Earnings Call Transcript - NVO Q1 2020

Karsten Knudsen, CFO

Thank you. Welcome to the virtual Q1 Novo Nordisk London Roadshow. This is Karsten Knudsen, CFO of Novo Nordisk. With me today, I have our CSO, Mads Thomsen; and our EVP of Commercial Affairs and Commercial Strategy, Camilla Sylvest. So we have a broader presentation that we will go through briefly in the next 15 to 20 minutes, after which we will move over to Q&A as in our normal London Q1 roadshow launch events. So first of all, I'd like to thank Michael Leuchten and UBS for hosting this virtual call. And we hope you're all safe out there, even though it's challenging times with COVID-19. This is the agenda for today, and as usual, this call might include some forward-looking statements. And of course, they're surrounded by uncertainty. And I would say even - or especially in these COVID-19 times, there is a certain level of uncertainty regarding how that plays out and consequences of COVID-19. In terms of COVID-19 and our response as a company, early on in the spread of the pandemic, we saw what was happening in China. As a company, we initiated a corporate crisis response team. We set out a couple of top priorities to guide the company through this crisis. One was to safeguard the health of our employees because without the health of our employees, we would not be able to supply life-saving medicines to patients on a global scale, which is our second priority in this context. Thirdly, while we've been navigating through the crisis, we have been focused on how we, as a company, are able to support society in getting through the crisis in the best possible way, using our capabilities and resources to support that. In the fourth quarter of 2019, we hosted the Capital Markets Day. As part of the Capital Markets Day, we launched a set of strategic aspirations, which are basically the aspirations we are pursuing from now until 2025, fully aligned with our corporate strategy, saying, what are we aspiring to reach by 2025. In the first quarter, we launched a number of affordability options in the U.S. that are out there in the public. They include patient assistance programs linked to the new high unemployment levels in the U.S. So unemployed individuals have the possibility of accessing free insulin for a period of time until they find the right health care insurance. We supported a number of fronts, including international aid organizations in relation to the COVID-19 pandemic. Finally, we went live with our solar power field in the U.S., thereby securing 100% renewable power across all production sites globally, reducing our global CO2 emissions by more than 10% on an annual basis. On investment and therapeutic focus, Mads will go through the pipeline later on, but worth noting Rybelsus approval in the EU and U.K., Ozempic submitted in China, and this quarter, we reported the semaglutide Phase II data readout in NASH. In terms of commercial execution, we expanded our diabetes care leadership in value market share increasing by 0.7 percentage points, thereby moving towards our strategic aspirations of 33% diabetes value market share. Our obesity business increased by 30%, tracking towards our aspiration of doubling our obesity care business over this strategic aspiration period. Biopharm grew by 16% in the quarter with some one-off impacts that we'll get back to later on. All in all, this led to a sales growth of 14% in the quarter, of which 7% was COVID-19 stocking related, deriving 12% operating profit growth for the quarter also COVID impacted. With that, I will hand over to Camilla Sylvest to go through the commercial execution for the quarter.

Camilla Sylvest, EVP of Commercial Affairs and Commercial Strategy

Thank you, Karsten. Before we get into the details of the growth and sales split, I want to mention that we have established a new reporting structure in International Operations (IO), now consisting of Europe, Middle East, and Africa. We have booked a couple of regions for this reporting purpose. We also have China consisting of Hong Kong, Taiwan, and Mainland China, and then the rest of the world. The sales growth is distributed across all geographical regions, meaning that they are all contributing to growth. The 14% sales growth is around 7% when adjusted for the COVID-19-related stocking. International operations is driving sales growth of 19% across all therapy areas. The stocking effect that we see here is mainly in the EMEA region. North America operations sales increased by 9%, and here, the stocking is mainly at the patient level. When we look at how the sales growth is distributed across therapy areas, you see that all therapy areas are contributing to growth. In insulin, we see a 2% increase with a wide variation between the U.S. and North America and IO. The U.S. saw a decrease of 15% driven by channel mix, high rebates, and coverage gap, whereas in international operations, we see a 14% growth driven by all insulin categories. In the GLP-1 segment, we see growth of 37%, driven by a 30% increase in North America and a 55% increase in international operations. Summing that up, as Karsten said, we are expanding our global diabetes value market share by 0.7 percentage points to 28.7%. This is driven by increases in insulin volume market share to 46.5%, and an increase in our GLP-1 market share of 2.2 percentage points to 43.3%. Our obesity business grew by 30% with an equal split between international operations and North America. Biopharm grew by 16%, driven primarily by Norditropin and hemophilia products. When we look at the details of the early results uptake, Novo Nordisk has a total GLP-1 NBRx leadership of almost 58%. We have also a TRx GLP-1 leadership of 48%. We see a continued uptick of Ozempic now with NBRx leadership compared to Trulicity of 36.6%. Rybelsus has progressed to 8.8% NBRx and 2% of total scripts. The market access is progressing and is now above 50% unrestricted access, and we expect that to gradually increase over the year. In International Operations, we are gaining market share in the total diabetes value market share segment, driven by growth in both insulin and GLP-1. Our share of growth is now above our total diabetes market share. What's driving growth in IO is that insulin sales are driving 44% of the growth, and GLP-1 is driving 35% of the growth with a distribution that makes insulin still the larger growth driver in most regions. We had 30% growth in the quarter in obesity. We launched Saxenda in 46 markets, and we continue to invest in market development. We have a market share of 39% in IO and 72% in North America. Our efforts are less focused on gaining market share, but more on developing the market to meet our long-term aspirations of also doubling our obesity sales by 2025. In biopharm, we see growth of 16%, driven by hemophilia and growth disorders products. We have 7% growth in NovoSeven sales and a continued global rollout of our innovative hemophilia products, along with a 28% growth for Norditropin, driven by some stocking and demand due to competitive landscapes in selected countries. Now I will hand over to Mads for an update on our R&D.

Mads Thomsen, CSO

Thank you, Camilla. As we turn to the next slide, I want to start by saying that ever since we showed the 39% NASH resolution with liraglutide in NASH in the U.K., which was published five years ago, we've been intrigued by the potential of GLP-1 in the NASH field. We are now happy to report the outcome of a large Phase IIb biopsy-driven trial dose response for semaglutide versus placebo. Semaglutide at 0.1, which corresponds to a liraglutide 1.8 milligram dose in metabolic efficacy, provides 40% NASH resolution coinciding with what we have seen before, growing all the way up to 59% NASH resolution as the primary endpoint versus 17% on placebo. This study indicated good tolerability with only four discontinuations in the high dose group as well as in the placebo group, which is low. The data points to the fact that semaglutide is arresting fibrosis progression. Secondary endpoints show encouraging results in terms of FibroScan imaging-based elastography and health biomarker test panels, indicating that semaglutide is arresting fibrosis progression but does not significantly revert progression during the course of these 72 weeks. Overall, this is very encouraging and exciting data that will be discussed with the relevant stakeholders, including regulators in the near future. Moving on, I hope to preempt an exciting time for obesity management therapies in the industry, namely the STEP program. The first of the STEP trials for semaglutide in obesity, once weekly 2.4 mg, is STEP 4. The design of the trial is that participants are escalated to 2.4 mg over a period of 20 weeks. They will then be randomized to either withdraw therapy or continue therapy. This design mimics real-world situations. We are eager to see the differences in outcomes based on whether participants treat themselves with semaglutide for 68 weeks or withdraw the drug after 5 months. There are many exciting results, milestones, and approvals throughout the rest of the year. In Phase I, we will report the PCSK9 peptide LDL lowering results. In Phase II it will be the new WHO name for Amylin 833, a once-weekly analog. And in Phase III, of course, we have the STEP program. In terms of approval, the most important will be Japanese approval for Rybelsus, which is relatively imminent. I think with that, I'll hand it over to Karsten.

Karsten Knudsen, CFO

Thank you, Mads. Briefly on financials, we reported 14% sales growth and 12% operating profit growth. When we adjust for COVID-19 stocking-related effects in the first quarter, sales growth was 7% compared to 14%. Adjusting further for the one-off reversal of Rybelsus preapproval inventories in Q1 last year, our operating profit growth was 4%. The reason for profit growth being lower than sales growth on an adjusted basis is driven by low R&D spending in the first quarter last year, a nearly flat operating margin, and note a 48% operating margin in the quarter. Net financial items were impacted by significant depreciation of emerging market currencies, linked to oil prices in countries like Russia and Brazil, significantly affecting net financials in the quarter. In terms of the outlook for the year, we maintain our outlook across all main parameters, with one exception on financial items where we expect a movement from DKK 1.5 billion to DKK 2.5 billion, primarily due to the depreciation of emerging market currencies. With that, we'll end our presentation. This slide shows our key focus areas and milestones for 2020 that link to our strategic aspirations for 2025, including a heavy R&D news flow in the second quarter that we are looking forward to. With that, I would like to open up for Q&A. (Operator Instructions) And I would like to give the first set of questions to Michael Leuchten from UBS.

Operator, Operator

The line of Mr. Michael Leuchten from UBS is now open.

Michael Leuchten, Analyst

I'd start with one question actually. We spent a lot of time on NASH yesterday. On the international business, so the IO business, I was wondering if you could talk a little bit in more detail about the trends in Q1. We saw a very strong performance in China. You mentioned some tender business or phasing there. But when we look at the corridor that you said, the 6% to 10% for your international business, the business seems to be tending towards the upper end of that range. So as you look at the performance and strip out the phasing, is there anything else that is worth flagging that would give us confidence we can actually see the growth range ending up in the upper end of the corridor for the rest of the year? Or is it really an extraordinary quarter in Q1, and we should see a reversal to something more moderate in the second half?

Karsten Knudsen, CFO

Thank you, Michael. When you look at our business mix or geo mix, it's clear that our operations in IO are performing extraordinarily well. Last year, IO grew 11%. When we adjust for stocking and some shipment phasing in IO in the first quarter, we had a number around the 10%, 11% mark. Clearly, that’s in the high end of the 6% to 10% range indicated in our strategic aspirations. One should be careful with looking at IO on a quarterly basis, but we see very solid traction for IO last year and into the first quarter. Balancing factors include COVID impact over the coming quarters as well as stocking impact to consider. Finally, there could be some periodization of product launches. Overall, very solid trends for IO for the quarters ahead. We are not guiding specifically on where we are in the range, but underlying, we are trending very positively in IO.

Operator, Operator

Our next question comes from Jaxie Liu from Billy Gifford.

Jiaxi Liu, Analyst

It's great to hear about your progress this quarter. I was just wondering if you could speak to any lasting effects that you have considered or noticed even from this COVID crisis?

Karsten Knudsen, CFO

Yes. That's a really good question. When you look at how to navigate through COVID, people are dividing it into a number of phases. Initially, it was simply about getting control over the entire situation, then stabilizing the business, preparing to get out on the other side. As part of that, we looked at what can we bring with us in terms of learnings and practices from COVID-19. On our supply chain side, we are pleased with how we've managed COVID-19 thus far with all factories running. However, when you put more pressure on the system, it's clearer where potential weaknesses are. We have good learnings to become an even more resilient manufacturing organization in the future. In R&D and executing trials, we learned how to work more remotely, one example being executing trials using more digital means. This trend is expected to be accelerated in the years to come. Commercially, many pharmaceuticals depend on sales representatives detailing GPs and doing sales calls. The technology and e-detailing are being accelerated regarding virtual interactions with stakeholders. A lot of good learnings are there. In terms of company culture and operations, this call exemplifies how the need for travel could likely reduce over time with more usage of virtual means. We’re exploring various practices and are defining what better practices we want to anchor going forward.

Operator, Operator

Our next question comes from Michael Leuchten from UBS.

Michael Leuchten, Analyst

So two questions. One, just on your new geographic disclosure. I was wondering whether there's anything more to it. Is there any replumbing being done? And if so, what's the rationale behind it? That will be question number one. And then question two is following up on the previous question. Do you think that there's going to be a change in the way companies like Novo Nordisk interact with physicians on the scientific side due to things like medical conferences being virtual? What implications might that have for the future?

Karsten Knudsen, CFO

Great. Thank you, Michael. In terms of our geographical split, the reason for the changes is purely an internal restructuring in our International Operations commercial organization, looking at how to organize effectively. This is an ongoing review, and that's the fundamental driver for our external disclosure. So there is nothing more to it than that. Mads, do you want to comment on the conferences?

Mads Thomsen, CSO

Yes. Consider all the many ADAs, ESDs, and other conferences we have attended. They are fantastic in getting scientific messaging across to the scientific community. One new factor this year with ADA being virtual is that the attendance could be good enough so live-streamed presentations could be downloadable. Attendees won’t need to miss sessions due to scheduling conflicts and can revisit presentations later. If doctors adopt this habit post-event, it presents a unique opportunity for better understanding and retention of data. However, we’re also looking forward to meeting folks again at live conferences. There are ups and downs to both formats. Camilla, do you have something to add?

Camilla Sylvest, EVP of Commercial Affairs and Commercial Strategy

Thanks, Mads. Just to add from a commercial perspective, this gives us a good opportunity to reach a broader audience with scientific data. We can utilize sessions and reach countries that otherwise wouldn’t have been able to send representatives to ADA. We’re planning in terms of how to do this, which will take place in most countries participating.

Operator, Operator

Our next question comes from Peter Sehested from Handelsbanken.

Peter Sehested, Analyst

It’s Peter from Handelsbanken. I apologize if this question has been asked before, but I arrived late. Essentially, it’s for Mads regarding the NASH data. Across studies, reports have shown Phase III endpoints preferred by the FDA and EMA. I mean you clearly exceed expectations here with your data. Regarding the other endpoint, which is important given the correlation between fibrosis and cirrhosis, could you add any context to your confidence in showing a benefit? Do you have some internal studies? Any correlations? Just anything that could add confidence in being able to show a positive sign in the Phase III data? Also, to my understanding, the EMA requires both endpoints for approval.

Mads Thomsen, CSO

Yes, Peter, that's a good question. It’s important to align FDA and EMA expectations for trial design leading to approval. We want to create something that satisfies both regulators, and I think we have a path forward. When looking at all measures of fibrosis— the ELF bio panel, FibroScan elastography imaging, and histopathology data from biopsies, we have consistent evidence that the placebo group remains stable without movement over 1.5 years in the trial. Meanwhile, we see consistent decreases in fibrosis progression with semaglutide using various assessments. The only endpoint we didn't hit was fibrosis improvement without worsening of NASH, which had a numeric increase of around 10% in patients but was not significant. However, it indicates that we are arresting fibrosis progression. The Phase III trial will primarily aim for NASH resolution, which is the approval endpoint according to the FDA. The extension part will focus on hard outcomes. We wish to show that over time, we can improve fibrosis as well. In terms of finances, we have included pipeline project progression into our expected R&D budgets. There’s no new news on that front. As for the likelihood of harmonizing guidance between FDA and EMA, that's important for the industry as a whole.

Operator, Operator

Our next question comes from Keyur Parekh from Goldman Sachs.

Keyur Parekh, Analyst

Karsten, Camilla, what do you think this pandemic means for the biopharma industry in the longer term? This could be both regarding perceptions of increased investment in health care over the next few years as well as what it means for the industry's social contract. If there are particular geographies to consider, please share those thoughts as well. Mads, as we think about the NASH data set, while we will see incremental data soon, yesterday you mentioned that the secondary endpoint of fibrosis wasn't met, but you were encouraged by other secondary endpoints. How do you feel about semaglutide's potential role in NASH versus in obesity?

Karsten Knudsen, CFO

Camilla, would you take the first question regarding long-term industry impact from COVID-19? Then Mads will address the NASH versus obesity topic.

Camilla Sylvest, EVP of Commercial Affairs and Commercial Strategy

In terms of long-term expectations for the pharma industry, there should be increased focus on health care in general. However, there may be increased pressure on chronic diseases we work with, which could risk getting less attention in cost pressures. Our opportunity is ensuring that we provide health care systems with easier ways of diagnosing, following up, and managing chronic diseases. In diabetes and obesity, we can leverage digitalization efforts to provide more information about individual patients, possibly enabling longer-distance dialogues with patients.

Mads Thomsen, CSO

It’s difficult to compare NASH and obesity prospective outcomes. Generally speaking, I tend to be an optimistic person. My enthusiasm for the STEP program remains very high. If a 15% weight loss is achievable, that will be exciting. On the NASH side, the data is also very encouraging, as we are closing in on around 60% NASH resolution for the high dose. The correlation between metabolic and anti-inflammatory effects on the liver and systemic circulation shows potential benefits on fibrosis and ballooning. However, comparing excitement for semaglutide in NASH with obesity is challenging since both studies are independent and focus on different patient populations. We see encouraging results driving both indications.

Operator, Operator

Our next question comes from Michael Luncheon from UBS.

Michael Leuchten, Analyst

I wondered about your outlook. You have maintained guidance for the year. The tailwinds in Q1 are due to the pandemic. When looking back to your AGM, there was a normalization assumption for patient flow you are now reconsidering. As you sit here today, it seems like underlying performance has gone slightly better than expected. How are you tracking patient flow? Are you using NBRx-based data? What variables do you monitor?

Karsten Knudsen, CFO

In terms of our outlook and the impact from COVID-19, we haven't faced a situation like this before. Modeling impacts of anything as uncertain as COVID-19 on high and stable diabetes markets is complicated. But we are looking at the duration of impact and how it affects new patient starts on our front based on NDRx levels in the U.S. and different data sources in other geographies. More uncertainty exists in the modeling. While the time frame between AGM and current guidance may seem short, it feels long in terms of the rapid changes from COVID. Patient flow recovery is gradual rather than V-shaped. Based on data points from China, we saw a 7% decline versus baseline in the Q1 pharma market with expected gradual improvement over time. Therefore, we have updated our impact modeling in the latest guidance. Thank you.

Operator, Operator

Our next question comes from Keyur Parekh from Goldman Sachs.

Keyur Parekh, Analyst

Just a follow-up to Michael's question regarding your reiterated guidance now also including unquantified impacts from channel mix pressure. I realize there are many variables, but could you help outline what's included in your guidance for 2020 for that? Presumably, the bigger impact is likely in 2021 compared to 2020. Can you confirm that?

Karsten Knudsen, CFO

You are correct, Keyur. We’ve included U.S. channel mix in our guidance. The solid progress in our business last year and the first quarter allows us to maintain our guidance for this year despite COVID-19 and U.S. channel mix impact. Regarding U.S. channel mix, many parameters factor into our modeling. We start with U.S. unemployment numbers. There will be negative impacts as patients move from commercial to either uninsured or Medicaid insurance, affecting profitability and potentially volumes on our side. We’ve modeled a negative impact in 2020 and expect this to also negatively impact 2021 given the channel mix changes.

Operator, Operator

Our next question comes from Richard Vosser from JP Morgan.

Richard Vosser, Analyst

Just a couple of questions about high-dose semaglutide. The dose is slightly higher than the high-dose diabetes dose. Can you share how you can differentiate the pricing of that medicine knowing Saxenda is about double the price of Victoza and Ozempic? Regarding NASH, treating the same obese patient with hard avoidance of outcomes like cardiovascular claims from SELECT, how should we think about pricing and potential savings for health systems?

Camilla Sylvest, EVP of Commercial Affairs and Commercial Strategy

It’s early days to determine how we'll price both the obesity business and high-dose semaglutide. Over time, as we see reimbursement in obesity channels improve, there might be a convergence in prices for obesity and diabetes treatments. However, I can’t provide any tangible details now until we see the results of the trials. We're excited for the STEP program readout in the second quarter and the commercial path forward once we have approval for high-dose semaglutide.

Mads Thomsen, CSO

On the NASH issue, it is interesting that hard outcomes for Victoza came from the LEADER trial years after its first launch. For Ozempic, PIONEER 6 facilitated cardiovascular indication claims early in its launch. For semaglutide in NASH, the harder outcomes will also flow from the first approval in the ongoing trial, removing extra trial requirements, which is a positive factor. We should be careful not to lump these together too much, as both diabetes and obesity are relevant. The management team will consider how to effectively leverage synergies while targeting specific populations.

Operator, Operator

Our next question comes from Wimal Kapadia from Bernstein.

Wimal Kapadia, Analyst

I missed the first few minutes, but regarding the Rybelsus co-pay program, I know it was three times the size of the Ozempic program. How far have you progressed in distributing those volumes and co-pays? You previously mentioned by the end of Q1, most volumes would have been distributed, so context on possible COVID-19 delays there. As for the new remuneration policy, could you provide color on what’s included and the weightings for long-term incentives? And finally, insulin rebates are high in the U.S., nearing 80%. What are your thoughts on how biosimilar players might struggle to compete, considering your scale and cost-effective peptide manufacturing?

Camilla Sylvest, EVP of Commercial Affairs and Commercial Strategy

On the Rybelsus co-pay program, we currently have a program where the patient maximum co-pay is $10. This program will continue while we develop market access, which will eventually replace it. As we mentioned, we now have 50% combined access for Rybelsus, and we expect that to continue to increase throughout the year. As such, the significance of the co-pay program will diminish as we secure more access.

Karsten Knudsen, CFO

Regarding the LTI and remuneration policy approved at the AGM, the targets include sales less commercial costs, profit, and pipeline success as the primary focus areas. These will roll into effect from 2021.

Mads Thomsen, CSO

Regarding biosimilars, even in a commoditized insulin market, we can produce them at an extremely competitive cost. Our production improvements yield significantly higher outputs than we did years ago. This enables us to win tenders in regions like Latin America against competitors. While we face pricing pressures, our efficiencies grant us a competitive edge in the market.

Operator, Operator

Our next question comes from Peter Verdult from Citi.

Peter Verdult, Analyst

Apologies for the delay. Mads, concerning the setup for STEP 4 in the obesity program, we note the Phase II data. Some KOLs suggest a pivotal moment if 30% of patients lose 15% of their weight in trial. What do you consider a minimum expectation? How would you view this data set?

Mads Thomsen, CSO

Excellent question, Pete. Based on the Lancet paper for Phase II data, I aspire to see a 15% average weight loss in STEP 1. Given the weights assessed for 52 weeks there, we anticipate some degree of weight loss at week 52 as well. The FDA's treatment of dropouts in this trial could impact how percentages are reported, so our strong dropout rates relative to prior programs should work in our favor. I remain optimistic that if we can achieve a 15% average weight loss, our success rate among participants could increase markedly from previous trials. We have outlined various weight loss categories as secondary endpoints, and you will see them soon. The primary endpoint focuses on the weighted average across the cohort. Regarding SELECT, while recruiting patients is historically slow, we were ahead in enrollment pre-COVID-19, with more than 12,000 patients at present. We still track well with recruitment numbers but acknowledge that extended delays from COVID-19 could impact our pace as the event rate drives outcomes.

Karsten Knudsen, CFO

We have time for only two more questions.

Operator, Operator

Of course, sir. Our next question comes from Sachin Jain from Bank of America.

Sachin Jain, Analyst

I have a question on Rybelsus. What are your expectations for 2Q trends given lower new patient visits? Can you forecast 2Q sales relative to 1Q? You haven't confirmed the DKK 2 billion consensus forecast, but it's unchanged since COVID. What do you think about achieving that without normalizing patient flows in 2H? For NASH, can you touch on the evidence of metabolic versus cirrhotic phenotypes within NASH? Do you think GLP-1s could effectively target both? Lastly, about oral semaglutide next-gen formulations, where do things stand?

Camilla Sylvest, EVP of Commercial Affairs and Commercial Strategy

Regarding Rybelsus, we had strong early uptake pre-COVID. We expect NBRx trends to pick up once patient dynamics improve. We expect the trends seen before COVID-19 to return when flows normalize, likely in the second half of this year. We have noticed slight increases over the past weeks, returning to levels higher than the average for GLP-1 uptake.

Mads Thomsen, CSO

Regarding metabolic versus cirrhotic phenotypes in NASH, the community has debated this topic. Based on our data and analyses, it seems that the life cycle of standard NASH patients is driven primarily by metabolism, resulting in inflammation, cell death, and fibrosis. We had substantial positive effects on ballooning, with a decrease in cell death. So while we gather more evidence, we see promising results connecting GLP-1 efficacy across both phenotypes. As for next-generation oral semaglutide formulations, we are continuing to explore smarter ways of formulation. Trials are ongoing, and in earlier-stage tests, they may face delays due to COVID. However, we have Rybelsus already on the market, which eases the immediate urgency for new formulations.

Operator, Operator

Can I take one follow-on for Camilla?

Sachin Jain, Analyst

Thanks. What are you seeing regarding real-life discontinuation rates versus what was in the label?

Camilla Sylvest, EVP of Commercial Affairs and Commercial Strategy

It's too early for us to say anything on that currently. We need to observe patient numbers to see continuous Rybelsus uptake. We don't observe qualitative signals indicating any issues regarding discontinuation rates.

Operator, Operator

Our last question comes from Michael Leuchten from UBS.

Michael Leuchten, Analyst

Regarding risk management, one of your big drivers of returns has been efficient manufacturing, including yield improvements. As we navigate the pandemic, should you consider decentralizing manufacturing processes to avoid potential disruptions? Or can you manage risks with your current setup?

Karsten Knudsen, CFO

That question is relevant as we learn from COVID-19. However, we have been discussing these manufacturing risk management processes with our Board for several years. We frequently assess risk across our value chain, and I believe our manufacturing setup provides robust coverage. Some capacity involves dual sourcing in raw material manufacturing to hedge against potential disruptions. The critical suppliers of raw materials focus on dual sourcing from different manufacturers or geographies. If that isn't feasible, we maintain high inventory levels—12 months’ worth for critical materials, and much more for APIs. In-house manufacturing has also evolved with additional facilities allowing for better hedge management in various regions. We see this setup as strong against disruptions. Our finished goods manufacturing strategy includes filling plants worldwide with dual approvals on products. As exemplified when China closed early in the year, we had other facilities stepping in to supply markets not served by Tianjin. We don’t foresee significant changes to our global manufacturing network based on COVID-19 learnings, but we will consider other practices as appropriate. Thank you for attending the UBS virtual Novo Nordisk Q1 roadshow. If you have further questions, please do not hesitate to reach out to Investor Relations, and we'll respond swiftly. Have a good rest of the day and stay safe out there. Thank you.