Memorandum

Novo Nordisk 4Q13 – new records for Victoza and modern insulins; flurry of late-stage pipeline activity – January 30, 2013

Executive Highlights

  • Worldwide diabetes care sales totaled DKK 17 billion (~$3.1 billion) in 4Q13, up 4% YOY; 2013 diabetes care sales grew 8% to DKK 65.5 billion (~$11.7 billion).
  • Victoza rebounded from its dip in 3Q13, growing 19% to DKK 3.2 billion ($590 million in 4Q13; full-year 2013 revenue exceeded $2 billion; management attributed the pick-up to waning pancreatitis concerns.
  • Heaps of late-stage trial updates: phase 3 initiation for liraglutide for type 1 diabetes, the first ever phase 2 oral GLP-1 trial, better tolerability for semaglutide in phase 3 than phase 2, release of topline DUAL IV results.

February 4th update: After Novo Nordisk’s 4Q13 financial update, management held an IR presentation on February 3 in London, which included some highly interesting management commentary:

(i) the company sees the early type 2 diabetes population as the optimal target for oral insulin and GLP-1 agonists, expects the pricing to be “more or less one-to-one” with injectables, and should provide an oral insulin update in next quarter or two;

(ii) management commented about clinical trials of liraglutide 3mg (for obesity) having shown imbalances in pancreatitis and gall bladder disorders on balance, this isn’t favorable news, and management expects in-depth discussion at a likely Advisory Committee meeting in 3Q14;

(iii) management does not see Sanofi’s U300 insulin glargine as “a game changer”, and believes Sanofi’s lawsuit over Lilly’s biosimilar glargine should preserve the current basal insulin market dynamics; and

(iv) management believes Lilly’s dulaglutide will be non-inferior to Victoza and that Victoza may turn out to have a weight benefit that trumps dulaglutide's convenience factor.

The report below elaborates on the highlights from the 4Q13 and London calls, and provides a comprehensive table of pipeline candidates and their statuses. It also contains Q&A transcripts from both presentations.

 

Novo Nordisk reported 4Q13 and 2013 financial results in a call led by CEO Lars Sørensen on a frenzied day where Denmark’s government was in turmoil. The company achieved total diabetes care sales of DKK 17.1 billion (~$3.1 billion) in 4Q13, up 4% year-over-year as reported and 12% in local currencies. This was a milestone in both currencies – the first time over $3.0 billion and the first time to reach DKK 17.0 billion. Growth was driven by the modern insulins and Victoza, which grew 7% (on a challenging comparison) and 19% year-over-year, respectively. Full-year 2013 diabetes care sales rose to DKK 65.5 billion (~$11.7 billion) in 2013, up 8% from 2012. Financial highlights include

(i) Victoza’s rebound from its slight slump in 3Q13 and continued growth despite increased competition. Victoza had lots of milestones this quarter; 4Q13 was Victoza’s first time exceeding Levemir sales in a quarter and 2013 was its first time exceeding $2 billion in one year;

(ii) a new high for modern insulin sales of 10 billion DKK ($1.9 billion) (with an especially strong performance by Levemir);

(iii) a peek into Tresiba’s launch performance (~10% basal market share in countries with favorable reimbursement and ~1% share in countries with poor reimbursement) and its two new trials to substantiate hypoglycemia claims (we’re optimistic on this and hope they use CGM to indicate time in zone);

(iv) the company’s modest 2014 guidance (4.5%-7.5% growth, 8%-11% in local currencies) taking into account a more competitive US pricing environment (this compares to the original guidance of 3.5%-6.5% for 2013); and

(v) extensive discussion in Q&A on the loss of its Express Scripts contracts for Victoza and NovoLog (which Novo Nordisk expects to undercut its worldwide diabetes care growth in 2014 by about 1% and 2.5% in the US).

With regards to the pipeline, 4Q13 saw a flurry of late-stage clinical trial activity. Pipeline highlights from 4Q13 include:

(i) the advancement of liraglutide for type 1 diabetes into phase 3;

(ii) the initiation of phase 2 for oral GLP-1 agonist OI217SC (a once-daily formulation of semaglutide and the first ever phase 2 trial for an oral GLP-1 agent);

(iii) the release of topline DUAL IV data (the third of five phase 3 DUAL trials for IDegLira to report results), showing glycemic benefit of IDegLira as add-on to sulfonylurea with or without metformin, but also slight weight gain (in contrast to previous DUAL I and II results);

(iv) completion of SUSTAIN 6 enrollment (the CVOT for once-weekly GLP-1 agonist semaglutide), which took only 10 months and management’s remark that it believes tolerability to have improved in phase 3 from the adjusted titration scheme; and

(v) initiation of the phase 3a pump trial for FIAsp (NN1218, the ultra-rapid acting insulin aspart).

Finally, Novo Nordisk also announced the promotion of Kaare Schultz to President and Chief Operating Officer – Mr. Sørensen urged during Q&A not to view this as a succession move, though the 59-year-old CEO has stated in the past that he would step down prior to his 65th birthday.

Top Five Financial Highlights

Table 1: Full-year 2013 and 4Q13 sales of major products

Product

2013 Revenue in Billions

Reported Growth from 2012

4Q13 Revenue in Billions

Reported Growth from 4Q12/3Q13

Total Modern Insulins

DKK 38.2 ($6.8)

9.5%

DKK 10.1 ($1.9)

7.2%/8.0%

   NovoRapid

DKK 16.8 ($3.0)

7.3%

DKK 4.5 ($0.81)

3.7%/8.8%

   NovoMix

DKK 9.8 ($1.7)

4.5%

DKK 2.5 ($0.46)

1.7%/7.1%

   Levemir

DKK 11.5 ($2.1)

18.0%

DKK 3.2 ($0.58)

17.8%/7.5%

Human Insulins

DKK 10.9 ($1.9)

-3.8%

DKK 2.7 ($0.49)

-10.5%/4.7%

Victoza

DKK 11.6 ($2.1)

22.5%

DKK 3.2 ($0.59)

19.3%/13.5%

Total Diabetes Care

DKK 65.5 ($11.7)

7.5%

DKK 17.1 ($3.1)

3.7%/6.8%

 

1. Novo Nordisk’s insulin modern insulin portfolio achieved worldwide sales of DKK 10.1 billion (~$1.9 billion) in 4Q13, up 7% year-over-year (YOY) as reported (14% in constant currencies) against a challenging 4Q12 comparison. While growth may not appear “off the charts”, this is still a very strong result as it represents a new quarterly high for modern insulin sales and is against a very challenging quarterly comparison from 4Q12. Sequentially, sales rose 8% in 4Q13, this time against a fairly easy comparison (3Q13 modern insulin sales fell 2% sequentially). North America represented a major driver of growth, in which sales rose 30% YOY as reported (we can only imagine what this would have been had degludec been approved last year by the FDA). For the full-year 2013, modern insulin sales rose 10% as reported (14% in constant currencies) to DKK 38.2 billion (~$6.8 billion), compared with 21% reported growth in 2012 and 8% reported growth in 2011. Novo Nordisk’s share of the global modern insulin value market is steady at 46%.

  • Within the portfolio, Novo Nordisk’s basal insulin Levemir (insulin detemir) was the strongest performer. In 4Q13, Levemir achieved worldwide sales of DKK 3.2 billion (~$580 million), up 18% from 4Q12 (24% in constant currencies). This is consistent with Levemir’s YOY growth in the first three quarters of 2013 (which ranged from 17-20% as reported). Levemir’s consistent strong growth through 2013 may be attributable in part to the marketing staff and resources that were originally intended for Novo Nordisk’s newer ultra-long-acting basal insulin Tresiba (insulin degludec), which received a surprise Complete Response Letter from the FDA in early 2013 (read our report; more on Tresiba below). Levemir’s performance in Japan, however, was strikingly weak (falling 33% YOY in 4Q13 and falling 25% for FY 2013) – although at first glance, we assumed this reflected patient switches to Tresiba, as Japan is one of Tresiba’s markets where its access is comparable to glargine, Novo Nordisk did show through quarterly market share data that its share in Japan had fallen (see Table 2). Tresiba performance was not noted; we believe it is included in the “other diabetes care” category. 
  • Despite solid performance for the full year, Novo Nordisk’s modern insulin portfolio did lose momentum in 2H13: YOY reported growth for the portfolio was 14% in 1Q13, 12% in 2Q13, 6% in 3Q13, and 7% in 4Q13 – all were against quite challenging comparisons. During Q&A, management acknowledged that Novo Nordisk has seen a slowdown in insulin sales in Japan, Europe, and the United States in recent months. Management expressed skepticism that SGLT-2 inhibitors represent the primary culprits; early SGLT-2 inhibitor growth has been strong in the US, but total sales are still very modest relative to the insulin market. Management also noted that IMS figures may be underestimating the recent growth in the insulin market due to a lack of data in the US.
  • Novo Nordisk’s human insulin portfolio delivered poorer performance in 4Q13: sales fell 11% YOY as reported (a 5% slide in constant currencies) to DKK 2.7 billion (~$490 million). In North America, sales fell 16% as reported from 4Q12, while in China (Novo Nordisk’s largest market for human insulin), sales were up a modest 3%.

Table 2: Novo Nordisk’s share of the insulin market, by region

 

Novo Nordisk Share of Total Insulin Market (by Value)

Novo Nordisk Share of Modern Insulin Market (by Value)

Nov 2013

Nov 2012

Nov 2013

Nov 2011

Global Total

48%

49%

46%

46%

USA

40%

41%

39%

38%

Europe

49%

50%

49%

50%

International Operations

56%

58%

53%

55%

China

59%

61%

64%

65%

Japan

52%

55%

48%

51%

 

2. Worldwide sales of Victoza (liraglutide) rebounded from a slight 3Q13 slump, rising 19% YOY are reported (25% in local currencies) to DKK 3.2 billion (~$590 million) in 4Q13 – full-year Victoza sales exceeded $2 billion for the first time. 4Q13 is the first quarter for Novo Nordisk in which Victoza sales have surpassed Levemir sales. Sequentially, Victoza sales rose 14% in 4Q13 against an easy comparison, as 3Q13 sales fell 1% sequentially. Victoza holds a 71% share of the global GLP-1 agonist value market, and the GLP-1 agonist segment now accounts for 6.9% of the total diabetes care market (up from 5.9% one year ago) — see Table 3 below for more details. Victoza growth in 4Q13 was particularly strong in North America (29% as reported), a region that is responsible for 65% of Victoza’s global sales; Victoza holds a 67% value share of the US GLP-1 agonist market, up slightly from 66% in 3Q13. Europe and International Operations posted strong growth as well (8% and 7%, respectively). Full-year 2013 Victoza sales reached DKK 11.6 billion (~$2.1 billion), up 23% as reported (27% in constant currencies) from 2012.

  • During Q&A, management expressed excitement regarding the rebound in the US GLP-1 agonist market, and considered the reasons for the course-correction. Notably, CEO Lars Sørensen suggested that some of the rebound was due to waning negative impact from the pancreatitis/pancreatic cancer scare that peaked in mid-2013 – we also assume this is true as we heard many respected KOLs dismissive of the safety concerns throughout ADA and EASD, 2013’s most important scientific meetings in diabetes. Mr. Sorensen attributed much of the success to the statements released by high-profile scientific and regulatory agencies in the US and Europe; read our Pancreatitis Primer for a full chronicle of the controversy. In line with earlier guidance, Mr. Sørensen forecast that Novo Nordisk will see average quarterly Victoza sales growth in the neighborhood of DKK 150 million (~$25 million) from quarter to quarter – this sounded a bit on the low side to us, but perhaps the CEO was thinking conservatively.
  • Victoza has been the long-time clear market leader for GLP-1 agonists. AZ’s twice-daily Byetta and once-weekly Bydureon and Sanofi’s once-daily Lyxumia (OUS) are the other GLP-1 agonists on the market. The potential launch of Lilly’s once-weekly dulaglutide in 2014 may have a bigger impact on Victoza’s reign – in the AWARD-6 head-to-head trial with Victoza, dulaglutide is expected to come out non-inferior in terms of A1c. The convenience of its once-weekly administration (compared to Victoza’s once-daily) may be enough for patients to prefer dulaglutide. However, as Novo Nordisk management points out, Victoza may still beat dulaglutide on weight. Novo Nordisk does not plan to change its marketing or pricing strategy in response to dulaglutide. 

Table 3: Market share of the GLP-1 segment and Victoza, by region

 

GLP-1 Agonists’ Share of Total Diabetes Care Market (by Value)

Victoza’s Share of the GLP-1 Agonist Market (by Value)

Nov 2013

Nov 2012

Nov 2013

Nov 2012

Global Total

6.9%

5.9%

71%

68%

USA

8.6%

7.3%

67%

62%

Europe

7.6%

6.7%

78%

76%

International Operations

2.8%

3.0%

75%

80%

China

0.6%

0.5%

74%

45%

Japan

2.1%

2.3%

71%

77%

 

3. Management provided more details on the launch of the ultra-long-acting basal insulin Tresiba (insulin degludec), although we once again were not treated to specific sales figures – Tresiba is achieving roughly 10% basal insulin market share in countries with good reimbursement. A chart on the presentation slide set showed Tresiba’s basal insulin market penetration in all eight countries where it is currently available. Management stated that Tresiba’s penetration has been robust and continues to grow in the markets where it has reimbursement similar to Sanofi’s market-leading Lantus (insulin glargine) — in Switzerland, Mexico, and Japan, the drug has captured 9-12% value shares of the basal insulin market after 8-10 months on the market. However, in India, Sweden, Denmark, and the UK (where Tresiba does not have the same payer coverage as Lantus), sales have grown much more slowly (capturing only around 1-4% of the local basal insulin market share by value). Management noted that Tresiba launches are planned in 20 new countries in 2014. As background, Lars Sørensen discussed Novo Nordisk’s aggressive pricing strategy for Tresiba during the company’s 3Q13 update. Management has strongly argued in the past that Europeans must pay for innovation, and cannot depend on the US to fund innovation for the rest of the world. Thus, we believe it is placing less importance on how much early revenue Tresiba brings the company and more on consistency in value-based pricing. Mr. Sørensen expressed confidence that providers and patients will realize the added value of the product after trying it; we have certainly heard this is true from KOLs. Overall, the company appears to be willing to stick to its guns, and accept slow penetration in exchange for maintaining its premium pricing for the drug (as well as its moral high ground).

  • As first announced during Novo Nordisk’s Capital Markets Day in December, two trials have been initiated to further substantiate the hypoglycemia profile of Tresiba (insulin degludec), presumably in part to bolster its US re-submission. The trials are both 64-week, randomized, double-blind, cross-over trials comparing Tresiba and Lantus (insulin glargine). In both trials, patients will be treated with insulin glargine and insulin degludec sequentially in a random order for the first 32 weeks (which will be divided into a 16-week washout period to reach A1c <7% and a 16-week stable A1c period) and then switched over to the other for the second 32 weeks (divided the same away as the first). BEGIN-SWITCH 1 aims to enroll 450 people with type 1 diabetes and will use insulin aspart in addition to the randomized basal insulin therapy. BEGIN-SWITCH 2 aims to enroll 670 people with type 2 diabetes and will use metformin in combination with the basal insulin treatment. The primary endpoint of these studies is symptomatic confirmed hypoglycemic events during the A1c-stable period. Secondary endpoints include symptomatic nocturnal confirmed hypoglycemia in the A1c-stable period and proportion of patients with one or more severe hypoglycemia events in the A1c-stable period. Patients will be divided into morning and evening dosing groups – this was one of the FDA’s concerns about Tresiba claiming nocturnal hypoglycemia benefit over glargine (see bullet below).
    • As a reminder, Novo Nordisk claims a nocturnal hypoglycemia benefit for Tresiba over Lantus (insulin glargine), but the FDA called the validity of this claim into question during the Advisory Committee meeting for Tresiba in November 2012. The FDA’s two biggest concerns were Novo Nordisk’s definitions of hypoglycemia and whether timing of administration was a confounding factor. With regards to hypoglycemia definitions, Novo Nordisk used a relatively broad definition of severe hypoglycemia (the patient could be asymptomatic with a measured blood glucose <56 mg/dl or plasma glucose <50 mg/dl), but when the stricter ADA definition of hypoglycemia was applied (patient must have symptoms and a low measured plasma glucose of ≤70 mg/dl), the degludec advantage for hypoglycemia changed in many cases, and in some cases even turned into an increased risk for hypoglycemia relative to glargine. With regards to timing of administration, degludec was consistently administered at night, while glargine could be administered at any time of day. This was problematic due to the molecules’ different pharmacokinetic profiles – degludec peaks about 12 hours after injection, whereas typically glargine peaks earlier, which means that if glargine were dosed at night then it would be expected to cause more nocturnal hypoglycemia than degludec. See page 5 of our report on the FDA Advisory Committee meeting for Tresiba for more details on the FDA’s concerns on hypoglycemia. 
    • During Q&A, management reaffirmed that it expects to be able to perform an interim data analysis on Tresiba’s CVOT, DEVOTE, two-to-three years from the start of the trial (October 2013). Novo Nordisk plans to re-submit Tresiba to the FDA with these interim data. There does continue to be controversy about interim analyses and implications for patients and trials.

4. The company expects sales growth in 2014 to range from 4.5%-7.5% as reported (8%-11% in local currencies), which struck us as a very modest figure. Looking back, however, the company’s guidance has generally proven to be conservative: the company’s full-year 2013 results (7.5% growth as reported) beat its guidance from the beginning of the year (3.5%-6.5%), and its full-year 2012 results (21% growth as reported) beat its guidance from the beginning of the year (11%-15%). Of course, the company does face a number of headwinds in 2014, many of which management discussed during the presentation and during Q&A. These detracting factors include: (i) a challenging contract environment in the US; (ii) intensifying competition in diabetes; (iii) poor macroeconomic conditions in a number of markets in International operations; and (iv) foreign exchange.

  • Management commented during Q&A that the pricing environment in the US has become more competitive. Although Novo Nordisk won a list price increase for Levemir in late 2013, the company believes that pricing increases will be less frequent. Much of the pricing pressure will come from the increasingly challenging nature of formulary contract negotiations (see below).

5. Novo Nordisk’s loss of two key contracts (one for Victoza, one for NovoLog) with the pharmacy benefit management company Express Scripts was one of the most touched-upon topics during Q&A. As background, we learned in September 2013 that Novo Nordisk lost its 2014 contract for Victoza to AZ (the manufacturer of Byetta and Bydureon), and lost its 2014 contract for NovoLog to Lilly (the manufacturer of Humalog). In the latter case, we understand that Lilly offered Humalog at a price roughly 3% lower than what Express Scripts had been paying for NovoLog.

  • During Q&A, management stated that the loss of the Express Scripts contracts would cut worldwide diabetes care growth in 2014 by around 1% (2.5% in the US). The company has apparently already seen a drop in new-to-brand prescription share in both the insulin and GLP-1 agonist US markets in the first few weeks of 2014. Management noted that profound shifts in NBRx are generally seen in the first three months after any major formulary change, and that the change in overall script volume is generally more modest. Regarding the company’s plans moving forward regarding Express Scripts, CEO Lars Sørensen noted that the contracts in question are valid for two years, and stated that Novo Nordisk will put itself in a position to try and regain the contracts the next time around. He declined to comment whether the company would try to do anything to disrupt the current contracts.
  • However, management also remarked that patients covered by Express Scripts who were previously on Victoza have been able (in some cases) to obtain approval to stay on Victoza. Understandably, gaining this approval is more difficult for Express Scripts patients who are new to the class. During Q&A, management was asked whether the company has observed pushback from providers or patients regarding the formulary switch. Mr. Sørensen responded that, although the company has heard feedback that many patients and physicians prefer Victoza, it is still an open question whether this preference will be enough to motivate serious pushback or encourage patients to change coverage plans. Management suggested that the effects of the Express Scripts decision will be better understood by the end of 1Q14. 

In addition, Lilly also reported its 4Q13 and full-year 2013 financial results this morning as well. In 4Q13, Humalog (insulin lispro) achieved sales of $730 million, up 19% YOY as reported (compared to NovoLog’s 7% growth in USD from a slightly higher base). Humulin achieved sales of $370 million, up 8% YOY as reported (compared to the 8% decline seen with Novo Nordisk’s human insulins, also from a higher base).

 

Top Five Pipeline Highlights

1. LATIN T1D (liraglutide for type 1 diabetes) entered phase 3 in November, as announced during Novo Nordisk’s Capital Markets Day in December. The first phase 3 trial is called ADJUNCT ONE. It will aim to enroll 1,404 people with type 1 diabetes, who will receive liraglutide 0.6 mg, 0.8 mg, 1.2 mg, or placebo in addition to their insulin regimens for 52 weeks. As mentioned on today’s call, Novo Nordisk expects to initiate ADJUNCT TWO in 1H14. Details on any other trials ADJUNCT program have yet to be disclosed, but if completion timing is similar, Novo Nordisk could potentially file for a type 1 diabetes indication in 2015. In the past, management has forecast an end- of-2016 approval should everything go as planned.

  • Novo Nordisk presented phase 1 data on liraglutide in type 1 diabetes as a poster at ADA 2013 (1007-P; ClinicalTrials.gov Identifier: NCT0153665). In this trial, liraglutide 1.2 mg and 1.8 mg significantly reduced patients' insulin dose requirement, while the 0.6 mg dose did not. All three doses brought about significant weight reductions. Please see page 19 of our ADA 2013 Incretins Report for more details.

2. As scheduled, the oral GLP-1 agonist OI217SC (NN9924, an once-daily oral formulation of semaglutide) initiated phase 2 in December – this is the first phase 2 trial for an oral GLP-1 ever! This news was also announced previously at Novo Nordisk’s Capital Markets Day. It is a multiple dose-ranging trial (ClinicalTrials.gov Identifier: NCT01923181) testing once-daily dosing of 2.5 mg, 5.0 mg, 10 mg, 20 mg, and 40 mg doses of OG217SC. All arms include 26 weeks of treatment with varying titration schemes and five weeks of follow-up. There is an oral placebo comparator as well as a semaglutide 1.0 mg injection comparator arm. The estimated completion date is December 2014, suggesting that if the candidate is brought to phase 3 in 2015, that it could be submitted as early as 2016 or 2017 (optimistically speaking). In Novo Nordisk's 2Q13 call, it suggested that the efficacy of OG217SC could be on par with that of injectable Victoza based on phase 1 results. At that time, management also suggested that it may be able to take small short-cuts with regulatory proceedings with the OG217SC clinical trial program since it is already conducting a full program for the once-weekly injectable semaglutide. OG217SC utilizes Emisphere’s Eligen as the carrier technology to deliver the GLP-1 molecule from the gut into systemic circulation.

  • Novo Nordisk also has three other oral GLP-1 agonists in phase 1: OG217GT (NN9928) is an oral formulation of semaglutide using Merrion's GIPET carrier; OG987SC (NN9927) is an oral formulation of liraglutide using the Eligen carrier; and OG987GT (NN9926) is an oral formulation of liraglutide using the GIPET carrier.
  • Novo Nordisk has previously indicated that it expects oral GLP-1 to be an easier venture than oral insulin since the therapeutic window for GLP-1 is much wider therapeutic window.

3. Novo Nordisk released DUAL IV data for the first time (the third of five phase 3 DUAL trials for IDegLira to report results). This trial examined IDegLira (fixed-ratio combination insulin degludec/liraglutide) as add-on to sulfonylurea with or without metformin and completed in December 2013. From a mean baseline A1c of 7.9%, 435 people with type 2 diabetes were randomized to IDegLira or placebo. After 26 weeks, the IDegLira arm achieved a 1.4% A1c reduction compared to 0.5% on placebo – a substantial decrease from a somewhat low base. Nearly 80% of people on IDegLira achieved an A1c of <7% (the ADA goal) compared to only 30% of those on placebo; nearly 65% achieved the AACE goal of ≤6.5% vs. just over 10% in placebo. The IDegLira arm experienced statistically significantly higher rates of hypoglycemia (exact rates unspecified), and the IDegLira arm also gained 1.0 kg (2.2 lbs) compared to a weight loss of 0.5 kg (1.1 lb) on placebo. The unfavorable weight result runs contrary to DUAL I and II results where IDegLira was associated with weight loss (0.5 kg in DUAL I for patients on 1-2 OADs, and 2.5 kg in DUAL II for patients previously on basal insulin). The higher rate of hypoglycemia may be expected with the addition of a GLP-1 agonist/basal insulin to SFU (in DUAL I and II, hypoglycemia rates on IDegLira were better compared to Tresiba or Victoza, and there was no placebo comparator).

  • As a reminder, full DUAL I results were presented at ADA 2013 and were some of the most impressive data we saw in 2013; DUAL II results were announced as a press release in December 2012 and presented in full at IDF 2013. See details in our ADA 2013 Incretins report and our IDF 2013 Day #2 report.
  • IDegLira remains under regulatory review in the EU where it was filed in May 2013, which suggests it could receive a decision in May 2014 under a standard 12-month review cycle. IDegLira remains well ahead of Sanofi’s basal insulin/GLP-1 agonist fixed-ratio combination product, LixiLan (Lyxumia/Lantus) in Europe (submission expected in 1Q14). LixiLan may be filed slightly earlier than IDegLira in the US, as Sanofi is awaiting completion of the ELIXA CVOT (expected in 2015), and Novo Nordisk is awaiting regulatory action on Tresiba (re-submission expected late-2015 at the very earliest and more likely in 2016).

4. The 3,260-person SUSTAIN 6 CVOT for semaglutide (once-weekly GLP-1 agonist) completed recruitment in December (taking only about 10 months!), which management believes reflects investigators’ enthusiasm for the candidate. The trial is expected to complete in January 2016 according to ClinicalTrials.gov (Identifier: NCT01720446). Management noted in Q&A that while it is blinded to phase 3 results, so far it does know that phase 3 discontinuation rates have been much lower than in phase 2, suggesting that the new titration scheme is indeed improving tolerability. As a reminder, in phase 2 trials, the highest dose of semaglutide tested (1.6 mg) had better efficacy than Victoza 1.8 mg (1.2% placebo-adjusted on semaglutide compared to 0.8% placebo-adjusted on Victoza) but also an unacceptable nausea profile (57% nausea rate and 31% of patients on the 1.6 mg dose withdrew from the study). Novo Nordisk ultimately decided to carry forward lower doses into phase 3 (1.0 mg and 0.5 mg) and altered the titration scheme such that patients would start at a lower dose and wait longer before escalating. We are pleased to hear that this strategy appears to be successful so far in ameliorating drop-outs.

  • The long-acting GLP-1 agonist market is starting to crowd, although Novo Nordisk believes that semaglutide will be able to sufficiently differentiate itself. So far, semaglutide has a phase 3 head-to-head study underway against AZ’s Bydureon, and we would not be surprised if it achieved superiority.
    • AZ’s Bydureon is currently the only once-weekly on the market, but requires the extra hassle of manual reconstitution and has been shown to less A1c-lowering efficacy than Victoza (and as we understand it, Novo Nordisk’s goal is for semaglutide to be more effective than Victoza). The auto-reconstitution dual-chambered pen for Bydureon is under regulatory review (EU decision expected 2Q14 and US 4Q14).
    • GSK’s once-weekly Eperzan (albiglutide) received a positive CHMP opinion earlier this month (but also failed to meet non-inferiority to Victoza).
    • Lilly’s once-weekly dulaglutide has been submitted with regulatory action expected this year; its head-to-head trial with Victoza (AWARD-6) completed in December 2013 with results expected in 1Q14 – we would expect dulaglutide to be the most direct competitor with semaglutide.
    • Intarcia’s ITCA-650, the once-yearly exenatide osmotic mini-pump, is in phase 3 trials and reported striking interim results at JP Morgan 2014 Day #1 showing >3% A1c reduction in a high-baseline A1c population (>10%). 

5. The phase 3a pump trial for FIAsp (NN1218, the ultra-fast-acting insulin aspart) has been initiated, and it is called onset 4. This trial is a six-week trial (n=40, up from a previously planned 30) in adults with type 1 diabetes (ClinicalTrials.gov Identifier: NCT01999322). It will compare compatibility and safety of NN1218 to insulin aspart in insulin pumps (Medtronic MiniMed Paradigm) – the primary outcome is number of microscopically confirmed episodes of infusion set occlusions. Since the rapidity of insulin action has been one major barrier to the development of closed-loop systems, FIAsp could help accelerate these efforts, as it would be the first injectable ultra-fast-acting insulin to market should it be approved (it would be behind MannKind/Afrezza's ultra-fast-acting inhalable human insulins). We enthusiastically await faster-onset insulin analogs, as we imagine they could also dramatically improve glucose control and adherence to insulin regimens over currently available analogs. Onset 4 is the fourth and final trial of the “onset” program. The other three consist of two trials comparing NN1218 to Novolog (insulin aspart) as part of a basal-bolus regimen with Levemir (onset 1 and 2), and a third trial investigating intensification from basal insulin therapy to basal-bolus therapy using NN1218 (onset 3). For details on trial design of onset 1, 2, and 3, please see our Novo Nordisk 3Q13 report.

Honorable Mentions

1. As announced the day after Novo Nordisk’s 3Q13 financial earnings call, the FDA approved the FlexTouch pens for NovoRapid and Levemir and that the Canadian health authorities had approved it for Levemir. These pens should help patients moderately. Both insulins were previously sold in the FlexPen. When doses are dialed for the FlexPen and other "traditional" prefilled pens, the extension of the push button, especially at larger doses, may present difficulties for the patient. The FlexTouch's push button does not extend at any dose, which allows patients to more easily deliver their insulin. US launch is expected in 2H14.

2. As announced in December, liraglutide 3 mg has been filed for an obesity indication in the US and EU. Please see our report here for details.

 

Table 4: Novo Nordisk’s Diabetes Pipeline as of January 30, 2014.

Name

Class

Status

Notes and Timeline

Tresiba (insulin degludec)

Ultra-long acting basal insulin

Approved OUS/ CRL in US

Will re-submit in US upon interim analysis of DEVOTE CVOT (initiated in October 2013 with interim analysis expected 2-3 years in)

Ryzodeg (insulin degludec/insulin aspart)

Pre-mixed insulin

CRL in US/Approved OUS

Expected launch ~one year after Tresiba launch in approved territories

IDegLira (insulin degludec/liraglutide)

GLP-1/basal insulin fixed ratio

Filed OUS/Awaiting Tresiba decision in US

EU filing in May 2013 would make May 2014 approval possible

Liraglutide 3 mg (NN8022) for obesity

GLP-1 agonist

Filed in US and EU

December 2013 filing may make December 2014 approval possible

FIAsp (NN1218)

Ultra-rapid acting insulin

Phase 3

Phase 3 “onset” program expected to complete in late 2015

Semaglutide (NN9535)

GLP-1 agonist (once-weekly)

Phase 3

SUSTAIN 1-5 expected to complete late 2015 and SUSTAIN 6 (CVOT) in early 2016.

LATIN T1D (liraglutide; NN9211)

GLP-1 agonist for type 1 diabetes

Phase 3

“Hoping” for a 2015 launch

OG217SC (oral semaglutide; NN9924)

Oral GLP-1 agonist

Phase 2

Novo Nordisk may be able to take small short-cuts with regulatory proceedings since it is already conducting a full program for injectable semaglutide; uses Emisphere’s Eligen carrier technology.

LAI287 (NN1436)

Ultra-long-acting basal insulin (potential for once-weekly dosing)

Phase 1

Completed first phase 1 trial in July 2013, one month ahead of schedule

OG987GT (oral liraglutide; NN9926)

Oral GLP-1 agonist

Phase 1

Uses Merrion’s GIPET oral delivery technology

OG987SC (oral liraglutide; NN9927)

Oral GLP-1 agonist

Phase 1

Uses Emisphere’s Eligen carrier technology.

OG217GT (oral semaglutide; NN9928)

Oral GLP-1 agonist

Phase 1

Uses Merrion’s GIPET oral delivery technology

OI338GT (NN1953)

Oral basal insulin

Phase 1

Uses Merrion’s GIPET oral delivery technology

OI362GT (NN1954)

Oral basal insulin

Phase 1

Uses Merrion’s GIPET oral delivery technology

OI287GT (NN1956)

Oral basal insulin

Phase 1

Uses Merrion’s GIPET oral delivery technology

 

Questions and Answers: 4Q13 and Full-Year 2013 Financial Update

Q: We've seen a very good rebound of the GLP-1 market from Q3. How much is actually due to the marketing boost and how much to the genuine demand in the market? We've also seen that the DPP-4 market has not rebounded. A comment on that would be appreciated. Secondly, regarding Tresiba, Mads said that the enrollment process is doing fine. What’s the timeline for completing enrollment? Are you also on track to potentially deliver data in 4Q15?

A: It's still early days, but what we can say is that we are off to a good start so to speak and today we are recruiting others not only in the United States but also in the first European territories. You asked about 4Q15 as a potential entry analysis quarter. That is actually within the two to three-year guidance that we've given, because we did initiate in October of last year, so that would be a possibility on the good side, but we are sticking to the two to three year guidance. As the year progresses we will be able to be more specific, but we can say we are encouraged by the progress at this point.

On the GLP-1 market in the US, we agree. We were quite happy about the developments we saw. Whether it’s due to our marketing boost or general market development - when we look at the second half of 2013 we believe that we saw the GLP-1 rebound due to the waning negative impact from the publicity around pancreatic cancer in the first half following the relatively strong statements presented by scientific institutions and agencies both in the US and in Europe. Our expectation going forward is that the general market will continue and Novo Nordisk will add another DKK 150 million per quarter [about $26 million]. We have yet to see the impact from the ESI contract. We are starting to see week-by-week impact on the NBRx, which one would expect in such a situation. How large it is and whether that is comparable to our own planning is a little bit premature to say. We believe we need to have a few more weeks, if not a month or two, so you will get a much better fix on this when we are back to you with the first quarter result.

Q: Going back to the ESI comments, do you stand by your guidance that for 2014 you expect the contract changes to remove about 1% in terms of growth given the trends you're seeing? Has the gross-to-net ratio changed significantly in 2013? Given recruitment in the SUSTAIN 6 trial – does that tell you anything in terms of the implications for patient preference – once weekly over once daily – or is that impossible to read for now?

A: At this point I see no reason to change the guidance we gave when it was originally made public that we lost the ESI contract. We're talking about an approximate headwind of 1% of group sales, 2.5% of US-based sales. We would of course like to be able to give you an update on this in Q1 when we have a better fix on the trending. We do see impact from NBRx on both the insulin side to Lilly and on the GLP-1 side to AstraZeneca.

Of course the key development in gross-to-net for Novo Nordisk is the development in the North American sales and where we typically have seen a deduction in the ballpark of 26%, 27% of the gross sales being deducted. And I would say this year the general rebating level in the US has increased that adoption by approximately a percentage point. Assume approximately 1% overall increase in the gross-to-net reduction effect for the year.

In terms of semaglutide, I think it's very important as others before us have done to not just classify GLP-1 agonists or analogs as a once-weekly or once-daily. Within the once-daily class there's huge differences for instance between liraglutide and lixisenatide. I need say no further in that regard. And within the once-weekly class there are also big differences between these agents both in terms of convenience and in terms of the efficacy profile that they offer both for glycemic and weight control. I don't think you can make any generic statements. What I can say is that the SUSTAIN 6 program is one where there was a high degree of investigator enthusiasm to join the program because people had been informed about the phase 2 efficacy results and how we managed the titration phase in a more subtle manner in phase 3 so as to avoid side effects and so on. We are happy to say that we were able to do the entire recruitment of more than 3,000 patients within the last calendar year. That means that we are on track for the entire SUSTAIN program since this is deemed to be gating for the new drug applications.

Q: We saw at the end of last year some slowdown in the insulin market growth. What's causing that? Are you seeing the slowdown due to the SGLT-2s? And given there's a second and probably third coming to market, should we be expecting an impact there?  Secondly, on semaglutide, have you seen any data around the tolerability – whether the better titration profile is able to manage the tolerability profile of that product? Have you been able to see anything from the trial so far?

A: You’re right that we did see a relatively harsh tolerability in the phase 2 trials of semaglutide. First of all what happened in phase 2, as you're probably aware, is that we basically underestimated the potency of the drug, meaning that in principal some of the groups went onto a dose that corresponded to 1.8 mg of Victoza on a daily basis without making the titration. There are two ways of rectifying that. One is by starting at a lower dose level, and the other is by adding a longer dosing period, i.e. four weeks between each titration steps. Both of these have been built into the phase 3 SUSTAIN program. Even though I'm blinded to these trials, I am aware of the blind discontinuation rates. At this point in time I can inform you that these continuations and rates are markedly lower than what we saw in phase 2.

With regard to insulin market growth, it is correct that towards that part of the year we've seen somewhat of a slowdown in Japan, in Europe and in the United States. But again, we have to be very, very careful in judging these numbers. On a quarterly basis we also have the issue that IMS has decided not to report on the same comparables because of lack of access to vital data in the US market, and then try to restate their numbers backwards so that we can get a better fix on this in connection with the Q1. We think the impact so far from the SGLT-2 is too small to really have been the culprit in this regard. I'm starting to see some uncertainty on quarterly numbers and statistics, we hope to get a better fix in Q1.

Q: On pricing, the pricing environment is strong, but more competitive. To the extent you can, I wonder if you can just give us some color on what pricing is assumed in your guidance broadly? If that ends up being better than expected, does that benefit drop through to the bottom line, or would you reinvest?

A: In terms of pricing assumptions it is correct that since we gave the guidance last year connected with Q3, there was a price adjustment in the US. The pricing platform from that perspective is slightly more positive, which is also contributing to the fact that we could raise the upper end of the operating range of the guidance. In terms of what the final demand is going to look like going forward, it is somewhat uncertain. The basal segment seems to be in a situation where the pricing can go upwards, but on the contracting side, for instance, in GLP-1, we were up against Bydureon with our Victoza. Pricing environment was soft to say the least on our part and the same thing on the insulin. It varies a little bit from product category to product category but I would agree with you that the pricing environment is slightly tougher in general in the United States. And the pricing environment in Europe and Japan is the same picture that you've known for years basically. We are not assuming the same degree of frequency of price increases in the US, but potentially seeing in the second half some inflation plus adjustment in prices. But also bearing in mind the more competitive pricing environment, which is likely to lead to further erosion of net prices and maybe see the gross-to-net percentage increasing by one to two percentage point in the US due to the portfolio contracts we currently have. It will also depend very much on what mix of our products we have, whether it's basal insulin or whether it's short-acting and GLP-1.

Q: On biosimilar Lantus - if Sanofi will be successful in getting a 30-month stay if they file a patent infringement against Lilly, do you think it could prolong the positive pricing environment we see in the basal segment right now? Again with the ESI contract, what kind of pushback have you seen from patient organizations, from doctors and also from patients that they have been forced to go to Bydureon?

A: On the Sanofi and Eli Lilly situation it's a little delicate for us to comment on how these two players are going to react. We don't know the composition of the Lilly product and whether or not the patents that Sanofi has can be brought to bear on that. But if all other things are equal and a 30-month stay is enacted, it would change the competitive picture in the basal market and defer that generic threat, which would be a positive to Novo Nordisk, I would imagine. 

On the ESI side, it's a little bit too early to really give any concrete quantitative information on how the patients are responding – it's clear that the patients and the doctors see the two products as different. The question is whether that difference is big enough to warrant the physicians to make effort to push back on the plan to have Victoza. It's also uncertain as to whether the difference is big enough for the patient to want to choose a different plan. We'll give you some more guidance on that, but it certainly – we have seen positive feedback from patients and physicians that they prefer Victoza, certainly we have.

Q: On Express Scripts, in terms of Novo regaining or negotiating back access to formulary, can you remind us what timelines Novo is working towards? Just a confirmation - pretty aggressive pricing dynamics in basal are probably likely to continue. I just wanted to confirm that a similar level of price increase for Levemir that we enjoyed in 2013 is not in your assumption for 2014?

A: We're going into the year based on a list price adjustment happening for Levemir towards the end of 2013 and you could say the first price increase is a given. I wouldn't expect the same frequency of price increases in 2014, but I did say that I anticipated in the second half of 2014 there could be an inflation plus base price adjustment, but that's of course very speculative, and will depend on the market condition at that point in time. I also noted that the contracting environment in the US will continue to be challenging and hence the gross-to-net sales effect will be smaller both due to prior agreement with a number of plans on what effect the eventual price increase will have on the effective prices and also due to continued contracting on smaller plans in the US. But there's no significant plans up for grabs near term.

With regard to the contracting, the ESI contract is a two-year contract as it relates to commercial, and that excludes the Medicare Part D contract. The commercial part is significantly larger than the Part D part. We have been driving ourselves into a negotiating position in recent times. Whether or not we can do anything to disrupt the current contract remains unsure, and is certainly nothing we're going to speculate on in public.

Q: On the insulin front, can you tell us a little bit more about the FlexTouch Pen and whether you think that will be a significant commercial advantage? Could we see this taking you ahead of Lantus’ Solostar going forward? Secondly, on the emerging markets, you talked about the disruption in terms of foreign exchange? Are you worried that there could be an economic slowdown in some of these countries that could make it more difficult for governments to place tenders? Or have you made any adjustment to your effective underlying gross rates in emerging markets because of this currency disruption?

A: Great question. Of course it's not just currencies. Currencies reflect the underlying competitiveness of the nation and its trading patterns. It seems like the situation has deteriorated in recent weeks. These are profound changes that have occurred over the last 14 days. What we have factored into here is the currency effect and we have not factored any significant commercial changes in the individual markets. It is clear that we have in our plans something for a country like Argentina where these developments were more foreseen. There we have had a plan that forecasted some challenges in terms of currency turmoil so that has to some degree been factored into the plans already. In some of the other markets I would say no significant changes have been made so far. This, everything else being equal, entails a risk of not being able to launch our newer products and continuing with current products. It clearly also entails a risk of not being able to basically get compensating price increases in the market.

I also would like to note that we in the nonprofit market do have compensating factors. We have a very large, if not the world's largest insulin-filling facility in Brazil, which gives us a Brazilian cost base to offset some of the income we have from that market. We're also in India where we have decent operations in terms of a global service center where we deploy from 650 Indians working with offshoring services and that provides us with some local costs, which everything else gives some hits to us. Longer term this impacts the growth level from these markets, and I think we will have to make some adjustments during the year. But those have not been reflected in our focus as of now.

Q: You mentioned that once the pharmaceutical ingredient becomes comparable, then the device difference does normally play a role in adoption – will the approval of the FlexTouch have any significant impact on your ability to continue to gain share in the United States or regain share in the segments where you lost share? Would you talk a little bit about that in relationship to FlexTouch versus Sanofi’s SoloStar (Lantus)?

A: When you don't have parity, i.e., when one drug is superior to the other drug, then the device can't do that much about it. But when you do have parity, i.e., drugs like Levemir and Lantus that are perceived to be in the same ballpark in terms of safety and efficacy, then the device can actually be the swing factor. The most predominant benefit of the FlexTouch is the auto-injection function. Other benefits include the fact that it's ergonomic and has a high degree of legibility on the scale. These have given us a 70% to 80% patient preference in many different territories where it's been tested out. It's not that we expect any dramatic effect, but that it will help us sustain the positive momentum that we have for Levemir, and also have new stories to tell about innovation, both for NovoLog and for Levemir in the US.

Q: On the role of President, how does that differ from the role of CEO? And should I view [the promotion of Kaare Schultz] as something more like a succession planning longer term? In terms of the contracting situation and Express Scripts, any detail in terms of any employer plans? And have you seen any movements there? Or any early signs that actually the effect might not be quite as bad?

A: Well, the way that we look at this is we have given Kaare a promotion to President for a couple of reasons and with a couple of intentions. One is to recognize his contribution during the last 10 to 12 years of running the most complex part of our organization, mainly manufacturing and our whole commercial organization with some success. Also a recognition of the fact that we do believe he can do more. So this appointment will mean that he and I will share the responsibility of managing both internally towards the company agenda, and towards the Board of Directors. No reporting lines are being changed as a consequence of this, and there's no change in the structure of our meetings. It will have the benefit for me personally that I will alleviate part of my agenda so as to enable me to spend more time in the key markets and in particular in the United States to understand that increasingly complex and very exciting marketplace for us. All in all we believe that's a good use of our time. And this is not to be seen as a succession move, other than of course it gives Kaare an opportunity to develop his leadership skills. So you could say that he's cutting his stock in as far as that goes.

There had only been a few out of all the prime employees covered that are continuing under the national formulary. I would like to reiterate what I said earlier that in general patients who were on Victoza treatment on the ESI national report have found it easier to obtain grandfathering for their reimbursement, whereas it's of course challenging for physicians to get authorization for patients not previously on Victoza. In terms of the impact so far, we have indicated that the effect was to tune of 1% on global sales and in the ballpark of double that on US, a bit more than double that on US sales and I think that still stays. We are seeing an impact overall on our business on that magnitude, but as Lars also alluded to, we would have to get to 1Q14 to see whether that estimation was right. You do have to be aware that the effect on the NBRx will be profound in the first three months of a changed formulary. We saw that when United Healthcare introduced a block on a NovoLog back in, I think it was 2011, and on the other hand when we won the CVS Caremark contract for our NovoLog then we also saw that profound shift over the next three months in terms of NBRx where the effect on total scripts is more modest.

We do appreciate that you called in today to listen to this announcement. We chose to announce our results on a quite chaotic day in the market, for those of you that are not residing here, we have a chaotic political situation in that one of the leading parties of the government coalition has collapsed and we have a new political situation in Denmark and this is driven by a wish to have Goldman Sachs to invest in an oil and gas and windmill company in Denmark. So quite hectic and bizarre and therefore we appreciate your attention to our results.

 

Questions and Answers: February 3 London Presentation

Q: How do you see the pricing and the competitive scenario in terms of oral insulin and GLP-1?

A: In terms of all versions of GLP-1, you should be aware that it’s going to take a while. Even with the fantastic results we expect from Mads, it’s still going to take a while to do the full phase 2 and phase 3 program. When you then think about where it will be best positioned, it’s not with type 1 diabetes. It’s with earlier type 2 diabetes, where you don’t need high precision with dosing, where you have some proper capacity, which means that a long-acting agent being a long-acting oral GLP-1 or a long-acting oral insulin makes sense. You can imagine that these products will be repositioned early, which is a great opportunity because 75% of all diabetics on medication are basically on OADs. So getting into that volume and still having the very serious basal-bolus be injectable and very precise is a scenario we would like to see. That also means that you should expect the pricing will be more or less one-to-one. It’s not likely that the OAD version or the oral version of GLP-1 or of insulin would be in any way cheaper than the injectable version.

Q: You talked about the oral insulin, is that still moving ahead?

A: It is true that it’s been some time since we gave the last update on oral insulin. So I think it would be appropriate that over the next quarter, we provide an update. We are into multiple dosing in patients in phase I. We also have several analogues that are undergoing phase I activities. At some point, we have to choose the most promising, and take that to the next level. In the next quarter or two I should be able to give you a further update. It’s still early, but the early data actually look fairly encouraging. That’s as much as I'll say now. It’s more difficult than oral GLP-1 for the reason that the patient’s tolerability of insulin excursions is much less than that of GLP excursions.

Q: Would the phase 2 data you’re expecting next year [on oral GLP-1] be sufficient to move straight to phase 3? Or do you think further phase 2b studies would be required given that you’ve got roughly 40 patients, 50 patients per arm? Also, is anybody else in oral GLP-1 and what is the competitive landscape looking like?

A: We’re doing this trial and we’re doing a handful of other trials, but this is the big one, 600 patients. We’re doing a handful of other trials that relate to drug–drug interactions, further studies about food-drug interactions, interactions at the level of hepatic metabolism, stuff like that. It’s a comprehensive phase 2 program. I would anticipate that what we are doing will suffice at an end-of-phase 2 meeting with the agency to actually define a phase 3 program without further phase 2 trials, but it all depends on our data. If there are uncertainties and if it’s unclear which dose to take further or if there are safety concerns we will have to do further investigations. Also bear in mind that we have a carrier called SNAC that we are characterizing over the next year or so. And I expect next year to be able to provide you with an update on both the clinical outlook and the carrier system.

Q: On oral insulin and GLP-1, how far ahead of the competition are you?

A: Quick answer, there isn’t any.

Q: Is the 30-month stay for generic glargine a positive in terms of pricing or does it give Sanofi more time to make a switch for its U300 and therefore make it more difficult for Tresiba later?

A: If we make the assumption that there will be a 30-month stay and there will be litigation, then you should expect that the pricing environment for basal long-acting insulins in the US marketplace the coming three years will be similar to what it has been in the past three years, because it’s basically an unchanged situation. You have two long-acting analogues, Lantus and Levemir, fighting over market share through all the classical sales, marketing, contracting means that exist in the marketplace. When it comes to the point where you might see U300 or Tresiba in the marketplace, then you should expect that these products will come in at similar list prices, but with lower discounts than the older products, and that they will gain market share from that base. I won’t comment on how much Sanofi can do with U300. It’s not a clinical game changer in the sense that it has not shown any significant difference in clinical efficacy compared to U100, but they might want to roll the market over for other reasons. Tresiba has clearly shown significance on clinical end points, and that is being seen as a game changer in the sense that it’s the new and improved long-acting insulin. We are very optimistic, provided that we get FDA approval in the US.

Q: If I understood your comments last week correctly, you do not expect Express Scripts to show any changes for the fixed formularies. CVS Caremark is also not up for grabs. Can you confirm that you’re not expecting any major tendering in the U.S. for 2014 from the PBMs?

A: From our perspective, no very significant contracts are up for renegotiation in 2014. A number of contracts, including CVS Caremark, are likely to be up for renegotiation in 2015. Changed reimbursement terms on major contracts will not have a significant impact in 2014, except for the ESI impact, which we estimate at about 2.5% of U.S. sales.

Q: You’ve obviously filed the obesity data, could you give us a perspective on the safety profile that has – or some of the safety data with respect to CV, pancreatitis, cancer, the potential hazard ratios or numeric events?

A: We haven’t seen anything there on either item, so the CV outlook based on what we know today for liraglutide 3 mg is looking benign and very good indeed. We haven’t seen cancer signals and we haven’t seen neuropsychiatric disturbances. What we have seen is an imbalance in pancreatitis, which we have in the label already, since it is in the label for diabetes. It’s a class label for all compounds in both DPP-4 inhibitor class and the GLP-1 analog class. We’ve also seen a numeric imbalance in gall bladder disorders, which we ascribe to the rapid loss of body weight. In people who diet vigorously, it’s classically observed that hepatobiliary or metabolism changes lead to gall stone occurrence, but of course, we’re investigating further.

I don’t see any of the classic obesity drug killers present in the data set. But, I will expect a lot of debate when we have an AdCom, probably in the third quarter. We’ll also have discussions about C-cells like we did for Victoza, but in terms of C-cells and calcitonin there’s nothing to look at specifically in the trials.

Q: Beyond the headline A1c level when AWARD-6 reports for dulaglutide, what do you think we should focus on?

A: A1c wise, you should focus on two things. There’s the pre-specified non-inferiority margin defined in the statistical analysis plan, which is typically 0.4% A1c. The expectation is that dulaglutide will be non-inferior to Victoza. After that, you should look at the statistical analysis. What was the A1c decrement compared to Victoza and was there a statistically significant difference in favor of one of the drugs? The two other things that we haven’t heard much about from dulaglutide is body weight, which hasn’t been well reported at this point. My hope is that Victoza will prevail in body weight based on the robust data we’ve seen in the LEAD program on weight loss in type 2 diabetes. The second is systolic blood pressure. We observed a statistically significant reduction in systolic blood pressure in four out of five LEAD trials for Victoza, and these numbers haven’t been reported yet for dulaglutide. So I’d be eager to learn that as well. Finally, there is safety and tolerability, where the GI side -effect profile becomes important. There have been different speculations about the compounds, and I’m also looking forward to see them.

Q: Assuming that dulaglutide ends up being the best-in-class once-weekly, how do you think semaglutide is going to differentiate from dulaglutide in a few years?

A: If you compare phase 2 data for semaglutide and Victoza, and also look at what have we seen for dulaglutide in the AWARD program and what have we seen for semaglutide in the oral and in other clinical pharmacology trials, my speculation is that on body weight, I would actually foresee that semaglutide becomes the best-in-class once-weekly agent, and potentially also with more weight loss than corresponding doses of Victoza. For A1c, the picture is less clear but I would again expect to see that semaglutide actually leveled out at very high A1c decrements, 0.4% above those of Victoza. We would hope to see the same as Victoza or even better, but it’s too early to speculate. Regarding side effects tolerability, we had a lot of GI side effect reporting in phase 2. Now, we are using a more subtle titration with four weeks between the steps. We’ve also taken the steps at a lower level because we underestimated the potency of this molecule in phase 2, and we’ve reverted to that in phase 3. Now, I would expect to see a GI side effect profile that’s fully tolerable.

Q: I have a question on dulaglutide and some comments Lilly made on their recent results call. They described non-inferiority in AWARD 6 as a win situation, with the payer discussions referencing the price premium for the Victoza 1.8 mg dose vs. the 1.2 mg dose. How do you interpret that commentary?

A: Regarding dulaglutide, nobody knows the data. All I can say is that in general, when you talk about competition in the serious end of diabetes, where you need injectables, then the marketplace normally looks this way: if you’re at par on all the clinical parameters, then you can compete on convenience or device or something like that. But if you have one element that is not at par, then you’re seriously in trouble. To really gain market share, you need a hook, so you need one thing where you’re better than competition. And I think Apidra is a good example. In the U.S., Apidra doesn’t have a hook, they have a product that looks pretty similar to everything else. And that’s why despite massive sales promotion, they ’re not really gaining traction. With dulaglutide, they’re having the same issue: they need a hook to really convince people that it’s clinically better than Victoza. It’s not enough to be more convenient. If one of the parameters is just numerically inferior in terms of A1c reduction or weight reduction or blood pressure, then of course they have a serious problem, because they may need to go out to explain to the market that they should use this despite the fact that this one element is worse than it is with Victoza. But we have to see the data before we can say more about it.

Q: Having experienced some of the Tresiba launch in Europe, how do you see the IDegLira launch going in Europe and what sort of opportunity does IDegLira represent in Europe?

A: We have seen a very strong launch of Tresiba in the markets where we had good reimbursement. For IDegLira, we will have a phenomenally good clinical profile and it’s going to be difficult to say exactly how we can position vis-à-vis the authorities and reimbursement, but it will be an easier sell because we have many markets where we do have full reimbursement for Victoza. The pricing differential will be easy to overcome, and we have a very clear-cut clinical benefit. So we’re optimistic about the potential for success in Europe. In the US, we have to wait to get Tresiba approved and in Japan, we don’t have that exact dosing. We will probably find that the first markets where we IDegLira really makes it will be in Europe.

Q: On the Tresiba rollout, it looks like it is flattening in Switzerland and Mexico. Has there been a response from some of your competitors, or what’s going on there?

A: We are seeing very strong competitive activity, but that was the pattern even before launch. The monthly numbers are a bit random up and down. There’s no change in the underlying trend. When I say 10% share in 12 months, you have to notice that these curves are only eight or nine months long, and there will be some random changes. From every previous insulin launch we’ve done, we know that the perception is basically created in the first six months, and that perception stays in the marketplace, and then you normally get 5-10 year penetration curves that are surprisingly steady once you get going. We expect the same here and we see a lot of counter promoting and counter detailing, but nothing that is really changing these graphs on a monthly basis.

Q: Can you elaborate a little bit more on the dosing in the new phase 3 trials [for Tresiba]?

A: Regarding the blinded trials, we actually feel that everything we’ve done so far has been done completely state-of-the-art.  Just to cater for any specific criticisms or needs of the outside observers, we have decided not only to do these things blinded, but also in such a way that the dosing cannot be accused of being skewed. I am as confident about these trials as I was when we did the phase 3a trials because I think it might actually be a benefit to the new experimental insulin to be blinded against the well-established one. One of the things we’ve done is avoid allowing people to come in on Lantus and go direct – or glargine and go directly onto glargine, because that gives the benefit of both the patient and the physician knowing how to titrate and how to use it. As you can see from the cross-over design, we’ve avoided that scenario by not having patients coming in on that and by blinding.

Q: What happened to Levemir in those markets where you’re getting down to about a 10% share? Did you do an aggressive switch?

A: Basically, there has been a gain of market share for Tresiba, which has come from the existing players. That means it’s coming from Lantus and from Levemir. There’s slightly more Levemir that’s converting, but it’s very close to the market mix. That means that Levemir is holding up quite nicely in the markets where we see Tresiba being launched. As an example, in the Swiss market, the penetration of Tresiba has been enough for us to become the leaders in the basal segment in the combination of Levemir and Tresiba. So, while we lose some Levemir sales, it’s more or less in proportion to the market.

 

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