Q4 2022 Novo Nordisk A/S Earnings Call
Okay.
Good day and thank you for standing by welcome to the Q4 2020 to Novo Nordisk earnings Conference call.
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Please be advised that today's conference is being recorded I would now like to hand, the conference over to your speaker today Lars for got Jorgensen CEO . Please go ahead.
Thank you operator, welcome traditional Nordisk earnings call for the full year of 2022 and the outlook for 2023.
My name is Joshua Garth Jones, and I'm, the CEO of Novo Nordisk.
Mr de Jager executive Vice President and head of commercial strategy and corporate affairs.
Understood.
Extensive vice President North America operations.
We expect device personal health development margin heart lung and find the Chief Financial Officer, Karsten Munk Knudsen.
All of us will be available for the Q&A session.
Today's announcement and the slides for this call are available on our website, nor nauseous Dot com. Please note that the call is being webcast live and a recording will be made available on our website as well. This call is scheduled to last one hour. Please turn to the next slide.
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 slide three.
As always our neutral advise you that this call will contain forward looking statements, which are subject to risks and uncertainties that could cause actual results to differ materially from expectations.
For further information on the risk factors. Please see the announcements for the full year 2000.
And the slides prepared for this presentation. Please turn to the next slides.
And 2022 we delivered double digit sales growth and operating profit growth.
We need to make progress on our strategic aspirations I would like to go through the highlights before handing over the word to my colleagues.
We continue to make progress across all dimensions of purpose and sustainability carbon carbon emissions decreased by 29% compared to pre pandemic levels in 2019.
We continue to reach even more patients and patients living with diabetes.
Compared to last year.
In line with our aspiration of being sustainable employer, we expanded the number of women in leadership positions to 39% compared to 36% in <unk> in terms of volume.
Within R&D, we are pleased that we now have initiated the first two phase one times based on the dose or not.
On a technology platform that we acquired in 2021.
Looking back at 2022, we have seen exciting trial readouts across all of our therapy areas and in 'twenty.
Look forward to having an equally exciting year.
Martin will come back to this in our own R&D milestones later.
In 2022, we delivered double digit sales growth, reflecting strong commercial execution across geographies and all therapy areas by both operating units contributing to sales growth, we saw particularly strong sales growth in North America, driven by accelerated demand policies one treatments.
I'll start this and obesity.
Can we not talk will go through the details per therapy area later.
Customer goes through the financials, but I'm very pleased with the sales growth of 16% and operating profit growth of 15% in 2022.
Lastly, I have a brief update on our strategic aspirations within financials, we have achieved for U S expiration of converting 70% of sales two products launched since 2015.
<unk> sales growth has in the last couple of years surpassed expiration of 6% to 10% growth.
Consequently, we have decided to remove these retail expirations going forward will be focused on and committed to delivering solid sales and operating profit growth.
I'll give the word to Camilla on update on execution.
Thank you Lasse and please turn to the next slide.
Our class mentioned, our 16% sales growth for the full year of 2022 was driven by both operating units with North America operations growing by 21% and international operations growing 13% with strong sales growth has unfortunately resulted in periodic supply constraints and related jobs charges notifications.
A number of products and geographies.
Our tier 140.
42%, driven by North America, growing, 36% and international operations growing 57%.
Insulin sales decreased by 11% driven by a 7% decline in international operations and a 21% sales decline in North America operations.
The U S insulin sales declined by 22%.
This was driven by lower realized prices as well as the decline in volume.
<unk> to 2020, one the U S insulin volume market declined by 3%.
Furthermore, insulin sales in international operations were impacted by the implementation of volume based procurement in China, starting in May 2022, and know what days in EMEA.
Obesity care sales grew by 84% overall in international operations sales grew by eight 2% and in North America operations obesity care sales grew 85%.
In the U S D to C cafes grew by 90%.
Rare disease sales grew 1% driven by a 5% sales increase and international operations offset by a 5% decline in North America operations.
Please turn to slide six.
Our 14% sales growth within diabetes care continues to be higher than the overall diabetes market.
That means we have improved our market share by one eight percentage points to 31, 9%. We continue to be on track to reach one third of the diabetes value market by 2025.
This increase primarily reflects one market growth as well as share gains in both operating units.
Please turn to the next slide.
International operations diabetes care sales increased by 10% in 2022, driven by tier one sales growing by 57%.
<unk> remains the market leader in international operations with a tier one value market share of 64%. This is driven by share gains across geographies with simply continues to expand its <unk> one market share leadership in international operations with around 43% last year.
<unk> class growth is more than 50% <unk> penetration remains slow at around 5% of total diabetes.
We felt with sales more than doubled compared to 2021.
The growth was mainly driven by new launches and increasing volumes, making rebels as the second largest growth contributor in 2022 after that with sandvik.
The increased momentum in international operations is driven by launch of <unk>.
Markets, such as Japan, Italy, and Spain.
And with that I will hand over the word to Doug. Thank you for that update Camilla. Please turn to the next slide.
The U S. GOP, one market volume grew by around 50% comparing the fourth quarter of 2022 to the fourth quarter of 2021.
The recent competitor launching GOP one has supported the continued acceleration in market growth and from an MBR ex perspective, we can we continue to see all time high levels of new patients starting on our portfolio of GOP when products towards the end of 2022.
Measured on total prescriptions Novo Nordisk has maintained its market share leadership with a market share of more than 50%. Please go to the next slide.
Obesity care sales increased by 84% with 85% growth in North American operations, and 82% and international operations.
The global branded obesity market expansion continues with a volume growth of more than 50%.
We are excited that will go away is now launched in Denmark, and Norway. The first to markets outside of the U S.
But we also remain encouraged by the performance of <unk> in international operations.
Region EMEA is the key growth driver with 96% growth in 2022.
In the U S obesity care sales grew 90% with both will go the <unk> contributing to growth.
All dose strengths of <unk> were made available in the U S. Again in December of 2022.
And in only a few weeks, we'll gobi prescription trends have accelerated and already reached all time high levels.
The uptake underlines this significant unmet need for patients with obesity.
Many patients have been waiting for all doses that will go away to be available again, which has created a pent up demand.
We are now looking forward to continuing the relaunch of <unk>.
Now back to Camilla for an update on rare disease.
And next slide please.
<unk> sales increased by 1% in 'twenty. Two this was driven by a 5% sales growth in international operations.
Set by a 5% decline in North America operations.
We have blood disorders grew by 7% driven by Nova <unk>.
<unk> as well as the launch products <unk> and <unk>.
Specifically hemophilia a products grew by 6% <unk> sales by 16% and over 700 by 6%.
We're endocrine disorder sales declined by 6% the declining sales were driven by international operations, decreasing 1% and by North America operations decreasing by 18%.
The sales were negatively impacted by lower realized prices.
As well as the sky constraints in the fourth quarter 2022.
And now you're matching fund update on R&D. Thank.
Thank you Camilla, please turn to slide 11.
Firstly, I'm very happy to be able to share that we have initiated two phase one trials for the niche. This is particularly exciting because the two assets are both based on the small interfering RNA technology that we acquired as part of the the sirna acquisition back in 2021.
Both trials, a 52 week trials and target elixir and Marc one respectively.
Both assets for long term Nash resolution and fibrosis improvement with monthly or even less frequent dosing.
The objective of both phase one trials is to investigate the safety Tolerability and PK PD profile of each asset.
Respected.
The fact that we have now initiated these trials is a testimony to the successful integration and fast progression of the RNA based research and development in Illinois.
As mentioned at our capital market day in March of last year, our ambition is to generate an annual average of free first human doses across therapy areas based on the RNA technology over the next 10 years.
Please turn to the next slide.
We're looking forward to a very exciting 2020 free with many important phase III trial readouts across all therapy areas I would like to briefly go through a few highlights.
We then have to diabetes, we expect to see results from the phase III trial pioneer plus once daily also magnified 25, and 50 milligram respectively.
During the first half of 2023.
The primary endpoint of the 68 week trial is to confirm superiority of <unk> 25, and 50 milligram versus also magnetite 40 milligram on <unk> reduction.
The expectation is to reach an efficacy and safety profile comparable to that of our shipping.
Also diabetes, we expect to initiate the phase III program bouquet for Sema in the second half of 2023, following the very exciting phase two results that we shared last year.
Furthermore, we have completed the 26 week safety extension phases for the onwards, one at six trials with insulin <unk>.
The results confirm that <unk> has the potential to be the ideal starter insulin for people with type two diabetes.
While there's still more assessments to be done in type one diabetes.
We expect to submit internal architect for regulatory review in the first half of 'twenty to increase.
And implicitly we look forward to sharing the phase III results from once daily oral Tomatoes at 50 milligram.
Well, our expectation is to reach a level of efficacy and safety comparable to data equally.
Pending the results this would add to our portfolio of PC to treatments to address the significant unmet need that remains for many patients with obesity.
Furthermore.
We look forward to sharing the results from the ongoing select cardiovascular outcomes trial in the middle of 2023.
Within rare disease, we're looking forward to a decision from regulatory authorities on once weekly Sequoia for the treatment of growth hormone deficiency.
This will offer a reduced treatment burden compared to daily or retrofit and the device that is easy to use for patients.
Finally, we expect to initiate a phase <unk> trial with <unk> for the treatment of heart failure with preserved ejection fraction in the first half of 'twenty to inquiry.
Altogether, we're looking forward to a very excited again with clinical trial initiations as well as results across all therapy areas with that over to you guys. Thanks.
Thank you Martin please turn to the next slide.
In 2022, our sales grew by 26% in Danish krone, and 16% at constant exchange rates driven by both operating units the <unk>.
Gross margin increased to 83, 9% compared to a three 2% in <unk> 'twenty, one driven by a positive product mix due to increased tier one sales a positive currency impact and productivity improvements.
Lower realized prices, particularly in the U S and China, partially offset these effects.
Sales and distribution costs increased by 25% in Danish krone, and 16% at constant exchange rates.
The increase is driven by launch activities and promotional expense.
<unk> and <unk> as well as market development activities for obesity.
The cost increase is reflecting lower activity levels in 2021 due to COVID-19, and higher distribution costs.
Research and development costs increased by 35% in Danish krone, and 29% at constant exchange rates.
The increase is driven by higher clinical activity levels within other serious chronic diseases and tier two one.
Well see operating costs and amortization related to the acquisition of <unk> Pharmaceuticals.
We acquired <unk> sirona in the fourth quarter of 'twenty one.
Administration costs increased by 10% in Danish kroner, and 6% at constant exchange rates.
Operating profit increased by 28% in Danish kroner and by 15% at constant exchange rates.
Net financial items for 2022 showed a loss of around 6 billion Danish kroner compared to a gain of around <unk> 4 billion in 'twenty one.
This mainly relates to losses following the appreciation of the U S dollar as reflected in the favorable currency impact on operating profits.
As per the end of December 'twenty, two a positive market value financial contracts of approximately 1 billion Danish kroner has been deferred for recognition in 2023.
Yes.
The effective tax rate in 2002 was 19, 6% compared to 19, 2% in 'twenty one.
Mainly reflecting nonrecurring impacts from acquisitions.
Net profit increased by 16% and diluted earnings per share increased by 18% to 20 for Corona and 44 yeah.
Free cash flow was $57 4 billion Danish kroner compared to $29 3 billion things corner in 'twenty, one supporting the strategic aspiration to deliver attractive capital allocation to shareholders.
The cash conversion in 'twenty, two is positively impacted by timing rebate payments in the U S, including provisions related to the revised 340 <unk> distribution policy.
Income onto the <unk> B program has been partially recognized.
Please go to the next slide.
In <unk>, we expect to increase our capital expenditure to around 25 billion Danish kroner.
This is a significant step up compared to <unk> 22, and reflects the innovation based growth strategy that we're pursuing in novo Nordisk.
The increase in capital expenditure, mainly relates to investments in additional capacity for active pharmaceutical ingredient production and fill finish capacity.
Current and future injectable and all products across therapy areas.
In the coming years, the capital expenditure to sales ratio is expected to be low double digits.
The investments will gradually add capacity flexibility and resilience in our manufacturing setup, while also accommodating potential upsides to forecast.
Next slide please.
Yes.
In <unk>, we returned more than 49% in Danish kroner to shareholders via dividends and share buybacks.
<unk> has consistently returned its free cash flow business through both share buybacks and dividends.
At the annual General meeting on March 23rd transparency tree.
The board of directors will propose a final dividend of eight kroner and 15 era for children trying to try to dividend of 12 Corona and fortier.
A 19% increase compared with <unk> touch one, making it the 27th consecutive year with increasing dividends.
In addition towards the dividend, 24% in Danish kroner was used for repurchase of shares.
Portrayed statutory the board of directors has approved a new share repurchase program of up to 28 billion to be executed during the coming 12 months next.
Next slide please.
We continue to our strategy.
Vinson and expect the sales growth to be between 13% and 19% at constant exchange rates.
This is based on several assumptions as described in the company announcements.
The guidance reflects expectations for sales growth in both international operations and North America operations, mainly driven by tier one based treatments for diabetes and obesity care.
The sales growth within diabetes and obesity care.
<unk> to be partially countered by declining sales in rare disease due to supply constraints.
The guidance ranges for sales and operating profit growth reflect the level of volume growth of <unk>, one based diabetes treatments.
They also reflect the inherent uncertainty of the pace of obesity care market expansion. Following the relaunch of the Gulf and the U S and and expected gradual rollout in international operations.
The outlook includes an expectation of continued periodic supply constraints and the latest drug shortage notifications and twice the tragic tree across a number of products and geographies.
This is driven by higher than expected volume growth for tier one based products such as specific.
Temporary capacity limitations at some manufacturing sites.
We are gradually increasing our supply capacity.
We expect that operating profit will grow between 13 and 19% at constant exchange rates. This primarily reflects the sales growth outlook and continued investments in current and future growth drivers within research development and commercial.
Commercial investments are mainly related to the relaunch of the group in the U S.
<unk> market development activities in international operations, as well as promotional activities for <unk> and <unk>.
The acquisition of pharma therapeutics is negatively impacting operating profit growth due to higher operating costs and amortization.
Finally, the guidance also reflects inflationary impacts on the cost base.
Yes.
Given the current.
James rates, most notably a weakening of the U S. Dollar, we expect a negative currency impact for 2023.
Our reported sales are expected to be four percentage point lower at CER and operating profit is expected to be five kilowatts.
The negative currency impact on operating profit of five percentage points is partially offset by a net gain on financial items.
We expect that financial items will amount to a net gain of around $2 4 billion Danish kroner, mainly reflecting gains associated with foreign exchange hedging contracts.
Capital expenditure is expected to be around 25 billion in Danish krone and transfer entry as I outlined earlier in this presentation.
Our free cash flow is now expected to be between 60, and 68 billion Danish kroner, reflecting the sales growth and investments in capital expenditure.
That covers the updated outlook for Chinese tree now back to you for final remarks.
Thank you Carsten, please turn to the final slide.
We are very pleased with double digit sales growth for the full year of 2022 and that we continue to reach even more patients 'twenty to 'twenty three is truly significant year in history with Novo Nordisk as we celebrate our 100th year anniversary.
In this period, we have grown from a smaller things company into a global one delivered developing lifesaving medicines for millions of patients around the world.
In 2023, we look forward to continuing our focus on commercial execution, expanding our pipeline and investing significantly in the expansion of production capacity for current and future products.
So that we're now ready for the Q&A. We're currently ask all participants to limit yourself to one of.
Maximum two questions operator, we're now ready to take the first person.
Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
We will now take our first question.
One moment please.
And it comes from the line of Harry <unk> from Credit Suisse. Please go ahead. Your line is open.
Thank you very much for taking my question or just the the one on pricing. Please.
Our latest pricing data suggests that you've already taken a low single digit price increase in January across your U S portfolio. Despite the larger headroom for price increases this year with high CPI could you look to increase prices in the second time later in the year given the headroom for headroom full price increase.
And then just on your international operations as well there are a number of drug pricing reform being proposed across European markets. Do you anticipate that these changes could be material near term headwinds feel great and international operations. Thank you very much.
Thank you Harry So duck perspective on how we look at pricing in the U S. First.
Yes, Thanks, Eric for the question, Yeah, we had a.
Commitment back in 2016 around price and we've held to that commitment and I don't want to give any forward looking statements on price moving forward.
Thank you so on on.
On Europe .
We don't anticipate any single event to be to be mature we have over the years seen.
Various countries operating with the different reforms sometime.
Sometimes in the in the <unk>.
Soma something that looks more like a tax.
No.
We are used to operating in this environment and you should expect that for now our guidance incorporates what we anticipate in this.
Thank you Harry So next question please.
Thank you.
We will now take the next question.
And it comes from the line of Peter <unk> from Citi. Please go ahead. Your line is open.
Thank you Pete <unk> Citi two questions, Doug and committed firstly just in light of these U S. GOP one trends we are seeing the intense publicity and media coverage can you characterize how the recent pay discussions are evolving.
Any efforts to step up and restrict access more aggressively and can you provide an update on the $30 million commercial opportunity number that you provided the Q3.
And then July and cost and just if I could try my luck I would push you to better understand what is possible and what is not with respect to we go the capacity that you have in place for 2023, if I look at the Q1 trends were fast approaching 40000 weekly script script, right, which is implying annualized sales around $2 billion.
I know you've talked about pent up demand, but you are also going to stop promoting quite actively to develop the market. Further so just with that in mind.
Do you have the theoretical capacity in place to support <unk> being three to 4 billion dollar drug in 2023.
Asking for guidance, but I want to get a handle on what's possible and what is pure function in respect to the PC market potential this year. Thank you.
Okay.
Thank you Pete So talk first on.
First Utica one trends.
Payer discussions.
The patient access with us.
Yes, Thanks, Steve for the question and I would I would say that.
Certainly first thing to recognize is that the volume of prescriptions in the GOP. One category is still only about 10%. So theres a lot of runway. There secondly, what I would say is that the payers do take notice the categories that are growing this win is certainly growing at double digits.
But they also recognize the need for this product and again, it's only 10% of the prescription volume.
Did I Miss something within them.
So 30 million Oh, yes, I'm, sorry, importantly, we guided on in Q3 of $30 million. We're now at approximately 40 million lives. So its overall, 80% access and that equates to the effective access our number of lives is approximately $40 million and thats comprised of commercial Medicaid and some federal business.
<unk>.
Thank you Doug and cost.
And we go with capacity.
What we've seen in the market now.
Youre not going to tell the whole story.
And you say, yes.
It's of course.
A key question that we spent a lot of time on ultra internally to ensure that we're not disappointing our customers when we launch products in different markets and in my starting point to answering. The question is is the guidance I just covered before so so 13% to 19% top line growth guidance.
Surface.
Very competitive industry wise.
It is of course, very attractive and a large chunk of that growth comes from Colby. So we would not be able to get to this level of guidance without a significant step up in the Kobe.
<unk>.
And as I'm sure you can appreciate then then it's important for us to say that we can supply to our guidance. So both the top and the low end of the guidance. So that's what we commit to in terms of our Investor Communication then in terms of.
Additional scenarios then.
I would say is that that.
That 19% is another metric ceiling in terms of our guidance.
It's basically a function of products and geographies and timing.
And then yes, we continue to scale up manufacturing capacity of the Colby as you know.
One nine in house, we have one CMO up and running.
Full speed and we have one line on track to be online first half of this year and then another line on track to be get online in second half.
This year. So so we have significant step up in <unk> production capacity.
And then I'd say just at a final note of course, we have we do not have unlimited capacity and.
So trending on a vertical.
Correct.
The uptake is impossible and that's why we've been out saying.
Be careful with the first data points because they are.
They are impacted by the pent up demand that Doug was talking to.
So thank you to summarize clearly.
Significant addressable markets from it.
This is fundamental and also capacity coming in so we can we can go after that opportunity. So very encouraging indeed, thank you. Peter next question. Please.
Thank you.
We will now take the next question.
And it comes from the line of Mike <unk> from Cowen. Please go ahead. Your line is open.
Thank you for the questions I have two the first is on the select trial when taking interim looks at select does novo consider whether or not a futility analysis has been pre specified and presumably passed to be material information to be shared with the market. That's the first question and then the second.
Question is on the oral stomach <unk> readout, so when we see phase III obesity data for oral summit, we tied some of our consultants are expecting meaningfully diminished weight loss relative to injectables, if that ends up being the case what percent weight loss would still support commercial success. Thank you.
Thank you Michael I think margin dose are posed to you.
Yeah, absolutely so with regard to select.
As we already discussed we had one look.
Before the expected final outcome of the trial that was done by a DMC. So we're not privy to the data. The DMC is looking at the totality of the data.
There was a pre specification for when they could recommend to stop UCB.
Very convincing superiority for <unk> I E.
More than 20% difference between <unk> and placebo.
They've recommended us to continue the trial, which makes US believe that we are probably still in the realm of the 17% that we have sampled sized full.
But they look at everything and they can recommend to stop the trial should they feel to do so.
With regards to also magnetite posted in <unk>.
Diabetes and obesity the trials that are signed and the doses uptake.
We expect to get exposure similar to that of subcutaneous <unk>, both or simply to procure milligram and we go to four milligram every would therefore aim to have full efficacy and safety profile comparable to.
Those two formulations.
So a very effective product profiles from from what we can tell pharmacovigilance P&G perspective.
Thank you Martin and thank you Michael next question. Please thank you.
We will now take the next question.
It comes from the line of <unk> Jain from Bank of America. Please go ahead. Your line is open.
Hi, guys Sachin Jain Bank of America, just two very simple questions trying to get a bit more color on what can go right. So again I'll try my luck succession on DCT, you've noted inherent uncertainty.
Any commentary on pent up demand and capture the first data point. So I'm just trying to get a sense of how much of a bolus you think mix. We gave the first couple of weeks is in.
Best expectations for run rate once that bolus comes off.
And then secondly on the cost and we've discussed this a lot before but <unk> growth rate. It's the biggest delta to guide just from your perspective are you expecting a trend shift 323 from the existing 40% 50% Greg.
Because I don't think a continuation of existing trend doesn't seem to even in the top end of guidance. Thank you.
Thank you Sachin.
Try to address the first question.
We go we pent up demand and saw some of that in cost you can get some good <unk>.
We know.
For fact that patients have been lined up.
We have had some 60 plus patients.
Notice for one products, where it would be available.
That's quite unusual situation to have so we know for a fact that there is pent up demand.
It's really difficult for us to precisely to be honest.
We are obviously encouraged by the by the trend line we received.
But we also do believe that there'll be a normalization of that as we have.
Construe that.
That builders.
But it's really really difficult for us to give any meaningful sizing of it.
We would be looking at will be looking at the first couple of months I would say Q1 to be on stand on how that how that looks.
So.
But the first data points really exciting so.
We feel we're in a really really good place.
Cost not on growth rates I recall, we have been saying in prior years that we thought the growth rate.
Got.
It didn't happen so can you.
Crystal ball I don't know.
Yeah. Thanks for reminding me on that one.
I'd say for you know first of all that that's one of the reasons why we have a forward looking statement and in our announcements that is when we start to come down on future market growth rates.
And I would say secondly, that's also one of the reasons why we are rolling with an unusually broad guidance range. This time round.
When we look at the market growth I can start out with the U S. M. A T wise for <unk>.
Based on the latest monthly data points or at the latest data points or we are around 40% and that would be the same ex U S. Also so a global volume market growth and <unk>.
Around 40.
Being the latest data point, if we take shorter data points in the U S. We're closer to the 50% Mark.
Data.
And then in terms of what that implies going forward that's of course a function of.
Yeah.
All activities and competitive activities as well as supply capacity.
For the players in the market.
We have built our guidance.
On continued strong market growth.
Of course, I cannot give you.
Yeah.
Our assumptions, but more than to say continued strong market growth and th one in diabetes being a key growth driver for Faneuil Hall also in <unk>.
Maybe just adding that when you have a category, where youll have efficacious products competing against each other typically leads to market grows more than checking.
That's what we're seeing in type two diabetes and I think that's also what we would expect to see beauty category, that's efficacious products drives market growth more than shale play.
Thank you have a recession.
Next question please.
Thank you.
We will now take the next question.
It comes from the line of Richard Parkes from BNP Paribas. Please go ahead. Your line is open.
Hi, Thanks, very much for taking my questions just got a couple firstly on the Capex.
Expansion plans and just wondering whether you could give us any indication of what that increased capacity could allow you.
To meet in terms of market expansion kind of by the end of the deck.
Decades at least some kind of ballpark range in terms of kind of what market <unk> market expansion that would allow us to meet.
Supply fall would be very helpful.
And then secondly on Jan one and two trials of insulin Kodak.
I mean, playing Devil's advocate looks incrementally worse than previously I think.
<unk> won't see advantage no longer significant.
Significantly worse in both trials showing.
<unk> Harper sites.
Glycemia profile. So I'm just wondering how this impacts your expectations for that product segment, both profitability and commercial potential thanks very much.
Thank you Richard So let me try to give a perspective on Capex and then Marshall you can get.
On loss trends so far.
For us this.
True.
True creates.
Obviously.
<unk> future supply in a market that we believe will have a very attractive growth.
Create strategic flexibility.
And.
I think in the tier one space you will have.
The potential of having one of the biggest drop categories.
Never seen so really being able to build that capacity and serve the markets.
I believe creates.
Our competitive advantage.
Got it.
As is evident.
So.
We also have a pipeline products coming that will be using the same type of capacity.
So both from an API and Philippines perspective.
We have a lot of optionality in the footprint we have.
And being able to build this and drive efficiencies is something that's required to play longer term in this category. So you should take it as a sign of confidence.
And.
Trust in the existing business, we have in the pipeline we have will come.
The margin on what's.
The latest data on what does it mean for the potential yes, absolutely. So first of all it's important to recall that both onwards, one and onward six were originally 52% and 26 week studies.
This was the regulatory intent and in the 52 week period of the almost one study as you know we showed superior it will see reduction with a code and flat and stable.
Sorry hypoglycemia profile.
Then for regulatory reasons have to do extensions of those two studies in both type two and in type one diabetes basically because we need to show safety exposure. So the.
Focus of the extension is safety assessment and establishing the long term safety profile of <unk>.
In both type one and type two diabetes, if I stay with almost one over the additional 26 weeks, we actually saw a completely flat.
<unk> maintained glycemic control over time.
<unk>.
The statistical significance, but again in an open label extension you also lose a little bit of rigor and power and <unk>.
Sort of have to expect that but it certainly confirms the efficacy profile of insulin <unk>.
<unk>.
With regards to hypoglycemia first of all it's important to recall already at 52 weeks, we saw very very low hypoglycemia rates.
The numerical difference between the two incidents and that difference actually remained completely stable.
Throughout the trial.
So when we then.
Statistical significance, it's function of of more events, rather than all of a sudden seeing a difference between the two treatment arms and its also important if we put that into a clinical context to recall with the rates that we've seen in patients on insulin <unk> in this setting we'll have to wait two to three years to experience an event.
Not severe hypoglycemia.
And in that context, I also want to call out that the risk of having severe hypoglycemia with insulin <unk> in on which one was almost effects of tends to do then with insulin <unk>. So again confirming the safety profile of <unk> in the city. So we remain very very confident from.
Clinical perspective that that <unk> is the perfect starter insulin for type two diabetes.
And obviously, we're looking at on what six we had to in order to have some work to do with.
Type one diabetes and can milliken, maybe talk to the commercial potential of both obviously the type two and type one diabetes, yes. Thanks.
So based on the totality of the data that you just went through and from the total onwards program. We are very confident in efficacy and the safety profile of a once weekly I could take and also the potential to become standard of care and into the next choice for people with type two diabetes.
And once weekly insulin a false represents a whole new way of managing into being that keeps a lot of benefits to people as just described but also on the convenience path.
By the way also has a very positive environment to profile and.
Your question about type one diabetes, we would estimate that that is.
To the tune up potentially 7% of the total potential so that doesn't change our overall.
<unk> profile.
The aggregate potential.
Thank you Camilla. Thank you Martin a clear sign of our commitment durations of innovation.
So.
A critical area market part of the University of Illinois.
Still innovating in instrument and I think we can drive tremendous value for patients and physicians here.
100 years.
Thank you Richard next question please.
Thank you.
We will now take the next question.
It comes from the line of Richard <unk> from Jpmorgan. Please go ahead. Your line is open.
Hi, Thanks for taking my questions first question just thinking on Zen.
<unk> trends and how you see those going forward I think Q3, you were saying 40% of patients we're.
Naive to diabetes treatment of new patients going on.
<unk> how are you seeing the week IV relaunch impact that and how do you see sort of that.
<unk> situation.
Developing throughout this year with Z back into.
For supply.
Do you see that slowing down significantly because of like IV and then second question just going back to the back to the reimbursement and payers.
Obviously very good at getting 40 million.
<unk> how are the payers are treating.
The.
The patients maybe in the second maybe third year of treatment.
Patients get that loan if they reach levels as normal BMI or lose significant amounts of weight do you pay is then say well that's brilliant youre back to normal.
Come off the drug or how are they treating that in your reimbursement discussions thanks very much.
Thank you Richard first Camilla on the Olympic trends after recoveries in the market and Doug you can talk a bit to the.
U S perspective.
Yes.
Jonathan I think we see a continued.
Kris we see we are back to TRA extent MPLX.
Chip and when it comes to how much of a difficulty in sourcing that is from.
Diabetes, then we can we can say that the up lift in David go with trends in the U S is basically from primarily the tier two five at the standard dose and that basically means that these are patients that are new to <unk> treatment.
No.
Of course looking forward that means that we expect that there is.
Thank you for both of these two classes to coexist entered to continue increasing as we see both unexploited potential for tier one treatment in diabetes as well as in <unk>.
Doug on the Payer's perspective.
Multiple years of treatment.
Richard Thank you I think it's important to note that we're pleased with the level of access that we have today overall, 80% access as such.
Nothing that we're proud of it and the team has done a nice job effective access we've been hard at work at as you know this requires opt ins.
But again, we're pleased with the overall 40 million lives that can have access.
And how the payers to Korea, and there's no stopping rules in place today and I think the payers recognize that this is a chronic treatment and that's important for not only stakeholders payers, but all the work that we're doing is to realize this is a serious chronic disease and it's a chronic disease that needs long term treatment.
Thank you. Thank you thank.
Thank you Richard next question. Please thank you.
We will now take the next question.
It comes from the line of Michael <unk>.
Chen from UBS. Please go ahead your line is open.
Thank you two questions. Please Michael Eisen from UBS.
If I look at the value of the volume for Sandvik and balances in the U S does seem to be some trend changes.
Q4 may be authentic also in Q3 is that a fair reflection of the competitive rebating environment or should we not over interpret those trends as we think about.
The value to volume looking into 2023.
And then a question for Martin.
And at select isn't really something you can talk about actively anymore. It only really comes up in Q&A is that because in your mind. The relevance has taken a step back given that didn't stop at the interim and maybe on track for the 17% risk reduction, which which may or may not as meaningful as maybe a 25% would have been or.
Another reason why why you don't mention it as much anymore is that you have in the past. Thank you.
Thank you Michael So first karsten on value versus volume dynamics for different.
<unk>.
Yeah. So so Michael first of all to a true to queue for questions versus.
22 or then.
Then there are no changes vis vis 'twenty two so so as you know normally then.
24, then given the lack of scripts.
Could be true ups normally in Q4 that can impact the volume volume equation. So so I think the more appropriate way to look at it.
As for the.
And then I'd say on top of that.
Given the supply situation.
<unk>.
Yeah.
Might be also some noise in that calculation from from changes in inventory levels on Olympic specifically.
From there moving into <unk> into 'twenty.
<unk> tried to tree.
Why not guiding four 4 billion volume.
Transitory then I would say the dynamics remain the same.
<unk> 'twenty, two and 'twenty three.
Thank you Carsten.
So thats why im not talking about select so.
So first of all we're still very excited and very confident about select.
Issue is obviously that we have no results to share we have no data to share and therefore, the only thing I can call out.
You also saw in my part of the presentation is that we are looking very much forward to the data coming out around between two and three and that will be incredibly exciting. So we still think slate is very important and very time.
Thank you.
Thank you Michael next question please.
Thank you.
We will now take the next question.
It comes from the line of Hugh Alright.
Please go ahead your line is open.
Alright. Thank you hopefully you can hear me okay.
What lines of questioning please the first one on Capex.
The 2022 capital markets day, Youre slides implied capex for 2025 to be between 10.
Turning 15 billion Danish kroner.
What youre guiding to today implies capex close to 25% to 30 billion Danish kroner in 2025.
So just wondering if you can give us a sense for kind of how much of that doubling of Capex is active beauty to your perception of higher demand for the existing products. So we could be kind of rebalance says <unk>, one diabetes products well as soon as how much.
This is but the view.
Ensuring supply for the non diabetes non obesity product as that pipeline emerges over the course of the next kind of two to three years. So that's kind of question number one.
And then separately kind of coming back to our I, Quebec.
I would love your thoughts on how you obtained onwards, one and onward 60 extension data.
JJ is if a call the commercial positioning for this molecule from your perspective does this make it a bit more.
More often international product compared to a U S product given the convenience at play here or do you still think that existing room for you to have differentiated pricing for this molecule in the U S. Given the extension data. Thank you.
Thank you Kayla.
To your question so first cost on Capex.
Was <unk> and perspective on.
Sure.
System products.
New areas and then community can talk to the <unk>.
Sure.
Yeah. Thank you Ross so so so capex.
Of course quite a significant step up compared to our capital market Panther and again Thats why we are forwardlooking statements. So the world has the tendency to change. These days more unusual I would say this step up in capex to meet on a very positive background.
I can unfortunately, not to kind of separate how much. This work because we have both facing and.
Sure platform, so, it's a little bit trying to separate hot and cold water.
But I wouldn't say that.
Main drivers to it is first of all.
Stronger volume uptake.
Then what we had built into our initial capex modeling clearly and the stronger volume uptake.
<unk> impacts both on the API side of our currently.
Marketed products as well as fill finish that we're scaling more so than that then.
The claims.
And then as to the pipeline I'd say there are two main drivers too.
Step up and you can say in a historic perspective, where we were like a call it between five and 10% Capex to sales and now we're more in the call. It between 10 and 15% Capex to sales.
Our ratio.
Towards 25.
The Delta is that historically it was predictable peptide based capex investments, we are doing and we continue to do that through the volume scaling I just spoke about but on top of that we are building to cater for the all platform that just requires significantly higher amounts of API, whether it's for repair.
<unk>, all sema obesity or some of the earlier all compounds.
As you know we have all of them accretion in phase one and we haven't <unk> also so.
So clearly for the all platform and then for the non protein peptide platforms.
We're looking at.
What are we doing to cater for pipeline assets like my mate and since if they commit and our atti's as well, which is an antibody platform. So thats why were looking at it also expanding our capacity.
The monoclonal antibody side, so I hope that provides a little bit of color, but not fully able to.
Hollander Courtois.
Thank you Carsten.
Judging Python line leads to.
Need for Capex. So Camilla how excited are you on I predict based on the recent data.
Thank you last one as we just discussed before we remain very confident in the efficacy and safety profile of Iclusig that given as a once weekly insulin has the potential to.
To become standard of care.
People with type two diabetes.
And to your question. This has not changed our perspectives in terms of <unk> and rollout of aggregate, we remain equally confident in the U S and in the rest of the work for how this can help people with type two diabetes and keep in mind that the potential of this is that the basal segment approximately.
<unk> includes 30 million patients with a value of around 8 billion U S. Dollar silhouette, that's a place where we today have a market share and in the ballpark of one third and so there is ample potential to increase that.
Thank you Camilla.
<unk> next question please.
Kim.
We will now take the next question.
It comes from the line of Simon Baker from Redburn. Please go ahead. Your line is open.
Thank you for taking my questions here, if I may please firstly.
This relates to some earlier questions in recent years the increased spend in the U S. On June one was offset by lower spending on <unk>, which gave us an easy headroom to the category to expand I. Just wondering if you could give us an update on whether that is still the case.
Yes.
Lee.
You talked about the impact of so you touched on your acquisition on for Q R. J Im just wondering if you could give us an idea of how much of the additional R&D expense incurred was one off and how much is continuing thanks so much.
Thank you Simon.
If you have those data.
On top of.
What I would say is this that insulin as you saw as we just reported continues to be under pressure pricing pressure. So we're still continuing to take value there and as I mentioned earlier, we're still only approximately 10% of the prescription volumes coming out of <unk>. So we still think that there's opportunity there.
The DPP four class.
Price decline and soon to come <unk> will also free up some space to fund innovation.
No.
Yes.
On the Sirona.
One off vessels.
Continued.
Simon.
As we've been communicating all along in terms of how all our strategic resource allocation than the than we.
We are highly focused on advocating.
Additional resources towards R&D to expand and diversify our pipeline and.
<unk>.
As seen throughout the year with a significant step up in R&D spend.
Ending at 29% for the full year.
You're right that that in the fourth quarter, we have an extraordinary step up also when you do the quarterly trending.
It's not due to Australia, because we had that all along so it's basically due to two factors one being a.
I will say my name is.
Impairment on intangible assets and other piece being a cost related to the former therapeutic.
Transaction and restructuring and and as you recall.
And then he had novo.
We are reporting clean numbers, so where other companies would have seen some other companies have been adjusting this into core earnings. So adjusted earnings then.
Yes.
This is what you get.
As to a specific number.
For Q4.
In round terms between the two impairment.
Format.
Around half a billion and DKK.
Thank you very much thank.
Thank you Soma, we have time for the final question.
Q.
We will now take the next question.
It comes from the line of Mathias HUD loans from 101, Ken. Please go ahead. Your line is open.
Thank you so much two questions. Please firstly with regards to the decision in January to double down and initiate the high dose Sema obesity trial.
Curious to understand what triggered the decision why now almost one and a half yourself that they would go with apparel and why not there already and then secondly, with top line data from select data do you tend to see what's a reasonable timeframe from topline results on the data that can help facilitate reimbursement outside the U S a year.
Or is it a drawdown to given the size and complexity of the study.
Okay. Thank you Martin is so true margin.
Hydro assume obesity why why now.
Yes.
So first of all we see emerging data, suggesting that it is possible to Max out on <unk> biology.
It's very very clear based on some of our recent start is that we could potentially increase exposure, thereby.
Accruing more weight loss than what we see.
With the current doses.
Yeah.
This obviously, we have to pursue we have to investigate because there's an opportunity to without compromising on safety.
Accrue even more weight loss, specifically in new business and potentially also in Peru.
Improve glycemic control in diabetes.
We aim to conduct these studies very very fast and that also means that they will be available to patients if the data supports it.
Also distant future and still well within the relevant time period, possibly overtime.
Then there was a question on timeline from selects.
Data too.
Reimbursement support part without going into too much detail. So some of you have heard about us bragging about being able to to obviously handle our clinical data.
In a reasonable way.
I would not be looking at a one to two year timeline, obviously, we'll close down the study we will have the results around mid this year, we'll do a regulatory file and they will have the regulatory interactions and then it's in use of to Doug and his team to discuss with payers and others on how that will impact.
The dynamics.
Thank you Martin Thank you Mathias and thank you all participating in our earnings call.
Please reach out to our Investor Relations Officer, if you have more questions and look forward to meet you and talk to you.
Thank you very much bye bye.
That does conclude our conference for today. Thank you for participating you may all disconnect.
Yeah.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Okay.
Okay.
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