Novo Nordisk A/S

Good day and thank you for standing by. Welcome to the Q3 2023 Novo Nordisk AS Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Daniel Boson, Head of Investor Relations. Please go ahead, sir.

Welcome to this Novo Nordisk earnings call for the first nine months of 2023. This call follows the early announcement of top-line results and the updated outlook for 2023, shared in October. The release was advanced due to Danish securities regulations. My name is Daniel Boson and I am the Head of Investor Relations at Novo Nordisk. With me today, I have CEO of Novo Nordisk, Lars Forgaard Jørgensen, Executive Vice President and Head of Commercial Strategy and Corporate Affairs, Camilla Sylvestre, Executive Vice President and Head of North America Operations, Doc Lange, Executive Vice President and Head of Development, Martin Holst Lange, and finally, Chief Financial Officer, Carsten Munch Knudsen. All speakers will be available for the Q&A session. Today's announcement and the slides for this call are available on our website, NovoNordisk.com. Please note that this call is being webcast live and the recording will be made available on our website as well. The call is scheduled for one hour. Please turn to that. The presentation is structured as outlined on slide two. Please note that all sales and operating profit growth statements will be at constant exchange rates unless otherwise specified. Please turn to the next slide. As always, we need to advise you that this call will contain forward-looking statements. These are subject to risk and uncertainty that could cause actual results to differ materially from patients. For further information on the risk factors, please see the company announcement for the first nine months of 2003 and the slides prepared for this presentation. With that, over to you, Lars, for an update on our strategic aspirations.

Thank you, Daniel. Next slide, please. In the first nine months of 2023, we delivered 33% sales and 37% operating profit growth at constant exchange rates. I'd like to start this call by going through the performance highlights across our strategic aspirations. before handing over the word to my colleagues. Within Purpose and Sustainability, we continue to make progress. Our carbon emissions decreased by 28% compared to pre-pandemic levels in 2019, and in line with our aspiration of being a sustainable employer, we continue to expand the number of women in senior leadership positions. This is now 41% compared to 38% last year. In R&D, an important milestone is that we will stop the flow kidney outcomes trial early as semaglutide demonstrated a benefit in people with type 2 diabetes and chronic kidney disease. Further, within R&D, we have recently agreed to acquire oziduron for the treatment of cardiovascular disease. This supports our aspiration of establishing a presence in other serious chronic diseases with a high unmet medical need. Margie will come back to this and our overall R&D milestones later. The sales growth reflects strong commercial execution with both operating units contributing to a continued sales growth driven by increasing demands for our GLP-1-based diabetes and obesity treatments. Camilla and Doug will go through the details in the therapy area later. Within commercial execution, we are pleased to have reached our obesity aspiration of 25 billion Danish kroner and our aspiration for diabetes by reaching a global value market share of one-third. Naturally, the progress is not holding us back, and we continue to aim for treating more patients with our innovative treatments. Karsten will go through the financial details, but I'm very pleased with our overall performance for the first nine months of 2023, which has enabled us to raise our outlook for the full year. With that, I'll give the word to Camilla for an update on commercial execution.

Thank you, Lars, and please turn to the next slide. In the first nine months of 2023, our total sales increased by 33%. The sales growth was driven by both operating units with North America operations growing 49% and international operations growing 17%. Our GLP-1 sales increased 49% driven by North America growing 43% and international operations growing 60%. Insulin sales decreased by 7% driven by a 1% decline in international operations and a 24% sales decline in North America operations. The sales decrease was driven by decreasing sales in the U.S. and region China. Obesity care sales grew 174% overall. In international operations, sales grew 52%, driven by both Saxenda and Vigovi. In North America operations, obesity care sales grew 244%. Total rare disease sales decreased 18%, which was driven by a 22% decrease in international operations and by a 13% decrease in North America operations. Please turn to the next slide. With 25% sales growth in our diabetes care, we are now growing faster than the total market, improving our global diabetes value market share to 33.3%. The increase reflects market share gains in both North America operations and international operations. In international operations, total diabetes care sales increased by 21% in the first nine months of 2023. This was driven by GLP-1 sales growing 60%, driven by all geographical areas. Novo Nordisk is the market leader in international operations with a GLP-1 value market share of 69%. Sempec continues its GLP-1 market leadership with just shy of 46% market share. Rebelsys has 12% value market share driven by strong uptake across geographies. And with that, I will hand over the word to Doug.

Thank you, Camilla. Please turn to the next slide. The GLP-1 class expansion continues in the U.S. in the first nine months of 2023. The U.S. GLP-1 market volume grew around 50%, comparing Q3 of 2023 to Q3 of 2022. Measured on total prescriptions, Novo Nordisk continues to be the market leader with 53% market share. Please go to the next slide. Obesity care sales grew by 174% in the first nine months of 2023. This was mainly driven by the US. The global branded anti-obesity market expansion continues with a global volume growth of 94%. In international operations, Obesity care sales are driven by strong sex underperformance and the Vagovi launches in five international operation countries. While eager to launch Vagovi in more IO countries, our focus remains to do this in a sustainable manner. For example, by capping volumes. In the U.S. alone, sales of Vagovi grew by 467%. Demand for Vagovi continues to exceed supply. And to safeguard continuity of care for patients already on WGOVI, the supply of the lower WGOVI dose strengths in the U.S. has been reduced since May of 2023. Please go to the next slide. Our rare disease sales decreased by 18%. The sales decrease was driven by a 13% decline in North America operations and a 22% sales decline in international operations. Sales of rare blood disorders increased by 2%. driven by the launch products in hemophilia A and B, and partially countered by Novo7. Sales of rare endocrine disorder products decreased by 54%, reflecting a temporary reduction in manufacturing output. Now over to you, Martin, for an update on R&D.

Thank you, Doc. Please turn to the next slide. Serious chronic not communicable diseases affect millions of people globally, and have emerged in recent years as a major public health issue. Given our extensive scientific and clinical knowledge within metabolic diseases, we are well positioned to advance our understanding of semaglutide's potential benefits in associated health complications. With the current body of evidence, it is clear that the beneficial effects of semaglutide goes even further than glycemic control and weight loss. Semaglutide has already now demonstrated convincing risk reductions in a number of cardiovascular outcome studies. This includes SUSTAIN-6 and PIONER-6 in type 2 diabetes, as well as STEP-HEF-PEF-SELECT in obesity. While we await data from the SELECT trial to be presented, we continue to build evidence for the semaglutide molecule in the cardiovascular space. In 2024, we expect several readouts. This includes type 2 diabetes cardiovascular outcome study, SOL, with oral semaglutide 14 mg, and the functional outcome trial, STRIDE, which focuses on the high-risk population with peripheral vascular disease. As previously discussed, we also investigated the potential therapeutic effects of semaglutide on osteoarthritis and metabolic dysfunction associated with steatohepatitis. previously known as non-alcoholic steatohepatitis. In addition to this, we recently announced early closure of the FLOW trial due to efficacy. Next slide, please. This closure was based on a recommendation from the FLOW Independent Data Monitoring Committee following a preplanned interim analysis. As you know, FLOW is an outcomes trial conducted across 28 countries and more than 400 sites. 3,534 people were enrolled and randomized in a one-to-one ratio to receive either once-weekly semaglutide 1.0 mg or placebo. The eligibility criteria were designed to include patients with type 2 diabetes and high or very high risk for progression of chronic kidney disease. The primary objective of FLOW is to demonstrate delay in progression of chronic kidney disease and to lower the risk of kidney and cardiovascular mortality through the composite primary endpoint. This is on top of standard of care, including the use of SGLT2s. The trial is powered to detect a 20% risk reduction on the primary endpoint. Key secondary endpoints include annual rate of change in estimated glomerular filtration rate, major adverse cardiovascular events, and all-cause deaths. Today, few treatment options exist for chronic kidney disease in people living with type 2 diabetes. With a projected global increase in type 2 diabetes, there is a clear need for additional treatment options to help mitigate the residual risk in people with concomitant chronic kidney disease. The next step will be to close down the trial. The start of flow is expected in the first half of 2024. The presentation of detailed data is expected to take place at a medical conference also during 2024. Next slide, please. In line with our strategic aspiration of establishing a presence in other serious chronic diseases, we are pleased to announce the acquisition of vasoduranone for the treatment of cardiovascular disease from KBP Biosciences. There remains a significant need in treatment of hypertension. which is a leading risk factor for cardiovascular events, heart failure, chronic kidney disease, and death. Osidurinone is a once-daily, all-administered small molecule with a long half-life and a high affinity for the mineralocorticoid receptor. Osidurinone has an attractive efficacy and safety profile and is currently being examined in the Phase III trial, CLARA, and CKD in patients with uncontrolled hypertension and advanced chronic kidney disease. We expect to initiate additional cardiovascular as well as chronic kidney disease outcomes trials during the course of 2024. Next slide, please. Turning to other IRG milestones, I would like to highlight some of the other trial readouts and initiations across our therapy areas in 2023 and in the first half of 2024. Within diabetes in the third quarter of 2023, We initiated the first pivotal phase III trial in the re-imagined program for cacrosema in people with type 2 diabetes. In the fourth quarter, we have submitted oral semaglutide 25 and 50 mg in the EU. We are also anticipating the results from the ongoing pivotal phase III trial for icosema combined III in the first half of 2024. Icosema has the potential to be a first-in-class, once-weekly, fixed-ratio combination of basal insulin and GLP-1 receptor agonists in patients with type 2 diabetes in need of intensification. Within obesity, we are happy to announce that we in September initiated a 32-week phase 1 trial with once-weekly subcutaneous amicretin in people with overweight obesity. While we await select data, at the American Heart Association Congress, we have submitted the trial to the US FDA and the European Medicines Agency. We are pleased that the FDA has granted priority review for the supplemental new drug application. This marks a significant milestone in our ongoing efforts to address unmet needs in patients with overweight and obesity and establish cardiovascular disease. Finally, we also expect the chronic heart failure trial with preserved ejection fraction in obese patients and diabetes to read out in the last quarter of this year. In rare disease, Nidotrin was approved by the US FDA for treatment of primary hyperoxaluria type 1. This marks the first approved siRNA treatment for Novo Nordisk. In other serious chronic diseases, we initiated a phase 1 trial with our angiopoietin-like free protein inhibitor. This is a monoclonal antibody in development for cardiovascular disease, specifically for lowering of cholesterol and triglycerides. With that, over to you, Carsten.

Thank you, Martin. Please turn to the next slide. In the first nine months of 2023, our sales grew by 29% in Danish kroner and 33% at counter-exchange rates, driven by both our operating units. The gross margin increased to 84.5% compared to 84.3% in 2022. The increase in gross margin reflects a positive product mix driven by increased sales of GHP-1 based treatments. This is partially countered by costs related to ongoing capacity expansions, a negative currency impact, and lower realized prices mainly in the U.S. and region China. Sales and distribution costs increased by 22% in Danish kroner and by 25% at constant exchange rates. The increase is driven by both operating units. In North America, the cost increase is driven by the relaunch of Vigovi and promotional activities for Sempec. In international operations, the cost increase is driven by promotional activities for Rebelsys, as well as obesity care market development activities. The increase in sales and distribution costs are impacted by adjustments to legal provisions. Research and development costs increased by 38% measured in Danish kroner and 39% at constant exchange rates. The increase reflects increased late-stage clinical trial activity and increased early research activities compared to the first nine months of 2022. The acquisition of pharma therapeutics in 22 and in Masago Pharma also increased R&D spending. Administration costs increased by 9% measured in Danish kroner and 11% at constant exchange rates. Operating profit increased by 31% measured in Danish kroner and 37% at constant exchange rates, reflecting the sales growth. Net financials showed a net gain of 1.2 billion Danish kroner compared to a net loss of 5 billion Danish kroner last year. The effective tax rate was 19.9% in the first nine months of 23 compared to 20.5% in the first nine months of 22. Net profit increased by 47% and diluted earnings per share increased by 49% to 13 kroner and 71 øre. Free cash flow was 75.6 billion Danish kroner compared with 62.6 billion kroner in the first nine months of 22. In line with the strategic aspiration of delivering attractive capital allocation to shareholders, a total of 52 billion Danish kroner has been paid back to shareholders through share buybacks and dividends. The cash conversion is positively impacted by timing of payment of rebates in the US. Capital expenditure for property, plant, and equipment was 16.4 billion Danish kroner compared to 7.2 billion in 2022. This primarily reflects investments in additional capacity for active pharmaceutical ingredient production and finished capacity for both current and future injectable and oral products. Please go to the next slide. Nine months into 2023, we are continuing our sales growth momentum, which has enabled us to raise the outlook for the full year. We now expect the sales growth to be between 32% and 38% at constant exchange rates. The increased sales outlook is primarily reflecting higher foliar expectations to Osempic volume sold in the U.S. and growth-to-net adjustments for Osempic and Vigovi in the U.S. The guidance reflects expectations for sales growth in both North America operations and international operations. The guidance is mainly driven by volume growth of GLP-1-based treatments for diabetes and obesity care. This is partially countered by declining sales in rare disease due to a temporary increase reduction in manufacturing outputs. The guidance reflects the level of volume growth of DH1-based treatments. The inherent uncertainty of the pace of SMPIC obesity care market expansion following the relaunch of Vigovi in the U.S. and a limited rollout in international operations are also included in the guidance range. Finally, the sales outlook reflects expected continued periodic supply constraints and related drug shortage notifications across a number of products and geographies. NordNordisk is investing in internal and external capacity to increase supply both short and long term. While supply capacity for Vigovi is gradually being expanded, the lower dose strength in the US will remain restricted to safeguard continuity of care. We now expect operating profit to grow between 40% and 46% at constant exchange rates. This primarily reflects the sales growth outlook and continued investments in future and current growth drivers within research, development, and commercial. For 2023, we expect net financial items to amount to a gain of around 1.6 billion Danish kroner, mainly reflecting gains associated with foreign exchange hedging contracts. Capital expenditure is still expected to be around 25 billion Danish kroner, reflecting the upscaling of the supply chain and the innovation-based growth strategy pursued by Nordnorsk. In the coming years, the capital expenditure to sales ratio is expected to be low double digits. The free cash flow is now expected to be between 65 and 73 billion Danish kroner, reflecting the sales growth a favorable impact from rebates in the U.S. and investments in capital expenditure. The updated cash flow expectation is mainly reflecting increased net profit expectations, partially countered by business development activities. That covers the outlook for 2023. Now back to you, Lars, for final remarks.

Thank you, Carsten. Please turn to the final slide. Today's announcement discloses the full set of quarterly results and updated outlook for 2023, which was shared earlier in October. Overall, we are very satisfied with the sales growth in the first nine months of 2023. The growth is driven by demand for our GF1-based therapeutic interventions for diabetes and obesity, which is now reaching more people than ever before. The performance in the first nine months of the year has enabled us to raise the outlook for the full year. From an R&D perspective, we have reached a significant milestone with the submission of SELECT and look forward to sharing more data at American Heart Association. In addition, we're excited about the early closure of the FLOW trial and anticipate it will get read out in the first half of 2014. Finally, the accuracy of ozidurinone will strengthen the portfolio of cardiovascular disease and underlines the commitment to establish presence with other serious chronic diseases. With that, I'll hand over to the final word to Daniel.

Thank you, Lars. Next slide, please. With that, we are now ready for the Q&A session, where I kindly ask all participants to limit her or himself to one or maximum two questions, including sub-questions. Operator, we are now ready to take the first question.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. We will now go to the first question. And your first question comes from the line of Michael Nedelkovic from TD Cowan. Please go ahead.

Thank you for the question. I have one for Martin. Martin, if you'll allow me to set up something of a straw man, here's a potential set of expectations for the phase three select data when we see them at AHA. One, clinically meaningful benefit across each of the individual MACE components and regardless of BMI category. Two, cardiovascular benefit that clearly emerges within one year on WeGoV therapy and does not diminish over time. And three, no noticeable imbalance in any very rare adverse events such as suicide or cancer. My question is, would you urge me to modify these expectations in any way?

Martin, a straw man for you.

So thank you very much for that question. As you'll probably imagine, I cannot speculate to anything beyond what we've already disclosed, and that is the 20% risk reduction on the primary endpoint for MACE, which is obviously myocardial infarction, stroke, and cardiovascular death. We see attribution from all three, but we do not go into more detail. What I will commit to is obviously that we saw a very clear and positive safety profile from Select and with no outliers identified.

Thank you, Martin, and thanks, Mike, for the question. Next question, please.

Thank you. We'll now take the next question. And your next question comes from the line of Richard Parks from BNP Paribas. Please go ahead.

thanks very much for taking my questions i've got a couple so firstly when i look at zempic and wadovi u.s symphony prescriptions they're both trending flat to down um over the last quarter i think due to supply constraints but your guidance suggests an expected acceleration and top line growth in in q4 so i'm just wondering if you can help me to understand that i mean are you expecting to see kind of further improved supply into the end of the year would be, I assume, kind of the swing factor there. And then the second question is just your slide outlines the potential benefits of semaglutide beyond glycemic control and weight loss, and maybe we'll see some insight into that from the SELECT study. But your chart suggests there's potential for patients to benefit from the CV aspects. that don't have diabetes or obesity. So I'm just wondering how you can capitalize on that, given that your trials currently, I think, are just recruiting patients with either obesity and diabetes and comorbidities. Thanks very much.

I'll give the first to you, Carsten.

Supply going into our guidance. Yeah, so thank you for that question, Richard. And clearly, when we put out guidance, that's because we believe that's the most... realistic forecast range that we're putting in, and we don't have too many months to roll on. So, of course, we see the TRX trends and bake that into our forecast. What I would give of additional flavor on top of that is, of course, the growth rate is also a function of X Factor sales last year, and we did see some big having a lower base last year in the fourth quarter than what we would normalize into this year. And then, of course, there can be fluctuations in inventories, for instance, with wholesalers. And then finally, I would say this pickup in sales growth in the fourth quarter, this is not to be kind of read into anything, any difference on the supply situation. What we're selling in the fourth quarter has been produced months ago. Thank you, Carsten.

Martin, any comments on benefits beyond weight loss for SEM?

So first of all, I think it's exactly right that our starting point is the cardiometabolic space, starting out with obesity and diabetes, and these are the patients that we investigate. I think it's important to call out that the vast majority of patients suffering from ASCVD, from heart failure, from cancer, chronic kidney disease, but also metabolic liver disease also have an element of metabolic derangement. And there's a clear association and overlap to both diabetes and obesity. So from our perspective, this actually creates some very nice synergies and certainly not seen as exclusive. But our starting point is patients suffering from diabetes and obesity.

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

Thank you. We'll now take the next question. And your next question comes from the line of Seamus Fernandez from Guggenheim Securities. Please go ahead.

Oh, thanks very much for the question. So just very quickly, as we think about the select trial results in the wake not just of the presentation, but the very rapid filing. There have been a lot of questions around this being actually a cardiovascular medication and perhaps gaining access to CMS in that regard. Can you just talk about the prospects of that actually becoming reality? And then the second question is just on the oral emicretin and the initiation of the subcutaneous emicretin. Can you just help us understand, is this more of a supply chain-related decision, an IRA-related decision, or a decision related to some challenges with the oral formulation of amacretin? Thanks so much.

Thank you, Seamus. Doc, I'll give the first question to you.

Yeah, thanks, Amos. We do believe that there's an opportunity, a potential opportunity to use the medical exception process through the CV component, but let's wait to see.

Thanks, Doc.

Martin, any thoughts on amicretin? Yeah, on amicretin, our decision to go also into subcutaneous is actually caused by neither of the above of the three reasons that you mentioned. It's actually driven by the fact that we are learning that optionality is important for patients and prescribing physicians. in both diabetes and obesity. And we've seen a clear potential for amicretin to become both an oral but certainly also a subcutaneous offering. And therefore, in phase one, it is prudent for us to investigate both.

Thanks, Martin. And thanks, Simus. We're ready for the next question.

Thank you. We will now take the next question. And your next question comes from the line of Peter Fedult from Citigroup. Please go ahead.

Yeah, thank you, people at Old City. Two questions, Carsten, your favorite topics, supply and pricing. Just on supply, if we take the sort of run rate for GLP-1 volumes, your franchise in the U.S., and just extrapolate into 24, if nothing changes, I mean, there's going to be a big disconnect in terms of people's expectations for growth next year, and I think it'll be effectively flat. Now, I know it's going to improve next year, but can I just push you on when we might see the handbrake being released? I mean, logical thinking might be that at the time of the Monjaro launch, you'll want to be in a less capacity constrained position. So I know you can't go into too much detail, but just some incremental color on when we might see the handbrake being removed would be helpful. And then on pricing, if we do our value per script calculation, there's a huge jump from Q2 to Q3, and you've called out gross-to-net adjustments. We know that commercial mix has improved, but just making sure, is this a sort of high-water mark, a one-off in terms of value prescription? In terms of baselining and thinking going forward, can we use the value prescription in Q3 as a baseline, or is it artificially high? Thank you.

Thanks, Pete. Kasten Supply going into 24, and value prescription.

Pete, thank you for those, my favorite topics. So I would say, first of all, with the guidance for the full year this year that has a midpoint of 35% sales growth and accounts exchange rates, at least in the NOVO setting, it feels like we have released the handbrake and moving at very high pace in terms of growth rates. At least it's the highest in the history of the company. But that said, and extrapolations into 2024, I would say, first of all, we're clearly pursuing growth strategy based on the innovation. We have shown that we have the innovation platforms, especially in Ocempic and Vigovi, to drive growth this year and clearly also next year. So not teaching you how to extrapolate, but if you extrapolate our implied Q4 sales growth based on our guidance, then you actually get to a sales growth number next year in the double digits, which is actually not that far away from where consensus is currently. So I do believe that we're scaling very fast. And then specifically on Vigovi and any handbrakes there, then what I would say as to 2024, is that in 2024 we will be delivering significant step up in volumes to the U.S. market compared to 2023 as we did from 22 to 23. And then to pricing questions, as we've said on numerous occasions, the appropriate way of looking at net realized pricing in the U.S. is to look at the year-to-date numbers So most contracts are contracted on an annual basis. And the tricky part is the lag effect between when a script is written and then we receive the rebate claims from the payers. And there's just a lag effect of several months. And that's why in reality Q3 is the first point where we see how the channel payer mix tool is falling out for 2023. So I wouldn't use Q3 in isolation for anything forecasting-wise. I would recommend you to use year-to-date Q3 as a starting point. Thank you.

Thank you. We're ready for the next question.

Thank you. Your next question comes from the line of Mark Purcell from Morgan Stanley. Please go ahead.

Thank you very much for taking my questions. The first one on GLP-1 and higher doses. at least starting higher dose trials for Ticepatide. You have 8 and 16 milligrams coming through by the end of this year. Can you help me understand your expectations there and the importance of increasing your dose where the pivotal trial at 7.2 will read out late next year? And then secondly, in terms of the PEN platform leverage, we estimate that about 100 million GLP-1 PEN units are going to be sold by Novo in 2023 for GLP-1s, that is. The majority is the FlexTouch platform with a 3ML platform. So will you use those two platforms to launch with Gove in the US, and if not, why not?

Martin, the first question for you. GLP-1, higher dose considerations?

Yeah, absolutely. Thank you for that question. So you're absolutely right. We're investigating 8 and 16 milligram in diabetes, but we're also investigating 7.2 milligram in obesity. The purpose is obviously to assess whether we we can achieve an even higher efficacy without compromising on safety. Our models suggest, in particular in the obesity space, that a higher dose could potentially be associated with an even greater weight loss without having to compromise on safety. And being diligent, we want to assess this.

Thank you, Martin. And if I understood your question correct, Mark, then the question was whether we leverage our FlexTouch platform also to launch Vigo in the U.S. in the FlexTouch device. But last, maybe to you, any strategic considerations on our device platforms?

Yeah, Mark, thanks for the question. I'll just say that we have a situation today where we have a number of device platforms inside the company. One using outside vendor and technology. So that gives us flexibility, and it's actually part of fueling the growth today that we can flex this. So I'll not go into specific speculation about what we use of device per market, but we see that it's a strength that we can flex between different presentations. And we see today that it's really the, you know, the efficacy of the molecule that drives that. So that gives quite some flexibility in how we go-to-market country by country and strategic flexibility on our side. Thank you. Thank you, Lars.

Next question, please.

Thank you. Your next question comes from the line of Emily Fields from Barclays. Please go ahead.

Hi, thanks for taking my question, LS2. One, just on the step nine osteoarthritis study, I believe that this is not large enough to be added to the Wigobi label. So if this were to be a positive study, what would be your next steps plans? And then just on anti-obesity medications and muscle loss, we've seen competitors more explicitly make efforts in R&D for compounds that could preserve lean mass over fat mass and overall weight loss. I was wondering if you could just give an update on where you stand on that within your R&D portfolio. Thank you.

Thank you. Emily, Martin, two for you.

Yeah. So specifically on the osteoarthritis trial, you are right. It's not the biggest trial. I think it's too early to speculate whether that will have an impact on a label. It's very, very clear that for us it's also guiding for future clinical activities, specifically maybe for Cagpacem and Micretin or our GLP-1 GIP combination. So it has actually two potentials, both to serve for information specifically for Wigoe, but also to guide us for future activities.

And the second one, Martin, obesity and research and development focus on muscle loss versus... I think this is a relevant point.

It's also a focus of ours. With current treatment, specifically with GOI and Saxenda, we actually see a reasonable preservation of lean body mass given the broader weight loss. But it has to be a focus area, and you'll probably see also in our pipeline without going into details, maybe even quite soon, assets that could lead to a preservation of lean mass.

Thank you, Martin. Thank you, Emily. We're ready for the next question.

Thank you. Your next question comes from the line of Simon Baker from Redburn. Please go ahead.

Thank you for taking my questions. Two, if I may. Firstly, on China. So growth looks pretty good over there. But I just wanted to give us an update on the impact of reduced access to Chinese hospitals on how that is affecting things, if indeed at all. And then secondly, on semaglutide, there was an interesting publication journal preprint on Monday looking at its use in alcohol use disorder, which looked very impressive. It would be interesting to get your thoughts on the potential of that indication in your opinion. Thanks so much.

Thank you, Simon. So, Camilla, the first one to you. Do we see reduced access to Chinese hospitals?

So in general, we are working across the country, and we also have access to hospitals in general. What we do see in China is an effect of the VPP, of course. That's what you mean, the insulin sales results. And that is also, when you look at an overall IO business point of view, that is what is actually dragging down the overall IO insulin growth. But in China, OCEMPIC is going really well. We have a great momentum of OCEMPIC that we've had since the launch and since the inclusion on the reimbursement list and that can drive growth in China.

No major issues with access. Martin, the second question.

Yeah, thank you very much for the question. We've also seen these observational studies and being intrigued by the fact that GLP-1 may have a place in also treating alcohol abuse, does actually lie within the mode of action of GLP-1. From our perspective, and also considering the timing, the combination of two mode of actions that could potentially also help here, namely GLP-1 and amylin, so specifically from our perspective, Kagrisema, is probably the more attractive and efficacious approach. So if you see us going into That space, that would be with Kekusema and not with Somatilside alone. Thank you, Martin.

Thanks so much.

We're ready for the next question.

Thank you. Your next question comes from the line of Naresh Kauhan from Inton Health. Please go ahead.

Hi there. Thanks for taking my question. First one on Wigovi US market access. We're hearing that a growing number of employers are having to opt out, having already opted in because the demand's been too high. Can you just help us to get a sense of how big or small an issue this is? And obviously, next year, that's probably potentially likely to increase when supply resumes and demand increases. And secondly, on supply, If I look back at when you seemed to be relatively comfortable with the demand, we were at about 30,000 new pet starts a week in the U.S. Is that a fair starting point for the ability to supply and growth from there going into 2024? Thank you.

Thank you, Nares. So, Doc, any updates on U.S. market access for Vigovic?

Yep. Thanks, Naresh. And overall, we're very pleased with the broad market access that we have for WGOVI. Most major PBMs and health plans are covering it, and that derives around 50 million people with obesity now being covered. And importantly, we're seeing about 80% of the patients that are paying less than $25 for WGOVI. Now, to your question specifically around employers, we do see some opt-outs, but we're seeing overall, more opt-ins than opt-outs. So directionally, we're heading in the right direction. And our focus will be continuing on securing employer coverage as well as stronger access for AOMs overall.

Thank you, Don. Carsten, any additional comments on the GOE supply going into next year?

Yeah, so I think the way to look at the U.S. GOE supply is a starting point of... of currently around 100,000 TRX per week according to IQVIA and then we have the five different load strengths and of course the magic is to get that split right into the link into manufacturing and then we scale from there and as we've said in prior quarters then this is something we do dynamically so don't look for a hockey stick it's a gradual process where Of course, we'll be starting at the lower doses and then increasing them as we move forward. There are different data sources in terms of new starts, so I'm not really sure what your data source is, but I think my data point is lower than yours in terms of number of new starts per week. Thank you, Carsten.

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

Thank you. Your next question comes from the line of Florence Espedes from Societe Generale. Please go ahead.

Good afternoon. Thank you very much for taking my questions. Two, please. First one on VigoV in Europe. Have you started to talk to the payers in Europe as you have already submitted the data to the European authorities? And do you believe that you will need to show a statistically significant benefit on the cardiovascular best presented at the AHA next week. And my second question is on Ozempic, following the flow results. How would you position the product on this population as we already have products available to treat these patients, notably the SGLT2? And it seems that in the trial, 15% of the patients are under SGLT2 treatment, so some color on this one would be helpful. Thank you.

Thank you, Johan. Camilla, maybe the first one for you in terms of MIGOBI outside the U.S.

Yeah, so in terms of, I believe the question was whether we need statistical significance. I would just say, you know, now we await the presentation at the conference, but in general, there is a great interest in in Vigovi and of course also the benefits in Celec. So we will get back to that, but we do see authorities interested in bringing up the discussion again with us already at this point for reimbursement of Vigovi. And just a reminder, we have reimbursement of Saxenda already in close to 15 countries around the world, and of course here we are talking a step up in treatment.

Thank you, Camilla. Martin, any medical perspectives on flow and the population that we potentially could treat?

Yeah, absolutely. Maybe just also calling out on Select, the study was designed to have a power specifically for the primary endpoint. So assuming statistical significance for the secondary endpoints is to be seen as an upside and not as something to be expected. I just want to call that out. But obviously, please tune in on what we can present on November 11 in Philadelphia. Specifically on flow, I think there's a tremendous unmet need in the diabetes space. It's also very, very clear that not all patients today who suffer from diabetes and chronic kidney disease are on an SGLT2 or on a GLP-1. And therefore, to have data to suggest that we can actually decrease, and again, we haven't seen the data, but we can potentially decrease the kidney disease deterioration by a substantial number on top of standard of care, including SGLT2s, is a really, really attractive offering. And it will allow more patients in need to get on SGLT1.

Thank you. Martin? Thanks for the question, and we are ready for the next question.

Thank you. We will now take the next question, and the question comes from the line of Richard Foster from J.P. Morgan. Please go ahead.

Hi, thanks for taking my question. A question on the European rollout of Wagovi first. Obviously we know in Denmark in May there was a substantial demand for Vagovi in about 1% of the population. So I was wondering how that has developed since then, both in terms of volume and how you're seeing patients staying on the drug through Denmark, given it's an out-of-pocket market. And then the second question is on your KP Bioscience product. Just wondering how that differentiates from other MR antagonists, particularly Corendia from Bayer, but there are also others in development from AstraZeneca, etc. Just your thoughts on how this is different. Thanks very much.

Thank you, Richard. Camilla, the first one to you, Vigoli, roll out in Denmark.

In Denmark, we see a continued interest in Vigobi, and Vigobi continues to perform very well. and it is more than 1% of the population at this point in time. In terms of how many stays on the product, we also have, it's too early to give you exact stay time numbers, but we do have, I could say, anecdotal evidence that there is a high number, a very, very high number of the people that stay on the product from the beginning of the year when the product was launched.

Thank you, Camille. Martin, reflections on osedurin?

Yeah, absolutely. So what we've seen with osedurin is a molecule with a very high affinity for the receptor and also a very high half-life. That actually means that we expect to see differentiation not only on efficacy, but it also appears to have a potential upside on the safety side, specifically on hyperkalemia. So we do expect to see a differentiated drug in this case.

Thank you, Martin. Thank you, Camilla. Thanks, Richard, for the question. We're ready for the next.

Thank you. Your next question comes from the line of Peter Welford from Jefferies. Please go ahead.

Hi, I hope you can hear me. I've got two questions. Firstly, if I could come back to the gross margin. I appreciate the commentary year to date, but in the third quarter, it seemed to trend down quite a bit, which I guess is somewhat unusual given the quite significant improvements we saw in the gross to net in your most profitable market for both Wegeby and Zempix. So can you just talk a little bit about in the third quarter what the incremental costs or whether perhaps any write-downs or something of inventory or something that could potentially depress the gross margin in what would normally be a more profitable quarter? And then secondly, just coming back to the comment that was made on stay time, but thinking about it a different way, which is in the past you cited for Saxenda that around 25% or more of patients are on the drug for at least a year, and most of those are treated by obesity experts. I appreciate it's still early for Wegevi to necessarily give comments on the U.S. for stay time, but can you sort of talk about whether you're seeing different trends than those of Saxenda, both in terms of the obesity experts versus those aren't, and also the number of patients, perhaps, of reaching a year at this point? Thank you.

Thank you, Peter. So, first over to Carsten on the gross margin, and then later, Doc, on what we see on stay time in the U.S. for the goal.

Peter, well spotted gross margin Q3. And just a word of caution to begin with, looking at gross margins at a quarterly basis is always tricky due to fluctuations over the year. But if I am to comment specifically on the quarter, then at constant exchange rates, the gross margin is flat compared to last year. So the decline compared to last year is FX driven. And then you could say, why is it then not increasing compared to last year, given the gross net adjustment and the product mix? And there are basically two pieces to it. First of all, remember the starting point, our gross mining is already high at 84% or so. And then secondly, what is different compared to prior years is that the amount of capex we're running these days. And just from an accounting policy standard point of view, we are realizing more costs related to our capital expenditure projects into the P&L. So it doesn't all go to the balance sheet. Some of it also hits the P&L. And that is basically what is offsetting the benefit from product mix.

Thank you, Karsten. And over to you, Doc, any insights on stay time on Mugabe in the U.S. so far?

Yeah, Peter, thank you, because generally you're right. We expect to be able to say more about stay time in 2024. Obviously, it's been difficult given the few time periods with unrestricted supply, but what I can say is based on early data from multiple sources, persistency on Mugabe, it looks better than sexenda with fewer patients dropping off in the first 12 months, but we'll have more to say in 2024.

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

Thank you. Your next question comes from the line of Matthias Heggbloom from Handelsbanken. Please go ahead.

Thank you so much. R&D question. In the scenario that both high-dose SAMA at 7.2 milligram as well as Cagri-SAMA works in phase three, can you help me think about the regulatory pathway for a fixed-dose combination with Cagri-SAMA using the high-dose SAMA? and whether that would require a new Phase III or if a small bridging study would be enough. Thanks so much.

Thank you, Mathias. Martin?

Yeah, absolutely. Thank you for that question, Mathias. That would most likely require a reasonably – I think we can bridge some safety data, but we would still have to establish both safety and efficacy. So we actually see that as a potential opportunity, but we see that as a lifecycle management activity.

Thank you, Martin. And we have time for two more set of questions. So we're ready for the next one.

Thank you. The next question comes from the line of Emmanuel Papadakis from DB. Please go ahead.

Thanks for taking the question. Hopefully you can hear me okay. Maybe a follow-on for Carsten on supply. Carsten, you said you're going to, quote-unquote, significantly increase supply in 24 versus 23, as you did in 23 versus 22. Eyeballing data, it looks like there was approximately a five-fold increase, 23 over 22. So are you telling us you're going to have another five-fold increase in 2024? And if not, can you help us with the approximate quantum? And then a follow-on also on flow. Martin, you were helpful enough on select to give us an indication that the contribution of components had been approximately equal, well-balanced in select. Is that also the case in flow, or how should we think about the contribution of the composite endpoint components, and what should we expect in terms of labeling? Thank you.

Thank you, Immanuel. First, Karsten, any additional supply?

Yeah, and thanks for triangulating that way around, Immanuel. I'd love to give you a further flavor, but as you know, we're guiding for next year come our full year results late January. So that's why we'll be doing our financial guidance for 24 and giving too much granularity into scaling of Vigubi gets too close to guiding for next year. So I'm sorry, but I'll have to try that at a later point in time. Thank you, Karsten. Martin, can you share more from Flo?

I think it's a great question and I maybe just want to clarify. I don't think we've seen equal contribution from the three modern components. We just say that they all contributed and obviously again we have to await November 11 until we see the full data set. Specifically for flow, I would really love to be able to answer you, but due to the nature of an interim analysis, we've not seen the data. So for better or worse, I know absolutely no more than you do at this point, so I can't speculate.

Thank you, Martin. Thank you, Emmanuel. Then we'll take the last set of questions.

Thank you. Your last question for today comes from the line of Michael Novot from Nordea. Please go ahead.

Thank you very much. Just on the cost side, Can you please go through some of the dynamics here in Q4 in order to make the cost go up? As I see it, it needs to go up at an extreme pace for Q4. Are there any specific investments that you're able to take early or anything like that prior to going into 2024, just to understand your EBIT guidance?

That's over to you, Carsten.

Yeah, Michael, thanks for that question. When I look at our total operating cost growth in the fourth quarter, then it's actually not markedly different compared to year to date. So what you should be expecting is a continued, what I call high level of growth in R&D expenditure around the 40% mark and some 20% plus growth.

on on s d expenditure and and the competitive gross margin also in the fourth quarter so so in reality no no big swings in in the fourth quarter at constant exchange rates thank you carsten thanks for the the question michael and this concludes the q a session thank you for participating and please feel free to contact investor relations in case you have any follow-up questions before we close the call i would like to hand over to you last for any final remarks

Yeah, thank you, Daniel. I'd also like to thank you all for participating today. I hope it's clear from our comments that we're very pleased with the strong momentum we have in our business, also underlined with the raised guidance for 2023, and many questions on the coming years, not least the coming year. But we are really focused on pursuing an innovation-based growth strategy, and I feel confident in our ability to scale supply to support that. We're really excited about flow, underlining the attractiveness of semaglutides, and we are equally excited that we soon can disclose what Select has to show at the upcoming conference at AHA in a matter of a few days. So thank you all. We appreciate your time today, and with that, we'll close the call. Thank you.

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