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Novo Nordisk (NYSE:NVO)
Q4 2018 Earnings Conference Call
Feb. 1, 2019 7:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to Q4 2018 Novo Nordisk A/S earnings conference call. At this time, all participants are on listen-only mode. There will be a presentation followed by a question-and-answer session.

At which time, if you wish to ask a question, you will need to press star and one on your telephone. I must advise you, meeting is being recorded today on Friday, the 1st of February 2019. I would now like to hand the conference over to your speaker today, Chief Executive Officer Lars Fruergaard Jorgensen. Please go ahead sir.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you very much. Welcome to this Novo Nordisk's conference call regarding our performance in 2018 and the financial outlook for 2019. I'm Lars Fruergaard Jorgensen, 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 Q&A session are Executive Vice President and Head of Commercial Space and Corporate Affairs Camilla Sylvest; and Executive Vice President and Head of International Operations 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 for one hour.

As usual, we'll start the presentation as outlined on Slide 2. The Q&A session will begin in about 25 minutes. Please note that this conference call is being webcasted live, and a recording will be made available on Novo Nordisk's website. Now please turn to Slide 3.

As always, I need to advise you that this call will contain forward-looking statements. Such forward-looking statements are subject to risk and uncertainty 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 4.

In 2018, sales were broadly unchanged in Danish kroner and increased by 5% in local currency. International operations grew by 7%, while North America operations sales increased by 3%, both measured in local currencies. Sales growth was mainly driven by the GLP-1 franchise with Victoza and Ozempic combined growth of 18% and accounting for a 78% share of growth in local currencies. Within research and development, several achievements can be highlighted.

In November, we completed the PIONEER program for oral semaglutide. Following the successful completion of the remaining two Phase 3a trials, PIONEER 6 and 9. Within biopharmaceuticals, we have completed two Phase 2 trials, explore four with concizumab and the extended REAL3 trial with somapacitan. Furthermore, we have initiated a Phase 2 trial or a once-weekly insulin LAI287 and a Phase 1 trial with LAIsema, a once-weekly combination of LAI287 and semaglutide.

Turning to financials. Operating profit declined by 3%, sorry, 4% in Danish kroner and increased by 3% in local currencies in 2018. Operating profit was negatively impacted by severance costs related to the layoffs in the second half of 2018 and the expensed priority review vouch before the filing of oral semaglutide. Adjusted for this, operating profit increased by 6% in local currencies.

The diluted earnings per share increased by 4% to 15 kroner and 93 euro. At the annual general meeting, the board of directors will propose a final dividend for 2018 of 5 kroner and 15 euro per share in addition to the three kroner per share paid in interim dividend in August 2018 totalling an expected dividend for 2018 of 8 kroner and 15 euro. Moreover, the board of directors intends to initiate a new share repurchase program of up to 15 billion Danish kroner, which will be executed during the coming 12 months. For 2019 outlook, sales growth is expected to be 2% to 5% measured in local currencies with an expected positive currency impact of two percentage points.

The expected sales growth includes a negative impact of approximately 2 billion Danish kroner from the change in the funding of the Medicare Part D coverage gap in the U.S.. Operating profit growth is expected to be 2% to 6% measured in local currencies with an expected positive currency impact of 4 percentage points. Finally, the board of directors has adjusted the long-term financial target for operating profit after tax to net operating assets from 125% to 80%, to reflect the changed accounting principles for handling of leases, as well as the expected tangible and intangible investment level. In addition, the cash to earnings target of 90% is adjusted to 85% also to reflect the investment level.

The long-term financial targets for operating profit growth remains unchanged. Please turn to Slide 5. In 2018, the overall growth was broadly unchanged in Danish kroner and increased by 5% in local currencies. The sales growth was mainly driven by the diabetes care and obesity segment, where the diabetes franchise grew by 4% and accounted for 73% share growth.

The GLP-1 segment was the primarily growth driver where Victoza sales increased by 9% and Ozempic realized 1.8 billion Danish kroner in sales. The total insulin sales were broadly unchanged, reflecting 5% insulin sales growth in international operations driven by solid Tresiba and Xultophy volume growth. This is offset by the U.S. insulin sales decline of 9%, mainly driven by lower realized prices in the U.S.

basal insulin segments. Within obesity, Saxenda grew by 60% measured in local currencies and accounted for 30% share growth. Biopharmaceutical sales in local currencies were broadly unchanged, driven by continued solid execution of the strategic priorities. Please turn to Slide 6.

In 2018, sales grew by 5% measured in local currencies. International operation's sales increased by 7%, where all regions apart from region Japan and Korea, contributed to growth. Sales in North America operations increased by 3% in local currencies, driven by GLP-1 sales increasing 19% and Saxenda sales increasing 39%. For global insulin franchise, sales were broadly unchanged in local currencies, driven by North America operations declining by 7%, partly countered by 5% sales growth in international operations, with solid performance within the basal and fast-acting insulin segment.

The decline in North America was primarily driven by lower realized prices in the basal insulin segment, partly countered by solid uptake of Tresiba and Xultophy. The GLP-1 sales growth of 18% was primarily driven by North America operations and the continued solid market volume growth of the GLP-1 class. GLP-1 sales in international operations increased by 14%, mainly driven by region Europe with the expanded CV label for Victoza and initial contribution from the launch of Ozempic, as well as inclusion of Victoza on the National Drug Reimbursement List in region China. Saxenda continues to be a solid growth driver, increasing sales by 60% in local currencies in 2018.

Saxenda sales in the U.S. increased by 40%, driven by a volume market share increase of 7 percentage points to 27% of the branded anti-obesity market. Saxenda has now been launched in 41 countries, supporting Saxenda sales growth in international operations where sales reached 1.2 billion Danish kroner. Please turn to Slide 7.

Ozempic has now been launched in 11 markets, in the U.S. and Canada and nine European countries. In the U.S., Novo Nordisk is retaining the market leadership with a combined new-to-brand market share of around 48%. The number of new-to-brand prescriptions for Ozempic surpassed Victoza in December, and the Ozempic market share is now 26%.

The formula records for Ozempic is now around 80% combined. In Canada, Ozempic continues to increase new-to-brand prescription market share. The latest new-to-brand prescription market share for Victoza and Ozempic combined was above 81%, with Ozempic Now having achieved more than 50%. Ozempic has now been launched in nine markets in Europe.

And by the end of November, Ozempic had gained around 10% total volume market share in the launch, European countries combined. The roll out of Ozempic continues in 2019. Please turn to next slide. In the U.S.

GLP-1 sales increased by 19% in local currencies in 2018, supported by both Victoza with an updated CV label, and the Ozempic launch. The U.S. GLP-1 market continues to expand, growing 27% in Q4 2018. We are pleased with the Ozempic launch, which by the end of December 2018, achieved a total GLP-1 volume market share of around 8% in the U.S..

Novo Nordisk has thereby stabilized its total GLP-1 volume market share at around 43%. Please turn to next slide. Tresiba has gained around 15% market share since the launch in 2016, thereby gaining around five percentage points market share each year in a very competitive basal insulin segment. The market uptake has been supported by the updated U.S.

Tresiba label, including a 40% reduction in severe hypoglycemia compared to insulin glargine U100. By the end of December, Novo Nordisk's combined volume market share for Levemir, Tresiba and Xultophy was 36% in the U.S. basal insulin market. Please turn to next slide.

In 2018, obesity sales increased 60% and accounted for 30% share growth. The total sales growth was driven by strong volume uptake in both North America operations and international operations. Novo Nordisk is the global value market leader with 45% market share of the anti-obesity market. In North America, Saxenda sales increased by 39% in 2018, and Novo Nordisk increased its value market share to 66%.

In international operations, Saxenda sales more than doubled, driven by the continued roll out of Saxenda in region Europe, region AAMEO and region Latin America, reflecting a solid volume uptake of Saxenda, which is now launched in 39 countries outside of North America. Efforts are still needed to expand the obesity segment. This is why we invest in progressing our innovative obesity pipeline, as well as patient support and educator programs. Please turn to Slide 11.

In 2018, biopharmaceutical sales were broadly unchanged measured in local currencies, mainly driven by the NovoSeven sales increasing 11%, partly countered by Norditropin and NovoEight growing 7% and 26%, respectively. In 2017, Novo Nordisk implemented a new biopharm strategy with the purpose of returning biopharm growth. We have since then launched Refixia in 12 countries, and we expect the approval of N8-GP in the U.S. and in Europe in the first half of 2019.

We have furthermore secured label updates for NovoSeven for surgical use and increased global focus on acquired haemophila treatment. We have progressed our pipeline for both concizumab and xomapacitan. Furthermore, in 2018, two complimentary assets have been added to the biopharm business. The in-licensing of EpiDestiny's assets within sickle cell disease called [Inaudible], as well as the acquisition of the North American rights for the first FDA-approved oral diagnosis product for adult growth hormone deficiency, Macrilen.

The biopharm business is a key priority to us, and we are on track with executing on our biopharm business strategy. With this, over to Mads for an update on R&D.

Mads Krogsgaard Thomsen -- Chief Science Officer

Thank you, Lars. Please turn to Slide 12. With the completion in November of the two final PIONEER trials, PIONEER 6 and 9, the Phase 3A program for oral semaglutide has now concluded successfully. Across all PIONEER trials, oral semaglutide has demonstrated statistically significant reductions of hemoglobin A1c, ranging from 1% to 1.8% at trial completion for the 14 milligram dose.

These glycemic improvements led to between 52% and 80% of all patients, achieving the ADA target of an HbA1c below 7%. In terms of body weight, oral semaglutide has demonstrated statistically significant reductions of two kilogram to five kilogram at the 14 milligram dose. Consequently, between 25% and [Inaudible] pecernt of patients experienced a weight loss greater than 5%. Throughout the PIONEER trials, oral semaglutide has proven to be statistically significantly better regarding both HbA1c and weight reduction at trial completion when compared to the leading SGLT2 and DPP-4 inhibitors, as well as the leading injectable GLP-1 analogues liraglutide and dulaglutide in the Japanese population.

Oral semaglutide has demonstrated a safe and well-tolerated profile, consistent with that of the existing GLP-1 analogues in the market. Please turn to Slide 13. PIONEER 6 investigated the cardiovascular safety of oral semaglutide 14 milligrams compared to placebo both added to standard of care in a trial that enrolled approximately 3,200 adults with Type 2 diabetes at high risk of cardiovascular disease. PIONEER 6 accrued around 140 major adverse cardiovascular events, so called MACE, within a median treatment period of 16 months.

The primary endpoint was MACE defined as the first occurrence of cardiovascular death, non-fatal myocardial infarction on non-fatal stroke. The hazard ratio was 0.79 in favor of oral semaglutide compared to placebo, implying a 21% albeit non-significant reduction in MACE. The 21% reduction in MACE was derived from a statistically significant 51% reduction in cardiovascular death. One non-fatal myocardial infarction and non-fatal stroke did not differ significantly between the groups.

In addition, PIONEER 6 showed a statistically significant reduction of 49% in all cause mortality for the oral semaglutide arm. Furthermore, when looking across the two cardiovascular outcome trials performed for semaglutide, the observed MACE reduction of approximately 25% was found to be driven by all three MACE components; cardiovascular deaths, myocardial infarction and stroke. The safety and efficacy profile of oral semaglutide in PIONEER 6 was consistent with the profile established in previous PIONEER trials. PIONEER 6 was the last of the 10 Phase 3a PIONEER trials, and oral semaglutide is now almost ready for NDA submission.

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. Please turn to the next slide.

In November, we initiated the Phase 2 program for LAI287, the once-weekly acylated insulin. The first trial is the multinational double-blinded active controlled trial with around 350 insulin-naive people with Type 2 diabetes. The main objective is to assess the safety and efficacy profile of LAI287 versus once-daily glargine U100. In early January of this year, we initiated a Phase 1 trial for LAIsema, which is the name of the once-weekly fixed ratio combination of LAI287 and semaglutide.

The main objective of this trial is to investigate the single-dose pharmacokinetics of LAIsema in a fixed ratio compared to LAI287 and semaglutide given separately to people with Type 2 diabetes. In November, we announced the research collaboration with Embark Biotech, focusing on the discovery of novel treatments for obesity. The aim of the collaboration is to develop novel drug candidate that help people with obesity to lose weight by increasing the energy expenditure. Embark Biotech will receive research support, while Novo Nordisk has an option to license exclusive worldwide rights to develop and commercialize any discovered drug candidates.

In December, we announced a collaboration and exclusive option agreement with Staten Biotechnology to develop novel therapeutics for the treatment of cardiovascular disease associated with hypertriglyceridemia. Novo Nordisk will provide research and development funding and support for Staten to develop its lead asset, STT-505. Novo Nordisk will, according to the agreement, have the right to acquire Staten Biotechnology at a predefined milestone. In November, we successfully completed the main phase of the Phase 2 trial Explorer 4 with concizumab.

The trial evaluated efficacy and safety of the prophylactic administration of subcutaneous concizumab in hemophilia A and B patients both with inhibitors. In Explorer 4, proof of concept for concizumab was achieved by showing reduced annual bleeding rate on daily subcutaneous concizumab prophylaxis compared with on demand NovoSeven treatment. The results from both Explorer 4 and 5 also confirmed the correlation between increased levels of concizumab, decreased levels of circulating TFPI and increased clotting potential as evidenced by [Inaudible] of thrombin generation potential in most of the patients. In both trials, concizumab was safe and well tolerated, and there were no issues with breakthrough bleed.

Based on these Phase 2 results, concizumab is now approaching Phase 3 readiness, and we plan to initiate the Phase 3 program in haemophila during the second half of 2019, pending further regulatory dialog. Furthermore, we completed the pediatric Phase 2 extension of the REAL3 trial with a long-acting growth hormone somapacitan. The endpoint for the REAL3 extension was to evaluate the effect of different dose regimens for once-weekly somapacitan after one full year of treatment compared to daily Norditropin. The trial confirmed a dose-dependent increase in growth velocity, and the observed safety profile of somapacitan was similar to that of Norditropin.

Novo Nordisk is now preparing for the Phase 3 program in growth hormone deficient children, as well as for a Phase 2 trial in children born small for gestational age. In addition, we are preparing for a regulatory submission of somapacitan for the adult growth hormone deficiency indication in the second half of this year. Lastly, in November, we discontinued subcutaneous N8-GP due to detection of anti-drug antibodies that were considered to be related to the subcutaneous route of administration in this particular trial. Please turn to the next slide.

As mentioned earlier, we expect to submit the NDA for oral semaglutide to the FDA around the end of the first quarter, and subsequently to receive expected feedback from the agency toward the end of the third quarter with the utilization of a priority review voucher. During Q2 and 3, respectively, oral semaglutide is furthermore expected to be submitted to the EU and Japanese regulators. Within diabetes, we expect to conclude the Phase 3b Head-to-Head trial comparing Tresiba to insulin glargine 300, also known as Toujeo, in the second quarter of this year. Within hemophilia, we expect the FDA and the EU to provide feedback on our N8-GP submission in the first two quarters of this year.

Lastly, we expect to initiate the Phase 3 program with concizumab in the second half of 2019. With this, over to Karsten for an update on the financials.

Karsten Munk Knudsen -- Chief Financial Officer

Thank you, Mads. Please turn to Slide 16. In 2018, sales were broadly unchanged in Danish kroner and increased by 5% in local currencies. The gross margin was 84.2% measured in Danish kroner, which is in line with 2017.

The unchanged gross margin reflects a negative currency impact of 0.2 percentage point and lower realized prices in the U.S., offset by improved productivity and a positive contribution from product mix. Sales and distribution cost increased by 4% in Danish kroner and by 7% in local currencies, reflecting higher promotional activities globally for Victoza, Saxenda, well as launch activities for Ozempic. R&D costs increased by 6% in Danish kroner and 8% in local currencies, reflecting higher costs in both research and development. The increased costs are impacted by the expense priority review voucher for the oral semaglutide filing and severance costs.

Administration cost increased by 3% in Danish kroner and 7% in local currencies impacted by severance costs. Operating profit decreased by 4% in Danish kroner and increased by 3% in local currencies. Operating profit was impacted by severance costs and the expense priority review voucher. Adjusting for this, operating profit increased by 6% in local currencies.

Net financial items showed a gain of around 0.4 billion Danish kroner compared with the loss of 0.3 billion in 2017, primarily driven by foreign exchange hedging gains mainly due to the U.S. dollar on average having traded lower in 2018 compared to 2017, partly countered by losses from non-hedged currencies. Diluted earnings per share increased by 4% to 15 kroner and 93 euro. Please turn to Slide 17.

For 2019, sales growth is expected to be in the range of 2% to 5% measured in local currencies. This reflects expectations for continued growth of the GLP-1 segment and roll out of Ozempic, as well as global penetration of Saxenda. This guidance also reflects the 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 2 billion Danish kroner. Reported sales growth is expected to be around 2 percentage points higher than in local currencies.

Operating profit growth measured in local currencies is expected to be in the range of 2% to 6%. The outlook reflects the sales growth outlook and the negative impact from the coverage gap in the U.S., as well as a positive impact from the priority review voucher that was expensed in the fourth quarter of 2018. Reported operating profit is expected to be around 4 percentage points higher than in local currencies. Financial items is expected to be a loss of approximately 2.4 billion Danish kroner, reflecting losses associated with foreign exchange hedging contracts mainly related to the U.S.

dollar. The effective tax rate is expected to be in the range of 20% to 22%, and capital expenditure is expected to be around 9 billion Danish kroner in 2019. For 2019, we expect the free cash flow to be around 29 billion to 34 billion Danish kroner. Furthermore, based on the updated accounting principles for leases are for 16 and the expected investment level, the long-term financial targets for operating profit after tax to net operating assets has been adjusted from 125% to 80%.

The target for cash to earnings has been adjusted from 90% to 85%, reflecting the investment level. The target for operating profit growth remains unchanged. Please turn to the next slide. During the coming 12 months, we will execute a new 12 months share repurchase program for 2019 of up to 15 billion Danish kroner.

The proposed total dividend for 2018 increases 4% to 8.15 kroner, which includes the interim dividend of three kroner paid in August 2018. The total payout ratio of 50.6% is in line with our peer group pay-out ratio. This concludes the update on financials. Now back to you, Lars.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Karsten. Please turn to Slide 19. 2018 was a year of change and significant progress for Novo Nordisk. We delivered on our targets for sales and operating profits and have successfully launched Ozempic [Inaudible] in several countries.

The results from the broad PIONEER Phase 3a program for oral semaglutide are very encouraging for people with Type 2 diabetes, and we're now prepared for the regulatory submission. Operator, we're now ready to take the first question. 

Questions and Answers:

Operator

Thank you. [Operator instructions] And your first request is from the line of Peter Verdult from Citi. Please go ahead.

Peter Verdult -- Citi -- Analyst

Yes, good afternoon. Peter Verdult with Citi. Two questions, first for Mads on the pipeline; second for Lars on U.S. pricing and reimbursement.

Mads, just on weekly insulin and the LAIsema combo. Just how are you thinking in terms of clinical differentiation over the daily preparations, and also just given the fact that currently the endos love the data around insulin GLP-1 combos, but the broader adoption has been hampered by primary care reluctance to use combination biologics in the treatment of diabetes and the restrictive label. So I'm just wanting to get your thoughts there. And then for Lars, just given ongoing HHS efforts to remove the safe harbor provisions around rebates, has the privilege of Novo considering second brand in your [Inaudible] business increased? Could you also provide maybe a little perspective on the government's renewed focus on insulin pricing and FDA efforts to accelerate generic insulin? Just interested in your updated thoughts there, thank you.

Mads Krogsgaard Thomsen -- Chief Science Officer

OK, Peter, first of all, a small correction. When it comes to the restricted label having to have failed GLP-1 or insulin therapy, as you know that is a U.S. thing. We don't have it in most other territories.

And in the countries, including several European countries like France and others, very strong growth is seen for Xultophy in those markets where we actually decide to have it as one of the preferred products. So we actually do expect quite a lot from Xultophy going forward. And I do think sales doubled this year compared to last year. When that is said, LAIsema is in reality a once-weekly version where you get the best of semaglutide with all the benefits inherited from the Ozempic label hopefully.

And then of course, LAI287, [Inaudible] without seeing any direct you can say disadvantages in terms of variability and peak-to-trough values and so on. But when that is said, the Phase 2 trials with LAIsema are up against what is today still the most used insulin molecule named glargine U100. So the purpose of the Phase 2 program for LAIsema is to have a competitive once-weekly convenient offering with a profile benefit risk wise equal to that at least insulin glargine U100. And LAIsema is then seen as an intensification product where the patients in the future were to be on oral sema, injectable GLP-1 or even for that matter injectable insulin.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Mads. Yes, Peter, on U.S. pricing, clearly a lot of moving parts and a lot of political interest. What came out last night in the U.S.

in terms of moving away from a rebate from the, being allowed us even to the PBMs. We actually applaud the administration for bringing this forward. It's been discussed for a long period of time. The current system where rebates are not shared with the patients is a chanting environment for us to operate in, and you can see what has happened recently is that political pressure has increased in actually understanding how does the market work.

So we welcome this proposal. As you know, we gave last year 68% in rebates, 113 billion in Danish kroner. This is put into the supply chain in terms of rebates. And we think from a decisive point of view, from patient point of view, the allocation of those rebates can be done in a better way, providing more value for the patients without being say a negative for Novo Nordisk.

We have looked at, when you say new branch or second branch, if you think about launching in the [Inaudible], we looked at that. We do not believe it's the best way forward. So the chance outlook for rebates I think is the more viable way to go forward. We are collaborating on the requests we have received for more transparency around how we conduct business, how that will play out.

It'll probably take a long time. At least some of the requests are quite comprehensive. When we talk about changes in how rebates are handled in the U.S., it's not something we see will have an impact on how business is conducted in 2019, maybe not even in '20 because there are a number of contracts being made between us and our customers, and again from PBMs to insurance companies, etc. So it's a relative comprehensive set of legal commitments and change flow of money that has to be unwinded.

In terms of generic insulins and Scott Gottlieb's comments, I think as we look at the market now, it's a market that's already highly competitive on price. So we actually feel that we're already operating in an environment where there's tough price competition. So I'm not sure that, that in itself is going to significantly change that outlook. Thank you, Peter.

Next question.

Operator

Your next question is from the line of Sachin Jain, Bank of America. Please go ahead.

Sachin Jain -- Bank of America Merrill Lynch -- Analyst

Hi, Sachin Jain, Bank of America. Couple of questions on oral ema if I may. I wanted you to comment on oral sema timelines roughly where you think you will flee to the market with promotion, just remembering back to Ozempic, you're roughly three months I think to launch with five to six months before promotion. How should we think about oral sema in comparison to that? And then second question on oral sema pricing.

I'm not asking for prices, I know that's off the table, but just some variables as you think about it. Consensus seems to gravitate to roughly $10 to $12 per day based on recent commentary that you would price for quick access. I want you to comment on two variables related to that. A, the timeframe you think about when when you think about the pricing decision.

Historically, you've been happy to price and build for long term. For example when you launch Victoza. And then second, the impact of the existing GLP business if you were to price that level. And then any other key variables that you think play into that pricing decision.

Thank you.

Operator

Sachin, thank you for that quite detailed question. On all time line, I think what what we can share with you is obviously that now we're using the priority voucher. We have guided that we expect to submit by the turn of the coming quarter and that we're looking at a six-month review period that indicates also when we would be able to have a proper pool. As you know, when you launch, you have, no access is blocked day one.

So we need to do a contracting with our customers, and that is something that takes time in the U.S. market. We're not going to guide in terms of when we expect that to be completed or when we expect to be in the market. We think that's something we like to keep the close to us.

In terms of pricing, it's a bit the same. We have consistently for the last few quarters said that we do not want to openly discuss the pricing. We think this is information of a competitive nature and it's not really serving our investors well to be open on that. And it's the classical elements that we have mentioned before, if there is a clinical differentiation of the product, the competitive situation and the cost of goods sold for that.

So those are the elements that we would be factoring in, and we of course are forming our own view on what that is, but we'd like to keep that close to us for the time being and hopefully you are understanding of that. Thank you, Sachin, and...

Sachin Jain -- Bank of America Merrill Lynch -- Analyst

OK, thank you.

Operator

Your next question is from the line of Florent Cespedes, Societe Generale. Please go ahead.

Florent Cespedes -- Societe Generale -- Analyst

Good afternoon gentlemen, Florent Cespedes from Societe Generale. Three quick questions. First, financial related questions. Could you share with us the level of non-recurring costs, the absolute numbers which impacted Q4 and the full year? And the fuller question on this side is how do you see operating profit margin for this year? Because as you start from a lower base, it's fair to assume margin expansion for 2019.

Or with the earlier launch of oral sema, is it fair to assume higher launch costs? Second question, a quick one regarding Ozempic cardiovascular safety discussions you have with the FDA. When should we have the final decision from the FDA regarding that and the labeling of Ozempic with the update of this cardiovascular safety trial? And the last but not least, regarding growth hormone. The Q4 was quite dynamic, so could you share with us how do you see the trend going forward? Is there a new environment? Is there any reasons to believe that we should see a little bit strong growth going forward for this franchise? Thank you.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Florent. I think you know that ended up to maybe three or four questions, so we'll try to answer them a bit consolidated [Inaudible]. So Karsten, first on non-recurring cost in Q4 and full year and margins, then Mads on Ozempic CV.

Karsten Munk Knudsen -- Chief Financial Officer

Yes. So non-recurring in terms of restructuring costs, then for the full year '18 cost was around 900 million kroner. And for the fourth quarter then, since we communicated 600 at the third quarter, the new [Inaudible] roughly 300 million in the third, in the fourth quarter, sorry. The priority review voucher is around 800 million Danish kroner of cost hitting the fourth quarter.

As to margin in '19, when you look at our guidance range, then top line 2% to 5% and operating profit 2% to 6% both in local currencies, not necessarily a huge margin play there. And too remember that given the operating margin and where we are, then it is not part of our strategy to use margin leverage to drive profitability. We have a top-line focus to drive profitability. And then perhaps a final note on '19 margins is that the coverage gap impact in the U.S.

of 2 billion DKK is of course a hit that goes all the way straight through the P&L when you do your modeling.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Karsten. And Mads, what [Inaudible] of Ozempic CV.

Mads Krogsgaard Thomsen -- Chief Science Officer

Yes. As you can recall from the investor event we held at the ADA meeting last June, we did talk with the agency that cardiovascular outcome trials that could be needed to support the SUSTAIN 6 program were fully worthy of FDA consideration, assuming that they were on the same molecule of course regardless of route of administration. And it is on this premise that we believe that the PIONEER 6 really strengthens the case for semaglutide cardio protective properties such that we would seek to get a cardiovascular... NDAs that have a 10-month regulatory process.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Mads; and thank you, Florent for those questions. We take next question.

Operator

Thank you. Our next question is from the line of Martin Parkhoi of Danske Bank. Please go ahead.

Martin Parkhoi -- Danske Bank -- Analyst

Yes. Martin Parkhoi, Danske Bank. First, a question which I think is related to Karsten. At your capital markets day in 2017, you gave some indicative levels for the CAPEX for '19, '20, where you shared that should be at the level of '16, and now you guided 2 billion higher by 2019.

Is that an external event in '19, or will we also see such a level in 2020? And is this related to the Clayton facility running above budget? Or what relates to this changed CAPEX level compared to just less than one and a half years ago? And then secondly to Mads, if you look at the timeline, you still expect to start, initiate the oral sema I recall in Q2, and you have the decision by FDA on oral sema in Q3. Why do we not wait start the oral sema program until you know, have more clarity on the potential of getting a CV label on Ozempic, and maybe even on oral sema?

Lars Fruergaard Jorgensen -- Chief Executive Officer

So thank you, Martin. And Karsten, first on CAPEX.

Karsten Munk Knudsen -- Chief Financial Officer

Yes. So in 2018, we spent 9.5 billion on CAPEX, which was spot on our guidance. And our guidance for '19 is 9 billion. It is correct, as you state, that if you go back and directionally compare to the CMD slides, then it's had a higher level.

But things are changing over time, and we are spending more on CAPEX in '19 than what we anticipated. The main driver is of course our API investment in North Carolina. That is our biggest CAPEX project these days where we are roughly 50% done. But apart from that, we have a number of upgrades and capacity expansion projects in manufacturing, for instance in device assembly.

So you should see this as facing off of investments, and you should expect our level of CAPEX to go down after's 19. So '20 and onwards.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Karsten. Mads on timing.

Mads Krogsgaard Thomsen -- Chief Science Officer

Yes. Well, first of all, of course we've taken a deep look at this whole trial based on all the existing evidence, also from the PIONEER 6. And that means in terms of the powering of the study, the need for the amount of patient and hence also the cost of the study, that of course has been the subject of discussion based on the reassuring data from PIONEER 6. That's one thing.

Another thing I'd like to mention is that it is the study we planned, and it's also a study that supports our ambition to have a renal label update with the kidney claims for first Ozempic, and delayed [Inaudible] oral semaglutide in that the agency has accepted that we also bridge primary endpoints from, for instance, the flow study, which is the diabetic neuropathy study that we are contemplating on doing with Ozempic, and bring that over to confirmatory secondary endpoints that were to be included in the sole trial for the oral semaglutide, such that we can criss cross from oral sema to Ozempic when it comes to CV data, and we can criss cross back again from Ozempic to oral when it comes to renal data. That's the thinking behind some of these conclusions.

Martin Parkhoi -- Danske Bank -- Analyst

Can I just follow up and ask, just remind me when you expect to file oral sema late this quarter. Will you file for a CD indication actually or CD label based on PIONEER 6, and maybe with support for SUSTAIN 6?

Mads Krogsgaard Thomsen -- Chief Science Officer

It is our intention to leverage the very strong and robust data that together emerged from the combination of SUSTAIN 6 and PIONEER 6 in the best of all ways. And that in principle goes for both products, Ozempic and oral.

Martin Parkhoi -- Danske Bank -- Analyst

Thank you.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Mads; thank you, Martin. Next question please.

Operator

Your next question is from the line of Kerry Holford of BNP Paribas. Please go ahead.

Kerry Holford -- Exane BNP Paribas -- Analyst

Yes, Kerry Holford from Exane. A couple of questions please. First, the oral question that you talked about that increasing again this year in the U.S. I wonder if you can just talk a little bit more about the key drivers of that in regards to insulin.

Is that the key driver still? Or are we seeing more of that increase now impacting GLP-1? And I wonder if you could compare the position of each of those franchises from that perspective? And then secondly with regard to restructuring, can we assume that program is now complete as of the end of 18? Any further actions or charges likely to come through this year? Essentially I guess the question is are you now comfortable with your cost base in the current environment?

Lars Fruergaard Jorgensen -- Chief Executive Officer

Karsten, will you comment a bit on that?

Karsten Munk Knudsen -- Chief Financial Officer

Yes, yes. So first of all, as you see in our annual report, which we published on our website this morning, the U.S. rebate percentage is going up from 64% to 68% between '17 and '18. The main drivers in that respect is delivery of rebating.

And as we've been counting on before, it's basically in the basal insulin space where we've been paying a higher rebate to remain on formularies. So that's the main driver in terms of the growth from that. We don't have anything new to add on the competitive situation in any of the segments. We have very solid formulary coverage for our products going into '19.

And now for Ozempic, we are around 80% unrestricted access in the U.S. markets. So we feel comfortable on that. As for restructuring cost, we took the 900 million in charges in 2018 and we have not anything in our guidance for 2019.

But of course we are reallocating our resources and our cost base on an ongoing matter, but we do not foresee any major restructuring charges in 2019.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Karsten; thank you, Kerry. Next question please.

Operator

Your next question is from the line of Michael Novod of Nordea Markets. Please go ahead.

Michael Novod -- Nordea Markets -- Analyst

Yes, hello, it's Michael from Nordea. Two questions, one to obesity, which continues to surprise on the upside. We also see that there's some sort of say a reacceleration or further acceleration in the U.S. Maybe you could talk about some of the key drivers behind this and also perhaps put it into context to what you expect in terms of say, better access, better uptake with the sema, where we're going to see the Phase 3 data, I don't know, 12, 15 months from now? And then secondly to the launch cost for oral sema.

I know that you won't comment on the exact timing in the market. Just want to get some clarity around how your thinking is about cost levels for the launch, if that is fully incorporated into the guidance at the current time for 2019. Thanks.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Michael. And Camilla, some comments on obesity?

Camilla Sylvest -- Executive Vice President and Head of Commercial Space and Corporate Affairs

Yes, so generally we are tracking in line with the expectations on obesity. We are of course growing very significantly. We also now are close to 50% value market share on a global level. On volume market share level, we are still in the range of 4% to 5%, so it means there's still significantly untapped potential.

And we are continuing our efforts in terms of supporting the market in terms of education of obesity as a disease, and also in terms of our activities to try to ensure reimbursement in different countries for obesity. And that is a process that will take time. But we are continuing along this road, and that's basically the things that are going to drive this. So we do see in international operations this year, we should expect the number of new launches that can continue some of these growth rates; and we also see generally across the board, global level, and good growth rate.

When it comes to the actual market growth, this is still not very strong and actually has been going down slightly recently. But that doesn't go for Novo Nordisk, so we keep gaining share and we're very confident about the growth in this area.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Camilla. And comments from Mads?

Mads Krogsgaard Thomsen -- Chief Science Officer

Yes, you also mentioned semaglutide, Michael, and I think the three drivers of sema that will help Camilla and the team create stronger penetration and a larger market that deserves to be there is the durability of drug treatment. As you know, they keep on losing weight the semaglutide patients also in diabetes throughout a full year. And it's also the magnitude of the weight loss that helps. And then finally, if you actually improve patient outcomes, and that's why we're doing the SELECT study.

So all the things Camilla's team are doing now is also paving the road for something that is hopefully going to be the future anchor drug in obesity.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Camilla and Mads. And on launch costs, Michael, I think if you look at the past few years here, we have been in constant prelaunch, launch mode across the world so we cannot, it's not really meaningful to go in and talk on cost on a specific launch. But we do expect to have an [Inaudible] ratio in the vicinity of 25% to 26% in 2019. So that does work, we can guide on that for now.

Thank you, Michael, and next question please.

Operator

Next question is from the line of Richard Vosser of J.P. Morgan. Please go ahead.

Richard Vosser -- J.P. Morgan -- Analyst

Hi. Thanks for taking my question. Couple of product ones, so just looking at Tresiba in the fourth quarter in the U.S., looked as though there may be some destocking or maybe some rebates in there. Just could you talk about the trends you're seeing in Tresiba in the U.S.? Second question, just Victoza, China.

Obviously on the end, overall very strong growth in Q3, less growth in Q4. Just how should we think about the future picture for Victoza in China, in the U.S.? And then just one final, a couple of questions around oral sema. Just thinking about the access that you've got so far on Ozempic. You mentioned 80% access, and I think when you first launched you had 50% access.

Are these the sort of levels of access that you're looking to achieve for oral sema? And then sort of linked to that, you mentioned on the Clayton facility that you're 50% through the spend. I presume you're starting up the facility production soonish though, but sort of when would you start to start that up and when would we see an impact from incremental depreciation from the start up? Thanks very much.

Lars Fruergaard Jorgensen -- Chief Executive Officer

OK, that was quite a number of questions, Richard, so we'll try to keep track of this. So on Tresiba, no particular fluctuation there. When you look at it, quite constant uptake overall. And as I mentioned, 15% market share growth over the past three years, 5% a year.

So we actually see that as being quite stable from a U.S. point of view. Mike, any comments from you on Victoza in China?

Mike Doustdar -- Executive Vice President and Head of International Operations

No, I can say Victoza China was, it almost doubled and it appeared against our own expectations. From quarter to quarter, your see these deviations sometimes, and it has to do with the lifting of the hospital and the speed of those compared to what the plan is. But I'm happy to say that now we have full coverage actually with the reimbursement in China after the national drug list took place at the beginning of the year. Then we have gone to various different regions and the hospitals, and we have the coverage that we had anticipated.

So I don't foresee the Q4 to be any indications of what happens later on.

Lars Fruergaard Jorgensen -- Chief Executive Officer

And very shortly on Ozempic, that's right, we are at 80%. That's actually a relative high access rate compared to our product [Inaudible]. So we're not necessarily looking at going to that on oral sema to be successful. And very quickly on the Clayton facility, we are ramping up construction, then comes the validation, qualification of it, which takes quite some time.

So gradually we'll be phasing in the factory from 2020 and in the coming period there. So thank you, Richard. And let's remind each other to stick to two questions going forward. Next question please.

Operator

Your next question is from the line of Michael Leuchten from UBS. Please go ahead.

Michael Leuchten -- UBS -- Analyst

Thank you very much. Two questions please, one for Mike and one for Karsten, I think. So on the international operations in the fourth quarter, it looks like we had quite a few sort of distortions in terms of timings of shipments. And it seems a little bit more pronounced than maybe we've seen in the past.

Just wondering if there's any sort of trend to this, why we all of a sudden see that in Q4. And if that's the case, are we going to see all that coming back in Q1? Or is that a more balanced in 2019? Any color would be helpful. And then a question on the gross margin. If we sort of adjust for rebate adjustments in 2018, pricing pressure, you mentioned the gross to net in the insulin space, your gross margin did phenomenally well obviously particularly on mix.

But is there anything else that made 2018 a year that made the gross margins particularly strong that wouldn't repeat as we look into 2019 and maybe 2020? Or is the mix effect likely going to be as strong going forward?

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Michael. Mike, first on Q4 timing, anything that's mentioned?

Mike Doustdar -- Executive Vice President and Head of International Operations

So all the timing that has been announced has been actually in the emerging market, in AAMEO and LatAm, which it is quite usual actually to have timings of the shipments. Primarily actually it has been a few countries, just a handful of countries in AAMEO. Interesting enough, I think if you take a look at the Q4 results of the other regions, so the more regular regions, Europe and China, Japan, they all did better in Q4 than the previous year's in terms of growth rates. So that should give you a good indication that we don't foresee a major full-year effect of that as we go forward.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Mike. And Karsten for the gross margin, anything special about 2018?

Karsten Munk Knudsen -- Chief Financial Officer

So I would say what was special for 2018 was that in manufacturing, we really hit it on all cylinders. And that's not something that we can plan with for every year. It's like winning all cylinders in international operations. It happens in few years, but most often you win some, you lose some.

So I think overall, manufacturing had a fantastic year in '18. I think I'm more balanced at this point in terms of our productivity gains in terms of '19. Still favorable productivity and some positive mix from the GLP-1 franchise. Do bear in mind again that the doughnut hole impact hits straight through, so of course a negative impact on that account.

And then come 2020 and onwards, and we're not guiding on that specifically albeit from a low base, but oral sema in Italy will be at a lower gross margin which is naturally in a ramp up phase of a product.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Karsten; and thank you, Michael. So we have time to we have one last question.

Operator

And your final question is from the line of Carsten Madsen of SEB. Please go ahead.

Carsten Madsen -- SEB -- Analyst

Thank you very much, Carsten from SEB. So then we'll follow up on Karsten's last comment here on the gross margin for oral sema because I can see on clinical trials for [Inaudible] that the new trial with lower doses have been completed. Essentially, it seems like that trial would have the potential for you to cut your cost for oral sema into half with the new formulation. I was wondering if you could share some details on what was the outcome of the trial and what would be your next step? Thank you.

Lars Fruergaard Jorgensen -- Chief Executive Officer

That actually sounded like a question to me, I suppose, Karsten...

Carsten Madsen -- SEB -- Analyst

Oh, yes.

Karsten Munk Knudsen -- Chief Financial Officer

Yes, and I always at least pretend as if I know some details about R&D. But on this particular occasion, I will disappoint you because unfortunately, the trial has completed the in-live phase. But as I think you are aware, Carsten, after the in-live phase, even for a small trial, [Inaudible] work to be done before you actually can lock the database, do the analysis and so on. So this is something that we for sure at the Q1 road show will be able to update you on the two different kinds of clinical activities that are ongoing in the oral GLP-1 space in Phase 1.

Carsten Madsen -- SEB -- Analyst

Oh, OK, OK. Could you maybe then just say, do you expect this trial to be the final trial for a new formulation? And what is the regulatory strategy going forward? Is this something you can quickly update and get into the market if it's a successful trial?

Mads Krogsgaard Thomsen -- Chief Science Officer

OK, so Carsten, it all depends. But if you have a known ingredient such as semaglutide in the snack formulation, and what you've done is changed the composition and/or the way you create the tablet, then as long as you can match the clinical profile with your new tablet in a way that is bioequivalent to that of the existing generation product, i.e., the one we're going to launch as soon as possible, then you can in principle do one confirmatory trial where you, after a period of, for instance, six months, show that it is indeed clinically equivalent and as safe as the existing generation of product. And that would then be clearly at a reduced cost of goods sold. But let's talk more about it when we have some data.

Lars Fruergaard Jorgensen -- Chief Executive Officer

Thank you, Mads; thank you, Carsten. This concludes our conference call. Thank you all for participating. We look forward to meet many of you over the coming days.

In the meantime, if you have any question, please reach out to our investor relations officers. Thank you very much, have a good day.

Operator

[Operator signoff]

Duration: 60 minutes

Call Participants:

Lars Fruergaard Jorgensen -- Chief Executive Officer

Mads Krogsgaard Thomsen -- Chief Science Officer

Karsten Munk Knudsen -- Chief Financial Officer

Peter Verdult -- Citi -- Analyst

Sachin Jain -- Bank of America Merrill Lynch -- Analyst

Florent Cespedes -- Societe Generale -- Analyst

Martin Parkhoi -- Danske Bank -- Analyst

Kerry Holford -- Exane BNP Paribas -- Analyst

Michael Novod -- Nordea Markets -- Analyst

Camilla Sylvest -- Executive Vice President and Head of Commercial Space and Corporate Affairs

Richard Vosser -- J.P. Morgan -- Analyst

Mike Doustdar -- Executive Vice President and Head of International Operations

Michael Leuchten -- UBS -- Analyst

Carsten Madsen -- SEB -- Analyst

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