Novo Nordisk A/S

Ladies and gentlemen, thank you for standing by and welcome to the first quarter 2020 Novo Nordisk Earnings Presentation Conference Call. At this time, all the participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one on your telephone. I must advise you that this call will be recorded today. I would now like to hand the conference over to your speaker today, Mr. Karsten Munk Knudsen. Please go ahead, sir.

Good. Thank you. Welcome to the virtual Q1 Nordisk London Roadshow. This is Karsten Munk Knudsen, CFO of Nordisk. With me today I have our CSO Mads Grossgaard-Thomsen and our EVP of Commercial Affairs and Commercial Strategy, Camilla Silvestre. So we have a broader presentation that we will go through briefly in the next 15 to 20 minutes after which we will move over to Q&A as in our normal London Q1 Roadshow launch events. First of all, I'd like to thank Michael Leuthen and UBS for hosting this virtual call. We hope you're all safe out there, even though it's challenging times with COVID-19. This is the agenda for today and as usual then this call might include some forward-looking statements and of course they are surrounded by uncertainty and I would say even or especially in these COVID-19 times there is a certain level of uncertainty regarding how that plays out and consequences of COVID-19.

In terms of COVID-19 and

and our response as a company then early on in the spread of the pandemic we saw what was happening in China and as a company we initiated a corporate crisis response team and the team we set out early a couple of top priorities to guide the company through this crisis one was to safeguard the health of our employees Because without the help of our employees, then we would not be able to supply life-saving medicines to patients on a global scale, which is our second priority in this context. And then thirdly, we are also, while we've been navigating through the crisis, been very focused on how we as a company are able to support society getting through the crisis in the best possible way, using our capabilities and resources to support that. In the fourth quarter of 2019 we hosted the Capital Markets Day and as part of the Capital Markets Day we launched a set of strategic aspirations which are basically the aspirations we are pursuing from now until 2025 fully aligned with our corporate strategy and basically saying what are we aspiring to reach by 2025. In the first quarter, we launched a number of affordability options in the US that are out there in the public. Part of that includes a patient assistance program that is linked to the new high unemployment levels in the US. So as unemployed then people have the possibility of accessing free insulin for a period of time until they find the right health care insurance. Then we supported on a number of fronts, including international aid organizations vis-à-vis the COVID-19 pandemic. And then finally, we went live with our solar power field in the US. thereby securing 100% renewable power across all production sites globally which in round terms is reducing our global CO2 emissions by more than 10% on a global scale on an annual basis. On innovation and therapeutic focus, Mads will go through the pipeline later on but worth noting Rebels' approval in the EU and UK, OSIMPEC submitted in China, and then this quarter we reported the semaglutide phase 2 data readout in NASH. So we'll come back to that. In terms of commercial execution, we expanded our diabetes care leadership in terms of value market share increasing by 0.7 percentage points, thereby moving towards our strategic aspirations of 33% diabetes value market share. Our obesity business increased by 30%, thereby also tracking towards our aspiration of doubling our obesity care business over the period of the strategic aspirations. And BioPharm grew by 16% in the quarter with some one-off impacts that we'll get back to later on. All in all this led to a sales growth of 14% in the quarter of which 7% was COVID-19 stocking related and in turn deriving 12% operating profit growth for the quarter also COVID impacted. So with that I will hand over to Camilla Silvestre to go through the commercial execution for the quarter.

Thank you, Karsten. And before we get into the details of the growth and sales split, maybe it's worthwhile to just mention that we have established a new reporting structure in I.O., meaning that we now have the EMEA reading consisting of Europe, Middle East, and Africa, and we have grouped a couple of regions for this purpose reporting here. We also have China consisting of Hong Kong, Taiwan, and mainland China. and then the rest of the world. And as you can see, the sales growth is distributed across all geographical regions, meaning that they are all contributing to growth. The 14% sales growth is around 70% when adjusted for the COVID-19 related stocking. And international operations is driving sales growth of 19% by all therapy areas and the stocking effect that we see here is mainly in the EMEA region. North America operations sales increased by 9% and here the stocking is mainly at the patient level. When we look at how the sales growth is distributed across therapy areas, you see here that all therapy areas are contributing to growth. In insulin, we see a plus 2% increase with a very wide variation between the U.S. and North America and I.O. So U.S. minus 15%, including Canada, driven by channel mix, high rebates and coverage gap. Whereas in international operations, we see a growth in insulin of 14% driven by all insulin categories. In the GLP-1 segment, we see a growth of 37%, driven by a 30% increase in North America and 55% increase in international operations. And summing all of that up, it means that, as Karsten said, we are expanding our global diabetes value market share with 0.7 percentage points to 28.7. That is driven by an increase in both the insulin volume market share to 46.5%, but also an increase in our GLP-1 market share of 2.2 percentage points to 43.3%. Obesity grew by 30% with an equal split between international operations and North America. And BioPharm grew by 16%, primarily driven by nautitropin and hemophilia products, as you can see. When we look at the details of the early rebuttals uptake, you see from this slide on the left-hand side that Novo Nordisk has a total GLP-1 NBRX leadership of almost 58%. We have also a TRX GLP-1 leadership of 48%. We see a continued uptake of Osempic now with NBRX leadership compared to Tulicity of 36.6%. and on the TRX and continued improvement in our total market share and now at a level of 24%. Rebelsis has progressed to 8.8% NBRX and 2% total Scripps and here it's also important to say that the market access is progressing and is now above 50% unrestricted access. and we expect that to gradually increase over the year. Also in IO we are now gaining market share in the total diabetes value market share segment driven by growth also in both insulin and GLP-1 and you see here that our share of growth is now above our total diabetes market share. What's driving the growth in IO you see on the right hand side, you see that insulin sales is driving 44% of the growth and GLP-1 is driving 35% of the growth with a distribution that makes insulin still the bigger growth driver in most of the regions so far. On obesity, we had 30% growth in the quarter. We now have launched Saxenda in 46 markets and we are continuing to invest in market development. We have a market share of 39% in Iowa and 72% in North America. However, our effort is less focused on keep gaining market share but more on developing the market to meet our long-term aspiration of also doubling our obesity sales by 2025. In BioPharm we see growth of 16% driven by haemophilia and growth disorder products and especially also 7% growth in Novo7 sales and also a continued global rollout of our innovative products in the haemophilia area as well as a growth of 28% for Norditropin driven also by some stocking and change in inventories but also an additional demand due to The competitive landscapes in selected countries. And now I'd like to hand over to Matt for an update on our R&D.

Thank you, Camilla. And if we turn to the next slide, I'll just start by saying that ever since Phil Newsom showed the 39% NASH resolution with the arachnotide 1.8 mg in NASH in the UK in the Lancet paper five years ago, we've been intrigued by the potential of GLP-1 in the NASH field and we're happy to now report the outcome of a large Phase IIb biopsy and many more. Thank you very much. In this study, the drug was well tolerated. There were four discontinuations in the highest dose group as well as in the placebo group, four out of 80. So low discontinuation rates, good safety and tolerability. And there were numerous readouts on secondary endpoints in terms of FibroScan imaging-based elastography, in terms of ELF biomarker test panel, in terms of and numerous other assessments of fibrosis that actually point to the fact that semaglutide is arresting the fibrosis progression including also the histology assessments, arresting the progression but not significantly reverting progression during the course of these 72 weeks. So very, very encouraging and exciting data that will be discussed with the relevant stakeholders including regulators in the near future. On the next slide, this is to preempt what will promise to be very exciting times, I hope. for the evolution of obesity management or therapies in the industry, namely the STEP program. And the first of the STEP trials for semaglutide in obesity once weekly, 2.4 mg, is the STEP 4. And I'll just spend a few seconds on explaining the somewhat strange design of the trial. It's a trial where people essentially are escalated to 2.4 mg of semaglutide over a period of 20 weeks. And at this point, they're then randomized to either withdrawal therapy or continue therapy so this withdrawal design in a way mimics a little bit what happens in the real world that people treat themselves for five months then they stop and put on weight again here it will be exciting to see what is the difference between whether you actually treat yourself for a full 68 weeks with semaglutide or if you withdraw the drug already after five months so It's actually an interesting trial that mimics a little bit a real-world situation of chronic therapy versus abrupt therapy and that will then be followed by a classic step 1 obesity trial, a step 2 diabetes trial and a step 3 combination interventional therapy trial. All of that is coming during the first half of this year and hopefully gating for a submission during the latter part of the year and a regulatory review. We're excited by this and the SELECT trial will of course continue hopefully to show cardioprotection in a non-diabetic context, namely in obese individuals. Finally, just to wrap up, There are many exciting results, milestones and approvals throughout the rest of the year. I will just right now highlight the quarter here. What will follow is in Phase 1 the PCSK9 peptide LDL lowering readout from Phase 1. In Phase 2 is actually the Cagrelin type, the new WHO name for the amline 833 once weekly analog. That reached out in monotherapy plus in phase 1b in combo therapy for four months together with semaglutide. And then in phase 3 it's of course the STEP program and in terms of approval the most important thing will be the Japanese Rebels' approval which is relatively imminent.

I think with that I'll hand it over to Karsten. Thank you, Mads. Briefly on financials, so as you saw we reported 14% sales growth and 12% operating profit growth. When we adjust for COVID-19 stocking related effects in the first quarter, then sales growth was 7% compared to the 14%. And if we further adjust for the one-off reversal of Rebelsys pre-approval inventories in Q1 last year, then our operating profit growth was 4%. The reason for our profit growth being lower than the sales growth on an adjusted basis is basically driven by a low R&D spend in the first quarter last year. Then it's more or less a flat operating margin and do note a 48% operating margin in the quarter. Net financial items impacted by a significant deterioration or depreciation of emerging market currencies, very much linked to the oil price in countries like Russia, Brazil, etc., impacting net financials significantly in the quarter. All in all, diluted earnings per share up 16%. In terms of the outlook for 2020, we maintain our outlook across all the main parameters with only one exception, which is on financial items, where we have a movement from 1.5 billion to 2.5 billion, and that movement is for all practical purposes explained by the depreciation of emerging market currencies I just spoke to before. So with that, we'll end our presentation. This is just a slide showing our key focus areas and milestones for 2020 that links to our strategic aspirations for 2025, including a news-heavy R&D news flow here in the second quarter of this year that we're all looking forward to. So with that, I would like to open up for Q&As, and please Ladies and gentlemen, we are now beginning the question and answer session. As a reminder, if you wish to ask a question,

You will need to press star 1 on your telephone and wait for your name to be announced. Please stand by while we compile the Q&A Q&A. This will only take a few moments. Thank you. The line of Mr. Michael Linton from UBS is now open.

Oh, thank you. So I'll start with one question, actually. We spent a lot of time on Nash yesterday. On the international business, so on the I.O. business, I was wondering if you could talk a little bit in more detail about the trends in Q1. We saw very strong performance in China. You did refer to some Tender Business are phasing there. But when we look at the corridor that you've set, the 6% to 10% for international business, obviously the business seems to be tending towards the upper end of that range. So as you look at the performance and strip out the phasing, is there anything else that is worth flagging that would give us confidence that we can actually see The growth range ending up in that upper end of the corridor for the rest of the year or is it really an extraordinary quote in Q1 and we should see a reversal to something more moderate in the second half?

Okay, thank you Michael. When you look at our business mix, our geo-mix, then it's clear that our operations in IO are performing extraordinarily well. You'll recall that last year IO grew 11% and when we At just out stocking and some of the shipment facing in I.O. in the first quarter, then the number would be around the 10-11% mark. So clearly in the high end of the 6-10% range we indicated in our strategic aspirations. Always be careful with looking at I.O. on a quarterly basis. But I would say that we see very, very solid traction going for I.O. last year and into the first quarter. And then you would say the balancing factors, of course, COVID impact over the coming quarters, as well as stocking impact that you would have to take into account. And then finally, There could be some periodization of product launches, but all taken together, very solid trends for IO for the quarters to come. We're not guiding specifically on where we are in the range, but I think underlying we're trending very positively in IO. Thank you.

Thank you. Once again please star 1 if you wish to ask a question. Once again star 1 if you wish to ask a question. Thank you. Our next question comes from the line of Jiaxi Liu from Billy Gifford. Please ask your question. Your line is open.

Hello. Thank you for this call and it's great to hear about your progress this quarter. And I was just wondering if you could speak to any lasting effects that you might have considered or noticed even from this COVID crisis.

Yes, that's a really good question. And when you look at how to navigate through COVID, then people are dividing it into a number of phases. So initially it's simply about getting overview and control of the entire situation, then stabilize the business. Then prepare to get out on the other side and as part of that look into what can we bring with us of learnings and practices from COVID-19. I would say as a company when we look at it then just talking through the value chain then I would say on our supply chain side I think we're very happy with how we've managed COVID-19 thus far with all the factories running. But of course when you put more pressure on the system then it's also more clear where potential weaknesses are. So we have good learnings to become an even more resilient manufacturing organization in the years to come. In R&D and executing trials I would say One of the learnings we have is how to work even more remotely and one example could be in executing our trials and using more digital means in terms of our trial execution. Something that we've been looking at already for a while but a trend that we believe will be accelerated in the years to come. Commercially, I would say the commercial approach for us and many other pharmaceuticals is based on sales reps detailing GPs and having visits and doing sales calls. and I'd say the technology and e-detailing is clearly getting turbocharged in terms of virtual interactions with our stakeholders from now on. So a lot of good learnings there. And then as a company culture and generally operating as a company and I think this call is a good example The need for traveling could probably go down over time and more virtual means of operating as a company whether it's in investor relations and investor interactions or it's just generally company events and meetings. So we're looking at a number of cases and currently we are also in the process of defining How and what are the better practices to anchor going forward? Thank you. Next question.

Thank you. Thank you. Our next question comes from the line of Michael from UBS. Please ask your question. Your line is open.

Thank you. It seems people can try. So, two questions. One, just on your new geographic disclosure, I was wondering whether there's any Anything more to it? Is there any re-plumbing that is being done? And if so, what's the rationale behind it? That would be question number one. And then question number two is following up on the previous question, when we think about things like medical conferences, obviously the ADA this year is virtual, like are many other Do you think there's going to be a change in the way companies like Novo Nordisk will interact with physicians on the scientific side and what implications might that have as we think about the world going forward if and when we come out of the pandemic? Thank you.

Great, thank you Michael. I'll take the first one and then I'll hand over to Mads and Camilla for the medical congresses. In terms of our geographical splits, then the reason why we changed, and I apologize for the hassle on the analyst side of redoing your forecast models, but it is purely a function of an internal restructuring in our commercial organization in international operations where we are basically looking at how do we most effectively organize that and that is the case from time to time and that's the fundamental driver for our external disclosure so there's nothing more to it than that. And Mads, on the congresses?

Yeah, so Michael, if you consider all the many, many ADAs and ESDs and other conferences that many of us have been to, they are fantastic in terms of getting your scientific messaging across from clinical trials to the scientific community. but do bear in mind when we mingle and walk around at the conferences you can only attend one session at a time and the new thing with ADA the way it's done virtually this year is that if the attendance is good enough and high enough so to speak that remains to be seen www.NordiskA.com of actually using this even after the event has occurred. That gives a unique opportunity to better understand data and remember them going forward. But it remains to be seen how it pans out. And to be honest, personally, I'm of course also looking forward to be able to meet folks again at real live conferences. But that can be ups and downs to it. Kim, did you have something to add?

Thanks, Mads. I just wanted to add that from a commercial point of view, of course, this also gives us a good opportunity to Thank you very much.

Thank you. Our next question comes from the line of Peter Sester from Andalsbanken. Please ask your question. Your line is open.

Hi, it's Peter from Andalsbanken. And I am sorry if this question has been asked before, but I came a bit late into the call. So essentially, it's from us, and it's relating to the NASH data. If you look across studies which has reported on the Phase III endpoints preferred by the FDA and EMA. I mean, you clearly blow the roof here with your data with respect to this endpoint. With respect to the other endpoint, which is also important given the correlation between fibrosis and cirrhosis, we still need to see them. But nevertheless, could you add some flavor here As to your confidence of showing a benefit, do you have some internal studies? Can you make some kind of correlations? Just anything that can sort of add to the confidence of being able to show a positive sign here in the phase three data. And also, as I believe, and this may not be correct, that EMA actually requires both endpoints for approval. Thank you very much.

Yeah, so Peter, that's a good question and one of the most important things for us now is to align FDA and EMA expectations for the trial design that will lead to approval because we would of course like to have something that satisfies both regulators and not just one regulator and I think there's a path forward in that regard. When we look at all the measures of fibrosis, the ELF biopanel being one of them, the FibroScan, illistography imaging, and many more. Thank you. The only thing we didn't hit, as you know, is the endpoint of fibrosis improvement without worsening of NASH, and that's where we had numeric around 10% increase in patients, but that was not statistically significant. but what it tells me is that we're arresting the progression also of the fibrosis and that means that you should imagine that a phase 3 trial will hit the endpoint of NASH resolution and that is the approval endpoint at least according to FDA and then you continue your F2, F3 patients Thank you very much. Then that would read out later and of course give a stronger health economic picture that you will then reap at that point in time. So that's how you should see this is predominantly a metabolic and to some extent anti-inflammatory drug, but it clearly pans out in the way that it arrests progression also of fibrosis.

Should I interpret your answer as saying that as monotherapy, which is mainly a drug for the US where in Europe the combination drug Thank you. Well, first of all, Peter, in terms of the finances, Karsten and I have built into the expected R&D budgets progression of certain of the pipeline projects, so there's no news on that one. No, on the other one, I would like to see a harmonization

between our colleagues and co-workers at FDA, EMA and other regulators so that we can find one common stance on how to develop such products and get approval and preferably that would be meeting the FDA guidance of showing natural resolution or in the case of four trials then fibrosis improvements. and we will see how far we get in the discussions with the European regulators as well. But we'll try to harmonize the guidance here. I think that is important for the whole industry.

Thank you. Congrats on the good results. Thank you.

Thank you. Our next question comes from the line of Kiri Parker from Goldman Sachs. Your line is now open.

Hi. Good afternoon. Two questions please. Karsten, Kamila, I would love to hear your thoughts on kind of what you think this pandemic means kind of from a longer term perspective kind of for the biopharma industry kind of both as it relates to kind of what might be perceived as increased investment in healthcare over the next few years but also kind of on what it means for the social contract that the industry might have on a broad basis and if there are particular geographies that one should kind of think about, I think that would be keen to hear that. And then separately, kind of Mads, as we think about kind of this NASH data set, and obviously we'll see incremental data over the next few weeks, but I think yesterday you mentioned that while the secondary endpoint of fibrosis wasn't met, that you were encouraged by a lot of the other kind of secondary endpoints. So as you look at the totality of data, are you more or less encouraged than you were kind of on SEMA's potential role in NASH kind of three months back? And how would you categorize your excitement for SEMA in NASH versus SEMA in obesity?

Thank you.

So we'll take the first question to Camilla on long-term industry impact from COVID-19, and then Mads, how do you see NAS versus obesity, and how encouraged are you really about this data?

Okay, thank you, Karsten. So in terms of expectations for the longer term for the pharma industry, it's likely that, of course, there will be an increased focus on healthcare in general, but also likely that there will be an increased focus on emergencies and potentially some of the severe chronic diseases that we work with could risk getting less attention and be put under slightly more cost pressure. Of course, our opportunity in this context is to make sure, vis-a-vis the digitalization discussion we just had, to make sure that we can provide healthcare systems with easier ways of diagnosing and following up and getting patients with chronic diseases in good control. And here with both diabetes and obesity, we have an opportunity to use digitalization efforts to provide more information about each individual patient, for example, via our connected pens and the follow up with glucose measurements and getting that data set ready for the doctor, meaning that a longer distance dialogue with the patient, online dialogue with the patients would be more likely. and the same for obesity where one could also imagine where the diagnosis is easier to make the online scripts and potentially online pick up of products and so on would be ways to try to eliminate some of the pressure on the healthcare systems. So whereas we do believe that there will be an increased pressure on the healthcare systems, we also expect that we also from a social contribution point of view would be able to also improve both the efficacy of the system and with that also hopefully increase our reputation in the longer term. So those are some of the dynamics that we are looking into.

First of all, it's very difficult to compare swings and carousels or apples and pears. And you know, generally I am a relatively enthusiastic CSO and I would say my enthusiasm for the STEP program that we'll see results from in the next couple of months remains very, very high. I've kind of hinted that a 15% weight loss would be achievable based on phase two. We'll see if that pans out or not. If that happens, I will remain highly enthusiastic. But I must say to you that the NASH data are also, in my view, very encouraging because I had hoped for like 50% NASH resolution. We are homing in on around 60 for the high dose. And on top of that, using, as I have mentioned now a couple of times, Both progression of fibrosis on the biopsies but also fibrosis decreases on elastography on ELF biomarker panel and other biomarkers is really encouraging because it's probably secondary to the metabolic and anti-inflammatory effects that are exerted on the liver by semaglutide and in the systemic circulation maybe even. but it still hints that over time you will improve fibrosis. Histologically that may take longer time to prove but that will then be seen in kind of the extension part of a phase 3 trial. So I remain very encouraged by the biopsy data or the phase 2 data.

Thank you. Our next question comes from the line of Michael Lanshan from UBS. Please ask your question. Your line is now open.

Oh, thank you again. I was wondering if I could go to the outlook. So you've maintained your guidance for the year. You've given us the tail end in Q1 from the pandemic. But when I go back to your AGM, you did make an assumption about a normalization in the patient flow earlier than you're assuming now. So as you sit here today, obviously the underlying performance has gone a little bit better than you had expected. This is how I would read your commentary. So how are you tracking that patient flow? Is this sort of like we would do on an NBRX basis? What are the variables that you keep an eye on? And the reason I'm asking is the ATM wasn't that long ago and you've changed your view on how you think the situation might go back to normal. Thank you.

Good. Thank you, Michael. So in terms of our outlook and the impact from COVID-19, I think it's fair to say that none of us have seen a situation like this ever before. So in terms of modeling impact, Where normally diabetes is a very, very stable market, then estimating impact from something as COVID-19 and basically estimating how a pandemic rolls across the globe is highly complicated. And I think we see that also with all the epidemiologists that are making comments in this space. So the way we're looking at it is And the way we're modeling it is, as you allude to, we're looking at duration of impact. So what's our recovery assumptions? And that links to what you read in the papers about V models or U models or L-based recoveries, et cetera. and so duration and then depth or impact of it which is mainly on the new patient starts on our fronts and the new patient starts we model based on In a US setting based on NBREX levels as we've been talking to, in other geographies it's different data sources. We have a different data source for instance in Brazil and in other places it's purely like a pack X factory trending tool we use to estimate impact. So I say that there are many uncertainties in how to model that and I'd say even though It seems like a short period of time between AGM and this guidance, I think some of us feel A long time in terms of COVID-19 and what has happened in just those weeks. And I think generally speaking, also when you look at the impact across the globe, I think more and more people are being clearer on the shape of recovery and that this is not a V-shaped recovery, but a more gradual recovery, which is also informed about what we see in the Chinese market. And when we look at the data points in China in terms of impact to the overall farmer market in China, then we saw some impact to the June of 7% down versus baseline in Q1. And our estimate is that that is gradually improving over time, but it's not rapidly improving. So that's why we've been adjusting kind of our impact modeling in the latest guidance. Thank you.

Thank you. As a reminder, please press the one if you wish to ask a question. Our next question comes from the line of Kiers Parikh from Goldman Sachs. Please ask your question. Your line is open.

Thank you. Karsten, just to follow up to Michael's question that obviously your kind of reiterated guidance now also includes an unquantified impact kind of from for the channel mixed pressure or kind of commercial patients going to non-commercial channels and I realize that there are many variables just but help us understand how even within broad ranges how we should think about what is included in your guidance for 2020 for that and I'm presuming that the bigger impact of that is likely in 2021 compared to 2020. What if you can just confirm that? Thank you.

Yeah, you're perfectly right. We have included the US channel mix in our guidance. The starting point for us being able to maintain guidance, just to reiterate, is that we had a very solid progress in our business and very good commercial performance end of last year and going into the first quarter. So that we're very satisfied with and that is what is fundamentally enabling us to maintain our guidance for this year despite the impact from COVID and US channel mix. In terms of US channel mix specifically, then a lot of parameters going into our modeling around that and this is based on many assumptions like COVID, but fundamentally we start with the unemployment numbers in the US and then Clearly there will be a negative impact from patients moving from commercial insurance to either uninsured or Medicaid insurance so that will have a negative impact on profitability and potentially volumes on our side. That uncertainty or that modeling of course has uncertainty in terms of what coverage did people have before. and the coverage they are moving to and the duration that we're seeing this impact so there might be a positive rebound in terms of unemployment numbers when the US economy opens back up when we look at the sectors mostly impacted by unemployment being for instance hospitality business and restaurants etc. We have modeled a negative impact in 2020, and given the movement of channel mix, that will also negatively impact 2021. You're perfectly correct. Thank you.

Thank you. Our next question comes from the line of Richard, also from JP Morgan. Thank you.

Thank you for taking my question. Just a couple of questions about high dose SEMA. When we think about high dose SEMA, of course the dose is just slightly higher than the high dose diabetes dose. So could you give us some ideas on how you can differentiate the price of that medicine, given that Saxenda is roughly double the price of Victoza and Adempic today. How can you work around that going forward? And maybe linked to that, you know, NASH is a very interesting area, but essentially treating the same obese patients, but with Thank you very much.

Thanks, Richard. I will hand the first question regarding pricing of our Phase 3 project for high-dose SEMA to Camilla vis-à-vis obesity pricing, and then Anas, a question for you, Mads.

Thanks, Karsten. Thanks, Richard. So, as you can imagine, it's early days to give details on how we will price also both the obesity business in the future and also HiDoSema and how that corresponds. But of course, over time, it's likely that as we see more and more reimbursement in the obesity channel, it's likely that there might be a conversion of the prices in the obesity and the diabetes business. But I cannot give more sort of tangible details at this point in time. We need to see the results of the trials. And of course, we're also excited to see the STEP program read out now in the second quarter. and much more on the commercial part of all of this once we have the approval of same obesity.

And then Richard on the NASH issue. It is interesting, isn't it, that in the case of Victoza, the hard outcomes for Victoza came in the form of Thank you very much. Thank you very much. Even though one of the comorbidities of obesity clearly is NASH, we know that, it's also one of the comorbidities of type 2 diabetes. And when I look at the 60% who had diabetes in this population, they were on average less obese than the non-diabetic obese. So the things that induce NASH are both weight related but also non-weight related, inflammation related, metabolically related. and of course as a management team we will now look into strategically how we'll make all of this come together but the short version is that whether you do a mixed diabetes obesity trial or only one of the two or whatever you will still do the same kind of trial with the same kind of endpoint where you will extend the trial and we're speaking with the power that we can see from the phase two not thousands of patients but maybe 1500 to 2000 patients also a little bit depending on the safety database that the agencies want and that's a little bit uncertain because SEMA is already on the market so it's known to be a safe product but still there are demands and new indications so we'll revert with a lot more of our strategic and operational thinking once we have met with the regulators also and ourselves.

Great, thank you.

Thank you. Our next question comes from the line of Wimok Kabaria from Bernstein. Please ask your question. Your line is now open.

Great. Thanks very much for taking my questions. Sorry if I missed the first few minutes in because it's already come up. But just in terms of the Rhybiosis co-pay program, I mean, I know it was three times the size of the Ozempic program. So I guess I just wanted to know how far you are in giving those volumes and those co-pays away. You know, previously you made the comment that By the end of 1Q, most of the volumes would have been distributed. So just to get some context there on when we think, given COVID-19, there's been a delay there. The second question, a bit of a random one, but I thought I'd ask, is this on the new remuneration policy? So I guess, can you give any colour on what's actually been included and what the weightings are for the long-term incentives, so whether they are R&D based or financial based, just some weighting in color there would be, I think, really interesting. And then the final question is just on insulin rebates. So if I look at basals now in the US, we're looking at about 80%, close to 80% rebate levels.

So I guess I wanted to get your thoughts on at what point do you think

The biosimilar players will be unable to compete, given your scale and your ability to manufacture peptides very cost-effectively. Any comments there will be helpful. Thank you.

Great. Thank you, Vimal. I will hand the question on the Repelsys program, the copay program, to Camilla, and then I'll talk to the LTI program structure, and then, Mads, we can split the biosimilar comments.

Thank you, Karsten. So on Rebelsus copay program, as you said, we currently have a copay program that means that the patient maximum copay $10. And this program we are continuing with as we are developing our market access. So that will eventually replace that program. As we spoke to yesterday in our news is that we now have a 50% combined access for Rebelsus and we expect that to continue to increase over the rest of the year. So gradually with that of course the co-pay program will diminish in its importance as we sustain more and more access. Thank you.

Great. Then on the LTI program and our remuneration policy and in case you have not all read it then I encourage you to find it on our website. So it was approved in connection with the AGM. In terms of to your question on the specific targets on LCI VML, then this is something for management which will roll into effect from 2021. The main targets group will be on sales slash commercial, then it will be on profits, and then it will be on pipeline. as the main groups that we're looking at in the LTI program going forward. Then on biosimilars and productivity and ability to get to our scale and productivity.

I think it is a fact that coming from a beer brewing country, a place called Carlsberg, we have a very long experience with yeast physiology and technology. And that also means that the way we produce our insulins, not only if we did X yield per liter fermentation broth 20 years ago, will we now be doing 10 or even 20X because of the constant technology improvements, We're also doing them in a way where it's continuous fermentation and not batch fermentation where you have to clean up every time you've done a batch, et cetera, in most other companies. So technology-wise, We are in a situation where even in a commoditized by similarized insulin market, we can produce at extremely competitive cost. That's also why you quite often see that government tenders in countries like Latin America and so on are won by our company. So we are very competitive. But Karsten, I don't know whether you have more non-technical stuff to add.

No, I think that's sufficient for now. Let's take the next question.

Thank you. Our next question comes from the line of Peter Verdelt from Citi. Please ask your question. Your line is now open.

Yeah, thank you. Good afternoon, Peter Verdelt, Citi. Apologies if this question has already been asked, but I'm a little late on the call. Just, Mads, going into the setup for step four or the obesity program, you know, we've also got the phase two data that we can look at. If we speak to some of the KOLs out there, They're saying a game changer would be if they see up to 30% of patients losing 15% of their weight in the trial. So look, just help me understand, at least from a Novo perspective, what you would define as a minimum expectation and what for you would be a win in terms of interpreting the upcoming data sets for semaglutide in obesity.

Yeah, so Pete, excellent question. First of all, you do recall from the Lancet paper with the Phase 2 data that my aspiration of the 15% weight loss on average in, for instance, in the Step 1 trial, for instance, that's a classical obesity trial, hinges upon the weight loss seen in Phase 2 and the fact that we are having a full year on the steady-state dose and there was weight loss even at Week 52. This time we're doing 68 weeks. Also, the way the FDA wants data analyzed is that if you have a lot of patient dropouts, missing data counts as placebo values, i.e. non-responders. That's bad news in terms of the percent you can report weight loss. But since we know, even on a blinded basis, that the dropouts in these trials are very low and much lower than they were in the scale program for Saxenda, We will not be hit by all of these Estiman things to the same extent as we could have done if we had greater dropouts. So I remain optimistic about this and if your KOLs say that if a third lose 15% or more body weight, www.NordiskA.com We have those categorical weight loss elements, 10, 15, 20, with all of them included as secondary endpoints. So you will have them coming soon. They're secondary endpoints. The weight loss, of course, per se, is the primary endpoint.

Great. Max, can I have one follow-up? Yeah. Just shifting gears, select. So we're hearing that that's a difficult patient population to recruit for. because relatively young after her prior CV event. And that is unlikely to read out until 23, 24. I think you were hinting at that yesterday in your comments. I think someone else asked the question. I think it was Peter from where he handles banking. But is that fair that selectors, even pre-COVID, has been enrolling pretty slowly?

No, no, it's not quite fair, Pete. We were nervous. We were truly nervous pre-select about the frequency and occurrence of these patients because of the reasons you mentioned. However, pre-COVID-19, we were actually trailing ahead of the recruitment curve. and I would like to say that we probably have more than 12,000 patients enrolled at this point in time. We were ahead of the anticipated recruitment curve, planned recruitment curve, pre-COVID-19. Right now we're still tracking on it, but that is due to us being ahead pre-COVID-19. So the longer that COVID-19 draws out, it is true that we will then end up being behind the recruitment curve. Then, of course, once we have all the patients, 17,000, if we decide to go for the full 17,000, Then, of course, it's the event rate that drives when you have events enough to terminate the trial, and it's too early to speculate on the event rate. But it's lower than it is in a leader, sustained, six-like population, but it's higher than it is in a normal diabetic population. So we're probably speaking around a couple of percent event rate, but let's see.

Thank you. Thanks. I think we have just time for two rounds more of questions, so two more, and then we'll have to close out for today.

Certainly, sir. Our next question comes from the line of Sachin Jain from Bank of America. Please ask your question. Your line is now open.

Hi, Sachin Jain, Bank of America. And again, apologies if these have already been asked. I held them a little bit late. But one question on Rhein-Belsus. You just talked to 2Q trends with lower new patient visits and how we should think about 2Q sales relative to 1Q. And you haven't ever really confirmed the 2 billion sort of consensus forecast, but that is basically unchanged since COVID. So just your perspectives on being able to achieve that should 2H patient flows normalize. And the second one on NASH. Mads, let me just touch on if you in your data or reading see any evidence of metabolic versus cirrhotic phenotypes within NASH. There's been a little bit of a debate there, and whether you think GLP-1s can act across both or more favorable in a metabolic phenotype. And then a very quick third question, just on oral SEM and next-gen formulations. We haven't heard about those for quite a while, so I just wanted to check in where you were with progressing those. Thank you.

Great. Thank you, Satyen, Camilla. Rebelsis script trends in Q2 and how do you see Rebelsis impacted by COVID-19 and then over to Mads on NASH and fibrotic phenotypes?

Thanks, Karsten. Rebelsis, first of all, we'd like to just reconfirm that the early uptake before COVID-19 was very encouraging and Therefore, we also expect that the NBRX trend will peak up again when patient dynamics are less affected by COVID-19. So our assumptions are, as our general assumptions are, that when the patient flow gets back to normal, as we assume now in the second half of this year, then we will also be able to see the trend of the early uptake of rebalances to come back to that level. And right now, we are seeing sort of a weekly And then Sachin on

Yeah, there's a lot of debate in the community around metabolic and serotic phenotypes and so on. Based on the data we have at our hands and we'll, of course, I mean, disclose them at conferences and in major publications, then I would argue that the life cycle of a standard NASH or MASH patient is actually driven by this metabolism that causes inflammation in the liver and then when you have ballooning of the cells I.e. the cells are dying. That is quite often replaced by fibrous tissue. And the reason why I can say this, we have very nice effects on ballooning in this trial. We have very significant reductions in cell death in the biopsies. And when I then look at the fibrosis markers in the ELF biomarker panel, but also in the elastography fibroscan, we're actually seeing that those fibrosis parameters come down dose-dependently. So for me, The serotic phenotype is typically a consequence of the dysmetabolism inflammation that drives the disease. Then the fibrosis is the end outcome. You might have patients that are more prone to fibrosis even at lower levels of steatohepatitis. But I don't have much proof to the pudding from this trial. And then on the oral, yes it is true we are doing these new generation or new ways of formulating rebalances in a smarter way and those trials are ongoing. They might be a bit delayed because they are ongoing trials and of course these are early stage trials and you know that phase one like trials are more Thank you for that color on NBRX and QH. What are you seeing in terms of real-life discontinuation rates versus what was in the label?

It's too early for us to say anything on that at this point in time. So we would have to see sort of the continuous uptake of rebalances before we can say that with a reasonable patient number. And we don't see any signals that there are any issues on this regard. So we don't have any qualitative sort of feedback on that.

Thank you.

Thank you. Our last question. comes from the line of Michael Langen from UBS. Your line is now open.

Thank you for the final question. So just talking about risk management, one of your big driver of the returns has been your ability to be extremely efficient on the manufacturing side, which obviously includes the yield improvement that Matt was referring to. As we now go through the pandemic, Is there an argument that you may have to decentralize your manufacturing process to be able to stop potential disruption that a pandemic such as we are experiencing now might bring to a manufacturing site? Or are you able to manage this in your minds with the setup you have, maybe by just segmenting the existing facilities? Thank you.

Thank you, Michael. It's a very relevant question that we of course ask ourselves as part of the learnings from COVID-19. And in reality, it's a question that we've been discussing with our board for a number of years. As part of general risk management and we have a review of the biggest risks for the company across the value chain and I say in conclusion when you look at our manufacturing and if I take kind of the value chain in manufacturing then on our supplier base then for our critical suppliers of the various raw materials We are very focused on having dual sourcing from different manufacturers or from different geographies for the critical raw materials in manufacturing. If for some reason that is not the case, then for those few raw materials we set inventory policies that are Very, very high. So then we could have perhaps 6 or 12 or even more months worth of raw material on inventory. Then in terms of our in-house manufacturing, if we move through the value chain in API, This is basically a key part of our API manufacturing that now we have our diabetes API facility soon to be up and running within the next year or so in Clayton, North Carolina. So actually we have a better hedge than ever before on insulin API on top of the inventory policies we have that are between I would say 9 and 24 months on API. Biofarm, we also have a facility in the U.S. now in New Hampshire for some of the Biofarm products apart from the inventory levels. And then finally on the finished goods manufacturing, we have filling factories in France, in China, in Brazil, in the U.S. and in Denmark and then a few others. And there we are securing dual approvals for our products. So for instance, when China closed down early in the year, Then we had other finished goods facilities that could step in and supply markets that Tintin could not supply. So I don't foresee any significant change to our global manufacturing network as a learning from COVID-19. But that said, of course, there are other learnings that we'll take into account. So with that, Thank you for attending the UBS virtual Nordisk Q1 Roadshow and thank you for the interest in our company and if you have further questions please do not hesitate to reach out to Investor Relations and we'll get back to you swiftly. So have a good rest of the day and stay safe out there. Thank you.

Ladies and gentlemen, that does conclude your conference for today. Thank you for participating. You may now all disconnect. Thank you.