諾和諾德 (NVO) 2019 Q2 法說會逐字稿

Good afternoon, everybody.

I'm James Quigley, European pharma biotech analyst for JP Morgan standing in for Richard Vosser.

It's my pleasure to welcome you here to the Novo Nordisk Second Quarter Management Road Show.

So today, we've got the CEO, Lars; the CFO, Karsten; and the Chief Scientific Officer, Mads.

So with that, over to you, Lars.

Thank you very much for the introduction, and thank you for hosting us.

We'll go through the slide deck from our release relative quickly, and then we'll have ample time for Q&A.

This is our [first] sales update that I'll give; R&D update; and then the financials and outlook.

You all know that we'll be talking about the future, and the future might not turn out exactly as we preach, so take care about these forward-looking statements.

So when you look at the first 6 months, we're very pleased with how we have started the year.

We see strong commercial momentum from our portfolio of products, actually in all markets across all products.

We are still facing tough pricing in the U.S., but we see very strong commercial momentum also in the U.S. So this has led us to upgrading both our outlook for top line and the operating profit.

We also made a small change to my executive team.

Lars Green, whom some of you know, has passed -- in finance in Novo Nordisk, has moved on to a position as Chief Financial Officer in Novozymes, and that has led me to elevate Monique Carter into the executive team, so we have a dedicated People & Organisation, this is Novo Nordisk's terminology for HR, at the table.

And then Lars' other responsibilities have been allocated to Karsten and Henrik Wulff.

So I believe this is, again, a strong team with a good blend of long timers, newcomers, genders, nationalities, so a good diverse team.

If you look at the sales growth for the first 6 months, 5% growth driven by International Operations and then offset by the decline of 2% in North American operations.

And when you look at International Operations, it's worthwhile noticing that we see all regions pulling through, so strong, strong growth coming out of all regions.

The U.S. is what drives down North American operations, so U.S. declined by 3%, linked to the wholesale reductions we saw in the first quarter.

So that's the geographical split.

If you look at the product split, we see that we have flattish growth on insulin, and that's composed of IO still delivering strong growth with -- in the insulin business.

And that's based on the full portfolio of products that's increasingly being rolled out and prioritized in IO markets, and then we see a drag from the U.S. market.

Despite the fact that we actually take a bit of share, the price development means that we see a declining U.S. insulin business as we've seen for quite some years now.

Very strong momentum in the GLP-1 franchise growing 18%, and that's both International Operations and North America.

Solid 56% growth of our obesity business, and again, both International Operations and North America; and then we actually see the strongest biopharm growth we've seen for some quarters, biopharm growing by 3%.

If you look again on our competitive performance, we are adding 0.8% market share in the global diabetes market, so that's a relatively strong commercial performance.

And we have been investing in number of product for many years, so we have this market-fit approach where we are increasingly letting markets in several operations own their own markets, make sure that gets as close to the customers as possible, leveraging our portfolio and that turns into this increasing market share.

We're also taking share in the U.S. And you can see on the right-hand side that we're actually adding also insulin market share, somewhat compensating for the price pressure in the U.S.

If we look into the Ozempic launch, we have now launched in 21 countries, 18 of those being in Europe.

And here, you can see our uptake in Europe, strong across all markets.

Some markets grow slightly low, or have a slightly lower uptake.

Those are markets where you do not have 1-step products, but we have to secure regional access after national access.

That's markets like U.K. and Sweden.

All our markets, very strong uptake.

And you can see that with our increasing share of growth, we're now approaching our market share and, hence, a turnaround in European GLP-1 market share performance.

Similar strong performance in the U.S., more than 50% -- no 53.3% share of new scripts, very strong performance.

And we see a continued strong growth in the U.S. market fueled by the Ozempic -- the launch of Ozempic.

But actually, each and every recent launch of our innovative products has fueled that market growth.

Saxenda, continued strong momentum.

We actually see a step-up in growth compared to the average growth we have seen last year.

So we're very encouraged.

It's slightly different business in the terms of reimbursement and a lot of the growth actually being driven by out-of-pocket spends in markets outside of U.S.

Biopharm, 3% growth.

We see that the dynamics around NovoSeven is slightly more positive than we had expected.

We see that there are still breakthrough bleeds for patients using HEMLIBRA and there, NovoSeven is the preferred rescue treatment.

The broad portfolio of hemophilia agents also helps mitigate that, so NovoEight is doing relatively well.

And now we're also rolling out our long-acting Factor VIII and IX.

With that, Mads, I think we should go in to R&D.

Thank you, Lars.

As you are aware, we are trying to maximize the value of the semaglutide molecule by also conducting even further major outcome trials, including a renal outcome trial using Ozempic or semaglutide, 1 milligram, called the FLOW trial, to get diabetic kidney disease onto the label.

Likewise, we have a time-driven diabetic retinopathy trial seeking to, over a 5-year period, actually document that the excellent glucose control offered by semaglutide will enable eyesight, as measured by the ETDRS scale to improve by 3 points or more over a 5-year period.

SUSTAIN FORTE is the life-cycle management activity basically poised to make intensification of Ozempic 1 milligram possible.

As you are aware, over time, A1c increases, and by going to 2 milligrams, you can have further extension of the stay time on that brand.

SOUL is an oral cardiovascular outcomes trial to further confirm the cardio protective benefits of the semaglutide molecule in the oral version.

Now looking at what has happened over the last period, quite a lot in the overall milestone or pipeline.

Sema has been submitted as a tablet for approval in Japan.

We've got the New England Journal of Medicine data from the Ellipse trial onto Victoza label with a patent term extension in both U.S. and Europe.

We have a couple of interesting approvals in Asia: Xultophy in Japan and Ryzodeg in China according to a fast-track approval path actually in that country; and a couple of Phase I new interest molecules: one, a very special insulin for diabetes; and LA-GDF15, which is a new mechanism within the field of appetite regulation.

Biopharm-wise, Esperoct got approved in Europe following on to the U.S. approval approximately 1 quarter later.

And we are now in Phase III with the kids with growth hormone deficiency for somapacitan, the so-called REAL 4 trial.

And also, I think I'd like to highlight the Gilead collaboration where we're taking our sema asset and combining that with a nonsteroidal FXR agonist and also a ACC inhibitor from the Gilead pipeline so that we will have a coinciding of Phase II data from the big biopsy study we're doing with sema as monotherapy and these combo data with the Gilead molecules around the summer of '20, i.e., next year.

I will not go through this one in great detail, but only suffice to say that in terms of diabetes milestones over the next couple of months or quarters, for sure, the oral semaglutide action date on September 20 with the FDA is the #1 thing to look out for; followed, of course, in January by the cardiovascular indications, both for Ozempic and for oral semaglutide.

In terms of the biopharm, I think we should highlight that concizumab, our pan-segment antibody against TFPI for all kinds of hemophilia, is going to start Phase III across these different hemophilia segments during the second half of this year.

But also that we're submitting somapacitan for the adult growth hormone deficiency indication in both Europe and U.S. over the next couple of quarters.

I think I'll let it be there and hand over to you, Karsten, for the financial.

Thanks, Mads.

On financials, as you heard, that Lars said, 5% sales growth in local exchange rates for the first half.

We have tailwind from currencies, so the U.S. dollar is up some 7% compared to first half last year against the kroner, so that's why we're reporting 9% sales growth.

On our gross margin in same currencies, we're down 1 percentage point, and that's purely ascribed to U.S. pricing.

So everything else is benign.

Then we keep investing in our business, so our sales and distribution is up 4%.

The main driver is investments in growth products and markets in International Operations, so that's the main driver behind the 4%.

Then R&D, down 7% in same exchange rates.

That's not because we're culling meds big time.

But we had the gain in Q1, as you recall, about the inventory reversal where we had a onetime benefit to our P&L of some DKK 500 million.

So that's one driver.

Adjusted for that, R&D is flat.

And then do bear in mind, we're kind of in between trials, so we've been ramping down the PIONEER trials, and now we're in the process of ramping up in -- especially on the SELECT program and then the 4 late-stage trials there that we put into our announcements.

So it's kind of we're ramping up again in terms of patient loads.

So that gives a 6% operating profit growth and reported 12% given the dollar.

Then we have, of course, a hedging approach.

That has not materially changed compared to what you've seen in prior quarters.

And our tax rate, also in line with Q1.

So based on that, first half performance, and I would say, mostly driven by the strong 12% growth in IO, we've been able to strengthen our outlook for the year.

So now our local currency sales growth is 4% to 6% compared to 2% to 5% at Q1.

So we're raising the midpoint there, and we're also raising the midpoint for operating profit.

We raise that with 1 percentage point by raising the floor in the guidance range for operating profit.

And then we have some minor tweaks on net financials, which is linked to emerging market currencies, and then we're tweaking, narrowing the range for our free cash flow, but no major change there.

So with that, these are the key takeaways.

Lars, I don't know if you want to go through those.

Or you want to...

I think we have been through them, so maybe we should just get over to the Q&A.

But I'll just wrap up by saying that we are very encouraged by the momentum we have right now.

We can see that some of the changes we have made in how we execute commercially are paying off.

We have also been investing more, but we can see that it responds.

And what Mads and colleagues for many years have been developing, we're getting more value out of than we have ever been.

So we see that as boding well for the future.

And of course, the news we have coming up late September in terms of oral sema will be very exciting in terms of momentum further accelerating going forward.

But I think we should invite Mads and Karsten up, and then we can take your questions.

Yes.

Given that JP Morgan are the host, I think I'll...

Yes.

Sorry.

So the first question on Victoza.

So there was a rebate adjustment in Victoza, which, similar level to last year, so assuming around DKK 300 million.

What are the key drivers for that?

If it's for prior periods, did that mean that the 2% to 3% of channel mix that you mentioned in terms of the growth impact, is that -- could that go up in the second half?

And secondly, on the special new insulin, the new-generation insulin, what have you seen in the early-stage trials, in the preclinical models, that makes it differentiated versus Tresiba and also the long-acting insulin -- the weekly insulin?

Okay, Karsten?

Yes.

So prior periods, that's pretty easy because on GLP-1, the prior periods nets out so that it has a 0 impact and, hence, the channel mix in Q2 is similar to what we saw in Q1 channel payment.

Okay.

I'll try to answer equally, simply, on a more complicated question.

In general terms, after the Basaglar thing in 2016, as a company, we've decided only to pursue insulins that do something over and above pharmacokinetics improvements.

That means either it has to go via another route, such as oral, or it has to be doing something unique, such as being glucose-sensitive and only basically not demand glucose monitoring and so on.

This is actually falling in another category where it has benefits on comorbidities related to diabetes by having a unique pharmacodynamic relationship.

And I think we'll get back to that more into the future.

But it is not just a Tresiba (inaudible) beta at all.

It is a basal, but it is a basal that does other things.

A somewhat tedious housekeeping question for Karsten on the financials; then one for you, Lars, on China.

So maybe the more interesting question first.

Look, I know you're heavily reliant on the old portfolio at the moment in China, but can you -- pardon my forgetfulness, but can you remind me the time lines you're working to in terms of filing Ozempic in China, oral sema?

And am I right that Tresiba and Victoza are already on the market and have received reimbursement?

So just in terms of the future growth drivers, what's -- just remind us the time lines for China.

And then for Karsten, look, on the $2 billion-plus investment you're making, can you just give us -- is it $100 million depreciation from 2022?

Just a depreciation schedule.

And then lastly, the dynamic.

I'm not going to ask about oral sema pricing, but given this is an oral drug, should we -- should the market be thinking about quite heavy sampling in the first year just to make sure that we don't get carried away with that initial ramp in sales?

So first on China, so Victoza is on the market, reimbursed and doing very well.

Tresiba, we do not yet have broad reimbursement.

We are in the final stages of getting that.

And that's a very important product for us to get onto the market because there's the dynamics now where we are losing in the basal category.

There's a relatively strong glargine market and there's even a couple of glargines in the market at relative attractive price level.

So hopefully, we will have that in the near future.

We are also pushing Ryzodeg in China, so we have approval.

We yet have to market access.

So we see actually an interesting dynamics in China where we are a bit behind in getting, say, the growth drivers from rest of the world to the market in China.

So we see a good opportunity in that.

And it's a sophisticated market in the sense that the Chinese regulators use some of the tactics they see from around the world in how to manage cost and pricing.

So we see that we get fairly good price, and then, obviously, you have good access when you have that.

And Mads, maybe you could comment on timing for Ozempic and oral sema?

Yes.

Semaglutide, as soon as all the clinical activities are done, of course, it will be submitted with priority.

The discussions we're having with the Chinese FDA are actually moving towards them wanting innovation earlier to market.

So all the usual prerequisites for not being able to start a Chinese dedicated trial until you have home market approval, all of that seems to be becoming a thing of the past, which I think is good news.

But that is really what is underlying why we've been so much delayed as of other companies.

But actually, for the time being, Victoza is the only reimbursed GLP-1 antagonist in the Chinese market and is doing well.

But of course, we're moving as fast as we can.

Sorry, Mads, I'm going to push you for a time line on Sema.

When do you think...

I think I'll give you a time line when we're a bit closer.

But the other thing to say, is sema -- the obesity market in China is not really there at this point.

But we feel a great deal of interest also on behalf of the -- both health but also regulatory authorities of looking into obesity in China.

So that's also on the radar.

Yes.

And then our Clayton investment of $2 billion plus, so of course, the positive note is that our CapEx, we see that coming down over the coming years.

Right now, we have this DKK 9 billion this year, or some 8%, and we see that coming down over the coming years.

Then, of course, it doesn't come for free because then we start depreciating.

Our approach to depreciation for the Clayton side is that we start depreciating when we start to see assets.

So you will not see kind of a significant onetime step-up.

So it'll be phased or starting with the utilities in '20 and potentially a purification partly in '20 and then come recovery and fermentation later on.

And then that's the entire inventory effect of that.

So what I -- simply put, don't expect a step-up, but expect a gradual ramp-up over the next 3, 4 years.

And on the sampling?

On sampling, sorry, could you just repeat?

Also, when we are going to do oral sema sampling?

Yes.

So like any other launch product, then sampling is part of that.

And yes, sampling is a sales and distribution cost, of course.

Jo Walton at Crédit Suisse.

I have 2 questions.

One R&D, concizumab.

What sort of patients will you be looking to recruit?

And how would you -- how should we think about the design given that we've now got something like HEMLIBRA out there and you've got long-acting and regular Factor VIII?

What would be the appropriate comparator?

And how would you expect to see that enroll?

And my other question's one on health care reform.

A few months ago, we were thinking it was going to be great, that we might get rebates removed.

And you do some really fantastic slides, Slide 60, just highlighting just how high your rebates are.

Now we seem to be moving to something without rebates with a change in the donut hole and possibly a sort Medicaid-type tax.

I wonder if you can talk about how you think health care reform might come about.

What you think you, as part of pharma, can do to influence it to be perhaps more positive?

And as investors, should we just assume that the positives that you get in the lack of donut hole are eaten up with Medicaid tax or something like that?

How would you suggest that we forecast changes in the U.S.?

Yes.

Sure.

Start with that.

So I think we have seen politicians in the U.S. agreeing that something is needed to improve affordability for patients.

So that's probably the one thing politicians can unite around.

When it comes to actually uniting about what to do, it's a completely different topic.

So as you referenced to, the first proposal to take away the safe harbor for rebates, I think it was originated out of a wish to make product more affordable for patients.

It dies because it turns out that politicians realize how much rebates are actually funding the health care system.

And if you take that away, it might be that it becomes more affordable for those who are actually sick.

And typically, those who benefit the most from rebates are in diseases like diabetes, chronic diseases where there is choice and that leads to actually significant rebates being sucked out so potentially on the account of many will have to pay more for insurance.

And so the budget deficit that comes out of that kills that proposal.

I think that's quite symptomatic for the discussion in the U.S. that while everybody can agree, then we need to do something for the patients, often, it ends up costing for the one who pay for it, and then the sort of -- the direction with the patient kind of diminish.

If you look at the Finance Committee's proposal, which is interesting to learn from because it's actually a very powerful committee, it's a committee that's bipartisan, so they aligned about a proposal to bring forward.

And the first thing that happens is that, actually, both sides start discussing and coming with amendments to it, and suddenly, it kind of disappears slowly again.

So I cannot tell you what will happen, but I can -- my feel is that it's becoming increasingly difficult to actually unite.

And there's a lot of excitement about parallel imports, importation, reference pricing, all of that.

And when you start then looking into the complexities of it, it turns out that that's not something you just do overnight.

So in parallel, I think the industry is looking at what are the things we can do to actually help some of these patients.

And I can tell you that we are focused on individuals who lose their parent's insurance coverage and live with type 1 diabetes.

That's a very fragile group because you have low income.

Typically, you have no insurance or you have low-quality insurance.

We have increased the threshold for how to qualify for the patient assistance programs we have.

So an individual, a young individual making less than $50,000 a year can get free insulin from Novo Nordisk if you do not have insurance.

A family of 4 making less than $103,000 can get free medicines from Novo Nordisk if you have no insurance.

When you add to these -- get to these high-deductible plans, that's tricky because then you actually have insurance.

But it's the insurance plan design that's taking away the affordability from you because you're not -- the rebate we pay are not being shared with the patient.

So that's a bit trickier, but we're also considering how we can do that.

So I'm not overly optimistic in terms of the political system actually solving it.

That's the problem because that just means that the pressure continues, and it means that we need to consider what can we do.

But again, as you allude to, the high rebates means that we actually we have some room to work with, and there are different opportunities.

One of the recent proposals is linked to creating the opportunity to have a second NDC code, so it was portrait-ed as actually importing your own products.

I think that's because importation is, from a political point of view, sounds like a solution.

But it is, in essence, that you have an additional product which you sell at a net price.

So I think within the system, there are some opportunities.

It will be patchwork.

It's not necessarily -- these affordability issues, I think we can actually bring forward in a way where it's not changing our net price for the product a lot, but it's changing for the patient a lot how the affordability looks like.

So my concern or the risk I see is that if nothing is done, the political pressure increases, and that means that you look at industry pay-fors; you ask the industry to pay for something, like what we have currently with the 2% of global sales impact, the DKK 2 billion impact on our sales because of this coverage gap mitigation.

So I think that's a bit a recap.

So I can unfortunately, not tell you how to model this because I don't know.

I think most people are talking a bit and actually figuring out what could happen.

It becomes very fast, very political, and a lot of individual politicians probably having more loyalty to the state and their constituents than the party when you have these discussions.

Are Medicaid impacted?

Because that 22% of the market is Medicaid.

Yes.

So when you look -- I'll not comment on individuals, but if you look at the totality of the Finance Committee proposal, I think the totality of that was neutral or maybe slightly positive for us.

Obviously, there were elements that were more negative than others.

So we already give 100% rebate in Medicaid.

And if you kind of increase what we should pay, it turns a bit -- it's a bit of a funny market because then you actually -- you give your products away and you also put money in the box when you give it away.

I don't think that's really a market structure that's sustainable.

So obviously, I don't think that's a good idea.

On the other hand, the Part D reform that was proposed would actually benefit a company like Novo Nordisk selling relatively inexpensive products compared to some of the more expensive Part D products.

So yes, I can only observe that whenever these proposals are being brought forward, there is some initial, actually a very dramatic share price reaction.

And then a few days later, the whole political process starts.

And the U.S. government structure -- governance structure is one of making very difficult to make dramatic changes.

So yes, I can keep on for hours on this topic.

I'll try to do the much easier concizumab question a bit faster because if you compare to HEMLIBRA, then mechanistically speaking, concizumab doesn't need a specific activated clotting factor to be present on the platelet, like Factor IX indications within [hemophilia].

So that means that a clear niche that is obvious and which is why we've got a breakthrough status from the FDA is, of course, hemophilia B to become the first subcutaneous agent, and also hemophilia B with inhibitors.

But that being said, the efficacy of concizumab is expected to be similar across these various populations, and that also means that we're making a broad program.

And in terms of comparators, the CBER's division for blood products has not had a history of asking for active comparators also because it is a rare disease.

So what you do is you take the historic bleeds and they're your historic comparator and then you actually just monitor what is the ABR, the annualized bleeding rate, either median or mean, and then you go for a load target and hope for the best results in that regard.

And I think we have gotten the dosing right.

We've done a Phase II where we actually fully understood that there was no safety concern, clinically speaking, even at the highest dose we were using, and that has paved the road for discussions with agencies where we actually can do proper dosing from the get-go in Phase III.

So I think we have done our homework.

It's going to be a cross-segment agent hemophilia A, B and D and A with inhibitors.

And do bear in mind, Jo, that it's not as if in a given therapy area, one drug class sweeps it all.

HEMLIBRA is a fantastic product, but it is not the drug to end all hemophilia treatment innovation because there are patients either who do not respond or who bleed more frequently than is reasonable or for other reasons will not be targeted by HEMLIBRA.

So obviously, we see a place for a new mechanism of action, in particular if we're first-in-class and have good data.

So we're optimistic, and we're starting the whole thing late this year.

In a good device and subcutaneous administration.

Yes.

Thank you, Karsten.

That's actually my usual comment because -- thank you, because actually, in Phase II, the feedback we got -- we use the leading Novo Nordisk FlexTouch delivery technology.

The feedback we got on these patients who've always had intravenous infusions and suddenly, they have ultrafine needle and they felt nothing.

That was unique.

So the user experience so far is really positive.

Thank you.

It's Michael Leuchten from UBS.

Two questions about the margin please, Karsten.

One, you were talking on Friday about why the increase in operating profit guidance for this year is slightly less than the top line.

You referred to some projects you were able to now kick off that the first half performance was better.

So just wondering if you could flesh it out a little bit more what is it you're working on now that previously wasn't on the cards for this year, maybe say for next year.

And then the second question is around the gross margin.

So like you said in your commentary, down 100 bps in constant exchange rates, but GLP-1 growing 18% in the first half in constant exchange rate.

Insulin's is down.

Presumably, that growth is mostly U.S. So can you talk about that negative drift of the gross margin relative to GLP-1 growth that was extraordinarily strong in the first half?

Yes.

Yes.

So just covering gross margin and I said it initially also, so the 100 bps in local currencies, gross margin erosion is driven by lower U.S. prices.

So the product mix benefit we get from selling more GLP-1s is offset by negative geo mix by IO growing 12%.

So basically, in human insulin volumes, so insulin -- not in human but insulin volumes in AAMEO and Latin American markets, so that's the balancing part to the GLP-1s.

And sorry, the first one was?

The optionality that...

Ah yes, so the guidance ranges.

So on the guidance ranges, if you take all for Novo as a company, then with an operating margin north of 40% or in the 45% range in the first half, then the value creation for shareholders and our build to drive value creation is not through a leverage-type strategy but more so through a top line expansion strategy.

So of course, that's what we're looking at.

So the logic choices for us to pursue investments in and keep driving and allocating as many resources as we can against is keep pursuing growth in IO geographies and products; GLP-1, I'll say globally, but especially in the U.S. with the pressure on PCP campaigns and so on; and combined with obesity as another one.

Then we look at our pipeline and both look at our R&D ratio.

So both looking at early research for future generations, of course, but also the ramp-up of our late-stage portfolio.

And then the fourth and last thing is oral sema prelaunch preparations.

So all the prelaunch we can do to make oral sema a success is, of course, also a high priority.

So those are the 4 dimensions.

And you shouldn't think about this as something that just pops up.

But it's part of us looking at these are our strategic priorities and value drivers for the company.

Then, with the strong performance in IO, then we look at -- so what is the right balance in yielding a higher return to shareholders while also investing in the company for future growth.

Yes?

Wimal Kapadia at Bernstein.

I think it's on.

It's on?

Okay.

So 2 questions, please.

So first on Ryzodeg.

So it doesn't get much love in terms of questions.

But China and the premix market is still a significant growth market.

And when we speak to the Chinese physicians, that doesn't really seem like that's going to change.

So premix is going to be the largest market moving forward.

So how should we think about NovoMix and Ryzodeg in China?

Should we expect cannibalization?

Or could Ryzodeg be a relatively large product stand-alone on top of NovoMix so that you've got a very big mix market in China?

And then my second question is on obesity and the OUS market.

So my understanding is that the OUS market is completely out of pocket today and tell me, correct me if I'm wrong on that, but you guys are obviously growing extremely fast in that region.

When do you actually think you'll start to get reimbursement?

Which regions do you think you'll get reimbursement in first?

And how could the growth rate change considering we've got such fast growth just based on out-of-pocket?

Would you talk to Ryzodeg?

Yes.

I had the privilege, Wimal, of attending the result meeting on the Ryzodeg China study quite some time ago.

But I love seeing results and I remember them typically quite well.

And this set of data were good.

So if you look at NovoMix 30, how that is differentiated versus Mixtard 30, it's actually mostly, to be honest, in the late post-prandial phase where you have less of a shoulder, which gives you less of risk of hypoglycemia, but it's small.

Yet, it's really meant that NovoMix became one of the top products in the Chinese market overall.

Ryzodeg really beat certain parts out of NovoMix in a head-to-head comparison.

So Ryzodeg data, if and -- we've got fast-track approval, if and when we get reimbursement, it is natural for us to be -- just like we're doing with of Tresiba, that this is the new thing.

Do bear in mind that the meal-related component, because they still take in quite a lot of carbohydrates, does call for quite a lot of premix usage in China.

And this is truly 2 different insulins in 1 combination for the first time ever.

So we'll go all in on Ryzodeg when we can based on strong data and a strong label.

Sorry, a follow-up.

Is that -- will there be cannibalization or do you expect...

It's a little bit interesting because when I compare the Ryzodeg data with the Tresiba data, I would actually say the Ryzodeg Chinese data are even better than the Tresiba Chinese data.

But as Lars alluded to, what has happened over the last years is that Sanofi has priced Lantus at a very high level compared to the premixes in China.

So each patient, to my understanding, on a new basal, like Tresiba or Lantus, is actually more valuable to the company than a premix patient.

But we haven't disclosed how Ryzodeg is being priced because Ryzodeg is Tresiba plus, you can argue.

So I think it's more for the commercial folks to work out.

I think just 2 additional data points.

So one, in Japan, we've shown that Ryzodeg can really take over after NovoMix.

So we've seen Japan used, historically, to be a mix market, and we see really strong uptake of Ryzodeg in Japan as one data point.

Another data point is in the Chinese insulin market is growing high single digits in volume currently.

So -- and it's across all 3 segments.

So launching into that market is both launching for the new start, which are, of course, easier to acquire than drive switches.

So that's a benefit.

And then on top of that, with competition pursuing biosimilar mixed insulin, then this is also a way for us to upgrade in the mix segment and compete in the mix segment.

And on obesity, it's correct that outside of U.S., outside North America, it's largely out-of-pocket.

And so it's interesting reflection that Saxenda comes at a relatively high price point because we have linearity in the pricing, yet people find it worthwhile paying for.

So in a lot of settings, we talk about health technology assessments, et cetera.

Here, we actually have the consumer viewing the product saying that this is actually worthwhile paying for.

So there's a massive spend on all kinds of weight management tools, and so there's an established market for that.

There's not an established drug market for weight management because efficacy has not been good.

So we see that one thing that is true actually established obesity as a disease area, and that's probably what it takes to get most, say, advanced economies to then also reimburse for it.

So that's a journey that's ongoing.

So a part of our, say, market-building activities is to create that market.

So establish it as a disease, make sure that physicians are educated in that now there is a medical intervention to obesity.

And of course, we are hopeful that sema obesity, where we'll have some data coming up in a year's time, will further open up for that.

Of course, we're also doing late-stage outcome trials to prove that it's not just about weight management.

It's actually about health management.

So it's a longer -- it's a long horizon that we're building for.

But we believe that we both have the products that can make it a successful journey getting there, but we also have the innovation that can actually be brought into that market when it's fully established.

So it's a strategic commitment for us.

And we can see that others are kind of getting to the same conclusion that it's worthwhile developing products for this because why is it we treat type 2 diabetes?

Why is it we let obesity lead to a number of other diseases when you can actually address that by medical intervention?

So we enjoy the growth, and we keep investing in building for our long term here.

Yes?

It's Keyur Parekh from Goldman.

Three questions, please.

Lars, the first one for you.

Since Novo's inception, the way you think about long-term targets has been pretty consistent.

As you think about the variables -- I think you alluded to this both on the call on Friday and today as well, but as we think about when you revise long-term financial targets for the next cycle, what are the variables we should be thinking of?

Is it still operating profit growth?

Or should we be more focused on kind of top line growth?

Or is there something else beyond that?

That's one.

Secondly, as you think about geographically, do you expect North America to return to growth in 2020 given everything going on?

Or will North America still be a drag on your growth?

Linked with do that, International Operations historically used to be kind of 4% to 6% growth.

First half is 12%.

What should we think of as a sustainable growth rate going forward?

And then lastly, on NovoSeven...

Now we're into a fourth question.

I'll bundle some of the first ones into one answer.

The NovoSeven, I think, Mads, you said on the call on Friday that when you originally guided to down kind of 50% or 50% being at risk, that was under certain assumptions and things have worked out better than you expected with contraindication for fiber and things like that.

So what is the new number as opposed to the minus 50%?

Good.

So you all know that we have already with long-term financial targets for many, many years.

They have been set in a way where we have had an anticipated, say, 4 to 6 years ambition horizon.

And we are approaching the end of that horizon for the past guidance.

But I'll not today give any speculation about what we will do after that.

We are focused on achieving this existing long-term financial targets.

I think we are well on track to do that.

And then we have also announced a Capital Markets Day where we will have a bit more time to explain our extra story and how we look into the future.

In terms of growth, I will not guide for 2020 either.

It's clear that we have 2 segments, 2 major segments of our U.S. business, 1 is the insulin segment, 1 is the GLP-1 segment.

And for years, we have seen a declining price point in the insulins.

And this first 6 months, the value of the insulin market dropped by 12% compared to a year back.

So we have had this trend for years.

I think while there'll also be price pressure next year, I'll not get into speculating the clearly positive momentum we have in the GLP-1 side of things, how well can that mitigate that.

We'll guide on 2020 when we get to the full year.

IO is growing really nicely, 12%.

We have said that underlying growth is 9% to 10%.

And that's what we expect for this year.

So far, knock on wood, this is a year without major -- well, I think we have issues around the world, but we'll not have any major issues from a geopolitical -- of a geopolitical nature that actually impact our business.

I think there are enough challenges around, but not something that has hit us.

So the 9% to 10% should be seen as a run rate this year in a year without major issues.

But, of course, you can think about Iran.

Just mention one country you can talk about trade wars.

I don't think we will be hit by that in short term.

I think we have a China-to-China setup and a U.S.-to-U.

S. setup.

But I think there are enough issues in the world that you can see that level coming down in a year where we're hit by one or more of these events.

But stay tuned for the Capital Markets Day, and then we can give a bit more granularity at how we see the future growth.

NovoSeven?

Yes.

Just quickly.

So I think, Keyur, what we said on Friday or tried to say is that we originally speculated that the HEMLIBRA targetable elements of NovoSeven consumption, i.e., that did not include operative or surgical recovery; did not include acquired hemophilia A; it did not include on-demand, acute bleeds, et cetera.

But the rest, i.e., the prophylaxis part of HEMLIBRA, that was at risk.

It's quite clear now that -- we're not changing guidance, by the way, because we need to understand the data points much better.

But it's quite clear that the slope towards that potential trough level has been softer than expected.

And part of that is, of course, due to the fact, as I think we alluded to, that in real world, HEMLIBRA patients do actually bleed every now and then, and they can only use NovoSeven.

And that is disclosed both by us and by Roche for patient safety.

So that is a positive that we had not predicted in those days.

We've been better and better at educating the medical community that when a patient who's not known to be a hemophiliac but who still bleeds profusely during surgery, during cancer treatment, during parts -- birth or whatever, that should be investigated for acquired hemophilia.

And if that is the case, you need to treat with NovoSeven and we're seeing more of that.

So there are some subtleties that are in favor of NovoSeven.

But we don't understand the whole environment well enough to change the guidance.

We're just happy that it is shown to be more resilient than our original speculation.

And perhaps just adding one point to that.

And you followed our business for a long time.

Just go back to full year last year, NovoSeven sales, down 11% in constant exchange rate.

So it's just the CFO cautioning that the trend is still downwards on NovoSeven.

It looks better, but don't judge it on 2 quarters, including a positive rebate adjustment.

Good.

You've had your hand up a number of times.

So what will be the key topics for the CMD?

And also, would you consider guiding for first-year sales of oral sema as you did for Ozempic?

Yes.

So you're Head of Investor Relations.

So CMD, we'll get back on that one.

So the intention was to -- we put into announcement and so hold the date and then you'll keep the suspense.

But of course, it's exactly explaining our equity story and the outlook for the various business segments where we're in, including our pipeline.

So oral sema, we will come back to that exactly how we communicate about that.

Right now, let's just get the regulatory approval squared off, and then we'll talk about commercialization after that.

Nice picture on oral sema.

Yes.

So as we think about launch into next year, and the market will obsess on IMS launch curves, maybe you'd just talk about what you think is an appropriate benchmark.

SGLT2, volume was very different to GLP-1 and there's lots of reasons for that price positioning.

What's the best benchmark to think about for oral Sema?

And then beyond volume launch, obviously, endgame is sales, but what are your metrics for the organization in terms of payer access, position, feedback surveys, total GLP-1 growth?

How are you orientating the organization ahead of that launch?

And then just one for Mads.

We've talked a lot about hemophilia.

Is gene therapy in hemophilia exciting for you?

Do you think that can be transformational?

So in terms of benchmarks, so of course, the logic benchmarks, you have to look in diabetes goes without saying.

Even when we benchmark our Ozempic performance, then one could say Ozempic, that's simple because then you compare against the latest GLP-1 weekly that's Trulicity.

But is that a fair benchmark or no because the market has changed so much?

So do we benchmark on scripts, where we're like 80% above; or do we benchmark on share and what's the right benchmark?

So for oral semaglutide, of course, the injectables would be one benchmark to look at.

And then the latest kind of SGLT2 launch trajectories would be the other benchmark to look at.

But there's no perfect benchmark because you know the story of Trulicity and when they got access and the phased approach, and the benchmark is a function of both the market size but also kind of the access steps and how that works.

And we haven't gotten to access, and that's not clarified at this point.

So regulatory and then there's the access approach.

And that links into the second part of your question about performance management vis-à-vis the organization.

And in general, in the U.S. organization, then we make people accountable for the performance in -- on which they can influence in the territories.

So they're not accountable for changes either way on formularies.

So if you're like a GLP-1 rep, then if you have a huge formulary win or lose, then that's adjusted in your baseline.

So we take all the -- kind of the pricing contracting market access out of the reps, and it's a very small team that's accountable for that.

And we have done patient, physician and nurse research, obviously, with [active] goal target profiles, including oral sema.

And there, it looks good whether you're in the PCP domain or in the endo domain.

Okay?

And you say we know how to launch products.

We have, based on experience, collect the kind of best practice templates, so we know there's a long list of activities we go through.

And it's really the market-building activities where we make sure that physicians, starting with the key opinion leaders, later on, GPs, but also the medical directors at the payers really understand what is the product about.

So there's a comprehensive plan for how to conduct that.

And of course, right now, we follow -- we reward people based on actually implementing that plan.

And then on hemophilia, so a couple of things, Sachin.

Yes, of course, we are -- everyone is somewhat excited by gene therapy in hemophilia and so are we.

A couple of comments to just start with.

A, the first generation, at least, will only be utilized for people who are adult in body size because, as you know, the gene transcript will be diluted as the liver grows in kids.

So it's more of an adult hemophilia thing.

And do bear in mind that the treating physician, at that point in time, where you're like 18 years old, has typically been in contact with the boy, his family for years because there's a very close relationship over a lifelong experience.

And that means that the point in time where they decide to take a concrete action on a given individual, they will realize that in some ways, they're letting go of the treatment principle because it's a one-off treatment and it's a big decision.

So the things that I, when I talk to the hemophilia specialists here, is that they are looking into the need for steroid therapy.

How good is expression over time?

Does it deteriorate in year 2 and year 3 and so on?

But yet they are, of course, also excited on perhaps the patient having the more -- or more or less bleed-free life if that can be achieved.

So they're really weighing pro and con before they would consider using.

So I don't foresee a dramatic -- because we do have Factor VIII, IX, VII HEMLIBRA, whatnot, available.

So I don't see a dramatic first-generation takeoff overnight, but I think it's coming of age.

And Novo Nordisk is, of course, looking into where could there be opportunities.

I do think the point in time where it will really take off is when you have a nonsteroidal regimen, where you can potentially re-dose if expression levels go down over time, and you have found a payer model that is acceptable to everyone.

So I think there are few things that need to come into place before -- and make the hemophilia specialist totally comfortable about the principle before it will really take off.

Starting the second round.

Mark, you're first, then [Pete].

Just a quick follow-up on the manufacturing site that you recently acquired.

How does that fit into Clayton?

And why did you need that as an external investment as opposed to build it organically?

It fits in perfectly.

So -- no, but it's actually rather simple logic in the sense that we spent this more than $2 billion building the API facility in Clayton, which has enough API capacity for a very, very long time.

So if we run out of capacity on that one, then it's a really, really positive problem.

And then where we then have the bottleneck in terms of scaling for oral sema is on the tableting facility we have in Måløv that some of you saw at the last Capital Markets Day.

So that -- and there's, of course, a lead time from your taking an investment decision until it gets online.

And then we have -- a tableting facility is much simpler type investment.

And then we have this make-by decision where we say either we build it ourselves or we buy something which is not completely finished but like reasonably finished.

And then we got a good deal here, and it's in North Carolina, not far away from our site.

So thereby, there's limited investments required to finalize that as a tableting facility, which will then enable a full U.S.-to-U.

S. supply chain from API to tableting to the market.

And Karsten, if I can just add.

From the R&D perspective, it's a beautiful scenario for R&D to be able to actually liberate the facility that's right in the middle of the discovery campus that today is commercial.

Liberate that for the emerging portfolio of oral biologics that can then actually be made ready for the clinic and then can become kind of a development facility, which is highly needed because we have high aspirations.

Good.

And the final question?

Can I have 2 quick ones?

Yes.

Time line on sort of the higher-yield or lower-volume, however you want to call it, sema.

What's the best-case time line for that coming to market?

And then secondly, would you agree or push back that future innovation be it in diabetes or obesity, however good it is, always come in at a lower price point than we have to now?

Do you still think that there is the ability to innovate with a premium price to current pricing levels in the -- obviously, thinking more about the U.S. than rest of the world?

Yes.

So [Pete], quite frankly, if and when we understand in totality this is the new formulation, it offers this element of increased biopotency, then the trick is actually just to do one regulatory trial where you show that this mimics totally an established dose of oral sema.

So it's not a big deal.

But when you decide to do that trial, you really should feel that you know what dose do you put in that new formulation to make sure -- which by the way, is patentable and whatnot, but to make sure that you hit the endpoint of showing this is similar to the existing product in that you can say clinical trial.

And the short answer is I still believe there's pricing power in the U.S. So there's very interesting and very effective generic erosion of pricing, and you can say that's kind of what we see, in a way, in the insulin space because there's choice.

But if you come with a differentiated molecule, just to pick one, a glucose-sensitive insulin, that would be a game-changer.

And if you look across innovative products being launched in the U.S., there's still being launches made at very high pricing.

So it's a function of the innovation.

So I believe there's, say, some commodity nature around some of the existing products.

But with a differentiated product, there's clearly opportunity to price that at a different point.

Good.

Thank you very much for your time.

I hope that it stopped raining.

Thank you in the -- for the interest in Novo Nordisk, and see you soon in the future.

Thank you.