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Novo Nordisk in Japan Overview, status and opportunities

Novo Nordisk in Japan Overview, status and opportunities. by Senior Vice President Roger Moore President of Novo Nordisk Pharma Ltd, Japan at Carnegie Bank A/S 27 November 2002. East Japan. Chubu. West Japan. Kanto. Kinki. Novo Nordisk in Japan. Sales force structure.

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Novo Nordisk in Japan Overview, status and opportunities

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  1. Novo Nordisk in JapanOverview, status and opportunities by Senior Vice President Roger Moore President of Novo Nordisk Pharma Ltd, Japan at Carnegie Bank A/S 27 November 2002

  2. East Japan Chubu West Japan Kanto Kinki Novo Nordisk in Japan Sales force structure Facts about Novo Nordisk in Japan… • Approx 700 employees (more than 400 in sales and above 100 in development) • Net sales of DKK 4,079 million in 2001 (17% of Novo Nordisk sales)

  3. Development in Sales 1980-2001 CAGR (1980 – 2001) = 22% CAGR (1992 – 2001) = 13%

  4. Historical highlights 1955 Kodama began import of Novo insulins 1975 Yamanouchi began import of Nordisk insulins 1980 Novo Yakuhin established as a 50/50 JV with Kodama 1990 Kodama agreement terminated and Novo Yakuhin converted to 100%-owned affiliate 1990 Start of Novo Nordisk Pharma Ltd 1992 hGH business transferred from Yamanouchi to NNPL 1993-97 +50 MR recruitment plan 1998 Start of self-distribution 1999 Glucagon promotion / distribution assigned to Eisai 1999 Diabetes alliance with Takeda on Actos 2001 Launch of InnoLet® and NovoRapid® 2002 Launch of NovoRapid® FlexPen®

  5. Top 20 foreign pharma companies, 2002 Sales DKK million Source: IMS 2002 (September – MAT) Exch. rate: Average Sept. 2002 YTD

  6. A nation of contradictions Strong culture, traditions Rapid adoption of new technology A nation in transition Economic recovery – when? Deregulation / markets opening Institutional fatigue A nation of opportunities 2nd largest economy Most foreign companies have relatively small presence Doing business in Japan

  7. A nation of contradictions Strong culture, traditions Rapid adoption of new technology A nation in transition Economic recovery – when? Deregulation/markets opening Institutional fatigue A nation of opportunities 2nd largest economy Most foreign companies have relatively small presence Customer Relations Mgmt the Japanese way Innovative products key, but 0% defects expected Pressure on prices Towards global competitiveness Changing corporate models 2nd largest pharma market Major growth opportunity Doing business in Japan What it means for Novo Nordisk

  8. A shrinking economy Deflation Increasing unemployment Bankruptcies Non-performing loans Government not able to solve the problems Is this picture correct? Yes, but not complete! The media picture of Japan

  9. Current challenges for Japan

  10. Economic recession…

  11. Ageing population… Source: Ministry of Health, Labour and Welfare (2001)

  12. … pressure on healthcare spending… +5% CAGR +7% CAGR Source: Morgan Stanley

  13. … leads to regular price cuts Introduction of consumption tax Source: Morgan Stanley

  14. The healthcare market in Japan

  15. The healthcare market in Japan Compared to Europe / the US • Hospitals and GPs sell drugs, however, this source of income is drying out • Pharmacies are gaining market share from hospitals and GPs • Decreasing margin to be shared between distributors and medical institutions • In general, patients get 70-80% reimbursed (National Health Insurance) • Twice as many hospital beds as in the US for half the population • Patients stay in hospital 5-6 times longer than in the US Market size and dynamics • Japanese pharmaceutical market 6,000 billion JPY (ethical drugs) • Annual growth of approx 3% • MHLW: New vision for the Japanese pharmaceutical industry • Regulatory environment • MHLW approves product registrations and prices • Demonstrate medical merit and safety compared to existing products in Japan • Bridging with foreign data problematic, however getting easier • NHI price cuts and pricing of new products are problematic

  16. Japan ethical sales by hospital, GP and pharmacy Source: IMSBase-JPM (Japan Pharmaceutical Market) 2002* : Market Share as of Sept MAT 2002

  17. Diabetes care

  18. The diabetes care market(insulin + OAD market) • Size 　　　　Approx 160 billion JPY • Growth 11% / year • Treatment M SGrowth rate • Insulin 31% + 8% • OAD 69% +13% • Competitors Takeda, Aventis, Bayer, Lilly, Dainippon, Sankyo, Yamanouchi • Future trends Market growth of 10%+ expected: Insulin analogues, prefilled devices and new OAD products expected to drive growth Company estimate , MAT Sep 2002

  19. Rest 13% Novo Nordisk 25% Lilly 6% Insulin 31% Aventis 9% OAD 69% Bayer 9% Takeda 38% The Japanese diabetes care market A USD 1.1 billion market growing at 12% 4Y CAGR* A few large players * Growth in local currency

  20. The diabetes care market( Insulin market only) • Size Approx 50 billion JPY • Growth 8% / Year • NNPL market share Approx 76% • TreatmentM SGrowth rate • Short-acting 26% +23% • Premix 50% +6% • Long-acting 24% -2% • Customers 8,500 HP & GP • Competitors Eli Lilly • Future trends Increase in use of analogues (currently 8% penetration) and increased use of prefilled devices Company estimate , MAT Sep 2002

  21. Novo Nordisk and the diabetes care market • Novo Nordisk’s productsVial :~5% Prefilled :~20% Cartridge :~75% • Novo Nordisk products in pipelineFull range (FlexPen®, InnoLet®), NovoMix30, NN304 , NN1998, NN2211 • Historic and current market position 1955: Kodama Pharma starts selling insulin of Novo brand.1988: Launch of NovoPen®1992: Recombinant insulin was launched.1994: Launch of NovoLet®2001: Launch of rapid-acting insulin NovoRapid®, InnoLet® • Novo Nordisk’s strengths and challengesStrengths The leading insulin company Product line-up Device superiority Challenges Aventis entry in insulinNew analogue products introduced later than competition

  22. 180 160 140 120 100 80 60 40 20 0 Insulin market volume development 8.5% 4Y CAGR 1997 2002 2000 2001 1998 1999 * Index as Q1 1997 = 100

  23. Upgrading the Japanese insulin market Prefilled Device Penfill® Insulin analogue Human insulin

  24. Cartridge Prefilled Vial Move from durable to prefilled devices Total insulin market volume, Japan 100% 80% 60% 40% 20% 0% 2000 Q2 2000 Q3 2000 Q4 2001 Q1 2001 Q2 2001 Q3 2000 Q1 1999 Q2 1999 Q3 1999 Q4 2001 Q4 2002 Q1 2002 Q2

  25. Insulin market share development

  26. New insulin products to underpin strategy Lauched April 2002 Young people Patients preferring a pen Doctors preferring a pen Older people Patients preferring a doser Doctors preferring a doser Lauched July 2001

  27. Patients segment and preference Geriatric pts. Middle-age pts Geriatric pts Young pts （number） 10s, 20s 60s 30s-50s Over 70 NovoPen® 3 22 21 9 2 NovoPen® 300 13 21 9 - Ergo Pen 15 25 22 11 NovoLet® 11 25 7 4 HumaKart Kit 16 21 13 7 InnoLet® 5 6 20 32 NovoPen300 Demi® 28 10 2 2 FlexPen® 27 25 27 24 Sources：SSRI survey on injectors of kit products

  28. An early peek at the implementation Novo Nordisk market shares in the prefilled segment 66.9% 8.7% 0.5%

  29. Human growth hormone

  30. The market for growth hormones • Size Approx 60 billion JPY • Growth -1% / year • NNPL market share 28% • TreatmentM S Growth rate • Vial 5% -39% • Cartridge 93% -1% • Prefilled 2% -31% • Customers 2,400 HP & GP • Competitors Pharmacia, Lilly, Sumitomo • Future trends Presently the market growth is very low, but will likely increase coming from new indications (eg GHDA and IUGR/SGA). Company estimate , MAT Sep 2002

  31. Novo Nordisk and the market for growth hormones • Novo Nordisk’s products • Vial :~1% Cartridge :~99% • Novo Nordisk new indications and devices in pipeline • eg IUGR/SGA • Historic and current market position • 1977: Yamanouchi Pharma started selling human growth hormone ‘Nordisk‘ • 2000: Launch of liquid growth hormone: Norditropin® S • Novo Nordisk’s strengths and challenges • Strengths Product superiority Long experience of Nordisk, YMN and NNPL • Challenges Increase market share in a decreasing market.

  32. 1600 1400 1200 1000 800 600 400 200 0 The growth hormone market in Japan Modest volume growth A few large players Serono 2% Gram Sumitomo 12% Pharmacia 35% Lilly 21% Novo Nordisk 28% 2001 1998 1999 2002 2000 1997

  33. Market share development in Japan

  34. Fast conversion to SimpleXx® in Japan

  35. Norditropin® SimpleXx® and development key to market share gain • hGH specialist sales force • Development of new indications and devices • eg IUGR/SGA • Expansion of marketing tools, scientific information and activities

  36. Haemostasis management

  37. NovoSeven® in Japan • Market size Less than 10% of world market • Launched in Japan In 2001 • Sales Less than 5% of total NovoSeven® sales • Customers 150 HP & GP • Competitors Baxter (Feiba Immuno , Proplex , AutoPlex) • Future market for NovoSeven • Increase awareness of NovoSeven® via education of doctors • Independent NovoSeven Business Unit has been established with own sales force • Development of new indications • Japan included in the global intra-cerebral hemorrhage bleeding study • Japan planned to be included in future global NovoSeven® studies

  38. The future of Novo Nordisk in Japan

  39. The future for Novo Nordisk in Japan • Challenges • Maintain high insulin market share facing increasing competition from Lilly and Aventis analogues • Strengthen hGH market position • Strengths • The best customer satisfaction ratings in diabetes care • The best and most innovative device portfolio with fast adoption • Highest attention to product quality • Strategy • Value upgrade of insulin to offset pressure on market shares and bi-annual price reductions • Increase hGH market share in a flat or decreasing market by re-focusing sales, marketing and development efforts • Increase NovoSeven® use and develop new indications

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