Novo Nordisk A/S Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 2, 2023

There are 20 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Q3 2023 Novo Nordisk AS Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Daniel Boesen, Head of Investor Relations.

Operator

Please go ahead, sir.

Speaker 1

Welcome to this Novo Nordisk earnings call for the 1st 9 months of 2023. This call follows the early announcement of top line results the updated outlook for 2023 shared in October. The release was advanced due to Danish Securities Regulations. My name is Daniel Bosten, and I'm the Head of Investor Relations at Novo Nordisk. With me today, I have CEO of Novo Nordisk, Lars Voorgaard Jarnsen Executive Vice President and Head of Commercial Strategy and Corporate Affairs, Camilla Silvest Executive Vice President and Head of North America Operations, Stok Lange Executive Vice President and Head of Development, Martin Holz Lange and finally, Chief Financial Officer, Carsten Munk Knutsen.

Speaker 1

All speakers will be available for the Q and A session. Today's announcement and the slides for this call are available on our website, novonoise.com. Please note that this call is being webcast live and a recording will be made available on our website as well. The call is scheduled for 1 hour. Please turn to light.

Speaker 1

The presentation is structured as outlined on Slide 2. Please note that all sales and operating profit growth statements will be at constant exchange rates unless otherwise specified. Please turn to the next slide. As always, we need to advise you that this call will contain forward looking statements. These are subject to risks and uncertainties that could cause Actual results to differ materially from expectations.

Speaker 1

For further information on the risk factors, please see the company Thank you, Daniel. Next slide please. In the 1st 9 months of 20 3 and the slides prepared for this presentation. With that, over to you Lars for an update on our organic aspirations.

Speaker 2

Thank you, Daniel. Next slide, please. In the 1st 9 months of 2023, we delivered 33% sales and 37% operating profit growth at constant exchange rates. I'd like to start this call by going through the performance highlights across our strategic aspirations before handing over the word to my colleagues. Within purpose and sustainability, we continue to make progress.

Speaker 2

Our carbon emissions decreased by 28% compared to pre pandemic levels in 2019. And in line with our aspiration of being a sustainable employer, We continue to expand the number of women in senior leadership positions. This is now 41% compared to 38% last year. In R and D, an important milestone is that we will stop the flow kidney outcomes trial early as semaglutide demonstrated a benefit in people with type 2 diabetes and chronic kidney disease. Further, within R and D, we have recently agreed to acquire Ocaduuron for the treatment of cardiovascular disease.

Speaker 2

This supports our aspiration of establishing a presence in other serious chronic diseases with a high unmet medical need. Marcio will come back to this and our overall R and D milestones later. The sales growth reflects strong commercial execution With both operating units contributing to a continuous sales growth, they are driven by increasing demands for our GLP-one based diabetes and obesity treatments. Camilla and Doug will go through the details in the therapy area later. Within commercial execution, we are pleased to have reached our BCT The aspiration of DKK 25,000,000,000 and our aspiration for diabetes by reaching a global value market share of 1 third.

Speaker 2

Naturally, the progress is not holding us back, and we continue to aim for treating more patients with our innovative treatments. Carsten will go through the financial details, but I'm very pleased with our overall performance for the 1st 9 months of 2023, which has enabled us to raise our outlook for the full year. With that, I'll give the word to Camilla for an update on commercial execution.

Speaker 3

Thank you, Lars, and please turn to the next slide. In the 1st 9 months of 2023, our total sales increased by 33%. The sales growth was driven by both operating units with North America operations growing 49% and international operations growing 17%. Our GLP-one sales increased 49%, driven by North America growing 43% and international operations growing 60%. Insulin sales decreased by 7% driven by 1% decline in international operations and a 24 Obesity Care sales grew 174% overall.

Speaker 3

In International Operations, sales grew 52%, driven by both Saxenda and Wegovy. In North America Operations, obesity care sales grew 2 44%. Total rare Sales decreased 18%, which was driven by 22% decrease in international operations and by a 13% decrease in North America operations. Please turn to the next slide. With 25% sales growth in our diabetes care, we are now growing faster than the Total market improving our global diabetes value market share to 33.3%.

Speaker 3

The increase reflects market share gains in both North America Operations and International Operations. In International Operations, total diabetes care sales increased by 21% in the 1st 9 months of 2023. This was driven by GLP-one sales growing 60% driven by all geographical areas. Novo Nordisk is the market leader in international operated GLP-one value market share of 69%. Sempican continues its GLP-one market leadership with just shy of 46% market share.

Speaker 3

Wibeltus has 12% And with that, I will hand over the word to Doug.

Speaker 4

Thank you, Camilla. Please turn to the next slide. The GLP-one class expansion continues in the U. S. In the 1st 9 months of 2023.

Speaker 4

The U. S. GLP-one market volume grew around 50%, comparing Q3 of 2023 to Q3 of 2022. Measured on total prescriptions, Novo Nordisk continues to be the market leader with 53% market share. Please go to the next slide.

Speaker 4

Obesity Care sales grew by 174% in the 1st 9 months of 2023. This was mainly driven by the U. S. The global branded anti obesity market expansion continues with a global volume growth of 94%. In international operations, Obesity Care sales are driven by strong Saxenda performance and the Wegovy launches in 5 international operation countries.

Speaker 4

While eager to launch Wegovy in more IO countries, Our focus remains to do this in a sustainable manner. For example, by capping volumes. In the U. S. Alone, sales of Wegovy grew by 467%.

Speaker 4

Demand for Wegovy continues to exceed supply and to safeguard continuity of care for patients already on Wegovy, The supply of the lower Wegovy dose strengths in the U. S. Has been reduced since May of 2023. Please go to the next slide. Our rare disease sales decreased by 18%.

Speaker 4

The sales decrease was driven by a 13% decline in North America operations and a 22% sales decline in international operations. Sales of rare blood disorders increased by 2% driven by the launch products in hemophilia A and B and partially countered by NovoSeven. Sales of rare endocrine disorder products decreased by 54%, reflecting a temporary reduction in manufacturing output. Now over to you Martin for an update on R and D.

Speaker 5

Thank you, Doc. Please turn to the next slide. Serious chronic non communicable diseases affect millions of people globally and have emerged in recent years as a major public health issue. Given our extensive scientific and clinical knowledge within metabolic diseases, we are well positioned to advance our With the current body of evidence, it is clear that the beneficial effects of semaglutide goes even further than glycemic control and weight loss. Semaglutide has already now demonstrated convincing risk reductions in a number of cardiovascular outcomes studies.

Speaker 5

This includes SUSTAIN6 and PIONEER SEX in Type 2 diabetes as well as STEPHEP PEP Select in Obesity. While we await data from the Select trial to be presented, We continue to build evidence for the semaglutide molecule in the cardiovascular space. In 2024, we expect several readouts. This includes Type 2 diabetes cardiovascular outcomes study SOL with oral semaglutide 14 milligram and the functional outcomes trial STRIDE, which focuses on the high risk population with peripheral vascular disease. As previously discussed, we also investigated the potential therapeutic effects of semaglutide on osteoarthritis and Metabolic Dysfunction Associated Stereotopatosis, previously known as non alcoholic steatohepatitis.

Speaker 5

In addition to this, we recently announced early closure of the flow trial due to efficacy. Next slide please. This closure was based on a recommendation from the FLOW Independent Data Monitoring Committee following a preplanned interim analysis. As you know, FLOW is an outcomes trial conducted across 28 countries and more than 400 sites. 3,534 people were enrolled and randomized in a one:one ratio to receive either once weekly somaglutide 1.0 milligram of placebo.

Speaker 5

The eligibility criteria were designed to include patients with type 2 diabetes and high or very high risk for progression of chronic kidney disease. The primary objective of FLOW is to demonstrate delay in progression of chronic kidney disease and to lower the risk of kidney and cardiovascular mortality through the composite primary endpoint. This is on top of standard of care, including the use of SGLT2s. The trial is powered to detect a 20% risk reduction on the primary endpoint. Key secondary endpoints include annual rate of change in estimated glomerular filtration rate, major adverse cardiovascular events and all cause death.

Speaker 5

Today, few treatment options exist for chronic kidney disease in people living with type 2 diabetes. With a projected global increase in type 2 diabetes, there is a clear need for additional treatment options to help mitigate the residual risk in people The next step will be to close down the trial. The study of flow It is expected in the first half of twenty twenty four. The presentation of detailed data is expected to take place and a medical conference also during 2024. Next slide please.

Speaker 5

In line with our As a reminder, we are pleased to announce the acquisition of Ovsodurinone for the treatment of cardiovascular disease from KVP Biosciences. There remains a significant Orsuduranon is a once daily oral administered small molecule with a long half life and a high Affinity for the mineralocorticoid receptor. Osuduran has an attractive efficacy and safety profile and is currently being examined in the Phase 3 trial, Klara and CKD, in patients with uncontrolled hypertension and advanced chronic kidney disease. We expect to initiate additional cardiovascular as well as chronic kidney disease outcomes trials during the course of 2024. Next slide please.

Speaker 5

Turning to other R and D milestones, I would like to highlight some of the other trial readouts and initiations across our therapy areas in 2023 and in the first half of twenty twenty four. Within diabetes in the Q3 of 2023, we initiated the 1st pivotal Phase 3 trial in the EU. We are also anticipating the results from the ongoing pivotal Phase III trial for ICOSEMA Combine 3 in the first half of twenty twenty four. Icocema has the potential to be a 1st in class, once weekly, Fixed ratio combination of basal insulin and GL receptor sorry GLP-one receptor agonist in patients with Type 2 diabetes in need of intensification. Within obesity, we are happy to announce that we Intatempa initiated a 32 week Phase 1 trial with once weekly subcutaneous amicretin

Speaker 1

in people with overweight obvious 2.

Speaker 5

While we await select data At the American going to be presented at the American Heart Association Congress, we have submitted the trial to the U. S. FDA and the European Medicines Agency. We are pleased that the FDA has granted priority review for the supplemental new drug application. This marks a significant milestone in our ongoing efforts to address unmet needs in patients with overweight and obesity and Established Cardiovascular Disease.

Speaker 5

Finally, we also expect the chronic heart failure trial with preserved ejection fraction in obese patients and diabetes to read out in the last quarter of this year. In rare disease, nidaziran was approved by the U. S. FDA for treatment Primary hyperoxaluria Type 1. This marks the first approved siRNA treatment for Novo Nordisk.

Speaker 5

In other serious chronic diseases, we initiated a Phase 1 trial with our angiopoietin like free protein inhibitor. This is a monoclonal antibody in development for cardiovascular disease, specifically for lowering of cholesterol and triglycerides. With that, over to you, Carsten.

Speaker 6

Thank you, Martin. Please turn to the next slide. In the 1st 9 months of 2023, Our sales grew by 29% in Danish kroner and 33% at constant exchange rates, driven by both our operating units. The gross margin increased to 84.5% compared to 84.3% in 2022. The increase in gross margin reflects a positive product mix driven by increased sales of GLP-one based treatments.

Speaker 6

This is partially countered by costs related to ongoing capacity expansions, a negative currency impact and lower realized prices mainly in the U. S. And region China. Sales and distribution costs increased by 22% in Danish kroner and by 25% at constant exchange rates. The increase is driven by both operating units.

Speaker 6

In North America, the cost increase is driven by the relaunch of VEGOVI and promotional activities for Ozempic. In International Operations, the cost increase is driven by promotional activities for Rybelsus as well as Obesity Care market development activities. The increase in sales and distribution costs are impacted by adjustments to legal provisions. Research and development costs increased by 38% measured in Danish kroner and 39% at constant exchange rates. The increase reflects increased late stage clinical trial activity and increased early research activities compared to the 1st 9 months of 2022.

Speaker 6

The acquisition of Pharma Therapeutics in 2022 and in VASAGO Pharma also increased R and D spending. Administration costs increased by 9%, measured in Danish kroner and 11% at constant exchange rates. Operating profit increased by 31 percent measured in Danish kroner and 37% at constant exchange rates, reflecting the sales growth. Net financials showed a net gain of DKK 1,200,000,000 compared to a net loss of DKK 5,000,000,000 last year. The effective tax rate was 19.9% in the 1st 9 months of 2023 compared to 20.5% in the 1st 9 months of 2022.

Speaker 6

Net profit increased by 47% and diluted earnings per share increased by 49% to DKK 13.71. Free cash flow was DKK 75,600,000,000 compared with DKK 62,600,000,000 in the 1st 9 months of 2022. In line with the strategic aspiration of delivering attractive capital allocation to shareholders, a total of DKK 52,000,000,000 has been paid back to shareholders through share buybacks and dividends. The cash conversion is positively impacted by timing of payment of rebates in the U. S.

Speaker 6

Capital expenditure for property, plant and equipment was DKK 16,400,000,000 compared to DKK 7,200,000,000 in 2022. This primarily reflects investments in additional capacity for active pharmaceutical ingredient production and finished capacity for both current and future injectable and oral products. Please go to the next slide. 9 months into 2023, we are continuing our sales growth momentum, which has enabled us to raise the outlook for the full year. We now expect the sales growth to be between 32% 38% at constant exchange rates.

Speaker 6

The increased Sales outlook is primarily reflecting higher full year expectations to Ozempic volume sold in the U. S. And gross to net adjustments for Ozempic and Viggoi in the U. S. The guidance reflects expectations for sales growth in both North America Operations and International Operations.

Speaker 6

The guidance is mainly driven by volume growth of GLT-one based treatments for diabetes and obesity care. This is partially countered by declining sales in rare disease due to a temporary reduction in manufacturing output. The guidance reflects the level of volume growth of GLP-one based treatments. The inherent uncertainty of the pace of Ozempic Obesity Care market expansion following the relaunch of Vicovia in the U. S.

Speaker 6

And a limited rollout in international operations are also included in the guidance range. Finally, the sales outlook reflects expected continued periodic supply constraints and related drug shortage notifications across a number of products and geographies. Novo Nordisk is investing in internal and external capacity to increase supply both short and long term. While supply capacity for VIGOVI is gradually being expanded, the lower dose strengths in the U. S.

Speaker 6

Will remain restricted to safeguard continuity of care. We now expect operating profit to grow between 40% 46% at constant exchange rates. This primarily reflects the sales growth outlook and continued investments in future and current growth drivers within Research Development and Commercial. For 2023, we expect net financial items to amount to a gain of around DKK 1,600,000,000 mainly reflecting Gains associated with foreign exchange hedging contracts. Capsule expenditure is still expected to be around DKK 25,000,000,000 reflecting the upscaling of the supply chain and the innovation based growth strategy pursued by Novo Nordisk.

Speaker 6

In the coming years, the capital expenditure to sales ratio is expected to be low double digits. The free cash flow is now expected to be between DKK 65,000,000,000 and DKK 73,000,000,000 reflecting the sales growth, a favorable impact from rebates in the U. S. And investments in capital expenditure. The updated cash flow expectation is mainly reflecting increased net profit expectations, partially countered by business development activities.

Speaker 6

That covers the outlook for 2023. Now back to you Lars for final remarks.

Speaker 2

Thank you, Carsten. Please turn to the final slide. Today's announcement discloses the full set of quarterly results and updated outlook for 2023, which was shared earlier in October. Overall, we are very satisfied with the sales growth in the 1st 9 months of 2023. The growth is driven by demand for our GLP-one based The performance in the 1st 9 months The year has enabled us to raise the outlook for the full year.

Speaker 2

From an R and D perspective, we have reached a significant milestone with the submission of Select and look forward to sharing more data at American Heart Association. In addition, we're excited about the early closure of the FLOW trial and anticipate readout in the first half of twenty twenty four. Finally, the increase of osseuduran will strengthen the portfolio of cardiovascular disease and underlines the commitment to establish presence with other serious chronic diseases. With that, I'll hand over to the final word to Daniel.

Speaker 5

Thank you, Lars. Next slide, please. With that,

Speaker 1

we are now ready for the Q and A session. We kindly ask all participants to limit her or himself to 1 or maximum 2 questions, including sub questions. Operator, we are now ready to take the first question.

Operator

Thank We will now go to the first question. And your first question comes from the line of Michael Nedelkovic from TD Cowen. Please go ahead.

Speaker 7

Thank you for the question. I have one for Martin. Martin, if you'll allow me to set up something of a Here's a potential set of expectations for the Phase 3 select data when we see them at One, clinically meaningful benefit across each of the individual MACE components and regardless of BMI category. 2, cardiovascular benefit that clearly emerges within 1 year on Wegovy therapy and does not diminish over time. And 3, no noticeable imbalance in any very rare adverse events such as suicide or cancer.

Speaker 7

My question is, would you urge me to modify these expectations in any way?

Speaker 1

Martin, a strong one for you.

Speaker 5

So thank you very much for that question. As you probably imagine, I cannot speculate to anything beyond what we've already disclosed and that is The 20% risk reduction on the primary endpoint for MACE, which is obviously myocardial infarction, stroke and cardiovascular death. We see attribution from all 3, but we do not go into more detail. What I will commit to is obviously that we saw a very clear and positive safety profile From Select and with no outliers identified.

Speaker 1

Thank you, Martin, and thanks, Mike, for the question. Next question, please.

Operator

Thank you. We will now take the next question. And your next question comes from the line of Richard Parkes from BNP Paribas. Please go ahead.

Speaker 8

Thanks very much for taking my questions. I've got a couple. So firstly, when I look at Ozempic and Wegovy, U. S. Symphony prescriptions, they're both trending flat to down over the last quarter, I assume due to supply constraints.

Speaker 8

But your guidance suggests an expected acceleration in top line growth in Q4. So I'm just wondering if you could help me to understand that. Are you expecting to see kind of further improved supply Into the end of the year would be, I assume, kind of swing factor there. And then the second question Is just your slide outlines the potential benefits of semaglutide beyond glycemic control and weight loss and maybe We'll see some insight into that from the Select study. But your chart suggests there's potential for patients to benefit from the CV aspects that don't have diabetes or obesity.

Speaker 8

So I'm just wondering how you can capitalize on that given that your trials currently, I think, are just recruiting patients with either obesity and diabetes and comorbidities? Thanks very much.

Speaker 1

So I'll give the first to you, Carsten. Supply going into our guidance.

Speaker 6

Yes. So thank you for that question, Richard. And clearly, when we put out guidance, that's because we believe that's the most realistic forecast range that we're putting in. And we don't have too many months to roll on. So of course, we see the TRx trends and bake that into our Into our forecast, what I would give of additional flavor on top of that is, of course, the growth rate is also a function of Exactria sales last year and we did see Ozempic having a lower base last year in the Q4 than what we would normalizing into this year.

Speaker 6

And then of course there can be fluctuations in inventories for instance with wholesalers. And then finally I would say This pickup in sales growth in the 4th quarter, this is not to be kind of read into anything, any Difference on the supply situation, what we're selling in the Q4 has been produced months ago.

Speaker 1

Thank you, Carsten. Martin, any comments on the benefits beyond weight loss percent?

Speaker 5

So first of all, I think it's exactly right that our starting point is the cardiometabolic space starting out with obesity and diabetes, And these are the patients that we investigate. I think it's important to call out that the Best majority of patients suffering from ASCVD, from heart failure, from Chronic kidney disease, but also metabolic liver disease also have an element of Metabolic Derangement. And there's a clear association and overlap to both diabetes and obesity. So from our perspective, this actually creates some very nice synergies and are certainly not seen as exclusive. But our starting point is patients suffering from diabetes and obesity.

Speaker 1

Thank you, Martin. Thank you, Richard, for the questions. And we're ready for the next Question.

Operator

Thank you. We will now take the next question. And your next question comes from the line of Seamus Fernandez from Guggenheim Securities. Please go ahead.

Speaker 9

Thanks very much for the question. So just very quickly, As we think about the select trial results, in the wake, not just of the presentation, but the very rapid filing, There have been a lot of questions around this being actually a cardiovascular medication and perhaps gaining access to CMS in that regard. Can you just talk about the prospects of that actually becoming reality? And then the second question is just on the oral And the initiation of the subcutaneous amicretin, can you just help us understand, is this more of a supply chain related decision, An IRA related decision or a decision related to some challenges with the oral Thank you,

Speaker 1

Seamus. Doc, I'll give the first question to you.

Speaker 4

Yes. Thanks, Seamus. We do believe that there's an opportunity, a potential opportunity to use the medical exception process through the CV component, but let's wait to see.

Speaker 1

Thanks, Doug. Martin, any thoughts on Amicretin?

Speaker 5

Yes. On Amicretin, our decision to go also into subcutaneous is actually By neither of the above of the three reasons that you mentioned, it's actually driven by the fact that we are learning that optionality is Important for patients and prescribing physicians in both diabetes and obesity. And we've seen a clear potential for amacretin to

Speaker 1

Thanks, Martin, and thanks, Simus. We're ready for the next question.

Operator

Thank you. We will now take the next question. And your next question comes from the line of Peter Verdult from Citigroup. Please go ahead.

Speaker 10

Yes, thank you. Peter Dault Citi. Two questions, Carsten, your favorite topics, supply and pricing. Just on supply, if we take The sort of run rate for GLP-one volumes, your franchise in the U. S, just extrapolate into 2024.

Speaker 10

If nothing changes, I mean, there's going to be a big disconnect in terms of People's expectations for growth next year and I think it will be effectively flat. Now I know it's going to improve next year, but can I just push you on when we might see the handbrake being released? I mean logical thinking might be that at the time of the Manjaro launch, You'll be want to be in a less capacity constrained position. So I know you can't go into too much detail, but just some incremental color on when we might see The handbrake being removed would be helpful. And then on pricing, if we do our value per script calculation, there's a huge jump From Q2 to Q3, you've called out gross to net adjustments.

Speaker 10

We know that commercial mix has improved. But Just making sure, is this a sort of high watermark, a one off in terms of value per prescription? How should in terms of baselining and thinking going forward, Can we use the value per script in Q3 as a baseline or is it artificially high? Thank you.

Speaker 1

Thanks, Pete. Gas and supply going into 2024 and value per script?

Speaker 6

Yes. Pete, Thank you for those my favorite subjects. So I'd say, first of all, with the guidance that for the full year this year That's a midpoint of 35% sales growth at constant exchange rates. At least in the Novo setting, it feels like we have released the handbrake and moving at very high pace in terms of growth rates. At least it's the highest in the history of the company.

Speaker 6

But that said and extrapolations into 2024, I would 1st of all, we're clearly pursuing growth strategy based on the innovation. We have shown that we have the innovation Platforms, especially in Ozempic and Vigovit to drive growth this year and clearly also next year. So not teaching you how to extrapolate, but if you extrapolate our implied Q4 sales growth based on our guidance, Then you actually get to a sales growth number next year in the double digits, which is actually not that far away from from where consensus is currently. So I do believe that we're scaling very fast. And then specifically On VIGOVI and any hand breaks there, then what I'd say as to 2024 is that in 2024, we will be delivering significant step up in volumes Through the U.

Speaker 6

S. Market compared to 2023 as we did from 2022 to 2023. And then to your pricing questions, As we've said on numerous occasions, the appropriate way of looking at net realized pricing in the U. S.

Speaker 1

Is to

Speaker 6

look That's the year to date numbers. So most contracts are contracted on an annual basis. And the tricky part It's a lag effect between when a script is written and then we receive the rebate claims from the payers. And there's just a lag effect of several months, and that's why in reality, Q3 is the first point where we see How the channel payer mix tool is falling out for 2023. So I wouldn't use Q3, in isolation for anything forecasting wise, I would recommend you to use year to date Q3 as a starting point.

Speaker 6

Thank you. Very clear. Thank you.

Speaker 1

We are ready for the next question.

Operator

Thank you. Your next question comes from the line of Mark Purcell from Morgan Stanley. Please go ahead.

Speaker 11

Yes. Thanks very much for taking my questions. The first one on GLP-one and higher doses, Lilly, starting higher dose trials for teseprotide. You have 8 60 milligrams coming through by the end of Can you help me understand your expectations there and the importance of increasing your dose where the pivotal trial at 7.2 will read out late next year? Then secondly, in terms of the PEN platform leverage, we estimate that about EUR 100,000,000 GLP-one PEN units can be sold by Novo in 2023 for GLP-1s that is.

Speaker 11

The majority is the FlexTouch platform with a 3 ml platform. So will you use those two platforms to launch for Govee in U. S? And if not, why not?

Speaker 1

Martin, the first question for you GLP-one higher dose considerations?

Speaker 5

Yes, absolutely. Thank you for that question. So you're absolutely right. We're investigating 8 milligrams and 16 milligrams in diabetes, but we're also investigating 7.2 milligrams in obesity. The purpose is obviously to assess whether we can achieve an even higher efficacy without compromising on safety.

Speaker 5

Our model suggests We want to assess this.

Speaker 1

Thank you, Martin. And if I understood Your question, Greg, Mark. Then the question was whether we will leverage our FlexTouch platform also to launch the Govee in the U. S. In the FlexTouch device.

Speaker 1

But last maybe to you, any strategic considerations on our device platforms?

Speaker 2

Yes. Marc, thanks for the question. I'll just say that we have a situation today where we have A number of device platforms inside the company, 1, Using outside vendor and technology, so that gives us flexibility and is actually Part of fueling the growth today that we can flex this. So I'll not go into specific speculation about what we use of device per market, But we see that it's a strength that we can flex between different presentations. And we see today that it's really The efficiency of the molecule that drives that, so that gives quite some flexibility in how we go to market country by country and strategic flexibility on our side.

Speaker 1

Thank you. Thank you, Lars. Next question, please.

Operator

Thank you. Your next question comes from the line of Emily Field from Barclays. Please go ahead.

Speaker 12

Hi, thanks for taking my question. I'll ask 2. One, just on the STEP 9 osteoarthritis study, I believe that this is not large enough to be added to the Wegovy label. So if this Were to be a positive study, what would be your next steps plans? And then just on anti obesity medications and muscle loss, we've seen competitors More explicitly make efforts in R and D for compounds that could preserve lean mass over fat mass and overall weight loss.

Speaker 12

Was wondering if you could just give an update on where you stand on that within your R and D portfolio? Thank you.

Speaker 1

Thank you, Emily. Martin, 2 for you.

Speaker 5

Yes. So specifically on the osteoarthritis trial, you are right. It's not the biggest trial. I think it's too early to speculate Whether that will have an impact on a label, it's very, very clear that for us, it's also guiding for Future clinical activities, specifically maybe for Calcasieuma and Vicretin or GLP-one GIP combination. So It has actually 2 potentials both to serve for information specifically for Wegoi, but also to guide us for future activities.

Speaker 1

And the second one, Martin, obesity and research and development focus on the muscle loss versus Yes.

Speaker 5

I think this is a relevant point. Also a focus of ours. With current treatment specifically with Gobi and Saxenda, we actually see a reasonable preservation of Lean body mass, given the broader weight loss, but it has to be a focus area and you'll probably see also in our pipeline without going into Details, maybe even quite soon, assets that could lead to a preservation of lean mass.

Speaker 1

Thank you, Martin. Thank you, Emily. We're ready for the next question.

Operator

Thank you. Your next question comes from the line of Simon Baker from Redburn. Please go ahead.

Speaker 13

Thank you for taking my questions. 2 if I may. Firstly, on China, Growth looks pretty good over there, but I just wonder if you could give us an update on the impact of reduced access to Chinese hospitals on how that is affecting things, if indeed at all? And then secondly, on semaglutide, There was an interesting journal preprint on Monday looking at its use in alcohol use disorder, which looked very impressive. Be Interesting to get your thoughts on the potential of that indication in your opinion.

Speaker 13

Thanks so much.

Speaker 1

Thank you, Simon. So Camilla, the first one to you. Do we see reduced access to Chinese hospitals?

Speaker 3

So in general, we are working across the country and we also have access to To hospitals in general, what we do see in China is an effect of the VPP. Of course, that's what you mean, the insulin and sales results. And that is also when you look at an overall IO business point of view, that is what is actually dragging down the overall IO Insulin growth. But in China, Ozempic is going really well. We have great momentum of Ozempic that we've had Since the launch and since the inclusion on the reimbursement list and that can drive growth in China.

Speaker 1

So no major issues with access.

Speaker 5

Martin, the second question? Yes. Thank you very much for the question. We've also seen These operational studies and being intrigued by the fact that GLP-one may have a place in also treating alcohol abuse That was actually live within the mode of action of GLP-one. From our perspective and also considering the timing, the combination of 2 mode of actions that could is probably the more attractive and efficacious approach.

Speaker 5

So if you see us going into that space, that would be with Calcasieuma and not with semaglutide alone. Thank you, Martin.

Speaker 6

Thanks so much.

Speaker 1

We're ready for the next question.

Operator

Thank you. Your next question comes from the line of Naresh Khulhan from IntonHealth. Please go ahead.

Speaker 14

Hi there. Thanks for taking my questions. First one on, with GoV U. S. Market access.

Speaker 14

And we're hearing that a growing number of employers are having to opt out, having already opted in Because the demand has been too high. Can you just help us to get a sense of how big or small an issue this is? And Obviously, next year, that's probably potentially likely to increase when supply resumes and demand increases. And certainly, on supply, if I look back at when you seem to be relatively comfortable with the demand, We were around about 30,000 new pet starts a week in the U. S.

Speaker 14

Is that a fair starting point for The ability to supply and growth from that going into 2024. Thank you.

Speaker 1

Thank you, Naresh. So, Doc, any updates on U. S. Market access for VIGOVI?

Speaker 4

Yes. Thanks Naresh. And Overall, we're very pleased with the broad market access that we have for Wegovy. Most major PBMs And health plans are covering it and that derives around 50,000,000 people with obesity now being covered. And importantly, we're seeing about 80% of the patients that are paying less than $25 for WIGOVY.

Speaker 4

Now to your question Specifically around employers, we do see some opt outs, but we're seeing overall more opt ins than opt outs. So directionally, we're heading in the right direction. And our focus will be continuing on securing employer coverage as well as stronger access for AOMs overall.

Speaker 1

Thank you, Don. Carsten, any additional comments on the gooey supply going into next year?

Speaker 6

Yes. So I think the way to look at U. U. S. V.

Speaker 6

A. V. Gold supply is a starting point of currently around 100,000 TRX per week according to IQVIA. And then we have the 5 different growth strengths. And of course, the magic is to get that split right Into the link into manufacturing and then we scale from there.

Speaker 6

And as we've said in prior quarters, Then this is something we do dynamically. So don't look for hockey stick. It's a gradual process where, Of course, we'll be starting at the lower doses and then increasing them as we move forward. There are different data sources in terms of new starts. So I'm not really sure what your data source is, but I think my data point is lower than yours in terms of the number of new starts per week.

Speaker 1

Thank you, Pat. Thank you, Naresh. And we are ready for the next question, please.

Operator

Thank you. Your next question comes from the line of Florent Cespedes from Societe Generale, please go ahead.

Speaker 15

Good afternoon. Thank you very much for taking my questions. 2, please. First one on Vgovy in Europe. Have you started to talk to the payers in Europe as you have already submitted the data to the Your open authorities and do you believe that you will need to show a statistically significant benefit on the cardiovascular best that will be presented at the next week.

Speaker 15

And my second question is on Ozempic following the flow results. How would you position the product on this population as we already have Products available to treat these patients, notably the SGLT2. And then it seems that in the trial, 15% The patients are under SGLT2 treatment, so some color on this one would be helpful. Thank you.

Speaker 1

Thank you, Florent. Camilla, maybe the first one for you in terms of NiGoi outside the U. S.

Speaker 3

Yes. So in terms of I believe the question was whether we need statistical significance. I would just say now we await the presentation at the conference. But in general, there is a great interest in the GOVI and of course also the benefits in Select. So we will get back to that, but we have we do see authorities interested in bringing up the discussion again with us already at this point for reimbursement of Digovy.

Speaker 3

And just a reminder, we have reimbursement of Saxenda already in close to 15 countries All around the world and of course here we are talking a step up in treatment.

Speaker 1

Thank you, Camilla. Martin, any medical perspectives on flow and The population that we potentially could treat.

Speaker 5

Yes, absolutely. Maybe just also calling out on select the study was designed to have a power specifically for the primary endpoint. So assuming statistical significant for the secondary endpoints This will be seen as an upside and not as something to be expected. I just want to call that out. But obviously, please tune in on what we can present on November 11 in Philadelphia.

Speaker 5

Specifically on flow, I think there's a tremendous unmet need in the diabetes space. It's also very, very clear that not all patients today who suffer from diabetes and chronic kidney disease are on NSGLC2 and or on GLP-one. And therefore to have data to suggest that we can actually decrease and again we haven't seen the data, but we can potentially decrease The kidney disease deterioration by a substantial number On top of standard of care, including SGLT2s, it is a really, really attractive offering. And it will allow More patients in need to get on GLP-one. Thank you, Martin.

Speaker 5

Thanks for the question.

Speaker 1

And we are ready for the next question.

Operator

Thank you. We will now take the next question. And the question comes from the line of Richard Foster from JPMorgan. Please go ahead.

Speaker 16

Hi, thanks for taking my question. A question on the European rollout of Wegovy first. Obviously, we know in Denmark, in May, there was a substantial demand for So, we're going to be in about 1% of the population. So, I was wondering how that has developed since then, both in terms of volume and How you're seeing patients staying on the drug through Denmark given it's an out of pocket market? And then the second question is on your KP Bioscience product.

Speaker 16

Just wondering how that differentiates from other MR antagonist, particularly Korindia from Bayer, but there are also others in development from AstraZeneca, etcetera. Just your thoughts on how this is different. Thanks very much.

Speaker 1

Thank you, Richard. Camilla, the first one to you, Vigoli rollout in Denmark

Speaker 3

and in South? Yes. So in Denmark, we see a Continued interest in Digovy and the Digovy continues to perform very well. And it is more than 1% of the population at this point in time. In terms of how many states on the product, we also have It's too early to give you exact daytime numbers, but we do have, I could say, anecdotal evidence that there is a high number, a very, very high number of the people that stay on The product from the beginning of the year when the product was launched.

Speaker 5

Thank you, Camille. Martin, reflections on Osedorin. Yes, absolutely. So what we've seen with osuzoduronon is a molecule with a very high affinity for the receptor and also a very high That actually means that we expect to see differentiation not only on efficacy, but it also Appears to have a potential upside on the safety side, specifically on hyperkalemia. So we do expect to see a differentiated drug in this space.

Speaker 1

Thank you, Martin. Thank you, Fila. Thanks, Richard, for the question. We are ready for the next.

Operator

Thank you. Your next question comes from the line of Peter Welford from Jefferies. Please go ahead.

Speaker 17

Hi. Hopefully, you can hear me. I've got 2 questions, I think. Firstly, if I could come back on the good gross margin. I appreciate the commentary year to date, but in the third Quarter, it seemed to trend down quite a bit, which I guess is somewhat unusual given the quite significant improvements we saw in the gross to net in your most profitable market for both Wegovy and Ozempic.

Speaker 17

So can you just talk a little bit about in the Q3 what the incremental Costs or whether perhaps any write downs or swing of inventory or something that could potentially depress the gross margin in what would normally be a more profitable quarter? And then secondly, just coming back to the comment that was made on Stateline, but thinking about it a different way, which is in the past, you cited for Saxenda That around 25% or more of patients are on the drug for at least a year and most of those are treated by obesity experts. Appreciate it's still early for Wegabie to necessarily give comments on the U. S. For stay time.

Speaker 17

But can you sort of talk about whether you're seeing different trends than those of Saxenda, both in terms of the obesity experts versus those arms and also the number of patients perhaps of reaching a year at this point? Thank you.

Speaker 1

Thank you, Peter. So first, also to Karsten on the gross margin and then later Doug on what we see on Stay Time in the U. S. Before we go.

Speaker 6

Yes, Peter. Well spotted gross margin Q3. And just a word of caution to begin with, looking Gross margins at a quarterly basis is always tricky due to fluctuations over the year. But if I am to comment specifically on the quarter, then at constant exchange rates, the gross margin is flat compared to last year. So the decline compared to last year is FX driven.

Speaker 6

And then you could say why is it not increasing Compared to last year given the gross to net adjustment and the product mix and there are basically 2 pieces to it. First of all, remember the starting point, our gross margin is already high at 84% or so. And then secondly, What is different compared to prior years is that the amount of CapEx we're running these days and just from an accounting policy Standard point of view, we are realizing more costs related to our capital expenditure projects into the P and L. So it doesn't all go to the balance sheet. Some of it also hits the P and L and that is basically what is offsetting the benefit from product mix.

Speaker 1

Thank you, Carsten. And over to you, Doug, any insights on stay time on BIGOVY in the U. S. So far?

Speaker 4

Yes, Peter, thank you. Because generally, you're right. We expect to be able to say more about stay time in 2024. Obviously, it's been difficult given the few time periods with unrestricted supply. But what I can say is based on early data from multiple sources, Persistency on Wegovy, it looks better than Saxenda with fewer patients dropping off in the 1st 12 months, but we'll have more to say in 2024.

Speaker 1

Thank you, Doug. Thank you, Peter. And we are ready for the next question.

Operator

Thank you. Your next question comes from the line of Matthias Hegbloom from Handelsbanken. Please go ahead.

Speaker 8

Thank you so much. R and D question. In the scenario that both high dose salmon 7.2 milligram as well as KAGRIS salmon works in Phase 3, Can you help me think about the regulatory pathway for a fixed dose combination with KAGRISAN using the high dose ama and whether that would require a new Phase 3 or if a small pitching study would be enough? Thanks so much.

Speaker 1

Thank you, Matthias. Martin?

Speaker 5

Yes, absolutely. Thank you for that question, Matthias. That would most likely require a reasonably I think we can bridge some safety data, but we will still have to establish both safety and efficacy. So we actually see that as a

Speaker 1

Thank you, Martin. And we have time for 2 more set of questions. So we're ready for the next one.

Operator

Thank you. The next question comes from the line of Emmanuel Papadakis from DB, please go ahead.

Speaker 18

Thanks for taking the question.

Speaker 2

Hopefully, you can hear me okay. Maybe a

Speaker 18

follow-up for Carsten on supply. Carsten, you said you're going to significantly increase supply in 2024 versus 'twenty three as you did in 'twenty three versus 'twenty two. Eyeballing data, it

Speaker 6

looks like it was approximately

Speaker 18

a 5 fold increase 23 over 22. So you're telling us you're going to have another 5 fold increase in 2024? And if not, can you help us with the approximate quantum? And then a follow on also on Flow. Martin, you're helpful enough on Select to give us an indication The contribution of components have been approximately equal, well balanced in Select.

Speaker 18

Is that also the case in Flow? Or how should we think about the contribution of the Composite endpoint components and what should we expect in terms of labeling? Thank you.

Speaker 1

Thank you, Emmanuel. First, Karsten, any additional supply?

Speaker 6

Yes. And thanks for triangulating that way around, Emmanuel. I'd love to give you further flavor, but as you know, we are guiding for next year come our full year results late January. So that's where we'll be doing our financial guidance for 2024 and giving too much granularity in scaling of rigor, we It gets too close to guiding for next year. So I'm sorry, but I'll have to fry that at a later point in time.

Speaker 1

Thank you, Martin. Can you share more on Clop? Yes.

Speaker 5

I think it's a great question. And I maybe just want to clarify, I don't think we've seen Contribution from the 3 modern components, we just say that they all contributed. And obviously, again, we have to wait November 11 until we see the full data set. Specifically for flow, I would give it up to be able to answer you, but Due to the nature of an interim analysis, we've not seen the data. So for better or worse, I know absolutely no more than you do at this So I can't speculate.

Speaker 1

Thank you, Martin. Thank you, Emmanuel. Then we'll take the last set of questions.

Operator

Thank you. Your last question for today comes from the line of Michael Novo Nordisk from Nordea. Please go ahead.

Speaker 19

Yes. Thank you very much. Just on the cost side, can you please go through some of the dynamics here in Q4 in order to sort of make the cost go up.

Speaker 5

As I see it,

Speaker 19

it needs to go up in extreme pace for Q4. Are there any specific investments that you're able to take early or anything like that prior to going into 2024 just to make understand your EBIT guidance?

Speaker 1

That's over to you, Kaif.

Speaker 6

Yes. Michael, thanks for that question. When I look at our total operating cost growth In the Q4, then it's actually not markedly different compared to year to date. So what you should be expecting is a continued, What I'll call high level of growth in R and D expenditure around the 40% mark and some 20% plus on S and D expenditure and the competitive gross margin also in the Q4. So in reality, no big swings in

Speaker 1

Thank you for participating and please feel free to contact Investor Relations in case you have any follow-up questions. Before we close the call, I would like to hand over to you Lars for any final remarks.

Speaker 2

Thank you, Daniel. I'd also like to thank you all for participating today. I hope it's clear from our comments that we're very pleased with the strong momentum we have in our business, Also underlined with the raised guidance for 2023. And many questions on the coming years, not least the coming year. We are really focused on pursuing innovation based growth strategy and I feel confident in our ability to scale supply to support that.

Speaker 2

We're really excited about Flow underlining the attractiveness of semaglutide and we are equally excited That we soon can disclose what Select has to show at the upcoming conference at in a matter of a few days. So thank you all. We appreciate your time today. And with that, we'll close the call. Thank you.

Operator

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

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Earnings Conference Call
Novo Nordisk A/S Q3 2023
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