Novo Nordisk A/S (NOVOB) Earnings Call Transcript & Summary

Good morning, good afternoon to everyone. A warm welcome from my side, and thanks very much for joining us in the 11th installment of our CEO call series, and today, that's with Novo Nordisk. It's our great pleasure to welcome the CEO of Novo Nordisk, Lars Fruergaard Jorgensen, who is going to speak with us today. So before I hand over to Lars for a few introductory remarks, I'd just remind everyone that this is primarily a call for your questions. So I'll ask a few questions upfront, but please feel free at any time to ask a question. [Operator Instructions] With that, I'd like to say thanks very much to Lars for joining us today and hand over to him for a few introductory remarks. Lars, welcome.

Thank you very much, Richard, and thanks for hosting us today. It's exciting times in Novo Nordisk. We are making good progress on all of our strategic aspirations we have defined for 2025. We're operating within 4 quadrants. And on personal sustainability, I would just like to highlight that despite really, really strong growth in the company, we have managed to deliver on that at a decreasing CO2 footprint. So we're very encouraged about having kind of broken the curve there. We are also making progress on our efforts of adding value to society both in terms of reaching more patients, supplying an insulin that's temperature stable, which is a really, really meaningful product in some of the low-income countries where just cool train transportation is a challenge. We're also increasing diversity, which we believe is really important for long-term innovation. On the commercial front, we have stepped up our market share significantly, 1.5 percentage point. Over a year's time, we see a strong growth in our B2 business. We had a somewhat more modest development in our rare disease business. There's some timing element to that would be -- that's back in growth when we get to the second half of the year. Also exciting news on the innovation front. We might be talking about icodec later on in the call. We're very encouraged that we can bring significant innovation also in the insulin phase with a weekly insulin with a superior profile and a safe profile. And also recently, we have announced some very exciting data for concizumab in type 2 diabetes. So we believe we have the successor molecule for semaglutide. And all of this has translated into a strong growth where we have been able to -- for the second time this year, to increase our guidance for the year, increasing our outlook both on sales and profit were the 2 percentage points compared to our guidance after the first quarter. So we see a really, really strong momentum in our business and strong progress on both commercial and science fronts, and that translates into an attractive return to our shareholders. So with that, I will hand it over to you, Richard, for starting the Q&A session. Thank you.

Thanks, Lars. I thought, first of all, maybe we just talk about a little bit to do with health care reform. I know that's probably not a topic that's fully at the front -- forefront of investors' minds, but Novo has had to contend with a significant step-up in rebates over the years to fill the coverage gap. And therefore, I wanted to maybe start there and just think on the coverage gap, whether the provisions in the IRA are going to mean potentially a positive element for Novo before we think about the direct negotiation element. So maybe your thoughts on the reforms in the U.S., first of all.

Yes. No, that's a good point. There are 3 elements, the inflation cap element, which is a limited negative. As you allude to, pricing development in the U.S. has changed significantly. So we are not seeing massive price increases. So I don't think that's a significant element. And then in the Medicare coverage gap, the change means that besides capping expenses for the elderly population, which is clearly a benefit in terms of sentiment around having access to our products and what does that mean from an out-of-pocket point of view. There is also the direct benefit that we'll be picking up a significant smaller part of the cost in the coverage gap. And you might recall, a few years back, we guided that this was something that had a significant impact on our top line. So there is a positive there. And you can also reflect around what that means in terms of staying on medication as the cost pressure is somewhat alleviated for this population. But then, of course, as you also allude to the negotiation of drug price after certain years in the market and a shorter period for the small molecules, that's obviously a negative. Exactly how it will play out still remains to be seen. We have products that are somewhat higher rebated than other products. So it's still a bit unclear for us exactly how that will develop and how those, say, mandates will be directed. So a mixed impact with some clear positives, but also a negative further out and also potential impact on how companies decide to opt for innovation across molecular formats and size of molecules.

And when I -- when you talked, you mentioned icodec and concizumab, which are clear significant innovation to come from Novo. And I do want to delve into the details, but just from a practical point of view around health care reform, I think traditionally, Novo has filed all of its products under the NDA pathway. These 2 products are significant innovation and would be coming, and they aren't small molecules. So is it possible to change that profile -- that filing? So that the bill seems to make rather arbitrary delineation between small molecules and products approved under the BLA in terms of the time before direct negotiations? Just your thoughts there as it relates to Novo?

Yes. So there is some wording linking to the number of amino acids determining whether it's a small or large molecule. And so there are different approaches to how you seek approval of products. It's a bit too early for us to comment on what our strategy will be for the future. I don't think it's likely that you can change after you have gotten a product approved. You cannot swap between approved pathways, but there is a clear -- basically, difference whether you end up being categorized as a small versus a large molecule. So that's what I can say for now, but clearly, more attractive to follow the large molecule regulatory pathway from this particular perspective.

Okay. Perfect. And maybe just one other area of health care reform, and then we'll open the lines and I can already see one verbal question there. VBP in China has been -- well, actually, it's not really impacted your results at all relative to expectations and also super strong results. So -- but we have seen a negative impact on VBP in the second quarter on the insulin franchises. So the question is, what's -- how has that implementation been going? And how do you see the path forward in terms of the impact around VBP in China on the insulin franchise, and then maybe on other franchises after that?

Yes, it's a good point. It was a huge debate, say, last year, how that would impact our guidance. When you see our International Operations business growing 10% the first 6 months, that's actually a strong growth path to be on, despite the fact that you have this track from the Chinese business. Our Chinese business is declining by 5% in the first 6 months, so that's impacted by the VBP. The reason why it's not a bigger impact is that we have innovation being launched. We have Ozempic being launched in China now in the national drug list and doing really, really well. We also have Ryzodeg being covered and listed and doing really, really well. So it's still a market that's open for innovation. And when you bring our innovation to China, we can still see really attractive commercial opportunities. So like I would say, also the U.S., strong ability to launch products and have an uptake. But of course, when you have -- when there's choice and when there's competition, you also see the competitive nature taking pricing down. So I'm actually okay with that market structure because we are an innovation-based company, and I believe with our footprint in China, our relationships, our ability to execute trials with Chinese included from the beginning that we can, in the future, launch innovation in China in the kind of the first cycle that has the opportunity of both yielding higher patent protection, but obviously, also compensating for potential VBPs also in the future. And we don't have any visibility on future rounds of VBP, but one can imagine that this is a mechanism that will be used also in the future because it clearly works for China. So it takes innovation to sustain growth in our industry, and that's also the case in China.

Excellent. Now just before I ask listeners on the line, I do have one e-mail follow-up question, which investors are wanting to ask. And they want to ask whether CagriSema falls under a large or small molecule. I think that's in relation to the conversation we've just been having with respect to the IRA.

So CagriSema, as you know, is a combination of 2 large molecules. So that's all I can say. We have not decided on, say, the regulatory pathway yet. But when you combine 2 large molecules, you can say, it's more likely that it's a large molecule and a small molecule. That's what I can say for now.

Very clear. Melissa, could you remind people how to ask a question and open the lines, please.

[Operator Instructions] Our first question today comes from Peter Lampert of Mawer.

A question on kind of big-picture strategy. My impression is, historically, the Novo Nordisk was very focused in terms of therapeutic areas and also very focused on organic growth, which is fairly unique among large pharma companies. And this allows the company to do a few things, but do them really well and allow you to be the innovation leader in diabetes and obesity. But as the company grows, it seems that the strategy is shifting a bit, more willingness to go into other therapeutic areas, more willingness to do M&A like Dicerna and Forma. So just curious, going forward, how you balance those 2 approaches, the narrow focus you've had in the past and maybe a willingness to broaden that out going forward?

Thanks, Peter. That's a great question. You are right that we historically has been very focused on organic growth, and I can promise you that we will stay focused on that. But we feel there is an opportunity to complement our in-house capabilities with additional technologies that we can apply up against the biologies we master. So we have a rather simple and also quite stringent strategic map, if you consider one by one, so to say, where you have -- on one axis, you have technologies. We have, I think, a world-leading capability in protein engineering. We have shown based on the Emisphere acquisition and initially collaboration later acquisition that we can also make these proteins available orally. We have over 20-plus years done research in stem-cell-based activities. We have now first in a collaboration then later an acquisition gotten access to interferons RNA based on the collaboration and acquisition of Dicerna, and there are additional technologies. You can also add gene editing to that. So a very focused set of capabilities where we want to be the best or among the best in the world in how we build those. And sometimes it's in-house. Sometimes it's in a collaboration. And sometimes that collaboration turns into an acquisition, so it gets in-house. And those technologies, we apply on then the other dimension which is biologists. So for long, we have mastered the, say, diabetes biology, and that has led us into the adjacency being obesity. You can take cardiovascular disease. We have shown that GLP-1 has a CV benefit. So when we get into these biologies, we gradually master more biologies or disease areas, which then creates an opportunity to acquire or organically develop more molecules that are treated -- that are used by those physicians who treat those disease areas. The same you can say in the rare disease area, where we have a long-standing stronghold in hemophilia. But there are a number of other rare blood disorders that are treated by these physicians, the same in -- based on growth hormone, there a number of rare endocrine disorders. So we have a really focused, say, strategic map of disease areas or biologists we master where we want to then use a defined set of technologies. So it's a gradual expanding of that strategic map, but we do it in ways where we still have a keen focus on having leading capabilities. So we are not playing with odds that are low or lower than what others would be able to do. So I think that creates meaningful options for us to expand in the future and create more growth options as we sustain growth in a decade-long perspective, so to say. I hope that answers your question, Peter.

Yes. And is it implicit in that strategy that you would not consider large M&A?

Yes. We believe we have an intact R&D capability in-house. We just spoke a bit on icodec. So the ability to make a weekly insulin that is superior on glucose lowering and without increasing risk of hypos. Most key opinion leaders would say that, that's impossible. Yet, we have done it. I still believe that, say, glucose-sensitive insulin is a meaningful option for us to pursue. It's quite challenging from a technology point of view, but we're pursuing that. So just to illustrate that we still drive innovation in our stronghold, our capabilities. So what we're doing is that we are doing relative small size bolt-on acquisitions of technologies and compounds because we believe we have ability to add value to those so it becomes value adding for our shareholders. And it's not likely that we would do transforming M&A since we have this intact as a organic/bolt-on growth outlook.

We don't currently have any further questions registered. So I'll hand back to you, Richard.

[Operator Instructions] But the -- maybe I can build on that answer, Lars. And maybe we'll talk about icodec for a bit. It has -- you said, people thought it was impossible to create, and it has shown a profile of superiority on HbA1c in a number of the ONWARDS trials. And non-inferiority on hypos in type 2 diabetes, but the hypo rate has been a little bit numerically higher. So just that numerically higher rate, does that -- how is the reaction of KOLs? First of all, what's their reaction been? And then maybe some of the reaction on -- from payers and how they're thinking about the profile? I think in the past, I think Novo has sort of said that the payers would only believe that an insulin was superior if it could show superiority on HbA1c and then pay for superiority at that point. Maybe the thoughts on the profile so far.

Yes, great questions. So if you look at it from the key opinion leader perspective, I mentioned that when we started this development and we engaged with key opinion leaders, most of them would had the position that giving a weekly insulin that's circulating for a week that is dangerous because if you get into, say, hypo territory, how do you get out of it? So when we have shown that we can actually -- actually, for the first time in clinical development of an insulin, show superiority on HbA1c without significant increase in hypos, that is something that's quite extraordinary. And you're right that the numerical hypo incident is a bit higher, but it's at a really, really low level. So it's not something that's a meaningful difference. So for physicians who have the opportunity of going from 365 injections a year to 52 injections a year, that's a very, very attractive way to both initiate treatment when it's time to have patients move to insulin. But also, if you think about the large pool of patients who are now moving on weekly GLP-1 as they are to intensify treatment weekly. Basal injection is a very, very easy intensification. And you could even say, starting that a bit earlier and then preserving the gluco sensitivity of GLP-1 could be attractive. So we have had key opinion leaders saying that, well, this profile -- we ask them, which patients should be on it? And after a bit of reflection, they say, well, everybody should be on it. And if you look at the basal market, it's a USD 10 billion market. And it's actually one of the few categories where we're never the leader. We have a 37% market share, and we believe we can drive, say, a redefined position of basal insulin and that we can take a significant share of that market.

Makes sense. And you're a number of years ahead of the competition as well. How do you see your product relative to -- I think there's only Eli Lilly?

Yes. And I think you should probably ask them. I don't have much knowledge about it. I think they're in clinical development, but I have not yet seen Phase III data from their side. So it's still some years out, to my knowledge.

Sure. Sure. Maybe -- I got a couple of questions.

To answer the question on payers reaction. I just wanted to add that if you look at how insulins are used today, obviously, it comes with intensified glucose monitoring. And if you can have the benefit of a weekly injection and less frequent glucose monitoring, it doesn't actually take a lot of safe glucose monitoring to have a quite attractive case in terms of price. And of course, in markets where we can drive promotion vis-a-vis patients, clearly a weekly injection, we saw that with GLP-1 when the GLP-1 category converted from daily to weekly even a product that was actually not superior on efficacy actually converted a significant part of GLP-1 users from daily to weekly. So I think we can both create a pull in the market, but I think there's also a value creation in terms of how additional costs associated with managing diabetes drives expenses for payers. Sorry for interrupting you.

No, no, no. All right. Got a question from one of the investors on obesity in general. And there they've made a statement that is obesity is more of a consumer product potentially or a consumer-led market than maybe diabetes? And they're wondering, what sort of changes and what sort of hires you've made? And what's -- I know you're not DTC marketing over yet, but just the thoughts on how the changes you've made to your strategy to maybe -- or will make to market into that more consumer-driven market?

Yes, it's a really, really good point. And we have been marketing Saxenda for quite some years where it developed into being the best-selling obesity medicine, but not really opening up for this consumer type pool. Then summer last year, we launched Wegovy, and we saw this amazing uptick in the U.S. And after that, we actually saw a spike or a trend change also in Saxenda prescription. So there is an inflection point these days where the awareness about both obesity as a disease, the option to do medical intervention is creating a new situation where there is both willingness to seek care, so a patient pool, but also a willingness among physicians to prescribe anti-obesity medicine because of its establishment as a medical condition, and we see that payers increasingly are also willing to pay. We see that in the U.S., there's a significant consumer pool, but it's still a lot of, say, reimbursed business in the commercial channel. We have broad reimbursement, and we have some 50% of employers who have opted in. In other markets like Latin America, Middle East, Asia, it's actually not reimbursed. It's out of pocket, and also in Europe, we see that there's significant out-of-pocket pay. So we are looking into how we can have a combined model where we do both establish, say, the medical use of anti-obesity medicine, but also cater for, say, the consumer pool. And as you know, we have a strategy of developing both injectable. We have Saxenda some years on the market. We are now launching Wegovy. We have CagriSema. So different efficacy levels. We're also developing the oral administration of semaglutide. We also have a next-generation accretion being now in Phase I as an oral administration. So we believe we can develop a broad portfolio of anti-obesity medicines that can cater for the different types of segments that will be there in the future. And we believe there will be a significant, say, consumer-driven business to be handled and you could even speculate then in the future that could be an OTC-type approach also. That's not yet possible because GLP-1s have a black box warning on label that prevents OTC and also typically, injectables are not OTC. But if we succeed in developing the oral administration and we can, over time, show safety to a degree where black box warnings are taken away. I think there's a very, very interesting opportunity in the oral category also. So it's interesting to reflect on that inflection point that Semag 2.4 created last year and all the hype in a number of media newspapers, social media, et cetera, in addition to the medical journalist who also spoke about Semag 2.4 being a significant game changer. So very exciting times for anti-obesity medicines.

We've got a couple of questions on the line. But just before we go there, I think I'll probably -- you talked about the significant demand and there is, and that sort of has outstripped the supply initially you had and then there were, of course, supply issues around Catalent at the turn of the year -- at the beginning of the year. Maybe you could talk about the latest updates around production plans and building supply so that -- and the success rate of the fill/finish process you have with Catalent maybe to start with.

Yes. So we all know the background that we launched last year. We saw a significant different pool than expected that created a situation where we emptied the supply chain, and then it was no longer robust enough to shoulder, say, a quality issue that led to close down of the contract manufacturer. We are on track in getting back and having all those strengths available in the U.S. towards the end of the year. We have 2 more fill/finish lines kicking in during next year. In the meantime, we see that Saxenda, as I mentioned, is doing quite well. So we have [indiscernible] with strong obesity growth based on Saxenda. So that's also interesting that the awareness of anti-obesity medicine is now so high that even Saxenda, which has been on the market for quite some years, is now seeing a significant growth. We have the high doses of Wegovy in the market in the U.S. supplied out of our Danish facility and patients are doing really, really well. So we are making sure now that we have the needed inventory to support a reintroduction of all those things in the U.S. so we don't create the same issue once again. So I'm quite encouraged and optimistic around our ability to drive solid growth when we get into next year based on a supply chain that will be robust and also scalable for our launch activities. So you will see that we'll start also launching in some of the IO markets.

Demand has been so strong, and we've also seen Mounjaro's launch like off the charts as well. I mean how do you actually work out? What you need? How do you go about sort of -- I mean, it's just initial demand estimates last year far exceeded. Maybe you could give us some insight into the thought process.

Yes, it's a great question, and to be honest, we don't have a perfect estimate. We were all, I guess, biased based on what we saw in Saxenda as a proxy for willingness to prescribe, willingness to seek care and also willingness to reimburse. But it's clear when you got to the weight loss we see with Wegovy, some 17%, 18% weight loss, you're in a completely different territory and the willingness to prescribe c-care and pay really was established for the first time. When we launched, we also had a rich patient support program. So basically, those who wanted the product to get access to it for modest cost. So that further fueled the launch. And obviously, we did that to make sure that physicians and patients could gain experience while building access. Now we have built the access, we have -- we believe we have around 30 million Americans we can sell to and that's growing. So I think the uptake will be a different uptake because there will be more sustainable business. The uptake we saw initially based on a rich patient support program was not necessarily patients on commercial insurance. So I think it created a lot of hype, a lot of interest, which is good in establishing the brand. But I think when we get back to the market, it's more like classical, say, sustainable business based on commercial access. But of course, also some that decide to pay out of pocket. But since we don't have the same degree of access support, we are not seeing the uptake that you see when you basically make products available at a very low cost. I think what Mounjaro is seeing now is a similar uptake as what we saw when we launched Wegovy. And I think they have also a quite, say, rich patient support program. So I don't know exactly their source of business, but I could speculate that it's the same. We saw that clearly an attractive opportunity to lose weight and a lot of patients wanted to be on that, but not necessarily a sustainable book of business in terms of who have sustained access via insurance. And perhaps, not individuals who are willing to pay out of pocket for the price point that's in the market. So we don't know exactly what that demand will be, but we're quite encouraged about the growth that it can deliver and also our ability to match that from a supply point of view. So a very attractive growth opportunity, but perhaps, not a straight line into the skies because that was fueled by, I think, the access program we had in place.

Very clear. Just 2 more on supply, and then I'll hand to Melissa for the questions on the line. We've also seen Ozempic have a little bit of a rocky road in terms of supply just this August with, I think, some shortages in the U.S. Maybe you could update us on how your -- where you are with supply for Ozempic, and what the bottlenecks are and how you can fix them?

Yes. So we saw when we got the clinical data and the approval of Wegovy last summer that there was a trend change in Ozempic sales. And you can speculate, well, that's linked to the awareness of the, say, great benefits on the diabetes indication or perhaps, also some off-label use in obesity. So we have launched in the U.S., as all know, and a large number of European markets. The U.S. volume or say, the U.S. market is growing by 35%, and we're taking market share. In international ratios, the volume growth is 50%, and we are taking market share again. So Ozempic is today the bestselling diabetes medicine, and it grew 73% the first 6 months. So this is a quite strong performance in all aspects, and of course, it drives a lot of extra volume. And we are -- we have made the, say, investments and the decisions to scale up, and we have a lot of capacity coming in line, both say APIs and also fill/finish, and that is kicking in as we speak. So we have had, unfortunately, momentarily, say, supply shortages, but we are -- as you have seen, we have upgraded our guidance twice this year. So we are supplying more and more products into the market compared to our initial baseline plan, but there will unfortunately be short periods where certain pharmacies might be out of product as we replenish those shortages. But again, we have lines coming in, and when we get into next year, we feel we have what is needed to sustain the growth profile that we have guided to our investors. So it's -- of course, it's never good for the individual patient, not getting the medicine she or he expects, but by being patient, you can get the medicine. And we have what it takes to sustain our growth and serving many more patients in the coming years.

And I think next year, we might have oral higher-dose semaglutide data for 50 milligrams for obesity and maybe diabetes as well. Just a final question on supply. That's going to require more API, but it's also going to require tableting capabilities. And I can imagine an oral obesity product might be quite interesting for people or patients rather. Have you got enough tableting capacity to keep up with that potentially?

Yes. So maybe starting by commenting on Rybelsus performance. We are very encouraged by also how, say, oral standard performance in the form of Rybelsus, I was just in Japan recently, and it's performing really, really well. So there is clearly a wish for the efficacy that is one it delivers and the convenience of a tablet. And this is to say, white space for us because we don't have any presence in the tablet category, so we are pleased with that. And sometimes Rybelsus stands a bit in the shadow of Ozempic, but it's actually growing very nicely. So to your question on capacity, we have built a large facility in the U.S. It's a 2 billion-plus factory to make the API that goes into this tablet, and that's progressing very well. We have also acquired a facility 1 or 2 years back to do the tableting. So we have one in the U.S. We have one in Denmark. And that's also coming along nicely. So we believe we are set up for supporting these products. And as you say, by having a portfolio of products, different types of dosing forms, obviously we can address more segments of this quite attractive business, both in obesity and in diabetes.

Excellent. Melissa, should we go back to the line?

We'll take our next question from [ Ian Tambu ] of [indiscernible].

Yes, Ian from [indiscernible]. Just curious on the GLP-1 side, the supply side has kind of risen quite a bit. Some new players kind of entering as you'd expect for growing market. Just curious, how do you think about staying on top with the best products? What kind of core competencies do you have? What edge do you have within GLP-1s that maybe a new entrant wouldn't have? And also, how do you think about just avoiding the insulin like pricing pressure to kind of merge in 2016, avoiding that kind of a situation longer term?

Thanks, Ian. Yes, so on GLP-1, you can say, it's been interesting, say, innovation journey. I think there are -- I don't know how many GLP-1s, 5, 6, 7 in the market, but it's actually only been a couple of companies who have succeeded in bringing innovation to a degree that it actually could drive share and also grow the market. So Victoza from Novo Nordisk was the first high-legacy product, semaglutide was then the highest efficacy product in the weekly category and that's now winning share. And our next-generation product being concizumab looks to then be also in due time, the best molecule. So I'm not aware of anything that can match what we have in the pipeline right now, and we have looked at all, say, types of incretins, be that GIP, be that glucagon, be that amylin and how you can make dual or triple agonist of those. And we are still looking at how to reach the optimum, but we believe in semaglutide now driving a really, really attractive profile. And in the future, concizumab being the highest efficacy with the best safety profile that so far has been shown in the market. So I'm very pleased with the capabilities of our researchers to explore different combinations and tease out the optimal profile from, say, a pharmaceutical benefit point of view for patients. On pricing pressure, you are right that we have seen pricing pressure in the insulin category where, so far, to be honest, I think we have not succeeded in driving enough differentiation. So we have Levemir. We have Tresiba with -- are really good products, but you also have glargine and different biosimilars of that. And payers feel comfortable about moving patients across these. So now we're bringing a weekly insulin. So that's in the category for itself. And if you're on a weekly insulin, it would be much harder for payer to force patients to go to a daily injection because that was seen as a significant step back and more invasive treatment on your lifestyle. So it's all about a degree of innovation and ability to move shares. And when you compare insulin and GLP-1, you have modest movements in shares in insulin unless it's driven on contracts and price. Whereas in insulin -- sorry, in GLP-1, you see massive movement in market shares across products because it's still a category that's driven by innovation, and we have not yet maxed out on that innovation. So Victoza was first. The winning product then came Tresiba being the weekly. And despite a slightly inferior clinical profile compared to Victoza, it drove market shares because of a weekly profile. Then came Ozempic from Novo Nordisk with also a weaker profile, but superior glucose and weight benefit. So that is now taking share. Then it will be interesting to see what Mounjaro does. And in concizumab, we have what we believe will be the best product. And each and every time there has been significant a step-change innovation, it has moved share. And when that happens, it means that payers have to have products on formulary, and it's harder to control and use the exclusivity tactics because patients would have a preference for being on, say, the innovative product. So, so far, quite different dynamics between insulins and GLP-1. And in the GLP-1 space, we have 2 companies so far being successful and that also plays into how you compete on price. Thank you, Ian.

Our next question is a follow-up from Peter Lampert of Mawer.

Just one follow-up on the -- expanding the strategy map that you explained earlier. It makes a lot of sense, and clearly, it's showing success. I'm just curious, how you actually implement it? So who is responsible for -- within the organization for identifying the areas where you have adjacencies, where there could be new technologies or new therapeutic areas to move into? Does it happen from the CEO's office top down? Or does it happen at the individual business unit levels? Or kind of how does that process work?

Thanks, Peter. So from a technology point of view, it's owned by our research and early development. So Marcus Schindler being the Chief Science Officer, he is responsible for scouting or his team is responsible for scouting for different technologies, and they bring them forward. And then we have a central corporate development unit reporting directly to me, and they do deal making. And they do that based on a mandate from a deal group where I sit together with Head of Research, Head of Development and the CFO. So a very, very lean process, but it is anchored at the top. In terms of moving into adjacent disease areas that you can say owned by the franchise teams, diabetes, obesity, rarely -- rare diseases where they look at what's the market size? What's the commercial opportunity? What's the unmet need? What's the prescriber landscape? And do we have capabilities that would lend themselves to be leveraged in these areas? And then they make a therapy area business plan where they make these proposals, and they are discussed in the executive management team, including myself, and we have proved where we go, so to say. So the strategic map is anchored in the top team, and we're not going anywhere that is not vetted with me and my direct reports, so to say.

We'll take our last question today from Carl Brown of Axiom.

I had a question for you on Ozempic and your Medicare business here in the United States. I just wanted to confirm, a, that there is still a material amount of sort of rebates and discounts that are provided in the Medicare population for formulary access, whether or not a Medicare patient is getting their drug benefit from either a Part D plan or from a Medicare Advantage plan. And then, b, what do you think happens with those discounts post 2026 or whenever Ozempic ends up going through the negotiation process? Once you get a negotiated price with the government or mandated discount, whatever you want to call it, does the need for those rebates diminish? Or are you guaranteed any kind of formulary access once you go through that process? Or do you still need to allow for discount after the fact because there's still -- you still have to get on the formularies at that point?

Yes, thanks. So I can confirm that there is still, say, rebating tactics to get on formulary in the government accounts. And right now, it's a stable competitive environment where we enhance rebates and not year-over-year to stay on formulary. And it's really a volume play because we drive growth of the, say GLP-1 category, and we grow based on that. Exactly how it will play out in '26, '27 is too early to say. How -- the rebates we pay to PBMs today obviously go to the insurance provider, including the government. And those rebates are then used to fund different health care expenses. So how the government would look at that vis-a-vis, let's say, negotiating pricing, I think, is still not perfectly clear for us. If we had a different tactics of, say, selling our products at the net price, obviously, the rebates would go away. And they would be missing somewhere in that whole funding of health care. So the price would be much lower, but there would be a missing rebate. So I think we still need to understand exactly how this will play out, but it's a downside end of the day in my view. But we are in the category of drugs with the highest rebate levels compared to, say, some of the specialty products. So I don't know exactly how this will be different across different types of products to be honest.

Okay. That's helpful. And just one quick follow-up. When you do have these negotiations with the PBMs for discounts, is it done on -- I assume it's not on a drug-by-drug basis, but maybe it's -- maybe there's a portfolio element to it. But more specifically, do you have separate negotiations based upon patient populations? Like do you have a one conversation that's limited to the discounts related to the Medicare population and a separate negotiation related to the commercial patient population? Or is it all just one negotiation?

No, it's distinct separate negotiations, and they take place at different times of the year. And it's also product by product. Obviously, you have relationships, you have a broader book of business, but it is 2 separate negotiations depending on which channel it ends up in. And it's, largely speaking, product by product.

Maybe I can sneak -- sorry, Melissa. Maybe I can sneak a couple of e-mail questions from investors, which are around Mounjaro, and I think the first one is just around the pricing strategy that Lilly has taken with Mounjaro, and how -- the investors are asking how comfortable you are with that pricing strategy? Maybe I'd just add, relative to, I suppose, obesity, but also diabetes and what you're using -- what you're charging for Ozempic and Wegovy?

Yes. So I don't know the pricing strategy for obesity as it's not approved, and I don't know if anyone knows anything about that. But in terms of diabetes, I'm quite comfortable with what they are doing. I think they are linking their price to the level of innovation and the price point in the market. So I'm -- that's fine. I think longer term, you will probably see a convergence of pricing in obesity and diabetes. And we are today only serving to the hundreds of thousands of patients, and it's a hundred of million of patient opportunity. So as we open that market further up, it's likely that pricing will come down to cater for many more patients. So it's not something that I'm overly concerned about. And if you take into consideration our portfolio play, I think we can have different price points in the market and cater for different price points and preferences. So we have what it takes to sustain growth and help a lot of people living with obesity also with the different pricing scenarios that could be anticipated.

Excellent. And then maybe the last question from an investor and -- because we're at the top of the hour, which is around the impact of Mounjaro on Ozempic at the moment. This investor is suggesting that Lilly is saying 2/3 of their GLP-1 switches to Mounjaro are coming from Ozempic. Maybe I could -- and they're wondering why that's occurring. But maybe I can broaden it out and just your thoughts around how the impact -- what you're seeing really and the impact from Mounjaro on Ozempic in terms of the prescribing physicians, and how easy it is to get through your message and maintain share and gain share in the market?

Yes. So it's not the data point we have. We see that the majority of those who start on Mounjaro treatment are actually new to the category. So naive to GLP-1 treatment, so not switching from Ozempic. And so far, we have been able to sell all the Ozempic we can send into the market. So we are not seeing any dampening of demand for Ozempic whatsoever. So I think we still have less than 10% of type 2 patients in the U.S. on GLP-1. Outside of the U.S., it's way less. It's low single digit share of people with type 2 diabetes. So this is a market expansion journey for both companies more than SGA. And obviously, when there's new products, the number of new scripts is distributed a bit differently because they do take new scripts. But when you look at total scripts, I'm quite confident that we can sustain growth because patients are really, really happy with the glucose control they get on Ozempic, and it comes with a very, very attractive weight lowering effect. And yes, it's a great product, and it will continue to do well in the market also in the case of a competing product. And I understand so far, they do not have capacity to launch outside of the U.S. So we see a strong growth in both the U.S. and outside of the U.S.

Excellent. We've got a little over time, so I'll be respectful of your time, Lars, and say, thanks very much for a great debate. I'd like to talk [indiscernible] all sorts of other things for at least another hour, but I'll be respectful. So thanks very much. Thanks very much, everyone, for joining us, and I hope everyone has a good rest of the day.

Yes. Thank you a lot for hosting us, and thank you for the great questions. Bye-bye.