Novo Nordisk - Q1 2024 London conference call

Transcript

Peter Verdult (Managing Director)

Good afternoon, everyone. Welcome to the event at Stirling Square at Citibank, and good afternoon to everyone in the room. To those listening in on the webcast, good morning, good afternoon, and good evening. It's been a very busy week for earnings and other events, but we are ending the week on a high with the Q1 London Roadshow of Novo Nordisk. The speakers don't really need introductions, but just out of courtesy, Karsten, Group's CFO, Camilla, Group Commercial Strategy Head, and last but not least, Martin, Head of R&D, joined by us an array of Investor Relations. Now, usually I'd be saying, without further ado, handing straight over to Karsten for some slides and some Q&A, but I think it is worth us just pausing and recognizing that it is Mr. Daniel Bohsen, his last function as the Head of Novo Investor Relations.

And I think that needs to be sort of recognized by the audience in the room. Not just yet. Not just yet. But it's almost safe. But on that note, I have known Danny for over 15 years. He was the whip-smart Novo Junior IR Officer, and I was still the whip-smart analyst covering Novo Nordisk, and we were discussing insulin and Victoza back in the days. And then I think with management's blessing, he was sent off to Colombia to go and sell some drugs, and then came back in 2020 to be Head of Investor Relations. And I think we can all agree, being head of IR in 2020 to 2024 for Novo, not a bad place to be. So Danny, I mean this, and I hope that I'm speaking on behalf of everyone here and on the line.

Your professionalism, your patience dealing with people like myself, your responsiveness, helpfulness, and just all around being a good bloke, really appreciated. We wish you well on your next venture with Novo Nordisk. That's plenty of good time, but I have to say, just call out, I think New Orleans 2016 was a particular highlight. So thank you for making that one special. So before we say goodbye, Danny, and wish him well, I do have a little gift for you. It's within my compliance policy of less than $25, but it is to help you immerse yourself in the Taiwanese culture. So Danny, on behalf of everyone here, I do want to say thanks for everything and good luck going forward. So thank you. I will be asking Karsten about Taiwan and the change in performance over the next few quarters under new management. So thank you.

Karsten Munk Knudsen (CFO)

Great. Thank you, Pete, for those nice words to Daniel. We're all set. He's leaving, but we're also very much looking forward to following him in Taiwan. We have a materiality assessment on what we report externally in terms of our segment split and so on. Every week, we'll be tracking in our weekly sales if Taiwan sales is becoming big enough to include in the quarterly external announcements. So we're all rooting for you, Daniel, for Taiwan to make one of the coming quarters. Thank you to Pete and Citi for hosting in your beautiful new premises here. Nicely renovated, so we appreciate that. Then we're bringing another strong quarter from Team Novo in terms of performance. Continued growth, continued momentum from last year among the strongest growth stories in the industry, as you know, and we keep pushing that.

So as you know, the future is uncertain, and it might play out differently, and hence we have a nice deck with a forward-looking statement included. So no further details on that. Then every quarter, we bring a status on our strategy execution, and I'm not going to go through all the details. You'll hear a lot more about it in the coming hour. Just to say on the environmental side, we keep pushing forward. Now we started reporting on full scope one, two, and three, and you see that being up 32%. And there's one singular key driver for our CO2 emissions being up that much. That is the fact that we're building a lot of new factories, which goes directly into our scope three emissions. So we don't take it lightly, but now we are fully transparent around our environmental footprint.

42 million people now on Novo products, up 4 million compared to a year ago, and then continued strong commercial execution that Camilla will come back to. I think actually one of the biggest years ever in Novo history in terms of the magnitude and importance of R&D readout. I'm getting an echo from the new audio. I'll keep talking. And then net-net 24% sales growth. So really pushing on all fronts. You'll hear much more. So without further ado, over to Camilla on commercial execution.

Camilla Sylvest (EVP of Commercial Strategy and Corporate Affairs)

Thank you, Karsten. Just to recap on our sales growth numbers this first quarter, we had 24% sales growth, 30% operating profit growth. As you can see from the slide here, 35% growth in North America and 11% growth in international operations. The growth is really driven by GLP-1. We see 32% growth in GLP-1 in diabetes, 42% growth in obesity. We are very pleased with the progression of, of course, our GLP-1 business, both in diabetes and in obesity. On total diabetes, we continue to gain market share. We have also increased market share this last quarter and now at 33%. If we now look at the obesity business here, you see a gradual increase of supply, continue to expand our obesity business. We very much, of course, understand that at this point in time, obesity business is a lot driven by the supply into the market.

The underlying business is performing very well. There are no major changes to that compared to last year, so we continue to be happy with the progression that we see here. We have gradually increased our supply of the lower dose strength since May last year, but again from January this year. The broad commercial access on the formularies means that we have approximately 50 million lives covered in the U.S., and we have now also launched Wegovy in nine countries in international operations, plus Canada. That means 10 countries now where we have made Wegovy available. We'll probably talk a little bit more about that later. Now I'll just hand over to Martin to say a few words about R&D.

Martin Holst Lange (EVP of Development)

Thank you very much, Camilla. As you all know, we conducted a small study called SELECT. That read out last year, and we were very excited about the results. We're actually equally excited about the update to the U.S. label that we've received during this quarter. Obviously, we get the CV indication indicating that semaglutide is associated with a 20% risk reduction for MACE, major adverse cardiovascular events. That's myocardial infarction, a stroke, and it's cardiovascular death. On top of that, this risk reduction is now reflected in the label is achieved regardless of baseline gender, age, race, adiposity, body mass index, and baseline renal function. On top of that, we also were allowed to indicate the data despite the fact that it was outside of the testing hierarchy, that we see a 15% numerical reduction in cardiovascular death and a 19% significant reduction on all-cause mortality.

That is now reflected in the label, which obviously is something that we are very, very excited about. In addition, the FDA has indicated that the mechanism of the CV benefit is not fully understood, indicating that that benefit is associated with more than just the body weight loss. And this is something that we've talked to a couple of times. We see something in semaglutide that goes above and beyond body weight loss when it comes to the CV benefit, potentially also the renal benefits that we have observed with the molecule. In line with our broader cardiovascular strategy, we are considering to do acquisitions through both our pipelines. As you know, our focus when we talk about cardiovascular disease is not any cardiovascular disease. It's basically in the broader metabolic aspects of cardiovascular disease.

Key focus is on ASCVD and inflammation and on heart failure with preserved ejection fraction. We recently acquired a company called Cardior, having a lead asset which was or is an ASO targeting microRNA 132, which is directly involved in heart failure pathophysiology. So this goes directly into our strategy of expanding our cardiovascular presence with focus on heart failure, with focus on ASCVD. And we're very excited about progressing the Cardior assets into further clinical development. These were just two highlights. Obviously, it's quite exciting, as Karsten also alluded to, to be in R&D in Novo Nordisk's space. We do see progress across all of our CVD areas.

Obviously, with chief focus on diabetes, cardiovascular disease, obesity, and rare blood disorders, but we do also see progress in our hepatology focus, specifically semaglutide for NASH, where we will see the readout of the ESSENCE phase III trial later this year. We also see progress in our renal, obviously exemplified by FLOW. And that basically means that we continue to press on all cylinders and see very successful readout, very successful initiations throughout the course of the year. This, I think, is almost going to be the quiet quarter because moving into the later stages of this year, we are looking towards two advisory committees with the U.S. FDA. One is on icodec. Icodec has already received a positive CHMP opinion from the European authorities. It's approved in Canada and Switzerland, and it has an action date in the U.S. in July.

The outcome for insulin icodec in the US is focused specifically on type 1 diabetes. The outcome is also from a timing perspective placed so that this is in due time for the action date. So it's going to be a good discussion. We have been informed that the committee will not discuss the type 2 indication, which we've already discussed, is clearly demonstrating a very nice benefit risk, but also some very nice convenient benefits of insulin icodec in this space. The other advisory committee hearing is going to be about heart failure with preserved ejection fraction and semaglutide. This is a huge upside. So as you know, we conducted the STEP-HFpEF trials with the purpose of looking at six minute walk test and Kansas City Cardiomyopathy Questionnaire. But in those two studies, we also saw heart endpoints, heart failure hospitalization, and cardiovascular death.

When we submitted the data, the FDA actually granted us both priority review, indicating that the data are actually exciting, clinically relevant, but also coming from two small studies. We also got the advisory committee hearing to discuss the impact of that. Again, a huge upside for semaglutide specifically with Wegovy. I can feel Karsten is becoming impatient, so I have to start focusing. Maybe just calling out that in a couple of weeks, we'll see the long-awaited data in our rare blood disorder franchise from Mim8, which obviously also could potentially be something very, very exciting. With that, back to you, Karsten.

Karsten Munk Knudsen (CFO)

Thank you, Martin, for an elaborate walkthrough of the slides. As always. As always. No, joking aside, amazing year from R&D in terms of readouts and actions. I cannot remember a year where we've had so much action and so many readouts, and this is important. So really, really important to deliver on this. So results for the first three months, you've all seen it in our company announcements, coming back to 24% growth, continuing the momentum from last year, the same growth drivers being Ozempic and Wegovy and Rybelsus. Then in the quarter, we had a one-off in terms of an accounting estimate adjustment, which bumped up growth by 5%. So just for that, we are in the 19% range. Yes, last year's comparator was easier, but then there were some supply issues.

So just to say, the run rates in the first quarter is around 20%, apples-to-apples. Then in terms of our capital and resource allocation, as I covered at the Capital Markets Day, of course, we continue to drive productivity but a broadly stable gross margin, lower growth in commercial investments than sales growth, simply due to the fact that we have the infrastructure in place and the demand nature for our products. But then on the other hand, linked to the slide you just saw, a lot of opportunity in R&D, so really pushing to expand and broaden our R&D pipeline, stepping up R&D investments by 28%. All in all, operating profit up 30% and our earnings per share up 29% for the quarter. Outlook for the year.

If you adjust for the accounting estimate adjustment in the first quarter, then our guidance is unchanged, accounts for exchange rates, but bumped by 1% linked to the one-off. So now our full-year expectations are between 19% and 27% on top-line growth and 22% and 30% on OP. And then given the strengthening US dollar, then currencies are a little bit more favorable, which are then in turn offset by hedging losses on the net financials. All right. This covers the formal presentations. And then we have Daniel Bohsen facilitating his last Q&A. So we look forward to that. And of course, any specific questions on Taiwan, Daniel is more than open to cover them himself. Should we move to this?

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Karsten. And lovely. I know Camilla has been General Manager for Region China, so she will cover those questions today. But please state your name and institution. Let's go with one question per person, then we can take several rounds. And Emily had her hand up very fast.

Emily Field (Director)

Hi. Thank you, Emily Field from Barclays. I'm not going to ask directly about the competitor data overnight, but when could we expect to see the phase I data from your once-monthly GLP-1 GIP, and how important do you think it is to have dose and convenience that goes beyond once weekly?

Daniel Bohsen (SVP of Finance and Operations)

Martin, I think this one is for you. A few words on that. Our focus there.

Martin Holst Lange (EVP of Development)

The study for the once-monthly GLP-1 GIP is going to be ongoing. We expect to see the readout around the turn of this year. In terms of the importance, I think the current dynamics, as I see it, and obviously, Camilla can also speak to that, there's a clear drive by efficacy over preference or anything else in this space. And obviously, our question when we have stuff in our pipeline is always, is it differentiated with efficacy? And then obviously, the convenience becomes a secondary factor. We will continue to pursue that, but efficacy, as I see it, comes first.

Daniel Bohsen (SVP of Finance and Operations)

Let's go to Simon.

Simon Baker (Partner and Head of Global Biopharma Research)

Thank you, Simon Baker from Redburn Atlantic. I too will refrain from asking you to comment on someone else's data that nobody's seen. But just in terms of how you see the market evolving over time, it seems highly unlikely that it'll be the same in 2030 as it is today because of your own products that you have as well as others. It also seems unlikely that everything else outside Novo that's in development will fail. Equally unlikely, everything will work. So what's your assumption of how this market will evolve both through your own portfolio evolution and the efforts of others? Thank you.

Daniel Bohsen (SVP of Finance and Operations)

Camilla, I think, can you give some perspectives on the obesity market, how we think it will develop?

Camilla Sylvest (EVP of Commercial Strategy and Corporate Affairs)

There, Simon. So of course, if we take a starting point in the number of people living with obesity, we know that there are more than 800 million. We know also today we are helping treat less than 1 million in terms of full-year equivalent patients, if we may call it like that. And that basically means that there's ample opportunity to grow in this space and to help many more patients. It's likely that there will be different segments in the future where the high efficacy segment is, of course, where we have our strong focus. From a science point of view, we have a strong label now with SELECT on Wegovy, where we are addressing not just weight loss but also beyond weight loss, cardiovascular risk profile. We know that that is what people die from. 31% of everyone dies from cardiovascular issues.

Now we have also, of course, our FLOW data. And so to complement Wegovy label with that is, of course, a lifecycle management plan for us. In addition to that, we are then bringing on new compounds with also hopefully greater efficacy. But it's not to say that there will not also be a space for high convenience products, maybe with lower efficacy. So having said that, today there are two companies that are competing in this space. It's still early days. There's probably room for more, just given the magnitude of the numbers. So I do expect that we've seen a lot of progress in the last few years on physicians that are willing to prescribe obesity products. Just a few years back, we all remember, it wasn't exactly like that.

There has been a lot of development, and hopefully, it will mean we can address more of these comorbidities related to obesity. That, of course, clearly goes beyond just weight loss.

Daniel Bohsen (SVP of Finance and Operations)

Thanks, Camilla. So let's move over here, yeah.

Evan Seigerman (Managing Director and Head of Healthcare Research)

Evan Seigerman from BMO Capital Markets. So I'm not going to ask about the FTC second request because I know that's not you specifically, but I did want to ask about how much more capacity do you think you can get from the three facilities from Catalent, and what does that do to the supply of all of your products by 2026? Thank you.

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Evan. And Karsten?

Karsten Munk Knudsen (CFO)

Yeah. So in terms of FTC, to cover that one first, it's completely normal that when you have a big transaction, that there's a process with the FTC to assess any antitrust considerations. So there's nothing unusual there, and we have no changes in our expectations and in terms of deal certainty and confidence in that, just to cover that piece. As to scalability, we're not out explicitly guiding on the magnitude. But if you look at our current footprint on fill-finish, where we have around a handful or so of filling sites today, then adding three filling sites of varying sizes, this is a meaningful step up in capacity on our fill-finish.

And I would say on the single-dose syringes, we have very, very limited capacity in-house today. So that's mainly a CMO setup. And with this change, then we take a key platform for the company.

We use it for currently Wegovy in the U.S. as a main product, but then we take a very important production platform in-house under full control. So there's also a risk control element to what we're doing here. But a significant step up. And the important part, the reason why we do it, just to remind you, this is about speed and scale. So it is to step up capacity as fast as possible compared to other alternatives.

Daniel Bohsen (SVP of Finance and Operations)

Thank you. Thank you, Karsten. Thanks for the question. Jo?

Jo Walton (Pharma Analyst)

Jo Walton, UBS. It's along the same lines in terms of capacity. So I guess it's for Camilla, this one, though, perhaps. In the market today for obesity, people have moved from Saxenda to Wegovy. They've really moved up and not stayed at the lower efficacy. So let's just assume that CagriSema has good data. Should we be assuming that you would expect pretty much everyone to move from semaglutide to CagriSema? Because that seems to be an even more difficult manufacturing problem given that cagrilintide you're making externally. And I just wonder whether governments, particularly when semaglutide is cheaper, if it's in IRA, will say, "That's good enough," and that semaglutide will be your base load of product, and then CagriSema would just be reserved for the more difficult patients.

So perhaps it's more Simon's question about how the situation evolves and whether we should think of that transition that we've already seen moving to the next one or not. Thank you.

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Jo. Camilla?

Camilla Sylvest (EVP of Commercial Strategy and Corporate Affairs)

So thanks, Jo. I think you are right. It's a completely different situation than what we have with Saxenda and Wegovy, not least just for the bare efficacy of what we have on Wegovy today, including the SELECT trial that Martin has just presented. And so because of the magnitude of the numbers and because of the number of people being treated, plus the need and the demand out there, it's more likely to see an expansion of the market with new products coming in and a very strong base, of course, with Wegovy also many years into the future. So I would not see this whole addition of a strong pipeline as purely a cannibalization exercise.

It wouldn't be the right thing to do because we have so many patients that need to be treated, and some need a higher focus on weight loss, others need higher focus on comorbidities. So there is a position for also new innovations that are add-ons to the existing base that we are developing for many years into the future with Wegovy also.

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Camilla. Let's go to, yeah, James.

James Quigley (Executive Director of European Pharma and Biotech Equity Research)

Thank you. James Quigley from Goldman Sachs. I've got a question for Martin on muscle sparing. So what are you hearing from doctors in terms of if there's a desirable ratio in terms of fat loss versus muscle loss, or is it more of a case of just losing the weight in general? And then as you think about SELECT versus STEP 1 and SUSTAIN 8, where it's 40% loss from lean body mass, have you seen any data from SELECT that suggests that flips over time or gets a bit better?

Martin Holst Lange (EVP of Development)

So what we hear from treating physicians is that that is currently not a consideration. I think it comes from a lot of these physicians have introduced weight loss with not-drug interventions for a period of time. And if you look into sort of the broader literature, when you introduce a weight loss, the proportional weight loss coming from lean body mass is typically somewhere between 25% and 45%. And the driver of that ratio between lean body mass loss and fat mass loss is typically the speed of weight loss. So when you have a proportional weight loss from lean body mass around 35%-40%, that's actually within that realm. And that basically means that that is a normal and healthy weight loss.

You could actually argue, and this is obviously also why we are super happy with data from SELECT. We can actually show even in cardiovascularly sick patients, so presumably slightly more frail patients, we show that we improve not only cardiovascular morbidity but actually also all-cause mortality. And that basically, again, just plays into this appears to be a healthy weight loss. So based on current treatments, I don't see this as a broader problem. I think it has to be a focus area also with current treatments, in particular in frail patients. And when we move into the potential for bigger weight loss, it has to continue to be a focus area.

This is where we take some comfort from the animal biology because based on animal studies, both from us but also from others, animals appear to be associated with an even bigger improvement of the lean-to-fat mass ratio. We didn't do body composition assessment in SELECT, so I don't have any data from there. But again, based on what we see, also based on the actual outcomes for patients, do they live longer? Do they live healthier? We are quite comfortable with what we see right now.

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Martin. Thank you, James. Let's go to Sachin here on the first row.

Sachin Jain (VP)

Sachin Jain, Bank of America. Perhaps a Karsten on S&D phasing through the year alongside supply. So the question is, first quarter S&D and the full-year guide obviously implies inflection and spend through the year. So any color on what is gating that inflection and spend, is it linked to an inflection in supply? And is the supply inflection linked to whatever promotional activity you do around Ozempic, Wegovy? So, for example, SELECT or Heart Failure towards your end. Thank you.

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Sachin. Karsten, any comments on S&D phasing?

Karsten Munk Knudsen (CFO)

Yeah. So S&D in the quarter was 20% of sales. Full-year, we're looking at more around 22% or something like that in terms of S&D ratio. So you are correct that our S&D phasing is slightly backloaded. And of course, that's linked to our commercial strategies, and our commercial strategies are linked to supply availabilities as well as R&D readouts. So, for instance, now we've had SELECT, and now we'll start promoting even more based on the updated label from SELECT. That, of course, entails some promotional spending linked to that in the U.S. as a specific example. So you shouldn't link it directly as a direct causality that then there's more out of manufacturing in a specific quarter. But of course, it's all tied together in a logic. So I think that's as precise as I can get it.

Sachin Jain (VP)

On R&D, sorry, is there anything other than SELECT that you'd pull out?

Karsten Munk Knudsen (CFO)

In terms of readouts?

Sachin Jain (VP)

Yes. You said commercial linked to R&D other than SELECT or anything else? Sorry. Apologies. You said commercial linked to R&D other than SELECT. Is there anything else that we should be thinking about this being linked to?

Karsten Munk Knudsen (CFO)

Oh, you could say in terms of weekly launches, there'll, of course, be some launch preparations taking place there. And then Martin's infamous pipeline slide there, you saw that whatever we get in terms of feedback from the advisory committees, also on HFpEF, will impact our commercial strategies for the rest of the year.

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Sachin. Thank you, Karsten. So we can go to Richard.

Richard Parkes (Pharmaceuticals and Biotechnology Equity Analyst)

Yeah. Richard Parkes from BNP Paribas. And it's a full-on follow-up question I asked yesterday, but it's on the same theme related to potential segmentation of the market because obviously, other companies are making a bet that if you can develop a scalable oral, then you can unlock a much broader opportunity. And maybe that's severely obese, people with overweight and health issues. So you've placed your bet on monlunabant, which I suppose my question is, how confident are you that the drug isn't getting into the brain and therefore won't have the psychiatric side effects? Because we see other companies that are developing BTK inhibitors arguing about who's got the best data of the drug's ability to penetrate the brain. So what underpins your confidence that the drug isn't getting into the brain and therefore unlikely to cause those side effects?

Daniel Bohsen (SVP of Finance and Operations)

Martin, this one's for you.

Martin Holst Lange (EVP of Development)

Yeah. Thank you. So we're quite confident that the brain penetration is substantially less than what has been the case for previous drugs in this class. We've never talked about ruling out some brain penetration. But if you look back at the historical cases, it was actually about exposure. And therefore, with the very low penetration that we expect to potentially see here, based on the data, also clinical data that we've seen so far, we are not concerned. We take it seriously, and that's also why you'll actually see us normally. I'll talk about the speed to going into phase III and further development. In this specific case, we actually specifically want to do a large-scale phase II study with the purpose of ruling out any new psychiatric risks.

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Martin. We can go to Laura. Hope there's a mic behind you.

Laura Hindley (Equity Research Analyst)

Thanks. Laura Hindley, Berenberg. Just going back to the once-monthly, what is the latest on applying your once-monthly technology to your other pipeline assets? So could you apply it to amycretin, CagriSema? And if not, what's the limiting factor? And does once-monthly tie into why you've progressed the GLP-1 GIP combination, even though it's a once-weekly progression? Thanks.

Daniel Bohsen (SVP of Finance and Operations)

Thank you. Martin, that's also for you.

Martin Holst Lange (EVP of Development)

So we have actually several different modalities for protected action. And obviously, the one that we have in the clinic right now is attracting some attention. That could potentially be applied elsewhere. But we currently have, as I said, several modalities being investigated in the preclinical space. And what we at the end of the day will move forward also into later stages development depends, obviously, on the efficacy but also the potential for scalability. So we're not committed to anything yet. And you have to see the current ongoing once-monthly with GLP-1 GIP as an exposure study to investigate the technology.

Daniel Bohsen (SVP of Finance and Operations)

Thank you. So we can go to Peter.

Peter Welford (Equity Research Analyst)

Hi. Peter Welford with Jefferies. Can I come back to a topic that came up a while ago on Wegovy in terms of the different sort of formulations or types that could be available in the U.S. and sort of in general the U.S. strategy? Have you revised at all your thinking in terms of sticking with a single-use pen in the U.S. market and not launching any other alternatives? Equally, any thoughts on a sort of direct distribution system that I think what your competitor obviously has done as well, where we're to cut out the middleman to some extent to supply U.S. patients?

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Peter. Camilla, portfolio considerations?

Camilla Sylvest (EVP of Commercial Strategy and Corporate Affairs)

Yeah. So we continue to, of course, evaluate how can we optimize our portfolio considerations also for the U.S. Right now, we're very focused on the single-dose device. But of course, over time, we're looking at also how can we make efficient dosing of GLP-1s in fixed, you can say, dosing regimens? How can we do that in a smarter way that requires less capacity? It's something that we constantly look at across our value chain. How can we optimize with the presentation formats we have across the world? How can we release more products and with that also increase our scalability? So constantly, we will be evaluating those things.

Daniel Bohsen (SVP of Finance and Operations)

Good. Let's go up here to Rajesh.

Rajesh Kumar (Head of Pharmaceutical and Life Sciences Equity Research)

Hi, Rajesh Kumar from HSBC. One for Martin. It would be unfair of me to ask you to comment on how others would design their clinical trials. But given the data path we have seen so far on semaglutide, if you were, say, designing next-generation trials for your next-generation products, would you be, say, for example, the like for SELECT or CKD, would you be using placebo as a control, or would you be using semaglutide? And what does that mean about how do you need to power the trial? What size of trial do you need?

Daniel Bohsen (SVP of Finance and Operations)

Thank you. Martin, trial design considerations?

Martin Holst Lange (EVP of Development)

So really complex question and a lot of regulatory considerations also. I think you're actually seeing different approaches across industry right now. We are getting closer to, for example, in obesity in the cardiovascular space, if there is a gold standard, you can compare to placebo. You have to compare to that gold standard, and that could potentially be the negative side. That basically means, from our perspective, if we, for example, look at CagriSema, if we want to claim the same benefit as semaglutide, we have to show parity with semaglutide and non-inferiority to semaglutide if we did a head-to-head. That would require, I would say, a normalized outcomes trial if going for the same endpoints. If you had to show superiority over semaglutide, obviously, we're talking about a taller order.

There we would have to be looking at, obviously, the sample size, but also what are the potential endpoints and what are other aspects of the trial design that would allow us to, within reason, demonstrate superiority on the relevant endpoints. You see others adding to the number of composites in the primary endpoint. That's obviously a vehicle to increase the number of events that you're looking at and thereby allowing it to go with a smaller sample size. All of that has to play in. If there's no gold standard, it makes still a lot of sense to compare to placebo. If we look at other aspects of our product's benefits, we would potentially also still be comparing to placebo. CagriSema, for example, is comparing to placebo when it comes to cardiovascular outcomes.

That is basically because at the point in time where we initiated the trial, there was no gold standard.

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Martin. Let's go to Richard Vosser here on the front row. We have time for a few more questions.

Richard Vosser (Managing Director)

Hi. Thanks, Richard Vosser from JPMorgan. Just a thought on the Part D redesign that we're going to see next year, how that could impact the net pricing for Ozempic and Rybelsus into 2025. Thanks.

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Richard. Karsten? I think this one is for you.

Karsten Munk Knudsen (CFO)

Thank you. So first of all, we are in negotiations. This is negotiation season, so we haven't formularies played out yet. So there's really a lot of uncertainty at this point in time. I would say two pieces to it. There's the redesign, and then there are the negotiations dynamics in Part D. On the redesign, it's important to note that with the redesigned benefit design, then yes, there's a benefit because the donut hole is being eliminated. But then there's a different exposure in terms of catastrophic coverage as well as some other coverage. So net-net, while we initially thought it was directly positive, now we believe it's brought to neutral on the redesign.

And then I'd say on the redesign impact to the plan sponsors and hence the insurance companies and how it impacts them and how much they can pass on to their customers and what that then, in turn, indirectly impacts us remains to be defined. But I would say the competitive situation in the marketplace is unchanged between suppliers into the marketplace. So too early to comment on.

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Karsten. Sachin, you had a question, and we'll take Emily afterwards. And then.

Sachin Jain (VP)

Thank you. Sachin Jain, Bank of America. For Martin, sema, NASH, increasing focus towards U.S. Just wanted to clarify a comment you made on the call yesterday. I think the wording, and correct me if I was wrong, was if you repeated the phase, so it would be a good outcome. Just wanted to clarify phase II, you didn't hit stat sig on fibrosis. So is just NASH resolution enough without fibrosis for filing commercial? And if that is incorrect, what's your confidence around hitting fibrosis? Is the effect size you saw in phase II enough to get you across the hurdles in phase III? Thanks.

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Sachin. Martin?

Martin Holst Lange (EVP of Development)

For regulatory approval, both improvement in steatosis and fibrosis is required, and the study is designed to look at that. Our dialogue with FDA was that our phase II trial was never sample-sized to look from a statistical perspective on fibrosis. So we saw a highly significant reduction in steatosis. We actually saw a great numerical reduction in fibrosis as well. And the statement from FDA was, "If we saw a similar numerical reduction in a properly sample-sized study, obviously, that would become statistically significant. And from a regulatory perspective, that would also be acceptable." So instead of asking us to conduct two phase III studies, they said that the phase II study could serve as one of the two regulatory studies. And we now are doing ESSENCE as the other study.

Sachin Jain (VP)

Despite the 10% delta? If that's repeated in phase III, that's your power for that?

Martin Holst Lange (EVP of Development)

Slightly more than 10%. Yes, if that becomes statistically significant, then we are in a good place.

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Martin. Thanks, Sachin. Let's take the last question from Emily, and then we'll have time to talk with management afterwards also before they depart.

Emily Field (Director)

Thank you. Emily Field from Barclays. Going back to Wegovy pricing, I know this was asked yesterday, but there's an FT article today talking about Novo cuts Wegovy price. So maybe to ask a little differently, has the net price evolution for Wegovy in the US been within your expectations? And you also mentioned pricing movements in certain channels. I know you'll have more Medicare going forward with SELECT, but could you just give some granularity on what you meant by that?

Daniel Bohsen (SVP of Finance and Operations)

So Karsten?

Karsten Munk Knudsen (CFO)

Yeah. Since it's probably me being quoted, then I'd better stand out for it. So this is completely as expected, right? So what we're looking at in the market is that this is a volume opportunity, and we're very happy with the market access we have in the U.S. So we have more than 50 million people with obesity covered in the U.S. today. So our market access is very good. And of course, then we work with the payers to ensure that we have the appropriate market access that ensures this level of coverage or even more. And then, of course, the market is also defined through competition and a competitive entry. So there are no surprises in pricing in the U.S. And just reminding you, this is a significant volume opportunity.

So the 50 million people with obesity that we have coverage for today, we are only serving a fraction of that, so less than 1 million, right?

Daniel Bohsen (SVP of Finance and Operations)

Thank you, Karsten. That concludes the Q&A session. Before giving the word to Karsten for his final remarks, I just want to say thanks, Pete, for the kind words. Thanks to all of you that many of you have met many times over the last four years. I've truly enjoyed the conversations, the challenging questions, also the pushback. Thank you so much. Please remember to keep them on their toes also in the future. Karsten, over to you. Any final words?

Karsten Munk Knudsen (CFO)

Very briefly, thank you, Suzanne, again. You feel we're on a roll. So amazing levels of sales growth continuing into this year, 24% for the quarter, turning into attractive profit growth, 30% for the quarter at the constant exchange rate. Our innovation machine is really also on a roll in terms of readouts and what you just have seen thus far between SELECT, FLOW, and hopefully to be replicated into the near future on the coming readouts. So very strong push on innovation for the rest of the year. So thank you for your attention, and we'll be around for another quarter or so. So looking forward to discussing more detail. Thank you.