Good day, and welcome to the Q2 2013 Novo Nordisk A/S Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Lars Rebien Sørensen. Please go ahead, sir. Lars Rebien Sørensen: Thank you, and welcome to Novo Nordisk's conference call regarding our performance in the first 6 months of 2013 and the outlook for the full year. I'm Lars Rebien Sørensen, the CEO of Novo Nordisk. With me, I have our Chief Financial Officer, Jesper Brandgaard; and Mads Krogsgaard Thomsen, our Chief Science Officer. Present are also our Investor Relations officers. Today's earnings release and the slides to be used for this call are available on our web page, novonordisk.com. The conference call is scheduled to last approximately 1 hour. And as usual, I'd like to start with an outline of the presentation. The Q&A session will begin in about 25 minutes. Turn to Slide #3. As always, I need to advise you that this call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause the actual results to differ materially from expectations. For further information on the risk factors, please see the earnings release and the slides prepared for this presentation. Please note that the conference call is being webcast live and a replay will be made available on Novo Nordisk website after the call. Turn to Slide #4. We are pleased with the strong sales in the first 6 months 2013. Sales increased 14% in local currencies and 11% in Danish kroner as compared to the same period in 2012. Sales growth was driven by strong performance in North America, International Operations and China. Sales growth was realized within both diabetes care and biopharmaceuticals with majority of growth coming from modern…

Thank you, Lars. Please turn to the next slide. The regulatory revenues of Tresiba and Ryzodeg continued around the world. New drug applications are under review [indiscernible] countries and approval has now also been obtained in India. In Canada, we've been informed by Health Canada that the agency requires additional data for approval. While disappointing, especially since Tresiba is already approved in Europe, Japan and several other countries, Novo Nordisk will continue to work with Health Canada to ensure that the additional data we provide will fulfill their request. In June, we initiated a global 26-week, randomized, open-label, Phase III trial comparing the efficacy and safety of Tresiba with insulin glargine in approximately 800 people with type 2 diabetes. The trial is expected to recruit most of the patients from China and will provide the basis for the NDA submission to the Chinese Food and Drug Administration. Please turn to the next slide. So we have now received feedback from FDA in the U.S. on the clinical trial protocols for the cardiovascular outcomes trial for Tresiba. The feedback confirms the expectations we recently communicated with regard to the trial design. The event-driven trial will thus be double-blind, use insulin glargine as comparator and include around 7,500 patients. The submission of cardiovascular data to FDA is expected to be based on an interim analysis of the major adverse cardiovascular events in the trial. And Novo Nordisk will subsequently continue the trial in order to meet the post-approval criteria as they are described in FDA's CV guideline for diabetes therapies. Following the protocol agreement with the FDA, we've now submitted the clinical trial application in the United States and the trial is now expected to be initiated before the end of the year. The interim analysis is still expected to be available…

Thank you, Mads. Please turn to Slide 20. In the first 6 months of 2013, sales increased by 14% in local currencies and by 11% to DKK 41.4 billion, measured in Danish kroner. Sales growth was positively impacted by approximately 2 percentage points due to a number of nonrecurring events, including adjustments in the provisions for rebates in North America, as well as the timing of tenders and shipments and the extraordinary sales in International Operations. The reported gross margin improved by 90 basis points to 82.6% in the first 6 months of 2013, primarily driven by favorable price development in North America and the positive net impact from product mix due to increased sales of modern insulins and Victoza. Gross margin was negatively impacted from currencies by around 0.2 percentage points, primarily as a result of depreciation of the Japanese yen versus the Danish kroner. Total nonproduction-related costs increased by 12% in local currencies and by 10% in Danish kroner to DKK 18.4 billion. S&D costs increased by 15% in local currencies and by 13% in Danish kroner to DKK 11.4 billion. Growth in costs is driven by the expansion of the U.S. sales force in the second half of 2012 and sales and marketing investments in both China and in selected countries in International Operations; costs related to the launch of Tresiba in Europe and Japan, as well as an impact on the cost growth percentage arising from the reversal of legal provisions, which occurred in the first half of 2012. R&D costs increased by 7% in local currencies and by 6% measured in Danish kroner to DKK 5.4 billion. The relative modest cost increase is impacted by timing of clinical trial activity and is primarily driven by development costs related to the completion of the Phase IIIa…

[Operator Instructions] We will now take our first question from Richard Vosser of JPMorgan. Richard Vosser - JP Morgan Chase & Co, Research Division: It's Richard Vosser from JPMorgan. The first question, just on the oral GLP-1. I was wondering if you could give us an idea of the amount of GLP-1 that's going into each tablet relative to the injectable form, an idea maybe how big the tablet is at this point. And also I think, Mads, you alluded to the HbA1c drops and the weight loss are fully on a par with GLP-1. Could you just clarify that and just confirm that my understanding is that, that is the same sort of level of HbA1c drop of about 1% and certainly larger than a DPP-4. That will be very useful. And then just secondly, commercially, just what you've seen so far in terms of an impact from the incremental competition on Victoza in Germany? Lars Rebien Sørensen: Mads Krogsgaard, why don't you go ahead with that and then I'll come back with the Victoza competition in Germany.

Yes. Well, Richard, first of all, just as a background, the semaglutide has more other things being chosen based on a very, very long intravenous half-life. That means basically, 1% shot, it will have a half-life of a whole week for human beings yet we're administering the tablet on a daily basis to counteract the swings that could be in bioavailability from day to day, actually allowing a surprisingly consistent profile over time. So the size of the tablet is actually smaller, not much smaller but slightly smaller than an average painkiller tablet, and the patients are expected to receive 1 and only 1 tablet on a daily basis. In terms of efficacy, even though the patient came in with a relatively low baseline A1c, below the 8% range, both the weight loss and the A1c decrements were fully in line with some of the best that we've seen in the liraglutide trials. So clearly, it makes sense that 1% A1c drop and the weight loss that was substantial, in particular considering the trial duration of only slightly more than 2 months. Lars Rebien Sørensen: Then on to competition in Germany from Lyxumia. We have not seen any change in Novo Nordisk share on Victoza. It seems like Lyxumia is primarily coming from switches from phenocide [ph] and bardurium [ph]. And the market share so far, depends on whether you use weekly data or monthly data. You can get any [indiscernible] you want. If you look at the current weekly data then it's probably something in the neighbor of 10%. If you use monthly data, then it's back to something like 3% to 4%. So no major impact on Victoza in Germany. However, the GLP-1 market in Germany is developing very -- in a very disappointing way, you might say, by not growing so substantially.

Our next question comes from Michael Novod of Nordea.

It's Michael Novod from Nordea Markets in Copenhagen. Just some questions to the, say, extraordinary items as you clarify them in Q1, Q2. Is there something there you can say you're worried that it's cannibalizing some of the expected sales into the second half? Or is this just, say, something that has occurred on top of good performance in the first half, so we shouldn't be too worried about the second half performance? And then also, regarding the GLP-1 market growth, you have said on media calls that you've seen some impact on the growth from the incretin scare. Do you see that reverse? Or how do you actually expect the market over the next 6 to 12 months? Lars Rebien Sørensen: Jesper, will you take care of elaborating a little bit more, if you can, on the extraordinary items where they are -- where things which will have [indiscernible] in the second half or the issues around the top and so therefore, we're not going to get dropped off dramatically in the second half.

Yes. And the local currency sales growth for Novo Nordisk was to be the size of 113.6% [ph], and the extraordinary elements, we hit the rate at about 1.6% which we rounded to 2%. So net, it was 12%, the 14% minus 2%. The 1.6% can be divided into 2 elements, roughly equal in size. The first bit was a reversal of rebates related to North America, and the second element was related to partly extraordinary sales due to some replenishments of some stocks in the Middle East, where the original drops were destroyed by being frozen and we had to replenish them, by what was full sales value for that replenishment. And then there were some sales which were deferred from 2012 into 2013. So I would estimate out of this totality, there would only be in the ballpark of DKK 100 million, which can be related to earlier delivery of sales and International Operations in Q2, originally anticipated that would be delivered in '13. So very limited impact. The other point we have mentioned in terms of nonrecurring events was actually relating to 2012, and I just like to reiterate that we had in the ballpark of a couple of 100 -- around DKK 200 million or so in reversal of provisions that basically reduced our selling and distribution cost in Q1 and Q2 in 2012. And I previously stated that was partly related to provisions we had established for the issues surrounding overtime pay for the sales force in the U.S., where a Supreme Court ruling, mid-2012, ruled out that, that would be a liability, and that was the reason why this was deferred. But actually, a very limited impact on Q3 and Q4 in 2013. Lars Rebien Sørensen: So back to pancreatic safety. Yes, we would tend to agree with there might have been a slight impact from this first half, a negative publicity around the pancreatic safety. And as such, since the agencies have come out with relatively strong statements, the bad effect, if there was any, should be washed off. There are, however, many moving parts. If we look at the whole incretin base, then it seems like DPP-4s have flattened out somewhat also. Basically, this could be because the patient starts to fail on DPP-4 treatment, then needs something else. It could be because SUFT-2 [ph] has come into the market. So it's going to be difficult to really assess this going forward but, yes, we believe that there has been some minor negative effects on the volume growth.

Our next question comes from Sachin Jain of Bank of America.

Two, please. One on oral semaglutide. It's obviously very early, but just want to think about the potential timing to market. And I wonder if you could discuss whether you would be considering a faster Phase III study referencing the data package for the injectable formulation, whether it will be a full Phase III program including CV study? And then second question is on U.S. insulin pricing. I understand Lantus took a roughly 15% price increase this week. Assuming you'd follow, could you just clarify what U.S. pricing is assumed within guidance for this -- for the rest of this year, and then your broader expectations given that U.S. insulin pricing remains, I think, stronger than we've all thought? Lars Rebien Sørensen: Yes. Mads Krogsgaard, any speculations on whether there could be a possibility to bridge some of the injectable data into the package so that we can get part of the market on [indiscernible].

Well, certainly, first of all, we are initiating Phase II towards the end of this year. That means that these [indiscernible] meetings with the agency as regards, can you piggyback on the cardiovascular program that is currently already ongoing for the Phase III subcutaneous semaglutide, or do you have to do your own kind of full or partial investigation. That is something that remains to be discussed with the agency. But the company is fully dedicated to utilize, as much as possible, the existing safety data for the new active substance known as semaglutide. And in fact, I was very happy on the day that I realized that semaglutide had these promising properties due to its very stable molecular structure, because it does mean that there a lot of things that do not have to be redone. Obviously, we will seek to -- this is very pioneering, and it also means that the very shortcuts that you can try to make every now and then, as you have seen us do for FIAsp, where we move from Phase I into Phase III and so on. These are obviously not doable in this new era of protein-based tablet therapies. However, of course, it's a priority program and that's why we will also do a comprehensive Phase II followed by an adequately sized Phase III. But we'll do it as fast as we can. Lars Rebien Sørensen: Then, yes, our competitors have raised price on Lantus in the United States, and this is a very recent event. [indiscernible] and we are not decided on how we're going to respond to that. We don't expect to announce it on the call here. But I can say that our guidance that you have just gotten did not include any significant price increases in the second half for Levemir, and so the extent to which we will follow the trend from Sanofi then that will be an add-on[ph].

Our next question comes from Michael Leuchten of Barclays.

Two questions, please. On the Tresiba cardiovascular outcome study, can you just confirm that in your discussion with the FDA, has the FDA actually agreed to the submission of the interim analysis, or is that a working assumption? And then just going back to the pricing discussion just now. When you talk about pricing, or more positive pricing trends, is that actually your ability to put the list prices up more than you thought? Or is that the retention of net price is more than you thought i.e. is this partly related to the rebates that you have benefited from in Q2? Lars Rebien Sørensen: Mads, [indiscernible] that's the question.

Yes, and in reality, the agreement with the FDA is somewhat reminiscent of what you can say is the case for classic -- at least historically non-insulin diabetes products in that you were key to an interim analysis, that if this one falls out, with a reassuring endpoint estimate on the [indiscernible] and a continent [ph] interval that lives up to certain criteria. Then you basically submit on that. If you cannot come up with such data, then you run right to the very end. And in this case, I hope it's obviously to submit on the interim, and the plan is to submit on the interim and then have the definitive assessment post-approval in the full -- you can say, amount of May's events that are at protocol specified. Lars Rebien Sørensen: Okay, and let me just repeat. What has happened is that our competitors have raised the list price. What their net take-home price will be in -- is dependent on which channels they end up serving their products to and hence, which kind of rebate they're offering to these different channels i.e. where the patients come from, that eventually will buy these products. And so -- and typically, of course, the list price increase is higher and then some of this is paid back to the distribution chain in terms of rebate. And in a way, you could say it had nothing to do with the rebates as such, that we had to reverse in the first half of this year. This has more something to do with the fact that we got clarity on some states and some programs that allow us to recalculate the necessary rebates, and we had apparently been more conservative in terms of rebates than what they actually ended up selling and hence, we could reverse that as positive. So it had no -- nothing to do with the price increase which we heard from the competition.

Our next question comes from Matthew Weston of Crédit Suisse. Matthew Weston - Crédit Suisse AG, Research Division: Two, if I can, please. On a number of your competitors, Q2 calls, they've specifically said that they are going to invest in further selling infrastructure in injectable diabetes, and many of them have blamed you for retaining the Tresiba infrastructure, which is going to lead them to require further investment to keep their share of voice. Within your second half assumptions, have you assumed that competition is going to hot up? And if you do see some of your competitors add reps, are you comfortable with your current U.S. selling infrastructure, or do you think that you will have to counter with some further hires of your own? And then secondly, just to clarify some comments over the newswires around China. It seems the comment has been attributed to management that you've not been approached for a formal investigation in China associated with the issues around GSK and selling practices. Can you just confirm whether or not you've been informally approached, and just set out whether or not you remain confident that your compliance infrastructure within China is sufficient to mean that we won't see any similar problems at Novo? Lars Rebien Sørensen: This is Lars Sørensen. I'm going to try to answer both questions, please. And in terms of investments and the fact that the competitors pressure its IPs [ph] and injectables are heating up, clearly looks to the fact that we did not launch Tresiba and hence, our current market product continued to have the support for sale forces. Yes, this is correct. And then we see the markets, quite frankly, responding to that, so that's fine. We will make the necessary adjustments to our sales force as we…

Our next question is from Keyur Parekh from Goldman Sachs.

It's Keyur Parekh from Goldman Sachs. And I have two questions, if I may, please. The first thing to Lars. Lars, I realize it's perhaps slightly a quarter too early for you to start forwarding kind of guidance for 2014 and 2015. But just as we think about some of the changes likely in the marketplace over the next couple of years, can you help us think about the pushes and pulls as you see on the revenue line, specifically into 2014? And then secondly, one for Mads. Mads, as you think about kind of the upcoming data for the dulaglutide, how do you think that data pans out for Victoza, and how do you assess kind of the odds for dulaglutide for showing superiority in the head-to-head trial versus Victoza? Lars Rebien Sørensen: This is Lars Sørensen, first, and you are absolutely right. 2014 is a bit little early, but of course, there are a number of moving parts here. There are currencies; there competitive pressures, which we just discussed; there's pricing environment, and -- but we see more or less 2014 as a normal year. We will, however, draw your attention to the fact that in 2013, we will have had perhaps 3 quarters of the year with Brandon [ph] and then we'll likely be gone in the next year, so that needs to be back up of the U.S. numbers. We have good momentum behind our modern insulins. We still need to see whether there was a short-term trend reversal or negative impact from the pancreatic safety issue on Victoza and other products similar in that category. So yes, there are many moving parts and as usual, we will be starting to give you some color on it when we do our Q3 and then you'll get a more final one when we announce the annual results. So I hope you can bear with us, but it looks like it's more business as usual for 2014. Obviously, had we had Tresiba then the world would have been looking more rosy. It would have been nice, but that's history. Mads?

Yes, Lars, and then of course, that's why we will seek to start the CV trial such that can have Tresiba, although it will for sure not be in 2014. But we'll start the trial in the second half of this year. Now dulaglutide, it's clearly as we see it in a [indiscernible] and logged in a disposable device, clearly the one that we're looking out for, but in terms of the head-on comparison trial that is ongoing and reporting, maybe turn of the year or so, the likelihood that we would show A1c superiority or be able to show A1c superiority is probably rather immodest because my understanding is that the number and periodic criterion for A1c that has been put into the protocol is the 0.4% cutoff, which is relatively useful but it's clinically meaningful difference. So the likely that anyone will show superiority on the primary endpoint is rather low. My expectation as regards body weight is actually that 1.8 milligram of liraglutide, based on what I've seen from Phase II and the limited data I've seen from Phase III, suggesting that the liraglutide seems to hold the upper-hand in terms of body weight, probably related to the large, molecular size weight and hence, difficult permeation via the blood-brain barrier of dulaglutide as compared to liraglutide. In terms of CV risk markers such as systolic operation and so on, we know that the liraglutide has a very consistent ability to lower systolic blood pressure. It's more debated than the time for dula and I'm looking forward to more data. But you're quite right in stating that dulaglutide is one the we're looking out for and looking forward to, together with the Lilly colleagues to further expand this exciting market. Lars Rebien Sørensen: And ladies and gentlemen, since we started a little late and took a very long time for our presentations we are going to ask for 2 more individuals to be able to pose their questions. So let's have the next question, please.

The next question comes from Peter Verdult of Morgan Stanley.

Peter Verdult, Morgan Stanley. Two questions, one for Mads and one for Lars. Mads, how should we think about getting further clarity on whether the FDA requires a CV study pre-approval for Victoza and obesity? I know we're all waiting for the guidelines to be published. If they are published before year end, is it right to say FDA will communicate to you whether you can go ahead and file? Or could we potentially have to wait until the PDUFA later next year? And then secondly, just Lars, you've spent a lot of time talking about the pricing amounts for U.S., for basal insulins going forward. Could you just maybe update us on your thoughts for how you think the outlook for the basal market has changed with the top line data we've seen for U300 and the potential for Sanofi to be on the market with that product in 2015? Lars Rebien Sørensen: Mads Krogsgaard, what are your thoughts about CV requirements for Victoza 3 milligrams?

Well, Peter, this has been an ongoing dialogue with pretty many, you can say, exchanges of request and discussion items with the agency that we've discussed previously. And the notion is that a number of meta-analyses, both ones whether you lump together the lead trials, the Phase IIIb trials or glucose regulation type 2 diabetes with the SCALE program, such that you have a grand, you can say, meta-analysis of lira versus all other comparators, as well as more specific Phase III SCALE-oriented meta-analysis across the trials there. That is what is assessed to be part of the package and the approval criteria. But I can inform you, now that we do have all the data at hand, is that we can fully confirm, as we did in diabetes, that [indiscernible] the GLP-1 agent, we are seeing point estimates that are, you can say, below 1.0 as you would also expect. And that also applies to the obese population. So on the cardiovascular side, I think we have a good proposition and we are following the delineated package put forth by the agency. Lars Rebien Sørensen: And this is Lars here. yes, and what can happen in 2015? I think that for the patients and for the suppliers, the relation is good. And Sanofi coming out with the U300 with some unique selling points which are better than Lantus will be stabilizing for the future pricing environment in the United States. We would hope that Lilly comes out with similar innovations of their own. Because then I think that we will have a much further price level than if we had a -- Sanofi with no U300 and Lilly with basal biosimilar glargine in the marketplace. So I think from that perspective, it's positive. I would say if you ask Medtrosa [ph] He would probably say that the selling benefits of U300 is not flabbergasting. So therefore we believe that placebo would be a better product than the U300 and hence, we would be able to position when we do hopefully finally get to the marketplace.

Our last question today comes from Philippe Lanone of Natixis.

Two quick questions, first on the tax rate. You said that it will be 1% less but when -- will it be already in 2014? And more generally, most of the competitors have indicated or guided for the next few years for a decline in tax rate by more than 1%. So will there be more going forward? And one question on NovoSeven, which had a very strong quarter again on -- despite the -- that high base. I understand it's still a tight quarter-after-quarter, but do we have to fear, that in the second half we might have some weak figures to compensate for that because of inventory or something? Lars Rebien Sørensen: Jesper, tax?

That gives me opportunity to clarify what is the actual development in the Danish corporate tax rate. Now the current rate is 25%, and that 25% will be lowered by 0.5 percentage points in 2014 and by another full percentage point in 2015 and then it was 1.5 percentage points in 2016, thereby taking it from 25% to 22%. Now in most cases, more than 50% of our total taxes in Denmark and hence, the consequence of this, everything else being equal, should be around 1.5 percentage points. We do however, have a tax structure so that the biopharmaceutical products in Novo Nordisk is generally owned and managed out of Switzerland and with a lower taxation rate than what applies to the Danes and whereas it's the diabetes care portfolio that is growing the fastest. So everything else being equal, there's also a mix effect in moving a higher proportion of overall products towards the diabetes care space and hence, everything else being equal, we estimate that the net effect will probably be at least 1% when you get to 2016, and it will be a gradual and -- a gradual thought [ph] accelerating to the period as the decline in the Danish corporate tax rate is progressive. The change in the second quarter and -- to 22.7%, which is currently the expected full tax rate for the full year of 2013 is reflecting a reevaluation of our deferred taxes, so that's also been taken into account, the new long-term Danish corporate tax rate. Lars Rebien Sørensen: Okay, and then for the final question. This is Lars Sørensen. Here, yes, we have a -- we've been spectacularly poor at forecasting quarterly sales of NovoSeven. And the first 2 quarters this year was very strong. I mean, [indiscernible] our guidance is including numbers which are not of the same magnitude that we saw in the first quarter. So we're in a way hinting that it will go back to normal in the second half. If it does not, then it's an upside for our company. But again, I'm just tossing you, it's very difficult to predict what happens. This time we're talking about individual bleeding episodes, we're talking about a lot of moving parts. So difficult to predict but we are cautious in our guidance for the second half of the year. With that, ladies and gentlemen, thank you very much for listening in. Our Investor Relations officers will be available, once we have completed the calls in Copenhagen, to talk to investors. So you can call them all subsequently. Thank you very much.

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