Novo Nordisk Capital Markets Day 2017 – GLP-1 remains a major focus for diabetes and adjacent indications; “Ozempic” intended brand name for once-weekly GLP-1 semaglutide; Details on phase 3 program for semaglutide in obesity + new CVOT! – November 22, 2017

Novo Nordisk hosted its bi-annual Capital Markets Day at its R&D campus in Måløv, Denmark yesterday. The day was packed with updates across ten diabetes-related presentations, all linked here, encompassing everything from overall R&D strategy shifts, to updates on the company’s insulin and both injectable and oral GLP-1 agonist portfolios, updates by region (US, International Operations, and China), and much more. This is truly a gold mine of information, and we applaud Novo Nordisk’s transparency – scroll down for a transcript of the most interesting Q&A's! Read on for our top highlights from the update, and for a blast from the past, take a look at our coverage of Novo Nordisk’s 2015 Capital Markets Day – boy have  the diabetes field and Novo Nordisk advanced since then!

Top Five Highlights

1. Novo Nordisk’s New R&D Strategy Seeks to Strengthen Leadership in Diabetes/Obesity and Expand to Adjacent Indications in CV Disease, NASH, CKD; Emphasis on “Raising the Bar” for R&D, Innovative Contracting, RWE

Chief Science Officer Dr. Mads Thomsen listed key priorities of Novo Nordisk’s new R&D strategy for 2017 and beyond, first announced during the company’s 3Q16 update:

• (i) Strengthen leadership in diabetes with continued innovation in insulin and GLP-1 (greater clinical benefit, more patient-friendly delivery) as well as novel therapy classes.
• (ii) Strengthen leadership in obesity by developing biologics for use as monotherapy or in combination with GLP-1 agonists; surpass the ambitious target of >15% weight loss set by semaglutide in phase 2.
• (iii) Expand into diabetes/obesity-adjacent indications such as NASH, CV disease, and chronic kidney disease (CKD); leverage the company’s existing GLP-1 agonist portfolio as well as internal candidates and licensed external candidates. Very notably, GLP-1 agonists are a key component of each priority. This signals to us that Novo Nordisk is confident in this drug class as a future mainstay of diabetes care (we can’t wait for these days – only ~7% of second-line type 2 diabetes prescriptions in the US were for GLP-1 agonists in 2016 although Victoza did become Novo Nordisk’s top-selling product quite awhile ago), and as a potential therapeutic for other diseases, given its efficacy not only in glucose-lowering, but also weight loss, CV risk reduction, renal protection, etc. Much more on this in highlight #2 below.

Dr. Thomsen emphasized that Novo Nordisk’s goal is to “raise the bar” for innovation in each of these therapeutic areas. He pointed to a particular opportunity in the GLP-1 agonist class – Victoza (liraglutide) is the first GLP-1 agent to have a CV indication on its product label, and semaglutide has shown best-in-class efficacy in the SUSTAIN program, including superiority head-to-head vs. AZ’s Bydureon (exenatide once-weekly) and Lilly’s Trulicity (dulaglutide once-weekly). With these milestones achieved, Novo Nordisk is poised to further disrupt the market with adherence-friendly oral GLP-1 formulations as well (oral semaglutide). Turning to insulin, Dr. Thomsen claimed that Tresiba is “pretty much as good as it gets for basal,” meaning this particular sector of the insulin market is unlikely to experience any more truly disruptive improvements. This echoes Dr. Thomsen’s commentary from a recent WSJ interview, when he explained why diabetes companies can no longer count on rising insulin profits to fuel growth (because the public perceives incremental rather than disruptive change). That said, he foreshadowed during Capital Markets Day that the future will hold an entirely new generation of insulins, including liver-preferential insulin and once-weekly insulin, both of which are currently in Novo Nordisk’s phase 1 pipeline. Lastly, the company is raising the bar in diabetes drug development by pursuing novel targets/mechanisms of action. Senior VP of Global Research Dr. Peter Kurtzhals highlighted phase 1 PYY1562 for type 1 and type 2 diabetes (though no studies appear on ClinicalTrials.gov, as of Capital Markets Day 2017), phase 2 anti-IL-21/liraglutide for beta cell preservation in newly-diagnosed type 1 diabetes, and early-stage projects in stem cell research for type 1. According to Dr. Kurtzhals, each of these ongoing projects could result in an entirely new class of therapy (we’re also excited about PYY agonists for obesity, which Novo Nordisk has in phase 1, given the natural course of this gut peptide post-bariatric surgery). See below for a complete rundown of Novo Nordisk’s diabetes/obesity-relevant pipeline.

• Dr. Kurtzhals presented side-by-side pie charts to show shifts in Novo Nordisk’s R&D resource allocation from 2012 to 2017, with a notable rise in spending on obesity research, from ~10% to ~40% and now on par with diabetes (slide 12). Other chronic diseases (e.g. NASH, CV disease, CKD) accounted for 0% of R&D spending in 2012, but now capture ~10% in 2017. Dr. Thomsen framed this shift in terms of the large opportunity that exists in CV disease, NASH, and CKD – these are areas of high unmet need with sizeable patient populations (~420 million, ~15-40 million, and ~200 million people globally, respectively). Dr. Thomsen remarked that ~20 million people die annually from CV causes, a number on par with cancer. Despite the wide array of existing CV drugs, these mortality rates leave ample opportunity for improvement. For NASH and CKD, unmet medical need lies in the scarcity of available treatment methods: There are zero therapies approved for NASH (though several are in phase 3), and no new CKD therapies have been approved in the past 17 years (the most recent being irbesartan and losartan in 2000). Both of these disease states involve very low diagnosis rates (only 4%-20% for NASH and ~20% for CKD) likely due to the scarcity of available treatment methods and the fact that both conditions involve a prolonged asymptomatic period. NASH diagnosis involves the additional hurdle of an invasive, expensive liver biopsy. In a strategic sense, Dr. Thomsen noted that it is “serendipitous” that all three of these additional chronic diseases heavily overlap with the diabetes and obesity population, expanding the current patient base that Novo Nordisk knows so well. He shared that >70% of people with diabetes die from atherosclerotic CV disease, and 40% of heart failure hospitalizations involve people with diabetes. As many as 40% of diabetes patients will experience nephropathy, and 50% of people with CKD also have obesity. Furthermore, it is estimated that a sizeable fraction of people with NASH also have obesity (80%) and type 2 diabetes (35%). Novo Nordisk’s commitment to expanding into other chronic disease indications signals the company’s evolution from a diabetes giant to a leader in metabolic disease more generally.
• In introductory remarks, CEO Mr. Lars Jørgensen highlighted Novo Nordisk’s beyond-R&D strategies for raising the bar, including digital health, innovative contracting, and generating real-world evidence (RWE) to complement cutting-edge clinical science. Mr. Jørgensen confirmed the company’s commitment to digital health in an interview with us at last month’s Cities Changing Diabetes Summit in Houston. Moreover, the company’s most recent issue of Triple Bottom Line was focused entirely on digital health. It’s great to see pharma companies employing more patient-centered device thinking (and we note a recent announcement from Lilly/Dexcom – Lilly plans to commercialize smart pens with a paired dose titration app and an automated insulin delivery system in the next two-three years). To be sure, the next wave of diabetes management solutions will not be achieved by drug or device companies independently, and we think the growing emphasis on digital health from both sides is an important stride toward better diabetes care in the real world. We’re also glad to see Novo Nordisk’s interest in innovative contracting (Dr. Thomsen told the WSJ that he wants more outcomes-based contracting between manufacturers and PBMs), because issues of pricing and access cannot be ignored.

Table 1: Novo Nordisk Diabetes/Obesity Pipeline Summary

2. Long-Term Investment Plans in GLP-1 Agonists: Injectable and Oral Semaglutide as Future Market Leaders; Semaglutide Brand-Named Ozempic; All 10 (!) PIONEER Studies Slated to Report 2018

Announcing “Ozempic” as the intended brand name for once-weekly injectable semaglutide (FDA decision expected by year-end), CEO Mr. Lars Jørgensen outlined Novo Nordisk’s long-term commercial strategy for its trio of GLP-1 agonists: Victoza (once-daily liraglutide), Ozempic, and eventually oral semaglutide, with 10 phase 3 PIONEER readouts anticipated 1Q18-4Q18. The company envisions Ozempic as the new class-leading, once-weekly injectable GLP-1 agonist. In slight contrast, management expects oral semaglutide to absorb some prescription share from daily GLP-1 agonists, including Victoza. The timing on this appears to work well in Novo Nordisk’s favor – patent expiry for Victoza is anticipated in 2022 or 2023 (Teva Pharmaceuticals filed an abbreviated NDA for generic liraglutide this past February), and provided phase 3 results are strong, oral semaglutide could be filed as early as 2019 or 2020 (slide 7). In the short term, Novo Nordisk’s focus will remain on Victoza – and its re-launch with a CV indication – but also on building market access for Ozempic, since the once-weekly formulation will drive the company’s GLP-1 business in the long term. According to Mr. Jørgensen, Novo Nordisk aims to make both injectable and oral semaglutide market leaders in their own right. He explained how each therapy could be seen as an optimal treatment for different stages in the course of diabetes, with oral semaglutide competing with SGLT-2 and DPP-4 inhibitors for second-line prescriptions, and injectable GLP-1 initiated slightly later in disease development but still considered before insulin (slide 10). As of now, DPP-4 and SGLT-2 agents together hold ~3x the market share of GLP-1 agonists by volume in the US (17% and 6%, respectively, while other oral anti-diabetes agents make up 53%). Dr. Jørgensen maintained that these market dynamics will be shifting soon, and he described Ozempic as a possible growth driver for the GLP-1 agonist class as a whole, especially since the company will target new therapy starts rather than patient switching. Indeed, presentation slides showed that 51% of patients who start GLP-1 agonist therapy come from only oral agents, while 30% add a GLP-1 agonist to insulin and only 9% switch from another GLP-1 agonist. We’re impressed by the logic and ambition of this plan, and we so appreciate the emphasis on earlier intervention with a GLP-1 agonist (oral semaglutide as second-line, injectable semaglutide before insulin). This class offers remarkable A1c-lowering, weight loss, possible cardioprotection and renal protection, and reduced hypoglycemia risk – plus, many of these clinical benefits translate to improved quality of life (particularly the weight loss and less hypo). Given this therapy profile, it’s disheartening to see that so few type 2 diabetes patients are currently on a GLP-1 agonist, but with Novo Nordisk’s commitment to its GLP-1 business, we imagine this class will grow. A world where the standard of care after metformin is an oral GLP-1 agonist, and where a wide spectrum of patients has access to these advanced agents, is a world we’d like to live in.

• Pending approval, Ozempic will be launched in the US in 1Q18, and will be launched in Japan by mid-2018. The launch timeline in Europe is extended because of access negotiations, but Ozempic is also expected to be available there in 2018. Mr. Jørgensen explained that access in the US comes gradually, so semaglutide will launch with relatively lower patient access but gradual expansion over the year. We have high hopes that Ozempic could be priced on par with Victoza, although it will be available only in the more advanced FlexTouch (vs. the FlexPen) – management noted during Novo Nordisk’s 3Q17 earnings update that this is an inherently costlier device. Still, this doesn’t mean the list price will necessarily be higher than Victoza’s, particularly as management also suggested this could lead to smaller profit margins in the short term. In fact, in Q&A, management commented that they're targeting GLP-1 agonist class pricing with Ozempic. We’re hoping that Novo Nordisk is able to leverage semaglutide’s superior glycemic and weight loss efficacy to obtain strong patient access and reimbursement.
• The GLP-1 agonist class is increasingly differentiated based on demonstrated CV benefit, and Novo Nordisk is keen on that differentiation. As Mr. Jørgensen put it, the “two molecules from Novo Nordisk stand out in the pack,” as only LEADER (for liraglutide) and SUSTAIN 6 (for semaglutide) have found significant risk reduction for three-point MACE (non-fatal MI, non-fatal stroke, CV death). Mr. Jørgensen reviewed the company’s recent efforts to increase awareness of the diabetes/CV disease overlap (including a global online survey launched with IDF), and to expand knowledge among HCPs that Victoza offers compelling CV risk reduction (see our coverage of Novo Nordisk’s exhibit hall debut at cardiology conferences, including AHA and ESC). Moreover, the company has launched direct-to-consumer advertising around Victoza’s CV indication, directing patients to HeartofType2.com. Mr. Jørgensen noted that the rollout of this Victoza indication is critical to create a wave of interest in GLP-1 for Ozempic (Novo Nordisk will likely conduct a larger, post-marketing CVOT for semaglutide to support its own CV indication).
• Mr. Jørgensen mentioned Victoza’s impending patent expiry almost as an afterthought, “2023 or so.” Presentation slides indicate that Novo Nordisk expects the shift in focus from Victoza to Ozempic to be well underway – if not complete – by that point, but also that oral semaglutide will be gaining market share as Victoza’s prescription volume declines. We are reminded of FDA Commissioner Dr. Scott Gottlieb’s recent blog post, which specifically named liraglutide as the agency released two draft regulatory guidances to ease the process of generic development for complex drugs (GLP-1 is one example). Teva Pharmaceuticals has already filed an abbreviated NDA for generic liraglutide, though overall, Novo Nordisk management seems unworried, presenting a very positive outlook on its GLP-1 business with injectable and oral semaglutide. The fact that GLP-1 agonists are a key component of each prong in the company’s new R&D strategy (see above) is quite significant, in our view, highlighting the still-unrealized potential of this class to help more people with diabetes and to treat diabetes-adjacent indications (obesity, NASH) as well.

Table 2: PIONEER Phase 3 Program for Oral Semaglutide

3. Priorities for Novo Nordisk’s Insulin Portfolio: Drive PCP Awareness of Tresiba’s Hypoglycemia Benefit; Continue Marketing Modern Insulins and Human Insulins through “Market-Fit Strategy”

Novo Nordisk EVP of International Operations Mr. Mike Doustdar presented the company’s major plans to drive insulin growth, and emphasized efforts to improve hypoglycemia-related knowledge among general practitioners (GPs) so they can better understand the benefits of next-generation basal insulin Tresiba. To this end, Novo Nordisk has launched a campaign directed at GPs, highlighting how common hypoglycemia is and how often fear of hypoglycemia drives patients to significantly reduce their insulin dose, leading to sub-optimal treatment of hyperglycemia. The campaign also explains risk factors and feelings associated with hypoglycemia. According to a 200-person survey Novo Nordisk conducted (100 endos and 100 GPs), among the top five prescription drivers for endocrinologists are low intra-patient variability, flat/stable profile, and low overall hypoglycemia. On the other hand, GPs showed more concern over comfort and simplicity of the product, for both patients and themselves. These data confirm what we’ve long suspected – that many PCPs aren’t fully aware of or comfortable prescribing next-gen therapies for diabetes – and this is a problem considering the majority of diabetes patients only see their PCP and not a specialist. The EMA recently approved a new hypoglycemia claim for Tresiba based on DEVOTE and SWITCH (which found reduced hypoglycemia risk with Tresiba vs. standard of care Lantus), and regulatory feedback from FDA on a similar requested label change is expected in 1Q18. We imagine having this data on the product label will allow Novo Nordisk to further amplify its marketing around hypoglycemia awareness and Tresiba’s distinct advantages, which could get this advanced basal option into the hands of many more patients, and which could also be leveraged in payer negotiations.

• In addition to clinical inertia, access on both public and private formularies has been a significant hurdle for next-gen insulins. Despite the fact that ~75% of patients with type 1 diabetes and ~50% of patients with type 2 diabetes will reduce their insulin dose following episodes of hypoglycemia – contributing to long-term complications – payers have been reluctant to cover what they see as incremental improvements. But Mr. Doustdar argued (and we absolutely agree) that a 40% reduction in severe hypoglycemia and a 53% reduction in severe nocturnal hypoglycemia vs. Lantus, as seen in DEVOTE, is no incremental improvement. DEVOTE data shows that an episode of severe hypoglycemia increases a patient’s risk of all-cause death four-fold in the following 15 days, and each episode is associated with up to $14,500 in direct and indirect costs to the healthcare system. Mr. Doustdar observed that Tresiba is doing best in markets with on-par access (slide 11), noting a flurry of uptake in Denmark and the Netherlands when access was gained. He also pointed out that Xultophy is doing especially well in France, where Tresiba did not get access.
• Mr. Doustdar maintained that there’s room for Novo Nordisk’s entire insulin portfolio to expand globally, as the company’s human, modern, and next-generation insulins all offer their own advantages – or rather, trade-offs – in terms of affordability and innovation. Novo Nordisk insulins + Victoza currently reach 26 million people worldwide – that’s five or six times the population of Denmark, but that’s also only 6% of the 425 million people with diabetes worldwide. While Novo Nordisk aims to set a new standard of insulin treatment and differentiate itself from competitors with its next-gen portfolio (basal Tresiba, basal/bolus mix Ryzodeg, GLP-1 agonist/basal combination Xultophy, and faster-acting Fiasp), it also recognizes that providers know and trust modern insulins (Levemir, NovoMix, NovoLog) and that human insulins (Insulatard, Mixtard, Actrarapid) are most affordable for those who can’t access newer/pricier products. Mr. Doustdar referenced the “market-fit strategy” of matching needs of customers in specific segments and countries with their products, acknowledging that aspirations for the next-gen profile exist alongside worldwide unmet need. The company hopes to grow the global insulin market by getting more patients on Novo Nordisk products. In Mr. Doustdar’s words, “There is an ocean of people in need when it comes to diabetes. We have an obligation to increase our volume uptake by finding these individuals and providing our vast array of diverse products in various different categories, from most affordable to most innovative.”

4. New Detail on Phase 3 STEP Program + CVOT for Semaglutide in Obesity; STEP 1-4 Slated to Start 1H18 and Complete 2020; EVP Ms. Camilla Sylvest on Novo Nordisk’s Commercial Efforts in Obesity

CSO Dr. Mads Thomsen announced the phase 3a, 68-week STEP program (n=~4,500) to evaluate once-weekly injectable semaglutide in obesity. Four studies are slated to start in 1H18. And, in major news, Dr. Thomsen shared plans for a phase 3b CVOT of semaglutide in people with obesity (without diabetes). STEP 1 (n=1,950) will investigate weight loss in patients with obesity, STEP 2 (n=1,200) aims to show efficacy in patients with type 2 diabetes not taking insulin, STEP 3 (n=600) combines semaglutide with intensive lifestyle modification to maximize weight loss, and STEP 4 (n=900) will investigate semaglutide for weight loss maintenance. Each will be 68 weeks, with expected completion dates in 2020, and each will use a once-weekly 2.4 mg dose of the active agent. Dr. Thomsen was particularly enthusiastic about the CVOT of semaglutide in patients with obesity but no diabetes (n=12,500), and so are we. He underscored that no trial to-date has established medical obesity as a chronic disease, as UKPDS and DCCT did for type 2 diabetes and type 1 diabetes: “Novo Nordisk wants to be the company that does that landmark study.” While Dr. Thomsen shared that trial endpoints are still under discussion with regulatory agencies, he believes this study will show once and for all that people with obesity stand to benefit tremendously from pharmacotherapy. The possibilities stemming from this CVOT are incredibly exciting: There could be a CV indication applicable to people with obesity, the field would have hard data supporting the long-term impact of obesity on overall health, and results could translate into a vastly improved reimbursement landscape for obesity pharmacotherapy. Moreover, we imagine a subset of participants will have prediabetes, and we’re intrigued by the prospect of intervening even earlier in the course of hyperglycemia to reduce CV risk, given this is ultimately the leading cause of mortality for the diabetes patient population. J&J has mentioned plans to conduct a prediabetes CVOT of SGLT-2 inhibitor Invokana, but we haven’t heard any updates on this project since the company’s 3Q16 update. Phase 2 trials of once-daily semaglutide in obesity showed 16% body weight loss at one year with the highest 0.4 mg dose, which was well-tolerated – Dr. Thomsen called this “a new level of efficacy” in weight loss, surpassing even Saxenda (liraglutide 3.0 mg). Similar results with once-weekly dosing would be a veritable breakthrough. Dr. Thomsen explained how the potency of semaglutide allows it to overcome the body’s natural counteraction of weight loss – at one year, participants taking the highest dose were still, statistically speaking, losing weight. We imagine HCPs might be interested in off-label use of semaglutide for obesity if and when the drug enters the US market for type 2 diabetes in 1Q18.

• Ms. Camilla Sylvest, EVP of Commercial Strategy & Corporate Affairs, spoke to Novo Nordisk’s efforts to change the mindset surrounding obesity pharmacotherapy, to increase physician engagement, and to improve patient access. The ACTION study (n=~3,500), presented recently at Obesity Week, was commissioned to identify barriers to patients receiving obesity drugs, and the Rethink Obesity platform provides medical education on the pathophysiology of obesity and why it can be difficult to treat, while also providing dialogue tools to help physicians communicate with patients – ~300,000 people are subscribed to this already. The Treat and Reduce Obesity Act hopes to improve funding and reimbursement for obesity therapy, specifically targeting Medicare coverage, by making policymakers aware of the societal burden of obesity. These broad efforts could hardly be more important: Of 650 million people with obesity in 2017, only 7% visit the doctor for obesity and only 2% are treated with medication. Interestingly, Ms. Sylvest shared that the target population for Saxenda is patients with a BMI >35 kg/m² with a high prevalence of related comorbidities, because that’s where the biggest difference stands to be made. We imagine Novo Nordisk could target a wider patient population considering the underutilization of obesity therapies, but we understand the need for focus in marketing. We were also reminded that despite Saxenda’s high market share by value – 50% in the US, according to Novo Nordisk – volume is still quite low, at only 3% of the market in the US, underscoring the product’s high list price.

• Dr. Thomsen also reviewed Novo Nordisk’s obesity pipeline, which includes six molecules in phase 1 in addition to Saxenda on the market and semaglutide phase 3-ready (refer to table 1 above). Novo Nordisk is interested in building an obesity portfolio – a full armamentarium – that works to both reduce appetite and increase energy expenditure, and some candidates do both: the glucagon analog NN9030, the GLP-1/glucagon dual agonist NN9277, and the GLP-1/GIP/glucagon tri-agonist NN9423. Also in development toward an obesity indication are PYY analog PYY1562, FGF21 analog NN9499, and amylin analogue AM833. In particular, Dr. Thomsen highlighted the company’s amylin analogue, which has been engineered to have a half-life of one week, up from its usual one hour. Phase 1a data show placebo-corrected 3.7% body weight loss 28 days after a single injection for the highest-tested 60 mg/kg dose. Moreover, animal models have shown AM833 to be additive with semaglutide, as the former targets the brainstem and the latter the hypothalamus. With multiple-dose studies currently underway (expected to complete January 2018), the company will make a stop-go decision on phase 2 trials of the amylin analog next year. Zealand also has a BI-partnered long-acting amylin analog in phase 1 for obesity.

5. Updates by Region: US Focuses on “Must-Win Battles” to Expand Tresiba Volume, Victoza Value, and the Obesity Market; Chinese Healthcare Reform Opens Door for Victoza and Tresiba

Capital Markets Day featured in-depth regional updates for Novo Nordisk’s key geographic markets. Click for the presentations on the US, International Operations, and Region AAMEO and Region China (two of the largest regions within the International Operations division).

• According to EVP of North America Operations Mr. Doug Langa, GLP-1 agonists and next-gen basal insulin were key drivers of growth in the overall US diabetes market from 2014-2017 (indeed, our analysis of the diabetes/obesity industry in 1H17 attributed >50% of industry growth to the GLP-1 class). A distinct advantage for Novo Nordisk is that its diabetes portfolio features strength in GLP-1 as well as insulin. Mr. Langa outlined three “must-win battles” for Novo Nordisk in the US: (i) growing volume share in the basal insulin market with Tresiba, (ii) growing value share in the GLP-1 agonist market, and (iii) growing the US obesity market with Saxenda (in the near term, and maybe semaglutide down the line).
  
  • Tresiba’s volume share of the US basal insulin market continues to grow (weighing in at 9% TRx as of October 27, 2017) and remains on track to reach 10% TRx by the end of 2017, as discussed in Novo Nordisk’s 3Q17 update. By prescriber type, Tresiba accounts for 17% of total basal insulin scripts among endocrinologists in the US (vs. 8% among PCPs), underscoring the opportunity for growth that exists in educating PCPs about this product. The company is well aware of this discrepancy, and has a PCP-targeted campaign emphasizing Tresiba’s hypoglycemia benefit – see highlight #3 above for much more color on this. An FDA decision on a hypoglycemia claim for Tresiba (based on DEVOTE and SWITCH data; now approved on EU label) is anticipated in 1Q18, and this would allow for even more promotion of this very important, clinically-meaningful benefit (and would certainly help Novo Nordisk win this first “must-win battle”). On the other hand, Basaglar could be a potential headwind for the Tresiba business in 2018. Novo Nordisk’s insulin will maintain its tier 2 position alongside Lilly/BI’s biosimilar on the Medicare Part D formulary in 2018, while Sanofi’s Lantus and Toujeo are both excluded, but Mr. Jørgensen acknowledged that Basaglar is now a more familiar product within the diabetes community and could thus be a greater competitive threat going forward.
  • Turning to GLP-1, Mr. Langa highlighted the success of the new campaign promoting Victoza’s indication as the first GLP-1 agonist to reduce risk for major CV events. Following the FDA approval of this indication in August 2017, Victoza’s NBRx share of the US GLP-1 agonist market saw an uptick from ~38% to 42% as of October 27, 2017. Mr. Langa noted that further NBRx growth will be needed to defend Victoza’s total prescription share of the US GLP-1 agonist market, which has fallen from 50% to 44% from October 2016 to October 2017, largely due to the growth of Lilly’s once-weekly Trulicity (which grew from 23% to 38% TRx over the same time period; slide 11). TRx moving annual total (MAT) volume has grown at a faster rate for more patient-friendly once-weekly GLP-1 agonists (+49%) than their once-daily counterparts (+8%) from October 2016 to October 2017. While this may be a challenge for Victoza, Mr. Langa underscored that it bodes incredibly well for the future performance of Novo Nordisk’s once-weekly semaglutide, as discussed in highlight #2 above.
  • On obesity, Mr. Langa pointed out that Saxenda dominates the US market with 51% value share (vs. 42% for other branded obesity drugs and 7% for generics) but holds only 3% TRx, leaving ample opportunity for volume growth. In order to grow Saxenda’s TRx, he highlighted Novo Nordisk’s ongoing initiatives to boost prescriptions with an obesity educator program and to obtain Medicare coverage for Saxenda by advocating for the passage of the Treat and Reduce Obesity Act.
• EVP Ms. Camilla Sylvest, former SVP of Region China, characterized China as one of the greatest opportunities for Novo Nordisk’s diabetes business, especially in light of recent healthcare reform measures that will expand access to diabetes care and broaden the availability of newer drugs. Ms. Sylvest explained that until this year, China’s national list of drugs eligible for reimbursement hadn’t been updated since 2009, forcing patients to pay out-of-pocket for any medicine approved after this date. Recent healthcare reform will ensure more frequent updates to China’s reimbursement register (Ms. Sylvest estimated every three or four years), and will additionally increase the pace of both drug development (which currently takes up to eight years longer in China vs. the US) and regulatory review for new drug approvals (down from 36 months to the 10-12 month timeline typical of the FDA and EMA). These updates bode well for Victoza, which was added to China’s newly-updated reimbursement list in July 2017. Longer-term, this also bodes well for Tresiba, which was approved in China in September 2017 after a 25-month review period, but will not be eligible for reimbursement until the next iteration of China’s national reimbursement list. Ms. Sylvest underscored that the GLP-1 agonist market currently accounts for only 1% of the value share of the Chinese diabetes market (vs. 12% for the worldwide diabetes market; slide 9) and Novo Nordisk aspires for this to eventually reach par with Europe at 10% value share of the diabetes market now that people will be able to access Victoza at a more affordable price. Patient and provider education will of course be a major prerequisite for Victoza’s growth, and Ms. Sylvest noted that these efforts are going strong.
  
  • This presentation also included a rundown of Region AAMEO, the largest and in many ways most challenging geography in the company’s business, spanning 110 countries. SVP of Region AAMEO Mr. Frederik Kier explained that the lion’s share (73%) of Novo Nordisk’s ~$1.4 billion in total sales in the region comes from insulin, of which 50% is accounted for by modern insulin, 20% by human insulin, and the remaining 3% by new-generation insulin. A whopping 62 launches of new-generation insulins (Tresiba, Xultophy, Fiasp, and Ryzodeg) are planned in the region by 2020, and this is predicted to be a major source of future growth. Novo Nordisk is particularly focused on a handful of high growth-potential countries, including India, Indonesia, Iran, Turkey, Algeria, and Pakistan, and is investing in local manufacturing and disease awareness campaigns here to lay the groundwork for future product launches. Mr. Kier underscored that GLP-1 agonist products Victoza and Saxenda respectively accounted for only 8% and 1% of Novo Nordisk’s total AAMEO sales, and these products are also expected to be important drivers of future growth as Novo Nordisk works to secure more market access.
• EVP of International Operations Mr. Mike Doustdar highlighted stable 5%-7% growth for Novo Nordisk’s portfolio in International Operations, attributing this stability to the fact that there are no shortage of unique commercial opportunities in such a large swath of the world. Indeed, this region encompasses 90% of the world’s diabetes population, spanning Europe (8% of the world population, 19% of total sales), Africa, Asia, the Middle East, and Oceania (AAMEO; 59% of the world population, 11% of total sales), China (19% of the world population, 10% of total sales), Latin America (9% of the world population, 3% of total sales), and Japan & Korea (2% of the world population, 5% of total sales). Across all of International Operations, Novo Nordisk’s top growth drivers to-date in 2017 were NovoRapid (~$77 million), Tresiba (~$71 million), and Saxenda (~$49 million), each of which was driven by a different geography – AAMEO, Europe, and Latin America, respectively. As illustrated below, there is tremendous diversity in the commercial markets across this region on the insulin front, from Region Japan & Korea where next-generation products dominate both by volume and by value, to Region AAMEO and Region Latin America, where human insulin still holds a sizeable portion of the insulin market.

Questions and Answers

R&D Update

Q: What are the dosing regimens for the once-weekly injectable semaglutide across indications?

Mr. Peter Kristensen (SVP Global Development): In diabetes, we are moving on with 0.5 mg and 1 mg. We will be exploring doses in obesity up to 2.4 mg a week because that is what we can cover based on the phase 2 study since we are going from once daily to once weekly. For the NASH, we are looking at once-daily injections, and that is a dose-ranging phase 2 study.

Q: Looking at CVD, should we expect to see utilization of real CVD agents or other classes, like small molecule SGLT-2 inhibitors, in combination with semaglutide?

Dr. Mads Thomsen (Chief Science Officer): In terms of oral semaglutide and oral GLP-1, the most natural combination would be high-potency SGLT-2 inhibitors where you get the additivity we would expect.

Mr. Peter Kurtzhals (SVP Global Research): From the research perspective, we are having an open mind on what could be used in combination to further boost what we’ve seen in cardiovascular benefit with semaglutide. We are looking for the best possible match where we could apply the technology we have and bring forward molecular entities or formulations that can do even more than the GLP-1 class.

Q: Hypothetically following the approval of semaglutide, what would a next outcome trial of semaglutide in diabetes look like?

Mr. Kristensen: We would be doing a trial aimed at convincing cardiologists that this is the right drug to use when you have a patient who has been diagnosed with myocardial infarction and diabetes at the same time, which frequently happens. To do that we would lead a large outcome trial in a blinded fashion comparing standards of care. In the cardiology space, they are very focused on the actual statistical outcomes in large outcome trials. While we are happy with SUSTAIN-6 realize, we all realize it was 254 events, which is why we are preparing to create a follow-up to that.

Q: This is the first time we have seen the actual curves on SUSTAIN 7 trial. At 8 weeks, dulaglutide 1.5 mg gives a lower A1c – could that explain why there was no difference in retinopathy?

Dr. Thomsen: It is true that dulaglutide is not titrated, so you go head-on with the dose. In general terms, I think it is the early wash phenomenon. You have to take that into consideration when looking at poorly controlled late-stage people with diabetes with active eye disease who should follow good clinical practice guidelines in terms of visiting ophthalmologists, so I do not think you see any real difference.

Q: Could you talk a little more about the comment you made on using internal obesity assets to provide an entrance to NASH? Which of those assets are you looking at? Are you looking to combine them with other assets from other companies currently in phases 2 and 3?

Dr. Thomsen: We as a company are very into the biology, biochemistry, and pathophysiology associated with obesity and diabetes, which gives us good entry into metabolic derangements and glucose toxicity, which create F1, F2, and F3 stages of the NASH disease – but we do not have insight as a company into the fibrotic components of NASH. If we do things with anti-fibrotic elements that could synergize with semaglutide to treat NASH, that would be in partnership.

Mr. Kurtzhalz: We are currently exploring the assets that are showing the most promise in preclinical models. What we know is that GLP-1 will be an important backbone as we have the link to obesity and probably to inflammatory components.

Q: What is the rationale for doing a phase 2 study for semaglutide in NASH, rather than going straight to phase 3?

Dr. Thomsen: When we conducted a global NASH advisory board, the majority of people there were hepatologists and not endocrinologists. Many of them did not know what semaglutide is, so just to put semaglutide on the NASH map is of high value. It is valuable to document and prove that semaglutide leads to resolution of NASH.

Diabetes & Obesity

Q: Can you give more color on the messaging concerning semaglutide’s CV impact and how that will affect profitability?

Mr. Lars Jørgensen (CEO): Right now, we’re focused on promoting Victoza’s CV impact to grow the market and regain leader status. Come 2018, we can launch Ozempic. What’s on the label will determine what we can make in terms of claims, but we believe there’s enough clinical evidence to be able to talk about cardiovascular impact in the field without making a claim like Victoza. , but do believe we can establish the profile that SUSTAIN 6 showed. In terms of margin, it’s too early to say exactly what margin will be – that’s a function of clinical profile and price. We’ll aim for GLP-1 agonist type pricing and believe the margin on oral semaglutide will be on par with our internal average.

Q: Can you talk about how you think oral semaglutide will need titration?

Dr. Thomsen: With oral semaglutide, you start with a 3 mg dose for a month, then move to 7 mg. That will do the job for most people, but you can go up to 14 mg for further glucose control and weight loss. So there is titration, as in Victoza – but it hasn’t held us back there. You can to amalgamate benefit vs. convenience thing, and hopefully PIONEER will prove we’re right on this.

Q: When you changed long-term guidance last year, the message was that all diabetes pricing is connected, and if one piece got cheaper, all the other parts would have to get cheaper. With the level of rebates and lack of profitability common in the oral market today, how should we think about your move there with semaglutide?

Mr. Jørgensen: Pricing in the oral market is actually quite differentiated today. Metformin is obviously generic, and DPP-4 inhibitors have lots of rebate competition but are less differentiated than SGLT-2 inhibitors, which differ slightly in their safety profiles. For oral semaglutide, it’s really about efficacy of the molecule. There is a need for physicians to advance treatment for patients on orals – and you can make the choice of insulin or GLP-1 agonists. If we succeed with oral semaglutide, it expands the GLP-1 agonist choice. We believe it’s a very easy-to-use regimen and the efficacy will justify the GLP-1 agonist price point. In PIONEER, we intend to show we can deliver the injectable profile. Today, the GLP-1 agonist market is driven by convenience and innovation – the cheap options in GLP-1 agonist space today are losing out. If we can demonstrate efficacy equal to Victoza with an oral formulation, that will drive the market.

Q: What feedback has resulted in the target profile of >15% weight loss for obesity therapy?

Dr. Thomsen: Advisory boards have taught us that, at that level, you have several ramifications. The propensity to go on the drug increases, because patient expectation is not typically 7% weight loss: They’re thinking 15-20% weight loss. Comorbidities and mortality also get so much better at that level that your propensity to stay on the medication increases. It’s a medical thing, but also the health economic outcomes for agents at this level are way above what you see for today’s orals giving 5-6% weight loss. We could also develop an agent that gives 7% WL, if it can be, for example, combined with semaglutide to give over 20% WL.

Q: Should we continue to see orals and injectables as different and opposed, or would you integrate more oral compounds in your pipeline?

Dr. Thomsen: We’ve done a survey looking into what added efficacy a patient needs in order to accept an injectable over an oral; as I recall, it was a weight benefit of 3.2 kg (~7 lbs). Patients expect more bang for the buck. If people can get away with a tablet, that’s what they prefer. For the oral GLP-1 agonist, we will do everything we can to get the price down and ultimately develop analogs with either greater viability, potency, or half-life, and to go all the way up to the obesity dose range at an affordable price.

Q: In obesity, are you trying to define which patients might respond to which products?

Dr. Thomsen: The short answer is yes, but the whole area of obesity research is decades behind diabetes in terms of investment from academic institutions and companies. We are early birds. We’re working closely with global research to look at the most relevant biomarkers that can help untangle who can be expected to respond well to a therapy. We don’t have a totally clear picture of these responders, with either Saxenda or semaglutide, but we are working down the line of thinking. It all starts in animal models, and then translation into clinical pharmacology. Right now, we’re analyzing the years-old SCALE data and starting to identify “phenotypes” of likely responders based on whether they previously responded to behavior modification.

Q: Semaglutide patents expire in 2030-31, and the key strategy to fend that off seems to be obesity. That’s an underdeveloped market, and semaglutide won’t enter it until around 2021. There must be a point of no return where you decide whether the obesity market can be developed or not?

Mr. Jørgensen: We believe obesity is a very meaningful opportunity. Our entry with GLP-1 agonists is low risk and low cost because we already have the assets. We also have a pipeline of candidates where we combine mechanisms to hopefully get something with higher efficacy and unlock that market. The follow-on approach with an existing molecule gives a shorter run-in time, but we’re not worried about that. We’re making a bet on obesity and believe we can make a ride based on efficacy.

Dr. Thomsen: Our theory in R&D and regulatory is to make the next analogue available – whether moving from injectable to oral, or from semaglutide to the next analogue – to switch over the market with either added benefit or convenience. We’re not going to sit and wait until 2031. The whole strategy is to have things in place ahead of the curve, not behind.

IO & US Updates

Q: What is the short-term and long-term potential for Xultophy?

Mr. Mike Doustdar (EVP International Operations): I don’t see Xultophy as a niche product. The major problems with Europe are (i) we’ve been launching Tresiba and now Fiasp, and we need to pace ourselves, (ii) we’ve had to dialogue with authorities on the price of Xultophy. Xultophy has two ingredients; we have to be thoughtful with how we create good value with various products in various markets.

Mr. David Moore (SVP US Commercial): There is an opportunity for Xultophy in US. When the product was launched, it was not resourced in way that we’ll be able to resource it next year. We changed to have a dedicated sales force in primary care focused on insulin and GLP-1 agonists, which is going to provide more of a voice in front of customers. Our primary focus is Tresiba, but we’ll have more calls dedicated to Xultophy. I certainly expect to see a difference with this change in promotional effort.

Q: You’ve seen initial success with DTC campaigns for Victoza. If you get a label update on Tresiba, should we expect similar campaigns and sensitivity in market share uptake?

Mr. Doug Langa (EVP North America Operations; President Novo Nordisk Inc.): We treated the CV indication like a launch. For the first time ever, we launched it to all employees of the organization at the same time, which was really unprecedented. With any update for DEVOTE and SWITCH we’ll do the same.

Mr. Moore: With DTC, we planned and timed it right around the indication approval to have a heavier back half with respect to Victoza. The CV add-on portion of DTC has just begun and in 1Q18 we’ll launch the A1CV DTC campaign. We’ve seen a response in the insulin side as well, and we’re excited about the potential to talk on-label about DEVOTE data.

Q: Obesity outcomes lend themselves to outcomes-based contracting – can you touch on that in US and international markets? How much of the US market is controlled markets?

Mr. Langa: We created a strategy and innovation team about a year ago, to work with Camilla’s team’s global efforts, in order to build frameworks to better enable us to have value-based contracts. These aren’t simple and we don’t want to do them with all contracts, and we haven’t seen a lot of utility and success in the US. We’re learning from them and do think Saxenda is a good product for value-based contracts, and I see opportunity with semaglutide. I would say roughly 30-40% are still in a traditional market and varying degrees are in other quadrants.

Q: With the Victoza DTC campaign, is a 5% shift in five weeks what you expected or faster?

Mr. Jesper Brandgaard (CFO): A high level comment would be that if you could change 5% NBRx with a month campaign, we’d be doing a lot of DTC in 2018. We see it as an integrated part of our marketing mix. Over the last year, we’ve been able to market a diverse portfolio of products with a reasonably controlled cost base.

Mr. Moore: It’s difficult to say that is tied to DTC with respect to the CV indication. As a proxy, we looked at Jardiance and its inflection point to model around it. I think it speaks more to the fact that there was knowledge about this in the market very quickly. It wasn’t DTC in terms of commercials; it was more about an omni-channel approach we took, which speaks to the fact that we treated it like a launch. We recently launched a newer tactic called “geo doming” where we can target writers of specific products in specific markets where we know we have a certain amount of access. That took place with the CV indication and we’re expanding it into other marketing teams.

Executive Management Q&A

Q: If you all want to dream big, what do you talk about for GLP-1 agonists’ potential?

Mr. Jørgensen: I think I’ve been quoted before saying we could at least double the market. When we launch oral semaglutide, it’ll be the first product in a new category where we see opportunity for driving down cost both by how we formulate an oral GLP-1 agonist and by the molecule’s efficacy. From a patient point of view, it can become a much larger market.

Q: What do you need to see from PIONEER to market oral semaglutide at a GLP-1 agonist price point?

Mr. Jørgensen: My view is that the US market is wide open for innovation. I think payers are willing to pay for innovation. All the new products get to market in the US. But when you have choice and more products, payers get the long end of the discussion and price goes downwards. It’s a classic supply and demand issue. If we do a good job with PIONEER and demonstrate that you can intensify OAD treatment without having to inject insulin or GLP-1 agonists, I think it’s going to be a very attractive opportunity for physicians and patients.

Q: How do you see a once-weekly basal insulin? Is it just another basal that nobody wants to pay a premium for or is it a frog jump?

Mr. Langa: Absolutely there’s opportunity for innovation and a willingness to pay for it. Once weekly insulin has both clinical and patient advantages, and we’ve seen payers are still willing to pay for clinical innovations.

Dr. Thomsen: Some of it remains to be seen. There’s some hesitation among physicians about having a very big depot, for instance bound to albumin, and that being in circulation for a week. We likely won’t see the same bonanza as when Bydureon came of age in phase 2 because the therapeutic window for insulin is so much smaller. But there will be a very clear niche for once-weekly basal among those who find it difficult to administer daily drugs, are afraid of needles, etc. There’s also a big rationale for combining a once-weekly basal with semaglutide, to make a once-weekly Xultophy of sorts. We’ve seen that Xultophy reduces the risk of hypoglycemia by 90% against basal-bolus, so this could be a once-weekly intensification regimen.

Q: You often say the US pricing system needs to be more transparent – could you speak more to that?

Mr. Jørgensen: In the past, we’ve seen manufacturers set high prices and give lots of that back as rebates. That’s no longer the case so much in the US. There’s a big public debate about drug pricing, based on development of list prices. We compete on net price, not list price. When we talk about transparency, we welcome it in principle – we want people to know what happens with rebates and who is pocketing what. A number of states are pursuing legislation to enhance transparency; unfortunately, we’re not sure it will lead to meaningful transparency. It becomes difficult to do business when you disclose contracts. If you look at net price development in our products, in the insulin space prices are actually decreasing on a per product level. It’s not the list price we’re competing on. There are a number of complexities in the US market: If a patient is out of insurance or has “Obamacare” with a high deductible, the patient is charged the list price at the pharmacy despite the fact that we’ve already given a rebate on it. That’s unsustainable. The US system leads to a lot of wrong conclusions and perceptions about drug pricing; we want it to be more transparent who is selling at what prices and who is pocketing what profit.

Q: The average stay time for obesity drugs is four to five months – what about GLP-1 agonists?

Mr. Doustdar: It’s about eight months for Europe and roughly the same for the US. Sometimes they go to insulin, sometimes to competitors, and sometimes to nothing if it was being used off label. 

-- by Ann Carracher, Abigail Dove, Payal Marathe, and Kelly Close