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

Welcome to the Novo Nordisk session at the 2024 JPMorgan Healthcare Conference. I'm Richard Vosser, European pharma analyst with JPMorgan, and it's my great pleasure to welcome the CEO of Novo, Lars Fruergaard Jorgensen, to the conference for the first time. So we're going to do this session slightly differently, and it's going to be more of a chat between us. But ahead of that, I'm going to hand over to Lars for a few introductory remarks. Lars, welcome to the conference.

Thank you, Richard, and thank you to JPMorgan for hosting all of us. Right now, it's a truly exciting moment in Novo Nordisk in '23. We celebrated our 100 year anniversary, and we did that by growing 30-plus percent. There's still a bit of numbers to be counted, so we are truly excited about the momentum we have obviously fueled by our GLP-1 business. We have worked on obesity for more than 25 years. Most of those years, most of the world felt that, that was probably not a meaningful thing to do. Now finally, the market is opening up, and we're really excited about what we can bring there. And as we'll get into, we're just getting going. So from a growth point of view, I'm truly excited about the coming years also.

Maybe we start there. I mean it's just the start, but there's been maybe some full starts as well, because the demand is actually outstrip supply. So I think one of the big questions on people's minds is where are we with supply? And how should we think about supply as we go forward into '24?

Yes, it's a good place to start, obviously. And if you look at our growth in '23, Q3 year-to-date, we grew Ozempic by 50%. We grew Wegovy by close to 500% obviously, from a low base. And Ozempic is the best-selling diabetes product in the world today. So the fact that we grow that by 50% talks a bit to the magnitude of the capacity expansions we are doing, and I'm very comfortable looking into '24 and specifically for Wegovy and the U.S. that we can add significant additional volumes also in '24. So it's a situation where we gradually scale up manufacturing, we have lines coming in. So there's not like a one triggering event. Unlocking this it's a continued journey of building capacity for the years to come, but a significant additional capacity for '24 for sure.

And if we think longer term in supply, I mean, you're planning for the longer term, we've seen big CapEx announcements. But can you envisage a point in time where you, your competitors can supply significant ways of the U.S. market, but also in Europe. Is that something that's possible? Can you get reimbursement? How do you see that picture in the longer term?

Yes, it's interesting because for us, it's the first time that we have products where there's a very significant, say, pull nature from the markets. So typically, when you have to scale up, you would have to invest to quite aggressively in sales and distribution to drive the business. That's different now. We, today, serve 40 million patients globally. We're probably say, the volume leader in terms of injectable therapy in diabetes and obesity. We are adding today on a yearly basis, around 4 million additional patients. So it took 100 years to get to 40 million patients. And now we're adding 4 million patients a year. So when you talk about the addressable market and the kind of cadence we're in now, that actually stacks up to quite a number of patients we'll be able to cater for.

And when we think about supply and let's say, in a couple of years' time, supply is solved, I don't know whether that's right or not, but bear with me. The next big question will be, how do we pay for that as a system? Obesity category is projected to be quite large, and it's a new category. So how -- maybe we'll get to that, but picture of reimbursement now and then longer term, how does that change?

Yes, it's a picture that's a bit different across the world. We launched first in the U.S., and we saw a very, very strong urge from patients to seek treatment. We saw a very, very strong willingness to prescribe among physicians. And we actually also saw all the large players being willing to adopt Wegovy, at the price point that was already in the market. So a significant better efficacy for the same price point that we had for Saxenda. In Europe, it's different. It's actually largely out of pay. So again, a strong willingness to pay for the products. And that was the starting point. And then since then, we have seen more and more clinical evidence building to the whole story about the value of treating obesity. And it's still early days, and I think most have probably heard about the SELECT data, but the fact that we are now at a turning point of establishing obesity as a disease, for me, it's a bit the same as the U.K. PDS, even many years back that actually unlocked the whole type 2 diabetes market by actually proving that it's actually worthwhile doing intensive therapy for people living with type 2 diabetes. And now I think the same is happening for obesity, that for long, it has been seen as not a real disease. It's a matter of will and getting the act together. And I was actually been acknowledged that, okay, it's actually quite different from different people, how you stop that and that there is a significant health consequence of doing that and preventing some of those comorbidities. I believe, and I've all along communicated that, I think it's going to be the medical intervention with the best, say, health technology assessment in terms of what it saves of course, in the health care system. And we all know that health care systems have been designed for acute care, but today is actually chronic care that takes up 80% of all health care costs. And I think obesity plays a key role in actually lowering some of those expenses for the health care systems.

And you touched on SELECT. I mean what's been the reaction to SELECT from the payers, the initial reaction? Are they seeing these benefits that -- are they happy with the long-term benefits versus the short-term cost?

Yes. It's still early days. We can have, say, a medical discussion with the payers. We cannot yet promote it. But it's clear that all payers are looking at aging populations, growing number of people living with obesity. And this, when you model it out, is going to be a very significant cost strain on their budgets. So if you start modeling out, addressing the high BMI comorbidity population first, getting a relative quick saving there, that can actually fund a wider adaptation of it. And I think the release of the SELECT data was a real game changer for us, both among payers, but also among physicians, clinicians actually now developing a more, say, weight-centric approach to dealing with a number of diseases.

And maybe drilling on that, the physicians, have you seen a widespread positive reaction across different physician types. I mean, cardiologists notoriously -- notorious may be a little wrong word, but they are relatively slow to adopt treatment. We've seen that with many drug categories.

I think the reaction we got at AHA this year was a quite strong reaction, I think it's fair to say. Oncologists are not known to applaud data in the opening session. So there was a very favorable reception of that. And I typically tell my own team that we have to bear in mind that whenever we are dealing with semaglutide, things tend to be different. So I think it's really important not to be biased too much about what typically happens because I think in semaglutide, we have a molecule that, say, redefines trends, and I think now it's upon us to drive that. and make sure that across a number of, say, disease areas and medical professionals that the importance of having a weight-centric approach to dealing with some of these comorbidity is really important.

And the price is different for Wegovy in the U.S., ex U.S., different price points, but it's relatively high in the U.S. at the moment, maybe even on a net basis. How do you see that developing as the supply improves?

Yes. So as you mentioned, it's important to work based on the net price. And we all know that sometimes the story is hijacked a bit by the list price. And in this country, there are significant rebates. And also, as you launch, you launch at the lowest rebates or the highest net price, and then you've given a bit year-over-year to make the supply chain work, where it's typically different in, say, in Europe, you launch at the price you will be having for some time. So when you look at the technology assessment, the cost of the U.S. health care system is also significantly different. So when you do the math and look at what is the value of treating patients, I think we end up in an equally favorable technology assessment in the U.S. as we do elsewhere. The market uptake is obviously different. The U.S. has a very fast adoption of innovation, it's a bit slower in other geographies. So you can say in that sense, we're bringing the value first to the U.S. health care system. And I think that's quite meaningful.

And how -- we've seen huge excitement across the category, both from the financial community, but also on -- even on TikTok and all sorts of places, the Oscars. But how do you see actual demand developing? We have -- do we have a bolus of excitement here, which is then going to come down? How do you see the picture?

Yes. So you can say that there's probably a quick first social media excitement. But what moves scripts is actually physicians understanding the science and the products. So I think we are in a more steady phase now where it's actually our focus on educating the medical community in understanding the science, the mechanisms and what is it that the products are doing. So I see a very steady, robust demand that's I think moving a bit out of the hype, which I think is positive, because it was not easy for us to actually control that or even be involved in it. So we have all the time focused on making sure that physicians understand the products and they can work with the patients to make sure that they make the decision that's right for [ individual ] patients.

And different geographies, same sort of rate of demand right now?

Yes, we have seen basically in the markets where we launched, say, unconstrained, a similar type of very, very steep uptick, to a degree where we now are launching in markets in a controlled manner because we want to get to enough markets and actually cater for the patients who are in the biggest need. So now we're testing out new tactics of doing that, and we have launched last year in the U.K. and Germany in controlled launches, where we have kind of set what the volume we bring to the market. We have made arrangement with health care systems to make sure that the most vulnerable patients were typically dealt with by the health care system, they actually get treatment. And then there's an out-of-pocket opportunity. And that equity-based model, I think, is important because we have to face that in today's Western society, some of those living and struggling with obesity, also are living in less favorable social economic settings. And I think we have failed as an industry, as a company, if we have not made sure that we also get to them. And they are the ones who end up also putting a burden on the health care system. So I actually see there's keen interest from payers also in single-payer countries in Europe to actually figure out how can we get to those patients. And then in parallel, there's a large out-of-pocket opportunity and also willingness to pay. So our outtake is that there'll be a few single health care systems in Europe who would cater for all patients. But if we help them cater for them, those -- they are most vulnerable, there's very attractive out-of-pocket opportunity in extra [indiscernible].

And in the U.S., do you see the use in the most severe obese patients? Or is there some use in -- I mean, there's some off-label use of Ozempic even maybe with people with lower BMIs, but where is the use today?

Yes. We actually see that when we collect data on, say, average BMI comorbidities, we actually see that it's very well aligned with label. So we well into the, say, 30 range of BMI and many patients having one or more comorbidities. So I think there's a lot of social media, and you mentioned Oscars, that takes a lot of attention, but the data we have actually talked to that it's the right, say, target group of patients that's on treatment. And I think that's important because that's where the value lies for the health care systems. And I think we have the biggest impact on society.

And one of the key questions, I suppose, from investors is also how long are people going to stay on these drugs? We've seen your first generation product was a very short stay time akin to the weight loss duration. How -- what are you seeing at the moment with Wegovy and how do you think the clinical data that you've generated is going to play into this?

No, it's a great topic. And I guess it's one [ men ] are trying to get the head around in terms of modeling, what this is going to be. And as you allude to for Saxenda, we saw relative short stay time. I believe -- and it's too early to tell because we haven't had patients on average on treatment for that long. But I believe, again, here's an example of sema being different because if you have lost, say, 15% to 20% of your body weight, and more than 1/3 of the patients in the clinical trial lost more than 20%, that's most likely the first time you have experienced that say, defining moment of actually having lost that much weight. Many have succeeded in losing, say, 5% just to regain it. So if you ever had that experience of -- sorry, improved health prospects, redefined your life, social activity from that, I think you are highly motivated to stay on treatment. We know from all medical interventions, no stay time is not like 100%. So it will not be that for us either. But I think we'll see a significantly higher stay time than what we have seen so far on obesity treatment. And if you talk to a few of the patients who have been on treatment, and I've met some of those who are in our Phase III program and then had to leave that before the product was launched, and that reintroduces the cravings and the life you didn't appreciate, I think, will create a very strong incentive for being on treatment, if you at all have an opportunity to stay on treatment.

Makes sense. Wegovy's got a proven CV benefit from the SELECT trial. But in terms of actual average weight loss, it may be is 5%, 6% below Zepbound from your competitor, Lilly. How do you see the launch of Zepbound impacting the rollout of -- or demand for Wegovy?

Yes. So a few proxies. We know from the GLP-1 space that when you have efficacious products and you launch new efficacious products, it actually fuels the growth of the category. Inferior products will drop out. I actually think we have a highly efficacious product. And as I mentioned, more than 1/3 of patients lost more than 20%. So there are a lot of patients who do really very well. So we are only scratching the surface of the obesity market. The biggest challenge we have is not competition, it's actually awareness of obesity as a chronic disease, the need for medical intervention, the value it has on your health system. So I welcome competition in actually driving and unlocking that market. And then it's a healthy competitive situation. And we have also a pipeline with interesting assets coming in, where we believe we can, again, lift the bar in terms of what is attractive weight loss. And there are so many patients to go forward that most likely short term, it will be availability of products that drives top line growth more than competition.

And there's been a bit of Zepbound and Wegovy are injectable products. There's developing discussion about oral versus injectable. Where do you stand on that? Where do you see oral products coming in? And how do you think that will affect the demand for injectable?

No, it's a great question. And I'm known in the company for not being a big favor of market research. And I'm often told that if you do market research, and you ask patients, would you prefer a tablet or injectable, most will say, a tablet. And here we are that there's actually a very, very strong, say, willingness to take a week injection. And if you ask many of these patients who have been on weekly injection with GLP-1, they find it to be a really, really convenient treatment regime, only have to deal with it once a day. But of course, there are different segments, different preferences. So I think there is space also for all treatment. We are pursuing it ourselves based on, say, a large molecule approach and using the SNAC technology to make all formulations. And I think it's important, when you look at some of the small molecule approaches that you will look at what's the safety profile, how small use a small molecule, because it's fair to say that today, we, I believe, are establishing a very safe profile of the injectable treatments, and I think there will be very low regulatory appetite for introducing all treatment that comes with some safety issues. Then it's also fair to say that when we look at our oral, it has a relative low bioavailability, so it takes quite some API. So we have to kind of balance how do we -- as you mentioned, we are investing a lot in APIs. So we have recently announced an API expansion facility. We announced one a couple of years back. We just finished one in the U.S. So we are manyfold ramping up our [ API ] capacity to create the optionality to go all or injectable based on how we see the market. And when you look at some of the small molecule attempts, I think it's important to also look into how scalable are they, because for a real small molecule approach to work, it has to be safe and scalable.