Memorandum

Novo Nordisk 3Q19 – D/O up 9% to $3.8 billion, driven by Ozempic (+478% to $462 million) and Saxenda (+46% YOY to $213 million); PCSK9 inhibitor added to pipeline – November 1, 2019

Executive Highlights

  • Novo Nordisk provided its 3Q19 update this morning. See the presentation slides, webcast, financial results, and investor presentation.

  • Novo Nordisk’s full diabetes/obesity portfolio climbed 9% YOY to $3.8 billion. Growth was driven by Novo Nordisk’s expansive GLP-1 portfolio (+24% YOY) and robust international growth (+10% YOY to $1.9 billion). For comparison, Novo Nordisk’s total diabetes growth ranks second among the market leaders, very impressive given that it’s the largest base by some ways, over $1.0 billion bigger than Lilly, the second biggest: Lilly grew 14% YOY to $2.7 billion, AZ fell 1% YOY to $680 million, Merck was down 13% YOY to $1.3 billion, and Sanofi fell 10% YOY to $1.5 billion.

  • With Novo Nordisk reporting, we can now calculate total sales for the entire GLP-1 class. In 3Q19, revenue from GLP-1 surged 19% YOY (and 2.3% sequentially) to $2.43 billion from $2.05 billion in 3Q18, and $2.37 billion in 2Q19) suggesting to us that the field will approach $10 billion in sales for 2019 and should undoubtedly exceed $9 billion, up from $8.1 billion in 2018. If GLP-1 sales are flat in 4Q19, class growth will be ~ 16% for 2019; to match 2018 GLP-1 class growth of 25%, 4Q19 sales would need to hit just under $3.2 billion. That’s a very tall order, with two months of the year left – let’s see what oral GLP-1 can add, along with all the focus from the summer meetings on the importance of getting new patients on this class (cardio-protection, new indications, etc), which should help virtually all compounds. Why, when they don’t all have the indication? All the compounds prompt weight loss, all are glycemic dependent, all are easier to take than they used to be, and all are more durable that medicines like metformin only, SFU only, etc. We’ll be back with more in our quarterly roundup in the coming weeks. Have any comments on GLP-1 growth – let us know!  

  • In the pipeline, Novo Nordisk added a phase 1 PCSK9 inhibitor and discontinued its oral GLP-1 OG2023SC in favor of a next-gen enhanced oral semaglutide. This PSCK9 candidate is “very potent” and has the potential to be formulated with “any product in the pipeline” – the possibilities here are very intriguing in terms of highly efficacious combo therapies between GLP-1 and PCSK9. We’re thrilled to hear that there will be an enhanced oral sema – Novo Nordisk certainly seems “all in” on oral (see below).

  • A focused “specialist launch” of Rybelsus has been initiated, with a full commercial launch expected in early 2020. US availability is expected in 4Q19 (we are now well into the quarter and we’ve just called Walgreen’s and they certainly have it – Kelly will get back to us on availability per Aetna) and we’re eager to learn about Rybelsus’ commercial performance in Novo Nordisk’s next update. A US FDA decision on Rybelsus’ CV indication is expected in January 2020 as well. Rybelsus was a major focus during Q&A – see below for comments regarding Rybelsus’ launch, access, pricing, and more.

  • Ozempic: Up 478% YOY to $462 million, reaching “blockbuster status” according to management – more than, we’d say, with the drug already annualizing at nearly $2.0 billion! Notably, new-to-brand prescriptions in the US for Ozempic are now 37%, just behind Victoza at 38% - while some may ask why patients are even getting Victoza when Ozempic is available, we remind readers that some payers aren’t covering Ozempic yet or patients may not have the ability to pay a higher price or co-pay, depending on the payer. Aetna, for example, covers Victoza “in a heartbeat” for Kelly ($25 co-pay), along with its SGLT-2 of choice (sole source), Jardiance ($25 co-pay), but Walgreen’s said that Ozempic wasn’t covered and requested “approximately $900” for four pens, which would last Kelly longer than a month. Victoza was listed at $1,100 for three pens, while Rybelsus was listed at $926.99 for 30 tablets.

  • Victoza: Down 15% to $795 million as Novo Nordisk prioritizes commercialization and promotion of Ozempic and Rybelsus.

  • Saxenda: Up 46% YOY to $213 million, with management highlighting its performance multiple times. Saxenda’s future was also discussed an ample amount during Q&A, with high interest shown from the investing community. Questions ranged from average drug stay (four to five months) to marketing tactics. It’s very surprising from our view that Saxenda is selling nearly as much (well, 2/3 as much) as Tresiba!

  • Tresiba: Up 7% YOY to $341 million. Management highlighted growth in Europe (+29%), Japan and Korea (+8%), and Latin America (+27%). China recently admitted Tresiba into its national reimbursement drug list, which should serve as an important tailwind moving forward. Given how much better Tresiba is perceived vs. Levemir, we’re surprised that they are both selling about the same amount (both between $300 and $350 million in 3Q19). Overall, basal insulin sales fell 3% year over year, while rapid acting sales were flat.

  • Fiasp: Up 84% YOY to $45 million. Management mentioned Fiasp during prepared remarks for the first time in several quarters, highlighting the drug’s two recent approvals: the first, an EMA label expansion to treat adolescents and children >one-year old; and the second, FDA approval for use in insulin infusion pumps. While some hope that the approvals will create some much-needed tailwinds for the drug, which has experienced sluggish uptake to date, we doubt this will be the case. We underscore that the rapid-acting insulin market in general has been challenging, since many more people with type 2 are taking SGLT2 and GLP-1s and in general delaying the time to mealtime insulin.

  • Xultophy: Up 30% YOY to $85 million. Despite the product’s efficacious profile (superior glucose-lowering efficacy + milder side-effect profile + lower injection burden), Xultophy sales continue to underwhelm the market. Our sense is that while HCPs remain reluctant to prescribe fixed-combination therapy, which is somewhat rigid in both its components and titration, Novo Nordisk is not investing in this brand the way it does other GLP-1 products.  

Below, find our thoughts, summary financial tables, Novo Nordisk’s diabetes-related pipeline, historical graphs, and Q&A from the call.

3Q19 Financial Results for Novo Nordisk’s Major Diabetes Products

Product

3Q19 Revenue - USD millions (DKK billions)

Year-Over-Year

Reported (CER) Growth

Sequential Reported Growth

Share of Reported YOY Growth

Basal Insulin

$742 (DKK 5.0)

-3% (-6%)

-7%

--

- Tresiba

$341 (DKK 2.3)

+7% (+3%)

-8%

4%

- Levemir

$316 (DKK 2.1)

-17% (-19%)

-9%

0%

- Xultophy

$85 (DKK 0.6)

+30% (+27%)

0%

4%

Rapid-Acting Insulin

$686 (DKK 4.6)

0% (-2%)

-3%

--

- NovoLog

$641 (DKK 4.3)

-3% (-5%)

-4%

0%

- Fiasp

$45 (DKK 0.3)

+84% (+79%)

+11%

4%

Premix Insulin

$384 (DKK 2.6)

+3% (0%)

+1%

--

- NovoMix

$343 (DKK 2.3)

-1% (-3%)

+1%

0%

- Ryzodeg

$41 (DKK 0.3)

+43% (+37%)

+8%

2%

Human Insulin

$331 (DKK 2.2)

-6% (-9%)

+3%

0%

Victoza

$795 (DKK 5.4)

-12% (-15%)

-1%

0%

Ozempic

$462 (DKK 3.1)

+478% (--)

+34%

73%

Saxenda

$213 (DKK 1.4)

+46% (+42%)

-1%

13%

Other

$154 (DKK 1.0)

-1% (-3%)

-8%

0%

Total Diabetes and Obesity Portfolio

 $3,767 (DKK 25.5)

+9% (+5%)

+1%

--

 

Pipeline Highlights

1. Oral GLP-1 OG2023SC Discontinued in Favor of Next-Gen Enhanced Semaglutide Formulation

In its pursuit of enhanced next-gen oral GLP-1 after the launch of Rybelsus, Novo Nordisk announced that it has discontinued OG2023SC in favor of further developing better oral semaglutide formulations. We first heard of OG2023SC during Novo Nordisk’s 3Q18 update, where CSO Dr. Mads Thomsen explained that this next-gen oral GLP-1 agonist came from the same series of compounds that led to semaglutide and presented two exciting possibilities: It could either be dosed to give higher efficacy than oral semaglutide, or efficacy could match oral semaglutide but come at a lower price (i.e. lower COGS through greater bioavailability). Interestingly, Dr. Thomsen noted that the goal with 2023 was not necessarily to exhibit greater efficacy vs. semaglutide: “It has not really been possible to identify any GLP-1 agonists that [are better than semaglutide].” Rather, 2023 is optimized for better oral exposure (it also uses a SNAC carrier and tablet formulation); this means similar bodily exposure as with oral semaglutide can be achieved at a lower dose, or greater efficacy can be achieved with a similar dosing level as oral semaglutide. We wonder what prompted Novo Nordisk to abandon this compound in favor of next-gen oral semaglutide formulations – could high enough bioavailability/oral exposure levels not be reached to justify further development, given the higher efficacy seen with the semaglutide molecule? For our part, we remain very excited about the possibility of a cheaper oral GLP-1 agonist and hope that development of a next-gen oral semaglutide could translate to more affordable generics far, far down the line.

2. PCSK9 Inhibitor Added to Pipeline; Phase 1 Trial Initiated in August 2019

Novo Nordisk continues to invest in injectable peptides for metabolic diseases, adding a phase 1 PCSK9 inhibitor to its pipeline in 3Q19. According to management, a phase 1 dose escalation trial for the candidate was initiated in August, with the objective of establishing safety tolerability and pharmacokinetics of the drug in healthy volunteers (one cohort in the study does have hypercholesterolemia, however). We’re immensely excited to see further investment from Novo Nordisk in this space and are hopeful about the potential of future combo therapies with other next-gen peptides in Novo Nordisk’s pipeline. What could a semaglutide/PCSK9 inhibitor combo look like? Management hinted at this possibility during Q&A, detailing that “in principle [this PCSK9 candidate] can go into formulation with any product in the pipeline since it also has a neutral pH value, and you don’t need to fear overdosing it because all it can do is soak up the circulating PCSK9 and as we know from the genetic experiments in mankind that is not associated with any risk. This will offer the opportunity to reduce LDL significantly in patients whether it’s with diabetes, NASH, obesity, and cardiovascular disease. It basically just offers the added benefit of cutting the LDL cholesterol in half, and we’ll investigate those options and talk more once we have the data from these studies as soon as possible.” To be sure, this PSCK9 inhibitor is far from the market as it’s currently in phase 1; however, we do note that the current market for PCSK9’s is quite unfavorable, with issues of access currently plaguing the class. Whether Novo Nordisk’ candidate can differentiate itself in terms of efficacy/combo treatments will surely dictate how and if it progresses through the pipeline.

3. Rybelsus Specialist Launch Initiated, Full Commercial Launch Expected in 2020; CV Indication Decision Expected in 1Q20

Novo Nordisk highlighted the recent US FDA approval of Rybelsus (oral semaglutide) during today’s call and noted that it is now initiating the “specialist launch” of the product while a full commercial launch is expected “as early as possible” in 2020. Rybelsus will be available in the US starting in 4Q19, so we’re eagerly anticipating seeing the product in pharmacies soon and for Novo Nordisk to report early sales numbers for the franchise in its 4Q19 update. Regarding the US launch, Novo Nordisk is currently still navigating securing access for Rybelsus and was unable to further comment on what levels of access it has already achieved (although one investor estimated during Q&A that commercial access is currently around 40% -- see below).

  • In line with previous timelines, Novo Nordisk still expects to hear from FDA regarding a CV risk reduction indication for Rybelsus in 1Q20. The company submitted two NDAs for oral semaglutide on March 20, 2019 with a priority voucher, requesting FDA approval for (i) treatment of type 2 diabetes; and (ii) CV risk reduction in adults with type 2 diabetes. The latter decision will be based off of pooled data from SUSTAIN 6 and PIONEER 6. It remains a possibility that an FDA Ad Comm will be held to discuss this decision, although Novo Nordisk has not yet heard from FDA regarding such a meeting.

  • Regulatory approvals for Rybelsus in Europe and Japan are expected in 2020, with submissions in both regions already completed. In the EU, Novo Nordisk submitted oral semaglutide in April 2019, with an EMA decision expected in early 2Q20. Submission in Japan occurred in July 2019, with a decision expected in mid-2020.

4. Novo Nordisk Diabetes/Obesity Pipeline Summary

The table below reflects the latest updates, as far as we are aware, on Novo Nordisk’s diabetes/obesity pipeline products. Items highlighted in yellow indicate notable changes to the pipeline in 3Q19.

Candidate

Indication

Class/Mechanism of Action

Phase

Timeline/Notes

Oral semaglutide

Type 2 diabetes

Once-daily oral GLP-1 agonist

Submitted in US and EU

 

Approved by FDA in September 2019; Submitted in Japan in July 2019; Submitted to FDA with priority review voucher in March 2019 (decision by September 2019) – CV indication also requested for Ozempic and oral semaglutide; Submitted to EMA and Canada’s HPFB April 2019;

Phase 3b SOUL CVOT to begin 2Q19, expected completion July 2024

Data released from PIONEER 1, PIONEER 2, PIONEER 3, PIONEER 4, PIONEER 5, PIONEER 6, PIONEER 7, PIONEER 8, PIONEER 9, PIONEER 10

Injectable semaglutide

Obesity

GLP-1 agonist

Phase 3

Phase 3a STEP program (four trials) initiated 2Q18; SELECT CVOT in obesity launched 3Q18; Positive phase 2 data in obesity in 2Q17

Injectable semaglutide

NASH

GLP-1 agonist

Phase 2

Phase 2 (n=288) study in biopsy-confirmed NASH expected to complete April 2020

Injectable Semaglutide + cilofexor (FXR agonist) + firsocostat (ACC inhibitor)

NASH

Combination therapy (GLP-1 agonist + FXR agonist + ACC inhibitor)

Phase 2

Phase 2 proof of concept study initiated in July 2019 and expected to complete June 2020; Part of partnership with Gilead announced in April 2019

NN9828

Type 1 diabetes (newly-diagnosed)

Anti-IL 21/GLP-1 agonist (liraglutide) combination for beta cell preservation

Phase 2

Topline phase 2 results released in 2Q19; FDA Orphan Drug Designation in January 2017

LAI287 (NN1436)

Type 1 and type 2 diabetes

Once-weekly injectable basal insulin

Phase 2

Phase 2 trial (n=250, type 2 diabetes) expected to complete December 2019 with results in 4Q19; Second phase 2 trial in type 2 posted April 2019; Positive phase 1 results

AM833 (NN9838)

Overweight/Obesity

Long-acting amylin analog

Phase 2

Phase 2 trial (n=700) recruiting and expected to complete April 2020; Phase 1 in combination with semaglutide expected to complete June 2020; Phase 1 readout (from study completed in January 2018) expected 2Q18 (not yet provided, to our knowledge); Previous phase 1 trial completed March 2016

LAIsema (NN1535)

Type 2 diabetes

Once-weekly basal insulin/GLP-1 fixed-ratio combination

Phase 1

Phase 1 (n=60) PK study launched 4Q18, expected to complete October 2019 with results in 4Q19

OG2023SC (NN9023)

Undisclosed (obesity, NASH, type 2 possible)

Next-generation oral GLP-1 agonist

Phase 1/Discontinued

Discontinued in 3Q19 because of higher efficacy with enhanced oral semaglutide formulations; Phase 1 trial completed December 2018; Announced during 3Q18 update; Potential for lower dosing or higher efficacy vs. semaglutide

PYY1875 (NN9775)

Obesity

PYY; Under development as monotherapy and in combination with semaglutide

Phase 1

Phase 1 trial initiated October 2018, complete in August 2019

PYY1562 (NN9747)

Obesity

PYY; Under development as monotherapy and in combination with semaglutide

Phase 1

New phase 1 trial expected to complete August 2019, with results expected 4Q19; Previous phase 1 trial completed February 2017; Advanced into phase 1 in 3Q15

GG-co-agonist (NN9277)

Obesity

GLP-1/glucagon dual agonist

Phase 1

Phase 1 study now expected to complete May 2019 (pushed back from December ’18); Previous phase 1 trial completed September 2017

Tri-agonist 1706 (NN9423)

Obesity

GLP-1/GIP/glucagon tri-agonist

Phase 1

Second phase 1 expected to complete September 2019, results expected 4Q19; Previous phase 1 trial completed August 2017

FGF21 Obesity (NN9499)

Unspecified disease areas (discontinued for obesity)

FGF21 analog

Phase 1

 

Discontinued for obesity in 2Q18 but will remain under investigation in other disease areas; No longer listed in pipeline on website; New phase 1 trial posted in 1Q18, expected to complete May 2019; Previous phase 1 trial completed October 2017

FSI965

Type 1 and 2 diabetes

Next-generation basal insulin

Phase 1

Added to pipeline in 2Q19; Phase 1 initiated in 2Q19

LA-GDF15

Obesity

Long acting GDF15

Phase 1

Added to pipeline in 2Q19

PCSK9 inhibitor

Metabolic diseases

PCSK9 inhibitor

Phase 1

Phase 1 trial initiated in August 2019

5. Novo Nordisk R&D Strategy and Priorities

Select Questions and Answers

Rybelsus and GLP-1

Q: On the prospects for Rybelsus and timing of launches in international markets: The US makes a lot of sense for Rybelsus, but pricing dynamics are quite different in international markets. Just hoping that you could give us a better sense of how you think about the opportunity for Rybelsus in areas like Japan, Europe and I know that there was some discussion of China there as well. So just wanted to get a better understanding of the US versus international opportunity for Rybelsus.

Maziar Mike Doustdar: So, we are awaiting regulatory approvals both in Europe and Japan and hoping to get that done by next year. And there's no secret that we're also preparing ourselves for launches in both of these geographies first and foremost and I do hope that we will get number of countries in Europe as well as Japan hopefully within the next 12 to 18 months done. There is a huge potential for us regardless of which geography you look at as we are moving into an area we have not been competing before and the whole GP (general practitioner) segment for us is going to be extremely keen to capture. So we are very excited about that. On the question on the pricing, I will not give you any answer today as we are too far away and, of course, here we have to wait and see post approvals how each country negotiations will go. So, more to that later on

Q: I wonder if you could comment on the ICER statement that came out today, where they said that – they somewhat changed there too, having previously said that oral sema would be cost effective. They now say that based on the list price and presumably their view, I don't know how educated that might be of discounts that it was no longer cost effective relative to the SGLT2s or not as cost effective as the SGLT2s

Mads Thomsen: Let's first just remind each other of the differences between a classic health economic outcome research analysis taking into account or the big landmark trial data that have emerged over time that would typically predict what the societal cost of the burden of diabetic complications will be over decades, two decades, three decades and so on. And those analyses are the ones that we have done with the impact – metabolic impact of Rybelsus, showing that, over decades, this is clearly cost effective for society to use the product. This element is not really integrated into ICER research, which just looks at the mere data as they are and the metabolic outcomes here and now. But as I understand the report, having not had really time to study today, it is still the perception that I have that when it comes to sitagliptin and liraglutide, there seems to be cost effectiveness of Rybelsus. And then, it's only when you look at the empagliflozin that they claim that not to be the case. When all of that is set, then, by the way, the discussions that our American team have ongoing with the PBMs, they are ongoing and we'll keep you updated as they come to conclusion over time.

Q: Just to pick up on Mads' last comment on Rybelsus' payer access, just wondering if you could set expectations for the Capital Markets Day in a couple of weeks as to what level of granularity you think you'll be able to give us on Rybelsus payer access progression?

Lars Fruergaard Jorgensen (CEO): And in terms of giving update on the Rybelsus access,– we're just now one month plus into discussing this with payers. So we're not going to be very elaborate on that – on the Capital Markets Day. This is something that takes a bit of time to finalize and we are having good discussions. But you shouldn't have expectations about something that's very granular when we come to the Capital Markets Day.

Q: Just on the CV PDUFA date coming up in January, I wonder if you can confirm that there is no notice from FDA, even AdCom or perhaps you have notification that there will definitely not be an AdCom for either oral or injectable sema?

Mads Thomsen: So, the two supplemental NDAs for Rybelsus and Ozempic cardiovascular indication in type 2 diabetes, the review of those are ongoing in parallel. We have had no notification that there will be an AdCom, but on the other hand, that does not mean to say that I can confirm that they will never be one. In principle, it is the prerogative of the agency to call for one if need be, but I have seen no signs to suggest that, that is going to happen at this point in time.

Q: Our research suggests that Rybelsus' commercial access is around 40% already and that seems to be ahead of where Ozempic was. And around half of that don't require prior authorization. Could you confirm if that's kind of where we are and where we're not, that's ahead of your expectations?

Lars Fruergaard Jorgenssen: We cannot comment on level of access. We are still early in the progress of negotiating this access.

Q: Going back to GLP-1 franchise price in the US, I wonder if you can just talk about your ability to take future list price increases here just given the current political environment?

Lars Fruergaard Jorgenssen: So, on GLP-1 price and ability to take a price increase, I do not really want to comment on that. The ability in the industry in general to take price increase is lower in this environment where there's lot of focus on pricing, but I think it differs largely across the type of products, therapy areas and what exposure that is. So, I can, unfortunately, not be more explicit on that.

Saxenda

Q: My question is on Saxenda, clearly the product is doing very well. Can you just talk a little about how long patients are staying on the drug and how this period has evolved to since the launch? And then, how long do you expect the average stay time on semaglutide to be within Obesity?

Camilla Sylvest (EVP and Head of Commercial Strategy): So, on Saxenda, our stay time differs a little bit between countries, but is generally in the range between four to five months. There are a few countries that are slightly lower than that, but in the US, it's around five months. With regards to semaglutide in Obesity, I think Mads would just like to give a few words.

Q: Are you able now to start being more active on sort of diabetic – the marketing on Saxenda in Obesity and thinking about national TV commercials, but more in terms of say select media, et cetera, where you go out and push more for this. Are you still waiting to get a product on the market with better efficacy to really kick start this?

Camilla Sylvest: And I think the question also went to whether we would do a DTC and right now with Obesity in general and with Saxenda in the US, we are focused on a number of opportunities, but also barriers. So, one of those – the first one is, of course, that patients are actually seeking care. So, as you will notice, we have initiated a number of opportunities to collaborate with companies that do behavioral modification that also should inform patients about how they can, of course, seek care for Obesity like Saxenda, but also how they can improve their wellbeing in general. So, combining these two things had shown us in pilot studies that they are – in 4,000 patients, that they are good results to achieve and we will share some of these results also at our Capital Markets Day. And that also means that the market is yet not mature enough for us to do direct-to-consumer marketing because of the barriers that we still see in the system. So we are focused also while on that to make sure that we can inform the healthcare professionals about Obesity as a chronic disease. And when we have progress in both of these areas, so patients seeking care and providers being able to provide the care, then the market will be more mature for DTC activities, but not at this point.

Q: On Saxenda, how should we think about the sustainability level of strong underlying growth the rest of FY 2019 and going forward in 2020?

Camilla Sylvest: Overall on Saxenda growth, we still see a continued strong growth both in the US, but also outside the US. As you know, we're not guiding for next year at this point in time, but we do see also in the US that the general market, of course, is not developing as positively as our Saxenda is and that means that we keep taking share, of course, with Saxenda, but our focus also remains to build the market and grow the market.

Pipeline

Q: On the new PCSK9 in the pipeline, can you talk a little more about your plans here? I don’t think anyone is expecting you to be developing a standalone injectable PCSK9 given the market dynamics. But is this about co-developing with GLP-1 in terms of an oral format or using new technologies?

Mads Thomsen: On the PCSK9 peptide, it has been designed in such a way that it is very potent. Meaning that it can, in principle, go into formulation with any product in the pipeline since also it has a neutral pH value and you don't need to fear overdosing it, because all it can do is soak up the circulating PCSK9. And as we know from the genetic experiments of nature in mankind, that is not associated with any risk. So, in principle, the product options are i.e. offering the opportunity to reduce LDL significantly in patients whether it's with diabetes, NASH, obesity, cardiovascular and so on. It basically just offers the added benefit of cutting the LDL cholesterol in half and we'll investigate those options and talk more to them once we have the data from these studies as soon as possible.

Q: You've talked about why you've terminated OG2023, but can you just give us a little bit more detail on the progress you've made on next-generation oral sema in terms of bioavailability? Anything we can get our teeth into will be helpful there

Mads Thomsen: On, OG2023 that relates to the fact that we have seen really nice data. You do recall, that we had two ongoing trials in parallel. One was the enhanced formulations of oral semaglutide that is completed and the other one was the new analog OG2023. And with the benefits that we've seen, vis-à-vis, the formulations impact on bioavailability, we see no need to further develop OG2023. So, we actually view this as a sign of success of the strong collaboration between the R&D colleagues and the product supply colleagues who are able to constantly upgrade, you can say, the performance of oral semaglutide.

Q: Mads, can you just give us a general sense of when and what we're likely to see from your novel incretin portfolio as well as kind of the combinations? My sense is, is that we're anticipating second half of 2020 to see data from your long-acting amylin. So, just was hoping to get an update there as well as kind of what you're hoping to see in those trials to advance them into phase 3.

Mads Thomsen: So, on the injectable portfolio of incretin-like projects, it was up with the most advanced first, that is obviously the combination between semaglutide and the Amylin 833 compound. And those data will be out as you correctly state in the first half of next year and based on what I know from preclinical experiments and the monotherapy over seven weeks with the Amylin compound, they should be hopefully showing really good weight loss data since this is in obese people is taking place. So, we'll get back to that next year. Then, we have two agonists, the triple and the dual agonist ongoing in multiple dosing in phase 1b and that is, of course, the GIP/GLP-1/glucagon triple agonist and it's the GIP-GLP co-agonist. And those data are actually available later this year. And then, finally, we are gearing up for using sema, which we perceive to be a people-free anchor drug in several diseases, but also the anchor drug partner in new to be developed combination products. And, therefore, we're also combining that expectedly with a once-weekly human GIP to optimize the ratio between these two incretins in the event that GIP actually turns out to play a role in human biology. That's still a bit uncertain at this point.

US Insulin Pricing Environment

Q: On the US insulin market, basal and short acting, perhaps you could highlight how you're seeing the formulary access for next year and how we should think about the pricing environment, whether it's similar to 2019, for 2020.

Lars Fruergaard Jorgenssen: So, for the US insulin market, we expect roughly same access for Novo Nordisk going into 2020 as we have for this year. We'll not, at this point of time, comment about pricing. That will be a part of our full-year release and our guidance for 2020. But clearly you can see that we have price pressure this year. When you add up all the three manufacturers, you see that the value of the insulin market declined double digit. So, we had price pressure. We had that for some years and that will also be the case for next year.

China

Q: On China, hot topic in light of some companies making hay and obviously getting smacked by volume-based procurement, can you just remind us how you assess the risks from VBP to your current 15% growth rate in China and remind us the timelines you are working to getting products like Tresiba, Ozempic and Rybelsus approved and reimbursed on the NDRL?

Maziar Mike Doustdar (EVP and Head of International Operations): So, the so-called 4+7 public procurement, it has had a very large impact, I think, on some of our peers, but I would say, based on the current scope of the program, there will be limited impact on us as insulin is out of the scope at least for the time being. So we have to wait and see what happens with that. We could eventually, at one point of time, I mean near future, get impacted on our sales, but that, of course, is a smaller part of our business there. On your second part of the question, Peter, with regards to bringing new products in, we are hard at work. We have, as you know, already registered Tresiba and got it into the national drug list effective 1st of January 2020. Right now, we are in recruitment of additional sales force getting ready for that launch and expansion of Tresiba. We have a registration for Ryzodeg and we'll be launching that product also hopefully before the end of the year. It's anyone's guess when the list opens up again and we will be able to bring Ryzodeg into their national drug list, but when it does, then hopefully, we're ready with that and Ozempic will follow that also in some years to come, but, right now, we're doing quite well with Victoza.

Q: Just going back to the Tresiba opportunity in China, perhaps you could give us some framing of that opportunity over the next couple of years relative to the sort of declines you're seeing in the US market for basal insulin.

Maziar Mike Doustdar: So, on the basal opportunity in China, I think if you take a look, we have had most of our growth historically in China due to insulin and primarily, of course, the premix insulin, NovoMix, and before that mix, that are – two of their leading products in China and we've done really, really well. What I think most people don't realize is that China has a very large basal market. So according to IQVIA, the Chinese insulin market is around DKK 14 billion, the basal market is DKK 5 billion what at least IQVIA covers and you can perhaps double that to get to the real numbers. Within the premix segment, which is only DKK 4 billion, we have 77% market share. So we are really in a defensive mode trying to make sure that we can defend that and hoping then, of course, we get eventually into the market and keep the defense on that high market share. Within the larger DKK 5 billion market, then we only have 15% market share. And it's no secret that with now having Tresiba into the market with good access, we see a very large opportunity for us to capture market share in that large segment. So I'm very hopeful with the basal market share and that's why we're also expanding our sales force in that front.

Financials

Q: Could you just briefly give us a more detail on exactly what was driving the impairment this quarter and how the DKK 1 billion is split between R&D and COGS? And then, tied to this, if I assume DKK 500 million reduction for both, it suggests an underlying R&D margin of 10% and a COGS margin 15%. Is there any specific reason the spend was lower this quarter or should we think of these margins as a possibility moving forward if – even if only for a few quarters within a given year?

Karsten Munk Knudsen (EVP and CFO): We have had DKK 1 billion in impairment in the third quarter as you noted, Wimal. Impairments in pharma and biotech is not unusual. I think it carries some interest with us because of the way we report our numbers in a transparent way. So we don't have to split between core and non-core earnings. So, again, it's not unusual. We've also had impairments previously. What is slightly unusual in a Novo Nordisk context is that we have more impairments in an individual quarter, but that is a pure coincidence. You're perfectly correct in terms of the split between R&D and cost of goods. You can split the DKK 1 billion roughly 50/50 between R&D and cost of goods sold. As to the implied margins, then, of course, you get to two different margins. On our R&D margin, we're still guiding full year for an R&D margin of 12%. The reason behind that is that we're basically in a valley between a ramp-down of trials in 2018, primarily the PIONEER program, and then ramp-up of a number of trials with SOUL, SELECT, and FLOW and more. So, no changes to the R&D ratio outlook and the same goes for cost of goods. We're still guiding a reported 1-percentage-point reduction in cost of goods, our gross margin ratio for the full year.

Mads Thomsen (CSO and EVP): Yes. Our understanding from the research and the investigations we do with the specialists in the area and our investigators and so on, that, for semaglutide, these three factors that will contribute to a longer stay time. And the first and quite clear one is the greater efficacy. So, when you have greater efficacy compared to Saxenda is what we expect in the STEP program. This lessens the propensity of the individual patient to shy away or discontinue the product. The other one is, of course, the convenience element that is given once-weekly instead of once-daily. So, it's less of a hassle in the patients' life. And the third one is that the trials are ongoing for six to eight weeks. That includes a titration phase, followed by 52 weeks of steady-state phase. And since we, in phase 2, saw that there was a constant and ongoing active weight loss even into the last week of the trial, that should also mean that the patient experience benefits for at least the first year or so of therapy. But it remains to be seen how long this data will be, but it will be longer than for Saxenda.

Financial Highlights

1. Overall D/O Portfolio Rises 9% YOY to $3.8 Billion; Obesity Leaps 50% YOY; Novo Nordisk Regains Total GLP-1 Volume Market Leadership

In another robust quarter, Novo Nordisk’s overall diabetes and obesity portfolio climbed 9% YOY to $3.8 billion from $3.6 billion in 3Q18. Between the two sectors, diabetes increased 4% at CER, and obesity leapt ahead 50%. Sequentially, sales remained relatively flat at +1% from a base of $3.8 billion in 2Q19. Novo Nordisk’s impressive collection of GLP-1s (Victoza, Ozempic, and soon Rybelsus as well) certainly headlined the quarter, growing 24% YOY and 5% sequentially. The company has now regained total GLP-1 volume market leadership from Lilly with a formidable 47%. Collectively, the class now makes up 39% of Novo Nordisk’s D/O portfolio sales and contributed a tremendous 90% of growth. With oral semaglutide Rybelsus now on the table, as well as an “enhanced next-generation” oral semaglutide in the pipeline, we can’t help but wonder how soon GLP-1s will cross the 50% mark for D/O portfolio sales – without a doubt, the growth has been astronomical so far. Comparatively, total insulins dipped 6% YOY and -6% sequentially. Despite the challenging financial quarter for insulins, management noted a 1% growth in global volume market share, withstanding increased competitive pressure in the US.

Novo Nordisk D/O Worldwide Financial Results – Past Five Quarters

Diabetes/

Obesity

3Q18

4Q18

1Q19

2Q19

3Q19

Revenue – USD billion (DKK billions)

$3.64

(DKK 23.4)

$3.82

(DKK 24.9)

$3.73

(DKK 24.8)

$3.84

(DKK 25.2)

$3.77

(DKK 25.5)

YOY Reported (CER) Growth

+5% (+6%)

+8% (+7%)

+9% (+5%)

+9% (+7%)

+9% (+5%)

Sequential Reported Growth

+1%

+7%

0%

+2%

+1%

Novo Nordisk D/O Sales – 3Q19 Geographic Results

 

Revenue – USD (DKK billions)

YOY CER Growth

North America

$1.8 billion

(DKK 12.5)

+1%

International

$1.9 billion (DKK 13.0)

+10%

Novo Nordisk D/O Sales (1Q12-3Q19)

2. Ozempic Reaches “Blockbuster Status” and Rockets +478% YOY to $462 Million

Ozempic was again a major bright spot this quarter, surging +478% YOY to $462 million from $84 million in 3Q18 and contributing a massive 73% of growth to the entire D/O portfolio. Sequentially, sales rose a much more modest 34% from a base of $354 million in 2Q19. Ozempic was said to have achieved “blockbuster status” in both prepared remarks and presentation materials. Domestically, the drug’s new-to-brand prescriptions reached 37% (almost overtaking Victoza, which is at 38%), bringing Novo Nordisk’s total GLP-1 NBRx to a whopping 54%. Ozempic currently makes up 19% of GLP-1 volume market share in the US, compared to 45% for Lilly’s Trulicity and 27% for Victoza. Trulicity’s numbers stayed relatively flat again this quarter, which suggests that the majority of Ozempic’s growth comes from Victoza cannibalization. After transitions from Victoza further stabilize, we expect Ozempic to directly compete with current market-leader Trulicity and contribute to overall GLP-1 growth by bringing more patients to the class with its appealing once-weekly dosing and impressive efficacy on body weight, glucose, and CV (and potentially renal) protection. We’ll be curious to see how oral GLP-1 Rybelsus contributes to the mix, and it’s certainly an exciting time for the class broadly. Ozempic has now been launched in 24 countries, slightly up from 21 in 2Q19.

Ozempic Worldwide Financial Results – Past Five Quarters

Ozempic

3Q18

4Q18

1Q19

2Q19

3Q19

Revenue – USD millions (DKK billions)

$84

(DKK 0.5)

$152

(DKK 1.0)

$214

(DKK 1.4)

$354

(DKK 2.3)

$462

(DKK 3.1)

YOY Reported (CER) Growth

--

--

+1,965% (--)

+1,092% (--)

+478% (--)

Sequential Reported Growth

+177%

+84%

+44%

+63%

+34%

Ozempic Sales – 3Q19 Geographic Results

Ozempic

Revenue – USD millions (DKK billions)

YOY Reported (CER) Growth

Sequential Reported Growth

North America

$413 (DKK 2.8)

+425% (--)

+30%

International

$48 (DKK 0.3)

+4557% (--)

+33%

Ozempic Sales (1Q18-3Q19)

3. Victoza Drops 15% to $795 million stemming from shifts to other GLP-1s Ozempic and Rybelsus; Management Cites Declining US Sales (-24% YOY)

Victoza (liraglutide) sales decreased 12% YOY (-15% CER) to $795 million from a base of $951 million in 3Q18. Sales also fell 4% sequentially from $825 million in 2Q19, likely driven by large declines in North American sales starting in 1Q19. US sales continue to decline with a notable 24% drop YOY, partially offset by a 7% increase YOY in international markets. As in 2Q19, management contributes lackluster US performance to changes in the “channel and payer mix,” overall coverage gap legislation, and lower average realized price. Victoza sales are further hindered by the launch Ozempic and competition from Lilly’s once-weekly GLP-1 agonist Trulicity (dulaglutide). Of course, this is central to Novo Nordisk’s strategy of shifting promotional and commercial focus toward Ozempic and Rybelsus and away from Victoza, especially as Victoza’s patent expires in the coming years.

  • Management continues to highlight Victoza’s FDA approval and positive CHMP opinion for use in children and adolescents age 10-17. This decision was based on results from the phase 3b ELLIPSE trial, in which Victoza conferred a meaningful 1.1% treatment difference on A1c (-0.64% from baseline 7.8%) versus placebo that grew to 1.3% after 26 additional weeks of open-label treatment. As of August, the ADA recommends Victoza for children with type 2 in the same age group if goals aren’t met with metformin and/or basal insulin therapy. This makes liraglutide the first non-insulin medication approved for pediatric type 2 in the past 20 years, joining metformin and insulin. Novo Nordisk reported that they’ve applied for a six-month pediatric label extension for Victoza in 18 European countries as well.

  • Novo Nordisk remains the global market leader for GLP-1s in all areas outside Japan and Korea, capturing 47% of market sales. With this, the GLP-1 segment share of the total diabetes market increased 17%, up 14% YOY from 3Q18. Class-wide growth was attributed to increases in sales from the introduction of Ozempic and new CV indication for Victoza in Europe. Similar trends are apparent in China, where Victoza’s market share has spiked to 93%.

Victoza Worldwide Financial Results – Past Five Quarters

Victoza

3Q18

4Q18

1Q19

2Q19

3Q19

Revenue – USD millions (DKK billions)

$951

(DKK 6.1)

$996

(DKK 6.5)

$859

(DKK 5.7)

$825

(DKK 5.4)

$795

(DKK 5.4)

YOY Reported (CER) Growth

+14% (+14%)

 

+3% (+9%)

-5% (-10%)

-6% (-9%)

-12% (-15%)

Sequential Reported Growth

+7%

+6%

-12%

-5%

-4%

Victoza Sales – 3Q19 Geographic Results

Victoza

Revenue – USD millions (DKK billions)

YOY Reported (CER) Growth

Sequential Reported Growth

North America

$512 (3.5)

-22% (-24%)

-4%

International

$256 (1.7)

+9.2% (+7%)

-7%

Victoza Sales (1Q12-3Q19)

4. Saxenda Drives 50% YOY Growth for Obesity Portfolio; Leaps 46% YOY to $213 Million

Novo Nordisk’s key obesity drug Saxenda (liraglutide 3.0 mg) jumped 46% YOY to $213 million from $154 million in 3Q18, driving overall obesity sales up 50% YOY. Despite sequential sales dipping a slight 1%, management remained bullish on Saxenda’s future and pointed out that the product has now been launched in 45 countries. Currently, the company maintains global obesity market volume leadership at 54% and a value market share of 71%. Saxenda came up multiple times during Q&A, hinting at increased interest from the broader investment community. Questions ranged from average drug stay (four to five months) to marketing tactics. We were pleased to hear that Novo Nordisk is paying particular attention to (i) finding a patient population for Saxenda (making sure that “patients are actually seeking care”); and (ii) collaborating with companies that work in behavioral modification to improve overall patient wellbeing. Most recently, Novo Nordisk partnered with New York-based digital health company Noom to provide digital health solutions (app + human coaches) for weight management, as a part of the SaxendaCares program. We’re very excited to see such a clear company commitment to building infrastructure around an obesity drug – a step we think is key to successfully finding an audience.

Saxenda Worldwide Financial Results – Past Five Quarters

Saxenda

3Q18

4Q18

1Q19

2Q19

3Q19

Revenue – USD millions (DKK billions)

$154

(DKK 1.0)

$188

(DKK 1.2)

$182

(DKK 1.2)

$223

(DKK 1.5)

$213

(DKK 1.4)

YOY Reported (CER) Growth

+54% (+58%)

+76% (+78%)

+57% (+51%)

+66% (+60%)

+46% (+42%)

Sequential Reported Growth

+12%

+25%

-2%

+21%

-1%

Saxenda Sales – 3Q19 Geographic Results

Saxenda

Revenue – USD millions (DKK Billions)

YOY CER Growth

Sequential Reported Growth

North America

$137 (DKK 0.9)

+32%

-1%

International

$76 (DKK 0.5)

+63%

-11%

Saxenda Sales (1Q16-3Q19)


5. Tresiba Grows 7% YOY to $341 Million; Expansion into China Ongoing

Next-gen basal insulin Tresiba (degludec) was up 7% YOY (+3% CER) to $341 million from a base of $335 million in 3Q18. Sales dipped 8% sequentially, driven by a 16% drop in US sales. Despite losses in the North American sector, sales for the franchise grew in Europe (+29% YOY) due to Tresiba’s introduction earlier this year. Management highlighted similar strides in Japan and Korea (+8% YOY; 45% basal insulin market share in Japan) and Latin America (+27% YOY). Notably, China admitted Tresiba into the national reimbursement drug list effective in 2020. During Q&A, management stated that they are currently recruiting additional sales force members to prepare for the franchise’s expansion. When pressed for more details about this venture, management stated that there is a very large basal market they are trying to expand Tresiba into.

  • Tresiba predecessor Levemir fell 17% YOY (-19% at CER) and 9% sequentially to $316 million.

Tresiba Worldwide Financial Results – Past Five Quarters

Tresiba

3Q18

4Q18

1Q19

2Q19

3Q19

Revenue – USD millions (DKK billions)

$335

(DKK 2.2)

$332

(DKK 2.2)

$322

(DKK 2.1)

$380

(DKK 2.5)

$341

(DKK

YOY Reported (CER) Growth

+23% (+24%)

+16% (+14%)

+22% (+16%)

+28% (+22%)

+7% (+3%)

Sequential Reported Growth

+11%

+1%

-1%

+16%

-8%

Tresiba Sales – 3Q19 Geographic Results

Tresiba

Revenue – USD millions (DKK billions)

YOY Reported (CER) Growth

Sequential Reported Growth

North America

$199 (DKK 1.3)

-8% (-11%)

-16%

International

$131 (DKK 0.88)

+28% (+25%)

-1%

Tresiba Sales (1Q16-3Q19)

6. Fiasp Up 84% YOY to $45 Million; Two Fiasp Approvals Have Potential to Boost Sluggish Debut; NovoLog Falls 3% YOY to $641 Million.

Mealtime insulin Fiasp grew 84% YOY to $45 million from a base of $26 million in 3Q18. Sequentially, sales grew 11% from $41 million last quarter. Excitingly, Fiasp was mentioned during prepared remarks for the first time in recent history, with reference to the drug’s two recent approvals: the first, an EMA label expansion to treat adolescents and children >one-year old; and the second, FDA approval for use in insulin infusion pumps. Hopefully, the approvals will create some much-needed tailwinds for the drug, which has experienced sluggish uptake to date, though we underscore that the rapid-acting insulin market in general has been challenging. In the past, we’ve speculated that Fiasp may perhaps fare best as a component of a closed loop system or dual hormone artificial pancreas, and we see the recent pump approval as bringing the drug one step closer to that future. Thus far, Fiasp has been launched in 31 countries, up from 29 in 2Q19. Notably, the drug was approved for use in Japan this past quarter, as predicted in the 2Q19 call. Novo Nordisk currently leads the fast-acting insulin market at 51% of global volume market share. Looking ahead, Fiasp’s growth is expected to level out losses from NovoLog, keeping the company’s volume market share relatively unchanged.

Fiasp Worldwide Financial Results – Past Five Quarters

Fiasp

3Q18

4Q18

1Q19

2Q19

3Q19

Revenue – USD millions (DKK billions)

$26

(DKK 0.2)

$32

(DKK 0.2)

$35

(DKK 0.2)

$41

(DKK 0.3)

$45

(DKK 0.3)

YOY Reported (CER) Growth

--

--

+178% (+167%)

+99% (+94%)

+84% (+79%)

Sequential Reported Growth

+20%

+26%

+12%

+18%

+11%

Fiasp Sales – 3Q19 Geographic Results

Fiasp

Revenue – USD millions (DKK Billions)

YOY CER Growth

Sequential Reported Growth

North America

$20 (DKK 0.1)

+81%

+5%

International

$24 (DKK 0.2)

+78%

+9%

Fiasp Sales (1Q18-3Q19)


NovoLog Worldwide Financial Results – Past Five Quarters

NovoLog

3Q18

4Q18

1Q19

2Q19

3Q19

Revenue – USD millions (DKK billions)

$692

(DKK 4.4)

$740

(DKK 4.8)

$713

(DKK 4.7)

$683

(DKK 4.5)

$641

(DKK 4.3)

YOY Reported (CER) Growth

-12% (-11%)

+6% (+5%)

+1% (-3%)

-7% (-9%)

-3% (-5%)

Sequential Reported Growth

-7%

+9%

-2%

-6%

-4%

NovoLog Sales – 3Q19 Geographic Results

NovoLog

Revenue – USD millions (DKK billions)

YOY CER Growth

Sequential Reported Growth

North America

$290 (DKK 2.0)

-17%

-7%

International

$351 (DKK 2.4)

+7%

-5%

NovoLog Sales (1Q12-3Q19)


7. Xultophy Up 30% YOY to $85 Million

Sales for fixed-ratio basal insulin/GLP-1 Xultophy (insulin degludec/liraglutide) rose 30% YOY to $85 million from $69 million in 3Q18, while sequential numbers remained flat. Last quarter, sequential sales climbed 20%, perhaps in part due to Xultophy’s key label expansion in February allowing for use as a first-line injectable in the US, following a relatively stagnant 6% sequential in 1Q19. The company’s financial report highlighted Xultophy as a partial offset factor to long-acting insulin’s overall declining sales. Despite the product’s efficacious profile (superior glucose-lowering efficacy + milder side-effect profile + lower injection burden), Xultophy sales continue to underwhelm on the market. Our sense is that HCPs remain reluctant to prescribe fixed-combination therapy, which is somewhat rigid in both its components and titration.

  • Excitingly, Xultophy was also approved in Japan this past June. Currently, the product has been launched in 32 countries and has remained at that number since 1Q19. Despite challenging market dynamics, we sincerely hope the drug continues to be rolled out to all patients it could possibly benefit. 

Xultophy Worldwide Financial Results – Past Five Quarters

Xultophy

3Q18

4Q18

1Q19

2Q19

3Q19

Revenue – USD millions (DKK billions)

$69

(DKK 0.4)

$69

(DKK 0.5

$72

(DKK 0.5)

$87

(DKK 0.6)

$85

(DKK 0.6)

YOY Reported (CER) Growth

+150% (NR)

 

+69% (+68%)

+41% (+38%)

+50% (+46%)

+30% (+27%)

Sequential Reported Growth

+16%

+2%

+6%

+20%

0%

Xultophy Sales – 3Q19 Geographic Results

Xultophy

Revenue – USD millions (DKK billions)

YOY CER Growth

Sequential Reported Growth

North America

$30 (DKK 0.2)

+34%

-6%

International

$55 (DKK 0.4)

+24%

0%

Xultophy Sales (1Q17-3Q19)

 

 

--by Ursula Biba, Rhea Teng, Martin Kurian, and Kelly Close