Memorandum

Novo Nordisk 4Q13 report expansion - striking commentary from Feb 3 London IR presentation on liraglutide 3 mg for obesity, oral insulins, Lilly's dulaglutide, and IDegLira

We've expanded our Novo Nordisk 4Q13 report to feature a transcript of some striking highlights from the Q&A session from management's February 3 presentation in London. Notably, Chief Scientific Officer Dr. Mads Thomsen remarked that "imbalances" in pancreatitis and gall bladder disorders were seen in clinical trials of liraglutide 3 mg for obesity and suggested that there would be lots to discuss during a likely AdCom in 3Q14. The company also expects to provide an update on the development of its oral insulin candidates in the next quarter or two; notably, management suggested that early type 2 diabetes patients would be the optimal target for such therapies, and that pricing will be "more or less one-to-one" with injectable versions (although some might think given the massive investment needed to develop and possibly commercialize such products that this is surprising, we expected there would not be a significant price premium due to payer resistance and likely massive volume gains were it to be reviewed favorably). The audience posed multiple questions on Lilly's dulaglutide, which was compared head-to-head with Novo Nordisk's Victoza in the AWARD-6 trial (study completed; topline data expected later in 1Q14). Novo Nordisk expects that dulaglutide will be non-inferior to Victoza, and Dr. Thomsen suggested that Victoza might win in the body weight category. He also indicated that Novo Nordisk's own once-weekly GLP-1 agonist candidate semaglutide could eventually be best-in-class with regards to body weight and A1c. Management stated that dulaglutide would need to prove some sort of clinical benefit above Victoza to gain share successfully - by comparison, Lilly management stated during the company's recent 4Q13 update that it would see non-inferiority as a win, and that the drug's injection device would be a defining competitive advantage. We also heard management's thoughts on an IDegLira launch (the first market that "really makes it" will probably be Europe), the designs of the new blinded crossover trials for Tresiba, and the lull in major formulary contract negotiations in 2014.

Our update also corrects an error in our original report - we had initially stated that Victoza sales in 4Q13 totaled DKK 2.7 billion ($690 million), while the actual total was DKK 3.2 billion ($590 million). We sincerely apologize for the error.