Thank you very much, and welcome to this Novo Nordisk Earnings Call for the 1st 3 months of 2021 and outlook for the year. I'm Lars Rokgaard Jorgensen, the CEO of Novo Nordisk. With me, I have our Chief Financial so Carsten von Knudsen and Executive Vice President and Head of Development, Martin Holz Lange. Also present and available for Q and A session is Executive Vice President and of Commercial Strategy and Corporate Affairs, Camilo Silvest. Today's earnings release and the slides for this call are available on website, nonoise.com.
Please note that this call is being webcasted live and a recording will be available on Novo Nord's website. The call is scheduled to last 1 hour. The presentation is structured as outlined on Slide 2. Please note all sales and operating profit growth statements will be at constant exchange rates unless otherwise specified. The Q and A we'll begin in about 25 minutes.
Please turn to Slide 3. As always, I need to advise you that 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 and AG slide. In the past 3 months, Novo Nordisk has progressed on all four dimensions of our strategic patients.
We want to continue to add value to societies while we have taken steps on prevention and access. We have announced 2 partnerships where we invest in healthier urban populations as well as support frontline healthcare workers in low- and middle income countries to improve access to diabetes add up. As part of our circular for 0 environmental strategy, we are pleased to note that several suppliers have already committed to the 0 carbon target by 2,030 when supplying Novo Nordisk, which is expected to eliminate an estimated 15% of Novo Nordisk supplier carbon actions. Martin will come back to key milestones within innovation. But firstly, I want to mention that while we had an initial setback for Ozempic 2.0 anneagram in the U.
S. With the FDA issued refusal to file letter, we are working towards a resubmission in the Q2. Furthermore, I'm happy to share with you that Ozempic has been approved for type 2 diabetes its treatment and established cardiovascular disease in China. For commercial execution, we have progressed on all three strategic actions. Lastly, within financials, despite a tough comparator, which has been partly offset by inventory changes and timing your shipments in the Q1 of 2029, sales grew by 7% while operating profit increased by 3% both at constant exchange rates.
Please turn to Slide 5. The sales increase of 7% was by 9% sales growth in International Operations and North America Operations growing by 5%. The negative impact for COVID-nineteen related stocking in the Q1 of 2020 is primarily offset by inventory changes and timing of and in this quarter. All therapy areas contributed to growth with diabetes care sales growing by 9% driven by GLP-one sales and unchanged insulin sales. GLP-one sales increased by 23%, driven by North America growing by 19% and international margins growing by 31%.
The unchanged insulin sales were driven by 5% growth in international and other acquisitions offset by 10% sales decline in North America. The U. S. Incident sales declined by 10% driven by decline in volume, rebate enhancement, while partially offset by channel mix. Diabetes Care sales grew by 9% as International Operations grew by 18% and North America Operations grew by 2%.
Biopharm sales increased by 1% driven North America operations. Please turn to Slide 6. In line with our strategic actions of reaching onethree of the diabetes value market by 2025, we have improved our market share by 0.6 percentage points to 29.3%. The increase reflects GLP-one market share gains in both operating units. We have increased our insulin new market share to 47.3 percent driven by market share gains in International Operations supported by all three areas.
Please turn to Slide 7. The U. S. GLP-one volume market is around sorry, the US GLP-one volume market growth is around 20% in the Q1 of 2021, driven by once weekly injectable as well as all GLP-one products. Novo Nordisk market leadership is now 58%, driven by the uptake of Ozempic and supported by Rebelsus.
Measured total scripts, Novo Nordisk is a market leader with more than 50% market share. Please turn to Slide 8. In the U. US, Rybelsus increases its volume market share both in terms of total scripts and new patient starts despite to the no face to face interactions between Novo Nordisk and the prescribers. We have secured broad market access for Rybelsus, why the majority of Rybelsus apps are now reimbursed and more than 80% of new patients are from outside the GLP-one class.
Outside of the U. S, Rybelsus has now been launched in 14 countries with one key market being Japan. 2.5 months into the launch, Rebersus has captured 0.5% of the all anti diabetes market. The OAD market in Japan constitutes around 80% of the diabetes market. Please go to Slide 9.
In International Operations, Diabetes Care sales increased by 10% driven by all of this. The continued rollout of new generation insulins and focus on the GLP-one product portfolio has resulted in an increased diabetes market share, which is now 23.6%. This is driven by share market share gains in both GLP-one and insulin. The value share of the GLP-one class of the total diabetes market has increased 1.8 percentage points to 11.2%. Please turn to Slide Obesity Care sales increased by 9% with 2% growth in North Air Operations and 18% growth in International Operations.
Throughout 2020 and into 2021, fewer patients have started treatment with Saxenda due to COVID-nineteen lockdown and reduced access to health care providers. In the U. S, we have since the start of the year seen an upward trend in the new patient starts on Saxenda, indicating early signs of recovery in patient flow. Please
turn to Slide 11.
Biopharma sales grew by 1%, driven by 3% sales growth in North America Operations and on changed sales in International Operations. Rare block disorders grew by 2% driven by new product launches with Esperoct and Refixia. The 2% NovoSeven sales decline was more than offset by hemophilia A products growing by 16% and hemophilia B increasing by 18%. Rare endocrine disorders grew by 2%, driven by new indications and global rollout of next and device for Nordicropine. Now over to Hugh Martin for an update on R and D.
Thank you, Lars. Please turn Slide 12. We continue to progress our late stage pipeline aiming at initiating Phase III activities across all of our therapy areas over the next year. In other serious chronic diseases, we in April initiated the Phase 3a trial called ESSENCE evaluating subcutaneous once weekly aglutide 2.4 milligram for treatment of nonalcoholic steatohepatitis or NASH. The trial will enroll around 1200 people will NASH in stages 2 and 3 of fibrosis.
The trial is planned in 2 parts. Part 1 will assess the effect of semaglutide 2.4 milligram versus placebo, both on top of standard of care. The primary assessment will be based on liver histology after 72 weeks of treatment. Part 2 will be an extension of Part 1, thereby preserving action and assessing the effect of semaglutide 2.4 milligram on liver related clinical outcomes after a total of 2 and 40 weeks of treatment. The regulatory submission is expected to be based on Part 1 of the trial, combined with the already completed and reported results from the Phase 2 trial for which we have been granted breakthrough designation by the U.
S. FDA back in 2020. Please turn to the next slide. In obesity, our strategic aspiration is to develop a leading portfolio superior treatment solutions. Consequently, we've decided to complement our injectable therapy portfolio with an all options.
From market research, we know that the majority of people with overweight seeking care with health care providers are not referred to anti obesity medicines prescriber. Further, research has shown that a number of patients as well as their prescribers have a preference for tablet based treatment. Consequently, we expect to be able to address and unmet need by developing a broader palette of obesity offerings as we in April announced our decision to enter into and 3 in obesity with oral semaglutide 50 milligram. This decision follows the completion of the STEP S3A clinical program for once weekly subcutaneous semaglutide 2.4 milligram, which is currently under regulatory review in the U. S.
As well in EU. The global 68 week program, also called OASIS, will enroll around 1 as people with obesity or overweight with at least one weight related comorbidity in a total of 3 months. As usual, weight related comorbidities are defined as hypertension, dyslipidemia, obstructive sleep apnea and cardiovascular disease. We expect to in the second half of twenty twenty one to initiate the initiate the first of the 3 trials, which is expected to enroll around 6 50 trial participants. The objective is to confirm superiority of oral amaglutide 50 milligram versus placebo on weight loss in people with obesity or overweight.
Please turn to next slide. Now turning to the broader R and D high level milestones in 2021. As Lars mentioned mentioned earlier, we have in U. S. In March received a refusal to file letter for the label expansion for 2 point 0 milligram of Ozempic for the treatment of diabetes.
The regulatory file was based on the SUSTAIN FORWARD trial. The U. S. Requested additional information mainly related to additional manufacturing data, and it is our belief that no additional clinical data will be needed for the resubmission. We're currently in a constructive dialogue with the FDA and work to resubmit during Q2 of 2021.
Moving on, also in the Q1 of 2021, we have initiated a Phase AASHrefree 52 week clinical trial with once weekly semaglutide 2.4 milligram in people with obesity related failure with preserved ejection fraction, also called HFpEF. In the Q2, we also expect to initiate the free program for all semaglutide in Alzheimer's disease, and we look forward to receiving the feedback from the U. S. FDA on the application for semaglutide 2.4 milligram in obesity. Moving to the second half of twenty twenty one, we expect to see Phase 1 results within our insulin innovation.
And we also expect to initiate the Phase 3 outcomes trials for celtivekumab within cardiovascular disease. Towards the turn of the year, we expect a decision from the EU on semaglutide a 2.4 milligram in obesity as well as for Ozempic 2.0 milligram within diabetes. And within biopharm, we expect to have results the Phase III program for somapacitan in children. Lastly, for the ongoing combined Phase one and two trial with MIND MATE, we expect to see results from the different cohorts during the coming 3 quarters. With that, over to
Thank you, Martin. Please turn to Slide 15. In the 1st 3 months of 20 and Q1, sales were unchanged in Danish kroner and grew by 7% at constant exchange rates. The gross margin declined to 80 2.8% compared to 84.1% in 2020. The decline reflects negative currency impact and lower realized
prices in the U. S, partly offset by
positive product mix and price prices in the U. S, partly offset by positive product mix and productivity. Sales and distribution costs increased by 9% in is kroner and 16% at constant exchange rates. The increase is driven by launch activities and promotional spend for Rybelsus, and Ozempic market development investments for obesity as well as sales force expansions in China. Research development costs increased by 4% in Danish kroner and 7% at constant exchange rates.
The cost increase is driven by a higher activity level as we progress the early stage pipeline within other serious chronic diseases as well as the ongoing cardiovascular and. Administration costs increased by 1% in Danish kroner and 3% at constant exchange and operating profit decreased by 8% in Danish kroner and increased by 3% at exchange rates. The negative currency impact on operating profit is partly offset by around DKK 1,000,000,000 Danish kroner in hedging gains under net financial items. This compares to a loss of DKK 1,300,000,000 in 2020. The hedging gains are a consequence of the U.
S. Dollar trading 9% lower compared to last year. Net profit increased by 6% and diluted earnings per share increased by 8% to DKK 5.45. Free cash flow was DKK 9,500,000,000 compared to DKK 7,700,000,000 in 2020. The increase reflects the higher net profit and impact from changes in working capital.
Please turn to Slide 16. In the Q1 of 2021, we realized a negative currency impact on sales and operating profits. The currency headwinds are driven by most major currencies and emerging and market currencies trading at lower levels in 2021 than in 2020. Some of the negative currency impact from major currencies on operating profit is, as mentioned, and partly offset in net financial items as they are hedged. Please turn to the next line.
Based on the strong underlying performance seen in the beginning of 2021, we now expect 2021 sales growth between 6% percent at constant exchange rates. This guidance reflects continued Diabetes Care growth, mainly driven by Ozempic and Rybelsus as well as obesity Care growth. Also embedded is intensifying competition both within Diabetes Care and Biopharm and continued pricing and the U. S. Operating profit is now expected to grow between 5% and 9%, reflecting the sales growth outlook and investments in current growth drivers as well as pipeline assets to secure future growth.
As previously mentioned, As we expect negative currency impact for the full year, consequently reported sales and operating profit growth is now still expected to be 4% and 6% lower than at constant exchange rates, respectively. The current COVID-nineteen pandemic causes certainty to the outlook regarding new patient initiations and societal impacts. Financial items is still expected to be a gain of around DKK 0 point at DKK7 billion. Due to minor timing changes, we now expect capital expenditure to be around DKK7 point DKK 5,000,000,000 in 2021. Lastly, free cash flow is parallel shifted upwards by DKK 1,000,000,000 and now expected to be between DKK 37,000,000,000 and DKK 42,000,000,000.
As a consequence, the ongoing share buyback program is expanded with DKK 1,000,000,000 to DKK 18,000,000,000. Now back to you, Lars, for final remarks.
Thank you, Carsten. Please turn to Slide 18. We are very encouraged with the start of the year. Sales growth was driven by all therapy and across geographical areas within International Operations as well as North America Operations where growth was accelerated in U. S.
We were also pleased to announce plans to develop oral semaglutide as a convenient and effective treatment option for people with obesity, complementing our injectable obesity medications. The solid financial performance in the 1st months of 2021 has enabled us to raise our outlook range for the full year. We're now ready for the Q and A, where I kindly ask all participants to and he or himself to questions. Operator, we're now ready to take the first questions.
Thank you.
Our first question comes from Emmanuel Papadis from Deutsche Bank. Please go ahead.
Thank you very much. Meny Apodog from Deutsche Bank. Since I'm early, perhaps I'll start with the guidance question. It The majority of the Q1 revenue beat was stocking related perhaps, you could just quantify that. And Notably, you've raised guidance regardless.
So if you could just talk about the confidence in that stocking you saw in Q1 on the revenue side will not reverse and Through the course of this year and whether there are any other factors driving your increased confidence for the full year outlook or indeed any We should be thinking about in terms of the range for this year. And then perhaps I'll take a question around the Look in China, what have you assumed if anything at present in your guidance for potential VPP insulin impact? It appears possible it still could come within 2021. What are your latest expectations around timing and price impact? And what options would be available
and Thank you, Emmanuel. Two questions related to the guidance, one linked to the stock we saw and what more to say about the guidance lift and then and outlook for China also in linked to guidance and the volume based So, Karsten, over to you.
Yes. Thank you for those questions, Emmanuel. And clearly, Some movements on Q1 results that's important to take into account when providing full year guidance. So just reiterate our 7% sales growth in the Q1 should be considered in the light of the DKK 2,000,000,000 destocking we saw in the Q1 last year. So if adjusting for that would take us to 40% sales growth.
And then what we So in the Q1 of this year between wholesaler stocking in the U. S, partly related to the launch of Ozempic with the 3 ml cartridges as 1 piece and then timing of shipments in IOs and tenders as well would basically adjust the $0.14 sales growth down to 9%. So in adjusted terms, our Q1 underlying sales growth is 9%, And that's basically in the high end of the guidance range we issued back in February where we said from 5% to 9% and being in the high end was one of the key indicators for us to increase and Our full year guidance. On top of that, linking to your China impact and To guidance question. Then of course, when assessing the proper guidance for the remainder of for the full year, of course, that also takes into account the risk picture we're looking into.
And what we see in China specifically is that we do see an impact from volume based purchasing on NovoNorm, so the so called VPP4, where we'll see an impact on NovoNorm starting from May and onwards. So that's fully included into our guidance. In terms of pursuing VPPs in China. We do not expect insulin to be included in VBP and the impact from insulin on volume based pricing in China would be later in the year. So truly quantifying that is Hard because we don't know the exact structure and timing.
But that's also why we're working with guidance ranges. So it can be bigger or smaller, but we do expect a negative impact in the time to come from insulin in China.
Thank you, Carsten. Thank you, Ivan Ruhl. Next set of questions, please.
Our next question comes Peter Verdult from Citi. Please go ahead.
Yes, thanks. Peter Verdult, Citi. Two questions. Mads sorry, and Simple one, just tax, what the implications would be if U. S.
Goes to 28%. Realize it won't have an impact to and But just going forward, any sort of sensitivities there would be helpful. And then assuming Camilla is on the line, could you just remind us how big the and your current approach to the launch. Should we be thinking sort of omni and channel approach or are you particularly focusing on either widening the prescriber base, getting patients to seek treatment initially or to improve the reimbursement access or you're trying to do all things at the same time. So anything you're willing to share at this juncture would be appreciated.
Thank you.
Thank you, Pete. So first, Carsten, on impact from potential change in tax as a structure in the U. S? And then later on, Camilla?
Yes. Thanks, Pete. That's clearly something We're looking at so and as you know, it has not been concluded in Congress at this point. But I'd say the simple sensitivity measure on tax impact is that a and what we saw as when the Trump administration reduced rates some years back was that on the U. S.
Corporate income tax rate by 1 percentage point. So taking the U. S. Rate from 21 to 28, that would move our group rates by some 50 basis points or something like that. There are a number of other potential elements in the rule making process, and I'm sure you read about global minimum taxes and so on.
At this point, it's simply It's too early to assess whether it has an impact or not. But the simple sensitivity is around 0.5% from the U. S. Corporate income tax.
Thank you, Carsten. And then Camilla, what can you share in terms of tactics for the obesity commercial efforts in the U. S?
Yes. So in terms of tactics for the obesity in U. S, we are, of course, focused on driving the expansion in the commercial segment, but we, of course, are also working longer term to get into the Medicare segment. This, of course, is not there is no sort of an immediate timeline to that. But what we can say about the Accessing the commercial segment is that there is we are working on making sure that there is opt in and to the gross coverage, meaning that we can improve also on our net coverage.
And of course, we also expect that over time when we launch Our next product, semaglutide 2.4, subject to approval, that will also, of course, be of Effectful in terms of getting coverage. So coverage continues to be important. In terms of sales reps, we are complementing our efforts from sales reps with omni channel approaches and of course also Looking to see if we can expand what we call the direct care approach, which means that since there are very few physicians that prescribing obesity products at this point, it might be easier to enable that with an omnichannel approach, meaning online diagnosis potentially over time and And online scripts. So that's something that we are working on, but it's not in full force at this point in
Thank you.
Thank you, Camilla. Thank you, Pete. Next set of questions, please.
Our next question comes from Wilmar Kapadia from Bernstein. Please go ahead.
Great. Thank you very much for taking my questions. Wilma Kapadia from Bernstein. Can I just first ask on GLP-one pricing, please? It seems that the net price of In 1Q was around $13.5 per day.
That compares to closer to 20 dollars per day For Ozempic. So just curious if we now believe this is at the steady state from which future declines will appear? Or is there Some co pay impact in Rybelsus, which will mean that the net price could be slightly higher for the rest of 2021. And then my second question is just following up China and VBP again. I just wanted to get a sense of what is your current base assumption.
When we eventually do see a VBP, how would it be the more traditional approach like the typical Wave 5 and 6 in the future? Or could it be a Wuhan style VBP, which was be very different? And then just tied to that, any thoughts on the potential GLP-one VBP at some point in the future? Will the Chinese government actually consider all GLP-1s in the same class like we did with the different insulin classes? Thank you.
Thank you, Umerald. So first, Karsten, on GLP-one pricing?
Yes. So on rupelsus and GLP-one pricing, So, Wimael, it's always dangerous to do this value per script on a quarterly basis. But I would say in Trying to make it as simple as possible. Then when you compare Ozempic and Rybelsus, then there's a delta of 11 percent on a list price per day simply due to the size of the script between the weekly and the daily treatments. So that's one delta.
Then furthermore, we do see continued use of affordability programs for Rybelsus. So there's both a bigger copay buy down compared to that of Ozempic since we're competing in the oral segment down to $10 And then we still see a tail of some of the affordability programs from 2020, Where you have some runway before that ends. And then, of course, there's the usual channel mix dynamics Where you start out in the high margin channels and then over time products are available in more channels also in lower margin channels. So I'd say in short, the affordability piece with the tail going out on some of the launch programs that should be beneficial. But the channel mix, as we've seen it with other products, and Should be negative going forward on a ARP per script basis, but on a net value, it will be positive.
Thank you, Carsten. And on China volume based pricing, we cannot really go in and speculate about what will happen in and I'll just say that I believe it's slightly more complicated to handle biological medicines for physicians and if you go into these type of tender situations compared to small molecules, but it's not really possible for us to speculate on and how this will play out in the future. Thank you, Wimal. Next set of questions, please.
Thank you. Our next Question comes from Janik Endokur from ABG. Please go ahead.
Hi, thanks for taking my questions. This is Janik and Can I ask a little about your maneuver room right now in the U? S. In terms of getting right Belsus on the road? Essentially now this is the, what, 3rd time you're trying launch it with the field force coming.
So can you talk a little more about your field force interactions? So I understand that you are approaching some 85% or so and of the call interactions with ACPs are face to face. How does that translate into productivity, I. E. In terms of usual number of calls that you make?
And And secondly, also on Rybelsus rollout. Then in Japan, obviously, there's this 14 day limitation for the 1st year on prescriptions. So how should we think about the uptake in Japan this year? Because obviously, longer term, this is a huge opportunity. Thanks.
Thank you, Janik. I'll pass on both questions to Camilla.
Thank you, Janik. Yes, correct that we are quite optimistic Around when we get back into the field, we see that the NBRx curves of Rebeltos comes back to Similar slopes of the curve, so to say. Of course, we are not fully, as you say, back in the field yet, so there's still some room. But we are, of course, constantly and Raising our presence in the field also. So and in 2020, we also got quite some experience on how to supplement and our infill presence with other types of multichannel engagement parameters.
So that's the way that we try to do this. But over time, this constantly should It would increase also with the U. S. Opening up. Then on Japan and Rybelsus rollout, we Quite satisfied with the uptake so far, especially when we look at also our share of voice where we, together with Merck, have the I share voice in the OAD segment in Japan at this point in time.
So despite the sort of special conditions In Japan with the 2 week prescription rules, then we feel that on a comparative note, we are tracking quite well in Japan and following the very recent launch of Rybelsus.
Thank you, Camille, and thank you, Janek. So as you can hear, we are confident and very pleased with how Rybelsus is performing both in the U. S. And Japan and we are very optimistic about the for Brubelis. So next set of questions, please.
Next question comes from Simon Baker from Redburn. Please go ahead.
Thanks for taking my questions. 2, please. Firstly, on phasing. I wonder if you could give us any Point us as to the phasing of R and D and SG and A costs across the remaining three quarters. Is there anything we should Remember in terms of trial starts and launch costs.
And also on Phase E, if you could remind us on the COVID stocking, destocking and for last year, obviously it was €2,000,000,000 in Q1, €500,000,000 destock in Q2. If you could just remind us what the Q3 and Q4 impact was? And then secondly, on obesity, I wonder as you're moving into supplement injectable Long been a suggestion in some quarters that payers are probably more receptive to an injectable because it's seen as a more Serious medical intervention and then a pill. Is that your belief? And are there any things we should be thinking about in the future?
Thanks
so much.
Thank you, Simon. First, Karsten on phasing both on cost and stock.
Yes. Thank you, Simon, for that set of questions. So on phasing, I would say the key aspect to be looking out for in terms of comparables versus last year is in Q2, where we saw quite significant destocking last year, taking our Q2 sales growth last year down to basically 0. So of course, That will impact the comparator as we saw impacting the comparator in the Q1 of this year the other way around. So that would be the main on sales growth.
I think on the other partial destocking between Q3 and Q4 last year, I think it will be on the decimal, so I wouldn't be hunching that vis a vis other impacts on top and In terms of our spending, I'd say you should not expect any Significant changes to our spending pattern this year. So the way it happens, I would say, if I'll take R and D first. Then we're basically facing our spending vis a vis the trial execution. So there's a start up cost and a close down and the remainder of the spending on trials are basically spread over the lifetime of the trial and hence it's being faced rather gradually, then there would only be a significant and Then there would only be a significant bumps in case of, you could say, any impairments to intangible assets. And as We don't have a lot of acquired assets in Novo Nordisk.
So don't expect a significant bumps on in terms of R and D spending. S and D, what you saw here in the Q1 with S and D being up 16 And that was an artifact of us both pushing Rybelsus and Ozempic, especially in the U. S. Market From the beginning. So we're basically running parallel DTC campaigns behind the brands.
So we front and The spending, but more granularity in terms of the phasing. I would not want to give at this point in time because that and indicates some of our commercial tactics visavis, for instance, DTC programs in the U. S.
Thank you, Carsten. And on at payer reception of oral semaph in obesity. We're starting the trial now, so maybe It's a bit early to start talking about market access. But I would just make the comment that we see that for Rybelsus, which is an older version of CEMA, we see pricing similar to what we see on Ozempic. So I think this is all about efficacy.
And bear in mind that The obesity market is, say, a market to be opened up. And I think there is plenty of opportunity to segment that market. And I'm sure that there's a very large AgMent, who would prefer an oral treatment. So for us, that's a significant opportunity. Thank you, Simon.
Next set of
Our next question comes from Trung Hyung from Credit Suisse. Please go ahead.
Hi, guys. It's Trung Keung from Credit Suisse. Three questions, if I can. First one, oral sema and obesity. The 50 mg dose that you're going for is 25 times more than the injectable semi dose for obesity.
So I know you're working on improvements on yield, but how should we think about the gross margin impact of this in the short term, but also the long term? Secondly, you initiated the study of So perhaps can you discuss some of the rationale for starting this study, Maybe the commercial opportunity you have there, is there any opportunity to move beyond the obesity and diabetes patients? And then finally, just on NIM-eight, The Phase III results now are listed as 2Q to 2H. Just seeing if that's somewhat a slight delay at now? Or are we expecting multiple data sets throughout this year?
Thanks very much.
So thank you, Chongyong. So first, Karsten, on and the 50 mg gross margin impact?
Yes. Thank you for pointing to that And that is a Phase 3 asset that only takes 1,000 patients trials in the clinical trials to get to a regulatory decision. So our cost to get to market is and in the first place, relatively manageable compared to most other Phase III programs. Then in terms of commercialization, you know all about the volume of Chunch in obesity and the Attractiveness of having an asset with an efficacy in the magnitude of what we see with the Zimmer 2.4 and up to 18% weight loss as we saw in the STEP program. And of course, before entertaining such a trial, then we do a lot of financial modeling, including cost of goods and manufacturing.
And I would say with the scaling we're doing in our manufacturing setup and the process improvement we are entertaining in manufacturing. First of all, we do see improvements in our cost of goods as we've also been discussing with the Rybelsus early on. Furthermore, what we're also So doing is that we're looking at the formulation of the tablets in the 50 milligram action, thereby also looking at certain opportunities in terms of improving our gross margin profile for the product. So all in all, we expect to see an attractive product on also on a gross margin level if and when we get to
market. Thank you, Carsten. And Martin combined answer to make it sound like one answer to second question on Sema HF and MIMEADE? That's going to be
a tall order combining obesity and hemophilia, but I'm going to give it a try. On HFpEF, we see obviously A great number of patients suffering from heart failure and there's no treatment specifically for because 80% of people with HF suffer from obesity. And we have clear indications that weight loss will improve the outlook, the quality life and the activity of daily living with these patients. So we see this as an opportunity to serve some patients we're currently no treatment and a potential for label expansion of the obesity label for semaglutide. Moving fast And then to the MiMed question, we will see a readout from different cohorts throughout the next 3 quarters.
We will combine our assessment of those readouts and report on the efficacy and safety of MiMate later year as based on this data.
Thank you, Maarten. So really no change to MiMate compared to previous quarters' comments. Thank you, Tong Young. Next set of questions, please.
Our next question comes from Sachin Jain from Bank of America. Please go ahead.
Hi, there. Thanks for taking my questions. I've got a 2 pass on obesity, if I may. I understand your midterm excitement build in the market, but I wonder if you Dolce, we can just give some color on launch expectations. I'm going to frame the question versus consensus.
The consensus has Sema launching and the execution of Saxenda launch and layering on top of Saxenda's flat and Q3. So to my perspective on the Speed of Summer launch versus prior Saxenda, what initiatives? And then the second is how to think about the 2 products in combination, what short term dynamics should we be thinking of in terms of potential Semi cannibalization of Saxenda patients. I understand your stay time dynamic debate, but I That takes time to manifest in terms of patient build. Thank you.
Thank you, Sachin Jain. While we do not and kind of guide on launch trajectory, etcetera, for products or comment on consensus estimates. Camilla, what can we say on this?
Yes. So What we are trying to do in many countries, but also of course in the U. S. Is to build the market, And with the launch of semaglutide 2.4 with a much higher efficacy, we know from our early discussions with and payers in general that weight loss in the magnitude of what we are seeing with 2.4 is of course of high relevance. So it will Feed into our attempts to build the market in terms of making sure that more patients seek treatment for Obesity Care because Obesity Care has such a obesity has such a big influence on the health care system and the cost.
So of course, with Higher efficacy, we are more likely to see a strong uptake of 2 and But that is, of course, early days to say, but we are basing this just on efficacy. But we're also launching into a market that is more mature than what it was when We launched Saxenda. So in the meantime, of course, we have built the awareness around obesity. We're working to have it recognized as a disease. In many countries around the world, we have launched new websites, Truth About Weight for patients where they can learn about obesity and also we think obesity for physicians where they can also obtain more information about obesity in So a bigger sort of base to build on for a more effective product.
So that's basically the difference in the situation compared to Saxenda where We started very much from scratch. In terms of cannibalization, it's difficult for us to We cannot give the details on that. But of course, we are launching a product that has more than twice the efficacy into the
market. Yes. Thank you, Camille. So it's, of course, still early days. But looking at the reports that come out from the medical community observing, say, the early payer dialogue, I think this is a significant different trajectory than what we have seen in the past.
And I think in my view, this is the first time there's a real solution to managing obesity with medical intervention. So I think it's really, really exciting. Thank you, Sachin. Next set of questions, please.
Our next question comes from Michael Nougat from Nordea. Please go ahead.
Yes, thanks a lot. It's Michael from Nordea. Two questions also. Maybe you could elaborate a bit on the sales differences between Q4 and Q1 in terms of Rybelsus in the U. S, which, of course, looks quite dramatic.
I know you've been talking to and the general volatility between quarters, but this looks very dramatic. So it would be great to get an update on that in more detail. And then secondly, on and the 2.0 milligram refused to file letter from the FDA in diabetes. And what kind of feedback you're getting on the 2.4 milligram Yes, man. Obesity file and also whether we should see a potential risk on sort of any type of read across between the 2 on the manufacturing side.
Good. Thank you, Michael. First, Carsten, on Brubelso sales Q4 last year versus Q1 this year?
Absolutely. And I recognize that it looks odd that Rebeldo sales being a launch product is lower in Q1 this year compared to Q4 last year. I would say there are a couple of technicalities that explains basically all of it. And then I think we should talk to the online kind and dynamics of the products, which are 100% intact. So on the technicalities, so let me just start out by 2 First of all, looking at quarterly sales on the launch product is always super dangerous, and we've seen that again and again for different dynamics.
The 2 key dynamics you should take into account here is, first of all, there's a so called So basically the ratio between what we sell to wholesalers and scripts being written to actions. And there's quite some volatility on launch products in that ratio since that We are building pipeline in the supply chain when you're launching a product. So basically product going into rural pharmacies and distribution centers across the nation. So we saw that in the Q4 of last year that and quite a high expected ratio and where we see a more normal expected ratio in the Q1 of and so that would be kind of a natural launch supply chain volatility. And then the second piece to take into account and on adjustments to rebates as we've also seen on launch products.
So being a launch product, you don't know exactly How much is being utilized through cash programs and co pay and different insurances. And there, of course, With the lag we have, there will be some adjustments over time. And that was what we talked to in Q4 that we had a favorable impact and to our GLP-one business. And I would say for Rybelsus, it's in isolation. We didn't call it out on the brand.
It's less than EUR 100,000,000 in the 4th quarter. But of course, for a launch brand with somewhat to sales, then of course, it's a bigger piece. So, expected ratio and changes to rebates and estimates in the Q4. Adjusting for that, 20% volume increase from the Q4 to the Q1. But Camilla, on the underlying fundamentals on Rybelsys?
Yes. On the underlying fundamentals, we track on a number of Answers to understand, of course, our uptake and launch with the Becelsus and all of that is in line with our ambition. So It means that the breadth that means the number of prescribers is continuing to progressing well. And we also see That awareness and preference is improving over time, especially on the preference to 5 Realtus that has increased significantly and looks very strong also compared to other branded OADs in the market. So what we are working on right now is to increase our awareness of the brand and that comes with us and reps coming back into the market and as we continue the launch trajectory.
So we are quite confident with that We also continue to see that the source of business and the positioning is working out so that the sourcing is 80 Percent outside the GLP-one class as we have talked to before also. So it means that we continue to be Very confident in Rivelsus and the commercial strategy. But of course, we also see that it's a very promotion sensitive launch product and we have and As we talked to before, whenever we have reintroduced the product, we see that we get back on a very strong trajectory. We continue to support Rebuildis, of course, also with DTC and Of course, also with reps more and more in the field as we just talked about before.
Thank you, Carsten and Camilla. Strong confidence from our side in the trajectory for fibrosis. And with that, over to Martin on read across from the refusal to file letter from the FDA to 2.4 milligram.
Yes. Thank you very much. So broadly speaking, I don't think I will speculate on an ongoing regulatory But maybe just say that the FDA has accepted the submission of the 2.4 milligram. It's under review, and we currently have no indications of that file being impacted by the refusal to file on the Usenpi 2.0 milligram.
Good. Thank you. Thanks. Thank you, Michael. Next set of questions, please.
Next question comes from Michael Leuchten from UBS. Please go ahead.
Thanks so much.
It's Michael Leuchten from UBS. Just two quick ones, please. Just on in terms of the mix Price mix effect on the insulin side. There seems to be quite a few things going on in the U. S.
At the moment with patient access and Coming out, 340B is playing a part. As we think about this beyond 2021, would you be able to give a bit of a feel for What the underlying conventional price mix effect is and what is sort of 2021 specific? And then the second question, Going back to the tax question, it doesn't look like there will be any manufacturing offset in terms of tax rebates in in the U. S. Does that have any relevance in terms of how you think about your manufacturing setup as you increase your oral and Vaccine platform.
Thank you.
Thank you, Michael. Two questions to you, Karsten, on pricemix effect on insulin and also looking a bit into the future? And then again on taxes in the U. S. Combined with manufacturing footprint in the U.
S?
Yes. Thank you for those questions, Michael. So first of all, all on insulin and insulin dynamics. You see our North American business down 10% in the Q1 on insulin, which is a function of both lower volumes. It's enhanced rebates and then offset from and positive channel mix.
So what you should expect going forward is that, Of course, there'll be competition in the market for volumes with potentially more biosimilars entering into the market. So that will intensify, but of course, we'll be defending our leading position in the market in terms and the impact of market share. With competition comes also pressure on rebating and pricing. So the dynamic around pricing and rebating. We do expect to continue for those reasons.
And as to channel mix, the positive factor on channel mix is mainly related and to 340p, where we are basically we stopped our shipments as we discussed with the full year. We stopped our shipments to contract pharmacies, which enables us to avoid double dipping of rebates and hence a better channel mix impact on our insulin sales. That is, of course, only something one can do One time. I would have to say that on 340B, while comfortable in terms of what we included in the Q1, of course, there's still some uncertainty vis a vis legal cases and legislative impacts around future rulemaking and on a prospective basis. Then to your question on taxes and manufacturing offsets.
Then I would say the starting point when we look at our manufacturing footprint is that we look at supply chain backup and redundancies and closeness to markets. So of course, we take Taxes into account, but tax is not a prime criteria for when we decide where to put our manufacturing footprint. So what we're looking at now is that we're just in our final stages of finalizing documentation on our and U. S. API expansion project, so project running according to plan.
So we now we're moving into ramp up phase. And the CapEx ramp up we've been signaling with now a EUR 7,500,000,000 CapEx spend this year is mainly driven by expansions in Denmark. So I'd say no implications for our CapEx manufacturing strategy from the changes in U. S. Tax legislation.
Thank you, Carsten. And then we have time for a last set of questions, please. Thank you, Michael Oso. Thank you.
Our next Question comes from Carsten Madsen from SEB. Please go ahead.
Yes. Thank you very much. Maybe I'll actually only take one question here for Martin. It's in relation to the NASH Phase III trial with the ZEMA. You mentioned that there are Two binary histology endpoints, what does this actually mean?
In Phase II, you showed the resolution of NASH,
Thank you, Carsten. Over to you, Martin.
Yes. It's a super relevant And the regulatory guidance basically stipulates that you have to win on 2 counts. You had to show improvement in steatohepatitis and you had to show improvement in fibrosis. Just to clarify, of course, there have been a Phase II trial, this trial was not powered to look at fibrosis. However, numerically, we did see an improvement in fibrosis as well as the sort of stopping in worsening of fibrosis, if we see the same numerical change in the Phase III trial, we will actually be in a place where we are not only clinically relevant but also statistically significant and thereby living up to the regulatory guidance.
So what we need is for our Phase III trial to confirm what we saw in Phase II. Okay. Thank
you. Thank you, Carsten. Okay. Okay. The second question?
Yes. I had a quick second question. That was just for the other Carsten. In terms of the gross margin development, 80 bps and Of the 130 bps lower gross margin this quarter versus last year's FX, how is the remaining 50 bps divided between amortization and price pressure on your or price mix you can say?
Yes. So That's well spotted, Karsten. And I think when what we disclosed upon acquiring Hemisphere was that we do expect a negative impact here in the 1st year of less and then 1% of OP simply due to the delta between the royalty payments under the previous contract and then the amortization profile having acquired the company. So if you take that 1% or less than 1 and then that will make you into that corresponds to less than 50 bps on the margin. So The main driver is in reality amortizations related to Hemisphere.
You can look in the cash flow statement on the step up and amortizations also just to get a feel for it, but that's the main driver. The other effects remain the same, we continue to drive productivity. We continue to get the product mix gain from GLP-one, and we continue to see some negative impact from prices in the U. S.
Okay. Excellent. Good.
Thank you, Carsten, and thank you, Carsten. With that, And we thank you for your attention today at our conference call. And if you have more questions, feel free to contact our Investor and with that, we wish you a good day. Thank you. Bye bye.