Novo Nordisk A/S Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2024

There are 17 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the 1st 6 months of 2024 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, Jacob Border, Head of Investor Relations.

Operator

Please go ahead, sir.

Speaker 1

Thank you. Welcome to this Novo Nordisk earnings call for the 1st 6 months of 2024. My name is Jacob Martin Wieber Rohl, and I'm the Head of Investor Relations at Novo Nordisk. With me today, I have CEO of Novo Nordisk, Lars Voorko Janssen Executive Vice President and Head of Commercial Strategy and Corporate Affairs, Camilla Srivast 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 Munkenkrussen. All speakers will be available for the Q and A session.

Speaker 1

Today's announcement and slides for this call are available on our website, novenordis.com. Please note that this call is being webcasted 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.

Speaker 1

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. We need to advise you that this call will contain forward looking statements. These are subject to risk and uncertainty that could cause actual results to differ materially from expectations. For further information on the risk factors, please see the company announcement for the 1st 6 months of 2024 as well as the slides prepared for this presentation.

Speaker 1

With that, over to you, Lars, for an update on our strategic aspirations.

Speaker 2

Thank you, Jaap. Please turn to next slide. In the 1st 6 months, we delivered 25% sales growth and 19% operating profit growth, both at constant exchange rates. The operating profit growth was impacted by the impairment loss related to oxycoduronone. 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.

Speaker 2

Starting with our focus on purpose and sustainability, we are now serving more than 42,000,000 patients with our diabetes and obesity treatments. Our total carbon emissions rose by 31% as compared to the 1st 6 months of 2023. This was primarily driven by our increased investments in capital expenditure to meet the high demand for

Speaker 3

our products.

Speaker 2

To uphold our commitment to being a sustainable employer, we expanded the number of women in senior leadership positions to 41% compared to 40% in the 1st 6 months of 2023. Across all leadership positions, 46% are held by women. Within R and D, we had a number of exciting readouts this quarter, including the positive MiMate Phase III results. Martin will come back to this and our overall R and D milestones later. The quarterly sales growth reflects solid commercial execution across both operating units.

Speaker 2

The performance in the 1st 6 months has enabled us to raise our outlook for the full year. Camilla and Doug will go through the details later. Karsten will go through the financials, but I'm very pleased with our performance in the 1st 6 months of 2024. With that, I'll give the word to Camilla for an update on commercial execution.

Speaker 4

We'll ask and please turn to the next slide. In the 1st 6 months of 2024, our total sales increased by 25% at constant exchange rates. The sales growth was driven by both operating units with North America operations growing 36% and international operations growing 11%. In the U. S, sales growth was positively impacted by gross to net sales adjustments related to prior years.

Speaker 4

Our GLP-one sales increased in diabetes by 32%, driven by North America operations growing 39% and international operations growing 20%. Insulin sales increased by 10%, driven by North America operations growing 36% and international operations growing 3%. Obesity care sales increased 37%, driven by North America growing 35% and international operations growing 47%. In international operations, we continue to roll out the gobi gradually with volume cap launches to balance supply and demand. In both geographies, growth was driven by the gobi, partly offset by declining Saxenda sales as the market is moving towards once weekly treatments, where disease sales decreased by 3%.

Speaker 4

Please turn to the next slide. With 25% sales growth in diabetes care, we are growing faster than the total diabetes market. As a result, our global diabetes value market share increased to 34.1%. This is above our strategic aspiration of reaching 1 third of the global diabetes value market in 2020 5. The increase reflects market share gains in both North America operations and international operations.

Speaker 4

Please turn to the next slide. In International Operations, Diabetes Care sales increased by 11% in the 1st 6 months of 2024, which was primarily driven by GLP-one sales growing 20%. Novo Nordisk is the market leader in international operations with a GLP-one value market share of 69%. Ozempic continues its GLP-one market leadership with 46.6% market share. We're also pleased to see Rebertus increasing its market share to more than 16% driven by solid uptake across geographies.

Speaker 4

And with that, I will hand over to Doug.

Speaker 5

Thank you, Camilla. Please turn to the next slide. Sales in North America is driven by market share gains and healthy prescription volume growth of the GLP-one class above 10% in the Q2 of this year compared to the Q2 last year. Sales of GLP-one diabetes care products in the U. S.

Speaker 5

Increased by 42% at constant exchange rates. The sales increase was mainly driven by continued uptake of Ozempic. Measured on total prescriptions, Novo Nordisk expands its market leadership now with around 56% market share. Note that the sales growth of Ozempic was negatively impacted by periodic supply constraints in the beginning of the year. Please go to the next slide.

Speaker 5

To safeguard continuity of care for Wegovy, we reduced the supply of the lower dose strengths in May of 2023, which continued throughout the remainder of last year. In the beginning of this year, we gradually started increasing the supply of the lower dose strengths and I am pleased to see that this has been reflected in prescriptions and we are now seeing more than double the number of prescriptions in the market compared to the beginning of the year. Further, while demand is still expected to exceed supply, we grow more confident in our ability to supply. We will continue to dynamically manage supply, but only the initiation dose strength of 0.25 milligrams. Wegovy still has broad market access with coverage for more than 50,000,000 people with obesity.

Speaker 5

And importantly, around 10,000,000 vulnerable people with obesity now have access to Wegovy through channels such as Medicaid, which is now available in more than 20 states. Ultimately, our focus is to reach more patients living with obesity. And as volumes go up, prices will come down. In the 1st 6 months of 2024, sales growth was driven by increased volumes partially countered by lower realized prices. Next slide, please.

Speaker 5

Our rare disease sales decreased by 3%. Sales in international operations declined by 14%. This was partly offset by a 13% sales increase in North America operations, reflecting the SAGORIA launch and positive gross to net adjustments related to prior years in the U. S. Rare blood disorder sales decreased by 2% driven by lower NOVA7 and hemophilia A sales.

Speaker 5

This was partially countered by increased hemophilia B sales. Rare endocrine disorder sales decreased by 8%. We are working on reestablishing full supply capacity of rare endocrine disorder products following a reduction of manufacturing output. Now over to you Martin for an update on R and D.

Speaker 6

Thank you, Doug. Please turn to the next slide. I'm very pleased to share the results of the FRONTIER II Phase III trial with MyMate, which we provided headline results for back in May. The full data set was also disclosed at the ISTH in June. Before I walk you through the results, I would like to briefly remind you of the innovative clinical trial design.

Speaker 6

PRONTIER II was a pivotal Phase 3, 26 week open label, randomized controlled and multi arm trial. The trial investigated the efficacy and safety of once weekly and once monthly subcutaneous VIMID versus no previous prophylaxis treatment or on demand treatment and versus prior coagulation factor prophylaxis treatment. 254 people aged 12 years and older with hemophilia A with or without inhibitors were included in the trial. The co primary endpoint was mean annualized bleeding rate for treated bleeds for both once weekly and once monthly MIMATE versus on demand treatment and versus prior coagulation factor prophylaxis treatment. Please turn to the next slide.

Speaker 6

Overall in PRONTIER II, MiMID's demonstrated superiority of MiMID prophylaxis with both weekly and monthly dose. In the on demand treatment population, MyMed demonstrated superior reductions of 97% 99% in estimated mean annualized bleeding rate for once weekly and once monthly treatment respectively. This was compared to those receiving continued on demand treatment. In the intra patient comparison in people with prior coagulation factor prophylaxis, MyMen demonstrated superior reductions of 48% 43% in estimated mean annual bleeding rates for once weekly and once monthly treatment, respectively. Of note, in the population with prior on demand treatment, 86% 95% of people receiving once weekly and once monthly MiMID treatment respectively experienced 0 treated bleeds.

Speaker 6

In the population with prior coagulation factor prophylaxis, 66% 65% of people receiving once weekly and once monthly MiMID respectively had serop leads. In the trial, MIMEADE appeared to have a safe and well tolerated profile with no thromboembolic events observed and no evidence of neutralizing anti mimetic antibodies. Further, only 5% to 12% of patients experience injection site reactions across all five treatment arms. In conclusion, we are very excited about the FRONTIER II results. Given the differing needs of people living with hemophilia AAE at once weekly or once monthly dosing provides optionality and flexibility for people living with hemophilia AAE with and without inhibitors.

Speaker 6

We now expect to file for 1st regulatory approval of MyoTIMATE during the first half of twenty twenty five. Next slide, please. Turning to diabetes. I would also like to share the results from the COMBINE-one trial, which investigated the use of once weekly Icocema, a combination of once weekly insulin Icodec and once weekly semaglutide in people with type 2 diabetes. The objective of the 52 week trial was to assess the efficacy and safety of switching to once weekly iQOSEMA compared to once weekly insulinicodate alone in people with type 2 diabetes inadequately controlled on a daily basal insulin with or without oral anti diabetic drugs.

Speaker 6

The trial achieved its primary endpoint with IQOSEMA demonstrating superiority in reducing A1c at week 52 with once weekly IQOSEMA compared with insulin Icodec. From an overall HbA1c baseline of 8.2%, IQOSEMA achieved an estimated reduction in A1c of 1.6 percentage points compared to 0.9 percentage points for insulin IHODEC. People in the trial had a baseline body weight of 48 sorry, 84.5 kilograms. Treatment with the icosema achieved a superior change in body weight with a weight loss of 3.7 kilograms compared with a 1.9 kilograms weight gain with insulin Icodec. The estimated treatment difference was 5.6 kilograms.

Speaker 6

In the trial, the rate of clinically significant or severe hypoglycemia was statistically significantly lower with Icocema at 0.14 events per patient years of exposure versus 0.63 events per patient year of exposure with once weekly insulinicotec. In the trial, once weekly, Icocema appeared to have a safe and well tolerated profile. Now that the 3rd and last pivotal Phase III trial is completed, we expect to file for regulatory approval of Icocema during the second half of twenty twenty four. Next slide, please. Now I would like to highlight some of the additional exciting R and D news, including trial readouts and initiations anticipated for the rest of the year.

Speaker 6

Within diabetes, insulin Icodec under the brand name of Awekki has been approved in multiple countries. In the U. S, however, we're disappointed to have received a complete response letter from the FDA for insulin Icodec. The letter outlined requests related to the manufacturing process and the Type 2 sorry, the Type 1 diabetes indication before the application review could be completed. We're evaluating the content of the CRL and we'll work closely with the FDA to fulfill the requests.

Speaker 6

We do not expect to be able to fulfill the request during 2020 4. In the first half of this year, the FLOW data were submitted as a label expansion application to the FDA in the U. S. And to the European regulatory authorities. Submissions to regulatory authorities in Japan and China are expected in the second half of twenty twenty four.

Speaker 6

Additionally, in the second half of this year, we are expected to see the readout of the STRIDE ART COV trial with Ozlempek 1.0 milligram in peripheral artery disease. Further, we also expect readout of the SOUL cardiovascular outcomes trial with the Rybelsus 14 milligram. Both trials are expected to further strengthen the comprehensive cardiometabolic evidence that we have for semaglutide. Also in the second half of the year, we look forward to initiate a Phase 2 study for Imetretin, demonstrating our commitment to continuously raising the innovation behind diabetes. Moving to Obesity Care.

Speaker 6

In the Q2, we successfully completed the OASIS 4 trial. OASIS 4 investigated once daily semaglutide 25 milligram for weight management in add ons with obesity or overweight with 1 or more comorbidities. The trial achieved its primary endpoint with oral semaglutide 25 milligram demonstrating superiority compared to placebo with respect to change in body weight. From a baseline body weight of 105.9 kilograms, oral semaglutide 25 milligram achieved a 13.6% reduction compared to 2.2% reduction with placebo. The global launch of oral semaglutide 25 milligram is contingent on portfolio prioritization and manufacturing capacity.

Speaker 6

For WE GOI, we received regulatory approval for the treatment of obesity or overweight in China. And in the EU, the EMA adopted a positive opinion for an update of the WIGO label to reflect data from the SELECT trial. The SELECT cardiovascular outcomes trial demonstrated that WIGO is statistically reduced the risk of major adverse cardiovascular events by 20% compared to placebo. The label update will also include select data showing a numerical risk reduction in cardiovascular death by 15%, a significant risk reduction of death from any course by 19% as well as a significant risk reduction of 18% in heart failure composite endpoints. Last for FIGOI based on injections with the FDA, we decided to withdraw the results from the STEPHepPEP trials for regulatory review in the U.

Speaker 6

S. And EU to further substantiate the likelihood of getting hard endpoints into the label update. We now expect to resubmit the file in the beginning of 2025 with additional relevant data. We remain excited about the potential of somagnetide 2.4 milligram in this population, given the data that we've seen from the 2 completed STEPHEN trials. Looking ahead, we are in the second half expecting Phase II trial results for mornunabant as well as Phase III results for the STEP BLOK trial with somaglutide 7.2 milligram around the turn of the year.

Speaker 6

Lastly, we anticipate 1st Phase III results for REDEFINE-one with acacruzema in obesity. With all of this activity, we are confident with the progress we are making towards developing superior treatment solutions for people with obesity. Within cardiovascular and emerging therapy areas, we in June 2024 announced that the CLARION CKD Phase 3 trial involving osiduran was terminated. This was based on an interim analysis performed by an independent monitoring committee that concluded that the trial met the pre specified futility criteria, meaning that the trial unfortunately did not meet its primary endpoint. We have initiated a randomized and placebo controlled Phase III cardiovascular outcomes trial called the ARTEMIS.

Speaker 6

The trial will assess the efficacy and safety of cilobecamab 15 milligram in acute myocardial infarction. Lastly, we look much forward to the Phase 3 readout of the ESENCE trial, investigating semaglutide 2.4 milligram in mesh. With that, over to you, Carsten.

Speaker 7

Thank you, Martin. Please turn to the next slide. In the 1st 6 months of 2024, our sales grew by 24% in Danish kroner and 25% at constant exchange rates, driven by both operating units. In the U. S, sales growth was positively impacted by gross to net sales adjustments related to prior years.

Speaker 7

The gross margin decreased to 84.9% compared to 85.1% in 2023. The decline is mainly driven by increased costs related to ongoing capacity expansions. This is partially countered by a positive price impact from gross to net adjustments related to prior years in the U. S. In addition to positive product mix reflecting increased sales of GLP-one based treatments.

Speaker 7

Sales and distribution costs increased by 5% in Danish kroner and by 6% at constant exchange rates. The increase in sales and distribution costs is impacted by adjustments to legal provisions in the Q2 of 2023. In North America operations, the cost increase is mainly driven by promotional activities related to Wegovy. While in international operations, the increase is mainly related to promotional activities for Rybelsus as well as obesity care market development activities. Research and development costs increased by 79%, measured in Danish kroner and by 78% at constant exchange rates.

Speaker 7

The increase in cost is mainly driven by increased late stage clinical trial activity and increased early research activities as well as the impairment related to oseduranon of DKK 5,700,000,000 and other impairments of intangible assets. Administration costs increased by 8%, measured both in Danish kroner and constant exchange rates. Operating profit increased by 18% measured in Danish kroner and by 19% at constant exchange rates. Operating profit is impacted by the impairment loss related to osaduran of DKK 5,700,000,000. Net financial items showed a net loss of DKK 530,000,000 compared to a net gain of DKK 96,000,000 last year, mainly reflecting hedging losses on the U.

Speaker 7

S. Dollar. The effective tax rate was 20.6% in the 1st 6 months of 2024 compared to 19.9% in the 1st 6 months of 2023. Net profit increased by 16% and diluted earnings per share increased by 17% to DKK 10.17. Net profit is negatively impacted by the DKK 5,700,000,000 impairment of Orsudrona.

Speaker 7

Free cash flow realized in first half of twenty twenty four was DKK 41,300,000,000 compared to DKK 45,500,000,000 in the 1st 6 months of 2023. The lower free cash flow reflects increasing capital expenditure as well as acquisition of intangible assets. This is partially countered by net cash generated from operating ex. The impairment of the intangible asset of DKK 5,700,000,000 has no impact on free cash flow. Capital expenditure for property, plant and equipment was DKK 18,900,000,000 compared to DKK 10,600,000,000 in 2023.

Speaker 7

This was primarily driven by investments in additional capacity for API production and field finish capacity for both current and future injectable and oral products. Please go to the next slide. A key priority for Novo Nordisk is to ensure attractive allocation of capital to shareholders. For 2023, the total dividend per share increased 51.6 percent to DKK 9.40 For 2024, the Board of Directors has decided to pay out an interim dividend of DKK 3.50 per share, which would be paid out in August of this year. We have returned more than DKK 38,000,000,000 to shareholders through dividends and share buybacks in 1st 6 months of 2024.

Speaker 7

Our ongoing repurchase program for the full year amounts to up to DKK 20,000,000,000, a reduction from DKK 30,000,000,000 allocated last year. This allocation aligns with our strategic capital allocation strategy for Novo Nordisk. We prioritize investing in internal growth opportunities, returning capital to shareholders through dividends and business development activities. Finally, we look towards share buyback program as a flexible measure contingent on the first three priorities to distribute excess cash. We continued the growth momentum in 2024 and have raised our sales growth outlook to between 22% 28% at constant exchange rates.

Speaker 7

The updated sales outlook at constant exchange rates reflects higher full year expectations for both operating units. The guidance reflects expectations for sales growth in both North America operations and international operations, mainly driven by volume growth of GLP-one based treatments for obesity and diabetes care. With the expectation of continued volume growth and capacity limitations at some manufacturing sites, the outlook also 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. Operating profit growth outlook is now expected to be between 20% 28% at constant exchange rates.

Speaker 7

The updated expectation reflects the impairment loss reflected to Osturinan communicated in June of negative 6 percentage points. Excluding this impact, we now expect a positive 4 percentage point increase on operating profit growth expectations for the full year. This is driven by the updated increased sales outlook compared to previous expectations. Capital expenditure is still expected to be around DKK 45,000,000,000 in 2024, reflecting expansion of the global supply chain. Free cash flow is now expected to be between DKK 59,000,000,000 and DKK 69,000,000,000, reflecting the sales growth, a favorable impact from rebates in the U.

Speaker 7

S. Countered by investments in capital expenditure. The updated cash flow expectation mainly reflects the increased sales growth outlook. Income under the 340 program has been partially recognized. One ruling from the U.

Speaker 7

S. Court of Appeals for the 7th Circuit remains pending and along with the DC Circuit ruling may be subject to further discretionary appellate review before the U. S. Supreme Court. Depending on the outcome of any subsequent rulings and appeals in these matters, there may be a material impact on Novo Nordisk's financial position, net sales and cash flow.

Speaker 7

Financial impacts related to and following the expected closing of the Catalent transaction have not been included in the financial guidance. That covers the outlook for 2024. Now back to you, Lars.

Speaker 2

Thank you, Carsten. Please turn to the final slides. We're very pleased with the sales growth in the 1st 6 months of 2024. The growth is driven by increasing demand for our gibbonne based diabetes and obesity treatments, and we're serving more patients than ever before. Within R and D, we're very pleased with the 1st Phase III trial results with MiMate and its potential for people living with hemophilia as well as the recommendation for label extension for cardiovascular risk reduction for WIGOVI in the EU.

Speaker 2

With that, I'd like to hand over the word to Jacob.

Speaker 1

Thank you, Lars. Next slide, please. With that, we're now ready for the Q and A. We kindly ask all participants to limit her or himself to 1 or maximum 2 questions, including sub questions. Operator, we're now ready to take the first question.

Operator

Thank And your first question comes from the line of Emily Field from Barclays. Please go ahead.

Speaker 8

Hi, thanks for taking my questions. I'll ask one on Wegovy pricing and one on Wegovy supply. The first question on pricing, in terms of the gross to net in the U. S. Widening from 1Q to 2Q, can you help us understand the moving parts here?

Speaker 8

Is there a component of seasonality? How much due to competition or how much due to channel mix as you talked about more penetrating into the Medicaid channel and you can now sell to the select population in Medicare? And then secondly on supply, it's great to see the 0.51 mg doses of WIGOVY coming off the FDA drug shortage list. Although it does seem like you're voluntarily keeping the 0.25 dosage capped in order to limit new patients, do you expect this cap to continue throughout the rest of the year? Or could it be lifted before the end of 2024?

Speaker 8

Thank you.

Speaker 1

Thank you, Emilie, for those two questions. For the first question, I'll hand it over to Lars on overall pricing dynamics before turning to Doug on U. S. Specific dynamics pricing wise and also on the supply situation. Lars?

Speaker 2

Yes. Thank you, Emilie and thank you, Jaap. So I would say overall, the current market structure is 1 where we really compete and secure success based on ability to supply. So it's not one where, say, classical commercial tactics is dominating. And you should see our, say, our commercial strategies in that perspective.

Speaker 2

You alluded to the channel mix, and we also just had in our briefs that we are now expanding access in Medicaid. So we have 20 states adopting WIGOVY in Medicaid. And of course, with that expansion, as we know, from all drug categories, when you move into some of these channels, it comes at a lower, say, net price in these channels, which then has no oil impact. But I would say, we are encouraged with, say, a stable competitive dynamics. And our focus is really on securing supply to make sure that we can serve as many patients as possible more than others, say, tougher commercial tactics.

Speaker 1

Thank you, Lars. And with that, I'll hand over to you, Doug, on the U. S. Specifics as well as on the supply situation.

Speaker 5

Yes. Thanks, Lars, and thanks for the question, Emily. So overall, I'd start with, we're pleased with the Wegovy performance, whether you look at the NBRx moving from roughly 5,000 new branded prescriptions at the beginning of the year to 35 currently or the TRx, which moved from 100,000 beginning of the year to roughly 200,000 or doubling. We're pleased with that. We're serving more patients than ever before as Lars mentioned earlier.

Speaker 5

And market access continues to be robust. As I had mentioned, there's over 50,000,000 people with obesity and importantly around 10,000,000 vulnerable patients that have access via Medicaid in around 20 states. So that's robust and we're pleased with that. And in doing that, we're seeing that almost or above 80% of the patients are paying $25 or less. And that is our ambition.

Speaker 5

Our goal is to grow market access. And it's fair to assume as volume goes up, prices will come down and we have seen lower WIGOVI prices in the first half. I don't want to get into specifics there, but it is in line with expectations. Our focus remains in building even stronger access for AOM treatments across all channels. And again, I'd say that we are pleased with the overall performance and we're serving more patients than ever before.

Speaker 1

Thank you so much, Doug. And finally also on the lower dose strengths of BI GOBE and the update there?

Speaker 5

Yes. And so, we don't believe that the 0.25 that was a choice we made. Again, as we've said consistently quarter after quarter, continuity of care is incredibly important to us and maybe what separates us. We think it's really important that patients are able to titrate through the appropriate doses. So we'll continue to dynamically manage that, but we're also confident in the levels that we see with all the other dose strengths.

Speaker 5

So you shouldn't anticipate that 0.25 changing throughout this year to the question.

Speaker 1

Thank you, Doug and thank you, Emily. We are now ready to take the next question please.

Operator

Thank you. Your next question comes from the line of Louise Chen from Cantor. Please go ahead.

Speaker 9

Hi, thanks for taking my questions here. So first one I have was just on manunivant, wanted to see what type of efficacy and safety you expect see or want to see to move forward with this product? And then second question was just on Essence, out of the 1200 patients enrolled in the Phase 3 study, how many patients are expected to be part of the F2, F3 biopsy readout? Thank you.

Speaker 1

Thank you, Louise, for those two questions. I'll hand both of them to you, Martin. First on Molunovant expectations as well as on patients enrolled in SSENSE.

Speaker 6

Yes, absolutely. So we continue be excited about the potential for Molunovant. We don't have a lot of news yet. We expect the readouts from the dedicated obesity trial in Q3 of this year and from the diabetes kidney disease trial at the end of this year. Based on our modeling, we expect around a 15% weight loss.

Speaker 6

And obviously, our focus is on demonstrating that together with an attractive safety profile. But we don't have a lot of news at this point, you have to wait a couple of months before that. On the Aestence trial, you probably recall we sort of have a 2 tier trial. The first proportion of the trial includes 800 patients, which will serve as the regulatory submission. We'll see the readout of those 800 patients this year.

Speaker 6

They will all have liver biopsies and they will be in the F2 to F3 category. We then go to the full 1200 patients for a heart outcomes proportion of the trial. It will basically also be patients who have a liver biopsies and be in the F2 to F3 categories. But first step is to see the regulatory readout, which we will receive at the end towards the end of the year.

Speaker 1

Thank you, Martin, and thank you, Luis. We are now ready to take the next question, please.

Operator

Thank you. Your next question comes from the line of Evan Feigerman from BMO Capital Markets. Please go ahead.

Speaker 10

Hi guys. Thank you so much for taking my questions and for all of the color on the call today. A few from me. Just on the Catalent transaction, maybe you can just walk us through kind of the update there. And more specifically, as you think about building out capacity, what are the levers can you pull to kind of get your supply of inkertens up to meet demand?

Speaker 10

I know that was a key theme on the call today. Then maybe you can kind of walk us through some of the expectations for the CB1 inverse agonist data that's coming later in the Q3. Thank you so much.

Speaker 1

Thank you, Evan, for those two questions. Firstly, to Carsten on Catalent and overall supply chain strategy.

Speaker 7

Yes. Thanks, Evan, for this question and good to connect. So on Catalent, is still our expectation that the transaction closes towards the end of 2024. We're in active dialogue with the different regulators in terms of antitrust reviews. So but reiterate closing towards the end of the year.

Speaker 7

And with Catalent, we are significantly expanding our fill finish network with 3 additional sites on top of the sites we already have up and running and by the way also are expanding. So our overall supply chain strategy is really one of scaling our API facilities in Kallenborg on the peptide side and in Hillelovo, Denmark on the antibody side linked to our pipeline progression and then scaling our finished sites on a global scale to be able to accommodate significantly many more patients than we've been able to do so historically. And that ties into our overall corporate strategy of being able to reach many, many more patients than we've ever done before linked to the unmet need in the cardiometabolic space.

Speaker 1

Thank you, Carsten. And secondly on Molunoban expectations again for Martin?

Speaker 6

Yes. So again, not a lot of news. We're expecting 2 data readouts, one from obesity, one from diabetes later this year. That will be exciting. Our focus will obviously be on the efficacy in terms of the weight loss.

Speaker 6

Our current modeling is suggesting at least a 15% weight loss. That will be an attractive oral monotherapy in and of itself, but also with the potential of being combined with somaglutide. But these are early days, these are model data and we'll see the stronger readouts in Q3 and Q4 of this year.

Speaker 1

Thank you, Martin, and thank you, Evan. We are ready to take the next question, please.

Operator

Thank you. Your next question comes from the line of Sachin Jain from Bank of America. Please go ahead.

Speaker 3

Hi, thanks for taking my questions. 2, please. Firstly, a big picture one for Carsten, just on guidance. Midpoint, I believe, implies underlying acceleration in 2H relative to the underlying growth in first half. Given there's a lot of moving parts, I wonder if you could just talk through some of the key drivers, pushes and pulls, particularly around Wegovy and Ozempic.

Speaker 3

And then the second question is to try and get a bit more color, Doug, Karsten, Lars, on the Wegovy price around the commentary of as volumes go up, price comes down. If you would give us some sense of magnitude of price pressure short and midterm. So I'm going to frame the question like this. You've loosely commented to around 10% price pressure per year for Ozempic. Should we think about Wegovy as more or less than that?

Speaker 3

And can you give any specific color on 2H trends relative to 1H? Thank you.

Speaker 1

Thank you, Sachin. For the first one on guidance building blocks, I'll hand that to you, Carsten.

Speaker 7

Yes. Thank you for that question, Sachin. And as noted in our release, then we are upgrading our top line guidance by a couple of points and narrowing the guidance range also, so really supporting the fact that we are off to a really strong start in this year and see strong trends, both commercially as well as supply chain wise. So that's the backdrop for our increase in guidance. And then to the second half acceleration part of your question, yes, that is correct.

Speaker 7

And you could say the 25% growth we have in the first half of this year benefits from the rebate adjustments we've been talking to related to the U. S. Both in the Q1 and in the second quarter as well as to an easier comparator linked to the phasing of rebates in 2023. So we delivered 25% with both the tailwind and an easy comparator. And then delivering that for the full year clearly entails an acceleration into the second half in terms of growth, despite the fact that the comparator is tougher linked to the rebate phasing of last year.

Speaker 7

And that acceleration is really a function of continued trends of what you're seeing already in the marketplace today in terms of the VIGOVI penetration in the U. S, where we doubled number of scripts from the beginning of the year until now, weekly scripts, also an acceleration in terms of the GOVI sales in international operations and a continuation of Ozempic performance into the second half. So underlying, clearly an acceleration during the second half compared to the first half.

Speaker 1

Thank you, Carsten. And secondly, on overall pricing dynamics, Lars?

Speaker 2

Yes. So thanks, Sachin. So we would refer not to get into very detailed comments on pricing because that turns into say a quarter over quarter storyline then. So but I would like to say underlying what I mentioned in my opening that and also as Carsten just alluded to, this is a marketplace where we compete on bringing, say, volumes to the market. So it's not one where we feel that we are into, say, price competition.

Speaker 2

Having said that, there are different segments of the market. And we feel that it's relevant to also be present in the segments where we had the most vulnerable patients and they are typically served by Medicaid. So we have now, as we mentioned, 20 states having adopted to Bikovy. And we all know that for any product when you go into Medicaid, it comes at a somewhat lower price point. So that should be factored in.

Speaker 2

So it's a stable competitive setting and it's really for us about scaling the volumes to deliver on the demand sorry, on the access we have delivered. And we can see the demand is there. So it's about scaling to meet the demand, I would say, more than any other tactics, so to say. And as Carsten just mentioned, we have the capacity to scale and accelerate serving many more patients in the second half. And I think that's I think the encouraging part of our release here that we upgrade to do that against a somewhat tougher comparator in the second half of the year.

Speaker 2

So I think there's a sign of strong momentum and also execution from a supply chain point of view. Thank you.

Speaker 3

Last one, just ask for clarification. Where are you with Medicaid penetration? Should we expect a major uptick in 2H related to 1H?

Speaker 2

So I don't have detailed insight into that, and I'm not sure we can comment specifically on that. So

Speaker 7

if I can give one data point. So we have Medicaid coverage into the June of 20 states. How exactly the volumes are going to fall out in the second half between Medicaid and commercial, of course, is very speculative. But we have actually a very strong Medicaid based access of 20 states and around 10,000,000 people with obesity covered that way around.

Speaker 1

Thank you, Lars. Thank you, Carsten. And thank you, Sachin. And with that, we are ready for the next set of questions, please.

Operator

Thank you. Your next question comes from the line of Richard Foster, JPMorgan. Please go ahead.

Speaker 11

Hi. Thanks for taking my question. Maybe one on WEGOVI in the U. S. As well.

Speaker 11

Based on the new patient, I know you've said that your 35,000 scripts a week, you'll limit those starter doses. But based on the new patients you've already accrued and that level of patients and your knowledge of the pull through of patients to higher doses, how do you see the TRx developing? You've obviously doubled in the first half, but some idea of how that could develop, I think, would be helpful to people. And I suppose the question is, at what point do you expect TRx to exceed scripts from Ozempic on a weekly basis? And then one other question just on Ozempic ex U.

Speaker 11

S. Supply. I think you alluded to that, that could improve in the second half, but just when can you anticipate supply being resolved there so that we can expect strong growth in the second half? When can we expect strong growth for Ozempic to resume in IO? Thanks very much.

Speaker 1

Thank you, Richard. On the first one in terms of the strong TRx trends in the U. S, I'll hand it over to you, Doug.

Speaker 5

Yes. Thank you, Richard. And let me just clarify, we're not precisely limiting to 35. We're dynamically managing that because again, critically important to us is patient continuity of care. So that is the starting dose as you know and so that's the one we will manage.

Speaker 5

It's not to limit and so you may see fluctuations in that. What I would anticipate is a steady consistent TRx trend. I don't want to get into where that may go or where that may cross Ozempic. Again, we're pleased with the performance as Carsten and both Lars alluded to, we've more than doubled that from the beginning of the year to currently. We're seeing strong NBRx and we're serving more patients.

Speaker 5

So I don't want to get into predictions of 1 Mill Cross.

Speaker 1

Thank you, Doug. And on the gradual supply scaling, over to you, Carsten.

Speaker 7

Yes. So talking about ex U. S. And scaling there. Then first of all, I'd just like to allude to the performance in international operations where Rybelsus or oral semaglutide is doing really well in the first half growing 6%.

Speaker 7

So actually contributing as much as Ozempic in International Operations. And then looking at IO between the first half and second half, then clearly our ambition and what's implied in guidance is an acceleration from the 11% we delivered in the first half. And that acceleration will come from the Sema franchise. But as you see, we have now launched in 12 markets with Wegovy in international operations. So clearly, you should also expect to see some pickup there driving higher sales growth in the second half in IO.

Speaker 1

Thank you, Carsten, and thank you, Richard, for those two questions. We are now ready to take the next set of questions, please.

Operator

Thank you. Your next question comes from Peter Verdult from Citigroup. Please go ahead.

Speaker 12

Thank you. Peter Verdolte, Citi. Two questions. Doug, just simply obligatory, any latest data or intel in terms of average duration of use on Wegovy? And then secondly, Carsten on the 340B, when we last spoke, my understanding was Novo has been very conservative in revenue recognition from 340B leaving risks very much to the upside.

Speaker 12

And I think when we last discussed, it's my role on should the rulings go your way, there could be quite a material uplift to earnings, I think, to the tune of 5%. So can I just check-in with you whether that is still the case? Or have you any updated thoughts there? Thank you.

Speaker 1

Thank you, Pete. On the first one on VEGOVIST daytime, I'll give that to you, Doug. Yes.

Speaker 5

Thanks, Pete, for the question. So in the U. S, we're still seeing around 6 months and that's given the periodic supply constraints and we have to work through that. What I would tell you this, we are confident that over time the stay time will improve more towards 12 months and beyond, which would reflect the clinical profile of the product and what we saw in some of the clinical trials. So, still around 6 months, we're working through that more to come as we see more stability in supply over time.

Speaker 1

Thank you, Doug. And over to Carsten on 340B.

Speaker 7

Yes. Thanks, Pete, for that comment. And first of all, I'd just like to refer also to our company announcement and the update on 340B that we included on the legal matters there. And I would say the only new item compared to when we discussed connection with Q1 is that there's one additional ruling that has come out in this case complex, which is a DC circuit ruling, which ruled similarly to the ruling we had in our case. So all supporting our case, but we still have one key ruling outstanding in the 7th Circuit.

Speaker 7

And then as to our accounting, I don't remember us discussing it being conservative. I remember us discussing it being prudent and aligned to the accounting standards of revenue recognition, where revenue recognition has to be highly probable in order to book it as revenue. So that's how we do it. And but we also call out that there is a scenario where that could have a material impact on our financial position, and that's what we call out in our announcement. And then let's see how the 7th Circuit rules and what level of appeals we'll be looking at in the coming months.

Speaker 7

It could be any day that could be news, but I don't know anything further as of today.

Speaker 12

Thank you.

Speaker 3

Thank

Speaker 1

you, Carsten, And thank you, Pete, as well. We're now ready to take the next question, please.

Operator

Thank you. Your next questions come from James Quigley from Goldman Sachs. Please go ahead.

Speaker 13

Great. Thank you for taking my questions. I've got 2, please. So firstly on sort of the obesity portfolio considerations. You've got a number of obesity readouts in the second half of the year.

Speaker 13

But how are you thinking of the relative positioning and weight loss expectations for step up, so the 7.2 milligram SEMA and obviously, CAGRISEMA then as well? Will it be an eitheror approach from a commercial perspective? Or will it be purely data dependent? And could sema 7.2 mg potentially be more desirable given the known CV benefits from sema across all the trials we've seen and then we haven't necessarily seen that with CAGR yet? And then second question on oral therapies.

Speaker 13

So obviously, there's been some competitive data, some early competitive data that's been on the market recently. But in terms of your oral offerings, so Oasis 4, how would you characterize the competitiveness of the data you've seen so far for 25 milligram dose? And how are you thinking about positioning in the market or even a market fit approach on the launch? And then maybe also related to that on the oral snack technology, can you remind us where you are in terms of the latest generations? And so at what point you'll be able to have a peptide based oral with the STACK technology that could be as convenient as a typical small molecule?

Speaker 13

Thank you.

Speaker 1

Thank you, James. I think I counted

Speaker 6

a little bit more

Speaker 1

than 2 questions there, but first over to Camilla on the overall obesity portfolio. And after that, we'll turn to Martin on the knee on the snagging hazard.

Speaker 4

Yes, thanks a lot. First of all, I'd just like to say that we are very encouraged about the progression of our pipeline in obesity. And of course, we look forward to the readouts that we are having in the second half of this year. It's going to be an exciting second half from a number of Phase 3 readouts that we have and both in the oil and also in the injectable space. And I think let's await those readouts and then later on of course when we get closer to launches, we can talk about positioning and how we are going to commercially utilize the strong pipeline that we have.

Speaker 1

Thanks a lot, Camilla. And over to you, Martin, on SNAK.

Speaker 6

Yes. So specifically in the clinical space, we have been testing, obviously, generation 1, 2 and 3, as you know. And in the research space, we continue to evolve this. Goes without saying, we'll not take any new generation into the clinic unless we see a potential for step change in terms of bioavailability. And this is an ongoing journey and an ongoing effort for us.

Speaker 6

With respect to the sort of dosing restrictions, We actually don't see them as limitations. But I also have to say, we don't see a potential of removing those limitations anytime soon.

Speaker 1

Thank you, Martin. And just a reminder in the company announcement, James, you will also see the approval in EMA of the new doses related to oral sebaclutide ribosus in the EU. Thanks a lot, Martin, and thanks a lot, James. We are now ready for the next set of questions.

Operator

Thank you. Your next question comes from the line of Emmanuel Papadakis from Deutsche Bank. Please go ahead.

Speaker 14

Thank you for taking the question. Maybe a question on Sema, Head of Central Inclusion in 2027, Ira Price Negotiation. Perhaps you could just enlighten us as to what magnitude of price cut you've assumed in your midterm planning and your latest perspectives on potential impact in the commercial channel from reduced pricing in Medicare? And then on CAGRISEMRA ahead of the first predefined results, just talk to us a little bit about your device capacity for the dual chamber pen device at launch. Would that be enough to switch a significant proportion of patients from CEMA to CAGRISEMRA over that 2026, 2027 timeframe?

Speaker 14

Or indeed, is there any reason why you wouldn't expect the majority of patients to start switching over? Thank you.

Speaker 1

Thank you, Emmanuel. The first one on the IRA and the latest there, that goes to you, Doug.

Speaker 5

Yes. Thanks, Emmanuel, for the question. Maybe as a starting point, I'd like to say that we fundamentally disagree with the principles of price setting. It hurts innovation. It potentially creates higher out of pocket costs for seniors and less choice.

Speaker 5

So that's not good. What I would say is that we're not going to comment on price, but we've worked through the first negotiations on NovoLog and FIESP. And as you know, that's a minor part of our business. So we expect limited impact there. And then I would say as it relates to a read through to semaglutide, it's just way too early.

Speaker 5

This has been a new process for both us and the government. We're learning a lot. I'm sure they learned a lot. But I don't want to speculate on what that may mean for us maggotad read through.

Speaker 1

Thank you, Doug. And for the second question on KAKU SEMA and capacity, over to you, Carsten.

Speaker 7

Yes. Hi, Emmanuel. Thank you for the question. For Crecosimme and supply chain strategy, then of course, we learned a from Govee and we are full speed in terms of scaling our capacities linked to Kagoshima. It is a dual chamber device, so scalability is different compared to multiuse devices that we have in other parts of our portfolio.

Speaker 7

But we are rapidly scaling the kegrosimab device. We are exploring a co formulation also to improve scalability. It's not without risk and that's why I say we're exploring the opportunity to do so. And then bear in mind, behind Cactrima in our pipeline, we have Amicretin in a subcutaneous version, which we report out in the Q1 of next year, which is another offering together with the step up. And then as my last comment, I would say, given the clinical profile of semaglutide, we believe that we will be selling semaglutide for many, many years to come, and we are building the infrastructure to compete on that at a global scale for many years to come.

Speaker 1

Thank you, Carsten, and also thanks for the questions. With that, we are ready for the next set of questions, please.

Operator

Thank you. Your next questions come from the line of Simon Baker, Redburn Atlantic. Please go ahead.

Speaker 14

Thank you for taking

Speaker 15

my questions. 2, if I may. Firstly, going back to the obesity pipeline, you announced that you terminated the development of the once monthly injectable GLP GIP due to portfolio considerations. I wonder if you could elaborate on that and also update us on your appetite for a monthly injectable obesity treatment. And then, Given the

Speaker 12

complete

Speaker 15

Given the complete response letter and leaving aside the questions on manufacturing, is a Type 1 carve out from the application a possible solution to expediting this? Because I assume that one mustn't just think about icodec, but also icosema, which is potentially the bigger opportunity and obviously held up by this. Any thoughts on that would be much appreciated. Thank you.

Speaker 1

Thank you, Simon. Both of those go to you, Martin, firstly on D1's Monthly GLP-one GIP and secondly on Icodec.

Speaker 6

Yes. Absolutely. So I just want to reiterate, I think we all along stated that the once monthly GLP-one GIP study that we conducted was an exploratory study, more assessing the concept of a once monthly technology than the actual GLP-one GIP component. It was exploratory and while we definitely can use the data, the current profile was not something that we would take into further clinical development. So basically, we still have this focus.

Speaker 6

We do see once monthly as convenience more than anything else. Our primary focus is efficacy and safety. And as we already discussed that we have a very competitive pipeline and portfolio. But we will maintain this focus with either next generation of this technology or alternative technologies. Specifically on Icodec, we are in ongoing dialogue with the FDA, so I don't want to speculate too much, but obviously part of this is a potential carve out of the type 1 diabetes.

Speaker 6

You should not see this impact the icosimab dialogue.

Speaker 15

Right. Thanks so much.

Speaker 1

Thank you, Martin, and also thank you, Simon, for those two questions. Then we have time for one final set of questions, please.

Operator

Thank you. Your final questions come from the line of Mark Purcell from Morgan Stanley. Please go ahead.

Speaker 16

Yes. Thank you very much for taking my questions. For Govee heart failure, could you help us understand the additional data you're looking to file and whether you're going for a CV death and heart failure endpoints, sort of hard endpoints in terms of the claim from the studies? I guess, the pooled analysis of the STEP HF programs showed a strong 69% risk reduction in CV death and heart failure events, but there's significant numbers of patients in select and flow, which I guess could be relevant. So an understanding of what you're aiming to achieve there would be great.

Speaker 16

Thank you. And then the second one, just as a follow-up to IV202. Could you help us understand, Martin, how IV347 differs compared to IV IMV-two zero two in terms of PK and CNS distribution and selectivity to CB1 versus CB2 receptors? Just trying to understand whether this could actually leapfrog melanoband into Phase 3?

Speaker 1

Thank you, Marc. And both of those to you, Martin. Firstly, semaglutide in HFpEF and secondly within Imvastaco, the INV-three forty seven.

Speaker 6

Yes. Thank you very much, Mark, for those questions. First of all, on HFpEF, as you recall, we conducted 2 dedicated HFpEF trials in patients with established HFpEF1 in diabetes and one in patients without diabetes but with obesity. When we do the meta analysis of the two trials, we see a 69% decrease in risk of CV death or hospitalization for heart failure. So absolutely very strong data and something that has encouraged us a lot.

Speaker 6

This was also why the FDA granted us breakthrough designation. As we discussed last quarter, we had fairly few events in these two reasonably small studies. And through our dialogue with the FDA, it was very clear that if we could sort of increase the volume of events to further substantiate this, the likelihood of getting heartache points into the U. S. Label would increase.

Speaker 6

Given that we have some strong have had and will have some strong readouts in the not so distant future, it was a reasonably easy decision to say we can accept a small delay and then increase our likelihood of getting hard endpoints into the label as compared to the more functional test. So we saw that as a really good bargain. On Molunarband, 2nd generation is still early days. There is a potential for a longer half life. So a potential for less frequent than once daily dosing, which is obviously attractive and further a potential for even less brain penetration.

Speaker 6

Again, we are quite confident with the safety profile of monlunabant. But again, if 2nd generation could have an even lower likelihood of potential adverse events, that would be attractive. I don't think you will see anything surpass our progress of Monlunab and we see this as a really, really strong life cycle management opportunity.

Speaker 1

Thank you, Martin. Thank you, Marc, and thank you to everyone else who have asked questions during the session. This concludes the Q and A session. Thanks a lot for participating, and feel free to contact Investor Relations regarding any follow-up questions you might have. Before we close the call, I'd like to hand it over to you, Lars, for any final remarks.

Speaker 2

Thank you, Jacob. I hope it comes across that we are very pleased with the momentum in our business, in particular our GLP-one business in diabetes and obesity, not least the strong growth for Wegovy script trends in the U. S, which is really fueling the upgrade we have communicated today, which also means that our supply is on track in being able to serve many more patients, both short and longer term. We're also excited about our pipeline, news we have announced recently, but also what we have coming up later in the year. So with that, thank you all from my side for your questions and attention today.

Speaker 2

With that, we close the call. Thank you.

Operator

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

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Earnings Conference Call
Novo Nordisk A/S Q2 2024
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