Novo Nordisk CEO on Wegovy, Ozempic Supplies and Pricing

Joining us now, I’m pleased to say we have Lars Frogard Jorgensen. He is the CEO of Novo Nordisk out with earnings today. And obviously a lot of questions, a lot of focus on production and on capacity. It seems like you still have the very happy problem of having more demand than you do supply, something that you expect to see gradual improvement over the next year or so. But if you can give us a little bit more color on when we’re expected to see that improvement, expected to see more supply arrive in the US, that would be very helpful. Yeah. Thanks for having me back. And you are right, this is a key topic for us and I would actually point to some clear evidence. We saw that when we started the quarter we were down to some 56000 new patients start on a weekly basis. That has now increased to some 27,000 new starts on a weekly basis. So that we that’s really the proof point that we are scaling up the number of of products we bring to the market and we have a a policy of making sure that when we bring patients onto treatment they can also stay on treatment. So we can assume that we also have the higher doses available now, so we can actually titrate patients up to that. And this is what has happened say through the first say four months of the year, so to say. And we will gradually be expanding manufacturing throughout the year and also into coming years. So we are committed to bring our innovation to more and more patients on a greater on a gradual basis. Let’s talk about manufacturing a little bit more. Obviously earlier this year you purchased Catalent to help boost your efforts there. You also said that you’re doubling your investment in manufacturing capacity this year to about $6.4 billion. And I’m curious where that money will be spent, whether we’re talking about the final fill finish stage or actually boosting capacity manufacturing of your active ingredient. Where do you see the biggest constraints? Right now we are doing both. So over the past few years, we have made a couple of commitments to expand our API capacity. That’s primarily done in our big sites here in Denmark. And then to complement that, we are adding will finish capacity, we do that on all our existing sites, but we also do that will contract manufacturers. And it’s in this context our acquisition of three full finish sites from new holdings who are then acquiring Catalent is an important transaction for us. And that’s really part of this all ramp of capacity and we’re really excited about what this brings of opportunity to treat millions of more patients in the coming years with that ramp up in capacity. There’s an added cost that comes with that. Lars, what’s the balance between those added costs and your own pricing power longer term? Well, I see it like this that when we ramp up capacity, we actually bring scale into manufacturing. That’s an opportunity to bring down a unit cost and also over time serve many more patients. And typically when you add more and more patients, you also add patients that come at a lower, say, cost because different channels have different price points. So I think it’s a great opportunity of us to bring innovation to more and more patients, the benefit to the healthcare systems of treating those patients, but obviously also a continued growth opportunity for no Nordisk and I think that’s actually a wonderful model where we can benefit society, the NVIDIA patients what also bring growth to our company. What are your unit costs right now for Ozempic and Mugovi? Well, we don’t disclose those. You can see our our say post of of goods sold in our accounts. There’s been some talks in the market about what the cost of producing our products. I think those numbers are not correct. Those are perhaps reflecting some of the direct input cost, but it does, they do not reflect the massive investments you need to do into both running quality systems and actually building these facilities that’s that’s needed. So it’s massive billions of dollars that we invest into capacity to bring our invasion to patients. I understand that. I mean, I’m sure you’re aware of that Yale study that seemed to suggest that you can produce this profitably, profitably on a unit basis at around $5, which is still a pretty big deferential, at least for what those drugs cost here in the US, upwards of $1000 a month here. Even if you take into account the billions in research that you had to do to get these drugs to market, is that gap maybe a little bit still too wide? I’m actually quite disturbed by a number like that because I don’t think that’s a true representation of what it costs to produce medicine. I think it thinks it brings false hopes to patients that anyone can produce at that price and it’s interesting. I actually think it’s actually you know creating less incentives to actually start making production if that’s what people believe it will cost. So it cost much more than that to produce products of say a high quality that’s living up to the requirements from FDA and other regulators. So, so I don’t, I don’t really subscribe to that number to be honest. So some quibbles of course with the Yale study, you also have the likes of US Senator Bernie Sanders opening an investigation into the pricing of Ozempic and Wegovi basically saying that insurers are going to have to double their premiums in order to cover these drugs. And let’s talk a little bit more about pricing and your strategy here. Given the debate, the conversation that of course is going on around both Ozempic and Wegovi, what are the steps, what are the decision points that you’re making when it comes to actually lowering the list price. So let’s, let’s be honest and talk about what is the real price and you can see now earnings release for this quarter that we are actually seeing lower realized pricing coming to no notice. If you look over the period since we launched Ozempic, we actually have a price point to no notice that some 40% lower than when we launched the product. So that a lot of talk about the list price in the US but the way the market works is that there’s a gross to net model you launch at a list price, you give some rebates, you typically enhance those rebates over the years. So it’s a bit, again misunderstood to just talk about price of medicine looking at the list price and if we as a company just law reduce the list price, that would actually not benefit patients because in many cases that would lead to us having less access on the formularies and our products would be available for fewer patients. So it’s a, it’s a net price we compete on. And if you look at our price over the years, we’ve been on the market in the US since 2018, that’s actually gone down by some 40%. So OK, So you’ve also said of course that Waco V, when it comes to the lowered realized price, it’s expected to persist throughout the year those prices coming down. And I want to talk a little bit about the forces behind that driving those prices down. Is that going to be due to competitive pressure in your view or just expanding access more supply? I think it’s a combination which typically see that when you launch in the US, you realize the highest price year over year, you give rebate concessions and of course that rebate concession is also a function of competition. And now we’re seeing more competition in the Tier 1 space and that that also has an impact on price. So I think this is a good development because there’s a big need for our innovation. We see more and more patients and prescribers wanted to use our products. We enhance rebates. We realise a lower net price. And I actually think that’s a model that works both for, for the payer and for us because the volume drives our volume growth or our revenue growth despite the fact that we get less and less farm medicines on a per dose and per patient unit measurement. Lars, I am curious here. If we look a little bit more long term and based on what we know about the science of these GLP ones, there’s been a lot of discussion as to whether these are kind of quote, UN quote forever drugs that once you start taking them, you’re basically going to need to stay on them for life in order to realize and maintain the benefits. Has there been much discussion within Novo about whether this is indeed a forever drug or whether there is an off ramp for those folks who lose the weight, who improve their health and effectively want to cease taking the drug? Yeah, I believe these are early days. Globally. There’s more than a billion patients who live with obesity and I think we’ll come to realize that they are quite a difference among these patients. Some will have a very, say progressive disease, be that type 2 diabetes or obesity, and will continuously need more and more efficacious medicine. So they’ll stay on innovative medicine and probably higher priced medicines. But you’ll also find the patients who perhaps can you know, manage the disease by being on medicine for a shorter period of time and maybe can move to say a first generation, a generic, a cheaper price medicine and some might even be able to do without medicine. It’s simply too early to say. So we’ll have to to study that more and and look at at the individual patient journeys and all of that. I think that’s a fantastic opportunity from a commercial point of view, but also in terms of lasting health benefit for the individual patients. And that’s really what the healthcare systems are after. And we know that some of these conditions we talk about is actually what is driving a significant part of the healthcare system cost. So different patient journeys to get to a lasting health benefit for the individual and the healthcare system. And I think that’s what innovate is going to justify also paying for these innovations. I’m also curious to talk about forms here. Obviously, the current form is injectable. There’s a lot of interest though and when this will be available in a pill form. So if I take a look at oral semaglutide, it’s in phase three trials, I believe. Looking further into the future, when of course that is up and running and available to the public, how do you see that shaping up? Do you think that pills could possibly overtake the injectables? We see the data we had today maybe as the best proxy in in type 2 diabetes where we have the same active ingredients, the same molecule available both as a weekly injection and as a daily tablet. And there we actually see that when both are available, many will actually believe that weekly injection is is a very convenient way of dealing with your your disease. You take one shot a week and don’t need to worry about it. But there are also patients who prefer and all treatment. So I think these administration routes will coexist in the market and you’ll be down to individual patient preference. And then of course back to our prior discussion, efficacy matters. So if you have a progressive state of your disease where you you really need to have the highest efficacy possible, you most likely need to be on injectable treatment because that’s the easiest way to get into, say, the benefit of the molecule by injecting. And then you might have patients who who need, say, less efficacious treatment who can get away with using a template if they actually prefer daily template based treatment.