Hello, and welcome to the Q2 2020 Novo Nordisk AS Earnings Conference Call. Throughout the call, all participants will be in listen only mode and afterwards there will be a question and answer session. Today, I'm pleased to present Lars Hrvoegord Jurgensen. Please go ahead with your meeting.
Thank you. Welcome to this Novo Nordisk conference call regarding our performance for the 1st 6 months of 2020 and our financial outlook for 2020. I'm Lars Roegard Jorgensen, the CEO of Novo Nordisk. With me, I have our Chief Financial Officer, Carsten von Knudsen and our Chief Science Officer, Thomas Mads Kosko Thomsen. Also present and available for Q and A sessions are Executive Vice President and Head of Commercial Strategy and Corporate Affairs, Camilo Sulles as well as our Investor Relations Officer.
Today's earnings release and the slides for this call are available on our website, novonouis.com. Please note that this conference call is being webcasted live, and a recording will be made available on Novo Nord's website. The call is scheduled to last for 1 hour. The presentation is structured as outlined on Slide 2. We'll begin with the highlights for the quarter, addressing Novo Nordisk continued response to the COVID-nineteen pandemic and then move on to the performance for the 1st 6 months of 2020.
Please note all sales and operating profit growth statements will be at constant exchange rates unless otherwise specified. The Q and A session will begin in about 20 minutes. Please turn to Slide 3. As always, I need to advise you that this call will contain forward looking statements. Such forward looking statements are subject to risk and uncertainty that could cause actual results to differ materially from expectations.
For further information on the risk factors, including the uncertainties around COVID-nineteen, please see the company announcement for the first half of twenty twenty and the slide prepared for this presentation. Now please turn to the next slide. In 2019, Novo Nordisk introduced our strategic aspirations 2025, which consists of 4 components: purpose and sustainability, innovation and therapeutic focus, commercial execution and financials. In the Q2 of 2020, Novo Nordisk has continued our focus on adding value to society with the launch of a new social responsibility strategy called Defeat Diabetes. The strategy every country and to continue the drive of innovation to improve lives.
First steps in the strategy are to reduce the ceiling price of human insulin from $3 to $3 per vial in 76 low- and middle income countries and to expand our aspiration in our Changing Diabetes in Children program to reach 100,000 children by 2,030, from 25,000 children. Furthermore, in July of this year, Novo Nordisk announced our participation in the AMR Action Fund, a $1,000,000,000 initiative from more than 20 biopharmaceutical companies to combat antimicrobial resistance. We also saw encouraging progress within our innovation and therapeutic focus aspiration during the quarter. Rebersos was approved in Japan for the treatment of type 2 diabetes. And as described at our virtual R and D event in June, the STEP Phase 3 program, AM833 monotherapy trial and AM833 plus semaglutide trial, all successfully completed.
Further, Nonoiz signed an agreement for the acquisition of Covidya Therapeutics, including the Phase IIb project, siltiveklimab. Moving to commercial execution. Diabetes sales increased by 7% with no noise increasing our diabetes value market share leadership by 0 point 8 percentage point to 29%. GLP-one sales continue to perform well at 28% growth. Obesity Care and Bio increased by 7%, with International Operations growing by 12% and North America Operations growing by 1%.
Operating profit increased by 8% to DKK 30,000,000,000 As a consequence of the solid underlying performance in the 1st 6 months of 2020, we are maintaining our sales growth guidance of 3% to 6% and raising the floor of our operating profit guidance from 1% to 5% to 2% to 5%. For 2020, the Board of Directors has decided to pay out an interim dividend for 2020 of DKK3.2 5, which will be paid out in August this year. Please turn to Slide 5. The months have been highly unusual given the COVID-nineteen pandemic. During this time, Novo Nordisk has continuously focused on ensuring that our business is operating safely, that we are able to supply lifesaving medicines as well as support societies around the world.
Within production, all new noise manufacturing sites continue to operate and products are still distributed and being available to patients worldwide. Within research and development, we continue to conduct already initiated clinical trials. For ongoing trials, recruitment of new patients is negatively impacted, but gradually improving. It is now possible to initiate new trials in certain countries. The majority of the pandemic, stocking mainly at the patient level was seen particular in the U.
S. And Europe, but a gradual destocking started in the second quarter. The COVID-nineteen pandemic evolves differently across geographies, but operations are gradually normalizing in many markets. The majority of sales representatives are now partially back in the field. Again, we take our responsibility to support society seriously.
Recently, Novo Nordisk, together with partners, has developed a new coronavirus antibody test, which will be used by Ryshospetel in Denmark as in an observational study to identify the level of transmission of COVID-nineteen among people in the Danish labor market. Please turn to Slide 6. During the past 6 months, the COVID-nineteen related lockdowns negatively impacted new patient initiations in the U. S. Across all therapy areas we operate in, indexed against January averages around 15% in the U.
S. But there are signs of gradual recovery. Patient initiations in the International Operations have also been negatively impacted by COVID-nineteen. But as mentioned, despite the differences in how the pandemic evolves across geographies, operations are gradually normalizing. Please turn to Slide 7.
For the first half of the year, total sales increased by 7%, which was driven by a solid sales growth of 12% in International Operations. The COVID-nineteen related stocking in the Q1 was largely offset by destocking and fewer patient initiations in the Q2. In International Operations, all areas and all fewer patients initiating treatment as well as other timing events. North America operations increased by 1%, driven by sales growth for GLP-one, obesity and biopharm segments. Sales growth was impacted by the COVID-nineteen related surge in demand in Q1 2020, fewer patients initiating treatment as well as less use of NOVA7 due to the lock Following the stocking seen in March 2020, sales were negatively impacted by COVID-nineteen related destocking of around DKK 500,000,000, partially at the table level.
Sales were additionally negatively impacted by fewer patients initiating treatment. These effects largely offset the stocking of estimated DKK 2,000,000,000 in the 1st 3 months of 2020. Please turn to Slide 8. In the 1st 6 months of the year, sales growth was driven by GLP-one, obesity and biopharm, partially offset by a decline in insulin sales. Global insulin decreased by 3%, driven by a 23% reduction of the in the U.
S, partially offset by 10% growth in International Operations. The U. S. Sales decline was driven by lower realized prices due to an unfavorable channel mix, rebate enhancements, the launch additional affordability programs and changes in coverage GAAP legislation. In International Operations, insulin sales growth were driven by all insulin segments.
GLP-one sales increased by 28%, driven by 37% sales growth in International Operations and 25% sales growth in North America Operations. The sales increase was impacted by COVID-nineteen related stocking, largely offset by fewer patients initiating treatment. Novo Nordisk has expanded both our global insulin volume market leadership as well as our GLP-one market leadership. This has resulted in the previously mentioned expansion of Novo Nordisk global diabetes market leadership now at 29%. Obesity Care sales grew by 9% with both operating units contributing to growth.
Sales growth was impacted by fewer patients initiating treatment due to COVID-nineteen. Biopharm sales increased by 6%, driven by Nordic token. Please turn to Slide 9. The U. S.
GLP-one market continues to grow around 30% in volume when measured quarter over quarter driven by once weekly GLP-one products. With the uptake of Ozempic and the launch of Reberlsus, Novo Nordisk has neutral brand market share leadership of around 58% and is a GLP-one market leader measured on total prescriptions with around 49% market share. ReBelto's market access has progressed well, and we have around 70% unrestricted access across commercial and Medicare plans. The weekly new to brand market share has reached 11%, and the total Rebelsus prescription share is nearly 3%. Ozempic continues to increase its market share in the U.
S. In terms of new to brand prescriptions, Ozempic is close to 35% market share. And in terms of total prescriptions, Ozempic market share is slightly more than 26%. Please turn to Slide 10. Novo Nordisk is increasing our diabetes market share in International Operations as indicated by the near 26% share of growth versus our market share of around 22%.
This represents a market share increase of 0.4 percentage points versus 2019. The market share increase in international operations is driven by both insulin and GLP-one. The diabetes franchise represents around 80% share of growth in international Operations, with insulin share of growth at 51% and GLP-one share of growth at 39%. Please turn to Slide 11. Obesity Care sales increased by 9%, driven by both North America Operations and International Operations.
Sales growth was negatively impacted by fewer patients initiating treatment due to COVID-nineteen. Our strategic aspiration is to move to more than is to more than double sales in obesity by 2025. In support of that, Saxenda has been launched in 48 countries globally, and we continue to invest in market development activities. Please turn to Slide 12. Biopharm sales grew by 6% in the first half of twenty twenty, driven by 10% sales growth in International Operations and by 1% sales growth in North America Operations.
Sales were positively impacted by timing of shipments, changes in inventory and COVID-nineteen related stockings. Sales were negatively impacted by lower demand due to COVID-nineteen related lock downs. For hemophilia, the declining sales of 1% were driven by lower NOV7 sales, partly reflecting reduced elective and bleedings due to lockdowns, but partly offset by the continued global rollout of the new products, RafiXia and Esproduct. Noyetropin sales increased by 18%, driven by changes in inventory, COVID-nineteen related stocking as well as additional demand driven by supply challenges for competing products in selected countries. Novo Nordisk remains the leader in the human growth hormone disorder market with a value market share of 34.2%.
With this, over to Mads for an update on R and
D. Thank you, Lars. Please turn to Slide 13. In the next couple of slides, I'll discuss recently communicated results from our obesity pipeline, starting with the STEP program. STEP investigated once weekly subcutaneous semaglutide 2.4 mg in the treatment of obesity and showed strong weight loss across the 4 Phase 3a trials, STEP 1, 2, 3 and 4.
The STEP 1, 3 and 4 trials evaluated semaglutide in people with obesity or overweight with comorbidities, while STEP 2 weight loss of 17% to 18% in the obesity trials and around 11% weight loss in the diabetes trial. These are compared to a placebo a placebo related weight loss of 2% to 5%. Additionally, cardiovascular risk markers were significantly reduced and health related quality of life improved significantly after 6 to 8 weeks of semaglutide treatment. In all the individual STEP trials, semaglutide 2.4 milligrams furthermore appeared to have a safe well tolerated profile with the most common adverse events being the transient gastrointestinal events typical of the GLP-one class. No new and unexpected safety signals emerged in step.
Following completion of the 4 step trials, Novo Nordisk will now prepare to file the regulatory dossier, an NDA submission, which is expected to take place around the turn of the year. Please turn to Slide 14. In June 2020, the Phase II results with a novel once weekly subcutaneous human amylin analog AM833 were announced. The 26 week Phase 2 monotherapy trial with AM833 investigated the safety, tolerability and efficacy in weight management among 706 people with obesity or overweight plus at least one weight related comorbidity. From a baseline body weight of 107.4 kilograms, AM833 demonstrated a substantial weight loss of 10.8% following only 26 weeks of treatment.
Also in June 2020, the results from the Phase 1b trial investigating AM833 in combination with semaglutide were announced. This 20 week multiple ascending dose trial investigated the safety, tolerability pharmacokinetics and weight loss potential of AM833 administered in combination with semaglutide 2.4 milligrams in AT people with obesity overweight. After only 20 weeks of treatment and with only the last 4 weeks at the therapeutic doses of 2.4 milligrams of 95.1 kilograms. 66 percent of the participants on the highest dose of the combination therapy achieved a weight loss of more than 15% after only 20 weeks. Dual targeting of the GLP-one and amylin satiety pathways in the brain henceforth holds the potential to perform strong future noninvasive treatment alternative to bariatric surgery in patients with high BMI indices.
Furthermore, AM833 in combination with semaglutide appeared to be well tolerated with the most common adverse events being transient, mostly mild to moderate gastrointestinal events, which the increased efficacy of the combination therapy occurred only at the level similar to semaglutide monotherapy. Following the completion of the Phase 2 monotherapy trial with AM833 and the combination trial with AM833 and semaglutide, a multi dose pharmacokinetic study of the combination will be initiated in the second half of this year and Phase III development is expected to begin next year. Please turn to Slide 15. In the Q2 of 2020, a number of R and D milestones were reached. Milestone that have already been mentioned include the Rybelsus approval in Japan as well as the STEP results in obesity, Phase II results for AM833 monotherapy and the Phase Ib trial for the combination therapy.
Regarding some other GLP-one related clinical obesity projects we've been pursuing, namely the co agonist and triagonist triagonist projects, we've decided to terminate both projects. This decision is based on the strong obesity data obtained for semaglutide and AM33 that in aggregate have raised the innovation bar for future Novo Nordisk Obesity Care, and we therefore prioritize the resources accordingly to achieve the best possible patient outcomes and product benefit risk profile. Within the cardiovascular space, the PCSK9 inhibitory peptide successfully completed its first tumor dose trial in June of this year. The peptide has a long lasting efficacious safe and well tolerated profile. Following completion of the trial, the next steps in clinical development are now being evaluated.
Lastly and also in June, Staten and Novo Nordisk initiated the first human dose trial for their monoclonal so called sweeping antibody, STT-five thousand and 58 designed to target and eliminate lipoprotein APOC3 leading to APOC3 lowering. This in turn expected to significantly lower triglycerides, leading to a potential reduction of cardiovascular events in the hypertriglyceridemic target population. The trial is a single center randomized double blinded placebo controlled trial designed to investigate safety, tolerability, pharmacokinetics and pharmacodynamics. The remainder of the year and into 2021 promises a number of milestones, including results and potential regulatory submission for SUSTAINFORDE, which is a large trial involving semaglutide dosed at 2.0 milligrams in type 2 diabetes. Additionally, we are planning to initiate the Phase 3 program for the 1st in class once weekly insulin Icodec before the end of the year.
Likewise, we expect regulatory submission in the U. S. For semaglutide 2.4 milligrams in obesity towards year end. Finally, will be NASH readouts for semaglutide in combination with the FXR and ACCI compounds from Gilead as well as Phase 2b results related to the anti interleukin-six monoclonal antibody, siltivekimab, in patients with atherosclerotic cardiovascular disease and chronic kidney disease. With that, over to Carsten for an update on the financials.
Thank you, Mads. Please turn to Slide 16. In the 1st 6 months of 2020, sales increased by 8% in Danish kroner and by 7% at constant exchange rates. The gross margin was 84.1% compared with 83.9% in the 1st 6 months of 2019. The increase in gross margin reflects productivity improvements, mainly within insulin and GLP-one, a positive product mix driven by increased GLP-one sales and a positive currency impact of 0.2 percentage points.
This was partly countered by a negative impact from lower realized prices in the U. S. Sales and distribution cost increased by 3% in Danish kroner and by 3% constant exchange rates. The increase in costs was driven by North America operations, reflecting launch activities for Rybelsus and In International Operations, promotional activities are focusing on the continued rollout of Saxenda and launch activities for Ozempic and Reversus. The spend was impacted by COVID-nineteen, resulting in a lower activity level and delays in promotional activities.
Research and development costs increased by 13 percent in Danish kroner and by 13% at constant exchange rates. The cost increase is impacted by the reversal of write downs of prelaunch inventory in the Q1 of 2019 following the filing of oral semaglutide with the U. S. FDA. The cost increase is driven by increased activities within other serious chronic diseases due to progression of the early pipeline within NASH and cardiovascular disease as well as increased spend within insulin and program.
Administration cost decreased by 1% in Danish kroner and was unchanged at constant exchange rates, reflecting broadly unchanged spend across administrative areas. Operating profit increased by 9% in Danish kroner and 8% at constant exchange rates. Net financial items showed a loss of around DKK 1,700,000,000 compared to a loss of around DKK 2,300,000,000 in 2019. Diluted earnings per share increased by 14% to DKK 9.58 Free cash flow increased by 62 percent to DKK 30.3 billion. The increase was driven by timing of an interim dividend for 20.20 of DKK3.2 an interim dividend for 20.20 of DKK3.25 for each DKK0.20 foreign The foreign exchange rates have moved significantly since our Q1 2020 financial release in May, with especially the U.
S. Dollar depreciating against the Danish kroner, followed by many emerging market currencies. This development impacts our full year outlook, where we now expect currency headwinds on sales growth and operating profit growth of minus 2% and minus 3% respectively, relative to growth rates at constant exchange rates. Furthermore, in May 2020, we expected net financial items for the full year to be a loss of DKK 2,500,000,000 but with the latest currency movements, the expected loss has been reduced to DKK 1,200,000,000, reflecting gains associated with foreign exchange hedging contracts, partly offset by non hedged currencies. Despite the expected negative impact from COVID-nineteen in 2020, sales growth is still expected to be between 3% 6%.
The guidance reflects an expectation continued robust sales performance of the GLP-one based diabetes care products, Ozempic, Victoza and Rybulsus, the portfolio of new generation insulin and the biopharm products. The guidance also still reflects intensified competition within Diabetes Care and Biopharm, continued pricing pressure within Diabetes Care as well as the expansion of affordability initiatives. As discussed in the previous slide, given the at constant exchange rates. The current COVID-nineteen pandemic causes uncertainty to the outlook regarding new patient initiations and societal impacts such as the unemployment rates in the U. S, which is impacting health insurance coverage.
The estimated annualized impact hereof is around 3% on U. S. Sales. The outlook is based on a number of assumptions related to severity of impacts from COVID-nineteen, including a gradual normalization across geographies of new patient initiations in the 3rd Q4 as well as the continued gradual destocking during 2020 expected to be 2% to 5%. The updated outlook reflects savings due to COVID-nineteen.
The expectations for operating profit growth primarily reflects the sales growth outlook and continued investments in current and future growth drivers across the operating units. Again, given the current exchange rates versus the Danish kroner, growth reported in Danish kroner is now expected to be around 3 percentage points lower than at CER. Consequently, we are on track to deliver our 2020 financial guidance set before the COVID-nineteen Financial items is now expected to be a loss of around DKK 1,200,000,000, reflecting the lower losses associated with foreign exchange hedging contracts. Lastly, we now expect free cash flow to be between DKK 33,000,000,000 and DKK 38,000,000,000, reflecting Please turn to Slide
19. Despite COVID-nineteen, Please turn to Slide 19. Despite COVID-nineteen, we are satisfied by the performance in the first half of twenty twenty and by the progress made on our strategic aspirations. We saw a strong uptake in our GLP-one portfolio, and we continue to increase our diabetes value market share. Within R and D, our BT clinical trials result are very encouraging.
As COVID-nineteen continues to severely impact societies around the world, our priorities continue to be to safeguard our employees, continue supply of our lifesaving medicines and to help societies around the world to fight the pandemic. With that, I would like to thank you your support, and we're now ready for the Q and A. We kindly ask all participants to limit him or herself to 2 questions. Operator, we're now ready to take the first set of questions.
Thank
you.
And our first question comes from the line of Peter Verdult of Citigroup. Please go ahead.
Thank you. It's Peter Verdult from Citi. Two questions. Lars, can you characterize how the obesity data generated in Q2 for sema, AM833 and the combination played versus internal expectations. One could argue that the profile emerging versus an existing obesity franchise that was approaching $1,000,000,000 pre COVID, make sure sort of $2,000,000,000 plus obesity aspiration look rather conservative.
I realize Q2 is not the forum by which you change strategic objectives, but I would like to hear your thoughts about confidence of reaching or far exceeding that target. And then secondly, and a little bit more near term for MADS, can you just remind us how you think about the magnitude of threat, if any, to somaglutide from upcoming tirzepatide Phase III data, the profile you're expecting? And a quick reminder as to when in Q4 we should expect the sustained Forte data? Thank you.
Thank you, Pete. So it's clear that we are very encouraged by the clinical profile we have seen not only for semaglutide and obesity, but clearly also AM833 alone and in combination with semaglutide. We, at our Capital Markets Day, said that we expected to at least double the obesity franchise. And it's clear that, that statement was set with confidence that we would also get strong clinical data. But in no way has we have we seen any weakness in that position.
So if anything, it has certainly strengthened our confidence in achieving that. But as you say, I'm not going today to put out a new strategic aspiration for obesity. But we are very pleased with the data, and we're very confident that we can make this into a very sizable business for Novo Nordisk. And then, Mads, on the clinical profile and the potential spread of competing product. Obviously, there are limits to what we can say about competitor products, but some comments.
Yes. There are indeed, Lars. And so I will refrain from being very specific on the tirzepatide molecule. Tyme will show the data, but I can make some generic comments. One is that we are now understanding very much the profile of semaglutide at higher doses, do bear in mind, Pete, that we have actually conducted semaglutide in NASH, where a significant portion of the patients had diabetes, and that was at a dose of up to more than 2 milligrams, where we saw very substantial weight loss and very significant A1c lowering.
We've done the same also in as an element in the STEP program. So I can say with confidence that the SUSTAIN FORWARD trial, in my mind, will show a very powerful lowering both of glucose and body weight. And I do expect to see a benign adverse event profile in line with what we've seen both in the NASH trial and also in the STEP program where the higher doses were deployed. Obviously, tirzepatide being a GLP-oneDIP agonist will, in my mind, based on data we've seen so far, unlike the combination of AM833 and sema, which is an amylin analog and a GLP-one analog, there will probably be additivity of the GI side effect profiles of the GIP and the GLP-one components. At least this is what we have seen both in a trial we've Phase II and the escalation trials that our colleagues at Eli Lilly have done.
But we will see the data late this year and I guess during the course of next year. Thank you, Mads. Just a quick
follow-up on the Forte,
the timing. Yes, this is the Q4 time line. Are we talking very
over the
year for Forte or
Yes. We are talking Q4, Pete, Q4.
Okay. Thank you.
Thank you. Thanks for trying. Next questions, please.
Our next question comes from the line of Wimal Kapadia of Bernstein. Please go ahead.
Great. Thanks very much. Wimal Kapadia from Bernstein. So firstly, can I just ask a little bit about Ozempic pricing? If I look at my math, it's down around 21% per milligram in the first half of twenty twenty versus full year twenty nineteen, and that follows a 17% decline in 2019 versus 2018.
So you described the impacts across unfavorable channel mix, rebate enhancements and changes in coverage gap legislation. Gap legislation. So could you just help us better understand the contribution from each of these three factors and the pricing dynamics? And then tied to that, should we assume similar trends moving forward? And then my second question is just on Saxenda.
Clearly, a tough 2Q as expected. So could you just talk a little bit about what you've seen in the last month or so, particularly within the OUS out of pocket market? Should we expect continued weakness to a similar extent for the remainder of the year? Or should we actually see a return to growth OUS?
Thank you, Rimal. So Karsten, first on Ozempic pricing and then Camilla can comment on Saxenda for Q2.
Yes. So Wimal, I cannot recognize the percentages you are alluding to from your analysis. So we're looking at different data points, first of all. So what we're looking at in terms of Ozempic pricing in the Q2 is exactly in line with what we saw in the Q1. So there are no structural changes here in the Q2 compared to Q1.
Changes here in the Q2 compared to Q1. As to our pricing in GLP-one ore, but also in with Ozempic specifically, then you're right. There's a gap between the volume growth and the realized net sales growth. Again, the main building blocks remain. First of all, we have a coverage gap impact in the U.
S. This year. Of course, we don't have that impact next year. Then we have the channel mix and the payer mix impacting. And then finally, the rebate enhancements to secure that we continue to have around 90% unrestricted access.
So we're actually rather encouraged by the performance overall by Ozempic, and we believe that the performance is strong and continues to be strong.
Thank you, Carsten. And Camilla, on Saxenda performance in Q2 and what to expect?
Yes. So Saxenda performance have been significantly impacted by COVID-nineteen, as you saw, especially because products with a very short stay time like Saxenda, 4 to 5 months is impacted by the fact that the NBRx scripts are going have been reduced, especially in the Q2. We saw the lowest point around April, and now we are seeing that we are partly getting closer to a recovery of that. We are still not back to where we were before COVID-nineteen, but we are approximately at index 85 of before COVID-nineteen. So we have seen some signs of recovery, but not completely there.
And of course, in the coming quarters, we will see how that develops in the U. S, but also in the rest of the world.
Thank you very much. Thank you, Smilher. Thank you,
Our next question comes from the line of Trond Hyung of Credit Suisse.
I have 2 if I can. First one just on the broader politics given the political crosshairs for diabetes. So I'm just wondering if you could just tell us your thoughts on what you think might happen with regard to potential U. S. Healthcare reform and with a particular to international reference price?
And then perhaps some comments on the European pricing outlook given that we're probably going to enter a period of austerity. And then my second question is just on the initial price of ribelsus in the EU and how have your pricing discussions gone here? And are you getting much price acceptance on what you want?
Thanks very
much. Thank you very much. I will try to give some overall comments on the Healthcare System, U. S, Europe and then Camilla can touch on Roberto's pricing in Europe. So many attempts have been made to try to reform the U.
S. Health care system. And most have turned into some challenging prospects of actually getting implemented. And it's important to bear in mind that the U. S.
Health care system is largely a private market locked up in contracts between different partners. And there is a gross and net play here where, in aggregate, I think in 2019, dollars 100 and $5,000,000,000 were paid in rebates that helped fund the health care system. So any change in that market structure will have to accommodate how those profit pools are structured and allocated today, and that's a significant challenge. The recent executive orders, 2 of them deal with increased pass through rebates to patients. We welcome any initiative that would help patients at the point of sale and actually lowering their out of pocket costs.
But it's also clear that, that would then mean that some rebates that's today been used to lower premiums and fund other expensive medicines would have to be that money would have to be found somewhere else. So I think something has to change, obviously, for the benefit of the patients, but it's not easy to do. International reference pricing, again, while complex, what price are you going to reference? And gross net, many products are launched first in the U. S.
S. So again, while complex. So I don't expect a lot to change short term. Regarding U. S.
Price sorry, European pricing, the pricing structure in Europe is such that you negotiate your price with authorities. So there's a health technology assessment where you assess the value of a product up against the price you pay for it. And I think that is a rational way of going and that will most likely continue. Having said that, of course, Somehow, that will have to be recouped in a way. So that's one trend that could potentially make health care spending harder.
On the other side, I think it's also clear that a healthy population is important in a COVID-nineteen perspective, not least the diseases we treat where there's evidence that having diabetes or being overweight is additional risk factors to getting COVID-nineteen. So I think there is probably an incentive to treat the patients we treat even more intensively going forward than what we've seen in the past. So that was a long answer to really say that I don't believe there will be a major change short term. Camilla, on Rybelsus pricing in Europe?
Yes. On Rybelsus in Europe, we have initiated pricing and reimbursement discussions in a number of countries, and we are well on track for the first launches now in quarter 3, this quarter. So you will see that coming up very soon. The reimbursement negotiations are generally going very well, and we are achieving also reimbursement at price levels in the GLP-one ballpark, so around the same level as you see for Ozempic and other GLP-1s in Europe. So all in all, all of that is progressing very well.
Thank you.
Excellent. Thanks very much.
Thank you.
Our next question comes from the line of Simon Baker of Redburn. Please go ahead.
Thank you for taking my questions. Just continuing on your last comment, Lars, about more intensive treatment of patients in which is tied in with COVID, although it was in part preexisting. So I just wonder if you've seen any tangible evidence from governments yet that in light of COVID there may be more accepting view on therapeutic options for treating obesity? And then secondly, on costs, you said that the operating profit guidance has been raised in part due to COVID related savings. Firstly, I wonder if you could give us an idea how much of those COVID savings have fallen through to the guidance and how much has been reinvested?
And also, how sticky are those savings? Do you expect there to be a long term benefit from simply doing business a more efficient way that will have a positive effect in 2021 and beyond? Thanks so much.
Thank you, Simon. So on obesity, yes, I do see a growing acknowledgment of the importance of dealing with obesity. I have pleasure of meeting and discussing this with health ministers around the world, obviously, not a lot recently. But as one travels and you have these engagements, it is clear that it's recognized that obesity is a significant challenge. I think many are struggling with how much is the medical intervention and how much is lifestyle and how do you deal with both.
So we as part of our obesity strategy is to really drive that agenda, understand make people understand that it's a disease. It takes medical intervention for many. Educate physicians, but also make people living with obesity understand that it makes sense to seek treatment. So that's part of our strategy. And then obviously, as we now come with a significantly stronger efficacy, we believe that is the, say, breakthrough in innovation that's going to make this accelerate this development.
And I think it will come hand in hand with a growing acknowledgment supported by COVID-nineteen that obesity is something that health systems needs to deal with. Karsten, on the COVID-nineteen savings. Yes.
Hi, Simon. On savings, then if you look at our spend in the second quarter, where we have our spend going down by to the tune of 3% and then compare that to how would it have looked had we not had a COVID-nineteen pandemic, then that spread is to the tune of DKK 1,000,000,000. And that DKK 1,000,000,000 you can say part of that is phasing and part is savings. So the phasing could, for instance, be commercial launch activities that are deferred from first half into second half and the marks are opening up or clinical trial activities where patients are recruited slightly later or trials initiated slightly later. So that would be the phasing part, and the saving part would more directly be linked to, for instance, on travel, where, for instance, our airline flights in the Q2 was down 90% compared to the Q2 a year before.
And those savings, of course, we're allocating our resources in an optimal way, also investing some of them in increased distribution costs and in digital initiatives. So on the hard math for this year's guidance, you can say CHF 1,000,000,000 in savings. And since we raised the floor in our guidance, then mathematically, the midpoint would go up by 0.25 $1,000,000,000 so 25% of the $1,000,000,000 being delivered to shareholders and the rest being phasing and reallocations. And then as a final note, do bear in mind that we are operating already at a very high level in terms of our operating margin first half at 47%. So we believe that we generate more value for our shareholders by whatever resources we can free up from our business that we invest in future growth and whether it's commercially or in future pipeline activities and pipeline assets.
So that's our strategic approach to resource allocation.
Much. Thank you. Next questions, please.
Our next question comes from the line of Mark Purcell of Morgan Stanley. Please go
ahead. Yes. Thank you very much for taking my questions. The first one is on your medium term guidance, given it was given pre COVID and so just to sort of check on this. You talked about North American growth obviously being sort of flattish over 2020 2021 for some of the reasons you gave, and then it recovered to mid single digits.
And then IO growth being at the upper end of the range of 6% to 10%. So I wonder if you could help us understand where you are relative to that medium term guidance, given that COVID was not a discussion point when you gave the guidance back in November. I think in terms of North America, if you make the the adjustments for stocking and then the new patient starts, you seem to be on track in that 0% to 2% guidance range. I guess it would be useful to understand where you are in terms of the $1,000,000,000 of PKK patient affordability initiatives so far in the first half and also the impact to the first half of the coverage gap and whether clearly the increase in unemployment could increase the patient affordability initiatives you felt were going to be roughly DKK1 1,000,000,000 And then turning to IO, again making the adjustments, it looks like you're actually at the top, if not even slightly above your 6% to 10% sales growth range if you adjust for new patient starts as well as taking out the stocking. And so again, sort of more looking forward, given that we now have COVID to contend with, do you anticipate more slowing down of GDP growth impacting your business or potential for governments rebuilding balance sheets under facing debt mountain to have to reduce prices potentially a little bit more than you'd expected back then?
And then the second one is a quick one, it's housekeeping. Of the DKK 2,000,000,000 of stocking, of which DKK 1,500,000,000 remain, could you help us understand broadly how this is split by geography and also by product to help us with our modeling for the remaining quarters of the year? Thank you.
Thank you, Marc. There was a number of questions and data points. So Karsten, if you try to talk a bit to the medium term guidance and I can try to address some of the longer term perspectives.
Yes. So in terms of medium term guidance that and you alluded to our Capstone Markets Day in the Q4 of last year, then you're absolutely correct. When we look at international operations, we're very encouraged about the growth and the overall performance, both how we closed out last year and the performance this year. So the 12% growth we're looking at is above the 6% to 10% we talked about. The COVID is largely neutral, and then we have some timing effects.
So you would say we're in the top end of that range and very encouraged about the performance and all the launches that are taking place there. In terms of the U. S, as you recall, then our strategic aspiration talks to the transformation of our U. S. Business and that we have to transform 70 percent of our business to products launched after 2015.
And that is basically what we see between the insulin business and the GLP-one business. So in North America, we're growing 1% in first half of this year, and the 1% should be seen in the light of the chorus gap you talked to, which has an impact to the tune of 2 percentage point on growth as well as affordability initiatives. Then as I said before, then of course, U. S. Unemployment will have a negative impact on our channel mix because some people will move from the employer sponsored health plans.
Our estimate at this point is that it will have an annualized impact of 3% on U. S. Sales if we stay around current year, then first half year performance is a good starting point. Then donut hole and affordability is perhaps not at the same level when we look into next year, while unemployment then pulls the other way. And then, of course, we have the performance of our GLP-one business and the rollout and launch of Rybelsus helping us continue to drive growth.
In terms of stocking, taking that before going to GDP growth, then the €2,000,000,000 stocking, where we now had saw a SEK 500,000,000 reversal in the 2nd quarter, so SEK 1,500,000,000 remaining is broadly equally split between North America and IO. And I would say in relative terms, you should split it relative to size on products. Yes, I think that's the best way to do it. Lars, on GDP growth?
Yes. So I think everybody is struggling to estimate what the world will look like post COVID-nineteen. I would just say, like I mentioned before, I think there are different forces here. One is obviously that governments are spending a lot of money on fueling economic growth and I. E, that creates a larger challenge in funding health care.
Having said that, as I mentioned before, the disease areas we are exposed for are chronic diseases and to some degree risk factors in relation to COVID-nineteen. So I think it also creates an underlying bigger acknowledgment of the importance of treating diabetes and dealing with obesity. So I think that can create, I'd say, a volume opportunity going forward. And you also see right now that we are actually executing in a way where we take market share. So I think we also have an opportunity of actually mitigating any, say, potential price pressure by volume upside.
So overall, for, say, the foreseeable time horizon, we feel quite confident in our ability to manage and drive growth within the frame we have outlined.
Our next question comes from the line of Richard Vosser of JPMorgan.
Perhaps you could give us an idea of the breakdown in Victoza, Levemir and Tresiba in the Q2. It seems to be a lot lower. Just wondering whether some of the unemployment changes, whether you've changed the rebate structure in those to anticipate going forward. If you could give us some details there, that would be great. And then secondly, around next steps for the PCSK9, What can we expect?
Can we expect a combination with semaglutide in a Phase II trial and monotherapy? Could you give us some idea on and timings and your thoughts there?
Thank you, Richard. So Karsten, first on breakdown rebate levels for brands.
Yes. So Richard, clearly, when you look at the quarterly reported sales, then there are some fluctuations on these brands as you allude to. By far, the key explanation on these three branches is the COVID movements between Q1, Q2. So you should not look too detailed at the Q2 numbers, but rather look at the first half year numbers than no significant changes on pricing on the products. Perhaps on one of the products, there's a slight tweak on channel mix, but no major U.
S. Unemployment included in Q2 numbers and no major changes to estimates and rebates in the quarter either.
Thank you, Carsten. May I ask what to expect with the readout from PCSK9?
Yes. Well, Richard, first of all, we saw the hoped for very long and nice half life, the high potency and also the strong after single dose pronounced and prolonged lowering of LDL cholesterol and lipid improvements. So it fully lived up to what we're hoping for. And that then begs the question, is this a combination partner in a cardio drug in combo with semaglutide, FGF21, as you know, which we also have in the pipeline, ciltivekumab and so on. And these analyses are ongoing, but it is a nice small need peptide that due to its potency and small size and low viscosity, actually can be combined with basically anything and everything, and it has a neutral pH value.
So it's a nice partner for anything, and we're investigating that right now.
Thank you, Thank you, Richard. Next set of questions, please.
Our next questions come from the line of Martin Parkoy of Danske Bank. Please go ahead.
Yes. Martin Parkoy of Danske Bank. Firstly, a question for Mads. Just on the portfolio decision in obesity, while you have terminated these Phase I programs, the question is actually what now then? What will be the new bar?
Will it be more making a supreme device for the combo, your combo of amylin semaglutide? Semaglutide? Is it a convenience? Because I guess that it appears that in your quotes that you have reached the gap of closing the gap to or you have reached the target of closing the gap to biotic surgery. So what will be the target for a next generation of obesity drugs, if we can talk about that already now?
And then just on somaglutide filing, which you you expect to in obesity at the turn of the year. Do you believe at this point in time that FDA has the capacity to handle a regulatory process in 6 months if you decide to use the voucher? And then secondly, if you decide to use the voucher, then you have to alert FDA, I think it's 3 months prior, which means that you need to make a write down of the value of the voucher this year. Is that something that you can absorb in the current guidance for your EBIT growth?
So Mads, first on the heavy situation, what's next in obesity? Because you've already delivered so much efficacy. So what can we do better?
Yes. And indeed, Martin, that is an excellent point, and it's something that my R and D team and myself have been looking quite a bit into lately following the AM833 and semaglutide data. There are things that pick themselves, such as looking into increasing in a safe way whole body energy expenditure. You are aware that in the old days, we are working with companies on brown fat and the likes of it, unfortunately, without success. But we might revisit some parts.
We have done that already in some research projects within the field of safe increased energy expenditure. We're also looking into the Holy Grail of identifying the homeostatic set point. We all live in a world where we have a genetic band which we can operate in body mass index wise, and that is driven by what we call a homeostatic set point probably in the hypothalamus. We are investigating whether we can identify that and tweak it to actually get it to a lower level, like changing the thermostat on your radiator, old fashioned radiators in the old days. We can also look into all and more convenient delivery of various moieties and different combinations thereof.
So there are a lot of things to do, Martin, but you have a good point. And that's why actually the co agonist and triple agonist, they did not live up to the target product profiles of the future because they have been increased in terms of efficacy and actually also improved in terms of what we want to see in terms of safety.
FDA capacity and tactics around potentially accelerated review, etcetera. The FDA is designed to be able to handle these, so we can only assume that they have that capacity. We have not made any decisions on whether to pursue that or not. So we'll refrain from commenting more on that, including what is capacity in our guidance, etcetera. So very optimistic, Matt, on obesity.
So that's great. So with that, thank you, Martin, and we have time for one last set of questions.
Thank you. In that case, our last questions come from the line of Sachin Jain of Bank of America Merrill Lynch. Please go ahead.
Hi, Sachin Jain here. Thank you for fitting me in. A couple of questions. Just to clarify the payer mix commentary of 3% annualized that you made cost. Can you just clarify how much of that has been seen in 1H and what is implied for 2H?
And is 3% a fair estimate into 2021? Just to clarify that. 2nd question is on the Rybelsus access, which is now at 70%. I think a similar level of access drove a fairly material inflection in Ozempic back in the day. So should we expect something similar for Rybelsus now that you have this access?
And then just one clarification on an earlier S. Growth for next year. Karsten, you listed a number of puts and takes for U. S. Growth versus the 0 to 2.
Could I just clarify that 0 to 2 still
stands? Thank you, Sachin. First, Karsten, on payer mix, first half, second and the comment on impact from unemployment.
Yes. So thanks, Sachin. So to clarify, the unemployment impact in the U. S. That I mentioned is on 3% is an annualized impact.
So the impact in terms of specific phasing is, of course, super speculative because it's would say, it's, of course, an estimate standing on many, many variables in the first place. As I said before, no nothing material included in 1.8 this year. We expect to see part of partly an impact in the 2021. So that's on the 3%. And again, this assumes unemployment levels around the current level of this 11% we see now in the U.
S.
Thank you, Carsten. And then to on Rivelsus, we are very pleased with the 70% combined access we have, which means that all of our territories are now in strike mode. And we have basically all our reps back in the field in the U. S. They are not having, let's say, the full face to face contact they had exactly before.
We are around 80%, and some of that is by virtual means. But we are in we are now in full swing on Rebelsus, and we are quite optimistic about what that should lead to in terms of uptake. With that, we'll close our call here. Orkars, do you want to comment on the U. S.
Growth?
Yes. Sorry. Yes. Sorry, Lars. So Satyan, on U.
S. Growth, again, the commentary at CMD was given in the light of transformation of our portfolio. I think now it's better to instead of standing on something which is more or less 10 months old than using kind of the current performance of our U. S. Business on North America, where we're at 1% given the puts and takes where we have.
So I think we're encouraged. And you could say there are puts and takes compared to where we are. And then we are focusing a lot on our GLP-one business and driving Rybelsus out in the market the coming quarters.
Thank you.
Thank you all for listening in. I'm sorry for running a bit over time. We'll close our investor call now and wish you all that you stay safe in these difficult times. Thank you all for your attention.