Novo Nordisk A/S (NVO) Q4 2009 Earnings Report, Transcript and Summary

Good day, and welcome to the Novo Nordisk financial year 2009 results conference call. For your information, this conference is being recorded. At this time, I'd like to turn the call over to your host today, Mr. Lars Rebien Sørensen, CEO. Please go ahead. Lars Rebien Sørensen: Yes, and welcome, ladies and gentlemen, to this Novo’s conference call regarding our 2009 full year results, which was released earlier today. I’m Lars Rebien Sørensen, the CEO of Novo Nordisk. With us, I have our Chief Financial Officer, Jesper Brandgaard; Mads Krogsgaard Thomsen, Chief Science Officer; and, present are also our investor relations officers. Today's earnings release is available on our home page novonordisk.com, along with the slides that we would be using for this conference call. The conference call is usually scheduled to last approximately one hour. And I’d like to start with the presentation as outlined on slide number two. The Q&A session will begin in about 25 minutes. Turn to slide number three. As always, I need to advise you that this call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause the actual results to differ materially from expectations. Further information on the risk factors could be seen in the earnings release and the slides prepared for this presentation. Note, as mentioned, that the conference call is being webcast live, and the replay will be made available on the Novo Nordisk's Web site after the call. Turn to slide number four. We’re satisfied with the sales result in 2009 with a sales growth of 12% reported and 11% in local currencies. This performance was driven by continuous penetration of our modern insulins in our key markets. North America continues to expand its position as the largest sales region for Novo Nordisk…

Thank you, Lars. Please turn to slide nine for the overview Europe R&D pipeline within diabetes and obesity. Significant regulatory progress has been made for Victoza, the first once-daily human GLP-1 analog that was previously known under the INN name liraglutide. As announced on the 20th and 26th of January, respectively, Victoza has now received approvals both in Japan and the US. Following this, Victoza has now being approved in all of the triad markets within the timeframe of only 20 months, which is setting a new standard for regulatory approvals in the major territories. In the US, Victoza’s indicated as an adjunct to diet and exercise to improve glycemic control in adults with type 2 diabetes. The detailed update on the FDA approval was recently provided at our conference call on January the 26th. We’re very excited to be able to launch Victoza in the US in the weeks to come. And we’ll also continue to work diligently with the FDA to ensure that the post-marketing requirements, including the cardiovascular clinical trial and other studies are addressed by Novo Nordisk. As regards the benefits and risks of being put to (inaudible), I’d like to point your attention to our review article in the February issue of Diabetes Care, in which a number of reporters, including Dan Droca [ph] and several past and present ADA presidents summarized today’s knowledge. One of the conclusions in the review article had said that sustained GLP-1 receptor activation induced by long-acting GLP-1 receptor agonists leads to growth and seasonal changes that are not replicated in monkeys, and that in man, further studies of long-acting GLP-1 receptor agonists are warranted to rule out human relevance. Moving now to Japan, Victoza is the first GLP-1 analog to be approved by the Ministry of Health, Labor, and…

Thank you, Mads. Please turn to the next slide. We’re satisfied with the financial results for 2009. Total sales growth was 12% as reported and 11% in local currencies. Growth was realized within both diabetes care and biopharmaceuticals and the primary goal contribution originated from the modern insulins. Our gross margin for 2009 increased to 79.6%, compared with 77.8% in 2008. This improvement primarily reflects improved production efficiency, higher average selling prices in the US, and 0.4% point positive contribution from currencies. In 2009, total non-production related operating costs increased by 12%, around 1.5% point of the increase in non-production related operating costs reflected the higher value of key currencies that there is to Danish kroner in 2009, compared to '08. The underlying development in non-production related operating costs relates to the expanded sales forcer especially in the US, the UK, Germany, Japan, and China, supplemented by a stable level for research and development costs. The unchanged absolute level for research and development costs primarily reflects in non-recurring costs in 2008 related to the discontinuation of all pulmonary diabetes projects and also discontinuation of the growth hormone therapy project in patients with low serum albumin in dialysis. This was matched by costs related to the late stage development of the new insulins degludec and DegludecPlus, which we formerly knew as SIBA and SIAC in the second half of 2009. Operating profit in 2009 increased by 21% to almost Danish kroner 15 billion, compared to 2008, and is slightly higher than the latest guidance for growth in reported operating profit of around 18%. In financials, (inaudible) net expense of Danish kroner 945 million, compared to a net income of Danish kroner 322 million in 2008. For 2009, the foreign exchange result was an expense of Danish kroner 751 million, compared to…

Certainly. Thank you, sir. (Operator Instructions) We now move to our first question, which comes from Richard Vosser from J.P. Morgan. Please go ahead. Richard Vosser – J.P. Morgan: Hi. Thanks for taking my question. I’m Richard Vosser from J.P. Morgan. A couple of questions on the liraglutide please, I wonder if you could disclose your sales of liraglutide in Europe for 2009, and whether you could explain how your guidance changed following Victoza approval in Japan and overseas -- in the US? And whether you could comment on the -- you expect the effects from both the sales guidance and operating profit guidance, whether you’ve built any extra cost assumptions in that aspect? And then just one on the pipeline, which is, I wonder if you could explain what sort of peptides NN9161 (inaudible) product is. Should we exclude that is a GLP-1 based approach? And I wonder if you could go into a bit more detail of the rationale of your development process there? Thanks very much. Lars Rebien Sørensen: Okay. This is Lars Rebien here. I’ll try to give you just a little light on this (inaudible) on Victoza. We prefer not to disclose specifically sales of Victoza in the first quarters. And you should not expect that we will so either in 2010 because the numbers are so heavily impacted on the launches in individual countries and pipeline ceiling. And so for the rather modest, as you can expect, given the size of the markets, where we have a launch for it so far. But more importantly, I think it’s the penetration and the quick uptake that we have seen in the markets where we have launched. In regards to the guidance on 2010, you noticed that we have narrowed the range in from 5% to 10%, to 6% to 10%. And that is a reflection of some more visibility on our ability to launch Victoza in the US, giving us visibility of the full years on the market, in the US. And that has what has impacted the top line guidance. Jesper, do you want to comment on the operating profit guidance, what has happened between Q3 and what we are guiding now? And then, Mads, we’re going to put you on this (inaudible) whatever later.

Yes. First, as Lars alluded to, we're basically taking the button of the sales range out now. This 5% is no longer relevant. So within the 6% to 10% range, we are certainly assuming that within this range that we have a US healthcare reform that could have a significant impact on the numbers also. In terms of costs for Victoza, we have included a cost in our guidance of having an operating profit of around 10%. And if you want to get form the original at least 5% operating profit growth that we stipulated in local currencies in connection with Q3 that was the minimum level of operating profit we would have if we were at the bottom range of the internal guidance. The guidance we’re giving now is assuming what operating profit growth we will have at the mid-interval of our sales guidance. You should also note that we have now expected a slightly higher level of other operating income. Now we are predicting that other operating income will be in the full part of Danish kroner 500 million, partly reflecting slightly higher royalty income in 2010 and the years beyond. Richard Vosser – J.P. Morgan: Thank you very much. Lars Rebien Sørensen: And so Mads, on toNN9161, can you -- will you -- should you disclose the nature of this molecule?

Well, I can say what it is not. It is not a GLP-1 analog. It is a stabilized human variant using a kind of new launch technology as opposed to post-stabilization of peptides and proteins. An analog of an anorexigenic peptide hormone that plays a major role or is believed to play a major in the natural homeostasis of human feeding behavior. Lars Rebien Sørensen: Thank you very much. If you got any wiser from that, thank you. Next question please.

Thank you. Our next question comes now from Michael Novod from Handelsbanken. Please go ahead. Michael Novod – Handelsbanken: Yes. Hello. It’s Michael Novod from Handelsbanken. Could you try to give us some flavor on initial feedback you have from keeping leaders, senior doctors in the US because there so much different opinions traveling around starting the Victoza label in the US? So could you give us some flavor on what you hear? And then secondly, could you try to elaborate a bit more on the subpoena from the Department of Defense in the US, try to give us some of the feeling of what are we dealing with here?

Thank you very much, Michael. And Mads Krogsgaard, what is your initial feedback from KOLs in the US given that that we now know the label of Victoza in the US and compare that to the situation perhaps in Europe and in Japan? And then, Jesper, if you’d care to comment as much as you can on the subpoena on NovoSeven from the Department of Defense after Mads?

Yes. Well, I think maybe the most unbiased way to do it is really to reflect a little bit upon the couple of both review articles and editorials that had just emerged this week in the Diabetes Care journal. They have been (inaudible) by both a number of past presidents of the ADA and the current one, past president Rogga [ph] from Toronto. And they pretty much reflect the perception that I have and we have from a number of key wills that we're attaching on a very regular basis in the US. And that is that the class of GLP-1 agonists, as you can read in this issue, essentially in their view has a clearly beneficial ratio between the benefits and the richness of the compounds. They actually see that the long-acting GLP-1 agonists do have this propensity to stimulate rodent C cells whereas they do not do so in monkeys. And they feel that they’re still for -- due to the sustained activation of the GLP-1 receptor by the long-acting class of (inaudible) ones. They essentially feel that we need to even further solidify the human safety. And that is what we do in this part of the (inaudible) zone. So if you want my personal view, I think due to the B program and the many, many chemical studies and investigators that we have had on board in our phase 3 AMV programs, we are in the situation where each individual KOL is pretty much able to make up his or her own mind as to the merits of these products. Of course, they will look into the label, and so on, but they have a pretty good feel for what Victoza does in terms of benefit-risk profile. Michael Novod – Handelsbanken: And any comments on Europe and Japan and as with the continents?

Well, in Europe and Japan, of course, we have the direct hands-on user experience. And quite frankly, we had a meeting with 600 diabetologists in Paris a couple of months ago. And it was really, really nice to see how they felt about the product and how they were using it and tried trading in the events of transient nausea. They had made their own ways of getting about this and so on. And the same goes for Japan, where we don't have it on the market yet, but we have very nice feedback. We have the first GLP-1 analog to -- or agonist to come to the Japanese market and there’s a lot of excitement out there. Lars Rebien Sørensen: So basically, at the back works warning in the US market is obviously not a positive. It’s going to mean that it's a little bit more uphill to expand the old market for GLP-1’s in the US? Long term, what' going to be decisive for us is work up to the label of other sustained release versions of a -- (inaudible) from our competitors. And you can appreciate it from our stance, since scientifically we believe that they would be having the same block -- back warning as we have. Of course to market it, that’s going to be difficult. Michael Novod – Handelsbanken: Yes, but subpoena -- NovoSeven, Department of Defense of the United States?

Yes. We received in January a subpoena from the Department of Defense, which directed Novo Nordisk to provide its document related to NovoSeven. Although we do not know the specific reason or scope of this investigation, the thing we are aware of it is that the US Army doctors have at their discretion been using NovoSeven. And the US Army had been purchasing NovoSeven for trauma use within soldiers. But we do not know the specific scope for this investigation. And hence, we cannot predict the outcome of the investigation nor the timeline of financial consequences for this investigation. So that is as much clarity I can provide at this stage.

Yes. Again, this is Lars Rebien here. The interesting thing is we’ve not been marketing the product to the Department of Defense, so that was a program, which was adopted based on that potential wave of the label, research had been on NovoSeven in United States. So we need more clarity on that, and hopefully, we can update you next time when we have our earnings release. Next question please.

Thank you. Our next question now comes from Henrik Simonsen from SEB Enskilda. Please go ahead. Henrik Simonsen – SEB Enskilda: Yes. Hello, gentlemen. Henrik Simonsen here. Two questions from my side, I think call mentioned about half a year ago, no idea (inaudible) he would be willing to comment on the Victoza launch, so to speak in Europe about the six months. And we had Victoza now on the German market for about six months. Would you be willing to comment on how you see the uptake and how much switching you’ll see in from Byetta and how the German doctors have to see this untoward risk? And second to question, I guess to Jesper, if you would comment give a little bit guidance on the cost structures of 2010/ I noticed that the sales and distribution costs shot up to about 32% of sales in the fourth quarter against 28% in the third quarter, and admin costs were down year-on-year on the fourth quarter. So could you drive a little bit clarity on cost structure guidance for 2010 please? Lars Rebien Sørensen: Yes. Thank you, Henrik. This is Lars Rebien here. And Mars, so can you quantitatively talk a little bit about the adoption in Germany? Obviously, we’re not disclosing the specific sales numbers but nonetheless, relativity speaking, into other products to the company that’s in the marketplace, and what are you seeing and where we are getting the patients form?

Yes. Well, first of all, we can say that the trend we also reported on the DAST conference call where the most of the patients we were taking in Germany essentially were not coming from Byetta switches, but approximately maybe one out of three did so. We have seen a consistence -- let’s say market penetration where the most of the patient are coming from oral antidiabetics. We are actually also seeing some patients switching from insulin, but the majority is still coming from oral antidiabetics. And we are growing the market, you can say, to some extent, it may be one-third or so to the -- at the expense of Byetta, but mostly by a market expansion. And you can say at this point, it seems as if the target group that we are mostly hitting are the ones that are failing on one or two OADs, which is essentially also the main target for this one, the GLP-1. So we’re consisting of -- we are continuing the performance that we alluded to at the EST meeting. Henrik Simonsen – SEB Enskilda: Thank you, Mars. Jesper, the cost guidance or the cost structure of our expectations for 2010?

Hi, folks. The first thing of course will be a continuation of our expansion of gross margin. We continue to expect that we will improve our gross margin also going into 2010. Our guidance is both an improvement in the gross margin between 50 to 100 basis points in 2010 over 2009, no currency effect expected at present. In terms of the S&P ratio, we will expect a ratio around 30%. I do note that we have expanded our sales forces in all the major markets. And hence, do not expect any significant expansion our sales force in 2010 in the market where we launched or rollout Victoza. In terms of R&D, clearly, a slightly disappointing numbers for us with the 15.4% on the ratio in 2009, and we expect to avail that in terms of investments in 2010. And I would anticipate the R&D ratio to be in the full part 15% to 17% of sales in 2010. So that should be made up by a round percentage point or so. In terms of admin costs, we continue to improve the admin to sales ratio. And I would predict that the admin ratio will be in the range of 5% to 5.5% or so. And although operating income, as I alluded before, we have made some agreements regarding intellectual property that will provide some royalty income for us. And our guidance now for other operating income would be around Danish kroner 500 million for 2010. And we believe that that income level is a sustainable level for new launch also in the years to come. So that is hopefully, if you use the mid-range of our sales growth, should get you to a growth level of around 10%. Lars Rebien Sørensen: Thank you , Jesper. Next question please.

Thank you. Our next question now comes from Sam Fazeli of Piper Jaffray. Please go ahead. Sam Fazeli – Piper Jaffray: Oh hi, gentlemen. Thank you very much. My two questions, can you tell us if 9068 is degludec or Levimir in it? And also with regard to the impact of the formulation patent progress that you’ve had for the European Union, what do you think -- does this raise the bulk further for a generic launch after the competition of matter patent on the analogs expires? Lars Rebien Sørensen: Thank you very much. Mars Krogsgaard, this is for you. The 9068, the components, and what can we read out of the extension of our formulation patent with regard to generic competition in the European market?

Right. Well, there are, you can say, some similarities between Victoza and degludec. They are both neutral, stable preparations with a duration of action of 24 and 30 hours-plus in humans. And they're both actually to the analogs of insulin and GLP-1. And those properties have rendered them (inaudible). So it is indeed a combination of degludec and Victoza, where as I was discussing, you can either achieve as a product where you get a safer insulin with less weight gain and hyper risk or they -- even more indication with GLP-1 with a boost insulin. That remains to be seen because we are only in phase 1 at this point. As regards the aspart formulation pattern, you are aware that we have previously had a situation where there was a lawsuit with Sanofi-Aventis that actually revoked our original patent that related to some ways of stabilizing physically and chemically the insulin aspart in the formulation for a long shelf life and without risk of degradation and other problems. That was revoked giving us, you can see, an IP situation that was going to leave us without any protection beyond 2011 in Europe and 2014 in the US. Now what has happened here in the last instance and that is the final round is that actually the patent has been put back in place again, and we have prevailed. Meaning that the ways through which -- by different means of -- you can see excipients in the formulation changes in various proper constituents and other elements of stabilization of the insulin aspart molecule. We have covered that now until 2017. That implies then that any attempt to make a biosimilar version of insulin aspart will have to do and work around in terms of the rather broad scope of activities that we have in our patent to make sure that you have the physically, chemically-stable product. So it has made it more uphill for biosimilar companies, so to speak. Lars Rebien Sørensen: Thank you very much, Mads. Next question please.

Thank you. Our next question now comes from Jacob Thrane from Standard & Poors. Please go ahead. Jacob Thrane – Standard & Poors: Hi. Good afternoon, gentlemen. Thank you for taking my questions, most of them have been answered already. Just a question on the switching you mentioned in the German markets, say roughly one-third of the uptake of new patients. There's a switch from Byetta. Do you get envy -- well obviously, but would you like to share with us what the reports back from the markets had been and why patients have been switching from Byetta into Victoza, and if that is obviously indicative of what we can expect in the US market? Thank you very much. Lars Rebien Sørensen: Yes. Mads, can you say something qualitatively about the reason for switches on these one-third that's assumed to be switching from Byetta to Victoza?

Yes. Well originally, it was higher because of course many doctors were ready and waiting for this product. But we are seeing that number coming down. And that is also as we would hope because that's what you need to see in order to be able to expand the market. I think overall, what you will see as going forward that it is becoming more and more oral antidiabetic failures after -- either metformin failure or metformin plus one more OAD failure. So you should expect somewhat a pessimistic situation in the US where the only labeling difference is of course that here it can be used also in monotheraphy albeit not in first-line diet failure patients. So essentially, our expectation is that we have, as Lars alluded to, to grow the market, expand the market, which is today you can see very small considering the excitement surrounding the GLP-1 class. And that predominantly means tapping into the market for all antidiabetic failures preferably already at the metformin failure stage. Lars Rebien Sørensen: And of course, for people switching from current Byetta use to--

Well the response we have from at least 600 physicians that came on board there that was essentially that in many cases they didn't want to continue because of the nausea associated with Byetta or the inflexibility of the dosing. And that's their personal observation, as you can see. But there are different reasons. After all, you can see Victoza, at least according to the LEAD 6 study that we have conducted, does are for more -- too close control with a more simple dosing regimen. And that's also what we are witnessing now in the real life setting. If anything, people, once they get to know which patients to use this product in actually feel that they're getting very satisfactory treatment outcomes. Lars Rebien Sørensen: Thank you very much, Mads. Let continue on with the next question please.

Dani Saurymper – Goldman Sachs: Hi. Good afternoon. I have two questions if I may. One relates to NovoSeven, it seems as though there's a little bit of softness in the fourth quarter. Can you perhaps maybe just comment as to what you're expected the drug trends might be for that product going forward? And by contrast, human growth hormone was stronger than expected in the fourth quarter. Is there any stocking or anything we should be aware of within that? And then just lastly, I wanted to ask with regard to following off on the formulation patent comment in Europe, just to confirm the 2014 patent for the US still holds or is that extended to 2017 (inaudible)? Lars Rebien Sørensen: This is Lars Rebien here. First question's on growth rates at Q4, respectively on NovoSeven and the human growth hormone and what are the expectations for 2010. And then, the second question was the 2014 US patent on NovoLog and if the compound patent for NovoLog still stands at 2014 in the United States if -- what has been prolonged (inaudible) and that means -- and so it's the same situation as in Europe. A biogeneric version of the molecule could be made, but the formulation of its current form the way it's being used in Europe and United States cannot be done directly. So as Mads was alluding to, any biosimilar entry will have to reformulate outside of the physical, chemical parameters which we have stipulated in our formulation patent, and of course, stipulated in the pattern because it's difficult to stabilize the NovoLog product. And therefore, it gives meaningful protection. In fact, we believe, a big hurdle for biosimilar entries and postponing the likelihood until 2017. Jesper, would you comment on the Q4 and perhaps -- more importantly the growth rate expectation for 2010 for NovoSeven and human growth hormone.

Yes, especially for NovoSeven, one has to be a little bit careful watching the currencies in Q4 as be -- in comparison in Q4 of 2008 was quite significant. So if you basically back wrap the currencies take out of almost 10% at this point, you have a local currency growth of NovoSeven in the fourth quarter to the tune of 6%. And then you also have to bear in mind that we -- as we also noted when we did the 2008 report, we had a bit of a pipeline fill in Q4 2008 in the US because there was some speculation in the wholesaler level of distributors on pricing because they competed such price rise. And hence, if you adjust that out, I think you are quite close to a normal growth level. But 6% growth in local currency trends for NovoSeven in the final quarter, I think that's pretty representative of what the product is able to do. The guidance we are giving for 2010 for NovoSeven will be about in the single digit level. Whether it would be mid or high single digit, I think we'll have to get a little bit further into the year before we'll know more about it. In terms of growth hormone, the local currency growth we have for Norditropin in the year -- in the final quarter of 2009 was a growth of around 15%, so we're very happy with that. The growth guidance for 2010 for Norditropin will be in the 5% to 10% range. We continue to gain a little bit of market share and we are closing in on Pfizer as the global market leader within growth hormone. So we expect to continue to expand our franchise with Norditropin. Lars Rebien Sørensen: Thank you very much, Jesper. And thank you for the question. And we could take the next question please.

Martin Parkhøi – Danske Bank: Hello. I also have two questions. Firstly, going back to patent expiries, I was wondering -- I know of course that there are NovoRapid is expiring in Europe, the (inaudible) patent in -- next year. I know that it's not very likely that any biosimilar competition will arrive at that time. But do you actually see the risk that some healthcare authorities would force you to take down your price? And I'm thinking a market for example France. And then secondly, I remember when you gave your new long term guidance in connection with the fully resolved last year. You were asked if you -- what kind of price increases you have included in your long term guidance in duress. And at that time I think you said it was not as dramatic as you have seen in the past. Nevertheless, I noticed that insulin allows for increased in price in general by 5% to 10%. And human insulin was increased by 20%, of course on a list price sake. Could you please elaborate a little bit on that? Lars Rebien Sørensen: Yes. Thank you, Martin. First of all, Mads, would you comment on your expectations how the authorities would view a compound patent expiry on NovoRapid in Europe, whereas (inaudible) the formulation pattern, meaning that they will be imminent entry into this from a biosimilar perspective. So as to -- I think Martin, you should not take too much indication from the -- despite the increase in the United States of human insulin. It's just basically signaling that we are moving on in the human insulin segment altogether. And as you well know, a lot of this human insulin is actually being sold to government contracts and the hospitals under Medicare or under the Medicare programs and they're -- hence, the actual prices are quite different from the list price. But this is an indication that we are moving out of the market and this is prudent for us. I think that the price increase is -- as you've indicated on the modern insulin's somewhere between 5% to 10% has been historical levels. In some years, it's actually been higher. It's been 10% dollar anticipation that going forward it would be rather conservative market where we are not very likely to continue being able to raise prices as indicated. But Mads, do you have any comment on -- your view on the NovoRapid situation in Europe?

Yes, I do actually. I'd just like to emphasize a few points. One is that unlike the human growth hormone situation where six or seven contenders are all offering exactly the same protein with 191 amino acids in the same place, here we're talking different insulin analogs with different properties, i.e. they are in their own right new molecular entities. With that borne in mind, we first of all have no legislation in place in Europe, or US for that matter, that actually allows for biosimilar analogs of insulin to be brought to market at this point even though it's being discussed. And second of all, we have no examples where protein-based molecules of different backbone structures undergo class substitution in any society. You can have generic substitution of the same molecule, but not of a different molecule. So the short version is, should a lispro arrive, for instance in the European market a couple of years from now, that is not expected to significantly impact the NovoRapid situation. Martin Parkhøi – Danske Bank: That wasn't actually my question. My question was that I understand that there would not be any generic versions arriving. But the question was if the health authorities could say that, "Now you have earned your money on this compound," and then actually force you to take down the prices on the compound. Nevertheless there will not be any generics out there. Lars Rebien Sørensen: This is Lars here, Martin. We're reading all (inaudible) lowering the prices by different governments. It's pure speculation. You have seen the discussion with the Quick [ph] in Germany. And we just saw the cluster here scientifically-based arguments for why certain comparisons should be used in considering price. It's all speculation. We, of course, will state our case. And then it'll have to be a discussion and negotiation with the given authorities. I think that was it, next question please.

Thank you. Our next question comes from Carsten Madsen from Carnegie Bank. Please go ahead. Carsten Madsen – Carnegie Bank: Thank you very much. I just have two questions to growth rates in the quarter actually. First of all, lets look at North America in the diabetes franchise growth rate. It seems to drop significantly from Q3. Could you elaborate a bit on what has happened here? And at the same time also touch up on what is happening in international operations where growth rate is the other way -- drawing in the other way significantly up. Could you shed some more color on this? Lars Rebien Sørensen: Yes. We certainly will try. This is growth rate in Q4 in the United States. I think we -- actually we saw growth rates in North America of around 12% in local exchange rate in the Q4. On the line growth, it's actually more like 20%. The Q4 sales in local currencies was impacted by the fact we had taken some provisions in anticipation of a healthcare reform and that may or may not come to operation until -- of course to the extent which that is being (inaudible). It'll have some impact both on those provisions, but also have impact for our guidance on the top line in 2010. And we also have some other provisions for returned goods, for discontinuation of products, which is impacting the US business as such. So there's no -- in our view, no underlying signs that the business had deteriorated in the fourth quarter in the US.

But do note that the currency effect in comparing Q4 with Q4 for the North American market is in exceeding 10%. So a lot of the challenges here are very, very significant currency effect in that specific quarter. And that's also a part of the reason why we're seeing -- when we look at the guidance we gave for 2010, do bear in mind that the growth rates in the second half of 2010 is going to be higher than what they are in the first half because of the comparisons during 2009, of course assuming stable rates throughout 2010. Lars Rebien Sørensen: And do you have any comments, Jesper, to the IO sales in Q4, which were in the opposite direction, came in quite strong.

Yes. The overall sales in IO was developing quite nicely. And the key driver here was a very strong quarter in the Q4 in local currency trends in China, but also a solid development in Turkey. So that was some of the main markets delivering positive development for IO. Lars Rebien Sørensen: But this is all across -- highlight the issue of looking at quarter-to-quarter variations. It's rather complicated. We don't want to see any major shifts in our business either way. The United States is not going down and we see that IO is going through the roof. So you should expect more like the annualized numbers than what you have seen reported in the fourth quarter. Thank you very much. Next question please.

Thank you. That comes from Sebastien Berthon from Exane. Please go ahead. Sebastien Berthon – Exane: Yes. Hello, gentlemen. A few backline questions please. First, can you update us on your plans with semaglutides for phase 3 as well as Victoza -- obesity in the US following the approval of Victoza? And secondly, when will we have some first entry results for degludec? Can we have that towards the end of this year? Lars Rebien Sørensen: Yes. Thank you very much Sebastien. Last quarter, semaglutide was of that program, we chose obesity in the United States. Now we have a green light. Will you be moving forward and when? We will see some recourse on degludec and DegludecPlus during this year.

Yes. Well the last one first, degludec and DegludecPlus, you can imagine having recruited a 1,200 patients over the last months. This implies that some of the six-month studies are indeed going to start reporting as of you can see mid this year, maybe into Q3. And that would mean that from then and onwards, there's going to be almost an avalanche of reporting of these, you can say, 16 to 18 trials that have been kicked off in those programs. So that's something we'll get back to later this year. In terms of the GLP-1 situation, it is true that the Victoza approval for diabetes treatment in the US now enables us, we feel, to, with a deep and broad portfolio, really progress significantly, whether it's the combination treatment with the degludec, whether it's now going to the FDA discussing the path for -- what's for obesity. Where as you know, we have only initiated the small of the three phase 3 trials. And the two big ones have not been initiated. Obviously, we'll now be discussing with the agency how they see the situation going forward. And that is something we plan on replying for meetings regarding -- in the very near future. Semaglutide there, as you know, we've completed phase 2 trials with strong efficacy results. And there, we want to wrap up all the monthly little experiments and you can say elements of this whole program and have discussions with the agency before -- in the second half of this year, are able to come with a stop-go decision for phase 3, which if everything works out fine both on the regulatory and on the non-clinical side would enable us to then proceed into phase 3. Lars Rebien Sørensen: Thank you very much. Ladies and gentlemen, let's have the last question please.

Thank you. Our final question comes from Jack Scannell from Sanford Bernstein. Please go ahead. Jack Scannell – Sanford Bernstein: Thanks very much. Two questions, the first, on the Victoza conference call after approval, you alluded to some studies looking at the range of long-acting GLP-1s suggesting that you saw a similar thyroid signal for a range of different molecules. Can you just clarify or remind us whether those were whole animal studies looking at (inaudible) or were there some kind of cellular or cell culture based receptive binding study? Secondly, in this (inaudible), there was a post editorial to which you alluded, by Drucker, on the GLP-1 class. There was also a less positive editorial by Butler on pancreatitis. And I just wonder if you can give us your thoughts on that, both in relation to class in general, also possible differential risk with the long-acting GLP-1s such as LAR or (inaudible). Lars Rebien Sørensen: Thank you very much. Mads, so the reference you made to us having started the long-acting GLPs, including our own, obviously, were they done in the whole animal studies or were they done in gel-based studies? And finally, what's your comment as to the Butler editorial on the pancreatitis, on the long-acting GLPs?

Okay. So the paper that would be coming out in the near future is a very comprehensive paper that looks at both human and non-human, i.e. reptile, GLP-1 analogs. Obviously, with the amount of compounds that are being studied, not everything is going into the in vivo situation, where you need to produce large amounts of compounds, use large amounts of animals, and so on. What we have done though is for each and every relevant late stage GLP-1 agonist of the long-acting and the short-acting ones, we've constructed full dose response curves on the relevant rodent assays looking at (inaudible) release and functional activation of B cell systems that we know in the pre-clinical situation are predictive of a leader response in the vivo situation. And so in that end, we have been -- done pharmokinetic experiments to map out what are the equivalent bioexposures that you need for a reptile peptide known as exanitide and the human one known as the raglutide to match activity exposure that equivalents the doses that are needed to exert the antidiabetic effect. And then we've, in that situation, done studies where repeated dosing of the animals have led to a seasonal proliferation and hyperplasia, and they are, as will be shown in this paper, completely identical and super imposable whether you use the human -- the raglutide molecule or the reptile exanitide molecule. Also, we have in this publication GLP-1 receptor knockout data and we have the human data from the liraglutide meter analysis. So this will be a very comprehensive paper with a lot of data and is coming, we believe, in the next month. And then the Butler-- Lars Rebien Sørensen: Butler's concern about pancreatitis.

Yes. Well yes, we should remark one thing, and that is that when the FDA is talking in their (inaudible), whether it's for Byetta or whether it's for liraglutide, they do actually use the phraseology, "the risk of pancreatitis," where when you talk about the C cells, they talk about the potential risk. Hence, it is at this point the verdict of the FDA that they do discuss the risk of pancreatitis. Even though you can say the numbers are small and is not scientifically proven, then this is at this point something that the producers of GLP-1, such as Novo Nordisk, have to relate to. That being said, the Peter Butler paper is using, I would say, one particular model of a transgenic mouse diabetes where pancreatitis has been seen initially with a DPP-4 inhibitor. And actually, it is contradicted by other models that are used in other laboratories where they see no difference whatsoever on the occurrence of pancreatitis. Also, Novo Nordisk has not seen this in its pre-clinical studies. So I think the jury is out and it's quite clear that pancreatitis is one area for further studies. Lars Rebien Sørensen: So with that, thank you very much, Mads. It was a conclusion based on Victoza. And ladies and gentlemen, this is the conclusion of our teleconference. A copy of the webcast will be made available on our home page. Our investor relations officers will be available to answer questions shortly after our -- there's a conference in Copenhagen, which takes place in about one hour. So we thank you for your attendance. And we will be back in connection with our first release. So see you then.

Thank you. That conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.