Novo Nordisk Capital Markets Day 2015 – Positive outlook for continued double-digit growth in diabetes; Semaglutide beats Lantus in SUSTAIN 4; Overview of phase 3 for oral semaglutide – November 20, 2015

Novo Nordisk hosted a Capital Markets Day today at its corporate headquarters in Bagsvaerd, Denmark. The company only hosts this event once every two years, and boy has a lot happened in that time. The day was packed with updates on Novo Nordisk’s diabetes and obesity portfolio and commentary from management on the company’s outlook, which remains quite optimistic. We had wondered coming into the meeting whether the company’s Cities Changing Diabetes program would be mentioned after the inspiring Summit earlier this week. We did not have to wonder for long, as CEO Mr. Lars Sørensen opened the day with a video on the program and remarks about this new way for Novo Nordisk to take the lead in articulating diabetes as a problem. We see this as a very positive sign that Novo Nordisk considers the program a central part of its agenda. Read on below for our top highlights from the packed day. Webcasts and presentations from the meeting are all accessible on the company’s website.

1. Novo Nordisk still expects double-digit growth for its diabetes portfolio in the next few years despite some pricing challenges.

2. New topline results from the SUSTAIN 4 trial showed superior A1c reductions and weight loss with semaglutide vs. Sanofi’s Lantus (insulin glargine).

3. Novo Nordisk shared the first detailed overview of the PIONEER phase 3a program for oral semaglutide.

4. Novo Nordisk has postponed its planned withdrawal of Tresiba from Germany and remains in discussions with the German government on the product.

5. Mr. Jesper Høiland (Executive Vice President, US) very enthusiastic over the US launch of Tresiba.

6. Management highlighted a planned “real world” trial investigating Victoza vs. oral drugs in primary care.

7. Novo Nordisk provided new updates and continued positive commentary on the slow initial launch of Saxenda (liraglutide 3.0 mg).

8. Chief Scientific Officer Dr. Mads Thomsen stated that Novo Nordisk will evaluate its two oral insulin candidates next spring to determine which is more promising.

9. We learned about two new preclinical candidates slated to enter phase 1 soon: the liver-targeted rapid-acting insulin NN1406 and the GLP-1/glucagon dual agonist NN1177.

10. Management suggested that attendees should expect more external innovation from Novo Nordisk in the future.

11. A breakout session provided more granularity on the challenges and opportunities for Novo Nordisk in China.

12. A breakout session on International Operations illustrated the extent to which this segment, which is rarely discussed in depth in quarterly updates, is a strong driver of growth.

Top Twelve Highlights

1. Novo Nordisk still expects double-digit growth for its diabetes portfolio in the next few years despite some pricing challenges. As CEO Mr. Lars Sørensen laid out in his introductory remarks, this optimistic outlook is based on four expected growth drivers: (i) continued volume growth in the insulin market as more patients are diagnosed and progress to injectables; (ii) market share gains as new best-in-class products are launched; (iii) value upgrade as patients move from human to modern insulin and modern to next-generation insulin; and (iv) continued leadership in the growing GLP-1 agonist market. Notably, the company does not expect price increases to contribute significantly to growth going forward due to increased pricing pressure in the US. We were struck throughout the day by how positive the company’s expectations were, especially relative to competitors like Sanofi. We suspect at least some of this is due to a longer-term view of the diabetes market that allows Novo Nordisk to frame initial slow launches of products like Tresiba (insulin degludec) and Saxenda (liraglutide 3.0 mg) in a more positive light. The positive outlook does rely on products like Tresiba and Xultophy (insulin degludec/liraglutide) living up to fairly high expectations. Whether they can do so remains an open question. We believe the clinical value is there, particularly for Xultophy, but access and reimbursement are always somewhat uncertain.

2. New topline results from the SUSTAIN 4 trial showed superior A1c reductions and weight loss with semaglutide vs. Sanofi’s Lantus (insulin glargine). The open-label trial randomized 1,089 insulin-naïve patients with type 2 diabetes to one of two doses of semaglutide (0.5 mg and 1.0 mg) once weekly or insulin glargine once daily for 30 weeks. Results showed impressive A1c reductions of 1.2% and 1.6% with the two respective doses of semaglutide vs. 0.8% with insulin glargine (baseline = 8.2%). In addition, 58% and 73% of participants, respectively, achieved an A1c <7% with semaglutide vs. 38% with insulin glargine, though the difference was only significant with the higher dose of semaglutide. As expected, semaglutide also produced a significant weight benefit: weight loss of 3.5 kg and 5.2 kg with the two respective doses vs. 1.2 kg weight gain with insulin glargine (baseline = 93 kg). Dr. Peter Kristensen (Senior Vice President, Global Development) also noted that more than half of the patients on semaglutide experienced >5% weight loss. These benefits came at the cost of fairly high nausea rates of 21-22% with semaglutide vs. 4% with insulin glargine. However, Dr. Kristensen noted that the discontinuation rate was only 7% even with the 1 mg dose. Hypoglycemia rates were low in all groups (0.3 events per patient-year with semaglutide vs. 0.5 with glargine) – we suspect the difference would be greater in real-world practice. So far, the SUSTAIN results (including those from SUSTAIN 1 and SUSTAIN 3) have painted a picture of a very promising and versatile profile for semaglutide. The remaining three SUSTAIN trials should report within the next six months, beginning with SUSTAIN 2 vs. Merck’s Januvia (sitagliptin), which is now complete according to ClinicalTrials.gov.

3. Novo Nordisk shared the first detailed overview of the PIONEER phase 3a program for oral semaglutide. The program will include 10 trials involving >9,300 patients – this is up from seven trials with 8,000 patients in the first announcement about the decision to enter phase 3. The trials will all be conducted over the next two years and should provide a very comprehensive sense of the product’s potential throughout the type 2 diabetes treatment algorithm. See the table below for a complete overview. Dr. Kristensen particularly highlighted the inclusion of PIONEER 7, a flexible dose escalation trial that is designed to mimic clinical practice rather than satisfy regulatory criteria. We would love to see such “real world” trials become a more common part of clinical development programs. We also learned that the company plans to evaluate 3 mg, 7 mg, and 14 mg doses of semaglutide in phase 3. The phase 2 program included doses of up to 40 mg, but Novo Nordisk had previously stated that the highest dose would likely not be carried forward. We have assumed this decision was due to higher rates of GI side effects with the highest dose, and Dr. Kristensen confirmed that the dropout rates rose to 20-25% with the higher doses. The costs of manufacturing may also have been unsustainable at those doses. These lower doses are not expected to match the efficacy of injectable semaglutide, but Dr. Kristensen indicated that they should be able to beat other oral drugs and match Victoza (liraglutide). We also found it notable that Lilly/BI’s Jardiance (empagliflozin) is being used as the SGLT-2 inhibitor comparator rather than market leader J&J’s Invokana (canagliflozin) – perhaps this will become more standard practice in the post-EMPA-REG OUTCOME era.

Table 1: PIONEER phase 3 trial program for oral semaglutide

4. Novo Nordisk has postponed its planned withdrawal of Tresiba from Germany and remains in discussions with the German government on the product. The company announced in July that it would withdraw Tresiba from the German market as of the end of September following a series of negative pricing decisions. However, Mr. Jerzy Gruhn (Executive Vice President, Europe) shared during Q&A that the product remains on the market in Germany while the company continues negotiations with the authorities. The pricing environment for new diabetes drugs in Germany has been one of the strictest in Europe in recent years, leading to several withdrawals or non-launches of new products. AZ was able to re-launch its SGLT-2 inhibitor Forxiga (dapagliflozin) in Germany following a lengthy re-arbitration process, offering some precedent for a positive outcome in this case. Novo Nordisk would almost certainly not accept the original price point set by German authorities for Tresiba (comparable to human insulin), but we wonder whether it will be willing to lower the premium to some extent to gain access to such an important market. Earlier during Q&A, Mr. Gruhn suggested that while Novo Nordisk is committed to some premium price for Tresiba in Europe, there may be some wiggle room with regard to the exact price point in various countries. If the company does find a way forward for Tresiba in Germany, it would remove what was expected to be an important competitive advantage for Toujeo, which did not have to undergo the stringent IQWiG/G-BA review process because it has the same active ingredient as Lantus.

5. Mr. Jesper Høiland (Executive Vice President, US) was extremely enthusiastic over the US launch of Tresiba. He quipped that the day Tresiba was approved was the most exciting time in his career at Novo Nordisk. He also noted that Tresiba’s profile exactly matches that of the ideal next-generation insulin described at a meeting a decade ago in which management asked what insulin the company would need to compete in the coming years. Mr. Høiland also drew a more explicit contrast between Tresiba and Sanofi’s Toujeo (insulin glargine U300) than we have heard from Novo Nordisk in the recent past. He particularly emphasized the insulin dose reduction with Tresiba vs. Lantus in phase 3 trials compared to the dose increase seen with Toujeo, seeming to imply that Sanofi’s next-generation product was effectively inferior to its current gold standard. We agree that Tresiba likely has a slight edge over Toujeo clinically due to these dose reductions, the potential for flexible dosing, and its longer duration of action. However, Sanofi’s emphasis on broad early access for Toujeo and the sizable base of patients on Lantus should work to the product’s advantage, and early feedback on Toujeo from patients and providers has been positive thus far. We think it is far too early to predict whether one of the two will emerge as the clear leader among next-generation basal insulins and generally feel it will just be great for patients to have access to “next generation” basal insulins.

6. Management highlighted a planned “real world” trial investigating Victoza vs. oral drugs in primary care. The trial, slated to begin in 1Q16, will randomize approximately 2,000 patients with type 2 diabetes to either Victoza or an oral agent as an add-on to metformin for 104 weeks. The patients will be treated by primary care providers with limited intervention by study investigators. The primary endpoint is time to inadequate glycemic control, defined as A1c >7% at two consecutive visits. As Dr. Kristensen described it, the main goal of this trial is to demonstrate to providers and payers that early initiation of Victoza can lead to sustainable benefits, in contrast to the current treat to failure model with oral agents. He believes the trial effectively splits the difference between mimicking typical clinical practice and producing high-quality data. We agree that these sorts of real-world studies can be a very effective addition to traditional phase 3 programs and think that payers in particular should find them compelling. We would also love to see more “real world” studies that take into account the social and cultural factors highlighted so vividly in the Cities Changing Diabetes Summit earlier this week.

7. Novo Nordisk provided new updates and continued positive commentary on the slow initial launch of Saxenda (liraglutide 3.0 mg). Management noted that Saxenda has been launched in Canada and Denmark, with an additional eight to ten launches planned for 2016 and regulatory review ongoing in ten countries. Consistent with commentary since the product’s US launch, management emphasized the immature state of the market for obesity drugs and stated that the initial indicators for Saxenda have been encouraging. Novo Nordisk is currently focused on targeting a small group (8,000) of prescribers and engaging payers it perceives as receptive to reimbursing obesity medications. Chief Scientific Officer Dr. Mads Thomsen conceptualized the obesity market as being about 15 years “right shifted” compared to the type 2 diabetes market, noting that the industry had very little focus on type 2 diabetes in the early 1990s before the UKPDS results illustrated the clear long-term benefits of glucose-lowering. This was an interesting comparison, but we would argue that the position for the obesity market today is even more challenging – there was never a debate over whether type 2 diabetes was a disease, and there is unlikely to be a UKPDS for obesity in the near future. Nonetheless, we applaud Novo Nordisk for their clear dedication to this challenging area, as illustrated by the flow of recent activity in the early-stage pipeline.

8. Dr. Thomsen stated that Novo Nordisk will evaluate its two oral insulin candidates next spring to determine which is more promising. The company’s current lead candidate OI338GT (NN1953) entered phase 2a in July, at the same time a new candidate, OI320GT (NN1957) was advanced to phase 1. Both trials are expected to complete in December 2015-January 2016. We have wondered since then whether Novo Nordisk planned to advance both candidates all the way through the pipeline or select one, and it appears from these comments that the latter is the case.

9. We learned about two new preclinical candidates slated to enter phase 1 soon: the liver-targeted rapid-acting insulin NN1406 and the GLP-1/glucagon dual agonist NN1177. NN1406 is designed to more closely mimic physiologic insulin by increasing distribution to the liver relative to the periphery, hopefully producing weight and hypoglycemia benefits. The company expects to begin phase 1 trials before the end of the year. We will be watching closely to see if any of the liver safety signals that have delayed the progress of Lilly’s liver-selective basal insulin peglispro might be a concern here as well. The GLP-1/glucagon dual agonist will join a long list of other candidates in this class, which is appealing due to the potential for greater weight loss compared to GLP-1 agonists alone. Novo Nordisk is also pursuing a GLP-1/glucagon co-formulation approach (distinct from a co-agonist approach) by eventually combining its phase 1 glucagon analog with liraglutide. The co-formulation approach allows for greater optimization of the dose ratio in humans, but the regulatory pathway is trickier because both components need to be approved separately and in combination. The co-agonist approach faces a simpler regulatory path, but a single fixed dose ratio must be chosen based on animal studies, leaving less room for optimization.

10. Management suggested that attendees should expect more external innovation from Novo Nordisk in the future. The company has historically been unusual in its focus on developing compounds in-house rather than licensing or partnering. These comments suggest that this could change to some degree, though it appears that the external innovation will take the form of collaborations with academia or small biotech companies rather than large-scale partnerships or licensing of advanced compounds. Importantly, Novo Nordisk has already taken several major steps in this direction in recent months with the acquisition of Dr. Richard DiMarchi’s companies Calibrium and MB2 and the formation of collaborations with MIT and the University of Washington, all of which are major moves for the insulin giant.

11. A breakout session provided more granularity on the challenges and opportunities for Novo Nordisk in China. Ms. Camilla Sylvest, Senior Vice President Region China (and the only woman to take the stage the entire day) acknowledged that the short-term outlook for the company in China is more challenging than in the past. This is due to factors including slower GDP and healthcare spending growth, price pressure due to the government’s focus on cost containment, increased competition from local players, and a shift in the market from premix insulin (where Novo Nordisk is the market leader) toward basal insulin (dominated by Sanofi and local players). However, she also emphasized that the long-term potential is strong. The sheer size of the target population (110 million people with diabetes, most of whom are not achieving A1c goals) ensures that there will be a large potential market for some time. In addition, the current GDP growth of 6-7% is still very high compared to other markets, prices are relatively high compared to Europe, and Novo Nordisk eventually hopes to compete more strongly in the basal insulin segment with Tresiba. We will continue to watch this area very closely

12. A breakout session on International Operations illustrated the extent to which this segment, which is rarely discussed in depth in quarterly updates, is a strong driver of growth. We saw this part of the day as among the very most valuable as we learned enormously about the opportunities and see significant cause for upside in “mix” as some countries just get access to more insulin, some change from human to modern, and eventually (far in the future) some will get more advanced insulins. The segment encompasses 141 countries and accounts for 55% of Novo Nordisk’s market share by volume – that’s far higher volume than we had realized and these volumes are expected to increase rapidly in the coming years as the number of people with diabetes expands due to urbanization and an aging population and as thankfully more of these people get insulin. Indeed, Mr. Maziar Doustdar (Executive Vice President, International Operations) emphasized that most of the growth is coming from the company’s modern portfolio, contrary to many people’s assumptions. Within International Operations, all regions experienced double-digit growth in the first nine months of 2015, and growth was strongest in Latin America and the Middle East. Mr. Doustdar explained that the company divides the segment into three tiers based on the maturity and stability of the market and the country but that the overall strategy is the same everywhere: outperform the market, make the best use of launches, focus on value upgrades (human to modern to next-generation insulin), and break the barriers to access. 

-- by Emily Regier and Kelly Close