Lars Rebien Sorensen - President & CEO Mads Krogsgaard Thomsen - CSO Jesper Brandgaard - EVP & CFO Jakib Riis - EVP China Pacific & Marketing Lars Fruergaard Joergensen - EVP Corporate Development, Vice Chair Operations Committee

Sachin Jain - Bank of America Merrill Lynch Peter Verdult - Citigroup Michael Novod - Nordea Markets Michael Leuchten - Barclays Capital Jonathan Beake - Redburn Partners

Welcome to the Q4 2015 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 Mr. Lars Rebien Sorensen, CEO. Please go ahead, sir.

Thank you and welcome to this Novo Nordisk conference call regarding our performance in 2015 and outlook for 2016. I'm Lars Rebien Sorensen, the CEO of Novo Nordisk. With me I have our Chief Financial Officer, Jesper Brandgaard, Mads Krogsgaard Thomsen, our Chief Science Officer. Also present and available for the Q&A sessions are Executive Vice President China, Pacific and Marketing, Jakob Riis and Lars Fruergaard Joergensen, Executive Vice President Corporate Development and Vice Chair of our Operations Committee. Present are also our investor relations officers. Today's earnings release and the slides for this call are available on our website novonordisk.com. The conference call is scheduled to last one hour. As usual, we'll start with the presentation as outlined on slide number 2. The Q&A session will begin in about 30 minutes. Please note, as mentioned, that the conference call is being webcast live and a replay will be made available on Novo Nordisk website. Turn to slide number 3. As always, I need to advice you that this call will contain forward-looking statements. Such forward looking statements are subject to risks and uncertainties that could cause the actual result to differ materially from expectations. For further information on the risk factors, please see the arranged release and the slides prepared for this presentation. Turn to slide number 4. Sales growth in 2015 was 22% Danish krone and 8% measured in local currencies. The growth was primarily driven by North America and international operations. Sales growth was realized within both diabetes care and biopharmaceuticals, with the largest contributions coming from Victoza and Levemir. Rollout of our new generation insulins, especially Tresiba is progressing well. And Tresiba has now been launched in the United States. Within R&D, we announced the positive results from the SWITCH 2 trials last week which are very encouraging. Moreover, we have successfully completed SUSTAIN 4 and 2, two trials comparing once-weekly semaglutide with sitagliptin and once-daily insulin glargine respectively. Turning to the financials, operating profit grew 43% in Danish krone in 2015. When adjusting for the successful partial divestment of the IT service and consulting company NNIT, the growth in operating profit was 14% in local currencies. Diluted earnings per share increased by 34% to DKK13.52. The outlook for 2016 sales growth is 5% to 9%. Operating profit growth is also expected to be 5% to 9% measured in local currencies. Adjusted for the income from the partial divestment of NNIT and the non-recurring out-licensing income from the divestment of the inflammation assets, both in 2015. The continued solid performance has also led us to revisit our long-term financial targets and make significant change to two of the four historic targets. First, a new target for operating profit growth has been set at 10$. Secondly, we decided not to establish a new target for the operating margin as it is expected to remain at the current level of around 44%. Jesper will provide more insights on the revised target later in this call. Turn to the next slide. 2015, North America accounted for 62% of growth, followed by international operations accounting for 26%, both measured in local currencies. Sales growth in North America was 32% in Danish krone and 11% in local currencies. Victoza is the largest growth driver, aided by the high growth of the GLP-1 market. Levemir remains a key growth driver, reflecting an underlying volume growth in the basal market as well as continued market share gains. Within international operations, sales grew by 19% in Danish krone and 15% in local currencies. In international operations, NovoRapid and NovoMix were the largest growth drivers. Moreover, human insulin grew 23% in local currencies, as we won the last Brazilian human insulin tender and the continued rollout of Tresiba contributed notably to growth. Sales growth in region Europe was 3% in Danish krone, 2% in local currencies. Growth was driven by Tresiba and Victoza as well as positive contribution from the NovoEight and NovoRapid. The European growth is partly offset by the contracting pre-mixed insulin segment and declining human insulin sales. Moreover, sales are affected by a negative impact from the implementation of pricing reforms in several European countries and the negative outcome of the pricing negotiations for Tresiba in Germany. In region China, sales grew 22% in Danish krone and 4% in local currencies. The amount of sales growth is driven by continued market penetration of [indiscernible] insulins. However, being negatively impacted by intensified local competition as well as the decline in the growth rate of the overall diabetes care market. The decline in market growth reflects cost-containment measures in the healthcare system, including restrictions on access to healthcare professionals. Sales in Japan and Korea grew 11% in Danish krone and 5% in local currencies. Growth in Japan and Korea is driven by Victoza, reflecting a positive impact from the improved product label in Japan from September of 2014 and rather strong Tresiba uptake. The growth is partially offset by a slightly declining overall insulin market volume. Starting from the first quarter of 2016, we'll be reporting sales based on our new regional setup. The U.S. will be a region of its own, while Canada will be part of region Pacific which also includes Japan and Korea as well as Australia. Consequently, region international operations no longer includes Australia. Please turn to the next slide. From a product perspective, sales growth was realized within both diabetes care and biopharmaceuticals with the majority of growth coming from modern insulins and Victoza. Within modern insulins, Levemir is the biggest growth driver, accounting for 25% of total growth, measured in local currencies, driven by North America. Furthermore, with the continued rollout of the [indiscernible] portfolio, new-generation insulins contributed 10% to the growth in 2015. The increase in other diabetes and obesity care reflects a significant positive contribution from the U.S. launch of Saxenda, partly offset by declining sales of needles in Europe and North America. The growth within biopharmaceuticals was primarily driven by Norditropin which grew 8% in local currencies and accounted for 7% of total growth. This growth was primarily derived from North America and reflects favorable pricing, increased demand, driven by the pre-filled FlexPro device. Hemophilia sales accounted for 3% of the total growth. This was primarily driven by the rollout of NovoEight in Europe, Japan and United States. Turn to slide number 7. Victoza sales increased 34% in Danish krone and 18% in local currencies. Sales growth was primarily driven by North America and Europe. In North America, Victoza sales increased 44% in Danish krone and 21% in local currencies. The sales growth reflects an underlying prescription volume growth of more than 20% in the United States. Despite the recent launch of multiple competing products as an associated decline in market share in the U.S., Victoza remains still the clear market leader with prescription volume market share up 56%. Turn to slide number 8. Levemir grew 29% in Danish krone and 13% in local currencies. The growth of Levemir was primarily driven by North America where sales increased 19% in local currencies. Meanwhile, Levemir growth rates in Europe as well as Japan and Korea was impacted by the launch of Tresiba in these markets. U.S. growth is driven by underlying volume growth of the insulin market of around 6% and the continued market share gains for Levemir. Despite the launch of a competing product earlier this year, Levemir maintains a 24% volume market share. Turn to the next slide for an update on the rollout of Tresiba. Tresiba has now been launched in 39 countries. In Japan, where Tresiba was launched in March of 2013, Tresiba has reached 33% of the basal insulin market measured as monthly value market share. In Europe, we now launched Tresiba in Spain. Meanwhile Tresiba distribution in Germany was ceased as of January 15, 2016, following the negative outcome of price negotiations with the German National Association of Statutory Health Insurance Funds. In the U.S., Tresiba was launched in January this year. The initial feedback from physicians and patients are encouraging. The dialogue with payers regarding formulary access is ongoing. And coverage is increasing. Turn to slide number 10. The encouraging uptake of Saxenda continues during the second half of 2015, considering the seasonality of the anti-obesity market. As a result, Saxenda has grown to be a value leader with a 31% market share amongst the branded anti-obesity medications. Market access for anti-obesity medication in the U.S. remains restrictive compared to other therapeutic categories such as diabetes. However, we've been able to obtain access with multiple large pharmacy benefit managers. And we're currently growing our share with each of these accounts. Outside the U.S., Saxenda has also been launched in Canada, Denmark and Italy. With this, over to Mads for an update on the R&D.

Thank you, Lars. Please turn to the next slide. Last week, we announced the headline results from the SWITCH 2 trial. The first of two 64 week randomness double blind crossover treat to target trials comparing the safety and efficacy of Tresiba and insulin glargine with the brand name Lantus. Both insulins were randomized one to one to morning or evening dosing using vials. The main purpose of the trial was, under rigorous blinded conditions, to further document the hypoglycemia benefits of Tresiba compared to insulin glargine in type 2 diabetes. As a prerequisite for the subsequent hypoglycemia comparisons, the trial should -- and did -- show non-inferiority in HbA1c reduction of Tresiba compared to insulin glargine. The trial met its primary endpoint in that Tresiba showed a statistically significant 30% reduction in severe or blood glucose confirmed symptomatic hypoglycemia in the maintenance period. Further, the confirmatory secondary endpoint of severe or blood glucose confirmed symptomatic nocturnal hypoglycemia episodes in the maintenance period showed a 42% reduction with Tresiba compared to insulin glargine. Another confirmatory secondary endpoint regarding the proportion of subjects experiencing severe hypoglycemia during the maintenance period did not reach statistical significance despite a 46% reduction in the event rate. However, throughout the entire 64 week treatment period, a 51% statistically significant reduction in severe hypoglycemia rate was observed for Tresiba when compared to insulin glargine. Furthermore, on a general note, the symptomatic hypoglycemia [indiscernible] rates reported in SWITCH 2 clearly indicate that hypoglycemia remains a significant clinical problem in the management of type 2 diabetes. Finally Tresiba appeared to have a safe and well-tolerated profile and adverse events were comparable in the two treatment arms. Having demonstrated the superior hypoglycemia profile of Tresiba in type 2 diabetes, we now look forward to evaluating results from the SWITCH 1 trial in people with type 1 diabetes. A trial which is expected to report shortly. Together, the trials can hopefully form the basis for a label update regarding hypoglycemia for Tresiba in the United States. Please turn to the next slide. During the fourth quarter of 2015, we reported headline results from two more phase IIIa trials in the SUSTAIN program for our once-weekly subcutaneous human GLP-1 analog semaglutide. The results were reported from the two trials SUSTAIN 2 and 4, they were consistent and in line with previous trial results with regards to both HbA1c and weight reduction. This gives us further reassurance in our belief that semaglutide has the best in class efficacy profile among GLP-1 products. The first of the two trials to report during the first quarter -- fourth quarter of 2015, SUSTAIN 4, compared once-weekly semaglutide with once-daily insulin glargine. From a mean baseline HbA1c of 8.2%, people treated with doses of 0.5 and 1 milligram semaglutide achieved statistically significant and superior improvements in HbA1c of 1.2% and 1.6% respectively, compared to 0.8% with insulin glargine after 13 weeks of treatment. The second of the two trials, SUSTAIN 2, was a double blind trial investigating semaglutide compared with 100 milligrams sitagliptin in type 2 diabetes. Both drugs were added onto metformin, TCD or a combination thereof. From a mean baseline HbA1c of 8.1%, people treated with 0.5 of 1 milligram semaglutide achieved a statistically significant and superior improvement in HbA1c of 1.3% and 1.6% respectively compared to 0.5% with sitagliptin. In all of the four SUSTAIN trials that have reported to date, the 1 milligram weekly dose has led to an HbA1c reduction of at least 1.5 percentage points, in each case leading to more than two thirds of patients achieving the ADA target of an HbA1c below 7%. Please turn to the next slide for an overview of the weight-reduction scene in the SUSTAIN trials. Semaglutide has, despite the larger HbA1c reductions than comparators, demonstrated a statistically significantly larger weight loss than comparators in all four trials reported to date. In SUSTAIN 2, people treated with 0.5 and 1 milligram semaglutide experienced a superior weight loss of 4.3 kilograms and 6.1 kilograms respectively. From a mean baseline body weight of 89 kilograms. Compared with a weight loss of 1.9 kilograms for people treated with sitagliptin. Likewise in SUSTAIN 4, people treated with semaglutide experienced a superior weight loss of 3.5 and 5.2 kilograms respectively, from a mean baseline body weight of 93 kilograms, compared with a weight gain of 1.9 kilograms for people treated with insulin glargine. SUSTAIN 1 and 3 have previously reported similar robust weight loss data for semaglutide. Finally, semaglutide showed a safe and well-tolerated profile in SUSTAIN 2 and 4, as was the case in pervious trials. The most common adverse event was nausea which diminished over time. In both trials, discontinuation rates due to adverse events for semaglutide were low. 6% for the 0.5 milligram dose and 8% and 10% for the 1 milligram dose in SUSTAIN 4 and 2 respectively. The low discontinuation rates indicate the classical GLP-1 related run-in side effects have been reduced through the selected titration scheme. Please turn to slide 14. In January of this year, we've initiated DUAL VIII, a 104-week phase IIIb trial investigating the durability of glycemic control following treatment with Xultophy and insulin glargine or Lantus respectively. The trial will include 1000 insulin naive type 2 diabetic adults inadequately controlled with all anti-diabetic agents. In December of last year, we announced that we have now submitted the regulatory dossiers for faster-acting insulin aspart in both Europe and the United States. Within GLP-1, we decided this January to discontinue further development of liraglutide as a joint therapy to insulin in type 1 diabetes as the overall benefit-risk profile emerging from the LATIN phase IIIa trials did not support a legal extension. Meanwhile, we've progressed a potential immuno-metabolic combination treatment modality for type 1 diabetes, as we have initiated a phase II trial investigating anti-interleukin-21 and liraglutide either alone or as a combination treatment for preservation of insulin-producing beta cells in people with newly diagnosed type 1 diabetes. Within hemophilia, we achieved a milestone in January related to the submission of the marketing authorization application with the European Medicines Agency for the approval of long-acting factor IX, nonacog beta pegol, also known as N9-GP. We expect to be able to file the BLA for nonacog beta pegol with the FDA during the first half of this year. Finally, we announced today that we plan to initiate a phase II clinical study for semaglutide in the treatment of non-alcoholic steatohepatitis, known as NASH, later this year. The plans are based on the recent positive NASH results from a liraglutide study published in The Lancet by independent researchers. In preparation for the trial, we're currently in dialogue with the relevant regulatory authorities. We intend to communicate the trial design in connection with our financial results for the first six months. Please turn to slide 15. 2015 provided news flow from a large number of significant R&D events and, as shown on the slide, 2016 will be no different. Particularly the coming three months will be eventful as we're expecting results to be reported from SWITCH 1 and SUSTAIN 5 as well as the CV trials for both Victoza and semaglutide, i.e. LEADER and SUSTAIN 6. We expect headline results from LEADER to be announced in March. In the third quarter, we're expecting an FDA response with regards to the new drug application for Xultophy in the United States. As Xultophy is first in a new drug class, we're planning to be able to have an advisory committee as part of the approval process. Finally, DEVOTE will conclude clinically in mid-2016 and results are expected to be reported during the fourth quarter of this year. With this, over to Jesper for an update on the financials.

Thank you, Mads. Please turn to slide 16. In 2015, sales increased by 22% measured in Danish krone and by 8% in local currencies to DKK108 billion. The reported gross margin improved by 140 basis points to 85.0%. This reflects a positive currency impact of 150 basis point as well as a positive impact from the product mix, primarily due to increased sales of Victoza and modern insulin. This is countered by ramp-up cost for new manufacturing facilities. Sales and distribution costs increased by 22% in Danish krone and by 9% in local currencies, to DKK28.3 billion. The increase is driven by launch costs related to Saxenda and NovoEight as well as the preparation for the Tresiba launch in the U.S. Research and development costs decreased by one percentage point in Danish krone and decreased by six percentage points in local currencies to DKK13.6 billion. The decline in cost reflects the discontinuation of activities within inflammatory disorders in September 2014. Adjusting for the one-off cost, R&D cost increased by 8% in local currencies. The underlying increase reflects the progression of the late-stage diabetes care portfolio and is primarily driven by the DEVOTE trial and the SUSTAIN program. Other operating income net was DKK3.5 billion, compared to DKK770 million in 2014. The increase is driven by the non-recurring proceeds from the initial public offering of NNIT of around DKK2.4 billion as well as a non-recurring income related to the out-licensing of assets intended for inflammatory disorders of around DKK450 million. Operating profit increased by 43% in Danish krone and by 21% in local currencies, to DKK49 billion. Adjusted for the income related to the partial NNIT divestment and out-licensing income from the divestment of inflammation assets, the growth in operating profit was 13% in local currencies. Net financials showed a net loss of around DKK6 billion compared to a net income of DKK400 million in 2014. The loss in 2015 is larger than the latest guidance of around DKK5.6 billion, primarily reflecting higher than expected losses on commercial balances following the depreciation of non-hedged currencies, namely the Argentine peso, the Russian ruble and the Brazilian real during the fourth quarter of 2015. The foreign exchange expense was DKK5.9 billion, compared to an income of approximately DKK400 million in 2014. The result reflects losses on foreign exchange hedging contracts, especially for the U.S. dollar, due to its appreciation versus the Danish krone, compared with the prevailing exchange rates in 2014. Foreign exchange hedging losses of around DKK700 million have been deferred for recognition in the income statement for 2016. Please turn to slide 16. Overall, there was a significant positive impact from currencies on operating profit -- it was slide 17 I think, I apologize. Please turn to slide 17. The development related to the appreciation of all key currencies versus the Danish krone with the majority of impact resulting from the significant appreciation of the U.S. dollar. The average U.S. dollar rate for 2015 was 20% higher than the average rate in 2014. Similarly, the average exchange rate in 2015 for the Chinese yuan and the British pound were 17% and 11% higher than last year respectively. The positive impact from key invoicing currencies on operating profit of around DKK7.8 billion was to a large degree countered by the loss from forward-hedging contracts of DKK5.9 billion. Please turn to the next slide for the financial outlook. Sales growth for 2016 is expected to be 5% to 9% measured in local currencies. This reflects expectations for continued robust performance for our modern insulins Vectoza and Tresiba as well as a contribution from the launches of Saxenda and Xultophy. This is expected to be partly countered be an impact from a contract loss in the U.S., by healthcare reforms, the loss of exclusivity for products within hormone replacement therapy in the fourth quarter in the U.S., intensifying competition within diabetes and biopharmaceuticals as well as the macroeconomic conditions in a number of markets in international operations, but also in China. Given the current level of exchange rate versus the Danish krone, the reported sales growth is expected to be around one percentage point lower than the growth in local currencies. Operating profit growth is expected to be 5% to 9% measured in local currencies. Adjusted for the partial divestment of NNIT and the out-licensing income from the divestment of inflammation assets both occurring in 2015. The expectations for operating profit growth reflect growth in selling and distribution costs to support continued launch activities, as well as in research and development cost to progress our pipeline. Reported operating profit growth is expected to be around one percentage point lower than the local currency guidance. For 2016, we expect a net financial loss of around DKK1.3 billion. This primarily reflects expected losses incurred from foreign exchange hedging contracts. All of the above assuming the exchange rates for Novo Nordisk's key invoicing currencies remain at the current level for the remaining part of 2016. The effective tax rate for 2016 is expected to be between 20% to 22%. Capital expenditure is expected to be around DKK7 billion in 2016 up from DKK5.2 billion in 2015. Which primarily reflects investments in an expansion of the manufacturing capacity for biopharmaceutical products, additional capacity for active pharmaceutical ingredient production within diabetes care and expansion of the insulin-filling capacity and the construction of new research facilities. The free cash flow for 2016 is expected to be between DKK36 billion and DKK39 billion, up from DKK34 billion in 2015. Please turn to slide 19. While we do not expect to achieve double-digit sales growth in -- in total sales growth in 2016, it remains our ambition as the world leader in diabetes to pursue double digit growth for our diabetes care franchise. We envision that the growth of the diabetes care franchise will be based on a sustained volume growth in the global insulin market, market share gains driven by the launch of new generation insulins and by continuously upgrading patients to better treatment within new generations of insulins. Just as we expect for our GLP-1 franchise to contribute to this ambition, driven by the continued expansion of the GLP-1 market and eventually the launch of a once-weekly hopefully best in class GLP-1. The continued pursuit of double digit growth for the diabetes care franchise forms the basis of our updated long-term financial targets. Please turn to the next slide. In 1996, we introduced four long-term financial targets to balance short and long-term considerations and thereby ensure a focus on shareholder value creation. The targets have subsequently been revised and updated on several occasions but are in general perceived to have served as a relevant guidance for our investors, outlining the intended financial development of the Company. In 2015, we reached our four long-term financial targets set in the annual results report for 2012. The operating profit growth rate in 2015 was 43%, resulting in a growth rate of 23% on average for the years from 2012 to 2015 and thereby exceeding the target rate of 15%. Meanwhile, the realized operating margin for 2015 was above 46% or 44% adjusted for the divestment of NNIT, thereby exceeding the target set at 40%. Our current operating margin level of around 43.6% adjusted for the effect of the partial divestment of NNIT has been achieved by continuous improvement in manufacturing efficiency, positive pricing impact, sales and distribution leverage, re-prioritization of focus areas within research and development as well as administrative efficiencies. Having met the target, the Board of Directors has approved three updated long-term financial targets to guide Novo Nordisk's performance. The targets have been based on an assumption of a continuation of the current business environment. The target level for long-term operating profit growth has been set at 10%, reflecting the current outlook for organic sales growth and the opportunities for operating margin leverage. We have a strategic priority to continue to invest in future organic sales growth. And as a consequence, operating margin expansion is not expected to be a major contributor to operating profit growth. These expectations reflect an expanded product portfolio, a significant number of product launches and continued investments within research and development. Consequently, it has been decided not to establish a new target for operating margin as the operating margin is expected to remain at the current level of around 44%. The target levels for operating profit after tax to net operating assets and cash to earnings ratio remain unchanged at 125% and 90% respectively. Please turn to slide 21. We maintain our ambition of returning cash to our shareholder and will also, in 2016, do so through dividends and a share repurchase program. At the annual general meeting on 18 March 2016, the Board of Directors a 28% increase in dividend to DKK6.40 per share of DKK0.20. This corresponds to a payout ratio of 46.6%. When adjusted for the impact of the partial divestment of NNIT the payout ratio is 50%. I note that the cash flow from the divestment of NNIT was returned to shareholders via a DKK2.5 billion expansion of the 2015 share repurchase program announced in April. At the annual general meeting in March 2015 the Board of Directors was granted an authorization to distribute extraordinary dividends. Consequently, and subject to final approval from the Board, Novo Nordisk intends to introduce the first interim dividend in August 2016. Finally, yesterday the Board of Directors approved a new share repurchase program of up to DKK14 billion to be executed during the coming 12 months. When combining the annual dividend the first expected interim dividend in August 2016 and the announced share repurchase program, Novo Nordisk expects to return more than the currently guided free cash flow to our shareholders. With this over to Lars.

Thank you very much Jesper. Turn to slide number 22. In summary we are very pleased with the performance in 2015 and the achievements of our four long-term financial targets. Our key products continue to perform well, and we look forward to 2016 being an important year in which we will continue to focus on the global launch of Tresiba. We are encouraged by the recent SUSTAIN 2 data further demonstrating the ability to reduce the risk of hypoglycemia from people with Type 2 diabetes on basal insulin therapy. We are now ready to take the first question and answers. And I would kindly ask you, due to all participants being able to participate, to restrain yourself to two questions please. Operator, we are now ready to take the first questions.

[Operator Instructions]. We can now take our first question from Sachin Jain from Bank of America Merrill Lynch. Please go ahead.

It's Sachin Jain from Bank of America. Just two questions, firstly not a surprise on the long-term targets. You've given some color on the double-digit diabetes growth within those, but I wondered if you could touch on some of the other key variables that you see that influence that outlook, perhaps NovoSeven outlook with competition coming, when you expect an inflection from China. And then a bit more color on the SG&A expansion, if that line was to grow in line with sales for the next four to five years at an additional of DKK1.5 billion of absolute spend is that about right and where do you deploy that? And the second question is on LEADER with that data coming in March. I understand it's been said there was a non-inferiority study for regulators but there is obviously some discussion around you showing a CV benefit there. What are the commercial implications for you if you were to show a CB benefit versus not showing a benefit given the MPREG data out there? Thank you.

I'll defer the first question on some of the other variables to Jesper Brandgaard, then I'll ask Jakib Riis to comment on when he expects we'll see some acceleration of our business in China. Then I'll come back to comment on the SG&A evolution going forward, and then Mads Krogsgaard will be speculating on what the pro or con for CV benefits of Victoza in the LEADER study. Jesper?

Yes, on the launch of financial targets it's clear that the franchise within the biopharm space will be challenged by potential new entrants coming into the space within hemophilia. On the other hand we have the opportunity of rolling out Novoeight which is fairing so far pretty well. And we have the opportunity of also rolling out N9-GP assuming that we will be able to obtain approval there. Overall, I do not see biopharm to be a major contributor to growth in a four to five year horizon. However, we will continue to see a very solid growth coming from our growth hormone franchise. In terms of the selling and distribution cost it is correct that we are assuming that it will grow in line with our growth in sales and hence a relative increase. So your basis assumption there is right. I don't know Lars if you want to comment on where we are going to spend it.

Yes, I'll revert to this but I think we do actually here need to add also the fact that Vagifem [ph] is going off patent and there will be a drag on that, we'll have basically a patent cliff for that in 2017 which will be factored into this as well. But, Jakib let's turn to China first and see when do you expect to see some reacceleration of our growth in China?

Part of the reason for the suppression of growth we are experiencing now in China is also the pricing reform that's ongoing and the impact of that is not yet seen to a large extent. So we'd expect this to unfold here in 2016 but also into 2017. So that's one indicator that we probably need to go through that before we see, could potentially see a return. We see good volume growth. We also need to reposition ourselves vis-a-vis our position in the basal segment. And we filed Tresiba last year in August. So you could also say before we get that approved and into the market the impact of this will not be visible. So, I wouldn't want to predict an exact timing of it, but I give an indication that we are probably going to see suppressed growth here for -- in 2016 and potentially also into 2017.

Then back to the SG&A, yes it is our anticipation that we will be growing SG&A in line with the exception of perhaps the administration part there will still be a little bit of leverage as we've got a global footprint there. But it is primarily in my consideration that we may need to expand our sales force in the United States. I'd like to draw your attention to the fact that we have, of course, currently employed our full sales force, almost entirely full sales force on Tresiba. We are still supporting Victoza which is a successful brand. We will be, hopefully be in a position to launch Salsify [ph] later this year. We are also hoping for a faster aspart to be approved. We have Ryzodeg on the shelf to be launched at an appropriate point in time. And we would like to continue to push Victoza in the U.S. to create the strongest possible platform for when we launch semaglutide. So I think there will be requirements for further adjustments of our sales force, and this could be both in certain markets outside the U.S. but also in U.S. markets. And we'll have the traditional expansion of our international organization in the emerging markets. And Mads, some speculation on CV plus/minus for LEADER and Victoza.

Yes I think from a purely biological perspective there is no doubt that what we have seen so far is that in earlier stage diabetes and indeed in obesity and pre-diabetes we have, albeit the numbers are very small, seen a hazard ratio that has consistently been to the left of one i.e. below one for Victoza. However when that is said the patients being studied here are significantly more eposcharotic [ph] they are above 60 and so on and so forth, and are more reminiscent of the population that we saw in the empirical study. Now what is that per population? That is a population where many of them have emerging heart failure. Many of them have had heart attacks previously. And that basically means that the effect of MPT Flozin which is basically reduction of volume overload that occurs in such patients is something that is not necessarily likely to happen in an earlier stage population. Whereas the way we believe GLP-1 may work if it works at all in a long-term study like LEADER is one that is more basically into the pathophysiology of the vessel wall disease. And by that I mean that the earlier we treat the more effect we would expect to see in terms of benefit on cardiovascular performance. So my and Jaeger Bryson, everyone's argument would be that if we can see something in LEADER that would be a rationale for up-streams more use of liraglutide, which we have to bear in mind is today is very often as third or even sometimes fourth line of treatment.

We can now take our next question from Peter Verdult from Citi. Please go ahead.

It's Pete Verdult here from Citi. Just two questions, Tresiba and then back to financial targets. Just on Tresiba can you give us any early data on formal reactions that you've achieved in the commercial and the Part D setting? I realize Part D is going to be more challenging but any data points you can point to there or are you going to save that for the capital markets day next week? And then what the latest update is regarding Tresiba in Germany. And then Jesper back to the long-term targets, lots of discussion with investors this morning about it. I'm not going to ask you to go line by line through every assumption, but I do want to better understand the philosophy here. At the capital markets day you were clearly aspiring or you laid out your aspirations to maintain double-digit top line growth. We know that 2016/2017 are going to be huge investment years and that U.S. pricing dynamics are going to be more challenging. That said your product mix longer term is going to improve. You've got four CV studies rolling out this year you've got the [indiscernible] phase 3 programs all rolling out. So put together it does seem to me that over the long term if you're growing -- if you get anywhere near your aspirational revenue targets, there is going to be scope for further margin expansion. So I'm just wondering given the current U.S. political backdrop on drug pricing is there some sensitivity about communicating that to the market, or am I missing something?

I am not aware Peter that we have a capital markets day next week.

Meet management yes.

Okay, alright.

My apologies.

It's the Boston meeting you are referring to.

Yes that's [indiscernible].

Okay. So we'll probably have an opportunity to discuss Tresiba also at that occasion. Early days are that it looks good. We have achieved the planned formulary access in the commercial markets. And we have slightly earlier than anticipated received some access also in Part D. So I think if you look at it from that perspective we are slightly ahead of our expectation when it comes to formulary access. And then we may have a chance to talk about this next week in Boston, if there are new information emerging. Tresiba, Germany, our negotiations did not pan out unfortunately. We had small hopes I'd have to say based on an opening by the German authorities to revisit the pricing discussion. But at the end of the day they came back with basically the same offer that we were offered initially, hence basically we would have had to accept the pricing based on human insulin. And this was not really something that we could accept. And therefore, we have started the ceasing of the distribution and helping the authorities and the medics to transfer patients to the best of our ability and no harm for them. So Jesper, long-term financial targets and looking at the very strong pipeline we have that surely will give some opportunities for mix changes, how you see this going forward.

I think first I think you find some very meaningful guidance on this overall pricing impact in the U.S. which is clearly an uncertain effect that weighs in on the outlook. But if you look to 2015 and become very concrete then you could say in 2015 we basically had no effect from prices on our average gross margin. And the impact also from U.S. was flat. What we did see was a positive mix impact having an impact to the tune of 30 basis points positive on our gross margin. However that was largely offset by a ramp up cost in our production bringing additional capacity on stream within diabetes care. I think that is the right way to think about the next couple of years. I think we will see a roughly unchanged gross margin as we continue to invest in bringing on new production capacity and production capacity for the new variants that we are going to launch over the next couple of years. I do believe that we will continue to see a mix impact. And we are not anticipating near term overall any significant positive pricing impact. If you look to our accounts that will be released on the annual report if you look to that on Monday you will actually see that the rebate percentage of our U.S. sales have gone up to 56%. And that to me is a sign that whereas list prices may be adjusted the majority of them are actually being offset by increased rebate level, so overall not anticipating any very significant impact. In terms of the key growth drivers in the long-term outlook, as I alluded to before, it has to be driven by our diabetes care franchise. Yes, it is correct that it could accelerate further if we have positive outcomes for the full whole portfolio of trials that we have. We try to give kind of a middle of the road assumptions. From there could it go slightly better? Yes. However, when we look to the diabetes care franchise and the Vagifem issue that Lars rightly alluded to, it is hard to see that we are going to get any significant contribution from that area in the 2016/2017 horizon. And then there is also the risk of having a significant competitive product entering into the NovoSeven space. So we'll have to see how that evolves. But all that has been taken into consideration, and we've come up with what we think is a balanced approach to growth which is aspiring to reach 10% primarily being based on growing our diabetes care franchise and no significant leverage. As for the other cost lines in terms of leverage I think we -- Lars alluded to clearly that we will continue to invest in selling and distribution in line with the sales growth. It will probably involve expansion of sales forces in a number of places. In terms of R&D we are comfortable with the 12% to 13% level. We think that will enable us to continue to organically deliver a quite attractive portfolio of products for the market. And then of course admin costs should continue to be able to give a 10 to 20 basis point leverage. But we felt that that was too marginal in the overall composition of our P&L to give a specific guidance on that. So that's hopefully a bit more flavor on it.

A lot of moving parts all ending up in a projection now for the next three to five year horizon, 10% operating profit growth based on basically top line growth. So next question please.

We can now take our next question from Michael Novod from Nordea. Please go ahead.

It's Michael from Nordea. Two questions, one is to the current Victoza trend. You also mentioned you yourself you had to give slightly higher rebates in Q4 in the U.S.. Is that because you do see some impact from payers trying to play you off against Lilly on Trulicity. And also what is happening in the European franchise? Are there any trends we should be aware of, or is it just [indiscernible] swings we see on Victoza? And then secondly on the projections of solid growth continuing in growth hormone, maybe you could outline a bit of the moving parts here and also see or comment on how you see the Versartis product against your once a week growth hormone. Thank you very much.

This is Lars Rebien here. Yes, the numbers in Q4 were weak in particular in the United States. And this is of course what we continuously try to notify the markets, be a little bit cautious about reading too much into quarterly numbers because we did do a rebate adjustment for Victoza in the U.S. relating to sales from previous quarters in the U.S.. So that negatively impacted the Q4 numbers to make them weaker than they in reality are. No major changes in Europe, strong performance of our franchise in Europe and no major impact from competing products. Mads, growth hormone how do you see the long-term competitive with long-acting growth hormone ours versus Versartis.

Yes, I think as you may know from the most recent evolution one of the other, you can say, companies in the field have had to kind of pull the plug on that project. And some of the reasons seem to be related to [indiscernible]. And I do note that when it comes to Versartis they have recorded a couple of cases at least of neutralizing antibodies, which is something that we have not seen for Somapacitan or NN8640 and are hoping not to see at all. So far we have not seen it. Another thing is that injection site reactions are at the level of Norditropin with somapacitan and there I do bear in mind that Versartis have seen injection site reactions also with some frequency for that product. So in as much as they are timeline wise ahead of Novo Nordisk I remain confident in our product in that it seems to deliver a performance like once daily with the same [indiscernible] profile albeit it through once weekly subcut injections.

And then with regard to the market situation for human growth hormone, we did extremely well in 2015 in the United States based on contract wins in the United States. We did extremely well in international markets. We might actually have done better in international markets, because we were somewhat restrained capacity-wise last year. So if I look forward to growth hormone expansion I'm looking at a year which is slightly growing less than what we did in 2015. So, more rather like 5% than the 8% that we reported for 2015, based on growth in the U.S., growth in international operations some growth in Japan and flat markets in Europe.

We can now take our next question from Michael Leuchten from Barclays. Please go ahead.

Two questions please. It's Michael Leuchten from Barclays. One, I apologize just going back to the long-term targets you make very clear your views on the gross margin and the SG&A. You didn't however touch so much on the R&D line. And I guess one way to read the long-term target is that you will also invest quite significantly in R&D. Could I just ask you to contextualize it a little bit given that you have the SUSTAIN program rolling out or off. You've got DEVOTE coming to an end. In terms of numbers of patients and trials in Phase 3 trials that is a -- I would have thought it would help you, yet you seem to suggest that your R&D budget is going up, so why and where? And then the second question just in terms of 2016 for Jesper, I appreciate you've given the DKK1.3 billion in FX hedging loss for 2016, but then there is also a FX dis-benefit in terms of top line and operating profit. There seems to be a disconnect between the two, so if you could just go through that again. I think you made a comment about that in your initial remarks but I couldn't quite catch that.

Mads Krogsgaard, how do you see the long-term expansion of R&D cost and how does the change in the large number of cardiovascular patients then relate to patient load going forward and the complexity of those trials that we embark on going forward.

Yes, and that's a really good question. Of course, your argument is Michael that with the completion of three cardiovascular trials LEADER, DEVOTE and SUSTAIN 6 and indeed the entire SUSTAIN program as such wee are coming to the end of a 25,000 patient commitment you can argue. That has to be counted by a 9,300 patient commitment in the PIONEER. And do bear in mind that this year the sheer workload associated with completing all the CV outcome trials and initiating a huge phase 3 program for semaglutide orally is keeping everybody busy including the external cost base relatively high. But one important thing to bear in mind is that in as much as we do not have the same heavy load coming from phase 2 into phase 3 the next couple of couple of years, we on the other hand have had a huge load of early market assets. Whether it's the three degludec products or whether it's the future semaglutide or PS products saxenda and what not, and all of them deserve to have fully professional and dedicated phase 3b programs and even emerging real world evidence surrounding those assets. That means that you will see a relative increase in the proportion of development costs associated with the protection and expansion of the business opportunity for these five, six, seven new products in the diabetes and metabolism studies.

This is Lars Rebien here, just to add a general comment, I think one should assume that going forward our clinical programs will be more complex in that we need to include in our global clinical program regional input to take into consideration the market access challenges we have in different markets. And also the increasing need for real world data to demonstrate the value of the drugs to get them on the market as quickly as possible. So all in all other things being equal I think it's going to expand the cost to develop new drugs. And in particular in areas like ours where the effect is only accrued over time, and therefore monitoring the benefit will require more patient years than we've had in the past. Thank you very much. Let's take the next question please.

No, no sorry I need to have the reply to the question regarding the impact from FX on 2016. And just thanks for asking that which is a little bit of a frustrating situation for 2016 as it looks currently. If we go back to 2015 we had on operating profit a positive impact of DKK7.9 billion and that was offset by a net financial loss of DKK6 billion. So in totality we had a DKK1.9 billion positive impact. And then when you look to 2016 suddenly we don't have that matching effect between the impact on operating profit and the financial items. And it has to do partly with the U.S. dollar. So we do have a positive impact on our operating profit from the U.S. dollar being at a slightly higher level in 2016 than the average level for 2015. However, that is being more than offset by lower currency levels for the CNY for the British pound and for Canadian dollar. And then in addition in the emerging markets we will be suffering, especially from a currency like the Argentinean peso where you've had a significant decline. Overall if you take that net impact from all these currencies you end up with something which is just slightly bigger than a 0.5% of negative currency, hence we guide to a minus 1% in line with our historic practice on that area. And then if we look to the other side of the currency the hedging impact included in our financials it is basically a negative impact of to the tune of DKK1.1 billion and then there are other financial items making it to DKK1.3 billion. But the hedging is a net DKK1.1 billion negative and that's predominantly an effect from U.S. dollar. And for the U.S. dollar you should actually note that the challenge we do have when we buy 12 months forward U.S. dollar that you have a higher interest level in the U.S. than you have in euro. And hence the forward rates we do get at adoption compared to the spot rate. And when you then have relative stable spot rates you end up with a slightly negative effect on hedging. So a little bit complicated the explanation. The net effect is that we expect the financial line of minus 1.3 and we do expect just above 0.5% negative impact on operating profit growth from currencies in 2016.

We can now take our last question from Jonathan Beake from Redburn. Please go ahead, sir.

Just two if I may, firstly I know you've been asked about it a lot but is there any chance you can give an explicit assumption for what you're assuming for ACE910 in your long-term guidance? And then secondly on SWITCH, is it possible if we looked at the ADA definitions of hypos would the hypoglycemia benefit be equally compelling? And also what should we make of the lack of benefit seen in the maintenance phase of the trial?

Jesper what sort of basic assumptions have you factored into our mid-term guidance and in relationship to the potential competition from ACE910. And then Mads if you just talk about the results we've seen and compare that to the guidelines whether there is an issue with the maintenance phase.

I think the best guidance I can give to the market at this point of view and actually providing guidance three years out on the potential competitive landscape is hard. What I think we want to say is that the biopharm portfolio is not anticipated to be a major contributor to growth on a three year horizon. And we have assumed that there would be additional competition entering into our core hemophilia space. So that is the basic assumption, but of course it can go in various directions.

Yes, so two elements here one on the specific maintenance period issue impact. We measured over the maintenance period as the primary and you can say confirmatory secondary endpoint and found as you know specifically significant and clinically meaningful reductions both in [indiscernible] blood glucose confirmed symptomatic hypoglycemia as well as similar measurement just for nocturnal. Now the issue with the severe in the maintenance period is not that there was not a reduction because it was actually 46% in the bit rate. However it was the numbers that were low because you're only measuring in the 16 week maintenance period. Fortunately was a pre-specified other analysis was measuring severe hypoglycemia throughout the period, and when that is done the reduction percent-wise is similar, its 51% versus 46%. But here the numbers naturally accrued are larger and a clearly statistically significant benefit in the occurrence of severe hypoglycemia then takes place. When we come to the definition of hypoglycemia as you will recall from the advisory committee the FDA actually had four major you can say points to consider for us in the construction of the new SWITCH trial. One being the timing of the dosing i.e. morning versus evening, and this we have randomized to 50/50 morning and evening for both products in a blinded way. Another being the hypos, not the level of which to measure but rather whether they were symptomatic etcetera, and here we have actually made them symptom -- only measured symptomatic 56mgs per deciliter, and moreover the severe hypoglycemic episodes were actually adjudicated by a committee not to forget. And then it's also a notion that the population was perceived to be unreasonable or not the most ideal because we had weeded out those at highest risk of hypoglycemia. This did not take place in this trial where we looked into different ways of being at risk of hypoglycemia either of having a hypo in 12 weeks, a severe hypo in 12 months, have had insulin treatment for more than five days or moderate renal insufficiency. So all of these patient sub-populations were part of the trial, so I think it's difficult to find any flaws to be quite frank. And all hypos measured are indeed symptomatic.

So ladies and gentlemen with this lecture from Mads Krogsgaard on hypoglycemia we thank you for your participation and for your questions. And we are sure that we will be meeting several of you as we will be embarking on our road show immediately. Thank you very much.

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