Novo Nordisk A/S Q2 2010 Earnings Call Transcript

Novo Nordisk A/S Q2 2010 Earnings Call Transcript
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Novo Nordisk A/S (NVO)

Q2 2010 Earnings Call

August 05, 2010 07:00 am ET

Executives

Lars Rebien Sørensen - President and CEO

Mads Krogsgaard Thomsen - EVP and CSO

Jesper Brandgaard - EVP and CFO

Analysts

Sam Fazeli - Piper Jaffray

Jacob Thrane - Standard & Poor's

Peter Verdult - Morgan Stanley

Gavin MacGregor - Credit Suisse

Henrik Simonsen - SEB

Richard Vosser - JPMorgan

Michael Novod - Handelsbanken

Martin Parkhøi - Danske Bank

Stuart Harris - New Street Research

Lars Hatholt - Nordea Markets

Tim Race - Deutsche Bank

Presentation

Operator

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Good day, and welcome to the Novo Nordisk Q2 Earnings Conference Call. For your information, today's conference is being recorded. And at this time, I would like to turn the conference over to Lars Rebien Sørensen, CEO. Please go ahead.

Lars Rebien Sørensen

Thank you very much, and welcome ladies and gentlemen, to this Novo Nordisk conference call regarding our performance for the first six months of 2010 and the outlook for the year. I am Lars Rebien Sørensen, the CEO of Novo Nordisk and with me I have our Chief Financial Officer, Jesper Brandgaard; Mads Krogsgaard Thomsen our Chief Science Officer; and several Investor Relations officers.

Today's earnings release is available on our homepage novonordisk.com, along with the slides that we will be using for this conference call. The conference call is expected to last approximately one hour. And as usual start with an outline of the presentations on slide number two. The Q&A session will begin in about 20 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. For further information on the risk factors see the earnings release and the slides prepared for this presentation. Also note, as mentioned, that this conference call is being web cast live, and a replay is made available on Novo Nordisk's website after the call.

Turn to slide number four, we are very satisfied with the performance in the first six months of this year. Sales growth in the first six months was 14% reported and 11% in local currencies. The performance is driven by continuous penetration of our modern insulins in all key markets.

For a regional perspective key growth drivers have been North America and international operations. Victoza was recently launched in Japan and we continue to see a solid performance of Victoza across launched markets. Within R&D, the key events during the second quarter of 2010 has been the completion of this patient recruitment for the Phase III program, Degludec and DegludecPlus, which encompasses 17 clinical trials in more than 9000 patients.

The first of five trials with DegludecPlus is now complete. This trial confirms the DegludecPlus improved long term by glycaemic control and reduce hypoglycemic events in people with Type 1 diabetes. Within Hemophilia we have established clinical proof of concept for NN1731, an ultra fast-acting recombinant factor VII analogue based on the results of our Phase II clinical trial evaluating the safety pharmacokinetics efficacy of NN1731 in stopping joint bleeds.

Turning to financials, our gross margin improved by 60 basis points to 80.5 during the first six months. Operating profits grew 19% report and 15% in local currencies. The solid performance of our underlying business and the encouraging Victoza launch performance enables us to raise financial guidance for 2010. We now expect sales growth in the range of 9% to 10% in local currencies compared to 7% to 10% previously.

Operating profit growth in local currencies is now expected in the range of 12% to 15% compared to previous guidance of more than 10%. Turn to slide number five, our portfolio of modern insulins continue to show a strong performance overall. In the first six months the portfolio of modern insulins was the main growth driver accounting for almost 7% to 10% of sales growth in local currencies.

Sales performance reflects the steady and durable penetration of our modern insulins in an expanding market. Victoza sales reach DKK666 million in the first six months representing more than 20% of sales growth this year in local currencies. NovoSeven grew 11% reported and 9% in local currencies. Sales growth for NovoSeven was primarily realized in North America and reflects increasing sales from the treatment of spontaneous bleeding episodes for congenital inhibitor patients.

Sales of our growth hormone therapy, from our Norditropin increased 6% in local currencies in first six months with all regions contributing and need to grow. Novo Nordisk remains second largest company in the global growth hormone market with 25% market share measured by volume.

Turning to the next slide for an update by region. First six months all regions contributed to growth measured in local currencies North America was a main contributor with 63% share growth measured in local currencies followed by international operations in Europe. Local currencies sales in North America increased 20% in the first six months. Sales growth was driven by strong performance of modern insulins and initial Victoza sales are solid and we noted an encouraging level of reordering during the second quarter of 2010 following the distribution pipeline filling reported in the first quarter of the year.

European sales grew 5% in local currencies driven by continued progress for the portfolio of modern insulins and a solid performance of Victoza. The volume growth of 4% of the European insulin market remains slightly lower than the global average of around 7%. Sales within international operations increased 12% in local currencies for the first six months.

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