Novo Nordisk’s CFO on the oral Wegovy rollout and beyond

Introduction

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0:30Today is Friday, August 7th, and you're listening to The Topline, brought to you by Fierce Pharma and Fierce Biotech. I'm your host, Ayla Ellison.

Novo Nordisk Earnings

0:48Novo Nordisk's second-quarter earnings landed this week under a pretty bright spotlight. Analysts and investors were looking for signs that the rollout of Oral-Wagovi could ease some of the concerns hanging over the company's pipeline. So, Fierce sat down with Novo's chief financial officer, Karsten Munch-Nudsen, to get beyond the headline numbers.

1:20He sat down with Fierce Biotech senior editor, James Waldron, to talk about why Novo raised its guidance for the year, how the European launch of Oral-Wagovi is progressing, and what the company is watching as it tries to sustain long-term growth. Let's get into it.

1:40Karsten, thank you so much for joining us on The Topline. We're recording this just after Novo Nordisk has announced its second-quarter earnings, so let's start there. You were able to raise your guidance for the year. Can you talk me through the rationale behind that decision? Yeah, James, thank you for having me on your podcast. And it's a good day today because we beat the expectations for the second quarter and consequently raised our guidance.

2:11For the second quarter, we delivered 7% top-line growth and 11% adjusted operating profit growth. So, really a quarter that was not only ahead of our own expectations, but also significantly ahead of the market expectations. It was predominantly driven by underlying volume growth for our GLP-1 franchise, both in international operations, but also in the U.S. across injectable and all platforms. And with that performance, that enabled us to materially increase our guidance for the full year.

2:43So, back at Q1, we issued guidance between minus 4% and minus 12% adjusted top-line. And now we raised our guidance to be between 0% and minus 6%. So, one of the bigger guidance of High Square we've had as a company. So, it sounds like you had a very strong start to the year. In layman's terms, and correct me if I get this wrong, you were looking at a kind of sales growth slowdown, and now that's looking a lot shallower than you were expecting. So, do you want to talk a little bit about what you're predicting for the rest of the year then?

3:14Why is that sales growth levelling out slightly? Is there something to be concerned about, or was that always expected? It was always expected. So, if we look at the balance of year, a simplistic way of looking at it is that in the first half, we delivered 2% top-line growth on an adjusted basis, and the midpoint for the full year is minus 3%, implying a slowdown in the second half. There are basically two reasons to it beyond a continuation of the trends we're seeing in the markets today. One is a tough comparator, because last year we had favorable one-off browse-to-nets rebate adjustments in the U.S.

3:51to the tune of 5 billion DKK in the second half of last year, which are not planned to repeat this year, so setting a tough comp. And the second explanation is that in a few international operations markets, we have patent expiry for semacrotides. That would be markets like Canada and Brazil. And as a consequence, we have a negative sales impact from those markets in the second half of this year. So, if you take those two factors in, then it's really a continuation of the volume trends we're seeing in the first half.

4:23Well, that's fascinating. And you mentioned there the rollout of generic semaglutide in Canada, Brazil, India, countries like that. So, could you explain a little bit more what kind of impact that's having? I mean, are you seeing a lot of impact from that? And does that affect your global strategy? First and foremost, patent expiry is part of running a pharmaceutical company, and that's what encourages us to invest in R&D pipeline and innovate and create new and better products to the benefits of patients and society.

4:54So, there's nothing new there. We have been guiding already since last year that the impact on this year's top line would be low single digits, and that guidance still stands. And what we're looking at in the markets in terms of implications is that, first and foremost, the main implications financially we're seeing is in Canada and then Brazil. What we've seen so far, it's still very, very early days in terms of impact, but we've seen a significant pricing step down, which is a function of the regulations in Canada when generics are being approved.

5:30So, really no surprise there. And then in the initial weeks of generic entry, we actually managed to hold on to the volumes we had on our grants, and generics mainly expanding the markets. And that is also the case in India. So, market expansion, pricing down, and then the drill on our side as a play forward also is that we absolutely intend to fight for the volumes we have in the markets, and then, of course, compete with the generics as they enter.

6:02And then shifting our focus across to Europe, Novo is starting to roll out Orville-Wagovi on the continent now. I think we've had the launch in the UK, and I believe Germany is next in your sights. Could you talk a bit about the strategy in Europe specifically, and whether that's different to how you've approached the rollout in the US? Yeah, you're correct. We started launching the Vigovi pill in the US in January. Then in the second quarter, we launched in UAE. And then we've launched in the UK here in July. And then Germany will come in September.

6:34And then we'll continue global rollout without disclosing any markets and timing at this point in time. When I compare the different markets, then all at a global scale, Vigovi and injectable as well as Vigovi pill is mainly an out-of-pocket product. So, it's self-pay. In the UK, it's to a very high extent telehealth driving the volume uptake. And as was said at the press call this morning, just in a matter of a few weeks during July,

7:04we managed to get to around 300,000 patients in the UK alone. So, a very, very rapid uptake, which was also what we saw in the US. Very rapid uptake, which is enabled by the telehealth distribution setup, different from what you see in other pharmaceutical segments, where uptakes are generally slower because it's a lot of detailing of PCPs and education of PCPs. Germany, I think it will not exactly be the same, but there will be some of the same characteristics with telehealth also being present in Germany

7:37and some of the same players as in the UK. And as we were first to launch in the US, we were also first to launch in the oil segment in UK. And we expect to be first to launch in Germany also. And in terms of pricing this product, I think I've heard you talk before about finding that sweet spot for pricing. Do you feel like you've found that sweet spot in terms of pricing or Rogovi in Europe? And has that been impacted at all by the most favoured nations policy in the US?

8:08Yeah, so looking at the uptake, then I do believe we found a sweet spot. And it's important to note that since this is an out-of-pocket market, then we really have to consider pricing very carefully, not only for patient starts, but also for patient retention and persistency or stay time of patients that we price the product in a good way that both reflects the value that the product brings to patients and society, but also have a clear focus of affordability for patients.

8:42And so we found that. And to your question as to MFM, then do bear in mind that the price point where we launched in the US, which was part of the MFM negotiations, so having a price point of $149 for the lower doses, I think that enables also finding a sweet spot for pricing in the ex-US markets. We'll continue the conversation right after this message from our sponsors. In global life sciences, insight isn't the problem.

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Oral Wagovi Uptake

10:03Have you got any learnings so far about the patient data in terms of the uptake of the oral Wagovi pill? So I'm thinking, are these tending to be new starters taking Wagovi for the first time, or are you kind of cannibalizing part of your injectable patient population and simply shifting them across? Have you got any insight yet into what the split is between those groups? While it is still somewhat early days, then we have quite some insights. And in terms of source of business, then this is predominantly market expansion.

10:36So our estimate is that to the tune of 80% of patients on the Wagovi pill are new patients to the segment, and hence not cannibalizing from switching from either Wagovi or competition. That would only be the remaining 20% that are switching. Of course, it's hard to estimate to what extent there's some indirect cannibalization from patients who would otherwise have started on an injectable product. But net-net, the vast majority, is new to the category

11:09and then supporting expanding the oral segment. And it's important to note that the obesity market as such is growing to the tune of 80% year over year. So it's a huge potential market, and we are seeing the market expanding rapidly in volume terms compared to last year, exactly as we expected. That's really interesting. I wondered, in terms of the prescription data, I'd seen some reporting that telehealth sales maybe aren't always included in prescription tracking numbers.

11:40Have you found that to be an issue, or is that something that could be changing the calculus and causing some unexpected adjustments to the data further down the line? Yeah, it's part of making the uptake discussions a little bit more convoluted, because in reality, what's happening is that the obesity market being so dominated by self-pay at more than 90%, that also drives a different type of product distribution compared to traditional pharma markets with telehealth. And as a consequence,

12:11the data providers that we normally use, the capital markets also normally use, being called Symfony and IQVIA, their models are not fully geared to this new type of distribution setup. And that's why when we reported last night, we included the latest weekly script numbers in the US at 265,000 weekly scripts based on our full capture estimation. And if you compare that to the capture of IQVIA, then in rough terms, we estimate that IQVIA covers to the tune of 60%

12:46of the market in their reporting. So we try to be transparent in terms of what we see and what IQVIA captures. And then it's really for the capsule markets to take it from there. Okay, great. And let's shift focus over to Cagrocema. It's felt like a bit of a roller coaster at times with that drug. We had a lot of hype initially, and then that was dampened slightly with some studies suggesting maybe it won't beat Lily's drugs head-to-head in weight loss. We're currently awaiting an FDA decision on approval,

13:17but this morning we saw some fresh phase 3 data showing that when it came to controlling blood sugar in a phase 3 study of diabetic patients, it didn't seem to be able to beat Munjaro on that front. So from a financial perspective, are you still optimistic about Cagrocema? Where do you see it fitting in into Novo's broader portfolio? I'm still optimistic on Cagrocema, and I'll explain why. So first and foremost, if you take obesity, as I spoke about before, it's a very, very big market

13:50with a billion potential patients at a global scale and a significant market expansion opportunity. And that market is going to fragment, and different patient segments will have different patient preferences for different products. And with the profile we're looking at, we believe that Cagrocema is an attractive product in that segment. And then to the numbers reported in this quarter's announcement called Reimagine 4, I think it's important not to take the negative lens on that,

14:22because actually what the data showed is that in patients with diabetes, Cagrocema lowers weight by 15%. And that is one of the key drivers in the diabetes segment beyond A1C. And the blood glucose lowering at 1.9 was, while not proving non-inferority, it's actually a really good blood glucose lowering, and also what we've seen in prior trials with Cagrocema. So in the increasing class of products, being around 2 is where you should expect to be,

14:55and then having a high weight loss lowering effect at 15 is actually really, really nice, which proved non-inferority. So I believe it's going to be a competitive diabetes product for many years to come. And while we're looking at Novo's pipeline, on the call this morning with journalist CEO Mike Duster, you made no secret to the fact that Novo is on the hunt for fresh candidates to bring into the pipeline. I think he described it as saying, right now our staff are looking at multiple different assets.

15:27So should we be expecting a deal imminently from Novo? Is there something far in development? And should we be keeping our eyes out for announcement of a significant acquisition in the near term? The foundation for Novo as a company is to drive innovation-based growth. And as a consequence, we are always on the hunt for new innovation, regardless of whether it's internal innovation from our own labs or from external. And the key premise is that it has to fit in into our strategic focus of therapeutic categories.

15:58It has to serve unmet needs and that we believe in the science. And it has to be rational from a financial point of view. So nothing really changed there. And we are always on the hunt. So there's nothing changed. And from prior weeks or prior quarters, we always push for new and better innovation internally and externally. So really no change. And how does that hunt for new assets fit into the cost-saving program? I think the aim was to try and save

16:28about 8 billion Danish kroner, if I'm right. How's that process been going so far? And have we still got more work to do on that front? Yeah. So on the transformation program and specifically on cost-saving, actually, we are ahead of plan. So unfortunately, we had to say goodbye to 9,000 colleagues last year. And when we look at our reporting this quarter, we're 12,000 employees down compared to last year. So we have delivered on the program and we're even ahead. And on procurement savings, we're also pushing hard

16:59to generate savings there. And really, the purpose of the program is to free up resources so we can invest in the growth opportunities. Like in other industries, we cannot save ourselves to success. We can save to invest in growth and growth options, both short and long-term. So what we're doing is basically that we're taking the savings we're generating and then, of course, we use some of them to mitigate the decline in top line. But we also use a lot of the savings to invest in R&D pipeline expansions

17:32for the year to come. And then, as you've alluded to, those cost savings, one example of quite significant change that's happened at Novo over the last year or so, a change at the top with the leadership, but also a strategic refocus and the kind of scrutiny that comes with that. So for my final question, I wanted to get a little bit personal and just ask, as CFO of a company that's gone through a lot of significant change and is under a lot of shareholder scrutiny at the moment, do you feel under a lot of pressure in the role

18:02to prove Novo's sustainable financial future?

CFO Reflections

18:06How have you been navigating those kind of challenges at the top of the company? Yeah, thank you for that question. And I would say it's been quite a rollercoaster. I've been the CFO for almost nine years and we started out with a bit of a rough patch when I started with very, very low growth and a lot of pressure and a new team. And then we had a period of hyper growth where we were growing like 20, 30, even 40% in some quarters where it was all about scaling and manufacturing to meet unprecedented demand.

18:38And then unfortunately, growth slowed down almost as fast as it came around. and as a consequence, we disappointed a lot of investors and our share price declined markedly over the last two years. That, of course, entails a lot of pressure, but also a lot of responsibility to make the right choices given where we are as a company. And I take that on me and as a management team, we take that on us to chart the course, to set the company off to delivering sustainable future growth. So it's not always fun,

19:09but it's a very important task to really steer the company into the future in the right way. Well, I'm sorry it's not always been fun, but it's certainly been fun having you on the top line. So, Carsten, thanks so much for sparing the time on an incredibly busy earnings day to speak to us at Fierce. It's been a real pleasure to catch up, but I hope we can speak again soon. Thank you, James, very much for having me on the top line and looking forward to being back at a later point. That's it for The Top Line. I'm your host, Ayla Ellison.

19:40You can find out more about this topic in our show notes at FierceBiotech.com. Look for podcasts. And that's the bottom line from The Top Line.

20:02See you next time.