Novo Nordisk (NVO) Q3 2023 Earnings Call Transcript

Novo Nordisk (NVO 0.84%)
Q3 2023 Earnings Call
Nov 02, 2023, 8:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Q3 2023 Novo Nordisk A/S earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session.

[Operator instructions] Please be advised that today's conference is being recorded. I would now like to turn the conference over to your first speaker today, Daniel Bohsen, head of investor relations. Please go ahead, sir.

Daniel Bohsen -- Head of Investor Relations

Welcome to today's Novo Nordisk earnings call for the first nine months of 2023. This call follows the earlier announcement of top-line results and the updated outlook for 2023 shared in October. The release was advanced due to Danish securities regulations. My name is Daniel Bohsen, and I'm the head of investor relations at Novo Nordisk.

With me today, I have CEO of Novo Nordisk, Lars Fruergaard Jorgensen; executive vice president and head of commercial strategy and corporate affairs, Camilla Sylvest; executive vice president and head of North America operations, Doug Langa; executive vice president and head of development, Martin Holst Lange; and finally, chief financial officer, Karsten Munk Knudsen. All speakers will be available for the Q&A session. Today's announcement and the slides for this call are available on our website, novonordisk.com. Please note that this call is being webcast live, and a recording will be made available on our website as well.

The call is scheduled for one hour. Please turn to the next slide. The presentation is structured as outlined on Slide 2. Please note that all sales and operating profit growth statements will be at constant exchange rate unless otherwise specified.

Please turn to the next slide. As always, we need to advise you that this call will contain forward-looking statements. These are subject to risks and uncertainty that could cause actual results to differ materially from expectations. For further information on the risk factors, please see the company announcement for the first nine months of 2023 and the slides prepared for this presentation.

With that, over to you, Lars, for an update on our strategic aspirations.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you, Daniel. Next slide, please. In the first nine months of 2023, we delivered 33% sales and 37% operating profit growth at constant exchange rates. I'd like to start this call by going through the performance highlights across our strategic aspirations before handing over the word to my colleagues. Within purpose and sustainability, we continue to make progress.

Our carbon emissions decreased by 28% compared to pre-pandemic levels in 2019 and in line with our aspiration of being a sustainable employer. We continue to expand the number of women in senior leadership positions. This is now 41% compared to 38% last year. In R&D, an important milestone is that we will stop the FLOW kidney outcomes trial early as semaglutide demonstrated a benefit in people with type 2 diabetes and chronic kidney disease. Further, within R&D, we have recently agreed to acquire ocedurenone for the treatment of cardiovascular disease.

This supports our aspiration of establishing a presence in other serious chronic diseases with a high unmet medical need. Martin will come back to this and our oral R&D milestones later. The sales growth reflects strong commercial execution with both operating units contributing to a continued sales growth driven by increasing demand for our GLP-1-based diabetes and obesity treatments. Camilla and Doug will go through the details in the -- in the therapy area later. Within commercial execution, we are pleased to have reached our obesity aspiration of 25 billion Danish kroner and our aspiration for diabetes by reaching a global value market share of one-third. Naturally, the progress is not holding us back, and we continue to aim for treating more patients with our innovative treatments. Karsten will go through the financial details, but I'm very pleased with our overall performance for the first nine months of 2023, which has enabled us to raise our outlook for the full year.

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

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

Thank you, Lars, and please turn to the next slide. In the first nine months of 2023, our total sales increased by 33%. The sales growth was driven by both operating units with North America operations growing 49% and international operations growing 17%. Our GLP-1 sales increased 49% driven by North America growing 43% and international operations growing 60%.

Insulin sales decreased by 7% driven by a 1% decline in international operations and a 24% sales decline in North America operations. The sales decrease was driven by decreasing sales in the U.S. and region China. Obesity care sales grew 174% overall. In international operations, sales grew 52% driven by both Saxenda and Wegovy.

In North America operations, obesity care sales grew 244%. Total rare disease sales decreased 18%, which was driven by a 22% decrease in international operations and by a 13% decrease in North America operations. Please turn to the next slide. With 25% sales growth in our diabetes care, we are now growing faster than the total market, improving our global diabetes value market share to 33.3%. The increase reflects market share gains in both North America operations and international operations.

In international operations, total diabetes care sales increased by 21% in the first nine months of 2023. This was driven by GLP-1 sales growing 60% driven by all geographical areas. Novo Nordisk is the market leader and international operator GLP-1 value market share of 69%. Ozempic continues its GLP-1 market leadership with just shy of 46% market share repurchase.

Rybelsus has 12% value market share driven by strong uptake across geographies. And with that, I will hand it over to Doug.

Doug Langa -- Executive Vice President, Head of North America Operations

Thank you, Camilla. Please turn to the next slide. The GLP-1 class expansion continues in the U.S. in the first nine months of 2023.

The U.S. GLP-1 market volume grew around 50% comparing Q3 of 2023 to Q3 of 2022. Measured on total prescriptions, Novo Nordisk continues to be the market leader with 53% market share. Please go to the next slide. Obesity care sales grew by 174% in the first nine months of 2023.

This was mainly driven by the U.S. The global branded anti-obesity market expansion continues with a global volume growth of 94%. In international operations, obesity care sales are driven by strong Saxenda performance and the Wegovy launches in five international operation countries. While eager to launch Wegovy in more IO countries, our focus remains to do this in a sustainable manner, for example, by capping volumes. In the U.S.

alone, sales of Wegovy grew by 467%. Demand for Wegovy continues to exceed supply. And to safeguard continuity of care for patients already on Wegovy, the supply of the lower Wegovy dose strengths in the U.S. has been reduced since May of 2023.

Please go to the next slide. Our rare disease sales decreased by 18%. The sales decrease was driven by a 13% decline in North America operations and a 22% sales decline in international operations. Sales of rare blood disorders increased by 2% driven by the launch products in hemophilia A and B and partially countered by NovoSeven. Sales of rare endocrine disorder products decreased by 54%, reflecting a temporary reduction in manufacturing output.

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

Martin Lange -- Executive Vice President, Head of Development

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

Semaglutide has already now demonstrated convincing risk reductions in a number of cardiovascular outcome studies. This includes SUSTAIN 6 and PIONEER 6 in type 2 diabetes, as well as STEP HFpEF SELECT in obesity. While we await data from the SELECT trials to be presented, we continue to build evidence for the semaglutide molecule in the cardiovascular space. In 2024, we expect several readouts.

This includes type 2 diabetes -- type 2 diabetes cardiovascular outcomes study, SOUL, with oral semaglutide 14-milligram and the functional outcomes trial, STRIDE, which focuses on the high-risk population with peripheral vascular disease. As previously discussed, we also investigated the potential therapeutic effects of semaglutide on osteoarthritis and metabolic dysfunction-associated steatohepatitis, previously known as nonalcoholic steatohepatitis. In addition to this, we recently announced early closure of the FLOW trial due to efficacy. Next slide, please.

This closure was based on a recommendation from the FLOW independent Data Monitoring Committee following a pre-planned interim analysis. As you know, FLOW is an outcomes trial conducted across 28 countries and more than 400 sites. 3,534 people were enrolled and randomized in a 1-to-1 ratio to receive either once weekly sales semaglutide at 1.0 mg or placebo. The eligibility criteria were designed to include patients with type 2 diabetes and high or very high risk for progression of chronic kidney disease. The primary objective of FLOW is to demonstrate delay in progression of chronic kidney disease and to lower the risk of kidney and cardiovascular mortality through the composite primary endpoint. This is on top of standard of care, including the use of SGLT2s.

The trial's powered to detect a 20% risk reduction on the primary endpoint. Key secondary endpoints include annual rate of change in estimated glomerular filtration rate, major adverse cardiovascular events, and all-cause death. Today, few treatment options exist for chronic kidney disease in people living with type 2 diabetes. With a projected global increase in type 2 diabetes, there is a clear need for additional treatment options to help mitigate the residual risk in people [Audio gap] and chronic kidney disease. The next step would be to close down the trial.

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

There remains a significant need in treatment of hypertension, which is a leading risk factor for cardiovascular events, heart failure, chronic kidney disease, and death. Ocedurenone is a once-daily oral-administered small molecule with a long half-life and a high affinity for the mineralocorticoid receptor. Ocedurenone has an attractive efficacy and safety profile and is currently being examined in the phase 3 trial, CLARION-CKD, in patients with uncontrolled hypertension and advanced chronic kidney disease. We expect to initiate -- to initiate additional vascular as well as chronic kidney disease outcomes trials during the course of 2024. Next slide, please. Turning to other R&D milestones.

I would like to highlight some of the other trial readouts and initiations across our therapy areas in 2023 and in the first half of 2024. Within diabetes, in the first -- third quarter of 2023, we initiated the first pivotal phase 3 trial in the REIMAGINE program with CagriSema in people with type 2 diabetes. In the fourth quarter, we have submitted all semaglutide 25- and 50-milligram in the EU. We are also anticipating the results from the ongoing pivotal phase 3 trial for IcoSema combined 3 in the first half of 2024. IcoSema has the potential to be a first-in-class once-weekly fixed-ratio combination of basal insulin and G receptor -- sorry, GLP-1 receptor agonist in type 2 diabetes in need of intensification.

Within obesity, we are happy to announce that we in September initiated a 32-week phase 1 trial with once-weekly subcutaneous amycretin in people with overweight obesity. While we await SELECT data at the American -- going to be presented at the American Heart Association Congress, we have submitted the trial to the U.S. FDA and the European Medicines Agency. We are pleased that the FDA has granted priority review for the Supplemental -- Supplemental New Drug Application.

This marks a significant milestone in our ongoing efforts to address unmet needs in patients with overweight and obesity and established cardiovascular disease. Finally, we also expect the chronic heart failure trial with preserved ejection fraction in obese patients and diabetes to read out in the last quarter of this year. In rare cases, nedosiran was approved by the U.S. FDA for treatment of primary hyperoxaluria type 1. This marks the first approved siRNA treatment for Novo Nordisk. In other serious chronic diseases, we initiated a phase 1 trial with our angiopoietin-like protein inhibitor.

This is a monoclonal antibody in development for cardiovascular disease, specifically for lowering of cholesterol and triglycerides. With that, over to you, Karsten.

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

Thank you, Martin. Please turn to the next slide. In the first nine months of 2023, our sales grew by 29% in Danish kroner and 33% at constant exchange rates, driven by both our operating units. The gross margin increased to 84.5%, compared to 84.3% in 2022.

The increase in gross margin reflects a positive product mix driven by increased sales of GLP-1-based treatments. This is partially countered by costs related to ongoing capacity expansions, a negative currency impact, and lower realized prices mainly in the U.S. and region China. Sales and distribution costs increased by 22% in Danish kroner and by 25% at constant exchange rates. The increase is driven by both operating units.

In North America, the cost increase is driven by the relaunch of Wegovy and promotional activities for Ozempic. In international operations, the cost increase is driven by promotional activities for Rybelsus, as well as the obesity care market development activities. The increase in sales and distribution costs are impacted by adjustments to legal provisions. Research and development costs increased by 38% measured in Danish kroner and 39% at constant exchange rates. The increase reflects increased late-stage clinical trial activity and increased early research activities compared to the first nine months of 2022.

The acquisition of Forma Therapeutics in '22 and Inversago Pharma also increased R&D spending. Administration costs increased by 9% measured in Danish kroner and 11% at constant exchange rates. Operating profit increased by 31% measured in Danish kroner and 37% at constant exchange rates, reflecting the sales growth. Net financials showed a net gain of 1.2 billion Danish kroner, compared to a net loss of 5 billion Danish kroner last year. The effective tax rate was 19.9% in the first nine months of '23, compared to 20.5% in the first nine months of '22. Net profit increased by 47%, and diluted earnings per share increased by 49% to 13.71 kroner.

Free cash flow was 75.6 billion Danish kroner, compared with 62.6 billion kroner in the first nine months of '22. In line with the strategic aspiration of delivering attractive capital to shareholders, a total of 52 billion Danish kroner has been paid back to shareholders through share buybacks and dividends. The cash conversion is positively impacted by timing of payment of rebates in the U.S. Capital expenditure for property, plant, and equipment was 16.4 billion Danish kroner compared to 7.2 billion in 2022. This primarily reflects investments in additional capacity for active pharmaceutical ingredient production and for finished capacity for -- for both current and future injectable and oral products. Please go to the next slide.

Nine months into 2023, we are continuing our sales growth momentum, which has enabled us to raise the outlook for the full year. We now expect the sales growth to be between 32% and 38% at constant exchange rates. The increased sales outlook is primarily reflecting higher full-year expectations to Ozempic volumes sold in the U.S. and growth to net adjustments for Ozempic and Wegovy in the U.S.

The guidance reflects expectations for sales growth in both North America operations and international operations. The guidance is mainly driven by volume growth of GLP-1-based treatments for diabetes and obesity care. This is partially countered by declining sales in rare disease due to a temporary reduction in manufacturing output. The guidance reflects the level of volume growth of GLP-1-based treatments. The inherent uncertainty of the pace of Ozempic -- obesity care market expansion following the relaunch of Wegovy in the U.S.

and a limited rollout in international operations are also included in the guidance range. Finally, the sales outlook reflects expected continued periodic supply constraints and related drug shortage notifications across a number of products and geographies. Novo Nordisk is investing in internal and external capacity to increase supply both short and long term. While supply capacity for Wegovy is gradually being expanded, the lower dose strength in the U.S. will remain restricted to safeguard continuity of care. We now expect operating profit to grow between 40% and 46% at constant exchange rates.

This primarily reflects the sales growth outlook and continued investments in future and current growth drivers within research, development, and commercial. For 2023, we expect net financial items to amount to a gain of around 1.6 billion Danish kroner, mainly reflecting gains associated with foreign exchange hedging contracts. Capital expenditure is still expected to be around 25 billion Danish kroner reflecting the upscaling of the supply chain and the innovation-based growth strategy pursued by Novo Nordisk. In the coming years, the capital expenditure to sales ratio is expected to be low double digits. The free cash flow is now expected to be between 65 billion and 73 billion Danish kroner, reflecting the sales growth, a favorable impact from rebates in the U.S., and investments in capital expenditure. The updated cash flow expectation is mainly reflecting increased net profit expectations, partially countered by business development activities.

That covers the outlook for 2023. Now, back to you, Lars, for final remarks.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Thank you, Karsten. Please turn to the final slide. Today's announcement discloses the full set of quarterly results and updated outlook for 2023, which was shared earlier in October. Overall, we are very satisfied with the sales growth in the first nine months of 2023.

The growth is driven by demand for our GLP-1-based therapeutic interventions for diabetes and obesity, which is now reaching more people than ever before. The performance in the first nine months of the year has enabled us to raise the outlook for the full year. From an R&D perspective, we have reached a significant milestone with the submission of SELECT and look forward to sharing more data at the American Heart Association. In addition, we're excited about the early closure of the FLOW trial and anticipated readout in the first half of '24. Finally, the acquisition of ocedurenone will strengthen our folio of cardiovascular disease and underlines the commitment to establish presence with other serious chronic diseases.

With that, I'll hand over to -- the final word to Daniel.

Daniel Bohsen -- Head of Investor Relations

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

Questions & Answers:

Operator

Thank you. [Operator instructions] We will now go to the first question. And your first question comes from the line of Michael Nedelcovych from TD Cowen. Please go ahead.

Mike Nedelcovych -- TD Cowen -- Analyst

Thank you for the question. I have one for Martin. Martin, if you'll allow me to set up something of a strawman, here's a potential set of expectations for the phase 3 SELECT data when we see them at AHA: one, clinically meaningful benefit across each of the individual MACE components and regardless of BMI category; two, cardiovascular benefit that clearly emerges within one year on Wegovy therapy and does not diminish over time; and three, no noticeable imbalance in any very rare adverse events such as suicide or cancer. My question is, would you urge me to modify these expectations in any way?

Daniel Bohsen -- Head of Investor Relations

Martin, a strawman for you.

Martin Lange -- Executive Vice President, Head of Development

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

Daniel Bohsen -- Head of Investor Relations

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

Operator

Thank you. We will now take the next question. And your next question comes from the line of Richard Parkes from BNP Paribas. Please go ahead.

Richard Parkes -- Exane BNP Paribas -- Analyst

Thanks very much for taking my questions. I've got a couple. So, firstly, when I look at Ozempic and Wegovy U.S. Symphony prescriptions, they're both trending flat to down over the last quarter, I think, due to supply constraints.

But your guidance suggests an expected acceleration in top-line growth in -- in Q4. So, I'm just wondering if you could help me to understand that. Are you expecting to see kind of further improved supply into the end of the year, or would be, I assume, kind of the swing factor there? And then, the second question is just, your slide outlines the potential benefits of semaglutide beyond glycemic control and weight loss, and maybe we'll see some insight into that from the SELECT study. But your charts suggests there's potential for patients to benefit from the CV aspects, be it -- that don't have diabetes or obesity. So, I'm just wondering how you can capitalize on that given that your trials, currently, I think, are just recruiting patients with either obesity and diabetes-type co-morbidities.

Thanks very much.

Daniel Bohsen -- Head of Investor Relations

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

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

Yeah. So, thank you for that question, Richard. And -- and clearly, when we put out guidance, that's because we believe that that's the most realistic forecast range that we're putting in. And we don't have too many months to -- to rule on, so -- so, of course, we see the direct trends and bake that into our -- into our forecast. And what I would give of additional flavor on top of that is, of course, our growth rate is also a function of -- of extra sales last year.

And we did see Ozempic having a lower base last year in the fourth quarter than -- than what we would normalize into this year. And -- and then, of course, there can be fluctuations in inventories, for instance, with wholesalers. And then, finally, I'll say this, this pickup in sales growth in the fourth quarter, this is not to be kind of read into anything, any difference on the supply situation. What we're selling in the fourth quarter has been produced months ago.

Daniel Bohsen -- Head of Investor Relations

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

Martin Lange -- Executive Vice President, Head of Development

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

Daniel Bohsen -- Head of Investor Relations

Thank you, Martin. Thank you, Richard, for the questions. And we are ready for the next question.

Operator

Thank you. We'll now take the next question. And your next question comes from the line of Seamus Fernandez from Guggenheim Securities. Please go ahead.

Seamus Fernandez -- Guggenheim Partners -- Analyst

Oh, thanks very much for the question. So, just very quickly, as we think about the SELECT trial results in the wake, not just of the presentation, but the very rapid filing, there have been a lot of questions around this being actually a cardiovascular medication and perhaps gaining access to CMS in that regard. Can you just talk about the prospects of that actually becoming reality? And then, the second question is just on the oral and the initiation of the subcutaneous amycretin. Can you just help us understand, is this more of a supply chain-related decision, an IRA-related decision, or a decision related to some challenges with the oral formulation of amycretin? Thanks so much.

Daniel Bohsen -- Head of Investor Relations

Thank you, Seamus. Doug, I'll get the first question to you.

Doug Langa -- Executive Vice President, Head of North America Operations

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

Daniel Bohsen -- Head of Investor Relations

Thanks, Doug. Martin, any thoughts on amycretin?

Martin Lange -- Executive Vice President, Head of Development

Yeah, on amycretin, our decision to go also into subcutaneous is actually caused by by neither of the above of the three reasons that you mentioned. It's actually driven by the fact that we are learning that optionality is important for patients and prescribing physicians in both diabetes and obesity. And we -- we've seen a clear potential for amycretin to become both an oral but certainly also a subcutaneous offering. And therefore, in phase 1, it is prudent for us to investigate both.

Daniel Bohsen -- Head of Investor Relations

Thanks, Martin, and thanks, Seamus. We're ready for the next question.

Operator

Thank you. We'll now take the next question. And your next question comes from the line of Peter Verdult from Citigroup. Please go ahead.

Pete Verdult -- Citi -- Analyst

Yeah, thank you. Peter Verdult, Citi. Two questions cast on your favorite topics: supply and pricing. Just on supply, if we take the sort of run rate for GLP-1 volumes of your franchise in the U.S.

and just extrapolate into '24, if nothing changes, I mean there's going to be a big disconnect in terms of people's expectations for growth next year. And I think it'll be effectively flat. Now I know it's going to improve next year, but can I just push you on, you know, when we might see, you know, the handbrake being released? I mean, logical thinking might be that, at the time of the Mounjaro launch, you'll want to be in a less capacity-constrained position. So, I know you can't go into too much detail but just some incremental color on when we might see, you know, the handbrake being removed would be helpful.

And then, on pricing, if we do our value-per-script calculation, there was a huge jump from Q2 to Q3. And you've called out growth to net adjustments. We know that commercial mix has improved. But just making sure, is this a sort of high watermark, a one-off in terms of value prescription? How should -- in terms of baselining and thinking going forward, can we use the value per script in Q3 as a baseline, or is it artificially high? Thank you.

Daniel Bohsen -- Head of Investor Relations

Thanks, Pete. Karsten, supply going into '24 and the value per script.

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

Yeah. Pete, thanks. Thank you for those, my favorite subjects. So, I would say, first of all, with the guidance that -- for the full year this year that has a midpoint of of 35% sales growth at constant exchange rates, at least in a novel setting, it feels like we -- we have released the handbrake and moving at very high pace in terms of growth rates, at least it's the highest in the history of the company. And -- but -- but that said, and extrapolations into 2024, I would say, first of all, we're clearly pursuing a growth strategy based on the innovation.

We have shown that -- that we have the -- the innovation platforms, especially in Ozempic and Wegovy to drive growth this year and, clearly, also -- also next year. So -- so not teaching you how to extrapolate, but if you extrapolate our implied Q4 sales growth based on our guidance, then -- then you actually get to a sales growth number next year in the double digits, which is actually not that far away from -- from where consensus is currently. So -- so, I do believe that -- that we're scaling very very fast. And then, specifically on -- on Wegovy and any handbrakes there, then -- then what I'll say as to -- as to 2024 is that, in 2024, we will be delivering significant step-up in volumes to the U.S.

market compared to 2023 as we did from '22 to '23. And then -- then to a pricing question, as we've said on numerous occasions, the appropriate way of looking at net realized pricing in -- in the U.S. is to look at -- at the year-to-date numbers. So, most contracts are contracted on an annual basis.

And -- and the tricky part is -- is the lag effect between when a script is written and then we receive the rebate claims from -- from the payers. And there's just a lag effect of several months, and that's why, you know, in reality, Q3 is the first point where we see how -- how the channel PM is truly is falling out for 2023. So -- so, I wouldn't use Q3 in isolation for -- for anything, forecastingwise. I would recommend you to -- to use year-to-date Q3 as a starting point. Thank you.

Daniel Bohsen -- Head of Investor Relations

Thank you, Karsten. Thanks, Pete.

Pete Verdult -- Citi -- Analyst

Thank you. Very clear. Thank you.

Daniel Bohsen -- Head of Investor Relations

Yeah. We're ready for the next question.

Operator

Thank you. Your next question comes from the line of Mark Purcell from Morgan Stanley. Please go ahead.

Mark Purcell -- Morgan Stanley -- Analyst

Yeah, thanks very much for taking my questions. The first one on -- on GLP-1, on higher doses, at least starting higher doses trials for -- to semaglutide, you have 18, 60 milligrams coming through at the end -- by the end of this year. Can you help me understand your expectations there and the importance of increasing your dose with the pivotal trial at 7.2 readout late next year? And then, secondly, in terms of the pen platform leverage, we estimate that about 100 million GLP-1 pen units are going to be sold by Novo in 2023, for GLP-1s, that is. The majority is the FlexTouch platform with a 3 mL platform.

So, will you use those two platforms to launch with -- both in the U.S. And if not, why not?

Daniel Bohsen -- Head of Investor Relations

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

Martin Lange -- Executive Vice President, Head of Development

Yeah, absolutely. Thank you for that question. So, you're absolutely right. We investigated 8 --18 and 16-milligram in -- in diabetes, but we're also investigating 7.2-milligram in obesity.

The purpose is obviously to -- to assess whether we -- we can achieve an even higher efficacy without compromising on safety. Our models suggest, in particular, in the obesity space, that a higher dose could potentially be associated with an even greater weight loss without having to compromise on safety. And being diligent, we want to assess this.

Daniel Bohsen -- Head of Investor Relations

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

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Yeah, Mark, thanks for the question. I'll just say that we -- we have a situation today where we have a number of device platforms inside the company, one using outside vendor and technology. So, that gives us flexibility. And it's actually part of fueling the growth today that we can -- we can flex this.

So, I'll not go into specific speculation about what we use of device per market. But we see that it's a strength that we can flex between different presentations. And we see today that it's really the, you know -- the efficacy of the molecule that drives that, so that gives quite some flexibility in how we go to market country by country and strategic flexibility on our side. Thank you.

Daniel Bohsen -- Head of Investor Relations

Thank you, Lars. Next question, please.

Operator

Thank you. Your next question comes from the line of Emily Field from Barclays. Please go ahead.

Emily Field -- Barclays -- Analyst

Hi, thanks for taking my question. I'll ask two. One, just on the STEP 9 osteoarthritis study, I believe that this is not large enough to be added to the Wegovy label. So, if this were to be a positive study, what would be your next STEPs plans? And then, just, you know, on anti-obesity medications and muscle loss, we've seen competitors, you know, more explicitly make efforts in R&D for compounds that could preserve lean mass over fat mass and overall weight loss.

I was wondering if you could just give an update on where you stand on that within your R&D portfolio. Thank you.

Daniel Bohsen -- Head of Investor Relations

Thank you, Emily. Martin, two for you.

Martin Lange -- Executive Vice President, Head of Development

Yeah, so specifically, on the osteoarthritis trial, you're right, it's not the biggest trial. I think it's too early to -- to speculate whether that will have an impact on -- on a label. It's very very clear that -- that, for us, it's also guiding for future clinical activities, specifically maybe for concizumab, amycretin, or GLP-1 -- GLP combination. So -- so, it has actually two potentials both to serve for information, specifically for Wegovy, but also to guide us for -- for future activities.

Daniel Bohsen -- Head of Investor Relations

And the second one, Martin, obesity and research and development focus on muscle loss --

Martin Lange -- Executive Vice President, Head of Development

Yup. I think this is a relevant point. It's also a focus of ours with current treatments, specifically Wegovy and Saxenda, that we actually see a reasonable preservation of lean body mass given the broader weight loss. But it has to be a focus area. And you'll probably see also in our pipeline, without going into details, maybe even quite soon, assets that could lead to a preservation of lean mass.

Daniel Bohsen -- Head of Investor Relations

Thank you, Martin. Thank you, Emily. We are ready for the next question.

Operator

Thank you. Your next question comes from the line of Simon Baker from Redburn. Please go ahead.

Simon Baker -- Redburn Partners -- Analyst

Thank you for taking my questions. Two if I may. Firstly, on China, growth looks -- looks -- looks -- looks pretty good over there. But I just wonder if you could give us an update on the -- the impact of reduced access to Chinese hospitals on how -- and how that is affecting things, if indeed at all.

And then, secondly, on -- on semaglutide, there was an interesting journal preprint on Monday, looking at its use in alcohol use disorder, which looked very impressive. I'll be interested to get your thoughts on the potential of that indication, in your opinion. Thanks so much.

Daniel Bohsen -- Head of Investor Relations

Thank you, Simon. So -- so, Camilla, the first one to you, do we see reduced access to Chinese hospitals?

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

So, in general, we are working across the country in -- and we -- we also have access to to hospitals in general. What we do see in China is an effect of the -- of the BPP, of course, that's mainly the insulin sales results, and that is also -- when you look at an overall IO business point of view, that is what is actually tracking down the overall IO insulin growth. And -- but in China, Ozempic is going really well. We have a great momentum of Ozempic that we've had since -- since the launch and since the inclusion on the reimbursement list, and that -- that can drive growth in China.

Simon Baker -- Redburn Partners -- Analyst

Thank you.

Daniel Bohsen -- Head of Investor Relations

And no major issues with access. Martin, the second question.

Martin Lange -- Executive Vice President, Head of Development

Yeah, thank you very much for the question. We've also seen these -- these observational studies and been intrigued by the fact that -- that GLP-1 may have a place in also treating alcohol abuse. It does actually lie within the motivation of -- of GLP-1. From our perspective and also considering the timing, the combination of two motivations that could potentially also help here, namely GLP-1 and amylin.

So, specifically, from our perspective -- sorry, cagrisema is probably the more attractive and efficacious approach. So, if you see us going into that space, that would be with cagrisema and not with the semaglutide alone.

Daniel Bohsen -- Head of Investor Relations

Thank you, Martin.

Simon Baker -- Redburn Partners -- Analyst

Thanks so much.

Daniel Bohsen -- Head of Investor Relations

We're ready for the next question.

Operator

Thank you. Your next question comes from the line of Naresh Chouhan from Intron Health. Please go ahead.

Naresh Chouhan -- Intron Health -- Analyst

Hi there. Thanks for taking my questions. First one on the Wegovy U.S. market access.

We're hearing that a growing number of employers are having to opt-out, having already opted in, because the demand has been too high. Can you just help us to get a sense of how big or small an issue this is? And obviously, next year, that's probably potentially only likely to increase when supply resumes and demand increases. And secondly, on supply, if I look back at when you were -- you seem to be relatively comfortable with -- with the demand, we were -- we were at about 30,000 new pet starts a week in the U.S. That'd be -- is that a fair starting point for kind of the ability to supply and growth from there, you know, going into 2024? Thank you.

Daniel Bohsen -- Head of Investor Relations

Thank you, Naresh. So, Doug, any updates on the U.S. market access for Wegovy?

Doug Langa -- Executive Vice President, Head of North America Operations

Yeah. Thanks, Naresh. And overall, we're very pleased with the broad market access that we have for Wegovy. Most major PBMs and health plans are covering it, and that derives around 50 million people with obesity now being covered.

And importantly, we're seeing about 80% of the patients that are paying less than $25 for Wegovy. Now, to your question specifically around employers, we do see some opt-outs, but we're seeing, overall, more opt-ins than opt-outs. So, directionally, we're heading in the right direction. And our focus will be continue on -- continuing on securing employer coverage, as well as stronger access for AOMs overall.

Daniel Bohsen -- Head of Investor Relations

Thank you, Doug. Karsten, any additional comments on the Wegovy supply going into next year?

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

Yeah, so -- so, I think the way to look at U.S. Wegovy suppliers is a starting point of -- of currently around 100,000 TRx per week according to -- to Iqvia. And then, we have the five different growth strengths. And -- and of course, the magic is to get that split right into the link into manufacturing, and then -- then we scale from there. And as we've said in prior quarters, then -- then this is something we do dynamically.

So -- so, don't look for -- for a hockey stick. It's a -- it's a gradual process where, of course, we'll be starting at the lower doses and then increasing them as we move forward. And there are different data sources in terms of of -- of new starts. So, I'm not really sure where -- what your data source is, but I think my data point is -- is lower than yours in terms of number of new starts per week.

Daniel Bohsen -- Head of Investor Relations

Thank you, Karsten. Thank you, Naresh. And we are ready for the next question, please.

Operator

Thank you. Your next question comes from the line of Florence Cespedes from Societe Generale. Please go ahead.

Florent Cespedes -- Societe Generale -- Analyst

Good afternoon. Thank you very much for taking my questions. Two, please. First one on Wegovy in Europe.

Have you started to talk to the payers in Europe as you have already submitted the data to the European authorities? And do you believe that you will need to show a statistically significant benefit on the cardiovascular deaths that will be presented at the AHA next week? And my second question is on Ozempic. Following the FLOW results, how would you position the product on this population as we already have products available to treat these patients, notably the SGLT2? And it seems that in the trial, 15% of the patients are under SGLT2 treatment. So, some color on this one would be helpful. Thank you.

Daniel Bohsen -- Head of Investor Relations

Thank you. Go on, Camilla, maybe the first one for you in terms of Wegovy outside the U.S.

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

Yeah, so, in terms of -- I believe the question was whether we need statistical significance, I would just say now we await the presentation at the -- at the conference. But in general, there is a great interest in -- in Wegovy and, of course, also the benefits in SELECT. So, we will get back to that. But we have -- we do see authorities interested in -- in bringing up the discussion again with us already at this point for reimbursement of Wegovy. And just a reminder that we have reimbursement of Saxenda already in close to 15 countries -- around the world.

And of course, here, we are talking a -- a step-up in treatment.

Daniel Bohsen -- Head of Investor Relations

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

Martin Lange -- Executive Vice President, Head of Development

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

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

Daniel Bohsen -- Head of Investor Relations

Thank you, Martin. Thanks for the question, and we are ready for the next question.

Operator

Thank you. We will now take the next question. And the question comes from the line of Richard Vosser from J.P. Morgan.

Please go ahead.

Richard Vosser -- JPMorgan Chase and Company -- Analyst

Hi, thanks for taking my question. Question on the European rollout of Wegovy first. Obviously, we know, in Denmark, in May, there was a substantial demand for Wegovy in about 1% of the population. So, I was wondering how that has developed since then, both in terms of volume and how you're seeing patients staying on the drug through Denmark given it's an out-of-pocket market? And then, the second question is on your KBP Biosciences product.

Just wondering how that differentiates from other MR antagonists, particularly Kerendia from Bayer, but also others in development from -- from AstraZeneca, etc. Just your thoughts on how this is different. Thanks very much.

Daniel Bohsen -- Head of Investor Relations

Thank you, Richard. Camilla, the first one to you, Wegovy rollout in Denmark and [Inaudible].

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

Yeah. In Denmark, we see a continued interest in -- in Wegovy and -- and -- and Wegovy continues to perform very well. And it is more than 1% of the population at this point in time. In terms of how many states are on the product, we also have -- it's too early to give you exact daytime numbers, but we do have, I could say, anecdotal evidence that there is a high number, a very very high number of the people that stay on the product from the beginning of the year when the product was launched.

Daniel Bohsen -- Head of Investor Relations

Thank you, Camilla. Martin, reflections on ocedurenone.

Martin Lange -- Executive Vice President, Head of Development

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

Daniel Bohsen -- Head of Investor Relations

Thank you, Martin. Thank you, Camilla. Thanks, Richard, for the question. We are ready for the next.

Operator

Thank you. Your next question comes from the line of Peter Welford from Jefferies. Please go ahead.

Peter Welford -- Jefferies -- Analyst

Hi, I hope you can hear me. I've got two questions. Firstly, if can come back [Inaudible] gross margin. Appreciate the commentary year to date, but in the third quarter, it seemed to trend down quite a bit, which I guess is somewhat unusual given the quite significant improvements we saw in the gross to net and your most profitable market for both Wegovy and Ozempic.

So, can you just talk a little bit about, in the third quarter, what the incremental costs or whether perhaps any writedowns or something of inventory or something that could potentially depress the gross margin in what would normally be a more profitable quarter? And then, secondly, just coming back to the comment that was made on stay time but thinking about it a different way, which is, in the past, you've cited for Saxenda that are around 25% or more of patients are on the drug for at least a year, and most of those are treated by obesity experts. Appreciate it's still early for Wegovy to necessarily give comments on the U.S. on this stay time, but can you sort of talk about whether you're seeing different trends than those of Saxenda, both in terms of the obesity experts versus those aren't, and also the number of patients perhaps of reaching a year at this point? Thank you.

Daniel Bohsen -- Head of Investor Relations

Thank you, Peter. So, first of all, to Karsten on the gross margin and later talk on what we see on stay time in the U.S. for Wegovy.

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

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

And -- and there are basically two pieces to it. First of all, it's -- remember the starting point. Our gross margin is already high at 84% or so. And -- and then, secondly, what is different compared to prior years is that the -- the amount of capex we're running these days. And just from an accounting policy standard point of view, we -- we are realizing more costs related to our capital expenditure projects into the P&L.

So, it doesn't all go to -- to the balance sheet. Some of it also hits the P&L, and that -- that is basically what is offsetting the benefit from product mix.

Daniel Bohsen -- Head of Investor Relations

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

Doug Langa -- Executive Vice President, Head of North America Operations

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

Daniel Bohsen -- Head of Investor Relations

Thank you, Doug. Thank you, Peter. And we are ready for the next question.

Operator

Thank you. Your next question comes from the line of Mattias Haggblom from Handelsbanken. Please go ahead.

Mattias Haggblom -- Handelsbanken Capital Markets -- Analyst

Thank you so much. R&D question. In the scenario that both high-dose semag at 7.2-milligram, as well as cagrisema, works in phase 3, can you help me think about the regulatory pathway for fixed-dose combination with cagrisema -- using the high-dose semag, and whether that would require a new phase 3, or if a small bridging study would be enough? Thanks so much.

Daniel Bohsen -- Head of Investor Relations

Thank you, Mattias. Martin.

Martin Lange -- Executive Vice President, Head of Development

Yeah, absolutely. Thank you for that question, Mattias. That would most likely require a reasonably -- I think we can bridge some safety data, but -- but we would still have to -- to establish both safety and efficacy. So -- so, we -- we actually see that as a potential opportunity, but we see that as a lifecycle management activity.

Thank you, Martin. And we have time for -- for two more set of questions. So, we're ready for the next one.

Operator

Thank you. The next question comes from the line of Emmanuel Papadakis from DB. Please go ahead.

Emmanuel Papadakis -- Deutsche Bank -- Analyst

Thanks for taking the question. Hopefully, you can hear me OK. Maybe a follow-on for Karsten on supply. Karsten, you said you're going to "significantly increase supply in '24 versus 23 as you did in '23 versus '22." Eyeballing data, looks like there was approximately a fivefold increase '23 over '22.

So, are you telling us you're going to have another fivefold increase in 2024? And if not, can you help us with the approximate quantum? And then, a follow-on also on FLOW. Martin, you were helpful enough on SELECT to give us an indication that the contribution of components had been approximately equal, well balanced in SELECT. Is that also the case in FLOW? Or how should we think about the contribution of the composite endpoint components? And what should we expect in terms of labeling? Thank you.

Daniel Bohsen -- Head of Investor Relations

Thank you, Emmanuel. First, Karsten, in the additional supply.

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

Yeah, and thanks for-- for triangulating that way around, Emmanuel. I'd love to give you further flavor, but -- but as you know, we're guiding for next year. Come our full-year results late January, so that's where we'll be doing our financial guidance for -- for '24. And giving -- giving too much granularity into scaling of Wegovy gets too close to -- to guiding for next year. So, I'm sorry, but I'll have to provide that at a later point in time.

Daniel Bohsen -- Head of Investor Relations

Thank you, Karsten. Martin, can you share more from FLOW?

Martin Lange -- Executive Vice President, Head of Development

I think it's a great question, and I maybe just want to clarify. I don't think we've seen equal contribution from the three main components. We just said that -- that they all contributed. And obviously, again, we have to wait November 11 until we see the full data set.

Specifically for FLOW, I would dearly love to be able to answer you, but -- but due to the nature of an interim analysis, we've not seen the data. So -- so -- so, for better or worse, I know absolutely no more than you do at this point, so I can't speculate.

Daniel Bohsen -- Head of Investor Relations

Thank you, Martin. Thank you, Emmanuel. Then we'll take the last set of questions.

Operator

Thank you. Your last question for today comes from the line of Michael Novod from Nordea. Please go ahead.

Michael Novod -- Nordea Markets -- Analyst

Yep, thank you very much. Just on the -- on the cost side, can you please go through some of the dynamics here in -- in Q4? In order to sort of make the cost go up, as I see it, it needs to go up in extreme pace for -- for Q4? And any specific investment that you're able to take early, or anything like that, prior to going into 2024, just to -- to make -- understand your -- your EBIT guidance?

Daniel Bohsen -- Head of Investor Relations

That's over to you, Karsten.

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

Yeah, Mike, thanks for that -- that question. When -- when -- when I look at -- at -- at our total operating cost growth in the fourth quarter, then it's actually not markedly different compared to -- compared to year to date. So -- so, what -- what you should be expecting is -- is a continued, what I call, high level of -- of growth in R&D expenditure around the 40% mark and -- and some 20% plus on -- on S&D expenditure and -- and competitive gross margin also in the fourth quarter. So -- so, in reality, no -- no big swings in the fourth quarter at constant exchange rates.

Daniel Bohsen -- Head of Investor Relations

Thank you, Karsten. Thanks for the question, Michael. And this concludes the Q&A session. Thank you for participating, and please feel free to contact investor relations in case you have any follow-up questions.

Before we close the call, I would like to hand over to you, Lars, for any final remarks.

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

Yeah, thank you, Daniel. I'd like to thank you all for participating today. I hope it's clear from our comments that we're very pleased with the strong momentum we have in our business also underlined with the raised guidance for '23. And many questions on -- on the coming years, not least the coming year, but we are really focused on pursuing innovation-based growth strategy.

And I feel confident in our ability to scale supply to -- to support that. We're really excited about FLOW, underlining the attractiveness of semaglutide, and we are equally excited that we soon can disclose what SELECT has to to show at the upcoming conference at AHA in a matter of a few days. So, thank you, all. We appreciate your time today, and with that, we'll close the call.

Thank you.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Daniel Bohsen -- Head of Investor Relations

Lars Fruergaard Jorgensen -- President and Chief Executive Officer

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

Doug Langa -- Executive Vice President, Head of North America Operations

Martin Lange -- Executive Vice President, Head of Development

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

Mike Nedelcovych -- TD Cowen -- Analyst

Richard Parkes -- Exane BNP Paribas -- Analyst

Seamus Fernandez -- Guggenheim Partners -- Analyst

Pete Verdult -- Citi -- Analyst

Mark Purcell -- Morgan Stanley -- Analyst

Emily Field -- Barclays -- Analyst

Simon Baker -- Redburn Partners -- Analyst

Naresh Chouhan -- Intron Health -- Analyst

Florent Cespedes -- Societe Generale -- Analyst

Richard Vosser -- JPMorgan Chase and Company -- Analyst

Peter Welford -- Jefferies -- Analyst

Mattias Haggblom -- Handelsbanken Capital Markets -- Analyst

Emmanuel Papadakis -- Deutsche Bank -- Analyst

Michael Novod -- Nordea Markets -- Analyst

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