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

Welcome to the Novo Nordisk session at the 26th JPMorgan Health Care Conference. I'm Richard Vosser, European pharma analyst at JPMorgan. And it's my great pleasure to welcome the new CEO of Novo, Mike Doustdar. He's been about CEO for about 5 months and has been spending that time looking at the strategy, revising the strategy. So he's going to go through a few of those thoughts that he's had on the business with a few slides, first of all, and then we're going to have a nice chat.

Hope so.

So Mike with that, over to you.

Thanks so much.

Welcome.

Thank you very much. It is 5 months only. It feels like 5 years, believe it or not. But let me, I think, start with after showing you the forward-looking statement, talk maybe into what have you changed, if anything at all on the strategy. And then I think that will set the scene for some of the questions that you may want to ask me. Novo has a 103-year history. And then of course, we are mainly synonymous for doing a couple of things, but doing it better than anyone else. That has not changed. I think if you take a look at the left-hand side of the slide, you'll see that the company has always been about diabetes and remains so. We have more recently moved into the obesity space innovating in that front, and that is also remains very much intact. Then, of course, when you take the 2 large chronic disease of diabetes and obesity, you recognize that patients suffering from these conditions often have many other issues, comorbidities related to them, chronic kidney disease, CVD, MASH and the likes. And we have been moving into these adjacencies the last few years more and more. And then we will continue doing that. But with one fine difference, I would say, and that is that the starting point for us will have to be focused around a patient, that's either suffering from high blood sugar, so diabetes or high weight obesity. We will then look into our own R&D shop and try and see what can be built for these patients. Often, the assets we will explore do more than one thing. They will do more than just reduce your weight or reduce your sugar as we have seen with semaglutide and many other assets of similar type. And that's perfect. We will go into those adjacencies once that happens and, of course, create the indications for them and sell them eventually. But we no longer will try to rush in, let's take CKD as an example. Into CKD if it does not touch an obese patient or one suffering from diabetes. So if I click now, you'll see some of those circles go away. So the difference between actually the strategy before and after I have joined is simply that some of those circles became half circles. And that is simply taking the company back to the DNA that we have. There are a lot of companies here, not least the one you were just speaking to that have a DNA of diversification, and that works very well for them. For Novo Nordisk, we have realized that we are really good when we focus. So the focus, again, will go back to obesity and diabetes. And for those who then will get a little bit nervous, just a couple of things. I'll remind them that those couple of things have 2 billion people suffering from those conditions. So this is a very, very large unmet need where we and our competition today are only touching the surface when it comes to treatment of these individuals. We have the rare disease business, that's the yellow part in the business, and then that's almost like a biotech company running within our own company, and we will, of course, continue doing that. But we will cater to about 2 billion individuals that are suffering from diabetes, obesity or overweight. The numbers are very large. And then when you look at the right-hand side, the most right-hand side of the slide, you see that although the population size is very large, the number of the people who are right now getting prescriptions related to these conditions are still very small. So there is a very long runway for this. And knowing that we probably have some of the best scientists in these areas, we certainly can scale second to none in these areas, we have the commercial expertise, again, better than most, it gives me a lot of hope that there is a bright future ahead of us. So that's, I think, this one. And then into maybe an immediate action that people are a little bit wondering about Novo. After a difficult 2025, what are we going to do? Well, we're going to accelerate our commercial execution. We need to do a couple of things. We need to bring the higher dose of Wegovy into the market, 7.2, and we can discuss why that's important as we go forward. We have seen that, especially within the field of obesity, there is a -- this acts a lot more as a consumer business than a traditional medication. So the direct-to-patients, I would even dare to say direct-to-consumers and cash channels and mastering that is something high on our agenda. We definitely feel that we have a phenomenal pipeline. But when you're dealing with a market size of 2 billion people, you're never satisfied. And we are not. So we are going to continue strengthening our R&D pipeline, be it again, using our own internal capabilities or through business development and bringing several diabetes and obesity, late assets into the market, while, of course, developing the early assets into Phase III. [ASAP] is the second pillar. And then, of course, we're going through a bit of a transformation after last year, making sure there is financial discipline on the back of lower growth rates for the time being, reduced prices, which are going to impact us during 2026. Means that we need to be financially disciplined and make sure that we continue, of course, investing where the investments are needed while evolving our organizations around some of the new capabilities I just touched upon. So that's, in a nutshell, our short-term priorities.

Awesome. And maybe you touched on the difficult '25 and on commercial execution. So when you've analyzed '25 what are you going to do differently? What did you see there? And particularly in the U.S.?

Yes. So first, I'll come up with not an excuse, but a bit of a defense on 2025. '25 was a difficult year. It was difficult for Novo Nordisk, has been difficult for our shareholders. So I will not belittle that one bit. But I will say, it's the curse of a leader. We went into obesity some 30 years ago. And at the time -- and up until more recently, I would say, many of our peers that have sat in this stage now or will sit here in the future were making fun of us. They basically thought obesity is not a disease. Obesity, there is no money in it. Obesity is something that should be left to individual patients to get on with it, get on with your lifestyle, get on with your exercise and diet and kind of -- this is not for pharma to go there. I am really happy that I worked for a company that became the voice of 2 billion people and created a scenario that today pretty much almost every participant of JPMorgan is getting excited about entering this field. That's great. That's fantastic. But it also is great and fantastic if we can deal with it and compete with them. Not if we create a scene for everyone else and then leave it to them. So that basically ended up in '25 being a critical year for us to recognize this. That we're no longer on our own, and we need to hurry up and it cannot be like the previous couple of years where we were left alone just because we had a head start. And through that leadership, of course, number of things. On the hindsight, when I look back, we could have done better. And it's easy for those who are following us to correct our mistakes and make sure that they do a better version of it. So our job is this year to recognize what were some of the things that we could do better. I touched upon it in my last slide that mastering this cash channel in the U.S. is really, really important. When we came into the registration and the promotion of Wegovy initially, we were told that 55 million of the 100 million Americans that suffer from obesity are covered by insurance. That sounds really good, especially I was responsible for the rest of the world, ex U.S. In my previous job, I didn't even know what insurance means, in that part of the world. So to hear 55 million people have insurance was really exciting. Only then to get into the details and realize that's a bit theoretical. All the pre-authorizations, the obstacles that the insurance companies have created for many of these millions means that it's not that they're going to be able to get their medicine just because they're obese and/or have insurance. That meant that there had to be a different channel, the cash channel, the e-health channels, a lot of new players, not least the compounders were created on the back of that need. We need to really make sure that now we master it. We have relaunched our NovoCare Pharmacy on the back of the, what you call, the Wegovy pill. I'm very optimistic about that, but we also realize that that's not enough future. We need to meet the patients where they are. So we have gone into a massive amount of partnerships with Ro, LifeMD, Amazon, WeightWatchers, Costco and really making sure that we make our products available. And then the best example of that is the recent launch of the Wegovy pill because the other thing that we have realized is that we need to expand the market. Right now, we are being judged how many patients are being switched between us and Eli Lilly. And while that is an important element to not belittle again, us and Lilly combined have probably 10 million, 15 million patients. What about the other 85 million, we need to get to them. And a big part of those people, by the way, don't want an injection. They're waiting for the pill. So going into expanding the market has been very, very important. And again, coming up with better versions of semaglutide and preparing ourselves for the next wave of the battle has been some of the learnings from '25 that we're taking into '26.

You touched on the pill. And we've seen -- at least I've seen the cause circling Union Square...

Yes.

Which look very nice. But you've got a little lead to another player, Eli Lilly with orfo, what can you do to establish Wegovy in a pill ahead of them coming?

Well, first of all, if you allow me to say that I don't see it as a little lead. I think if you're thinking about the time element of it, probably it's a little. Life is longer than -- the distance between us and Lilly's launch. So that you could say it's not what's on my -- top of my head. Actually, our company has done incredibly well in diabetes, always being second to market. So this is a luxury being first in some interesting way. But I put the emphasis of the lead on many other elements of the pill. When we decided to go, not the small molecule path, but the peptide and protein path, when it comes to the Wegovy pill. Again, there were a lot of skeptics out there saying that this is just not possible. Scientifically, this is impossible to swallow and eat a peptide and not get it dissolved by your gut enzymes before it gets to the bloodstream. We proved everyone wrong. Now the benefit of that is that we have a very potent drug that if you take it, you reduce your weight by 16.6%, which is equivalent of its injectable sister Wegovy. To the best of our knowledge, today, no one has been able to show that in any Phase III clinical trials. That's a big leap at a time where the magnitude of the weight loss is trumping everything else. A few percentages up and down, we have seen that it matters. So it should also matter on the pills. Then when you look at it from a tolerability point of view, when you look at our clinical trials, some 7% of the trial participants left us due to tolerability issues. When you look at my competitors, it was around at the highest dose from 22% to 24% that left. I will make sure that, of course, I take that with some sort of excitement. And again, in the definition of your leap color, that's a big difference between 7% to 22%. So all in all, I think we have a phenomenal drug at hand. And then we have brought this with the Wegovy label, which is really, really important because it is Wegovy. So in addition to all of that, we have the CV benefits in there -- in our label. I think this is going to be good.

Some people talk about the fasting requirements for the Wegovy pill that other drugs don't have, orfo doesn't have. What would you say to that?

Good question. For sure, if I was sitting on the other side, I will try to drill on that one. That's the only thing I can think of one can drill on. And I welcome that. I would say my answer to it is a couple of things. First, we have about 1.5 million patients to the last count I had, on Rybelsus, which is the same drug in the diabetes segment. And we have not seen this being an issue with 1.5 million people. So I beg to think that this should be the same with Wegovy pill. Having looked at also this a little bit more broader, I looked into -- if you have a thyroid problem, apparently, all drugs with thyroid have that issue, and that's also not a problem. So while I understand if you're sitting on the other side of the table, this would be a good -- a small talk to have. I would say, we have not seen evidence of it in the market. And then, of course, if you really want to dig deep into, he said, she said is that, I have no idea what orfo's label will look like and time will tell. But I have looked into their clinical trial protocol. And in the clinical trial protocol, I noticed that, if you're taking a specific type of a statin, then you have to wait 2 to 4 hours to take orfo. I don't know about you, but I know how many obese patients take statins. So we have to take a look and see where the market and how this will be planned out. I certainly expect, of course, my competitor to find things in my profile. And my job is to make sure that I speak to the facts.

And when we think about orals versus injectables, do you think that the orals have a cannibalization effect on the injectables impact the injectables? Or do they sort of broaden the market or address a different segment?

I think to a very large extent, that will broaden the market. I can speak to -- but I think there are some exceptions to it. Let me give you a couple of anecdote and maybe personal stories. My father in law has been very much waiting for an oral, even though he has been needing and wanting to take a GLP-1. The reason he actually did not want to go for Wegovy has been, he didn't feel like he should get an injection. I think there's a societal taboo on injection. I told one of the journalists yesterday that if I would -- right now, while I'm talking to take a pill, a headache pill and take a sip of the water, you will not tomorrow morning, remember I did that. If I pull my shirt up and start injecting myself with a shot of anything, believe me, for a while, you're going to remember it. I think that's an important societal understanding that we need to have and realize that this will help a number of people get to where they need to go. And again, efficacy here will not need to be compromised. So it's really, really important. And they can take a pill instead of a pen. There's also the element of refrigeration. I have a friend in Montana, who basically is -- my competition's drug and mentioned to me the other day that wants to switch to Wegovy pill. And I have to say I was surprised. Why do you want to do that? And I first thought, it was just because he's my friend. But that was not the case. This gentleman travels a lot. And he's simply too nervous about all the time having kept the medication in cold chain. So wants to go with a pill format. And I think there will be some of that. I don't think it will be a massive cannibalization of it. But I think, to a large extent, you will get people coming in expanding the market.

On the injectable market, you touched on semaglutide 7.2. What's the importance there? What does that bring?

It's a really good question. And it's a learning, Richard for us. When we came into designing and figuring out, okay, what should we do with semaglutide. We had, of course, pioneered the field with Saxenda, 5%, 6% weight loss. And we came to conclude that with 2.4% -- 2.4 milligram of semaglutide, you get to around 15%, 16% weight loss. That's really good. At 3x Saxenda, why should we put more stuff into the pen. And our company is also a bit conservative when it comes to these things. We really feel that we should not overdose patients unless -- it's just -- so we thought 2.4 milligrams, 15%, 16%, 3x Saxenda, fantastic. We went in that direction and the product came out. And we then did a lot of studies around heart, kidney and took it from a very much diabetes muscle memory that we had and developed semaglutide and brought it to the market. I cannot speak to what my competition has done. I can only imagine that when you are second to market and you're designing your trials, then you look at whatever is existing. So let's assume that Novo Nordisk product has 15%, 16%, and you want to get to 20%, 21%, then you tell yourself well, I've got to go all the way up to 15-milligram of my product to get there and then you design your trials and then you show that you're efficacious. The world, in my opinion, has a little bit misread this. The world has read this as Saxenda was the first generation of the product. Then it was Ozempic, Wegovy semaglutide second generation. And the most modern thing in the market right now is Mounjaro and Zepbound as the third generation. My humble nonscientific version of it that medicine to a large extent, often is dose dependent. And you just dial little bit higher, you get more effect. At one point or the other, you have to stop, but there is maybe a long runway before you do that. We did a test on that, and we realized that with step-up trial that we did, if I could say, in quotations, only 7.2 milligram of semaglutide, we're able to get to 20% weight loss. And since the world is putting the weight loss impact above and beyond everything else, heart and kidney and liver and god knows what. Then we have to changed the narrative back that, at the right dose, molecules are giving the same weight loss. So we changed that rhetoric and then come back and say, there could be something in the magic sauce of semaglutide that in addition now to 20%, 21% weight loss, we're also having cardiovascular benefits and the other benefits that so far has not been proven elsewhere. So then maybe the current market perception that is, in our view, imbalanced, will get a bit more balanced again.

On the injectable market overall, you touched on the price changes that came with the White House agreement and some of the price changes that you and your competitors have been making. What do you think that does to the market? Can we see price elasticity here? Can we see volume increases in different channels?

We have to -- is that simple -- I mean, it's business 101 that you reduce the price, more people start to afford it. But you have to find that sweet spot. And that's what, of course, we have been trying to do with both the negotiations with the White House as well as, of course, our own channels. And looking at our competition, not least the compounders, I'd like to think actually that this 1 million-plus people that went into knockoff products sold by compounders did not want a knock-off product, but they felt like they can have afford $199 and they cannot afford $1,300 box per month. That's why they went there. So we have considered that. But having said this, I also tell our investors that it's a difficult decision sometimes to make that because when you have a very large base patients on a price and you decide to have the price in the hope that you get more than double the volume to have some gain, while mathematically, that can pan out correctly and as you saw with 2 billion people and only 10 million, 15 million on the product, you see that is the right strategy. The question is, will you accept -- will your investors accept a short-term pain because you know that the prices goes down on one day with the signature between you and the President, but the volume doesn't double on the morning after. So that comes back to the dialogue and the communication and the transparency that you can have with yourself and your investors to basically say, this is the strategy. It's impossible for us to get to 1 billion or 2 billion patient pool with the current prices. We have to go there, but there is a short-term pain you have to stick with me during the bad period.

And a lot of that 2 billion are ex U.S. So maybe we could just touch a little bit on the IO opportunity and how you see that developing from here? And there's been some supply constraints that have maybe held you back. There are generics coming. There's a lot of moving parts. Maybe you could just talk a little bit about that.

Yes. So I'll start with the part of the question you mentioned, the volume opportunity is in international operations. That's where the world's population is. That's where longer term, of course, both us and our competition has probably built all the factories and the scaling to cater for U.S. as attractive as a market, it is and will remain, from a volume perspective will be the smaller player of the 2 sides of the Atlantic. So that, again, gives us hope. Now the strength and the good thing about Novo Nordisk is international operations of Novo Nordisk has always been one of its stronger footprint. We have a unit and affiliate in some 80, 85 markets, where we have our own people on the ground, our own management. And that's a competitive advantage because the market knows us. On the other hand, of course, again, we have to recognize that obesity world is somewhat different. Even you can, without any office come and put on an online shop from a different market and sell your products, so we have to build those muscles. And we will continue, of course, not getting complacent on the fact that we are historically strong in international operations and make sure that the new things that we need to build is also built in IO. Short term, again, we have headwind in international operations in 2026. We'll not go into all the details of it because we are in a quiet period right now, but I will actually say what my CFO has told the world that because in a number of markets, we have lost exclusivity at this year, we will get competition. And when you have a very high market share, competition will take some of that share away, we need to focus on the market expansion and then again, realize that, okay, we will maybe have a difficult year but a bright future still. We also, of course, have our main competitor, Lilly gearing up and doing well in a number of [TIO] markets. And we need to make sure with some of the tools I mentioned, be it the pill or the higher dose or new products, compete fairly with them because they're a worthy competitor. So that's the strategy.

Second priority on your slide was strengthening the R&D pipeline. So what are the key elements you're looking to improve here? What are the must wins?

Yes. A very good question. So let me break it down into late stage and then early stage. And both are equally exciting. And then, of course, we can talk about business development on the side, if you want. We have, of course, the approval of CagriSema, that's semaglutide and amylin in a fixed combo coming up sometime late this year. Super exciting. The amylin biology, I think just excites a lot of people here, and it's really nice to see that we are one of the first, if not the first, that's kind of going to be able to launch a meaningful product with that. So that is exciting. And then, of course, the other asset that right now is going to Phase III and soon after will, again, we will get excited after CagriSema, it's amycretin. So those 2 are the ones we speak a lot, I would say, initially when we think about late assets. Now within those, there are going to be a lot of indications that is going to be exciting, different dosing, a lot of the learnings that we have learned from semaglutide will bring it up there, make sure that we don't underdose some of these things and have the right dosages of them, I think. Then we also noticed that take CagriSema initially, I would say 2, 3 years ago, it was CagriSema. Now we're talking about CagriSema as one product but cagrilintide or cagri mono as a whole different product. And we noticed that, of course, the world is not going to be obsessed continuously on only the impact of the weight loss. So that 23% is better than 21%, which is better than 20%. That's for one segment of the society. There are a number of people that are happy with 12%, 13%, 15% weight loss. If the tolerability is almost like placebo, which we think we can actually achieve with products like Cagri mono. So that becomes incredibly exciting for a segment of the population as a stand-alone product, and we are into Phase III of that, and that's super, super exciting, I would say. And then if I pivot into early phases, and you will probably hear more of this throughout the year, so I will not have any breaking news here, but expect us to come with many, many more first human doses. Now that we have the focused strategy of diabetes and obesity only, we are able to show and prove that we can actually go much earlier into human dosing with many great assets.

Maybe just a little bit on CagriSema in detail. We've seen obviously, 18 months ago or so, the REDEFINE 1 data, et cetera. And we -- what do you think the profile of CagriSema today brings to the market for you?

Yes. So a couple of things. Again, I think the amylin biology is really interesting. I would say we have so far clocked to 23% weight loss, which is today, if the product was out today would have been the highest efficacious product on the market. So that itself, I think, is super exciting, but it will not be the only thing. We also had seen, if I remember the numbers correctly, the tolerability of the product is really, really decent. So we had 3.7% discontinuation of the trial due to gastrointestine side effects. That's very good. So that's super exciting, I would say, on that one. And that's before we learned from what you just alluded to 18 months ago and started looking into redesigning some of our trials. So we have REDEFINE 11 coming up, which I'm quite excited about. And of course, again, higher dosages of this. So we are making no secret that we're looking into CagriSema [forte] in terms of not just using 2.4 milligrams of semaglutide inside, but the 7.2 now that we have. And then you could do the back-of-the-envelope calculations where the percentages will go. But I am, at this point, the data will speak for itself. At this point, my gut feeling tells me I should be excited.

You talked about cagrilintide monotherapy. And I think that seems to be lost in the debate that there's a monotherapy amylin in Phase III for Novo. But there are others as well, different 355, et cetera. What are you looking to do to maximize the profile and the benefit -- the commercial benefit of the amylin biology for Novo?

The first thing I do is I tell my colleagues that I've been with Novo 33 years, so I love the company's culture and the Danishness of the company. But I tell my Danish colleagues that sometimes when you're too humble and you don't talk about things, people won't -- they don't read your mind, so they don't hear it. That's why it gets lost in translation. We need to talk about it. So we're going to start talking about these things a little bit more without thinking that we're showing off too much. But the molecules you just mentioned, of course, they have not -- they're not into Phase III yet, and we have to wait and see where the data takes us. But again, they are -- we're dealing with Amylin, which has shown and proven to be a really good molecule in weight management. And I'm very excited about it. I think what we would do with cagrilintide mono, again, looking to the dosage of it. And then simply wait till the readouts are there some time from now, and then we'll talk more about it. But I think it's really exciting, albeit the weight loss on its own as a monotherapy, will never get to some of the double and the triple agonist, the tolerability of this will be incredibly exciting for a very large portion of the people right now suffering from obesity and that's what we will target.

Maybe you touched on -- just to finish. You touched on the setbacks to near-term growth. When you're thinking about planning for the long term and thinking about the internal pipeline and business development, M&A, et cetera, how are you thinking about the balance here and what you need to continue the growth in the long term.

So maybe I'll give you a recent example of our business development activity and the purchase of Akero as a company. This is clearly one of the ones that's actually in the sub circles, MASH for fatty liver, right? We have seen that we have a phenomenal drug in semaglutide dealing with fatty liver. 80% of these patients have obesity. So this is very much aligned with our strategy. But semaglutide is only good in F2 and F3. We have seen that if you really want to be there for these patients and when you talk about the totality of the patient pool, there are a group of people that it's no longer are benefiting from semaglutide, the F4 patients. We come across their lead assets and recognize that this is, if proven, and if we bring it to the market and if the data we see pans out to be correct, which I hope it does. This can eliminate liver transplant, which is the only option that these patients have. So it's a great way for us to marry something we have not created ourselves with something that we have in-house and address a large population size. So that's just one concrete example of how we look at this. And we will continue searching for molecules, assets, companies that basically are complementary to our own portfolio, and we have increased our BD activities over the last 5 to 6 months. And we will not shy away doing that going forward. So more to come.

And so yes, do you think you need to deploy more capital externally to -- I mean, does the sema LOE in 2032, does that -- is that needed?

If it is, we actually have the possibility for it. So the good news about our balance sheet and our financial structure is we can go really high in doing so. But it really starts first to look and see what you can do internally and then go -- one of the questions that journalist often ask me, especially on the backlash of Metsera. Now that you were basically trying to buy this asset for $10 billion, what is your next amount? There is no next amount. It could be $20 billion, it could be $30 billion it could be $40 billion, we could afford it. But it has to be worth it. We stopped at $10 billion in Metsera because to us, it was not worth a penny more. So we don't start with trying to -- we start looking at what do we have ourselves. And then we try and see basically how can be complement it keeping those patients in the center of everything we do. And my promise is not right now to make, again, an announcement on how much more do we need to invest in order to be successful. My promise is to make sure we -- you have a promise from our side that we will retain and try to expand on our leadership on the few things that we know what to do with diabetes and obesity.

Brilliant. Well, we're out of time. So this has been a great debate. Great discussion.

Thank you, Richard.

Great chat. Thank you very much, everyone. Thanks, Mike.

Thank you.

Have a good conference.

Thank you.