Lars Fruergaard Jorgensen – President and Chief Executive Officer Mads Krogsgaard Thomsen – Executive Vice President and Chief Science Officer Jesper Brandgaard – Vice President and Chief Financial Officer Lars Green – Executive Vice President and head of Business Services & Compliance

Trung Huynh – Credit Suisse Simon Baker – Exane Sachin Jain – Bank of America Michael Novod – Nordea Peter Verdult – Citibank Richard Vosser – JPMorgan Michael Leuchten – UBS Tim Race – Deutsche Bank Carsten Madsen – SEB Keyur Parekh – Goldman Sachs

Good day, and welcome to the Q2 2017 Novo Nordisk Earnings Conference Call. Today’s conference is being recorded. And at this time, I’d like to turn the conference over to Mr. Lars Fruergaard Jorgensen, CEO. Please go ahead, sir.

Thank you very much. Welcome to this Novo Nordisk conference call regarding our performance in the first 6 months of 2017 and the outlook for the year. I’m Lars Fruergaard Jorgensen, the CEO of Novo Nordisk. With me, I have our Chief Financial Officer, Jesper Brandgaard; and our Chief Scientific Officer, Mads Krogsgaard Thomsen. Also present and available for the Q&A session are Executive Vice President and Head of International Relations, Mike Doustdar; and as of July 1st, Executive Vice President and Head of Business Services and Compliance, Lars Green. Lars has returned to Denmark from a position as Head of Finance and Operations in North America Operations. 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 for 1 hour. As usual, we’ll start with the presentation as outlined on Slide 2. The Q&A session will begin in about 25 minutes. Please note that this conference call is being webcasted live and a replay will be made available on Novo Nordisk’s website. Please 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 and could cause 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 turn to Slide 4. Sales growth in the first 6 months of 2017 was 4% measured in Danish kroner and 3% in local currencies. North America Operations grew by 2% and accounted for 32% share of growth in local currencies. International Operations grew by 5% and accounted for 68% share of growth both in local currencies. Within International Operations Region Europe by 4%; Region China by 7%; and region AAMEO by 4% all measured in local currencies. Sales growth came from diabetes and obesity care, with the main growth drivers being Tresiba, growing 149% and Victoza growing 18% in local currencies. In June, we announced the headline results from the Phase II trial for semaglutide in obesity. When adjusting for the patients who discontinued the trial, patients treated with the highest dose of semaglutide experienced an average weight loss of 13.8%. Moreover, regulatory feedback from the FDA regarding the Tresiba label update based on the SWITCH trials was expected in Q2. However, we now assess that the FDA plans to review the SWITCH study in the context of the recently submitted data from the DEVOTE trial for Victoza – sorry, for Tresiba. The regulatory decision is now expected by the end of the first quarter of 2018. In June, we also received a positive 17-2 vote from an FDA Advisory Committee that Victoza provides substantial evidence of cardiovascular risk reduction in patients with type 2 diabetes. We expect a decision from the FDA in this quarter. Finally, the European commission has now included the LEADER data in the label for Victoza. Victoza is now the only GLP-1 in the EU with a label that includes prevention of cardiovascular events. Turning to financials, operating profit for the first 6 months of 2017 grew by 8% in Danish kroner and 6% in local currencies. The diluted earnings per share increased by 6% to DKK 8%. The range for sales growth is now expected to be 1% to 3% measured in local currencies compared with the previous range of 0% to 3%. And negative currency impact of 3 percentage points is now expected. The range for operating profit growth has also been lifted to 1% to 5% compared to the previous range of minus 1% to 3% now negatively impacted by currencies of 4 percentage points additionally the Board of Directors approved interim dividend for 2017 of DKK3 per share, which will be paid out in Aug. 2017. Please turn to slide 5. In a 6 month of 2017 the overall sales growth was 3% in local currencies and 4% in Danish currencies. The sales growth was derived from both International operations and America – North America Operations, which grew by 5% and 2% measured in local currencies, respectively. Within International Operations, the main growth contributors were Region Europe, Region China and Region AAMEO. Sales growth in North America Operations was 2% in local currencies, driven by the higher sales of Tresiba due to a market share gain in the basal insulin segment and an underlying market volume growth. This was partly countered by lower Levemir sales and lower realized sales prices for basal insulin. Sales growth was additionally driven by Victoza. In line with expectations, Vagifem sales declined by 85% due to generic competition. In Region Europe, sales increased by 4% in local currencies. The growth was driven by the penetration of Tresiba as well as a positive contribution from Xultophy across the region. This was partly offset by declining Levemir sales, reflecting the continued rollout of Tresiba. Region China grew by 7% in local currencies. The sales growth was driven by a 17% increase in sales of modern insulin, which was partly offset by declining human insulin sales. Sales in Region AAMEO comprising Africa, Asia, Middle East and Oceania, up 4% in local currencies. The sales growth was largely driven by modern and new-generation insulin as well as Saxenda, partly countered by lower biopharma sales related to timing of tender deliveries. Please turn to Slide 6. From a product perspective, the sales growth in the first 6 months of 2017 was derived from the diabetes and obesity franchise, but quiet negatively impacted by decline in the biopharma franchise, as expected. In the first 6 months of 2017, sales of Tresiba reached DKK 3.7 billion; sales of Levemir declined by 13% in local currencies, partly due to the continued rollout of Tresiba, which has now been launched in 56 countries. Sales of Xultophy reached DKK 284 million in the first 1 months of 2017, compared with DKK 89 million in 2016. Xultophy is currently marketed in 15 countries and launch activities are progressing as planned. Victoza sales increased by 18% in local currencies, driven by the U.S. where Victoza grew by 23% in local currencies. This reflects an underlying prescription volume growth of the GLP-1 class and a positive impact from higher realized prices. Furthermore, sales were positively impacted by internal movements in the first quarter of 2017. The rollout of Saxenda is progressing according to plan, and Saxenda has now been launched in 19 countries. In the first 6 months of 2017, sales of Saxenda reached approximately DKK 1.2 billion. Sales of biopharmaceuticals products declined by 20% measured in local currencies. This was mainly driven by declining in Norditropin sales and a negative impact of Vagifem sales due to launch of a generic version in the U.S. Please turn to slide 7. Tresiba has now been launched in 56 countries with a positive market uptake in countries with the same level of reimbursement as insulin glargine U100. In countries where Tresiba and subsequently Xultophy has been launched. Xultophy has contributed to continued market share gains in the basal insulin segment. As an example, Tresiba has obtained a market share of 28% in Switzerland and when combining Tresiba and Xultophy, the total value of market share is 56% in the basal insulin segment. In France, Xultophy has reached an impressive market share – value market share of 10% in the basal insulin segment since the commercial launch in January of this year. Lastly, Xultophy was launched in the U.S. in May and launch activities are progressing as planned. Please turn to Slide 8. Since the beginning of 2017, the combined market share of Tresiba and Levemir in the U.S. has grown by around 3 percentage points to a total of 32%. Tresiba has now reached a total script share of 8.5%, and we still expect to reach the 10% – volume market share of around 10%. This is driven by the strong penetration in the commercial channel while the performance in Medicare Part D segment has been modest. Please turn to Slide 9. Victoza sales increased by 18% in local currencies. The sales growth was driven by North America operations comprising 91% share of growth. In the U.S., Victoza sales have increased by 23% in local currencies, with the primary driver being the underlying growth in the U.S. GLP-1 market. Victoza is facing intense competition from once-weekly GLP-1 products and despite a continued growth in prescription volume, the relative Victoza market share has declined to 46%. Please turn to next slide. In the U.S., formulary negotiations with pharmacy benefit managers and managed care organizations for 2018 are progressing. Average prices after rebates are expected to be lower compared. 2017, driven by a changing pricing environment, especially in the basal insulin segment. Market Access for our key products is anticipated to remain broadly unchanged compared to 2017. However, at this stage, there’s still level of uncertainty pertaining to formularies yet to be finalized and announced. This includes Medicare Part D and custom plans and potential impact on price and volume. Going forward, we do not intend to provide explicit guidance on the expected price development as we believe that commenting on price in isolation does not provide complete picture of outcome of formulary negotiations and growth prospects in general. We believe that price development must be seen in the context of volume and mix developments. We maintain our long-term financial targets and intend to provide preliminary guidance on sales and operating profit growth for 2018, along with our Q3 2017 results as we have done historically. With this, over to Mads for an update on R&D.

Thank you, Lars. Please turn to Slide 11. In June, we announced the headline results from the Phase II trial for semaglutide in obesity. Investigating the potential for infusing and maintaining weight loss in people with obesity, as well as assisting safety and tolerability. In the trial, almost 1,000 obese people were randomized in blinded manner to daily treatment with doses of semaglutide between a 0.05 and 0.4- milligram per day or placebo. Saxenda was additionally included for comparison. Approximately 100 people were included in each active treatment arm, all in combination with diet and exercise. At baseline, weight was around 111 kilo corresponding to a BMI of 39, and the enrolled subjects were on average in their mid-40s. The patients who completed 1 year’s treatment demonstrated an average weight loss of 17.8 kilograms with the highest dose of semaglutide. This corresponds to weight loss of 16.2% for completers and is associated with almost 2 out of 3 patients exhibiting a weight reduction of 10% or more at the highest dose of semaglutide. When including patients who discontinued the trial, by assigning them placebo level weight results, this group experienced a weight loss of 13.8% on average. Patients on placebo diet and exercise alone experienced a weight loss of 2.3%. The results from the Saxenda arm were broadly in line with previously reported data and highlights that semaglutide may indeed set a new efficacy standard for anti-obesity medicines. Semaglutide was generally well-tolerated with the most common adverse events being gastrointestinal. There have been no incidents of retinal disease observed in obesity program to-date despite uses of doses up to almost 3 times diabetes dose. This lends further support to previously-performed mediate analysis, showing that semaglutide’s unique glucose lowering efficacy in Type 2 diabetes may well be responsible for the occasional transient worsening of existing eye disease. As similarly been observed in landmark studies involving intensive insulin therapy. Next step is to initiate the Phase III trial program for semaglutide in obesity in the first half of 2018 where we are planning for once-weekly dosing of semaglutide. Please turn to Slide 12. In the second quarter, we submitted data from the DEVOTE trial to the regulatory authorities in the U.S. and the EU for a label update of Tresiba related to a reduced risk of severe hypoglycemia when compared to treatment with insulin glargine U100. Regulatory feedback from the FDA regarding the SWITCH trials, which were submitted as a supplemental NDA in September 2016 was expected in Q3. But as mentioned by Lars, FDA now plans to review the SWITCH studies in the context of the very large, convincing and robust data set present in the submitted supplemental NDA for the vote. A decision is thus now expected by the end of first quarter next year. In July, the European commission approved the label update for Victoza based on the LEADER cardiovascular outcomes trial. Victoza is now the only GLP-1 in the EU with a label to include prevention of cardiovascular events in people with type 2 diabetes. Furthermore, in the U.S., we received a positive 70-2 vote from an FDA Advisory Committee that Victoza provides substantial evidence of cardiovascular risk reduction in patients with type 2 diabetes. Within obesity, the EU label update for Saxenda has, based on the LEADER trial, been approved by the European Commission, and the label now includes the May SWITCH reduction data obtained with liraglutide 1.2 milligram in type 2 diabetes. Within hemophilia B, N9-GP has been approved under brand name REBINYN in US and Refixia in EU.Furthermore we Submitted new drug Application for N9-GP to the Japanese authorities PMDA. Finally, we’ve obtained Phase IIIa results for somapacitan in adults with growth hormone deficiency. In the pivotal trial, there was a statistically significant difference in favor of somapacitan versus placebo on the primary endpoint from truncal fat percentage. Thus somapacitan showed a significant reduction in truncal fat percentage compared to placebo after 34 weeks of treatment. Additionally, significant increases in lean body mass and muscle mass were seen following somapacitan treatment. The study is now continuing into a 52- week extension phase. Please turn to the next slide. Within this quarter, we are soon expecting the SUSTAIN 7 results for the semaglutide head-to-head trial versus dulaglutide in people with type 2 diabetes. Moreover, we expect to get regulatory feedback from the FDA regarding the label update for Victoza in the U.S. based on the LEADER CVOT. Furthermore, the FDA is expected to provide regulatory feedback on fast-acting insulin aspart this quarter. Finally, we expect to receive regulatory feedback on the once-weekly semaglutide in type 2 diabetes in both the U.S. and the EU towards the end of this year. With that over to Jesper for an update on the financials.

Thank you, Mads. Please turn to Slide 14. In the first 6 months of 2017, sales increased by 4% in Danish kroner and by 3% in local currencies. The gross margin was 84.8%, measured in Danish kroner similar to the level in 2016. Gross margin was negatively impacted by lower prices in the U.S. as well as slightly lower capacity utilization for certain products. Gross margin was positively impacted by the contribution from product mix due to higher Tresiba and Victoza sales. This was partly countered by lower sales of Vagifem following the launch of a generic version in the U.S. Sales and distribution cost remained unchanged in Danish kroner and declined by 1% in local currencies. This reflect lower spend for promotional activities in the U.S. following the Tresiba launch in 2016 and broad cost control initiatives. Research and development cost increased by 1% in both Danish kroner and in local currencies. The increase in cost reflects higher development costs driven by the PIONEER program for semaglutide. This is partly countered by lower costs following the completion of the DEVOTE trial and lower research costs following the updated R&D strategy announced in Oct. 2016, which led to discontinuation of number of research projects. Administration cost declined by 1% in Danish kroner and declined by 2% in local currencies. The lower administrative costs are mainly related to general cost containment initiatives. Operating profit increased by 8% in Danish kroner and 6% in local currencies. Net financial items showed a loss of around DKK 1.2 billion compared with a loss of approximately DKK 4.3 billion in 2016. This development reflect losses on foreign exchange hedging in the first half of 2017 involving especially the U.S. dollar and Chinese yuan versus the Danish kroner. The diluted earnings per share increased to DKK 8.73 corresponding to an increase of 6% in Danish kroner. Please turn to Slide 145. The currency development constitute a major challenge for Novo Nordisk expected results reported in Danish kroner from Q3, 2017 and onwards. However, in line with our treasury policy, the most significant foreign exchange risk has been hedged primarily through foreign exchange forward contracts. Since the Q1 report of 2017, we’ve seen a significant 8% depreciation of the U.S. dollar and most other key invoicing currencies versus the Euro and the Danish kroner. As a consequence reported operating profit in 2017 is now expected to be negatively impacted by 4 percentage points. The depreciation of currencies is reflected in our financial guidance, which I will now turn to. Please turn to Slide 16. For 2017, sales growth is now expected to be in the range of 1% to 3% growth compared to the previous range of 2% to 3%, both measured in local currencies. This reflects expectations for continued robust performance for Victoza and Tresiba, as well as a positive contribution from Saxenda and Xultophy. These sales drivers are expected to be countered by an impact from lower realized prices in the U.S., driven by lower prices in the basal insulin segment and the growth hormone segment. Given that our key currencies have depreciated versus the Danish kroner, reported sales growth is now expected to be around 3 percentage point lower than the local currency level. This should be compared with the previous guidance of a positive currency impact of 1 percentage point. Operating profit growth is now expected to be in the range of 1% to 5% growth measures in local currencies compared to the previous range of minus1 to 3% point growth. The expectations for higher operating growth primarily reflects the improved outlook for sales growth and a continued positive effect from cost-containment measures. The outlook for operating profit reflects an expected increase in sales and distribution costs in the second half of 2017 compared to the first half to support launch preparations for semaglutide, as well as investment in sales growth initiatives. Moreover, it reflects an increase in research and development cost to support the progress of the pipeline. The reported operating profit is impacted by the significant depreciation of the U.S. dollar, as Lars mentioned, and a negative currency impact of 4 percentage points is now expected. This should be compared with the previous guidance in April 2017 of a positive contribution of 1 percentage point; hence, in total, a 5 percentage point negative impact on reported operating profit growth arising from the movement in currencies since the end of April. Furthermore, we now expect financial items to be a loss of around DKK 0.2 billion compared to DKK 1.8 billion expected as loss at the end of April or an improvement of DKK 1.6 billion related to hedging gains on U.S. dollar and Japanese yen. The current expectation will collect losses associated with nonhedged currencies, partly offset by the gains on foreign exchange hedging contracts, just mentioned above, mainly related to the U.S. dollar and Japanese yen versus the Danish kroner. The effective tax rate for 2017 is now expected to be in the range of 21% to 22%, which is broadly in line with the statutory corporate tax level in Denmark of 22%. Capital expenditure is now expected to be around DKK 9.5 billion which implies a significant increase in the second half of 2017 compared to the first half. This will primarily be driven by the construction of an active pharmaceutical ingredient production facility in Clayton, North Carolina. a. b. Ongoing investment estimated to be around $2b and expected to be completed in 2020, we still expect free cash flow to be between DKK 29 billion and DKK 33 billion. This concludes the financial update. Now back to you, Lars.

Thank you, Jesper. Please turn to Slide 17. With the performance in the first 6 months, we are well on track to deliver on our targets for 2017 based on sales growth driven by our new innovative products within diabetes and obesity care and a continued focus on cost control. Further, the formulary negotiations in the U.S. reflect the tough competitive environment. We remain confident that our long-term financial growth targets are achievable. We are now ready for the Q&A.

Thank you sir. So ladies and gentlemen [Operator Instructions] we will now take our first question from Trung Huynh from Credit Suisse. Please go ahead.

It’s from Trung Huynh from Credit Suisse. Two questions, if I can. Firstly, can you explain some of the current dynamics you’re seeing in Medicare Part D. You saw modest sales for Tresiba in this area. What’s the reasoning for this? And can you let us know how Levemir sales did here? And can I ask you about Victoza? We saw good growth in the U.S but in Europe and Japan, we saw growth was declining. Can you perhaps discuss what you’re seeing in these regions and for the GLP class as a whole?

Yes, so if I give it a shot on these 2 questions. So in the Medicare Part D, segment, you have to bear in mind that when we launched new products, they typically start out by penetrating in the commercial segment and then later on, you expand into the low price segments like the Medicare Part D. So that’s really the explanation why we see the dominating part of the Tresiba business being in the commercial space from 18 moving more into Part D. And for Levemir, we would have more than normalized between commercial and Part D because that’s a mature product with good penetration in Part D. In terms of Victoza growth, we highlighted on the call very strong growth in the U.S. If you look across the world in Region Europe and in Japan, we see a tough competition from the long- acting GLP-1s taking share and growth away from us. So we see a bit of a different dynamics between the U.S. and the mature markets. We still see that Victoza is growing nicely in the emerging markets where, say, the latest long-acting GLP-1 product is not yet launched. So that’s the dynamics. On a positive note, we have just obtained reimbursement in China for Victoza and we are quite encouraged by that. We still see good pricing in China also after the reimbursement, and we’ll now go out and push Victoza heavily also in the Chinese market.

Thank you very much. Next question please.

Thank you. Our next question comes from Simon Baker from Exane. Please go ahead. Your line is open.

Thanks for taking my question. Two, please, if I may. Firstly, on the comment you made about the termination of guidance on the impact of price, firstly, I wonder if you could confirm the suggestion that if you are reiterating your long-term guidance, it would be reasonable to assume that the pricing environment for 2018 is broadly as you have guided previously. And secondly, I wonder if you could give us a little more color on how you are going to present that information on volume and mix going forward. And then secondly, a question for Mads, given the paper that was recently published in the Lancet on exenatide as a potential treatment for Parkinson’s, I would be keen to get your thoughts on GLP-1 and [indiscernible] as a potential treatment option within that disease. Thanks a lot.

So on the first question in terms of price guidance and also volume mix guidance, we are really not going to get into those details. We had indeed last year to be a bit specific on the pricing development because we had to revise our long-term financial targets, but we do not believe it’s meaningful going forward to get into specific guidance on pricing because, as you also allude to, it’s a function of volume and mix. And if we were to go down the road of both guiding on detailed pricing, detailed volume, detailed mix, it’s simply too granular for us to address. So instead, we reiterate that we believe the long-term financial targets we have guided last year is still the right level for us to give investors a feel for where we look at the business going forward. So it’s not based on detailed sales guidance but a guidance on overall operating profit. Jesper, you want to make a comment?

Yes, also, Simon, just bear in mind the challenge you have for just – let’s choose a product like Tresiba is that Tresiba will initiate the launch in the commercial channel, and it will be a mixture of negotiated contracts. And then there will also be coverage among a number of plans in Tier 3 without the price of the product being negotiated initially. And then a rebate will only be negotiated as the product growth will be important for the plan. Furthermore, cost of product, as Lars also alluded to, will gradually penetrate in to the Medicare Part D segment, which is generally lower priced than the commercial channels. So there, inherently, you will have, as you launch a product, you will have a gradual decline in the average realized price, which is a natural consequence of obtaining broader penetration of the product. That is not really a increased rebate for an individual product but just a gradual evolution that happens over time. Also, for that matter, we have decided not to provide further guidance because in reality, the pricing component is also in effect of the channel mix you have for the individual products, and that will evolve over time.

Thank you, Jesper. And then Mads, on Parkinson’s disease and semaglutide.

Yes, and there were some indeed some interesting observations in the Lancet Journal a few days ago. currently conducting in vivo animal studies to investigate with the semaglutide, and this is semaglutide, induces a neuronal rescue down in the area of the Dopamine neurons that are critical to Parkinson’s patients. If that is the case, it’s truly exciting and something we will elaborate a lot more on, potentially even in humans. We’re also investigating whether it’s more down-to-earth anti- inflammatory effects or glucose transporter effects into the brain or even effects on insulin siphoning. Some are more interesting than other, and we will see what we find. We’ll have the data from some of these animal studies, towards the end of this year and then they will form the basis for the next movement, if any, in this area. As regards – as I must say you are aware of the study that is today going in Phase II at Imperial College sponsored by us and the Alzheimer’s Society.

Thank you Mads. Next question.

Thank you. Our next question comes from Sachin Jain from Bank of America. Please go ahead.

Thank you Sachin Jain, Bank of America. Two questions. One, just a follow-up on Simon, I guess a different way of asking it. As we think about the holistic view for full year 2018, you previously talked about 2018 being a rebound sort of 4% to 5% EBIT range closer to your midterm target to 5%. And while it was an official guidance at the full year results yes, when you talk about it Vagifem the 2017 growth should accelerate given annualization of Vagifem and taking out the impact from Norditropin to take you from the 2017 level up to the sort of 4% to 5% for 2018. Do you still standby that prior comment and given that 2017 growth is now higher and wherever we sit on this price volume debate for 2018? And a second question is for Mads. You mentioned the Phase III obesity dose for sema would be a weekly administration. Could you confirm what doses you’re planning for that Phase III and what the weight loss was at. The Phase III doses in Phase II, I think you have only commented on the highest dose in Phase II. Thank you.

Thanks, Sachin. First on operating profit 2017, as you rightly alluded to, the operating range that we’re now providing will actually reach the stipulated long- term financial target growth level, which inherently will make it, of course, more challenging in absolute terms to reach the 2018 target make it, of course, more challenging in absolute terms to reach the 2018 target level. We’re still having the ablation level of growing in line with our long-term financial targets when we look into the longer-term horizon of 2018, 2019. One specific issue one have to bear in mind when we look toward 2018 is the approval process for semaglutide and the investment entailed in the launch of that product. So timing there can also be of essence. But of course, we anticipate that we will become more firm on where 2018 is faring when we provide some initial guidance in connection with our third quarter results end of October.

Yes, so we basically plan to conduct a three, as you correctly stated, using a once weekly application and as we have done also in type two diabetes in more than 8,000 individuals. The basis for calculating the dose is obviously the usual benefit risk assessment and since there were no unexpected risks or adverse events or side effects associated with semaglutide other than those related to GLP-1 agonists therapy, it’s obvious that we will go towards the higher end of the dose range. And I can inform you that going into more detail that at both the highest doses, 1.3 and 1.4, we are speaking to the tune of 15 to 17 plus kilogram weight loss after a 1-year treatment in those patients who complete. So that is what we are expecting. And Saxenda in that very trial performed like it should do, given the kind of efficacy level that we have seen in the SCALE studies. So this is a new level of efficacy which is why we are already now planning for the Phase III program.

Thank you.

Thank you. Thank you Mads, Thank you Sachin. Next question please.

Thank you. Our next question comes from Michael Novod from Nordea. Please go ahead.

It’s Michael from Nordea. A question to the gross margin. So even though there’s still some positive FX in Q2, it’s holding up extremely well. So how should we look at this also going into 2018 because we have seen your long-term guidance include quite significant decrease in the gross margin. But it seems to be holding up pretty well, that’s the first question. And then the second question, longer, say, down the lines in terms of cost initiatives, we’re seeing quite successful 2017 execution on the cost containment. How do you look at this going into 2018 and 2019?

So Jesper, two questions that [Indiscernible] well for you.

First, in terms of gross margin, I think actually, the development we’ve seen in the first half overall, if you backout the currency effect, I think it actually gives some pretty good impression of where our gross margin is faring. It is pretty much in line with the approximately 50 basis point lower, which is a kind of a net effect of the price impact from average lower price primarily related to the U.S., partly offset by continued improvement in our mix where we sell ever more volumes of our higher-value products like Victoza and Tresiba. So that’s clearly positive. In terms of cost containment, we are seeing a very positive results stemming from initiatives we had we called prioritizing for growth that Lars Fruergaard and I have overseen over the last 12 months. We are quite satisfied with the progress of that. It has focused ambition of generating cost savings in 2017 and ‘18, and hence, I only see us partly through that process. We are continuing with that program and we should continue to be able to see a very well-controlled developed in the cost base of Novo Nordisk and with additional resources move towards hopefully growth generating initiatives and ideally also a launch of new products.

Thank you, Jesper. Thank you, Mick. Next question please.

Thank you. Peter Verdult from Citibank, please go ahead. Your line is open.

Verdult, Citi, two questions, just expanding on the question from Michael. Just on OpEx growth over the medium term, I realize this is not a conference call to give medium term guidance, but the reason for the question regards the EBIT margin and the strength. I mean, if you execute on your plan you are going to be returning to a sales growth level that is somewhere between 4% to 6% from 2018. I’m struggling to see why R&D and sales distribution will track that given you’ve got DEVOTE and PIONEER rolling off. I realize you got semaglutide coming the cost containment measures that you’re undertaking and the ability to recycle promotion dollars in the U.S. given the current environment into the launch of sema and Xultophy. So any help here in terms of pointing out what I’m missing would be appreciated. And then just question number two, Jesper, on the commentary in the first release about access being broadly unchanged. Can you just give us any more detail on how access is shaping up for the basal insulin franchise in GLP-1? Thank you.

Thanks. If I start on the operating expenditure and then maybe Lars can give some points on the access situation, I think the best way to kind of describe the longer-term potential development of our cost structure would be that, as I mentioned for the gross margin, a gradual decline reflecting a more competitive price environment in the U.S., partly offset by a positive mix effect. I think that should be anticipated also in this long-term financial target period, so towards 2020. In terms of the other cost lines, you could take sales and distribution. It will be at the level of 25% to 26% I think at the broad guidance, but do bear in mind that this will inherently swing in individual quarters, depending on what specific launch activities we have. In terms of R&D, we have an ambition of reinvesting in R&D to the tune of 13%, and then, of course, it will be sensitive to what specific programs we’re running, especially cardiovascular outcome programs for sema could be significant investment areas. The specific timing of those will of course be subject to the approval process and are likely to be initiated shortly after the approval of the compound. As for admin cost, I would be disappointed if we could not continue to make a gradual steady improvement in our cost structure there, so that would be some of the key factors. So a slight deterioration in the gross margin may be helped by improvement in admin, and with some variation in selling and distribution and R&D, depending on specific activities approvals, et cetera.

And with regards to the comment of having broadly the same access in the U.S., we – discussions and contracting discussions is ongoing. You have all seen that ESI and CVS has announced their formularies and these are the two biggest PBMs for Novo Nordisk. In this year, we’ve had quite a number of disruptions with the products being excluded and a lot of the physician activity engaged in switching patients from one product to the other. We – based on what we can see and what has been announced already, we believe we’ll have a more stable environment going into 2018, and that’s important for us because we are in the business of communicating product benefits to physicians who create a preference for our products, and we believe there will be a better environment for that compared to an environment where physicians are engaged in moving patients from one product to the other because of contracting. I’ll refrain from speculating more about what has led to unchanged courage. You can have views on what that means for PBMs and providers in terms of what has been successful and what has not been successful in the 2017 events. But in the case of Novo Nordisk, I think it’s a positive that it’s a stable environment because we can go out and sell the leading portfolio of products in this environment. Thank you.

Thank you.

Thank you. Our next Our next question comes from Richard Vosser from JPMorgan. Please go ahead. Your line is open.

Hi, thanks for taking my question. Just a couple of questions. Firstly, on 2018, just thinking we’ve just come off the back of [indiscernible] where there was strong data from ACE910, so just maybe you can help us with the – how you’re thinking of the impact of that data now you’ve seen it on Nova 7, 3 into ‘18? And then secondly, just on Tresiba, you talked about that you think you can still hit the 10% market share for Tresiba in the U.S. Just could you give us some color on the measures that you’ll be undertaking to achieve that, especially as you won’t have the promotion to the PCPs on how hyperglycemia perhaps you thought you would have at the beginning of the year based on the SWITCH data? Thanks very much.

So Jesper, if you start out by 2018 and ACE910 impact.

Yes, Richard, I was actually down in Berlin and I think we saw some solid results from Roche on ACE910 and hence, it would be our anticipation that this product would come to market. As previously mentioned I think it was back at our Capital Markets Day in November of ‘15, you would anticipate that approximately 50% of our NovoSeven turnover at that point in time of around DKK 10 billion could be exposed to competition from ACE910. This should be expected to happen gradual as the penetration and approval around the world will be gradual, don’t see any reason for changing that guidance. I think it is a reasonable guidance. Also, noting that it is apparent that NovoSeven is highly likely to be the preferred rescue agent for patient that experienced breakthrough beats with ACE910. So in terms of the profiling of NovoSeven as the preferred on-demand in surgical setting agent for physicians to use, I think that will be reinforced, and there is inherently in that some opportunities. And I’d also like just to mention that in China now, we actually also have been obtaining national reimbursement coverage for NovoSeven and that should hopefully be then reflected in the regional and the provincial reimbursement guidelines within the next half year or so and hence provide some NovoSeven turnover. And if you look to the turnover distribution, we have very, very limited biopharmaceuticals sales in China. So there’s inherent opportunity there. But for near term, you should expect a clear impact from ACE910 provided that’s approved.

And on Tresiba performance, we ended 2016 with market share of around 5% in the U.S. We have added 3.5% so far this year, partly fueled by the contract changes. We believe it’s realistic to add another 1.5% to get to the [indiscernible] by year end. You’re right that it would have been easier had we gotten a switch on the label. But we believe we can still talk to this via our medical liaisons based on a peer- reviewed articles. And of course, patients, physicians are already feeling the benefit of being on Tresiba. So it’s not only about label claims, it’s also experience in the market that will continue fueling the growth of Tresiba. So we still believe 10% by year-end is achievable. Thank you, Richard. Next question please.

Thank you. Our next question comes from Carsten Madsen from SEB. Please go ahead. The line is open.

Carsten, SEB. Could you please try to talk us through the second part of this year, what it will take for you to reach the low end of the guidance because it seems like we should see quite some deterioration in Q3 and Q4 in order for this to be a possibility? And maybe you could put special attention to your Victoza assumptions as it seems this one is the one that could disturb things quite a lot if there’s continued pressure from Trulicity. And also, put emphasis on NovoSeven, what do you think should – we should put in for the coming quarters. It’s super volatile also depending on how many clinical trials Roche are setting up and rolling for. That was it. And maybe one final thing for Norditropin, whether you expect any sort of major changes in 2018 like we have seen here in 2017 because there has been a big drag on reported revenue to see Norditropin down by 20-plus percent each quarter. Thanks.

Jesper, second half 2017 guidance?

I mean, it would be nice, Carsten, if we were providing detailed guidance per quarter, but life is not that good for an analyst yet. What I will say at this point in time is that in terms of us to get down to the low end of operating profit guidance, of course, we would need to get down towards the low end of the sales guidance. In terms of bringing us to the low end of the sales guidance, we would have to see a negative impact from the pipeline situation we have in the U.S. and where we have mentioned a few times that we are seeing up towards a 0.5 percentage points or so of annual turnover in pipeline building, that was primarily in the first quarter. A reversal of that in the third or fourth quarter would then be a negative and a drag. Also, noting to the development of Victoza, one would have to see a slowdown in the penetration of Victoza and the GLP-1s in the market, where we’re currently significantly supported by a, I would say, very high-growth level. That would be some of the factors. And then of course, we are always subject to swings in terms of tender orders in a number of International Operations, market primarily AAMEO and LATIN America where we can be exposed to variations. So if we got to the low end of the sales range, then we would also be moving towards the lower half of the operating profit guidance. In terms of Norditropin in 2018, I think Norditropin this year is a little bit hard to analyze and we really have to backout that reversal of rebate in first quarter of 2016 when you look at the Norditropin numbers. But even with that, the second quarter this year also had a tough comparison last year where there was a minor rebate adjustment in the U.S. That said, I think generally, the Norditropin franchise is experienced an intensified competition. And I’m really assured, as Mads also alluded to, that we now have probably a winning version of a once weekly growth hormone initially in adults and later in also being pursued in Phase III clinical trials currently for kids of poor stature, and that really is for us the major growth driver and the way that we really document our leadership position within growth hormone treatment. So 2018, I would say, will probably continue to be challenged. We’re seeing strong performance currently in Japan, but we are under challenged in U.S. So I think that would be my comments as to Norditropin.

Thank you, Jesper. Thank you, Carsten.

Thank you. Our next question comes from Keyur Parekh from Goldman Sachs. Please go ahead. The line is open.

Good afternoon. Two big picture questions, please, or broad, broad questions, please. The first one, Jesper, as you think about market shares for your basal insulin products going beyond 2017, can you just help us think about should we be expecting a similar rate of growth for market share across the portfolio for 2018, 2019 given the access that you are talking about or should we expect the rate of growth to slow down? And then secondly, for Mads, Mads, just help us think about why the FDA is choosing not to think about or why is it choosing to clump SWITCH 1 and 2 together with DEVOTE. What does that inherently imply? Are you still expecting to get a label for lower hypoglycemia or should that not be our base case going forward? And then lastly, on semaglutide, given how close we’re now to the PDUFA potentially, should we still be thinking about a potential Advisory Committee there or is that now ruled out? Thank you.

Thank you, Keyur. So we start out by expectations to Tresiba and market share. You say that there are different moving parts. You could say initially, you might have a slight higher uptake when you launch on your other side we all expect to have the benefit of the SWITCH and DEVOTE data. So adding that all up, our expectations for next year would be a continued development compared to what we have seen this year. So basically a straight line. Mads? Firstly on DEVOTE.

Yes, so on SWITCH and DEVOTE, a couple of things. One is that you have to bear in mind that if you for instance take SWITCH 2 and look at the amount of severe hypoglycemic events, we are counting only between 10 and 20 throughout that study, as I think you are aware. Where DEVOTE, we are speaking more severe adjudicated line severe hypo events than even so taking doze above 750. So the robustness and the strength and the ability to analyze [indiscernible] syndrome in the DEVOTE study is in a very different league than that of the SWITCH study. So when that is said as you can see in the German papers that came out last month, the SWITCH studies are really good studies but the FDA has, as we understand it, taken the prerogative to actually look at the big overall hypoglycemic benefits with this agent versus insulin glargine U100 with everything that we know from SWITCH, DEVOTE and so on. And maybe this comes at a point in time where the FDA is hosting a number of workshops. They just had one last month where they’re looking into how do we go beyond hemoglobin A1c as a labeling endpoint in the field of diabetes. And by that, I mean that for instance, taking label claims and benefits into the safety area such as severe hypoglycemia being a safety parameter is something that is, relatively speaking, unprecedented for the agency. However, they are clearly voicing that they are now seeking to go beyond A1c at these workshops. And one of the most obvious targets for a non-A1c related label outcome is, of course, severe hypoglycemia due to the danger that, that poses upon patient, family and society. So that’s how we see it. And so my optimism as regards to the label update is completely unchanged, but the timing is not. That is now targeting as we would understand it late Q1 related to the DEVOTE action data. As regards semaglutide and the Advisory Committee, do remember that the FDAAA Act of 2007 actually states specifically that unless a new molecule and sema is indeed a very new molecule, unless a new molecule for some reason does not qualify for an Advisory Committee because it’s too molecular or the likes of it, then one should expect Advisory Committees. So we are working and preparing under the assumption that such can easily happen within the realm of the PDUFA action period.

Thank you, Mads. We have time for the last 2 questions.

Our next question comes from Tim Race from Deutsche Bank. Please go ahead. Your line is open.

Thanks for taking my question. Yes, I’ve got a couple left. First of all, if you just look at the contracting that we’ve seen for the SGLT2s in diabetes class, could you perhaps just comment on what you think is going on in terms of the cardiovascular benefit claims for the audience and whether that actually holds much sway in terms of contracting or not? And also, in terms of the uptake that you’re seeing actually in the market and what are your expectations for the CV benefit of Victoza and/or semaglutide, how much of the benefit are you having and what your learnings in the market may be there. And then just perhaps if you could just comment. We’ve seen [indiscernible] or Glaxo talk about [indiscernible] and sort of withdrawing that from the market that was obviously the lower price GLP-1. I just wonder if you’ve got any comments in terms of pricing in GLP-1 and where you think that goes from here. Thank you.

Thank you, Tim. So I’ll not get into a lot of speculation about the SGLT2 class. It’s obviously a segment we are not in. I would just make a comment that when you look at CV benefit, we actually have a bit of internal data from Germany where we have been able to promote the CV benefit for Victoza even before obtaining the level. And there, we can see that we actually did stop the decline in our GLP-1 market share because we could go out and talk to this. So I would expect that in the other markets, we’ll see a similar impact from getting the label updated. With regards to [indiscernible] and withdrawal from the market, I think what we see in the GLP-1 segment is that it’s still a market with quite differentiated products. So unless you offer the efficacy level of Victoza, it’s really difficult to compete in my view. And it also – I think it’s a positive sign that even if you work with pricing and give steep rebates, you’re not going to penetrate the market because if the efficacy is not good, it’s simply not taking up. So I think that holds well for next year where we hopefully will be launching semaglutide, which by far is the GLP-1 with the strongest clinical profile and that should give continued growth of the GLP-1 market, but also a rebound of our market share. Jesper, you have one comment. Okay, so one final question.

Thank you. Our last question comes from Michael Leuchten from UBS. Please go ahead. Your line is open.

It’s Michael Leuchten from Barclays, sorry, from UBS. Just a question on the guidance for this year and then just looking at how your top line guidance and your EBIT guidance has changed. It clearly indicates that seeing stuff happen much quicker this year or much more extensively than you have planned at the beginning of the year. So just wondering if you could comment on what has really been driving that pace of change that you were after in terms of setup, in terms of structure, in terms of finance strategy, whatever it is, it just seems that is a remarkable change given that 6 months of the year have already passed.

But if I should end with that, the sales are great. What we do is relatively small upgrade. So to your point, it’s really the cost discipline in the company, and this is obviously something, as Jesper alluded to before, that we mobilized a year back, and Jesper also mentioned it’s something that has an impact over a couple of years time because these structural changes strength and moving positions from high-cost territory into our sales service center in India. There is a bit of lead time in that. But we have seen that the organization responds very well to our cost focus and across the board on cost. There is cost items we see as significantly lower spend. We have even seen a modest sales increase because of one-offs and price. If you look at the underlying volume growth or maybe approximately, that in a way we increase diabetes and obesity sales by 10%. So there is significant volume growth in our activity level that we’re delivering with basically flat cost level across the border. I think that’s a very strong sign that we have taken the right measures in terms of addressing the cost profile of Novo Nordisk. With that, I would like to conclude the conference call, and thank you all for participating. And feel free to contact our Investor Relations officers, and we look forward to meet quite a number of you on the road over the coming days. Thank you very much, and have a good day.

Thank you. And once again, ladies and gentlemen, that will now conclude today’s conference call. Thank you very much for your participation today. You may now disconnect.