Novo Nordisk 1Q17 – Diabetes/obesity portfolio up 10% YOY to $3.3 billion; Strong performance continues for Tresiba, Victoza, and Saxenda; Basal insulin, rapid-acting insulin, and GLP-1 agonist pooled market analyses – May 3, 2017

Novo Nordisk provided its 1Q17 financial update in a call this morning led by new CEO Mr. Lars Jørgensen. Our report includes our top takeaways on the company’s diabetes/obesity products and pipeline, and also includes pooled market highlights for GLP-1 agonists, basal insulin, next-generation basals, basal insulin/GLP-1 agonist fixed-ratio combinations, and rapid-acting insulin. Novo Nordisk’s webpage features the company’s press release and presentation slides and access a webcast replay.

Pooled Market Highlights

1. Pooled revenue for the basal insulin market fell 2% year-over-year (YOY) to $2.3 billion in 1Q17; see below for more on Novo Nordisk’s Levemir. Sequentially, pooled revenue declined a steep 12% from $2.7 billion in 4Q16, a trend we attribute largely to falling revenues for Sanofi’s flagship product Lantus in the aftermath of its exclusion from the CVS formulary beginning in January of this year. As we understand it, Sanofi has retained about 55% of patients through copay cards, though realized price and revenue for Lantus dropped substantially as a result. Pressures for Lantus will likely only be exacerbated as the copay cards expire (though we’re not sure about this) and the UnitedHealthcare formulary exclusion kicks in April 1. Despite falling sales, Lantus continues to lead the class and captured 56% of the $2.3 billion market by value in 1Q17, followed by Levemir (25%) and next-generation newcomers Tresiba (9%) and Toujeo (8%). Recently-launched Basaglar, the first biosimilar to enter the basal insulin market, captured the remaining 2% of the market by value. By volume, Lantus captured 52% of market share in terms of total prescriptions (TRx), while Levemir held 24% market share, Toujeo held 8%, Tresiba held 7%, and Basaglar held 4%. It’s notable from our view that Basaglar has 4% of volume but just 2% of revenue – this seems to imply a lower price or perhaps more patient access than we may have expected (or both). It’s also notable from our view that next-gen basal insulins Tresiba and Toujeo now have 17% and 15% of the market by value and volume – we’ll be providing historic information later.

2. Against the backdrop of falling revenues in the overall basal insulin market, next-generation basal insulins – Sanofi’s Toujeo and Novo Nordisk’s Tresiba – more than doubled to ~$419 million in total sales YOY and fell 12% sequentially. The market share by value is split neck-and-neck with Tresiba holding 51% and Toujeo holding 49%. 1Q17 marks the first quarter in which Tresiba revenue has surpassed that of Toujeo (in 4Q16, Toujeo held 53% of the market by value to Tresiba’s 47%), despite Toujeo’s additional year on the US market and we’ll be watching closely to see if this trend will continue. It seems obvious that Novo Nordisk is investing in Tresiba and Tresiba holds the advantage of a position on CVS Health’s formulary, while Toujeo has been excluded. Both next-gen products are excluded from the UnitedHealthcare formulary, which we are very disappointed to see, particularly given the “real world” enthusiasm about both drugs. These are great examples, in our view, of therapies where CGM data would show so much more than traditional A1c and BGD data does. Very notably, both insulins experienced sequential declines in 1Q17: -4% for Tresiba and -19% for Toujeo. We suspect that the launch of biosimilar Basaglar and continued pricing pressures in the US insulin market are driving these challenges – it may also be that some patients who were getting access to the next-gen insulins at the end of the year are finding it more difficult now at the start of a new year.

3. The GLP-1 agonist class grew 35% YOY and 6% sequentially to $1.4 billion in 1Q17 – a remarkably strong performance that follows strong 25% growth in full year 2016 to nearly $5 billion from an already-high base of $3.9 billion in 2015. Novo Nordisk’s Victoza continues to lead the class with 57% market share by value, though management acknowledged that it faces “intense” competition from Lilly’s Trulicity (which comes with once-weekly dosing and a very patient-friendly IDEO-designed pen). Trulicity captured 26% of all GLP-1 agonist sales in 1Q17, up from 19% in 3Q16 (when Victoza held 61%) and 25% in 4Q16 (when Victoza held 56%). Moreover, Novo Nordisk’s presentation slides showed that Victoza is losing volume to Trulicity: As of February 2017, Victoza’s share of total GLP-1 prescriptions in the US (TRx) was 48%, down from 50% in 4Q16 and 51% in 3Q16. Trulicity’s TRx share is trending in the opposite direction, at 22% in 3Q16, 25% in 4Q16, and 30% in 1Q17. In our view, there’s plenty of room for both products to sustain commercial success, given that many more patients could benefit from GLP-1 agonists than those currently on them. We also expect Novo Nordisk’s semaglutide (a potent, once-weekly GLP-1 agonist formulation with demonstrated CV benefit in SUSTAIN 6) to spur whole class growth once FDA-approved. In the same vein, getting LEADER data added to the Victoza label will likely boost the company’s existing GLP-1 agonist business and will stimulate more uptake of GLP-1 agonists broadly (once one of them is explicitly indicated for CV risk reduction). AZ’s Bydureon accounted for 11% of pooled GLP-1 agonist sales in 1Q17, while Byetta accounted for 3%. GSK’s Tanzeum captured 2% of this market by value and Sanofi’s Lyxumia captured <1%.

4. Pooled sales of basal insulin/GLP-1 agonist combinations totaled $19 million in 1Q17, the first quarter in which Novo Nordisk and Sanofi broke out sales for Xultophy and Soliqua, respectively – specifically, Sanofi reported $4 million in sales for Soliqua and Novo Nordisk reported $15 million for Xultophy. By value, Xultophy currently holds 79% market share while Soliqua holds 21% share. Notably, Xultophy’s revenue is derived entirely through ex-US sales, where the product has been available for over two years, since January 2015 – US launch of Xultophy occurred just hours after the 1Q17 update today. On the other hand, Soliqua’s revenue is largely driven by US sales, where payer negotiations and reimbursement for both combos is still ongoing. We’ll be watching closely to see how the dynamics for this class shape up, especially with both products now launched in the US market, which we expect to drive the lion’s share of sales longer-term. This class has garnered more intense praise than any other new class we can remember – we very much hope that the training for the product is strong as we think so many patients only on GLP-1 or only on basal insulin can benefit.

5. The rapid-acting insulin market fared especially well in 1Q17, growing 14% YOY to $1.6 billion against an easy comparison of 7% YOY decline in 1Q16. Sequentially, revenue fell 8% against the difficult comparison of 16% sequential growth in 4Q16. Novo Nordisk’s NovoRapid leads with 48% of the market by value, surpassing Lilly’s Humalog (now at 45%) for the first time. Sanofi’s Apidra comprises the remaining 7%. Despite the uptick, the rapid-acting insulin class continues to face intense competitive pressure from the increased uptake of GLP-1 agonists and SGLT-2 inhibitors as methods to address postprandial excursions, a challenge that we believe will only grow with the continued uptake of orals in type 2 as well as basal insulin/GLP-1 agonist combinations. We’ll be interested to see whether growth will come from patients who live longer and should intensify their insulin regimens – this should become easier with new insulin dosing apps and a much greater focus on data, as well as CGM.

Financial Highlights

6. Novo Nordisk’s overall diabetes/obesity portfolio grew 10% YOY as reported (11% in constant currencies), posting 23.2 billion DKK ($3.3 billion) in total revenue against a modest comparison of 6% growth in 1Q16. Notably, this growth was driven primarily by next-generation basal insulin Tresiba, which now accounts for 5% of Novo Nordisk’s total diabetes/obesity revenue according to management. By our calculations, Novo Nordisk’s new-generation insulins (Tresiba, Xultophy, and Ryzodeg) accounted for 41% of growth in 1Q17, while GLP-1 agonist Victoza was responsible for 45%. Sequentially, total sales from all major diabetes/obesity products fell 3% from $3.9 billion in 4Q16, but 1Q17 still marks a strong quarter overall for Novo Nordisk’s diabetes/obesity business. While growth in 3Q16 and 4Q16 was modest (both quarters featured a 3% YOY rise), we’re impressed to see a double-digit YOY increase to kick-off 2017. That said, sequentially, total diabetes and obesity portfolio revenue fell 3%, against a tough comparison of sales rising 7% sequentially to 23.8 billion DKK ($3.4 billion) in 4Q16.

7. Notably, Victoza continues to grow quite significantly. Global sales of GLP-1 agonist Victoza totaled 5.7 billion DKK ($824 million), up 25% YOY as reported (22% in constant currencies). Management attributed this to underlying growth in the GLP-1 agonist class, and while 1Q17 featured a greater YOY rise in net sales vs. recent quarters, management acknowledged that Victoza’s market share by volume in the US is trending down, despite continuing to lead the market. We are very interested to know the “net prices” that Novo Nordisk is offering PBMs vs. what Lilly is offering – while patient and HCP preferences used to be bigger drivers of revenue, today in the US, formulary status is absolutely critical. Victoza’s share of total US GLP-1 agonist prescriptions (TRx) fell to 48% in 1Q17, from 50% in 4Q16 and 51% in 3Q16. Management identified Lilly’s once-weekly Trulicity as Victoza’s leading source of competition, and suggested that getting the LEADER data added to the drug label and obtaining approval for semaglutide will be key next steps for Novo Nordisk’s GLP-1 business to reach full potential – we think these will be key drivers.

8. Although still a small product overall, only about a fourth of the size of Victoza, Tresiba continued to be a bright spot for Novo Nordisk, nearly tripling YOY to DKK 1.5 billion (~$214 million) in 1Q17. Revenue for Novo Nordisk’s overall new generation insulin portfolio (consisting of Tresiba, Xultophy [Levemir/Victoza combo], and Ryzodeg [Tresiba/Novolog combo]) also nearly tripled YOY to DKK 1.7 billion (~$242 million). Despite this strong YOY growth, Tresiba experienced its very first sequential decline (-4%) in 1Q17 – this was a bit of a worrisome bit of news to see so early in the drug’s launch cycle. Correspondingly, the new generation insulin portfolio, which is largely driven by Tresiba, declined 1% sequentially.

9. The company broke out Xultophy sales for the first time in 1Q17 – the basal insulin/GLP-1 agonist combo generated 103 million DKK ($15 million) in quarterly revenue. Management reiterated the message that Tresiba and Victoza – rather than their combination – will continue to be commercial priorities for now. We’re a bit distressed to hear this message given so much enthusiasm about Xultophy from key opinion leaders and given how hard advocates helped work to get this drug approved by the FDA. That said, Novo Nordisk’s decision to break out sales for Xultophy is a positive. While some may see this as a sign of Novo Nordisk’s long-term confidence in the combination, we don’t think there is any question about Novo Nordisk understanding how potent the drug is – the decision to hold it back reflects the company’s focus on keeping revenue for the individual products as strong as possible. Management did underscore that roll-out of Xultophy in worldwide markets is on track, such as it is – the combination therapy is now available in 14 countries – including US launch with a $1/day patient savings card just hours after the update call wrapped up. We will be looking into how easy or difficult it is to quality for this card’s use, given Novo Nordisk’s explicit statements about how it will be prioritizing sales of the individual components of Xultophy, Victoza and Tresiba, rather than the combo. While we understand the commercial strategy behind this decision, for a company so focused on sustainability, we are surprised by the decision.  

10. Novo Nordisk’s modern insulins (Levemir [insulin determir], NovoLog [insulin aspart], and NovoMix) experienced a relatively strong quarter: despite underlying challenges in the insulin market, particularly in the US, the portfolio as a whole rose 3% YOY in 1Q17 (growing 2% operationally) to DKK 12.1 billion ($1.7 billion). This was largely driven by robust sales of NovoLog, which rose 15% as reported (13% operationally) to DKK 5.3 billion ($761 million), and to some extent NovoMix, which rose 3% YOY as reported and operationally to DKK 2.8 billion ($396 million). That said, growth in both products were against easy comparisons of 1% and 2% declines in 1Q16. Levemir was the exception with sales falling 9% YOY as reported (-10% operationally) to DKK 4.0 billion ($575 million), though this was against a tougher comparison of 8% growth in 1Q16. This reflects the particularly intense pricing pressure in the basal insulin sector, as well as the possibility that some Levemir users have switched to next-generation Tresiba.

11. Human insulin experienced a challenging quarter with revenue falling 5% YOY as reported (-4% operationally) to DKK 2.6 billion (~$372 million) in 1Q17. Sequentially sales fell 11%.

12. Revenue from obesity drug Saxenda more than doubled YOY (from a low base) to 539 million DKK ($77 million) in 1Q17, though was flat sequentially. Management highlighted Saxenda as an important growth driver, and pointed to the huge opportunity for growth that still lies ahead, given that only 2% of 600 million people with obesity are currently being treated (by any therapy). We’re very glad to see Novo Nordisk’s commitment to obesity, not only in developing therapies but in promoting a concept of obesity as a treatable chronic disease. We hope to see Novo Nordisk work on combination approaches in obesity, particularly those involving helping patients on the behavioral front (e.g., Omada, or other approaches).

Pipeline Highlights

13. Very notably, Novo Nordisk has initiated a phase 1 trial for a GLP-1/GIP/glucagon tri-agonist for obesity. The trial hopes to enroll 56 male participants with overweight and obesity and is expected to complete in September 2017. We’ve been expecting Novo Nordisk to add a tri-agonist to its clinical development pipeline for some time now, ever since its acquisition of the brilliant Dr. Richard DiMarchi’s biotech organizations Calibrium and MB2. Dr. DiMarchi previously published promising preclinical results for a GLP-1/GIP/glucagon tri-agonist with an exendin-4 backbone, though – based on management’s comments in the past – we assume the candidate Novo Nordisk has advanced is differentiated and based on a human GLP-1 analog (like liraglutide or semaglutide) backbone.

14. Management shared that an FDA decision is expected in 3Q17 for the Class II resubmission of faster-acting insulin aspart (branded Fiasp ex-US), slightly ahead of the 4Q17 timeline shared at time of resubmission. Notably, in Q&A, management shared that Fiasp will likely be less of a priority at launch, given the company’s acknowledged focus on Tresiba, Victoza, Saxenda, and – to a lesser extent – Xultophy.

15. A phase 2 trial for once-daily, injectable GLP-1 semaglutide in obesity is expected to report results in 3Q17. Management expects to initiate a full phase 3 program, enrolling ~3,500 patients, for semaglutide in obesity within a year following the results.

16. Novo Nordisk shared that the SUSTAIN 7 phase 3b trial of semaglutide head-to-head with liraglutide is expected to report in 3Q17. The fact that Novo Nordisk conducted this trial signals a great deal of confidence in semaglutide’s efficacy and we’re very eager for the results. Novo Nordisk highlighted the submission of once-weekly, injectable semaglutide to regulatory authorities in Japan. Notably, the company shared that, in the Japanese pivotal studies, mean A1c dropped below 6% with semaglutide treatment for the first time (baseline A1c not reported). An FDA decision and an EU CHMP opinion for the submissions of once-weekly, injectable semaglutide for type 2 diabetes are expected in 4Q17.

17. There was no mention of the ongoing phase 3 program for the once-daily oral formulation of semaglutide. As of 4Q16, all 10 trials in the massive program have initiated. See below for a table with a complete overview of the PIONEER program.

18. We noticed several updates to Novo Nordisk’s phase 1 obesity trials on ClinicalTrials.gov. While not mentioned on the call, a phase 1 trial of PYY agonist NN9747 completed in February 2017, according to ClinicalTrials.gov. The expected completion date of the phase 1 trial of FGF21 analog NN9499 in obesity has been delayed to October 2017, from August 2017 previously. The phase 1 trial of standalone glucagon analog NN9030 for obesity has also been delayed slightly, with completion now expected in July 2017 rather than June.

Table 1: 1Q17 Financial Results for Novo Nordisk’s Major Diabetes and Obesity Products

Pooled Market Analysis Highlights

1. Basal Insulin Market: Pooled Revenues Fall 2% YOY as Lantus Sales Continue to Decline

Pooled revenue for the basal insulin market fell 2% year-over-year (YOY) to $2.3 billion in 1Q17. Sequentially, pooled revenue declined a steep 12% from $2.7 billion in 4Q16, a trend we attribute largely to falling revenues for Sanofi’s flagship product Lantus in the aftermath of its exclusion from the CVS Health formulary beginning in January of this year. As we understand it, Sanofi has retained about 55% of patients through copay cards, though realized price and revenue for Lantus dropped substantially as a result of these assistance programs. According to Sanofi management, pressures for Lantus will likely only be exacerbated as the impact the CVS exclusion, as well as the UnitedHealthcare formulary exclusion (implemented April 1), reaches its full force. Despite falling sales, Lantus continues to lead the class and captured 56% of the $2.3 billion market by value in 1Q17, followed by Levemir (25%) and next-generation newcomers Tresiba (9%) and Toujeo (8%). Recently-launched Basaglar, the first biosimilar to enter the basal insulin market, captured the remaining 2% of the market by value. By volume, Novo Nordisk shared that Lantus captured 52% of market share in terms of total prescriptions (TRx), while Levemir held 24% market share, Toujeo held 8%, Tresiba held 7%, and Basaglar held 4% (slide 9). It’s notable from our view that Basaglar has 4% of volume but just 2% of revenue – this seems to imply a lower price or more patient access than we may have expected (or both). It’s also notable to us that the next-generation basal insulins Tresiba and Toujeo now hold 17% and 15% of the market by value and volume, respectively. More on this subsection of the basal insulin market below.

Figure 1: Basal Insulin Market (1Q06-1Q17)

• As illustrated by this downward trend, the basal insulin market remains extremely challenging, with competitive pricing – particularly in the US – as the major obstacle. 2016 marked a breaking point in the pricing controversy over insulin, with the ADA issuing a resolution and petition calling for increased transparency and access solutions from all stakeholders in the insulin supply chain, the Endocrine Society calling for collaboration among stakeholders to address the diabetes drug pricing crisis and Senator Bernie Sanders going as far as to call for a Department of Justice investigation into possible insulin price fixing. We hope that 2017 ushers in an era of greater transparency and access. Several insulin manufacturers have begun to take action, and we wonder if we will soon see visible ramifications of measures such as Lilly’s discount insulin program in partnership with Blink Health and its efforts to engage payers directly in potentially considering insulin a separate, copay-free benefit category. We’ve also been impressed by Novo Nordisk’s position statement to address diabetes drug affordability and J&J’s pricing transparency report. Although these programs represent important steps forward the extent to which this will translate into greater access is as of yet unclear.
• One potential push forward for the basal insulin market is the excitement brewing over basal insulin/GLP-1 agonist combination products, namely Sanofi’s Soliqua (insulin glargine/lixisenatide) and Novo Nordisk’s Xultophy (insulin degludec/liraglutide), which could bolster sales for both drug classes – although the possibility remains that these more advanced combination products will cannibalize basal insulin sales further. More on this below.

2. Next-Generation Basal Insulin Market: Overall Market Increases Over 2-Fold YOY; 1Q17 Marks First Sequential Decline in the Market’s Short History

Against the backdrop of falling revenues in the overall basal insulin market, next-generation basal insulins – Sanofi’s Toujeo and Novo Nordisk’s Tresiba – more than doubled YOY to ~$419 million in total sales year over year. The market share by value is split neck-and-neck with Tresiba holding 51% and Toujeo holding 49% – Tresiba has edged slightly ahead for the first time, holding 47% of the market share by value to Toujeo’s 53% in 4Q16. This is despite Toujeo’s additional year on the US market and we’ll be watching closely to see if this trend will continue. It seems obvious that Novo Nordisk is investing in Tresiba and Tresiba holds the advantage of a position on CVS Health’s formulary, while Toujeo has been excluded. Both next-generation products are excluded from the UnitedHealthcare formulary, which we are very disappointed to see, particularly given the “real world” enthusiasm about both drugs. These are great examples, in our view, of therapies where CGM data would show so much more than traditional A1c and blood glucose data does.

• Very notably, the next-generation sector of the basal insulin market experienced a steep 12% sequential decline in 1Q17; Tresiba sales fell 4% and Toujeo sales fell 19%. This marks the first sequential decline in either product’s history. We suspect that the launch of biosimilar Basaglar and continued pricing pressures in the US insulin market are driving these challenges – it may also be that some patients who were getting access to the next-gen insulins at the end of the year are finding it more difficult now at the start of a new year.

3. All-Time High Sales for GLP-1 Agonists; Whole Class Grows 35% YOY to $1.4 Billion

The GLP-1 agonist class grew 35% YOY and 6% sequentially to $1.4 billion in 1Q17 – a remarkable performance that follows strong 25% growth in full year 2016 to nearly $5 billion from an already-high base of $3.9 billion in 2015. Not to mention, 1Q17 marks the highest-in-history quarterly sum of sales from all major GLP-1 agonists on the market. We’re beyond happy about this growth trajectory for the class – these advanced agents have demonstrated significant and clinically-meaningful glucose-lowering, weight loss, and systolic blood pressure-lowering, among other positive health effects, and we love the idea of more patients benefiting from them. A paper published in Diabetes Care last October reported that only 5% of type 2 diabetes patients in the US were on GLP-1 agonist therapy in 2013, which is far (far!) too low in our opinion, considering the profound benefits to A1c, quality of life, and long-term cost-savings for payers and for the healthcare system overall. Indeed, according to Novo Nordisk’s roadshow presentation for 1Q17, 4% of patients globally and in North America currently have a GLP-1 agonist as part of their diabetes treatment regimen. According to the company’s 1Q17 press release, GLP-1 agonists account for 10% of the global diabetes care market and for 12% of the US diabetes care market by value (share of total revenue from all diabetes drugs). Clearly, these numbers are still very low, which only points to future growth prospects for the class. To this end, we hope payers recognize the potential cost-savings associated with GLP-1 agonists and that manufacturers continue to offer helpful patient savings programs, both with an aim to expand access to this class of advanced medicines. We expect new market entries to spur further class growth as well: Novo Nordisk’s semaglutide (a potent, once-weekly GLP-1 agonist formulation with demonstrated CV benefit in SUSTAIN 6) and Intarcia’s ITCA 650 (an implantable mini pump offering continuous, subcutaneous release of exenatide for three-six months – effectively eliminating the challenge of medication adherence) are both currently sitting with the FDA. If approved, these therapies will bring new innovation to the class and could meaningfully boost sales for all GLP-1 agonist products. In line with this, Novo Nordisk management mentioned during 1Q17 prepared remarks that the regulatory approval of semaglutide will be one key next step for the company’s GLP-1 agonist business to reach its full potential. We’re glad to see this investment beyond Victoza, which also seems like a smart move in light of liraglutide’s impending loss of exclusivity – Teva pharmaceuticals filed the first abbreviated NDA for generic liraglutide in February of this year.

• Novo Nordisk’s Victoza continues to lead the class with 57% market share by value, though management acknowledged that it faces “intense” competition from Lilly’s Trulicity (which comes with once-weekly dosing and a very patient-friendly pen). Trulicity captured 26% of all GLP-1 agonist sales in 1Q17 by our calculations, up from 19% in 3Q16 (when Victoza held 61%) and 25% in 4Q16 (when Victoza held 56%). Moreover, Novo Nordisk’s presentation slides showed that Victoza is losing volume to Trulicity: As of February 2017, Victoza’s share of total GLP-1 prescriptions in the US (TRx) was 48%, down from 50% in 4Q16 and 51% in 3Q16. Trulicity’s TRx share is trending in the opposite direction, at 22% in 3Q16, 25% in 4Q16, and 30% in 1Q17. In our view, there’s plenty of room for both products to sustain commercial success, given that many more patients could benefit from GLP-1 agonists than those currently on them. Getting LEADER data added to the Victoza label will likely boost Novo Nordisk’s existing GLP-1 agonist business and will stimulate more uptake of GLP-1 agonists broadly (once one of them is explicitly indicated for CV risk reduction). Notably, Victoza is the only existing GLP-1 agonist option with demonstrated CV efficacy, and we imagine this confers some advantage to the product, especially following the ADA’s recommendation of liraglutide for type 2 patients at high-risk for CV events in its 2017 Standards of Care. The ELIXA trial found resoundingly neutral CV effects for Sanofi’s Lyxumia (lixisenatide) in 2015, and we still await CVOT data for the other major GLP-1 agonists on the market: EXSCEL for AZ’s Bydureon (exenatide once-weekly) is scheduled to complete in April 2018, as is REWIND for Trulicity (dulaglutide). HARMONY for GSK’s Tanzeum (albiglutide) is scheduled to complete in May 2019 (see our timeline of ongoing CVOTs for more). AZ’s Bydureon accounted for 11% of pooled GLP-1 agonist sales in 1Q17, while Byetta accounted for 3%. GSK’s Tanzeum captured 2% of this market by value and Sanofi’s Lyxumia captured <1%. These four products have all struggled somewhat due to competition from Victoza and Trulicity, the definitive market leaders, though we can’t emphasize enough how much room we see for all these GLP-1 agonists to be successful commercially by extending a broader reach within the diabetes patient population.

Figure 2: Total GLP-1 Agonist Sales (1Q06-1Q17)

4. In First Quarter of Reported Revenue, New Combos Xultophy and Soliqua Post $19 Million

Pooled sales of basal insulin/GLP-1 agonist combinations totaled $19 million in 1Q17, the first quarter in which Novo Nordisk and Sanofi broke out sales for Xultophy and Soliqua, respectively. By value, Xultophy (insulin degludec/liraglutide) currently holds 79% market share, while Soliqua (insulin glargine/lixisenatide) holds 21% share. Notably, Xultophy’s revenue is derived entirely through ex-US sales, where the product has been available for more than two years, since January 2015 – official US launch of Xultophy was announced just hours after the 1Q17 earnings call (more on this below). On the other hand, Soliqua’s revenue is largely driven by US sales, where payer negotiations for both combos is still ongoing. We do think payer negotiations will be key for this class, and we’ve been impressed by Sanofi’s pricing strategy for Soliqua (which is priced on par with “traditional” GLP-1 agonists). We’ll be watching closely to see how the dynamics for this class shape up, especially with both products now launched in the US market, which we expect to drive the lion’s share of sales in the future (after all, the US is the largest market for diabetes globally). Xultophy benefits from demonstrated CV benefit to its GLP-1 component (LEADER showed liraglutide to be cardioprotective, while ELIXA found resoundingly neutral CV effects for lixisenatide), but Soliqua is a major near-term priority for Sanofi Diabetes, while Novo Nordisk management has suggested that Xultophy will be a later-term priority after further increasing uptake and sales of Tresiba (insulin degludec) and Victoza (liraglutide) individually. Both combination products have been highly-anticipated in the diabetes field, and thought leaders expressed tremendous excitement the day both were finally FDA approved following a three-month delay (Dr. John Buse: “From the first patient we studied, I was blown away by the efficacy of the combined approach to control glucose and reduce A1c”). While it’s easy to think about this new class of therapy in terms of a Xultophy vs. Soliqua rivalry, we want to emphasize that the much more important aspect is how these combo products offer substantial improvements vs. basal insulin or GLP-1 agonist monotherapy. We’d love for both Novo Nordisk and Sanofi to carry their products forward to great commercial success – and we think this is entirely possible. Success won’t come overnight, as Sanofi management acknowledged during the company’s 1Q17 earnings call last week – Sanofi expects gradual uptake of Soliqua in the US following concerted efforts to improve reimbursement and educate providers, and we expect this trend will apply to Xultophy’s launch in the US as well.

5. Rapid-Acting Insulin Market: 14% YOY Growth from Low Base; Competitive Pressure from GLP-1 Agonists and SGLT-2 Inhibitors Remain a Major Force

The rapid-acting insulin market fared especially well in 1Q17, growing 14% YOY to $1.6 billion after several consecutive quarters of low or negative growth (-7% in 1Q16, 1% in 2Q16, -6% in 3Q16, and -2% in 4Q16). Notably, given the challenges of 2016, 1Q17 YOY growth occurred against an easy comparison. Sequentially, revenue fell 8% against the difficult comparison of 16% sequential growth in 4Q16. Novo Nordisk’s NovoRapid leads with 48% of the market by value, surpassing Lilly’s Humalog, now at 45%. Sanofi’s Apidra comprises the remaining 7%. Despite the uptick, the rapid-acting insulin class continues to face intense competitive pressure from the increased uptake of GLP-1 agonists and SGLT-2 inhibitors as methods to address postprandial excursions, a challenge that we believe will only grow with the continued uptake of orals in type 2 as well as basal insulin/GLP-1 agonist combinations. We’ll be interested to see whether growth will come from patients who live longer and should intensify their insulin regimens – this should become easier with new insulin dosing apps and a much greater focus on data, as well as CGM.

Figure 3: Rapid-Acting Insulin Market (1Q06-1Q17)

• We are curious to see how Fiasp will impact the rapid-acting insulin market. Novo Nordisk has resubmitted its NDA for Fiasp, with an approval hopefully expected by the end of 2017 following a Complete Response Letter for the product in October 2016. Given this timeline, faster-acting insulin aspart stands to be the first-to-market next-generation rapid-acting insulin analog to reach the US market. Fiasp is already approved in the EU and Canada and has launched in Canada, the UK, and Germany. It is the only ultra-rapid acting insulin currently available, and likely will remain so for the foreseeable future given Lilly’s termination of its partnership with Adocia for phase 3-ready ultra-rapid insulin BioChaperone Lispro, which will delay the phase 3 program for BioChaperone Lispro until Adocia secures a new partner.

Financial Highlights

6. Strong Quarter for Diabetes/Obesity Portfolio Overall, with 10% YOY Growth

Novo Nordisk’s overall diabetes/obesity portfolio grew 10% YOY as reported (11% in constant currencies), posting DKK 23.2 billion ($3.3 billion) in total revenue against a modest comparison of 6% growth in 1Q16. This growth was driven primarily by next-generation basal insulin Tresiba, which now accounts for 5% of total diabetes/obesity revenue according to management. By our calculations, Novo Nordisk’s new-generation insulins (Tresiba, Xultophy, and Ryzodeg) were responsible for 41% of growth in 1Q17, while GLP-1 agonist Victoza was responsible for 45%. Sequentially, total sales from all major diabetes/obesity products fell 3% against a tough comparison of sales rising 7% sequentially to DKK 23.8 billion ($3.4 billion) in 4Q16. While growth in 3Q16 and 4Q16 was modest (both quarters featured a 3% YOY rise), we’re impressed to see a double-digit YOY increase to kick-off 2017. Novo Nordisk’s diabetes/obesity care segment experienced YOY growth in most global markets – in particular, US sales grew 16% YOY operationally to DKK 12.5 billion ($1.8 billion) in 1Q17. This is reassuring in the context of pricing pressure affecting diabetes drugs in the US, which has been cited by many large pharma companies as a reason for underwhelming diabetes portfolio performance. This isn’t to say that Novo Nordisk’s products haven’t encountered these same challenges, and we’d love to hear more details from management on exactly how US pricing pressures have impacted net sales. We applaud the company for its position statement on affordability of diabetes drugs in the US, released toward the end of 2016 (J&J, Lilly, and others have followed suit with similar statements of pricing transparency), and we hope that all these manufacturers remain open to productive conversation on how to fix the problem of skyrocketing prescription medicine prices and how to lower burdensome out-of-pocket costs that prevent patients from accessing essential therapies.

Figure 4: Total Diabetes/Obesity Sales (1Q12-1Q17)

7. Victoza Sales Rise 25% YOY to $824 Million, Marking Largest YOY Spike Since 2015

Global sales of GLP-1 agonist Victoza (liraglutide) totaled DKK 5.7 billion ($824 million), up 25% YOY as reported (22% in constant currencies). By our calculations, the GLP-1 agonist was responsible for 45% of growth in Novo Nordisk’s overall diabetes/obesity portfolio. Victoza’s 1Q17 YOY growth is markedly greater than what the franchise experienced in 2016 (16% YOY increase in 1Q16, 10% in 2Q16, and 9% in 3Q16, 10% in 4Q16, and 11% for the full year vs. 2015), and it matches the larger story on GLP-1 agonists in that the whole class is growing fast from a high base. Accordingly, management attributed Victoza’s strong performance to underlying growth in the GLP-1 agonist class, which matches commentary from previous earnings calls in 3Q16 and 4Q16. Management also acknowledged that Victoza’s market share by volume in the US is trending down, despite continuing to lead the market. The product’s share of total US GLP-1 agonist prescriptions (TRx) fell to 48% in 1Q17, from 50% in 4Q16 and 51% in 3Q16. Management identified Lilly’s once-weekly Trulicity as Victoza’s leading source of competition – Trulicity’s TRx share has been increasing from 22% in 3Q16, to 25% in 4Q16, to 30% in 1Q17. All this said, Novo Nordisk remains wholly committed to growing its GLP-1 agonist business, and management suggested two key next steps toward this goal: (i) getting LEADER data added to the drug label (and making Victoza the first GLP-1 agonist and second of any diabetes therapy, after Lilly/BI’s SGLT-2 inhibitor Jardiance, to be indicated for CV risk reduction), and (ii) obtaining approval for once-weekly next-generation semaglutide. An FDA decision on the Victoza label update is expected by August 2017, while a regulatory decision on semaglutide is expected by 4Q17. Though not mentioned on the call, we also note that Victoza’s loss of patent exclusivity is impending – Teva pharmaceuticals filed the first abbreviated NDA for generic liraglutide in February of this year – so it makes sense that Novo Nordisk is counting on once-weekly semaglutide to sustain its GLP-1 agonist business in the long term.

• By geography, US Victoza sales grew 33% YOY as reported (29% in constant currencies) to DKK 4.2 billion ($607 million). Paralleling trends in worldwide Victoza sales, this marks the largest YOY rise for the GLP-1 agonist franchise in the US since 2015. Ex-US revenue rose 8% YOY as reported to 1.5 billion DKK ($217 million).
• Global sales also rose 7% sequentially from DKK 5.4 billion ($774 million) in 4Q16. Notably, this fairly impressive growth from a high base occurred against a relatively tough comparison of 6% sequential growth in 4Q16. Once again, these numbers highlight a strong performance by Victoza in 1Q17 despite the product losing market share among all GLP-1 agonists (down from 64% to 56% between February 2016 and February 2017, as per Novo Nordisk’s financial materials).

Figure 5: Victoza Sales (1Q12-1Q17)

Table 2: GLP-1 Agonist Market Share

8. Tresiba: Growth Continues with Revenue Increasing Nearly 3-Fold YOY

Tresiba continued to be a bright spot for Novo Nordisk, with sales nearly tripling YOY to DKK 1.5 billion (~$214 million) in 1Q17. Management highlighted that Tresiba accounted 5% of total revenue for Novo Nordisk globally, though it’s still a relatively small product overall (Victoza revenue eclipses Tresiba’s at four times the size). Revenue for Novo Nordisk’s overall new generation insulin portfolio (consisting of Tresiba, Xultophy [Tresiba/Victoza combo], and Ryzodeg [Tresiba/NovoLog combo]) also nearly tripled YOY to DKK 1.7 billion (~$242 million). Despite this strong YOY growth, Tresiba experienced its very first sequential decline (-4%) in 1Q17 – this was a worrisome bit of news to see so early in the drug’s launch cycle. Correspondingly, the new generation insulin portfolio as a whole, which is largely driven by Tresiba, declined 1% sequentially. Management did not comment on what factors drove this poor sequential performance for the growing star of the company’s insulin portfolio, but we suspect that the launch of biosimilar Basaglar and continued pricing pressures in the US insulin market are driving this to some extent. Tresiba’s most direct competitor, Sanofi’s Toujeo (insulin glargine U300) also experienced its first sequential decline in 1Q17 falling a sharp 19% - more on this above in our pooled analysis of the next-generation basal insulin market. Tresiba’s overall trajectory leaves it well-positioned to reach blockbuster status in 2017, and we hope future sequential declines don’t prevent Tresiba from hitting this milestone.  The product (and next-generation basal insulins in general) represent a major improvement compared to current gold standard Lantus and we believe its continued uptake will translate to better patient outcomes for patients who can benefit from a basal insulin with a flatter action profile, less hypoglycemia, and flexible dosing.

Figure 6: New-Generation Insulin Sales (1Q14-4Q16)

• Management announced that the EMA has approved a label update for Tresiba to include data from the SWITCH 1 and 2 clinical trials. This welcome news comes right on schedule with the 2Q17 decision date cited in the EMA’s positive CHMP opinion and bodes well for a corresponding FDA decision, expected by September 2017 after filing for a label update in September 2016. The SWITCH program demonstrated significant reductions in severe or blood glucose-confirmed symptomatic hypoglycemia and nocturnal hypoglycemia with Tresiba therapy compared to standard-of-care Lantus (insulin glargine) in both type 1 and type 2 diabetes, and the inclusion of this impressive data on the label will solidify this differentiating factor for Tresiba in Novo Nordisk’s marketing and promotion materials. Tresiba’s current label is headlined by a flexible-dosing claim, which allows patients to take Tresiba at any time of the day as long as it is at least eight hours before the next dose of Tresiba. The drug’s most direct competitor, Sanofi’s next-generation basal insulin Toujeo (U300 insulin glargine), does not have either a hypoglycemia benefit or flexible dosing claim on its label. That said, the SWITCH data were included on the label in the “Pharmacological Properties” section (page 12, table 7), rather than as one of the claims in the headlining “Clinical Particulars” section (starting on page 2, and includes the flexible dosing claim). While inclusion of the data anywhere on the label is valuable to order for Novo Nordisk to be able to talk about this data with patients and providers, we expect a concerted education campaign will be required to get information out about these hypoglycemia findings given how far down in the label the data is located and how increasingly busy physicians are.
• Tresiba has now launched in 55 countries, with particularly strong performance in Japan, where it holds a 40% share of the basal insulin market by value (notably Tresiba has comparable reimbursement as Lantus in this market). Value share is also strong in Italy (30%), Switzerland (28%), Greece (26%), and Denmark (25%), but less so in markets such as the UK (5%) and Brazil (10%) where more restricted market access for Tresiba has slowed its uptake. See slide 8 of the company’s presentation for a full rundown of the drug’s market penetration by geography.
• Management highlighted Tresiba’s solid performance in the challenging US market. In the US, Tresiba holds an increasing volume share of the basal insulin market, with 7% TRx, neck-and-neck with Toujeo’s plateauing 8%. See our pooled analysis of the basal insulin market at the beginning of this report for a much deeper dive on these trends. Management attributed this positive trajectory for Tresiba in the challenging US market in part to its strong formulary positioning, with 70% access for patients in commercial channels and Medicare part D. Another contributing factor was CVS Health’s 2017 formulary update, which excluded Lantus and Toujeo beginning in January, and positioned Tresiba as the preferred next-generation basal insulin option. Despite the exclusion, Sanofi has managed to retain about 55% of CVS prescriptions, largely through the use of patient assistance programs, but Sanofi expects the impact of the CVS exclusion to intensify in the coming months. As Lantus prescriptions continue to decline, we imagine that its positive effect on Tresiba will become even more pronounced in quarters to come. The UnitedHealthcare exclusion of Lantus will go into effect April 1, but the formulary also excluded both Tresiba and Toujeo so we this exclusion will have the larger effect of driving patients toward Basaglar.
  
  • On the new-to-brand prescription (NBRx) front, Tresiba holds a solid 12% NBRx share, down from 15% NBRx share in 4Q16. It is unclear where this loss comes from, but given rival Toujeo’s poor formulary positioning, we find it most likely that Tresiba’s loss of NBRx share was taken from outside of the next-generation basal insulin sector with patients opting for more affordable options such as the traditional basal insulins or newly-launched biosimilar Basaglar. In 4Q16, Toujeo’s NBRx share was 10% – it’s unclear what share of NBRx Toujeo held in 1Q17, as Novo Nordisk chose not to display basal market NBRx trends for the first time in several quarters. Instead, the company chose to display volume share in the basal market in terms of total prescriptions (TRx; see above for numbers) – we see this as a sign that Tresiba is maturing as a product and its total prescription share is substantial enough that Novo Nordisk is less focused on NBRx.

9. Xultophy Posts $15 Million in First Quarter of Reported Revenue

The company broke out Xultophy sales for the first time in 1Q17 – the basal insulin/GLP-1 agonist combo generated DKK 103 million ($15 million) in quarterly revenue. Just hours after the call wrapped up, Novo Nordisk announced the official US launch of Xultophy with a $1/day patient savings card. We’re glad to see this discount option available to eligible patients with commercial insurance – it effectively reduces co-pay for a monthly supply of Xultophy (insulin degludec/liraglutide) to $30. This direct patient assistance is particularly important, in our view, given Novo Nordisk’s early pricing strategy to list the product at a premium (~$31/day) vs. existing GLP-1 agonists (~$20-25/day), not reflecting rebates. The patient savings card will hopefully expand access to the advanced combination therapy, despite the higher list price – this could be especially helpful for patients with high co-pays, though this savings card will not be able to help those in the high deductible phase of their health plans or uninsured cash-pay patients, per the eligibility criteria. Of course we’re exceptionally early in the commercial life of basal insulin/GLP-1 combos, and payer negotiations on reimbursement are still ongoing, which we hope will further meaningfully expand access to this innovative therapy. Sanofi management shared last week that one reason for delay in coverage decisions is payers wanting to consider Xultophy and Soliqua (insulin glargine/lixisenatide) together, so we look forward to following this reimbursement landscape now that both products in this class are available in US pharmacies. Novo Nordisk management underscored that roll-out of Xultophy in worldwide markets is on track – the combination therapy is now available in 14 countries, including the US.

• Management reiterated the message that standalone Tresiba and Victoza – rather than their combination – will continue to be commercial priorities for now. This marketing strategy stands in direct contrast to Sanofi’s promotional/educational efforts surrounding Soliqua. Notably, the Tresiba and Victoza franchises are individually major drivers of growth for Novo Nordisk, which is less true for Sanofi’s Lantus (insulin glargine) and Lyxumia (lixisenatide). In this sense, Soliqua may be more critical for Sanofi’s diabetes business in the short term than is Xultophy for Novo Nordisk’s diabetes business, considering the context of other portfolio assets and overall portfolio growth. Novo Nordisk reps have also explained the company’s strategy as an effort to cultivate familiarity – insulin degludec itself is relatively new-to-market, and patients/providers have to be comfortable with an agent before they prescribe it in combination. That said, the company’s decision to break out sales for Xultophy suggests to us that the product is doing well and is a sign of Novo Nordisk’s long-term confidence in the combination. We’re happy to note this positive outlook, given how highly-anticipated Xultophy was in the US – and rightfully so, since the fixed-ratio combination offers superior A1c-lowering and weight loss alongside a milder side-effect profile vs. basal insulin or GLP-1 agonist monotherapy. In clinical studies, Xultophy has shown a stronger profile vs. Soliqua in some ways (weight loss instead of weight neutral, hypoglycemia benefit). Xultophy also has more positive CVOT data backing it: The LEADER trial showed significant CV benefits to Victoza, while the DEVOTE trial for Tresiba is scheduled to report at ADA 2017 (topline data showed non-inferiority to Lantus). In contrast, the ELIXA trial for Lyxumia found neutral CV effects of lixisenatide, as did the ORIGIN trial for insulin glargine. Importantly, we see plenty of room for both Soliqua and Xultophy on the market, and the best case scenario would be whole class growth. See our pooled market highlights above for more on this.

10. Modern Insulins: Portfolio Rebounds with 3% YOY Growth

Novo Nordisk’s modern insulins (Levemir [insulin detemir], NovoLog [insulin aspart], and NovoMix) experienced a relatively strong quarter with combined revenue growing 3% YOY as reported (2% operationally) to DKK 12.1 billion ($1.7 billion). This was largely driven by robust sales of NovoLog, which rose 15% as reported (13% operationally) to DKK 5.3 billion ($761 million) after consistent YOY declines in every quarter of 2016. That said, this growth occurred against a fairly easy comparison of a 1% revenue decline in 1Q16. NovoMix also contributed growth to a lesser extent, rising 3% YOY as reported and operationally to DKK 2.8 billion ($396 million). Levemir was the exception with sales falling 9% YOY as reported (-10% operationally) to DKK 4.0 billion ($575 million). In addition to the continued pricing pressure in the basal insulin sector, management repeatedly Levemir’s downturn to Tresiba uptake – apparently, a not-insubstantial portion of new Tresiba starts are due to switches from Levemir (as well as, presumably, switches from Lantus and new basal starts).

• The growth of Novo Nordisk’s modern insulin portfolio was largely driven by ex-US sales, which rose 5% YOY to DKK 5.7 billion ($819 million) versus a more modest 2% YOY increase to DKK 6.4 billion ($913 million) for US sales. This underscores the challenging pricing environment that diabetes companies face in the US, particularly surrounding insulin. The positive, albeit modest, growth of Novo Nordisk’s modern insulin portfolio in 1Q17 therefore comes as a very welcome change of pace from several consecutive quarters of negative growth in 4Q16, 3Q16 and 2Q16. Despite overarching challenges in the insulin arena, Novo Nordisk remains a true giant in this domain, capturing 46% of the total insulin market and 45% of the modern and new-generation insulin market as shown in the table below.

Table 3: Novo Nordisk Insulin Market Share

11. Human Insulin: Challenging Quarter with 5% YOY Decline

Human insulin experienced a challenging quarter with revenue falling 5% YOY as reported (-4% operationally) to DKK 2.6 billion (~$372 million) in 1Q17. Sequentially sales fell 11%. The portfolio saw negative YOY growth in all geographic regions, but Europe, Japan and Korea, and Latin America were hit particularly hard, with revenue declining 13%, 18%, and 14% operationally, respectively. US revenue decline was more modest (-4% operationally), and human insulin revenue in China and in Region AAMEO (Africa, Asia, Middle East, and Oceania) grew 1% in constant currencies.

12. Saxenda Sales Flat Sequentially, Up >100% YOY from a Low Base

Revenue from obesity drug Saxenda more than doubled YOY (from a low base) and was flat sequentially at DKK 539 million ($77 million) in 1Q17. While it’s true that this marks the first quarter since 2015 launch with no sequential growth in Saxenda sales, we note that this was a very tough comparison – revenue grew 55% sequentially in 2Q16, 11% in 3Q16, and 29% in 4Q16. On the other hand, we might expect more sustained growth from a product that so recently hit the market, and we expect that poor reimbursement is a substantial hurdle creating a (hopefully temporary) upper cap on uptake right now, along with continued patient and provider reluctance to turn toward a chronic pharmacotherapy for obesity treatment. Management highlighted Saxenda as an important growth driver, and pointed to the huge opportunity for growth that still lies ahead, given that only 2% of 600 million people with obesity are currently being treated. We’re very glad to see Novo Nordisk’s commitment to obesity, not only in developing therapies but in promoting a concept of obesity as a treatable chronic disease. We learned from reps at Diabetes UK 2017 that obesity occupies a substantial portion of the company’s R&D budget, and that some of these resources are allocated to educational efforts so that more providers/payers understand obesity as a biological and not-to-be stigmatized disease. This fits well with management’s previously-outlined goal to grow the market for obesity pharmacotherapy overall, which will require going above and beyond Saxenda advertising. Reluctance among patients/providers to consider pharmacotherapy for chronic weight management persists, and reimbursement prospects for agents in this class are poor – both of these obstacles must be addressed before we can expect to see boosted volume and sales of obesity drugs, and we’re thrilled that Novo Nordisk is interested in tackling them head-on.

• Sales were broken out by geography for the first time (which we see as a good indication of Novo Nordisk’s investment in the product and confidence in long-term commercial success): Saxenda generated DKK 375 million ($53 million) of revenue in the US and DKK 164 million ($23 million) ex-US. Sales in Europe specifically totaled DKK 16 million ($2 million), while sales in Latin America/AAMEO totaled DKK 114 million ($16 million). Management shared that Saxenda is now launched in 18 countries, and that commercial roll-out is “progressing as planned.” Successful launch in Brazil in 2H16 was mentioned as a bright spot for the obesity franchise.
• Novo Nordisk Chief Scientific Officer Dr. Mads Thomsen spoke to the recent FDA approval of the inclusion of three-year SCALE data on the Saxenda label. We see this as a major win for the franchise. Providers and patients will now more readily be able to see how Saxenda in combination with lifestyle modification led to 6% body weight loss vs. 2% with placebo at 160 weeks, and how ~50% of individuals on Saxenda who lost ≥5% body weight at week 56 maintained this weight loss over three years. This long-term, sustained efficacy is impressive, and inclusion of this data will be valuable for busy healthcare providers who rely on product labels to inform their practice. Moreover, three-year SCALE results point to the long-term safety of Saxenda. Many patients/providers are wary of the side-effects and adverse health consequences of weight loss pharmacotherapy (reasonably so, due to the safety issues that came up during the first-generation of obesity medications) – this is another critical hurdle to obesity management that must be knocked down. With an update to the Saxenda label, Novo Nordisk is making strides to reassure patients/providers of the safety of newer weight loss agents.

Pipeline Highlights

13. Phase 1 GLP-1/GIP/glucagon Tri-agonist Added to Pipeline

Very notably, Novo Nordisk has initiated a phase 1 trial for a GLP-1/GIP/glucagon tri-agonist NN9423 for obesity. The trial hopes to enroll 56 male participants with overweight and obesity and is expected to complete in September 2017. We’ve been expecting Novo Nordisk to add a tri-agonist to its clinical development pipeline for some time now, ever since its acquisition of the brilliant Dr. Richard DiMarchi’s biotech organizations Calibrium and MB2. Dr. DiMarchi has spoken compellingly about the process for polyagonist development and previously published promising preclinical results for a GLP-1/GIP/glucagon tri-agonist with an exendin-4 backbone. The candidate that Novo Nordisk has advanced is distinct from this earlier candidate, however, as Novo Nordisk’s pipeline page specifies that NN9423 is an agonist of native human GLP-1. This makes the GLP-1 component of the tri-agonist more similar to liraglutide or semaglutide than exenatide. Despite the differences, we assume Dr. DiMarchi and his team played a major role in the discovery and preclinical development of this tri-agonist as well. To our knowledge, this is the first tri-agonist that has been advanced into clinical trials, though there are several GLP-1/glucagon dual agonists and a number of GLP-1/GIP dual agonists in a fairly robust competitive landscape. That said, the majority of GLP-1/glucagon and GLP-1/GIP dual agonists that we are aware of are being investigated for a type 2 diabetes indication rather than an obesity indication, though both Novo Nordisk and OPKO Health are notably focused on obesity indications for their GLP-1/glucagon dual agonists. We’re intrigued by Novo Nordisk’s decision to focus, at least initially, on an obesity indication for this tri-agonist. Presumably, NN8423 will likely also have A1c reduction efficacy and we imagine could be an especially good option for patients with obesity and prediabetes especially. See below for more on Novo Nordisk’s increasingly robust phase 1 obesity pipeline – we continue to be impressed by the organization’s commitment to this area!

14. Fiasp FDA Decision Expected in 3Q17

Management shared that an FDA decision is expected in 3Q17 for the Class II resubmission of faster-acting insulin aspart (branded Fiasp ex-US), slightly ahead of the 4Q17 timeline shared at time of resubmission. Notably, in Q&A, management shared that Fiasp will likely be less of a priority at launch, given the company’s acknowledged focus on Tresiba, Victoza, Saxenda, and – to a lesser extent – Xultophy. This is not altogether surprising to us, considering that management has previously stated that the development of Fiasp is more of a defensive measure on the part of Novo Nordisk rather than a potential growth driver. Furthermore, phase 3 data have led some to suggest that Fiasp does not represent quite as significant of a leap forward as next-generation basal insulins, though we think many patients could still stand to benefit from Fiasp’s potential for tighter postprandial control, less hypoglycemia, and perhaps more flexible dosing. Also, we think there’s enormous potential for faster insulins in pumps and closed loop systems. Fiasp has already launched in the UK and Germany and is priced at no extra cost to NovoRapid in those markets – we hope the company continues this trend when Fiasp reaches the US and prices it on par with NovoLog to help ensure that as many patients as possible have access to this advanced option. Fiasp has also launched in Canada.

15. Phase 2 Obesity Results for Semaglutide Expected 3Q17

A phase 2 trial for once-daily, injectable GLP-1 agonist semaglutide in obesity is expected to report results in 3Q17. According to ClinicalTrials.gov, the trial completed in April 2017. The trial enrolled a whopping 957 patients and investigated seven doses of semaglutide once-daily, ranging from 0.05 mg to 0.4 mg. The trial also included a head-to-head comparison with Saxenda (liraglutide 3.0 mg for obesity). If the semaglutide results in type 2 diabetes are any indication, we’d expect even greater weight loss efficacy from semaglutide compared to Saxenda – though nausea and GI side effects will be key to watch out for here (as we understand it, this can be managed through slower titration of the GLP-1 agonist). Like Saxenda, management expects to initiate a full, largescale phase 3 program for semaglutide in obesity. According to management, this will likely include a major trial with around 3,500 participants. The company shared that it has already begun planning for a phase 3 obesity program for semaglutide, to initiate within a year after the phase 2 results report. The program will advance forward two doses from the current phase 2 trial – presumably, by conducting a separate, full phase 3 program, Novo Nordisk is not constrained to advancing the doses used for once-weekly type 2 diabetes therapy. Semaglutide as a molecule is clearly a core aspect of Novo Nordisk’s competitive strategy moving forward: by the time this phase 3 program initiates, once-weekly semaglutide for type 2 diabetes will hopefully already be on the market and daily oral semaglutide’s phase 3 program will be well underway. The daily injectable formulation is also currently in a phase 2 trial for NASH – this trial isn’t expected to complete until January 2020 (NASH trials are notoriously long and costly, due to the lack of well-validated biomarkers for the candidate).

16. Injectable Semaglutide Upcoming Regulatory Decisions and Phase 3b Data

Novo Nordisk shared that the SUSTAIN 7 phase 3b trial of semaglutide head-to-head with liraglutide is expected to report in 3Q17. The trial enrolled participants with type 2 diabetes on metformin therapy. Few other details are available and we weren’t able to find this trial on ClinicalTrials.gov, so we’re very curious as to the size of the trial, etc. The fact that Novo Nordisk conducted this trial signals a great deal of confidence in semaglutide’s efficacy and we’re very eager for the results. It’s clear that Novo Nordisk hopes to position semaglutide as a next-generation successor to liraglutide (complete with positive CVOT data and an obesity formulation) – this head-to-head trial indicates that the company isn’t afraid of cannibalizing Victoza sales by demonstrating semaglutide’s potential superiority to the current market-leading GLP-1 agonist.

• Novo Nordisk highlighted the submission of once-weekly, injectable semaglutide to regulatory authorities in Japan. Notably, the company shared that, in the Japanese pivotal studies, mean A1c dropped below 6% with semaglutide treatment for the first time. This is certainly impressive, though the baseline A1c in the trial was not shared.
• An FDA decision and an EU CHMP opinion for the submissions of once-weekly, injectable semaglutide for type 2 diabetes are expected in 4Q17. It’s not yet known whether an FDA Advisory Committee will be required for the product – while semaglutide will join a robust GLP-1 agonist class, it is the first agent in the class with pre-approval CVOT data demonstrating superiority (and a signal for retinopathy) in-hand. Novo Nordisk has acknowledged that it will likely need to complete a larger, post-approval trial explicitly powered to demonstrate CV superiority to support a CV indication on the label. Nonetheless, it will be interesting to see how regulatory agencies digest the SUSTAIN 6 data.

17. No Updates on Oral Semaglutide

There was no mention of the ongoing phase 3 program for the once-daily oral formulation of semaglutide. As of 4Q16, all 10 trials in the massive program have initiated. See below for a complete overview of the PIONEER program.

Table 4: PIONEER Phase 3 Trial Program for Oral Semaglutide

18. Obesity Pipeline Phase 1 Trial Updates

We noticed several updates to Novo Nordisk’s phase 1 obesity trials on ClinicalTrials.gov. While not mentioned on the call, a phase 1 trial of PYY agonist NN9747 completed in February 2017, according to ClinicalTrials.gov. This candidate was advanced into phase 1 in 3Q15 and we’re very eager to learn more about these first clinical results. PYY elevation (along with GLP-1 elevation) has been implicated in post-bariatric surgery caloric intake drop – a PYY-based obesity therapy (or a PYY/GLP-1 combination, potentially) could be a first step toward the “holy grail” of mimicking the effects of bariatric surgery in injection or pill form.

• The expected completion date of the phase 1 trial of FGF21 analog NN9499 in obesity has been delayed to October 2017, from August 2017 previously. The trial is still recruiting patients and hopes to enroll 56 male participants with overweight or obesity. There appears to be a revitalized interest in FGF21 of-late and we’re very curious if Novo Nordisk will perhaps pursue a NASH indication for the product – the company has indicated that NASH is an area of interest (and, indeed, once-daily injectable semaglutide is in phase 2 for NASH) and BMS recently presented promising phase 2 NASH data for its own FGF21 candidate at EASL 2017. Roche added an FGF21 candidate to its pipeline in 1Q17 – it’s unclear if this candidate is being investigated for type 2 diabetes or obesity. FGF21 has been of interest as a therapeutic target for type 2 diabetes for some time – indeed, BMS originally acquired its candidate for a possible type 2 diabetes indication before pivoting away from this disease area. That said, both Lilly and Pfizer’s FGF21 candidates were discontinued due to lackluster glucose-lowering results in type 2 diabetes and we see more promise for this class in obesity or NASH, especially given the increasingly high bar for new diabetes drugs – Novo Nordisk management evidently agrees on this front.
• The phase 1 trial of standalone glucagon analog NN9030 for obesity has also been delayed slightly, with completion now expected in July 2017 rather than June. The trial is fully enrolled, with a total of 48 participants with overweight or obesity. Novo Nordisk is also investigating NN9030 in combination with liraglutide in patients with overweight or obesity – the phase 1 trial is still enrolling patients (n=180) and is expected to complete in September 2017. The advantage of co-administration of a glucagon analog and a GLP-1 agonist is that it allows Novo Nordisk to titrate to the optimal ratio of GLP-1 and glucagon action for the target therapeutic profile. In contract, the more common GLP-1/glucagon dual agonists in the competitive landscape have essentially “set” ratios of GLP-1 and glucagon agonism following discovery and advancement of the candidate. Novo Nordisk is evidently keeping an open mind as to which strategy to pursue, given that it’s phase 1 pipeline also includes a single-compound GLP-1/glucagon dual agonist and GLP-1/GIP/glucagon tri-agonist.
• Overall, Novo Nordisk has substantially doubled-down on its commitment to obesity therapy in the long-term. While its later-stage obesity efforts (Saxenda and semaglutide) are for molecules first indicated for type 2 diabetes, almost all of the candidates in Novo Nordisk’s phase 1 obesity pipeline are being evaluated only for obesity currently (the exception is PYY analog NN9747/8, which is in phase 1 for both obesity and type 2 diabetes). Notably, Novo Nordisk’s early-stage obesity efforts now outnumber its diabetes candidates – the company has six candidates in phase 1 for obesity and only three in phase 1 for type 2 diabetes. This follows the company’s updated R&D strategy of focusing on (i) developing adjacent indications with high unmet need for its existing products (such as obesity for semaglutide); (ii) developing new diabetes medicines with “distinct differentiation or disruptive potential”; and (iii) developing drugs for new disease indications related to but distinct from diabetes and glucose regulation. Given the increasingly high bar for new diabetes drugs, we’re not surprised that that number of diabetes candidates with “disruptive” potential to make Novo Nordisk’s high internal bar for clinical development has dwindled. On the other hand, the company clearly sees obesity as an area of enormous opportunity and unmet need. Management emphasized that only 2% of an estimated 600 million people with obesity globally are receiving pharmacotherapy for the condition, suggesting there is immense market potential for Novo Nordisk if it is able to successfully lay the groundwork of educating patients and providers on obesity as a disease and the need for chronic treatment.

Table 5: Novo Nordisk Diabetes and Obesity Pipeline Candidates

See the table below for a complete overview of Novo Nordisk’s diabetes and obesity-related clinical development efforts.

-- by Abigail Dove, Payal Marathe, Helen Gao, and Kelly Close