NONOF - Novo Nordisk A/S (NVO) Presents at J.P. Morgan 42nd Annual Healthcare Conference Transcript
2024-01-09 14:36:07 ET
Novo Nordisk A/S (NVO)
J.P. Morgan 42nd Annual Healthcare Conference
January 09, 2024 12:45 PM ET
Company Participants
Lars Fruergaard Jorgensen - President & Chief Executive Officer
Conference Call Participants
Richard Vosser - JPMorgan
Presentation
Richard Vosser
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.
Lars Fruergaard Jorgensen
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 2023. 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 strategy point of view, I'm truly excited about the coming years also.
Question-and-Answer Session
Q - Richard Vosser
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 2024?
Lars Fruergaard Jorgensen
Yes, it's a good place to start obviously. And if you look at our growth in 2023, 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 2024 and specifically for Wegovy and the US that we can add significant additional volumes also in 2024.
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 2024 for sure.
Richard Vosser
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 US 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?
Lars Fruergaard Jorgensen
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 the – 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.
Richard Vosser
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? These categories 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?
Lars Fruergaard Jorgensen
Yeah. It's a picture that's a bit different across the world. We launched first in the US 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 UKPDS 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 healthcare system.
And we all know that healthcare systems have been designed for acute care, but today is actually chronic care that takes up 80% of all healthcare costs. And I think obesity plays a key role in actually lowering some of those expenses for the healthcare system.
Richard Vosser
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?
Lars Fruergaard Jorgensen
Yeah. 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 higher 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.
Richard Vosser
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.
Lars Fruergaard Jorgensen
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.
Richard Vosser
And the price is different for Wegovy in the US ex-US different price points, but it's relatively high in the US at the moment maybe even on a net basis. How do you see that developing as the supply improves?
Lars Fruergaard Jorgensen
Yeah. 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 US 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 US as we do elsewhere. The market uptake is obviously different. The US 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 US health care system. And I think that's quite meaningful.
Richard Vosser
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?
Lars Fruergaard Jorgensen
Yeah. 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 -- 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 [indiscernible] patients.
Richard Vosser
And different geographies same sort of rate of demand right now?
Lars Fruergaard Jorgensen
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 markets in a controlled manner because we want to get to enough markets and executor 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 UK 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 -- their most vulnerable there's very attractive out-of-pocket opportunity in extra [indiscernible].
Richard Vosser
And in the US, 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?
Lars Fruergaard Jorgensen
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.
Richard Vosser
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?
Lars Fruergaard Jorgensen
No, it's a great topic. And I guess it's one [indiscernible] 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 really to tell because we haven't had patients on average on treatment for that long. But I believe, again, here's an example of some of being different because if you have lost say 15% to 20% of your body weight and more than one-third 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 have 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 stayed time is not like 100%. So, it will not be that for us either. But I think we'll see a significantly higher stayed 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 3 program and then had to leave that before the product was launched and how 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 just to stay on treatment.
Richard Vosser
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?
Lars Fruergaard Jorgensen
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 one-third 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 topline growth more than competition.
Richard Vosser
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?
Lars Fruergaard Jorgensen
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 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. 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 US. So we are manyfold ramping up our API capacity to create the optionality to go all oral 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.
Q – Richard Vosser
And the -- we've seen good data with your oral approach. It's obviously on the market under the Rybelsus in diabetes, but there's a higher dose. What's -- what's the barrier? Is it that API? Or is it the formulation? And how long can we -- will it be until we can see that on the market?
Lars Fruergaard Jorgensen
It is about the API. And I mentioned, we have made the decisions to expand that significantly. So we will in the future have API. And then, it will be a trade-off between say competitive nature, number of patients we can get to. So we have R&D strategy of kind of going all in on the different say options and build optionality. And you can also see that in our pipeline semaglutide CagriSema Amycretin. And we also have a broad and deep early pipeline that we've not disclosed, yet. So we're teasing out all the different options. And I think this is such a huge addressable market, that there will be space for different types of products, different administrations and probably also different efficacy levels.
Q – Richard Vosser
When we think about side effects, we're all aware of the GI side effects. But there have been some news reports and some investigations on other side effects. And maybe first question here, how do you feel around the side effects? What's the latest?
Lars Fruergaard Jorgensen
Yes. So, it's a key commitment of ours to make sure that the medicines we make are safe. So we started this really carefully, and we take it very, very seriously. I'm very encouraged by the data we have. We have had GLP-1s in diabetes on the market for 15 years, eight years for obesity. So we have millions of patient years there. We have tens of thousands in clinical trials, and recently the SELECT study. We have also noticed a number of academic institutions doing research of the data.
So when I look across the body of evidence, I'm very comfortable about the safety profile. And yeah, I think we have a situation where we are in such large populations that you get the background population variance in the patients you treat. So it's important to keep stating it, but there's nothing that causes me to be worried as we speak.
Richard Vosser
Maybe we can switch gears and think about diabetes, which is where this all came from in the first place. There's been a change in the guidelines on diabetes. You mentioned weight becoming more centric. That's maybe in cardiology we heard this year, but last year as well the guidelines changed. So how that's I think driven a bit of a step change in the market? How do you see that diabetes market developing for the interim class?
Lars Fruergaard Jorgensen
Yeah. So I think clearly we have seen that that is moving from just HbA1C alone to also addressing the comorbidities cardiovascular being a key. And on that note, I'm very encouraged by semaglutide being the only molecule consistently showed say 20 or in the -- to the 20 range percentage cardiovascular risk reduction. Other active ones are in nothing in the low teens if at all showing a benefit.
So when we developed semaglutide there was a number of GLP-1 analogs developed and we tested them up for pharmaceutical benefit and picked this one. So I'm very encouraged about the added value we can bring in diabetes. And I think this is becoming a required to play part of treating diabetes. And we all know that a key risk is to develop cardiovascular disease and it's one of the biggest causes of debt. So it is a real value and it is a real benefit for patients.
Richard Vosser
And with that benefit I mean it's the there are the SGLT2s that had a cardiovascular benefit but only the GLP-1s that really lose weight significantly. What penetration do you think you can get the market get to in terms of GLP-1s in diabetes?
Lars Fruergaard Jorgensen
I believe it can become quite significant. If we look at it today in the US, we are in say mid-teens from a volume perspective. Outside of the US, it's still low single-digit percentage share of the volumes, highest in Europe and then we are now penetrating China in other markets.
So I believe it can move significantly higher than that. When you get into volumes like that you have to look at how do you scale. In the US there's a wide use of say single-shop devices that makes it harder to scale. So I think when we have to go into significant populations you also have to look at how you actually making the dosing. But it doesn't change the fact that I believe with the benefits of this class of products in particular semaglutide, I see a very large volume opportunity and this moving into background treatment like we know it from metformin today, which is a great product but it's not the most efficacious compared to what we're bringing with GLP-1s.
Richard Vosser
Is that going to reusable pens back to reusable pens? Or is it…?
Lars Fruergaard Jorgensen
Yeah. We were the company who kind of invented the device. We moved the market to disposable devices. And I think increasingly that will become a challenge from an environmental point of view and also a scalability point of view when you get into large millions of patients. And I mentioned that we're adding four million patients a year and obviously, there's a big difference whether that's a reusable device or it's a single-shot device.
So I think both from a scaling, but also from a basic environmental point of view, I think there will be a day where a patient as a consumer would not change is throwing out a device after having used it once. And I think that actually plays into scaling also to many more patients.
Richard Vosser
And we touched on obviously growing the obesity market. How do you see that affecting the size of the diabetes market? We've seen in Type 2 diabetes insulin users is now declining in terms of volume terms, presumably GLP-1 related. How do you see the effect on Type 2 diabetes?
Lars Fruergaard Jorgensen
There is an underlying strong growth in the Type 2 diabetes market. So whenever there's a forecast being made, it's almost adding 100 million patients. So there's a very, very strong underlying trends leading to Type 2 diabetes. And if we one day succeed in actually bending that curve by treating obesity, I would be really, really happy because I think that's the strongest contribution, we can have to society in actually preventing a serious chronic disease like Type 2 diabetes. And in doing that, we have had a good business in helping people lose weight. And it's a big addressable market than those who live with Type 2 diabetes.
So the purpose of Novo Nordisk is to drive change, to defeat serious chronic diseases and actually looking at obesity treatment as a way to prevent Type 2 diabetes get the disease, cardiovascular disease I think is the greatest proposition you can pursue.
Richard Vosser
And you alluded to ex US the penetration is even lower. So is that a bigger growth opportunity if anything?
Lars Fruergaard Jorgensen
It is. When you look at say the insulin market that's significantly larger outside of US than it is in US. So everything else equal, you can say the volume opportunity in diabetes is way bigger outside of the US. I think obesity is probably more prevalent in the US than it is elsewhere, but the trend is going towards the same. So as I mentioned before, typically in the US, we have the first approval of innovation and we have the fastest and earliest uptake. So typically, we start here.
But there is a significant opportunity in moving into what we call international operations. And we have a leading footprint in international operations. We had a stronger position there before we break through in the US. So the reason why we are the volume leader today in say injectable therapy is largely because of that international operations. And obviously that creates a huge opportunity for us as we ramp up capacity, serve those markets at a lower price point, but a very, very large say volume opportunity compared to the US.
Richard Vosser
Maybe competition. Mounjaro. So Zepbound and Mounjaro. Mounjaro for diabetes. How do you see that? We've not seen an effect on Ozempic growth yet, but do you -- they're relaunching. How do you see that?
Lars Fruergaard Jorgensen
So at least again if you look at the history of the market, whenever a new efficacious GLP-1 has been launched, it further fueled the market growth. So we've seen that over the last, say, couple of generations of products from Novo Nordisk and Eli Lilly. And still we're only in the mid-teens in terms of Type 2 patients being on a GLP-1 in the U.S.
So I think that will continue that physicians like to have choice. There are different responses from different people. And even when there's a new vacation product being launched that further fuels the category and both containers can continue growing at least at what history has informed us and I think that will go on into the future. And again, we have a pipeline coming where we believe we can stay competitive in that race.
Richard Vosser
If we think about health care reform and IRA, there's a reasonably long pattern life and we'll get to innovation beyond Wegovy in a second. But how do you see that affecting the portfolio?
Lars Fruergaard Jorgensen
Yes you can say, short-term, we're baking in the impact from the inflation penalty the co-pay cap for diabetes. I think the coverage gap is neutral. And then of course, we are now experiencing what does it mean to negotiate insulin price based on our as part products. We are not fully in alignment with the IRA and what it entails and some of the basic, say, logic around it. So we are contending that.
But again, here, we have a significant volume opportunity. So we are far from having served all patients. And that's -- I think that's one of the aspects where Type 2 diabetes and obesity is different. In particular, now whether we in obesity, because we have very long, say, launch parts and penetration of markets, and you have many other products where the uptake is relative faster, and then you plateau and you decline.
So even after an IRA impact, there will be volume growth opportunity, which can somehow compensate for the impact. And then, of course, we have innovation coming on top of it. So, I see a sustained, say, long-term growth opportunity despite of this.
Richard Vosser
And next-generation innovation. So we've seen a bit of that with CagriSema. How do you see the visible portfolio in terms of CagriSema for the next generation?
Lars Fruergaard Jorgensen
Yes. So we have -- as I mentioned, we've been working at this for 25 years, and we have looked across the incretins the amylin. And we have made a bet on what we believe has the best properties, and are quite excited about CagriSema where you both have the energy -- reduced energy intake from a GLP-1, and then the accelerated energy expenditure from the amylin and combining that.
And now we're conducting our Phase III studies so hugely exciting. We have an Amycretin as a single molecule approach to that both being pursued as an all and we're also testing out as a subcu started Phase I on that. And then I mentioned, we have a number of early stuff that we have not disclosed where we're basically looking at teasing out benefits across the whole spectrum of different say incretins and also working with some formulation opportunities to, yes, help scaling, et cetera.
Richard Vosser
And when we think about beyond obesity, beyond diabetes. I mean you've sketched out a long runway of growth here in next-generation products also extending that potentially. But how do you plan for beyond this or beyond when the growth is slower. What steps are you taking?
Lars Fruergaard Jorgensen
Yes. So we have a history of being really disciplined and focused on a few therapeutic areas and mastering a set of technologies we believe we can master better than most. And it's diabetes, obesity, cardiovascular disease, and it's rare blood diseases. So we go in and build strong portfolios here. And you can say cardiovascular and cardiometabolic space is an obvious place for us to invest. And you have seen that we are now increasingly using business development M&A to build a presence there. And from a position of strength, we by moving early, we actually believe we can add a lot of value to our shareholders by taking assets in relatively early and then use our core capability both in development but also in optimizing molecules manufacturing, et cetera and then the global reach we have.
So I feel quite excited about our ability to sustain a leadership role in diabetes and obesity, keep investing in those options. And then in parallel, building quite interesting and exciting CBD portfolio and also in rare diseases we are moving beyond, say, Haemophilia into sickle cell disease and there are a number of options there. So, a combination of a sustained volume opportunity that we've actually, I think, exists also after last activity and then building innovation in known areas and ensuring new areas that are near adjacencies to do what we do, I think, is the model we're pursuing to pursue long-term growth also.
Richard Vosser
Excellent. Lars, it's been a great discussion. Thanks very much.
Lars Fruergaard Jorgensen
Thank you.
Richard Vosser
Thanks, everyone, for listening.
Lars Fruergaard Jorgensen
Thank you.
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Novo Nordisk A/S (NVO) Presents at J.P. Morgan 42nd Annual Healthcare Conference Transcript