Memorandum

Novo Nordisk 1Q18 – D/O portfolio shows mixed results: Strength in Victoza (+4% YOY), Saxenda (+43% YOY), Ozempic ($11M) vs. significant pricing pressure on insulin; Spotlight on oral sema; Insulin pooled market analyses – May 2, 2018

Executive Highlights

  • Novo Nordisk’s 1Q18 was all around a relatively weaker quarter, with diabetes/obesity portfolio sales growing 6% YOY in local currencies and falling 2% sequentially to $3.7 billion, from $3.4 billion in 1Q17 and $3.7 billion in 4Q17.

  • Novo Nordisk highlighted strength in GLP-1: Victoza sales grew 4% YOY to $989 million, Saxenda sales grew 43% YOY to $127 million, and Ozempic posted $11 million in just two months on the market. According to management, a majority of the Victoza sales force is shifting priority to Ozempic, although promoting Victoza’s CV indication remains a key commercial priority.

  • On the other hand, pricing pressure had a severe impact on all of the company’s insulin products in 1Q18. Even Tresiba, still a bright spot, experienced muted 18% YOY growth and 7% sequential decline to $290 million. Management mentioned lower realized price on Tresiba in 2018 relative to 2017; while the preferred status within Medicare Part D is a win for patient access, it’s also driving down net revenue for the company. Novo Nordisk broke out Fiasp sales for the first time, which came in low at $14 million and only $2.5 million in the US. Levemir fell 31% YOY to $459 million, while NovoLog fell 12% YOY to $776 million.

  • This report includes four pooled market analyses:

    • The basal insulin market grew 2% YOY and fell 9% sequentially in 1Q18 to $2.4 billion. Pricing pressure abounds.

    • Next-gen basal insulins (Tresiba + Toujeo) grew 27% YOY but dipped 5% sequentially to $533 million. Together, these two advanced products reflected 22% of the basal insulin category, up from 18% in 1Q17.

    • Rapid-acting insulins posted $1.7 billion in pooled sales, growing 8% YOY and 4% sequentially. Without the new addition of Fiasp, the class still grew 7% YOY and 3% sequentially. Lilly’s Humalog was the main growth driver.

    • Basal/GLP-1 fixed-ratio combinations (Xultophy + Soliqua) grew 24% sequentially to $67 million. Soliqua was flat QOQ in 1Q18, meaning Xultophy (+26% YOY to $56 million) drove 100% of this growth.

  • The call offered notable R&D updates, headlined by a review of PIONEER 1 topline data (oral semaglutide vs. placebo). On the heels of these positive results, PIONEER 2 (vs. SGLT-2 empagliflozin), 3 (vs. DPP-4 sitagliptin), 4 (vs. GLP-1 liraglutide), and 7 (flexible dose escalation) are scheduled to report in 2Q18. Some of this new data will likely be presented on June 24 at ADA, during Novo Nordisk’s planned investor event. The company also debuted a new soluble glucagon candidate (HypoPen 1513), now in phase 1 for hypoglycemia rescue. Phase 2 trials of the once-weekly basal insulin will begin by year-end; the liver-targeted prandial insulin analog was discontinued from phase 1. Turning to the obesity pipeline, Novo Nordisk has decided to proceed with phase 2 studies of its long-acting amylin analog, on the docket for 1H19.

Novo Nordisk provided its 1Q18 financial update in a call this morning led by CEO Mr. Lars Jørgensen. See the company’s press release, earnings presentation, and roadshow presentation. Novo Nordisk continues to share incredible detail in its financial reporting, which we really applaud and savor.

Read on for key financial and pipeline highlights from Novo Nordisk’s Q1 update. Before you get to that, we’ve included pooled market analyses of basal insulins, next-gen basal insulins (Tresiba and Toujeo), rapid-acting insulins (now including Fiasp!), and basal/GLP-1 combos. Scroll further down for a comprehensive pipeline summary table, showcasing the latest updates on Novo Nordisk’s early- and late-stage diabetes, obesity, and NASH candidates. Finally, we conclude this full report with relevant Q&A from the call.

1Q18 Financial Results for Novo Nordisk’s Major Diabetes and Obesity Products

Product

1Q18 Revenue (billions)

Year-Over-Year Reported (Operational) Growth

Sequential Reported Growth

Basal Insulin

DKK 4.9 ($0.8)

-13% (-3%)

-11%

- Tresiba

DKK 1.8 ($0.3)

+18% (+33%)

-7%

- Levemir

DKK 2.8 ($0.5)

-31% (-22%)

-17%

- Xultophy

DKK 0.3 ($0.06)

+228% (+246%)

+26%

Rapid-Acting Insulin

DKK 4.8 ($0.8)

-10% (0%)

+5%

- NovoLog

DKK 4.7 ($0.8)

-12% (-2%)

+3%

- Fiasp

DKK 0.1 ($0.01)

--

--

Premix Insulin

DKK 2.6 ($0.4)

-8% (-1%)

+1%

- NovoMix

DKK 2.5 ($0.4)

-10% (-1%)

+2%

- Ryzodeg

DKK 0.1 ($0.02)

+48%

-15%

Human Insulin

DKK 2.4 ($0.4)

-9% (-3%)

-4%

Victoza

DKK 6.0 ($1.0)

+4% (+18%)

-5%

Ozempic

DKK 0.1 ($0.01)

--

--

Saxenda

DKK 0.8 ($0.1)

+43% (+64%)

+11%

Total Diabetes and Obesity Portfolio

DKK 22.7 ($3.7)

-5% (+6%)

-2%

 

Table of Contents 

Pooled Market Highlights

1. Basal Insulins: Pooled Sales Grow 2% YOY, Fall 9% Sequentially to $2.4 Billion; Pricing Pressure Affects Each and Every Insulin Product

The basal insulin market grew 2% YOY and fell 9% sequentially in 1Q18 to $2.4 billion, compared to $2.4 billion in 1Q17 and $2.7 billion in 4Q17. This analysis includes Novo Nordisk’s Tresiba (insulin degludec) and Levemir (insulin detemir), Sanofi’s Toujeo (insulin glargine U300) and Lantus (insulin glargine U100), and Lilly/BI’s Basaglar (biosimilar insulin glargine). Note that we estimate total Basaglar sales by doubling Lilly’s reported product revenue, since only Lilly’s share (and not BI’s) is publically disclosed; we can only speculate that the two companies split worldwide Basaglar revenue 50/50. In general, revenue from basal insulin has been falling for the past ~three years, with very modest gains like this 2% YOY growth offset by higher single-digit declines in 2015. You’ll see this reflected in the graph below. The downward trend has been driven primarily by a struggling Lantus franchise (-26% YOY to $1.1 billion in 1Q18), which has seen significant losses due to (i) widespread pricing pressure, (ii) exclusion from Medicare Part D and private formularies, and (iii) entry of next-generation and biosimilar competition. That said, Levemir hasn’t fared much better, with sales dropping 31% YOY in 1Q18 from a much lower base ($459 million in 1Q18 vs. $575 million in 1Q17). Newer basal insulin offerings are certainly doing better financially, but still can’t escape pricing pressure. Basaglar sales tripled YOY but climbed only 8% sequentially to $332 million in 1Q18; this is low sequential growth for a product so early in its launch cycle, and Lilly cited pricing pressure, pricing pressure, pricing pressure. Toujeo revenue rose only 3% YOY to $243 million in 1Q18, while Tresiba sales grew 18% YOY to $290 million. The market entry of newer insulins has further exacerbated pricing pressure, since PBMs/payers are able to pit each insulin against the others, negotiating higher rebates. As Novo Nordisk management emphasized on today’s call, PBMs/payers view insulins as largely interchangeable; certainly, many patients and providers would disagree with this sentiment. These dynamics culminate in lower realized price for manufacturers, as well as negative consequences for patients. As one example, Lantus’ loss of preferred status on the Medicare Part D formulary, where it now has a higher copay than Basaglar and Tresiba, has accelerated loss in US revenue and also means greater out-of-pocket expenses for individuals who wish to maintain continuity of care. Basaglar is also preferred over Lantus on the CVS Health and UnitedHealthcare formularies for 2018, and the same principle applies.

  • By value, Sanofi’s Lantus continues to lead the market with 46% share and $1.1 billion in revenue (-26% YOY) in 1Q18, by our calculations. Novo Nordisk’s Levemir is next, at 19% market share and $459 million in first quarter sales (-31% YOY). Newcomer Basaglar held 14% market share by value in 1Q18 with $332 million in sales (+261% YOY). Next-generation basal insulins follow, and these are the real bright spots within the class in our view, despite being in fourth and fifth place currently (much more detail below): Tresiba claimed 12% market share with $290 million (+18% YOY), and Toujeo took home 10% share with $243 million (+3% YOY). Basal market dynamics are shifting by the quarter, with Lantus/Levemir prescriptions going to Basaglar, Tresiba, and Toujeo instead: In 4Q17, Lantus and Levemir claimed 48% and 20% of pooled sales, while Basaglar held 12%, Tresiba 11%, and Toujeo 10%.

  • By volume, Lantus captured 42% of total basal insulin prescriptions in the US, followed by Levemir with 23%, Tresiba with 12%, Toujeo with 9%, and Basaglar with 8% (per slide 8 of Novo Nordisk’s presentation). We note changes already since 4Q17 (slide 9), when Lantus held 45% TRx, Levemir held 23%, Tresiba 11%, Toujeo 8%, and Basaglar 6%. This indicates that Lantus is in fact losing volume, either via patient switching or new therapy starts, to next-generation basals and to biosimilar Basaglar. As such, Sanofi’s share of the basal insulin market has fallen from 53% to 51%, while Novo Nordisk’s has grown from 34% to 35% in the same timeframe. We suspect the remaining volume share goes to human basal insulins, and that share actually seems to be dropping slightly (from ~8% in 4Q17 to ~6% in 1Q18).

  • Two more biosimilar insulin glargines are pending FDA approval, contingent on resolution of patent infringement lawsuits from Sanofi. Merck’s Lusduna Nexvue has been tentatively approved by FDA, and Mylan/Biocon’s NDA for Semglee was submitted in 3Q17 and immediately met with its own lawsuit. Neither can be fully approved or launched until lawsuit resolution. As a reminder, Lilly/BI faced a similar lawsuit over Basaglar and settled with an agreement on royalties and a launch delay. We think it’s unlikely that another biosimilar glargine will launch in 2018, but both will probably reach the US market eventually. When they do, these companies will benefit from Basaglar establishing safety, efficacy, and most of all familiarity for biosimilar insulin among prescribers.

Basal Insulin Market (1Q05-1Q18)

2. Next-Generation Basals: Tresiba + Toujeo Sales Grow 27% YOY but Dip 5% Sequentially to $533 Million; Volume is Up, Price is Down

Next-generation basal insulins Tresiba (degludec) and Toujeo (glargine U300) combined for $533 million in 1Q18 revenue, rising 27% YOY but dropping 5% sequentially, from $419 million in 1Q17 and $561 million in 4Q17. The disappointing sequential dip is no doubt a consequence of pricing pressure in the US, which we’ve discussed in-depth above. Indeed, US sales of $290 million in 1Q18 (when Tresiba posted $185 million in the US and Toujeo posted $105 million) dove 13% sequentially vs. $332 million in 4Q17 ($200 million Tresiba + $132 million Toujeo). OUS sales of $239 million ($105 million Tresiba + $134 million Toujeo) actually grew 4% from $230 million in 4Q17 ($103 million Tresiba + $127 million Toujeo). Novo Nordisk’s Tresiba continues to lead the two-member class with 54% share by value, while Sanofi’s Toujeo comprises the other 46% of revenue. This has been fairly consistent over the last year; in 2017, Tresiba took home between 51% and 59% of pooled sales and that number has been steady at 54% since 3Q17. In 1Q18, Tresiba sales climbed 18% YOY as reported but fell 7% sequentially to $290 million; management cited rebate adjustments that led to lower realized price, while continuing to be very positive about Tresiba as a growth driver (the insulin drove 21% of Novo Nordisk’s diabetes/obesity portfolio growth in 1Q, by our calculations). We’re excited about Tresiba’s potential in 2018 (2017 was its first blockbuster year), though Novo Nordisk does expect negative pricing dynamics to continue into the foreseeable future either way, we are very excited that more patients will receive it. Turning to Toujeo, sales rose only 3% YOY as reported and fell 9% sequentially to $243 million in 1Q18; we were disappointed at an utter lack of acknowledgement of Toujeo during Sanofi’s call, even though it was the company’s only diabetes product to grow YOY in 1Q. We’re also disappointed at the QOQ fluctuations from both agents, as we see enormous growth potential for the class. That said, the revenue drops seem to be all but entirely due to lower realized price, because both advanced basals saw volume gains from 4Q17 to 1Q18: Tresiba’s share of total basal insulin prescriptions in the US rose from ~11% to ~12%, and Toujeo’s rose from ~8% to ~9%. As such, we’re inclined to celebrate the YOY growth and hope that volume share continues to climb, as Tresiba and Toujeo are certainly far better options for patients than Lantus and Levemir. Together, these next-gens reflected 22% of the basal insulin market overall in 1Q18, up from 21% in 4Q17 and 18% in 1Q17.

  • In 1Q18, FDA approved the inclusion of DEVOTE data, but not SWITCH data, on the Tresiba label. The US label for Tresiba now reflects (i) the drug’s compelling CV safety and (ii) significant reduction in hypoglycemia risk vs. Lantus. In DEVOTE, participants on Tresiba experienced a significant 40% reduction in rates of severe hypoglycemia vs. participants on Lantus (the relative risk reduction for severe nocturnal hypoglycemia was even higher at 53%). Both SWITCH and DEVOTE results were added to the EU Tresiba label in 1Q17 and 3Q17, respectively. The implications of this decision are big: It should put to bed any lingering concern over Tresiba’s CV safety, and it officially reflects the hypoglycemia benefit associated with Tresiba. That said, only DEVOTE data were included, and that trial only enrolled patients with type 2 diabetes at high CV risk; only SWITCH 1 enrolled patients with type 1 diabetes. We were somewhat surprised that this didn’t come up on Sanofi’s call, as we think it can be quite positive for Toujeo as well by bringing more attention to the issue of hypoglycemia and the fact that newer basal insulins minimize that risk. To this end, we eagerly await more outcomes data on hypoglycemia: Novo Nordisk’s phase 3 study comparing Tresiba head-to-head vs. Toujeo is ongoing (expected completion in December 2018, pushed back from October). In the nearer-term, secondary endpoint data from Sanofi’s phase 4 BRIGHT study (which met its primary endpoint showing similar A1c reductions with Toujeo vs. Tresiba) will be presented at ADA 2018 in Orlando. We expect generally positive results, particularly given real-world evidence from the LIGHTNING program indicating lower rates of severe hypoglycemia with Toujeo vs. Lantus, and similar rates with Toujeo vs. Tresiba. Until Orlando!

3. Rapid-Acting Insulins: Pooled Revenue Rises 8% YOY to $1.7 Billion, Driven by 12% YOY Growth in Lilly’s Humalog

The rapid-acting insulin market grew 8% YOY and +4% sequentially to $1.7 billion, up from $1.6 billion in both 1Q17 and 4Q17. Fiasp joined this market anew in 1Q18, but Novo Nordisk’s next-gen bolus insulin only accounted for $14 million (<1%) of whole class sales, so even without it pooled revenue climbed 7% YOY and +3% sequentially. This analysis covers Novo Nordisk’s Fiasp and NovoLog (insulin aspart), Lilly’s Humalog (insulin lispro), and Sanofi’s Apidra (insulin glulisine). By our calculations, Novo Nordisk captured 47% of this market by value, with $14 million sales from Fiasp and $776 million sales from NovoLog (-12% YOY). Lilly captured 47% with Humalog alone (+12% YOY to $792 million), and the company has its own next-gen candidate in phase 3, which could join Fiasp and MannKind’s Afrezza in the emerging ultra-rapid-acting class. Sanofi held the remaining 6% of the market by value with Apidra sales of $112 million in 1Q18 (-7% YOY). No company has provided concrete data on US prescription volume within the rapid-acting insulin category, but we do know with certainty that pricing pressure abounds. Novo Nordisk management mentioned repeatedly on today’s call that insulin profitability is suffering: When payers view products as largely interchangeable, they’re inclined to design exclusive contracts, which allows them to negotiate higher rebates from manufacturers. If this is true for basals (and we have no doubt that it is), it’s even more pertinent for prandial insulins, because there’s even less obvious distinction. For instance, Tresiba showed significant hypoglycemia benefit over Lantus in the DEVOTE trial, which is now included on the product label, but nothing quite like this exists for mealtime insulins (it’ll be interesting to see how this evolves with new insulins that are supposedly much faster, in terms of onset time and offset time). That’s not to say we agree with the perspective that all bolus insulins are interchangeable – far, far from it! In fact, we’ve heard tragic stories about patients forced to switch from one mealtime insulin therapy to another because of insurance coverage. These products come in different pens or devices (including inhalable Afrezza); they’re also different molecules, and sometimes one works better than another for a particular patient. Even when two agents are similar, interrupting continuity of care and forcing patients to switch onto a formulary’s preferred drug can be damaging. On Lilly’s 1Q18 earnings call, management attributed 12% YOY growth in the Humalog business to declining use in the Medicaid channel, which implies that patient access challenges are only getting worse.

  • The rapid-acting insulin class has posted fluctuating sales over the past few years. Although 2017 was a year of modest growth, 2016 was characterized by single-digit YOY losses. We have every reason to believe that these fluctuations will continue moving forward, because US pricing pressure is unlikely to abate, and competition from SGLT-2 inhibitors and GLP-1 agonists is only getting stronger. Notably, SGLT-2s and GLP-1s also address postprandial excursions without excess hypoglycemia risk. Novo Nordisk management clarified that GLP-1 agonists are somewhat shielded from the US pricing pressure that hangs like a dark cloud over diabetes drugs, because these advanced agents present with more obvious differentiation from others in the same class.

  • Sanofi launched Admelog (biosimilar lispro), the first biosimilar mealtime insulin, to US pharmacies in 1Q18. This biosimilar was already available in select European countries under brand name Insulin lispro Sanofi (EMA approved in July 2017), but the company has yet to break out sales so this product is not included in our pooled market analysis for rapid-acting insulin. For more on Admelog, see our report on Sanofi’s 1Q18 financial results, and for more on Fiasp (including Novo Nordisk’s strategy), see below.

Rapid-Acting Insulin Market (1Q06-1Q18)

4. Basal Insulin/GLP-1 Combinations: Pooled Sales Grow Modest 24% Sequentially to $67 Million, Driven Entirely by Xultophy; Building Reimbursement and Educating HCPs Will be Key

Novo Nordisk’s Xultophy (insulin degludec/liraglutide) and Sanofi’s Soliqua (insulin glargine/lixisenatide) posted a combined $67 million in 1Q18, with pooled sales rising 24% sequentially from $54 million in 4Q17. This new class – fixed-ratio basal insulin/GLP-1 combinations (the field needs a pithier name) – more than tripled YOY from $19 million, though this is a less meaningful comparison since 1Q17 was the first quarter with both drugs on the market. Indeed, we still think this market is trending below expectations. A 24% sequential jump is disappointing for two products so early in their launch cycle, and so highly-anticipated at that. Whole class sales rose 75% sequentially in 2Q17 (from $19 million to $33 million), +12% in 3Q17 (to $37 million), and +45% in 4Q17 (to $54 million). Thought leaders have consistently touted the benefits of basal/GLP-1 fixed-ratio combos, listing superior glucose-lowering efficacy and a milder side-effect profile compared to either agent alone (i.e. less weight gain, less hypoglycemia, less GI discomfort). Xultophy has even demonstrated significant weight loss benefit, meaning it doesn’t just neutralize the weight gain normally associated with basal insulin, but goes one step further to meaningfully reduce body weight. Our sense is that Xultophy’s clinical profile is stronger than that of Soliqua (although we should note that no head-to-head RCT has been conducted), and in line with this, Novo Nordisk’s product drove 100% of sequential market growth in 1Q18. That said, Soliqua is incredibly better than “just” taking GLP-1 or “just” taking basal insulin, and it is priced very differently – we’ve also heard some HCPs say that most of the benefit can also be made up by taking Soliqua at “hour 18” though this is not an official recommendation. Xultophy sales climbed 26% sequentially to DKK 338 million ($56 million), while Soliqua sales remained flat at €9 million ($11 million). Xultophy’s share of pooled revenue grew from 80% in 4Q17 to 84% in 1Q18. This is despite a lack of commercial investment from Novo Nordisk, although this may have changed ever-so-slightly in the new year, as we discuss in more depth below. Nonetheless, these numbers are not great news for Sanofi, which has been investing all along in peer-to-peer medical education on the concept of fixed-ratio therapy, and in efforts to expand reimbursement. Soliqua’s US labeling poses an additional hurdle to uptake: FDA has indicated Xultophy and Soliqua only for patients who are on basal insulin or the specific GLP-1 component beforehand, which is very limiting for Sanofi since so few type 2s take Adlyxin (standalone lixisenatide); in contrast, Victoza (standalone liraglutide) is a market-leading GLP-1 agonist.

  • Above all, we want to emphasize that both Xultophy and Soliqua have ample head room for commercial growth, and we hope this class fares better in 2018 than it did in 2017. Sanofi will continue to roll out Suliqua in Europe this year, and notably, the EU indication is less stringent – the drug can be prescribed as second-line after metformin, without the “Adlyxin first” barrier. Novo Nordisk has submitted a follow-up application to FDA requesting that DEVOTE and LEADER data be added to Xultophy’s label, and CHMP has already endorsed this, which bodes well for an EU label update. With both CV benefit and hypoglycemia benefit reflected in product information, we imagine Xultophy uptake could really accelerate. In the US, especially, HCPs are reluctant to prescribe fixed-ratio combinations due to lack of familiarity and concerns over parsing out side-effects (we attribute this also to lack of familiarity, since HCP education should communicate that side-effects are milder with the combination drug than with each individual monotherapy). Professor Philip Home recently clarified that many prescribers view GLP-1s as a “pre-insulin” therapy, which makes a fixed-ratio combination of a GLP-1 + insulin seem illogical. He added that the fixedness can be a problem, since some providers may want to combine Lantus (glargine) with Victoza (liraglutide) or Trulicity (Lilly’s dulaglutide), the most familiar molecules in each class. Again, we think these challenges will be addressed by provider-facing education, and we’d love to see Sanofi and Novo Nordisk invest collaboratively toward this goal (e.g. by jointly sponsoring symposia at major meetings). We believe that getting Xultophy and Soliqua into more patient hands is a worthwhile goal across the field, because it will bring a stride forward in type 2 diabetes management.

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

Financial Highlights

5. Diabetes/Obesity Portfolio Falls 5% YOY as Reported but Rises 6% YOY in Local Currencies to $3.7 Billion; GLP-1 and New-Gen Insulins Counter Losses in Older Insulin Portfolio

Novo Nordisk’s overall diabetes/obesity portfolio fell 5% YOY as reported but grew 6% YOY in local currencies to DKK 23 billion ($3.7 billion), which also reflects 2% sequential decline. It was more or less a weak to neutral quarter. For comparison, total portfolio sales were DKK 24 billion ($3.4 billion) in 1Q17 and were DKK 23 billion ($3.7 billion) in 4Q17. A hat trick of strong performances from Victoza, Tresiba, and Saxenda helped offset losses across Novo Nordisk’s modern insulin portfolio (Levemir, NovoLog, and NovoMix). Pricing pressure continues to rage through insulin markets, especially in the US, lowering realized price for manufacturers. In our opinion, Novo Nordisk is weathering the storm as well as it can – particularly when we consider the hit Sanofi’s diabetes business has taken over the past couple of years, driven by losses from Lantus. On the other hand, Lilly’s arguably more diverse portfolio has fared better, posting double-digit growth from a lower base. Within Novo Nordisk’s portfolio, Ozempic boasts significant growth potential in coming years, and we’re also optimistic about Tresiba’s potential given recent gains in Part D access, plus a US label update highlighting hypoglycemia benefit. Novo Nordisk narrowed its financial guidance from what was previously 2%-5% sales growth this year to 3%-5%, on the strength of GLP-1s (Victoza, Saxenda, and Ozempic) and new-generation insulins (Tresiba, Xultophy, Fiasp, and Ryzodeg). By our calculations, Tresiba drove 21% of growth in Novo Nordisk’s diabetes/obesity portfolio in 1Q18, while reflecting only 7% of total revenue ($290 million, +18% YOY). Xultophy and Victoza each contributed a 19% share of growth, reflecting <2% of whole portfolio sales and 26% of whole portfolio sales, respectively. Saxenda drove 18% of portfolio growth while representing 3% of total revenue. Fiasp drove 6% of growth while representing <0.5% of total revenue, and Ozempic drove 5% while representing <0.5% of total revenue – note that both products were new to the US market in 1Q18, and this was the first time Novo Nordisk has broken out sales. Ryzodeg drove 4% of portfolio growth and reflected <1% of total revenue, and lastly, “other diabetes” drove 8% of growth and reflected 5% of total revenue. We see this diversity in growth as very positive evidence of strong GLP-1 and new-generation insulin performances. Most growth (70%) came from International Operations, especially Latin America and AAMEO, with the remaining 30% from North America; however, North America comprised 50% of total sales. To be sure, Novo Nordisk remains a leading – if not the leading – industry player in diabetes. According to 1Q18 materials, the company holds ~45% of the entire insulin market and ~27% of all diabetes care, by volume.

  • In this 1Q18 update, Novo Nordisk shifted the way it reports insulin revenue, and we have altered our report structure in accordance. Previously, insulin was grouped into (i) human, (ii) modern (NovoMix, NovoLog, Levemir), and (iii) new-generation (Tresiba, Xultophy, Ryzodeg, Fiasp). Now, Novo Nordisk is using four categories of (i) human insulin, (ii) premix insulin (NovoMix, Ryzodeg), (iii) long-acting insulin (Tresiba, Xultophy, Levemir), and (iv) fast-acting insulin (NovoLog, Fiasp). We’re not sure what the theory behind this shift was, but we might speculate that it was meant to dampen the appearance of losses across insulin products. With eight insulin products, Novo Nordisk is certainly feeling the squeeze of pricing pressure.

  • CEO Mr. Lars Jørgensen addressed the so-called doughnut hole in Medicare Part D, which we also heard about on Lilly's and Sanofi’s 1Q18 calls. Novo Nordisk expects a 1%-2% impact on US diabetes sales in 2019 with the closing of the Part D coverage gap, which was moved up to 2018 from 2019 earlier this year.

Total Diabetes/Obesity Sales (1Q12-1Q18)

6. Victoza Grows 4% YOY to $989 Million; Falls 5% Sequentially from All-Time High; Sales Force Shifts Attention to Ozempic

Sales of market-leading GLP-1 agonist Victoza rose 4% YOY as reported (+18% YOY operationally) to DKK 6 billion ($989 million) from a base of $824 million in 1Q17. Management commented multiple times, during both prepared remarks and Q&A, that the majority of their GLP-1 agonist sales force in the US has transitioned or is transitioning to promoting Ozempic. As such, it’s not unexpected that Victoza growth may already be slowing, ahead of liraglutide’s expected LOE in 2022/2023. For comparison, YOY growth for the GLP-1 was +25%, +17%, +5%, and +17%, in 1Q17, 2Q17, 3Q17, and 4Q17 (+16% in 2017 overall). Sequentially, sales fell 5% in 1Q18 from an all-time-high of >$1 billion in 4Q17, and we note a recent and small dip in overall GLP-1 agonist total monthly prescriptions (per slide 9), as well as slowed sequential growth for Lilly’s Trulicity in 1Q18. Victoza will likely remain a dominant force on the GLP-1 market for some time to come, and we sincerely hope that the franchise continues to climb in light of liraglutide’s new CV indication (granted by FDA in August 2017), although long-term, Novo Nordisk has outlined a clear plan to sustain its GLP-1 business with injectable and oral semaglutide. For now, management pointed to Victoza and Tresiba as key growth drivers in the company’s overall portfolio. Management also underscored a continued focused on promoting Victoza as the only GLP-1 agonist with a CV indication. Admittedly, it’s a bit difficult to get a clear picture of Novo Nordisk’s GLP-1 promotion priorities: In one statement, Mr. Jørgensen shared a continued emphasis on Victoza and its cardioprotection; in the very next sentence, he noted that most districts are switching promotional activities from Victoza to Ozempic. We imagine the shift isn’t as sharp as it might sound and that, in reality, reps will promote both products – after all, they are currently differentiated in terms of CV indication, dosing schedule, and formulary access (e.g. a patient may have coverage for Victoza but not Ozempic, affecting treatment decisions). Presumably, many believe that Ozempic is cardioprotective even if that has not been proven.  

  • What is supremely clear to us is that GLP-1 agonists are a major priority for Novo Nordisk, whether it be Victoza (liraglutide), Ozempic (semaglutide), or obesity drug Saxenda (liraglutide 3.0 mg). These three products together drove 43% of growth in the company’s diabetes/obesity portfolio in 1Q18. Novo Nordisk has started reporting results for a “total GLP-1” category consisting of Victoza + Ozempic, and this value grew 5% YOY as reported (+19% YOY operationally) to DKK 6 billion ($1 billion) in 1Q18. Novo Nordisk’s press release also shared that GLP-1 agonist sales now comprise 12% of the total global diabetes market, up from 10% one year ago, and 15% of the US diabetes market. During Q&A, Mr. Jørgensen commented that GLP-1s remain a class in which differentiation drives prescription rates, arguing that this dynamic has thus far fended off pricing pressure in contract negotiations. In contrast, he pointed to the basal insulin market, where products are more often “put up against each other and excluded.” While this happens to some extent with GLP-1s, it is at a much lower level. This is in line with previous commentary from management discussing higher realized price for Victoza (i.e. lower rebates paid to PBMs/payers), which they cited as contributing to record sales in 4Q17.

    • We very much hope Novo Nordisk and other GLP-1 manufacturers continue to keep pricing pressure at bay, but also work to expand access and improve affordability, especially for highest-risk patients. Novo Nordisk has utilized some outcomes-based contracting with Victoza, and we think value-based plans make complete sense for a drug indicated to reduce CV events – a triple win for patients, payers, and manufacturers.

  • Geographically, Victoza sales were once again stronger in the US, where revenue grew 7% YOY as reported (+19% YOY operationally) to DKK 4.5 billion ($746 million). OUS sales dropped 3% YOY as reported (+12% YOY operationally) to DKK 1.5 billion ($243 million), including a 6% reported decline in Region Pacific to DKK 126 million ($21 million) and a 7% rise in Region Europe to DKK 871 million ($144 million). US revenue fell 3% sequentially, while OUS revenue fell 10% sequentially. Performance in China was particularly strong, growing 43% YOY as reported to DKK 110 million ($18 million) from a low base of $11 million in 1Q17; this was driven by national reimbursement, secured in mid-2017 and accompanied by a slight drop in price for the region. During Q&A, EVP of Commercial Strategy & Corporate Affairs Ms. Camilla Sylvest aptly pointed out that GLP-1 remains a very small part of China’s diabetes market (~1%), indicating significant growth potential for Victoza in China.

Victoza Sales (1Q12-1Q18)

7. Ozempic Sells $11 Million in First Quarter on US Market; Management Optimistic about DKK 1 Billion Sales in 2018, Potential to Drive GLP-1 Class Growth; Upcoming CVOT + Retinopathy Outcomes Trial

In its first quarter on the market (a partial one at that), GLP-1 agonist Ozempic (semaglutide) posted DKK 69 million ($11 million) – roughly 1% of Victoza sales for 1Q18. Management emphasized that, so far, everything is going according to expectations. Ozempic was approved by the FDA in December 2017 and subsequently launched in US pharmacies in early February 2018, meaning this figure represents <two months of US availability. Novo Nordisk shared that sales were driven by inventory build-up associated with the product’s launch. We think very little can be read into this figure, but we do appreciate Novo Nordisk breaking it out so early, which we see as a reflection of enormous confidence in the product. Management reiterated that they expect at least DKK 1 billion in sales for 2018 (~$160 million at the current exchange rate). Most of the discussion on Ozempic was focused on progress made in formulary coverage and the fact that the majority of sales districts are shifting to prioritize Ozempic over Victoza. Management explained that formulary positioning is being gained as an “add-on” to Victoza’s positioning, so coverage isn’t coming at an expense to liraglutide access. Multiple Novo Nordisk execs also stated during Q&A that formulary access has been gained for more than half of current GLP-1 volume in the US – in other words, more than half of patients currently taking a GLP-1 would also have coverage for Ozempic, though we’re not sure about specifics in tiered/preferred status, which could have a big impact on patient copays. Novo Nordisk’s roadshow presentation (slide 63) shows that the biggest source of new-t0-brand prescriptions for its GLP-1 business is patients switching from oral therapies (51%), with another 29% switching from insulin and 9% from other GLP-1s. This is in line with strong underlying class growth and indicates that Ozempic need not steal share from Victoza to be commercially successful (nor do the various GLP-1 manufacturers need to worry about losing share to Ozempic, per se). Management was otherwise reluctant to offer specifics on what they think might happen between Victoza and Ozempic. Over the next few months, we expect patients/providers to start taking advantage of Ozempic’s improving formulary positioning. We’re beyond excited that this more potent once-weekly GLP-1 is now available to patients, as it could move diabetes care another stride forward.

  • Ozempic has also been approved in Japan and the EU, and launch in the first European countries is expected in 2H18, pending approval of two variation applications to the EMA. The first is for the ability to market Ozempic in two separate pens, one capable of dosing 0.25 mg (for titration) and 0.5 mg, and another capable of dosing 1.0 mg, as in the US. The EMA initially approved a single pen with all three dosing capabilities. During prepared remarks, Dr. Thomsen clarified that these device offerings will enable a flat pricing strategy in Europe. The second variation application is for the inclusion of SUSTAIN 7 data on the label; that trial demonstrated semaglutide’s superiority over dulaglutide (Lilly’s Trulicity) on A1c-lowering (~0.4% treatment difference) and weight loss (~5-7 lbs treatment difference). Both applications have been submitted, and decisions are expected in 3Q18. At ENDO 2018, we were intrigued to learn that company reps in the US are allowed to discuss SUSTAIN 7 results, despite the fact that they aren’t yet included on the FDA-approved label.

    • Launch in Japan will occur once reimbursement has been obtained, but no timeline has been provided.

  • As part of EMA approval, Novo Nordisk has agreed to conduct a long-term retinopathy outcomes study for Ozempic. SUSTAIN 6, the pre-market CVOT for semaglutide, found a 76% increased risk of retinopathy with study drug vs. placebo (HR=1.76, 95% CI: 1.11-2.78). This safety signal dominated the FDA’s Advisory Committee meeting, where a 17-person panel nonetheless cast a 16-0 vote in favor of semaglutide’s approval. Indeed, retinopathy has emerged as the only real safety concern with semaglutide, aside from the GI side-effects associated with all GLP-1 agonists. In our observation, the field has generally agreed that the retinopathy signal – not seen in any other SUSTAIN trials – is most likely due to “early worsening phenomenon,” wherein rapid drops in A1c are associated with temporary increases in adverse eye events, especially in those with retinopathy and/or high A1c at baseline. The same effect has been observed with insulin. CSO Dr. Mads Thomsen has expressed confidence that a longer outcomes study on retinopathy will support that tighter A1c control, including with semaglutide, is better for long-term microvascular outcomes. The SOUL CVOT, set to begin mid-year, should also help shed light on the issue of retinopathy.

  • In order to support a CV indication for semaglutide, Novo Nordisk will soon commence the post-market SOUL CVOT (n=~13,000) as a follow-up to the pre-market SUSTAIN 6 CVOT. SOUL is expected to begin around mid-2018; results won’t be available until roughly 2023. While SUSTAIN 6 demonstrated the CV efficacy of semaglutide vs. placebo, it was smaller (n=3,297) and shorter (~two years) than the standard diabetes CVOT. In SUSTAIN 6, semaglutide gave a significant 26% risk reduction on three-point MACE (HR=0.75, 95% CI: 0.58-0.95), but the design of the trial resulted in particularly wide confidence intervals. SOUL will enroll patients with type 2 diabetes and established CV or chronic kidney disease, following participants for 3.5-5 years on either 1.0 mg Ozempic or placebo. It is our understanding that Novo Nordisk will not pursue a CV indication with SUSTAIN 6 results alone, though we are intrigued to see how prescribers are going to view Ozempic over the next few years, before SOUL reads out. The European label for Ozempic acknowledges a significant CV and renal benefit (without an indication), but the US label approaches SUSTAIN 6 strictly as a safety trial. All things considered, we don’t think early uptake of Ozempic will be hindered by the lack of a CV indication. While manufacturers and thought leaders alike have emphasized that demonstrating CV benefit is becoming more and more important for the long-term commercial success of diabetes drugs, we imagine the exceptional glucose- and weight-lowering efficacy of Ozempic will be compelling to the vast majority of prescribers. For better or for worse, a minority of providers make prescribing decisions based on CVOT results, as things stand.

8. Tresiba Sales Climb 18% YOY to $290 Million, though Falling 7% Sequentially in Face of Pricing Pressure; Growth Opportunity with DEVOTE & “Relaunch” in 30+ Countries with Emphasis on Hypoglycemia Benefit

Tresiba (insulin degludec) sales of DKK 2 billion ($290 million) grew 18% YOY as reported (+33% YOY operationally) from $214 million in 1Q17. Despite this solid YOY performance, sales fell a disappointing 7% sequentially, from $302 million in 4Q17. In management’s words, the sequential revenue drop was driven by rebate adjustments translating to lower realized price on Tresiba vs. 2017 (when sales climbed 81% on the year), and indeed, the pricing pressure obstacle ran like an undercurrent throughout Novo Nordisk’s 1Q18 update. The company’s press release listed a 13% YOY decline as reported (-3% YOY operationally) in total long-acting insulin revenue, encompassing Tresiba as well as Levemir (-31% YOY to $460 million) and Xultophy (more than tripling YOY from a low base to $56 million). Tresiba was the bright spot within this portfolio, driving 21% of growth in Novo Nordisk’s overall diabetes/obesity business in 1Q18, by our calculations. Management briefly discussed 2018 formulary changes to Medicare Part D as accelerating Tresiba uptake, although better positioning here has also contributed to lower realized price; the same goes for inclusion of Tresiba on the UnitedHealthcare formulary in 2018, which just went into effect in April. With this latest development, Novo Nordisk estimates Tresiba’s total formulary access at ~80% of commercial lives. This is great news, and we emphasize again how incredibly unfortunate it is that pricing pressure continues to so negatively impact the insulin market. The bulk of Tresiba sales (64%) continues to come from the US, where 1Q18 revenue totaled DKK 1 billion ($185 million), a 16% YOY rise as reported (+34% YOY operationally). OUS sales were DKK 640 million ($105 million), reflecting 11% YOY growth as reported (+31% YOY operationally).

  • Now that both FDA and EMA have approved a Tresiba label change to include DEVOTE data reflecting hypoglycemia benefit vs. Lantus, Mr. Jørgensen shared that Novo Nordisk has initiated a global relaunch in >30 countries to highlight the role of insulin degludec in helping reduce severe hypoglycemia. The US label for Tresiba now shows (i) compelling CV safety and (ii) significant hypoglycemia benefit. Both of these points have important implications. First, Tresiba initially received a Complete Response Letter from FDA due to CV concerns, and this label revision should put any lingering reservations among patients/prescribers to bed, once and for all. Second, the addition of comparative hypoglycemia data is unchartered territory for FDA, and we’re impressed that Novo Nordisk got this on the label. We were, however, disappointed that SWITCH data was not included: DEVOTE only enrolled patients with type 2 diabetes and high CV risk, so the hypoglycemia claim might not be seen as extending to patients with type 1 diabetes or low CV risk. That said, we do think this update can do a lot to bring attention to the issue of hypoglycemia.

Tresiba Sales (1Q16-1Q18)

9. Mealtime Insulin: Fiasp Brings in $14 Million in First Quarter of Reported Sales, ~$2.5 Million in US; NovoLog Revenue Falls 12% YOY to $776 Million

Novo Nordisk broke out Fiasp sales for the first time in 1Q18, reporting DKK 83 million ($14 million) in revenue from the next-gen mealtime insulin (faster-acting aspart). According to the press release, Fiasp sales in 1Q17 were DKK 3 million ($43,000), and this revenue was entirely OUS. Fiasp was just launched to US pharmacies in early February 2018, following FDA approval in September 2017. Of the $14 million in global revenue, only ~$2.5 million came from the US market (Novo Nordisk hasn’t broken out sales by geography, but we’ve calculated ~$2.5 million from the company’s financial databook which lists US fast-acting insulin sales of DKK 2.5 billion and US NovoRapid sales of DKK 2.4 billion in 1Q18; Fiasp must account for the difference). This was a sluggish US performance from the advance mealtime insulin product, but we note that Fiasp was only on the market for two out of three months in 1Q18. Moreover, when Fiasp was launched a few months ago, Novo Nordisk SVP of Commercial Mr. David Moore told our team that reimbursement would be built up slowly over at least 12 months. Indeed, the product wasn’t approved in the US until after major PBMs had set their 2018 formularies, so we look to 2019 for more substantial revenue growth. In the meantime, the drug is priced on par with NovoRapid/NovoLog (insulin aspart), which should help boost uptake over the coming months, and which should be an attractive value proposition to payers (a more advanced product for the same cost). By our calculations, Fiasp contributed a 6% share of growth to Novo Nordisk’s diabetes/obesity portfolio in 1Q18, while reflecting <0.5% of total portfolio revenue. The company’s presentation slides outline plans to submit Fiasp in Japan in 3Q18.

  • NovoLog sales fell 12% YOY as reported (-2% in constant currencies) to DKK 5 billion ($776 million) in 1Q18. Revenue from the first-gen mealtime insulin increased 3% sequentially against an easy comparison of 10% sequential decline in 4Q17 (to $735 million). All products in Novo Nordisk’s modern insulin portfolio (NovoRapid, Levemir, and NovoMix) have struggled commercially over the past two years, and US pricing pressure is only getting more intense. US sales of NovoRapid dropped 17% YOY to DKK 3 billion ($417 million) in 1Q18, while OUS sales fell by a smaller margin of 5% YOY to DKK 2 billion ($359 million). Management remarked that the goal within the fast-acting and premix insulin categories is to “sustain our leadership position,” which fits in with prior commentary that Fiasp will help stabilize Novo Nordisk’s insulin portfolio rather than growing the business meaningfully. We suspect this is how dynamics will play out, and we only hope that Fiasp’s strength is able to offset losses from NovoRapid, because these will, in all likelihood, continue.

NovoLog Sales (1Q12-1Q18)

  • Thought leader perceptions of Fiasp have been mixed so far, but patient feedback has been fairly positive. At Endo Fellows 2018, UW’s Dr. Irl Hirsch expressed disappointment in Fiasp and suggested that efficacy isn’t all that much better than what patients get with NovoRapid/NovoLog. His exact quote was that Fiasp data has “not been as impressive as we would have liked.” Onset 5 (Fiasp in pumps) was presented at ATTD, showing non-inferior A1c reductions vs. NovoLog and a small but statistically significant benefit on one-hour post-meal glucose (p=0.001). During the same ATTD session, we saw one-year Onset 1 results, which largely paralleled 26-week results of modest but statistically significant A1c improvement and superior performance on a one-hour post-meal test with Fiasp vs. NovoLog. Dr. Bruce Bode shared a more optimistic view on using Fiasp in the real world, attributing the small (or non-significant, in the case of Onset 5) A1c differences to protective eating from patients on the ultra-rapid-acting insulin aspart, to avoid going to bed low or nocturnal hypoglycemia. With behavioral support, perhaps Fiasp could be meaningfully more effective than NovoLog in overall glucose-lowering. Dr. Bode also suggested that the ideal application for Fiasp may be in pumps or in closed loop systems, and at the recent GTB Bio Diabetes Summit, MGH’s Dr. Steven Russell said he’s interested in investigating Fiasp in the Beta Bionics bihormonal bionic pancreas. Notably, EMA has approved faster-acting insulin aspart for use in pumps, but FDA and Health Canada have not. We’ll be watching closely to see if this changes.

    • As for patient feedback, in the spring of 2017, market research firm dQ&A found that 23% of respondents taking rapid-acting insulin (n=2,312) said they would “definitely” switch to Fiasp if it was suggested by their doctor and reimbursement was similar to their current mealtime insulin. An additional 55% said they would “likely” switch, and the remainder responded “unlikely” (20%) or “definitely not” (2%) – for more information, contact richard.wood@d-qa.com. Respondents on NovoLog were significantly more likely to say they would “definitely” switch (26%) vs. those on Humalog (22%) or Apidra (13%) – this makes sense in terms of familiarity with Novo Nordisk’s products and insulin pens, and it’s also fitting, since major public and private formularies tend to list one manufacturer’s insulins as preferred over any others (e.g. Novo Nordisk’s Levemir and Tresiba preferred over Sanofi’s Lantus or Toujeo on Medicare Part D).

10. Xultophy Breaks $50 Million in Quarterly Sales, Rising 26% Sequentially and Driving 19% of D/O Portfolio Growth; Requests Filed with FDA and EMA to Add Devote + LEADER Data to Label

Xultophy sales of DKK 338 million ($56 million) grew 26% sequentially from DKK 268 million ($43 million) in 4Q17. This follows QOQ growth of +76% in 2Q17, -2% in 3Q17, and +51% in 4Q17. While Xultophy sales still aren’t climbing as steeply as we’d expected for a new, highly-effective drug, we’re pleased to see quarterly revenue surpass the $50 million mark. At this rate, we expect Xultophy to generate $250 million in 2018. By our calculations, Xultophy drove 19% of growth in Novo Nordisk’s diabetes/obesity portfolio in 1Q18, while capturing <2% of total portfolio revenue. This suggests to us that the fixed-ratio combination (insulin degludec/liraglutide) is becoming a more critical piece of Novo Nordisk’s diabetes/obesity business overall, and we hope this translates into more investment from the company in commercialization. In the past, Xultophy has been de-prioritized relative to Tresiba (insulin degludec) and Victoza (liraglutide), and company reps have underscored the importance of marketing the component monotherapies first to build familiarity among prescribers. Now, Victoza’s patent expiry is drawing near (2022/2023) and Tresiba is facing tremendous pricing pressure in the US (like all basal insulins). Indeed, neither Victoza nor Tresiba performed as well in 1Q18 as we expected. With these changes in the diabetes segment, we suspect Novo Nordisk will start to allocate more resources to Xultophy, though certainly a big shift of the sales focus is from Victoza over to second-gen GLP-1 Ozempic (semaglutide). Xultophy drove 100% of class growth in 1Q18, since revenue from Sanofi’s Soliqua (glargine/lixisenatide) was flat sequentially at $11 million. Novo Nordisk captured 84% of this market by value (combined Xultophy + Soliqua sales totaled $67 million in Q1), which goes to show that there’s a substantial commercial opportunity for the company with this new therapy class. We hope Novo Nordisk takes this and invests more commercial resources.

  • As one example of Novo Nordisk’s increasing commitment to Xultophy, the company has filed an sNDA to add DEVOTE and LEADER data to the US label. Assuming a standard 10-12 month review period, we anticipate an FDA decision by the end of 1Q19. Novo Nordisk submitted a similar request to EMA in November 2017, and in 1Q18, received a positive CHMP opinion. The revised label would highlight CV benefit for the liraglutide component (as seen in LEADER), alongside significant risk reduction for severe hypoglycemia with the degludec component (as seen in DEVOTE). This could very well boost volume/sales for Xultophy, and notably, it would distinguish Novo Nordisk’s fixed-ratio combination from Sanofi’s. Soliqua’s GLP-1 component, lixisenatide, is CV safe but not cardioprotective. The insulin glargine component was inferior to degludec on severe hypoglycemia in DEVOTE. The consensus among KOLs is that Xultophy offers a better clinical profile than Soliqua, and this update incorporating LEADER and DEVOTE results would show this superiority on the label even without a head-to-head trial. FDA tends to be more conservative in decisions like this compared to EMA, so we’ll have to wait-and-see if the label update comes through for both the US and European markets. We know there are so many patients with type 2 diabetes in the US and globally who could benefit from Xultophy treatment, which offers high glucose-lowering efficacy, weight loss, and excellent safety/tolerability. The lower injection burden compared to co-administration of basal insulin + GLP-1 separately is a more convenient regimen for patients, and also stands to improve adherence. Expanding access/affordability will also be key to widening the reach of this very effective drug (“the most effective anti-hyperglycemic agent on the planet,” according to Dr. John Buse).

  • Novo Nordisk will submit Xultophy to regulatory authorities in Japan in 3Q18, on the heels of positive phase 3a data from DUAL I and DUAL II enrolling Japanese patients. Last month, the product was approved by Health Canada.

Xultophy Sales (1Q17-1Q18)

11. Saxenda Soars Despite Tough Commercial Landscape for Obesity Drugs; Revenue Grows 43% YOY to $127 Million but Prescription Volume Remains Low

Saxenda sales of DKK 770 million ($127 million) grew 43% YOY as reported (64% in constant currencies) from DKK 539 million ($77 million) in 1Q17. Sequentially, revenue from the obesity drug (liraglutide 3.0 mg) increased 11% (from a base of $112 million in 4Q17). By our calculations, Saxenda reflected only 3% of total diabetes/obesity portfolio revenue in 1Q18, but contributed a remarkable 18% share of growth. This is impressive strength in a challenging commercial market – prescription volume for obesity pharmacotherapy remains exceptionally low on the whole due to stigma, weight-based bias, poor reimbursement, under-diagnosis, under-appreciation of obesity as a treatable, medical disease, and reluctance from both patients and providers to consider non-lifestyle interventions for weight loss. All this said, the Saxenda business has an ocean of room ahead for further growth, since very people with obesity today are receiving any medical management, let alone pharmacotherapy, let alone treatment with a highly-effective GLP-1 agonist. The list price of Saxenda is pretty high, as far as we’re aware; the product holds only ~1%-2% TRx (share of total obesity prescriptions) in the US vs. 50% of the market by value, according to slide 81 in this deck. Novo Nordisk has named expanding patient access as a key company priority within the obesity category, and this will hopefully increase Saxenda’s prescription volume. There was less discussion of Saxenda on today’s call than is typical for a Novo Nordisk earnings update, although management did highlight during prepared remarks that the product has launched in 25 countries. The company’s roadshow presentation mentioned particularly strong Saxenda sales in the US (+47% YOY to $91 million, reflecting 72% of the global franchise total), Brazil, Canada, Australia, and the UAE. In general, we applaud Novo Nordisk’s fierce commitment to obesity R&D, though again we’d like to see marked improvements in patient access to Saxenda sooner rather than later. As an aside, Novo Nordisk will conduct the first-ever obesity CVOT with semaglutide (SELECT will kick-off later this year) to “prove” that obesity and its complications are responsive to pharmacotherapy. At ENDO 2018, esteemed obesity thought leader Dr. Donna Ryan suggested that SELECT will help “legitimize our field.” Novo Nordisk is also engaged in efforts to combat stigma, to change the mindset around obesity pharmacotherapy, to increase HCP engagement, and to improve patient access to obesity care; see our coverage of Capital Markets Day for more information.

Saxenda Sales (1Q16-1Q18)

Pipeline Highlights

12. Oral Semaglutide Shows Glycemic & Weight Loss Efficacy in PIONEER 1; More Phase 3 Data Coming at ADA

Novo Nordisk CSO Dr. Mads Thomsen reviewed topline results from the PIONEER 1 study of oral semaglutide (n=703). After 26 weeks, and from a baseline A1c of 8.0%, the 3 mg once-daily dose of oral semaglutide stimulated a mean A1c reduction of 0.8%. The 7 mg and 14 mg doses led to 1.3% and 1.5% A1c decline, respectively, vs. a 0.1% A1c reduction with placebo (all p<0.05). The highest dose of oral semaglutide also showed statistically significant weight loss benefit vs. placebo; participants on 14 mg semaglutide lost a mean ~9 lbs vs. ~3 lbs for patients on placebo (baseline body weight ~194 lbs). Lower doses of oral semaglutide also helped patients lose weight (~4 lbs and ~6 lbs with 3 mg and 7 mg, respectively), but didn’t show statistically significant difference from placebo. Notably, this analysis is based on participants who adhered to treatment throughout the trial and who didn’t require rescue therapy. According to the topline release on PIONEER 1 (issued in February), 2%-7% of people randomized to oral semaglutide withdrew during the course of the study due to adverse events, while only 2% of placebo-treated patients withdrew. Dr. Thomsen confirmed these numbers on today’s call, and also emphasized that this on-treatment analysis is consistent with analytical methods used in the SUSTAIN pivotal program for injectable semaglutide (now approved as Ozempic). He further underscored that a higher proportion of participants in the oral semaglutide arms vs. the placebo arm achieved target A1c <7% after 26 weeks: 59% of the 3 mg group, 72% of the 7 mg group, a remarkable 80% of the 14 mg group, and only 34% of the placebo group. We certainly see this as promising glycemic and weight loss efficacy from the first oral GLP-1 agonist to enter phase 3. Dr. Thomsen expressed considerable optimism on Novo Nordisk’s behalf: “We’re very encouraged by these results, which build on and confirm the unprecedented oral efficacy as reported in phase 2.” The company is targeting 2019 for an oral semaglutide FDA submission, and to this end, all 10 phase 3 trials in the PIONEER program will read out in 2018 (see the image and table below). Dr. Thomsen announced that Novo Nordisk will share new PIONEER data on June 24 at an ADA investor event. We’re not sure if this means full results from PIONEER 1, initial findings from PIONEER 2, 3, 4, or 7 (all scheduled to report in 2Q18), or some combination – regardless, we look very forward to this update and we maintain high hopes for oral GLP-1. It would be a major win for patients to get one of the most effective diabetes therapies into a convenient tablet form.

  • Tempering our enthusiasm is the fact that more semaglutide-treated participants than placebo participants discontinued therapy during PIONEER 1 (2%-7% vs. 2%). Dr. Thomsen elaborated that mild-to-moderate nausea was the most common adverse event, reported by 5%-16% of patients on the study drug vs. 6% of patients on placebo. There’s also a chance that fasting requirements led to treatment discontinuation, and Lilly management has suggested that these stipulations (refrain from eating ~six hours before taking oral semaglutide and for ~30 minutes thereafter) could drive down real-world adherence. Dr. Thomsen didn’t address this concern specifically on today’s call, but in the past, he has defended that oral GLP-1 will still be easier to adhere to than injectable GLP-1. He also previously mentioned that the fasting protocol was simplified for phase 3 PIONEER trials, and we’re hoping to learn soon what these changes were (perhaps at the ADA investor event). Ultimately, we remain very excited about oral semaglutide as a new therapeutic option on the horizon. There will surely be some kinks to work out in getting the first oral GLP-1 to market and promoting it to patients, providers, and payers, but we have no doubt that Novo Nordisk is highly-committed and well-equipped to do this. 

PIONEER Phase 3 Program for Oral Semaglutide

Trial

Estimated Enrollment

Comparator/Design

Timeline

PIONEER 1

704

Placebo

Completed December 2017; Topline results announced February 2018

PIONEER 2

816

Lilly/BI’s Jardiance (empagliflozin)

Completed March 2018

PIONEER 3

1,860

Merck’s Januvia (sitagliptin)

Completed March 2018

PIONEER 4

690

Novo Nordisk’s Victoza (liraglutide)

Completed March 2018

PIONEER 5

324

Moderate renal impairment

Expected to complete May 2018

PIONEER 6

3,176

CVOT

Expected to complete September 2018

PIONEER 7

500

Flexible dose escalation

Expected to complete March 2019 (including trial extension)

PIONEER 8

720

Insulin add-on

Expected to complete August 2018

PIONEER 9

230

Placebo and liraglutide in Japan

Expected to complete August 2018

PIONEER 10

336

Lilly’s Trulicity (dulaglutide) as an add-on to oral agents in Japan

Expected to complete July 2018

  • CEO Mr. Lars Jørgensen made clear that Novo Nordisk will no longer comment on oral semaglutide pricing, now that the candidate is nearing regulatory desks. As a final word on this topic, he outlined three factors that will influence oral semaglutide pricing strategy: (i) the innovation required to develop the first oral peptide therapy for diabetes; (ii) the drug’s efficacy profile; and (iii) manufacturing cost for the product. Lilly only has oral GLP-1 agonists in preclinical development, but the company has pointed to relatively low bioavailability (1%-2%) for Novo Nordisk’s oral sema. As Lilly’s Head of Diabetes and SVP Mr. Enrique Conterno explained recently, pricing on par with injectable GLP-1 agonists would make it hard for oral semaglutide to compete with the value proposition of oral SGLT-2 inhibitors, but pricing on par with SGLT-2s might lead to very low profitability. To this end, Mr. Jørgensen assured that activities are ongoing at Novo Nordisk to optimize cost of goods sold.

  • During Q&A, Dr. Thomsen alluded to the CV efficacy of Novo Nordisk’s existing GLP-1s and suggested that this will carry over from injectable semaglutide to oral semaglutide. We’ll know for sure after the PIONEER 6 CVOT wraps up (expected to complete in September according to CT.gov). Another oral cardioprotective diabetes drug, besides SGLT-2s, would also bring meaningful improvements to diabetes care. Dr. Thomsen distinguished the anti-atherosclerotic effects of GLP-1s from the heart failure benefit of SGLT-2s, and he implied that this could help oral semaglutide compete commercially with SGLT-2 inhibitors (by being the ideal therapeutic choice for a select subset of the patient population). This comment also has us wondering about oral semaglutide + SGLT-2 co-administration and the possible additive CV benefits. Could a fixed-dose combination be feasible down the line? This is entirely our speculation and we recognize that it’s early to be thinking about these questions, but we can’t help our curiosity! For now, we await more PIONEER data and a hopeful NDA next year.

13. Movement in Novo Nordisk’s Insulin Pipeline – Once-Weekly Basal Progresses to Phase 2, Liver-Targeted Prandial Discontinued

In 1Q18, Novo Nordisk made two big decisions on its insulin pipeline: (i) Phase 2 trials of LAI287 (a once-weekly basal) are now on the docket for 2018, while (ii) PI406 (a liver-preferential prandial insulin analog) was discontinued after underwhelming phase 1 results. Management didn’t really elaborate on this termination – it’s possible that investigators noticed safety issues in phase 1, but we think the more likely explanation is that PI406 didn’t demonstrate sufficient efficacy to meet Novo Nordisk’s “higher innovation threshold.” The company established this higher bar for R&D in 3Q16; phase 2 oral insulin didn’t make the cut, and was discontinued. Separately, CSO Dr. Mads Thomsen spoke to the Wall Street Journal about how pricing pressure around insulin is reaching beyond the commercial marketplace to sway R&D priorities as well. Payers are reluctant to see major differences between various insulin products, and this leads to restrictive contracts, high rebating, and lower net revenue for manufacturers. As Dr. Thomsen put it, there’s a public perception now of incremental rather than disruptive improvement from one insulin therapy to the next. Even for an advanced basal insulin product like Tresiba, which now has DEVOTE data on its label reflecting hypoglycemia benefit (how is this not disruptive?!), pricing pressure is a substantial challenge – in fact, this was a defining theme of Novo Nordisk’s 1Q18 financial results, as we discuss above.

  • Given this background, we imagine early data on LAI287 must be quite impressive. We’re eager for more color: What did preclinical models show? What makes the company more confident in this once-weekly basal insulin vs. the liver-targeted prandial insulin or oral insulin? To be sure, earlier roadshow presentations have highlighted exciting potential for liver-preferential bolus insulin (less frequent hypoglycemia, lower weight loss compared to other mealtime insulins), and that apparently hasn’t panned out. As we know from the oral insulin story (among others), it’s more than possible for a drug candidate to be discontinued from later-stage development. So, we’re only cautiously optimistic about the once-weekly injectable basal insulin; we’ll have to wait patiently for phase 2 results and a decision on phase 3 development.

  • We were excited by some of the commercial ideas for once-weekly basal that management shared on today’s call: LAI287 could be ideal for elderly patients who need third-party help for insulin injection (they’d only need this once per week, instead of once every day). The once-weekly basal could be used as an early intervention in type 2 diabetes to preserve beta cell function. CSO Dr. Mads Thomsen alluded to a future fixed-ratio combination of LAI286 + semaglutide, which would reduce injection burden relative to once-daily Xultophy (insulin degludec/liraglutide). This is an exciting prospect to be sure, although we note some irony, since Novo Nordisk isn’t actively promoting Xultophy right now; the company hasn’t invested commercially in its current basal/GLP-1 combo, but it’s possibly interested in a future one. (There’s no shortage of efficacy around Xultophy, we might add – Dr. John Buse has called it “the most effective anti-hyperglycemic agent on the planet.”)

14. New Liquid-Stable Glucagon Candidate Advanced into Phase 1; Joins Competitive Landscape with Lilly’s Nasal Glucagon, Zealand’s Dasiglucagon, and Xeris’ G-Pen; Potential Use in Bihormonal AP?

Novo Nordisk has entered the next-generation glucagon competitive landscape with HypoPen 1513 (NN9513). This new phase 1 candidate was listed on presentation slides, though no details were discussed out loud during prepared remarks or Q&A. According to ClinicalTrials.gov, a phase 1 study (n=175) began in February and is expected to complete in June 2018. The trial will compare NN9513 vs. Novo Nordisk’s GlucaGen (glucagon reconstitution kit) vs. placebo in type 1s as well as type 2s; the primary endpoint is number of treatment-emergent adverse events. It seems like the next-gen candidate is a liquid-stable glucagon formulation that can be administered via syringe or via pen, and phase 1 participants will use both (specifically, the NovoPen Echo). We suspect Novo Nordisk aims to eventually commercialize this product in the NovoPen Echo (or perhaps a better pen/autoinjector will be ready by then, since this candidate is in early days right now). As a parallel example, Zealand has administered liquid-stable dasiglucagon via syringes throughout clinical development, but will market the product in the HypoPal rescue pen device. Dasiglucagon is now in phase 3 for hypoglycemia rescue and Zealand is targeting 2019 or 2020 for an FDA filing of HypoPal. Lilly and Xeris each have advanced glucagon candidates even further along – FDA submission is anticipated in 2Q18 for Lilly’s nasal glucagon and for Xeris’ G-Pen (though G-Pen development has been delayed in the past, so we’re not holding our breath for this timing). It’ll be interesting to see how Novo Nordisk distinguishes its candidate from these other offerings, which will likely already be on the market for several years by the time HypoPen 1513 is approved. That said, hypoglycemia rescue treatment is one of the most glaring areas of unmet need within diabetes care, in our view. Current glucagon reconstitution kits are time-consuming and error-prone, and we’re eager for more user-friendly options (preferably many of them!).

  • We wonder if Novo Nordisk is partly developing NN9513 for use in a dual hormone artificial pancreas system. The company very notably invested in Beta Bionics ($5 million) last year. Currently, Beta Bionics is using Zealand’s dasiglucagon to complement insulin in its bihormonal bionic pancreas – a phase 2b study should begin this July, followed by a phase 3 pivotal trial starting in June 2019. Could Novo Nordisk’s NN9513 be an alternative liquid-stable glucagon for Beta Bionics’ bionic pancreas? We note that Lilly has also invested in Beta Bionics, and has its own soluble glucagon formulation in phase 1.

15. Amylin Analog to Enter Phase 2 for Obesity in 1H19; Of Five Remaining Obesity Candidates in Phase 1, Novo Nordisk Will “Pick and Choose”

Of Novo Nordisk’s six obesity candidates in phase 1, the once-weekly amylin analog will be the first to advance into phase 2. A phase 1 trial of NN9838 (n=96) wrapped up in January 2018, and management announced that a phase 2 study will begin in early 2019 (the first half). We have yet to see the phase 1 data on this amylin analog, but we imagine it was positive, showing the candidate’s safety in participants with overweight/obesity (the primary endpoint was treatment-emergent adverse events). Novo Nordisk’s roadshow presentation (slide 82) highlights the appetite-suppressing effects of amylin, and indeed, we’ve heard positive views from thought leaders on amylin as a therapeutic target in obesity. Most recently, Dr. Daniel Drucker noted robust weight loss associated with amylin analogs; he suggested that amylin is a logical next step for advancing obesity pharmacotherapy (and he also spoke to amylin’s potential in improving metabolism and treating type 2 diabetes and NASH). Zealand/BI are also jointly developing a long-acting amylin analog for obesity, as you’ll see in our obesity drug competitive landscape.

  • We’re keenly interested in the rest of Novo Nordisk’s early-stage obesity pipeline as well. The company also has a glucagon analog, a PYY agonist, an FGF21 analog, a GLP-1/glucagon dual agonist, and a GLP-1/GIP/glucagon tri-agonist in phase 1 (the pipeline summary table below includes details on each). During Q&A, Dr. Thomsen mentioned that an “array of data” on these early-stage obesity candidates will be available in the next 12 months. “Then, we’ll have to pick and choose,” he explained, “because we won’t develop all these projects.” Dr. Thomsen briefly highlighted the potential for superior weight loss efficacy with multi-agonist approaches. At the same time, he emphasized the importance of getting the right ratio, since Sanofi’s GLP-1/glucagon dual agonist showed GI toxicity in phase 2 due to a higher-than-expected GLP-1 effect in humans compared to what was seen in non-human primates. Based on this commentary, we imagine Novo Nordisk is proceeding with caution on its GLP-1/glucagon and GLP-1/GIP/glucagon molecules, to ensure strong safety.

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 1Q18.

Candidate

Indication

Class/Mechanism of Action

Phase

Timeline/Notes

Oral semaglutide

Type 2 diabetes

Once-daily oral GLP-1 agonist

Phase 3

Topline PIONEER 1 data released 1Q18; All 10 phase 3 studies to report in 2018; Phase 2 data presented at EASD 2016 and published in JAMA

Injectable semaglutide

Obesity, NASH

GLP-1 agonist

Phase 2

Phase 3 STEP program and SELECT CVOT in obesity to launch 2018; Positive phase 2 data in obesity in 2Q17; Phase 2 NASH trial ongoing (expected to complete July 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 1

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

Phase 1

Added to pipeline in 1Q18; Phase 1 study expected to complete June 2018

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; Previous phase 1 trial completed March 2016

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

G530S (NN9030)

Obesity

Glucagon analog

Phase 1

Phase 1 trial of standalone agent completed July 2017; Phase 1 trial of co-administration with liraglutide completed September 2017; Previous phase 1 trial completed July 2016

FGF21 Obesity (NN9499)

Obesity

FGF21 analog

Phase 1

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; Management alludes to second phase 1 study starting up on 1Q18 call (not yet found on CT.gov); Added to pipeline in 1Q17

PI406 (NN1406)

Type 1 and type 2 diabetes

Liver-preferential prandial insulin analog

Discontinued

Program terminated in 1Q18 after phase 1 trial results

Questions and Answers

On Insulin & Pricing Pressure

Q: One perhaps nebulous question on pricing – you’ve talked about Medicare Part D in 2019, so does that mean you don’t expect any other major impacts in 2019? I’m curious to know what you’re thinking about any possible presidential announcements on US pharmaceutical pricing policy.

Mr. Lars Jørgensen (CEO, Novo Nordisk): We felt it was prudent to come out and say our expected impact of the change to the Part D coverage gap, because that’s a key change to our environment in the US. Our guidance is 1%-2%, but we haven’t yet closed contracts for 2019, so we can’t comment more specifically. This estimate is based on our share of patients being in Medicare Part D, and our assessment of how many would be in the doughnut hole.

Pricing dynamics within the basal category are a function of an increasing number of products competing for the same patients, and that is unchanged going into 2019. So, we expect continued pricing pressure in that segment.

Q: You had a much stronger quarter for GLP-1 than insulin, so can you talk about the pricing dynamics you’re seeing here? Do you continue to see relatively modest pricing pressure on GLP-1?

Mr. Jørgensen: With GLP-1, it comes down to differentiation between products. It’s not the same nature as the basal category, where products are put up against each other and excluded. We of course see some pricing pressure, but not at the same level as we see in basal.

Q: On the basal insulin franchise, when do you expect this to return to growth given the ongoing pricing pressure? You’ve shown that the basal insulin franchise can grow 9% by mid-term, but doesn’t that seem optimistic given the Q1 performance?

Mr. Karsten Knudsen (EVP & CFO, Novo Nordisk): When we look at the first quarter, the most abrupt dynamic in the US marketplace is where we see our basal insulin sales of modern and new-generation decline by 10% compared to 1Q17. We are actually doing well in terms of market share, to the tune of a 3% change compared to a year earlier. So, we have solid volume gains and Tresiba is doing nicely. Then we have a pricing dynamic that offsets this, taking us to the minus 10% growth. I think it’s important that we are clear that we had some one-off impacts in Q4 in terms of rebate adjustments that will catch up, that we booked in Q4 but that actually related to prior quarters including for Tresiba. If we adjust for that, and then another technical adjustment related to our non-contracted Tresiba volume in the first quarter of last year, then the decline in basal insulin was 6% vs. the 10% that we’re reporting.

Looking ahead, to the medium term, I will say that we have a competitive situation in the basal segment, with more players potentially entering over the next couple of years. I expect that pricing pressure will continue to be negative. Exactly how much, it’s impossible to say at this time.

Q: So just to follow-up, are we managing a rate of decline, or do you think you can grow basal?

Mr. Knudsen: So, our approach to the US basal segment is that we have DEVOTE data that we’re now launching. We have a label update, and it’s very important for us to establish Tresiba as a very strong basal insulin in the marketplace. We have good market access currently, and with volume comes strength for the years to come.

Mr. Jørgensen: We can’t guarantee anything, but rest assured that we’ll give it our best shot. We have a unique position now with the only insulin with a hypo claim. That’s a significant opportunity that we’ll give all the attention we can.

Q: I’d love more clarity on the doughnut hole implications. Should we assume Novo Nordisk will absorb this through cost control, or are you willing to accept lower profitability in the US market?

Mr. Jørgensen: We are still making our plan for 2019, looking for different options on how we can mitigate this. It’s too early for us to give guidance right now.

On New GLP-1 Agonist Ozempic

Q: In Q4, when you talked about your marketing strategy for Ozempic, you said you’re not establishing a sales force separate from Victoza. How is that changing, and when?

Ms. Camilla Sylvest (EVP, Commercial Strategy & Corporate Affairs, Novo Nordisk): As you correctly say, we are using the same sales force, but we gradually expect to shift toward Ozempic over the year. We’re very focused on obtaining market access. We’re quite happy with our progress so far, and we now have a majority of districts switched over to focus completely on Ozempic. We think this is positive. Ozempic coverage is generally more than half of GLP-1 volume in the US, and that’s in line with our expectations.

Q: You previously forecast a rapid ramp in Ozempic vs. flat growth for Victoza in 2019 and 2020. Now that you’ve seen initial sales on Ozempic, what do you expect? Are you winning contracts where Victoza is not on the formulary?

Mr. Jørgensen: What we guide for now is DKK 1 billion for Ozempic in 2018. I’m not going to go into specifics on what will happen to Victoza, because it’s still the early days of Ozempic’s launch. We still believe our overall GLP-1 business can grow by double-digits, and we can have a more detailed discussion later.

Mr. Knudsen: That being said, you should expect to see an add-on to formulary positioning that we already have for Victoza. It’s not going to be at the expense of Victoza. Our market access for Ozempic is progressing, and now we have market access to more than half of US GLP-1 volume.

Q: Ozempic prescription trends look like they’re tracking with Trulicity, and like they’re both expanding the market? What’s the main source of Ozempic patients? Are you anticipating a Trulicity-like $200 million like Lilly achieved in the first year?

Ms. Sylvest: There’s good momentum. The market keeps expanding on total number of scripts. When it comes to whether Lilly is a good proxy, you have to remember that Trulicity was launched at a time when the whole market was smaller, but our ambition is to have at least DKK 1 billion this year. In terms of source of patients, it’s still very early days and we can’t give any accurate estimates of that.

Q: One question on Victoza in China, where there was a small increase in sequential sales. When do you expect to see a pronounced effect of better reimbursement for Victoza in China?

Ms. Sylvest: In China, we got national reimbursement last year, and we worked on formulary access in the provinces. There’s significant potential, because currently the uptake of GLP-1 in China is very low. We’re looking to get that to European levels.

On the Diabetes Pipeline

Q: Post-PIONEER 1, what are your expectations for PIONEER 4? Will oral semaglutide show superiority to Victoza? What’s the delta on A1c that we should be looking for in general with oral sema?

Dr. Mads Thomsen: (CSO, Novo Nordisk): In PIONEER 1, the placebo-corrected A1c decrements were 0.7%, 1.2%, and 1.4% for oral semaglutide 3 mg, 7 mg, and 14 mg, respectively. How does that fare against other trials? DPP-4s usually yield placebo-corrected A1c decrements to the tune of 0.7%, so that leaves some room up to the A1c reduction achieved by high-dose oral semaglutide, namely 1.4%. I’ll refrain from being too optimistic, because that would refer to doubling. The trial vs. liraglutide is powered for non-inferiority on A1c reduction and body weight loss, and that’s hopefully what we’ll see. The other trials are powered for superiority.

Q: On oral semaglutide pricing, I understand not wanting to get engaged, but is this back at a blank sheet of paper? Or do your previous comments still hold?

Mr. Jørgensen: I’m not going to confirm or discard that. We’re doing certain activities to optimize cost of goods sold.

Q: As we look ahead to readouts from PIONEER 2, 3, and 4, what else beyond A1c and weight loss will determine the clinical profile of the product from a commercial perspective?

Dr. Thomsen: Oral semaglutide will be differentiated by virtue of A1c and body-weight lowering vs. other diabetes therapy classes. We hope to show this as primary and secondary endpoints in PIONEER 2 and 3. Against the DPP-4 class, we hope the end game is that oral semaglutide is cardioprotective as opposed to DPP-4 inhibitors which are cardio-neutral. We’re not going up against Victoza, but rather, we’re shifting into the oral space. Certainly, there’s literature showing that injections are less preferable than an oral pill (even inhalers are less preferable than an oral pill). This means the benefit of getting GLP-1 into a once-daily tablet will be tremendous, and we can potentially give access to many more patients, those who shy away from the needle. Against SGLT-2, we impact atherosclerosis and they impact heart failure, and those will go hand-in-hand. Either oral semaglutide will come first in the algorithm, or it’ll come after SGLT-2 inhibitors, but hopefully before.

Q: Can you talk about the profile you’re seeing for the long-acting insulin analog moving into phase 2?

Dr. Thomsen: LAI-287 is a once-weekly insulin analog engineered not toward creating a subcutaneous depot (because that could cause fluctuations in absorption rate), but rather it was developed for albumin-bound protection in circulation, giving it half-life in excess of one week. In steady state, you’d have a very smooth profile. We’ve done comparisons against the toughest one you can imagine – insulin degludec – and we’ve seen that the drug achieves within-patient day-to-day variability reminiscent of degludec, which means less than glargine. It’s close to insulin degludec in terms of difference in peak to trough, and the peak-to-trough fluctuations are lower relative to glargine.

But bear in mind that this is staying in the body for a long time, so we have to identify the right segments of the diabetes population most amenable to this particular therapy. At the same time, we have to do all the relevant studies to make sure no severe hypoglycemia would occur vs. insulin degludec. These things will be ongoing. Even though it’s early days, what we’ve seen in terms of hypo comes as a positive surprise.

Q: I’m thinking about the oral basal insulin paradigm which you had to stop. How will the once-weekly basal be differentiated? What proposition do you want to go to payers with when you think about moving to phase 3?

Mr. Thomsen: It’s a work in progress, I can’t give away too much, but we’ve got a shot at a once-a-week basal/GLP-1 fixed-ratio opportunity, if we combine with semaglutide. That would be a keep the doctor away kind of approach. Another option is monotherapy with LAI-287 that could go into early-stage insulin supplementation in type 2 diabetes to support the beta cells. So that’s one line of thinking, to maintain the health of beta cells with a supplemental squirt of weekly insulin when patients aren’t yet ready to adopt a treat-to-target regimen with daily insulin injections. Also, elderly people who need third-party support for insulin injection, they represent another opportunity. I think we’ll get back to this topic at a later point.

Q: We’ve seen Sanofi’s GLP-1/glucagon fail on GI toxicity. Can you remind me of the timeline for your GLP-1/GIP and GLP-1/glucagon opportunities?

Dr. Thomsen: You should probably ask Sanofi about that. My feeling is that one always has to tailor very quickly, not in animals but in humans, what is the real ratio you want to go for? We’ve adopted the triple agonist approach to create the right blend, and now that’s entering a second phase 1 study. An array of data is coming in the next 12 months, and then we’ll have to pick and choose, because we won’t develop all these projects.

On Diabetes Treatment Guidelines

Q: Do you think the new ACP guidelines will affect your US sales?

Dr. Thomsen: Yeah, I think everyone was surprised to see this recommendation. The professional societies – ADA, EASD, IDF – are not in agreement with that proposal. Rather, we are expecting to see the emergence of new treatment guidelines from ADA/EASD, potentially this year, which will emphasize that if people are up for it the target should always be crisp at 7%, and it should be individualized. So, we’re not actually worried about the impact. (Editor’s note – we’re glad management is not worried, but we are concerned for patients who have doctors who are likely to change targets….)

 

-- by Ann Carracher, Payal Marathe, and Kelly Close