Welcome to this Novo Nordisk conference call regarding our performance in the first three months of 2019 and our outlook for the year. I’m Lars Fruergaard Jørgensen, the CEO of Novo Nordisk. With me, I have our Chief Financial Officer, Karsten Munk Knudsen; and our Chief Science Officer, Mads Krogsgaard Thomsen.

Also present and available for the Q&A session are Executive Vice President and Head of Commercial Strategy and Corporate Affairs, Camilla Sylvest; and Executive Vice President and Head of Investor Relations, Mike Doustdar. Present are also our Investor Relations officers.

Today's earnings release and the slides for this call are available on our website, novonordisk.com. The conference call is scheduled to last one hour. As usual, we'll start with the presentation as outlined on slide two. The Q&A session will begin in about 25 minutes.

Please note that this conference call is being webcast live, and a recording will be made available on Novo Nordisk's website. Please turn to slide three. As always, I need to advise you that this call will contain forward-looking statements.

Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from expectations. For further information on the risk factors, please see the earnings release and the slides prepared for this presentation. Please turn to slide four.

In the first three months of 2019, sales increased 9% in Danish kroner and increased by 4% at constant exchange rates. International Operations sales grew by 13% in both Danish kroner and at constant exchange rates, while North America Operations sales increased by 4% in Danish kroner and declined 4% at constant exchange rates.

Sales growth was mainly driven by the diabetes and obesity combined sales growth of 10% in Danish kroner and 5% at constant exchange rates. Diabetes and obesity sales grew 4% and 51%, respectively at constant exchange rates. Ozempic sales were more than DKK 1.4 billion, and it has now been launched in 19 countries.

For research and development, several achievements are worth mentioning. In March, we filed three applications for the FDA, one for oral semaglutide for glycemic control with the use of the priority review voucher and two filings for cardiovascular risk reduction indications for Ozempic and oral semaglutide.

Furthermore, in April, we filed oral semaglutide in EU and in Canada. In March, a Phase 2b trial was initiated for the compound AM833. Within biopharmaceuticals, Esperoct, the long-acting factor VIII used for the treatment of hemophilia A was approved in the U.S.A.

in February, and the European Medicines Agency committed responsible for the human medicines, endorsed Esperoct in April. Furthermore, in March, concizumab was granted Breakthrough Therapy Designation in the U.S.A. for people with hemophilia B and inhibitors. Turning to financials.

In the first three months of 2019, operating profit increased by 14% in Danish kroner and by 8% at constant exchange rates. Operating profit was positively impacted by a reversal of write-downs of oral semaglutide prelaunch inventory. The dilutive earnings per share decreased by 1% to DKK 4.36.

For the 2019 outlook, sales growth is still expected to be 2% to 5% at constant exchange rates now with an expected positive currency impact of 3 percentage points, while operating profit growth is still expected to be 2% to 6% at constant exchange rates now with an expected positive currency impact of 5 percentage points. Please turn to slide five.

In the first quarter of 2019, the overall sales growth was 9% in Danish kroner and 4% at constant exchange rates. International Operations sales grew 13% in both Danish kroner and at constant exchange rates, driven by growth in all 5 regions and positively impacted by timing of shipments, primarily in Region AAMEO and Region Latin America.

In Region Europe, sales grew 5% at constant exchange rates, driven by diabetes growing 7% from increased GLP-1 and new-generation insulin sales as well as obesity sales growing 74%. Region AAMEO sales grew 29% at constant exchange rates, primarily driven by the insulin segment growing 30% and obesity sales growth of 149%.

Region China sales increased 9% at constant exchange rates, driven by insulin sales and GLP-1 sales increasing 9% and 90%, respectively. Region Japan & Korea sales growth of 9% at constant exchange rate was primarily driven by obesity sales and biopharma sales growth of 9%, while diabetes sales were unchanged.

Finally, Region Latin America sales growth of 20% was driven by insulin sales growth of 40% and solid obesity sales growth of 90%, partly offset by biopharm sales declining by 17%, reflecting timing of tender shipments. North America Operations sales increased 4% in Danish kroner and declined 4% at constant exchange rates.

The sales decline at constant exchange rates was driven by U.S. sales declining by 5%, negatively impacted by inventory reductions. Adjusted hereof, U.S. sales were broadly unchanged, which reflects increasing GLP-1 and obesity sales, partly offset by declining insulin and biopharmaceuticals sales. Please turn to slide six.

In the first quarter of 2019, the sales growth of 4% at constant exchange rates was driven by strong growth of the GLP-1 and obesity segments, while biopharm sales were stable. Total diabetes sales grew 4%, and insulin sales grew 2%, both at constant exchange rates.

International Operations insulin sales grew by 13%, and volume market share increased by 0.3 percentage point.

Insulin sales in North America Operations declined 13% at constant exchange rates, impacted by inventory reductions across products as well as a negative impact from changes in the channel and payer mix and lower average realized prices in the U.S., including the change in the coverage cap legislation.

GLP-1 sales grew 11% at constant exchange rates, driven by 25% growth in International Operations and 7% sales growth in North America Operations. Obesity sales grew by 51%, driven by International Operations growing 146% and North America Operations growing 13%, impacted by U.S. inventory reductions.

The sales growth was driven by a solid volume uptake in both operating units and the continued growth rollout of Saxenda, which is now being launched -- which has now been launched in 41 countries.

Biopharmaceuticals sales were stable, driven by a strong commercial execution across markets and rollout of new products, offsetting the NovoSeven sales decline. Please turn to slide seven. In the first three months of 2019, diabetes sales increased by 4% at constant exchange rates.

The diabetes sales growth was driven by a strength in global diabetes value market share increase of 0.6 percentage point to 28.1%, supported by an improving insulin volume market share and growth for the GLP-1 segment, partly offset by a decline in GLP-1 market share.

Insulin sales grew 2% at constant exchange rates by solid growth in -- by solid global volume uptake, supported by the continued penetration of new-generation insulin Tresiba, Xultophy and Ryzodeg. Novo Nordisk has expanded its global insulin market leadership position by 0.6% to 46.7% market share.

International Operations insulin sales increased 13%, driven by sales growth in all regions except Region Japan & Korea as well as products -- as several products were impacted by the statutory price reductions from 2018.

The sales growth in International Operations was supported by the continued market leadership expansion where Novo Nordisk increased the volume market share by 0.3 percentage points and now has an insulin volume market share of 49.3%. In North America Operations, insulin sales declined 13%, driven by U.S. insulin sales declining 14%.

Despite the insulin sales decline in North America Operations, Novo Nordisk has expanded the insulin market leadership by 1 percentage point to 40.2% in the last 12 month, driven by solid volume uptake, supported by the market penetration of Tresiba and Xultophy. Please turn to next slide. Ozempic has now been launched in 19 markets, in the U.S.

and Canada and in 17 European countries. In the U.S., the combined new-to-brand market share is now more than 50%. Broad formulary coverage has been obtained for Ozempic. And 12 months after the launch, Ozempic has obtained a new-to-brand prescription market share of 30.5%.

In Europe, Ozempic is off to a strong start in launched markets and has gained double digit volume market shares in less than 6 months post launch, showing the same trajectory as seen in Canada, where Ozempic has a volume market share of 34% just over a year after launch. The rollout of Ozempic will continue in Europe in 2019.

Please turn to next slide. In the U.S., GLP-1 sales increased by 6% at constant exchange rates, driven by a strong uptake of Ozempic, partly offset by declining Victoza sales.

The Victoza sales decline reflects a negative impact from inventory reductions, payer and channel mix changes and change in coverage gap legislation, which impacts the realized prices as well as an impact from the competing once-weekly products, including Ozempic.

Since the launch of Ozempic in the first quarter of 2018, the annual GLP-1 market growth has accelerated from 23% to the current market growth of just under 30%. We are pleased with the Ozempic launch, which has now achieved a total GLP-1 volume new market share of 11.8% in the U.S.

Novo Nordisk has thereby stabilized its GLP-1 volume market share at around 44%. Please turn to the next slide. In the first quarter of 2019, obesity sales increased by 51% and accounted for 33% share of growth. The solid sales growth was driven by strong volume uptake in both International Operations and North America Operations.

Novo Nordisk is the global value market leader with 55% value market share of the anti-obesity market. In International Operations, Saxenda sales more than doubled, driven by the continued global rollout, reflecting a solid volume uptake of Saxenda, which is now launched in 39 countries outside North America.

Novo Nordisk maintains market leadership with a 38% value market share in International Operations. In North America, Saxenda sales increased by 13%, driven by a volume market share increase in the U.S. alone of 10 percentage points to 29%, partly countered by inventory reductions.

Novo Nordisk is committed to changing obesity and recognize that obesity needs to be addressed from multiple angles through multiple programs, all while securing commercial execution of Saxenda and progressing our obesity pipeline.

With the vision to bring even better and more efficacious products to the market, we are also rolling out patient support programs to increase adherence and state time of the products to improve outcomes as well as educational programs to increase understanding and acknowledgment of obesity as a disease requiring chronical medical treatment.

Please turn to slide 11. In the first three months of 2019, biopharmaceutical sales remained stable at constant exchange rates, impacted by declining sales in North America Operations, Region Latin America and Region Europe, offset by sales growth in Region AAMEO, Region Japan & Korea and Region China.

Hemophilia sales declined 3%, driven by declining NovoSeven sales in North America Operations and Region Europe, impacted by the uptake from a competing product as well as the timing of NovoSeven tenders in Region Latin America.

The NovoSeven sales decline was partly countered by the global rollout of NovoEight, which has now been launched in 46 countries, as well as the continued rollout of Refixia in North America and Europe.

Growth hormone deficiency sales increased 1% at constant exchange rates, driven by the sales growth in International Operations, partly countered by declining sales in North America, impacted by inventory reductions in the U.S. The biopharm business is a key priority to us, and we are on track with excluding on our biopharm business strategy.

With this, over to Mads for an update on R&D..

FOCUS, a long-term superiority trial to establish the effects of once-weekly semaglutide on the development and progression of diabetic retinopathy in adults with type 2 diabetes; and FLOW, a long-term placebo-controlled trial to investigate the effect of once-weekly semaglutide on the progression of renal impairment in adults with type 2 diabetes and diabetic nephropathy.

Towards the end of the year, we expect to have the final Phase 1 program readout for 2 of our obesity products, the GIP/GLP/glucagon Tri-agonist 1706 and the PYY analogue 1562.

Within biopharm, we expect to initiate 2 Phase 3 trials for once-weekly growth hormone analogue, somapacitan, one in children with growth hormone deficiency; and one in children born small for gestational age and with insufficient catch-up growth.

Furthermore, we expect to submit somapacitan for the adult growth hormone deficiency indication in the U.S., EU and Japan in the second half of 2019. With this, over to Karsten for an update on the financials..

Thank you, Mads. Please turn to slide 15. In the first three months of 2019, sales increased by 9% in Danish kroner and by 4% at constant exchange rates. The gross margin was 83.8% measured in Danish kroner compared with 84.4% in 2018.

The decrease in gross margin reflects a negative impact from growth of lower-margin insulin products and lower prices, primarily related to the insulin segment in the U.S.A, partly countered by improved productivity and a positive currency impact of 0.6 percentage points.

Sales and distribution costs increased by 8% in Danish kroner and by 3% at constant exchange rates, reflecting resource allocation to growth markets and promotional activities for Victoza and Saxenda as well as launch activities for Ozempic in International Operations and promotional activities for Ozempic, Saxenda and Tresiba in the U.S.A.

R&D costs increased by 19% in Danish kroner and by 21% at constant exchange rates, impacted by the reversal of write-downs on clinical prelaunch inventory for oral semaglutide of approximately DKK 500 million.

Adjusted for this, R&D costs declined by 6%, primarily driven by the completion of the PIONEER program for oral semaglutide in 2018 and the head-to-head studies between Tresiba and insulin glargine U300, partly offset by increasing costs for the 2 semaglutide obesity clinical programs, STEP and SELECT.

Administration costs increased by 5% in Danish kroner and by 3% at constant exchange rates, reflecting growth in International Operations across the regions. Operating profit increased by 14% in Danish kroner and by 8% at constant exchange rates.

Adjusting for the positive impact from the reversal of the write-downs on clinical prelaunch inventory for oral semaglutide, operating profit growth was 4% at constant exchange rates.

Net financial items showed a loss of around DKK 1 billion compared with a gain of DKK 1.2 billion in 2018, primarily driven by foreign exchange hedging losses, mainly due to the U.S. dollar on average having traded higher against the Danish kroner in the first quarter of 2019 compared to the first quarter of 2018.

Diluted earnings per share decreased by 1% to DKK 4.36. Please turn to slide 16. For 2019, sales growth is still expected to be in the range of 2% to 5% at constant exchange rates.

This guidance reflects expectations for a robust performance for the GLP-1 products, Victoza and Ozempic and the obesity product, Saxenda, as well as the portfolio of new-generation insulin.

This guidance also reflects intensifying global competition within diabetes and biopharmaceuticals as well as continued pricing pressure, especially in the U.S., where the funding of the Medicare Part D coverage gap has an expected impact of approximately DKK 2 billion.

Reported sales growth is now expected to be around 3 percentage points higher than at constant exchange rates. Operating profit growth at constant exchange rates is still expected to be in the range of 2% to 6%.

The outlook reflects the sales growth outlook and continued focus on cost control as well as the positive cost impact for the priority review voucher, which was expensed in the fourth quarter of 2018. Reported operating profit is now expected to be around 5 percentage points higher than in local currencies.

Financial items is now expected to be a loss of approximately DKK 3.3 billion, reflecting losses associated with the foreign exchange hedging contracts, mainly related to the U.S. dollar and losses on unhedged currencies.

The effective tax rate is still expected to be in the range of 20% to 22%, and capital expenditure is still expected to be around DKK 9 billion. For 2019, we still expect the free cash flow to be around DKK 29 billion to DKK 34 billion. With this, back to you Lars..

Thank you, Karsten. Please turn to slide 18. We delivered very solid performance in International Operations, driven by sales growth in all regions. Meanwhile, sales in the U.S. were negatively impacted by inventory reductions. The global launch of Ozempic is well on track and continues to gain market share.

From a regulatory perspective, we achieved important milestones with the filing of oral semaglutide, both in the U.S., Canada and EU. We are now ready for the Q&A. We kindly ask all participants to limit themselves to two questions. Operator, we are now ready to take the first questions..

[Operator Instructions] And we do have questions coming through.

Do you want to take the first question?.

Yes, please..

The first question comes from the line of Peter Verdult from Citibank..

Peter Verdult, Citi. Two questions. Lars, you've been hit by the donut hole discounts widening in 2019, yet when we think through the post Part D reforms as they stand for 2020, the implied uplift in Novo seems to -- or at the very least very significant.

Could you talk to how you are thinking about, one, Part D reform actually happening in 2020; and two, a little more about the short- and long-term implications for Novo's book of business? And then secondly, Karsten, just a simple question.

Why do you think we are seeing significant inventory destock in the channels, particularly in GLP-1? And could you provide perhaps some quantification of the effects from destocking versus the channel mix changes you alluded to and the widening donut hole discounts?.

So thank you, Pete. The line was a bit broken from time to time, so correct me if I understood you wrongly. But your question was about the proposed rule of passing through rebates in 2020.

Is that correct?.

Yes. That's correct. Sorry. Lars, just the first question was just, do you think Part D reform will happen in 2020? And as far as the -- in terms of the proposals, the implied uplift is that Novo is significant. So just how you're thinking about the short and long-term implications. And I hope you heard my question correctly, Karsten, as well..

Yes, yes, thank you. I tend to believe that the pass-through of rebate reform will happen, but I also note that it's not a simple thing to change. Obviously, it would benefit patients, and we believe we can compete in a market where there's more transparency and we operate without rebates.

But also, we should all bear in mind that the rebates that are paid from the highly competitive parts of the pharmaceutical markets, like the insulin market, where purchasers can extract significant rebate amounts, that is going in to fund the health care system.

So if that is passed through to patients, there'll be a lack of funding in other parts of the health care system, which would mean that premiums would have to go up. So it's not a -- it's a complex system. And when you start changing parts of it, it can be difficult to fully understand who are winning and who are gaining.

As we look at it, there are different forces you could say. More transparency around pricing and competing on net pricing could lead to some negative impact on overall pricing because there would be a convergence to maybe a lower price point cost accounts.

On the other hand, we will have lower exposure in the Part D coverage gap, and you could also speculate that there would be a higher consumption of certain medicines. So I think that there are pluses and minuses. Exactly how it would play out, I will not comment on because I think this is a draft proposal.

And how the whole supply chain will react to it and think about fees, et cetera, how that will play out, we do not know yet. But that's kind of my thinking around it.

And then, Karsten?.

Yes. So, there was a couple of questions in the question, so I'll try and divide it up. In terms of inventory and inventory movements in the U.S., then as we have stated in our announcement, we've seen a faster move in the inventories in the U.S. in the first quarter in the sense that if we adjust for the inventory movement, we are seeing our U.S.

sales being broadly unchanged. The inventory movement, in broad terms, you can split equally between wholesalers and retailers, and retailers being predominantly the pharmacy chains. And bear in mind, we are not controlling the inventory levels, so it's a little bit hard exactly to speculate on the movements in neutral levels.

But what we can see is that we have a stable trend on our in-market demand and the TRx trends that we're seeing, and then we compare that to our expected outflows. So that's how we quantify it. Sometimes, it's linked to shipment schedules in connection with the holidays or the likes.

Or other times, it's linked to, I would say, balance sheet optimizations with wholesalers or retailers. So I think we don't -- again, we're not controlling that. In terms of where it's impacting on our side, then roughly half of the impact is on GLP-1, and the other half is split more or less proportionally between insulin, obesity and growth hormone.

So that's the mechanics around the inventory movements. In terms of sizing and sizing vis-à-vis channel mix, I presume you're alluding to the GLP-1 comment we've put in. And in broad terms, these are the 2 main explanations.

So sizing-wise, it's of similar size, the inventory movement on the GLP-1 side versus the channel mix impact in the first quarter..

Our next question comes from the line of Emmanuel Papadakis from Barclays..

I'll try and judiciously to reduce a couple of questions. Emmanuel Papadakis from Barclays. The coverage gap, I mean, it sounds like you took part of that in Q1. But I think in prior communication, you alluded to it stepping up somewhat and being phased more heavily in Q2 and Q3.

So perhaps you could just talk about to help us with modeling the phasing pattern of that, how it will be booked. The second one was a question on biopharma. I may take. Novo Nordisk appears to have stabilized somewhat in recent quarters. U.S. still has a double digit, decline in Q1. Perhaps you could just talk about the moving parts there.

And then, one of the things that has happened relatively recently is the first readout for positive once-weekly product in the pediatric setting. So your midterm expectations in terms of how that franchise evolves would be reasonable to assume that a competitor may get there before somapacitan in the key pediatrics.

That said, I'll be interested to hear your thoughts on that. And then if I could squeeze in a subpart. You said the return to growth strategy on biopharma is on track.

Does that mean you don't need external BD anymore? Or is that still implicitly required to return to growth?.

Sure. Thank you, Emmanuel.

So Karsten, if you can talk to, first, the phasing or the coverage gap impact through 2019?.

Yes, yes. Thanks for the question, Emmanuel. Phasing up of coverage gap is complicated, to be very exact about it, because it's very multidimensional between these price movements, other products, our products, utilization, et cetera.

But I would say a good rule of thumb would be that to the tune of 10% of the DKK 2 billion additional impact from coverage gap has been included in the first quarter of our numbers. Hence, the remaining 90% will be spread for the remainder of the year.

In terms of exact quarterly phasing, we don't want to go into too many details due to all the uncertainties. But I would say the first quarter is the main outlier in terms of price difference..

And I'll I just answer very quickly on biopharm back to growth as we're trying to limit it to 2 questions. So we're very pleased with what we can actually do in terms of stronger commercial execution with the products we have already, and we can see that we can actually mitigate the loss of sales of NovoSeven.

So we can say that we believe we can get back to a growth base in what we have, but we're not necessarily satisfied with that growth level, so we're also looking for what other external opportunities to accelerate that.

And then, Mads, on the growth hormone area and the once-weekly?.

Yes. I think just, first, to comment on our own somapacitan, which is essentially a human growth hormone with a fatty acid-like side chain.

We have now got the Phase 2 growth velocity for the full year, and we're extremely happy with the dose range finding that we achieved and have selected the exact dose for Phase 3 in agreement with regulators worldwide. So we are entering that almost as we speak.

And as you know, we'll submit for Adult Growth Hormone Deficiency in all trial markets during the course of the second half. It is true that there is a competitor or one of our peers that has conducted in kids a Phase 3 trial, and it's not really up for us to comment on.

I do note that they've got a nice growth velocity data to the extent that they actually trended higher than the once-daily comparator, which may or may not be the preferred option for regulators to actually have to match these once-daily dose. But I can't really comment on that. At least, it worked quite well.

And then you have to assist the biodegradability and the fate of the drug antibody. And also that is a regulatory interaction between the company and the regulator..

Thank you, Mads and Karsten, and thank you, Emmanuel, for those questions. Next questions, please..

The next question comes from the line of Wimal Kapadia from Bernstein..

Wimal Kapadia from Bernstein. Just starting on from Peter's initial question, it sounds like a rough 10% impact on GLP-1 growth in the quarter from the payer channel mix.

So I guess, my question is, how we should think about these impacts in the GLP-1s moving forward? As well as it's not a change in the fundamental underlying price decline it does actually result in a lower price point. And my second question is around CV and REWIND.

Just interested to get any comments you have from -- from any discussions you've had with payers on CV benefit in the GLP-1s.

And the question is, how likely is it that the physicians would actually consider a broad CV benefit from Trulicity as a class effect? Just trying to get and really understand what impact REWIND could have from a physician's perspective..

Thank you, Wimal. First, Karsten, on the ongoing effect on GLP-1..

Yes. So, U.S. GLP-1. So, Wimal, thank you for this question. I think doing your math, what you need to take into account vis-à-vis the channel mix and whether it's 10%, again, that we have a donut hole impact that I would not count as a channel mix impact. That's also included in the GLP-1 numbers just to be precise.

And then also do bear in mind that last year, we had a couple of smaller effects impacting the base for our GLP-1 business in the U.S. So we had the Ozempic launch order in Q1 of last year, and then we had the rebate phasing between Q1 and Q2 last year that also impacts the base. So I think you have to include those 2 in the math you're doing.

But the 2 main drivers, again, between the in-market TRx growth of 26% and the reported 6% growth in the U.S. is inventory and channel payer mix..

Thank you, Karsten. Then on the CV REWIND and the impact on contracting, et cetera, formulary -- or sorry, class effect. No, we have not seen the data from REWIND, so it's hard for us to speculate on what the impact of that would be.

I would make a note, though, that we see that more and more treatment guidelines are being updated to include the CV benefits. But still, seen in, say, primary care, it's glucose regulation that's on top of mind for physicians. So it's not -- it is being established as a prescription driver, but it's not yet a significant prescription driver.

And I think that's also what the payers would be impacted by when they have to make choice. But it's not, first, to make much more firm views as we have very limited insight to what the REWIND data informs us about. Thank you, Wimal. The next question, please..

The next question comes from the line of Trung Huynh from Credit Suisse..

Two, if I may. First one on NovoSeven. The rate of decline has slowed from about 20% CER at the end of 2018 to only 11% this quarter.

Is this a realistic rate for the rest of the year? Or should we expect a reacceleration of this decline? Secondly, what do you expect to see from volume demand with rebate reform? Do you have a view to -- as to -- as many patients abandoning scripts because of costs? And could that go away with lower patient co-pays?.

Good. Thank you, Truong. First, Karsten, on NovoSeven growth..

Yes. So we've been looking at our -- at NovoSeven for quite a number of years now. And one key takeaway, when looking at NovoSeven performance, is never ever judge NovoSeven by the quarter.

So the nature of NovoSeven prescriptions and NovoSeven uses, for instance, for emergency pleats and the various tender orders in International Operations mean that one should never be carried away in either positive nor negative in terms of NovoSeven performance.

So what we're seeing is that we are seeing continued erosion due to the launch of HEMLIBRA. We see that impact continuing in the U.S. We see the impact in Europe as well as in Japan. And so in that sense, there are no changes to our expectations around the erosion curve for NovoSeven.

And then, again, just worth reiterating that we are satisfied with the fact that we're able to mitigate the negative impact by the launch of our new products..

Thank you, Karsten. And on the speculation around potential higher volume demand in a world where rebates are passed through and there are less affordability issues for patients, we don't really have any firm view on what that could potentially be.

I note that, actually, in -- across the world, there is probably an under-consumption of insulin because it's not the easiest medicine to handle. And the concerns about hypo, et cetera, in general means that patients are not taking the volume they should.

So as we bring innovation to the market and potentially also bring digital solutions, we believe there can be a volume benefit from that insulin to become more safe. And how to split that between affordability and more convenient insulins, I think, is difficult to judge at this point of time. Thank you, Truong.

And next question, please?.

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

Sachin Jain here from Bank of America. I have two questions. Firstly, and just relating them into your comments this morning. Lars, based on your M&A strategy, you made some comments in there on potential gene therapy or genomic collaborations. I wonder if you could just provide a little bit color of around that on size and therapy area of focus.

And then, sorry, Karsten, just back to the channel mix, should we expect the impact that you've seen in the first quarter to persist through the quarters in '19 at a similar level of magnitude or is there any specific phasing around that? And is this channel mix impact predominantly a '19 impact that shouldn't be repeated into '20?.

Thank you, Sachin. And on M&A strategy, if you'll start with size first, that's really unchanged guidance. We're looking at relative smaller sized transactions in the low single billion dollar range. When you look at therapy areas and technologies, it's really opportunity-based.

I think we have opportunities, both in our core area, but, of course, we have a more stated strategy of supporting growth in the biopharm area based on in-licensing and acquisitions. And we have a leading position on the stem cell-based therapies, so we believe that can have a broad therapy area application over time.

When we look at other technology areas, I think it's important to look at, if we are to get new technologies in, ideally, we should be able to use them broadly also in Novo Nordisk. It's hard to get access to technologies directly just to one therapy area. But we're not going to guide specifically on what technology that we'll be looking at.

But we are -- we continue to look at it opportunistically. And as long as we can add value to make sure that our shareholders will sit with a part of the value to be harvested, we are open for considering this staying disciplined in value. Karsten, back to the popular question..

Yes. So channel mix has some focus today. So just coming back to the channels in the U.S.

market, then the main channels are, basically, how are people insured in the U.S.? Meaning what insurance schemes are they covered under? And here, we're talking about commercial insurance through employers, Medicare Part D for the elderly, Medicaid, VA, DoD and the likes. So these are the channels we're talking about.

And movements between channels happen gradually over time. So this could principally be an example of baby boomers driving growth in Part D as an example. And with this, I'm saying that you should not expect dramatic shifts between quarters in terms of channel mix.

This is -- whether it's a fast or a slow-moving train, but it's something that happens gradually over time. So the answer's, no, you should not expect any significant changes in terms of channel mix. Of course, the donut hole, as I alluded to before, there we'll see a step-up compared to what we saw here in the first quarter..

The next question comes from the line of Michael Novod from Nordea Markets..

Two questions, one to concizumab and the breakthrough designation in hemophilia B.

How fast do you actually think that you can complete this program? And could there be any rollover effects also in the hem A indication? Just to get a feeling of whether it has its own implications for the hemophilia B, also whether the entire program can benefit from this? And then secondly, to the IO performance, where I can see that, underlying, you grew around 89%.

That's been the trend the last, I don't know, 4, 5 quarters or so.

Are you willing to commit, too, that this is an ongoing trend going forward in the 8%, 9% growth or 7% to 9% growth compared to historically where it's been around 5% to 6%?.

Thank you, Michael, and thank you also for bringing in International Operations. We're very, very proud of our performance in International Operations. So I think we should hand that over to Mike Doustdar to comment on whether this 8% to 9% is the new norm..

So I think it was you, Michael, last quarter or perhaps one of your peers that was asking about why IO fourth quarter was at 4%. Last year, actually, we grew 7% throughout Q1 to 3, and then 4% on Q4, ending on the 7% growth. Historically, it's been 5% to 6%, you're correct.

I do think that a lot of the growth that you have seen is coming through new launches and obesity-specific, which International Operations did not have. Just saw so many quarters ago or you saw many quarters ago when we were dealing with about 5% to 6% growth.

So I cannot, of course, speculate on the exact percentage of growth as we go forward, but I could probably commit to some percentages above historical growth rate in IO. There are some timings for this specific quarter, but you should probably expect more out of IO as 95% of the global volumes are in IO.

And we have the aim with all of our products to reach to many people as possible..

Yes. Thank you, Michael. And then -- sorry, Mike. We'll thank Michael later. So, Mads on concizumab and breakthrough designation.

What can we get out of that?.

Yes. Well, there are clear benefits to it. And as I indicated, this affects the indication, the narrow indication called hemophilia B with inhibitors. But there are a list of things that are relevant to that narrow indication, but that will also aid and guide us throughout the pan segment development of concizumab.

You are aware that you get all features of the fast-track designation process. You also get intensified guidance on how to efficiently conduct your development program from now on right until you are out there with the patients in the market.

And you get an FDA organization commitment also from the senior managers in the agency to be committed to expeditiously handle any and every issue that might appear during the development phase. So we're extremely happy with it. We believe it will actually help the entire concizumab program, and we're already utilizing it as we speak..

The next question comes from the line of Richard Vosser from JP Morgan..

First question on the R&D rebate or restatement in the quarter. So given the production of oral sema has clearly been going on for some time through the quarters of last year, could you perhaps talk about your ability to supply the markets and how we should think about your ability to supply a ramp similar to Ozempic in the U.S.

through the coming year? And then second question, on the amylin analogue, do you think the combination of the amylin analogue and Ozempic high dose could be a significant treatment for NASH as well as obesity? And when could we see data here?.

Okay. Mads first on amylin and the application in NASH..

Yes. Well, the answer -- short answer is absolutely yes, Richard. We have done both mechanistic studies looking at the side of action in the brain, and they are highly complementary. One is primarily brainstem-related. That's the amylin side of action, and one is primarily hypothalamic. That's semaglutide.

We've also corroborated that in both studies, where we actually find that there's an activity in the weight loss. So it could mean whatever is -- are we speaking 15% for sema? Are we speaking 10% to 15% for amylin? In principle, we could be approaching bariatric surgery standards of weight loss, but that remains to be a forward-looking statement.

And of course, we're starting multiple dosing already between the 2 agents to find the optimal ratio in human terms. Yes, it could be used for obesity. It could be used for NASH, where it would defatten the liver and maybe also have certain anti-inflammatory properties primarily meeting by the GLP-1 component.

And it could also be used as an antidiabetic agent in particular in people with higher degrees of obesity..

And thank you, Mads. And Richard, on the oral sema supply, I just wanted to start by saying that it's not a restatement that we move, say, what was produced before submission of the registration file now on, say, inventory to be dissolved later.

And that's what we normally do, and I think also the industry does, when you actually have visibility that you're actually going to sell a product that has been in R&D. On supply, we are fully in control of that. We have very competent colleagues in our product supply unit.

We will produce the launch supply out of Denmark, API out of Kalundborg and tableting out of Måløv. And I think some of you had an opportunity to see that facility at our last Capital Markets Day. And then we have larger scale API kicking in when our U.S. facility is up and running. So we're fully ready to supply the launch and the ramp-up of that.

Thank you, Mads. Thank you, Richard. I think we have time for 2 more questions..

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

It's Michael Leuchten from UBS. One question about your range of guidance on the top line, please. Your lower end of the guidance of 2%, given that you've done 4% in the fourth -- first quarter with the pushes and pulls sort of netting out, leave that low end of the range. So sticking out is not entirely feasible, at least in my interpretations.

Just wondering, what do you take into consideration as the negative factors for the rest of the year outside the already discussed donut hole? That'd be helpful. And then secondly, a question for Mads.

The FOCUS and FLOW trials, when we look at the endpoint, is the strategy here to play a little bit more defense again the SGLT-2 inhibitors, where outcome trials out there are the same running? Or am I interpreting that wrongly?.

So Karsten, on our top line guidance?.

Yes. So Michael, when we do -- so, as we say then, we've confirmed our top line guidance in constant exchange rates between 2% and 5%. in the first quarter, we had 4% and with 2 more or less offsetting factors. So inventory reduction in the U.S. and -- which is negative and positive phasing in IO. So we have a good start for the year.

And then as we discussed before, then we have still 90% of our DKK 2 billion donut hole impact ahead of us. So that's what we're planning for, for the full year. In terms of getting to the 2%, of course, we've put a range on also to handle the uncertainties, which can go in both directions.

So in the bottom end of the range, historically, some of the main moving parts have been, if the rebate claims have come out differently than what we accrued, that has quarterly adjustments. Then we have tender uncertainties always in International Operations. Then, we saw in the first quarter, inventory movements in our big markets.

And then finally, one of the reasons why we see very strong results in IO in the first quarter is also that all regions and pretty much most countries, they are performing well.

And you never know, but there is a risk of some political uncertainty or some geopolitical items that could have an impact in -- somewhere in the International Operations, which, we're knocking on wood, would not happen. But that's what's included in the guidance range..

Thank you, Karsten. And Mads, let's round off with some comments on the FLOW trial..

Yes. So FLOW and FOCUS are actually not defensive maneuvers, but rather, in my view, extremely proactive ones.

One of them started as a defensive maneuver, where the European Medicines Agency asked us to do a post-approval safety study to actually secure that the early worsening phenomenon was indeed the responsible action behind the transient novelty worsening that we've seen in a few patients in one of the trials, and that we've turned into a superiority trial.

Because alongside our excellent experts in ophthalmology, it's our deep belief that it is -- there is a working phenomenon. And as we have seen potently in other outcome studies, that is followed by a period of progressive improvement in eyesight or reduction in eyesight deterioration as compared to standard of care.

So it's actually a superiority trial to prove that Ozempic might be the first compound to actually long term protect your eyes against loss of vision. We used a more than three-step progression in ETDRS scale, which is the internationally accepted measurement of accelerated visual loss.

In the FLOW trial, it is unfortunate that we, unlike a couple of our SGLT-2 peers, have not done a chronic kidney disease trial because it is my belief that the 36% improvement in either onset of kidney nephropathy or worsening of kidney nephropathy is a true phenomenon. It was actually also observed in the LEADER trial, where it was 22% or so.

So I do believe that by measuring a composite primary endpoint, where we look at greater than 50% reduction in eGFR, onset of a persistent eGFR below 15%, i.e., going into end-stage renal failure, and initiation of either hemodialysis or renal transplantation, plus supplemented with renal death or CV death, that composite endpoint should take us to where we want to be, namely high up in the treatment hierarchy in terms of nephrologists and people treating people with nephropathy.

So with that, we would have labels that range from glycemic regulation to weight regulation via ultimately NASH management, cardiovascular management and maybe also renal management, and maybe a little bit of upside on the eyes..

Thank you, Mads, thank you, Karsten, and thank you, Mike, for that last question. This concludes our conference call. Thank you all for participating. And of course, feel free to reach out to our Investor Relations officers to ask any follow-up questions you might have. Thank you. And have a fantastic day..