Novo Nordisk 1Q19 – D/O sales +9% YOY (+5% CER), flat sequentially at $3.7B; Ozempic +44% seq. to $214M; Strong growth from Tresiba, Saxenda; GLP-1 value share leadership at 46.1%; Three semaglutide trials in CVD, CKD, and retinopathy starting in 2019 – May 3, 2019

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

Table 1: 1Q19 Financial Results for Novo Nordisk’s Major Diabetes Products

Pipeline Update

• In the pipeline, two oral semaglutide NDAs have been submitted to FDA, requesting indications for (i) glucose lowering in type 2 (decision 3Q19, due to priority review voucher) and (ii) CV risk reduction (decision early 1Q19). Oral semaglutide has also been submitted in the EU and Canada, with Japan filing planned for 3Q19. Within 2Q19, the SOUL CVOT for oral sema – now posted to ClinicalTrials.gov – will begin enrolling ~9,600 people with type 2 and either CHD, CKD, PAD, or cerebrovascular disease for up to five years. The primary endpoint is three-point MACE and, notably, the first secondary endpoint is a renal composite; expected completion is July 2024. As a reminder, Novo Nordisk aims to support renal and (if necessary) CV indications for both oral and injectable semaglutide with data from SOUL and FLOW.

  • Novo Nordisk seems very optimistic about phase 2 long-acting amylin analog AM833. A large (n=700), dose-ranging phase 2 trial in overweight/obesity started recruiting in 1Q19 and should complete April 2020. A phase 1 study testing AM833 in combination with Ozempic is also recruiting. During Q&A, CSO Dr. Mads Thomsen outlined these agents’ complementary mechanisms (amylin action on the brainstem, semaglutide on the hypothalamus) and hypothesized that a combination could approach “bariatric surgery standards of weight loss.” For now, research is focused on identifying optimal ratios in humans.

  • Also in phase 2, the company’s study of liraglutide and anti-IL 21 in newly-diagnosed type 1 diabetes – aimed at preserving beta cell function – completed in February, and results are expected in 2Q19. This could be a huge breakthrough in disease-modifying therapy for type 1, and we’re eager for results. Additionally, phase 2 readout for once-weekly basal LAI287 in type 2 is expected in 4Q19.

  • Dr. Thomsen briefly highlighted, during prepared remarks, the company’s recent partnership with Gilead for a joint clinical trial in NASH, testing semaglutide/cilofexor/firsocostat combinations.

Questions and Answers from the Call

Q: The focus in the FLOW trial is on renal endpoints. Is the strategy here to play defense against the SGLT-2 inhibitors, where outcome trials of the same ilk are running?

Dr. Mads Thomsen (CMO): FLOW and FOCUS are actually not defensive maneuvers, but rather, in my view, extremely proactive ones. One of them started as a defensive maneuver, where the European Medicines Agency asked us to do a post approval safety study, to actually secure that the early worsening phenomenon was indeed the responsible action behind the transient increase in retinopathy, which is the worst thing that we're seeing in few patients [in SUSTAIN 6]. And then we have turned it into a superiority trial, because alongside our external experts and ophthalmologists, I do believe that it is the early worsening phenomenon. And as we have seen from other outcomes studies, that is followed by a period of progressive improvement in the eyesight or a reduction in eyesight deterioration, as compared to standard of care. So, it's actually a superiority trial to prove that Ozempic might be the first compound to actually, long-term, protect the eyes against a loss of vision. We use a more than three-step progression in the ETDRS scale, which is the internationally accepted measurement of accelerated visual loss.

In the FLOW trial, it is unfortunate that we, unlike a couple of our SGLT-2 peers, have not done a chronic kidney disease trial. Because it is my belief that the 36% improvement in either onset of nephropathy or worsening of kidney nephropathy is a true phenomenon. It was actually also observed in the LEADER trial, where it was 22% or so. I do believe that by measuring a composite primary endpoint where we look at ≥50% reduction in eGFR, onset of a persistent eGFR below 15 (i.e., going into renal failure), initiation of either hemodialysis or renal transplantation, and renal or CV death – that composite endpoint should take us to where we want to be, namely high up in the treatment hierarchy in terms of nephrologist and people treating people with nephropathy. With that we would have labels that range from glycemic regulation, to weight regulation (ultimately NASH management), cardiovascular management, and maybe also renal management and a little bit of upside on the eyes.

Q: Do you think the combination of the amylin analog and Ozempic high-dose could be a significant treatment for NASH as well as obesity, and when could we see data here?

Dr. Thomsen: The short answer is absolutely yes. We have done mechanistic studies at the site of action in the brain and they are highly complementary. One is primarily brainstem related, that's the amylin site of action, and one is primarily hypothalamic, that's semaglutide. We've also corroborated that in rodent studies. So it could mean whatever weight loss is – I will speak in 15% for semaglutide, I will speak in 10% to 15% for amylin – in principal, we could be approaching bariatric surgery standards of weight loss. But that remains to be a forward-looking statement. Of course, we're starting multiple dosing already between the two agents to find the optimal ratio in human terms. Yes, it could be used for obesity, it could be used for NASH where it would de-fatten the liver and maybe also have certain anti-inflammatory properties, and it could also be used as an anti-diabetic agent, in particular in people with higher degrees of obesity.

Q: Around CV and REWIND, I’m interested to get any comments you have from any discussions you've had with payers on CV benefit in the GLP-1s. How likely is it that the physicians would actually consider a broad CV benefit from Trulicity as a class effect?

Mr. Lars Jorgensen (CEO): We have not seen the data from REWIND, so it's a bit hard for us to speculate on what the impact of that will be. We see that more and more treatment guidelines are being updated to include the CV benefit but still see that in, say, primary care, it's glucose regulation that's on top of mind for physicians. So it is being established as a prescription driver but it's not yet a significant prescription driver. And I think that's also what the payers would be impacted by when they have to make choice. But it's hard for us to take much more firm views as we have very limited insight to what the REWIND data informs us about.

Q: You’ve been hit by the Donut Hole discounts widening in 2019, yet when we think through the proposed Part D reforms as they stand for 2020, the implied uplift for Novo Nordisk is at the very least, very significant. Could you talk to how you are thinking about (i) Part D reform actually happening in 2020 and (ii) a little more about the short and long-term implications to Novo Nordisk's book of business?

Mr. Jorgensen: I tend to believe that the pass-through of rebate reform will happen but I also note that it's not a simple thing to change. Obviously, it would benefit patients and we believe we can compete in a market where there is more transparency and we operate without rebates. But we should all bear in mind that the rebates that are paid from the highly competitive parts of the pharmaceutical market – like the insulin market, where purchasers can extract significant rebate amounts – that is going in to fund the healthcare system. So, if that is passed through to patients, there'll be a lack of funding in other parts of the healthcare system, which would mean that premiums would have to go up. So, it's a complex system. And when you start changing parts of it, it can be difficult to fully understand who are winning and who are gaining. As we look at it, there are different forces; you could say more transparency around pricing and competing on net pricing could lead to some negative impact on overall pricing because there would be convergence to maybe a lower price point across accounts. On the other hand, we would have lower exposure in the Part D coverage gap and you could also speculate that there would be a higher consumption of certain medicines. So, I think that there are pluses and minuses. Exactly how it will play out, I will not comment on because this is a draft proposal, and how the whole supply chain will react to it and think about fees, etcetera, how that will play out, we do not know yet. But that's kind of my thinking around it.

Q: What do you expect to see from volume demand with rebate reform? Do you have a view to patients abandoning scripts because of costs and could that go away with lower patient co-pays?

Mr. Jorgensen: On the speculation around a potentially higher volume demand in a world where rebates are passed through and there are less affordability issues for patients, we don't really have an informed view on what that could potentially be. I note that actually across the world, there's probably an under-consumption of insulin because it's not the easiest medicine to handle and the concerns about hypoglycemia, et cetera, in general mean that patients are not taking the volume they should. So as we bring innovation to the market and potentially also bring digital solutions, we believe there can be a volume benefit from that, as insulins become more safe, and how to split that between affordability and more convenient insulins I think is difficult to judge at this point of time.

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 1Q19.

Financial Highlights

Overall

• Novo Nordisk’s overall diabetes/obesity portfolio rose 9% YOY (+5% at CER) to $3.7 billion (flat sequentially), growing the company’s global market value share to 28.1% and maintaining GLP-1 value share leadership at 46.1%. Overall, the numbers benefited from a very easy comparison YoY.  

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

Novo Nordisk D/O Sales – 1Q19 Geographic Results

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

Victoza

• Falling revenue reflects North American sales declining 12% YOY as reported (19% at CER) to $595 million, significantly offset by International sales, up 20% (19% at CER) to $265 million – not surprising, as the lion’s share of Ozempic sales have come from the US. Management attributed Victoza’s US slide to a diverse list of factors, in addition to switching to Ozempic: inventory reductions, changes in payer and channel mix, and changes to Medicare coverage gap legislation that have lowered realized price, as well as continued competition from once-weekly GLP-1s including Lilly’s Trulicity.

Victoza Worldwide Financial Results – Past Five Quarters

Victoza Sales – 1Q19 Geographic Results

Victoza Sales (1Q12-1Q19)

Ozempic

• Ozempic continued surging…Indeed, management underscored that Ozempic’s new-to-brand prescription share now exceeds 30% in the US (quickly outpacing Victoza’s 20%, and approaching Lilly’s Trulicity’s 41%), bringing Novo Nordisk’s combined NBRx share for GLP-1 to just-over 50% (see slide below). Total prescriptions for the US GLP-1 class are currently growing at ~29% YOY according to the company, after accelerating from ~23% around the time of Ozempic’s US launch. Ozempic’s US volume share is now at 12%, while Victoza holds 32%, Trulicity 46%, and AZ’s Bydureon 10%. The strong performance was attributed to broad formulary coverage in the US. With launches in 8 European countries in 1Q19, we suspect international revenue will pick up substantially in 2019. Management noted that Ozempic is already off to a “strong start” in Europe, gaining double-digit volume shares less than six months after launch in some countries – the same trajectory can be seen in Canada, where Ozempic currently comprises 34% of the market by volume a year after launch.

  • A CV indication for Ozempic was submitted to FDA in March, based on data from SUSTAIN 6 and PIONEER 6 (decision expected 1Q20), and two other outcomes trials will investigate Ozempic. First, the FOCUS retinopathy outcomes trial (n=1,500, up to five years, expected completion May 2025) will begin recruiting in 2Q19. While a superiority-powered trial – that could prove semaglutide to be the first compound to protect against vision loss in the long-term, according to Dr. Thomsen – we note that this trial was included as part of EMA approval of Ozempic, on account of an increased risk for retinopathy observed with the drug in SUSTAIN 6. Second, the FLOW renal outcomes trial (n=3,120, up to five years, expected completion August 2024) will begin recruiting in 3Q19 and examine the impact of Ozempic on progression of renal impairment. FLOW is expected to support, in combination with the SOUL CVOT for oral semaglutide, renal indications for both Ozempic and oral semaglutide.

Ozempic Worldwide Financial Results – Past Five Quarters

Ozempic Sales – 1Q19 Geographic Results

Ozempic Sales (1Q18-1Q19)

Tresiba

• Topline results from the Novo Nordisk-sponsored, phase 3b head-to-head trial (n=1,609) of Tresiba vs. Sanofi’s Toujeo in type 2 were announced on the call. For the 88-week trial period, overall hypoglycemia risk as well as severe and nocturnal hypoglycemia risks were statistically significantly lower with Tresiba than Toujeo. During the 36-week “maintenance period,” overall hypoglycemia risk trended in favor of Tresiba but was not significant, though both severe and nocturnal hypoglycemia risk was significantly reduced with Tresiba; Dr. Thomsen characterized all risk reductions as “clinically meaningful.” Tresiba also conferred a significantly greater reduction in A1c than Toujeo (time period unclear), despite a significantly lower average dose at the end of the trial. Full results will be presented at a conference in 2H19. For context, this trial is Novo Nordisk’s answer to Sanofi’s similar BRIGHT study, which found a statistically significant decrease in incidence of hypoglycemia <70 mg/dl and <54 mg/dl with Toujeo vs. Tresiba during the first 12 weeks of the study – the “titration period” – but not in the subsequent 12-week “maintenance period.” The overt implication was that Toujeo conferred a reduction in hypoglycemia vs. Tresiba during titration, although the borderline p-values (0.03 and 0.044), transient benefit, and lack of a difference in fasting SMPG and A1c left the field less than convinced of a difference between the two therapies. We note that Novo Nordisk did not today speak to data during a “titration period,” and we look forward to seeing the full data presented.

  • Tresiba predecessor Levemir continued its steady decline, falling 6% YOY (-10% at CER) and 8% sequentially to $394 million.

Tresiba Worldwide Financial Results – Past Five Quarters

Tresiba Sales – 1Q19 Geographic Results

Tresiba Sales (1Q16-1Q19)

Xultophy

• Management did not mention Xultophy’s key 1Q19 label expansion, allowing use as a first-line drug in the US (February 2019). No longer do patients need to be on one of the component classes or molecules to begin a combo – a potential major tailwind for a class that has gotten off to a slow start. That said, we were encouraged to hear management tout “solid volume uptake” of Xultophy alongside Tresiba, leading to a 1% bump in company-wide volume share of the North American insulin market, to 40%. Xultophy has now been launched in 32 countries, up from 26 in 4Q18.

Xultophy Worldwide Financial Results – Past Five Quarters

Xultophy Sales – 1Q19 Geographic Results

Xultophy Sales (1Q17-1Q19)

Fiasp/NovoLog

• Given that Fiasp is still early in its life cycle, 13% sequential growth is underwhelming. Despite accounting for just over 1% of total diabetes/obesity portfolio, Fiasp drove 6% of growth in 1Q19. Steadfast NovoLog accounted for 19% of sales and drove 2% of growth. Neither were featured in today’s call or presentation, though the company’s press release notes that Fiasp has now been launched in 27 countries, up from 25 last quarter. Overall, blog and social media reactions to Fiasp have been mixed – while this is certainly not representative, Fiasp receives nothing like the applause and very positive reactions that Tresiba receive. We are are cautiously hopeful about next-generation rapid acting analog potential since it’s still clear even with closed loop results, that it is very challenging for some patients to get to goal. Seventy percent “time in range” is roughly equal to a 7% A1c – many patients will want to be above this and a faster-acting insulin would help toward this end.

Fiasp Worldwide Financial Results – Past Five Quarters

Fiasp Sales – 1Q19 Geographic Results

Fiasp Sales (1Q18-1Q19)

NovoLog

NovoLog Worldwide Financial Results – Past Five Quarters

NovoLog Sales – 1Q19 Geographic Results

NovoLog Sales (1Q12-1Q19)

Saxenda

• Obesity-grade GLP-1 Saxenda abruptly flattened; however, management was resoundingly bullish during the call and presentation, underscoring that Saxenda now comprises 55% of the global anti-obesity market by value, up from 45% just last quarter. By region, value share is 68% in North America and 38% internationally. This performance was attributed to solid volume growth globally, including a massive 10%-point increase to 29% of the total anti-obesity market in the US (we imagine this applies to the branded market only, as the company’s 4Q18 presentation states that Saxenda only held 4% of the US market). Management again underscored efforts to promote recognition of obesity as a chronic disease, educate HCPs on obesity management, and promote patient engagement with Saxenda (i.e., SaxendaCare). The process of promoting awareness and building reimbursement is meant to pave the way for semaglutide for obesity, which Dr. Thomsen called the “future anchor drug in obesity.”

Saxenda Worldwide Financial Results – Past Five Quarters

Saxenda Sales – 1Q19 Geographic Results

Saxenda Sales (1Q16-1Q19)

--by Ann Carracher, Peter Rentzepis, and, Kelly Close