Memorandum

Novo Nordisk 2Q13 - Diabetes Care revenue up 11%; Victoza up 26%; oral GLP-1 advanced to phase 2; Tresiba CVOT to begin by end of 2013 - August 9, 2013

Executive Highlights

  • Diabetes Care revenue totaled DKK 16.6 billion ($2.9 billion), up a reported 11% from 2Q12 and up 5% sequentially. Modern insulins increased 12% year-over-year to DKK 9.6 billion ($1.7 billion).
  • Sales of Victoza reached DKK 2.9 billion ($504 million) in 2Q13, up a reported 26% from 2Q12 and up 7% sequentially. Victoza currently holds a 69% value share of the global GLP-1 agonist market.
  • Oral GLP-1 agonist OG217SC (NN9924) is expected to advance to phase 2 by the end of the year.
  • Management expects Tresiba’s cardiovascular outcomes trial to commence by the end of 2013, allowing for potential 2016 or 2017 resubmission to the FDA with two to three years of interim data.

Novo Nordisk reported its 2Q13 financial results this morning in a call led by CEO Lars Sorensen.   Global Diabetes Care revenue rose 11% year-over-year to DKK 16.6 billion ($2.9 billion), driven again   by strong sales of modern insulins and Victoza (contributing 50% and 27% of Novo Nordisk’s total sales growth in 1Q13, respectively). Diabetes Care sales rose sequentially by 5%. Novo Nordisk currently   holds an industry-leading 27% value share of the global diabetes market, up from 26% in 1Q13. Sales of modern insulins increased 12% year-over-year and 7% sequentially to DKK 9.6 billion ($1.7 billion). The products – NovoRapid, NovoMix, and Levemir – experienced parallel year-over-year sales growth (ranging from 6-17%) as well as sequential sales growth (4-11%). Sales of Victoza grew a reported 26% year-over-year and 7% sequentially to DKK 2.9 billion ($504 million), driven by sales in the US and Europe. The year-over-year comparison was relatively challenging, as sales grew 83% in 1Q12. The 2Q13 results represent a continued slight slowdown from the tremendous growth seen in previous years (for example, year-over-year growth ranged from 30-83% in the four quarters of 2012). Management explicitly discussed fears concerning incretin therapies, pancreatitis, and pancreatic cancer during its presentation, citing the recent EMA announcement that current evidence does not confirm the suspected association. Nonetheless, during the Q&A, they did acknowledge that the controversy may have had a slight impact on Victoza sales in 1H13. Management did not break out Tresiba (insulin degludec) sales   as we had hoped they would, but did share promising uptake data from the product’s launch in Japan – Tresiba has received broad reimbursement in Japan, Switzerland, and Mexico while reimbursement is, unsurprisingly, more limited in the UK and Denmark.

Novo Nordisk had quite an active quarter in R&D. Management announced plans to advance one of its oral GLP-1 agonists (OG217SC) to phase 2 by the end of the year. For the first time, management disclosed that this compound is an oral formulation of semaglutide. Additionally the path forward for Tresiba’s CVOT has been solidified – the trial is expected to commence by the end of 2013 (and enroll only people with type 2 diabetes), allowing for a potential 2016 or 2017 re-submission to the FDA with interim data (see bullets for trial design details and regulatory requirements). Management provided heaps of new data during the call – the phase 3a SCALE program investigating liraglutide for obesity has concluded. SCALE-Sleep Apnea demonstrated that weight loss associated with liraglutide significantly improved obstructed breathing events (severe obstructive sleep apnea is associated with five-fold increased CV mortality). The presentation elaborated on SCALE-Obesity and Prediabetes results for which topline data were reported in May. Management also disclosed topline results from a phase 1 pump study of ultra-rapid acting insulin FIAsp (NN1218) in which FIAsp provided improvements in postprandial glucose measures. FIAsp should begin phase 3 in 3Q13 – this will be a big deal in our view. In other updates, IDegLira was submitted in Switzerland in June (following the previously announced EU submission in May). Additionally, though not mentioned during the call, a  new phase 3 trial for semaglutide (SUSTAIN 3) has been added to ClinicalTrials.gov (Identifier: NCT01885208) – it will be a head-to-head comparison with BMS/AZ’s once-weekly Bydureon. No updates were provided on Novo Nordisk’s oral insulins, its ultra long-acting insulin LAI287, or liraglutide for type 1 diabetes.

 

 

Financial Updates - Summary

  • Worldwide Diabetes Care revenue in 2Q13 totaled DKK 16.6 billion ($2.9 billion), up 11% on a reported basis (14% in local currencies) from 2Q12. This growth was below the 24% year-over-year (YOY) reported growth observed in 2Q12, albeit from a slightly higher base of DKK 15.0 billion ($2.6 billion), and still quite impressive. Once again, growth was primarily   driven by modern insulins and Victoza (accounting for 50% and 27% of total Novo Nordisk sales growth [including the company’s biopharmaceutical business] in local currencies, respectively). Geographically, growth was strongest in North America (up 23% operationally), China (up 15% operationally though down 6% reported), and the International Operations segment.   Surprisingly, the EU had the second highest reported growth figure. Sequentially, Diabetes Care sales rose 5% in 2Q13 on a reported basis against a fairly easy comparison (1Q13 sales fell 4% sequentially). As with 1Q13, Diabetes Care accounted for an 82% share of total Novo Nordisk’s overall growth. For the third time, the company reported Diabetes Care sales by region (see table below).

Table 1: Diabetes Care revenue by region in 2Q13

Diabetes Care Market

2Q13 Revenue (in billions)

Operational Growth from 2Q12

Reported Growth from 1Q13

Worldwide

DKK 16.6 ($2.9)

14%

5%

North America

DKK 7.8 ($1.4)

23%

10%

Europe

DKK 3.9 ($0.68)

2%

8%

International Operations

 

DKK 2.4 ($0.42)

 

18%

 

0%

Region China

DKK 1.7 ($0.30)

15%

-6%

Japan & Korea

DKK 0.8 ($0.14)

-7%

0%

*The above assumes an exchange rate of 1 DKK to 0.1751 USD.

  • Novo Nordisk currently holds a 27% value share of the global diabetes care market, followed by Sanofi, Merck, and Lilly. Novo Nordisk’s share is a slight increase from its 26% value share in 1Q13. The company has seen steady (albeit modestly paced) share growth over the past ten years. For comparison, Sanofi trails Novo Nordisk with a ~18% share, followed by Merck with a ~16% share (which has risen steeply from zero since Januvia’s launch) and Lilly with a ~12% share (values estimated from the Novo Nordisk’s slides). Both Takeda and BMS have seen steep declines in their market share due to the changing fortunes of Actos and Avandia, respectively – each company currently holds less than 5% share. IMS moving annual total (MAT) data cited in the presentation show that the overall diabetes care market totaled roughly DKK 235 billion (~$41 billion; estimate from slides) as of May 2013. Over the past 10 years, the global diabetes care market has grown at a compound annual growth rate (CAGR) of 10.2%, driven primarily by the strong CAGR of injectables (15.3%) and insulin (13.9%), followed by that of oral antidiabetic medications (6.1%).

 

  • Worldwide sales of Novo Nordisk’s modern insulin products (NovoRapid  [NovoLog], NovoMix, and Levemir) grew 12% YOY on a reported basis (15% in local currencies) to DKK 9.6 billion ($1.7 billion). Sequentially, modern insulin sales rose by 7%. Over the past ten years, the overall insulin market has grown by a CAGR annual rate of 6.5% by volume and 16.2% by value. Management attributed these trends to the increasing penetration of modern insulins and insulin devices. Novo Nordisk’s volume share of the global modern insulin market has held relatively steady over the past five years at around 46%. Overall, in 2Q13, each of the modern insulins saw their slowest quarter of growth since 4Q11 (when growth was 10% as reported YOY), in part due to challenging comparisons against 2Q12.
  • Once again, management provided excellent granularity on the regional performance of their modern insulin franchises. Growth in North America (particularly the US) was the primary driver behind the overall growth in modern insulin sales. As background, Levemir, NovoLog, and NovoMix hold 18%, 48%, and 33% market share in the US within their respective insulin categories. Management also noted that a favorable pricing environment has played a role in the strong US results. During the Q&A session, Novo Nordisk management stated that they are still deciding how to respond to Sanofi’s announcement that US Lantus prices will rise in 2H13. Year-over-year growth for modern insulins was strong in China as well (27% in local currencies), with 97% of sales volume going to devices such as the NovoPen. China sales in 2Q13 totaled DKK 680 million ($119 million). The International Operations segment grew 24% in local currencies from 2Q12 to DKK 1.2 billion ($213 million), driven by all three modern insulins and timing in tenders and shipments. Modern insulin sales in Europe totaled DKK 2.3 billion ($400 million), relatively flat from 2Q12 due to progress for Levemir and NovoRapid that was offset by pricing reforms in several markets. Sales in Japan/Korea showed the poorest performance, falling 4% in local currencies to DKK 526 million ($92 million). Management attributed the decline to stagnancy in the Japanese market as well as a challenging competitive environment.
  • Levemir sales grew 17% on a reported basis (20% in local currencies) from 1Q13 to DKK 2.9 billion ($501 million). This came against a fairly challenging comparison (2Q12 growth was 31% on a reported basis). Sequentially, sales increased 11% on a reported basis, partially due to a relatively easy comparison (sales were down 4% sequentially as reported in 1Q13). Levemir continues to struggle to gain share against other basal insulins (including Sanofi’s Lantus). According to our model, its value share appears to be leveling off around 20%. The EU and US patents for Levemir expire in 2018 and 2019, respectively, according to Novo Nordisk’s supplemental materials.
  • Sales of NovoRapid (NovoLog) increased 11% YOY on a reported basis (15%   in constant currencies) to DKK 4.3 billion (~$750 million). This was the lowest growth figure for the product since 4Q11, but (as with Levemir) it came against a fairly challenging comparison (YOY reported growth in 2Q12 was 25%). As a reminder, both the US and EU patents for NovoRapid expire in 2017, according to Novo Nordisk’s supplemental materials.
  • NovoMix sales grew 6% on a reported basis (10% in local currencies) from 2Q12 to DKK 2.5 billion ($435 million). The product faced a less challenging comparison that the other two modern insulins, as 2Q13 growth was 15% on a reported basis. NovoMix’s patent expires in 2014-2015 in the EU and in 2017 in the US, according to Novo Nordisk’s supplemental materials.

Table 2: Sales of modern insulin by product in 2Q13

 

2Q13 Revenue (in billions)

Reported Growth From

2Q12

1Q13

Novo Nordisk’s Modern Insulins

DKK 9.6 ($1.7)

12%

7%

     NovoRapid

DKK 4.3 ($0.75)

11%

7%

     NovoMix

DKK 2.5 ($0.43)

6%

4%

     Levemir

DKK 2.9 ($0.50)

17%

11%

 *The above assumes an exchange rate of 1 DKK to 0.1751 USD.

  • We were disappointed that Novo Nordisk did not break out sales for Tresiba  (insulin degludec). We remember feeling the same way for liraglutide, years back! Management announced that Tresiba has now launched in Mexico and Switzerland – the product had previously been launched in the UK, Denmark, and Japan. Management noted that the company is pursuing broad reimbursement through the National Insurance Companies in  Mexico, and has gained general reimbursement already in Switzerland and Japan. Management also remarked mentioned that post-launch patient and provider feedback has been encouraging.
  • The company’s presentation did include some non-financial measures of Tresiba’s first 21-week performance on the market in Japan indicating steady progress: according to management, approximately 5,900 providers have prescribed Tresiba (a reported 40% of targeted HCPs), resulting in approximately 29,000 Japanese patients on the product. It has reached 6.8% market share by value, barely surpassing NPH but still shy of the other insulins on the market. The presentation slide deck listed Novo Nordisk’s estimates of the market value for Tresiba in its initial launch countries: Japan was estimated at DKK 1.5 billion (~$260 million),    the UK was estimated at DKK 1.3 billion (~$230 million), and Denmark, Mexico, and Switzerland were each estimated at DKK 0.2 billion (~$35 million).
    • As a reminder, the FDA issued a complete response letter for Tresiba in February 2013 asking for additional cardiovascular safety data – further details can be found in our report here. During Q&A, management noted that the quarter’s performance (as well as the outlook for the rest of the year) would likely have been much rosier if the FDA had approved Tresiba. More often than not, however, management adopted a positive tone about Tresiba — they guided for CVOT initiation in 2H13 that could allow for a resubmission in 2016 or 2017 (see the pipeline section of this report for more details). Given that this is delaying IdegLira (combination GLP-1 and insulin degludec), this is most depressing from our view.
  • Sales of Human Insulins were DKK 2.8 billion ($490 billion) in 2Q13, flat on a reported basis (up 2% in local currencies) from the corresponding quarter last year. Sequentially, worldwide sales were down 2% as reported. Since May 2008, the overall human insulin market has shrunk slightly due to the increased penetration of modern insulins. Novo Nordisk’s share within that market has decreased slightly over the same time period, and now lies at approximately 55% (value estimated from graph). As opposed to other regions, human insulin sales were relatively strong in North America (up 21% as reported and 23% in local currencies). Sales in Japan/Korea continued to be weak, declining 37% as reported from 2Q12. Europe also posted a decrease, with sales declining 9% YOY as reported and in local currencies. Chinese sales were up 5% as reported YOY, and the International Operations segment remained relatively flat.
  • Sales of oral antidiabetic products (NovoNorm, Prandin, and PrandiMet) rose by   4% as reported from 2Q12 to DKK 681 million ($199 million). Sequentially, sales fell 2%. The press release attributed these results to positive pricing impacts in the US, offset by generic competition in several European markets. As background, in June a US appeals court struck   down Novo Nordisk’s patent for Prandin and PrandiMet. If the ruling holds, it will likely pave the way for an influx of generic competition in the US, which we imagine will further detract from Prandin franchise sales in 3Q13 and beyond.
  • Sales of protein-related products rose 4% YOY to DKK 643 million ($133 million). The latter result represented a sequential rise of 6% - we believe this might be due in part to early Tresiba sales, which we speculate may have been included in this category, since sales of NovoRapid, NovoMix, and Levemir add up exactly to total reported sales of modern insulins

Table 3: Sales of human insulins, protein-related products, and oral antidiabetic products.

 

2Q13 Revenue (in millions)

Reported Growth From

2Q12

1Q13

Human Insulins

DKK 2,779 ($487)

-0.1%

-1.6%

Protein-Related Products

DKK 643 ($113)

3.5%

6.1%

Oral Antidiabetic Products

DKK 681 ($119)

4.3%

-1.9%

*The above assumes an exchange rate of 1 DKK to 0.1751 USD.

  • Company Market Share: Novo Nordisk currently holds a 49% volume share of the total insulin market, on par with 1Q13 and 4Q12. The company continues to lead the global modern insulin market with a 46% volume share (on par with 1Q13 and 4Q12), followed by Sanofi with a 35% share and Lilly with an 18% share. 

Table 4: Insulin market by region

Region Value of total insulin market (in billions)

Composition

B=basal; FA=fast-acting; P=premixed

NovoNordisk's Volume Market Share
Global DKK 118 ($21) 43% B / 36% FA / 21% P 49%
North America DKK 76 ($13) 49% B / 37% FA / 14% P 41%
Europe DKK 26 ($4.5) 37% B / 39% FA / 24% P 50%
International Operations DKK 7.8 ($1.4) 28% B / 20% FA / 52% P 56%
Japan and Korea DKK 5.3 ($0.93) 31% B / 37% FA / 32% P 50%
China DKK 4.0 ($0.70) 16% B / 19% FA / 65% P 60%

*The above assumes an exchange rate of 1DKK to 0.1751 USD.

 

Financial Updates - Victoza

  • Sales of Victoza (liraglutide) in 2Q13 totaled DKK 2.9 billion ($504 million), increasing 26% as reported (28% in local currencies) from 2Q12. These results came against a challenging comparison, as 2Q12 YOY growth was a reported 83%, albeit from a lower base of DKK 1.3 billion ($240 million) in 2Q11. Strong double-digit growth was seen across all regions except for Japan & Korea – see our regional sales breakdown below for more details. Sequentially, global Victoza sales were up 7% from DKK 2.7 billion ($470 million) in 1Q13. These 2Q13 results continue the expected gradual slowdown in sales growth we have seen over the past two years for Victoza: YOY growth rates decreased from 340% in 1Q11 to 120% in 4Q11, to 81% in 1Q12, to 29% in 4Q12. Given that Victoza holds 69% of the global GLP-1 value market, we believe that this slowdown may be attributable to the product entering its mature phase. This is not to say that growth for Victoza should plateau: the press release noted that the GLP-1 agonist market continues to expand. In a separate conversation with Novo Nordisk, the company indicated that it expects the GLP-1 market to expand to ~10% of the total diabetes market. The segment’s share of the total diabetes care market grew to 6.6% in May 2013, compared to 5.2% the same time last year.

Table 5: Sales of Victoza by region in 2Q13

  2Q13 Revenue (in millions) Operational Growth from 2Q12 Reported Growth from 1Q13
Worldwide Victoza Sales DKK 2,877 ($504) 28% 7.4%
   North America DKK 1,841 ($322) 29% 7.0%
   Europe DKK 747 ($131) 25% 17.3%
   International Operations DKK 165 ($29) 62% -20.7%
   Japan and Korea DKK 85 ($15) -10% 3.7%
   Region China DKK 39 ($7) 117% 25.8%

*The above assumes an exchange rate of 1 DKK to 0.1751 USD.

  • Novo Nordisk provided an overview of Victoza’s global progress and, for the third time, reported revenue by region (see the above table). As with full-year 2012 and 1Q13, revenue was mainly driven by sales in North America (64% of global Victoza sales in 1H13) and Europe (25% of global Victoza sales in 1H13). The International Operations and China segments posted the largest growth rates (62% and 177% in local currencies, respectively), but from a significantly smaller base.
    • Victoza sales in North America totaled DKK 1.8 billion ($322 million) representing a rise of 27% on a reported basis (29% in local currencies) from 2Q12 and a 7% rise sequentially. North America accounted for 64% of Victoza sales   in 2Q13 and 1H13, and was responsible for approximately two-thirds of the overall growth in Victoza sales in 2Q13. Supplemental materials noted that the GLP-1 class continues to expand in the US – it now represents 8.2% of the total US diabetes care market in terms  of value, according to May 2013 IMS Moving Annual Total data, compared to 6.4% at the same time in 2012. The document also stated that despite the launch of a “competing product” (BMS/AZ’s Bydureon), Victoza continues to drive the expansion of the US GLP-1 market. The product now holds a commanding 65% value market share, compared to   58% one year ago. Supplemental materials stated that Victoza represents “only” 1.4% of total prescriptions in the US diabetes care market, indicating that Novo Nordisk has high hopes for continued sales growth in the US.
    • Victoza sales in Europe rose 25% as reported and in local currencies to DKK 747 million ($131 billion). Sequentially, sales rose 2%. European sales represented 25% of global Victoza sales, up slightly from 24% in 1Q13. Supplemental materials cited strong driving growth in France, the UK, Spain, and Italy. Victoza now holds 78% of the European GLP-1 market, which itself grew to 7.3% of the overall European diabetes care market by value in May 2013 from 5.8% in May 2012 according to IMS Moving Annual Total data. Supplemental materials demonstrate that Victoza commands the GLP-1 market in Germany, UK, and France. Sanofi’s Lyxumia (lixisenatide; also a once-daily GLP-1 agonist) does not seem to have had a significant impact on European Victoza sales. As background, Sanofi launched Lyxumia in Germany and the UK in March of this year — read our coverage of Sanofi’s 2Q13 financial update here.   During Novo Nordisk’s Q&A session, management mentioned that Lyxumia’s market share in Germany is only 3-10% depending on the time intervals being analyzed (Sanofi reported 10.3% weekly volume share in mid-July). Management postulated that the lack of immediate impact on Victoza sales might be because Sanofi is positioning Lyxumia as an add-on to its basal insulin Lantus (insulin glargine), whereas Victoza is positioned more as an add-on to oral antidiabetic agents such as metformin. Regarding Victoza’s performance in Germany, management seemed most concerned by the “disappointing” growth in the overall German GLP-1 market.
    • International Operations accounted for 7% of Victoza sales in 2Q13, growing 57% on a reported basis and 62% in constant currencies to DKK 165 million ($29 million). Similarly to the 4Q12 and 1Q13 updates, management stated that growth was driven by strong performances in Brazil and the Middle East (specific Middle Eastern countries were not specified). Victoza holds a 78% market share of the GLP-1 market by value in the International Operations, according to May 2013 IMS Moving Annual Total data. GLP-1 agonists now represent 2.9% of the total diabetes care market in this  segment.
    • Japan and Korea accounted for 3% of global Victoza revenue in 2Q13. Sales in this region were DKK 85 million ($15 million), down a striking 28% as reported (down 10% in local currencies) from 2Q12. The disparity between the reported and local currency growth figures were due in part to the continued devaluation of the Japanese Yen against the Danish Kroner – management noted that the Yen is currently 21% below its 2012 average exchange rate against the Kroner. Management did not discuss Victoza’s poor performance in the Japan & Korea segment in much depth. We wonder if the upcoming launch of Sanofi’s Lyxumia in Japan will cause further substantial decreases in Victoza sales in the region.
    • China accounted for 1% of Victoza sales in 2Q13. Although sales were up an impressive 117% as reported and in local currencies, the Chinese Victoza market remains fairly modest (DKK 39 million; $7 million). This is largely attributable to the lack of reimbursement for the GLP-1 class in China – the overall GLP-1 market in the country is only 0.6% of the overall diabetes care market. Sequential growth was 26% as reported. As background, Victoza launched in China in September 2011. Management in the past has cited a number of barriers to new product entry in China, including reimbursement challenges, provincial bidding, and individual hospital listings.

Table 6: Market share of the GLP-1 segment and Victoza, by region

 

GLP-1 agonists’ share of the total diabetes care market

(by value)

Victoza’s share  of the GLP-1 market

(by value)

 

May 2013

May 2012

May 2013

May 2012

Global

6.6%

5.2%

69%

64%

US

8.2%

6.4%

65%

58%

Europe

7.3%

5.8%

78%

73%

International Operations*

 

2.9%

 

2.5%

 

78%

 

79%

Japan

2.2%

2.1%

75%

82%

China#

0.6%

0.4%

66%

23%

Data based on IMS May 2013 data

*Data for 12 selected markets representing approximately 60% of diabetes sales in the region

#Data for mainland China, excluding Hong Kong and Taiwan

  • Management explicitly and forthrightly addressed public concern over incretin safety in the presentation segment of the call. Chief Scientific Officer Mads Thomsen  began by noting that the pancreatic safety of the incretin class has been extensively debated in the recent past, citing the NIDDK’s recent workshop on the issue – read our coverage of day one and  day  two of the summit, or our ADA 2013 Incretins Report for Dr. Vanita Aroda’s recap of the meeting. Dr. Thomsen highlighted that the data available at  the summit did not seem to confirm the results of the single study that sparked the controversy (read the study here). He also cited the EMA’s announcement in  July at the conclusion of its review on incretins. In the report, the EMA stated that current evidence did not suggest a link between pancreatic cancer and GLP-1-based drugs – read our take on the announcement.
    • In the Q&A session, management acknowledged that the pancreatitis safety controversy may have had a slight impact on Victoza’s 2H13 sales, but that it may be too early to tell. This represented a step away from the position taken during their 1Q13 update: that public concern had not yet impacted Victoza’s penetration or performance. Management noted that the strong statements made by major agencies and organizations on the issue should begin reducing this effect. They also postulated that the recent flattening-out of DPP-4 inhibitor sales (that some have attributed to these safety concerns) may instead stem from the class’ longevity — the drugs have been on the  market long enough for patients to be failing them and switching to other therapies. The entrance of SGLT-2 inhibitors to the market, in their mind, also makes it difficult to   assess the magnitude of the controversy’s effect on sales. Management’s explicit recognition of the incretin-pancreatitis controversy underscores how pervasive an issue it has become in the public eye and within the medical community. We share management’s optimism that the recent series of announcements by respected authorities should help restore faith in this efficacious class of therapies.

 

Financial Updates - 2013 Outlook

  • Novo Nordisk raised its forecast for sales growth in local currencies from 9-11% (from their 1Q13 update) to 11-13%. The forecast for reported sales growth is now approximately 7-9%, compared to the 6-8% forecast during the 1Q13 update. During the call, management attributed the improved outlook to a more favorable pricing environment in the US than expected, including more favorable rebate adjustments. Robust penetration of Novo Nordisk’s modern insulins, continued steady Victoza performance, and modest anticipated  Tresiba sales are also reflected in this outlook. Management expects these growth drivers to be countered by challenging pricing environments in certain unspecified markets, along with intensified generic competition to its oral antidiabetic agents. Novo Nordisk also raised its  forecast for its 2013 operating profit growth from ~10% in local currencies (5% as reported) to 12- 15% in local currencies (6-9% as reported). The revision reflects anticipated sales from Tresiba  but also the increase in marketing costs and sales staff that the product’s present and future launches will require.
  • Novo Nordisk’s strong performance in the diabetes injectables space has not gone unnoticed. Some of the company’s competitors, including AstraZeneca, discussed Novo Nordisk’s market share growth during their recent 2Q13 earnings calls. They attributed these results to Novo Nordisk’s allocation of marketing resources that were originally intended for a Tresiba launch towards Victoza and modern insulins. They also hinted at increasing their own selling infrastructure and marketing budgets to combat this trend. During the Q&A session, Novo Nordisk management acknowledged this issue: although they understandably did not discuss specifics during the call, they stated that they plan on making the necessary adjustments in their marketing and sales divisions to remain competitive.

 

Pipeline Updates - Tresiba

  • Novo Nordisk announced that the cardiovascular outcomes study (CVOT) for its next-generation basal insulin Tresiba (degludec) is expected to begin by the end of 2013, allowing for a potential 2016 or 2017 re-submission to the FDA. The FDA accepted Novo Nordisk’s proposed trial design that it previously announced: a double-blind, insulin glargine-controlled study, with MACE as the primary outcome. It is expected to be a 7,500-person trial, which is slightly smaller than the enrollment management proposed during its 1Q13 conference call (~9,000). Management expects to re-submit Tresiba with two-to-three year interim data and it expects to adhere to the FDA’s CV guidance for type 2 diabetes drugs: the upper bound of the 95% confidence interval for the hazard ratio (HR) should exclude 1.8 in the interim submission. Additionally, the final results of the trial (which is expected to last four-to-six years) would need to exclude an HR of 1.3.
    • As a reminder, Tresiba received a complete response letter (CRL) from the FDA in February. At the time, Novo Nordisk held a conference call to discuss this development; for details you can read our report.
    • We have learned directly from Novo Nordisk that Tresiba’s CVOT will only enroll people with type 2 diabetes. This is consistent with the company’s proposal during the FDA Advisory Committee meeting for Tresiba for a post-approval CVOT that would only include type 2 diabetes patients. Interestingly, the FDA’s CV meta-analysis for Tresiba found the event rate in the four trials of people with type 1 diabetes to be  generally lower than the event rate amongst people with type 2 diabetes. For more details, read our report on the FDA Advisory Committee meeting.
  • Novo Nordisk also highlighted its ongoing efforts for Tresiba in China – it initiated a trial in June 2013 that is expected to form the basis for regulatory submission with the Chinese FDA. The trial is a 26-week, randomized, open-label, insulin glargine-controlled trial with 800 people in China (ClinicalTrials.gov Identifier: NCT01849289).
  • The FDA appears to be increasingly willing to rely on interim CVOT data to form the basis of approvals. For example, the FDA approved J&J’s SGLT-2 inhibitor Invokana in March based on interim data from its CVOT, CANVAS. Orexigen’s Contrave will also be submitted using interim data from its CVOT, the Light Study. We appreciate that using interim data can help expedite the approval process. However, we are curious whether CVOTs will find it hard to retain participants post-approval or rejection. For example, panelists during the FDA Advisory Committee meeting for Invokana expressed uncertainty as to whether participants would stay in a blinded study rather than simply dropping out of the study and seeking out the approved drug. Conversely, if a drug were to receive a CRL, patients in a blinded study may drop out for fear of exposing themselves to a drug the FDA has deemed unsafe.
  • Tresiba’s US timeline puts it behind Lilly/BI’s and Sanofi’s new insulin glargine formulations and likely behind Lilly’s novel basal insulin analog LY2605541 (PEGylated lispro). Lilly/BI expect to file their insulin glargine formulation in the EU in July and in the US by the end of 2013. Sanofi expects to file its U300 glargine formulation in 1H14. Lilly has not given a submission timeline for LY2605541, but it does expect internal readouts of phase 3 data in 2013. Lilly recently expanded LY2605541’s phase 3 IMAGINE program to include a trial that examines the possibility of flexible dosing (IMAGINE-7), likely as a potential way to stay competitive against Tresiba. Please see our Lilly 1Q13 report for more details.
    • At ADA 2013, Sanofi presented compelling data that its U300 glargine reduced nocturnal hypoglycemic events by 21% compared to Lantus (for details, see here and here of our ADA 2013 Insulin Therapies report. 
    • In phase 2, LY2605541 has demonstrated weight loss (as opposed to the weight gain typically associated with insulin use) and less hypoglycemia compared to Lantus. However, this candidate also led to higher levels of ALT and AST liver enzymes (and non-significant increases in triglycerides), raising potential safety concerns. If the weight loss and potential for flexible dosing are substantiated in phase 3 trials, this would represent a significant step forward for basal insulin therapy.

    • Lilly/BI do not expect to release phase 3 results for their new insulin glargine formulation this year.

Pipeline Updates - IDegLira

  • Novo Nordisk’s basal insulin/GLP-1 agonist fixed-ratio combination product, IDegLira (insulin degludec/liraglutide), was submitted in Switzerland in June 2013. As a reminder, Novo Nordisk submitted IDegLira to the EMA in late May, suggesting it could receive a decision in May 2014 with a standard ~12-month European review cycle.
    • IDegLira remains well ahead of Sanofi’s basal insulin/GLP-1 fixed-ratio combination product, “lixi/lan” (Lyxumia/Lantus) in the EU. However, filing in the US is contingent upon regulatory discussions for Tresiba. Sanofi expects phase 3 for the lixi/lan fixed-ratio device to begin in 1H14. As a reminder, Sanofi had also been working on a fix-flex device that would have allowed for administration of variable Lantus doses at a fixed lixisenatide dose, but a “technical glitch” has set this device back. After Tresiba received its CRL from the FDA, Sanofi decided to focus on the fixed-ratio device  in order to take advantage of the opportunity to be first to market in the US. Sanofi still expressed intentions of eventually mastering the fix-flex device, but as of the company’s 2Q13 update, the fix-flex device no longer shows up in its pipeline.
  • Management recapped DUAL-I data for IDegLira that were presented at ADA 2013. These were some of the most compelling data we saw at ADA this year. After 26 weeks, A1c reduction was 1.9% for IDegLira, 1.4% for degludec, and 1.3% for liraglutide from a baseline of 8.3%. Remarkably, IDegLira participants ended with an average A1c of 6.4%. Furthermore, 81% of IDegLira participants achieved an A1c goal of ≤7%, and 70% reached a ≤6.5% goal. See our ADA 2013 Incretin Report for more details.
  • During its 1Q13 update, Novo Nordisk announced the topline results of the 26-week extension period of DUAL-I. These results confirmed that IDegLira’s benefits persisted to 52 weeks, though with a small amount of attrition in the percentage of people achieving goal. Please see our Novo Nordisk 1Q13 report for more details.
  • Novo Nordisk released results for the other pivotal trial for IDegLira, DUAL-II, in December 2012, which are consistent with DUAL-I results. Please see our December 20, 2012 Closer Look email for more details.

 

Pipeline Updates - Liraglutide for Obesity and for Type 1 Diabetes

  • Management announced that the phase 3a SCALE program has been completed,  with the fourth and final study, SCALE-Sleep Apnea, having concluded within the past six weeks. Novo Nordisk now expects to file liraglutide 3 mg for obesity around the “turn   of the year,” just slightly behind Orexigen’s recently stated plans to submit Contrave in the EU by the end of 2013 and to re-submit to the FDA, with a six-month review, shortly thereafter (also expected by the end of 2013). As a reminder, Vivus’ Qsymia (phentermine/topiramate) and Arena/Eisai’s Belviq (lorcaserin) are both already marketed in the US, but neither has had a positive reception with the EMA’s CHMP (Vivus received a negative opinion, while Arena  withdrew the Belviq MAA). Qsymia, Belviq, and Contrave are all oral agents, while liraglutide is   an injectable. There is plenty of room for differentiation and segmentation in the obesity market – liraglutide’s existing approval for type 2 diabetes may give it an upper hand in the regulatory process. However, the accompanying GI side effects, the need for injections, and public concern over pancreatic safety may be deterrents for patients. While comparisons between trials are inherently difficult, Novo Nordisk believes liraglutide’s efficacy could fall slightly higher than that of Contrave’s (Qsymia is generally accepted to be the most efficacious, and Belviq the least,   though with a good responder population)
  • Management disclosed results of the SCALE-Sleep Apnea study. This was a 32-week trial in 350 people with obesity and obstructive sleep apnea (OSA). OSA is a common obesity co- morbidity, and Novo Nordisk estimates that the prevalence of moderate-to-severe OSA has a 6% prevalence in the US. Untreated severe OSA increases the risk of mortality, with a five-fold increase in cardiovascular mortality. The apnea-hypopnea index (AHI) is a common measure for obstructed breathing events per hour. At a mean baseline AHI of 49, people in the trial treated with liraglutide 3 mg experienced a 12-index-point improvement compared to a six-index-point improvement on placebo. The response was dependent on the degree of weight lost: people who lost 10% or more weight experienced a score reduction of more than 20 index points. Weight loss in this trial was roughly consistent with previous results – from a baseline weight of 117 kg and 119 kg, respectively, people in the liraglutide and placebo arms experienced 32-week weight loss of 5.7% and 1.6%, respectively.
  • Topline results for SCALE-Obesity and Prediabetes were reported in May, and management provided more detailed data during the call. In this trial of people without diabetes who were obese or overweight with comorbidities (n=3,731), people in the liraglutide 3 mg arm achieved an average weight loss of 8.0% compared to 2.6% on placebo after 56 weeks. The proportion of people on liraglutide that achieved ≥5% weight loss was 64% compared to 27% on placebo, and the proportion of people achieving ≥10% weight loss was 33% versus 10% on placebo. Finally, in people that had prediabetes at baseline, 69% of those in the liraglutide arm returned to normoglycemia compared to 33% in the placebo group. Novo Nordisk reports that withdrawal due to adverse events was <10% in both groups and that the 56-week completion rate was 72% for liraglutide and 64% for placebo. As would be expected, these results are better than SCALE-Diabetes results, as it is often harder for people with diabetes to lose weight due to the negative effect on body weight associated with improved glucose control.
  • In the past, management has stated that it does not expect the requirement for a pre-approval cardiovascular outcomes trial, though from comments in Q&A, it seems that this discussion may still be up in the air. Nonetheless, management expressed great certainty that pooled data from liraglutide’s clinical trial program would very clearly demonstrate CV safety.
  • As a reminder, the other two SCALE studies were SCALE-Maintenance and SCALE- Diabetes. SCALE-Maintenance was not a traditional weight loss trial and was conducted back in 2010. It showed that in obese people without diabetes who were able to achieve 5% weight loss on diet and exercise, liraglutide treatment subsequently provided an additional ~6% weight loss compared with 0.05% on placebo after 56 weeks. SCALE-Diabetes completed in 1Q13 and reported a 6% body weight reduction on liraglutide 3.0 mg compared to 2% on placebo after 56 weeks.
  • Weight loss in the SCALE program should meet the FDA’s categorical requirement for obesity drugs (the percentage of on-drug participants who achieve >5% weight loss must   be ≥35% and at least twice the percentage of people on placebo achieving >5% weight loss). For background, the other option for fulfilling the FDA’s obesity drug efficacy requirement is for mean placebo-adjusted weight loss to be >5% from baseline (the continuous requirement).
  • While management did not mention liraglutide for type 1 diabetes (LATIN T1D; NN9211), ADA 2013 featured a poster presenting phase 1 results on the use of liraglutide in type 1 diabetes (1007-P; ClinicalTrials.gov Identifier: NCT0153665). In this trial, liraglutide 1.2 mg and 1.8 mg significantly reduced patients’ insulin dose requirement, while the 0.6 mg dose did not. All three doses brought about significant weight reductions. Please see our ADA 2013 Incretins Report for more details.
  • The phase 3a trial for liraglutide in type 1 diabetes is expected to begin in December 2013 (ADJUNCT ONE, Identifier: NCT01836523). According to ClinicalTrials.gov, the trial is expected to randomize 1,404 people with type 1 diabetes to liraglutide 0.6 mg, liraglutide 1.2  mg, liraglutide 1.8 mg, 0.6 mg placebo, 1.2 mg placebo, or 1.8 mg placebo as an adjunct to their pre-trial insulin regimen. For greater detail on the study design, please see our Novo Nordisk 1Q13 report. The study is expected to end in January 2015; details on any other phase 3 trials that may be included in the ADJUNCT program have yet to be disclosed, but if completion timing is similar, this could allow Novo Nordisk to potentially file for  a type 1 diabetes indication in 2015. In the past, management has forecast an end-of-2016 approval should everything go as planned.
  • As a reminder, in Novo Nordisk’s 4Q12 financial update, management discussed topline results of the phase 1 trial investigating the pharmacology of liraglutide in conjunction with insulin for patients with type 1 diabetes. The study demonstrated that liraglutide did not compromise the glucagon response during hypoglycemia or other counter-regulatory responses – this had been a potential concern given that GLP-1 analogs reduce the elevated glucagon levels observed in both type 1 and type 2 diabetes. In addition, liraglutide decreased type 1 patients’ daily insulin requirement and body weight in a dose-dependent manner over the four-week trial. Furthermore, management stated that CGM data suggest that using liraglutide in type 1 diabetes may improve time-in-zone. They also noted that the safety profile was similar to that seen in patients with type 2 diabetes. We hope to see these results substantiated in phase 3.

 

Pipeline Updates - Long-acting Oral GLP-1 Agents

  • Excitingly, Novo Nordisk announced plans to advance the oral GLP-1 agonist OG217SC (NN9924) into phase 2 by the end of the year. Management announced for the first time that OG217SC is an oral formulation of semaglutide, which the company is currently investigating in phase 3 trials as a once-weekly injectable GLP-1 agonist. During Q&A, management remarked that with its week-long half life, daily oral administration of low doses would buffer against variations in bioavailability. Additionally, during Q&A, management  disclosed that the size of the tablet is no larger than that of a painkiller. For background, OG217SC uses Emisphere’s Eligen as the carrier technology to transport the peptide from the stomach into systemic  circulation.
  • Management disclosed topline phase 1 results for the compound suggesting that its efficacy is on par with that of injectable Victoza: In a 10-week multiple dose trial, oral administration of OG217SC was associated with a significantly greater degree of weight loss than placebo in healthy volunteers and people with type 2 diabetes. Additionally, in the very small number of people with type 2 diabetes in the trial (n=10), OG217SC provided a statistically significant improvement in A1c compared to placebo. During Q&A, management remarked that even though the type 2 diabetes study participants had a relatively low baseline A1c of 8.0%, the degree of A1c reduction was still on par with the best A1c reductions achieved with Victoza, which seems quite impressive.
  • In Q&A, management suggested that it may be able to take small short-cuts with OG217SC since it is already conducting a full clinical trial program for once-weekly injectable semaglutide.
  • Management also announced that another of its oral GLP-1 candidates, OG217GT (NN9928), achieved its first human dose in May 2013. This compound is also semaglutide-based and uses Merrion’s GIPET carrier, a different carrier technology than OG217SC, to deliver the peptide from the stomach to the blood stream.
  • Novo Nordisk also has two other long-acting oral GLP-1 agonists in development: OG987SC (NN9927; Eligen technology; completed phase 1 single dose trial), OG987GT (NN9926; GIPET technology; completed phase 1 single dose trial).
  • Since injection represents a major barrier for GLP-1 agonist adoption, we imagine that an oral option could be transformational. Several other companies are also exploring the possibility of oral GLP-1 delivery, or, in Intarcia’s case, an implantable continuous delivery device. Other companies with oral GLP-1 agonists in development include Transtech (TTP054, phase 2), Oramed (ORMD-0901, an exenatide capsule; phase 2), Zydus Cadila (ZYOG1; phase 1), Arisaph (preclinical nasal and oral candidates), Poxel (discovery phase), Heptares (discovery phase oral small-molecule GLP-1 receptor agonist), Arisgen (oral and sublingual exendin-4, preclinical). Intarcia’s ITCA-650 is a once- or twice-yearly implantable osmotic minipump that began phase 3 studies in March.

 

Pipeline Updates - FIAsp

  • Management announced topline results from an exploratory phase 1 pump study   for the ultra-rapid acting insulin FIAsp (NN1218). The double-blind, crossover study was completed in June 2013. It investigated continuous subcutaneous infusion of FIAsp and Novolog (insulin aspart) in 42 people with type 1 diabetes. Patients experienced significantly better glucose control during the first two hours after a meal test on the last day of each 14-day treatment period. FIAsp also conferred a reduction in post-prandial glucose excursions throughout the trial (as monitored by blinded CGM), and at the final meal tests. Finally, people experienced a numerically lower rate of hypoglycemia on FIAsp than Novolog – we imagine that larger numbers are needed  to assess statistical significance. Novo Nordisk reports that both FIAsp and Novolog were well- tolerated, safe, and showed good pump compatibility.
  • Management confirmed that the phase 3 program for FIAsp, named “onset,” is expected to begin in 3Q13 and will include ~3,000 people with type 1 or type 2 diabetes.
    • While Novo Nordisk has not discussed details of the onset program, it posted trial details for onset 1 and onset 2 in the spring of 2013. Onset 1 will evaluate safety and efficacy of FIAsp compared to insulin aspart (Novolog) when either is co- administered with insulin detemir (Levemir) in adults with type 1 diabetes. It will also examine the possibility of post-meal prandial insulin administration (estimated primary completion in May 2015; ClinicalTrials.gov Identifier: NCT01831765). Onset 2 will evaluate safety and efficacy of FIAsp compared to insulin aspart when either is co- administered with insulin glargine and metformin in adults with type 2 diabetes (primary completion October 2014; ClinicalTrials.gov Identifier: NCT01819129).
    • According to ClinicalTrials.gov, a third phase 3 trial will investigate FIAsp as part of basal/bolus therapy compared to basal insulin alone, when either is added to metformin therapy in people with type 2 diabetes (ClinicalTrials.gov Identifier: NCT01850615). This trial is slated to begin in September 2013 and end in August 2014.
    • The early-2015 completion date for onset 1 places a potential regulatory submission around mid-to-late-2015 at the earliest if other trials in the onset program complete around the same time or earlier. FDA resubmission for Mannkind’s Afrezza is expected in September or October 2013. Halozyme’s Hylenex (for pre-administration prior to insulin pump infusion set insertion) is in a currently enrolling a phase 4 study, with significant revenue contribution expected by the end of 2014. Halozyme also has a coformulation of PH20 and rapid-acting analogs that is “phase 3 ready,” and phase 2 data for Biodel’s ultra-rapid-acting recombinant human insulin BIOD-123 is expected in 3Q13.
  • Since the rapidity of insulin action has been one major barrier to the development  of closed-loop systems, FIAsp could help accelerate these efforts, as it would be the   first injectable ultra-fast-acting insulin to market should it be approved (it would be behind MannKind/Affreza’s ultra-fast-acting inhalable human insulins). We enthusiastically await faster- onset insulin analogs, as we imagine they could also dramatically improve glucose control and adherence to insulin regimens over currently available analogs.

 

Pipeline Updates - Remaining Pipeline Candidates (Semaglutide, Oral Insulins, Other Early-Stage Insulins)

  • Although management did not mention its phase 3 once-weekly GLP-1 agonist semaglutide during the call, ClinicalTrials.gov shows that a new phase 3 trial has been added (SUSTAIN 3; Identifier: NCT01885208). This 56-week trial will compare semaglutide head-to-head with BMS/AZ’s Bydureon (exenatide once weekly) as an add-on to one or two oral antidiabetic agents in people with type 2 diabetes (expected enrollment = 798). The trial is expected to begin in December 2013 and end in July 2015.
  • As a reminder, Novo Nordisk commenced semaglutide’s first phase 3a trial, SUSTAIN 6 (a cardiovascular outcomes trial), in February 2013. The trial will investigate semaglutide 1.0 mg and 0.5 mg over 104-143 weeks in 3,260 people with type 2 diabetes. The primary endpoint will be time to first MACE (CV death, nonfatal stroke, and nonfatal myocardial infarction). The trial is expected to finish in January 2016 (ClinicalTrials.gov Identifier:  NCT01720446).
  • Please see our Novo Nordisk 1Q13 report for phase 2 data and details on the company’s decision to carry forward the 1.0 mg dose to phase 3.
  • Several other GLP-1 agonists have been recently launched, filed, or are expected to be filed in 2013: Sanofi’s Lyxumia has already launched in Europe, and Sanofi confirmed in January that it had filed Lyxumia with the FDA. GSK filed albiglutide to the FDA in January (the PDUFA date was recently extended by three months to April, 15 2014) and to the EMA in March. Lilly released fairly strong detailed phase 3 data for dulaglutide at ADA 2013 and plans to potentially file dulaglutide in 2013 as well. Other GLP-1 agonists in late-stage development include BMS/AZ’s Bydureon dual-chambered pen (3Q13 submission expected), BMS/AZ’s once- weekly exenatide suspension formulation (phase 3 initiated in 1Q13), Intarcia’s once- or twice- yearly exenatide osmotic minipump ITCA-650 (phase 3 initiated in March 2013), and PhaseBio’s Glymera (phase 2b).
  • Semaglutide could be as late as seventh or eighth to market (the fourth once-weekly and potentially following once- or twice-yearly ITCA-650), though its efficacy profile could offer a significant point of differentiation amongst once-weekly agents. As in the past, management speculated in Q&A that dulaglutide will show similar efficacy to Victoza  with perhaps lower body weight reductions in Lilly’s head-to-head trial. If ITCA-650 comes to market before semaglutide, we could see semaglutide facing significant challenges due to ITCA- 650’s potential efficacy and usability advantages. Intarcia forecasts A1c reductions of ~1.8% in phase 3 for ITCA-650, which is higher than has been seen in trials of injectable GLP-1 agonists. The ITCA-650 phase 3 program is examining 40 mcg/day and 60 mcg/day doses, which both conferred >3 kg (6.6 lb) weight loss in phase 2 trials. Perhaps even more importantly, the ITCA- 650 osmotic pump delivery device would eliminate the need for injections. Albiglutide’s phase 3 Harmony 7 study showed that albiglutide led to smaller improvements in A1c and weight compared to liraglutide, but was more tolerable – given that semaglutide was chosen for its presumptive superiority over once-daily liraglutide, it appears likely that it will present a more favorable profile than albiglutide, barring any serious safety/tolerability issues.
  • Management did not provide updates on its oral insulins. Novo Nordisk has three basal insulins in phase 1: OI287GT (NN1956), OI362GT (NN1954) and OI338GT (NN1953). The first phase 1 trial for OI287GT started in March and will investigate the safety, tolerability, and PK/PD of single doses of OI287GT in 84 healthy volunteers (ClinicalTrials.gov Identifier: NCT01809184). Both OI362GT and OI338GT have each completed a phase 1 safety, tolerability, and PK/PD study in healthy volunteers. According to ClinicalTrials.gov, OI338GT is now in a second ongoing phase  1 trial for safety, tolerability, and PK/PD in people with type 2 diabetes (Identifier:  NCT01796366). All three candidates utilize Merrion Pharmaceuticals’ GIPET oral delivery technology. In November 2008, Novo Nordisk signed a development and licensing agreement  with Merrion for the development and commercialization of oral insulin, in particular the   prandial oral insulin NN1952 (which has been discontinued). Novo Nordisk also has an ongoing agreement with Emisphere for its Eligen technology for oral drug delivery.
  • Biocon, Aphios, Oramed, Tamarisk, and others are also working on oral insulins. Our complete overview of the oral insulin landscape as of the end of 2012 is available here. Since publication of this oral insulin overview, a re-analysis of Generex’s Oral-lyn phase 3 “084 trial” showed that Oral-lyn failed to demonstrate non-inferiority to human insulin. To date the field has been full of challenges, with no particularly promising candidates standing out at this time, save for MannKind’s phase 3 inhalable buccal insulin, Afrezza, about which we are increasingly optimistic as an alternative and which we do believe will be FDA approved.
  • Management did not mention Novo Nordisk’s novel long-acting insulin, LAI287 (NN1436), which has the potential for once-weekly dosing and, according to ClinicalTrials.gov, completed its phase 1 trial in July, one month ahead of schedule. The trial was conducted in healthy volunteers and people with type 1 diabetes (ClinicalTrials.gov Identifier: NCT01730014). When previously asked about how LAI287 was engineered, management stated only that it was an analog (i.e., the primary amino acid sequence of the  human insulin backbone has been modified) with an attached side chain that promotes stability – we understand that this is also the case for degludec, so we remain curious how, specifically, LAI287 is able to achieve such a long half life.

 

Questions and Answers

Q: I was wondering if you could give us an idea of the amount of GLP-1 that’s going into  each tablet relative to the injectable form, and an idea maybe of how big the tablet is at this point. Also, could you just clarify that and confirm my understanding that the A1c drop and weight loss are fully on par with injectable GLP-1 (about 1% A1c drop) and is certainly  larger than a DPP-4? Secondly, what have you seen so far commercially in terms of an impact of the incremental competition on Victoza in Germany?

A: Semaglutide has been chosen based on a very long intravenous half-life. Once it is absorbed, it will have a half-life of a whole week, yet we are administering the tablets on a daily basis to counteract the swings in bioavailability from day to day, actually allowing a surprisingly consistent profile over time. So the size of the tablet is slightly smaller than the average painkiller. The patients are expected to receive one tablet daily. In terms of efficacy, even though patients came in with a relatively low baseline A1c level (below the 8% range) both the weight loss and the A1c decrease were fully aligned with some of the best that we’ve seen in the liraglutide trials. They experienced an A1c drop of 1% and a substantial weight loss,   particularly considering the trial duration of only slightly more than 2 months. Now moving on to the competition in Germany from Lyxumia, we have not seen any changes in the Novo Nordisk market share on Victoza. It seems like Lyxumia is primarily coming from switches from exenatide and Bydureon and the market share so far based on weekly data is falling around 10% and monthly data is around 3-4%. So no major impact on Victoza in Germany. However, the GLP-1 market in Germany is developing in a very disappointing way.

Q: Regarding the GLP-1 market growth, you have said on media calls that you see some impact on the growth from the incretin scare. Do you think that will reverse or how do you actually expect that market to change over the next 6-12 months?

A: We tend to agree that there might have been a slight impact on this. First off, despite the negative publicity on pancreatic safety, the agencies have come out with small statements, the effect of which, if  any, should be to wash off this negativity. If we look at the whole incretin stage, it looks like DPP-4s have flattened out. This could be because the patients start to fail on DPP-4 treatment and need something else, it could be because SGLT-2s have come into the market, or something else. This is difficult to really assess this going forward, but we believe that there have been some minor negative effects.

Q: On oral semaglutide [OG217SC], thinking about potential timing to market, would you consider a faster phase 3 study referencing the data package of the injectable formulation, or would it be a full phase 3 program, including a CV study? My second question is on US insulin pricing. I understand Lantus had a 15% price increase this week. Assuming you would follow, can you clarify what US pricing would be for the rest of this year and your broader expectations since US insulin pricing has remained stronger than we all thought?

A: We are initiating phase 2 towards the end of the year, so in the guiding meetings with the agencies we have yet to discuss if we can use the current CV program that is currently already ongoing for the phase 3 subcutaneous semaglutide, or if we need to conduct a new study. As a company, we are dedicated to utilizing the existing safety data for the new active substance known as semaglutide. I was happy about   the promising qualities that semaglutide has as a result of its stable molecular structure, meaning that there are a lot of things that do not have to be done. Obviously, we will seek to find the shortcuts that you can do now and then, but often these are not doable in the era of protein-based type 2 therapies. However, we would also do a conventional phase 2 followed by an adequately sized phase 3. 

Our competitors have raised the price of Lantus in the United States, but we have not decided how we are going to respond to that. Our guidance that you have just gotten did not include any significant price increases for Levemir for the second half of the year.

Q: On the Tresiba cardiovascular outcomes study, can you confirm that in your discussions with the FDA, they actually agreed to the submission of the interim analysis? Secondly, when you talk about more positive pricing, is that actually your ability to put up the list price more than you thought, or is that the retention of net prices more than you thought – i.e. is it related to the rebates that you benefited from in Q2?

A: In reality, the agreement with the FDA is somewhat reminiscent of the case for classic non-insulin diabetes products in that you agree to an interim analysis, such that if this one falls out with a reassuring endpoint estimate and the confidence intervals that live up to certain criteria, then you submit on that. If you cannot come up with such data, then you go to the very end and our hope is to submit an interim and then have a definitive assessment post-approval in the full amount of maintenance that is specified. On pricing, let me repeat that what has happened is that our competitors have raised the list price. What the net take home price will be is dependent on which channels they sell their products to and hence which kind of rebates they offer to these different channels – i.e. where the patients come from that will buy these products. Typically, the list price increase is higher, and some is paid back to the distribution channels. In a way, you can say that none of it has to do with the rebates as such, that it more has to do with the fact that we got clarity on some states’ rebates and some programs that allows us to calculate these. As a result, we were more conservative on these rebates than what they actually were, and hence we could reverse that as part of it. This had nothing to do with the price increase from the competition.

Q: On a number of your competitors’ Q2 calls, they said that they are investing in further selling infrastructure in injectable diabetes, and many of them have blamed you for retaining the Tresiba infrastructure, pushing them to spend more to keep their share of voice. In your projections for the second half of the year, have you assumed that competition is going to increase? Additionally, as you see others add reps, are you comfortable with your current US selling infrastructure or do you think you will have to counter with more hires of your own? Secondly, it seems, through a comment attributed to management, that you have not been approached for a formal investigation in China associated with the issues related to GSK and selling practices. Can you confirm whether or not you have been informally approached? Do you remain confident that your compliance infrastructure within China is sufficient to mean we won’t see any similar problems with Novo?

A: In response to your first question, this is correct. We see the markets responding to that, so that’s fine. We will make the necessary adjustments to our sales process as we see fit. I can assure you that we have one of the largest sales forces in the United States, and we want to remain competitive. Just from the point that we need to push the portfolio far, which has been on the market, we will want to stay competitive and will modify the sales force accordingly. In terms of China, I can confirm what has been said in the newswires. We were contacted on August 1 by the local authorities in Tianjin where we have our factory. They do contact companies on a regular basis to idnquire about business and to submit numbers for them to control the margins. It has not been disclosed to us that we are part of a formal investigation, and we have no knowledge that we should be. Having said that, I would not be surprised if there were to be an industry-wide investigation from the GSK situation  and that we would be contacted. We have been one of the first companies to invest in China; we have been operating in China for many years. I have to sadly remind everyone that we had a situation where we were required to significantly improve our compliance programs globally because we had a deferred  prosecution agreement with the DOJ in the United States. Consequently, we have been overhauling our compliance programs, including those in China. With the knowledge we have today around our company and GSK, we feel confident that we have a program where we have a good control of the sales marketing practice in China and we will work with the authorities on any questions they may have.

Q: Perhaps this is a quarter too early, but as we think about some of the changes likely in the marketplace over the next couple of years, can you help us see the pushes and pulls on the line in 2014? Secondly, as you think about upcoming data for dulaglutide how do you think that data pans out for Victoza and how do you assess the odds for dulaglutide showing the superiority in the head-to-head trial versus Victoza?

A: You are right, it is a bit early for 2014. Of course there are a number of moving parts. We see more or less 2014 as a normal year, but we will draw attention to the fact that in 2013 we will have three quarters  of the year with Prandin. That will likely be gone next year. We have good momentum behind our modern insulins. We still have to see if there will be a short-term reversible negative impact of pancreatic safety issue on Victoza and other similar products. As usual we will be starting to give you some color on it when we do our Q3 call and you’ll get more final one when we announce final year results. I hope you can bear with us, but it looks like more business as usual for 2014. Obviously if we had Tresiba, the world would have been rosier. Of course that’s why we will start the CV trial: to see if we can have Tresiba on the market, but it will certainly not be in 2014. Dulaglutide is clearly, as we see it being a human GLP-1 analog in disposable device, the one we’re looking out for. In terms of the head on comparator trial that is ongoing, the likelihood that either will show A1c superiority is probably modest because my  understanding is that the non-inferiority criteria for A1c is 0.4% cutoff – a relatively useful and clinically meaningful difference. The likelihood that anyone will show superiority on the primary endpoint is rather low. My expectation with respect to body weight – based on what I’ve seen from phase 2 and limited  phase 3, suggests that liraglutide seems to hold the upper hand in terms body weight. This is probably related to dulaglutide’s large molecular size and hence difficult permeation of the blood-brain barrier compared to liraglutide. In terms of CV risk markers, we know liraglutide has a very consistent ability to lower systolic blood pressure, which is more debated at the time for dulaglutide. You’re quite right in stating that dulaglutide is the one we’re looking out for.

Q: How should we think about getting further clarity on whether FDA requires a CV study for pre-approval Victoza obesity? I know we’re waiting for guidelines to be published. If they are published before the year-end, would the FDA communicate to you if you can file or would we have to wait for the PDUFA? You spent a lot of time talking about the price market for the US basal insulins, could you give us your thoughts on how the outlook for the basal market has changed with the topline data we’ve seen for [Sanofi’s] U300 and the potential beyond the market with that product in 2015?

A: This has been an ongoing dialogue with many exchanges with the Agency. There are a number of meta- analyses, both ones where you lump together the LEAD trials on blood glucose regulation in type 2 diabetes with the SCALE program, such that you have a grand meta-analysis of liraglutide versus all other comparators as well as more specific phase 3 scale-oriented meta-analysis across the trials there. That is what is assessed to be part of the package and approval criteria. Now that we do have all the data at hand, we can fully confirm that being a GLP-1 agent, we are seeing point estimates below 1.0 as you would expect, applying also to the obese population. So on the CV side, I think we have a good proposition and  we are following the delineated package put forth by agency.

In 2015, I think, for patients and suppliers, innovation is good. Sanofi coming out with U300 with unique selling points, which will be stabilizing for the future pricing environment in US better than Lantus. We would hope that Lilly comes out with similar innovations of their own because then we’ll have a much firmer price level than if we had a Sanofi with no U300 and Lilly with a basal, biosimilar glargine in marketplace. From that perspective it’s positive. If you asked Mads Krogsgaard, he would probably say  that the selling benefits of U300 are not flabbergasting. We believe Tresiba would be a better product than the U300 and we would be in a better position when it hopefully gets to the marketplace.

Q: On NovoSeven, which had a strong quarter, should we have to fear that we have some weak figures for the second half?

A: We have been spectacularly poor at forecasting the quarterly sales of NovoSeven, and the first two quarters were very strong. Our guide includes the numbers of a different magnitude than what we saw in the first quarter. We expect it to go back to normal in the second half of the year. It is difficult to predict, but we are cautious in our guidance for the second half of the year. With that, ladies and gentlemen, thank you very much for listening!

 

-- by Manu Venkat, Jessica Dong, and Kelly Close