Memorandum

Novo Nordisk 3Q13 – Diabetes Care revenue up 3%; Victoza/Lyxumia head-to-head trial underway; Tresiba CVOT initiated; FIAsp phase 3 initiated – November 6, 2013

Executive Highlights

  • Global Diabetes Care revenue totaled DKK 16.0 billion ($2.8 billion), up 3% from 3Q12 and down 4% sequentially, as reported. Modern insulins increased 6% as reported.
  • Victoza sales rose 14% to DKK 2.8 billion ($510 million); the company has initiated a phase 4 head-to-head trial comparing Victoza and Sanofi’s Lyxumia.
  • Tresiba’s cardiovascular outcomes trial (DEVOTE) initiated in October; “Onset” phase 3 program for ultra-rapid-acting insulin FIAsp initiated in August.

Novo Nordisk reported 3Q13 financial results on October 31 in a call led by CEO Lars Sørensen. Year-over-year, Global Diabetes Care revenue rose 3% as reported (10% in local currencies) to DKK 16.0 billion ($2.8 billion), and fell 4% sequentially – management stressed that 3Q13 reported results appeared weaker than usual due to currency headwinds experienced throughout 2013 that intensified in 3Q13. Novo Nordisk also faced a number of other challenges in 3Q13 including increased rebates in the US to cover the Medicare Part D “donut hole,” the genericization of Prandin, and increased costs associated with what was a potential US Tresiba launch that did not occur as a result of the controversial FDA decision in early 2013. Nonetheless, Novo Nordisk still holds an industry-leading 27% value share of the global diabetes care market, flat from 2Q13 and up from 25% in 3Q12. Global sales of Novo Nordisk’s modern insulins (NovoLog, NovoMix, Levemir, and Tresiba) contributed 59% of the growth in 3Q13; modern insulins rose 6% as reported (13% in local currencies) to DKK 9.4 billion ($1.7 billion), driven by North America, China, International Operations, and (product-wise) by a strong quarter for Levemir (on a slightly easier comparison). Tresiba (insulin degludec) sales were not broken out and remain “modest,” likely due in part to the company’s aggressive pricing strategy; notably, management suggested during Q&A that the high premium it is commanding in Europe is somewhat political in nature, arguing that Europe must share the burden of funding innovation with the US. We applaud this move and also note that even if modest, since sales are incremental, they certainly contributed to growth for modern insulins. Victoza (liraglutide) supplied 38% of Diabetes Care growth in 3Q13; this is down from 60+% in 2011, and up from just over 30% in 2012. Worldwide Victoza sales rose 14% as reported (20% in local currencies) to DKK 2.8 billion ($510 million), with a challenging comparison against 62% growth in 3Q12. Novo Nordisk’s value share of the GLP-1 market rose from 66% in 3Q12 to 70% in 3Q13. Notably, the company has initiated a phase 4 head-to-head trial comparing Victoza to Sanofi’s Lyxumia (lixisenatide), and appears confident that Victoza will prove superiority by a margin of at least 0.3% A1c. We hope the trial will use CGM so that “time in range” differences can be calculated; the A1c difference is necessary but not sufficient, in our view, to compare the two drugs.

Novo Nordisk had a great deal of pipeline news in 3Q13. Management announced that Tresiba’s cardiovascular outcomes trial (mandated by the US FDA for approval) enrolled its first patient in October. The trial is called DEVOTE, and, as previously discussed, management expects to be able to use interim data from the trial in two to three years to re-submit Tresiba in the US. The use of interim CVOT data has become quite controversial given that unblinding of results at an FDA Advisory Committee can lead to a host of trial integrity issues (see below for details) that were not assessed in 2008 at the time the cardiovascular guidance was written. On the ultra-rapid-acting insulin front, Novo Nordisk’s FIAsp (NN1218, a faster-acting insulin aspart), initiated its first phase 3 trial in August 2013. Three trials are currently underway (two investigating FIAsp compared to aspart in basal-bolus therapy and one investigating intensification from basal to basal-bolus using FIAsp) with a fourth trial (investigating FIAsp’s pump compatibility) expected to begin by the end of 2013. Given that rapidity of insulin action has been a major barrier to the development of closed-loop systems as well as in diabetes management more broadly speaking, we are hopeful that FIAsp could help accelerate these efforts. The status of other pipeline candidates hasn’t changed since our 2Q13 report – management reaffirmed in Q&A that it expects to file liraglutide 3 mg for obesity by the end of 2013 with hopes of launching in 2015. The once-weekly injectable GLP-1 agonist semaglutide remains in phase 3, and its three of its four oral GLP-1 agents remain in phase 1 – the one oral GLP-1 that was scheduled to move into phase 2 by year-end (OG217SC/NN9924) now has a phase 2 trial registered on ClinicalTrials.gov indicating that phase 2 will begin in December. All three oral insulin candidates remain in phase 1, and the novel long-acting insulin LAI287 with the potential for once-weekly dosing completed a phase 1 trial in July. 

Financial Updates — Summary

  • Worldwide Diabetes Care revenue in 3Q13 totaled DKK 16.0 billion ($2.8 billion), up 3% as reported (10% in local currencies) from 3Q12. In addition to coming against a fairly challenging comparison to 3Q12 when YOY Diabetes Care growth reached 23%, the company faced numerous challenges in 3Q13 – depreciation of the Japanese Yen and USD against the DKK, the genericization of Prandin, and rebate adjustments. Keeping with previous quarters, growth was driven by modern insulins and Victoza (liraglutide), which accounted for 59% and 38% of Novo Nordisk 3Q13 YOY Diabetes Care growth, respectively. Geographically, operational growth from 3Q12 was strongest in North America (up 15%) and International Operations (up 11%), followed by Region China (up 6%) and Europe (up 4%). Growth in China was negatively affected by an inventory change for NovoNorm; adjusting for this factor, underlying growth in China was around 15% according to management, consistent with previous years and still quite strong, particularly considering the expanding base. Japan and Korea saw a Diabetes Care sales decline of 2% operationally, with the depreciation of the Yen driving a 26% reported decrease. Sequentially, sales shrunk slightly across the board — this was particularly notable given that the sequential comparison was not very challenging (2Q13 sales for the Diabetes Care portfolio fell 4% sequentially). For the fourth time, the company reported Diabetes Care results by region (see table below). The US performed the best; this is a bit of a worry considering that there are concerns to what degree pricing can be sustained in the US.

Table 1: Diabetes Care revenue by region in 3Q13

Diabetes Care Market

3Q13 Revenue       (in billions)

Operational/Reported Growth from 3Q12

Reported Growth from 2Q13

Worldwide

DKK 16.0 ($2.9)

10%/3%

-4%

North America

DKK 7.5 ($1.4)

15%/8%

-3%

Europe

DKK 3.8 ($0.68)

4%/3%

-1%

International Operations

DKK 2.1 ($0.42)

11%/-2%

-12%

Region China

DKK 1.7 ($0.30)

6%/4%

-2%

Japan & Korea

DKK 0.8 ($0.14)

-2%/-26%

-4%

*The above assumes an exchange rate of 1 DKK to 0.1776 USD.

  • Novo Nordisk currently holds a 27% value share of the global diabetes care market, followed by Sanofi, Merck and Lilly. This share is flat from its 27% share in 2Q13, and up from its 25% share in 3Q12. The company has seen steady (albeit modestly paced) share growth during the past ten years. For comparison, Sanofi has an ~19% share of the global diabetes market by value, and appears to be trending upwards; this will certainly be the case as it develops its GLP-1 and GLP-1 / insulin portfolio, although what will happen with Lantus share over time is a major question. Merck trails Novo Nordisk and Sanofi with a ~16% share that rose rapidly in the years following Januvia’s launch, but that appears to be leveling off this year. Both Takeda and GSK have seen steep declines in their market shares in the past five years due to the changing fortunes of Actos and Avandia, respectively. Over the past ten years, the global diabetes care market has grown at a compound annual growth rate (CAGR) of 10.5%, driven primarily by the strong CAGR of injectables (15.6%) and insulin (14.1%) followed by that of oral antidiabetic medications (6.0%).
  • Management mentioned that the company’s board of directors decided to split company shares in January 2014 in a 5:1 ratio. While a split of any kind would reflect confidence on the board’s part, we were surprised the split was 5:1 and this reinforces for us the supreme confidence on the part of the company’s management and major shareholders in Novo Nordisk’s likely future performance. A 5:1 split must be aspirational for employees, we would imagine.
  • During Q&A, management noted that there was a slight negative impact from rebates in the US in 3Q13 due to coverage of the Medicare Part D “donut hole.” This change reflects the pharmaceutical industry’s agreement made as part of the broader US healthcare reform. Management stated during the call that these increased rebates will likely yield benefits because more healthcare plans are changing to become more like Medicare Part D, which we imagine will make brand-name drugs with “donut hole” rebates more attractive to patients.
  • Currency continued to have a substantial negative impact on the company’s sales growth as reported, with negative currency impacts intensifying compared to earlier in the year. Management noted during the call that the Japanese yen and the US dollar are currently 24% and 7% lower, respectively, than their 2012 averages. As a result, there were rather wide disparities in the growth figures operationally and as reported in 3Q13, and underlying growth measured in local currencies was generally stronger than the reported results indicated.
  • Worldwide, sales of Novo Nordisk’s modern insulin products (NovoRapid [NovoLog], NovoMix, and Levemir) grew 6% YOY on a reported basis (13% in local currencies) to DKK 9.4 billion ($1.7 billion). Sequentially, modern insulin sales decreased 2% against a somewhat challenging comparison (modern insulin sales increased 7% sequentially in 2Q13). Over the past five years, the overall insulin market has grown by a CAGR of 6.5% by volume and 16.2% by value. Novo Nordisk’s volume share of the global insulin market has held relatively steady over the past five years at around 46%; Sanofi is next with 35%, followed by Lilly with 18%. Total 3Q13 growth for Novo Nordisk’s modern insulins was roughly comparable to Lilly’s modern insulin portfolio performance (Humalog and Humulin grew 7% and 8%, respectively, as reported). Sanofi’s modern insulins performed relatively well in 3Q13; Lantus sales rose 14% as reported, while Apidra sales increased an impressive 28%, though from a much lower base.
  • Modern insulin growth in 3Q13 drove the strong performance in North America, China, and International Operations. North American sales rose 19% in local currencies to DKK 4.9 billion ($870 million). Sales in Region China increased 21% in local currencies to DKK 680 million ($120 million). International Operations grew 16% in local currencies to DKK 1.1 billion ($190 million). Modern insulin sales in Europe increased  just 2% in local currencies to DKK 2.3 billion ($400 million) while sales in Japan & Korea fell 4% in local currencies to DKK 490 million ($90 million). In a separate conversation with us, a company representative noted that the insulin market in Japan continues to shrink (due in part to the success of DPP-4 inhibitors and other oral therapies there), which drove the negative results in the Japan & Korea segment. We are surprised management said it was shrinking; we had assumed that patients were living longer and that they were merely staying on oral drugs longer but that more people overall would be moving onto insulin, and more onto MDI in particular.
    • As with 2Q13, Levemir (insulin detemir) was the strongest modern insulin performer in 3Q13, growing 20% as reported (27% in local currencies) to DKK 3.0 billion ($520 million). This came against a challenging comparison, as 3Q12 growth was 27% as reported. Sequentially, worldwide Levemir sales increased 3%, also against a challenging comparison (2Q13 sales were up 11% sequentially). Levemir performed particularly well in North America, where sales increased 44% in local currencies and 37% as reported. Management commented on these US results during Q&A, attributing them to Novo Nordisk’s plan to push into the basal insulin arena with Levemir until Lantus loses patent protection in 2015, which will fundamentally “change the marketplace” for basal insulins, they said. We are interested in what this means to management; it seems challenging to call at this stage. Management stated that they were seeing volume growth of around 8-10% in the US, and (following Lantus’ lead) had increased prices by about 30%. Sales were strong in China as well (up 32% as reported and 34% in local currencies). The EU and US patents for Levemir expire in 2018 and 2019, respectively.
    • Sales of NovoLog (NovoRapid; insulin aspart) increased 2% as reported (8% in local currencies) to DKK 4.1 billion (~$730 million). This was, by a fairly large margin, the lowest quarter of growth for NovoRapid since 2Q11 (in which YOY growth was 1%), but came against a fairly challenging comparison (sales rose 24% as reported in 3Q12). Sequentially, worldwide NovoLog sales fell 4% as reported, compared to the 7% sequential growth seen in 2Q13. As mentioned previously, net pricing for NovoLog saw a decrease in the US due to additional rebates to cover the Medicare Part D coverage gap, or “donut hole.” The US and EU patents for NovoLog expire in 2017.
    • NovoMix sales decreased 1% as reported (up 7% in constant currencies) to DKK 2.4 billion (~$420 million). This was the first quarter that reported sales have fallen since 3Q09, and it is only the second quarter ever that NovoMix has experienced negative reported growth. Sequentially, sales decreased 5% as reported. NovoMix’s patent expires in 2014-2015 in the EU and 2017 in the US. On October 25, 2013, Novo Nordisk announced that it was recalling a number of batches of NovoMix 30 from 13 European countries after a quality control that the company conducted showed that 0.14% of the products in these batches did not meet the requirement for insulin strength. While we don’t believe that the recall will have a material impact on finances, it was good to see Novo Nordisk address and announce this problem quickly.
    • During Q&A, management suggested that Express Scripts’ decision to cut its 2014 contracts for NovoLog and Victoza could impact the company’s top line by as much as 1%. As a result of the pharmacy benefit manager’s decision, tens of millions of Americans will lose their coverage for the two drugs from the beginning of 2014. Novo Nordisk lost its Novolog contract to Lilly’s Humalog, and lost the Victoza contract to BMS/AZ’s exenatide franchise.
    • The day after its 3Q13 conference call, Novo Nordisk announced that the FDA approved the FlexTouch pens for NovoRapid and Levemir and that the Canadian health authorities had approved the Levemir FlexTouch pen – 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.

Table 2: Sales of modern insulin by product in 3Q13

 

3Q13 Revenue

(in billions)

Reported Growth From

3Q12

2Q13

Novo Nordisk’s Modern Insulins

DKK 9.4 ($1.7)

6%

-2%

     NovoRapid

DKK 4.1 ($0.73)

2%

-4%

     NovoMix

DKK 2.4 ($0.42)

-1%

-5%

     Levemir

DKK 2.9  ($0.52)

20%

3%

*The above assumes an exchange rate of 1 DKK to 0.1776 USD.

  • Similar to Victoza, Novo Nordisk continues not to break out sales for Tresiba (insulin degludec), its ultra-long-acting basal insulin. In a separate conversation with Novo Nordisk, a company represented indicated that, like Victoza, Novo Nordisk would continue to lump Tresiba sales into the Protein-Related Products category for approximately its first six quarters on the market. Management announced that Tresiba recently received approval in Russia and Lebanon and has been launched in Sweden and India — Tresiba was already on the market in the UK, Denmark, Japan, Mexico, and Switzerland. New drug applications for Tresiba are under review in 41 countries, according to the company. CEO Lars Sørensen stated during the call that Tresiba performance, as well as patient and provider feedback on the new insulin continues to be encouraging.
    • As with the 2Q13 update, management provided some non-financial measures of Tresiba’s first 35 weeks of performance in Japan, the first market where it received broad reimbursement. Management noted in Q&A that the company did not pursue premium pricing in Japan due to the economic climate, and because the company (we assume it meant insulin) was already “losing ground” in the Japanese diabetes care market. In Japan, approximately 7,300 providers have prescribed Tresiba, resulting in ~42,000 patients on the product (compared to 5,900 providers and 29,000 patients at post-launch week 21). Tresiba now holds an 8.7% share of the Japanese basal insulin market, compared to 6.8% at week 21. It is early to assess at this stage the pace of sales growth for Tresiba; that said, growth seems to have slowed somewhat between weeks 21 and 35 compared to its first 21 weeks on the market in Japan.
    • The pricing strategy for Tresiba arose during Q&A — management noted that in most markets the company has priced the insulin rather aggressively due to its confidence that patients will recognize the product’s value after trying it, but has seen relatively slow uptake in the UK and Denmark. CEO Lars Sørensen then commented that Europeans must pay for innovation, and cannot expect the US to fund innovation for the rest of the world. For this reason, and because of the product’s benefits, the company appears to be willing to accept slightly slower penetration than it could see with less aggressive (i.e., lower) pricing
    • As a reminder, the FDA issued a complete response letter for Tresiba in February 2013 asking for additional cardiovascular safety data – further details can be found in our report on the CRL. Management announced that the CVOT began enrollment in October – see the Pipeline Updates section of this report for more details.  
  • Sales of Human Insulins were DKK 2.6 billion ($460 million) in 3Q13, decreasing 8% as reported and decreasing 2% in local currencies. Sales declined 7% sequentially. Since May 2008, the overall human insulin market has shrunk slightly due to the increased penetration of modern insulins. Novo Nordisk’s share within that market has receded slightly during the past five years and is now at approximately 55%. Sales were strongest in China (up 3% as reported and 6% in local currencies), although management noted during Q&A that the human insulin market in China is very competitive, especially due to local manufacturers entering the arena. The company forecast that the Chinese market would gradually transition to modern insulins; we assume this would make for a much more profitable business in China. Human insulin sales took the largest hit in Japan & Korea (down 38% as reported and 17% in constant currencies). In North America, sales fell 12% as reported and 5% in local currencies. Sales in Europe and International operations were down 6% and 10% as reported and 5% and 1% in local currencies, respectively.
  • Sales of oral antidiabetic products (NovoNorm, Prandin, and PrandiMet) fell 30% as reported from 3Q12 to DKK 504 million ($90 million), due to the genericization of Prandin in the US and EU. The quarter’s comparison was challenging, as 3Q12 growth for Novo Nordisk’s oral antidiabetic products was 28%. Sequentially, sales decreased 26% against an easier comparison (2Q13 sales were down 2% sequentially). While Prandin has not been a driver for Novo Nordisk’s overall Diabetes Care growth for some time, this generic competition is substantial enough to detract slightly from topline Diabetes Care results. Additionally, a changed inventory setup for NovoNorm in China hit sales growth there by roughly 4% in 3Q13, according to a company representative. 
  • Sales of protein-related products totaled DKK 670 million (~$120 million) in 3Q13, up 3% as reported from 3Q12 and up 4% sequentially. A company representative confirmed for us that Tresiba sales are reported in this category, just as Victoza sales had been when the GLP-1 was approved. The representative noted that the company only began breaking out Victoza sales approximately six quarters after its launch, and suggested that the same could apply for Tresiba.

Table 3: Sales of human insulins, protein-related products, and oral antidiabetic products.

 

3Q13 Revenue                (in millions)

Reported Growth From

3Q12

2Q13

Human Insulins

DKK 2,572 ($458)

-7.9%

-7.4%

Protein-Related Products

DKK 666 ($118)

3.4%

3.6%

Oral Antidiabetic Products

DKK 504 ($90)

-29.9%

-26.0%

*The above assumes an exchange rate of 1 DKK to 0.1776 USD.

  • Company market share: Based on August 2013 IMS data, Novo Nordisk currently holds a 48% insulin volume market share, down slightly from its 49% share in 1Q13 and 2Q13. The company continues to lead the global modern insulin market with a 46% modern insulin volume share (flat from 1Q13 and 2Q13), followed by Sanofi at 35% and Lilly at 18%. Looking at market share below, we see how US- and European-centric the insulin business is; 85% of its value is in these regions, although need is obviously increasing in every geographic region around. 

Table 4: Insulin market by region

Region

Value of total insulin market (billions)

Composition        B=basal; FA=fasting-acting; P=premixed

Novo Nordisk’s Volume Market Share

Global

DKK 120.9 ($22)

34% B / 28% FA / 38% P

48%

North America

DKK 78.2 ($14)

49% B / 37% FA /14 % P

41%

Europe

DKK 25.8 ($4.6)

37% B / 40% FA / 23% P

49%

International Operations

DKK 7.8 ($1.4)

28% B / 20% FA / 52% P

56%

Japan and Korea

DKK 4.9 ($0.87)

32% B / 37% FA /31 % P

50%

China

DKK 4.2 ($0.75)

13% B / 21% FA / 66% P

60%

*The above assumes an exchange rate of 1 DKK to 0.1751 USD.

Financial Updates — Victoza

  • Sales of Victoza (liraglutide) in 3Q13 totaled DKK 2.8 billion (~$510 million), up 14% as reported and 20% in local currencies from 3Q12. These results came against a challenging comparison, as YOY sales rose 62% in 3Q12 (albeit from a smaller base of DKK 1.5 billion in 3Q11). Sequentially, sales decreased 1% as reported, the first sequential decline ever. These results continue the expected gradual slowdown in sales growth we have seen over the past two years for Victoza due in large part to a growing sales base. Management did remark during Q&A that the public debate over incretins and pancreatic safety that began in March of 2013 did contribute to lower demand for GLP-1 agonists, but speculated that this had largely subsided. Novo Nordisk now holds a 70% value share of the GLP-1 market, compared to 66% at the same point in 2012. A supplemental slide showed that Victoza is driving the expansion of the global GLP-1 market, which has seen a CAGR growth rate of ~36% in the past five years.

Table 5: Sales of Victoza by region in 3Q13

 

3Q13 Revenue      (in millions)

Operational/ Reported Growth from 3Q12

Reported Growth from 2Q13

Worldwide Victoza Sales

DKK 2,847 ($506)

20%/13.7%

-1.0%

     North America

DKK 1,822 ($324)

22%/15.0%

-1.0%

     Europe

DKK 746 ($132)

24%/22.1%

-0.1%

International Operations

DKK 173 ($31)

12%/0.6%

4.8%

     Japan and Korea

DKK 78 ($14)

-11%/-33.3%

-8.2%

     Region China

DKK 28 ($5)

61%/55.6%

-28.2%

*The above assumes an exchange rate of 1 DKK to 0.1776 USD.

  • Novo Nordisk reported revenue for Victoza by region for the fourth time (see table above). As with full-year 2012, 1Q13, and 2Q13, revenue was mainly driven by sales in North America and Europe. China posted the largest year-over-year growth rates (56% as reported, 61% in local currencies), albeit from a significantly smaller base.
    • Victoza sales in North America totaled DKK 1.8 billion (~$320 million), representing a YOY rise of 15% on a reported basis (22% operationally) and a 1% fall sequentially. Both the YOY and sequential results had fairly challenging comparisons; YOY growth as reported in North America was 71%, and sequential growth as reported in 2Q13 was 7%. North America accounted for 64% of Victoza sales in 3Q13 (flat from 2Q13) and was responsible for slightly over two-thirds of the growth in overall Victoza sales. Victoza commands a 65% share in the US GLP-1 market, which (as management pointed out) continues to grow; it now represents 8.5% of the total US diabetes care market in value compared to 6.8% one year ago. Management did refer to “increased competition” in the US GLP-1 agonist arena — we assume this refers to BMS/AZ/Amylin’s Bydureon (exenatide once weekly). The presentation slides highlighted that over 80% of patients with commercial coverage or Medicare Part D are covered without restrictions, and that Victoza represents 1.5% of total prescriptions in the US diabetes care market (a figure that shows how much room the GLP-1 agonist class has to grow). As was mentioned earlier, net pricing for Victoza in the US saw a decrease due to increased rebates to cover the Medicare Part D coverage gap, or “donut hole.”
    • Victoza sales in Europe totaled DKK 746 million ($132 million), up 22% YOY as reported (24% in constant currencies). Sales were flat sequentially. Europe contributed 26% of global Victoza sales. The press release cited France, Spain, Italy, and the UK as the main drivers of growth in Europe. Victoza now holds 78% of the European GLP-1 agonist market. Supplemental presentation slides showed that Victoza continues to largely drive the expansion of the GLP-1 agonist class in Germany, France, and the UK (although it did appear that sales of Sanofi’s recently launched GLP-1 agonist Lyxumia [lixisenatide], although relatively modest, might be eating (minimally) into some of Victoza’s share in Germany). 
    • International Operation posted DKK 173 million ($31 million) in Victoza revenue, up 1% as reported (12% in constant currencies) and up 5% sequentially. The segment was responsible for 6% of global Victoza sales. The company press release stated that growth in this geography was primarily driven by an unspecified set of Middle Eastern countries. The size of the GLP-1 agonist class in this geography has shrunk slightly due to declines in Brazil after a strong launch, but the press release noted that excluding Brazil, the class is expanding.
    • Japan and Korea accounted for 3% of global Victoza revenue in 3Q13. Sales in the region were DKK 78 million ($14 million), down 33% as reported (11% in local currencies) and down 8% sequentially. This represents a continuation of the shrinkage in Victoza sales in this geography: YOY sales decreased 15% in 1Q13, and decreased 28% in 2Q13 (as reported). The striking difference between reported and local currency growth figures is due in part to the continued devaluation of the Japanese Yen against the Danish Kroner. Management did not discuss Victoza’s performance in this geography in much depth.
    • China accounted for 1% of Victoza sales in 3Q13. Sales there grew 56% as reported (61% in local currencies) but fell 28% sequentially to DKK 28 million ($5 million). The company press release noted that the entire GLP-1 agonist class is not reimbursed in China, which limits the size of this market. During Q&A, management noted that the pharmaceutical industry scandal in China (and resultant reticence of physicians in the country to meet with pharmaceutical company representatives) has had a negative impact on Victoza, given that Victoza is a more “promotion sensitive” product (compared to insulin, which is a life-sustaining drug and is not quite as expensive). However, management downplayed this effect and commented that the situation in China is already beginning to normalize.  

Table 6: Market share of the GLP-1 segment and Victoza by region

 

GLP-1 agonists’ share of the total diabetes care market

(by value)

Victoza’s share                                      of the GLP-1 market                        (by value)

 

August 2013

August 2012

August 2013

August 2012

Global

6.8%

5.6%

70%

66%

US

8.5%

6.8%

66%

61%

Europe

7.4%

6.3%

78%

75%

International Operations*

2.8%

3.0%

76%

81%

Japan

2.2%

2.2%

73%

79%

China#

0.7%

0.5%

73%

33%

Data based on IMS May 2013 data                                                                                                                  

*Data for 12 selected markets representing ~60% of diabetes sales in the region                                   

#Data for mainland China, excluding Hong Kong and Taiwan 

  • Management announced the initiation in October of a phase 4 trial comparing Victoza head-to-head with Sanofi’s recently launched GLP-1 agonist Lyxumia (lixisenatide). The randomized, open-label, 26-week trial will investigate the efficacy and safety of Victoza 1.8 mg versus Lyxumia’s 20 microgram dose as an add-on to metformin in 400 type 2 diabetes patients (ClinicalTrials.gov Identifier: NCT01973231). The study’s primary outcome will be change in A1c, with changes in fasting plasma glucose, body weight, and adverse event profiles included as secondary outcome measures. The study is slated to end in November 2014.
    • The study is designed to assess statistical superiority over Lyxumia by a margin of 0.3% A1c, and the company generally rather confident about Victoza’s relative efficacy. Novo Nordisk Chief Scientific Officer Dr. Mads Thomsen stated during Q&A that Victoza is in a “different league” in terms of efficacy compared to Sanofi’s product, and that Novo Nordisk does not foresee lixisenatide as a stand-alone product as a major threat to Victoza; management theorized that this (alleged) efficacy differential is the reason why Sanofi is positioning Lyxumia primarily as an add-on to its best-selling basal insulin Lantus (insulin glargine) rather than as an add-on to oral agents.
    • As background: Lyxumia has been launched earlier this year in several EU countries (including Germany, Spain, and the UK) as well as Japan and Mexico. Last month, Sanofi decided to withdraw its US FDA application for Lyxumia to prevent the disclosure of interim data from the candidate’s cardiovascular outcomes trial (CVOT) ELIXA — read our coverage of that development. Instead, the company will wait until the CVOT is completed in 2015 before re-submitting to the FDA, placing a regulatory submission around 2016 at the earliest.
  • The company acknowledged during the call that Victoza and the overall GLP-1 agonist class fell slightly short of expectations in 3Q13. During Q&A, the company cited Express Scripts’ decision to drop Victoza from its formulary as a sign of increasingly aggressive price competition in the GLP-1 agonist arena, and characterized the decision as unusual given that the competitors in the GLP-1 space are differentiated products. Management argued that Novo Nordisk was at a disadvantage in price negotiations as the dominant market share leader in the US because pricing adjustments would have a relatively large impact on whole-company sales, while companies with smaller share could bid more aggressively. Very notably, however, CEO Lars Sørensen stated that Novo will be “coming back to Express Scripts,” which in our view indicates some amount of confidence on the part of the company that Victoza can compete more effectively on pricing in the future.
    • Despite the increasingly competitive reimbursement climate in the US, management expressed cautious optimism about Victoza and the GLP-1 agonist class moving forward. CEO Lars Sørensen attributed the slowdown in demand for GLP-1 agonists to concerns from earlier this year regarding incretin therapies and pancreatic disease, but stated the strong statements by the FDA and EMA (among other prominent organizations) should help alleviate these concerns and potentially lead to a rebound in demand. He also mentioned that Novo Nordisk is conducting a direct-to-consumer advertising campaign that seems to be reaping rewards, as new prescriptions for Victoza have seen a recent pickup.

Financial Updates — 2013 Outlook

  • Novo Nordisk held its FY2013 forecast for sales growth and operating profit growth in local currencies constant at 11-13% and 12-15%, respectively, but slightly lowered its forecast for results as reported. It attributed this change to the impact of foreign exchange, specifically the strengthening of the Danish Krone, especially versus the Japanese Yen and US Dollar. Novo Nordisk lowered its forecast for reported sales growth from a drop of ~4% to a drop of ~4.5%. Its forecast for operating profit growth as reported went from ~6% lower to ~7% lower. Management stated during the call that this outlook reflects an expectation for continued robust performance for Novo Nordisk’s modern insulin portfolio and for Victoza, as well as a modest sales contribution from Tresiba. These growth drivers will be countered by continued generic competition to Prandin as well as intensifying overall competition within the diabetes care arena. It also cited macroeconomic conditions in a number of International Operations markets as a potential detractor from growth. Regarding the reduction in operating profit guidance as reported, management noted that marketing investments in the US, China, and select International Operations markets, as well as the launch of Tresiba outside the US and “key” diabetes pipeline projects, will lead to higher costs.
  • The company’s preliminary outlook for 2014 is for high single-digit growth in sales and operating profit, measured in local currencies. This is compared to the 10%-plus growth expected in 2013 and the 20%-plus growth seen in 2013. Management stated that its outlook reflects expectations for continued robust Victoza and modern insulin portfolio performance, as well as a positive sales contribution from Tresiba. When prompted during Q&A, management looked further into the future, characterizing the years 2014 through 2016 as “challenging,” but expressing confidence that the company would be able to sustain growth in the long term due to portfolio opportunities such as Tresiba in the United States, IDegLira (Victoza/Tresiba combination therapy), and liraglutide for obesity. CEO Lars Sørensen noted during Q&A that Obamacare should result in volume growth in the US, which will benefit companies in chronic care (such as Novo Nordisk) in coming years. Management stood by the forecast for operating profit growth of around 15%, but noted that the company is “not dogmatic” about that target and would be willing to deviate from that goal in order to secure improved longer-term growth.
    • During Q&A, management expressed particular “bullishness” about the US, China, and International Operations geographies moving forward. The company plans on expanding its sales force in each of those geographies. In the US, the additional sales force could be used to promote the company’s current portfolio as well as liraglutide for obesity (potentially). In China, the company hopes to improve access to the medical profession, especially in community clinics in more rural regions. 

 

Pipeline Updates – Tresiba (insulin degludec)

  • Management announced that Tresiba’s cardiovascular outcomes trial (CVOT) enrolled its first patient in October. As a reminder, insulin degludec received a complete response letter (CRL) from the FDA earlier this year asking for pre-approval CVOT data. The trial is called DEVOTE, and as previously discussed, it is a double-blind trial (n=7,500 people with type 2 diabetes ≥50 years old with existing or at high risk for CVD) using insulin glargine (Sanofi’s Lantus) as a comparator. The primary endpoint is MACE (CV death, non-fatal myocardial infarction, non-fatal stroke), and it is an event driven trial with an estimated primary completion date of November 2018 (ClinicalTrials.gov Identifier NCT01959529). Novo Nordisk reiterated plans to use a prespecified interim analysis after two to three years to support US approval. This places a potential resubmission in late 2015-2016; Novo Nordisk expects it will need to adhere to the FDA’s CV guidance for type 2 diabetes drugs (i.e., the upper bound of the 95% confidence interval for the hazard ratio (HR) should exclude 1.8 in the interim submission, and the final results of the trial would need to exclude an HR of 1.3).
    • When Novo Nordisk received the CRL for Tresiba in February, it held a conference call to discuss this development. For details you can read our report here.
  • The use of interim CVOT data to form the basis of approvals is clearly a double-edged sword. While it can help expedite the approval process, it may also lead to trial-integrity and patient retention issues. Novo Nordisk believes, however, that the double-blinding of the trial and the willingness of the FDA to work with companies to maintain appropriate blinding is sufficient to maintain proper trial integrity.
    • If interim results are publicly disclosed (as they are during an FDA Advisory Committee meting), then the ability to use final results to demonstrate superiority is lost since the lead investigators would be unblinded to interim results. J&J’s CANVAS study for its SGLT-2 inhibitor Invokana suffered this fate – J&J now plans to conduct a new CVOT for superiority.
    • Drugs that are either approved or denied based on interim trial results may find it hard to retain patients. If the drug is approved, rather than staying in a blinded study, patients could simply drop out and seek the approved drug. On the other hand, if the drug is not approved, patients may drop out for fear of exposing themselves to the purportedly unsafe drug.
    • Sanofi, in order to avoid these interim analysis issues, made the bold decision to withdraw its NDA for its GLP-1 agonist Lyxumia in September. ELIXA is currently slated to complete in 2015. For details, read our report here.
  • Tresiba’s US timeline puts it behind Lilly/BI’s and Sanofi’s new insulin glargine formulations and likely behind Lilly’s novel basal insulin analog LY2605541 (PEGylated lispro). Lilly/BI filed their insulin glargine formulation in Europe in July 2013 and hope to file in the US by the end of the year. Sanofi expects to file its U300 glargine formulation in 1H14. Lilly expects internal readouts of phase 3 data for LY2605541 in 2013 and a public topline data release in 2014. If data are favorable, Lilly hopes to submit as early as 2014. Lilly recently expanded LY2605541’s phase 3 IMAGINE program to include a trial that examines the possibility of flexible dosing (IMAGINE-7), likely as a potential way to stay competitive against Tresiba. Please see our Lilly 1Q13 report for more details on the IMAGINE program, and our Lilly 3Q13 report for our most up-to-date take on Lilly’s pipeline.
    • At ADA 2013, Sanofi presented compelling data that its U300 glargine reduced nocturnal hypoglycemic events by 21% compared to Lantus (for details, see page 12 and 17 of our ADA 2013 Insulin Therapies report)
    • In phase 2, LY2605541 has demonstrated weight loss (as opposed to the weight gain typically associated with insulin use) and less hypoglycemia compared to Lantus. This may be due to preferential action in the liver. However, this candidate also led to higher levels of ALT and AST liver enzymes (and non-significant increases in triglycerides), raising potential safety concerns. If the weight loss and potential for flexible dosing are substantiated in phase 3 trials, this would represent a significant step forward for basal insulin therapy.
  • Finally, although Merck has yet to formally announce that it is getting into the insulin game, it is believed to be developing a biosimilar insulin glargine, MK-1293. The phase of this candidate is not clear, but at least one trial is publicly registered on the NHS’ National Research Ethics Service website. Please see our Merck 3Q13 report for more details.  

Pipeline Updates – IDegLira

  • IDegLira remains under regulatory review in Europe. As a reminder, Novo Nordisk submitted IDegLira to the EMA in late May, suggesting it could receive a decision in May 2014 with a standard ~12-month European review cycle. IDegLira was also submitted in Switzerland in June 2013.
    • IDegLira remains well ahead of Sanofi’s basal insulin/GLP-1 agonist fixed-ratio combination product, “lixi/lan” (Lyxumia/Lantus) in Europe. Sanofi’s latest update on lixi/lan, during its ADA Diabetes Update, indicated that phase 3 for its fixed-ratio device is expected to begin in 1H14.
  • In the US, IDegLira filing is contingent upon regulatory discussions for Tresiba. As a reminder, Tresiba received a complete response letter from the FDA asking for pre-approval CVOT data that will delay Tresiba re-submission until late 2016 or 2017.
    • Sanofi’s recent decision to withdraw its US NDA for Lyxumia until ELIXA has completed in 2015 means that lixi/lan may well be delayed as much as IDegLira in the US. Earlier this year, Sanofi decided to commit to a fixed-ratio device over a fix-flex device in order to beat Novo Nordisk to the US market. This still appears possible, but it will likely be by a small margin. We are curious if Sanofi management will now consider returning efforts to the fix-flex device (which would allow patients to titrate their Lantus dose against a fixed Lyxumia dose using just one device).
  • To date, phase 3 data presented on IDegLira have been very impressive. DUAL-I data for IDegLira were some of the most compelling data we saw at ADA this year. After 26 weeks, A1c reduction was 1.9% for IDegLira, 1.4% for degludec, and 1.3% for liraglutide from a baseline of 8.3%. Remarkably, IDegLira participants ended with an average A1c of 6.4%. Furthermore, 81% of IDegLira participants achieved an A1c goal of ≤7%, and 70% reached a goal of ≤6.5%. See our ADA 2013 Incretin Report for more details. During its 1Q13 update, Novo Nordisk announced the topline results of the 26-week extension period of DUAL-I. These results confirmed that IDegLira’s benefits persisted to 52 weeks, though with a small amount of attrition in the percentage of people achieving goal. Please see our Novo Nordisk 1Q13 report for more details. Novo Nordisk released results for the other pivotal trial for IDegLira, DUAL-II, in December 2012, which were consistent with the DUAL-I results. Please see our December 20, 2012 Closer Look email for more details.

Pipeline Updates – Faster-Acting Insulin Aspart (FIAsp, or NN1218)

  • Management announced that three phase 3 trials for FIAsp (NN1218), a faster-acting insulin aspart, began in August 2013. The phase 3 program is named “Onset.” A fourth trial is scheduled to begin later this year.
    • Two of the three trials that have already begun, Onset 1 and 2, compare NN1218 to insulin aspart as part of a basal-bolus regimen with Levemir (insulin detemir). Onset 1 will examine 1,095 people will type 1 diabetes for 52 weeks with a primary endpoint of A1c change from baseline at week 26. Notably, Onset 1 will have one post-meal prandial insulin administration arm. The possibility for post-meal insulin administration could greatly improve adherence by allowing patients to better match their insulin dosage to their carb intake. We are curious how much time will be allowed post-meal-consumption for administration of NN1218; Novo Nordisk declined to disclose this as of now. Onset 1 is scheduled to complete in March 2015 (ClinicalTrials.gov Identifier NCT01831765). Onset 2 will examine 676 people with type 2 diabetes for 26 weeks with a primary endpoint of A1c change from baseline at week 26. Its estimated primary completion is listed as October 2013 on ClinicalTrials.gov, but we believe this must be an error, as Novo Nordisk’s slides indicate that it will continue through 4Q14. Onset 2 does not have a post-meal administration arm (ClinicalTrials.gov Identifier NCT01819129).
    • The third trial that has already begun is investigating intensification from basal insulin therapy to basal-bolus therapy using NN1218 (Onset 3). This 18-week study (n=218) will compare NN1218 in a basal-bolus regimen to basal-only in adults with type 2 diabetes on background metformin and basal insulin therapy (insulin glargine, insulin detemir, or NPH). The primary endpoint is change from baseline A1c at 18 weeks (ClinicalTrials.gov Identifier: NCT01850615). Onset 3 is slated to finish in August 2014.
    • The fourth trial that is slated to begin later this year (onset 4) will investigate NN1218’s pump compatibility. It will be a six-week trial (n=30) in people with type 1 diabetes. It is not yet listed on ClinicalTrials.gov. 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/Affreza’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.
  • Two phase 1 studies for NN1218 are also on ClinicalTrials.gov and are currently recruiting. One is investigating the PK properties of NN1218 in 40 Japanese people with type 1 diabetes (Identifier: NCT01934712), and the other is examining the PK/PD properties of NN1218 in 36 type 1 diabetes patients in Europe (Identifier: NCT01924637).
  • A company representative confirmed that the earliest possible submission date for NN1218 would be late 2015. For comparison, Biodel’s BIOD-123 reported phase 2 results in September with an end-of-phase 2 meeting with the FDA expected in early 2014. MannKind’s Afrezza was just resubmitted to the FDA on October 14, with an expected six-month expedited review. Other ultra-rapid acting insulin approaches include Halozyme’s Hylenex (recombinant human hyaluronidase [PH20] for preadministration prior to insulin pump infusion set insertion; in phase 4 studies for the pump infusion setting), and Halozyme’s PH20/rapid-acting analog co-formulation that is “phase 3-ready.” Though it sounds like many kinds of rapid acting insulin, we assume several brands and alternative delivery forms could succeed; we recall much growth at the major insulin companies when patients were changing from regular to modern insulins; while many patients still do not have access, of course, the conversion between the two “types” of insulin prompted growth for many years in the field. We assume conversion from “fast acting” to “ultra fast acting” could do the same for the market.

Pipeline Updates – Liraglutide for Obesity and for Type 1 Diabetes

  • In Q&A, management reaffirmed its plans to file liraglutide 3 mg for obesity toward the end of the year and stated that it is hoping for a 2015 launch. Management stated that it is optimistic about receiving approval for liraglutide 3 mg for obesity given that no new unknown side effects have emerged in the phase 3 program. As background, establishing a presence in obesity is one of the five strategic focus areas the company outlined during their recent 3Q13 London investor presentation. Liraglutide’s phase 3a SCALE program completed earlier this year. Across the various populations studied (people with diabetes, people without diabetes, people with sleep apnea, people who have already achieved 5% weight loss with diet and exercise), liraglutide provided ~4.0-5.5% placebo-adjusted weight loss. For a summary of the results of each of the four studies in the program, please see our Novo Nordisk 2Q13 report.
    • Orexigen also expects to file its anti-obesity agent, Contrave (bupropion/naltrexone) by the end of 2013 with a six-month review. Vivus’ Qsymia (phentermine/topiramate) and Arena/Eisai’s Belviq (lorcaserin) are both already marketed in the US, but neither has had a positive reception with the EMA’s CHMP (Vivus received a negative opinion while Arena withdrew the Belviq application). Qsymia, Belviq, and Contrave are all oral agents, while liraglutide is an injectable. There is plenty of room for differentiation and segmentation in the obesity market – liraglutide’s existing approval for type 2 diabetes may give it an upper hand in the regulatory process. However, the accompanying GI side effects, the need for injections, and public concern over pancreatic safety may be deterrents for patients. While comparisons between trials are inherently difficult, Novo Nordisk believes liraglutide’s efficacy could fall slightly above that of Contrave’s (Qsymia is generally accepted to be the most efficacious, and Belviq the least, although it is associated with a relatively high response rate).
  • Management did not mention liraglutide for type 1 diabetes (NN9211, or LATIN T1D) during the call, but according to ClinicalTrials.gov, the phase 3a trial for NN9211 (called ADJUNCT ONE) is still expected to begin in December 2013 (Identifier: NCT01836523). The trial’s estimated primary completion date has been changed from January 2015 to May 2015. 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. Details on any other phase 3 trials that may be included in the 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.

 

Pipeline Updates – GLP-1 Agonists (Semaglutide and Oral Agents)

  • Although management did not mention semaglutide, its phase 3 once-weekly GLP-1 agonist, during the call, ClinicalTrials.gov shows that a new phase 3 trial has been added (SUSTAIN 2), a head-to-head comparison to sitagliptin (Merck’s Januvia). This 56-week trial is not yet recruiting and is scheduled to begin in December 2013. It will aim to enroll 1,200 people with type 2 diabetes on background metformin, TZD, or both. It is a randomized, double-blind, double-dummy trial that will test both 0.5 mg and 1.0 mg arms for semaglutide. The primary completion date is estimated to be August 2015 (ClinicalTrials.gov Identifier: NCT01930188).
  • SUSTAIN 3, a head-to-head vs. BMS/AZ’s Bydureon (once-weekly exenatide), is also still scheduled to begin in December 2013. It has a primary completion date of July 2015 (ClinicalTrials.gov Identifier: NCT01885208).
  • As a reminder, Novo Nordisk commenced semaglutide’s first phase 3a trial, SUSTAIN 6 (a cardiovascular outcomes trial), in February 2013. The trial is investigating semaglutide 1.0 mg and 0.5 mg over 104-143 weeks in 3,260 people with type 2 diabetes. The primary endpoint will be time to first MACE (CV death, nonfatal stroke, and nonfatal myocardial infarction). The trial is expected to finish in January 2016 (ClinicalTrials.gov Identifier: NCT01720446).
  • Please see our Novo Nordisk 1Q13 report for phase 2 data and details on the company’s decision to carry forward the 1.0 mg dose to phase 3.
  • Semaglutide could be as late as the seventh GLP-1 agonist to market (the fourth once-weekly and potentially behind Intarcia’s once- or twice-yearly osmotic minipump ITCA-650). The twice-daily Byetta and once-weekly Bydureon are already marketed globally. GSK filed its once-weekly Eperzan (albiglutide) to the FDA in January (the PDUFA date is set for April 15, 2014) and to the EMA in March. Lilly submitted once-weekly dulaglutide to the EMA and FDA in 3Q13. Sanofi’s once-daily Lyxumia is already on the market in Europe, but Sanofi recently withdrew its NDA in the US in order to preserve the integrity of ELIXA CVOT results (rather than having interim data disclosed at an Advisory Committee meeting). Sanofi plans to resubmit upon completion of ELIXA, which is estimated to occur in 2015. Other GLP-1 agonists in late-stage development include BMS/AZ’s Bydureon dual-chambered pen (for which management continues to forecast a mid-2014 launch), Intarcia’s once- or twice- yearly exenatide osmotic minipump ITCA-650 (first phase 3 data expected by end of 2013). There appears to be plenty of room for differentiation and market expansion for GLP-1 agonists. Products may be differentiated by action profile (long-acting vs. short acting), efficacy (Novo Nordisk expects semaglutide to be the leader in this respect), side effect profile (frequency and severity of nausea and GI upset), delivery (pen injection vs. implant), and frequency of administration (twice-daily, daily, weekly, annually).
  • In the past, Novo Nordisk has forecast that semaglutide’s efficacy profile could offer a point of differentiation amongst once-weekly agents (management expects semaglutide to beat Victoza in efficacy). Management has previously speculated that Lilly’s dulaglutide will show similar efficacy to Victoza with perhaps lower body weight reductions in Lilly’s head-to-head AWARD-6 trial. If ITCA-650 comes to market before semaglutide, we could see semaglutide facing significant challenges due to ITCA-650’s potential efficacy and usability advantages. Intarcia forecasts A1c reductions of ~1.8% in phase 3 for ITCA-650, which is higher than has been seen in trials of injectable GLP-1 agonists. The ITCA-650 phase 3 program is examining 40 mcg/day and 60 mcg/day doses, which both conferred >3 kg (6.6 lb) weight loss in phase 2 trials. Perhaps even more importantly, the ITCA-650 osmotic pump delivery device would eliminate the need for injections. The phase 3 Harmony 7 study for GSK’s Eperzan (albiglutide) showed that albiglutide led to smaller improvements in A1c and weight compared to liraglutide, but was more tolerable – given that semaglutide was chosen for its presumptive superiority over once-daily liraglutide, it appears likely that it will present a more favorable profile than albiglutide, barring any serious safety/tolerability issues.
  • Although not discussed during the conference call, Novo Nordisk has four long-acting oral GLP-1 agonists in development: 1) OG217SC (NN9924) is an oral formulation of semaglutide using Emisphere’s Eligen as the carrier technology; 2) OG217GT (NN9928) is an oral formulation of semaglutide using Merrion’s GIPET carrier; 3) OG987SC (NN9927) is an oral formulation of liraglutide using the Eligen carrier; and 4) OG987GT (NN9926) is an oral formulation of liraglutide using the GIPET carrier.
    • In October, Novo Nordisk Chief Scientific Officer Dr. Mads Thomsen stated that over $3 billion may be needed to develop and commercialize a portfolio of oral GLP-1 agonist and/or insulin candidates. Read our take on Novo Nordisk’s oral diabetes tablet aspirations. Dr. Thomsen stated that oral candidates would be “game changers” in the diabetes care arena, although the challenges involved in their successful development and commercialization are sizeable.
  • OG217SC has completed phase 1, and Novo Nordisk stated in its 2Q13 call that it expects the candidate to move into phase 2 by the end of the year. While management did not provide an update on this timing during the call, one phase 2 trial (n=603) has been newly registered on ClinicalTrials.gov; it is not yet recruiting and is scheduled to start in December 2013 (Identifier: NCT01923181). It is a multiple dose-ranging trial 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 (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.
  • OG217GT began its first phase 1 clinical trial in May 2013. This 160-person trial is investigating the safety and PK of single and multiple doses of OG217GT in healthy males. It is scheduled to complete in February 2014 (ClinicalTrials.gov Identifier: NCT01866748).
  • OG987SC completed a single dose phase 1 trial in December and currently has no active trials registered on ClinicalTrials.gov
  • OG987GT completed a single dose phase 1 trial in May 2012 and has a newly initiated multiple dose phase 1 trial registered on ClinicalTrials.gov. This safety, tolerability, PK/PD study (n=82) began in October 2013 and has a completion date of June 2014 (ClinicalTrials.gov Identifier: NCT01967589).
  • Since injection represents a major barrier for GLP-1 agonist adoption, we imagine that an oral option could be transformational. Several other companies are also exploring the possibility of oral GLP-1 delivery, or, in Intarcia’s case, an implantable continuous delivery device. Other companies with oral GLP-1 agonists in development include Transtech (TTP054, phase 2), Oramed (ORMD-0901, an exenatide capsule; phase 2 [pre-IND submitted in September 2013 in the US]), Zydus Cadila (ZYOG1; phase 1 in India), Arisaph (preclinical nasal and oral candidates), Poxel (discovery phase), Heptares (discovery phase oral small-molecule GLP-1 receptor agonist), Arisgen (oral and sublingual exendin-4; preclinical).

Pipeline Updates – Other insulins (LAI287 and oral Insulins)

  • Management did not provide updates on its oral insulins. Novo Nordisk has three basal insulins in phase 1: OI287GT (NN1956), OI362GT (NN1954), and OI338GT (NN1953). The first phase 1 trial for OI287GT started in March and completed in August 2013. It investigated the safety, tolerability, and PK/PD of single doses of OI287GT in 84 healthy volunteers (ClinicalTrials.gov Identifier: NCT01809184). Both OI362GT and OI338GT have each completed a phase 1 safety, tolerability, and PK/PD study in healthy volunteers. According to ClinicalTrials.gov, OI338GT has also completed a phase 1 trial for safety, tolerability, and PK/PD in people with type 2 diabetes (Identifier: NCT01796366). Furthermore, OI338GT began a new phase 1 trial in August 2013 investigating PK/PD using three different coatings in healthy subjects. This trial is scheduled to complete in December 2013 (ClinicalTrials.gov Identifier: NCT01931137).
    • All three oral insulin candidates utilize Merrion Pharmaceuticals’ GIPET oral delivery technology. In November 2008, Novo Nordisk signed a development and licensing agreement with Merrion for the development and commercialization of oral insulin, in particular the prandial oral insulin NN1952 (which has since been discontinued). Novo Nordisk also has an ongoing agreement with Emisphere for its Eligen technology for oral drug delivery. As background, the major challenge in developing oral insulins is finding a way to protect the polypeptide from the harsh conditions of the gastrointestinal tract. We expect development of an oral insulin (especially a rapid-acting insulin) to be more difficult than development of an oral GLP-1 agonist, given the precision needed in dose timing.
  • Biocon, Aphios, Oramed, Tamarisk, and others are also working on oral insulins. Our complete overview of the oral insulin landscape as of the end of 2012 has more details. Since publication of this oral insulin overview, a re-analysis of Generex’s Oral-lyn phase 3 “084 trial” showed that Oral-lyn failed to demonstrate non-inferiority to human insulin. To date the field has been full of challenges, with no particularly promising candidates standing out at this time, save for MannKind’s phase 3 inhalable buccal insulin Afrezza, about which we are increasingly optimistic as an alternative and which we do believe will be FDA approved.
  • There were also no updates for the novel long-acting insulin, LAI287 (NN1436), which has the potential for once-weekly dosing and, according to ClinicalTrials.gov, completed a phase 1 trial in July, one month ahead of schedule. The trial was conducted in healthy volunteers and people with type 1 diabetes (ClinicalTrials.gov Identifier: NCT01730014). When previously asked about how LAI287 was engineered, management stated only that it was an analog (i.e., the primary amino acid sequence of the human insulin backbone has been modified) with an attached side chain that promotes stability – we understand that this is also the case for degludec, so we remain curious how, specifically, LAI287 is able to achieve such a long half life.

 

Questions and Answers

Q: My first question relates to the GLP-1 market. Could you comment on the trajectory you're seeing for Victoza going forward? You've been talking historically about DKK 200 million, then DKK 150 million. What should we expect going forward? And also, how do you view the overall US GLP-1 market and pricing?

Secondly, relating to guidance and the preliminary guidance, are you more, say, uncertain on next year’s guidance standing here today in late October than you've been in the other years when you've been giving these preliminary guidances? Because it seems there are a few more factors to consider. Or do you still feel very confident that you are able to actually live up to these expectations?

A: If we take the guidance on the sales line, and that's really the key one, we are quite comfortable with high single-digit growth. […] We have some significant swing factors we know will impact us in 2014. The first one is Prandin. I've been warning that Prandin would be subject to generic competition. That has now materialized from August onwards, and that will impact sales next year approximately 1% in the negative direction. Secondly, we also unfortunately lost a significant contract with Express Scripts, impacting both our Novolog franchise and our Victoza franchise in the US. It's a bit preliminary to fully estimate the financial amount of that contract, because it does depend on to what degree individual healthcare plans will decide to opt out under the national scheme operated by the Express Scripts, but I think it's feasible to assume that an impact on our top line will be in the magnitude of 1%. And then finally, I think there is an element of lower growth coming from the unusual level of growth from our biopharmaceutical franchise so far this year growing 12%, and with NovoSeven growing 11%, and that is probably higher than what we see as the long-term term trend for the product, although patients seem very reassured in the very safe profile of our NovoSeven brand.

[…]

With regards to the GLP-1 market, it is correct that our performance in 3Q13, underlying, was somewhat shy of DKK 150 million in the quarter. But we would say though, going forward, it's probably a reasonable estimate to assume an underlying ~DKK 150 million per quarter. If we look at the development in 2013 of the GLP-1 market, we did see, following the public debate about pancreatic safety of the incretin class in March, a slowdown in demand for these drugs, including GLP-1 products. With the very strong statements that came out over the summer, both from FDA and EMA and other competent organizations, of course, one can hope and wish for rebounding of the demand for GLP-1. It's perhaps a little bit early to have that optimism, but one thing that you may have noticed is that we are conducting a major DTC campaign in United States. And when we measure and look at the new scripts to our brand, we can definitely see a pickup. Whether that will translate to its base on the market is something we are hoping for. We can see some small indications, but we need some more data points on that. And then on pricing, of course, we have been able to raise price in United States and that's also anticipated going forward. But also due to the situation with Express Scripts, we're now seeing this aggressive price competition, even within a class of therapeutically different compounds, which is rather unusual. But I'm sure we're coming back to Express Scripts, so let's leave it at that.

Q: Rebates seem to be moving up and down where I think we had a benefit in the first half, and now in 3Q13, we had a drag from the rebate bookings. Can you just elaborate on what's driving the volatility and whether that's going to continue or whether that will quiet down over time?

And then the second question is on Levemir in the US. It had a particularly strong quarter in Q3, with revenues up 44%. How much of that is underlying and how much of that is a one-off?

A: With regards to rebates, it is correct that there were positive rebate adjustments when we look at the beginning of the year compared to 2012, and there was a drag in 3Q13. It relates to the amount of compensation for the donut hole, which we as a company had to share as part of the agreement that the pharmaceutical industry made with the administration in the US. It seems like there are more plans that are changing to become covered by Medicare Part D or become Medicare Part D-like, which helps give the benefit to the participants that the pharmaceutical industry will be covering the donut hole. And so this has impacted the rebate in 3Q13. I think all things being equal, we will see an acceleration or shortening of time period before rebates will have to be claimed and paid back. As we see healthcare reform being enacted, and as we see these changes starting to work, we should see a smoothing out of this relatively volatility that you've seen so far.

[…]

We're seeing a quite strong performance of our Levemir business, in particular in the United States. This is something that we actually did acknowledge also in 2012. And when we got the disappointing complete response letter on Tresiba, we actually noted that we anticipated that until we see a change in the basal insulin marketplace in the US in about 2015 when Lantus goes off patent and when biosimilar medicines may be launched, the market picture would be characterized by us continuing to push and being able to penetrate with Levemir in the US market. The volume growth is around 8% to 10% of the long-acting segment in the United States, and the rest is basically we're gaining share and we are taking price up. We are following the price lead of glargine in this case, and the price change has been around 30%, so the rest is volume.

Q: A question on long-term guidance – do you still stand by your 15% operating profit growth target, given that next year your guiding for headwinds, and I can't see in 2015, headwinds going away given that you might have competition to Victoza and also potentially generic competition.

On China, the market is having a lot of, let’s say, problems, and your numbers seem relatively robust. But could you just talk about what you're seeing on the ground? Do you think that there are any major changes to the Chinese dynamic? Are there any first signs of things getting better?

A: We basically stick to our long-term targets. We continue to work towards growing our business in operating profit terms 15% year-on-year, measured of course in local currencies, so take away the fluctuation caused by currencies. It is correct that we're guiding next year to the high single digits. I think if I take you back to 2012 and 2011, you would see a similar level of guidance. And it still looks like even in 2013, which has been a very challenging year for Novo Nordisk, we will come very close to 15% growth. That's the upper end of our guiding range in terms of operating profit. When we look to the years 2014 through 2016, there is no doubt that they will be challenging. I think we have opportunities with our portfolio of products. We now have Tresiba on a number of markets. We have filed IDegLira, and we hope to file liraglutide in obesity. So we still have opportunities to work with in the coming years until we clear the degludec family in the US, hopefully towards end of 2016, early 2017. And so that leaves us confident that we can continue to work towards this target.

[…]

It is, of course, also our hope and aspiration that with the enactment of Obamacare in the US, that that should lead to some volume growth in the US, and this should benefit, in particular, businesses like ours where we're dealing with chronic care patients.

On China, again, here, you're right, our business is largely unaffected when you look at the numbers. The 12% growth rate was impacted by a change in our distribution. We've gone from filling and shipping materials from Denmark to having consignment stock in China, shortening our distribution chain. And so it's a once-off event that we have taken out, which is good for business, good for predictability going forward. It's about three percentage points – and so if we add that back in, you're looking at a growth of our business in China of around 15%, which is what we've been guiding all along. What we notice in the marketplace is that has been, over the third quarter, a reduced willingness on the part of physicians to see representatives from the pharmaceutical industry. And now in terms of our business, since it is a business of chronic care, it has not had such a significant impact on the basal stable business we have. People are after all getting prescriptions of their insulins to treat their diabetes. However, we should point out one product where we may have seen a slight slowdown. It is the more promotion sensitive product line, Victoza, which is not reimbursed and which is very expensive. There, we have perhaps seen a slight slowdown in the Chinese market. So we do see a tendency, if we should be somewhat optimistic, that things are returning to normal. We do not see in our factories or our operations any vigilance from the authorities in terms of further investigations into the potential marketing practices that were so prominent and visible over the summer. So we think things are normalizing in China and that should be good.

Q: Have the payers started to signal any concerns over the price rises in the basal segment? Do you foresee more Express Scripts-type deals for the basal insulin segment in 2015? And if that's the case, then how do you think you could maintain share growth of Levemir during that period given the incremental competition?

And then going back to China and the lower human insulin growth you're seeing, could you shed a little bit more light on how the local players are competing there? Is there some more pricing pressure coming through or just incremental competition and more willingness to use the local players' human insulins?

A: It's interesting because if you look at the Express Scripts story, we were the incumbent player with about 80% – 70% of the market in the United States. And that, of course, gave the opposition, if you want, BMS/AZ, an opportunity to go in with an aggressive bid because that would be so painful for us if we look at it from a financial perspective to have to adjust all the way down as they apparently did. It's in a way the opposite situation when you look at the basals. In the basals, it's glargine that has the lion's share with 80%, and we have 20%. And so how that's going to play out in the future, I'm of course not going to discuss on the call here. But I do think that there might be others that will try to make similar plans as we've seen with Express Scripts. We had not had any specific pushback on the pricing of basals, and we are not the price leader and taker in this market. So I guess if any criticism has emerged, it would have been directed towards our competitor [Sanofi] and not towards us. So I would not exclude others from going down the same route. How that will play out in the basal segment might be quite different due to the different strength of the players in the marketplace.

The human insulin market in China is very competitive. We actually saw that the Chinese government adopted human insulin on the National Essential Drug List back on the first of May. It is likely that this will lead increased tender bidding for contracts in the regions in China. But so far, we've not seen any significant amount of that. That said, we are seeing that the local manufacturers like Tonghua Dongbao and United Labs are being competitive in those segments of the Chinese market. And where we're seeing the predominant part of our growth is clearly in the modern insulin segment where the biggest opportunities are as we see it for this new franchise. We're seeing the Chinese market gradually converting towards modern insulin, with very high penetration.

Q: Could you please comment on your plans for and the size of your sales force as you go into 2014? What's within your guidance assumption there? Could you also tell us the contribution of price and austerity measures to the third quarter sales? And then finally just a quick question with the launch of Lyxumia in Europe. Are you feeling any effects – or hearing any comments? I know it's early days but any feedback on that?

A: As we are aware, the lixisenatide application has been discontinued in the US, but in Europe, it is on the market. It's only, to my knowledge, sold to the tune of €3 million in the preceding quarter, and we have not seen any indentation on our, you can say, penetration in the European market. The feedback we are getting is that quite clearly, Victoza is in a different league in terms of efficacy. So that's also why we are setting out to do a superiority trial against lixisenatide, which has started recruiting. So essentially, we do not foresee lixisenatide, as a standalone product, as serious threat to liraglutide. One comment would be that it is being positioned mostly as an add-on for basal insulin intensification probably in realization of the notion that it is not a very efficacious standalone therapy as an oral anti-diabetic medication add-on. Victoza is positioned very early in treatment for this case, and it is actually also being used distinctly in that segment, and we have seen no slowdown in that regard.

On prices and austerity measures, I think gradually, we are seeing a lower impact on these factors in Europe. And if we specifically compare, 3Q13 against 3Q12, I'd say the overall impact on our business probably has been in the ballpark of negative 0.5 percentage points, primarily related to Europe and also with some effect coming from China in the lowering of the modern insulins in China in the first quarter of 2013.

Finally on how we go into 2014, we are quite bullish about three of the regions that we operate in. One is the United States where we're currently handling around 3,000 sales reps, and we have plans to expand that further with anticipation of an approval of [liraglutide for] obesity and also to continue to push our modern insulin franchise as well as our Victoza brand in the US. Then we plan to continue to invest in China. Some of our peers have been slightly worried about the lack of access to the medical profession in China. We think this is going to normalize, and we are intending to continue to expand our operation there because we want to support the government's intentions of rolling out healthcare capacity to community clinics in more rural and smaller cities, and that means that we need to employ more people going forward. And then finally, the general expansion of our organization in the region we called International Operations (IO), where we have about 1,800 reps, perhaps slightly more, which is comparable to China. We are also going to expand that. Whereas if we look at Europe, it's going to be a flat development of manning, and the same thing is applying in Japan going forward.

Q: Firstly, a question about Tresiba and pricing. We know that you have priced it with a substantial premium in several markets, except for Japan, where you have been successful. Have you met a larger resistance than you expected in the market that you have entered now with this high pricing? And then secondly with respect to the trial of Victoza versus lixisenatide, could you elaborate on what your definition will be on superiority? What kind of a margin, or how much do you actually have to beat it in order to claim it's superior?

A: The way you do these trials is that initially, you start by documenting non-inferiority. In terms of A1c difference, we would consider something like 0.3% both clinically meaningful and statistically valid as a both non-inferiority and superiority margin. And based on what we know for these two products, that is distinctly expected when you apply these drugs at 20 micrograms [Lyxumia] and 1.8 milligram [Victoza] on a once daily basis.

Then on to Tresiba pricing, you are absolutely right, we have been pursuing a rather aggressive pricing strategy because we think the product offers some significant benefits. And it has been around on average, in Europe, 70%, and that has of course meant that it has been somewhat difficult to convince certain authorities. You know that we have an ongoing debate about whether to launch in Germany or not, given the AMNOG procedure and the concern that the product might be withdrawn again or forced to be withdrawn again because of an evaluation in Germany. We see a relatively slow uptake in the UK and in Denmark. And we see, as you already indicated strong performance of the product in Japan. It's not because we did not pursue a premium pricing in Japan. It's just that given the economic situation in Japan, it is very, very difficult for anybody to get any kind of premium even for new products in Japan. And therefore, our assessment was because the price level in general in Japan is high that for the benefit of our organization that was losing ground in diabetes in Japan that we would accept a slight premium in Japan. So it's correct. Japan is the place where we have the most even playing field in terms of reimbursement and pricing with the competition, so that's where we can see the true grit of the product itself. Whereas if we take Switzerland, where we have full reimbursement, where the price differential is after all in our favor, there, the product is actually still the best. So all in all, yes, we are seeing pushback. We are determined to bring up the issue that the Europeans in general have to pay for innovation. We cannot assume that the Americans alone will fund innovation for the rest of the world. And therefore we have to take the political stand that this is what needs to be done. It will mean a slower penetration, but eventually, it's our hope that once patients gradually get to use this product, that we'll also see penetration in Europe.

Q: How should we think about the level of conservatism you've built into your initial 2014 guidance? And secondly, I would love to hear your thoughts on how you see the opportunity for liraglutide in obesity. Should we think of it as a small product potentially, or should we think of it as a much broader indication with the data you now have on prevention of patients moving from prediabetes to diabetes, and in the sleep apnea part of the study?

A: Well, it is clear, the further you stand away from a period that you are trying to explain the outcome of, the more deviation you will have in the likely outcome, and that's why we use a rather broad range in saying high single digits. As I also commented before, we have used this similar guidance for the two prior years, and there it was proven that we, at the end of the day, turned out to be slightly too conservative. I think when I look at 2013, it was not apparent to us that we would get the complete response letter, that's clear. On the other hand, we have seen a very strong performance of our portfolio of modern insulin and certainly those modern insulins are operating in a pricing environment in the US that has been more positive than what we anticipated. Secondly, I also think it's clear when you look at 2013 that the development for our biopharmaceutical franchise has been much more favorable than what we thought of. I think I mentioned some of the key events that will swing for 2014. I won't repeat all of them but just say that I think there are some factors currently that make us uncertain. I think later we'll probably have more understanding of the impact of, for example, an event like the loss of contract from Express Scripts, and hence, I would anticipate that we would be able to firm up the range, in January, and then hopefully, I would be proven to be conservative. But I'd say, my gut feeling now is that I'm branding it with exactly the same level of realism as has been used in prior years.

I think an interesting discussion is the opportunity for us with liraglutide 3 mg for obesity. Now of course, we have to mention the disclaimer again here that we don't know whether we're going to get an approval. We have learned very recently that it's very difficult to predict what the Agency is going to do. But you're right in saying that on the efficacy side, we have very strong data suggesting a very strong weight-lowering effect of liraglutide 3 mg, with around 30% of the cohort in our studies losing 10% or more, and that is very significant. It is believed that even 5% to 10% body weight loss has clinical relevance. Now, we know that obesity is underdiagnosed significantly, and is undertreated today significantly in the United States. So there are a number of hurdles to overcome. Just only recently, obesity has been characterized as a condition and a disease in the United States. And hence, it has up until then been looked upon as a social psychiatric problem rather than a medical condition. I attended the Cleveland Clinic's Obesity Innovation Summit just two weeks ago, where there were about 4,500 attendees that were physicians, investors and entrepreneurs in the field of medical technology. Cleveland Clinic, they greet you with one hand and then a knife in the other hand, meaning that they'd like to cut your stomach up, and they are highly aggressively promoting bariatric surgery as a way of dealing with obesity. But there were a number of other potential avenues introduced, and the audience was asked by the presenters in a query, how big they thought the obesity drug market would be, and they were given three different options. And the majority of the attendees believed there would be a $10 billion market eventually. So there are people out there that believe it will eventually be a pharmaceutical market, whether or not it would be lifelong treatment, and what we can see so far is that when you stop drug treatment, people start to regain weight. So it may add an option in conjunction with behavior modification programs, maybe even in conjunction with other types of intervention such as surgery. There are a lot of combinations that one can think of. We are optimistic that we will be able to get an approval because we do believe that the side effect profile we had seen in the clinical trial is known, and it's something that we would be able to deal with, but that of course depends on FDA discussions, which we expect will take place sometime mid-next year, because our filing will be done towards the end of the year. So we should, all other things being equal and with a little luck and tailwind on the pipelines, we should have a chance to be on the market, say, in 2015 in United States. And that goes back to the discussion about long-term financial targets. This will of course support our growth opportunity in exactly that window, which seems a little challenging, before we in all likelihood will be able to get Tresiba to the market, say, late 2016, early 2017 in the United States.

 

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