Novo Nordisk A/S

Hello and welcome to the Q3 2020 Novo Nordisk A S earnings conference call. Throughout the call all participants will be in a listen-only mode and afterwards there will be a question and answer session. Today I'm pleased to present Lars Frubergård Jørgensen. Please go ahead with your meeting.

Thank you very much. Welcome to this Novo Nordisk conference call regarding our performance for the first nine months of 2020 and our financial outlook for 2020. I'm Lars Rurgardt Jørgensen, the CEO of Nuo Nordisk. With me, I have our Chief Financial Officer, Karsten Munk Knudsen, and our Chief Science Officer, Mads Kroosgaard Thomsen. Also present and available for the Q&A session are Executive Vice President and Head of Commercial Strategy and Corporate Affairs, Camille Silvestre, and our Investor Relations Officers. Today's earnings release and the slides for this call are available on our website, nuonordisk.com. Please note that this conference call is being webcasted live and a recording will be made available on UNOI's website. The call is scheduled to last for one hour. The presentation is structured as outlined on slide two. 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 uncertainty around COVID-19, please see the company announcement for the first nine months of 2020 and the slides prepared for this presentation. Please turn to the next slide. In 2019, Nordisk introduced Strategic Aspirations 2025, which consists of four dimensions, purpose and sustainability, innovation and therapeutic focus, commercial execution, and financials. In 2020, Nordisk has progressed on both adding value to society and on our environmental footprint. During the course of 2020, Nordisk has launched a new social responsibility strategy, Defeat Diabetes, and as part of our access to insulin commitment, we have lowered the ceiling price of our human insulin in 76 low and middle income countries. Specifically, in the third quarter of 2020, Monoi set a target to reduce all direct supplier supply, sorry, Monoi set a target to ensure that all direct suppliers supply the company using 100% renewable power by 2030. In the third quarter, we made progress within our innovation and therapeutic focus aspiration. In particular, the phase 2B trial investigating siltivecumab in cardiovascular disease successfully completed. Mads will share more on R&D a little later. Moving to commercial execution, diabetes care sales increased by 8%. and we increased our diabetes value market share leadership by 0.8 percentage points to 29.2%. GLP-1 sales continued to perform well at 29% sales growth while Obesity Care and BioPharm sales increased by 6% and 4% respectively. Within financials, total sales increased by 7% with international operations growing by 12% and North America operations growing by 2%. Operating profit increased by 7% to 22.9 billion Danish kroner. As we disclosed on 8th of October, we now expect both sales and operating profit growth of 5% to 8% measured at constant exchange rates for the full year 2020. Please turn to slide five. Nordisk, like the rest of the world, continues to be impacted by COVID-19 pandemic. and like many other organizations, our commitment to employees, patients and communities remains unchanged. For production, Nordisk manufacturing sites continue to operate and products are being made available to patients throughout the world. Within research and development, trial recruitment is still below the pre-COVID-19 levels with some new trials being initiated. Commercially, fewer new patients initiated treatment during the lockdowns. This has specifically impacted launch products and products with a short stay time. A gradual recovery of patient initiations took place in the third quarter. The COVID-19 pandemic continues to evolve differently across geographies and operations are running accordingly. In many markets, sales representatives are partially back in the field. As alluded to, the pandemic has increased the number of new patients using our products. For the US GLP-1 class, as seen on the right hand side of this slide, new to brand prescriptions were substantially impacted by lockdown measures in Q2 of this year, but has since gradually recovered. However, total GLP-1 prescriptions growth has been relatively stable throughout this period. Please turn to slide six. For the first nine months of the year, total sales increased by 7%, which was driven by 12% sales growth in international operations and 29% sales growth for our global GLB-1 franchise. In international operations, all geographies and all therapies continue to contribute to growth. Sales growth was negatively impacted by COVID-19 as fewer patients initiated treatment, partially offset by COVID-19 related stocking and timing of shipments. Sales in North America operations increased by 2% in both Danish kroner and comparable exchange rates. Sales growth was negatively impacted by COVID-19 as fewer patients initiated treatment and increasing unemployment in the US, partly offset by COVID-19 related stocking in the first quarter. Sales growth was primarily driven by GLP-1, although we did see growth across our diabetes, biopharm and obesity franchises. Global insulin sales decreased by 3%, which is a result of 22% sales reduction in the U.S., partially offset by 10% sales growth in international operations. The U.S. sales decline was driven by lower realized prices following rebate enhancements, unfavorable channel mix, changes in coverage gap legislation, and the launch of affordability programs. In international operations, sales growth was driven by all insulin segments. GF1 sales increased by 29% driven by 37% sales growth in international operations and 27% sales growth in North America operations. Obesity care sales grew by 6% with both operating units contributing to growth. Sales growth was negatively impacted by fewer patients initiating treatment due to COVID-19. Biopharm sales increased by 4% driven by nortetropin. Please turn to slide seven. As part of our strategic aspirations 2025, we aim to reach one third of the global diabetes market. As previously mentioned, we have now reached 29.2%. This increase is a reflection of both the GLP-1 and insulin market share gains. For GLP-1, since 2019, we have increased our value market share by 3 percentage points to nearly 50%. The global rollout of Osempic in international operations and the uptake of Osempic and Rebelsus in North America have been key to this. For insulin, since 2019, we have steadily increased our market share by 0.8 percentage points. This can be attributed to the launch of new generation insulins in international operations facilitated by our market fit approach. Please turn to slide eight. The US 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 Asympic and the launch of Rebelsus, Nordisk has new to brand market share leadership of over 60% in this GLP-1 and is the GLP-1 market leader measured in total prescriptions with around 50% market share. Despite facing difficult launch conditions due to COVID-19, Rebelsys continues to take market share both for new-to-brand prescriptions and total prescriptions, which are around 14% and 4% respectively. Please turn to slide 9. Rebelsys has had a promising start in the U.S. You can see in the graph on the left that in the 20 weeks after launch, new-to-brand prescription numbers were matching that of the SDLT2 class. Once the COVID-19-related lockdowns were implemented in March, we saw a substantial decrease in new-to-brand prescriptions. However, as the lockdowns were lifted, Rebelsus uptake has picked up. This launch uptake development reflects the improved market access of Rebelsus, which is now around 85% across commercial and Medicare. Furthermore, more than 80% of new prescriptions are new to the GLP-1 class, and Direct-to-consumer advertisement has begun. Outside of the U.S., Rebelsys has now been launched in eight countries. Please turn to slide 10. In international operations, diabetes sales increased by double-digit percentages across all geographical areas. This growth has been driven by both insulin and GLP-1 across all geographical areas. The sales performance reflects our increased diabetes value market share in international operations as indicated by the 30% share of growth. This has driven a 0.5% increase in our market share which is now at 22.7%. Please turn to slide 11. Obesity care sales increased by 6% to 4.2 billion Danish kroner. Growth was driven by both international operations and North America operations. Sales growth was negatively impacted by COVID-19 as fewer patients initiated treatment. We have now launched Saxenda in 54 countries and just yesterday the US National Institute for Health and Care Excellence recommended the reimbursement of Saxenda. All of this supports our strategic aspiration of more than doubling obesity sales by 2025. Please turn to slide 12. Biopharm sales grew by 4% in the first nine months of 2020, driven by 8% sales growth in international operations. Sales growth was driven by Nordotropin. For Haemophilia, the declining sales of 2% were a result of NOVA7 sales decline offset by Espiroct and Refixia launches. Nordotropin sales increased by 13%, reflecting commercial execution as well as changes in inventories, COVID-19-related stocking, and additional demand driven by supply challenges for competing products in selected countries. With this, I will now ask for an update on R&D.

Thank you, Lars. Please turn to slide 13. In the next couple of slides, I will first share the results from the recently completed Phase 2b Rescue Trial for Siltivecumab, and thereafter review some recent and imminent R&D milestones. Siltivecumab, to be referred to as SILTI, is the first fully human anti-IL-6 ligand monoclonal antibody that we obtained as part of the Covigia Therapeutics acquisition back in June of this year. At the time of the acquisition, the Phase IIb rescue trial was well underway. Now it's completed and we're happy to share the results. To start with a bit of context, our head of global drug discovery, Dr. Markus Schindler, described Novo Nordisk's ambition to enter the cardiovascular disease space at our R&D investor event held in June. Within this therapeutic area, CILTI seeks to address the residual inflammation related risk that exists despite today's state-of-the-art management of atherosclerotic cardiovascular disease, also known as ASCVD. In ASCVD, reduced inflammation within the heart and blood vessels, typically assessed clinically by measuring CRP, has been shown to correlate with a robust reduction in major adverse cardiovascular events in a follow-up analysis to the CANCERES trial with IL-1 antibody canakinumab. Thus, in the CANCERES trial, patients in whom canakinumab treatment resulted in an end-of-treatment reduction in CRP and interleukin-6 levels below 1.65 nanograms per liter had a MACE risk reduction of no less than 36%. Patients who did not reduce their IL-6 levels below this level at the end of treatment correspondingly had no reduction in MACE events. Encouraged by this, as well as the documented robust human genetic association between high IL-6 expression and ASCVD risk, we measured CRP and other surrogate markers of anti-inflammatory cardiovascular action in the rescue trial. We found immediate dose-dependent and sustained CRP reduction at all levels of CLT, in fact by 93% at the highest dose. Additionally, we saw reductions in the number of other cardiovascular inflammation biomarkers such as fibrinogen, serum amyloid A, and haptoglobin, as well as a decrease in the heart failure biomarker N-terminal proBNP. The very encouraging data set we now have for the CILTI molecule in ASCVD should be seen in the light of CILTI's ability to reduce inflammation in atherosclerotic patients at a very low dose level that is expectedly clinically safe. Thus, and unlike any other proved interleukin-6 blockers, we did not observe any clinically meaningful impact on neutrophils, platelets, liver enzymes, or cholesterol in the rescue trial. Currently, a Japanese phase 2 trial is ongoing, and a major pivotal phase 3 cardiovascular outcome trial is being planned for initiation in the second half of next year, following interphase 2 meetings with regulators. Please turn to the next slide. In the third quarter of 2020, several R&D milestones were reached, including the notion that we now have, for the first time ever, more than 40,000 patients active in clinical trials. Starting with our semaglutide franchise, we have initiated a phase 3 B trial investigating 1 mg of Sempic in around 800 people with type 2 diabetes with peripheral artery disease, also called PAD. The background for the trial is the finding of a significant 35% risk reduction in both peripheral and coronary revascularization events in sustained six. The PAD indication represents yet another example of how we see continuous semaglutide label expansions based on demonstration of efficacy and safety in areas of high unmet medical need. Intriguingly, the first clinical trial has now been initiated for our first-in-class glucose-sensitive insulin. The trial investigates the safety, tolerability, pharmacokinetics, and dynamics of subcutaneously administered once-daily glucose-sensitive insulin. The target product profile for this molecule includes improved glucose control as well as the virtual elimination of hypoglycemic and other side effects seen with today's insulin therapies. Another phase 1 trial that has just started investigates higher doses of oral semaglutide for type 2 diabetes, aiming for oral semaglutide to ultimately match the full efficacy level associated with even high dose administration of injectable semaglutide. Within BioPharm, we've received approval of Somapacetan, now also known as Sogroya, in the US for adults with adult growth hormone deficiency. Also noteworthy within BioPharm is the re-initiation of Phase III clinical development activities for Concisumab, which is the subcutaneous prophylactic TFPI antibody treatment in hemophilia A and B patients regardless of inhibitor status. This follows pausing of the EXPLORER trials in March of this year related to the occurrence of non-fatal thrombotic events. A revised dosing regimen is now being deployed in the EXPLORER trials. Regarding the Factor VIII mimicking antibody project MI-MATE, We have, despite a COVID-19 related period of delay in phase one, caught up with the timelines and are now in phase two in hemophilia patients with or without inhibitors, hemophilia A patients. Within other serious chronic diseases, the NASH trial investigating semaglutide in loose combination with Gilead's ACC inhibitor and FXR agonist has completed. Results will be communicated at scientific conferences during this quarter. Importantly within NASH, Semaglutide has recently been granted breakthrough therapy designation by the FDA. Breakthrough designation implies, amongst other things, that the FDA will work closely with Novo Nordisk to develop, and hopefully approve, semaglutide expeditiously for the treatment of NASH. Looking towards the rest of this year and into 2021, we will soon initiate the Phase 3 onwards program for once-weekly insulin i-codec. Furthermore, there will be a number of exciting readouts, including Sustained Forte, which is the investigation of semaglutide 2.0 mg in type 2 diabetes. In obesity, we will be submitting semaglutide 2.4 mg in both the US and EU. We accordingly expect a decision on the US submission by mid-21, since we decided to use our priority review voucher for this application. Also within obesity, in 2021, We will seek to have Phase 3 initiation for our once-weekly combination product consisting of amylin 833 and semaglutide, along with reporting of the Phase 1 results for our long-acting GDF15 project. Lastly, within other serious chronic diseases, we will, during 2021, initiate Phase 3 trials for both semaglutide in NASH as well as the cardiovascular outcome trial for CILTI. With that, over to Karsten for an update on the financials.

In the first nine months of 2020, sales increased by 6% in Danish kroner and by 7% at constant exchange rates. The gross margin was 83.8% compared to 83.6% in the first nine months of 2019. The increased gross margin reflects a positive product mix driven by increased DLP-1 sales and productivity improvements. This is partly countered by a negative impact from lower realized prices in the US. Sales and distribution costs increased by 4% in Danish kroner and by 5% at constant exchange rates. The increase in costs was driven by North America operations reflecting launch activities for Rebelsis and continued promotional activities for Simpik. This was partly offset by lower promotional spend related to insulin. In international operations, promotional spend is related to launch activities for Simpik and Rebelsis and the continued rollout of Saxenda. The spend was impacted by COVID-19, resulting in lower activity and delays in promotional activities. Research and development costs increased by 12%, both in Danish kroner and at constant exchange rates. The cost increase is driven by amortization of the priority review voucher for semaglutide in obesity in the third quarter of 2020. Increased activities within other serious chronic diseases are driving the cost increase following progression of the early pipeline within cardiovascular disease and stem cell projects. This is partly offset by lower spend within obesity care driven by finalization of the semaglutide obesity pivotal phase IIIa program and COVID-19 impact on clinical trial activity. Administration costs remained unchanged in Danish kroner and increased by 1% at the constant exchange rates, reflecting broadly unchanged spend across administrative areas. Operating profit increased by 6% in Danish kroner and by 7% at constant exchange rates. Net financial items showed a loss of around 1.8 billion Danish kroner compared to a loss of around 3.1 billion in 2019. Diluted earnings per share increased by 10% to 14 kroner. Free cash flow was 41.6 billion Danish kroner compared to 32.7 billion Danish kroner in 2019. The increase was driven by higher net profit and favorable timing of rebate payments in the US. Please turn to slide 16. As Lars mentioned, our growth outlook for 2020 was updated on 8th of October. Sales growth is expected to be between 5% and 8% at constant exchange rates. The guidance reflects expectations for continued robot sales performance for the GEP1 franchise, Osempic, Victosa, and Rebelsis, the portfolio of new generation insulin, and the BioPharm products. The guidance also reflects intensified competition within diabetes care and BioPharm, especially within the hemophilia inhibitor segments. Continued pricing pressure within diabetes care as well as expansion of affordability initiatives, especially in the US, are expected to impact sales developments. Given the current exchange rates versus Danish kroner, reported growth is now expected to be around 3 and 4 percentage points lower than at constant exchange rates, respective to sales and operating profits. The current COVID-19 pandemic causes uncertainty to the outlook regarding new patient initiations and societal impacts, such as the unemployment rate in the US, which is impacting healthcare insurance coverage. The estimated annualized impact is now around 2% of US sales. Operating profit growth is expected to be between 5% to 8%. The updated outlook reflects savings due to COVID-19, The expectation for operating profit growth primarily reflects the sales growth outlook and continued investments in current and future growth drivers. Financial items is now expected to be a loss of around 1.4 billion Danish kroner compared to a loss of 1.2 billion Danish kroner in August 2020. This development mainly reflects losses from non-hedge currencies due to depreciations across several emerging market currencies. Lastly, we now expect free cash flow to be between 34 and 39 billion Danish kroner, reflecting higher net profits. And now, over to Lars for his final remarks.

Thank you, Karsten. Please turn to slide 17. We are very satisfied with the performance in the first nine months of 2020, despite the negative impacts from COVID-19. More patients use our GLP-1 treatments, and our diabetes market leadership continues to expand. Within R&D, an important milestone was reached with encouraging results from the Phase 2 trial in cardiovascular disease with siltivecumab, the lead candidate from the Covitea Therapeutics acquisition earlier this year. With that, thank you, and we're now ready for the Q&A, where I kindly ask all participants to limit him or herself to two questions. Operator, we're now ready to take the first set of questions.

The first question comes from the line of Vimal Kapadia from Bernstein. Please go ahead.

Thank you very much for taking my questions. So just a few for Mads, please. Mads, just first, can I ask about the balance, how you think about the balance between HbA1c control and tolerability for the GLP-1? So firstly, you know, what in your mind, you know, what HbA1c level do you see incremental increases less relevant given the impact on vascular complications start to slow down and, you know, the majority of patients are under good glycemic control? And then secondly, at what level of nausea, diarrhea, and vomiting levels do you believe the tolerability concerns outweigh incremental HbA1c control? So what I'm really trying to get is a sense of balance between these two prescribing drivers, both from the patient and the physician side, whilst taking into account the compliance adherence. And then my second question, you've now started a glucose-sensitive insulin trial, which complements the weekly and insulin 965, which targets micro and microvascular complications. How should we think about these three novel incidents in the context of what we are seeing in the basal market today? You know, what gives you confidence that these products will actually raise the bar enough to make a difference in what is a very challenging market? So how should we think about the return on investment of these products? And then just a very quick one to tie to that. What is Incident 147? I've never heard of that one before. Thank you.

Well, Wimel, the last one first, it was a hybrid molecule that had dual activities, but you shouldn't concern yourself about that one anymore for the time being, but more focus on the GSI insulin and the cardioprotective insulin and not the least, of course, the ICODEC insulin entering phase three. but it's a long-standing debate that the kind of correlation between A1C control and cardiovascular risk and what level is okay. And I think it suffices to say that the most ambitious A1C guidelines, namely the American Academy of Clinical Endocrinology ACE, they have a 6.5% A1C target and they have derived that from the notion that when you go much beyond or below, sorry, 6.5 in A1C, there is very little contribution of glycemia or hyperglycemia to the expected advent of major adverse cardiovascular events or macroangiopathy. Likewise, for microvascular complications, so I would argue that in a patient who's anywhere in the range of 6.5%, you would have to weigh up against the tolerability profile any glucose decrement below that level. That being said, of course, if you can achieve normal glycemia, such as, for instance, with a glucose sensitive insulin, without any risk of GI tolerability or hyperglycemic issues, then that is a desired state, because then you're basically having a diabetes normalizing molecule. I would say that the balance between if you're talking about GLP-1 therapies and tolerability vis-a-vis their efficacy, I think we feel that at the tolerability levels we are seeing for our semaglutide molecule, including what we are seeing at the 2.4 milligram dose in obesity in the STEP program, we've seen single digit level dropouts because of GI tolerability concerns and a very high satisfaction with the therapy. Health-related quality of life, whether it was estimated by ICOLITE or SF36, whether it was estimated psychologically or physically, was increased at 2.4 milligrams. Hence, I can say here we have a good balance between GI tolerability and efficacy. If you go much beyond that, I'm afraid it starts to be a different situation because then the patient's life might too often be a bit troubled by nausea and the likes, but that's not what we have seen. So I think that more or less covers it. In the terms of selling a GSL glucose sensitive insulin, I mean, if you can achieve better glycemic control, that will be put into the core and other models of the health economic outcomes and actually drive greater efficacy and more bang for the buck for the payers. and if you're on top of that, reduce the risk of side effects, you actually have a pretty interesting molecule also from a peer perspective.

Thank you very much. Thank you, Mads. Thank you very much. Next set of questions, please.

The next question comes from the line of Peter Seess from . Please go ahead.

Thank you for taking my question. I have one on obesity and just a follow-up question. Now that you spent your priority review, we are very close to launch, so if Camilla is there, if you could provide some further comments on how many physicians are actually prescribing obesity drugs in the USA today, and what is your target for year one post-launch and also year three post-launch, and where you are in your preparations. in order to, or how have you prepared authorities in terms of reimbursement, et cetera, et cetera, et cetera, just for us to gauge how fast the uptake could be. So that is the first question. If I have to select a second one, it would be with respect to the glucosensitive insulin, you are saying that you have phase one data next year. Typically, you have been in phase one Could you confirm that you're planning to start phase two relatively shortly after that or should we expect that to take a little bit longer? Thank you very much.

Thank you Peter. So first Camilla on obesity and the level of disclosure we can give. I'm not sure we can give targets about number of prescribers after one or two years but any comments on that and Mads then on glucose sensitive insulin speed of going to next phases.

Thank you Lars. So what we can share is that as preparation for the launch and for obesity in general we are Looking at the number of prescribers and it is very clear that for obesity of course to be realizing the significant potential that it has for the future we need to be looking at more prescribers than we have today so that's a clear focus of ours and we can support with a lot of education in the area. Another focus area of ours is of course the number of people seeking treatment. So here we know that with 650 million people Subtitles by the Amara.org community

And I think it's also encouraging to see that we actually now have this new and nice endorsement of Saxenda in the UK. So I think we are making progress in actually being able to articulate the value of treating obesity. And obviously, this is based on Saxenda. Then one can only believe what semaglutide can do. Mads, over to you on glucose-sensitive insulin.

Yes, so what you do, Peter, is the usual story. You start with single ascending doses, and then you move on to multiple ascending doses. And you typically, in an insulin trial, will always need a comparator. And that comparator, if it's a glucose-sensitive insulin where you want to document that it is truly glucose-sensitive, you have to go up against the comparator with the least documented hyperglycemia risk to prove even further benefits. And that, in this case, is insulin Degludec. and the way that you can assess for instance the risk of hyperglycemia is by forcing the patients with for instance tripling the insulin dose into what could be a severe hyperglycemic condition had they not been in a hyperglycemic clamp situation where you can save them at any predefined glucose level and then you can simply measure do they go down there or do they level off at a safe level without rescue therapy. This is the kind of trials we are doing. They are ongoing as we speak. And of course, moving into phase two from there on, we will do as fast as possible.

Thank you, Camilla. Thank you, Mads. And thank you, Peter. Next set of questions, please.

The next question comes from the line of Martin Parkhoy from Danske Bank. Please go ahead.

It's Martin Parkhoy, Danske Bank. Two questions. First, on IOO, one of your competitors mentioned yesterday that There was some weakness in some out-of-pocket markets outside North America. It's not really visible in your I.O. numbers, I must say, but are you seeing a small sign of that and is it something that we should expect to escalate going into 2021? And then just on the G1 price in the US, I can understand that you will not give any hard numbers of where the pricing are this year, next year. But just conceptually, if we look at what Lilly said earlier this week, and if I look at, I guess that your net pricing, if you adjust for the Victosa 2-up, then it's maybe down 10% in the third quarter. That is slightly more than Lilly. Can you maybe discuss conceptually why is that, given that it appears that your segment, Mixed Change, are much more favorable than Lilly? And how should we conceptually look at you compared to Lilly with a fairly old DL1 now going into the coming years?

Thank you, Martin, for those two questions. And let me try to give it a shot. In IEO, we're not really seeing anything that is a measurable impact of lower out-of-pocket pay. You know, we have a good momentum both with the instrument and GLP-1. and we have the market fit strategy that's still pulling through, so we're quite encouraged by the growth levels we see in I.O. To the U.S. DL1 pricing, what we see in Q3 is a continuation of what we have seen in the first and second quarter of this year, so we don't really see much change. It's a market with a very, very attractive volume growth. We're down to 8% of patients using GLP-1. We see differentiation in the market. So it's really a market that's driven by launch of new products which is fueling growth and preference. and the pricing impact from year-on-year enhancing rebates level a bit to stay on open formal areas. The legislative impact we see in Medicare now and then getting to your point about channel mix and maybe portfolio is unchanged for us. As a function of say the differentiation of products in the market, You of course have dynamics where brands as they grow older in the category, they have broader and broader access and get into lower and lower price points. And as new products are launched, typically starting in the high end of the market, you of course have the different players will have different say quality of book of business over time. And that dynamics will probably change a bit between the competitors. But we don't see any significant change over the quarters. So what we communicate here is a stable situation compared to what we've seen in prior quarters. Thank you, Martin. And next set of questions, please.

The next question comes from the line of Simon Maber from Exxon. Please go ahead.

Good afternoon, everybody. Thank you for taking my questions. I've got two. I think they're mainly for Mad, but you didn't discuss it in the presentation. I'm just wondering if you could maybe give us an update with respect to your intention or otherwise whether or not you will embark on a phase three program for semaglutide in Alzheimer's. And with that, with the data set to be published next Friday, I believe, would you urge caution to over-interpret what we should see and just your views around that would be very helpful, thanks. And then the second one is, Just a broader discussion on obesity. Obviously you've got the recommendation from NICE, which is positive, but still in the U.S. it remains somewhat elusive. I'm just wondering if you could help us understand how negotiations are going there with the authorities, and if it does remain elusive, the rationale really for using your priority review voucher for slagatized obesity. Thank you.

Simon, first mess on potential Start of phase 3 in Alzheimer's?

Yes, well, I'll essentially repeat I think what I also maybe answered last time, namely that Nordisk is looking at the aggregated burden of evidence or lack of such in terms of favoring entry with the semacretide into a phase 3 trial in Alzheimer's or Alzheimer's disease slash mild cognitive impairment. And in that regard, one has to look at Whatever exists out there, including the LAT study, but by no means the LAT study I don't think is the solution to all questions in that field for a number of reasons, but it will of course be interesting to see those data, I believe it's next weekend. One also has to look at the aggregated data sets that exist from meta-analysis, as you know we have done from registry-based studies and from preclinical studies, and then make up one's mind about such a decision. It is of course a big decision to go into phase three. That also means that one has to have all the pertinent considerations ahead of that decision.

Thank you, Mads. And Camilla on obesity.

Yeah, so in the U.S. in general, there is the 70% access in the commercial segment to obesity care, but what we are really focusing on is to make sure that Also employers opt into this because in reality the real access is only 20% when we take this into account. So this is of course where we are putting our focus. For the longer term we will also be focusing on the Troyer Treat and Reduce Obesity Act of course that potentially will give access to Medicare over time. But this more relates on political decisions. Right now, of course, with semaclutide having, as we talked about before, twice the effect of Saxenda, there is also a sustained potential for a longer stay time as we see that the weight loss continues up until 60 weeks, what we see from our STEP program. So in terms of that, the earlier we can get semaclutide 2.4 to the market, the earlier we can realize the potential of the obesity franchise.

Thank you, Camilla. Thank you, Simon. Next question, please.

The next question comes from the line of Simon Baker from Redburn. Please go ahead.

Thank you for taking my questions. Two for Mads, if I may. Firstly, on Xylti, the lipid profile or lack of negative effect is impressive and unusual, Mads. I just wondered if you had any thoughts on why you are not seeing a negative effect where others have. And secondly, there was an interesting case report in the New England Journal a couple of weeks ago about the use of ruxolitinib for essentially reversing type 1 diabetes. I'd be interested in your thoughts generally about the potential for JAK inhibition in type 1. Is this something that you've looked at before, whether you think there's any mileage in this? Thanks so much.

Yeah, so I think as regards silty and the benign adverse event profile or biochemical profile that we've seen in the rescue trial, I think there are two factors that come into play here. One of them is the notion that it is a IL-6 ligand blocker. It doesn't interfere with the IL-6 receptor signaling complex that, as you know, also mediates other cytokine signaling events. So we're not interfering with that. At the same time, we've apparently found a A dose down to the level of 15 milligrams that actually corresponds to a daily dose of 0.5 milligrams since the monthly dosing regimen is deployed that is so low and so potent that I think what we are seeing is essentially intravascular and cardiovascular anti-inflammatory action without enough of these antibodies actually permeating into more peripheral target tissues and compartments of the body including the immune system and maybe therefore having much less of an impact than we have seen for other IL-6 blockers. So I hope, I cannot prove this will hold true in phase three, but based on the data we have, we think we actually have the emergence of a very encouraging benefit risk profile for this particular compound. So we are very happy with the acquisition and with the progress of the project. As regards JAK inhibitors and other remedies for type 1 diabetes, I have to say, and we've been, as you know, working a lot in the field, including with anti-ALT twin antibodies, anti-ALT21 antibodies, with a very nice data set from phase 2, but that we have decided not to progress, as you are aware. that any remedy that will seek to reverse the autoimmune process to the extent that you avoid the immune attack and killing of the beta cells in the pancreas will have to be so relatively powerful that it is unlikely to not have untoward side effects, i.e. the benefits will go along with the risks. And I think the next major breakthroughs in the field of type 1 diabetes, if you want to go down that alley, are more likely to relate to regenerative medicines such as beta cell replacement when Nordisk is very active with a late stage research project as is also a couple of other companies.

Great. Thanks very much. Thank you, Mads. Thank you, Simon. Next question, please.

The next question comes from Steve Scala from Cowen. Please go ahead.

Thank you so much. Two questions, probably both for Mads. Mads, when you see the first Lilly Terzepatide Phase 3 data later this quarter, what will you be most interested to look for? And please enlighten us to any statistical methods Lilly may employ to portray the data in the most positive light. So that's the first question. Second question is that we have tracked clinical trial activity during the pandemic, and it shows Novo trials that are recruiting are down 20% year to date. That is two times worse than the next closest companies and 10 times worse than the average company. What do you think accounts for this? Is it a function of the therapeutic areas in which you traffic? Is it geographies or is it something else? Thank you.

Okay, well, first of all, I can't really comment on how Eli Lilly does their statistical analysis of GI side effects and related conditions. I think that that will be up to regulators and other bodies to really discuss that with the company. What I would look at as a clinician is what is, as we discussed in an earlier question during this session, What is the balance between efficacy and side effects because there is no doubt you can achieve almost anything with a molecule if you put people into a situation where they're constantly vomiting of course because that corresponds to a fasting situation and that can actually almost make you undergo diabetes remission but it's not a nice way to achieve that. So you have to have the overall benefit-risk profile defined, and we discussed that at an earlier point in time, and I think we've hit that spot both with the semaclutide in the injectable and in the oral versions at the doses that you've heard us talk about earlier today and previously.

But we'll have to see the terceptide data as they come out. It's a bit early to speculate, and in particular for us.

In regards to clinical trials, I'm not quite sure I agree with your statement because we followed the different TA areas including the diabetes area and today we've exceeded 40,000 patients in the active trials. The greatest reduction we have in any or delay we have in any trial even the major outcome trials that we're working to today is max three months till termination based on current analysis. We have adopted a number of tools allowing remote contact between physician, investigator and patient, arrival of medicines at the postal address of the person involved in the trial and a lot of other things that can make source data verification possible remotely using newly developed apps and the likes. So actually, I would say that Nordisk is a bit proud that we're able to say that we have managed to basically enhance the portfolio and grow the portfolio and the amount of patients during a time of COVID-19. So I think one of the reasons is that we have our own clinical research associates, 2,000 of them all over the world, and they're very dedicated colleagues and they've worked closely with headquarters to adopt these new, you can say, remote tools that will allow us to do virtual trials almost possibly next year, even in a COVID-19 situation, allowing us to progress the pipeline.

Thank you, Mads. Thank you, Steve, for those questions. Next questions, please.

The next question comes from the line of Peter Veldholt from Citi. Please go ahead.

Thank you, Peter Veldholt, Citi. Two questions. Lars, just on potential U.S. drug price reform, we all know net pricing and zero rebates are off the table, which is a little bit of a shame for NOVA because it would have helped given your heavy The one bipartisan bill that nearly made it to the floor this year was copay caps. Now regardless of who wins next week, I'd be interested to hear Novo's view on copay caps or other solutions that you think could be proposed to deal with the fundamental problem of lowering out-of-pocket costs. And then Camilla, I'm sorry to come back to obesity and commercial strategy. Don't worry, I'm not going to ask you for year one to five semi-obesity forecasts internally. But I do want to just understand how you're thinking about the opportunity here, because we all know the numbers are large, and the data is good, and that the prescriber base and the reimbursement is terrible. What we haven't talked about is this extenders for daily list price is way in excess of $50 a day, which clearly is not conducive. So I'm just wondering, you have a drug that's clearly got significant efficacy. But are you thinking about being able to price at a premium to create this market? Or given the fact you have a single dose device, does that give you an opportunity to really rapidly expand the prescriber base and reimbursement by going at a lower price? Some general thoughts about how you can maximize the commercial opportunity for obesity. Thank you.

Thank you, Pete. I'll refrain from going into much detail about the U.S. elections and what could happen. I can only observe that a lot of ideas have been on the table, but it's quite difficult to make significant intervention in a rather complex and gridlocked U.S. healthcare system. We are launching a portfolio of competitive products. We have an ambition of converting the 70% of our business to innovative products and as such conduct business based on clinical differentiation and real need and demand in the market. I think that's the strongest position to have in any market and I'm not saying we'll be immune for all kinds of interventions. But that means that there will be an underlying wish to use our innovative products and I feel comfortable that we can compete and also be successful from a financial point of view in most of these potential interventions. So we have to wait and see what the political system can agree on in a market that's largely a private market and hence not that prone for regulation. Camilla, back to obesity strategy.

Just to recap on the general market expansions, we are working on four dimensions. One is about having obesity recognized as a disease and this of course will be extremely important for also reimbursement down the road. We're also working on the number of patients seeking treatment and just before I mentioned that right now only 10% of patients living with obesity seek treatment. But when they then go to the physician to get treatment, actually the big majority of those are sent back without any treatment other than exercise and eating suggestions. So both in these dimensions we can work on with education. and with that hopefully also get some more you can say persistent prescribers of obesity medication. It's clear that many of the people suffering from obesity also have a number of co-morbidities that from a health economic point of view gives rise to us discussing with payers like we have just done with NICE in terms of the cost effectiveness of better treatment. and it is in this perspective that semaglutide 2.4 of course has an even bigger impact than what we have been used to with Saxenda. So these are the dimensions that we are working on to realize our long-term strategic aspiration that we communicated at our last Capital Markets Day. Of course reimbursement is important but it is also a very patient-driven disease that we are talking about here. It is not a prerequisite for us to realize our ambition, but of course it is something that we keep working on. When it comes to the price, as you know from other launches we've done, we will only communicate around the price by the time that we launch. Thank you.

Thank you.

And the next question comes from the line of Michael Lochten from UBS. Please go ahead.

Thanks very much. Two questions, please. One, just bigger picture patient footfall, Lars. During the last couple of quarters, you were giving us some steer on what your underlying assumption was for normalization of patient footfall. I guess we all thought we were going to get back to normal this year, but we have lockdowns coming again. So what's your assumption on the shape of the footfall, the patient footfall recovery as we head into the end of the year and then and then early next. And then my second question is on Ribelsa sequentially. The third quarter, the product was light relative to where consensus was. I guess we've all been sitting here trying to use the prescription data and assume a realized price and it came in a little bit light. So as we look at Q3 over Q2, other than the COVID impact and the area under the curve, is there anything else we should keep in mind as we think about The fourth quarter and trajectory into 2021. Thank you.

Good. So first, Karsten, on what to expect in terms of or what we have assumed in terms of patient flow or patient normalization.

Yeah, thanks for that question, Michael. And as you know, predicting a pandemic and how it rolls across the globe has proven to be difficult around first, second, third wave. I think what has been encouraging for us to see is the resilience of our TRX total script base and I would say the slightly smaller impact from a lower BRX base. And you saw from the initial slide that Lars showed on COVID that we see NBX trend improving over the past quarters. What we've built into our modeling is that we see a continuation of our TRX trends, but needless to say, there is uncertainty around How COVID will impact our business over the coming quarters until a vaccine is generally available. So that's why we're also operating with a broader range at this point than we would normally do.

Thank you, Karsten. And just initially on Rebels' performance, we're very pleased with the launch. We are making the reception of the product, the trend we see in terms of scripts. So let me just make that comment upfront and then Camilla, maybe a bit more coverage on that.

Yeah, so today we have over 33,000 ATPs writing Rebelsus and we are actually back to the number of new ATPs prescribing Rebelsus as we were before COVID-19 impacted us all. So we have more than 900 new prescribers per week on Rebelsus. We also have all districts in strike mode and as you know, our access is around 85%. So also our expansion of the class is working as we had planned for, meaning that more than 80% of the new scripts is coming from outside the GLP-1 class. And then you would also notice that the most recent numbers on our rebuttal scripts are where we estimate that approximately half of those are still impacted by our co-pay or voucher offerings. So just to keep that in mind. When you do the numbers. And then on the 21st of September, we launched our new DTC campaign, Wake Up to the Possibilities with Rebelsys. And we saw that there was an immediate increase to visits on our rebelsys.com website following this. So as Lars said, we are very encouraged by the launch of Rebelsys.

Thank you, Camilla. Thank you, Karsten. And thank you, Michael. So next set of questions, please.

The next question comes from the line of Sachin Jain from Bank of America. Please go ahead.

Sachin Jain, Bank of America. Thanks for taking my questions. Just to kick off for Karsten, I'm thinking about 21, obviously your official outlook next year. But I wonder if at a high level you could just discuss some pushes and pulls to sales growth rate versus the existing 6% to 7% run rate. You've previously talked about coverage gap, affordability initiatives. Run rate of the existing IO, 12%. So any updated perspectives there? And any directional margin commentary for next year? How do we think about an SG&A cost rebound following the COVID savings of this year and R&D growth given the number of phase three starts with obviously a number of outcome studies there? Second question is on Sema Nash and the breakthrough. For Mads, any early regulation conversations that change your perspective on the ability to use surrogates to speed up the file? and if you are able to use ELF or FibroScan when could the earliest file be? And then just a clarification on ELAD in your earlier commentary regarding a decision to progress to phase three. Have you actually convened an advisory board yet to discuss options and when do you expect to make a decision by and how will you communicate to the market? I'm working on the assumption that we'll hear nothing from you next week, thank you.

Thank you, Sachin. First, Karsten, while we do not guide for next year, some high-level comments.

Yeah. Thanks, Sachin, for this question. So as Lars is saying, then we will issue our 21 guidance in connection with our full year results in February. Our starting point is, and what you see in our numbers, currently an underlying run rate to the tune of 6%, 7% in our base business. The key drivers you should expect to remain the same, so a continued solid GLP-1 performance across the globe and solid growth from I.O. while U.S. will still be in the process of transforming the business to more recently launched products. So I.O., as we talked to at our capital markets day, We're working with this 6-10% range over the five-year period. We've had very good traction this year, performing even above that range. So, of course, we hope to continue to have solid traction in IO in the 6-10% range also come next year. As to US and some of the puts and takes, Yes, it's correct. We will not have the same coverage gap impact and some of the affordability impacts we have this year. On the other hand, then we have the unemployment where we only have a modest impact on channel mix this year and we have this annualized 2% impact on US sales pulling in the other direction. And then I would say finally, With the puts and takes, we also have some tailwind this year in our growth hormone business from supply issues with the competitor and of course we don't expect that to continue into next year. And then layer on top of those puts and takes, which should be no surprise to the market, then of course COVID-19 and potential second and third waves just puts an additional layer of uncertainty to the outlook we're looking into. In terms of margins and P&L, if I take the different lines, then With more than 40,000 patients on clinical trials currently and expanding and moving towards closer to the 50,000 mark, then of course we'll be investing more in R&D. You should note that we're running a number of efficiency initiatives in R&D also in terms of running our clinical trials. So it's not a linear approach you should take to it, but clearly we will be expanding our investments in R&D, which was also what we communicated 12 months ago at our capital markets day. In terms of S&D, we will continue to have a number of launches, both with Rebelsis, where we're only in some 50 markets now. Sorry, on OSIMPIC, only around 50 markets now. And then Rebelsis, where we're in 10 markets at this point. So quite a number of launches to come for the new products. In terms of the savings this year and into next year, yeah, you're correct. We have some savings. We do expect also some savings come next year in terms of some of the learnings we have. And also given the fact that COVID-19 is not over come 21. And then finally on gross margin and cost of goods, as we also communicated at Capital Markets Day, then we're ramping up our facility in Clayton, North Carolina, manufacturing for all semaglutides. So with the early volumes behind Rebelsys, then you should expect a negative impact, a mixed impact from Rebelsys compared to what you see this year.

Good. Thank you, Karsten. Then you can do all the modeling, all of you. Mads, quickly on seminars. Yeah, and first, the ELAD question, it's quite clear, yes, we have had advisory board meetings.

We have discussed the potential profile of the GLP-1 receptor agonist like semaglutide in that disease. And no, we are not connecting any kind of potential communication in the area to the ELAD study presentation as we have described previously. It's a multitude of data gatherings that will form the basis of such a potential decision. In regards to surrogates for NASH, I'm a strong believer in a combination of using, for instance, Fibroscan and ELF or NIS4 or one of the other biochemical biomarkers in conjunction to actually diagnose and follow the prognosis of NASH treatment. However, As it stands today with the FDA and with the EMA with whom we have had meetings, otherwise you cannot be granted a breakthrough designation, there we have actually agreed that it will be biopsy based in phase three. However, it may not be in the trial that the entirety of the population has to have reported 72 week biopsy results at the time of NDA submission. So there are some gives and takes there, but we, I think, are on the way to a very robust trial design with a single pivotal trial and a 72-week readout, followed by an extension where you see together hard outcome benefits of the drug post-marketing.

Thank you. Thank you, Sachin. This concludes our conference call. Thank you for participating and the interest in Nordisk, and do feel free to contact our Investor Relations Officers should you have more questions. Thank you and have a great day.

This now concludes the conference call. Thank you all for attending. You may now disconnect your lines.