Good day and thank you for standing by. Welcome to the Q3 2023 Novo Nordisk A/S Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Daniel Bohsen, Head of Investor Relations. Please go ahead, sir.

Welcome to this Novo Nordisk Earnings Call for the first nine months of 2023. This call follows the early announcement of top line results and the updated outlook for 2023 shared in October. The release was advanced due to Danish securities regulations. My name is Daniel Bohsen and I'm the Head of Investor Relations at Novo Nordisk. With me today I have CEO of Novo Nordisk, Lars Fruergaard Jorgensen; Executive Vice President and Head of Commercial Strategy and Corporate Affairs, Camilla Sylvest; 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 speakers will be available for the Q&A session. Today's announcement and the slides for this call are available on our website, novonordisk.com. Please note that this call is being webcast live and a recording will be made available on our website as well. The call is scheduled for one hour. Please turn to slide. The presentation is structured as outlined on slide two. Please note that all sales and operating profit growth statements will be at constant exchange rates unless otherwise specified. Please turn to the next slide. As always we need to advise you that this call will contain forward-looking statements. These 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 first nine months of 2023 and the slides prepared for this presentation. With that, over to you Lars, for an update on our strategic aspirations.

Thank you, Daniel. Next slide please. In the first nine months of 2023, we delivered 33% sales and 37% operating profit growth at constant exchange rates. I'd like to start this call by going through the performance highlights across our strategic aspirations before handing over the word to my colleagues. Within purpose and sustainability, we continue to make progress; our carbon emissions decreased by 28% compared to pre-pandemic levels in 2019. In line with our aspiration of being a sustainable employer, we continue to expand the number of women in senior leadership positions. This is now 41% compared to 38% last year. In R&D, an important milestone is that we will stop the FLOW kidney outcomes trial early; semaglutide demonstrated a benefit in people with Type 2 diabetes and chronic kidney disease. Further within R&D, we have recently agreed to acquire ocedurenone for the treatment of cardiovascular disease. This supports our aspiration of establishing a presence in other serious chronic diseases with a high unmet medical need. Maziar will come back to this and our overall R&D milestones later. The sales growth reflects strong commercial execution with both operating units contributing to continuous sales growth, driven by increasing demand for our GLP-1 based diabetes and obesity treatments. Camilla and Doug will go through the details in the therapy area later. Within commercial execution, we are pleased to have reached our obesity aspiration of DKK25 billion and our aspiration for diabetes by reaching a global value market share of 1/3. Naturally, the progress is not holding us back and we continue to aim for treating more patients with our innovative treatments. Karsten will go through the financial details, but I'm very pleased with our overall performance for the first nine months of 2023 which has enabled us to raise our outlook for the full year. With that I'll give the word to Camilla for an update on commercial execution.

Thank you, Lars, and please turn to the next slide. In the first nine months of 2023, our total sales increased by 33%. The sales growth was driven by both operating units with North America operations growing 49% and international operations growing 17%. Our GLP-1 sales increased 49% driven by North America growing 43%, and international operations growing 60%. Insulin sales decreased by 7% driven by a 1% decline in international operations and a 24% sales decline in North America operations. The sales decrease was driven by a decrease in sales in the US and region China. Obesity care sales grew 174% overall. In International operations, sales grew 52% driven by both Saxenda and Wegovy. In North America operations obesity care sales grew 244%. Total rare disease sales decreased 18%, which was driven by a 22% decrease in international operations and by a 13% decrease in North America operations. Please turn to the next slide. With 25% sales growth in our Diabetes Care, we are now growing faster than the total market, improving our global diabetes value market share to 33.3%. The increase reflects market share gains in both North America operations and international operations. In international operations, total diabetes care sales increased by 21% in the first nine months of 2023. This was driven by GLP-1 sales growing 60%, driven by all geographical areas. Novo Nordisk is the market leader in international operations, with a GLP-1 value market share of 69%. Ozempic continues its GLP-1 market leadership with just shy of 46% market share. Rybelsus has 12% value market share driven by strong uptake across geographies. And with that, I will hand over the word to Doug.

Thank you, Camilla. Please turn to the next slide. The GLP-1 class expansion continues in the US in the first nine months of 2023. The US GLP-1 market volume grew around 50% comparing Q3 of 2023 to Q3 of 2022. Measured on total prescriptions, Novo Nordisk continues to be the market leader with 53% market share. Please go to the next slide. Obesity care sales grew by 174% in the first nine months of 2023. This was mainly driven by the US. The global branded anti-obesity market expansion continues with a global volume growth of 94%. In international operations, obesity care sales are driven by strong Saxenda performance and the Wegovy launches in five international operation countries. While eager to launch Wegovy in more IO countries, our focus remains to do this in a sustainable manner, for example by capping volumes. In the US alone, sales of Wegovy grew by 467%. Demand for Wegovy continues to exceed supply, and to safeguard continuity of care for patients already on Wegovy, the supply of the lower Wegovy dose strengths in the US has been reduced since May of 2023. Please go to the next slide. Our rare disease sales decreased by 18%. The sales decrease was driven by a 30% decline in North America operations and a 22% sales decline in international operations. Sales of rare blood disorders increased by 2%, driven by the launch products in Haemophilia A and B and partially countered by NovoSeven. Sales of rare endocrine disorder products decreased by 54%, reflecting a temporary reduction in manufacturing output. Now over to you Martin for an update on R&D.

Thank you, Doug. Please move to the next slide. Serious chronic non-communicable diseases affect millions worldwide and have become a significant public health concern in recent years. Given our comprehensive scientific and clinical expertise in metabolic diseases, we are in a strong position to enhance our understanding of semaglutide's potential benefits and related health risks. Current evidence indicates that the positive impacts of semaglutide extend beyond glycemic control and weight loss. It has convincingly shown risk reductions in several cardiovascular outcome studies, including SUSTAIN 6 and PIONEER 6 for Type 2 diabetes and STEP-HFpEF SELECT in obesity. While we wait for the SELECT trial data to be revealed, we are continuing to gather evidence for semaglutide in the cardiovascular area. In 2024, we anticipate several results, including the Type 2 diabetes cardiovascular outcome study, SOUL, using oral semaglutide 14 milligrams, and the STRIDE trial focusing on high-risk patients with peripheral vascular disease. We also explored the possible therapeutic effects of semaglutide on osteoarthritis and metabolic dysfunction linked to hepatitis, formerly known as nonalcoholic steatohepatitis. Additionally, we recently announced the early termination of the FLOW trial due to its efficacy. Please proceed to the next slide. This decision was based on a recommendation from the FLOW independent data monitoring committee after a planned interim analysis. As you are aware, FLOW is an outcomes trial executed across 28 countries and over 400 sites, enrolling 3,534 individuals who were randomized in a 1:1 ratio to receive either once weekly semaglutide 1.0 milligram or a placebo. The eligibility criteria targeted patients with Type 2 diabetes and a high or very high risk for chronic kidney disease progression. The primary aim of FLOW is to demonstrate a delay in chronic kidney disease progression and decrease the risk of kidney and cardiovascular mortality through a composite primary endpoint, on top of standardized care, including SGLT2s. The trial is designed to observe a 20% reduction in risk for the primary endpoint. Key secondary endpoints encompass the annual rate of change in estimated glomerular filtration rate, major adverse cardiovascular events, and overall mortality. Currently, there are limited treatment options for chronic kidney disease in individuals with Type 2 diabetes. With a projected rise in Type 2 diabetes, there is an evident demand for additional treatments to alleviate the residual risks faced by those with coexisting chronic kidney disease. The next action for me is to finalize the trial. The presentation of FLOW results is anticipated in the first half of 2024, with detailed data expected to be shared at a medical conference later in 2024. Please go to the next slide. Aligned with our strategic goal of establishing a presence in other serious chronic diseases, we are pleased to announce the acquisition of ocedurenone for cardiovascular disease treatment from KBP Biosciences. There remains a substantial need for treating hypertension, a major risk factor for cardiovascular events, heart failure, chronic kidney disease, and mortality. Ocedurenone is a once-daily oral small molecule with a long half-life and a strong affinity for the mineralocorticoid receptor. It possesses a favorable efficacy and safety profile and is currently being studied in the Phase III CLARION-CKD trial for patients with uncontrolled hypertension and advanced chronic kidney disease. We anticipate launching additional cardiovascular and chronic kidney disease outcomes trials throughout 2024. Please move to the next slide. Turning to other R&D milestones, I want to highlight several upcoming trial readouts and initiations across our therapeutic areas in 2023 and the first half of 2024. In the third quarter of 2023, we commenced our first pivotal Phase III trial in the re-imagined program for CagriSema for individuals with Type 2 diabetes. In the fourth quarter, we submitted oral semaglutide 25 milligrams and 50 milligrams to the EU. We are also looking forward to results from the ongoing pivotal Phase III trial for IcoSema COMBINE 3 in the first half of 2024; IcoSema could become the first-in-class once weekly fixed ratio combination of basal insulin with GLP-1 receptor agonist in Type 2 diabetes requiring intensification. In obesity, we announced in September the initiation of a 32-week Phase I trial for once weekly subcutaneous Amycretin in individuals with overweight and obesity. While we wait for SELECT data at the American Heart Association Congress, we have submitted the trial to the US FDA and the European Medicines Agency. We are pleased to report that the FDA has granted priority review for the supplemental new drug application, marking a significant milestone in our efforts to meet the unmet needs of patients dealing with both overweight and obesity and established cardiovascular disease. Finally, we anticipate results from a chronic heart failure trial with preserved ejection fraction in obese patients with diabetes by the end of this year. In rare diseases, Nedosiran received approval from the US FDA for the treatment of primary hyperoxaluria type one, marking the first approved siRNA treatment for Novo Nordisk. Additionally, in other serious chronic diseases, we have initiated a Phase 1 trial for our Angiopoietin-like 3 protein inhibitor, a monoclonal antibody aimed at cardiovascular disease, specifically for lowering cholesterol and triglycerides. Now, I’ll hand it over to you, Karsten.

Thank you, Martin. Please turn to the next slide. In the first nine months of 2023, our sales increased by 29% in Danish kroner and 33% at constant exchange rates, driven by both our operating units. The gross margin rose to 84.5% from 84.3% in 2022. This improvement in gross margin is attributed to a favorable product mix, largely due to higher sales of GLP-1 based treatments. However, this was partially offset by costs associated with ongoing capacity expansions, negative currency effects, and lower realized prices, particularly in the US and Region China. Sales and distribution costs went up by 22% in Danish kroner and by 25% at constant exchange rates, driven by both operating units. In North America, the cost increase was fueled by the relaunch of Wegovy and promotional efforts for Ozempic. In international operations, the rise in costs was due to promotional activities for Rybelsus and efforts to develop the obesity care market. The increase in sales and distribution costs was also influenced by adjustments to legal provisions. Research and development costs surged by 38% in Danish kroner and 39% at constant exchange rates, reflecting higher late-stage clinical trial activity and increased early research efforts compared to the first nine months of 2022. The acquisitions of Forma Therapeutics and Inversago Pharma in 2022 further contributed to the rise in R&D spending. Administration costs rose by 9% in Danish kroner and 11% at constant exchange rates. Operating profit increased by 31% in Danish kroner and 37% at constant exchange rates, in line with the sales growth. Net financial results showed a net gain of DKK1.2 billion, compared to a net loss of DKK5 billion from last year. The effective tax rate for the first nine months of '23 was 19.9%, down from 20.5% in the same period of 2022. Net profit grew by 47%, and diluted earnings per share rose by 49% to DKK13.71. Free cash flow stood at DKK75.6 billion, compared to DKK62.6 billion in the first nine months of 2022. In accordance with our strategy of providing attractive capital allocation to shareholders, we have returned DKK52 billion to shareholders through share buybacks and dividends. Cash conversion benefited from the timing of rebate payments in the US. Capital expenditure for property, plant, and equipment amounted to DKK16.4 billion, up from DKK7.2 billion in 2022, primarily due to investments in additional capacity for active pharmaceutical ingredient production and fill-finish capacity for both current and future injectable and oral products. Please go to the next slide. Nine months into 2023, we continue to experience sales growth momentum, which has allowed us to raise our full-year outlook. We now anticipate sales growth between 32% and 38% at constant exchange rates, mainly due to increased full-year expectations for Ozempic volumes in the US and adjustments for gross to net for Ozempic and Wegovy in the US. The guidance reflects anticipated sales growth in both our North America and international operations, primarily driven by volume growth of GLP-1 based treatments for diabetes and obesity care. This is somewhat offset by declining sales in rare diseases due to a temporary reduction in manufacturing output. The guidance incorporates expected volume growth for GLP-1 based treatments, the inherent uncertainty surrounding the pace of obesity care market expansion following the Wegovy relaunch in the US, and a limited rollout in international markets. Lastly, the sales outlook takes into account expected ongoing supply constraints and related drug shortage notifications in various products and geographies. Novo Nordisk is making investments to enhance both short-term and long-term supply capacity. While we are gradually expanding supply capacity for Wegovy, lower dose strengths in the US will remain restricted to ensure continuity of care. We now project operating profit growth between 40% and 46% at constant exchange rates, reflecting our sales growth outlook and continued investments in current and future growth drivers in research, development, and commercial activities. For 2023, we expect net financial items to yield a gain of approximately DKK1.6 billion, mainly due to gains from foreign exchange hedging contracts. Capital expenditures are still expected to be around DKK25 billion, reflecting our supply chain enhancement and innovation-driven growth strategy. Over the coming years, we anticipate the capital expenditure to sales ratio to be in the low double-digits. We now expect free cash flow to be between DKK65 billion and DKK73 billion, reflecting sales growth, a favorable impact from US rebates, and capital expenditure investments. The updated cash flow expectations primarily reflect increased net profit projections, partially offset by business development activities. That covers our outlook for 2023. Now back to you, Lars, for final remarks.

Thank you, Karsten. Please turn to the final slide. Today's announcement discloses the full set of quarterly results and our updated outlook for 2023, which was shared earlier in October. Overall, we are very satisfied with the sales growth in the first nine months of 2023. Wegovy is driven by demand for our GLP-1-based future interventions for diabetes and obesity, which is now reaching more people than ever before. The performance in the first nine months of the year has enabled us to raise the outlook for the full year. From an R&D perspective, we have reached a significant milestone with the submission of SELECT and look forward to sharing more data at the American Heart Association. In addition, we are excited about the early closure of the FLOW trial and anticipate a readout in the first half of 2024. Finally, the acquisition of ocedurenone will strengthen our position in cardiovascular disease and underlines our commitment to establish a presence with other serious chronic diseases. With that, I'll hand over to Daniel.

Thank you, Lars. Next slide please. With that, we are now ready for the Q&A session, where I kindly ask all participants to limit themselves to one or a maximum of two questions, including sub-questions. Operator, we're now ready to take the first question.

Thank you. We will now go to the first question. And your first question comes from the line of Michael Nedelcovych from TD Cowen. Please go ahead.

Thank you for the question. I have one for Martin. Martin, if you'll allow me to set up something of a straw man. Here is a potential set of expectations for the Phase 3 SELECT data when we see them at AHA. One, clinically meaningful benefit across each of the individual MACE components and regardless of BMI category. Two, cardiovascular benefit that clearly emerges within one year on Wegovy therapy and does not diminish over time. And three, no noticeable imbalance in any very rare adverse events such as suicide or cancer. My question is, would you urge me to modify these expectations in any way?

Martin, a straw man for you.

Thank you very much for that question. As you'll probably imagine, I cannot speculate on anything beyond what we've already disclosed. And that is the 20% risk reduction on the primary endpoint for MACE, which is obviously myocardial infarction, stroke, and cardiovascular death. We see attribution from all there, but we do not go into more detail. What I will commit to is obviously that we saw a very clear and positive safety profile from SELECT and no outliers identified.

Thank you, Martin. And thanks, Mike, for the question. Next question please.

Thank you. We will now take the next question. And your next question comes from the line of Richard Parkes from BNP Paribas. Please go ahead.

Thank you for taking my questions. I have a couple. First, I noticed that Ozempic and Wegovy US Symphony prescriptions have been flat to declining over the last quarter, likely due to supply constraints, yet your guidance indicates an anticipated acceleration in top line growth in Q4. Could you clarify this? Are you expecting to see improvements in supply towards the end of the year? Secondly, your slide presents the potential benefits of semaglutide beyond glycemic control and weight loss, and we might gain insights from the SELECT study. However, your chart suggests that patients who don't have diabetes or obesity may also benefit from the cardiovascular aspects. How do you plan to leverage this, considering your trials currently seem to be enrolling patients only with obesity, diabetes, and related conditions? Thank you.

I'll give the first to you, Karsten, on supply going into our guidance.

Thank you for that question, Richard. And clearly, when we put out guidance, that's because we believe that's the most realistic forecast range that we are putting in, and we don't have two months to roll on. So, of course, we see the TRx trends and bake that into our forecast. What I would give of additional flavor on top of that is, of course, the growth rate is also a function of ex-factory sales last year, and we did see it was a bit having a lower base last year in the fourth quarter than what we would normalize for this year. And then of course there can be fluctuations in inventory, for instance with wholesalers. And then finally, I'll say this pickup in sales growth in the fourth quarter is not to be read into anything, any difference on the supply situation. What we are selling in the fourth quarter has been produced months ago.

Thank you, Karsten. Martin, any comments on the benefits beyond weight loss for SEM?

First of all, I think that's exactly right that our starting point is the cardio metabolic space. Starting out with obesity and diabetes, and these are the patients that we investigate. I think it's important to call out that the vast majority of patients suffering from ASCVD, heart failure, chronic kidney disease, but also metabolic liver disease, also have an element of metabolic derangement, and there is a clear association and overlap for both diabetes and obesity. So from our perspective, this actually creates some very nice synergies and certainly not seen as exclusive. But our starting point is patients suffering from diabetes and obesity.

Thank you, Martin. Thank you, Richard, for the questions, and we are ready for the next question.

Thank you. And your next question comes from the line of Seamus Fernandez from Guggenheim Securities. Please go ahead.

Thanks very much for the question. So just very quickly as we think about the SELECT trial results in the wake, not just of the presentation, but the very rapid filing, there had been a lot of questions around this being actually a cardiovascular medication and perhaps gaining access to CMS in that regard. Can you just talk about the prospects of that actually becoming reality? And then the second question is just on the Oral Amycretin and the initiation of the subcutaneous Amycretin. Can you just help us understand is this more of a supply chain related decision, an IRA related decision, or a decision related to some challenges with the oral formulation of Amycretin? Thanks so much.

Thank you, Seamus. Doug, I'll give the first question to you.

Yeah, thanks, Seamus. We do believe that there is a potential opportunity to use the medical exception process through the CV component, but let's wait to see.

Thanks Doug. Martin, any thoughts on Amycretin?

On Amycretin, our decision to go also into subcutaneous is actually caused by another of the above of the three reasons that you mentioned. It's actually driven by the fact that we are learning that optionality is important for patients and prescribing physicians in both diabetes and obesity. And we've seen a clear potential for Amycretin to become both an oral, but certainly also a subcutaneous offering, and therefore in Phase I it is prudent for us to investigate both.

Thanks, Martin, and thanks, Seamus. We are ready for the next question.

Thank you. I will now take the next question. And your next question comes from the line of Peter Verdult from Citigroup. Please go ahead.

Thank you. Pete Verdult from Citi. I have two questions. Karsten, regarding supply and pricing, if we look at the current run rate for GLP-1 volumes in your US franchise and project it into 2024 without any changes, there seems to be a significant gap between growth expectations for next year, which I anticipate will be essentially flat. I understand improvement is expected next year, but could you provide more insight on when we might see capacity constraints ease? It seems logical that this would coincide with the launch of Mounjaro, suggesting you'd want to be less constrained in terms of capacity at that time. While I know you can't go into extensive detail, any additional information on when these constraints might lift would be appreciated. Also, regarding pricing, we've noted a substantial increase in the value per prescription from Q2 to Q3, and you've mentioned adjustments from gross to net. Although the commercial mix has improved, could you clarify whether this is an anomaly or if we can consider the Q3 value per prescription as a reliable baseline moving forward? Thank you.

Thanks Pete. Karsten, supply going into '24 and the value per script.

Yes, thank you, Pete, for that great topic. To start with our full-year guidance, we anticipate a midpoint of 35% sales growth at constant exchange rates, which in the Novo context feels like we've really accelerated growth to the highest rates in the company's history. Looking ahead to 2024, we are focused on a cautious growth strategy driven by innovation. Our platforms, particularly Ozempic and Wegovy, are set to propel growth both this year and next. If we project our estimated sales growth for Q4 based on our guidance, it suggests that we could see double-digit growth next year, which aligns closely with current consensus. We are indeed scaling rapidly. Regarding Wegovy, I expect a substantial increase in volumes to the US market in 2024 compared to 2023, similar to what we achieved from 2022 to 2023. Concerning pricing, as we've emphasized before, the best approach to understand net realized pricing in the US is to look at year-to-date figures. Most contracts are annual, and there's a time lag between when prescriptions are written and when we receive claims from payers. This lag can take several months, making Q3 the first time we can really see the effects of the channel payer approach for 2023. Therefore, I would advise against using Q3 in isolation for forecasts; the year-to-date Q3 figures should serve as a better starting point. Thank you.

Very clear, thank you.

Thank you, Karsten. Thanks, Pete. We are ready for the next question.

Thank you. Your next question comes from the line of Mark Purcell from Morgan Stanley. Please go ahead.

Yes, thanks very much for taking my questions. The first one on GLP-1 and higher doses, clearly starting higher doses trials for semaglutide; you have 8 milligram and 16 milligrams coming through by the end of this year. Can you help me understand your expectations there and the importance of increasing your dose where the pivotal trial at 7.2 milligram will read out late next year? And then secondly in terms of the pen platform leverage, we estimate that about $100 million GLP-1 pen units going to be sold by Novo in 2023 for GLP-1 that is, the majority is the FlexTouch platform with a 3-ml platform, so will you use those two platforms to launch Wegovy in US? And if not, why not.

Martin, the first question for you, GLP-1 higher-dose considerations.

Yeah, absolutely. Thank you for that question. So you're absolutely right. We are investigating 8 milligrams and 16 milligrams in diabetes. But we're also investigating 7.2 milligrams in obesity. The purpose is obviously to assess whether we can achieve even higher efficacy without compromising on safety. Our model suggests, in particular in the obesity space that a higher dose could potentially be associated with an even greater weight loss without having to compromise on safety, and being diligent we want to assess this.

Thank you, Martin. And if I understood your question correct, Mark, then the question was whether we will leverage our FlexTouch platform also to launch Wegovy in the US in the FlexTouch device. Lars, maybe to you any strategic considerations on our device platforms?

Yeah, Mark, thanks for the question. I just say that we have a situation today where we have a number of device platforms; the company won using outside vendor technology. So that gives us flexibility and it's actually part of fueling the growth today that we can flex this. So I'll not go into specifics speculation about what we use of device per market, but we see that it's a strength that we can flex between different presentations and we see today that it is really the figures of the molecule that drives that, so that gives quite some flexibility in how we go to market country by country and strategic flexibility on our side. Thank you.

Thank you, Lars. Next question please.

Thank you. Your next question comes from the line of Emily Field from Barclays. Please go ahead.

Hi. Thanks for taking my question. I'll ask two. One just on the STEP 9 osteoarthritis study; I believe that this is not large enough to be added to the Wegovy label. So if this were to be a positive study, what would be your next steps plans? And then just on anti-obesity medications and muscle loss, we've seen competitors more explicitly make efforts in R&D for compounds that could preserve lean mass over fat mass and overall weight loss. I was wondering if you could just give an update on where you stand on that within your R&D portfolio. Thank you.

Thank you, Emily. Martin, two for you.

So specifically on the osteoarthritis trial, you are right, it's not the biggest trial. I think it's too early to speculate whether that will have an impact on the label. It's very, very clear that for us it's also guiding for future clinical activity and specifically maybe for Cagrisema, Amycretin or our GLP-1/GIP combinations. So it has actually two potential both to serve for information specifically for Wegovy, but also to guide us for future activities.

And the second one, Martin, obesity and research and development focus on muscle loss.

Yeah. I think this is a relevant point. It's also a focus of ours. With current treatments, specifically Wegovy and Saxenda, we actually see a reasonable preservation of lean body mass given the broader weight loss. But it has to be a focus area, and you will probably see also in our pipeline without going into details maybe even quite a few assets that could lead to a preservation of lean mass.

Thank you, Martin. Thank you, Emily. We are ready for the next question.

Thank you. Your 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 China. Growth looks pretty good over there, but I'm just wondering if you could give us an update on the impact of reduced access to Chinese hospitals on how that is affecting things, if indeed at all. And then secondly on semaglutide, there was an interesting journal pre-print on Monday looking at its use in alcohol use disorder, which looks very impressive. Be interesting to get your thoughts on the potential of that indication in your opinion. Thanks so much.

Thank you, Simon. So, Camilla, the first one to you. Do we see reduced access to Chinese hospitals?

In general, we are working across the country and we also have access to two hospitals. In general, what we do see in China is an effect of the VPP, of course, that's what you mean the insulin sales result, and that is also when you look at an overall IO business point of view, that is what is actually dragging down the overall IO insulin growth, but in China, Ozempic is going really well. We have a great momentum of Ozempic that we've had since the launch, and since the inclusion on the reimbursement list, and that can drive growth in China.

No major issues with access. Martin, the second question.

Yes, thank you very much for the question. We've also seen these observational studies and been intrigued by the fact that GLP-1 may have a place in also treating alcohol abuse. That was actually live within the mode of action of GLP-1. From our perspective and also considering the timing, the combination of two modes of action that could potentially also help here, namely GLP-1 and Amylin. So specifically, from our perspective, sorry CagriSema is probably the more attractive and efficacious approach. So if you see us going into that space, that would be with CagriSema and not with Semaglutide alone.

Thank you, Martin. Simon Baker. Thank you so much. We're ready for the next question.

Thank you. Your next question comes from the line of Naresh Chouhan from Intron Health. Please go ahead.

Hi there. Thanks for taking my questions. First, regarding Wegovy's market access in the US, we've heard that an increasing number of employers are opting out after initially opting in due to high demand. Can you provide some insight into how significant this issue is? It's likely to grow next year as supply resumes and demand increases. Secondly, on supply, when you seemed more comfortable with the demand, we were seeing around 30,000 new PET starts a week in the US. Would this be a reasonable baseline for your supply capabilities and growth as we head into 2024? Thank you.

Thank you Naresh. So Doug, any updates on the US market access for Wegovy.

Yes, thanks, Naresh. Overall, we're very pleased with the broad market access that we have for Wegovy. Most major PBMs and health plans are covering it, which derives around 50 million people with obesity now being covered. And importantly, we're seeing about 80% of the patients that are paying less than $25 for Wegovy. Now to your question, specifically around employers. We do see some opt-outs, but we are seeing overall more opt-ins than opt-outs. So directionally we're heading in the right direction. And our focus, what could be continuing on securing employer coverage as well as stronger access for AOMs overall.

Thank you, Doug. Karsten, any additional comments on the supply going into next year?

So I think the way to look at the suppliers is a starting point of currently around 100,000 TRx per week, according to IQVIA, and then we have the five different dose strengths and of course, the metric is to get that split right into the link to manufacturing and then we scale from there. And as we've said in prior quarters, then this is something we do dynamically. So don't look for a hockey stick, it's a gradual process where, of course, we will be starting at the lower doses and then increasing them as we move forward. There are different data sources in terms of new starts. So I'm not really sure what your data source is, but I think my data point is lower than yours in terms of the number of new starts per week.

Thank you, Karsten. Thank you, Naresh. And we are ready for the next question please.

Thank you. Your next question comes from the line of Florent Cespedes from Societe Generale. Please go ahead.

Good afternoon. Thank you very much for taking my questions. Two, please. First one on Wegovy in Europe. Have you started to talk to the payers in Europe as you have already submitted the data to the European authorities and do you believe that you will need to show statistically significant benefit on the cardiovascular best will be presented at AHA next week? And my second question is on Ozempic following the FLOW results. How would you position the product on this population as we already have products available to treat these patients, notably the SGLT2? And it seems that in the trial 15% of the patients are under SGLT2 treatments. So some color on this one would be helpful. Thank you.

Thank you, Florent. Camilla, maybe, the first one for you in terms of Wegovy outside the US.

In terms of, I believe, the question was whether we need statistical significance. I would just say now we await the presentation at the conference. But in general, there is great interest in Wegovy and of course also the benefits in SELECT. So we will get back to that. But we do see authorities interested in bringing up the discussion again with us already at this point for reimbursement of Wegovy. And just a reminder, we have reimbursement of Saxenda already in close to 15 countries around the world and, of course, here we are talking a step up in treatment.

Thank you, Camilla. Martin, reflections on ocedurenone.

What we've seen with ocedurenone is a molecule with a very high affinity for the receptor and also a very high half-life. That actually means that we expect to see differentiation not only on efficacy, but it also appears to have a potential upside on the safety side specifically on hyperkalemia. So we do expect to see a differentiated drug in this space.

Thank you, Martin. Thank you, Camilla. Thanks, Richard for the question. We are ready for the next.

Thank you. Your next question comes from the line of Peter Welford from Jefferies. Please go ahead.

Hi. I hope you can hear me. I've got two questions. Firstly, if I could come back on the gross margin. I appreciate the commentary year-to-date, but in the third quarter it seems to trend down quite a bit, which I guess it's somewhat unusual given the quite significant improvements we saw in the gross to nets in your most profitable market for both Wegovy and Ozempic. So can you just talk a little bit about in the third quarter, what the incremental costs or whether perhaps any write-downs or swings of inventory or something that could potentially depress the gross margin in what would normally be a more profitable quarter? And then secondly, just coming back to the comment that was made on stay time, thinking about it a different way, which is in the past you cited for Saxenda that around 25% or more of patients are on the drug for at least a year, and most of those are treated by obesity experts. I appreciate it's still early for Wegovy to necessarily give comments on the US for stay time, but can you sort of talk about whether you're seeing different trends than those of Saxenda both in terms of the obesity experts versus those on and also the number of patients perhaps who are reaching a year at this point? Thank you.

Thank you, Peter. So first of all to Karsten on the gross margin and then later talk on what we see on stay time in the US for Wegovy.

Yeah, Peter, well spotted gross margin in Q3. And just a word of caution to begin with looking at gross margins at a quarterly basis. It's always tricky due to fluctuations over the year, but if I'm to comment specifically on the quarter then, at constant exchange rates, the gross margin is flat compared to last year. So the decline compared to last year is FX driven. And then you can say, why is it not increasing compared to last year given the gross to net adjustment and the product mix and thereby two pieces to it. First of all, remember the starting point. Our gross margin is already high at 84% or so. And then secondly, what is different compared to prior years is that the amount of CapEx we are running these days and just from an accounting policy standard point of view we are realizing more costs related to our capital expenditure projects into the P&L, so it doesn't all go to the balance sheet. Some of it also hits the P&L and that is basically what is offsetting the benefit from product mix.

Thank you, Karsten. And over to you, Doug, any insights on stay time on Wegovy in the US so far?

Yeah, Peter. Thank you. Because generally you're right; we expect to be able to say more about stay time in 2024. Obviously, it's been difficult given the few time periods with unrestricted supply, but what I can say is based on early data from multiple sources persistency on Wegovy looks better than Saxenda, with fewer patients dropping off in the first 12 months. But we'll have more to say in 2024.

Thank you, Doug. Thank you, Peter. And we are ready for the next question.

Thank you. Your next question comes from the line of Mattias Haggblom from Handelsbanken. Please go ahead.

Thank you so much. R&D question. In this scenario that both high-dose sum up 7.2 milligram as well as CagriSema works in Phase III. Can you help me think about the regulatory pathway for a fixed dose combination with CagriSema in the high-dose sum up, and whether that would require a new Phase III or if a small pitching study would be enough? Thanks so much.

Thank you, Mattias. Martin.

Thank you for that question, Mattias. That would most likely require a reasonable amount of safety data, but we will still need to establish both safety and efficacy. We actually see this as a potential opportunity, but we consider it a lifecycle management activity.

Thank you, Martin. And we have time for two more sets of questions. So we are ready for the next one.

Thank you. The next question comes from the line of Emmanuel Papadakis from DB. Please go ahead.

Thanks for taking the question. Hopefully you can hear me okay. Maybe a follow on for Karsten on supply. Karsten, you said you're going to quote-unquote significantly increase supply in '24 versus '23 as you did in '23 versus '22. Eyeballing data, it looks like it was approximately a five-fold increase '23 over '22. So you're telling us you're going to have another five-fold increase in 2024? And if not, could you help us with the approximate quantum. And then a follow-on also on FLOW, Martin you were helpful enough on SELECT to give us an indication that the contribution of components have been approximately equal well balanced in SELECT, is that also the case at FLOW, or how should we think about the contribution of the composite endpoint components? And what should we expect in terms of labeling? Thank you.

Thank you, Emmanuel. First, Karsten, any additional supply.

Yeah, and thanks for triangulating that way around Emmanuel. I'd love to give you further flavor. But, as you know, we are guiding for next year, our full year results late January. So that's why we will be doing our financial guidance for '24 and giving too much granularity into scaling of supply gets too close to guiding for next year. So I'm sorry but I'll have to provide that at a later point in time.

Thank you, Karsten. Martin, can you share more from FLOW?

I think it's a great question and maybe just want to clarify, I don't think we've seen equal contributions from the three components; we just say that they all contributed. And obviously, again, we have to wait until November 11 until we see the full dataset, specifically for FLOW. I would really love to be able to answer you, but due to the nature of an interim analysis, we have not seen the data, so for better or worse. I know absolutely no more than you do at this point, so I can't speculate.

Thank you, Martin. Thank you, Emmanuel. Then we'll take the last set of questions.

Thank you. Your last question for today comes from the line of Michael Novod from Nordea. Please go ahead.

Thank you very much. Just on the cost side, can you please go through some of the dynamics here in Q4, in order to sort of make the cost go up, as I see it, it needs to go out at an extreme pace for Q4? Are any specific investments that you are able to take earlier or anything like that, price going into 2024 just to make understand your EBIT guidance?

That's over to you, Karsten.

Yeah. Michael, thanks for that question. When I look at our total operating cost growth in the fourth quarter, then it's actually not markedly different compared to year-to-date. So what you should be expecting is there is a continued what are called high level of growth in R&D expenditure around the 40% mark and some 20% plus on S&D expenditure, and the competitive gross margin also in the fourth quarter. So, in summary, no big swings in the fourth quarter at constant exchange rates.

Thank you, Karsten. Thanks for the question, Michael. And this concludes the Q&A session. Thank you for participating and please feel free to contact Investor Relations in case you have any follow-up questions. Before we close the call, I would like to hand over to you, Lars, for any final remarks.

Thank you, Daniel. I would like to thank you all for participating today. I hope it's clear from our comments that we are very pleased with the strong momentum we have in our business, also underlined with the raised guidance for 2023, and many questions on the coming years, not least the coming year, but we are really focused on fostering innovation-based growth strategy and I feel confident in our ability to scale supply to support that. We're really excited about FLOW, underlining the attractiveness of semaglutide, and we are equally excited that we soon can disclose what SELECT has to show at the upcoming conference at AHA in a matter of a few days. So thank you all. We appreciate your time today, and with that, we'll close the call. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.