Hello. And welcome to the Q4 2021 Novo Nordisk AS Earnings Conference Call. Throughout the call, all participants will be in listen-only mode. And afterwards, there will be a question-and-answer session. Today, I'm pleased to present Lars Jorgensen. Please go ahead with your meeting.

Thank you very much. Welcome to this Novo Nordisk Earnings call for the full year of 2021 and outlook for 2022. I'm Lars Norgensen, the CEO of Novo Nordisk. With me today, I have Executive Vice President and Head of Commercial Strategy and Corporate Affairs, Camilla Sylvest; Executive Vice President and Head of Product Supply, Henrik Wulff; Executive Vice President and Head of North America Operations, Doug Langa; Executive Vice President and Head of Development, Martin Holst Lange; and finally, Chief Financial Officer, Karsten Munk Knudsen. All presenters will be available for the Q&A session. Today's earnings release and the slides for this call are made available on our website, novonordisk.com. Please note that this call is being webcast live, and a recording will be made available on Novo Nordisk's website. The call is scheduled to last one hour. Please turn to the next slide. The presentation is structured as outlined on Slide 2. Please note that all sales and operating profit growth statements will be at constant exchange rates unless otherwise specified. The Q&A session will begin in about 25 minutes. Please turn to Slide 3. As always, I need to advise you that this conference call will contain forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For further information on the risk factors, please see the company announcement for the full year of 2021 and the slides prepared for this presentation. Please turn to the next slide. In 2021, Novo Nordisk delivered double-digit sales growth and progress on all 4 dimensions of our strategic aspirations. I would like to highlight a few today. Within purpose and sustainability, we continue to take action on our social responsibility strategy, Defeat Diabetes, with a focus on access and prevention. In 2021, we reached almost 35 million people living with diabetes with our treatments. More than 5 million of these received treatment through our Access and Affordability programs. From an environmental impact perspective, we have also progressed. In 2021, our CO2 emissions across operations and transportation decreased by 43% compared to 2019. Finally, to underline our commitment to offer an inclusive and diverse working environment, we launched a global gender diversity aspiration. The purpose of this is to achieve a balanced gender representation across all material levels by the end of 2025. Martin will come back to the specific key milestones within R&D, but I would like to briefly share my overall perspectives. By the end of 2021, we had ongoing Phase III clinical trials within all our therapy areas. 2022 will be an exciting year with multiple interesting readouts from our R&D pipeline. Following a productive partnership since 2019, we acquired Boston-based Dicerna Pharmaceuticals and its RNA interferon platform in 2021. Dicerna RNA interferon technology platform is complementary with Novo Nordisk's existing technology platforms. The acquisition supports our strategy of using a broad range of technology platforms across all our therapy areas. We expect to start clinical development with the first half in 2022. In 2021, we delivered double-digit sales growth, reflecting solid commercial execution across geographies as well as across diabetes, obesity and biopharm. Regarding the supply situation for Wegovy, Henrik will provide an update later. The commercial progress across all therapy areas will be covered by Camilla and Doug. Lastly, leaving financial to Knudsen - we are pleased with the sales growth of 14% and operating profit growth of 13% in 2021, both measured at constant exchange rates. With that, I give over the word to Camilla for an update on commercial execution.

Thank you, Lars. And please turn to Slide 5. In 2021, our total sales increased by 14%, and this sales increase was driven by both operating units with international operations growing 14% and North America operations also growing by 14%. GLP-1 sales increased 32%, driven by North America growing 25% and international operations growing 52%. Insulin sales increased by 1%, driven by 6% growth in international operations partially offset by a 9% sales decline in North America operations. The U.S. insulin sales declined by 9%, driven by lower realized prices and a decline in volume. Obesity care sales grew 55% overall. In International operations, Saxenda sales grew 52% and in North America Operations, Obesity care sales grew 57%. In the U.S., Obesity care sales grew 58%, driven by both Saxenda and Wegovy. Biopharm sales increased by 4%, driven by North America operations growing 6% and international operations growing by 3%. Please turn to Slide 6. In line with our strategic aspirations of reaching one third of the diabetes value market by 2025, our sales growth within diabetes care of 13% is faster than the overall diabetes market. Thereby, we have improved our market share by 0.8 percentage points to now 30.1%. The increase in flex GLP-1 growth of 32% and market share gains in both operating units. Currently, Ozempic has now been launched in 72 countries and Rybelsus in 29 countries. Please turn to Slide 7. In International Operations, diabetes care sales increased by 14% for the full year of 2021, driven by all geographies and therapy areas. Tier 1 sales increased by 52% in 2021. And Novo Nordisk remains the market leader in international operations with a GLP-1 market share of 58.9%, reflecting an increase of 5.2 percentage points compared to just 1 year ago. This is driven by share gains across geographies and overall GLP-1 share of growth in international operations of 74%. Please turn to the next slide. Biopharm sales grew by 4% in 2021. This was driven by a 6% sales growth in North America operations and 3% sales growth in international operations. Rare blood disorders grew by 9%, driven by uptake of launch products, Esperoct and Refixia as well as NovoSeven and NovoEight Specifically, hemophilia A products grew by 25%, hemophilia B sales by 25% and NovoSeven by 4%. Rare endocrine disorders sales declined by 2%. The decline in sales reflected [indiscernible] operations increasing by 5%, offset by North America operations decreasing by 12%. And now over to Henrik for update on the supply situation update.

Thank you, Camilla. Please turn to the next slide. Following up on the conference call in December 2021, I would like to provide you with an update on the Wegovy supply situation and our latest capacity expectations. I would like to start by recapping the situation. Put simply, Novo Nordisk produces the active pharmaceutical ingredients and thus the assembly and packaging in-house for Wegovy, while formulation and filling is now - for now done by a large contract manufacturing organization. In close collaboration with the CMO, we were on track to ramp up capacity and meet demand for Wegovy in the U.S. Unfortunately, as you know, the CMO received a 483 letter from the U.S. FDA, addressing cGMP issues at the production site for Wegovy syringas. Therefore, the CMO had to temporarily stop deliveries and manufacturing to correct the compliance issues. Since December, we have worked hard to optimize our internal capacity. Consequently, we now expect that our internal capacity in the first half of '22 will be close to the demand of around 20,000 weekly total script as seen in the U.S. market in the end of '21. This is an improvement compared to the previous communicated 60% to 90% range. While the CMO has yet to resume production, we see good progress and have a constructive collaboration in place and still expect that we will be able to meet U.S. demand for Wegovy in the second half of '22. Outside of the U.S., we have submitted the already existing PDS290 platform for regulatory review in the European Union. And expect a decision in the second half of '22. Working with 2 platforms will provide additional flexibility for future launches. With that, I would like to hand over to Doug.

Thank you, Henrik for that update. Please go to the next slide. Globally, Obesity care sales increased by 55% with 57% growth in North American operations and 52% in international operations. The U.S. launch of Wegovy has illustrated the significant unmet need for people with obesity. And as Henrik mentioned, we are doing everything we can to resolve the supply issues as fast as possible. Consequently, sales and marketing activities have been put on hold until there is sufficient supply to ensure patients can escalate through each of the 5 doses. Since year-end, the launched co-pay cards for Wegovy can no longer be activated. And combined with pause sales and marketing activities, we do expect to have fewer weekly new patient starts compared to the fourth quarter of 2021. Despite the supply challenges, the feedback from patients and prescribers continues to be very encouraging. And we remain confident that the long-term potential of Wegovy is unchanged. Currently, Wegovy has around 22,000 scripts per week and more than 70% of Wegovy prescriptions are still new to the anti-obesity medication class. Thereby, Wegovy is expanding the branded anti-obesity market. Market access has progressed since the launch of last year. And in record time of less than 6 months, we have reached Saxenda like access. Specifically, commercial formulary access for Wegovy is now more than 70% and importantly includes all of the major PBMs. Please turn to the next slide. The U.S. GLP-1 volume market growth is around 30%, comparing Q4 of 2021 to Q4 of 2020. And this is driven by once weekly injectable GLP-1s as well as Rybelsus. Novo Nordisk's new-to-brand market share leadership is now 63.9%, driven by the continued uptake of Ozempic and Rybelsus. Importantly, Ozempic remains the NBRx market share leader within injectable GLP-1s. Measured on total scripts, Novo Nordisk remains the market share leader, with more than 50% market share. Please turn to Slide 12. The global rollout of Rybelsus is progressing well and has now been launched in 29 countries. In the U.S. Rybelsus's total prescription trajectory continues to steadily increase, currently at above 45,000 prescriptions per week despite the impact from COVID-19 since launch. In 2021, Rybelsus was the second largest contributor to growth in Novo Nordisk, with its attractive clinical profile and early positioning in the type 2 diabetes treatment cascade. We are encouraged by the weekly increases in breadth and remain confident in the potential of the product. Outside the U.S., 1 of the key markets is Japan. Here, Rybelsus has now reached a 2.6% value share in the modern oral anti-diabetic market. In December of 2021, the 14-day prescription limitation was lifted, and we have already seen a jump in performance. Recall that in Q3 of '21, Rybelsus in Japan had reached a 0.9% MOAD value market share. Now over to Martin for an update on R&D.

Thank you, Doug. Please turn to Slide 13. Our 2021 ended on a high note in the R&D space. Within biopharm, we reached 2 exciting milestones during the fourth quarter of the year. The first was the successful completion of the 52-week Phase III trial with Sogroya, a 200 children suffering from growth hormone deficiency. The trial met the primary endpoint of non-inferiority in high velocity for once weekly Sogroya compared with once-daily Norditropin. The expectation is to submit Sogroya for regulatory approval for the treatment of growth hormone deficiency in children during the first half of '22. The second milestone was the successful completion of the first cohort of the multiple ascendant dose part from the ongoing Phase I/II clinical proof-of-concept trials Mim8. In the trial, Mim8 appeared safe and well tolerated, both pharmacokinetic and pharmacodynamic properties supporting once weekly as well as once monthly dosing. For the pivotal Phase III trial, one was initiated in the fourth quarter of '21. And we expect initiation of active Mim8 treatment in the second half of '22. We plan to share further details on both the Phase I/II results as well as the Phase III program at an upcoming event. Finally, and in line with our strategic aspiration of further raising the innovation bar for diabetes related treatment, we have initiated the first of 3 trials in the global Phase IIIa combined program for Icosema, a once weekly combination of semaglutide 1 milligram and insulin Icodec. The program is expected to enroll 2,650 people in total, all with type 2 diabetes. The first trial to be initiated as combined free, which is a 52-week trial, investigating the efficacy and safety of once weekly Icosema versus insulin basal bolus treatment in approximately 680 people with type 2 diabetes. The entire combined program is expected to complete during 2024. In Phase III, it is expected that Icosema will show superior efficacy versus motor components as well as attractive data on weight and hypoglycemia profiles combined with similar glycemia control. Furthermore, it will offer a dramatically improved convenience versus insulin-based bolus treatment in patients with type 2 diabetes. Now please turn to the next slide. Turning to the high-level R&D milestones, 2022 is a year with many exciting trial readouts across our therapy areas. However, before I get to that, I would like to touch upon milestones from the fourth quarter of '21 that I did not cover. Within diabetes, semaglutide 2 milligram was approved in the EU for the treatment of adults with type 2 diabetes based on results from the SUSTAIN FORTE trial. In the trial, people treated with semaglutide 2 milligram achieved a statistically significant and superior reduction in A1C at 40 weeks as compared to semaglutide 1 milligram. A decision in the U.S. is expected during the first half of '22. In addition, we initiated a 34-week Phase II trial comparing the effect of on glycemic control and body weight of a fixed dose combination of semaglutide and a once-weekly GIP analog compared to placebo as well as semaglutide 1 milligram in people with type 2 diabetes. Now turning to 2022. We also reached an important obesity milestone with the approval of Wegovy in the EU based on the STEP Phase IIIa clinical trial program, thus addressing the significant unmet need for people with obesity also in the EU. We look forward to making Wegovy available to many people living with obesity in Europe. And to prioritize short term internal production capacity for Wegovy, the initiation of the Cagrisema Phase IIa program will be postponed to the second half of '22. I would like to end by highlighting a few additional expected R&D milestones for '22. Within diabetes, we expect results from the ongoing Phase IIIa trials with Icodec and Phase II trial with Cagrisema in type 2 diabetes. Within biopharm, we expect results from the ongoing Phase IIIa trial with Concizumab in the first half of '22. And finally, we expect to initiate a Phase II trial during the first half of '22 for PRX004 for the treatment of ATTR cardiomyopathy. This was the asset that we acquired from Prothena during '21. With that, over to you Karsten

Thank you, Martin. Please turn to the next slide. In 2021, sales grew by 11% in Danish kroner and by 14% at constant exchange rates. The gross margin declined to 83.2% compared to 83.5% in 2020. The decline reflects a negative currency impact of 0.2 percentage points, lower realized prices in the U.S. and amortization of intangible assets related to the acquisition of Emisphere Technologies in 2020. These are countered by a positive product mix, driven by increased GLP-1 sales and productivity improvements in line with the strategic aspiration of driving operational efficiencies. Sales and distribution costs increased by 12% in Danish kroner and 15% at constant exchange rates. The increase is driven by investments in our key strategic priorities, most notably launch activities and promotional spend for Rybelsus and Ozempic as well as market development activities for obesity. This is partially offset by lower promotional spend related to insulin. Research and development costs increased by 15% in Danish kroner and 16% at constant exchange rates. The increase is driven by pipeline expansion and diversification, including progression of the pipeline within cardiovascular disease and NASH. Administration costs increased by 2% in Danish kroner and 4% at constant exchange rates, impacted by low spend in 2020 due to COVID-19. Operating profit increased by 8% in Danish kroner and 13% at constant exchange rates. Net financial items for '21 showed a gain of DKK436 million compared to a loss of around DKK1 billion in 2020. The gains on hedge currencies primarily relate to the U.S. dollar. The effective tax rate was 19.2% compared with an effective tax rate in 2020 of 20.7%. This mainly reflects a non-recurring impact from acquisitions in 2020 and 2021. Net profit increased by 13% and diluted earnings per share by 15% to DKK20.74. Free cash flow was DKK29.3 billion compared to DKK28.6 billion in 2020. The increase is driven by higher net profit and higher provisions for rebates in the U.S., partially driven by a changed distribution policy for the 340B program. The increase is partially offset by unfavorable impact from changes in working capital. Next slide, please. In 2021, Novo Nordisk returned approximately DKK41 billion in the form of dividends and share buybacks to shareholders. At the Annual General Meeting on March 24, '22, the Board of Directors will propose a final dividend of DKK6.09 for a total 2021 dividend of DKK10.40, a 14.3% increase from 2020. In addition to the dividend, DKK20 billion was used for the repurchase of shares. Novo Nordisk consistently returns it's free cash flow to investors through share buybacks and dividends, with dividends per share increasing for 26 consecutive years. For 2022, the Board of Directors has approved a new share repurchase program of up to DKK22 billion to be executed during the coming 12 months. The total program may be reduced in size in case of significant business development transactions during 2022. Please go to Slide 17. We enter 2022 with a solid growth momentum and expect the sales growth to be between 6% and 10% at constant exchange rates. The guidance reflects expectations for sales growth in both International Operations and North America operations and across therapy areas, but it's mainly driven by diabetes and obesity care. Within obesity care, the guidance reflects an expectation of meeting demand for Wegovy in the U.S. in the second half of 2022. It also reflects intensifying competition within both diabetes care and biopharma as well as a negative impact from volume-based procurement of insulin in China. We have previously called out that VBP in China would impact group sales negatively by 3 percentage points in 2022. Finally, continued pricing pressure within diabetes care, especially in the U.S. is expected to negatively impact the sales development. Operating profit is expected to grow between 4% and 8%, reflecting the sales growth outlook and continued investments in current and future growth drivers. This includes the continued rollout of Ozempic and Rybelsus, the launch of Wegovy and associated market development investments. Furthermore, additional resources are being allocated to both early and late-stage R&D pipeline activities. Specifically, the acquisition of Dicerna Pharmaceuticals is negatively impacting operating profit growth by around 3 percentage points. Given the current exchange rates, most notably the strengthening of the U.S. dollar, we expect a positive currency impact for 2022. Consequently, our reported sales and operating profit growth is now expected to be 5 and 7 percentage points higher than at constant exchange rates, respectively. The positive currency impact on operating profit is partially offset by a net loss on financial items for 2022 financial items are expected to be a net loss of around DKK2.8 billion, mainly reflecting losses associated with foreign exchange hedging contracts. Capital expenditure is now expected to be around DKK12 billion in '22. The expected increase mainly relates to investments in additional active pharmaceutical ingredient capacity at existing manufacturing sites, reflecting increasing demand and pipeline progress. Lastly, free cash flow, excluding potential major business development activities is expected to be between DKK50 million and DKK55 billion. The increase compared to '21 reflects the impact from the acquisition of Dicerna Pharmaceuticals in 2021. That covers the updated outlook for '22. Now back to you Lars, for final remarks.

Thank you, Karsten. Please turn to the final slide. We are very pleased with the double-digit sales growth in 2021. This growth was driven by all geographical areas within International Operations as well as North America operations and by all therapy areas. In particular, sales growth was driven by an accelerated growth of our portfolio of GLP-1 treatments for diabetes and obesity care. And we continue to reach even more patients. Finally, I would like to remind you of the upcoming Capital Markets Day that will be held on March 3 at our headquarters in Copenhagen. At this full day event, executive management and other senior executives will be present. The CMD will focus on our growth outlook with and beyond semaglutide and our 2025 strategic aspirations. We hope to see many of you in person. But as usual, the event will also be webcasted live. With that, we're now ready for the Q&A. I kindly ask all participants to limit her or himself to one or maximum two questions. Operator, we're now ready to take the first set of questions.

And the first question comes from the line of Wimal Kapadia from Bernstein. Please go ahead.

Thanks very much for taking my question. Wimal Kapadia from Bernstein. So can I first just ask on Wegovy supply. Clearly, there's been some positive movements for 1H both from internal capacity and some additional batches released from the CMO. So my question really is on your internal supply capacity, the potential additional CMOs that may be brought on board and the possible new EU device. Has your views really changed on what that means from a supply perspective, ex the larger Catalent [ph] supply, i.e., do you have conviction that you can increase supply in 2H regardless of Catalent? And if so, to what extent able to quantify? And just tied to that, any potential for the FlexTouch and for Wegovy to be filed in the U.S. or use more broadly internationally. And then my second question is just on the supply impact on reimbursement. So you flagged Wegovy has a similar access to Saxenda. Curious if these discussions have been impacted by your inability to supply greater volumes? Would coverage have been superior at this point if you had to supply or are the negotiations and the opt-ins unaffected? Thank you.

Okay. Thank you, Wimal. I think you managed to sneak in. I have 3 questions there, but we'll try to cover it anyhow. So if Henrik wants to talks a bit to the supply situation, what is we've done internally and how are we ramping up? And has that really changed much? And then Camilla, you can maybe talk a bit to the FlexTouch flexibility we are building. And then Doug, you can talk to where there's been any impact on reimbursement because of the events here. But then like first on how we look at ramping up the global supply.

Sure. Thank you, Lars. Thank you for the questions. So first of all, on our internal capacity, we have reshuffled our internal capacity so that we are able to hold the demand out of '21, as I stated, and that is the limitation of that capacity. We will be back following the demand in U.S. in the second half of '22 with the restart in the CMO facility. And then, from there on, we will continue building this supply chain. So it will be as mature and stable as our other supply chains. So it's basically unchanged plan compared to what we communicated in December.

Good, thank you. Am I confident there? Camilla on the FlexTouch optionality we're building?

Yeah. So the FlexTouch optionality, we are building for international operations is just to make sure that we have increased flexibility on the rollout of Wegovy. And right now, our launch plans are being developed, and we expect to initiate the first launches in the second half of 2022. So of course, we very much look forward to that part. So I think that's why we are now in international operations.

And I think it was also a question on U.S. So we believe we have the right setup for U.S., and we'll press on with that. And we think we'll have robust supply situation there. So no reason to change there of course. And then Doug, on the reimbursement impact, if any?

Yeah. Thanks, Wimal. We're certainly dealing with any concerns that a payer may have. And that has not impacted access. And just to reiterate, we have more than 70% access with all major PBMs. And to put that into context, that was access that was achieved faster in our commercial business than if we compare it to Ozempic or Rybelsus. So we're very pleased with the level of access right now.

Thank you.

Next set of question, please?

The next question comes from the line of Michael Leuchten from UBS. Please go ahead.

Thanks so much. Two questions, please, I think both for Karsten. Just the rest of the guidance, you've left it a little bit wider again this time around than you would have done in the past. I'm guessing the biggest style is just Wegovy timing, but just wondering if there's something else that would have driven the word lighter than maybe in the past. And then second question about longer term margin trajectory. Just looking at your guidance for 2022, it looks like you're pointing towards a high single-digit billion Danish increase in OpEx excluding cost of sales. Given it's a year where Wegovy comes in the second half, can you help us understand how that fits with your longer term margin aspirations of flattish trajectory? I would have thought sort of high single-digit billion OpEx increments, Wegovy could really make up for quite easily once it gets going. So does that still hold flattish margin trajectory and sort of what are the components that will keep it flattish? Thank you.

Thank you, Michael. So asking two questions on the rest of maintenance perspectives on margins linked to OpEx.

Yeah. Thank you, Michael, for that set of questions. So first on guidance, you could say our guidance range is not unusual compared to what you've seen from Novo Nordisk in previous years, if you go back in time. And yes, of course Wegovy, there's still some uncertainty. But as you can hear on Henrik, we are confident in our plans. But of course, we need to leave some flexibility in our guidance range should not pan out exactly as it's planned for. So apart from that, I would say it's business as usual. But of course, we also learned from 2021 that there is more volatility in the demand outlook we're facing. We are upgrading 3 times last year, and I think we want to be more accurate, but it also reflects that volatility is higher than it was in the old days. As to your question on OpEx and margins, then the short answer is yes, we stick to our broadly unchanged operating margin that I launched at the Capital Markets Day in late '19. And the way you should reconcile our '22 numbers is basically that - first of all, that we are continuing to invest in driving top-line. We've shown - I hope you agree, we've shown in '21 that our aggressive top-line investments have paid off with the results we're delivering. And then we're building future growth platforms in R&D, so really expanding and diversifying our R&D pipeline. So the dip in '22 is related to Dicerna. And as we are saying 3% negative impact on OP from Dicerna. And as you can see in our guidance, actually we've already mitigated 1% of the 3% in our guidance. So that's something that we're working diligently on.

Thank you, Karsten. Thank you, Michael. Next set of questions please?

The next question comes from the line of Sachin Jain from Bank of America. Please go ahead.

Hi, there. Sachin Jain. Thanks for taking my questions. Two, please. First, just a follow-up for cash flow guidance and then secondly for Henrik on the 483. Just to clarify the commentary on the guidance costing what GLP-1 growth scenario is included in the guide? Do you still expect a normalization of that growth rate, which is not necessarily visible as yet? And I just wanted to clarify your commentary on Wegovy supply. So just to be clear, there's the bottom end of guide include a scenario where there's no supply resumption? Or is that not a scenario? I just want to be clear as to what's included in the bottom end guide on Wegovy 2H? And then for Henrik. Does the 2H supply to meet demand time in the way you would it allow for time lines for assembly, packing freight and then whatever assumptions you've got on the demand curve, with production expected to resume before 2H. I'm just trying to get a sense of how close you are to production resuming? And what visibility you have on that to be as confident as you are stating today? Thank you.

Thank you, Sachin. Karsten, first on the guidance and the GLP-1 growth scenarios. I don't know how much clarity you can bring on that?

Yeah, absolutely. So forecasting market growth is more an art than a science. I'd say, looking at the market growth data historically. But as you can see in the data available externally also, the GLP-1 market growth on a global scale is to the tune of 30%. And we're taking market share. So really, really rapid growth of our GLP-1 franchise. And of course, we expect very attractive GLP-1 market growth to continue into 2022. My normalization comment 6 months ago was more related to the step-up we saw in Q2 in the U.S. where there was - I would say, a more kind of a nonrecurring step-up in TRx over a few months. But I'd say since early Q3, we've seen a more stable pattern in total scripts. So that was basically the normalization I've been talking to. And then guidance versus Wegovy, the guidance is built on Wegovy relaunch in the U.S. in the second half of 2022.

Thank you, Karsten. And then Henrik on - say restart of manufacturing, and when we expect products will be in the market and linked to that?

Yeah. So back to my slide presented, it's clear that we, of course, want a certain level of operational stock. And we also need time to assembly and pack the devices in our internal capacities. So - and as we are planning to follow the demand in U.S. in the second half of '22, then it will be quite logical that we need output from the CMO in second quarter of this year.

Good. Thank you, Henrik. Thank you, Sachin. Next set of questions please?

The next question comes from the line of Richard Vosser from JPMorgan. Please go ahead.

Hi. Thanks for taking my questions. On VBP in China, it looks like from your numbers, there was maybe some destocking in Insulin in Levemir, NovoMix and NovoLog in the fourth quarter. Can you talk to whether there was any inventory movements ahead of VBP? Whether we should anticipate those in Q1? And how we should think about the shape of implementation of VBP throughout this year? And then second question, just on the Cagrisema delays. Obviously, prioritizing manufacturing is important for the commercial launch. But - could you talk about - I think there were some issues with the pen with Cagrisema. Have those been solved so that as soon as you have manufacturing, we can think about those trials ramping up? And should we now think about a launch of Cagrisema maybe in '25? So just some thoughts on Cagrisema? Thanks very much.

Thank you, Richard. Karsten, first on VBP. China, any stocking?

So on the China numbers that I'm sure you alluded to with the 5% growth in the quarter. When you look at the Chinese numbers, you should be used to having some volatility on a quarterly basis. There are a number of confounding factors between different products be that import licenses whatever shipments to distributors and so on. So there's no destocking to wholesalers. And we continue to supply wholesalers with our insulin products as we've done all along.

Thank you, Karsten. And on Cagrisema and your comment about a small delay in initiation of that to prioritize supply. We are really pleased with our portfolio of both products and pipeline in obesity. And I think there's a tremendous opportunity. So we don't really regard this delay as something that's significant. But Martin, can you talk a bit to the device. And while I don't think we guide on when we launch products a bit perspective on the clinical trial program?

Absolutely, just reflecting what Lars said. We obviously still see Cagrisema as a very important product in our pipeline with great potential. Specifically on the device, obviously, it's a new device, but we are ready with that device. And it will be supplied for the clinical trials. And the current weight until second half of '22 is basically prioritizing Wegovy production. That being said, obviously, we and my team are now tasked with securing that we will still look towards no overall delay. And therefore, we maintain that our overall time lines will sort of be kept.

Thank you, Martin. Thank you, Richard. Next set of questions, please?

The next question comes from the line of Simon Baker from Redburn. Please go ahead.

Thank you for taking my questions. Two, if I may. Firstly, on the Wegovy contract manufacturer issue. I'm not sure the question is cropped up before about any potential compensation that you have either received so far or are potentially entitled to, should there be any further delays. So wondering if you could just give us some color on the situation there? And then secondly, on sales and distribution costs in the fourth quarter, I assume that there was some offset from delayed launch activity related to with Wegovy and yet the sales and distribution costs were somewhat higher than we've expected. So if you could just give us a little bit of color on if there was an offset there? And what that means for levels of sales and distribution in 2022? Thank you so much.

Good. Thank you, Simon. So on the Wegovy CMO issue, we have a good collaboration with the CMO. We think they are very confident and competent in what they do despite the unfortunate situation. And we are not making a bet on any say, significant compensation or the like. So we have a good strategic partnership that we are investing in also for the long-term. Karsten, on S&D in Q4 linked to the delay?

Yeah. So it was really bad timing with the delay because we've just been training our reps and then being ready to roll. So in reality, we spent what we planned to spend in Q4. We didn't really have any offsets vis-à-vis the Wegovy launch since it was a lot of launch preparations were pending. So I said that the Q4 spending was not, in any significant form, impacted by the Wegovy supply situation, which we also learned about very, very late in December. So our Q4 spending is just a continuation of investing in our diabetes GLP-1 and our obesity franchise on a global scale to drive growth.

Thank you, Karsten. Thank you, Simon, Next questions, please?

The next question comes from the line of Peter Verdult from Citi. Please go ahead.

Thank you. Also two questions for Martin on R&D. Just on the HBV Alpha-1 and alcohol used to sort of Dicerna programs. How should we think about these fitting into your R&D portfolio and strategy going forward? And then secondly, we're hearing from KOL checks that Sole and Flow [ph] could actually read out at the very end of this year or early next. Just wanted to sort of check with you on that because that surprised us to the upside. And then just perhaps on SELECT. Can you remind us when you expect to see an interim readout this year based on the event rate you're seeing in that trial?

Thank you, Pete. Two exciting questions, Martin?

Two very interesting questions. Thanks a lot, Pete. On your alcohol abuse and specifically on the Dicerna pipeline, it's obviously early days and - but you'll see that we are still looking at the individual assets and evaluating how to progress them. Specifically, we know that we are going to progress endorsement [ph] towards first, regulatory submission later this year. But beyond that, it's probably too early to go into details. With regards to our two outcomes trials, we are obviously monitoring the situation. We all hope for an upside of early readouts. I have to disappoint you and - to the extent that as per plan Sole and Flow will not read out this year. We have not seen neither higher nor lower event rate than what we anticipated, and that basically means that we have to run the course of the story. And on SELECT, we are still monitoring the situation, and we will inform course if and when an interim will take place.

Thank you, Martin. Thanks, Pete. Next set of questions, please?

Next question comes from the line of Simon Mather from BNP Paribas. Please go ahead.

Thank you for taking questions. The first one is just a clarification actually on Richard's question. Karsten, can you maybe comment with respect to BBP, it hasn't kicked off yet - and if not, when should we expect that to kick off? And is that one of the - obviously, the driving factors between the wider range of the guidance if it's much, much lower in the year, therefore, you're more likely to hit the top end of the guide? And then secondly, probably one for Martin, just on your semaglutide Phase II trial. Can you maybe just discuss a bit more of that and with respect to the doses that you're exploring? Is it just a 1-mg sema change in the dose of the GIP component, just thinking clearly if sema had a few little bit of delays and the importance of this product to fend off tirzepatide and arguably increases in importance? Thank you.

Thank you, Simon. First, Karsten, on timing of VBP?

Yeah. So timing of VBP, we've been informed that we should expect an implementation from May. And so that's our working assumption. And I wouldn't say it impacts guidance substantially if it's plus/minus a month or so. But of course, the guidance is impacted of that we don't know the exact implementation of VBP in terms of how volumes are allocated and how the different hospitals will use some of their free volumes in the marketplace between manufacturers. So that, of course, entails some uncertainty in terms of the specific impact from VBP.

Thank you, Karsten. And Martin, on semagabe trial design doses?

Yeah. Maybe taking a step back because I don't necessarily see Semaglutide as a response to [indiscernible]. We had some enzyme, 1 milligram we have semaglutide 2-milligram and looking at the totality of efficacy and safety. I think, in and of itself, semaglutide is a very attractive offering, bringing more than 80% to target in a safe and tolerable way. That being said, obviously, we want to explore semagabe. But in the sense of being a superior offering with the superior GLP-1 component, but also the superior GIP component. We are exploring different doses and different strength combinations in our Phase II trial and too early to go into detail.

Thank you, Martin. We clearly believe we have a strong position there. Thank you, Simon. Next set of questions, please?

Next question comes from the line of Michael Novod from Nordea. Please go ahead.

Yeah. Hi. I got two questions. So first of all, maybe you can talk a bit about the obesity dynamics for the quarter. Because, of course, we don't have the split out between Wegovy and Saxenda [ph]. Just trying to understand obviously, you had strong growth, but it was still below sort of what the street had expected. So understanding the impacts on Saxenda, potential volatility also in international operations. And then secondly, regarding the launch of - or the continued launch of Ozempic in China and also listing on the NRDL. So maybe you could give a bit more color on your sort of strategy in China? And when you expect sort of a true lift off for Ozempic in China?

Good. Thank you, Michael. Clearly, a strong obesity performance in 2021. And I don't think one should get hung up in quarterly deviations. We're really pleased with what we see in international operations. The fact that we can grow above 50% based on Saxenda, and then of course, in the U.S., we had a very exciting launch of Wegovy and clear that opens people's mind up for what is a potential Wegovy and - although we'll be prioritizing Saxenda, everybody is waiting for Wegovy. So I don't think we can say much more about our performance there. And then Camilla on launch of Ozempic in in China?

Yeah. Launch of Ozempic in China very exciting. We now are on the NDRL and that basically means that very, so to say, underexploited GLP-1 market now also has simply there to drive further growth. And there is of course, a big opportunity to have more patients with type 2 diabetes exposed to once weekly GLP-1. And [indiscernible] margin was referring to. So for us, that's very exciting and a big focus of ours.

Thank you, Camilla. All markets have been really embracing Ozempic so far. So we have high expectation for China, like any other markets. Thank you, Michael. Next set of questions, please?

Next question comes from the line of Kerry Holford from Berenberg. Please go ahead.

Thank you. Two questions please. Firstly, on the generic challenges you mentioned today in your press release. So you highlight 4 companies that can show you the patents. We understand that the 7 in total with the FDA, I wonder if you can comment on that. And also, what the next steps of you here? And given those filings come the drug substance patent, how concerned we would be about the potential read across 2 obese and with Wegovy patent states? And secondly, a question, Karsten, for you on M&A. You mentioned this in the context of share buyback program flexibility. Is it fair to conclude, therefore, you do have appetite for more here post- Dicerna? What you focus on - next or platform technology or more products and to satisfy acquisitions that are [Indiscernible] please? Thank you.

Thank you, Kerry. And if I start out on the challenge of Ozempic, this is basically exactly after a textbook. So there's a certain window after launch where you can attack patents and there is a defined route for doing that. So we were kind of waiting to see who would be the first. So we have been notified of the ones mentioned in the annual report. I don't think we have visibility on the remaining up to the number of 7, which I understand FDA has disclosed. So this is standard process. And we are very confident in our patents on semaglutide, and that goes for all the use of that molecule across indications. Karsten, on M&A appetite?

Yeah. So I would say we have always appetite for attractive assets into our R&D pipeline, whether it's internal or whether it's from external sources. So that's of course, the premise, assuming it fits our strategy and our focus. We have the capacity, you can see our balance sheet. So we have a leverage rate of zero, if you take net debt to EBITDA. So we have plenty of capacity to pursue the assets that would be out there. And vis-à-vis our commentary on the potential of scaling back our share buyback program. What you have seen over the last couple of years has been given the attractive level of cost of financing that we are out funding in the market more so than rolling down our share buyback program. So that's our capital allocation approach to continue to provide attractive capital allocation to our shareholders. As to the targets we're looking at, I'd say we continue to - of course, look for relevant technology platforms. So in the very early space that could supplement the disease areas in which we compete. And then we're looking at early and mid-stage assets across the therapeutic categories where we compete again. And of course, the assets will have to fit a set of criteria whether it's, I would say, commercial attractiveness, innovation, high safety parameters, financial attractiveness, et cetera. So we have the classic business development funnel. And a lot of tariffs we're looking at all along. And then from time to time, we succeed and get some assets in the door which we like.

Thank you, Karsten. Thank you, Kerry. Next set of questions, please?

The next question comes from the line of Mark Purcell from Morgan Stanley. Please go ahead.

Yeah. Thanks very much. Two questions. First on this flattish operating margins out 2025. Is that conditional going back to a couple of earlier questions on PED [ph] adding R&D platforms to the existing group? And in context with your peer group where R&D spend is in the high-teens, low-20s. How high should we expect R&D spend as a percentage of sales to go? And then the second question on Cagrisema. One of your competitors in December talked about how the signals around sort of calcitonin activation antidrug antibodies, injection site reactions and things like that. So when should we see more with respect to those safety aspects? When should we get the 40-week data, for example? And should we assume that you're now more positive on sema GIP as opposed to Cagrisema? Thank you.

Thank you, Mark. First, a question on operating profit margin and the PD impact and what to expect about R&D ratio?

Yeah. So thanks for that set of questions, Mark. Yes, our commentary stands broadly unchanged operating margin since our last Capital Markets Day towards 2025. Of course, can we end up in a situation where there's a specific PD opportunity that has a more sizable impact on our margins then we'll deal with that at that point in time. It's impossible to cater for every possible scenario into the future. And should such an opportunity come up we would not be stopped by kind of a one-off type of margin impact if the opportunity is the right one. But for now, clearly we stick to our broadly unchanged operating margin. As to R&D ratio, you should expect that to increase overtime. You'll see - you already see a decent increase in '21. You'll see even further increase come 2022 and the Dicerna impact. But I think more importantly than looking at the margin, then you should look at how much we are actually able to increase our investments into R&D, both the development side and on the research side, given the fact that our top-line is growing at the pace it is. So kind of the main funding mechanism to our R&D organization and expanding and diversifying our pipeline currently is in reality top-line growth.

Thank you, Karsten. A powerful model. Martin, on Cagrisema. Clearly, we are moving ahead from a position of shrink. And we have 2 assets, it's not a defensive play. But what can you say about?

So on Cagrisema, I think it's fair to state that we are very, very confident on Cagrisema, including on the safety of Cagrisema. I'll remind you that we have two clinical trials too, based on that one being in monotherapy, 26 weeks of exposure in doses exceeding those we intend to take into Phase II. And second, in combination with semaglutide 20 weeks also in doses exceeding those we intend to take into place. In both trials in monotherapy, in combination therapy, [Indiscernible] or our amylin analog proved to be very safe in that exposure time frame, which is again up to 26 weeks. And we - when we combined, it looked at a safety profile that was similar to that of semaglutide in monotherapy. So from our perspective, what we've seen so far is a safety profile that is very, very robust. And as you've all obviously seen before, also an efficacy profile that is more than robust. It's super competitive. And therefore, our confidence in the cage molecule is very, very high.

Good to hear, Martin, very encouraging. Thank you. And thank you, Mark for the questions. And we have time for final set of questions.

The final question comes from the line of Martin Parkhoi from Danske Bank. Please go ahead.

Absolutely. Excellent. Martin Parkhoi from Danske Bank, a couple of questions. And I think I will point them all towards Doug and North America. First of all, Doug, when I remember, when I look back at the Capital Markets Day in 2019, one thing that I stance as a highlight for me was the quite muted outlook for North America and a willingness to guide towards 25% on U.S. while you did that on international operations. Now the muted outlook was not really panning out with 14% this year. What are you actually seeing for the outlook for North America after - for the next couple of years? And in that context, maybe you can maybe also address what kind of dynamics you think will - we will see in the U.S. GLP-1 market after the launch of tirzepatide? We have always seen that a new launch will push the market upwards, but we are at a very high rate already and from a much larger base. So will this be much more about market share than a further market expansion? I'll keep it to that. Okay, thanks.

Thank you, Martin. Doug, perspectives on growth in the U.S. while we don't guide on the future per market. But clearly, a step-up in growth compared to what we - perhaps looked at in '19?

Yeah, Martin, and I don't want to disappoint you again, but we're not going to guide on U.S. then or today. But I would say this, I mean, we talked about the transformation of the U.S. business back at the Capital Markets Day. And we talked about our ability to transform the business from what was some legacy products and reinvest into what we were considering novel products or newer products from 2015 on. And the aim or ambition was to transform 70% of the business. We're at about 60%, and our goal was to do that by '22. And we're very encouraged to believe that we can hit that goal by the end of this year. What you'll see in the short term is continued growth around semaglutide, which will come in the form of both obesity and diabetes. We feel very good about how we're progressing with our NBRx, our ability to take share. There is consistent volume growth across the portfolio. And again, we're very pleased with how things are progressing there. And we expect them to continue this year. As far as tirzepatide [ph], like we mentioned back at capital markets in 2019, when products are getting introduced into this space, which still is roughly 10% of prescriptions, maybe 30% of the value. There's still plenty of room for patients to get on GLP-1. So we do believe that the introduction of additional product can bring further expansion of the category. It will be a competitive product, and I'm sure they're going to be competitive - they'll bring competitive muscle and marketing muscle. But we believe we have a great momentum with Ozempic, the potential of further products being offered. And we also have a portfolio approach. So we feel pretty good about where we are.

Good. Thank you, Doug. Clearly, Ozempic is a molecule you can go to and it delivers for also will not be the easiest product to compete against. Thank you, Martin. And with this, we'll close our earnings call today. We look forward to meet you again sometime in the future. Have a great day. Thank you. Bye-bye.

This concludes our conference call. Thank you all for attending. You may now disconnect your lines.