Novo Nordisk A/S

Hello and welcome to the Q2 2020 NOVO Nordisk A S earnings conference call. Throughout the call all participants will be in listen only mode and afterwards there will be a question and answer session. Today I am pleased to present Lars Frueger Jørgensen. Please go ahead with your meeting.

Thank you. Welcome to this NOVO Nordisk conference call regarding our performance for the first six months of 2020 and our financial outlook for 2020. I'm Lars Rurgard Jorgensen, the CEO of NOA Nordisk. With me, I have our Chief Financial Officer, Karsten Munk Knudsen, and our Chief Science Officer, Thomas Kroosgaard-Thompson. Also present and available for Q&A sessions are Executive Vice President and Head of Commercial Strategy and Corporate Affairs, Camilla Silvestre, as well as our Investor Relations Officer. Today's earnings release and the slides for this call are available on our website, noanordisk.com. Please note that this conference call is being webcasted live and a recording will be made available on NordNordisk's website. The call is scheduled to last for one hour. The presentation is structured as outlined on slide 2. We will begin with the highlights for the quarter, addressing NordNordisk's continued response to the COVID-19 pandemic and then move on to the performance for the first six months of 2020. Please note all sales and operating profit growth statements will be at constant exchange rates unless otherwise specified. The Q&A session will begin in about 20 minutes. Please turn to slide three. As always, I need to advise you that this call will contain forward-looking statements. Such forward-looking statements are subject to risk and uncertainty that could cause actual results to differ materially from expectations. For further information on the risk factors, including the uncertainties around COVID-19, please see the company announcement for the first half of 2020 and the slides prepared for this presentation. Now, please turn to the next slide. In 2019, Nordisk introduced our strategic aspirations 2025, which consists of four components, purpose and sustainability, innovation and therapeutic focus, commercial execution, and financials. In the second quarter of 2020, Nordisk has continued our focus on adding value to society with the launch of a new social responsibility strategy called Defeat Diabetes. The strategy introduces new long-term ambitions to accelerate prevention to halt the rise of diabetes, provide access to affordable care for vulnerable patients in every country and to continue the drive of innovation to improve lives. First steps in the strategy are to reduce the ceiling price of human insulin from $4 to $3 per vial in 76 low- and middle-income countries and to expand our aspiration in our Changing Diabetes in Children program to reach 100,000 children by 2030, up from 25,000 children. Furthermore, in July of this year, Nordisk announced our participation in the AMR Action Fund, a $1 billion initiative from more than 20 biopharmaceutical companies to address the need for new antibiotics to combat antimicrobial resistance. We also saw encouraging progress within our innovation and therapeutic focus aspiration during the quarter. Rebelsus was approved in Japan for the treatment of type 2 diabetes, and as described at our virtual R&D event in June, the step phase 3 program, AM833 monotherapy trial, and AM833 plus semaglutide trial all successfully completed. Nordisk signed an agreement for the acquisition of Covidia Therapeutics, including the Phase 2B project Siltivkemab. Moving to commercial execution. Diabetes sales increased by 7% with Nordisk increasing our diabetes value market share leadership by 0.8 percentage point to 29%. Tier 1 sales continue to perform well at 28% growth. Obesity care and biopharm sales increased by 9 and 6% respectively. Within finances, our total sales increased by 7% with international operations growing by 12% and North America operations growing by 1%. Operating profit increased by 8% to 30 billion Danish kroner. As a consequence of the solid underlying performance in the first six months of 2020, We are maintaining our sales growth guidance of 3-6% and raising the floor of our operating profit guidance from 1-5% to 2-5%. For 2020, the Board of Directors has decided to pay out an interim dividend for 2020 of 3,25 kroner, which will be paid out in August this year. Please turn to slide 5. The past months have been highly unusual given the COVID-19 pandemic. During this time, Nordisk has continuously focused on ensuring that our business is operating safely, that we are able to supply life-saving medicines, as well as support societies around the world. Within production, all Nordisk manufacturing sites continue to operate and products are still distributed and being made available to patients worldwide. Within research and development, we continue to conduct already initiated clinical trials. For ongoing trials, recruitment of new patients is negatively impacted but gradually improving. It is now possible to initiate new trials in certain countries. The majority of non-Nordic medicines are used for treating chronic diseases. However, during the period of social distancing implemented in many markets, we have seen fewer new patients initiating treatment. This is especially impacting launch products and products with relative short stay time. In the beginning of the pandemic, stocking mainly at the patient level was seen particularly in the US and Europe. But a gradual destocking started in the second quarter. The COVID-19 pandemic evolves differently across geographies, but operations are gradually normalizing in many markets. The majority of sales representatives are now partially back in the field. Again, we take our responsibility to support society seriously. Recently, NordNorge, together with partners, has developed a new coronavirus antibody test, which will be used by Rigshospitalet in Denmark in an observational study to identify the level of transmission of COVID-19 among people in the Danish labor market. Please turn to slide six. During the past six months, the COVID-19-related lockdowns negatively impacted new patient initiations in the US across all therapy areas we operate in. Indexed against January averages and after initial stocking followed by significant drops in prescription volume, we see the new-to-brand prescription numbers down around 15% in the US, but there are signs of gradual recovery. Patient initiations in the international operations have also been negatively impacted by COVID-19, but as mentioned, despite the differences in how the pandemic evolves across geographies, operations are gradually normalizing. Please turn to slide seven. For the first half of the year, total sales increased by 7%, which was driven by a solid sales growth of 12% in international operations. The COVID-19 related stocking in the first quarter was largely offset by destocking and fewer patient initiations in the second quarter. In international operations, all areas and all therapies continue to contribute to growth. The growth includes COVID-19-related stocking, which was largely offset by fewer patients initiating treatment, as well as other timing events. North America operations increased by 1%, driven by sales growth for GLP-1, obesity, and biopharm segments. Sales growth was impacted by the COVID-19-related surge in demand in Q1 2020, fewer patients initiating treatment, as well as less use of NOVA7 due to the lockdown. Speaking to second quarter of 2020, sales were unchanged from the second quarter of 2019. Following the stocking scene in March 2020, sales were negatively impacted by COVID-19-related destocking of around 500 million Danish kroner, partly at the wholesaler level. Sales were additionally negatively impacted by fewer patients initiating treatment. These effects largely offset the stocking of estimated 2 billion Danish kroner in the first three months of 2020. Please turn to slide 8. In the first six months of the year, sales growth was driven by GLP-1, obesity, and biofarm, partially offset by a decline in insulin sales. Global insulin sales decreased by 3%, driven by a 23% reduction in the US, partly offset by 10% growth in international operations. The US sales decline was driven by lower realized prices due to an unfavorable channel mix, rebate enhancements, The launch of additional affordability programs and changes in coverage gap legislation. In international operations, insulin sales growth were driven by all insulin segments. GLP-1 sales increased by 28%, driven by 37% sales growth in international operations and 25% sales growth in North American operations. The sales increase was impacted by COVID-19 related stocking, largely offset by fewer patients initiating treatment. Nordisk has expanded both our global insulin volume market leadership as well as our GLP-1 market leadership. This has resulted in the previously mentioned expansion of Nordisk global diabetes market leadership now at 29%. Obesity care sales grew by 9% with both operating units contributing to growth. Sales growth was impacted by fewer patients initiating treatments due to COVID-19. Biopharm sales increased by 6% Please turn to slide 9. The U.S. GLP-1 market continues to grow around 30% in volume, when measured quarter over quarter, driven by once-weekly GLP-1 products. With the uptake of Rosempic and the launch of Rebelsus, Nordisk has new-to-brand market share leadership of around 58% and is the GLP-1 market leader measured on total prescriptions, with around 49% market share. Rebelsus market access has progressed well and we have around 70% unstricted access across commercial and Medicare plans. The weekly new-to-brand market share has reached 11% and the total Rebelsus prescription share is nearly 3%. Osempic continues to increase its market share in the US. In terms of new-to-brand prescriptions, Osempic is close to 35% market share And in terms of total prescriptions, Osempic market share is slightly more than 26%. Please turn to slide 10. Nordisk is increasing our diabetes market share in international operations as indicated by the near 26% share of growth versus a market share of around 22%. This represents a market share increase of 0.4 percentage points versus 2019. The market share increase in international operations is driven by both insulin and GILBORN. The diabetes franchise represents around 80% share of growth in international operations with insulin share growth at 51% and GLP-1 share growth at 39%. Please turn to slide 11. Obesity care sales increased by 9% driven by both North America operations and international operations. Sales growth was negatively impacted by fewer patients initiating treatment due to COVID-19. Our strategic aspiration is to move to more than double sales in obesity by 2025. In support of that, Saxenda has been launched in 48 countries globally and we continue to invest in market development activities. Please turn to slide 12. BioPharm sales grew by 6% in the first half of 2020, driven by 10% sales growth in international operations and by 1% sales growth in North America operations. Sales were positively impacted by timing of shipments, changes in inventory and COVID-19 related stockings. Sales were negatively impacted by lower demand due to COVID-19 related lockdowns. For Haemophilia, the declining sales of 1% were driven by lower NO7 sales, partly reflecting reduced elective surgeries and bleedings due to lockdowns, but partly offset by the continued global rollout of the new products Refixia and Espiroct. Noidotropin sales increased by 18%, driven by changes in inventory, COVID-19 related stocking, as well as additional demand driven by supply challenges for competing products in selected countries. Nordisk remains the leader in the human growth hormone disorder market with a value market share of 34.2%. With this, over to Maz for an update on R&D.

Thank you, Lars. Please turn to slide 13. In the next couple of slides, I'll discuss recently communicated results from our obesity pipeline, starting with the STEP program. STEP investigated once-weekly subcutaneous semaglutide 2.4 mg in the treatment of obesity and showed strong weight loss across the four phase 3A trials Step 1, 2, 3, and 4. The Step 1, 3, and 4 trials evaluated semaglutide in people with obesity or overweight with comorbidities, while Step 2 evaluated semaglutide in overweight or obese people with type 2 diabetes. When taken as intended, we saw weight loss of 17-18% in the obesity trials and around 11% weight loss in the diabetes trial. These are compared to a placebo-related weight loss of 2-5%. Additionally, cardiovascular risk markers were significantly reduced and health-related quality of life improved significantly after 68 weeks of semaglutide treatment. In all the individual STEP trials, semaglutide 2.4 mg furthermore appeared to have a safe and well-tolerated profile, with the most common adverse events being the transient gastrointestinal events typical of the GLP-1 class. No new and unexpected safety signals emerged in STEP. Following completion of the four-step trials, Nobu Nordisk will now prepare to file the regulatory dossier, an NDA submission which is expected to take place around the turn of the year. Please turn to slide 14. In June 2020, the Phase II results with the novel once-weekly subcutaneous human amylin analog AM833 were announced. The 26-week Phase II monotherapy trial with AM833 investigated the safety, tolerability and efficacy in weight management among 706 people with obesity or overweight plus at least one weight-related comorbidity. From a baseline body weight of 107.4 kg, AM833 demonstrated a substantial weight loss of 10.8% following only 26 weeks of treatment. Also in June 2020, the results from the Phase 1b trial investigating AM833 in combination with semaglutide were announced. This 20-week multiple ascending dose trial investigated the safety, tolerability, pharmacokinetics, and weight loss potential of AM833 administered in combination with semaglutide 2.4 mg in 80 people with obesity or overweight. After only 20 weeks of treatment and with only the last 4 weeks at the therapeutic doses of 2.4 mg semaglutide plus AM833, patients in the trial lost an average of 17.1% body weight from a mean baseline of 95.1 kg. 66% of the participants on the highest dose of the combination therapy achieved a weight loss of more than 15% after only 20 weeks. Dual targeting of the GLP-1 and amylin satiety pathways in the brain henceforth holds the potential to perform a strong future non-invasive treatment alternative to bariatric surgery in patients with high BMI indices. Furthermore, AM833 in combination with semaglutide appeared to be well tolerated, with the most common adverse events being transient, mostly mild to moderate gastrointestinal events, which, despite the increased efficacy of the combination therapy, occurred only at the level similar to semaglutide monotherapy. Following the completion of the Phase II monotherapy trial with AM833 and the combination trial with AM833 and semaglutide, a multi-dose pharmacokinetic study All of the combination will be initiated in the second half of this year, and phase 3 development is expected to begin next year. Please turn to slide 15. In the second quarter of 2020, a number of R&D milestones were reached. Milestones that have already been mentioned include the Rebelsys approval in Japan, as well as the STEP results in obesity, phase 2 results for AM833 monotherapy, and the phase 1B trial results for the combination therapy. Regarding some other GLP-1-related clinical obesity projects we've been pursuing, namely the co-agonist and triagonist projects, we've decided to terminate both projects. This decision is based on the strong obesity data obtained for semaglutide and AM3-3 that in aggregate have raised the innovation bar for future new Nordisk obesity care, and we've therefore prioritized our resources accordingly to achieve the best possible patient outcomes and product benefit-risk profile. Within the cardiovascular space, the PCSK9 inhibitory peptide successfully completed its first human dose trial in June of this year. The peptide has a long-lasting, efficacious, safe, and well-tolerated profile. Following completion of the trial, the next steps in clinical development are now being evaluated. Lastly, and also in June, Statin and Novo Nordisk initiated the first human dose trial for their monoclonal so-called sweeping antibody STT5058 designed to target and eliminate lipoprotein ApoC3 leading to ApoC3 lowering. This in turn is expected to significantly lower triglycerides leading to a potential reduction of cardiovascular events in the hypertriglyceridemic target population. The trial is a single-center randomized double-blinded placebo-controlled trial Designed to investigate safety, tolerability, pharmacokinetics, and pharmacodynamics. The remainder of the year and into 2021 promises a number of milestones, including results and potential regulatory submission for SUSTAIN-40, which is a large trial involving semaglutide dosed at 2.0 mg in type 2 diabetes. Additionally, we are planning to initiate the Phase 3 program for the first-in-class once-weekly insulin ICODEC before the end of the year. Likewise, we expect regulatory submission in the U.S. for semaglutide 2.4 milligrams in obesity towards year-end. Finally, there'll be NASH readouts for semaglutide in combination with the FXR and ACC-I compounds from Gilead, as well as Phase IIb results related to the anti-interleukin-6 monoclonal antibody siltivekimab in patients with atherosclerotic cardiovascular disease and chronic kidney disease. With that, over to Karsten for an update on the financials.