Hi. Afternoon, everybody. My name is Wimal Kapadia, I'm the European Spec Pharma Biotech Analyst at Bernstein. It's my great pleasure to introduce the Novo executive management team. With that, Lars, I'll hand over to you.
Thank you, Wimal. Thank you for hosting us today, and great to see you all. We are very pleased with our performance in 2018, both in terms of our financial performance, key launch, the clinical pipeline progressing, also some key changes we have done in the company in terms of setting us stronger up for the future. I'll not go into a lot of details here. I'll just set the scene, then I'll ask my colleagues to go through the presentations, I'll go through the conclusions. When we talk about the future, there are forward-looking statements, we have to be aware that the future might not look exactly like we pitch today. Please, take these forward-looking statements in mind. We'll do a very short presentation, then we'll allow plenty of time for having discussions with all of you.
Camilla will start by talking to our sales performance. Camilla, will you go please?
Thanks a lot, Lars. With 5% growth in 2018, we see here that a big part of the growth was driven by IO, to a large extent by insulin, whereas in the U.S., 3% growth to a large extent driven by GLP-1. When we look at the details of the international operations, all of the five regions contributed to growth except for Japan and Korea. The majority of the growth in terms of growth rates coming from EMEA, Africa, Asia, Middle East, and Oceania. In China, also an 8% growth, in Region LATAM, a 29% growth. Underlying growth rate is slightly lower, this due to tenders. When we look at with therapy areas the growth was coming from, you see over here that we have a total growth of 5%, as I mentioned before.
In the therapy areas, insulin contributed with 1% in terms of growth rates. Quite a nice growth of 5% in International Operations driven by high volume growth, driven by also slight or moderate increase in market share. Of course, in the U.S., we also see increase in market share. We see a slight increase in growth. Then we have the price pressure that when we add all of that up, we are looking at a growth rate of -1%. We do gain market share in the total insulin segment across the world. When we look at our total diabetes market share, we also do gain slight increase in our total diabetes market share as a combination of performance in the insulin segment and in the GLP-1 segment. GLP-1 growth was 18%, 14% growth in International Operations, 19% growth in North America.
We have of course launched Ozempic in the beginning of 2018. We now see that our market share in the GLP-1 segment is stabilizing on a monthly basis. We see a strong and very good uptake of Ozempic leading to that the NBRx market share has increased to almost 25% and now is bigger than the NBRx share for Victoza. Our overall NBRx share is also increasing as a total of this. When we look at our obesity, we see a growth of 60%. It is coming both from International Operations and from the U.S. We see a strong growth also outside the U.S., especially in Latin America, in the Middle East, also in Korea. Obesity we expect, of course, to continue market share gains. We see that Saxenda now has 45% value market share. It has around 4.5% volume market share.
Still potential in the segment. In reality here, in the future, we are more focused on growing the market than our actual share. In biopharm, we see a -1% growth. The growth in the biopharm area is driven primarily by NovoEight and by Norditropin. Together, those two compounds account for approximately 14% of the total share growth of Novo Nordisk, whereas NovoSeven, due to the market share loss in terms of after the launch of Hemlibra, has declined somewhat. Altogether, that gets us to -1% in biopharm. That is the total of the distribution of the regional growth and the therapy area growth. Now Mads will elaborate a little bit more on our pipeline.
Thank you, Camilla. I will do so by actually showing you two slides, one on some of the milestones that we have come through during 2018, and one on what are the expectations for 2019. I think it comes as no surprise that the PIONEER program execution and completion was clearly one of the highlights during 2018. We are basically almost ready for regulatory submission of the new drug application to the FDA. We also expect, by the way, as you will hear later, that Europe and Japan will follow suit over the next couple of quarters.
We have initiated a phase II program for the first once-weekly insulin, both as a standalone agent to assess safety and efficacy up against Lantus U-100, but also for the fixed ratio combination lixisenatide, which explores semaglutide in combination as a once-weekly Xultophy, one might argue. That's in phase I. Obesity-wise, we've entered into a new research collaboration targeting energy expenditure increases with a University of Copenhagen spin-out called Embark Biotech. Biopharm-wise, actually quite a lot has happened during the course of, in particular, the later parts of 2018, in that we have now completed the phase II program for concizumab, the anti-tissue factor pathway inhibitory humanized monoclonal antibody for both HemA/B and inhibitor segments in hemophilia. Basically, on top of that, we are awaiting the regulatory approval of N8-GP in its int ravenous version.
Whereas we have had to discontinue the subcutaneous counterpart driven by anti-drug antibodies related to the route of administration explored. Finally, within other serious chronic diseases, we have completed a license agreement with a Dutch company, Staten Biotechnology, enabling a anti-APOC3 antibody development, sweeping antibody, as we call it, for hypertriglyceridemia, and thereby addressing a significant part of the residual risk associated with atherosclerotic cardiovascular disease. Looking then into 2019, a lot is going to happen. Starting out with Tresiba, we are awaiting the Toujeo head-on comparative study in a very big trial that is going to report during the course of Q2. Ozempic, I think you will expect to see us leverage the fact that PIONEER 6, in our view, corroborates the cardioprotective effect observed in SUSTAIN- 6 for the semaglutide molecule, meaning that we will seek a label update for Ozempic, including cardiovascular protection.
Anti-IL-21 is awaiting phase II completion in recent onset type 1 diabetes immuno-metabolic intervention. Like insulin 287, we will actually com plete the phase II program that started very recently during the course of Q4 this year. Then for oral semaglutide, we are actually going through both the submission and driven by the PRV, the priority review voucher, also hopefully the completion of the NDA review during the end of the third quarter this year, and we're submitting in Europe and Japan during second and third quarters. We are initiating an exciting phase II program for human amylin analog once-weekly AM833, based upon encouraging phase I-B data with nice weight reductions in that study. Then we have some early-stage obesity projects that are also reporting results during the course of the year.
I did mention that when we move into biopharm, N8-GP is awaiting first the U.S. regulatory decision, hopefully approval very soon, and EU in the quarter thereafter, and then Japan towards the end of the year. Concizumab, I mentioned that we are taking a pan-segment approach towards phase III initiation of that project, again, towards the end of the year. Somapacitan, two things are happening. We are kickstarting the pivotal trials for growth hormone deficiency in the pediatric segment and submitting the BLA for the adult growth hormone deficiency indication during the course of the third quarter this year in the two major markets and in Japan in the last quarter. With that, over to Karsten for the financials.
Thanks, Mads. You've seen the financial results in our company announcement. I'll just cover the headlines in this somewhat finance-type slide. 5% sales growth in local currencies turning into a flat reported sales growth, most notably driven by the U.S. dollar. We then look at our gross margin there, you see a flat gross margin in reported terms. Actually, in local currencies, our gross margin is up some 20 basis points. That you should see in the light of the fact that, as you know, we've had lower prices in the U.S. in 2018 compared to 2017. The price pressure in U.S., of course, negatively impact our gross margin. We have been able to compensate that through a combination of product mix, selling predominantly more GLP-1s, and also driving productivity gains in manufacturing.
Those two elements have offset the negative on price impact from the U.S. on our gross margin. R&D up 8% in local currencies. Do bear in mind that we had the impact from the priority review voucher, which we acquired for DKK 125 million. That needs to be taken into account in R&D costs. Admin impacted by restructuring, it's not like we are losing it on our administrative cost. It's adjusted for restructuring cost and our administrative cost of some 2%. Financial items, a gain of DKK 367 million reflects hedging gains from the U.S. dollar, not fully offsetting the net loss we report in operating profit where we go from 3% local currency to -4% reported decline in operating profit. The reason why we don't see a full offset is, one, hedging cost between Danish krone and U.S. dollar, the classic interest rate differential.
Secondly, losses on side currencies, emerging market currencies that we're not hedging. Of course, we don't get the gains then on financial items. Income taxes down in terms of effective tax rate, 18.9%. This is, I would say, artificially low or it's impacted by a couple of non-recurring items. Adjust for those, we're around the 21% mark. Hence net profit up one, and earnings per share with the share buyback up four percentage points. The outlook for 2019. We see a sales growth of between 2%-5% in local currencies. Do bear in mind, this growth rate basically takes into account that we have a hit of some DKK 2 billion from the donut hole legislation that we announced earlier in 2018. Despite that, we're guiding a 2%-5% local currency sales growth.
The U.S. dollar has flipped around, now we have a positive currency impact mainly due to the U.S. dollar, which is up around four percentage points compared to the average 2018 against the Danish kroner. Operating profit growth, 2-6 percentage points, again with a positive currency impact. The positive currency impact is of course, offset by hedging losses going into 2019 with DKK 2.4 billion. Effective tax rate is pretty much unchanged when we adjust for one-offs in 2018, between 20%-21%. CapEx, we go from DKK 9.5 billion in 2018 to DKK 9 billion in 2019, and from there we should see a decline. The, I would say, somewhat inflated CapEx level is driven by us building an API facility for diabetes API in Clayton, North Carolina. That impacts 2017, 2018, 2019, and from there we should see CapEx come down.
Depreciation worth noting, normally not spending too much time on that, but being impacted by IFRS 16. Amortization of leasing debt hits this line. Therefore, a step change compared to prior years. We've had an adjustment of our long-term financial targets. I would say it's more of a technical nature as a reflection, again, of IFRS 16, the lease accounting standard, as well as the elevated CapEx level linked to the U.S. data investment. We have adjusted our NOPAT ratio from 125% to 80%. Our cash to earnings target from 90% to 85%. Do bear in mind that our operating profit growth target of 5% is unchanged. All these three long-term financial targets, you'll recall, we restated or revised with the base in 2015.
We said in the fall of 2016 that operating profit growth would be an average based on 2015. Normally you would expect us to restate that or change that when we have met the target or when we can see we cannot meet the target. Historically, that has been on a three to five-year horizon, just to give a feel for the duration of the targets. With that, over to conclusions and Lars.
Thank you, Karsten. Just to wrap it up, very strong position in the diabetes care space. Strong growth in insulin operations in the insulin space, compensating for the price pressure in insulin in the U.S. Very strong position and exposure to the growing GLP-1 category. When you look at obesity, a leading position in a market that's responding very well to medical intervention, growing by 60%. We have managed with more focus on our biopharm activities to actually compensate for the Hemlibra pressure on NovoSeven. We've been able to compensate that largely by selling from our broad portfolio of both hemophilia and growth hormone. That meant that we ended up in the high end of the range we guided at the beginning of 2018.
Despite a DKK 2 billion impact from the coverage gap, we guide 2%-5% for this year on sales and 2%-6% on profits. Now I'd like to just make one comment on drug pricing in the U.S. here towards the end. There's been a lot of talk about drug pricing, not least insulin pricing. Just a few facts when you read and hear about companies like Novo Nordisk taking insulin pricing up. We believe we have a very affordable approach to insulin in the U.S. Just a few facts. We supply free of charge insulin for 50,000 Americans each and every day. Americans who are below 300% of the poverty limit in the U.S., they get free insulin from Novo Nordisk. That's 50,000 Americans each and every day.
You can buy very affordable human ins ulin via partnerships in the U.S., the biggest one being Walmart. half a million Americans also each and every day buy human insulin in a vial that brings down daily treatment costs to $1-$ 2, depending on the volume you consume. There's a lot of talk about the development in list price, and we also increased our rebates, and for the last few years, we've actually seen a decline in the price Novo Nordisk put in our pockets. In 2018, we on average gave 68% in rebates. That amounts to DKK 113 billion that is given in rebates to PBMs and then shared with insurance companies.
While we understand that there are some complexities in the U.S. healthcare structure, that means that patients are left in a situation where increasingly they're being charged the list price or have to pay co-pays as a fraction of the list price. We do take affordability very seriously. Again, half a million buy insulin, bringing daily treatment costs down to a few dollars, and 50,000 get insulin free of charge. That was our presentation, and will I now start the Q&A? Please use a microphone to make sure your question is clearly stated, because this session is being webcasted. Please also limit yourself to two questions. Wimal, as always, you better start.
Great. Thank you very much. I guess consensus missed Saxenda growth again, and clearly the product is performing very strongly. How should we think about Saxenda growth in 2019, given that you're going to continue to roll out the product across the globe? Should we see an acceleration in the Saxenda growth in 2019 versus 2018? Then my second question, possibly for Mads, is around the Trulicity CV label. I guess I just wanted to get your thoughts on what impact, potentially for Novo and Ozempic, if Trulicity was to get a broad CV claim, both in the primary and secondary populations, and what that would mean for Ozempic. Then just following on from that, in terms of your confidence of getting a CV claim using SUSTAIN-6 and PIONEER 6. Thank you.
Thank you. Camilla first on Saxenda growth.
I can start on Saxenda. We have now launched Saxenda in 37 countries, and we are about to launch it further this year in more countries. We are rolling it out across the globe. Saxenda is the first product that we will launch in our obesity franchise, and with that, we are preparing for developing our support to the market in terms of education, in terms of potential for funding in the future. We do expect that the obesity franchise over time will continue to grow. You have now seen a steady growth rate when you look at quarter-over-quarter. Without guiding on individual products for the future, we do expect that obesity will be a strong growth driver of ours for the future.
Thank you, Camilla. Mads on CV for competition and ourselves.
Yes, I think the only thing that all of us, I guess, know from Eli Lilly's communication on the REWIND study is that they overall saw a statistically significant reduction in MACE event. My guesstimate is that we're all heading for the same type of label, so to speak. Unless you were able to, for instance, in a primary prevention standalone cohort, show statistical significance, it is, in my view, unlikely that you get a broader claim than others have in the industry, being ourselves predominantly Victoza. As it comes to Ozempic, our view is that the PIONEER 6 data with a 51% significant CV mortality reduction, and an overall 21%, albeit non-significant MACE reduction, does really corroborate the SUSTAIN-6 data. When you add them together, so to speak, all three components of the strict MACE endpoint drive the overall outcomes.
That, in my book, indicates that the very high level of MACE reduction, 24% aggregated is something that we are really expecting and hoping to get into the labels after submission, as I mentioned, of a supplemental NDA in that regard. I think Ozempic will be competitive both as it goes for the metabolic effects and benefits as compared to other GLP-1s, but also on the CV side.
Okay, thank you. Michael?
Thank you. It's Michael Leuchten from UBS. Question on Ozempic. Obviously, the product did phenomenally well this year already. When we go back to the beginning of the year, your guidance was relatively cautious. Could you just talk through how the product has been able to do so well, given the coverage was relatively thin at the beginning of the year? What's changed during the year to allow it to perform so well outside maybe the clinical evidence that we know of? Then just going back to the pooling of SUSTAIN-6 and PIONEER 6, Mads, how exactly does the conversation happen with the FDA? They propose to you that pooling might be all right. You've given a fairly broad window on when you may or may not see a decision from the FDA. What does it mean you talk to the FDA? Is there a timeline?
Is there a deadline, or is it sort of whenever they may or may not look at it?
If I start by some comm ents on Ozempic. There is a significant number of diabetics who are not in good control, looking for better treatments. We hear the evidence that it doesn't take many weeks on Ozempic to really see a meaningful change in both glucose levels, and the weight profile is also something that's very attractive for patients. We took a stance from the beginning of the year that we wanted to build the access in a good way. We didn't rush it in many ways, and we had Victoza to focus on until the individual districts could actually switch as Ozempic access came in. The year unfolded more or less as we had planned it to. Yes, of course, we guided cautiously in the beginning of the year as we landed the access contracts.
Some of the contracts that were landed in Q1 came live from Q2, so that was a gradual build-up. Of course, that an acceleration throughout the year, we're very pleased with how we exited the year in terms of both establishing the product in a way where we're not just switching from existing GLP-1s, actually going out and talking to the attractiveness of using GLP-1-based therapy. As a leader, you really need to expand the market more than gaining share from others. We believe that GLP-1 is a very, very attractive way to treat diabetes, and we see basically across the board that all products are more or less growing in this category, thereby fueling the growth, which I think is very attractive for the long term. For clear, the feedback we get from physicians and patients is that Ozempic is indeed a very efficacious product, and a product that makes patients very satisfied in using it. Mads?
As I think you all know, we were engaged in a meeting, a discussion with the FDA on overall outcome studies for the entire semaglutide portfolio, during which the FDA clearly stated, as you are aware, that we did not need to do outcome studies, both injectable or oral , each and every time in a pivotal way. Rather, they saw the SUSTAIN-6 data as highly encouraging and quite strong, albeit the study was so small that they would like to see some kind of a confirmatory study. Whether that be undertaken with an injectable version, or oral , they didn't mind at all, because they would look at the exposure in the patient population, and if that is similar, which it, by the way, is for PIONEER 6 and SUSTAIN-6, and the inclusion criteria and the population were the same.
They would look at that and look, of course, across the data and see are they, in totality, robust, and you can say strict enough to warrant a CV label upgrade. That means that if and when we then get the upgrade for Ozempic, and that is a 10-month supplemental NDA regulatory process, of course, we are discussing. 10 months later, you would have a cardiovascular label claim with the SUSTAIN-6 data being the pivotal one, as you've also seen it for LEADER. In this case, it would be supported by the agency having analyzed across trials and looking at consistency, and so on and so forth. Much different, by the way , when we look into the cardiovascular opportunities for oral semaglutide.
There, the only weakness is that the PIONEER 6 data actually only accrued slightly more than half the amount of events in the SUSTAIN-6. The pivotal part of what would form a claim is, you can say, smaller and maybe less robust than it was in the case of Ozempic and SUSTAIN-6.
Thank you, Mads. Richard?
Hi. Thanks. Richard Vosser from JP Morgan. You mentioned needing to do, or someone needing to do a standalone trial to get a primary prevention label. Just thinking about SOUL and then maybe high-dose semaglutide in obesity, would it be the high-dose semaglutide in obesity that you might try to do primary prevention, or is that not on the table for any of your drugs? And then secondly, just thinking about the triagonist. Just with all the developments from Lilly, et cetera, what do you need to see from the triagonist in data later this year, early next maybe, to move forward on that? Just give us some idea of what you're looking for. Thanks.
Yeah. Richard, to take the last one first, the triple agonist, which is a GLP glucagon agonist, triple agonist from the Richard DiMarchi lab in Indianapolis. There, we would be seeking something that should preferably exceed that which we are expecting to see for the high-dose Ozempic. Because there's not much rationale in developing something that is a Ozempic high dose or tirzepatide lookalike. It would have to do, in my view, even better. That's also why it agonizes on no less than three receptors. The data we'll be getting, hopefully, are gaining for a decision on that one. Do bear in mind, when we come to weight loss, we have numerous shots on goal, including the Amylin in phase II and so on. We are looking at all of that in its totality.
All the trials are coming to an end during the course of this year, which really enables a portfolio-based discussion of the future of the obesity pipeline, and for that matter, to some extent, also the diabetes pipeline. When we look into primary prevention, to us SELECT is critically important because SELECT is the one that on the one hand is a landmark in terms of obesity being defined as a chronic serious disease where you can actually improve on outcomes with pharmacological intervention. That is one of the two main elements of SELECT. The other is defining semaglutide as a molecule that has cardio protective capabilities beyond those seen in type 2 diabetes.
There we actually see that SELECT, even though it is a high risk and established CVD cohort, that it is more important for us to expand semaglutide in CVD beyond diabetes and into non-diabetes, such as obesity, than to go for a direct primary prevention cohort. It is our feeling that when physicians get comfortable with the product and they use it, they will assess, not by doing ankle to brachial indices and all kinds of things during a GP investigation, but by assessing is a patient at cardiovascular risk, and then they will make their treatment choices based upon that kind of interaction. It's more important for us, and we have had the discussions, to move beyond diabetes with semaglutide , also CVD protection-wise, than it is to go into a classic primary prevention cohort.
Jo Walton at Credit Suisse. A couple, please, surrounding oral semaglutide . The first one on the gross margin. You said in the past that the gross margin was about the same as your industry, as your group average. I assume that isn't the case on day one when you're selling nothing and you've got a plant u p and running. How many, is it a couple of years, three years, before it gets to that margin? The reason that I'm asking is you're moving from being an injectable company where we perceive new products come through and perhaps come through to profitability quite quickly because you are focusing them on endocrinologists and specialists, and you're moving to an oral company where we see massively competitive markets. We can see much bigger groups of prescribers, and where I think we would typically think it takes, say, three years to get to profitability. The first question is how we should be thinking about the gross margin.
Secondly, assuming you get your approval third quarter, and you've got some of your access ready by the beginning of 2020, how should we be thinking about this move of you from being an injectable company where you can sustain your profit? Should we think this is such a fabulous opportunity, you're going to really invest heavily, and we could even see a dip in profits one year because you're going for that extra fast penetration to maximize your life cycle? If you could just talk about how we can think about injectables versus oral profits, gross margin, and how you see that marketing commitment going forward.
Karsten, without getting into guidance for 2020 and getting too close to pricing strategies, can you share some overall perspective somewhere?
Just recapping what we've been out saying around oral sema gross margin, and you're correct, Jo. We've been out saying that if we assume GLP-1 like pricing, then we can see oral semaglutide getting to a group average gross margins of 84% or so. That's the statement. It was not intended to say anything about the specific pricing choice, but just to give a feel for that despite the bioavailability, it can still be a very popular product. Timing wise, I would say we're talking in the medium term, I would say the three to five-year horizon before we get to that level. In terms of the group impact, of course, the impact in the earlier years is less just given the relative size of the product to the total portfolio.
If I can just add, I'm not a financial guy, the good thing is that this is a big facility and it's one that can do quite a lot of things. Of course, you only take the hit on the first product. In our view, we would like to see also even more products to come over.
Just a general comment, it's not like we're turning into an oral company. We still have for many years, the majority of our patients being on injectable treatments. I think it's correct that it's first time for us, well, we have NovoNorm , but broadly speaking, it's first time for us to enter the oral category. Significant amount of patients there, not in good control. I think it's an opportunity for us to expand and add growth more than we would say, oh, are we looking at completely changing the profile of the company. We have a question in the back.
Thanks. It's Kerry Holford from Exane. Just following up on Jo's question there on semaglutide . Perhaps if I can ask, how do you think about the investment that you're going to need to put in from a sales perspective? Do you envision needing to promote that product to a different set of physicians? Perhaps more primary care versus specialists. Perhaps you can talk about that relative to the GLP-1s you sell today. Secondly, on CapEx, we're still in this relatively elevated period of Clayton, but you mentioned that that should tail off after 2019. What is a suitable run rate or normal run rate going forward? Thanks.
Thank you. Camilla, first on target audience and capacity to cover that and then Karsten on CapEx.
Yeah. When you talk about the target audience and capacity to cover that, it's really going to be a region specific or market specific approach like we've done also for our GLP-1 launches and insulin. This means that in some countries, we already cover the majority of the relevant physicians and the potential, in other countries, we are further away from that. In each market, we will look to see how we optimize our coverage for the relevant population of physicians to market this. Of course, we are looking at also benchmarking ourselves to what it takes to compete in this segment.
Yeah. On CapEx, it's not like there's a single truth and one silver bullet of a number what is a baseline CapEx. You should expect us when we're done with the Clayton facility, we don't have any huge CapEx investments planned because we have the filling facilities we need for our current pipeline. We have the diabetes API manufacturing in place and obesity. It's a lot of rebuilds and upgrades and some capacity on the assembly side. Without being, or just to give you some flavor, we're talking perhaps in the DKK 5 billion-DKK 6 billion range. With some insulates around that in specific years. Just to give a feel for the size.
Good. Thank you.
Peter Welford from Jefferies. Just on oral semaglutide, first of all, again, just with regards to the filing, should we understand when you put in the filing in March to the FDA, will it include the SUSTAIN-6 and PIONEER 6 data? Presumably, it will have to include all those data. I guess therefore, given they're going to be reviewing the data at that time, why shouldn't we assume that there's going to be some sort of data? I guess what's going to change between the filing you're going to put in in March to FDA versus a filing you could then put in post the sNDA for Ozempic, given, as far as I understand, all the clinical data is now in-house already. Secondly, just on oral sema and sort of pricing, but not pricing specifically.
The kind of around the issue, is there anything, or are you already going with payers to put to them that this isn't a GLP-1, so to speak, in the sense that the risk here, I guess, is if they regard this as a GLP-1, therefore, when you then discuss pricing and obviously set rebates, et cetera, you end up being put in the same group, which could be both a positive and a negative. Is there any way in which you're trying to distinguish this differently, or are you trying to push with payers this is just a better GLP-1 drug?
First on the filing.
Yeah.
What we will do is of course submit the NDA and sNDAs that are needed, hopefully to accommodate both for oral semaglutide as pertains to glucose regula tion type 2 diabetes, and realizing the potential and nice upside of having a CV indication already at the time of launch. Preferably have kind of the ability of the regulatory division and the medical reviewers to look at data from SUSTAIN-6 supporting PIONEER 6 and vice versa, more or less at the same time, so that they don't have to do a multitude of reviews of what essentially constitutes the same cardiovascular database. I guess you are right that you are not going to see one submission and then a long time later other things coming in.
Just to be quite clear, you don't anticipate any
I think we will-
If they follow the PIONEER
I think we will update you more specifically in the near time to come on the specifics of the timing, et cetera, and the labels.
In terms of the dialogue with the payers, what we can do now is that we can have a dialogue between, say, medical representatives in our company and the payers. We talk about the clinical profile of the product. We're not yet into, say, pricing discussions or contract discussions. I think when you look across the oral category, I think that there are different mechanisms, and they compete not based on what kind of molecule it is, but what it does in terms of its glucose-lowering effect. That's of course our approach that there's a huge market for patients, physicians wanting to treat type 2 diabetes based on tablets, shying away from injections. There are different, you can say, treatment cascades today, different level of efficacy, and there's just a new kid going to join that class that has a higher efficacy.
I don't think it's a discussion about what is the mechanism, but it's ab out what is the clinical relevance and what is the preference for physicians and patients deciding how to treat their diabetes.
Naresh Chouhan from Intron H ealth. Could you talk about oral semaglutide access and how we should think about that? Ozempic obviously has had a very quick uptake or very quick access in the U.S. Trulicity will take a lot longer. Are you expecting step edits? How should we think about how quickly you open up that market, how would it differ, if at all, to Ozempic?
It's still early for us to talk to that because we're not yet in the price negotiations with the PBMs. From day one, there's a block in place, we cannot start selling until you get contracts in place. That's similar to what we saw with the case for Ozempic. We feel that there's general excitement about the profile of the product. That's more or less what we can say now. We have not yet announced what our list price will be. It's too early to guide and speculate around how that will play out.
Okay.
Thanks again. Wimal Kapadia again from Bernstein. I guess just one on pricing, and I know you can never give specifics, but on basal insulin pricing. On my math, Levemir was down realized price per unit about 21% in 2018. Again, you can't give specifics, but should we see an acceleration, a similar number, or a deceleration in price decline for 2019? Then second question is on priority review vouchers for sema in obesity. In the past, you talked about potentially using the voucher for semaglutide in obesity or semaglutide . We now know you use it for oral semaglutide. Will Novo buy another voucher for semaglutide in obesity?
Good. Camilla, on pricing.
Without commenting on specific products what we would expect is that there is going to be continued price pressure also in the insulin segment, in the basal segment. Over time, as more competitors might come into the market, it is likely that that will continue.
If I can add just one point to it. Your math is directionally correct. For 2018, there's one big difference between 2018 and 2019, which is we saw a formulary change between 2017 and 2018 in Part D. Whereas from 2018 to 2019, there are pretty much no formulary changes in the marketplace. Formulary changes basically have the tendency to inflate volumes and prices in our observations. To do your math, you need to look at both volume and prices.
On priority review vouchers and whether we will acquire one for the obesity indication, we cannot comment on that. It's clear that we will launch semaglutide relative close to patent expiration for the liraglutide molecule. Time means something, but we also have a case where efficacy would be significantly higher, assuming phase III development turns out to be what we saw in phase III. I think there'll be a significant differentiation there. You can have different approaches to that. We cannot give guidance on whether we would buy a priority voucher or not. We don't comment on that.
Just to follow up. Would it be a 10-month review timeline because you've done the review for the molecule?
As the same molecule, it is 10 months, and then minus four if you were to do a PRV.
Okay. Thank you.
We start the second round questions now.
Yeah.
Michael?
Thank you. It's Michael Leuchten from UBS. Just a question for Camilla. On Victoza, are you surprised how well it continues to do now that you've put the entire marketing effort behind Ozempic? Is that market more sticky than you thought it was going to be, or is it trending in line with expectation?
I think basically, Victoza and Ozempic is trending according to our expectations. We knew that it was going to take a while to get the access in place, as we talked about before. We basically only switched completely to focus on Ozempic by the mid-year. You could say in the last six months, we've done almost between 95% and 100% focus on Ozempic. We now see that Ozempic has a higher share, new to brand share growth than Victoza. That is in line with our expectations, and we do expect that this trend will continue over time. We are very focused on new patients with Ozempic because, of course, Victoza is also a good product and patients well controlled on Victoza will stay there. Over time, we will be able to start many more new patients on Ozempic.
That, of course, contributes also to the growth in general in the GLP-1 segment.
Michael, you may be a ble to add that, of course, those who are not switched from Victoza to Ozempic, as you know, they do have a stay time of three to four years. There will be a slow decay unless one does something special about that. There will be patients on the product a year.
Richard? Oh, sorry.
Sorry, Richard Vosser from JP Morgan. Just going back to the CV claim around oral semo. Does it really matter having a CV claim at launch? SUs don't, DPP-4s don't. The reason I'm asking is wouldn't that run the risk? Isn't that a trickier thing to get through the FDA? You've paid for a priority review voucher. What's the point?
Just a general comment, you could say when Victoza got the CV label, that was kind of a first time. I think we've seen more products showing CV benefits. We have come from ruling out that there was a risk to diabetes agents to actually seeing that a number of agents has a benefit. Treating diabetes is good for CV disease. We already have on label in the U.S. the underlying data, and of course, we have the label outside of the U.S. For the physician treating a type 2 diabetic, the first priority is to manage glucose levels, and Ozempic does that very well. That's the key driver, and you can see in the current market dynamics that it works really well.
I think it's nice to have the CV label, and of course we're going to go for it, but it is the diabetes efficacy that is making the brands right now. We have seen update in the treatment guidelines. Of course, increasingly physicians will also be aware of what are the choice that also gives the CV benefit. That is a benefit that's not fully established in the market yet. Short term, I think we are not worried about having CV or not. That's the importance of having it. I think you already answered the question in terms of the considerations around.
The only thing is for Ozempic, I actually do think, Richard, it's nice to get soon for the sheer reason that Eli Lilly would like to protect that for Trulicity in the injection-based segment. For that one, we also realized that the treatment guidelines were actually positioned just after Victoza because it is perceived by the medical community that the LEADER data were more robust and hence we are in second line in that regard. That would change in Ozempic if and when Ozempic gets that, but otherwise, I agree with that.
Another question here.
Hi, it's Ben Yeoh from RBC Global Asset Management. There's been a lot of talk on the reorganization of the U.S. organization over the last couple of years. I was just wondering how far along you are in that journey, whether there are any signs of improvement and what we should expect and essentially how that journey's gone. Secondly, although this perhaps is not the most friendly of audiences for it, I haven't heard much talk about the triple bottom line of late. I was just wondering whether any of that thinking has evolved in terms of culture and purpose and where the organization has gone, especially after a year or two of where there have been sort of reorganizations and moments in the sort of Novo organization, which it's probably never had to deal before in its history. Thank you.
Thanks for bringing that up. I think that's fundamental for any company. Just starting out on the U.S. organization, we went from a classical functional structure where you had sales, marketing, access, medical reporting all to the head of the U.S. organization. You can say the top management team in the U.S. became the common denominator, and people worked a bit in silo. In a time where you want centralized management, all territories are the same, that probably makes sense, or it's at least a logical choice. As the U.S. market has evolved, it has become more fragmented, so you have different access in different territories. You have territories where you have single clinicians, you have other territories where it's integrated units, et cetera.
We have reorganized in five large areas where there's a general manager type individual running each, having full responsibility for both sales, marketing, and local access. These individuals are empowered to run their territories much more locally. With the flow of tactics we had in 2018, first promoting Victoza, then Ozempic, we have been able to localize more how we did that and switching on promotion of Ozempic whenever it made sense locally. In my view, this has strengthened the leadership. It has empowered the front line to do a better job than we've seen in the past. I'm very pleased with that. That change we got in place late 2017, it has actually been in place from the get-go of 2018 where we launched Ozempic. To the triple bottom line and the purpose, thank you for bringing it up.
You're right, it's not something we often talk about in a meeting like this. Of course, that is a fundamental driver of the company, that you can actually articulate a purpose that the organization unites around. In my view, young, smart people nowadays, they are much more purpose-driven than, to be honest, I was when I was their age. It's really important that a com pany can articulate that, and in your behavior, you do something that's reinforcing your purpose. It's been a priority for me at a time where we have been more under pressure than we were in years back, that we did some visible things to really show that we were committed to a triple bottom line. Of course, the first one is financials. We've talked a lot about that, and I think we have stabilized the company and see a good growth track.
On the environmental dimension, we have, together with our annual accounts, launched a new environmental strategy, Circular for Zero, where we are aiming to become a circular company. We will already by 2020 have all our manufacturing powered by renewable energy. There are not a lot of companies who have that. We are setting an ambition to extend that to the whole operations of Novo Nordisk. By 2030, all operations, all manufacturing, all sales activities, company cars, flights, would have to be CO2 neutral. That's a very bold ambition, like it was when we defined the current ambition of actually powering manufacturing by CO2 neutral sources. Not all technologies are ready to do that, but by doing it, we also create a demand for that. I told my employees my next company car would be an electrical car.
I looked out on all the other managers. Guess what? They're also going to buy electrical cars. We need to make some choice there, and that is very engaging for employees. Lastly, on the social commitment, I started by talking about affordability in the U.S. and actually making the claim that I believe all Americans can afford Novo Nordisk insulin. Maybe not the latest innovation, but there should be nobody who should ration or go without insulin. We have also made partnerships with the International Red Cross to make sure that people who live in refugee camps, they also get insulin. We actually also give money to create capacity to treat diabetes in refugee camps. Lastly, we made a big partnership with the UN, backed by the WHO, which is not often received
Private-public partnerships like that, where we actually create an initiative to beat non-communicable diseases like diabetes, where we create a marketplace and infrastructure to make sure that products can get into, for instance, countries in Africa, where today it might be we have products in, but they end up getting significant markups before they get to patients. By leveraging the capacity of UNOPS, the project arm of the UN, we can get products all the way in a controlled manner without a lot of corruption around these products. Thanks for bringing it up. It's something we're strongly committed to, and I can tell you that a lot of people in Novo Nordisk who work in the company because of that.
Camilla talked about benchmarking your infrastructure in places where you were going to be moving more into orals and perhaps you weren't as involved with the docs that prescribe the orals at the moment. Could you share with us some sort of high-level views of where you think you need to actually put additional investment in, and where you're already correctly sorted? A second question, just if we are to see the rebate removed, Trump's latest one, how disruptive would that be? I know it's something that you think would ultimately be a good thing, do you see an easy way to go from here to there, or should we see some disruption on route?
If I start out on that. Today we have a situation where patients, not in all cases, are benefiting from the rebates provided, that problem is increasing in size as more and more patients are in, say, lower quality insurance. That's not a sustainable structure, it's never been the intention that any individual should buy at list price. The biggest customers do not buy at list price. They get a rebate. As a company, I think we cannot survive the long term if the marketplace is not solving society's problems. I think it has to change. Many things have been tried out. I actually welcome that we look into chan ging how we actually get that rebate in the hands of the patient. At the point of sale, we get the rebate all the way out.
It's not easy to do today there are a lot of contracts that are locked up. The DKK 113 billion we put into the system is locked up in contracts. It takes changes to that. There are also a lot of IT systems. Here in the U.K. you have one IT system, the NHS rules that on behalf of society. In the U.S., you have for each payer, each insurance scheme, you have IT set up. It will take some change. I think increasingly it's being understood, in the public domain, how the complexity of the system actually creates some issues that needs to be dealt with. I welcome now that Washington is looking a lot into actually how the system works. Some of my colleagues are being asked to go to Washington to explain. We get some letters with a number of data requests.
I actually welcome we get that out it's not working to our benefit today. Camilla commented on the development in basal pricing. That's not a sustainable model. We welcome that we actually do something that's better for patients. If it's better for patients, it also creates a more sustainable environment for us to compete in. It's not going to change overnight it's a very complex setup. Then we have the go-to-market.
To the market. To go-to-market, just wanted to elaborate on that. What I said was we're taking a market-feeder approach that we've also done for our other compounds. Just to give you an example of that, there would be places where we have a very good coverage of the OAD potential like the U.S., but there would also be regions where we have less of that because we traditionally have focused on injectables, and that would be places like Japan where OAD is a very big part of the market, but we have traditionally focused on insulin and injectables here for one. Then there'll be many countries that are in between of those two extremes. Based on that, on a market-feeder post, we would of course be benchmarking our approach to launch Ozempic.
We have one final question from the back. We will slowly be leaving and you can kind of catch us on the way out if you have one final question.
Thank you. It's Kerry Holford again at Exane. Two questions, please. You talked about your rebate in the U.S. increased to serve your list prices. Can you just talk about net benefit or loss pricing in the U.S. in 2018 versus 2017 and your expectations going forward? Lastly, your appetite for M&A. How do you prioritize internal investment versus external opportunities? Are you actively looking for bolt-ons? If so, what's your desired size target?
On net price, we increased our average rebates in 2018 from 64-68, so +4 points there. I cannot get into individual products, if you just look at one of the products that's been singled out in this insulin pricing discussion, that's NovoLog, that's a fast-acting insulin. It's a very important product for type 1 diabetes, mealtime insulin is very important. That has often been taken out in the public. Over the past approximately 15 years, the list price has gone up by 400%. The net price to us has gone up by 28%. The CAGR, the annual increase to us has been 1.5%. That's for NovoLog in a vial. If you take the same in a device, the CAGR has actually been -0.6%. You know all that for the last few years, insulin net pricing has been going down.
There is a significant spread between list and net. On M&A, we say M&A, but we also mean, when we say M&A, licensing. In Mads' area, we did 11 deals to build on to our organic pipeline. Mads can comment a bit on that. In the biopharm space, we did two deals, although smaller deals, in 2018. Towards the end of the year, we closed the Macrilen acquisition, which is a small diagnostics tool to identify those adults in need of growth hormone. Very nice complementary fit to our growth hormone business. We keep looking for biopharm, and we have previously guided that it's in the low single billion DKK. Most likely, these deals are smaller deals because typically it's assets sitting in biotechs where we can do a better job in helping commercialize that and finalize the development of it.
We still think that we have a basic capability and also capacity in biopharm where we can build on assets to support a business that's already doing better. I think it's really important to underline that biopharm was flattish in 2018, we are getting more out of our ongoing assets just by focusing more on it and have strengthened the leadership around it. Mads, maybe a few comments on what you have been building on.
I always use the terminology that, to be honest, most targets that Novo has worked on for the last century actually originated in academia, University of Toronto, Sweden, University of Copenhagen, and so on. In essence, you can say the fact that we are doing a lot of wheeling and dealing and the 11 collaborations that Lars mentioned, some of them were actually done with academia to access new targets so our molecular engineers can make those translate into the most suitable drugs for patients. Others relate to our ability to, for instance, enhance our capabilities by getting something in either the ability via MIT to make insulin orally available, or the ability via acquisition of a small biotech company to make insulin totally glucose sensitive, or to make peptides penetrate the blood-brain barrier.
We have brain-selective agents such as GLP-1s and others for obesity and maybe other diseases, the Ossianix collaboration. There are plenty of examples, but in reality, you will see that the way we replenish our pipeline due to the higher threshold for innovation going forward is that there will be more new targets and more new mechanisms of action, and that actually calls for a lot of early-stage collaborative deals with academia and with biotech. You're seeing that, and that will continue.
Good. Thank you all for your time. We truly appreciate it. On the way out, those who are most aggressive can catch one of us and sneak in one more question. Thank you very much, and have a nice afternoon.