Diabetes Europe Healthcare Pharmaceuticals

Novo Nordisk mostly unaffected by COVID-19 in Q1

Novo Nordisk is with the exception of the postponement of new clinical trials mostly unaffected by COVID-19. Sales in Q1 were however positively affected by stock piling of insulin. Growth continues to be spearheaded by Ozempic®, whereas Victoza® and Levemir® in the US continue to lead the decline. Rybelsus® revenue totaled DKKb 229 in the US in Q1. Rybelsus® was approved for the treatment of adults with type 2 diabetes in the EU on April 4th.

Novo Nordisk is experiencing positive GLP1R growth in the US due to Ozempic® and despite of Victoza®. Negative growth for insulin is led by Levemir®.


Novo Nordisk and Eli Lilly are both experiencing GLP1R growth in the US thanks to Ozempic® and Trulicity®, whereas Victoza® is declining.


Saxenda® for the treatment of obesity is also growing within and outside the US.

Eli Lilly has the dual GIP/GLP1 receptor agonist Tirzepatide (LY3298176) in phase 3 for diabetes (SURPASS) and obesity (SURMOUNT1 / NCT04184622), but it has gastrointestinal issues such as nausea, diarrhea and vomiting. The cardiovascular risk outcome trial (NCT04255433) is set to start this year.

Novo Nordisk has semaglutide for obesity in phase 3 (STEP). Results are expected in Q2 for STEP1 (NCT03548935), STEP2 (NCT03552757), STEP3 (NCT03611582) and STEP4 (NCT03548987) and later this year for STEP6 (NCT03811574). Results from the cardiovascular outcome trial SELECT (NCT03574597) is not expected until 2024.


Insulin is declining in the US led by Levemir® from Novo and Lantus® from Sanofi. Tresiba® (daily injection) is holding its ground in the US. Novo Nordisk has long acting Insulin Icodec (weekly injection / LAI287) in phase 2. The initiation of phase 3 could be affected by COVID-19.


Bloomberg – Novo Nordisk Joins Other Drugmakers With Gains on Virus Stockpiling

Reuters – Novo Nordisk’s drug sales boosted by virus-related stockpiling

Bloomberg – Novo Nordisk CEO on Earnings, 2020 Outlook, Coronavirus

Early Rybelsus® uptake further supports GLP-1 NBRx and TRx market leadership in the US

Novo Nordisk experiences growth among the GLP1R class of drugs, but this is offset by the decline of insulin in the US.

The diabetes world market as a whole across companies and across drugs is growing outside the US.

Growth of the sale of anti-diabetic drugs is experienced by Eli Lilly within and outside the US and by Novo Nordisk outside the US, whereas Merck, Sanofi and AstraZeneca are all declining in the US.

The GLP1R drug class (e.g. Ozempic® from Novo) is growing in the US, whereas insulin (e.g. Lantus® from Sanofi), DPP4 (e.g. Januvia® from Merck) and SGLT2 (e.g. Invokana® from J&J) are all declining in the US.

Pharmaceuticals S&P500

Mylan/Viatris and Teva at the 38th Annual J.P. Morgan Healthcare Conference

Mylan presented on Viatris at the 38th Annual J.P. Morgan Healthcare Conference. Below are selected slides from the presentations of Mylan and Teva at the conference and figures comparing the existing business entities prior to the merger with Upjohn.

Teva has closed many manufacturing sites, but still have more than Viatris; ~60 and ~50 respectively.

Viatris Synergy Cost Savings

The cost synergies between Mylan and Upjohn are expected to be approximately $1B, whereas Teva has already realized annual cost savings of $3B as part of their restructuring plan.

Teva Restructuring Plan Cost Savings

Whereas Viatris will be paying a dividend from day one (25% of free cash flow), Teva does not currently pay a dividend. This cash flow is spent almost entirely on reduction of debt.

It is not impossible to imagine an expansion of multiples at Teva and Viatris, if legal headwinds disappear.

Enterprise value to EBITDA for Mylan and Teva
Closing price and EBITDA for Mylan
Closing price and EBITDA for Teva

Teva and Upjohn have lost revenue in part because of generic competition to Copaxone® and Lyrica®, respectively.

Gross profit
Teva gross profit
Mylan gross profit

Teva is the only company that have lowered their SG&A significantly as part of their $3B restructuring plan as a response to the falling generic drug prices in the US.

SG&A as a percentage of revenue

The lowered SG&A translates to stabilized operating income.

Operating income

Future growth seems like a possibility for both companies.

2019-11-25 Bloomberg – Teva, Drugmakers in Talks With U.S. to End Generics Probes

2019-11-12 Mylan and Pfizer Announce Viatris as the New Company Name in the Planned Mylan-Upjohn Combination

2019-11-07 Bloomberg – Teva Profit Outlook Edges Up With Cost-Cutting Plan on Track

2019-07-29 Mylan and Upjohn, a Division of Pfizer, to Combine, Creating a New Champion for Global Health Uniquely Positioned to Fulfill the World’s Need for Medicine

2019Q3 Diabetes Healthcare Pharmaceuticals

Diabetes and the third quarter of 2019

Novo Nordisk and Eli Lilly have both reported their Q3 results. Below are some of the headlines related to their diabetes business.

  • Novo Nordisk
    • OG2023SC, an oral GLP-1 analogue, has been discontinued based on encouraging results for an enhanced oral semaglutide formulation.
    • US FDA decision on cardiovascular indication for Rybelsus® is expected in the first quarter of 2020.
  • Eli Lilly
    • The European Commission approved an expansion of the Trulicity® label to include results from the REWIND cardiovascular outcomes trial

The figures below summarise sales and sales growth by product and geography for Novo Nordisk and Eli Lilly.

The diabetes market as a whole

Despite the headwinds faced by insulins such as Lantus® and DPP4 drugs such as Januvia® the overall sales of antidiabetic drugs is not declining thanks to the superior GLP1 drugs.

Sales of anti-diabetic and anti-obesity drugs within and outside the US.

If the current growth rates for GLP1 and insulin continues, then GLP1 could overtake insulin in the US at the end of the 2nd quarter of 2020. It depends on the growth of Ozempic® and Rybelsus® and the pace at which Lantus®, Levemir®, Novorapid®, Humalog® and others continue to decline as they are cannibalised by Basaglar® and Admelog®.

Sales of anti-diabetic and anti-obesity drugs by drug class.

The advantage of GLP1 drugs over insulin is that there is no hypoglycaemic risk and an added benefit is weight loss. The table below compares the different types of anti-diabetic drugs and explains the reversed fortunes of insulin and GLP1 receptor agonists.

Novo Nordisk and Eli Lilly have been leading the GLP1 revolution and have been rewarded heavily, whereas the diabetes business of Sanofi has suffered and continues to suffer within and outside the US.

Sales of anti-diabetic and anti-obesity drugs by company.

The GLP1 class of drugs have picked up steam in Europe and elsewhere outside the US, but there is still an unmet potential.

GLP1 sales by company.

The GLP1 drug Victoza® is being cannibalised by Ozempic®, which is experiencing explosive growth of more than 400% in the US and in the world, which possibly makes it the fastest growing drug in the world in the third quarter.

GLP1 sales by drug.

It is the insulin Lantus® being cannibalised by Basaglar®, which is a drag on Sanofi. Tresiba® is the only insulin other than Basaglar® experiencing growth in the US.

Insulin sales by drug.

Novo Nordisk might be experiencing increased sales for Tresiba® in the US and their insulin drugs in China, but Levemir® and all of their other insulin drugs are decling in the US, which is not offset by the small sales growth of Tresiba® in the US.

Insulin sales by company.

Eli Lilly (and their partner Boehringer-Ingelheim) have seen their diabetes sales further strengthened compared to Novo Nordisk by the presence of the SGLT2 drug Jardiance® in their portfolio, which is competing with Farxiga® from AstraZeneca and Invokana® from J&J. Cardiovascular benefits have been shown for Jardiance® in the EMPA-REG OUTCOME clinical trial and the FDA have in June also granted fast track designation for the treatment of chronic heart failure.

SGLT2 sales by company.
SGLT2 sales by drug.

DPP4 drugs are declining in the US, whereas they are experiencing growth outside the US.

DPP4 sales by company.

The DPP4 decline in the US is led by Januvia® and Janumet® from Merck, but these two drugs are actually growing slightly outside the US for the time being.

DPP4 sales by drug.

Ozempic® and Jardiance® and the ICER report

The ICER report have found that oral GLP-1 Semaglutide, at estimated net price, is less cost-effective than SGLT-2 competitor Empaglifozin as add-on therapy for type 2 diabetes. CFO Karsten Munk Knudsen and CSO Mads Krogsgaard Thomsen of Novo Nordisk had the following comments to the ICER report.

So the known legislation related to the donut hole, which we have been public about earlier. The impact is 1% on group sales in 2020. And then, of course, it’s also important to note that this will have an impact in terms of patient affordability, so the American government, they are actually pushing more cost to patients with this change.

Novo Nordisk CFO Karsten Munk Knudsen on the ICER report during the Q3 earnings call.

First of all, Jo, let’s just remind each other of the differences between a classic health economic outcome research analysis taking into account all the big landmark trial data that have emerged over time that typically predict what the societal cost of the burden of diabetic-linked complications will be over decades, 2 decades, 3 decades and so on. And those analysis are the ones that we have done with the impact — metabolic impact of Rybelsus showing that over decades, this is clearly cost effective for society to use the product.

This element is not really integrated in the ICER research, which just looks at the mere data as they are and the metabolic outcomes here and now. But as I understand the report, having not had really time to study it today, it is still the perception that I have that when it comes to sitagliptin and liraglutide, there seems to be cost effectiveness of Rybelsus®. And then it’s only when you look at the empagliflozin that they claim that not to be the case. But all that is said then, by the way, the discussions that our American team have ongoing with the PBMs, they’re ongoing, and we’ll keep you updated as they come to conclusion over time.

Novo Nordisk CSO Mads Krogsgaard Thomsen on the ICER report during the Q3 earnings call.

Pipeline and R&D updates

In addition to the discontinuation by Novo Nordisk of the GLP1 candidate OG2023SC due to improved formulation of oral semaglutide there were other updates to the pipelines.

Novo Nordisk CSO, Mads Krogsgaard Thomsen, had the following comments on the discontinuation of OG2023SC, semaglutide and other injectable incretins.

2023, that relates to the fact that we have seen really nice data. You do recall, Peter, that we had 2 ongoing trials in parallel. One was the enhanced formulations of oral semaglutide, that is completed; and the other one was the new analog 2023. And with the benefits that we’ve seen vis-à-vis the formulation’s impact on bioavailability, we see no need to further develop 2023. So we actually view this as a sign of success of the
strong collaboration between the R&D colleagues and the product supply colleagues who are able to constantly upgrade, you can say, the performance of oral semaglutide.

So on the injectable portfolio of incretin-like projects, if we
start with the most advanced first, that is obviously the combination between semaglutide and the amylin 833 compound. And those data out, as you correctly state, in the first half of next year. And based on what I know from preclinical experiments and the monotherapy over 7 weeks with amylin compound, they should be hopefully showing really
good weight loss data since this is in obese people is taking place. So we’ll get back to that next year.
Then we have two agonists, a triple and a dual agonist ongoing in multiple dosing in Phase Ib, and that is, of course, the GIP/GLP-1/glucagon triple agonist and it’s the GIP/GLP co-agonist. And those data are actually available later this year.
And then finally, we’re gearing up for using sema, which we perceive to be both the anchor drug in several diseases but also the anchor drug partner in new to-be combination products. And therefore, we are also combining that expectedly with the once-weekly human GIP to optimize the ratio between these 2 incretins in the event that GIP actually turns out to play a role in human biology. That’s still a bit uncertain at this point.

Novo Nordisk CSO, Mads Krogsgaard Thomsen, on the Novo Nordisk Q3 earnings call.

Eli Lilly president of Lilly Research Laboratories, Dan Skovronsky, had the following comments on their injectable tri-agonist and oral incretins.

Finally, I’d like to highlight two exciting diabetes programs. With our next generation injectable incretin GIP, GLP, glucagon, tri-agonist or GGG we’re testing the hypothesis that adding glucagon to GIP/GLP will have more metabolic activity and stimulate additional weight loss.

The initial Phase 1 study, to study the safety of a single injection in healthy participants and we’re now studying multiple doses including dose titration. We expect this program to enter Phase II by late 2020 or early 2021; just like the hurdle for tirzepatide to enter Phase III was a meaningful improvement over Trulicity, the bar here will be a step change over tirzepatide itself.

Additionally, our commitment to oral incretins has continued to increase as we advanced programs through development we seek to improve upon administration or efficacy. Our first oral incretin program which we licensed from Chugai last year is a small molecule non-peptide agonist of GLP-1 that entered Phase 1 earlier this year.

Our initial focus will be on pharmacokinetics with the expectation that it should be meaningfully better than a peptide as well as the pharmacodynamic response, which we should see even in Phase 1, this molecule could enter Phase 2 in early 2021; in addition to this approach, we’re also pursuing dual GIP and GLP-1 receptor agonist peptides for oral delivery. These programs, which are designed to give tirzepatide like efficacy with a once-a-day oral peptide administration are also progressing preclinically and should enter Phase 1 next year. We look forward to tracking the progress of these assets over the coming years and we’ll share additional pipeline updates on our next earnings call.

President of Lilly Research Laboratories, Dan Skovronsky, on the Eli Lilly Q3 earnings call.
Eli Lilly pipeline.

Press releases

Novo Nordisk – Novo Nordisk’s operating profit increased by 11% in Danish kroner and by 5% at constant exchange rates (CER) in the first nine months of 2019

Eli Lilly – Lilly Reports Strong Third-Quarter 2019 Financial Results, Raises 2019 EPS Guidance

Media coverage

Nightly Business Report – October 23, 2019
Eli Lilly CEO on 3Q Results, Drug-Pricing Reforms

ReutersNovo Nordisk nudges up 2019 sales outlook as new drugs excel

BloombergNovo CEO Jorgensen on Biopharma, Insulin Prices, Innovation

Reuters – Sales of Eli Lilly diabetes drug Trulicity fall short, shares drop

2019Q3 Healthcare Pharmaceuticals

Roche reports very strong sales growth in the first nine months of 2019 – outlook raised

Roche issued a press release on its nine month sales with the following headlines.

  • Group sales increase 10% at constant exchange rates and 9% in Swiss francs, due to new products
  • Pharmaceuticals Division sales up 12%, driven by high demand for recently launched medicines, mainly Ocrevus, Hemlibra, Tecentriq and Perjeta 
  • Diagnostics Division sales grow 4%, primarily due to its immunodiagnostic testing portfolio
  • Outlook raised again: Roche now expects sales to grow in the high-single digit range, at constant exchange rates, for 2019

Growth at Roche has recently accelerated due to many new product launches in the pharmaceuticals division.


Roche is the largest pharmaceutical company in Europe, whether measured by market capitalisation, revenue or operating income.

Roche has one of the best operating margins among the European pharmaceutical companies.

But yet it is trading at lower multiples than many of its peers despite having an impressive product portfolio and pipeline with lots of new molecular entities (NMEs) in it.

Roche appears attractively valued despite the launch of biosimilars by Amgen of Avastin® and Herceptin® due to the extensive pipeline; for example risdiplam and satralizumab. It is also worth noting that all of the ten best selling drugs are monoclonal antibodies (mABs), for which generic biosimilars are not easily introduced, which offers some moat.

Media coverage

Reuters – Roche lifts 2019 sales view again as Chinese demand soars

Bloomberg – Roche Boosts Outlook for Third Time as New Drugs Surge

2019Q3 Healthcare Pharmaceuticals S&P500

J&J tops estimates

Johnson & Johnson [$JNJ] issued a press release before the market opened on its third quarter results with the following headlines:

  • Sales of $20.7 billion reflecting growth of 1.9%, operational growth of 3.2%* and adjusted operational growth of 5.2%*
  • EPS of $1.81 increased 25.7%; adjusted EPS of $2.12 increased 3.4%*
  • Company increasing Full Year Sales and EPS guidance due to strong performance

CEO Alex Gorsky issued the following statement:

“Our third-quarter results represent strong performance, driven by competitive underlying growth in Pharmaceuticals and Medical Devices, as well as continued optimization in our Consumer business. As we look ahead, we remain confident in the strength of our broad-based business model, which is fueled by our disciplined portfolio management, focus on transformational innovation and dedicated employees around the world who position us for success today and well into the future.”


The figures below summarise revenue, expenses, profits, margins and each segment. The revenue growth is driven by contact lenses (7.6%), interventional solutions (14.3%), beauty (8.1%) and the pharmaceutical segment and within it immunology (Stelara®, Tremfya®), neuroscience (Invega sustenna®) and oncology (Darzalex®, Imbruvica®).

Valuation and outlook

The share price of J&J has gone up in recent years, but the top line and bottom line have not quite followed suit. The company does not at all seem undervalued at current price levels despite the guidance being raised. Many lawsuits are looming and keeping the share price at check.

Media coverage

Nightly Business Report

2019Oct15 Reuters – Prescription drugs boost drives J&J forecasts higher, shares rise

2019Oct15 Bloomberg – Johnson & Johnson to `Grow Above Market’ in 2020, CFO Says

2019Oct15 Reuters – Missouri appeals court overturns $110 million Johnson & Johnson talc verdict

2019Oct15 Bloomberg – J&J Persuades Court to Throw Out $110 Million Talc Verdict

2019Oct15 Bloomberg – J&J Makes $4 Billion Opioid Offer as Distributors Seek Deal

2019Oct15 Bloomberg – J&J Says No Legal Reserves Needed Amid Wave of Lawsuits

2019Oct14 Bloomberg – J&J Faces 100,000 More Damage Claims After Taking $8 Billion Hit

2019Oct09 Reuters – Johnson & Johnson hit as jury awards “excessive” $8 bln in damages

2019Oct08 Reuters – Jury says J&J must pay $8 billion in case over male breast growth linked to Risperdal

2019Oct08 Bloomberg – J&J Unit Ordered to Pay $8 Billion Over Anti-Psychotic Drug

2019Oct07 Reuters – Oklahoma appeals size of $572 million award in J&J opioid case


Oral semaglutide (Rybelsus®) receives FDA approval for the treatment of type 2 diabetes

The FDA has issued a press release regarding the approval of the first oral GLP-1 treatment for type 2 diabetes. Novo Nordisk also issued a press release on Rybelsus®. Novo Nordisk in the US issued a separate press release. In terms of future peak sales this might be the most important FDA approval of any drug this year.

Insulin has in recent years lost market share to drugs such as injected GLP1, oral SGLT2 and in particular oral DPP4 such as Januvia® from Merck and Trajenta® from Eli Lilly.

Novo Nordisk has annual sales of approximately $17B of which more than 80% originate from anti-diabetic drugs. The oral DPP4 drug Januvia® in 2016 reached worldwide peak sales of approximately $6B. Rybelsus® does not have the same side effects as DPP4 and it is not impossible imagining Rybelsus® reaching peak sales as high or higher than Januvia®. Sales of Victoza® and Levemir® will continue to shrink as they are cannibalised by their superior equivalents Ozempic® and Tresiba® and other drugs. But this deterioration will most likely be more than offset by Rybelsus® going forward.

The late stage clinical trial SOUL (NCT03914326) for oral semaglutide follows the phase 3 PIONEER studies. If this trial is succesful, then this could put Rybelsus® on par with other GLP1 class drugs in terms of major adverse cardiovascular events (MACE) and further boost sales of Rybelsus® in the decade ahead.

Additionally it is worth pointing out that injected semaglutide is already used for the treatment of obesity (Saxenda®) and oral semaglutide could very well be approved for the same purpose.

Novo Nordisk has with the approval of oral semaglutide for the treatment of type 2 diabetes (Rybelsus®) positioned itself well for the future. But the approval might have been expected by the market for the past few years and a lot of it might already be priced in as witnessed by the somewhat insignificant share price movement of approximately +2% following the approval.

Reuters – Novo Nordisk wins U.S. approval for first-of-its-kind oral diabetes drug


Recent developments in the diabetes landscape halfway into 2019

All manufacturers of anti-diabetic drugs have issued press releases on their Q2 earnings. Novo Nordisk on August 9th and Eli Lilly on July 30th. And the 79th Scientific Sessions of the American Diabetes Association took place June 7-11, so a look at the changes in the diabetes landscape is due.

Worldwide sale of insulin continues to deteriorate, whereas the GLP1 class of drugs (e.g. Trulicity® from Eli Lilly and Ozempic® from Novo Nordisk) continues to grow within and outside the US.

The majority of the growth in the US is spearheaded by Lilly and the GLP1 drug Trulicity®, whereas Sanofi and their insulin Lantus® continues to descend lower.


The previous GLP1 bestseller Victoza® is descending from its peak sales, whereas Trulicity® is now the best selling GLP1 drug and Ozempic® the fastest growing. Interestingly semaglutide against obesity (Saxenda®) is turning into a blockbuster drug for Novo Nordisk. The GLP1 sale at Novo Nordisk could further accelerate, if oral semaglutide is approved by the FDA on 20th of September. Other noteworthy GLP1 news are summarised below. One of them regarding benefits of the phase III dual agonist tirzepatide from Eli Lilly. Another regarding the filing of oral semaglutide for FDA approval six months ago.

  • 26Jun Lilly’s AWARD-11 trial studying higher investigational doses of Trulicity® (dulaglutide) demonstrated superiority in A1C reduction in people with type 2 diabetes
  • 09Jun Trulicity® (dulaglutide) significantly reduced major cardiovascular events for broad range of people with type 2 diabetes
  • 08Jun Lilly’s tirzepatide demonstrates benefits in data presented at the American Diabetes Association’s® 79ᵗʰ Scientific Sessions®
  • 20Mar Novo Nordisk files oral semaglutide for US regulatory approval of glycaemic control, as well as for CV risk reduction for oral semaglutide and Ozempic®


In terms of insulin, Lantus® from Sanofi is slowly bleeding to death in the US caused by the patent expiration and the launch of the analog Basaglar® by Eli Lilly. Levemir® from Novo Nordisk is also deteriorating in the US and this is not offset by growing sales of the newer Tresiba®. Similarly Humalog® from Eli Lilly will suffer in the coming quarters from the launch of a generic insulin Lispro by Eli Lilly itself and the analog Admelog® by Sanofi. Today and tomorrow belongs to the GLP1 class of drugs and not to insulin.

  • Jun09 Lilly’s ultra rapid lispro provided similar A1C reductions compared to Humalog® (insulin lispro), with superior post-meal blood glucose reductions
  • May22 Lilly’s Lower-Priced Insulin Now Available


The SGLT2 drugs Farxiga® from AstraZeneca and Jardiance® from Eli Lilly continue to show positive growth in the US, whereas Invokana® from Merck displays negative growth. In the case of AstraZeneca SGLT2 is their fastest growing antidiabetic drug class. Recent news regarding the SGLT2 class of drugs are mentioned below.

  • Sep01 Detailed results from Phase III DAPA-HF trial showed Farxiga significantly reduced both the incidence of cardiovascular death and the worsening of heart failure
  • Aug20 Farxiga met primary endpoint in landmark Phase III DAPA-HF trial for the treatment of patients with heart failure


Along with insulin the DPP4 class of drugs will probably be a loser going forward. Oral semaglutide, injected GLP1 and SGLT2 will continue to take market share from DPP4 going forward. The big loser will continue to be Januvia®/Janumet® from Merck, which is currently the best selling antidiabetic drug in the world with combined TTM sales just shy of USD 6B. Eli Lilly is planning to launch a combined SGLT2/DPP4 tablet according to the June press release below.

04jun U.S. FDA Accepts New Drug Application for Triple Combination Tablet for Adults with Type 2 Diabetes

Novo Nordisk and Eli Lilly

The figures below summarise the sales for Novo Nordisk and Eli Lilly for individual drugs. For Novo Nordisk the losers are Levemir® and Victoza® and the future and current winner is oral and injected semaglutide (Ozempic®), respectively. Tresiba® is only partially offsetting the revenue loss by Levemir®. The big winner for Eli Lilly is Trulicity®. A future winner might be their phase III dual agonist, which is discussed elsewhere in this article. The insulin Basaglar® is cannibalising Lantus® and the SGLT2 drug Jardiance® is also doing well within and outside the US.

Novo Nordisk sales in 2019Q2 and 2018Q2 of antidiabetic and antiobesity drugs (DKKm).
Eli Lilly sales in 2019Q2 and 2018Q2 of antidiabetic drugs (USDm).


The table below summarises some of the ongoing or recently finished GLP1 studies from Sanofi, Eli Lilly and Novo Nordisk.

CompanyStudy IDTrial IDDrugStudy
LillySURPASS J-monoNCT03861052TirzepatideDulaglutide
LillySURPASS-4NCT03730662TirzepatideI Glargine
LillySURPASS-5NCT04039503TirzepatideI Glargine
NovoPIONEER 12NCT04017832O SemaglutideSitagliptin


Eli Lilly is more than just Trulicity® and diabetes (e.g. Taltz®), but it is very richly valued despite terzepatide and other interesting drugs in the pipeline. Levemir® will continue to deteriorate for Novo Nordisk and Ozempic® will continue to cannibalise Victoza®, but a positive catalyst is the expected approval of oral semaglutide on September 20th; oral semaglutide could take market share from injected GLP1 (USD9B), SGLT2 (USD3B), DPP4 (USD8B) and insulin (USD18B). There is a lot of potential upside. Neither company is particularly attractive at current prices.

P/S time series for manufacturers of anti-diabetic drugs.

Teva and status on CGRP migraine drugs

Teva Pharmaceuticals issued a press release on their Q2 earnings on August 7th.

Below are excerpts from the earnings call with CEO Kåre Schultz and outgoing CFO Michael McClellan and relevant figures and slides. Further below the CGRP migraine drugs Ajovy® from Teva, Aimovig® from Amgen and Emgality® from Lilly are discussed. The legacy litigations regarding opioids and pricing are not discussed here, but Teva has a $646 million provision for legal settlements following their $85M opioid settlement, which is further described in the earnings transcript and in this Bloomberg article.

Earnings call

If we go to historical development of revenue and profitability, I’d just like to remind you of the situation in late-2017 when I joined, where we saw generic competition coming in on COPAXONE, and we basically knew that revenues were going to fall roughly $4 billion on a yearly basis. That’s also what you see. You see the quarterly revenue coming down from some $5.3 billion to $4.3 billion.

But you also see now the beginning of the trough, as I’ve been calling it, the trough of 2019, which is basically where the revenue stabilises. You also see that the gross margin that was coming down is also stabilising now just above 50%, and the operating margin stabilising now around 23%, which is of course not our long-term target. Our long-term target, as I’ll get back to, is 27%, so we still need to see improvement there.

Talking about the trough, let’s look at the operating profit. If we look at that in the same historical period, then you’ll also see the very big effect of the revenues declining, and us only being able to take down the cost quarter-by-quarter, but still the effect now is that we are stabilising the operating profit at around roughly $1 billion per quarter, and you see that the net income is around $650 million right now. And that results, of course, in the earnings per share stabilising right now around $0.60.

Now this is – as I’ve said before, this is what we expect to be the trough year. It’s not that there will be a dramatic turnaround in the coming years, but the trend lines will slowly change and we’ll start to see a moderate increase in revenues and moderate increases in EPS going forward. But, just to remind everybody, this year will be the lowest year in terms of operating profit and also in terms of average earnings per share

Now, if we look at the business going forward and our financial targets for the business going forward, then I’d just like to repeat these. We have talked about them before, but just so that everybody knows what our long-term plan is. And one key element is, as I said in the beginning, to improve the operating margin. Now, that happens by a lot of elements.

One element is, of course, that you optimise your product portfolio, the gross margin on the products you’re selling. You optimise the manufacturing cost of the products you sell. And you make sure that you have a good and strong overall market development. As I showed you earlier, we are at the level of 23% right now, and we want to improve that up to the level of 27%.

The cash-to-earnings is quite simple because we need the cash in order to reduce our debt. And of course, we have a long-term plan to keep on reducing our debt. The simple math is that, right now, we probably have a net earnings of some $650 million per quarter. That’s 2.6 billion a year. 80% of that, that’s roughly just around $2 billion. So, as you see, we’re also guiding $1.6 billion to $2 billion on the cash flow, so we’re really aiming at getting to that level where we, on a consistent basis, generate most of the result as cash.

There will always be quarterly fluctuations with a big balance sheet as ours. Of course, there are quarterly
fluctuations. But, on a yearly basis, it’s very important that we meet this target of the 80% cash-to-earnings. And that is important because we need to reduce the debt.

As you know, our net debt-to-EBITDA ratio right now is about 5x, and we really want to get it below 3x, and the only way to do that is to generate cash and pay back the debt. So we will continue to use all our cash flows to really pay down debt. And as I stated many times, we do not plan to raise equity. We plan to continue to use cash to reduce the outstanding debt, and we think that’s the best way to create value for our long-term shareholders.

We ended the second quarter with a net debt of $26.6 billion and a net debt-to-EBITDA ratio of 5.72x. As you may recall, during April, we also entered into a $2.3 billion unsecured syndicated revolving credit facility, which replaced the previous $3 billion revolving credit facility that we had. This new RCF can be used for general corporate purposes, including repaying existing debt. As of June 30, 2019, no amounts were outstanding under the RCF. And as of today, we have $500 million outstanding under the RCF.

Today, we are reaffirming all aspects of our annual guidance that were first presented in February and reaffirmed in May, including earnings per share in the range of $2.20 to $2.50 and free cash flow from $1.6 billion to $2 billion for the year. Where we end up in the ranges of the full year will depend on the performance of the branded products, especially COPAXONE and AJOVY, the timing of generic launches, foreign exchange rates, especially the euro, and our expense management.

Spend base

Spend base

Debt Structure

CGRP migraine drugs

The quarterly sale of CGRP migraine drugs were:

  • $23M Teva Ajovy® (Fremanezumab)

AJOVY revenues in our North America segment in the second quarter of 2019 were $23 million. AJOVY was approved by the FDA and launched in the United States in September 2018 for the preventive treatment of migraine in adults.

  • $34M Lilly Emgality® (Galcanezumab)

For the second quarter of 2019, Emgality generated worldwide revenue of $34.3 million, an increase of $20.1 million compared with the first quarter of 2019. U.S. revenue was $33.8 million, an increase of $21.7
million compared with the first quarter of 2019. Emgality launched in certain international markets in the first quarter of 2019 and generated revenue outside of the U.S. of $0.5 million in the second quarter of 2019.

$83M Amgen Aimovig® (Erenumab)

Aimovig was launched in the U.S. in the second quarter of 2018 and generated $83 million in sales in the second quarter of 2019.

Below are important announcements regarding clinical studies and links to these studies.

On August 21st Teva announced that Fremanezumab data in The Lancet demonstrate clinically meaningful reduction in monthly migraine days versus placebo for patients with difficult-to-treat migraine.

On August 5th Lilly announced positive results for Emgality® (galcanezumab) from the CONQUER study in patients who failed previous migraine preventive treatments.

On May 2nd Amgen announced it would highlight extensive long-term safety and efficacy data of Aimovig® (erenumab) across the spectrum of migraine at the American Academy of Neurology annual meeting.

Below are slides and excerpts from earnings call transcripts.

We are very happy about the strong launch we’ve had of AJOVY. We still have above 20% TRx share in U.S., and we have just started the launches in Europe. We’ve seen a moderate decline in the NBRx share. We think it’s related to a couple of factors. One being the fact that we’ve stopped the full pay-down on all scripts, which means that some scripts where we are not covered actually do get declined at the pharmacy level. And we also see that, in some cases, the patients do prefer an auto-injector, and therefore, of course, we are very eagerly awaiting the approval and the launch of our own auto-injector for AJOVY.

And of course, we’re anxiously awaiting the approval of our auto-injection device and the launch of that device which we expect in the next six months. That will be a second stimulus, really, a second phase of our launch, and we expect a significant boost to our new-to-brand and our TRx share as a result of that.


Teva still suffers from negative revenue growth and return to growth is still distant

Teva reported on their first quarter results and issued the following press release with the following headlines and statements from the CEO:

– Revenues of $4.3 billion
– GAAP diluted loss per share of $0.10
– Non-GAAP diluted EPS of $0.60
– Free cash flow of $360 million
– Spend base reduction of $2.5 billion since initiation of the – restructuring plan in 2018; on-track to achieve $3.0 billion by the end of 2019
– Full year 2019 revenues and EPS guidance reaffirmed

Mr. Kåre Schultz, Teva’s President and CEO, said, “The second year of our two-year restructuring program got off to a promising start. We are on track to reduce our total cost base by $3 billion by the end of 2019 and we have achieved a reduction of $2.5 billion to date, while continuing to lower our debt. “

Mr. Schultz continued: “We faced the expected loss of exclusivities of key products COPAXONE® and ProAir® to generic competition. Our focus is on stabilizing our global generics business and ensuring the success of our long-term organic growth drivers, especially AJOVY® and AUSTEDO®. Both products continue to gain momentum since their initial launches and we are making the necessary investments to be able to bring them to markets outside of the U.S. as well as explore additional indications.”

Below the revenue is shown for each geographic segment, the multiple sclerosis drug Copaxone® and generic drugs. The operating expenses are also shown.

Copaxone® revenue has been further reduced following the introduction of generic versions from Mylan and Momenta at lower prices. Revenue from generic drugs in the US seems to have stabilised. The company is on track to achieve the goal of reducing expenses by $3B annually and $750M quarterly. The migraine drug Ajovy® does not yet contribute significantly to the overall revenue. Annual peak sales have been estimated to be greater than $500M. Ajovy® received EU approval in April 2019.

The slide below is a summary of the quarterly highlights not already mentioned above.

The slide below shows the NBRx market share of the migraine drug Ajovy®.

The current competition is Aimovig® from Amgen and Emgality® from Lilly.

Alder BioPharmaceuticals also has a CGRP migraine drug (eptinezumab) in phase 3.

The slides below are summaries of Austedo®, Copaxone® and Ajovy®

The slides below are summaries of GAAP and non-GAAP metrics and a summary of the items causing the difference; e.g. $348M of impairment charges to intangible assets and amortisation of $283M.

The slides below summarises the free cash flow and the long term debt.

The slide below summarises the non-GAAP outlook.

The final slide below shows the debt maturity. The CEO has said the company will not need to raise equity, but given the reduced revenue, profit and cash flow the company will definitely have to refinance. Currently the credit rating is BB with S&P and Ba2 with Moody’s.

I do think Teva could trade close to $30 within the next 2-5 years, but it’s not a business I would own long term, so I choose not to buy at $14-16 despite the lowest EPS forecast for 2020 currently being $2.28 and the remainder of the market (i.e. S&P500) being somewhat overpriced.

During the call the CEO didn’t reveal much about the long term targets and long term strategy:

Yeah, of course, we have the aim to become as effective as any of our competitors, which means that longer-term we need to improve our margins which is why we have a long-term financial target of an operating margin of 27%, which is higher than where we are right now. So, of course, in order to achieve that, we need to set plans in place so that this happens. Our plan right now is to communicate more broadly on this once we finish this year. So once we finish the restructuring of ’18 and ’19, we will communicate to you what is our strategy for manufacturing and for that part of the cost base.

You can see that, we have a long-term target of the operating profit of 27%, that’s higher than where we are now. Part of that improvement of course has to come from the COGS, because if we don’t improve the gross margin, then it’s going to be very difficult to get a significant improvement of the total margin. So yes, we will be targeting something like that. We will give you some more details on what we are planning to do once we finish the restructuring, that means once we report on the full year of 2019. Next February, we’ll give you an outline of how we see the ongoing optimization of our manufacturing system.

On the R&D side, we spent roughly $1 billion on R&D, and you could see the — a big chunk of that is for innovative specialty products. We have about 30 development projects ongoing, about two-thirds of those are biopharmaceuticals. And we don’t really want to share that with anybody right now. The reason is that, we are in the restructuring right now this year and last year, but our plan is to share more with you once we finish this year. So once we get to February of next year, we will share a bit more with you on what is our pipeline, what are the different projects we have.

Globes, May 2nd: Teva Q1 revenue down but profit beats analysts

Bloomberg, May 2nd: Teva Falls as Sales of Copaxone Decline Faster Than Expected

Reuters, May 2nd: Teva’s new migraine drug helps to contain profit fall

Globes, May 3rd: Teva CEO unsure about 2020 growth

CNBC, May 5th: Migraine drugs cause pain for investors


Novo Nordisk 2018Q4

Novo Nordisk has released their annual report. Positive growth was driven primarily by Ozempic® in the US, Saxenda®, Tresiba® and Victoza®, whereas negative growth was driven by primarily Levemir® in the US. The mentioned drugs and the trailing twelve month (TTM) sales of diabetes and obesity drugs are summarised below.

Name Drug Type Injection Therapy Successor
Ozempic® Semaglutide GLP-1 Weekly Diabetes
Victoza® Liraglutide GLP-1 Daily Diabetes Ozempic®
Saxenda® Liraglutide GLP-1 Daily Obesity semaglutide?
Tresiba® InsDegludec Insulin Once daily Diabetes LAI287?
Levemir® InsDetemir Insulin Once or twice daily Diabetes Tresiba®
Xultophy® InsDegludec + Liraglutide Insulin + GLP-1 Once daily Diabetes LAIsema?
NovoRapid® InsAspart Insulin Diabetes
NovoMix® InsAspart Insulin Diabetes
Ryzodeg® InsAspart + InsDegludec Insulin Diabetes
Fiasp® InsAspart Insulin Diabetes

Business segments

The revenue and profit generated by the two business segments and is summarised below:


In terms of R&D highlights they were LAI287 and the completion of the PIONEER6 phase 3 study on oral semaglutide. The slide below summarises other highlights:

On November 23rd Novo Nordisk sent out a press release on the PIONEER6 results, which concluded the PIONEER studies on oral semaglutide:
Oral semaglutide demonstrates favourable cardiovascular safety profile and significant reduction in cardiovascular death and all-cause mortality in people with type 2 diabetes in the PIONEER 6 trial
The result of the PIONEER studies in terms of HbA1c reduction and weight loss is summarised in the figure below:

Click for links to all of the press releases on the PIONEER trials:

Efficacy and Safety of Oral Semaglutide Versus Placebo in Subjects With Type 2 Diabetes Mellitus Treated With Diet and Exercise Only (PIONEER 1)
Novo Nordisk successfully completes the first phase 3a trial, PIONEER 1, with oral semaglutide

PIONEER 2 (vs SGLT2 / Jardiance® from Lilly):
Efficacy and Safety of Oral Semaglutide Versus Empagliflozin in Subjects With Type 2 Diabetes Mellitus (PIONEER 2)
Oral semaglutide shows superior improvement in HbA1c vs empagliflozin in the PIONEER 2 trial

PIONEER 3 (vs DPP4 / Januvia® from Merck):
Efficacy and Long-term Safety of Oral Semaglutide Versus Sitagliptin in Subjects With Type 2 Diabetes (PIONEER 3)
Oral semaglutide shows superior reductions in HbA1c and weight compared to sitagliptin in the long-term safety and efficacy trial, PIONEER 3

Efficacy and Safety of Oral Semaglutide Versus Liraglutide and Versus Placebo in Subjects With Type 2 Diabetes Mellitus (PIONEER 4)
Oral semaglutide shows statistically significantly greater reductions in HbA1c and weight compared to Victoza® and sitagliptin in the PIONEER 4 and 7 trials

Efficacy and Safety of Oral Semaglutide Versus Placebo in Subjects With Type 2 Diabetes and Moderate Renal Impairment (PIONEER 5)
Oral semaglutide provides superior HbA1c and weight reductions versus placebo in people with type 2 diabetes and renal impairment in the PIONEER 5 trial

A Trial Investigating the Cardiovascular Safety of Oral Semaglutide in Subjects With Type 2 Diabetes (PIONEER 6)
Oral semaglutide demonstrates favourable cardiovascular safety profile and significant reduction in cardiovascular death and all-cause mortality in people with type 2 diabetes in the PIONEER 6 trial

Efficacy and Safety of Oral Semaglutide Using a Flexible Dose Adjustment Based on Clinical Evaluation Versus Sitagliptin in Subjects With Type 2 Diabetes Mellitus. (PIONEER 7)
Oral semaglutide shows statistically significantly greater reductions in HbA1c and weight compared to Victoza® and sitagliptin in the PIONEER 4 and 7 trials

Efficacy and Safety of Oral Semaglutide Versus Placebo in Subjects With Type 2 Diabetes Mellitus Treated With Insulin (PIONEER 8)
Oral semaglutide demonstrates statistically significant reductions in HbA1c and body weight in people with long duration of type 2 diabetes treated with insulin

Dose-response, Safety and Efficacy of Oral Semaglutide Versus Placebo and Versus Liraglutide, All as Monotherapy in Japanese Subjects With Type 2 Diabetes (PIONEER 9)
Oral semaglutide demonstrates greater reductions in both HbA1c and body weight compared to Victoza® in Japanese people with type 2 diabetes

Safety and Efficacy of Oral Semaglutide Versus Dulaglutide Both in Combination With One OAD (Oral Antidiabetic Drug) in Japanese Subjects With Type 2 Diabetes (PIONEER 10)
Oral semaglutide demonstrates greater reductions in HbA1c and body weight and comparable number of adverse events vs dulaglutide in Japanese people with type 2 diabetes

Novo Nordisk har acquired a priority review voucher for oral semaglutide for DKK800m, which will speed up the launch.

The long acting insulin 287 (LAI287) with a weekly injection has been promoted to phase 2 in the pipeline and LAIsema (LAI287 + semaglutide) is in phase 1. A few of the upcoming clinical trials on LAI287 include NCT03789578 (LAI287 with and without semaglutide in T2D cases) and NCT03751657 (comparison of weekly LAI287 with daily Insulin Glargine).

Press coverage

The earnings release triggered the following headlines and interviews.
Bloomberg: Novo Nordisk CEO Applauds Trump Plan to Limit Rebates
Reuters: Novo Nordisk’s new diabetes drug, outlook lift shares


The figures below summarise some of the key financial metrics over the past 10 quarters and 10 years.


The main event in 2019 for Novo Nordisk will probably be the launch of oral semaglutide. Here the expectation regarding approval from CSO Mads Krogsgaard Thomsen:

Novo Nordisk has notified the FDA that we will ask for a priority review for oral semaglutide based on the priority review voucher acquired in 2018. The use of the priority review voucher shortens the expected FDA review period to six months. We now expect to file the NDA for oral semaglutide with the FDA by the end of this quarter and in the EU and Japan in the second and third quarters of this year, respectively.

One would expect Ozempic® and Saxenda® to continue to contribute positively to the growth in 2019. The annual report from Eli Lilly will be released two weeks from now.