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Novo Nordisk A/S (NYSE:NVO)
Q3 2020 Earnings Call
Oct 30, 2020, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello and welcome to the Q3 2020 Novo Nordisk A/S Earnings Conference Call. Throughout the call, all participants will be in a listen-only mode. And afterwards there will be a question-and-answer session.

Today, I'm pleased to present Lars Fruergaard Jorgensen. Please go ahead with your meeting.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you very much. Welcome to today's Novo Nordisk conference call regarding our performance for the first nine months of 2020 and our financial outlook for 2020. I'm Lars Fruergaard Jorgensen, the CEO of Novo Nordisk. With me, I have our Chief Financial Officer, Karsten Munk Knudsen; and our Chief Scientific Officer, Mads Krogsgaard Thomsen. Also present and available for the Q&A session are Executive Vice President and Head of Commercial Strategy & Corporate Affairs, Camilla Sylvest and our Investor Relations officers.

Today's earnings release and the slides for this call are available on our website, novonordisk.com. Please note that this conference call is being webcast live and a recording will be made available on Novo Nordisk's website. The call is scheduled to last for one hour.

The presentation is structured as outlined on Slide 2. Please note all sales and operating profit growth statements will be at constant exchange rates unless otherwise specified. The Q&A session will begin in about 20 minutes.

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 risks and uncertainties that could cause actual results to differ materially from expectations. For further information on the risk factors, including the uncertainty around COVID-19, please see the company announcement for the first nine months of 2020 and the slides prepared for this presentation.

Please turn to the next slide. In 2019, Novo Nordisk introduced strategic aspirations 2025, which consist of four dimensions. Purpose and sustainability, innovation and therapeutic focus, commercial execution, and financials. In 2020, Novo Nordisk has progressed on both adding value to society and on our environmental footprint. During the course of 2020, Novo Nordisk has launched a new social responsibility strategy, Defeat Diabetes. And as part of our access to insulin commitment, we have lowered the ceiling price of our human insulin in 76 low and middle-income countries. Specifically, in the third quarter of 2020, Novo Nordisk set a target to reduce all direct supplier supply, sorry, Novo Nordisk set a target to ensure that all direct suppliers supply the company using 100% renewable power by 2030.

In the first quarter, we made progress with -- in the third quarter, we made progress within our innovation and therapeutic focus aspiration, in particular the phase 2b trial investigating ziltivekimab in cardiovascular disease successfully completed. Mads will share more on R&D, a little later.

Moving to commercial execution, diabetes care sales increased by 8% and we increased our diabetes value market share leadership by 0.8 percentage points to 29.2%. GLP-1 sales continue to perform well at 29% sales growth, while obesity care [Phonetic] and biopharm sales increased by 6% and 4% respectively.

Within financials, total sales increased by 7%, with international operations growing by 12% and North America operations growing by 2%. Operating profit increased by 7% to DKK22.9 billion. As we disclosed on 8th of October, we now expect both sales and operating profit growth of 5% to 8%, measured at constant exchange rates for the full year 2020.

Please turn to Slide 5. Novo Nordisk like the rest of the world continues to be impacted by COVID-19 pandemic. And like many other organizations, our commitment to employees, patients, and communities remains unchanged. For production, Novo Nordisk manufacturing sites continue to operate and products are being made available to patients throughout the world. Within research and development, trial recruitment is still below the pre-COVID-19 levels, with some new trials being initiated. Commercially, fewer new patients initiated treatment during the lockdown. This has specifically -- this has specifically impacted launched products and products with a short stay time. A gradual recovery of patient initiations took place in the third quarter.

The COVID-19 pandemic continues to evolve differently across geographies and operations are running accordingly. In many markets, sales representatives are partially back in the field. As alluded to, the pandemic has increased the number of new patients using our products. For the US, GLP-1 class, as seen on the right hand side of this slide, new to brand prescriptions were substantially impacted by lockdown measures in Q2 of this year, but has since gradually recovered. However, total GLP-1 prescriptions growth has been relatively stable throughout this period.

Please turn to Slide 6. For the first nine months of the year, total sales increased by 7% which was driven by 12% sales growth in international operations and 29% sales growth for our global GLP-1 franchise. In international operations, all geographies and all therapies, continue to contribute to growth. Sales growth was negatively impacted by COVID- 19 as fewer patients initiated treatment, partially offset by COVID-19 related stocking and timing of shipments. Sales in North America operations increased by 2% in both Danish kroner and comparable exchange rates. Sales growth was negatively impacted by COVID- 19 as fewer patients initiated treatment and increasing unemployment in the US, partly offset by COVID-19 related stocking in the first quarter. Sales growth has primarily driven -- was primarily driven by GLP-1, although we did see growth across our diabetes, biopharma, and obesity franchises.

Global insulin sales decreased by 3%, which is a result of 22% sales reduction in the US partially offset by 10% sales growth in international operations. The US sales decline was driven by lower realized prices following rebate enhancements, unfavorable channel mix, changes in coverage gap legislation, and the launch of affordability programs. In international operations, sales growth was driven by all insulin segment. GLP-1 sales increased by 29%, driven by 37% sales growth in international operations and 27% sales growth in North America operations. Obesity care sales grew by 6% with both operating units contributing to growth. Sales growth was negatively impacted by fewer patients initiating treatment, due to COVID- 19. Biopharm sales increased by 4%, driven by Norditropin.

Please turn to Slide 7. As part of our strategic aspirations 2025, we aim to reach one-third of the global diabetes market. As previously mentioned, we have now reached 29.2%. This increase is a reflection of both the GLP-1 and insulin market share gains. For GLP-1, since 2019 we have increased our value market share by three percentage points to nearly 50%. The global rollout of Ozempic in international operations and the uptake of Ozempic and Rybelsus in North America have been key to this. For insulin since 2019, we have steadily increased our market share by 0.8 [Phonetic] percentage points. This can be attributed to the launch of new generation insulins in international operations facilitated by our Market Fit approach.

Please turn to Slide 8. The US GLP-1 market continues to grow, around 30% in volume, when measured quarter-over-quarter, driven by once weekly GLP-1 products. With the uptake of Ozempic and the launch of Rybelsus, Novo Nordisk has new to brand market share leadership of over 60% in this GLP-1 and is the GLP-1 market leader measured in total prescriptions with around 50% market share. Despite facing difficult launch conditions due to COVID- 19, Rybelsus continues to take market share both for new to brand prescriptions and total prescriptions, which are around 14% and 4% respectively.

Please turn to Slide 9. Rybelsus has had a promising start in the US. You can see in the graph on the left that in the 20 weeks after launch, new to brand prescription numbers were matching that off SGLT-2 class. Once the COVID-19 related lockdowns were implemented in March, we saw a substantial decrease in new to brand prescriptions. However as lockdown were lifted, Rybelsus uptake has picked up. This [Indecipherable] uptake development reflects the improved market access of Rybelsus, which is now around 85% across commercial and medicare. Furthermore, more than 80% of new prescriptions are new to the GLP-1 class and direct-to-consumer advertisement has begun. Outside of the US, Rybelsus has now been launched in eight countries.

Please turn to Slide 10. In international operations, diabetes sales increased by double-digit percentages across all geographical areas. This growth has been driven by both insulin and GLP-1 across all geographical areas. The sales performance reflects our increased diabetes value market share in international operations as indicated by the 30% share of growth. This has driven a 0.5 percentage point increase in our market share, which is now at 22.7%.

Please turn to Slide 11. Obesity care sales increased by 6% to DKK4.2 billion. Growth was driven by both international operations and North America operations. Sales growth was negatively impacted by COVID-19, as fewer patients initiated treatment. We have now launched Saxenda in 54 countries. And just yesterday, the US National Institute for Health and Care Excellence recommended the reimbursement of Saxenda. All of this supports our strategic aspiration of more than doubling obesity sales by 2025.

Please turn to Slide 12. Biopharm sales grew by 5% in the first nine months of 2020, driven by 8% sales growth in international operations. Sales growth was driven by Norditropin. For hemophilia, the declining sales of 2% were a result of Novoseven sales decline offset by Esperoct and Refixia launches. Norditropin sales increased by 13%, reflecting commercial execution as well as changes in inventories, COVID- 19 related stocking and additional demand driven by supply chains for competing products in selected countries.

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

Mads Krogsgaard Thomsen -- Executive Vice President, Head of R&D and Chief Scientific Officer

Thank you, Lars. Please turn to Slide 13. In the next couple of slides, I will first share the results from the recently completed phase 2b RESCUE trial for ziltivekimab and then after maybe some recent an imminent R&D milestones.

Ziltivekimab, to be referred to as zilti, is the first fully human anti-IL6 ligand monoclonal antibody that we obtained as part of the Corvidia Therapeutics acquisition back in June of this year. At the time of the acquisition, the phase 2b RESCUE trial was well under way. Now it's completed and we are happy to share the results. To start with a bit of context, our Head of Global Drug Discovery, Dr. Marcus Schindler described Novo Nordisk's ambition into the cardiovascular disease space at our R&D investor event held in June. Within this therapeutic area, zilti seeks to address the residual inflammation related risk that exist despite today's state of the art management of atherosclerotic cardiovascular disease, also known as ASCVD.

In ASCVD, reduced inflammation within the heart and blood vessels typically assessed clinically by measuring CRP has been shown to correlate with a robust reduction in major adverse cardiovascular events in a follow-up analysis to the CANTOS trial with anti-IL1 antibody, canakinumab. Thus in the CANTOS trial, patients in whom canakinumab treatment resulted in an end of treatment reduction in CRP and interleukin-6 levels below 1.65 nanograms per liter had a MACE risk reduction of no less than 36%. Patients who did not reduce their IL-6 levels below this level at the end of treatment correspondingly had no reduction in MACE events. Encouraged by this, as well as the documented robust human genetic association between high IL-6 expression and ASCVD risk, we measured CRP and other surrogate markers of anti-inflammatory cardiovascular action in RESCUE trial. We found immediate dose-dependent and sustained CRP reduction at all levels of zilti, in fact by 93% at the highest dose. Additionally, we saw reductions in a number of other cardiovascular inflammation biomarkers such as fibrinogen, serum amyloid A and haptoglobin as well as a decrease in the heart failure biomarker in terminal pro-BNP. The very encouraging data set we now have for the zilti molecule in ASCVD should be seen in the light of zilti's ability to reduce inflammation in atherosclerotic patients at a very low dose level that is expectedly clinically safe. Thus, and unlike any other proved interleukin-6 blockers, we did not observe any clinically meaningful impact on neutrophils, platelets, liver enzymes, or cholesterol in the RESCUE trial. Currently a Japanese phase 2 trial is ongoing. And a major pivotal phase 3 cardiovascular outcome trial is being planned for initiation in the second half of next year following in the phase 2 meetings with regulators.

Please turn to the next slide. In the third quarter of 2020, several R&D milestones were reached, including the notion that we now have for the first time ever, more than 40,000 patients active in clinical trials. Starting with our semaglutide franchise, we have initiated a phase 3b trial investigating one milligram Ozempic in around 800 people with Type 2 diabetes with peripheral artery disease, also called PAD. The background for the trial is the finding of a significant 35% risk reduction in both peripheral and coronary revascularization events in SUSTAIN 6. The PAD indication represents yet another example of how we see continuous semaglutide label expansions based on demonstration of efficacy and safety in areas of high unmet medical need.

Intriguingly, the first clinical trial has now been initiated for our first-in-class glucose sensitive insulin. The trial investigate the safety, tolerability, pharmacokinetics and dynamics of subcutaneously administered once daily glucose sensitive insulin. The target product profile for this molecule includes improved glucose control as well as the virtual elimination of hypoglycemic and other side effects seen with today's insulin therapy.

Another phase 1 trial that has just started investigates higher doses of also oral semaglutide for Type 2 diabetes. Aiming for oral semaglutide to ultimately match the full efficacy level associated with even high dose administration of injectable semaglutide. Within biopharma, we've received approval of somapacitan, now also known as Sogroya in the US for adults with adult growth hormone deficiency. Also noteworthy within biopharm is the reinitiation of phase 3 clinical development activities for Concizumab, which is the subcutaneous prophylactic TFPI antibody treatment in hemophilia A and B patients, regardless of inhibitor status. This follows pausing of the EXPLORER trials in March of this year related to the occurrence of non-fatal thrombotic events. A revised dosing regimen is now being deployed in the EXPLORER trials.

Regarding the FVIII-mimicking antibody project, Mim8, we have despite a COVID-19 related period of delay in phase 1, caught up with the timelines and are now in phase 2 in hemophilia patients with or without inhibitors, hemophilia A patients.

Within other serious chronic diseases, the NASH trial investigating semaglutide in loose combination with Gilead's ACC inhibitor and FXR agonist has completed. Results will be communicated at scientific conferences during this quarter. Importantly within NASH, semaglutide has recently been granted breakthrough therapy designation by the FDA. Breakthrough designation implies among other things that the FDA will work closely with Novo Nordisk to develop and hopefully approve semaglutide expeditiously for the treatment of NASH.

Looking toward the rest of this year and into 2021. We will soon initiate the phase 3 onwards program for once weekly insulin Icodec. Furthermore there will be a number of exciting readouts including, SUSTAIN 4, which is the investigation of semaglutide 2.0 milligrams in type 2 diabetes. In obesity, we will be submitting semaglutide 2.4 milligrams in both the US and EU. We accordingly expect the decision on US submission by mid-2021, since we decided to use our priority review voucher for this application. Also within obesity, in 2021, we will seek to have phase 3 initiation for our once weekly combination product consisting of Amylin 833 and semaglutide along with reporting of the phase 1 results for our long acting GDF15 project. Lastly, within other serious chronic diseases, we will -- during 2021, initiate phase 3 trials for both semaglutide in NASH as well as the cardiovascular outcome trial for zilti.

With that, over to Karsten for an update on the financials.

Karsten Munk Knudsen -- Executive Vice President, Chief Financial Officer

In the first nine months of 2020, sales increased by 6% in Danish kroner and by 7% at constant exchange rates. The gross margin was 83.8% compared to 83.6% in the first nine months of 2019. The increased gross margin reflects a positive product mix, driven by increased GLP-1 sales and productivity improvements. This is partly countered by a negative impact from lower realized prices in the US. Sales and distribution costs increased by 4% in Danish kroner and by 5% at constant exchange rates. The increase in cost was driven by North America operations reflecting launch activities for Rybelsus and continued promotional activities for Ozempic, this was partly offset by lower promotional spend related to insulin. In international operations, promotional spend is related to launch activities for Ozempic and Rybelsus and the continued rollout of Saxenda. The spend was impacted by COVID-19, resulting in lower activity and delays promotional activities.

Research and development cost increased by 12% both in Danish kroner and at constant exchange rates. The cost increase is driven by amortization of the priority review voucher for semaglutide and obesity in the third quarter of 2020. Increased activities within other serious chronic diseases are driving the cost increase following progression of the early pipeline within cardiovascular disease and stem cell projects. This is partly offset by lower spend within obesity care, driven by finalization of the semaglutide obesity pivotal phase 3a program and COVID- 19 impact on clinical trial activity.

Administration costs remained unchanged in Danish kroner and increased by 1% at constant exchange rates, reflecting broadly unchanged spent across administrative areas. Operating profit increased by 6% in Danish kroner and by 7% at constant exchange rates. Net financial items showed a loss of around DKK1.8 billion compared to a loss of around DKK3.1 billion in 2019. Diluted earnings per share increased by 10% to DKK14. Free cash flow was DKK41.6 billion, compared to DKK32.7 billion in 2019. The increase was driven by higher net profit and favorable timing of prepaid payments in the US.

Please turn to Slide 16. As Lars mentioned our growth outlook for 2020 was updated on 8th of October. Sales growth is expected to be between 5% and 8%, at constant exchange rates. The guidance reflects expectations for continued robust sales performance for the GLP-1 franchise, Ozempic, Victoza and Rybelsus, the portfolio of new generation insulin, and the biopharm products. The guidance also reflects intensified competition within diabetes care and biopharma, especially within the hemophilia inhibitor segments. Furthermore, continued pricing pressure within diabetes care as well as expansion of affordability initiatives, especially in the US are expected to impact sales development. Given the current exchange rates versus Danish kroner, reported growth is now expected to be around 3 percentage points and 4 percentage points lower than at constant exchange rates, with respect to sales and operating profit.

The current COVID-19 pandemic causes uncertainty to the outlook regarding new patient initiations and societal impact such as the unemployment rate in the US, which is impacting healthcare insurance coverage. The estimated annualized impact is now around 2% of US sales.

Operating profit growth is expected to be between 5% to 8%. The updated outlook reflects savings due to COVID-19. The expectation for operating profit growth primarily reflects the sales growth outlook and continued investments in current and future growth drivers. Financial items is now expected to be a loss of around DKK1.4 billion compared to a loss of DKK1.2 billion in August 2020. This development, mainly reflects losses from non-hedged currencies due to depreciations across several emerging market currencies. Lastly, we now expect free cash flow to be between DKK34 billion and DKK39 billion, reflecting higher net profits.

And now, over to Lars for his final remarks.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you Karsten. Please turn to Slide 17. We are very satisfied with the performance in the first nine months of 2020, despite the negative impact from COVID-19. More patients use our GLP-1 treatments and our diabetes market leadership continues to expand. Within R&D, an important milestone was reached with encouraging results from the phase 2 trial in cardiovascular disease, with Ziltivekimab, the lead candidate from the Corvidia Therapeutics acquisition earlier this year.

With that, thank you. And we are now ready for the Q&A, where I kindly ask all participants to limit him or herself to two questions. Operator, we're now ready to take the first set of questions.

Questions and Answers:

Operator

First question comes from the line of Wimal Kapadia from Bernstein. Please go ahead.

Wimal Kapadia -- Bernstein -- Analyst

Thank you very much for taking my questions. Good morning from Bernstein. So just a few Mads, please. Mads, can I of ask about the balance -- how you think about the balance between HbA1c control and tolerability for the GLP-1. So firstly, what in your mind -- what HbA1c level do you see incremental increase is less relevant given the impact on vascular complications start to slow down, given the majority of patients are under good glycemic control? And then secondly, at what level of nausea, diarrhea and vomiting levels, do you believe the tolerability concerns outweigh incremental HbA1c control? So what I'm really trying to get is the sense of balance between these two prescribing drivers, both from the patient and the physician side, while taking to account the compliance events.

And then my second question, you've now started the glucose sensitive -- insulin trial, which complements the weekly and insulin 965, which targets micro -- microvascular complications, but how should we think about these three novel incidents in the context of what we are seeing in the base market today. You know, what gives you confidence that these products will actually raise the bar enough to make a difference in what is a very challenging market? And so how should we think about the return on investment of these products? And then just a very quick one, or tied to that, what is insulin 147? I've never heard of that one before. Thank you.

Mads Krogsgaard Thomsen -- Executive Vice President, Head of R&D and Chief Scientific Officer

Well -- the last one first. It was a hybrid molecule that had dual activities, but you shouldn't concern yourself about that one anymore for the time being, but more focus on the GSI insulin and the cardio-protective insulin and not the least, of course the icodec insulin entering phase 3. But it's a long-standing debate the kind of correlation between A1c control and cardiovascular risk and what level is OK. And I think its suffices to say that the most ambitious A1c guidelines, namely the American Academy of Clinical Endocrinology, AACE, they have a 6.5% A1c target and they have derived that from the notion that when you go much beyond or below, sorry 6.5 in A1c, there is very little contribution of glycemia or hypoglycemia to the expected advent of major adverse cardiovascular events or macroangiopathy.

Likewise for microvascular complications, so I would argue that in a patient who is anywhere in the range of 6.5%, you would have to weigh up against the tolerability profile, any glucose decrement below that level. That being said, of course, if you can achieve normal glycemia such as for instance with the glucose sensitive insulin without any risk of GI tolerability or hypoglycemic issues, then that is decide [Indecipherable] then you are basically having a diabetes normalizing molecule. I would say that the balance between if you're talking about GLP-1 therapies and tolerability vis-a-vis the efficacy, I think we feel that at the tolerability levels we are seeing for our semaglutide molecule, including what we are seeing at the 2.4 milligram dose in obesity in the STEP program we've seen single digit level drop out because of GI tolerability concerns and a very high satisfaction with the therapy. Health related quality of life, whether it was estimated by acolyte or SF-36 where that was estimated psychologically or physically was increased at 2.4 milligram. Hence, I can say here we have a good balance between GI tolerability and efficacy. If you go much beyond that, I'm afraid it starts to be a different situation because then the patients like might too often be a bit troubled by nausea and the likes, but that's not what we have seen. So I think that more or less covers in.

In the terms of selling a glucose sensitive insulin, I mean -- if you can achieve better glycemic control that will be put into the core and other models of health economic outcomes, and actually drive greater efficacy and more bang for the buck for the payors. And if you are on top of that, reduce the risk of side effects, you actually have a pretty interesting molecule also from a payor perspective.

Wimal Kapadia -- Bernstein -- Analyst

Thank you Mads.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you very much. Next set of questions please.

Operator

The next question comes from the line of Peter Sehested from Handelsbanken. Please go ahead.

Peter Sehested -- Handelsbanken -- Analyst

Thank you for taking my question. I have one on obesity and just a follow-up question. I mean now that spent your priority review voucher, we are very close to launch. So if Camilla is there, if whether she could provide some further comments on how many physicians are actually prescribing obesity drugs in the USA today? And what is your target for year one post launch, and also year three post launch? And where you are in your preparations in order to -- or how have you prepared authorities in terms of reimbursement, etc., etc. just for us to gauge you know how as fast the uptake could be? So that is the first question.

If I have to select a second one, it would be with respect to the glucose sensitive insulin, you are saying that you have phase 1 data next year. Typically, you have been in phase 1 for quite some time with some of your previous molecules. Could you confirm that you are planning to start phase 2 relatively shortly after that or should we expect that to take a little bit longer? Thank you very much.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you Peter. So first Camilla on obesity and the level of disclosure we can give. I'm not sure we can targets about number of subscribers after one or two years, but any comments on that. And Mads then on glucose sensitive insulin, speed of going to the next phases.

Camilla Sylvest -- Executive Vice President, Commercial Strategy & Corporate Affairs

Yeah. Thank you, Lars. So what we can share is that as preparation for the launch and for obesity in general, we are looking at the number of prescribers. And it is very clear that for obesity, of course, to be realizing the significant potential that it has for the future, we need to be looking at more prescribers than we have today. So that's a clear focus of ours and we can support with a lot of education in the area.

And other focus areas of ours is of course a number of people seeking treatment. So here we know that with 650 million people suffering from obesity, only a fragment of those actually do seek treatment. We estimate around 10%. So in both of these areas there is significant potential especially now when we will be launching semaglutide 2.4 that has twice the benefit in terms of weight loss as Saxenda.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

And I think it's also encouraging to see that we actually now have this new a nice endorsement of Saxenda in the UK. So I think we are making progress in actually being able to articulate the value of treating obesity. And obviously this is based on Saxenda, then one can only believe what semaglutide can do. Mads, over to you on glucose sensitive insulin?

Mads Krogsgaard Thomsen -- Executive Vice President, Head of R&D and Chief Scientific Officer

Yes, so what you do Peter is, the usual story. You start with single ascending doses and then you move on to multiple ascending doses and you typically in an insulin trial will always need a comparator and that comparator, if it's a glucose sensitive insulin where you want to document that it is truly glucose sensitive, you have to go up against the comparator with the least documented hypoglycemia risk to prove even further benefits. And that in this cases is insulin degludec. And the way that you can assess for instance, the risk of hypoglycemia is by forcing the patients, for instance tripling the insulin dose into what could be a severe hypoglycemic condition, had they not been hypoglycemic clamp situation, where you can see them at any pre-defined glucose level. And then you can simply measure do they go down there or do they level off at a safe level, without rescue therapy. This is the kind of trials we are doing. They are ongoing as we speak. And of course, moving into phase 2 from there on, we will do as fast as possible.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you Camila. Thank you Mads, and thank you, Peter. Next set of questions please.

Operator

The next question comes from the line of Martin Parkhoi from Danske Bank. Please go ahead.

Martin Parkhoi -- Danske Bank -- Analyst

It is Martin Parkhoi, Danske Bank. Two questions, first on IO. One of your competitors mentioned yesterday that there was some weakness in some out of pockets markets in -- outside North America. Is that really visible in your IO numbers, I must say. But are you seeing small sign of that and is it something that we should expect to escalate going into 2021?

And then just on GLP-1 pricing US, I can understand that you will not give any hard numbers on where the pricing are this year, next year. But just conceptually if we look at what Lilly said earlier this week and if I look at, I guess that your net pricing if you adjust for Victoza true up, then it maybe down 10% in the third quarter, that is slightly more than Lilly. Can you maybe discuss conceptually why is that? Given that it appears that your segment mix change are much more favorable than Lilly? And how should we conceptually look at you compared to Lilly with a fairly old GLP-1 [Phonetic] now going into the coming years?

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you Martin for those two questions, and let me try to give it a shot. In IO, we're not really seeing anything that is a measurable impact of lower out of pocket pay. You know we have a good momentum, both with the insulin and GLP-1 and we have the market fit strategy that's still pulling through. So we are quite encouraged by the growth levels we see in IO.

To the US GLP-1 pricing, what we see in Q3 is a continuation of what we have seen in the first and second quarter of this year. So we don't really see much change. It's a market with a very attractive volume growth. We're down to 8% of patients using GLP-1. We see differentiation in the market. So it's really a market that is driven by launch of new products, which is fueling growth and preference. And the pricing impact from year-over-year enhancing rebates level a bit to stay on open formularies, the legislative impact we see in Medicare now and then getting to your point about channel mix and maybe portfolio is unchanged for us. As a function of -- say the differentiation of products in the market, you of course have dynamics where brands as they grow older in the categories they have broader and broader access and get into low and lower price points. And as new products are launched, typically starting in the high end of the market, you of course have the different players will have different, say quality of book of business over time and that dynamics will probably change a bit between the competitors, but we don't see any significant change over the quarters. So what we communicate here is a stable situation compared to what we've seen in prior quarters.

Thank you, Martin. And next set of questions please.

Operator

The next question comes from the line of Simon Mather from Exane. Please go ahead.

Simon Mather -- Exane -- Analyst

Afternoon, everybody. Thank you for taking my questions. I've got two. I think they are mainly for Mads, but you didn't discuss it in the presentation, but I'm just wondering if you could maybe give us an update with respect to our intention or otherwise, whether or not you will embark on a phase 3 program for semaglutide in Alzheimer's? And with that, with the data that is said to be published next Friday, I believe, would you like urge caution to over interpret that what we should see and just what your views around that would be very helpful. Thanks.

And then the second one is just a broader discussion on obesity. Obviously, you've got the recommendation from NICE, which is positive, but still in the US, it remains somewhat elusive. I'm just wondering if you could help us understand you know how negotiations are going there with the authorities. And if it does remain elusive, the rationale really you can use in your product review voucher for semaglutide obesity? Thank you.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Okay Simon. First Mads on potential start of phase 3 in Alzheimer's.

Mads Krogsgaard Thomsen -- Executive Vice President, Head of R&D and Chief Scientific Officer

Yes, I will essentially repeat, I think I also maybe answered last time that Novo Nordisk is looking at the aggregated burden of evidence or lack of such in terms of favoring entry with the semaglutide into a phase 3 trial in Alzheimer's disease/ mild cognitive impairment. And in that regard, one has to look at whatever exists out there including LAT [Phonetic] study, but by no means, the LAT [Phonetic] study, I don't think is the solution to all questions in that field for number of reasons, but it will of course be interesting to see those data, I believe it's next weekend. One also has look at the aggregated data sets that exist from [Indecipherable] analysis as you know we have done from registry based studies and from preclinical studies and then make up once mind about such a decision. It is of course a big decision to go to phase 3, but that also means that one has to have all the pertinent considerations ahead of that decision.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you, Mads. And Camilla on obesity.

Camilla Sylvest -- Executive Vice President, Commercial Strategy & Corporate Affairs

Yeah. So in the US, in general, there is 70% access in the commercial segment to obesity cap. But what we are really focusing on is to make sure that also employers opt into this because in reality the real access is only 20% when we take this into account. So this is of course where we are putting our focus. For the longer term, we will also be focusing on the [Indecipherable] and Reduce Obesity Act of course that potentially will give access to Medicare over time. But this all relates and political decisions. Right now of course with semaglutide having as we talked about before, twice the effect of the Saxenda, there is also a sustained potential for longer stay time as we see that the weight loss continues up until 60 weeks, what we see from our STEP program. So in terms of that, the earlier we can get semaglutide 2.4 to the market, earlier we can realize the potential of the obesity franchise.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you Camilla. Thank you Simon. Next question please.

Operator

The next question comes from the line of Simon Baker from Redburn. Please go ahead.

Simon Baker -- Redburn -- Analyst

Thank you for taking my questions. Two for Mads, if I may. Firstly on zilti, the lipid profile or lack of negative effect is impressive on unusual, Mads. So I just wondered if you had any thoughts on why you are not seeing a negative effect where others have?

And secondly, there was an interesting case report in The New England Journal a couple of weeks ago. About the use of ruxolitinib before essentially reversing type 1 diabetes. I'd be interested in your thoughts generally about the potential for JAK inhibition in type 1, is this something that you've looked at before, whether you think there's any mileage this? Thanks so much.

Mads Krogsgaard Thomsen -- Executive Vice President, Head of R&D and Chief Scientific Officer

Yeah. So I think as regards to zilti and the benign adverse in profile or by chemical profile that we've seen in the RESCUE trial, I think there are two factors that come into play here. One of them is the notion that it is IL-6 ligand program, it doesn't interfere with the IL-6 receptor signaling complex that as you know also mediates other cytokines signaling events. So we're not interfering with that. At the same time, we have apparently found a dose down to the level of 15 milligrams that actually corresponds to a daily dose of 0.5 milligram since the monthly dosing regimen is deployed. That is so low and so potent that I think what we are seeing is essentially intravascular and cardiovascular anti-inflammatory action without enough of these antibodies actually permeating into more peripheral target tissues and compartments of the body, including the immune system and maybe therefore having much less of an impact than we have seen for other IL-6 blockers. So I hope I cannot prove this will hold true in phase 3, but based on the data we have, we think we actually had the emergence of a very encouraging benefit risk profile for this particular compound. So we are very happy with the acquisition and with the progress of the project.

As regards JAK inhibitors and other remedies for type 1 diabetes, I have to say and we've been, as you know working a lot in the field, including with anti-IL 21 -- anti-IL 21 antibodies with a very nice data set from phase 2, but that we have decided not to progress it. As you are aware that any remedy that we will seek to reverse the autoimmune process to the extent that you're void the immune attack and killing of the beta cells in the pancreas will have to be so relatively powerful that it is unlikely to not have on toward side effects i.e. the benefits will go along with the risks. And I think the next major breakthrough is in the field of type 1 diabetes, if you want to go down that early more likely to relate to regenerative medicines such as PD cell replacement where Novo Nordisk very active with a late stage research project as is also a couple of other companies.

Simon Baker -- Redburn -- Analyst

Great. Thanks so much.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you Mads. Thank you Simon. Next question please?

Operator

The next question comes from the line of Steve Scala from Cowen. Please go ahead.

Steve Scala -- Cowen -- Analyst

Thank you so much two questions, probably both for Mads. Mads when you see the first Lilly tirzepatide phase 3 data later this quarter, what will you be most interested to look for? And please enlighten us to any statistical methods Lilly may employee to portray the data in the most positive light? So that's the first question.

Second question is that we have tracked clinical trial activity during the pandemic, and it shows Novo trials that are recruiting are down 20% year-to-date. That is two times worse than the next closest companies and 10 times worse than the average company. What do you think accounts for this? Is it a function of the therapeutic areas in which you traffic? Is it geographies or is it something else? Thank you.

Mads Krogsgaard Thomsen -- Executive Vice President, Head of R&D and Chief Scientific Officer

Okay. Well, first of all I can't really comment on how Eli Lilly does their statistical analysis of GI side effects and related conditions. I think that will be up to regulators and other parties to really discuss that with the company. What I would look at as -- what I would look at as a clinician is what is, as we discussed in an earlier question during this session, what is the balance between efficacy and side effects? Because there is no doubt you can achieve almost anything with the molecule, if you put people into a situation where they are constantly vomiting of course because that corresponds to two a fasting situation and that can actually almost make you undergo diabetes remission, but it's not a nice way to achieve that. So you have to have the overall benefit risk profile defined and we discussed at an earlier point in time and I think we've hit that spot both with the semaglutide in the injectable and in the oral versions, at the doses that you've heard us talk about earlier today and previously, but we'll have to see the tirzepatide data as they come out, It's a bit early to speculate and in particular for us.

In regards to clinical trial. I'm not quite sure I agree with your statement because we follow the different TA areas, including the diabetes area. And today, we've exceeded 40,000 patients in active trials. The greatest reduction we have in any or delay, we have in any trial even the major outcome trials that we are waiting to do today is max three months till termination based on current analysis. We have adopted a number of tools allowing remote contact between physician, investigator and patient arrival of medicines at the postal address of the personal involved in the trial. And a lot of other things that can make source data verification possible remotely using newly developed apps and the likes. So actually I would say that Novo Nordisk is a bit proud that we are able to say that we have managed to basically enhance the portfolio and grow the portfolio and the amount of patients during a time of COVID-19. So I think one of the reasons is that we have our own clinical research associates, 2000 of them all over the world. And they are very dedicated colleagues. And they're quite close to headquarter to adopt these new, you can say remote tools that will allow us to do virtual trials almost possibly next year, even in a COVID-19 situation allowing us to progress the pipeline.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you Mads. Thank you Steve for those questions. Next questions, please.

Operator

The next question comes from the line of Peter Verdult from Citi. Please go ahead.

Peter Verdult -- Citigroup -- Analyst

Thank you Peter Verdult, Citi. Two questions. Lars just on potential US drug price reform. We all know net pricing rebates are off the table, which [Indecipherable] heavy than a whole exposure. The one bipartisan bill that nearly made it to full this year was Copay caps. Now regardless of who wins next week, I will be interested to hear Novo's view on Copay caps or other solutions that you think to propose to deal with the fundamental problem of lowering out-of-pocket costs?

And then Camilla, I'm sorry to come back to obesity and commercial strategy, don't worry I'm not going to ask you for the year one to five, these people cost internally, but I do want to just understand how you're thinking about the opportunity. If you know the numbers are large and the data is good and at the prescriber base and the reimbursement is terrible, what we haven't talked about is Saxenda's daily list price is way in excess of $50 a day, which clearly is not conducive. So I'm just wondering, you have a drug that's clearly got significant efficacy, but are you thinking about being able to price at a premium to create this market or given the fact you have a single dose device, does that give you an opportunity to really rapidly expand prescriber base and reimbursement by going at a lower price? Some general thoughts about how you can maximize the commercial opportunity for in obesity? Thank you.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you Pete. So I'll refrain from going into much detail about the US elections and what could happen. I can only observe that a lot of ideas has been on the table, but it's quite difficult to make significant intervention in a rather complex and grid locked US healthcare system. We are launching a portfolio of competitive products, we have an ambition of converting the 70% of business to innovative products, and as such conduct business based on clinical differentiation and real need and demand in the market. I think that's the strongest position to have in any market. And I'm not saying we will be immune for all kinds of interventions, but that means that there will be an underlying wish to use our innovative products. And I feel comfortable that we can compete and also be successful -- be successful from a financial point of view, in most of these potential interventions.

So we have to wait and see what the political system can agree on in a market that's largely a private market and hence not that prone for regulation. Camilla, on -- back to be obesity strategy.

Camilla Sylvest -- Executive Vice President, Commercial Strategy & Corporate Affairs

Yeah, so just to recap on the general market expansions, we are working on four dimensions. So one is about having obesity recognized as a disease, and this of course will be extremely important for also reimbursement down the road. And we are also working on the number of patients seeking treatment. And just before, I mentioned that right now only 10% of patients living with obesity seek treatment, but when they then go to the physician to get treatment actually, the big majority of those are sent back without any treatment other than exercise and eating suggestions. So both on these dimensions we can work on with education. And with that hopefully, we also get some more, you can say persistent prescribers of obesity medication. It's clear that many of the people suffering from obesity also have a number of co-morbidities that from a health economic point of view gives rise to us discussing with payors like we have just done with NICE in terms of the cost effectiveness of better treatment. And it is in this perspective that semaglutide 2.4, of course has an even bigger impact than what we have been used to with Saxenda. So these are the dimensions that we are working on to realize our long-term strategic aspiration that we've communicated at our last capital markets day. Of course, reimbursement is important, but it is also very patient driven disease that we are talking about here. So it is not a prerequisite for us to realize our ambition, but of course it is something that we keep working on.

And when it comes to the price as you know from other launches, we've done, we will only communicate around price by the time that we launch. Thank you.

Peter Verdult -- Citigroup -- Analyst

Thank you.

Operator

And the next question comes from the line of Michael Leuchten from UBS. Please go ahead.

Michael Leuchten -- UBS -- Analyst

Thanks so much. Two questions please. One, just bigger picture patients footfall, Lars, during the last couple of quarters, you have given us some steer on what's your underlying assumption was for normalization of patient footfall. I guess, we all thought we were going to get back to normal this year, but we had lockdowns coming again. So what's your assumption on the shape of the footfall, the patient footfall recovery as we head into the end of the year and then, and then early next?

And then my second question is on Rybelsus sequentially the third quarter the product was light relative to where consensus was, I guess we've all been sitting here trying to use prescription data and assume a realized price and it came in a little bit light. So as we look at Q3 over Q2, other than the COVID impact and the area under the curve, is there anything else we should keep in mind as we think about the fourth quarter and trajectory into 2021? Thank you.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Good. So first, Karsten on what to expect in terms of -- or what we have assumed in terms of patient flow or patient normalization.

Karsten Munk Knudsen -- Executive Vice President, Chief Financial Officer

Yeah, thanks for that question Michael. And as you know, predicting a pandemic and how it rolls across the globe has proven to be difficult around first, second, third wave. I think what has been encouraging for us to see is the resilience of our total script base and I would say slightly smaller impact from lower direct space and lower indirect impact. And you saw from the initial slide that Lars showed on COVID that we see trend improving over the past quarters. What we've built into our modeling is that we see a continuation of our TRx trends, but needless to say there is uncertainty around how COVID will impact our business over the coming quarters until a vaccine is generally available. So that's why we also operating with a broader range at this point than we normally do.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you Karsten. And just initially on Rybelsus performance, we are very pleased with the launch. We are making the reception of the product, the trend we see in terms of scripts. So let me just make that comment upfront and then Camilla and maybe a bit more coverage on that.

Camilla Sylvest -- Executive Vice President, Commercial Strategy & Corporate Affairs

Yeah. So today we have over 33,000 [Indecipherable] Rybelsus and we are actually back to the number of new ATP prescribing Rybelsus as we were before COVID-19 impacted us. Also we have more than 900 new prescribers per week on Rybelsus. We also have all districts in strike mode. And as you know our access is around 85%. So also our expansion of the class is working as we had planned for, meaning that more than 80% of the new scripps is coming from outside the GLP-1 class. And then you would also notice that the most recent numbers on our Rybelsus scripts are where we estimate that approximately half of those are still impacted by our Copay or voucher offerings. So just to keep that in mind, when you do the numbers. And then on 21st of September, we launched our new DTC campaign, wake up to the possibilities with Rybelsus and we saw that there was an immediate increase to visit on our rybelsus.com website following this. So as Lars said, we are very encouraged by the launch of Rybelsus.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you Camilla. Thank you Karsten. And thank you Michael. So next set of questions please.

Operator

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

Mike -- Bank of America merrill lynch -- Analyst

Hi, it's actually Mike [Phonetic]. Thanks for taking my questions. Just kick off for Karsten and thinking about '21, I think obviously official outlook next year, but I wondered at a high level you could just discuss some pushes and pulls to sales growth rate versus your existing 6%, 7% run rate that you previously talked about coverage gap affordability initiatives, run rates of the existing IO 12%, is there any update or perspective there? And any directional margin commentary for next year, how do we think about an SG&A cost rebound following the COVID savings of this year and R&D growth given the number of phase 3 starts, with obviously a number of outcome studies there?

Second question is on sema [Phonetic] NASH breakthrough. For Mads, any early regulation conversations that change your perspective on the ability to use surrogates to speed up the file? And if you are able to use for L for FibroScan, when could the earliest file will be? And then just a clarification on ELAD in your earlier commentary regarding by decision to progress to phase 3. Have you actually convened an advisory board yet to discuss options? And when do you expect to make a decision by? And how will you communicate to the market? I'm working on the assumption that we will hear nothing for you next week. Thank you.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you Sachin. First Karsten, while we do not guide for next year, some high level comments.

Karsten Munk Knudsen -- Executive Vice President, Chief Financial Officer

Yeah. Thanks Sachin for this question. So as Lars was saying when we will issue our '21 guidance in connection with our full year results in February. Our starting point is, and what you see in our numbers currently in underlying run rate to the tune of 6%, 7% in our base business. The key drivers you should expect to remain the same. So continued solid GLP-1 performance across the globe and solid growth from IO, while US will still be in the process of transforming the business to a more recently launched products.

So IO as we talked to at our Capital Markets Day, we are working with this 6% to 10% range over the five-year period. We've had very good traction this year performing even above that range. So of course we hope to continue to have solid traction in IO in the 6% to 10% range, also come next year. As to US, some of the puts and takes, yes, it's correct that we will not have the same coverage gap impact and some of the affordability impacts we had this year. On the other hand, then we have the unemployment where we only have a modest impact on channel mix this year. And we have this annualized 2% impact on US sales, pulling in the other direction. And then I'd say, finally -- with the puts and takes. We also have some tailwind this year in our growth hormone business from a supply issues with the competitor. And of course, we don't expect that to continue into next year. And then layer on top of those puts and takes, which should be no surprise to the market. Then of course COVID-19 and potential segment, third waves, just puts and additionally of uncertainty to the outlook we are looking into.

In terms of margins and P&L, if I take the different lines then, with more than 40,000 patients on clinical trials currently and expanding and moving toward a closer to the 50,000 mark then of course we will be investing more in R&D. You should though note that we are running a number of efficiency initiatives in R&D also in terms of running our clinical trial. So it's not a linear approach you should take to it, but clearly we will be expanding our investments in R&D, which was also what we communicated 12-months ago at our Capital Markets Day.

In terms of S&D, we will continue to have a number of launches both with Rybelsus where we are only in some 50 markets now. Sorry, on Ozempic, only around 50 markets now and then Rybelsus we are in some 10 markets at this point. So quite a number of launches to come for the new products. In terms of the savings this year and into next year, yeah, you're correct way. We have some savings. We do expect also some savings come next year in terms of some of the learnings we have and also given the fact that COVID-19 will not over come '21.

And then finally on gross margin and cost of goods as we also communicated at Capital Markets Day that we are ramping up our facility in Clayton, North Carolina manufacturing for oral semaglutide. So with the early volumes behind Rybelsus then you should expect a negative mix impact from Rybelsus compared to what you see this year.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Good. Thank you Karsten. Then you can do all the modeling all of you. Mads, quickly on Seminis [Phonetic].

Mads Krogsgaard Thomsen -- Executive Vice President, Head of R&D and Chief Scientific Officer

Yeah, first, the last question is quietly yes, we have had Advisory Board meetings. We have discussed the potential profile of the GLP-1 [Indecipherable] semaglutide in that disease. And no, we are not conducting any kind of potential communication in the area to the ELAD study presentation as we have described previously. It's a multitude of data gatherings that will form the basis of such a potential decision.

In regards to surrogates for NASH, I'm a strong believer in a combination of using for instance FibroScan and [Indecipherable] or one of the other biomarkers in conjunction to actually diagnose and follow the prognosis of NASH treatment. However, as it stands today with the FDA and with the EMA with whom we have had meetings, otherwise you cannot be granted a breakthrough designation, there we have actually agreed that it will be biopsy based in phase 3. However, it may not be in the trial that the entirety of the population has to have reported 72 week biopsy results at the time of NDA submission. So there are some gives and takes there, but we -- I think are on the way to a very robust trial design with a single pivotal trial and a 72-week readout followed by a extension where you see together had outcomes benefits of the drug post marketing.

Mike -- Bank of America merrill lynch -- Analyst

Thank you.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you Sachin. This concludes our conference call. Thank you for participating and the interest in Novo Nordisk. And do you feel free to contact our Investor Relations officers should you have more questions. Thank you and have a great day.

Operator

[Operator Closing Remarks]

Duration: 64 minutes

Call participants:

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Mads Krogsgaard Thomsen -- Executive Vice President, Head of R&D and Chief Scientific Officer

Karsten Munk Knudsen -- Executive Vice President, Chief Financial Officer

Camilla Sylvest -- Executive Vice President, Commercial Strategy & Corporate Affairs

Wimal Kapadia -- Bernstein -- Analyst

Peter Sehested -- Handelsbanken -- Analyst

Martin Parkhoi -- Danske Bank -- Analyst

Simon Mather -- Exane -- Analyst

Simon Baker -- Redburn -- Analyst

Steve Scala -- Cowen -- Analyst

Peter Verdult -- Citigroup -- Analyst

Michael Leuchten -- UBS -- Analyst

Mike -- Bank of America merrill lynch -- Analyst

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