

Yes.

And then as I think we all know, we were engaged in a meeting, a discussion with the FDA on overall outcome studies for the entire semaglutide portfolio, during which the FDA clearly stated, as you are aware, that we did not need to do outcome studies whether for injectable or oral each and every time in a typical way.

Rather, they saw the SUSTAIN 6 data as highly encouraging and quite strong, albeit the study was so small that they would like to see some kind of confirmatory study, whether that be undertaken with an injectable version or an oral, they didn't mind at all because they would look at the exposure in the patient population.

And if that is similar, which it, by the way, is for PIONEER 6 and SUSTAIN 6. And the inclusion criteria and the population was the same.

They would look at that and look across the data and see, are they in totality robust and you can say, strict enough to warrant a CV label upgrade.

And that means that if and when we then get the upgrade for Ozempic, and that is a 10-month supplemental NDA regulatory process, of course, we are discussing.

Then 10 months later, you will have a cardiovascular label claim with the SUSTAIN 6 data being the pivotal one as you process hopefully, but in this case, it would be supported by the agency having analyzed across product and looking at consistently and so on and so forth.

Vice versa, by the way, when we look into the cardiovascular opportunities for oral semaglutide.

But there the only weakness is that the PIONEER 6 data actually only accrues slightly more than half the amount of events in the SUSTAIN 6. So then the pivotal part of what would form a claim is, you can say, smaller and maybe less robust than it was in the case of Ozempic and SUSTAIN 6.

Thank you, Mads.

Richard?

Richard Vosser from JPMorgan.

You mentioned needing to do or someone needing to do a stand-alone trial to get a primary prevention label.

Just thinking about sole and then maybe high dose sema in obesity.

Would it be the high-dose sema in obesity that you might try to do primary prevention or is that not on the table for any of your drugs?

And then secondly, just thinking about the triagonist.

Just with all the developments from Lilly, et cetera, what do you need to see from the triagonist data later this year, early next maybe to move forward on that?

Just give us some idea of what you're looking for.

Yes.

So Richard, to take the last one first.

The triple agonist, which is a GIP/GLP/glucagon agonist, triple agonist from the research market there in Indianapolis, there, we would be seeking something that should prefer we exceed that which we are expecting to see for the high-dose Ozempic.

Because there's not much rationale in developing something that is a Ozempic high dose or semaglutide lookalike.

It would have to do, in my view, even better.

That's also why it agonizes on no less than a few receptors.

So the data we'll be getting, hopefully, are getting a decision on that one.

Do bear in mind when we come to weight loss, we have numerous shots on goal, including the amylin insulin Phase II and so on.

So we are looking at all of that in totality.

All the trials are coming to an end during the course of this year, which really enables a portfolio-based discussion of the future of the obesity pipeline, and for that matter, to some extent also, the diabetes pipeline.

When we're looking to primary prevention, to us, SELECT is critically important because SELECT is the one that, on the one hand, is a landmark in terms of obesity being defined as a chronic serious disease where you can actually improve an outcome with pharmacological intervention.

So that is 1 of the 2 main elements of SELECT.

The other is defining semaglutide as a molecule that has cardioprotective capabilities beyond those seen in type 2 diabetes.

And there, we actually see that SELECT, even though it is a high risk and established CVD cohort, that it is more important for us to expand sema in CVD beyond diabetes and into non-diabetes, such as obesity, than to go for a direct primary prevention cohort because it is our feeling that when physicians get comfortable with a product and they use it, they will assess not by doing ankle-to-brachial indices and all kinds of things during a GP investigation, but by assessing is the patient a cardiovascular risk and then they will make their treatment choices based upon that kind of interaction.

So it's more important for us and we have had the discussion to move beyond diabetes with sema, also CVD protection-wise than it is to go into a classic primary prevention program.

Jo Walton, Crédit Suisse.

A couple please surrounding all sema.

The first one on gross margin.

So you said in the past that the gross margin was about the same as your industry -- as your group average.

I assume that isn't the case on day one when you're selling nothing and you've got the plant up and running.

So how many?

Is it a couple of years, 3 years before it gets to that margin?

And the reason that I'm asking is, you're moving from being an injectable company where we perceive new product come through and perhaps come through to profitability quite quickly because you are focusing them on endocrinologists and specialists and moving to an oral company where we see massively competitive market, we can see much bigger groups of prescribers and where, I think, we would typically think it takes, say, 3 years to get to profitability.

So the first question is how we should be thinking about the gross margin?

And then secondly, assuming you get to approval third quarter, you've got some of your access ready by the beginning of 2020, how should we be thinking about this move of you from being an injectable company where you can sustain your profit?

Should we think this is such a fabulous opportunity?

You're going to really invest heavily and we could even see a decent profit 1 year because you're going for that extra fast penetration to maximize your life cycle.

So if you could just talk about how we can think about injectable versus oral profit gross margin and how you see that marketing commitment going forward?

So Karsten, without getting into guidance for 2020 and getting too close to pricing strategies, can you share some or with respect to some of that?

Yes.

So just recapping what we've been out saying around oral sema gross margin.

And you're correct, Jo.

So we've been out saying that if we assume a GLP-1-like pricing, then we can see oral sema getting to group average gross margins of 84% or so.

So that's the statement.

It's not intended to say anything about the specific pricing choice, but just to give a feel for that despite the bioavailability, then it can still be a very profitable product.

Timing-wise, I would say from -- we are talking in the medium term, so I would say the 3- to 5-year horizon before we get to that level.

But in terms of the group impact, then, of course, the impact in the earlier years is less just given the relative size of the product to the total portfolio.

And then if I could just add.

I'm not a financial guy, but the good thing is that this is a big facility and it's one that can do quite a lot of things.

And of course, you only kind of hit on the first product.

So in our view, we would like to see also even more products to come on.

And just a general comment, it's not like we're turning into an oral company.

We still have for many years majority of our patients in an injectable treatment.

So I think it's correct that it's the first time for us -- well, we have no one -- broadly speaking, the first time for us to enter the oral category.

So significant amount of patients there, a lot of good control.

So I think it's maturity for us to expand and add growth more than you would say or we're looking at completely changing the profile of the company.

We have question at the back.

It's Kerry Holford from Exane.

Just following up on Jo's question there on oral sema.

First thing I can ask, how do you think about the investment that you're going to need to put in from a sales perspective?

You said you envisage needing to promote that product to a different set of physicians, perhaps more primary care versus specialists, perhaps you can talk about that relative to the GLP-1s you sell today?

And then secondly on CapEx, we're still in this relatively elevated period and place, but you mentioned that now it should tail off after 2019.

What's the suitable run rate, the normal run rate going forward?

Thank you.

Camilla, first, on target audience and capacity to cover that and then Karsten on CapEx run rate.

Yes.

So when we talk about the target audience and capacity to cover that, it's really going to be a region-specific or market-specific approach like we have done also for our GLP-1 launches and insulin.

This means that, in some countries, we already cover the majority of the relevant physicians and the potential.

And in other countries, we are further away from that.

So in each market, we would look to see how we optimize our coverage for the relevant population or physicians to market this.

And of course, we are looking at also benchmarking ourselves towards what it takes to compete in this segment.

On CapEx.

Yes.

And on CapEx, it's not like there's a single truth and one silver bullet of a number what is a baseline CapEx, but you should expect us to after -- when we're done with the Clayton facility, then we don't have any huge CapEx investment planned because we have the billings, still need to wait for our current pipeline.

We have the diabetes API manufacturing and sales and obesity.

So it's a lot of rebuild and upgrade and some capacity on the Ozempic side.

So without being dinged or just to give you some flavor, then we're talking perhaps in the DKK 5 billion, DKK 6 billion range, but with some ebb and flow around that specifically, just to give you a feel for the fact.

Peter Welford from Jefferies.

Just on oral semaglutide first of all, again, just with regards to the filing, should we understand that when you put in the filing March to the FDA, will it include the SUSTAIN 6 and PIONEER 6 data?

I mean, presumably, assuming we'll have to include all those data.

So I guess, therefore, given they're going to be reviewing the data at that time, why shouldn't we assume that there's going to be some sort of data?

I guess what's going to change between the filing you're going to put in, in March to FDA versus the filing you can then put in post the sNDA for Ozempic given as far as I understand all the clinical data is now in-house already?

Second then, just on oral sema and sort of pricing, but not pricing specifically, so regarding around the issue, is there anything or are you already going with payers to put to them that this isn't the GLP-1, so to speak, in the sense that the risk here, I guess, is if they regard this as a GLP-1, therefore, when we then discuss pricing and obviously set rebates, et cetera, you end up being put in the same group, which could be both a positive and a negative.

Is there any way in which you're trying to distinguish this differently or are you trying to push with payers, this is just a better GLP-1 drug?

So Mads, first, on the filing.

Yes.

So what we will do is, of course, submit the NDA, sNDAs that are needed hopefully to accommodate both for oral semaglutide as it pertains to glucose-regulating type 2 diabetes and realizing the potential and nice upside of having a CV indication already at the time of launch.

And preferably, we have kind of the ability of the regulatory division and the medical reviewers to look at data from SUSTAIN 6 supporting PIONEER 6 and vice versa more or less at the same time so that they don't have to do a multitude of reviews of what essentially constitutes the same cardiovascular database.

So I guess you are right that you are not going to see one submission and then a long time data, other things coming in.

(inaudible)

I think we will update you more specifically in the near time to come on the specifics of the timing, et cetera, and the label.

And in terms of the dialogue with the payers, what we can do now is that we can have a dialogue between, say, medical representatives in our company and the payers to talk about the clinical profile of the product.

So we're not yet into, say, pricing discussions or contract discussions.

And I think when you look across the whole category, I think that there are different mechanisms.

And they compete not based on what kind of molecule it is, but what it does in terms of the glucose-lowering effect.

And that's, of course, our approach that is huge market for patients, physicians wanting to treat type 2 diabetes based on tablets, shying away from injections.

And there are different treatment categories today, different level of efficacy.

And there's just a new kid going to join that class that has higher efficacy.

So I don't think it's a discussion about what is the mechanism for this about, what is the clinical relevance and what is the questions for physicians and patients regarding how to treat diabetes.

Naresh Chouhan from Intrinsic Health.

Could you talk about oral sema and access and how we should think about that?

Ozempic obviously has had a very quick uptake or very good access in the U.S., just able to be out longer.

Should we -- are you expecting to step at it?

How should we think about what we -- how quickly you open up that market?

And how will it differ, if at all, to Ozempic?

Still early for us to talk to that because we're not yet in the price negotiations with the PBMs.

Clearly, from Day 1, there's a lock in place.

So we do not start selling until you get contracts in place.

That's similar to what we saw with the case for Ozempic.

We feel that there's general excitement about the profile of the product.

And that's more or less what we can say now.

We have not yet announced what our list price will be so it's too early to guide and speak later on how that would play out.

Wimal Kapadia again from Bernstein.

So I guess just one on pricing.

I know you can never give specifics.

But on basal insulin pricing, so on my math, Levemir was down, realized price per unit about 21% in 2018.

So again, you can't be specific, but should we see an acceleration, a similar number or a deceleration in price decline for '19?

And then second question is on priority review vouchers for sema in obesity.

So in the past, you talked about potentially using the voucher for sema in obesity, oral sema.

And we now know you've used it for oral sema.

Will Novo buy another voucher for oral sema in obesity?

Good.

So Camilla, on pricing.

Without commenting on specific products, what we will expect is that there is going to be continued price pressure also in the insulin segment, in the basal segment.

And over time as more competitors might come into the market, it is likely that, that will continue.

If I can add just one point.

So your math is correct.

You got correct for '18.

There's just one big difference between '18 and '19, which is we saw a formulary change between '17 and '18 in Part D. So whereas from '18 to '19, there are pretty much no formulary changes in the market.

And formulary changes basically have the tendency to inflate volumes and prices in our operation.

So to do your math, you need to look at both volume and price.

On priority review vouchers and whether we will acquire one for the obesity patients, we cannot comment on that.

It's clear that we will launch the obesity relatively close to patent expiration for the right effect molecule.

So time means something.

But we also have a case where efficacy will be significantly higher assuming Phase III development turns out to be what we saw in Phase II.

So I think there'll be a significant differentiation there so you can have different approaches to that.

But we cannot give guidance on whether we would buy a priority voucher or not.

We don't comment on that.

Just a follow-up, would it be a 10-month review time line from the time that you provide the molecule or will it be...

Let's assume molecule is 10 months, and then minus 4 if you were to do appeal with that.

We'll start second round questions now.

Michael?

Michael Leuchten from UBS.

Just a question for Camilla.

On Victoza, are you surprised how well it continues to do now that you've put in higher marketing effort behind Ozempic?

I guess is that market more sticky than you thought it was going to be or is it trending in line with expectation?

I think, basically, Victoza and Ozempic is trending according to our expectations.

We knew that it was going to take a while to get the access in place, as we talked about before.

And we basically only switched completely to focus on Ozempic by the midyear.

So you could say, in the last 6 months, we've done almost between 95% and 100% focused on Ozempic.

And we now see that Ozempic has a higher share -- with wide share of growth than -- with wide share than Victoza.

And that is in line with our expectation.

And we do expect that this trend will continue over time.

We are very focused on new patients with Ozempic because, of course, Victoza is also good product and patients well controlled on Victoza will stay there.

But over time, we will be able to start many more new patients on Ozempic.

And that, of course, contributes also to the growth in general in the GLP-1 segment.

And Michael, you may be able to add that, of course, those who are not switched from Victoza to Ozempic, as you know, they do have stay time of 3 to 4 years.

So there will be as slow decay unless one does something special about that, but then there will be patients on the product as well.

Richard Vosser from JPMorgan.

Just going back the CV claim around oral sema.

Does it really matter having a CV claim at launch?

I mean, as use don't -- CV use don't.

And the reason I'm asking is, wouldn't that run the risk?

Isn't that a trickier thing to get through the FDA?

You've paid for a priority review voucher.

What's the point?

So just a general comment.

I would say when Victoza got the CV label, that was kind of a first time.

I think we have seen more products showing CV benefit.

So we have gone from ruling out that there was a risk to diabetes agent directly seeing that a number of agents has a benefit.

So treating diabetes is good for CV disease.

And we already have on label in the U.S. the underlying data.

And of course, we have the label outside of the U.S. So for the physician treating a type 2 diabetic, the first priority is to manage glucose level, and Ozempic does that very well.

So that's the key driver.

And you can see in the current market dynamics that it works really well.

So I think it's nice to have the CV label, and of course, we're going to go for it, but it is the diabetes efficacy that is making the brand right now.

And then we have obviously an update in the treatment guideline.

So of course, increasingly, physicians will also be aware of what are the choice that also give the CV benefit, but that is a benefit that's not fully established in the market yet.

So short term, I think we -- I'm not worried about having CV or not.

So that's the importance of having it.

I don't know.

I think you already answered the question in terms of the controversies around CV versus the -- I don't know, Richard.

So I don't think it is for Ozempic.

I actually do think, Richard, it's nice to get 2 for the sheer reason that Eli Lilly would like to purchase that for Trulicity in the injection-based segment.

And so for that one, we also realize that the treatment guideline were actually positioned just after Victoza because it is perceived by the medical community that the Lilly data were more robust, and hence, we are in second line in that regard.

That would change in Ozempic even when Ozempic gets that, but otherwise, I agree with that.

It's Ben Yeoh from RBC Global Asset Management.

There's been a lot of talk on the reorganization of the U.S. organization over the last couple of years.

And I was just wondering how far along you are in that journey, whether there are any signs of improvement and what we should expect and essentially how that journey has gone?

And secondly, although, this perhaps is not the most friendly of audiences for it, but I haven't heard much talk about the Triple Bottom Line of late.

And I was just wondering whether any of that thinking has evolved in terms of culture and purpose and where the organization has gone, especially after a year or 2 of where there has been sort of reorganizations and a moment in the sort of Novo organization which it probably never had to deal before in its history?

Thanks for bringing that up.

I think that's fundamental for any company.

Just starting out on the U.S. organization, we went from a classical functional structure where you had sales, marketing, access, medical reporting also to the head of the U.S. organization.

And we say that the top management team in the U.S. became the common denominator and people worked in different silo.

In a time where you want centralized management, all territories are the same, that probably make sense or if there is a logical choice.

But as the U.S. market has evolved, it has become more fragmented so we have different, say, we have different access in different territories.

You have territories where you have single clinicians.

You have other territories where it's integrated units, et cetera.

So we have reorganized in 5 large areas where there's a general manager type individual running each, having full responsibility for both sales, marketing and local access.

So these individuals are empowered to run their territories much more locally.

And with the flow of tactics we had in '18, first promoting Victoza then Ozempic, we have been able to localize more how we did that and switching on promotion of Ozempic whenever it made sense locally.

So in my view, this has strengthened the leadership.

It has empowered the front line to do a better job than we have seen in the past.

So I'm very well pleased with that.

And that change is in place.

We got in place late '17.

So that's actually been in place from the get-go of '18 when we launched Ozempic.

Then through the Triple Bottom Line and the purpose.

And thank you for bringing it up.

You're right.

It's not something we often talk about in a meeting like this.

But of course, that is the fundamental driver of the company that you can actually articulate the purpose that the organization unites around.

And in my view, young, smart people nowadays, they are much more purpose-driven than, to be honest, I was when I was at their age.

So it's really important that a company can articulate that.

And in your behavior, you do something that reinforces your purpose.

So it's been a priority for me at a time where we have been more under pressure than we were in years back that we did some difficult things to really show that we were committed to the Triple Bottom Line.

Of course, the first one is financial.

We talk a lot about that.

I think we have stabilized the company and as we go with the growth track.

On the environmental dimension, we have, together with our annual accounts, launched a new environmental strategy, Circular for Zero, where we're aiming to become a circular company.

We will already by 2020 have all our manufacturing powered by renewable energy.

There are not a lot of companies who have that.

We are setting an ambition to extend that through the whole operation of Novo Nordisk.

So by 2030, all our operations, all manufacturing, all sales activities, company cars, flight, will have to be CO2 neutral.

That's a very broad ambition like it was when we defined the current ambition of actually powering manufacturing by CO2-neutral sources.

Not all technologies are ready to do that.

But by doing it, we also create demand for that.

And I told my employees, my next company car will be an electrical car.

And when I look out on all the other managers, and guess what, they're also going to buy electrical cars.

So we need to make some choice there.

And that is very engaging for employees.

And that, lastly, on the social commitment.

I started by talking about affordability in the U.S. and actually making the claim that I believe all Americans can afford Novo Nordisk insulin, maybe not the latest innovation, but there should be nobody who should ration or go without insulin.

We have also made partnerships with the International Red Cross to make sure that people who live in refugee camps, they also get insulin.

And we actually also give money to create capacity to treat the people in refugee camps.

And lastly, we made a big partnership with the UN, backed by the WHO, which is not often you see private-public partnerships like that, where we actually create an initiative to treat noncommunicable diseases like diabetes.

We will create a marketplace, an infrastructure to make sure that products can get into, for instance, countries in Africa, where today, in my view, we have products in, but they end up getting significant markup before they get to patients.

By leveraging the capacity of UNOPS, the project arm of UN, we can get products all the way in, in a controlled manner without a lot of corruption around those products.

So thanks for bringing that up.

It's something we're strongly committed to.

And I can tell you there are a lot of people in Novo Nordisk who work in the company because of that.

Camilla talked about benchmarking your infrastructure in places where you were going to be moving more into orals and perhaps you weren't as involved with the docs that prescribe the orals at the moment.

Could you share with us some sort of high-level views of where you think you need to actually put additional investment in and where you're already correctly sorted?

And a second question, just if we are to see the rebate removed, translated one, how disruptive would that be?

Is it -- I know it's something that you think would ultimately be a good thing, but do you see an easy way to go from here to there or should we see some disruption on route?

If I start out on that, today, we have a situation where patients, not in all cases, are benefiting from the rebates provided.

And that problem is increasing in size as more and more patients are in the lower-quality insurance.

That's not a sustainable structure because it's never been the intention that anyone should -- any individual should buy at the list price.

The biggest customers do not buy at list price.

They get a rebate.

So as a company, I think we cannot survive the long term if the marketplace is not solving society's problem.

So I think it has to change.

Many things have been tried out.

So I actually welcome that we look into changing how we actually get that rebate in the hands of the patients.

So we get, at the point-of-sales, we get the rebate all the way out.

It's not easy to do because, today, there are a lot of contracts that are locked up.

The DKK 113 billion we put into a system is locked up in contracts.

So it takes changes to that.

There's also a lot of IT systems.

Here, in the U.K., you have one IT system.

The NHS use that on behalf of society.

In the U.S., you have for each payer, each insurance scheme, you have IT setup.

So it will take some change.

And I think increasingly, it's been understood in the public domain how the complexity of the system actually creates some issues that needs to be dealt with.

I welcome now that Washington is looking a lot into actually how the system works.

Some of my colleagues have been asked to go to Washington to explain.

We'll get some letters.

We have a number of data requests.

I actually welcome to get that out because it's not working to our benefit today.

And Camilla just commented on the development in basal pricing.

That's not a sustainable number.

So we welcome that we actually do something that's better for patient.

It's better for patients in order to create a more sustainable environment for us to compete in, but it's not going to change overnight because it's a very complex setup.

And then the go-to market.

The go-to market, I just wanted to elaborate on that.

So what I said was, we are taking a market feed approach that like we've also done for our other compound.

And just to give you an example of that.

There would be places where we have a very good coverage of go ready potential like the U.S. But there would also be regions where we have less of that because we traditionally are focused on injectables.

That would be in places like Japan where already is a very big part of the market, but we actually are going to be focused on insulin and injectable GLP-1.

And then there'll be many countries sort of in between those 2 extremes.

And based on that, on a market feed approach, we would, of course, be benchmarking our approach to launch oral sema.

We have one final question from the back.

Then we will slowly be leaving and you can kind of catch us on the way out if you have one final question.

It's Kerry Holford again from Exane.

So 2 questions, please.

You talked about your rebates in the U.S. increasing, but so have your list prices.

So can you just talk about the net benefit or loss of pricing in the U.S. in 2018 versus 2017 and your expectation going forward?

And then lastly your appetite for M&A.

So how do you prioritize internal investments versus external opportunities?

Are you actively looking for bolt-ons?

And if so, what's your desired size target?

So on net price, so we increased our average rebate in '18 from 64% to 68%, so plus 4 points there.

And I cannot get into individual products, but if you just look at one of the product that's been singled out in this insulin pricing discussion, that's NovoLog.

So that's a fast-acting insulin.

It's a very important product for a type 1 diabetic.

So meal-time insulin is very important.

So that has often been taken out in the public.

So over the past approximately 15 years, the list price has gone up by 400%.

The net price to us has gone up by 28%.

So the CAGR, the annual increase to us has been 1.5%.

That's for NovoLog in a vial.

You can take the same in a device.

The CAGR has actually been minus 0.6%.

And you know all that for the last few years, insulin net pricing has been going down.

So there is a significant spread between list and net.

On M&A, we say M&A, but we also mean when we say M&A, licensing.

And in massive area, we did 11 deals to bolt on to our organic pipeline.

So Mads can comment a bit on that.

In the biopharm space, we did 2 deals, although smaller deals, in 2018.

Towards the end of the year, we closed the Macrilen acquisition, which is a small diagnostic tool to identify those adults in need of growth hormone, very nice, complementary fit to our growth hormone business.

So we keep looking for biopharm.

And we have previously guided that it's in the low single-billion dollars.

But most likely, these deals are smaller deals because, typically, it's assets sitting in biotechs where we can do a better job in helping commercialize that and finalize the development of it.

But we still think that we have a basic capability and also capacity in biopharm where we can bolt on assets to support a business that's already doing better.

So I think it's really important to underline that biopharm was flattish in 2018, so we are getting more out of our ongoing assets just by focusing more on it and have strengthened the leadership around it.

So Mads, maybe a few comments on what you have been building on?

Yes.

So I always use the technology there.

To be honest, most targets we've worked on for the last century actually originated in academia, throughout the University of Sweden, Copenhagen University and so on.

And so in essence, you can say the fact that we are doing a lot of wheeling and dealing and the 11 collaborations that Lars mentioned, some of them were actually done with academia to access new targets, so our molecular engineers can be built frankly into the most suitable drugs for patients.

Others relate to our ability to, for instance, enhance our capabilities by getting something in, either the ability via MIT to make insulin orally available or the ability via acquisition of a small biotech company to make insulin totally glucose sensitive or to make peptides penetrate the blood-brain barrier so we have brain-selective agents such as GLP-1s and others for obesity and maybe other diseases through again collaboration.

So there are plenty of examples.

But in reality, you will see that the way we replenish our pipeline due to the higher threshold for innovation going forward is that there will be more new targets, more new mechanisms of action and that actually calls for a lot of early-stage collaborative deals with academia and with biotechs, and you have seen that and that would continue.

Good.

Thank you all for your time.

We truly appreciate it.

And we, on the way out, those who have multi-questions can catch one of us and sneak in one more question.

Thank you very much and have a nice afternoon.