Novo Nordisk A S (NVO) Q3 2023 earnings call transcript

Welcome to this NOVO NORDISK earnings call for the first nine months of 2023. This call follows the early announcement of top-line results and the updated outlook for 2023 shared in October. The release was advanced due to Danish securities regulations. My name is Daniel Bosn and I am the Head of Investor Relations at NOVO NORDISK. With me today I have CEO of NOVO NORDISK, Lars Forgård Jørgensen, Executive Vice President and Head of Commercial Strategy and Corporate Affairs, Camilla Sylvest, Thank you. The application is structured as outlined on slide 2. Please note that all sales and operating profit growth statements will be at constant exchange rates unless otherwise specified. Please turn to the next slide. As always, we need to advise you that this call will contain forward-looking statements.

These are subject to risk and uncertainty that could cause actual results to different material expectations. For further information on the risk factors, please see the company announcement for the first nine months of 2003 and The slides prepared for this presentation. That's over to you last for an update on our strategic aspirations.

Thank you, Daniel. Next slide, please. In the first nine months of 2023, we delivered 33% sales and 37% operating profit growth at constant exchange rates. I would like to start this call by going through the performance highlights across our strategic aspirations before handing over the word to my colleagues. Within Purpose and Sustainability, we continue to make progress. Our carbon emissions decreased by 28% compared to pre-pandemic levels in 2019, and in line with our aspiration of being a sustainable employer, we continue to expand the number of women in senior leadership positions. This is now 41% compared to 38% last year.

In R&D, an important milestone is that we will stop the flow kidney outcomes trial early as semaglutide demonstrated a benefit in people with type 2 diabetes and chronic kidney disease. Further, within R&D, we have recently agreed to acquire Oceduluron for the treatment of cardiovascular disease. This supports our aspiration of establishing a presence in other serious chronic diseases with a high unmet medical need.

Margie will come back to this and our overall R&D milestones later. The sales growth reflects strong commercial execution with both operating units contributing to a continuous sales growth, driven by increasing demands for our GP1-based diabetes and obesity treatments. Camilla and Doug will go through the details in the therapy area later.

Within commercial execution, we are pleased to have reached our obesity aspiration of 25 billion and our aspiration for diabetes by reaching a global value market share of one third. Naturally, the progress is not holding us back, and we continue to aim for treating more patients with our innovative treatments.

Carson will go through the financial details, but I am very pleased with our overall performance for the first nine months of 2023, which has enabled us to raise our outlook for the full year.

With that, I will give the word to Camilla for an update on commercial execution.

Thank you, Lance, and please turn to the next slide. In the first nine months of 2023, our total sales increased by 33%. The sales growth was driven by both operating units with North America operations growing 49% and international operations growing 17%. Our GLP-1 sales increased 49% driven by North America, growing 43%, and international operations growing 60%. Insulin sales decreased by 7%, driven by a 1% decline in international operations, and a 24% sales decline in North America operations. The sales decrease was driven by decreasing sales in the US and region China. Obesity care sales grew 174% overall. In international operations, sales grew 52%, driven by both Saxenda and Vigovie. In North America operations, obesity care sales grew 244%.

Total rare disease sales decreased 18%, which was driven by a 22% decrease in international operations and by a 13% decrease in North America operations. Please turn to the next slide. With 25% sales growth in our diabetes care, we are now growing faster than the total market, improving our global diabetes value market share to 33.3%. The increase reflects market share gains in both North America operations and international operations. In international operations, total diabetes care sales increased by 21% in the first nine months of 2023.

This was driven by GLP-1 sales growing 60%, driven by all geographical areas. NOVO NORDISK is the market leader in international operations, the GLP-1 value market share of 69%. SEMPIC continues its GLP-1 market leadership with just shy of 46% market share. Rebelsos has 12% value market share driven by strong uptake across geographies. And with that, I will hand over the word to Doug.

Thank you, Camilla. Please turn to the next slide. The GLP-1 class expansion continues in the U. S. in the first nine months of 2023. The U. S. GLP-1 market volume grew around 50%, comparing Q3 of 2023 to Q3 of 2022. Measured on total prescriptions, NOVO NORDIS continues to be the market leader with 53% market share. Please go to the next slide.

Obesity care sales grew by 174% in the first nine months of 2023. This was mainly driven by the U. S. The global-branded anti-obesity market expansion continues with a global volume growth of 94%. In international operations, obesity care sales are driven by strong sex center performance and the Vagovie launches in five international operation countries. While eager to launch Vagovie in more I. O. countries, our focus remains to do this in a sustainable manner, for example, by capping volumes.

In the U. S. alone, sales of WGOVI grew by 467%. Demand for WGOVI continues to exceed supply, and to safeguard continuity of care for patients already on WGOVI, the supply of the lower WGOVI dose strength in the U. S. has been reduced since May of 2023. Please go to the next slide. Our rare disease sales decreased by 18%. The sales decrease was driven by a 13% decline in North America operations and a 22% sales decline in international operations. Sales of rare blood disorders increased by 2%, driven by the launch products in hemophilia A and B, and partially countered by NOVO 7. Sales of rare endocrine disorder products decreased by 54%, reflecting a temporary reduction in manufacturing output.

Now over to you, Martin, for an update on R&D.

Thank you, Doc. Please turn to the next slide. Serious chronic, non-communicable diseases affect millions of people globally and have emerged in recent years as a major public health issue. Given our extensive scientific and clinical knowledge within metabolic diseases, we are well positioned to advance our understanding of semaglutide's potential benefits in associated health complications. With the current body of evidence, it is clear that the beneficial effects of semaglutide goes even further than glycemic control and weight loss.

Semaglutide has already now demonstrated convincing risk reductions in a number of cardiovascular outcome studies. This includes sustained sex and pioneer sex in type 2 diabetes, as well as step-half-path select in obesity. While we await data from the SELECT trial to be presented, we continue to build evidence for the semaglutide molecule in the cardiovascular space. In 2024, we expect several readouts. This includes type 2 diabetes cardiovascular outcome study SOL with oral semaglutide 14 mg and the functional outcome trial STRIDE, which focuses on the high-risk population with peripheral vascular disease. As previously discussed, we also investigated the potential therapeutic effects of semaglutide on osteoarthritis and metabolic dysfunction associated with stertohepatitis, previously known as non-alcoholic stertohepatitis.

In addition to this, we recently announced early closure of the flow trial due to efficacy. Next slide, please. This closure was based on a recommendation from the FLOW Independent Data Monitoring Committee following a pre-planned interim analysis. As you know, FLOW is an outcomes trial conducted across 28 countries and more than 400 sites. 3,534 people were enrolled and randomized in a 1-to-1 ratio to receive either 1-weekly semaginocyte 1.0 mg or placebo. The eligibility criteria were designed to include patients with type 2 diabetes and high or very high risk for progression of chronic kidney disease.

The primary objective of FLOW is to demonstrate delay in progression of chronic kidney disease and to lower the risk of kidney and cardiovascular mortality through the composite primary endpoint. This is on top of standard of care, including the use of STLT tubes. The trial is powered to detect a 20% risk reduction on the primary endpoint. Key secondary endpoints include annual rate of change in estimated glomerular filtration rate, major adverse cardiovascular events, and all-cause death. Today few treatment options exist for chronic kidney disease in people living with type 2 diabetes. With a projected global increase in type 2 diabetes, there is a clear need for additional treatment The next step for me to close down the trial is expected in the first half of 2024.

The presentation of detailed data is expected to take place at a medical conference also during 2024. Next slide please. In line with our strategic aspiration of establishing a presence in other serious chronic diseases, we are pleased to announce the acquisition of Vostodorinone for the treatment of cardiovascular disease from KBP Biosciences.

There remains a significant need in treatment of hypertension, which is a leading risk factor for cardiovascular events, heart failure, chronic kidney disease and death. Ossiduranone is a once-daily, all-administered small molecule with a long half-life and a high affinity for the mineralocorticoid receptor.

Ossiduranone has an attractive efficacy and safety profile and is currently being examined in the Phase III trial, CLERA and CKD, in patients with uncontrolled hypertension and advanced chronic kidney disease. We expect to initiate additional cardiovascular as well as chronic kidney disease outcomes trials during the course of 2024. Next slide, please.

Turning to other R&D milestones, I would like to highlight some of the other trial readouts and initiations across our therapy areas in 2023 and in In the first half of 2024, we initiated the first pivotal phase 3 trial in the reimagined program for Cagrocema in people with type 2 diabetes. In the fourth quarter, we have submitted oral somatolotype 25 and 50 mg in the EU. We are also anticipating the results from the ongoing Pivotal Phase III trial for iQoSema Combine III in the first half of 2024. iQoSema has the potential to be a first-in-class, once-weekly, fixed-ratio combination of basal insulin and GLB-1 receptor agonist in patient type 2 diabetes in need of intensification. With an obesity, we are happy to announce that we in September I will now initiate a 32-week Phase I trial with once-weekly subcutaneous amicretin in people with overweight obesity.

While we await select data at the American Heart Association Congress, we have submitted the trial to the U. S. FDA and the European Medicines Agency. We are pleased that the FDA has granted priority review for the supplemental new drug application. This marks a significant milestone in our ongoing efforts to address unmet needs in patients with overweight and obesity and establish cardiovascular disease.

Finally, we also expect the chronic heart failure trial with preserved ejection fraction in obese patients and diabetes to read out in the last quarter of this year. In rare disease, Nidoceran was approved by the US FDA for treatment of primary hyperoxyluria type 1. This marks the first approved siRNA treatment for NOVO NORDISK. In other serious chronic diseases we initiated a phase 1 trial with our angiopoietin free protein inhibitor This is a monoclonal antibody in development for cardiovascular disease specifically for lowering of cholesterol and triglycerides With that over to you Karsten Thank you, Martin. Please turn to the next slide.

In the first nine months of 2023, our sales grew by 29% in Danish corona and 33% at counter-exchange rates, driven by both our operating units. The gross margin increased to 84.5% compared to 84.3% in 2022. The increase in gross margin reflects a positive product mix driven by increased sales of GHP1-based treatments. This is partially countered by costs related to ongoing capacity expansions, a negative currency impact, and lower realized prices mainly in the US and region China. Sales and distribution costs increased by 22% in Danish krona and by 25% at constant exchange rates. The increase is driven by both operating units. In North America, the cost increase is driven by the relaunch of Vigovi and promotional activities for CEMPEC.

In international operations, the cost increase is driven by promotional activities for Rebelsos as well as obesity care market development activities. The increase in sales and distribution costs are impacted by adjustments to legal provisions. Research and development costs increased by 38% measured in Danish Krona and 39% at constant exchange rates. The increase reflects increased late-stage clinical trial activity and increased early research activities compared to the first nine months of 2022. The acquisition of former therapeutics in 2022 and in Masago Pharma also increased R&D spending. Administration costs increased by 9% measured in Danish krona and 11% at constant exchange rates. Operating profit increased by 31% measured in Danish krona and 37% at constant exchange rates, reflecting the sales growth.

Net financials showed a net gain of 1.2 billion Danish krona compared to a net loss of 5 billion Danish krona last year. The effective tax rate was 19.9% in the first nine months of 2023 compared to 20.5% in the first nine months of 2022.

Net profit increased by 47% and diluted earnings per share increased by 49% to 13 krona and 71 öre. Free cash flow was 75.6 billion Danish krona compared with 62.6 billion krona in the first nine months of 2022. In line with the strategic aspiration of delivering attractive capital allocation to shareholders, a total of 52 billion Danish krona has been paid back to shareholders through share buybacks and dividends. The cash conversion is positively impacted by timing of payment of rebates in the U. S. Capital expenditure for property, plant, and equipment was $16.4 billion, Danish kroner, compared to $7.2 billion in 2022.

This primarily reflects investments in additional capacity for active pharmaceutical ingredient production and finished capacity for both current and future injectable and oil products. Please go to the next slide. Nine months into 2023, we are continuing our sales growth momentum which has enabled us to raise the outlook for the full year. We now expect the sales growth to be between 32 and 38 percent at constant exchange rates. The increased sales outlook is primarily reflecting higher full year expectations to OSMPIC volumes sold in the US and gross to net adjustments for OSMPIC and Vigori in the US. The guidance reflects expectations for sales growth in both North America operations and international operations.

The guidance is mainly driven by volume growth of GLP-1-based treatments for diabetes and obesity care. This is partially countered by declining sales in rare disease due to a temporary reduction in manufacturing outputs.

The guidance reflects the level of volume growth of GLP-1-based treatments. The inherent uncertainty of the pace of USIMPIC's obesity care market expansion following the relaunch of Vigovia in the U. S. and a limited rollout in international operations are also included in the guidance range.

Finally, the sales outlook reflects expected continued periodic supply constraints and related drug shortage notifications across a number of products and geographies. NOVO NORDISK is investing in internal and external capacity to increase supply both short and long term. While supply capacity for Vigobi is gradually being expanded, the lower dose strength in the US will remain restricted to safeguard continuity of care. We now expect operating profit to grow between 40 and 46% at counter exchange rates. This primarily reflects a sales growth outlook and continued investments in future and current growth drivers within research development and commercial.

For 2023, we expect net financial items to amount to a gain of around 1.6 billion Danish kroner, mainly reflecting gains associated with foreign exchange hedging contracts. Capital expenditure is still expected to be around 25 billion Danish krona, reflecting the upscaling of the supply chain and the innovation-based growth strategy pursued by NOVO NORDISK. In the coming years, the capital expenditure to sales ratio is expected to be low double digits. The free cash flow is now expected to be between 65 and 73 billion Danish krona, reflecting the sales growth, a favorable impact from rebates in the U. S. and investments in capital expenditure.

The updated cash flow expectation is mainly reflecting increased net profit expectations, partially countered by business development activities. That covers the outlook for 2023. Now back to you, Lars, for final remarks.

Thank you, Karsten. Please turn to the final slide. Today's announcement discloses the full set of quarterly results and updated outlook for 2023, which was shared earlier in October. Overall, we are very satisfied with the sales growth in the first nine months of 2023. The growth is driven by demand for our GP1-based therapeutic interventions for diabetes and obesity, which is now reaching more people than ever before. The performance in the first nine months of the year has enabled us to raise the outlook for the full year.

From an R&D perspective, we have reached a significant milestone with the submission of SELECT and look forward to sharing more data at American Heart Association. In addition, we are excited about the early closure of the FLOAT trial and anticipate the readout in the first half of 2014.

Finally, the acquisition of Oshaduron will strengthen the portfolio of cardiovascular disease and underlines the commitment to establish presence with other serious chronic diseases. With that, I'll hand over the final word to Daniel.

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

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

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

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

Yeah, so thank you for that question, Richard. And clearly when we put out guidance, that's because we believe that's the most realistic forecast range that we're putting in. We don't have too many months to roll on, so of course we see the TRX trends and bake that into our forecast. What I would give of additional flavor on top of that is, of course, the growth rate is also a function of X-Factory sales last year, and we did see Ozymbic having a lower base last year in the fourth quarter than what we would normalize into this year.

And then, of course, there can be fluctuations in inventories, for instance, with wholesalers. And then finally, I would say, this pickup in sales growth in the fourth quarter, this is not to be kind of read into anything, any difference on the supply situation. What we're selling in the fourth quarter has been produced months ago.

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

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

Thank you, Martin. Thank you, Richard, for the questions, and we're ready for the next Thank you.

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

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

Thanks, Doc. Martin, any thoughts on emicretin?

Yeah, on emicretin, our decision to go also into subcutaneous is actually caused by neither of the above of the three reasons that you mentioned. It actually driven by the fact that we are learning that optionality is important for patients in prescribing physicians in both diabetes and obesity And we seen a clear potential for amicretin to become both an oral but certainly also a subcutaneous offering And therefore in phase one it is prudent for us to investigate both Thanks Martin and thanks Simus.

Thanks, Pete. Carsten, supply going into 24 and value prescripts.

Pete, thank you for those, my favorite topics. So I would say, first of all, with the guidance for the full year this year that has a midpoint of 35% sales growth at constant exchange rates, at least in the NOVO setting, it feels like we have released the handbrake and moving at very high pace in terms of growth rates. At least it's the highest in the history of the company. But that said, and extrapolations into 2024, I would say, first of all, we're clearly pursuing growth strategy based on innovation. We have shown that we have the innovation platforms, especially in USEMPIC and Vigovic, to drive growth this year and clearly also next year. So, not teaching you how to extrapolate, but if you extrapolate our implied Q4 sales growth based on our guidance, then you actually get to a sales growth number next year in the double digits, which is actually not that far away from where consensus is currently.

So, I do believe that we're scaling very fast. And then specifically on VGOVI and any handbrakes there, then what I'll say as to 2024 is that in 2024, we will be delivering significant step up in volumes to the US market compared to 2023, as we did from 2022 to 2023. And then to your pricing questions, as we've said on numerous occasions, the appropriate way of looking at net realized pricing in the U. S. is to look at the year-to-date numbers. So most contracts are contracted on an annual basis, and the tricky part is the lag effect between when a script is written and then we receive the rebate claims from the payers. And there's just a lag effect of several months, and that's why, you know, in reality, Q3 is the first point where we see how the channel payer mix tool is falling out for 2023.

So I wouldn't use Q3 in isolation for anything forecasting-wise. I would recommend you to use year-to-date Q3 as a starting point.

Thank you, Captain. Thanks, Peter. We're ready for the next question. Thank you.

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

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

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

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

Thank you. Thank you, Laf.

Thank you, Emily. Martin, two for you.

Yeah. So specifically on the osteoarthritis trial, you are right. It's not the biggest trial. I think it's too early to speculate whether that will have an impact on a label. It's very clear that for us it's also guiding for future clinical activities, specifically maybe for caccus hem and micretin or our GLP-1-GIP combination. So it has actually two potentials, both to serve for information specifically for WIGOI, but also to guide us for future activities. And the second one, Martin, obesity and research and development focus on muscle loss versus ... I think this is a relevant point. It's also a focus of ours. With current treatment specifically, we go we and and we actually see a reasonable preservation of lean body mass given the broader weight loss.

But it has to be a focus area and you'll probably see also in our pipeline without going into details, maybe even quite soon, assets that could lead to a preservation of lean mass.

Thank you, Martin. Thank you, Emily.

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

So in general we are working across the country and we also have access to hospitals in general. What we do see in China is an effect of the VPP, of course, that's what you mean, the insulin sales results. And that is also when you look at an overall I. O. business point of view, that is what is actually dragging down the overall I. O. insulin growth.

But in China, with Sempec is going really well. We have great momentum of Sempec that we've had since the launch and since the inclusion on the reimbursement list, and that can drive growth in China.

No major issues with access.

Martin, the second question.

Thank you very much for the question. We've also seen these observational studies and been intrigued by the fact that GLP-1 may have a place in also treating alcohol abuse. It does actually lie within the mode of action of GLP-1. From our perspective, and also considering the timing, the combination of two mode of actions that could potentially also help here, namely GLP-1 and amylin, so specifically from our perspective, CACUSEMA, is probably the more attractive and efficacious approach. So if you see us going into that space, that would be with CACUSEMA and not with Simaglite alone.

Thank you, Martin. Thanks so much.

Thank you, Noresh. So, Doc, any updates on U. S. market access for VGOVI?

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

Thank you, Dr. Kasten. Any additional comments on the GOE supply going into next year?

Yeah, so I think the way to look at the US Vigood supply is a starting point of currently around 100,000 TRX per week, according to IQVIA. And then we have the five different low strengths, and of course, the magic is to get that split right into the link into manufacturing, and then we scale from there. And as we've said in prior quarters, then this is something we do dynamically. So don't look for hockey stick. It's a gradual process where, of course, we'll be starting at the lower doses and then increasing them as we move forward.

There are different data sources in terms of new starts, so I'm not really sure what your data source is. But I think my data point is lower than yours in terms of the number of new starts per week.

Thank you, Juan.

Camilla, maybe the first one for you in terms of Vigobi outside the U. S. Yeah, so in terms of, I believe the question was whether we need statistical significance. I would just say, you know, now we await the presentation at the conference, but in general, there is a great interest in VGOVI and, of course, also the benefits in SELEC. So we will get back to that, but we do see authorities interested in bringing up the discussion again with us already at this point for reimbursement of VGOVI. And just a reminder, we have reimbursement of Saxenda already in close to 15 countries around the world. And of course, here we are talking a step up in treatment.

Thank you, Camilla. Martin, any medical perspectives on flow and the population that we potentially could treat?

Yeah, absolutely. Maybe just also calling out on select. The study was designed to have a power specifically for the primary endpoint. So assuming statistical significance for the secondary endpoints is to be seen as an upside and not as something to be expected, I just want to call that out. But obviously, please tune in on what we can present on November 11 in Philadelphia.

Specifically on flow, I think there's a tremendous unmet need in the diabetes space. It's also very, very clear that not all patients today who suffer from diabetes and chronic kidney disease are on an SGLT2 or on a GRP1. And therefore, to have data to suggest that we can actually decrease, and again, we haven't seen the data, but we can potentially decrease the kidney disease deterioration by a substantial number on top of standard of care, Including SGLT2s is a really, really attractive offering, and it will allow more patients in need to get on a GLP-1.

Thank you, Martin.

Thank you, Richard. Camilla, the first one to you, Vigoli, rollout in Denmark.

Yes, so in Denmark we see a continued interest in VGOVI and VGOVI continues to perform very well. And it is more than 1% of the population at this point in time. In terms of how many stays on the product we also have, it's too early to give you exact stay time numbers, but we do have anecdotal evidence that there is a very high number of the people that stay on.

Thank you, Camille. Martin, reflections on Ossidoran?

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

Thank you, Martin. Thank you, Camilla. Thanks, Richard, for the question.

Thank you, Peter. So, first over to Carsten on the gross margin, and then later, Doc, on what we see on stay time in the US for the goal.

Peter, well spotted gross margin Q3. And just a word of caution to begin with, looking at gross margins at a quarterly basis is always tricky due to fluctuations over the year. But if I am to comment specifically on the quarter, then at constant exchange rates, the gross margin is flat compared to last year. So the decline compared to last year is FX-driven. And then you would say, why is it then not increasing compared to last year, given the gross net adjustment and the product mix?

And there are basically two pieces to it. First of all, remember the starting point, our gross margin is already high at 84% or so. And then secondly, what is different compared to prior years is that the amount of CAPEX we're running these days, and just from an accounting policy standard point of view, we are realizing more costs related to our capital expenditure projects into the P&L. So it doesn't all go to the balance sheet. Some of it also hits the P&L, and that is basically what is offsetting the benefit from product mix.

Thank you, Karsten. And over to you, Doug. Any insights on stay time on Vigovie in the U. S. so far?

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

Thank you, Doc. Thank you, Peter.

Thank you, Mathias. Martin?

Absolutely, thank you for that question, Mathias. That would most likely require a reasonably – I think we can bridge some safety data, but we would still have to establish both safety and efficacy. So we actually see that as a potential opportunity, but we see that as a lifecycle management activity.

Thank you, Martin.

Thank you, Emmanuel. First, Carsten, any additional supply?

Yeah, and thanks for triangulating that way around, Emmanuel. I'd love to give you further flavor, but as you know, we're guiding for next year come our full year results late January. So that's why we'll be doing our financial guidance for 2024 and giving too much granularity in scaling of Vigoovich gets too close to guiding for next year. So I'm sorry, but I'll have to try that at a later point in time.

Thank you, Kirsten. Martin? Can you share more from Flo?

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

Thank you, Martin. Thank you, Emmanuel.

That's over to you, Kirsten.

Thanks for that question. When I look at our total operating cost growth in the fourth quarter, then it's actually not markedly different compared to year-to-date. So what you should be expecting is a continued, what I would call high level of growth in R&D expenditure around the 40% mark and some 20% plus on S&D expenditure and a competitive gross margin also in the fourth quarter.

So in reality, no big swings in the fourth quarter at constant exchange rates.

Thank you, Karsten.

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

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

We appreciate your time today, and with that we'll close the call. Thank you.