Novo Nordisk A/S Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
January 31, 2024

There are 20 speakers on the call.

Operator

Welcome to this Novo Nordisk earnings call for the full year of 2023 and the outlook for 2024. My name is Daniel Musvan Fosen, and I'm the Head of Investor Relations at Novo Nordisk. With me today, I have CEO of Novo Nordisk, Lars Borger Executive Vice President and Head of Commercial Strategy and Corporate Affairs, Camilla Sundvest Executive Vice President and Head of North America Operations, Doug Langer Executive Vice President and Head of Development, Martin Holz Lange and finally, Chief Financial Officer, Carsten Munk Knutsen. 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, novonordisk.com.

Operator

Please note that the call is being webcast live and a recording will be made available on our website as well. The call is scheduled to last 1 hour. Please turn to the next slide. The presentation is structured as outlined on Slide 2. Please note that all sales and operating profit growth statement will be at constant exchange rate unless otherwise specified.

Operator

Please turn to Slide 3. 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. For further information on the risk factors, please see the company announcement for the full year 2023 and the slides prepared for this presentation. With this, over to you, Lars, for an update on our strategic aspirations.

Speaker 1

Thank you, Daniel. Please turn to the next slide. In 2023, we delivered double digit sales and Operating Profit Growth and we continue to make progress on our strategic aspirations. I'll walk you through the performance highlights before handing over the words to my colleagues. We continue making progress on purpose and sustainability.

Speaker 1

On carbon emissions, our carbon emissions decreased by 34% Compared to pre pandemic levels in 2019 and in 2023, we reached more than 40,000,000 patients with our diabetes and obesity treatments. To uphold our commitment to being a sustainable employer, we expanded the number of women in senior leadership positions to 41% compared to 39% at the end of 2022. In the past year, we have developed and expanded our pipeline across all our therapy areas. In diabetes and obesity, we have seen several exciting trial readouts, and we have advanced novel acids into Phase 3. We have also expanded our footprint in cardiovascular disease and strengthened our late stage pipeline in rare blood disorders.

Speaker 1

Martin will come back to this And our overall R and D milestones later. In 2023, we have achieved 2 major milestones within commercial execution. We have reached our weekly sales operation of more than DKK 25,000,000,000 and our aspiration for diabetes, which Was to achieve 1 third of the global diabetes value market. Going forward, we continue to aim in treating more patients with our innovative treatments. Lastly, we're very pleased with a strong sales growth of 36% and operating profit growth of 44% in 2023, both measured at constant exchange rates.

Speaker 1

Now I would like to hand over the word to Camilla, who will give us the latest update on our commercial execution.

Speaker 2

Thank you, Lars. And please turn to the next slide. In 2023, our total sales increased by 36%. The sales growth was driven by both operating units with North America operations growing 54% and international operations growing 16%. Our GLP-one sales in diabetes increased 52%, driven by North America growing 52% and international operations growing 53%.

Speaker 2

Insulin sales decreased by 6%, driven by declining sales in the U. S. And Region China. Obesity Care sales grew 154%. In International Operations, sales grew 47%, driven by both Saxenda and Wegovy.

Speaker 2

Sales of Saxenda increased by 14% and sales of VEGOVI reached around DKK 2,000,000,000. Going forward, we continue to roll out VEGOVI in a In North America Operations, Obesity Care sales grew 212%. Total rare disease sales decreased by 15%, which was driven by a 24% decrease in international operations And by a 1% decrease in North America operations, following a reduction in supply of nordicopen. Please turn to the next slide. With 29% sales growth in Diabetes Care, we are growing faster than the total diabetes market.

Speaker 2

As a result, our global diabetes value market share increased to 33.8%, which is above our strategic aspiration of reaching 1 third of the global diabetes value market. This increase reflects market share gains in both North America Operations and International Operations. Please turn to the next slide. In international operations, total diabetes care sales increased by 20% in 2023, which was primarily driven by GLP-one sales growing 53%. Novo Nordisk is the market leader in international operations with a GLP-one value market share over 70%.

Speaker 2

Vicempic continues its GLP-one market leadership with 47.5% market share. Wibeltus has just shy of 14% value market And with that, I will hand over the word to Doug.

Speaker 3

Thank you, Camilla. Please turn to the next slide. In the U. S, sales growth of our GLP-one diabetes treatments are driven by a 50% expansion of the market in 2023 versus 2022. In the Q4 of 2023, the prescription volume growth of the GLP-one class was more than 30% compared to the Q4 of 2022.

Speaker 3

Measured on total prescriptions, Novo Nordisk continues to be the market leader with around 54% market share. Please go to the next slide. Obesity Care sales grew by 154%, driven by both operating units. The volume growth of the global branded obesity market more than doubled with a volume growth of 116%. In international operations, Obesity Care sales are driven by a strong Saxenda performance and the Wegovy launches in 7 International Operation Countries.

Speaker 3

In the U. S, sales of VULGOVI grew by 3 93%, reflecting the commercial relaunch in January of 2023. To safeguard continuity of care, We reduced the release of lower dose strengths back in May of 2023, which continued throughout the remainder of last year. I'm very pleased to state that we are now enabling more new U. S.

Speaker 3

Patients to initiate treatment by more than doubling the amount of the lower dose strength of Wegovy compared to the previous months. We will gradually be increasing the overall supply throughout the remainder of 2024. Please go to the next slide. Our rare disease sales decreased by 15%. The sales decrease was driven by a 1% sales decline in North America operations and 24% sales decline in international operations.

Speaker 3

Sales of rare blood disorders increased by 3%, driven by the launch products in hemophilia A and B and partially countered by NovoSeven. Sales of our rare endocrine disorder products decreased by 47%, reflecting a reduction in manufacturing output. Now Martin, over to you for an update on R and D.

Speaker 4

Thank you, Doug. Please turn to the next slide. First, I'm very pleased to share the exciting headline results from the COMBINE 3 trial with once weekly icosimab. COMBINE 3 was a 52 week open label, treat to target Phase 3 trial, comparing once weekly icosema with once daily insulin glargine U100 together with up to 4 daily injections of insulin aspart. This is also called basal bolus insulin treatment.

Speaker 4

The objective of Combine 3 was to assess the efficacy The trial achieved its primary endpoint of demonstrating non inferiority in reducing A1c at week 52 with once weekly icosema compared to insulin largely NU-one hundred together with insulin aspart. From an overall A1C baseline of 8.3%. Once weekly, Icocema achieved an estimated reduction in HbA1c of 1.47 percentage points compared with 1.40 percent for insulin enlarging together with insulin aspart. People in the trial had a baseline body weight of 80 5.8 kilograms. Treatment with alcozema achieved a superior reduction in body weight with a weight loss of 3.6 kilograms with Angosema compared with a 3.2 kilogram weight gain with the basal with the insulin basal bolus treatment.

Speaker 4

The estimated treatment difference was 6.7 kilograms. Icosema also showed superiority Over insulin glargine U100 together with insulin aspart, in terms of severe or clinically significant hypoglycemic events, with only 0.26 events per patient year of exposure compared to 2.18 events per patient year of exposure in the basal bolus treatment arm. Overall, icosema appeared to have a safe and well tolerated profile. These Phase 3 results for once weekly ikosema are very promising. For people with Polycontrolled type 2 diabetes on basal insulin.

Speaker 4

IQOSEMA has the potential to streamline insulin intensification By addressing the main patient barriers, icosyma sets a new standard for once weekly treatment by reducing the annual injections from around 1450 to 52 injections. This substantial reduction in patient burden It's provided together with a strong glycemic control, proper weight management and importantly, a factor of 10 times lower rates of hypoglycemia as compared to the current gold standard of insulin basal bolus treatment. Please turn to the next slide. Turning to the upcoming R and D milestones. There are many exciting trial results in 2024.

Speaker 4

However, Before I get to that, I would like to highlight a few of the milestones from Q4 of 2023. Within obesity, we have successfully completed 2 Phase III studies with zirmagnetide 2.4 milligram, addressing obesity related comorbidities as well as the Phase 1 trial for oral amicretin. First, the STEP 9 trial was a Phase 3 knee osteoarthritis trial that investigated the effects of semaglutide 2.4 milligram once weekly On the co primary endpoints of body weight and the Western Ontario and McMaster Universities' osteoarthritis index, Abbreviated VOMAC, this is a self administered measurement used in assessing pain and functionality. In the trial, 407 people with obesity and mild to moderate knee osteoarthritis were enrolled. The study achieved its co primary impact by demonstrating a superior reduction in both the WOMAC pain score as well as in body weight with semaglutide 2.4 milligram compared to placebo.

Speaker 4

The estimated reduction in me WOMAC pain score From baseline to Win 68 was 41.7 with semaglutide 2.4 milligram and 27.5 with placebo. The estimated treatment difference was 14.1, which was not only statistically significant, but also considered clinically very relevant. The trial results will serve as a foundation for potential RCONF trials with future obesity assets. Heart treatment on physical symptoms in patients with obesity, type 2 diabetes and established heart failure. In total, 660 people were enrolled in the study.

Speaker 4

The co primary endpoints were the average change from baseline in the Cancer City Cardiomyopathy Clinical Summary Score Questionnaire and Body Weight. In the trial, somaglutide showed a 13.7 points improvement versus 6.4 in the placebo arm at 52 weeks. The mean change was 7.3 points in favor of semaglutide, which is considered clinically very relevant and very solid results with chronic heart failure. A superior reduction in body weight was also observed for somagnetide 2.4 milligram versus placebo. We've submitted the results from the STEPHANFpefOpesity trial as well as the CHA2 diabetes trial for regulatory review in U.

Speaker 4

S. And Europe during the course of January of 'twenty four. This marks another milestone in our ongoing efforts to address the unmet medical needs in patients with overweight, obesity and established cardiovascular disease. The last highlight for the Q4 of 2023 Is the successful completion of oral amicretin Phase 1? This trial appeared to have a safe and well tolerated profile for Amicretin.

Speaker 4

We I have decided in September of 2023 to also initiate a Phase I trial with 13b subcutaneous amatretin. And further, we expect to advance hemicretin into further clinical development. Moving forward to 2024 within diabetes care, We expect the decision on approval of insulin Icodec in Europe, Japan, China as well as the U. S. During the second half of twenty twenty four.

Speaker 4

We are also anticipating the exciting results of Combine 1 and Combine 2 from the IQOSEMA development program during the initial half of twenty twenty four. Of note, we are expecting the Phase 1 results of the once weekly GLP-one GRP in the first half of twenty twenty four. And we have further initiated a Phase 1 trial with once monthly GLP-one GIP during the course of January of twenty twenty four. We continue to build evidence for the semaglutide molecule within diabetes as well. For subcutaneous semaglutide 1.0 milligram, We anticipate the readout of flow for people with type 2 diabetes and chronic kidney disease in the first half of this year.

Speaker 4

This will be followed by the functional outcomes trial STRIDE for people with type 2 diabetes and peripheral artery disease in the second half of twenty twenty four. As for ossimaglutide, the cardiovascular outcome study shown This is expected to be completed in the second half of twenty twenty four, investigating semaglutide in people with diabetes and cardiovascular disease. In the obesity area, we expect an FDA decision on the approval of the select data submission in the first half of twenty twenty four. Furthermore, We look forward to the 1st Phase III readout for Carcrusema towards the turn of the year. And as a last highlight, we are very excited about Upcoming readout of MiMate Phase 3 in the first half of twenty twenty eight.

Speaker 4

MiMate is a novel next generation Factor VIII mimetic antibody with potential for improved patient outcomes and reduced burden of treatment in people with hemophilia A. With that, over to you, Carsten.

Speaker 5

Thank you, Martin. Please turn to the next slide. In 2023, our sales grew by 31% in Danish kroner and 36% at constant exchange rates, driven by both operating units. The gross margin increased to 84.6% compared to 83.9% in 2022, driven by a positive product mix following increased sales of injectable GLP-one based treatments. Costs related to ongoing capacity expansions A negative currency impact and lower realized prices, mainly in the U.

Speaker 5

S. And region China, partially offset these effects. Sales and distribution costs increased by 23% in Danish kroner and by 26% at constant exchange rates. The increase is driven by both operating units. In North America, operations cost increase is driven by the relaunch of VIGOVI and promotional activities for Ozempic.

Speaker 5

While in international operations, cost increase is driven by promotional activities for Rybelsus as well as Obesity Care market development activities. Furthermore, the increase in sales and distribution costs are impacted by adjustment through legal provisions. Research and development costs increased by 35% measured in Danish kroner and 37% at constant exchange rates. The increase reflects our strategic objective to expand the pipeline across therapy areas. Specifically, we continue to increase late stage clinical trial and early research activities.

Speaker 5

The acquisition of Pharma Therapeutics in 2022 and Invesaco Pharma Also increased R and D spending. Administration costs increased by 9%, measured in Danish kroner, and by 11% at constant exchange rates. Operating profit increased by 37%, measured in Danish kroner, and by 44% at constant exchange rates, reflecting sales growth. Net financial items showed a gain of DKK 2,100,000,000 compared to a net loss of around DKK 5,700,000,000 last year. The effective tax rate is 20.1% in 2023 compared to 19.22.

Speaker 5

2. Consequently, net profit increased by 51%, and diluted earnings per share increased by 52% to DKK 18.62. Free cash flow realized in 2023 was DKK 68,300,000,000 compared with DKK 57,400,000,000 in 2022. This is in line with the strategic aspiration to deliver attractive capital allocation to shareholders. The cash conversion in 2023 was positively impacted by timing of payment of rebates in the U.

Speaker 5

S. And provisions related to the revised 340B distribution policy also in the U. S. Capital expenditure for property, plant and equipment was DKK 25,800,000,000 compared with dollars 12,100,000,000 in 2022. This primarily reflects investments in additional capacity for active pharmaceutical ingredient production and fill finished capacity for both current and future injectable and oral products.

Speaker 5

Please go to the next slide. In 2024, we expect to increase our capital expenditure to around DKK 45,000,000,000. The significant step up compared to 2023 reflects the expansion of our supply chain. This includes The previously communicated expansions of manufacturing facilities in Kalenborg and Hillel, located in Denmark and Chartres based in France. The increase in capsule expenditure in 2024 mainly relates to investments in additional capacity for active pharmaceutical ingredient production and fill finished capacity for both current and future injectable and oral products across our strategic therapy areas.

Speaker 5

In the coming years, the capital expenditure to sales ratio is still expected to be low double digits. Next slide, please. In line with our strategic aspiration to deliver attractive capital allocation to shareholders, we have returned more than DKK 61,700,000,000 to shareholders via share buybacks and dividends during 2023. At the Annual General Meeting on March 21, The Board of Directors will propose a final dividend of DKK 6.40 for a total twenty 3 dividend of DKK 9.40 including the interim dividends paid in August of 2023. This is over a 50% increase compared to 2022, making it the 28th consecutive year with increasing dividend per share.

Speaker 5

In addition to the dividends, the DKK 30,000,000,000 share buyback for the past 12 months has been concluded. For 2024, the Board of Directors has approved a new share repurchase program of DKK 20 DKK, to be executed during the coming 12 months. Next slide, please. We continue to we continue the growth momentum in 2024 and expect the sales growth to be between 18% 26% at constant exchange rates. This is based on several assumptions as described in the company announcements.

Speaker 5

The guidance reflects for sales growth in both North America Operations and International Operations. The sales growth is expected to be mainly driven by volume growth of GLP-one based treatment for obesity and diabetes care. With the expectations of continued volume growth and capacity limitations, The outlook also reflects expected continued periodic supply constraints and related drug shortage notifications across a number of products and geographies. We expect that operating profit will grow between 21% 29% 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.

Speaker 5

Our reported sales are expected to be 1 percentage point lower at constant exchange rates, And operating profit is expected to be 2 percentage points lower than at constant exchange rates. For 2024, we expect net financial items to amount to a gain of around DKK 1,300,000,000. This mainly reflects gains associated with foreign exchange hedging contracts as well as interest rate gains from cash and marketable securities. The free cash flow is expected to be between DKK 64,000,000,000 and DKK 74,000,000,000, reflecting the sales Gorr, a favorable impact from rebates in the U. S.

Speaker 5

Countered by investments in capital expenditure. That covers the outlook for 2024. Now back to you, Lars.

Speaker 1

Thank you, Carsten. Please turn to the final slides. We are very pleased with the strong performance in 2023, which reflects that more than 40,000,000 people are now benefiting from our innovative diabetes and obesity treatments. We continue to make progress on our strategic aspirations. In 2024, our focus will be on the continued significant expansion of our production capacity, reaching more patients and are progressing the expanding pipeline.

Speaker 1

With that, I would like to hand the word back to Daniel.

Operator

Thank you, Lars. Next slide, please. With that, we are now ready for the Q and A. We kindly ask all Participants to limit her or himself to 1 or maximum 2 questions. This includes sub questions.

Operator

Operator, we're now ready to take the first question.

Speaker 6

Thank We will now take the first question. One moment please. And the first question comes from the line of Mike Nedelkovits from TD Cowen. Please go ahead.

Speaker 7

Thank you for the questions. I have 2 for Martin. The first is on the GLP-one GIP dual agonist. As it relates to the clinical profile of a once monthly injection, it seems to me that navigating GI toxicity during the Titration phase with a drug that's on board for an entire month could be tricky. Do you think that's a valid concern?

Speaker 7

And if so, might it undercut to some extent the convenience Advantage. And then my second question is on oral amacretin. Can you provide any insight into the efficacy you saw in the Phase 1 trial? A reasonable ambition would be for weight loss that approaches that delivered by KAGRISENMA but via the oral route. How close did amicretin get to that profile?

Operator

Thank you, Mike. And Martin, over to you.

Speaker 4

Yes. So thank you. Thank you for those questions. First of all, on the once monthly GLP-one GIP, honestly speaking, we asked ourselves the same questions when we moved from once daily to once weekly. And this is all in the focus of titration.

Speaker 4

So proper titration will mitigate Most GI and tolerability side effects, and therefore, we're quite confident that we can manage a once monthly in that setting. We actually didn't see an increase moving from once daily to once weekly, and we don't expect to see that moving from once weekly to once monthly. On the amicretin, we're not disclosing Phase I data, but you should obviously read into the fact that we're stating that we We're progressing further development, which also means that we believe amacretin to be properly differentiated to whatever else is out there.

Operator

Thank you, Mike, for the question. Thanks for being up early. Next question, please.

Speaker 6

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

Speaker 8

Yes, thanks. Pippa Laudsziddhi. Two questions, please. For Lars or Carsten, you've mentioned many times Novo or management's number one priority is scaling supply. I just want to try and marry With the comments you provided for 2024 and guidance, I mean, if I just annualize your exit run rate Q4 2023, You pretty much are at the bottom end of 2024 guidance.

Speaker 8

Now I realize there's FX and there's rebating to consider, but I didn't want to push my luck and try and get a handle How significantly capacity will increase in 2024, especially in light of Select coming on the label this year and likely increasing demand further? And then secondly for Carsten, just a quick update on the revenue recognition from 340B Pharmacies. I know you currently only partially Ravi, you recognize and that's what's baked into guidance, but I thought there was a chance that that could change in 2023, given that you had prevailed in litigation with HHS. So Could there be any change in your stance on 340B in 2024? And am I right that were you to fully revenue recognize that could actually have quite a meaningful Lift to Novo earnings of around 5%.

Speaker 8

Thank you.

Operator

Thank you, Pete. Carsten, two questions for you.

Speaker 5

Yes. So first, as to our 2024 guidance, then the important point is that we are continuing the growth trajectory We showed already in 2023. And just to remind you, 36% sales growth, adding to the tune of 5,000,000 people on Novo Nordisk products over a 12 month period. So we do believe that, that's significant scaling. And in round numbers, we're talking about that magnitude when you look at our scaling into next year.

Speaker 5

So it's a similar type scaling we'll be doing in 2024. I don't like The logic between multiplying Q4 by 4 because we're in a chronic disease business. So all the ups and downs of currencies and inventories In one quarter makes it dangerous to annualize just based on 3 months. So but again, the growth platforms remain the same. It's Rybelsus, it's Ozempic and it's Vicovy.

Speaker 5

And we're scaling those all of those 3 platforms, which is what gives us the guidance that we provided today. And then as to 340B, you're right. As we state, we're only partially recognizing 3 for B revenue. And that's linked to the accounting standards of in order to recognize revenue, it has to be what the accountants or the auditors call highly probable. So that's the backdrop behind that.

Speaker 5

And yes, we prevailed in our case back in January of 'twenty three. There are still two cases Outstanding in different jurisdictions around the same question. So that would be key informative points for us to decide on how to proceed forward vis a vis our accounting recognition in the space.

Operator

Thank you, Pete. Thank you, Carsten. And next question, please.

Speaker 6

Thank you. We will now take the next question. One moment please. And the next question comes from the line of Louise Chen from Cantor. Please go ahead.

Speaker 9

Hi, thank you for taking my questions. So my first question is, how do you think about the launch of Lilly Stepbound in your guidance For 2024? And then second question is, when do you expect to report data from your NASH or MASH studies Such as your essence study or your FGF21? Thank you.

Operator

Thank you, Luis. Carsten, I'll give the first to you with guidance and then Martin later you on mesh.

Speaker 5

Yes. So as always, when one forecasting, then We take into account demand in the market competition and supply capacity. So those factors are what we've weighed into guidance, both in terms of the pricing environment in the U. S. To maintain a high degree of formulary access with the at PBM basis.

Speaker 5

And then on the volume basis, I would say that is more a question about supply capacity since we're not competing for share given the magnitude of the markets.

Operator

Thank you, Carsten. And over to Martin.

Speaker 4

Yes. Thank you very much. So for the Essence NASH study, we expect to see a readout around the turn of this year And then progress towards regulatory finding. The FJ21 study is a Phase II trial, actually also investigating the effect of GK semi in NASH, and we'll see that readout a little bit later.

Operator

Thank you, Martin. And we're ready for the next question.

Speaker 6

Thank you. We will now take the next question. One moment please. And the next question comes from the line of Sachin Jain from Bank of America. Please go ahead.

Speaker 10

Thanks for taking my questions. Sachin Jain here from Bank of America. Firstly, just on amicritin, back to you, Martin. The plan to progress your commentary is very vague, particularly for the oral formulation. So remember, just to ask you why you're being vague at the moment and the factors that go into that decision.

Speaker 10

One would assume an oral category summit would be exciting, so why not commit? So just what are you waiting for? And then the second question on supply. Thanks for the color on doubling of the lower doses for Wiggo in the coming months. Should I assume this ability to further supply at the lower dose or is doubling the limit for full year 2024?

Speaker 10

Thank you.

Operator

Thank you, Sachin. So, Marcin, first to you and then Karsten, you'll take the supply question.

Speaker 4

So thank you very much, Sachin. I'm not sure I'm being vague. We're just saying that we're not communicating Phase I data. I think you will hear or see or you will see us progress should the data confirm in both the subcutaneous but also potentially the oral. The reason why we are pursuing both in Phase 1 is obviously providing optionality.

Speaker 4

We see a big demand, and we need to provide Ability and optionality, having both an oral and a subcutaneous is providing that. When it comes to the efficacy, You've heard us say a number of times, and we'll stay with that. We want to see differentiated products, And that goes for both the subcutaneous and the oral in the marketplace. And what we have seen so far Vimecretin brings us confidence that amicretin in both oral and subcutaneous when we see the data Has that potential?

Speaker 5

Yes. Certainly. And thank you for the VIGOVI question. So to be a little bit More precisely vis a vis Vigovy. Then what we have done is that we have increased our supply of the start up doses by more than double.

Speaker 5

So that has taken place. And as we have also previously communicated, then we will continue to gradually expand Our supply of starter doses as well as all dose strengths. And we'll gradually scale that as we're scaling our supply capacity, so we have Sustainable Supply Chain in Place, including the necessary inventories to avoid the stop go pattern that we saw in the past.

Operator

Thank you. Thank you. Thank you. And we're ready for the next set of questions.

Speaker 6

Thank you. We will now take the next question. And the next question comes from the line of Martin Parcoy from SEB. Please go ahead.

Speaker 11

Great. Thank you very much. Two questions. Firstly, on the regional development, we saw a very big imbalance this Yes, at least in the especially in Q4 between North America and the International Operations, How should we see that in going into 2024? I don't expect to get precise numbers, but just some words Compared in relation to the guidance that you have.

Speaker 11

And then second question, you are doing some reprioritization, among other things, Removing leavenir from the U. S. Market, how far can you actually go? And how cynical can you be To prioritize less on insulin and of course, more of the production capacity on the GLP-one franchise.

Operator

Thank you, Martin. Karsten, the first question related to the guidance and regional and then later last few about the portfolio prioritizations.

Speaker 5

Yes. So as to the regional dynamics, I'd say these are classic dynamics When people, as yourself, have filed the company for an extended period of time, then there will be this type of seasonality. So Then talking into 2024, the growth drivers remain the same, again, Rybelsus, Wegovia and Ozempic. And the real difference what you saw in 2023 is actually that on PH1 in diabetes, The growth levels were similar, just north of 50%, both in IO and North America. So the fundamental difference It's the pace of the GOVI rollout.

Speaker 1

And of

Speaker 5

course, the North America are rolling ahead of IO, But it is important to note that we will be launching in additional IO markets in the volume pathway for Vekobi into 2024, But you should expect North America still to be rolling at a higher pace than IO.

Operator

Thank you, Karsten. Last over to you.

Speaker 1

Thank you, Martin. So on portfolio prioritization, I think you should see us as being committed to people living with diabetes and in need Of insulin, when we look at Levemir, specifically in the U. S, we have a situation where We have Tresiba as well. We will be launching a weekly our weekly insulin. And we also see dynamics where we have lost a contract on Levemir.

Speaker 1

So For us to stay committed to patients is also leading to us then thinking carefully about What are the most, say, optimal ways of treating those patients with the most efficacious products? And on GLP-one, there's also the in moving patients from daily treatment to weekly treatment where you get high efficacy and obviously an easier to produce presentation as you reduce the number of injections and presentations needed. So we are going to be, say, Having a social responsibility vis a vis the patients while still optimizing to a degree where it both benefit patients and our ability to scale.

Operator

Thank you, Lars. Thank you, Martin. So we'll take the next question.

Speaker 6

Thank you. One moment, please. The next question comes from the line of Richard Vosser from JPMorgan. Please go ahead.

Speaker 12

Hi, thanks for taking my questions. Two questions, please. First question, just could you update us on the payer discussions around Select and how you See rebate pressure in 2024 for the obesity franchise given it's still supply constrained, particularly in the U. S? And the second question also thinking about diabetes, we've seen a consistent sort of 10% to 15% rebate pressure in the U.

Speaker 12

S. Around Ozempic, Rybelsus and in the Type 2 side. Is that how we should think about the pressure going into 2024? Thanks very much.

Operator

Thank you, Richard. And then, Doug, I'll give the word to you For select pair discussions, what you can say and then also competitive dynamics in diabetes?

Speaker 3

Yes. Thank you for the question, Richard. Really appreciate it. So Just to reiterate, we're super excited about the potential of select data and we do eagerly await the whole full label update in the coming months. And we're doing our normal preparation for that.

Speaker 3

When we think about what that means certainly for Part D access, we're hopeful that Select can unlock some of that access. But in the end, even with the excellent data, It's likely not going to happen overnight. But in the end, we believe that Select can set sema2.4 milligram apart as The first and only AOM showing a consistent benefit across endpoints including MACE. So we're super excited about that. And

Operator

the second part, Doug, of the question with Regards to competitive dynamics in the GLP-1 diabetes space?

Speaker 3

Yes. So overall, we see stable A stable competitive environment. Obviously, as we see an increase in volume, we should Expect to see also a decrease in price over time as the product gets larger in the marketplace. But again, it's a stable competitive environment that we have.

Operator

Thank you, Doug. Thank you, Richard for the questions. Next questions please.

Speaker 6

Thank you. One moment please. The next question comes from the line of Harry Sefton from UBS. Please go ahead.

Speaker 13

Brilliant. Thank you very much for taking my questions. Maybe just for the first question back to Doug. So you mentioned that you've seen a stable competitive environment in the U. S.

Speaker 13

But just wanted to question whether you've observed Any changes to form a reposition for Ozempic in the U. S. Through 2023 and whether that impacted prescription growth for Ozempic in the Q4? And then my second question is on the stay time on therapy for patients. So firstly, an update on what you're seeing for Wegovy, but also whether the observed stay time on Ozempic has changed at all over the last year and what might be driving that?

Speaker 13

Thank you.

Operator

Thank you, Harry. So, Doc, any comments to formulary status for key products? And then the stay time I will give to Camilla.

Speaker 3

Yes. Thanks, Harry. So overall, we don't see any major change to formulary status for GLP-1s. And if again, you recall, we have More than 90% unrestricted access, so very favorable access and we see that largely unchanged in 2024 this year.

Speaker 2

Good. And on stay time, what we can say is that we generally see a better stay time on the GOVI than what we've seen on previous anti obesity treatment like Saxenda, so we basically see fewer patients dropping out. It's still early days for BIgovi because of the interrupted supply In the countries, but I can also say that both in the U. S. But also in Denmark, we see strong indications that the stay time is longer for V GoVy.

Speaker 2

And especially in Denmark, we see the majority of the patients who initiated treatment at the beginning Of last year, they stayed on the treatment throughout the year. And on Ozempic, generally, we see a continued long daytime In the tune of 4 to 5 years. So there's been no major changes to that.

Operator

Thank you, Camilla and Doc. And Thanks for the question, Harry. So we'll take the next question.

Speaker 6

Thank you. One moment, please. The next question comes from the line of Emily Field from Barclays. Please go ahead.

Speaker 14

Hi, thank you. I'll ask 2 questions. The first is just on the guidance range for revenue growth at constant exchange rate, is this Quite a wide delta between 2018 26. Could you just give us some color on the guidance between that? Is that primarily the cadence of Wago resupply coming online or is there anything And then another question just on commercial coverage in the United States.

Speaker 14

You've pretty consistently indicated that in that commercial size, about 50% of employers in the U. S. Opt in. Are you expecting any Major changes to that in 2024. Thank you.

Operator

Thank you, Emily. The sample is a bit bad, but I think we got your question. So Carsten, Any color on the guidance ranges? And then later, Doug, coverage of Begobi in the U. S?

Speaker 5

Thank you for that question, Emily. And yes, you're correct. Guidance ranges are not It's broader than what they had normally been at this point in time. And of course, the plan is to narrow guidance ranges over the years as time progresses. The reason why we've chosen to broaden them slightly It's basically the dynamics we've seen over the past quarters in 2023 and even in 2022.

Speaker 5

So, a dynamic market and constrained supply and growth to net adjustments linked to the U. S. Growth to net model. So fundamentally, there are no major fundamental changes to what we've seen in prior quarters. We just felt that it was more Prudent at the beginning of the year to start out with a much wider guidance ranges.

Operator

Thank you, Carsten. And Doc, comments on coverage for Wegovy in the U. S. And employer opt in?

Speaker 3

Yes. Thanks, Emily. So We still continue to enjoy broad market access for Wegovy. That's over 90%. And as we've communicated, that equates to around 50,000,000 people Living with obesity who are now covered.

Speaker 3

And overall, there will be opt ins and opt outs, but we continue to see improvements in the net coverage. So our focus will be continuing to secure coverage over time and to keep continuing to grow the volume market. But overall, we're pleased with the level of access that we have and Looking forward to improving that over time.

Operator

Thank you so much, Doug, and thanks, Emily, for the questions. Next questions, please.

Speaker 6

Thank you. One moment please. The next question comes from the line of Simos Fernandez from Guggenheim Securities. Please go ahead.

Speaker 15

Thanks so much for the question. So just a couple here. On the Lip Gipp, can you just help us understand the technology that you are using to extend the half life 2 once monthly, just trying to get a better understanding of the likelihood that and your confidence in delivering a monthly profile here as well as the efficacy profile given your plans to Work with alacrity on the oral amicretin molecule. And then just on the WOMAC scores, can you just help us understand how those WOMAC scores kind of compare in your OA study to other Treatment Regimens. And if a drop in on pain medication like naproxen or other medications like that was allowed and if that separation occurred despite that?

Speaker 15

Thanks.

Operator

Thank you Seamus for these questions. Martin, I'll give the word to you.

Speaker 4

Yes. Thank you very much. So first of all, on the Once Munch, as you obviously know, this is Phase 1, and this is one Of a number of tracks that we are pursuing in this space, it's a technology that we cannot share at this point in time. But broadly speaking, We're confident and happy with our research progress in this space. And obviously, we will not take Assets into Phase 1 without a level of confidence in their broad applicability and success.

Speaker 4

On the WOMAC, the sort of broad Applicability is that if you see a 35 point change from baseline You are in the very clinically relevant space, and here we saw a 41 point improvement. In terms of concomitant medication, this was allowed, but this is specifically why we have a control group in the study. You actually also saw improvement in the placebo arm, but the improvement seen with Semaglutide was above and beyond that and in the space of being Statistically significant as well as clinically relevant.

Operator

Thank you so much, Martin, and thanks, Seamus. Next question, please.

Speaker 6

Thank you. One moment please. The next Question comes from the line of Simon Baker from Redburn Atlantic. Please go ahead.

Speaker 16

Thanks for taking my questions. 2, if I may, please. Firstly, on CapEx, I wonder if you could give us some sort of idea of when that CHF 45,000,000,000 The investment in 2024 will start to come on stream, be it API manufacturer or fill and finish? And any indication about the run rate thereafter? And then secondly, a question on the recent Iroquois collaboration that you did.

Speaker 16

I wonder if you could just Give us some more of your reasoning for choosing that. And is this about Accessing their platform or is it a specific molecule that you've licensed, namely ERA 379? Thanks so much.

Operator

So first, Carsten, CapEx?

Speaker 5

Yes. So Simon, just reframing your question slightly because taking a point estimate and making into time series, I don't think It's necessarily the optimal way. So I would say because a good chunk of the CapEx we will be spending this year We'll be on projects we already initiated in 2023 or earlier. So as you've noted, then we have announced CapEx just in 'twenty three to the tune of SEK 75,000,000,000 in over the lifetime of these projects. So those are, of course, a key element of the SEK 45,000,000,000.

Speaker 5

So in terms of when coming onstream, It will be gradually over time on API, which are some of the bigger ticket items. We'll see API coming onstream already from additional API capacity coming onstream already from 2025. And then there will be different capacities coming online pretty much every year from there on across our manufacturing footprints.

Operator

Thank you, Carsten, and thank you, Simon. With regards to the recent A collaboration then at this point in time, we don't have too much to add, but I will use the opportunity to do a bit of advertisement for our upcoming Capital Markets Day, where we'll talk more about these early research partnerships and then we will be happy to address that. Next question please.

Speaker 6

Thank you. The next question comes from the end of Marc Purcell from Morgan Stanley. Please go

Speaker 17

ahead. Yes. Thanks for taking my questions. Question number 1, Wigovy U. S.

Speaker 17

Fill and finish lines. I think you moved from 1 to 3 lines over the course of 2023. Could you help us understand how many lines might be added in the cadence of those additions During the course of 2024? And then secondly, as we shift from weight as a surrogate market to outcomes becoming more important, How often are you assessing the key product attributes of CAGRISEMRA and amacretin such that you have confidence you can show an outcomes benefit Over samaglutide in future clinical development.

Operator

So, we go over to you, Karsten, and Martin later comprised for future obesity pipeline products.

Speaker 5

Yes. Hi, Marc. So as to Vgovi and CMO filling, What I can say is that we are on track with what we previously communicated with the 3 CMO lines. We don't think it's prudent to continue to specify number of lines and locations and potential CMOs Just to say that we'll continue to expand capacities in the years to come given the significant unmet need we're seeing. So unfortunately, then you'll have to impute from our guidance into our scalability how we are scaling our supply.

Speaker 4

And specifically on the cardiovascular benefits of our pipeline products Visavis Maglutide, what we for example know from Kagri Zem and right now we had to rely on biomarkers is that Kagrisema is obviously superior on body weight or has the potential to be superior on glycemic control, but also will be superior On, for example, blood pressure lowering, lipid lowering and potentially all the very relevant cardiovascular biomarkers, all of that gives us a lot of Confidence in that cagrozema will be associated with a quite profound benefit in the cardiovascular space, But obviously, we had to show that in Phase 3. And as you know, we are currently running the REDEFINE 3 study to that effect.

Operator

Thank you, Martin, and thank you, Marc. So we'll have time for 2 more set of questions if they are kept brief. So let's try to squeeze that in.

Speaker 6

Thank you. The next question comes from the line of Richard Parks from BNP Paribas, Exane. Please go ahead.

Speaker 18

Hi, thanks for taking my questions. I'll be quick, both on So guidance capacity, I think through last year you consistently stated that the top end of guidance wasn't necessarily a magic ceiling in terms of what you had Capacity to manufacture, I wonder if that's still the case in 2024 or whether the rider range suggests you'd be more bullish with the top end. And then just to push you a bit more on sort of capacity expansion plans, I mean, you've been quite clear about fill finish expansion for Wegovy. But my understanding is with FlexTouch, it's all about optimizing what you already have. So is there any waypoints That you can give for investors around when you might be able to move from being seeing more of an inflection around that rather than just Optimizing the capacity you currently have.

Speaker 18

Thank you.

Speaker 5

Kas, over to you. Yes. So thanks, Richard, for those questions. So as to the guidance range, Then it's important to reiterate, this is the most realistic outlook that we're providing to the markets. So had we thought that we could grow faster than this realistically, then we wouldn't have been providing this guidance at this point in time.

Speaker 5

So this is what you should expect on. And as a normal distribution, then expect something around the mid of That's how we work on this. And then it's important to note that being in a supply constrained environment, Then it's very important for us in order to manage our business in a sustainable way that we focus on our supply chain and ensure that it's resilient, so we don't get into some of the bumps that we saw in the past with the Top go type decision. So it's important that we have a sustainable supply chain. So that factors in also.

Speaker 5

So most likely range. And of course, our job is to run the company in the best possible manner, and that entails driving top line growth as well as having a resilient Supply chain setup. Then as to scaling of FlexTouch, which You can say in sales both cartridge filling, assembly and pack, I can only say that we're scaling All of those on an ongoing basis. So we have active projects in each of these areas. We don't want to Get into details externally around project plans and so on.

Speaker 5

But I would point you to our recently announced Expansion in charter of some DKK 16,000,000,000, which taps directly into expanding that pipeline as Just as an example of a significant CapEx project to that extent.

Operator

Thank you, Richard, for the questions. Thank you, Carsten. And we'll take one final question.

Speaker 6

Thank you. One moment please. The final question comes from the line of Michael Novod from Nordea. Please go ahead.

Speaker 19

Thank you very much. Two brief questions. So first of all, on oral amicretin. So you've previously been saying that The ambition was to sort of create an oral kagusema. Is that still the sort of the ambition given all the other questions we've had on oral ImpereGEN?

Speaker 19

And then secondly, on the program that Lilly did on Lilly Direct for sort of direct to consumer more or less, is Is that something that Novo is considering as well, given there could be sort of a significant untapped potential in the private market? Thanks.

Operator

Good. Martin, any brief comment on amicretin?

Speaker 4

Yes. So very high level short answer is yes. Obviously, if we have The aspiration to have differentiated products, amicretin, oral amicretin, has to be in the range of where we see efficacy and safety with Calcasimab.

Operator

Thank you, Martin. And Doug, over to you. Any comments on our competitive commercial strategy in light of a competitor movement?

Speaker 3

What I would say is, I'd bring it back to us and say, we believe in the foundation that we have in Novocare And there's lots of elements to that. So we'll continue to stay focused on that and appreciate the question.

Operator

Thank you, Michael. Thank you, Doug, for the answer. This concludes the Q and A session. Thank you for participating, and please feel free to reach out to Investor Relations if you have any follow-up questions. Before we close the call, as always, I would like to hand over to you, Lars, for the final remarks.

Speaker 1

Yes. Thank you, Daniel. And also thank you from me for all Today, I hope it's clear that we are very pleased with our performance in the past year and equally excited about what we can do in 2024 based On the attractive guidance range we have put forward, a lot of focus on scaling capacities with some real Tenable backing of our scaling in the form of now more than doubling the start doses in the U. S, and we look to continuously expand our capacity. And equally important, the expansion of our pipeline and really doubling down on our strongholds in diabetes, obesity, but also increasingly cardiovascular disease And we are Body Soders.

Speaker 1

So we are excited about how the pipeline is shaping up. So thank you all for your attention today and we look forward to seeing you in the near future. Bye bye.

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Earnings Conference Call
Novo Nordisk A/S Q4 2023
00:00 / 00:00