Memorandum

Novo Nordisk 3Q18 – D/O +5% YOY to $3.6B; Growth from GLP-1s Victoza (+14% YOY to $951M), Ozempic (+177% Sequentially to $84M), Saxenda (+54% YOY to $154M); New phase 1 oral GLP-1 agonist in pipeline – November 1, 2018

Executive Highlights

  • Novo Nordisk provided its 3Q18 update this morning in a call led by CEO Mr. Lars Jørgensen (press release, earnings presentation, webcast). Sales of diabetes and obesity products rose 5% YOY (6% operationally) to $3.6 billion, growing from $3.5 billion in 3Q17. By our calculation, growth (as reported) was driven by Victoza (30%), Ozempic (21%), Tresiba (15%), Saxenda (15%), Xultophy (10%), Fiasp (6%), and Ryzodeg (3%) – despite these therapies accounting for only ~45% of total portfolio revenue. Net profit was 33% for 3Q18 – that is, ~$4.6 billion from sales of ~$12.5 billion – compared to 38% in 2Q18 and 40% in 1Q18. Layoffs for 2018 have been tripled from 400 to 1,300, representing ~3% of Novo Nordisk’s total workforce of 43,200.

  • In GLP-1s, Ozempic climbed 177% sequentially to $84 million in its third quarter on the market. Very notably, management increased its 2018 guidance on Ozempic from ~$160 million to ~$240 million, reflecting the next-gen GLP-1s very strong start; Ozempic now claims 20% of new-to-brand prescriptions in the US. Within this context, flagship GLP-1 agonist Victoza gave a strong performance: +14% YOY and 7% sequentially to $951 million. For the first time ever, however, Lilly’s Trulicity passed Victoza in US GLP-1 agonist volume share: Trulicity held 43%, Victoza 38%, and Ozempic 5% as of September 2018. Positively, underlying volume growth in on the rise, coming in at 28% in 3Q18.

  • Next-gen basal Tresiba returned to growth with a 23% YOY and 11% sequential increase to $335 million, a solid performance following a concerning 11% YOY drop to $306 million in 2Q18. Notably, Novo Nordisk will re-launch Tresiba in Germany in December – it pulled out of the market in 2015 after being priced at the same level as human insulin. Levemir sales fell 19% to $398 million; the insulin now claims 22% of US basal insulin prescriptions, compared to 15% for Tresiba (and 39% for Sanofi’s Lantus, 11% for Lilly/BI’s Basaglar, and ~9% for Sanofi’s Toujeo). We aren’t sure what pricing will be exactly.

    • On a pooled basis, next-gen basal insulins grew 14% YOY and 5% sequentially to $584 million, with $335 million (+23% YOY, 57% value share) from Xultophy and $249 million (+9% YOY, 43% value share) from Sanofi’s Toujeo. Since 2Q18, next-gen basals have grown from 21% of total US basal insulin prescriptions to 23%, and that has been driven entirely by Tresiba’s growth from 12% to 14% as Toujeo struggles with formulary exclusions stateside. Sanofi has lowered prices of Toujeo, which should help on the demand front.  

  • Xultophy, Novo Nordisk’s basal insulin/GLP-1 agonist fixed-ratio combination, climbed 150% YOY and 16% sequentially to $69 million in 3Q18, up from only $28 million in 3Q17 and $60 million in 2Q18. Growth for Xultophy has slowed somewhat since its 1Q17 launch, but we were pleased to note a very strong emphasis on the product from Novo Nordisk management. Xultophy was submitted to Japan in 3Q18.

    • On a pooled basis, basal/GLP-1 combos rose 146% YOY and 15% sequentially to $92 million in revenue, from $37 million in 3Q17 and $80 million in 2Q18. 75% of that revenue came from Xultophy sales, and the remaining 25% from Sanofi’s Soliqua, on par with 2Q18. We see this as very positive growth, albeit from a low base, and continue to hope for more rapid gains in this highly impressive class.

  • Next-gen mealtime insulin Fiasp rose 20% sequentially to post $26 million in revenue for 3Q18, rising from a low base of $21 million in 2Q18. This is underwhelming growth considering US launch occurred only partway through 1Q18, and our sense is that reimbursement is still low for Fiasp. NovoLog sales dropped 12% YOY and 7% sequentially to $692 million, a performance management attributed to seasonality and rebate adjustments – while also emphasizing that NovoLog and the rapid acting insulin market are both very stable overall. That said, this is NovoLog’s lowest point since 1Q16 and we believe movement away from MDI for people with type 2 diabetes is at least some of the movement.

  • Saxenda continued to grow, climbing 54% YOY and 12% sequentially to $154 million in sales, from $101 million in 3Q17 and $138 million in 2Q18. The obesity drug (liraglutide 3.0 mg) continues to be a very bright spot in Novo Nordisk’s business, driving 13% of D/O growth by our calculation.

  • In very positive news – particularly considering ongoing safety concerns over obesity drugs – FDA approved a label update for Saxenda, adding data from the LEADER CVOT reflecting CV safety of liraglutide at a lower dose in people with type 2 diabetes.

  • Pipeline news was robust, led by the addition of (i) a new oral GLP-1 agonist and (ii) a second PYY molecule to phase 1. The former offers potential for either greater efficacy or lower cost vs. oral semaglutide, while the latter joins another PYY molecule in phase 1 as Novo Nordisk aims to optimize hypothalamic penetration and weight loss. Significant airtime was devoted to phase 3 oral semaglutide, as CSO Dr. Mads Thomsen highlighted A1c-lowering efficacy between 1.1% and 1.8% in the eight reported (to date) PIONEER trials. He also postulated that high-dose (2.4 mg) Ozempic, currently under investigation for obesity in the STEP program, could allow semaglutide to compete with Lilly’s new phase 3 dual agonist – suggesting that Novo Nordisk may even seek an expanded dosing indication for type 2 diabetes, separate from obesity. Unfortunately, Novo Nordisk also discontinued its HypoPen (next-gen glucagon), following disappointing PK/PD results in phase 1.

    Novo Nordisk provided its 3Q18 update this morning in a call led by CEO Mr. Lars Jørgensen. See the company’s press release and earnings presentation. Below, you’ll find pooled analyses for next-gen basal insulins and basal insulin/GLP-1 agonist combos in 3Q18, followed by financial highlights covering Novo Nordisk’s diabetes and obesity products. Rounding the report out are updates on the company’s robust pipeline, including a comprehensive summary table on Novo Nordisk’s diabetes, obesity, and NASH pipeline. Diabetes-specific Q&A from the call concludes the report.

    3Q18 Financial Results for Novo Nordisk’s Major Diabetes and Obesity Products

    Product

    3Q18 Revenue - USD millions (DKK billions)

    Year-Over-Year

    Reported (Operational) Growth

    Sequential Reported Growth

    Share of Reported Growth

    Basal Insulin

    $802 (DKK 5.2)

    +1% (+2%)

    -4%

    -

    - Tresiba

    $335 (DKK 2.2)

    +23% (+24%)

    +11%

    15%

    - Levemir

    $398 (DKK 2.6)

    -19% (-19%)

    -15%

    0%

    - Xultophy

    $69 (DKK 0.4)

    +150% (NR)

    +16%

    10%

    Rapid-Acting Insulin

    $718 (DKK 4.6)

    -9% (-9%)

    -7%

    -

    - NovoLog

    $692 (DKK 4.4)

    -12% (-11%)

    -7%

    0%

    - Fiasp

    $26 (DKK 0.2)

    --

    +20%

    6%

    Premix Insulin

    $393 (DKK 2.5)

    -1% (+2%)

    -2%

    -

    - NovoMix

    $363 (DKK 2.3)

    -4% (-1%)

    -3%

    0%

    - Ryzodeg

    $30 (DKK 0.2)

    +49% (NR)

    +9%

    3%

    Human Insulin

    $371 (DKK 2.4)

    -4% (0%)

    +2%

    0%

    Victoza

    $951 (DKK 6.1)

    +14% (+14%)

    +7%

    30%

    Ozempic

    $84 (DKK 0.5)

    --

    +177%

    21%

    Saxenda

    $154 (DKK 1.0)

    +54% (+58%)

    +12%

    13%

    Other

    $162 (DKK 1.0)

    +6% (+1%)

    -13%

    2%

    Total Diabetes and Obesity Portfolio

     $3,636 (DKK 23.4)

    +5% (+6%)

    +1%

    --

    Table of Contents 

    Pooled Market Highlights

    1. Pooled Next-Gen Basal Insulins Rise 14% YOY to $584 Million; Combined Volume Share in US Basal Market Reaches ~23%, Driven by Tresiba Gains

    Next-generation basal insulins Tresiba (Novo Nordisk’s insulin degludec) and Toujeo (Sanofi’s insulin glargine U300) together sold $584 million in 3Q18, reflecting a 14% YOY rise from $510 million in 3Q17. Sequentially, pooled revenue for the class jumped a modest 5% from $559 million in 2Q18. We’re glad to see this overall growth from the next-gen basal insulin class after it posted its first-ever negative YOY performance in 2Q18. After struggling in 2Q18, both Tresiba (+23% YOY to $335 million) and Toujeo (+9% to $249 million) displayed renewed growth in 3Q18. However, considering how relatively early both Tresiba and Toujeo are in their launch cycles, along with the impressive clinical profiles that both of these agents offer over first-generation basal insulins, we would like to see a more robust performance. The main culprit for depressed growth of this class, though, remains intense pricing pressures within US markets. On this front, we do note that Tresiba displayed positive growth within US markets this quarter (+25% YOY to $227 million), while Toujeo continued to struggle within the US (-15% YOY to $107 million). Very positively, in terms of volume these next-generation insulins currently combine to command ~23% of total basal insulin prescriptions in the US (14% for Tresiba and ~9% for Toujeo; slide 10), up from 21% in 2Q18. However, since 1Q18, Tresiba has climbed from 12% volume share, but Toujeo seems to have hovered still around 9%. Indeed, the effects of both US pricing pressure and formulary exclusions are evident in Toujeo’s performance; Sanofi’s next-gen continues to be buoyed by OUS sales (+37% YOY to $143 million). In terms of value share, Tresiba leads this two-member class, claiming a 57% share – slightly up from 55% in 2Q18 and the largest share that Tresiba has captured since 59% in 2Q17. Toujeo holds the remaining 43% of sales for the class in 3Q18. While its certainly becoming more and more popular to compare these two agents, we can’t stress enough the benefits that both of these agents have over first-generation insulins, nor how important it is to ensure that more patients are taking these over older options.

    Pooled Next-Generation Basal Insulin

    2. Basal/GLP-1 Combinations: Xultophy + Soliqua >Double YOY and Climb 15% Sequentially to $92 million, Value Share Stable at 75%/25%, Respectively

    Pooled sales of GLP-1/basal insulin fixed-ratio combinations – Novo Nordisk’s Xultophy (insulin degludec/liraglutide) and Sanofi’s Soliqua (insulin glargine/lixisenatide) – continued their steady ascent, more than doubling YOY (+146%) from $37 million in 3Q17 to $92 million in 3Q18. Sequentially, the class grew by 15% from $80 million in 2Q18. We find it particularly interesting to note the incredible consistency in class revenue growth since both products were simultaneously approved in December 2016 and launched in 1Q17 (see graph below). At a glance, it seems to be that when one product’s growth slows down for a quarter, the other picks up; pooled revenue has followed a nearly straight line for almost two years. By value, Xultophy captured 75% of the market, and Soliqua 25% – exactly the same breakdown as was seen in 2Q18. Notably, this is the highest share of the market that Soliqua has ever captured (3Q17 comes closest, when Soliqua captured 24% of sales). Interestingly, however, we learned during Zealand’s 2Q18 update that Soliqua actually captures ~two-thirds of prescription volume and has “significantly more coverage” than Xultophy – indicating a much better realized price for Xultophy. Individually in 3Q18, Xultophy climbed 150% YOY and 16% sequentially to $69 million (DKK 442), against an easy comparison of $28 million in 3Q17 and from $60 million in 2Q18. Soliqua grew an extraordinarily comparable 150% YOY and 18% sequentially to $23 million (€20 million), from a low base of $9 million in 3Q17 and from $20 million in 2Q18. We see these numbers as positive, but we also continue to look for stronger uptake of this clinically impressive class ­– we’ve enumerated its most notable benefits and barriers in the table multiple times and do this again below. Of course, we recognize that the recent launch and low reimbursement of these therapies (particularly in 2017) means that we are currently at a very early stage in the lifecycle of basal insulin/GLP-1 agonist combinations, and we are hopeful for faster growth in the future. From where we stand, this class has incredible growth potential.

    Pooled Sales of Basal Insulin/GLP-1 Agonist Fixed-Ratio Combinations (1Q17-3Q18)

    Benefits

    Barriers

    • US label requirements: Both Soliqua and Xultophy labels currently require patients to already be on basal insulin or the specific GLP-1 included in the combo before starting the fixed-ratio injection. Encouragingly, at ADA 2018, Tulane’s Dr. Vivian Fonseca advocated that FDA change product labels to elevate fixed-ratio combinations to a first injectable therapy in diabetes care. 

    • Reimbursement: Also, little discussion of reimbursement quality.

    • No established place in treatment algorithms or everyday clinical practice. Newcastle’s Professor Philip Home has previously relayed to our team that some prescribers continue to view GLP-1 agonists as a “pre-insulin” therapy, making fixed dose combinations of the two seem illogical.

    • In their respective calls, Novo Nordisk relayed their optimism and focus on Xultophy while Sanofi remained silent on Soliqua. This is slightly surprising (and disappointing) to us, though it is true that Sanofi focuses on a broader set of therapeutic areas. Historically, Sanofi has invested quite a bit more than Novo Nordisk in promoting fixed-ratio combination therapy and in securing access for Soliqua; in contrast, Novo Nordisk has de-prioritized Xultophy to focus on building up the Tresiba and Victoza franchises – though our sense has been that this has started to change at the latter company. Novo Nordisk’s 3Q18 call certainly put to rest any doubt we had, as management labelled Xultophy a key innovative product for the company and asserted their focus on capturing an even greater market share in the future. This further confirms past claims that Xultophy is doing very well in European markets where it has gained access, most notably in France. By comparison, Sanofi did not mention Soliqua once during prepared remarks or Q&A, and it did not break down sales by geography for the first time since 3Q17. We certainly hope that Sanofi does not view barriers to uptake as insurmountable, as the combos have SO much to offer patients.

    Financial Highlights

    3. Overall Diabetes/Obesity Portfolio Grows 5% YOY As Reported (+6% Operationally) to $3.6 Billion; GLP-1-Containing Therapies Account for ~75% of Growth but Only 34% of Revenue; 2018 Layoffs Tripled to 1,300

    Novo Nordisk’s total diabetes and obesity portfolio grew 5% YOY (+6% operationally) to $3.6 billion (DKK 23.4 billion) in 3Q18, from $3.5 billion (DKK 22.2 billion) in 3Q17. D/O sales also rose ~1% sequentially from $3.6 billion (DKK 23.2 billion) in 2Q18. By our calculations, this impressive YOY growth (as reported) was driven by Victoza (30%), Ozempic (21%), Tresiba (15%), Saxenda (15%), Xultophy (10%), Fiasp (6%), and Ryzodeg (3%), despite these therapies accounting for a combined ~45% of total portfolio revenue. Taken together, Novo Nordisk’s four GLP-1-containing products (Victoza, Ozempic, Saxenda, and Xultophy) accounted for over three-fourths of the company’s growth but only ~34% of total revenue; the three standalone GLP-1 agonists (Victoza, Ozempic, Saxenda) accounted for two-thirds of growth but only ~32% of total revenue. Surely, this speaks to the incredible strength of liraglutide and semaglutide, as well as Novo Nordisk’s certain leadership in the GLP-1 agonist class. According to Novo Nordisk, 69% of growth was driven by international sales while 31% was driven by North American revenue, while total revenue for the quarter was split evenly between the two regions; international sales comprised 49% and North America the other 51% of revenue. By region, the US accounted for 25% of growth, which we consider a solid showing given the extent of pricing pressure in the US – in 2Q18 we predicted there was little room to grow here. Europe accounted for 15% of growth, AAMEO 25%, China 20%, and Latin America 11% (page 27). Only Japan and Korea have listed a negative share of growth, at -2%; notably, the sum of all of these regions only comes to 94%.

    Novo Nordisk’s net profit was once again very high, at 33% for 3Q18 (page 23) and 37% for the first nine months of 2018 (net profit of DKK 30.1 billion [~$4.6 billion] from sales of DKK 82.1 billion [~$12.5 billion]). A 38% net profit was recorded in 2Q18 (page 22), and a striking 40% profit was recorded in 1Q18 (page 4). On the strength of this performance, financial guidance for 2018 was increased from 3%-5% sales growth in local currencies (2Q18) to 4%-5% as of November 1, 2018 (slide 18). Free cash flow expectations were increased from DKK 27-32 billion (~$4.1-$4.9 billion) at the half to DKK 29-33 billion (~$4.4-$5.0 billion; page 12). Novo Nordisk maintained its effective tax rate estimate for 2018 at a very low 19%-20% due to a non-recurring change in tax provisions related to settlement of international tax cases covering multiple years and reduced federal corporate tax rate in the US. The effective tax rate for the first nine months of 2018 was 19.1%, down 2.5% from the first nine months of 2017 (page 4). Novo Nordisk remains the leading player in the diabetes industry, as the company holds ~46% of the global insulin market by volume (page 7) and ~47% of the global GLP-1 market by volume (page 8). The company’s share of all diabetes care was not shared in 3Q18 but was ~27% by value in 2Q18 (slide 18).

    • Layoffs for 2018 have been tripled from 400 to 1,300, representing ~3% of Novo Nordisk’s total workforce of 43,200 (page 2). We were disappointed at the overt lack of information on this news from Novo Nordisk management, which may strike some as a bit as a bait-and-switch of the initial 400 R&D layoffs announced in September. CFO Mr. Karsten Knudsen only briefly touched on the news in prepared remarks, stating, “we expect the workforce to be reduced by 1,300 employees. The majority of the layoffs have been implemented.” As we see it, this is an inadequate statement for an event of this magnitude, especially considering that no separate press release was given as for the initial layoffs, which were rationalized as part of a transformation to Novo Nordisk’s drug identification and development approach (more on this below). The same reasoning was given for the new layoffs in Novo Nordisk’s 3Q18 financial report (page 1), but we’re not clear on why such a large increase has occurred. No color was provided on where these new layoffs are geographically (the first 400 were in Denmark and China). When asked what the annualized savings would be from the restructuring program, Mr. Karsten set the “cost” (it is unclear whether this means added or subtracted) of the layoffs was DKK 600 million, included in Novo Nordisk’s 3Q18 results. Notably, this is the biggest layoff at Novo Nordisk that we have ever seen. The second biggest came in September 2016 when the company laid off ~1,000 employees of its also 43,200-strong workforce.

      • While the layoffs were positioned as an R&D overhaul, CEO Mr. Lars Jørgensen did say during Novo Nordisk’s 2Q18 earnings call that Novo Nordisk will likely have to lay off employees in the coming year in order to mitigate the impact from coverage gap increases (i.e. the Medicare “Donut Hole”). This increase is a big deal and came as a  surprise to the field. As Mr. Jørgensen put it, Novo Nordisk is making a number of changes in different areas that will “lead to less people” a year from now. At the time of Mr. Jørgensen’s statement, Novo Nordisk had ~43,000 employees, up from ~41,000 in 2Q17, a sizable increase that may now be viewed as growth that was on the fast side. All this is speculation, of course.

      • The press release for the original layoffs was accompanied by a clear intent by Novo Nordisk to invest in machine learning as a means to more quickly and efficiently select molecules for development. This is particularly interesting – AI can quickly screen thousands of molecules, identifying correlations and properties likely to make a good therapeutic candidate. We suspect Novo Nordisk’s undertaking will likely involve IBM Watson. The two companies announced a partnership in December 2015, though nothing has come of it since that has been public (which doesn’t mean nothing is happening, but does mean nothing is public, which is similar to some other IBM Watson partnerships that we have seen). To this end, we have many questions:

    Close Concerns’ Questions

    How will machine learning be taught internally and developed? Will it be related to automated insulin delivery? How is Novo Nordisk thinking about automated insulin delivery given the new promise to deliver insulin more safely that reduces variability of response?

    Can we expect further investments in Big Data projects that determine ideal candidates for specific therapies, e.g. GLP-1 agonists? A Novo Nordisk/IBM poster at ADA showed that baseline A1c was the best predictor of whether or not a patient will benefit from new treatment with a GLP-1 agonist. Of course, “benefit” was defined pretty narrowly in that study – an A1c improvement of ≥1%. We’re eager to see similar approaches used with a broader perspective of GLP-1 benefits, including weight loss and cardioprotection.

    How might other recent Novo Nordisk partnerships play into this R&D overhaul? Specifically, the original press release highlighted Novo Nordisk’s recent acquisition of Ziylo to accelerate glucose-responsive insulin research and its partnerships in the fields of cardiometabolic and stem cell research as examples of external agreements. Presumably, the latter refers to Novo Nordisk’s collaboration with UCSF and Cornell for encapsulated beta cell therapy and recent partnerships with Ossianix and Kallyope to develop drugs that circumvent the blood brain barrier. 

    What areas of R&D will the layoffs come in? Are there diabetes or obesity candidates that won’t be developed? Will others be studied with a different approach?

    How does this decision fit with the context of declining insulin profitability and a higher innovation threshold for R&D? As background, Novo Nordisk CSO Dr. Mads Thomsen spoke to the Wall Street Journal last year about challenges in differentiating insulin products on the market. And, management announced on the company’s 3Q16 earnings call that the R&D strategy will adopt a higher bar going forward.

    How severely have changes to the Medicare coverage gap impact Novo Nordisk? Of note, all diabetes businesses have mentioned vulnerability to this policy (including Lilly – estimating a $200 million loss – and Sanofi – estimating a $108 million loss), and Novo Nordisk has the largest diabetes portfolio out there. We’ll be looking out for these numbers during 3Q18 and 4Q18 earnings seasons.

    Are more layoffs yet to come?

    4. Victoza Returns to Growth: +14% YOY, +7% Sequentially to $951 Million after First YOY Loss (-1%) in 2Q18; Loses US GLP-1 Volume Lead to Trulicity as Ozempic Climbs

    Revenue from GLP-1 agonist Victoza (liraglutide) rose an impressive 14% YOY (+14% operationally) to $951 million (6.1 billion DKK) in 3Q18 from a base of $844 million (5.3 billion DKK) in 3Q17. Some might say this growth would be unexpected from such an established franchise, but this performance fits in with the overall trajectory of Victoza sales. We also note that Victoza’s 14% YOY rise comes against a relatively easy comparison of 5% YOY growth to $844 million in 3Q17 (5.3 billion DKK). Nevertheless, 3Q18 sales do represent an encouraging rebound from 5% and 4% sequential losses, and unimpressive +4% and -1% YOY growth, in 1Q18 and 2Q18, respectively. Sequentially, sales climbed 7% from a base of $898 million (5.7 billion DKK) in 2Q18. We’re surely glad to see Victoza generate double-digit YOY growth and a sequential increase following a 1H18 performance that signaled a potential stagnation of the blockbuster GLP-1 franchise, though we don’t expect very substantial sustained growth going forward. Management again attributed Victoza’s strong performance to tailwinds provided by the product’s CV indication, approved by FDA in August 2017; Victoza remains the only GLP-1 agonist to hold such an indication. Moreover, they referenced overall underlying growth of the GLP-1 class – more on this below the graph.

    • By geography, Victoza sales were identically strong both inside and outside the US, with particularly exceptional growth in Chinese markets. Stateside, sales rose 18% YOY (13% operationally) to $703 million (4.5 billion DKK) from a base of $607 million (3.8 billion DKK) in 3Q17, also rising 9% sequentially from $648 million (4.1 billion DKK) in 2Q18. OUS, growth was slightly less robust at 6% YOY (but +19% operationally), climbing to $248 million (1.6 billion DKK) from a base of $237 million (1.5 billion) in 3Q17; sequentially, sales were flat from $250 million (1.6 billion DKK) in 2Q18. Notably, sales in China were up an astounding 186% YOY to $23 million (1.5 billion DKK), against an easy comparison of a 27% YOY drop to $8 million (0.5 billion DKK) in 3Q17. Management specifically commented on the strength of sales in China but warned on call to “not get hooked on these quarterly numbers”; when looked at holistically with 1Q18 and 2Q18 financial results, these fall in line with overall expectations of ~80% YOY growth in China. This very strong performance was attributed, naturally, to the inclusion of Victoza on the Chinese National Reimbursement Drug List in July 2017, which is presumably broadening patient access in this important emerging market. According to management, Victoza encompasses 82% of the GLP-1 market share by value in China; however, GLP-1s still only represent 1.2% of total diabetes market share by value in China. We see sure potential for serious growth here, as Victoza (and GLP-1s in general) begin to reach more patients in China, from a very small base; indeed, we imagine emerging markets as a whole could play an important role in buoying Victoza revenue as patients in more established markets continue to shift to Ozempic.

    Victoza Sales (1Q12-3Q18)

    • Novo Nordisk provided data (below) demonstrating robust and sustained annual market growth within the US GLP-1 agonist market, clocking in at a 28% YOY increase in total prescriptions in 3Q18 – the highest such rate since ~4Q16 (slide 9 and reproduced below). As seen on the left, total quarterly prescriptions of GLP-1s in the US are now nearly 3 million, and we fully expect that number to continue to climb through the foreseeable future; other data shows that ~1.3 million Americans are currently filling a GLP-1 agonist prescription (these numbers align well). Nevertheless, two primary factors continue to offset Victoza’s growth trajectory: (i) fierce competition from Lilly’s Trulicity (once-weekly dulaglutide) and (ii) the recent rollout of Novo Nordisk’s own Ozempic (once-weekly semaglutide). For the first time, Victoza is no longer the market leader in terms of US GLP-1 volume share; Trulicity’s steady climb overtook Victoza in 3Q18 (slide 9 and reproduced below). Trulicity now holds 43% of total volume in the US, while Victoza claims 38%. However, the vast majority of this decline in Victoza’s volume share – which clearly hasn’t come at the expense of overall prescription volume for Victoza – can be attributed to Ozempic’s launch and Novo Nordisk’s shifting of salesforce priorities to this newer, more efficacious agent (more on this below, under Ozempic); of note, in 2Q18, both Victoza and Trulicity each held ~42% of US GLP-1 volume (slide 9). That said, Victoza’s share of new-to-brand prescription volume has continued to fade since Ozempic’s launch in 1Q18, dropping from ~41% in January 2018 to 25% in October 2018 (slide 8). Meanwhile, Ozempic now captures 20% of new-to-brand prescriptions and will likely build on this number in the coming quarters as launch progresses and access is more fully secured. We see Victoza’s strong quarter as an impressive feat in the context of these factors, and hope that this growth represents a sustainable broadening of access to the GLP-1 agonist class.  

    5. Ozempic Brings in $84 Million, Rising 177% Sequentially in Third Quarter on the Market; Confidence Grows as Management Increases 2018 Guidance from ~$160 Million to ~$240 Million

    Ozempic (once-weekly semaglutide) continued its strong rollout in 3Q18, soaring to $84 million (540 million DKK) in sales from $31 million (195 million DKK) in 2Q18 – a near tripling in sequential revenue (+177%). Since its launch near the start of 2018, Ozempic has increased its revenue from $11 million in 1Q18 (its first partial quarter on the market) to $31 million in 2Q18 to this 3Q18 mark of $84 million. Ozempic revenue now reflects 9% of Victoza’s quarterly sales, up from 3% in 2Q18, and we expect this fraction to increase steadily in coming quarters. In a significant positive development reflecting this performance, management amended its previous guidance to Ozempic sales of at least 1 billion DKK (~$160 million) for 2018; the new guidance is to at least 1.5 billion DKK (~$240 million) in 2018 revenue, a significant jump. To date, Ozempic has sold $126 million total but on its current trajectory should easily achieve this new guidance; continuing 3Q18’s sequential growth rate would give ~$143 million in 4Q18 sales, bringing the 2018 total to ~$267 million. We’re thrilled (but not very surprised) to see this enhanced confidence from management. For the sake of comparison, Victoza launched in February 2010 and brought in ~$420 million (2.3 billion DKK) during its first year on the market; of course, Victoza entered a less mature and competitive GLP-1 class.

    Management highlighted that Ozempic is now available in seven countries (US, Canada, Denmark, Switzerland, Ireland, Sweden, and Netherlands); the Danish launch was first, in mid-August. Sales from European markets only totaled $1 million (7 million DKK) in 3Q18, with the rest of revenue coming from North American markets where Ozempic was launched earlier. In many ways, this is positive news from an earnings perspective: As Ozempic uptake picks up and launch progresses in Europe, it should provide a major tailwind for the franchise in 4Q18 and years to come. We would have loved more details on how access in progressing  on a country-by-country level, as this is so critical to the performance of a drug in each individual European country. For the US, Novo Nordisk detailed that Ozempic has achieved unrestricted formulary access on more than two-thirds of commercial plans and Medicare Part D combined; in 2Q18, it reported access in these areas was “>60%” but no mention was made of unrestricted formulary access – we’re not certain how meaningful this is.

    • Ozempic now comprises 20% of Novo Nordisk’s new-to-brand prescriptions in the US, up from 15% in 2Q18 (see figure below). In terms of total US volume share of the GLP-1 class, Ozempic claims 5% of total prescriptions stateside. Launch in Canada has been quite robust as well, with Ozempic now totaling 46% of new-to-brand prescriptions there. In Denmark, where Ozempic launched just a few months ago (mid-August), new-to-brand prescriptions were an impressive 15%. We do note that in all of these markets, Ozempic’s increase in NBRx share has been directly coupled with a nearly-proportional decreases in share for Victoza (slide 8). Of course, this should be expected, especially in light of the previously outlined shift in marketing priorities toward Ozempic and away from Victoza. However, we also note that Ozempic’s market entry aligns with an increase in underlying GLP-1 agonist class growth (see Victoza above), so we do think the therapy is also helping to bring more patients into the GLP-1 class.

    • Management is clearly very optimistic and enthusiastic about Ozempic’s future. They repeatedly commented that Ozempic was one of the primary growth drivers in Novo Nordisk’s diabetes portfolio. By our calculation, Ozempic alone drove 21% of diabetes and obesity portfolio growth, as reported. Moreover, by our count, “Ozempic” was directly mentioned 35 times on today’s call – the most of any of Novo Nordisk’s products, more than doubling that of the next closest product (Victoza was mentioned 15 times, Tresiba 13, Saxenda nine, and Xultophy seven). To be sure, this elevated attention from management is absolutely deserved, as the combination of Ozempic’s best-in-class clinical profile (in terms of glucose-lowering and weight loss) along with its novelty on the market make it an attractive center of discussion as well as a substantial growth driver.  

    • An EMA variation application for inclusion of SUSTAIN-7 data on Ozempic’s European product label was accepted in 3Q18. As a reminder, SUSTAIN-7 compared Ozempic to Lilly’s Trulicity (dulaglutide) and demonstrated Ozempic’s superiority on both A1c lowering (~0.4% treatment difference) and weight loss (~5-7 lbs treatment difference). Excitingly, these results were consistent across baseline A1c subgroups. We hope to see this data eventually added to Ozempic’s US label as well. In the past, Novo Nordisk representatives have mentioned to us that FDA has granted special permission for representatives to discuss the study’s findings.

    6. Tresiba Bounces Back: 23% YOY, 11% Sequential Growth to $335 Million After Sluggish 2Q18; Relaunch in Germany Planned for December Following 2015 Withdrawal

    Tresiba returned to growth in 3Q18, rising 23% YOY (+24% operationally) to $335 million (2.2 billion DKK) from a base of $278 million (1.8 billion DKK) in 3Q17. Sequentially, revenue rose a healthy 11% from a base of $306 million (2.0 billion DKK) in 2Q18. This is encouraging growth to see following a mildly concerning performance in 2Q18, when Tresiba posted its first ever YOY decline (a substantial -11%), also rebounding 11% sequentially against a 7% sequential drop to $290 million (1.8 billion DKK) in 1Q18. Contributing to Tresiba’s upward trajectory this quarter was the continued rollout of a new DTC campaign highlighting Tresiba’s updated label based off of DEVOTE data indicating its hypoglycemia benefit when compared to Lantus. We imagine the ongoing penetration of these marketing efforts has contributed to Tresiba’s somewhat surprising performance within the US, despite the sustained presence of pricing pressures in this region. Indeed, Tresiba’s growth was positive across geographies, rising 26% YOY as reported (25% operationally) stateside to $227 million (1.5 billion DKK) from a base of $184 million (1.2 billion DKK) in 3Q17. US sales continue to make up the majority of Tresiba’s revenue, at 68% and up slightly from 64% in 2Q18. Outside of the US, Tresiba rose 17% YOY as reported (21% operationally) to $108 million (696 million DKK) from a base of $94 million (595 million DKK) in 3Q17. On this note, management highlighted that Tresiba is now available in 75 countries. Contributing to Tresiba’s positive quarter was continued volume gains within US markets; since the beginning of 2018, Tresiba has steadily accrued a five percentage point gain to a 15% volume share of the total US basal insulin market (slide 10). As of 3Q18, Tresiba’s US volume share remains above both Lilly/BI’s biosimilar Basaglar (~11%) and Sanofi’s next-gen Toujeo (~9%), the latter of which has struggled with formulary exclusions; Sanofi’s Lantus retains 39% of scripts. In terms of access, Tresiba remains at “above 80%” coverage for commercial and Medicare Part D plans; this remains unchanged from 2Q18. In spite of this volume growth, however, management noted that lower realized prices due to consistent and intense pricing pressures have continued to suppress Tresiba’s overall revenue growth.

    • Management announced that Tresiba will be relaunched in Germany in December 2018. Novo Nordisk had previously withdrawn Tresiba from German markets in 2015 following a series of pricing decisions by health insurance funds in the country that led to Tresiba being priced at the same level as human insulin. Notably, Germany’s IQWiG (Institute for Quality and Efficiency in Health Care) ruled in its August 2014 assessment of Tresiba that the insulin offered no added benefit over existing insulin options (we think this is certainly inaccurate, though the data available at the time may not have offered very strong support); these decisions usually result in a drug being priced at generic (or equivalent) level. Consequently, Novo Nordisk ceased distribution of Tresiba in Germany, explaining that the unfair pricing decision would undermine future R&D efforts. Now, with the emergence of data from the DEVOTE trial demonstrating a 40% risk reduction for severe hypoglycemia vs. standard of care Lantus, Novo Nordisk is hoping that further analyses from Germany’s cost-effectiveness authorities will lead to more favorable pricing for Tresiba upon reintroduction. Suffice to say, we’re glad to see Novo Nordisk aim to leverage DEVOTE data and Tresiba’s hypoglycemia label update (in both US and EU) into ensuring access for German patients.

    • Levemir sales fell 19% YOY (-19% operationally) to $398 million (2.6 billion DKK) from $500 million (3.2 billion DKK) in 3Q17. Sequentially, sales fell 15% against a tough comparison of 9% sequential growth to $474 million (3.0 billion DKK) in 2Q18. In terms of US volume share, Levemir has displayed a slight yet steady decline from ~25% of total prescriptions two years ago to a 3Q18 volume share of 22%. Accounting for Levemir and Tresiba, Novo Nordisk’s total share of the US basal insulin market is 36% by volume (slide 10), climbing from ~28% over the same time period.

    Tresiba Sales (1Q18-3Q18)

    7. Xultophy Brings in $69 Million, Continues Strong Growth >Doubling YOY and +16% Sequentially; Management Highlights European Volume Growth, Aims to Expand Market Share; NDA Submitted in Japan

    Revenue from fixed-ratio GLP-1/basal insulin combination Xultophy (insulin degludec/liraglutide) continued trending steadily upward, climbing 150% YOY to $69 million (DKK 442 million), though against an easy comparison of only $28 million in 3Q17. This also represents solid 16% sequential growth from $60 million in 2Q18. Similarly to its sole competitor in this class (Sanofi’s Soliqua) sequential changes in revenue for Xultophy – which are likely the more telling comparison given Xultophy’s recent launch – have been variable since US launch in 1Q17: +76% (2Q17), -2% (3Q17), +51% (4Q17), +26% (1Q18), +13% (2Q18), and +16% (3Q18). To be sure, some of the gradual decline in sequential growth rate comes as a result of Xultophy growing from a higher base, but we’re overall quite pleased by the growth Xultophy has demonstrated in the face of multiple significant barriers to uptake (prescribing, indication, reimbursement, and more). Not insignificant among these is that, in the past, Novo Nordisk has de-prioritized Xultophy to focus on building up the Tresiba and Victoza franchises, a strategy that was espoused by company reps in the exhibit hall at Diabetes UK in 2017. We’ve noticed this shifting in recent quarters, and based on the call today, we’re very encouraged that this no longer seems to be the case. Xultophy drove a sizable 10% of Novo Nordisk’s diabetes/obesity growth (as reported) while still comprising <2% of total portfolio sales, a testament to both the quality of Xultophy as a diabetes drug and the impact of what we perceive as increasing investment from Novo Nordisk in making the fixed-ratio combination a commercial success. Indeed, during the call, management labelled Xultophy as a key innovative product for Novo Nordisk and emphasized their focus on capturing greater market share in the future; they also noted that strong uptake of Xultophy, particularly in European markets where labels are less restrictive (and, in some countries, where reimbursement has been more successful), has helped offset decline in basal insulins. Management stated that they do not expect shifts (i.e. gains) in volumes to come from contracting changes, raising some question about how Novo Nordisk aims to driving greater uptake of Xultophy.

    Xultophy Sales (1Q17-3Q18)

    • Novo Nordisk has submitted an NDA for Xultophy in Japan (

      slide 15). This comes on the heels of positive phase 3a data from DUAL I and DUAL II, which enrolled Japanese patients. Given that the Japanese regulatory reviewal process takes ~12 months, we would expect a decision in 3Q19, and this approval could be a meaningful tailwind for the product given the size of the Japanese market. According to Novo Nordisk’s 3Q18 financial report (page 6), Xultophy has now been launched in 24 countries.

    • We still anticipate an FDA decision on the inclusion of data from

      LEADER (CV benefit with liraglutide) and DEVOTE (40% reduced risk of severe hypoglycemia vs. Sanofi’s Lantus) on Xultophy’s US label in 1Q19. EMA approved an equivalent update for Xultophy’s European label in 2Q18, but we’re less certain the US agency will be receptive to the request. In general, FDA has historically been more conservative when it comes to requests of this sort – though we also don’t underestimate Novo Nordisk’s ability to engage in productive conversations with the agency. In our view, a label update of this magnitude would solidify Xultophy as clinically superior to its only competitor, Sanofi’s Soliqua (insulin glargine/lixisenatide). Although our sense is that this view is already well-held by most thought leaders, based on comparisons of each therapy’s individual components (Victoza vs. Adlyxin, and Tresiba vs. Lantus), a label update would allow company reps to explicitly promote Xultophy’s benefits and give prescribers more ready access to scientific evidence supporting these. At the same time, we’re reluctant to compare the two products too extensively, because we believe both products (i) represent meaningful innovation in diabetes therapy and (ii) should be accessible to more patients. Of note, a five-pen box of Soliqua does cost ~$310 less than Xultophy, on average, according to a phone survey our team conducted of ten pharmacies in different locations around the US (though there were significant differences between both pharmacies and geographies), potentially making it the more cost-effective option – at least before considering rebates, discounts, and reimbursement.

    • As it stands, a multitude of barriers stand in the way of fixed-ratio combinations, despite their many benefits: (i) the class doesn’t have an established place in treatment algorithms or everyday clinical practice; (ii) some prescribers continue to view GLP-1 agonists as a “pre-insulin” therapy, making fixed combinations of the two seemingly illogical (according to Newcastle’s Prof. Philip Home); (iii) the US labels for both Soliqua and Xultophy currently require patients to already be on basal insulin or the specific GLP-1 included in the combo before starting the fixed-ratio injection – Dr. Vivian Fonseca advocated to change this at ADA 2018; and (iv) reimbursement. That said, fixed-ratio GLP-1/basal insulin combinations have so much to offer patients in terms of: (i) glucose-lowering; (ii) milder side-effect profiles (less hypoglycemia, potential weight loss with Xultophy, and less GI discomfort); and (iii) greater patient convenience/lower injection burden – this new DUAL VII analysis from EASD demonstrated fewer injections, fewer adjustments, and lower insulin dosing with Xultophy compared to basal-bolus therapy. To be sure, we desperately want to see more patients accessing these advanced products and are so excited by Novo Nordisk’s expanding commitment to driving Xultophy and the class upward.

    8. Mealtime Insulin: Fiasp Sales Grow 20% Sequentially to $26 Million with Increased European Penetration and Minor Estimated Gain in US; NovoLog Falls 12% YOY to $692 Million

    Next-gen mealtime insulin Fiasp (faster acting insulin aspart) posted $26 million (DKK 164 million) in revenue for 3Q18, rising 20% sequentially from $21 million (DKK 137 million) in 2Q18, when sales rose 65% sequentially from $14 million (<100 million DKK) in 1Q18. We see this growth as slightly disappointing, given that sales for the ultra-rapid-acting insulin were only first broken out of the “new-generation insulins” portfolio in 1Q18 (aside from once in 1Q17, somewhat randomly). US launch only occurred in February 2018, which we would’ve expected to offer a stronger boost to the young insulin franchise. However, Novo Nordisk has retroactively reported Fiasp revenue for YOY comparisons in 2018; by our calculations – subtracting 1H17 revenue (DKK 16 million) from that of the first nine months of 2017 (DKK 49 million) – 3Q17 sales of Fiasp were ~$5.2 million (DKK 33 million). As such, our rough estimate is that Fiasp ~quintupled YOY in 3Q18, albeit from a very, very low base. Moreover, for 3Q18, we estimate ~$10 million in US Fiasp sales: Novo Nordisk did not provide this breakdown by geography, so we took the difference of DKK 66 million between total US sales for rapid-acting insulin and reported US sales for NovoLog in the company’s financial report (page 27) as Fiasp revenue. Considering that Fiasp made ~$2.5 million in US sales in 1Q18 (the first quarter the product was on the US market, and for only two months at that) and ~$9 million in 2Q18 (all calculated using the same methodology), 3Q18 represents a very slight gain in US traction vs. 2Q18 but one in line with Fiasp’s overall growth. Per these estimates, the US market accounted for 40% of the Fiasp business in 3Q18, compared to 41% in 2Q18 and ~18% in 1Q18. In line with modest increases in US Fiasp sales, Novo Nordisk’s 3Q18 financial report (page 7) notes that insulin sales in Europe were driven in part by increased penetration of Fiasp across the region.

    Despite these relatively modest sales, Fiasp did contribute 6% of the growth in Novo Nordisk’s overall diabetes/obesity portfolio, by our calculation, while comprising <1% of total portfolio revenue. While we’re slightly disappointed by this third quarter performance (given significantly better growth in 2Q18), we acknowledge that Fiasp’s share of growth relative to its representation in Novo Nordisk’s portfolio is impressive, and we hope and expect to see substantial additional growth in coming quarters. Indeed, when Fiasp was launched in February we heard from SVP of Commercial Mr. David Moore that reimbursement would be built up slowly over 12 months, and our sense is that Novo Nordisk is slowly accumulating coverage before firing full-force on Fiasp promotion. Moreover, Fiasp is priced at parity to NovoLog in most major markets, including the US, which should make it an attractive option for patients and payers alike (i.e. faster onset/offset, more flexible dosing, less uncertainty around meals – for the same price). However, there certainly are conflicting ideas as to how heavily Novo Nordisk will prioritize Fiasp moving forward. Historically, Fiasp has only been mentioned in passing during earnings calls; however, management labelled Fiasp as a key brand today, highlighting its Japanese submission and progressive global launch (below). While some thought leaders have been critical that faster-acting aspart offers marginal advantages over NovoLog, others have expressed interest in evaluating Fiasp in closed loop systems, arguing that this is where the molecule’s faster PK/PD profile will really shine. To be sure, we are still very early on in Fiasp’s launch, particularly in the US, and it might be too early to predict exactly which direction Novo Nordisk will take Fiasp.

    • Fiasp progenitor NovoLog fell 12% YOY as reported (-11% operationally) to $692 million (DKK 4.4 billion) against a tough 3Q17 comparison of $798 million; this also represents a substantial 7% sequential decline from $782 million in 2Q18. When asked about this decline, management offered two key points for consideration: (i) NovoLog is one of the most stable franchises that Novo Nordisk has (as evidenced by the graph below); and (ii) the short-acting market, in general, is a very stable market from both a market share and competitive dynamics point of perspective (more on this below the graph). Moreover, 3Q18 revenue was impacted by a perfect storm of seasonal declines in the supply chain (both in the US and internationally) as well as a rebate adjustment from 2017 leading to lower realized prices of NovoLog. That said, Novo Nordisk cited a similar reason in its 2Q18 call (though only for the US), even though NovoLog sales rose 2% sequentially. To be sure, the serious pricing pressure dynamics of insulin are reflected in NovoLog sales by geography: North American revenue fell 19% YOY as reported (-21% operationally) to $352 million (DKK 2.3 billion) while international sales dropped a less severe 3% YOY (0% operationally) to $340 million (DKK 2.2 billion), driven by 23% and 24% operational increases in China and Latin America, respectively.

    NovoLog Sales (1Q12-3Q18)

    • Overall, Novo Nordisk’s rapid-acting insulin portfolio (Fiasp + NovoLog) fell 9% YOY as reported (9% operationally) and 6% sequentially to $718 million (DKK 4.6 million).

    • There was no mention of competition from Sanofi’s Admelog, which posted $30 million in 3Q18, the first-ever reported revenue for the first-ever biosimilar mealtime insulin (based on Lilly’s Humalog). This more or less reflects the general sense we get from other manufacturers in the rapid-acting insulin market: President of Lilly Diabetes and Lilly USA Mr. Enrique Conterno predicted in the company’s 2Q18 call that Admelog would likely have its biggest impact in the Medicaid channel but also maintained that Admelog would not pose a significant commercial threat. Perhaps the silence speaks to Novo Nordisk’s claims today that the short-acting market, in general, is quite stable from a market share and competitive dynamics point of view. Considering that Fiasp is priced at parity to NovoLog in most major markets, including the US, both Novo Nordisk’s and Lilly’s comments on NovoLog and Humalog would presumably extend to Fiasp as well. However, we do think Admelog will shake things up in the rapid-acting insulin segment over the next few years: If costs for Sanofi’s biosimilar are lower than the insulin analogs, it can presumably offer a better deal to PBMs and payers than Lilly and Novo Nordisk can on Humalog and NovoLog, below the “floor” they’re at now.

    • An NDA for Fiasp in Japan was submitted in September, supported by results from the Onset clinical trial program in Japan. Fiasp has now been launched in 24 countries and interestingly seems to be on a very similar launch timeline to Xultophy. Notably, NovoLog reached the 15-year limit on price protection in Japan in April of 2018, leading to significant mandatory price reductions. Management offered this as another reason for the franchise’s underperformance in 3Q18.

    9. Saxenda Continues Growth to $154 million, Up 54% YOY and 12% Sequentially; CV Safety Data from LEADER Added to US Label; Increased Focus on Obesity from Novo Nordisk

    Obesity therapy Saxenda (liraglutide 3.0 mg) surged another 54% YOY and 12% sequentially to $154 million in 3Q18, from $101 million in 3Q17 and $138 million in 2Q18. Since sales for the drug were first broken out in 1Q16, Saxenda has been a consistent bright spot in Novo Nordisk’s diabetes and obesity portfolio, and 3Q18 was no exception. Similarly to 2Q18, management attributed this positive performance to strong international uptake, primarily in Europe (104% YOY operational growth to $9 million), region AAMEO (164% operational growth to $17 million), Latin America (69% operational growth to $15 million), and Korea and Japan (new launch; growth undisclosed). Indeed, international growth for Saxenda in 3Q18 was impressive, giving $49 million (DKK 315 million) in sales to mark a 149% YOY surge and 13% sequential rise. This all said, management also identified Saxenda as a solid growth driver in North America, where revenue totaled $105 million (DKK 672 million), which translates to 33% YOY operational growth and a 3% sequential rise. Contributing to this US success, according to Novo Nordisk’s 3Q18 financial report (page 9), is broad commercial formulary access (though generally with prior authorization requirements). According to management, Novo Nordisk now holds 43% of the obesity market share by value; however, we would love to see an updated breakdown of Saxenda’s market share by volume. Most recently, Novo Nordisk’s 1Q18 presentation (slide 81) revealed that Saxenda holds only ~1%-2% of total obesity prescriptions  in the US (generics account for 82% of prescriptions but only 8% of value), despite having ~50% market share by value. This reminds us once again that Saxenda comes with a rather high list price. Not including generics, Novo Nordisk most recently revealed in 3Q16 that Saxenda held 18% of the US obesity market by volume, up from 16% in 2Q16. We suspect that this has increased significantly since, in some proportion to Saxenda’s ever-rising value share. Altogether, Saxenda revenue drove 13% of Novo Nordisk’s diabetes and obesity portfolio growth (as reported) by our calculations, despite representing only ~4% of the portfolio in terms of revenue. The obesity therapy has now been launched in 37 countries, up from 23 in 3Q17. We’ll be back later this month with a pooled analysis of major obesity medications. In the meantime, see our 2Q18 pooled analysis (Saxenda was the main driver of 9% YOY growth).

    Saxenda Sales (1Q16-3Q18)

    • In exciting news, FDA approved a label update for Saxenda, adding data from the LEADER CVOT reflecting CV safety of liraglutide at the lower dose investigated in a population with type 2 diabetes, in October. As a reminder, LEADER found a statistically significant 13% risk reduction on three-point MACE (CV death, non-fatal MI, and non-fatal stroke) with Victoza vs. placebo (HR=0.87, 95% CI: 0.78-0.97, p=0.01 for superiority). The updated US label will reflect CV safety rather than CV superiority, and, to our understanding, stipulate strongly that these findings were with a lower dose and only in people with type 2 diabetes. Nevertheless, given ongoing safety concerns over obesity pharmacotherapy as a whole, this is certainly a win for Novo Nordisk and patients alike. A similar update to Saxenda’s EU label includes the therapy’s significant reduction on three-point MACE and has already been approved. On a broader scale, Novo Nordisk is certainly getting its money’s worth from LEADER, which has also been garnered V indications on the US and EU labels for Victoza (liraglutide) as well as placement on the EU label for basal insulin/GLP-1 agonist fixed-ratio combination Xultophy (insulin degludec/liraglutide). A decision on the company’s application for an update to the US label for Xultophy is expected from FDA in 1Q19.

    • We expect Novo Nordisk to place a more explicit emphasis on obesity, pharmacotherapy, and Saxenda moving forward; EVP of Commercial Strategy & Corporate Affairs Ms. Camilla Sylvest identified obesity as one of Novo Nordisk’s four focus areas for the future (we’re unsure of the other three). As motivation, she reiterated that 650 million people currently suffer from obesity worldwide – and only 2% are being treated with pharmacotherapy. To greater penetrate that market, Ms. Sylvest identified three key points for Novo Nordisk to work on: (i) greater recognition of obesity as a disease, (ii) prescriber engagement, and (iii) patient drop-off from obesity therapy. In particular, initiatives are focused on (i) promoting recognition of obesity as a chronic disease, (ii) educating HCPs on obesity management, and (iii) promoting patient engagement with Saxenda through programs that support sustained weight loss. Noticeably avoided was any mention of the generally poor reimbursement for obesity therapies, though to our understanding, Novo Nordisk is also engaging with payers on this front as per its 1Q18 presentation (slide 81). We would also love to get an update on the SaxendaCare program, which is meant to support patients in comprehensive obesity management (lifestyle modification, social encouragement, etc.) and was unveiled in 3Q17. To be sure, we certainly applaud the work Novo Nordisk is doing to target major barriers to the use of obesity pharmacotherapy, and we also appreciate the company’s continued deep investment in this historically less-than-fertile area.

    Pipeline Highlights

    10. Two New Phase 1 Candidates Added to Pipeline: Novel Oral GLP-1 Agonist OG2023SC + Second PYY Molecule, PYY1875 (Joining Phase 1 PYY1562)

    We were happily surprised to see Novo Nordisk add two phase 1 molecules to its diabetes/obesity pipeline, including (i) novel oral GLP-1 agonist OG2023SC (NN9023) and (ii) a second PYY molecule (PYY1875/NN9775) for obesity.

    • OG2023SC (“2023” for short) is in an already-recruiting phase 1 study (n=72) expected to complete January 2019 and assessing safety, tolerability, and pharmacokinetics. According to CSO Dr. Mads Thomsen, this next-gen oral GLP-1 agonist comes from the same series of compounds that led to semaglutide and presents two exciting possibilities: It could either be dosed to give higher efficacy than oral semaglutide, or efficacy could match oral semaglutide but come at a lower price (i.e. lower COGS through greater bioavailability). Interestingly, Dr. Thomsen noted that the goal with 2023 is not necessarily to exhibit greater efficacy vs. semaglutide: “It has not really been possible to identify any GLP-1 agonists that [are better than semaglutide].” Rather, 2023 is optimized for better oral exposure (it also uses a SNAC carrier and tablet formulation); this means similar bodily exposure as with oral semaglutide can be achieved at a lower dose, or greater efficacy can be achieved with a similar dosing level as oral semaglutide. Currently, Novo Nordisk is considering development of 2023 in type 2 diabetes, obesity, and NASH, and Dr. Thomsen’s comments imply the latter two would require higher dosing and efficacy vs. type 2 diabetes (a higher-efficacy type 2 drug is also a possibility). For our part, we’re very excited at the possibility of a cheaper oral GLP-1 agonist: If 2023 were developed to minimize COGS with a similar level of efficacy as oral semaglutide, it would be a huge win for patients and could even translate to more affordable generics far, far down line. Phase 1 data should be available in the spring of 2019.

      • A phase 1 study (n=104) of different oral semaglutide tablet formulations is also set to complete this month (November 2018) and read out in the spring of 2019. Dr. Thomsen referenced this trial in relation to 2023’s phase 1 trial; presumably, Novo Nordisk is looking for ways to improve bioavailability of oral semaglutide to decrease manufacturing and patient costs. If a different, more affordable tablet formulation of oral semaglutide proved successful, the company would ostensibly be more eager to pursue the higher-efficacy pathway for the 2023 molecule.

    • We were similarly, pleasantly surprised to see a second PYY molecule (PYY1875/NN9775) enter the pipeline; a phase 1 (n=88) study is currently recruiting and set to complete September 2019. As with Novo Nordisk’s first PYY molecule, PYY1562 (NN9747), this one is being investigated both as monotherapy and in combination with semaglutide, in people with overweight or obesity. As background, a similar phase 1 study for PYY1562 was completed in February 2017, but to our knowledge the candidate has been neither advanced nor terminated; it still remains on Novo Nordisk’s pipeline page. Very interestingly, Dr. Thomas detailed during Q&A that the mechanism of PYY seems to be similar to GIP in that its action is dependent on the presence of GLP-1; the same way GIP’s glucose-lowering benefits seem to require co-administration with GLP-1 agonism, such are PYY’s weight loss benefits. More specifically, he postulated an interaction at the level of the arcuate nucleus, part of the hypothalamus responsible for neuroendocrine functions including those that control feeding. Due to this, he says, the PYY molecule needs to be optimized for penetration into the hypothalamus. As such, our best guess is that Novo Nordisk is weighing these two PYY molecules against one another, but it doesn’t seem the company has concluded one is better than the other.

      • Also in Novo Nordisk’s robust obesity pipeline is an amylin analog, which management has expressed particular excitement about in the past (it will advance to phase 2 in 2019). More data on this, as well as the phase 1 dual and tri-agonists, is expected next year. Of course, high-dose (2.4 mg) injectable semaglutide also remains in phase 3 for obesity and promises to raise the bar for all obesity pharmacotherapy. We continue to be impressed by the depth and breadth of Novo Nordisk’s investment in obesity.

    11. Semaglutide Updates: Attention Turns to PIONEER 6 CVOT as Phase 3 Program for Oral Semaglutide Wraps Up Ahead of 2019 Filing; Potential for High-Dose Ozempic to Compete with Lilly Dual Agonist?

    As the phase 3 PIONEER program for oral semaglutide comes to a close, anticipation for the first-ever oral GLP-1 agonist continues to build; during prepared remarks, Dr. Thomsen presented a very useful summary of results so far for the 14 mg dose of oral semaglutide (below) demonstrating A1c lowering from 1.1% to 1.8% and weight loss of ~2.2 to ~11 lbs. The continued emphasis on 14 mg reinforced our understanding that Novo Nordisk is most focused on this dose, though, of course, these are also the most impressive outcomes to present on an earnings call; perhaps the bigger question is whether the company will seek to commercialize the lowest 3 mg dose. During 3Q18 specifically, three more PIONEER studies read out: PIONEER 5, PIONEER 8, and PIONEER 10; we now stand in eager anticipation of PIONEER 9 (vs. Victoza in Japanese patients) and PIONEER 6 (safety CVOT) results. During prepared remarks, Dr. Thomsen dedicated nearly 800 words to oral semaglutide and PIONEER. In particular, he emphasized that data from PIONEER 8, in patients with longstanding (15 years) diabetes and already on insulin, are “unprecedented” for such a trial population – we agree that the results are very impressive. Further, he reinforced recent changes to the company’s plans for securing a CV indication for both injectable and oral semaglutide: As announced during the company’s 2Q18 update, FDA discussions have led Novo Nordisk to change its intended superiority-powered SOUL CVOT for injectable semaglutide into a CVOT for oral semaglutide. Because SUSTAIN 6 has given tentative evidence of Ozempic’s CV benefit, another CVOT confirming benefit with oral semaglutide plus a bridging study between the two formulations would support indications for both products. That said, if the PIONEER 6 safety CVOT set to read out by the end of 2018 managed to demonstrate superiority for oral semaglutide (despite not being powered to do so), FDA would apparently be open to granting indications based off of the combined SUSTAIN 6 and PIONEER 6 data.

    • During Q&A, Ms. Camilla Sylvest (EVP, Commercial Strategy & Corporate Affairs) asserted that new dual agonist data from Lilly has no impact on oral semaglutide’s strategic positioning. As she explained, oral semaglutide stands to be positioned as the best oral diabetes therapy on the market, emphasizing that 65% of patients with diabetes are treated with oral medications compared to 6% on injectable GLP-1s (of course, the latter fact is highly unfortunate). That said, the point stands that oral semaglutide is fundamentally different from Lilly’s dual agonist (tirzepatide), just as it is from other injectable GLP-1 agonists, and both candidates are poised to fill different needs for patients while also expanding and encouraging uptake of GLP-1- and incretin-based therapies. It’s also worth noting that oral semaglutide’s regulatory filing is anticipated in 2019 (2020 launch), compared to a 2022 submission for tirzepatide.

    • Commenting further on Lilly’s dual agonist, Dr. Thomsen argued that high-dose Ozempic would enable Novo Nordisk to compete with greater glucose-lowering and weight loss efficacy from tirzepatide. A higher 2.4 mg dose of injectable semaglutide is currently in phase 3 for obesity in the four-trial STEP program, which includes a trial of patients with type 2 diabetes and is accompanied by the SELECT CVOT. Dr. Thomsen specifically referenced STEP 2, the trial in type 2 diabetes, as well as “other relevant clinical data” that could support a dose upgrade on the diabetes label; STEP 2 is expected to complete in May 2020. In our opinion, the readout of phase 2b data for Lilly’s dual agonist at EASD 2018 put significant pressure on Novo Nordisk: The company just launched Ozempic at the start of 2018, bringing a truly groundbreaking GLP-1 agonist onto the market. We appreciate the company’s continued drive to push forward on all fronts, as well as CEO Mr. Lars Jørgensen’s welcoming of the competition: “It’s good for the patients, it’s good for the market, and we are confident in both the short, medium, and long term competitiveness of Novo Nordisk.” Boy, is it ever!

    12. Next-Gen Glucagon HypoPen 1513 Discontinued in Phase 1 Due to Suboptimal PK/PD Profile

    In disappointing news, Novo Nordisk has discontinued its phase 1 next-generation glucagon candidate, HypoPen 1513 (NN9513). This candidate was only added to the pipeline in 1Q18. According to ClinicalTrials.gov, a phase 1 study (n=36) completed in May 2018; however, according to the company press release, this first in-human trial was stopped in August 2018 due to a “suboptimal PK/PD profile.” It’s not clear whether this indicates lower efficacy vs. current reconstitution kits, but we imagine this is the case given that ongoing innovation in glucagon targets better administration methods more so than improvements in PK/PD – candidates so far have aimed to demonstrate non-inferior efficacy, not superiority, to reconstitution kits. To be sure, it’s disappointing to see a discontinuation in a treatment area in such dire need of improvement: Current glucagon reconstitution kits are time-consuming and unwieldy, a far less-than-ideal treatment for severe hypoglycemia, and too few patients taking mealtime insulin (with both type 1 and type 2) currently fill a glucagon prescription. That being said, encouraging improvements are on the near-term horizon. FDA is currently reviewing Xeris’ Glucagon Rescue Pen (liquid-stable glucagon autoinjector) with a decision expected by June 2019, and Lilly has also filed its nasal glucagon with both FDA and EMA (decision expected ~2Q19). Also in the glucagon competitive landscape, Zealand’s phase 3, liquid-stable dasiglucagon is expected to reach the registration phase in 2H19. These three candidates could all be on the market in the 2019-2020 timeframe, and we’re thrilled that such robust innovation will reach patients soon.

    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 3Q18.

    Candidate

    Indication

    Class/Mechanism of Action

    Phase

    Timeline/Notes

    Oral semaglutide

    Type 2 diabetes

    Once-daily oral GLP-1 agonist

    Phase 3

    PIONEER 1 presented at ADA 2018; Topline data from PIONEER 2, PIONEER 3, PIONEER 4, PIONEER 5, PIONEER 7, PIONEER 8, PIONEER 10; Remaining two phase 3 studies to report in 2018; Phase 2 data presented at EASD 2016 and published in JAMA

    Injectable semaglutide

    Obesity, NASH (phase 2)

    GLP-1 agonist

    Phase 3

    Phase 3a STEP program (four trials) initiated 2Q18; SELECT CVOT in obesity launched 3Q18; Positive phase 2 data in obesity in 2Q17; Phase 2 NASH trial ongoing (expected to complete April 2020)

    NN9828

    Type 1 diabetes (newly-diagnosed)

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

    Phase 2

    Phase 2 trial expected to complete March 2019; FDA Orphan Drug Designation in January 2017

    LAI287 (NN1436)

    Type 1 and type 2 diabetes

    Once-weekly injectable basal insulin

    Phase 2

    Phase 2 trial slated to start by end of 2018, following positive phase 1 results

    HypoPen 1513 (NN9513)

    Type 1 and type 2 diabetes

    Next-generation glucagon

    Discontinued following phase 1

    Discontinued 3Q18 after being added to pipeline in 1Q18; Phase 1 study completed May 2018

    OG2023SC

    Undisclosed (obesity, NASH, type 2 possible)

    Next-generation oral GLP-1 agonist

    Phase 1

    Announced during 3Q18 update; Potential for lower dosing or higher efficacy vs. semaglutide

    AM833 (NN9838)

    Obesity

    Long-acting amylin analog

    Phase 1

    Phase 2 trial slated to start in early 2019; Phase 1 readout (from study completed in January 2018) expected 2Q18 (not yet provided); Previous phase 1 trial completed March 2016

    PYY1875 (NN9775)

    Obesity

    PYY; Under development as monotherapy and in combination with semaglutide

    Phase 1

    Announced with phase 1 trial in 3Q18 update

    PYY1562 (NN9747)

    Obesity

    PYY; Under development as monotherapy and in combination with semaglutide

    Phase 1

    Phase 1 trial completed February 2017; Advanced into phase 1 in 3Q15

    FGF21 Obesity (NN9499)

    Obesity

    FGF21 analog

    Phase 1

     

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

    GG-co-agonist (NN9277)

    Obesity

    GLP-1/glucagon dual agonist

    Phase 1

    New phase 1 study posted to ClinicalTrials.gov in 4Q17, expected to complete December 2018; Previous phase 1 trial completed September 2017

    Tri-agonist 1706 (NN9423)

    Obesity

    GLP-1/GIP/glucagon tri-agonist

    Phase 1

    Phase 1 trial completed August 2017; Second phase 1 study currently recruiting, expected completion September 2019; Added to pipeline in 1Q17

    Commercial Dynamics

    Q: On the short-acting insulin market, could we have an update on the dynamic of the market in the US and in Europe, as we see some decline?

    Mr. Lars Jørgensen (CEO): First of all, when you look at our NovoRapid, NovoLog, or short-acting franchise, it is actually one of the most stable franchises we have. So the deviations we see in this quarter are linked through to the timing of the rebate adjustments we did last year where we had a reduction or a correction in the latter part of the year. Then also, there is seasonality in the supply chain, both in the US and IO. So, we do not see any underlying issues in the short-acting category, which is a quite stable market from a market share and competitive dynamics point-of-view.

    Q: In the past you've noted GLP-1 pricing is limited versus the insulins. Now, you're through your 2019 contracting. Have you seen any significant change in this dynamic given the GLP-1s are now becoming a much bigger part of treatment?

    Mr. Jørgensen: On GLP-1 pricing, we see an unchanged competitive situation. I think it's really important to underline that we see a very strong market growth of some 25%, and we are growing on par with the market. So, we remain very confident and optimistic about the future of our GLP-1 business.

    Q: Lars, you made comments in Danish media that you don’t see competition on the insulin side increasing that much and potentially also that we should revise our most bearish expectations around where pricing is going. Could you elaborate on that, also after we saw Merck/Samsung not go for the basal insulin biosimilar?

    Mr. Jørgensen: I think it's important to operate with different scenarios for how the future pricing environment can move forward, and then look at what are the triggers for these scenarios to come into play. And if you look at the downtime scenario, that's one where one or more additional biosimilars come to market and then kind of reopen other contracts and you get another tough rebating round. With Merck/Samsung pulling out, I do not obviously know their calculations, but I would imagine that that's based on a commercial assessment that right now there is a situation where we are at a rebating level and a contracting composition across the players that make it difficult to come in and succeed commercially, which obviously means that I think that scenario becomes less likely – it’s the scenario where you say that, okay, we have reached rebate levels that are low. And if you have to unlock some of these contracts and move patients across, there is a risk associated with that because if you don't manage the volumes, the financials do not add up. So, I'd just say that since our last discussion a quarter ago, there's been one change that I think has made the likelihood of the low end less likely: One of the contenders in that scenario has pulled out. I'm not giving any guarantees, I'm just trying to say that it's important to operate with different scenarios and then look at what is the relative likelihood across those scenarios. So, I'm optimistic about the price environment going forward in the US basal category.

    Q: You do have very strong traction in obesity. Do you have any considerations around starting a more active promotion, DTC campaigning, et cetera, or do you still see that insurance coverage is too low in the US, for example?

    Ms. Camilla Sylvest (EVP, Commercial Strategy & Corporate Affairs): Today we have 650 million people suffering from obesity and as you know only 2% of those are being treated. With the pipeline that we have in obesity, it is clear that it's going to be one of our focus areas for the future. And we have just recently looked at some of the barriers to obesity treatment. A big part of that has to do with recognizing this as a disease, so that's clearly something that we will be working on going forward. A second driver is the number of physicians that are actually able to treat this disease, which is an initiative we have also taken on in a number of countries. And then finally, we also noticed that because obesity is not recognized as a chronic disease, we do see that patients will drop off treatment relatively early after having initiated the treatment. So, we are looking at how we can work with patient support programs that will support the patient to see a continuous weight loss. We're expecting that this is a chronic disease. So those are some of the elements we are working on and you will see us do more investments in this area, but hopefully also more returns.

    Q: We've seen some losses with some of your competitors in the Medicare area in terms of their coverage on lives. Yours is, I think, broadly the same. So, what sort of volume share gains do you think you can get a hold of in 2019?

    Mr. Jørgensen: In terms of overall changes next year, we see overall an unchanged access environment, so our focus is on winning market shares with Tresiba and Xultophy, and obviously Ozempic. So, we don't see a significant, say, shift in volumes coming from contracting, but we are quite confident that we can continue our strong commercial execution based on these key products.

    Q: As you think about the strategic positioning for oral semaglutide, can you help us think about how the Lilly data changes where you think oral semaglutide might play longer term?

    Ms. Sylvest: Oral semaglutide has the potential to be positioned as the best OAD in the market and we have read out eight PIONEER trials now that have shown very consistent data. So, we need to remember that 65% of patients in the diabetes market are treated by tablets. There is, of course, a potential for oral semaglutide to move into this particular space – whereas just around 6% are treated on injectable GLP-1s. So, there is a big potential for oral semaglutide outside the injectable space as well.

    Q: The GLP-1 agonist class today has about close to 5% of the volumes in the US. Does Novo Nordisk see a limit to the penetration of the class longer term?

    Mr. Jørgensen: It's not something we have, say, a set view on, but it's clear when you look at the profile of the GLP-1s and what they do to patients that this is a very attractive treatment to be on. We see strong growth currently. So, for the short term, we believe this dynamic will continue. But we'll not give you an answer for how big it will eventually be. Time will tell.

    Q: Victoza in Q3 in China delivered 190% local currency growth. How much of this is changes in the channel and how much is underlying demand for Victoza?

    Mr. Mike Doustdar (EVP, International Operations): We are very happy with the Chinese Victoza performance throughout the year. You should probably not get too hooked on the quarterly numbers so much. If you take a look at the first nine months, the growth has been 89% and spot-on to our own projections and expectations. And that's what you should basically expect. I think the opportunity is high. You should note that the GLP-1 market in China is relatively small compared to the rest of the world. So, we have a lot of opportunity and we have organized ourselves and made some large investments in terms of sales force. So, we do have high expectations. And so far, the first nine months have lived up to that.

    Pipeline

    Q: On the next generation oral GLP-1, could you share with us what's your goal, what you expect from this product, and how you will differentiate this drug versus oral semaglutide?

    Dr. Mads Thomsen (CSO): Yes. So, the analogue OG2023SC is based on the original research on the series of compounds that led to semaglutide not supposed to exhibit great efficacy per-se than sema because it's not really been possible to identify any GLP-1s that do so. However, it's been optimized for oral exposure. That basically means that you [indiscernible] (28:28) or lower oral dosing level achieve the same degree of exposure for body or alternatively, you can go to the same doses with oral sema and achieve a higher degree of exposure, and hence, the higher degree of efficacy. So, what analogue OG2023SC enables is one of two things, either higher efficacy, implying that it could be developed for obesity, could be developed for NASH, could be developed for high efficacy in type 2 diabetes, or you can match oral sema, as we know it today, and that would lead to a reduction in the cost of goods sold. And all of that we'll know a lot more about in the next spring, when we report the data, both from this trial and from the second generation oral semaglutide tablet formulation, they're reporting approximately at the same time

    Q: Could you provide your perspective on the recent Lilly GIP/GLP-1 data and any plans you might have for your dual and tri-agonists?

    Mr. Jørgensen: Let me start by giving an overall strategic perspective. First of all, I think what drives the value of a segment is continued innovation, and we have seen that until now, each and every time we have seen a new launch of an efficacious GLP-1 agent, we have seen larger market growth. We think that now with our launch of Ozempic as well. So, looking ahead I welcome that Lilly has also made a bet on innovation. There's still some time to go before they can enter the market, and in that period, we have ample of time to establish Ozempic as a new golden standard, and we have opportunity to hopefully also launch oral semaglutide. So, all value of the market will be benefiting from two companies competing with similar tactics and, say, the short to medium-term tactics still favor Novo Nordisk. Then we are quite confident that we can also, in terms of our next generation product, do something that's competitive vis-à-vis Lilly.

    Dr. Thomsen: The first and most obvious thing that's already ongoing is the emergence of a high dose Ozempic, of course, driven by STEP 2 and the other relevant clinical data that may be needed for such a dose upgrade vis-à vis the diabetes label. That would enable Ozempic to remain unbeaten even in the advent of the dual agonist from Eli Lilly, we believe. Then you also mentioned that we have, in multiple dosing clinical trials, both the triple agonist that targets the GIP, the glucagon, and the GLP-1 receptors simultaneously, and also a dual agonist known as 1177. You also correctly alluded to the fact that, driven by the acquisition of the Calibrium and MB2 company with Richard DiMarchi, we of course have access to numerous pharmacological tools ready to go, whether they'd be GIP compounds, dual agonist, or triple agonist and whether they'd be for fixed dose combination or for chimeric or hybrid molecule formation. All of that is, of course, in the pipeline and these are things that we analyze for the long haul. But for the short term, high dose Ozempic together with good success on the oral semaglutide and existing Ozempic is a clear way forward for us.

    Mr. Jørgensen: So in summary, we welcome continued competition. It's good for the patients, it's good for the market, and we are confident in both the short, medium and long-term competitiveness of Novo Nordisk in this.

    Q: Just going back to the high dose Ozempic, when looking at the phase 2 data with higher doses in patients with diabetes, can you give us your perspective on whether you will see higher HbA1c reductions? I think we obviously can think that the weight will be substantially higher when you increase Ozempic doses to higher levels. But there seemed to be some plateauing of the HbA1c drops in the phase 2 data.

    Dr. Thomsen: If you are referring to the only full dataset that we have across the dose response relationship for semaglutide in the injectable version, that is indeed true. The Lancet paper that came out a few months ago kind of compiles all the data that we have from phase 2. Now, do bear in mind that that was an obesity trial in close to 1,000 patients treated for about a year. And they were either totally non-diabetic or only dysglycemic, i.e. having a pre-diabetes defined by the hemoglobin A1c level being between 5.7% and 6.4%. This also means that it's very difficult to make any estimations on the A1c effects of semaglutide in the nondiabetic population. But what I can tell you is that we have explored, using HOMA-B for beta cell function and HOMA-IR for insulin resistance assessment, that as you hit the 90-plus percent efficacy level on the dose response curve for beta cell activation, probably at levels around the 1-milligram semaglutide dose, you are in a different situation when it comes to body weight, where you have not even leveled out at 2.4 milligrams because of the excellent penetration of semaglutide into the brain. That also means that the HOMA-IR, the insulin resistance measures, improve with the higher doses of semaglutide. And with improved insulin sensitivity, there's a secondary effect on the beta cell in that each insulin molecule works better, and you get a secondary effect on hemoglobin A1c. This you cannot see in a pre-diabetic population. There you have to go into an overtly type 2 diabetic population. And that's what we're doing now. And I would actually expect to see a rather significant secondary effect on A1c, despite the dose response curve being almost saturated for the beta cell. It's secondary to the improved insulin sensitivity that is relatively unique to semaglutide. We did not see it for liraglutide and I've not seen it for dulaglutide.

    Q: Lilly is very aggressively communicating that they think they can show data taking the discontinuations down well into the single digits. Given what you know about the PK/PD of GIP/GLP-1 and what the dual agonism does in the pancreas, how likely of a scenario do you think is it that somebody can get discontinuations into a range that is below what we've seen with GLP-1s across the board so far?

    Dr. Thomsen: To be honest, it very difficult for me to speculate on. I would say though that there is the notion that GIP and GLP-1 do each, in their own rights, have the ability to promote some degree of nausea by mechanisms that seemed to be not totally overlapping. That is, one plus one might equal two – at least that's what we've seen. We also saw that in the MAR709 trial. So, in order to go to a low-single digit discontinuation rate with such a high degree of efficacy, you'd have to have a very, very subtle escalation – dose escalation over many, many months, I would suggest. But I don't really have any comments there. You should trust the Lilly colleagues in their predictions, I guess.

    Q: What did you see in the original PYY product that gave you confidence in moving another into the clinic? And when will we see more data from the early stage pipeline, in particular the Amylin analogue, the tri-agonist, and even the dual GLP-1/glucagon agonist?

    Dr. Thomsen: On PYY, there is this interesting notion that it is a standalone therapy. The amylin analog, AM833, has shown weight reduction up to 1% per week for a total of seven weeks, meaning 7% weight loss in seven weeks in human beings, which is just relatively amazing. But if you look at PYY, this is not the case. PYY seems to behave a little bit like GIP does in the context of type 2 diabetes, where GIP only works in the presence of GLP-1. The same may well be the case for PYY in the case of weight loss: There is an interaction probably at the level of the arcuate nucleus between PYY and GLP-1. And that's why we need to optimize the PYY for penetration into the hypothalamus, then there is a good chance of really exciting weight loss profiles in humans – at least if they are to behave as the rodents that we've tested. In terms of when we get data from the early portfolio, this is the last meeting we're having this year because we're in Q3. So, I guess my answer would be next year.

    Additional Questions

    Q: A restructuring program has happened. Could you provide any context on what the annualized savings from that would be, and in the context of the 4% Part D EBIT headwind into next year?

    Mr. Karsten Knudsen (EVP & CFO): With the restructurings, what we've been out saying is that in terms of layoffs, we are looking at 1,300 employees by end of year, of which the majority has taken place as of now. And the cost included in our third quarter results is DKK 600 million ($93 million), and the total cost related to the layoffs is contained in our guidance for the full year. In terms of impacts on 2019, as we have previously announced, our guidance for 2019 will be issued on February 1. So, we are not going to provide any more detailed guidance on 2019 at this point in time.

    Q: Can you share your thoughts on how the recent guideline changes from both the ADA and the EASD shape your outlook for the GLP-1 business, especially as it relates to the non-US markets?

    Dr. Thomsen: Now, with the adoption of the final guidelines, we're actually seeing two very prominent drug classes right up there in the pull position after metformin, of course. And that is obviously the GLP-1 agonists and it's also the SGLT2 inhibitors. In terms of atherosclerosis and CVD in general, they single out GLP-1 and SGLT2 with an emphasis on GLP-1 for atherosclerotic cardiovascular disease and, there, the rank order is actually Victoza above Ozempic above Bydureon, and no others mentioned. And that's just based on the burden of evidence and how robust the data is. That's good news for both of our GLP-1 agonists. And as you know, ex-US, we already have all the wonderful SUSTAIN 6 data in the label for Ozempic, so that can be adopted by the colleagues in my business area right away. On the downside, there was a downgrade on the renal indication, I guess because of other excellent kidney data coming out in the SGLT-2 class. And, finally, I think for weight concerns, they explicitly mention again GLP-1 and alternatively SGLT-2. There they actually rank order Ozempic above Victoza, above Trulicity. So I think overall this is really good news for patients and it's also really good news for the Novo Nordisk GLP-1 portfolio.

     

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