Novo Resources
Annual Report 2009

Plain-text annual report

N o v o N o r d i s k A / S A n n u a l R e p o r t 2 0 0 9 Financial, social and environmental performance Creating value through innovation Performance highlights 2009 Financial performance Sales total Diabetes care Of which modern insulins Biopharmaceuticals Gross profit Gross margin Sales and distribution costs Research and development costs Administration expenses Operating profit Net profit Diluted earnings per share/ADR Effective tax rate Capital expenditure Free cash flow Long-term financial targets Operating profit growth Operating margin Return on invested capital (ROIC) Cash to earnings (three-year average) Non-financial performance Employees Employee turnover Employment impact worldwide (direct and indirect jobs) Least developed countries where Novo Nordisk sells insulin according to the differential pricing policy New patent families (first filings) Total waste Energy consumption Non-financial targets Maintain a level of engaging culture of 4.0 or above up to 2014 Diversity in all 28 senior management teams by 2014 Water consumption: 11% reduction by 2011 compared to 2007 CO2 emissions: 10% reduction by 2014 compared to 2004 Share performance Dividend per share (proposed) Closing share price (B shares) Market capitalisation (B shares)*** DKK million DKK million DKK million DKK million DKK million % % of sales % of sales % of sales DKK million DKK million DKK % DKK million DKK million % % % % Number % Number of jobs Number Number Tons 1,000 GJ Scale 1–5* %** % % DKK DKK DKK billion * Based on eVoice, an employee survey using a scale of 1–5, with 5 being the best. ** Diverse in gender and nationality. *** Novo Nordisk B shares (excluding treasury shares). See more financial and non-financial highlights and non-financial targets on pp 14–15. 2009 51,078 37,502 21,471 13,576 40,640 79.6 30.2 15.4 5.4 14,933 10,768 17.82 23.0 2,631 12,332 20.7 29.2 47.3 111.5 29,329 8.3 96,500 36 55 21,019 2,246 4.3 50 (34) (31) 7.50 332 159 2008 Change 45,553 33,356 17,317 12,197 35,444 77.8 28.2 17.2 5.8 12,373 9,645 15.54 24.0 1,754 11,015 38.4 27.2 37.4 97.6 27,068 12.1 88,500 32 71 20,346 2,533 4.2 43 (17) 2 6.00 271 136 12.1% 12.4% 24.0% 11.3% 14.7% 20.7% 11.6% 14.7% 50.0% 12.0% 8.4% 9.0% 12.5% (22.5%) 3.3% (11.3%) 25.0% 22.5% 16.9% For more than 85 years, Novo Nordisk has combined drug discovery with technology to turn science into solutions for people with diabetes, people with haemophilia, people with growth hormone deficiency and women experiencing the symptoms of menopause. Our commitment to research is reflected in our full portfolio of insulin products and the many new treatment options in our pipeline. At Novo Nordisk, decisions about our operations are driven by the Triple Bottom Line: a commitment to social responsibility, sound environmental management and balanced economic growth. With headquarters in Denmark, Novo Nordisk employs more than 29,300 employees in 76 countries and markets its products in 179 countries. Novo Nordisk’s B shares are listed on the stock exchanges in Copenhagen and London and our ADRs are listed on the New York Stock Exchange under the symbol ‘NVO’. We expect to receive approval to delist our B shares from the London Stock Exchange during 2010. For more information about our company, visit novonordisk.com. This public filing contains references and links to information posted on the company’s website; such information is not incorporated by reference into the public filing. Additional reporting online provides more background, context and data. Many sections of this report reference additional online information, and an index on p 108 provides links to online content at annualreport2009.novonordisk.com. Our 2009 accomplishments and results 2 Creating value through innovation 5 Meeting changing healthcare needs and societal expectations 7 Performance in 2009 13 Outlook 2010 14 Performance highlights 16 Pipeline progress Diabetes care 18 Diabetes care 19 Victoza®: a treatment revolution 19 Modern insulin portfolio 20 Changing Diabetes® 22 Expanding access Biopharma ceuticals 24 Biopharma ceuticals 24 Commitment to haemophilia 26 Changing Possibilities in Haemophilia® 26 Leadership and innovation How we work 28 How we work 28 Novo Nordisk Way of Management 30 Our impact on society 31 Engaging stakeholders 32 Our people 33 Working with integrity 35 Environmental responsibility Governance and leadership 37 Corporate governance 39 Executive remuneration 40 Risk management 43 Board of Directors 46 Executive Management Investor information 47 Shares and capital structure 50 Novo Nordisk at a glance Consolidated financial and non-financial statements 2009 52 Consolidated financial statements 89 Consolidated non-financial statement 96 Supplementary information (unaudited) 98 Financial statements of the Parent company 105 Management’s statement 106 Independent Auditor’s reports Additional information 108 Index Inside back cover: • Our products • References Novo Nordisk Annual Report 2009 1 s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O 2 Novo Nordisk Annual Report 2009 Creating value through innovation As the global economic environment and the reimbursement environment for medicines developed as we anticipated, with continuing challenges, we are pleased to be able to report very positive results for 2009. We increased sales by 11% (measured in local currencies) and our reported operating profit by 21%. Dividends to shareholders paid during 2009 increased by 25% compared to the prior year. We also completed share repurchases of 6.5 billion Danish kroner during 2009. Our accomplishments during the year also include measures that will provide a foundation for better long-term performance: • We launched a new product, Victoza®, which has the potential to improve diabetes care, and our research and development activities have resulted in a strengthened pipeline of new products for our therapeutic areas. • Overall we have improved our productivity, allowing us to invest more in research and development and expand our international sales and marketing organisation. • We have continued our efforts to expand access to diabetes care throughout the world as a company and via the World Diabetes Foundation. • We have decoupled growth in CO2 emissions from business growth. By the end of 2009, emissions from production had fallen below the level of the 2004 baseline year. Progress in innovation Our products are our greatest contribution to society. They pro- vide significant benefits to patients, tangibly improving people’s health. To remain competitive we must constantly innovate, improving treatment outcomes, and in this area the last year has been very eventful. Victoza®, the first once-daily human GLP-1 analogue, was approved and launched in Europe in the summer of 2009 and was approved in the US and Japan in January 2010. We are convinced that Victoza® will prove to be a valuable treatment option for type 2 diabetes in major markets around the world. Achieving market access and reimbursement for a new medicine in a new treatment class required strong evidence and compelling arguments for why this therapy should become a standard treat- ment. We are gratified that the initial launches surpassed our expectations. Photo: Lars Rebien Sørensen, president and chief executive officer A new generation of insulins for both type 1 and type 2 diabetes, Degludec and DegludecPlus, continues to show promising results and has progressed to phase 3 trials. If preliminary results are confirmed, this new generation of insulins has the potential to offer better treatment for people with diabetes and further strengthen Novo Nordisk’s competitive position. While the technical challenge of effective insulin treatment in tablet form is substantial, we are greatly encouraged by the progress our research and development teams have made during the past two years. Oral insulin could ensure improved treatment and better health for many people with diabetes, as greater convenience could lead to earlier and more diligent use of insulin therapy. Our first oral insulin preparation entered into phase 1 clinical trials at the end of 2009 – a testament to our belief in this future treatment paradigm. During 2009, we made notable advances in the development of our biopharmaceuticals pipeline, including progress with treatments for haemophilia A and B. We believe that we have an obligation and an opportunity to develop new and better ther apies both for inhibitor patients and for general haemophilia patients as well as other patients with rare coagulation disorders. We launched a new product, Victoza®, which has the potential to improve diabetes care, and our research and development activities have resulted in a strengthened pipeline of new products for our therapeutic areas. Global values for global growth In the insulin market we have maintained our position as the world leader with a market share of more than 50% by volume. We are continuing to increase market share in the modern insulin market and our portfolio of modern insulins was the key driver of our solid business performance in 2009. To expand our competitive position and brand awareness, not least among general practitioners, we have continued to increase our sales organisation in key markets. As we grow and globalise our business, it is critical that all em- ployees develop a deep understanding of the principles at the heart of the Novo Nordisk Way of Management, which describes our vision, our values, our commitment and our policies, and thereby guides all of our actions. Continual training is necessary as our business grows and attracts new people and as the regulatory environment and global norms change. We acknowledge that in 2005 Novo Nordisk was one of many companies listed as paying fees to the Iraqi government in con- Photo: Sten Scheibye, chairman of the Board of Directors s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O Novo Nordisk Annual Report 2009 3 model that helps drive the market for renewable energy. Based on our experience, we believe that transformation to a low- carbon economy is not only possible, it also offers a promise of economic returns. Outlook 2010 is going to be a year of greater uncertainty for Novo Nordisk than we have seen in the past. There are major healthcare reforms sweeping the globe, in particular in the US. We anticipate an impact on our business in the short term, but in the longer term, it is our expectation that healthcare reform will expand the use of particular pharmaceuticals to treat chronic diseases such as diabetes. We are potentially facing the impact of patent expiration of our only oral antidiabetic drug, NovoNorm®/Prandin® in the US and EU during 2010 which is likely to impact sales growth. In spite of these uncertainties, we are still forecasting significant growth in sales in local currencies and growth in operating profit. In other words, 2010 is going to be yet another exciting year for Novo Nordisk. Thank you We wish to thank everyone at Novo Nordisk for their tremendous efforts during 2009. Their contribution has solidified the foun- dation of our company, which is trust in our products and trust in Novo Nordisk. Finally, we also want to thank our shareholders and business partners for their support in yet another year when Novo Nordisk turned a positive return in the face of a rather grim financial picture. Lars Rebien Sørensen President and chief executive officer Sten Scheibye Chairman of the Board of Directors s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O nection with contracts entered into under the programme that enabled Iraq to sell oil to meet humanitarian needs. During 2009, we reached settlement agreements with the US Securities and Exchange Commission, the US Department of Justice and the Danish Public Prosecutor for Serious Economic Crime regarding the company’s sales to Iraq from 2000 to 2003 under the United Nations Oil-for-Food programme. Novo Nordisk has fully cooperated with the investigations of the company in connection with this matter. The mistakes committed were regrettable, and we have taken substantial measures to prevent similar events from occurring in the future. Our policies and procedures have been amended, and our training pro- grammes reflect these measures. We are dependent upon our ability to delegate responsibility as far out in our organisation as possible, but this delegation of responsibility involves an obligation to comply with our values. We are forecasting significant growth in sales in local currencies and growth in operating profit. Managing responsibly As we see it, a business can only be sustainable in the long term if it meets stakeholders’ expectations regarding social and environmental impact, in addition to delivering strong financial performance. This is the core of our Triple Bottom Line approach. Our approach to improving access to diabetes care in developing countries builds upon three main pillars: • Our long-term financial commitment to the World Diabetes Foundation, a leading funding body devoted solely to projects within diabetes care and prevention in the developing world • Our commitment to supply life-saving insulin at reduced cost in the poorest countries of the world • Our Changing Diabetes® in Children programme, which was recently expanded to include Bangladesh as its sixth developing country. The programme builds sustainable partnerships to offer diabetes care, including free insulin, for children with type 1 diabetes. As a global business, we need a long-term and global framework to make decisions about our future operations. We would there- fore have preferred clear targets for CO2 emissions from the COP15 meeting in Copenhagen in December 2009, but we acknowledge the tremendous obstacles to reaching such a commitment. We think that, viewed retrospectively, the outcome of the meeting, the Copenhagen Accord, will prove to be a turning point in the commitment to curb man’s impact on the climate. At Novo Nordisk, we have experienced double-digit sales growth rates in recent years. At the same time we have reduced CO2 emissions through greater efficiency and a new partnership 4 Novo Nordisk Annual Report 2009 Meeting changing healthcare needs and societal expectations Interview with Novo Nordisk’s CEO, Lars Rebien Sørensen As the global economy struggles to rebound and governments and private payers face budget constraints that impact healthcare spending, what are the implications for the future of the healthcare industry? The current economic downturn has impacted societies’ and individuals’ ability to pay for healthcare, including life-saving medicines. At an industry level, a lack of innovation also means that the number of new medicines approaching the market is not sufficient to replace revenue lost due to patent expiry. Of course, patent expiry also means that generic competition will lower society’s costs for existing treatments, creating room in healthcare budgets for new, innovative drugs that fulfil important medical needs. While there are problems at an industry level, there are also significant opportunities. The prevalence of chronic disease is increasing everywhere, and the demand for better and more convenient therapies is immense. To address the growth in chronic disease, healthcare systems will need to evolve and change, with increased emphasis on prevention and wellness. This trend has implications for how we approach innovation and treatment. In the treatment of diabetes, for instance, we need to consider the rise in obesity in many parts of the world, which is associated with a higher risk of chronic disease. The greatest improvements in quality of life will come from earlier interventions, halting or arresting disease progression. During 2009, we undertook our third round of future scenario development to help us analyse the emergence of new paradigms that may impact healthcare and our business. One scenario we considered is a world where obesity becomes the new ‘normal’, with a wider range of medical and public health interventions. Another possible scenario involves a change in industry dynamics, with increased emphasis on medicines as part of the full cycle of care and payment tied to carefully monitored healthcare outcomes. With a strong pipeline and a primary business focus on chronic disease, we believe we are well positioned for many of the challenges and potential changes facing the healthcare sector. Where do you see future growth coming from? In the near term, our growth will come primarily from the global expansion of insulin therapy with modern insulin analogues, particularly in the US and emerging markets. In addition, we anticipate substantial growth from the introduction of Victoza®, a new once-daily human GLP-1 analogue. One of the most interesting businesses we will develop in the next 10 years is a broad pipeline of treatments for haemophilia and rare coagulation disorders. We anticipate being the leading player in this field within 15 years. As markets are becoming more global we are seeing a convergence of medical and regulatory practices. This favours companies with a global presence and the building of global brands. By continuing to expand globally, Novo Nordisk will continue to develop into a strong international competitor, but with a Danish heritage. Our people around the world build the business. The responsibility of management is to ensure that the business is built on Novo Nordisk values. Novo Nordisk’s heritage and values are of great importance to our stakeholders and to our ability to attract employees who want to work for a company that prioritises ethical behaviour and social and environmental responsibility – and combine these with attractive, sustainable financial returns. s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O The prevalence of chronic disease is increasing everywhere, and the demand for better and more convenient therapies is immense. To address the growth in chronic disease, healthcare systems will need to evolve and change, with increased emphasis on prevention and wellness. How will healthcare reforms in various markets impact Novo Nordisk in the near term? Healthcare reforms are taking place all over the world with the aim of making provision of health services more affordable. This puts constant pressure on pricing of all products and services used. Most noticeable is the ongoing work in the US to extend services and insurance coverage to a larger part of the population. This may lead to a reduction in prices in the US in the short term, particularly for people whose treatment is paid for by government programmes. Extending coverage to more people could improve the prevention and treatment of chronic diseases, which today are underdiagnosed and undertreated. Ultimately, more people may be treated. Reforms are, however, a global theme as populations are growing older and consuming more healthcare services, and some parts of the world are becoming affluent enough to be able to afford heathcare services in the first place. Add to this an ever- increasing expansion of treatment options, and you can begin to understand the future funding difficulties. How does Novo Nordisk define value for money? Payers around the world are concerned about the cost of healthcare and the pricing of medicines. The requirement to substantiate healthcare purchases in terms of value for money is becoming an additional hurdle for product acceptance over and above clinical trial and regulatory requirements for safety, efficacy and quality. Novo Nordisk Annual Report 2009 5 diabetes products, so we have a responsibility to do what we can to ensure that treatment is available. In Africa, for example, more people are dying of diabetes than of HIV/AIDS. The increased prevalence of diabetes is of a magnitude that will impact economic growth in many countries. Giving products away is not sustainable. To create long-term change in healthcare systems, we need to have a substantial impact on healthcare infrastructure and capacity. For this reason we launched the World Diabetes Foundation in 2001. The WDF focuses exclusively on capacity-building and diabetes awareness in developing countries. Through our programme to reach children with type 1 diabetes, Changing Diabetes® in Children, we seek to improve distribution systems and healthcare education. By combining this with the company’s differential pricing scheme, which allows the poorest countries to buy our life-saving insulins at significantly reduced cost, we believe we can be part of the solution to healthcare access dilemmas. s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O We create value for healthcare patients and payers by offering medicines and devices that significantly improve healthcare outcomes and quality of life or reduce the need for other health services. In diabetes, for example, we have made the case that earlier diagnosis and treatment can significantly reduce the burden on healthcare spending as diabetes, if left untreated, carries significant economic and humanitarian costs in the form of serious late-stage complications. How will Novo Nordisk prepare for future challenges? It is not enough to produce a drug that is slightly better than its predecessor. The need for evidence of improved healthcare outcomes is growing, as is the demand for solid evidence. This means we not only have to innovate, we have to achieve a greater level of innovation than ever before. With a looming shortage of healthcare professionals in much of the world and existing healthcare systems overwhelmed by the increase in chronic disease, new types of innovation will also be required as treatment processes change. During 2009, we assessed the level of innovation within our organisation and how innovation is fostered. To challenge ourselves to continuously improve, we are introducing new pilot programmes in 2010 to cultivate new ways of thinking and working in several parts of our business. Another issue we must address is the fundamental trust society has in healthcare companies. Our sector needs to build stronger relationships with governments, regulators and people who need treatment and care. The need for evidence of improved healthcare outcomes is growing, as is the demand for solid evidence. This means we not only have to innovate, we have to achieve a greater level of innovation than ever before. We understand the need to be open about how we operate. I anticipate our engagement with stakeholders will intensify and hope this will increase understanding of what we are trying to accomplish. As the world leader in diabetes care, what is Novo Nordisk’s role? Our dream and our hope is that we can cure diabetes. Our commitment is backed by substantial investment in diabetes research, but finding a cure for type 1 diabetes and preventing type 2 diabetes are very difficult tasks. In the absence of a cure, we are leading the fight against diabetes, advocating and working for improvements in prevention, earlier diagnosis, better treatments and, eventually, a cure. We believe that access to health is a fundamental human right. We know that people around the world die of lack of access to 6 Novo Nordisk Annual Report 2009 Performance in 2009 2009 was a successful year for Novo Nordisk with solid sales growth in all major business areas, continued improvement in the gross margin and solid progress in the clinical development pipeline for key projects in both diabetes care and biopharma- ceuticals. In 2009, we launched Victoza®, the first once-daily human GLP-1 analogue, in several markets in Europe. Victoza® was approved in the US and Japan in January 2010. Our accomplishments during the year also include measures that will provide a foundation for better long-term performance. We have continued to improve the efficiency of our production and have decoupled growth in CO2 emissions from business growth. During 2009, we exceeded our target of a 10% absolute reduction in emissions from the 2004 baseline year. Sales increased by 12% in Danish kroner and by 11% measured in local currencies. Growth was realised within both diabetes care and biopharmaceuticals. Modern insulins were again the main contributor to growth, increasing by 24% (23% in local currencies). NovoSeven® and Norditropin® also contributed to the solid sales growth, increasing, by 11% (10% in local currencies) and by 14% (10% in local currencies) respectively. Sales by geographical area (cid:81)(cid:3)Europe (cid:81)(cid:3)North America (cid:81)(cid:3)International Operations (cid:81)(cid:3)Japan & Oceania DKK billion 2009 2008 2007 2006 2005 51.1 45.6 41.8 38.7 33.8 0 10 20 30 40 50 60 DKK billion Sales by therapy area (cid:81)(cid:3)Diabetes care (cid:81)(cid:3)Haemostasis management (NovoSeven®) (cid:81)(cid:3)Growth hormone therapy (cid:81)(cid:3)Hormone replacement therapy (HRT) (cid:81)(cid:3)Other products 2009 2008 2007 2006 2005 51.1 45.6 41.8 38.7 33.8 0 10 20 30 40 50 60 Sales growth Local and reported rates (cid:3) (cid:3) In DKK as reported In local currencies % 25 20 15 10 5 0 2005 2006 2007 2008 2009 Sales growth was realised in all regions. North America was the main contributor with 48% share of growth measured in local currencies. International Operations and Europe contributed 32% and 19%, respectively, of the total sales growth – also measured in local currencies. Reported operating profit increased by 21% to DKK 14,933 million. Adjusted for the impact from currencies, underlying operating profit increased by more than 15%. Net profit increased by 12% to DKK 10,768 million and earnings per share (diluted) increased by 15% to DKK 17.82. 2009 performance against long-term financial targets By focusing on growth, profitability, financial return and generation of cash, our four long-term financial targets guide Novo Nordisk’s financial development and the way we seek to create shareholder value. Our long-term financial targets are operating profit growth, operating margin, return on invested capital and cash conversion. s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O Operating margin (cid:3) Target (cid:3) Realised (cid:3) Realised excl pulmonary (cid:3) diabetes projects Growth in operating profit (cid:3) Target (cid:3) Realised (cid:3) Realised excl pulmonary (cid:3) diabetes projects Return on invested capital (ROIC) (cid:3) Target (cid:3) Realised Cash to earnings Three-year average (cid:3) Target (cid:3) Realised % 50 40 30 20 10 0 % 50 40 30 20 10 0 % 50 40 30 20 10 0 % 125 100 75 50 25 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Novo Nordisk Annual Report 2009 7 s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O Operating profit growth was realised at 21%. However, adjusted for the impact from currencies, the underlying operating profit growth increased by more than 15%. This performance reflects solid underlying sales growth as well as an improved gross margin. The long-term target is average annual operating profit growth of 15%. The operating margin for 2009 was realised at 29%, up from 27% in 2008, mainly driven by an improved gross margin. The long-term operating margin target is 30%. The return on invested capital was 47%, a significant improve- ment compared to 2008 when the return on invested capital was 37%. The improvement mainly reflects solid growth in operating profit as well as a lower level of invested capital following contin- ued working capital improvements but has also benefited from the development in key currencies. The long-term target for return on invested capital is 50%. The cash-to-earnings ratio was realised at 115% in 2009 and at 111% for the last three years on average. The long-term target for cash-to-earnings ratio is 80%. The cash-to-earnings ratio has been positively impacted by a relatively low level of investments during 2008 and 2009 compared to the long-term trend. The cash-conversion ability will inherently fluctuate between the individual years, and the long-term target therefore measures the cash-to-earnings ratio over a three-year period. Diabetes care We continue to be the global leader with 51% of the total insulin market and 45% of the modern insulin market, both measured by volume. We aim to expand our leadership position in diabetes care by leveraging the full portfolio of modern insulins in state- of-the-art delivery devices, and continuing the launch of Victoza®, while developing new antidiabetic agents and a new generation of insulins to provide more effective diabetes care. See pp 18–23. Sales performance Sales of diabetes care products increased by 12% measured in Danish kroner to DKK 37,502 million and by 11% in local currencies compared to 2008. Modern insulins, human insulins and protein-related products Sales of modern insulins, human insulins and protein-related products increased by 13% in Danish kroner to DKK 34,850 million and by 11% measured in local currencies, driven by North America and International Operations. Our portfolio of modern insulins was the main contributor to growth and sales increased by 24% in Danish kroner to DKK 21,471 million and by 23% in local currencies. All regions realised solid growth rates, with North America accounting for 51% of the growth followed by Europe and International Operations. Sales of modern insulins constituted 65% of our sales of insulin in Danish kroner in 2009. North America Sales in North America increased by 25% in Danish kroner and by 20% in local currencies in 2009, reflecting a solid penetration of the modern insulins Levemir®, NovoLog® and NovoLog® Mix 70/30. We maintained our leadership position in the US insulin market with 42% of the total insulin market and 34% of the modern insulin market, both measured by volume. At the end 8 Novo Nordisk Annual Report 2009 of 2009, 40% of our modern insulin volume in the US was sold in FlexPen®. Europe Sales in Europe were largely unchanged measured in Danish kroner and increased by 4% in local currencies during 2009. This reflects continued progress for the portfolio of modern insulins but also declining human insulin sales. Novo Nordisk holds 54% of the total insulin market and 51% of the modern insulin market, both measured by volume, and is capturing the main share of growth in the modern insulin market. The device penetration in Europe remains high with more than 95% of Novo Nordisk’s insulin volume sold in devices at the end of 2009, primarily NovoPen® and FlexPen®. Victoza®, the first once-daily human GLP-1 analogue, has been launched in Germany, the United Kingdom, Denmark, Ireland, Norway, Switzerland, the Netherlands, Greece and Sweden. Launch activities are progressing well in these markets and feedback from healthcare professionals and patients is encour- aging. At the end of 2009, Victoza® had obtained market leadership in the expanding GLP-1 market in both Germany and Denmark. Insulin value market share Geographical areas Europe North America International Operations Japan & Oceania Modern insulins Global value market share of segment NovoRapid® NovoMix® Levemir® % 100 80 60 40 20 0 % 100 80 60 40 20 0 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 International Operations Sales within International Operations increased by 17% in Danish kroner and by 19% in local currencies. The main contributor to growth in 2009 was sales of modern insulins, primarily in China and Turkey. Furthermore, sales of human insulin, primarily driven by China, continue to add to overall growth in the region. The device penetration in China is high with more than 90% of our insulin volume sold in devices, primarily NovoPen®. Japan & Oceania Sales in Japan & Oceania increased by 12% measured in Danish kroner and decreased by 1% in local currencies. The sales development reflects sales growth for all three modern insulins, NovoRapid®, Levemir® and NovoRapid Mix® 30, countered by s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O pressure on the overall Novo Nordisk market share due to intense competition. Novo Nordisk holds 67% of the total insulin market in Japan and 59% of the modern insulin market, both measured by volume. The device penetration in Japan remains high with more than 95% of our insulin volume sold in devices, primarily NovoPen® and FlexPen®. Oral antidiabetic products (NovoNorm®/Prandin®) In 2009, sales of oral antidiabetic products increased by 11% in Danish kroner to DKK 2,652 million and by 9% in local currencies compared to 2008. This increase primarily reflects increased sales in International Operations, particularly China. Biopharmaceuticals We continue to grow our biopharmaceuticals therapy areas by leveraging our specialised expertise with proteins and our understanding of chronic disease. Novo Nordisk is committed to developing innovative and improved ways to treat haemophilia and other rare coagulation disorders, growth hormone deficiency, the symptoms of menopause and inflammatory diseases. See pp 24–27. Sales performance In 2009, sales of biopharmaceutical products increased by 11% measured in Danish kroner to DKK 13,576 million and by 9% measured in local currencies compared to 2008. NovoSeven® Sales of NovoSeven® increased by 11% in Danish kroner to DKK 7,072 million and by 10% in local currencies. Sales growth for NovoSeven® was primarily realised in International Operations and Europe. The sales growth for NovoSeven® mainly reflected increased sales from treatment of spontaneous bleeding episodes for congenital inhibitor patients, which remains the largest therapeutic area of use for NovoSeven®. Norditropin® Sales of Norditropin® (ie growth hormone in a liquid, ready-to- use formulation) increased by 14% measured in Danish kroner to DKK 4,401 million and by 10% measured in local currencies compared to 2008. North America and Europe were the main contributors to growth measured in local currencies. We maintained our position as the second-largest company in the global growth hormone market with 24% market share measured by volume. Other products Sales of other products within biopharmaceuticals, which pre- dominantly consist of hormone replacement therapy-related products, increased by 9% in Danish kroner to DKK 2,103 million and by 6% in local currencies. This development primarily reflects continued sales progress for Vagifem®, a topical oestrogen product, in the US. Operating performance The gross margin increased to 79.6% compared to 77.8% in 2008. This improvement primarily reflects improved production efficiency, higher average selling prices in the US and a positive currency effect. The improved production efficiency primarily reflects higher yields in diabetes bulk production and increased utilisation of insulin filling and packaging lines. The gross margin was positively impacted by around 0.4 percentage points as a result of a positive currency development, primarily the higher value of the US dollar and the Japanese yen versus the Danish krone compared to 2008. Gross margin Development in gross margin % 85 80 75 70 65 2005 2006 2007 2008 2009 US dollar Cover and exchange rate (cid:81)(cid:3) Cover (left) Rate (right) Months 25 20 15 10 5 0 Rate 570 550 530 510 490 12/08 03/09 06/09 09/09 12/09 Japanese yen Cover and exchange rate (cid:81)(cid:3) Cover (left) Rate (right) Months 25 20 15 10 5 0 Rate 5.9 5.8 5.7 5.6 5.5 12/08 03/09 06/09 09/09 12/09 In 2009, total non-production-related operating costs increased by 12% to DKK 26,048 million compared to the same period last year. Around 1.5 percentage points of the increase in non-production-related operating costs reflect the higher value of key currencies versus the Danish krone in 2009 compared to 2008. The underlying development in non-production-related operating costs relates to the expanded sales forces in especially the US, the UK, Germany, Japan and China, countered by a stable level for research and development costs. The development in research and development costs primarily reflects non-recurring costs in 2008 related to the discontinuation of all pulmonary diabetes projects and of the growth hormone therapy project for patients in low serum albumin in dialysis (Growth Hormone Therapy in LSAD) countered by costs in 2009 related to late-stage development of the new Degludec and DegludecPlus (formerly known as SIBA and SIAC) in the second half of 2009. Licence fees and other operating income were DKK 341 million in 2009 compared to DKK 286 million in 2008. Operating profit in 2009 increased by 21% to DKK 14,933 million compared to 2008. Novo Nordisk Annual Report 2009 9 s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O Research & development costs (cid:81)(cid:3) Diabetes care (excl pulmonary diabetes projects) (cid:81)(cid:3) Biopharmaceuticals DKK billion 2009 2008 2007 2006 2005 0 2 4 7.9 7.5 7.2 6.3 5.1 6 8 10 Net financials and tax Net financials showed a net expense of DKK 945 million in 2009 compared to a net income of DKK 322 million in 2008. Included in net financials is the result from associated companies with an expense of DKK 55 million, primarily related to Novo Nordisk’s share of losses in ZymoGenetics, Inc. In 2008, the result from associated companies was an expense of DKK 124 million. For 2009, the foreign exchange result was an expense of DKK 751 million compared to an income of DKK 141 million in 2008. This development reflects losses on foreign exchange hedging of especially US dollars and Japanese yen, due to the appreciation of these currencies versus Danish kroner in 2009 compared to the exchange rate level prevailing in 2008. The effective tax rate was 23.0%, a decrease from 24.0% in 2008. Capital expenditure and free cash flow Net capital expenditure for property, plant and equipment for 2009 was realised at DKK 2.6 billion compared to DKK 1.8 billion in 2008. The main investment projects in 2009 were the insulin filling plant in Tianjin, China, and new device manufacturing lines in Denmark. Free cash flow for 2009 was realised at DKK 12.3 billion com- pared to DKK 11.0 billion in 2008. The higher cash flow is driven by higher net profit and lower income taxes paid, countered by increased capital expenditure during 2009. Equity Total equity was DKK 35,734 million at the end of 2009, equivalent to 65% of total assets, unchanged from the end of 2008. Proposed dividend At the Annual General Meeting on 24 March 2010, the Board of Directors will propose a 25% increase in dividend to DKK 7.50 per share of DKK 1, corresponding to a pay-out ratio of 40.9%, com- pared to 37.8% for the financial year 2008. No dividend will be paid on the company’s holding of treasury B shares. Share repurchase programme During 2009, Novo Nordisk repurchased 21,661,949 B shares at an average price of DKK 301 per share, equivalent to a cash value of DKK 6.5 billion, completing the share repurchase programme of DKK 19 billion initiated in 2006. 10 Novo Nordisk Annual Report 2009 The Board of Directors has approved a new DKK 7.5 billion share repurchase programme to be executed during 2010. Share savings programme In the autumn of 2009, the employees in the Danish part of the organisation were offered participation in a share savings programme. An annual maximum of DKK 22,800 per participant can be saved out of gross salary in 2010. The savings will be converted into Novo Nordisk B shares at the market price on 7 December 2010 contingent on continued employment. The shares will be restricted until January 2018. Approximately 8,400 employees elected to participate in the programme corresponding to 64% of the eligible employees. The total amount invested by employees will be approximately DKK 160 million. This programme is cost neutral to the company. Holding of treasury shares and reduction of share capital As per 2 February 2010, Novo Nordisk A/S and its wholly-owned affiliates owned 32,137,945 of its own B shares, corresponding to 5.2% of the total share capital. In order to maintain capital structure flexibility, the Board of Directors at the Annual General Meeting in 2010 will also pro- pose a reduction in the B share capital from DKK 512,512,800 to DKK 492,512,800 by cancelling 20,000,000 B shares of DKK 1 from the company’s own holdings of B shares at a nominal value of DKK 20,000,000, equivalent to 3.2% of the total share capital. After implementation of the share capital reduction, the com- pany’s share capital will amount to DKK 600,000,000 divided into an A share capital of DKK 107,487,200 and a B share capital of DKK 492,512,800. Legal issues Novo Nordisk is party to a number of legal cases. See key legal issues and information on contingencies for pending litigations on pp 84–85. Non-financial performance Strategic management of the direct and indirect economic, social and environmental impacts of our activities reduces risk and strengthens competitiveness. Managing our business using the Triple Bottom Line business principle helps ensure that decisions are balanced and take a long-term view, with the objective of protecting and enhancing shareholder and societal value. See pp 28–36. 2009 performance against long-term non-financial targets Long-term non-financial targets guide the company’s sustainability- driven priorities in an increasingly dynamic business environment. Focus is on maximising positive social impacts by improving access to and quality of care and effectively managing resources to minimise environmental impacts. During 2009, we met our long-term targets related to employee engagement and adherence to the Novo Nordisk Way of Management. We also made progress towards the diversity target we set in 2008. As a measure of our progress in expanding access to diabetes care, we also made progress in increasing adoption of our long-established differential pricing policy for insulin sales in least developed countries (LDCs). s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O Our long-term target for reduction of CO2 emissions was achieved at the end of 2009, well ahead of schedule. Targets for water and total energy consumption were also achieved. Social Performance on social dimensions continued on a positive trend with notable progress on all dimensions: people (employees), patients and communities. See p 89. People In 2009, we onboarded 4,640 new employees, compared to 4,496 in 2008. The global growth trend continues as projected, with Europe and International Operations leading the expansion. At the end of 2009, the total number of employees was 29,329, which corresponds to 28,809 full-time positions. The total number of employees increased by 8%, from 27,068 at the end of 2008. 1,000 full-time positions Full-time positions Geographical areas (cid:81)(cid:3)Denmark (cid:81)(cid:3)Europe (excl Denmark) (cid:81)(cid:3)North America (cid:81)(cid:3)International Operations (cid:81)(cid:3)Japan & Oceania 2009 2008 2007 2006 2005 28.8 26.6 25.5 23.2 22.0 0 10 20 30 Sales per full-time position Sales per full-time position DKK million 2.0 1.8 1.6 1.4 1.2 2005 2006 2007 2008 2009 DKK billion 1,000 tons Climate strategy impact (cid:3) Sales (left) (cid:3) CO2 emissions (right) 70 60 50 40 30 300 240 180 120 60 2005 2006 2007 2008 2009 In the same period, employee turnover decreased from 12.1% to 8.3%, reflecting a continuous focus on retention which was likely reinforced by the economic environment. Via the multiplier effect, the employment impact in 2009 – ie the number of jobs created in the supply chain and through employees’ private consumption – was 96,500 jobs worldwide. Most notably, of the total increase of 8,000 the largest portion is estimated to be in International Operations. Productivity continued to increase, with sales per full-time position at an average of DKK 1.8 million, compared to DKK 1.7 million in 2008. The ability to manage global growth and stimulate productivity and innovation is tracked via the internal facilitation process and a set of engagement scores in the annual employee survey, eVoice. In 2009, the consolidated score (on a scale of 1–5, with 5 being best) was 4.3, an increase of 0.1 from 2008. Annual scores have been consistently above the long-term target of maintaining a level of 4.0 or above. Similarly, the level of fulfilment of action points from facilitations of local units’ adherence to the Novo Nordisk Way of Management was 93% in 2009, against a long-term target to maintain a level of 80% or above. In 2008, we set a five-year goal to have diversity in terms of gender and nationality in all senior management teams. Achievement of this goal relies on training, talent management and succession planning; activities that have all been scaled up and intensified during the 12 months since the launch of a renewed strategy for diversity management. At the end of 2009, 50% of the senior management teams met the diversity criteria, an increase from 43% at the end of 2008. Patients Changing Diabetes®, our commitment to give people with diabetes priority, drive health outcomes and break the curve of the diabetes pandemic, aims to deliver sustainable positive impacts for people with diabetes. Efforts are being made to improve systematic measuring, tracking and reporting on outcomes, from a patient perspective as well as the socio- economic implications, of corporate-driven programmes as well as local initiatives. Developing healthcare capacity to improve the ability to diagnose and treat diabetes is key to achieving sustainable results in terms of improved access to care and personal health. Over the years, our investments in training and education of healthcare profes- sionals have been significantly scaled up. Since 2002, we have conducted training programmes for a total of 805,000 healthcare professionals worldwide. During 2009, we also reached out to 416,000 people with diabetes, offering training on how to manage their condition. Our pricing policy for people with diabetes in the world’s poorest countries (LDCs), in place since 2001, is now well-established in these markets. In 2009, we sold insulin at or below the policy price, not to exceed 20% of the average prices in the Western world, to 36 out of all 49 LDCs, up from 32 out of 50 in 2008. Our long-term goal is for the differential pricing to be adopted in all LDCs. Environment Performance on environmental dimensions also improved, and we successfully exceeded long-term targets for reduction of CO2 emissions, water consumption and total energy consumption. Our environmental targets and performance management focus on impacts from production. See p 89. Climate action Our aim has been to decouple environmental impacts from production growth and this has now been accomplished for CO2 emissions. At the end of 2009, we surpassed our 2014 target of a 10% absolute reduction compared to 2004 – well ahead of time. This accomplishment is the result of energy savings in all production facilities globally. Savings from energy reductions in Denmark have been earmarked to purchase wind energy to supply power for Danish operations from Horns Rev 2 – an Novo Nordisk Annual Report 2009 11 s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O offshore wind farm in the North Sea. The gradual conversion to renewable power supplies began in the second half of 2009 and is expected to be fully effective in 2010. Resource efficiency Consumption of water and energy for production decreased in 2009 by 34% and 19%, respectively, compared to the 2007 baseline. These reductions surpassed our long-term targets of 11% reductions in both areas by 2011 compared to 2007. The total volume of waste increased to 21,019 tons in 2009 from 20,346 tons in 2008, while the recycling percentage stayed consistent at 51%. The increased waste volume relates to increases in production, but as we are aiming for absolute reductions of environmental impacts wherever possible, we intensified efforts to map and manage waste during 2009. Developing a long-term waste target is part of this process. 12 Novo Nordisk Annual Report 2009 s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O Outlook 2010 The current expectations for 2010 are summarised in the table below: Expectations are as reported, if not otherwise stated Current expectations 2 February 2010 Sales growth • in local currencies • as reported Operating profit growth • in local currencies • as reported Net financial expense Effective tax rate Capital expenditure 6–10% At a similar level as local currencies Around 10% At a similar level as local currencies Around DKK 100 million Approximately 23% Around DKK 3.5 billion Depreciation, amortisation and impairment losses Around DKK 2.7 billion Free cash flow Around DKK 12 billion Novo Nordisk expects sales growth in 2010 of 6–10% measured in local currencies. This is based on expectations of continued market penetration for Novo Nordisk’s key strategic products within diabetes care, including continued global roll-out of Victoza®, and biopharmaceuticals as well as expectations of continued intense competition, potential generic competition to NovoNorm®/Prandin® and an adoption of a healthcare reform in the US. Given the current level of exchange rates versus Danish kroner, the reported sales growth is now expected to be at a level similar to the growth rate measured in local currencies. For 2010, growth in operating profit is expected to be around 10% measured in local currencies. The forecast reflects further improve ment of the gross margin, increased spending for R&D activities, primarily related to insulin Degludec and DegludecPlus, and higher licence fees and other operating income. Given the current level of exchange rates versus Danish kroner, the reported operating profit growth is now expected to be at a level similar to the growth rate measured in local currencies. Given the develop- ment in key curren cies in 2009, a higher share of the 2010 growth for reported sales and operating profit is expected to be realised in the second half of 2010. For 2010, Novo Nordisk expects a net financial expense of around DKK 100 million. The current expectation primarily reflects Novo Nordisk share of losses in associated companies. The effective tax rate for 2010 is expected to be maintained at around 23%. Capital expenditure is expected to be around DKK 3.5 billion in 2010, primarily related to the new insulin formulation and filling plant in China and new device capacity in Denmark. Expectations for depre- ciations, amortisation and impairment losses are around DKK 2.7 billion, and free cash flow is expected to be around DKK 12 billion. All of the above expectations are based on the assumption that the global economic environment will not significantly change business conditions for Novo Nordisk during 2010 and that currency exchange rates, especially the US dollar, remain at the current level versus the Danish krone during 2010 (see appendix 7). Novo Nordisk has hedged expected net cash flows in a number of invoicing currencies and, all other things being equal, movements in key invoicing currencies will impact Novo Nordisk’s operating profit as outlined in the table below: Key invoicing currency Annual impact on Novo Nordisk’s operating profit of a 5% movement in currency Hedging period (months) USD JPY CNY GBP CAD DKK 580 million DKK 150 million DKK 100 million DKK 80 million DKK 40 million * USD used as proxy when hedging Novo Nordisk’s CNY currency exposure. 17 15 17* 13 9 The financial impact from foreign exchange hedging is included in ‘Net financials’. Forward-looking statement Novo Nordisk’s reports filed with or furnished to the US Securities and Exchange Commission (SEC), including this document and Form 20-F, both expected to be filed with the SEC in February 2010, and written information released, or oral statements made, to the public in the future by or on behalf of Novo Nordisk, may contain forward-looking statements. Words such as ‘believe’, ‘expect’, ‘may’, ‘will’, ‘plan’, ‘strategy’, ‘prospect’, ‘foresee’, ‘estimate’, ‘project’, ‘anticipate’, ‘can’, ‘intend’, ‘target’ and other words and terms of similar meaning in connection with any discussion of future operating or financial performance identify forward-looking statements. Examples of such forward-looking statements include, but are not limited to: • statements of plans, objectives or goals for future operations, including those related to Novo Nordisk’s products, product research, product development, product introductions and product approvals as well as cooperations in relation thereto • statements containing projections of or targets for revenues, income (or loss), earnings per share, capital expenditures, dividends, capital structure or other net financials • statements of future economic performance, future actions and outcome of contingencies such as legal proceedings These statements are based on current plans, estimates and projections. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific. Novo Nordisk cautions that a number of important factors, including those described in this document, could cause actual results to differ materially from those contemplated in any forward-looking statements. Factors that may affect future results include, but are not limited to, global as well as local political and economic conditions, including interest rate and currency exchange rate fluctuations, delay or failure of projects related to research and/or development, unplanned loss of patents, interruptions of supplies and production, product recall, unexpected contract breaches or terminations, government-mandated or market-driven price decreases for Novo Nordisk’s products, introduction of competing products, reliance on information technology, Novo Nordisk’s ability to successfully market current and new products, exposure to product liability and legal proceedings and investigations, changes in governmental laws and related interpretation thereof, including on reimbursement, intellectual property protection and regulatory controls on testing, approval, manufacturing and marketing, perceived or actual failure to adhere to ethical marketing practices, investments in and divestitures of domestic and foreign companies, unexpected growth in costs and expenses, failure to recruit and retain the right employees and failure to maintain a culture of compliance. • statements of the assumptions underlying or relating to such statements. Please also refer to the overview of risk factors on pp 40–42. In this document, examples of forward-looking statements can be found under the headings ‘Creating value through innovation’, ‘Performance in 2009’, including long-term financial targets, ‘Outlook for 2010’ and note 28, ‘Financial risk’, on p 75. Unless required by law Novo Nordisk is under no duty and undertakes no obligation to update or revise any forward-looking statement after the distribution of this document, whether as a result of new information, future events or otherwise. Novo Nordisk Annual Report 2009 13 s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O Performance highlights DKK million 2005 2006 2007 2008 Sales Modern insulins (insulin analogues) Human insulin Protein-related sales Oral antidiabetic products (OAD) Diabetes care total NovoSeven® Norditropin® Hormone replacement therapy Other products Biopharmaceuticals total Total sales by business segment North America Europe1 International Operations1 Japan & Oceania Total sales by geographical segment Increase in sales prices and volume/product mix Currency effect (local currency impact) Total sales increase as reported Financial performance Depreciation, amortisation and impairment losses Operating profit Operating profit (excl AERx®)2 Net financials Profit before income taxes Net profit Total assets Equity Investments in property, plant and equipment (net) Free cash flow3 Financial ratios Sales in percent: Modern insulins (insulin analogues) Diabetes care total Biopharmaceuticals total Percentage of sales Sales outside Denmark Sales and distribution costs Research and development costs Research and development costs (excl AERx®)2 Administrative expenses Gross margin3 Net profit margin3 Effective tax rate3 Equity ratio3 Return on equity3 Payout ratio3 Payout ratio adjusted for impact of Dako and AERx® Ratios for long-term financial targets Operating profit margin Operating profit margin (excl AERx®)2 Growth in operating profit Growth in operating profit (excl AERx®)2 Growth in operating profit, three-year average Return on invested capital (ROIC)3 Cash to earnings Cash to earnings, three-year average Share ratios5 Basic earnings per share/ADR in DKK Diluted earnings per share/ADR in DKK Dividend per share in DKK 14 Novo Nordisk Annual Report 2009 7,298 13,543 1,463 1,708 24,012 5,064 2,781 1,565 338 9,748 33,760 9,532 14,020 5,497 4,711 33,760 15% 1% 16% 1,930 8,088 8,088 146 8,234 5,864 41,960 27,634 3,665 4,833 21.6% 71.1% 28.9% 99.2% 28.7% 15.1% 15.1% 6.3% 72.8% 17.4% 28.8% 65.9% 21.7% 33.2% 33.2% 24.0% 24.0% 15.9% 15.9% 11.0% 24.7% 82.4% 82.4% 8.95 8.92 3.00 10,825 13,451 1,606 1,984 27,866 5,635 3,309 1,607 326 10,877 38,743 12,280 15,300 6,494 4,669 38,743 16% (1%) 15% 2,142 9,119 9,119 45 9,164 6,452 44,692 30,122 2,787 4,707 27.9% 71.9% 28.1% 99.2% 30.0% 16.3% 16.3% 6.2% 75.3% 16.7% 29.6% 67.4% 22.3% 34.4% 34.4% 23.5% 23.5% 12.7% 12.7% 12.4% 25.8% 73.0% 80.2% 10.05 10.00 3.50 14,008 12,572 1,749 2,149 30,478 5,865 3,511 1,668 309 11,353 41,831 13,746 16,350 7,295 4,440 41,831 13% (5%) 8% 3,007 8,942 10,267 2,029 10,971 8,522 47,731 32,182 2,268 9,012 33.5% 72.9% 27.1% 99.2% 29.6% 20.4% 17.2% 6.0% 76.6% 20.4% 22.3% 67.4% 27.4% 32.8% 34.9% 17,317 11,804 1,844 2,391 33,356 6,396 3,865 1,612 324 12,197 45,553 15,154 17,219 8,425 4,755 45,553 12% (3%) 9% 2,442 12,373 12,698 322 12,695 9,645 50,603 32,979 1,754 11,015 38.0% 73.2% 26.8% 99.2% 28.2% 17.2% 16.5% 5.8% 77.8% 21.2% 24.0% 65.2% 29.6% 37.8% 37.8% 2008–2009 Change 4,154 (489) 220 261 4,146 676 536 132 35 1,379 5,525 3,125 321 1,401 678 5,525 109 2,560 2,235 (1,267) 1,293 1,123 4,139 2,755 877 1,317 2009 21,471 11,315 2,064 2,652 37,502 7,072 4,401 1,744 359 13,576 51,078 18,279 17,540 9,826 5,433 51,078 11% 1% 12% 2,551 14,933 14,933 (945) 13,988 10,768 54,742 35,734 2,631 12,332 42.0% 73.4% 26.6% 99.2% 30.2% 15.4% 15.4% 5.4% 79.6% 21.1% 23.0% 65.3% 31.3% 40.9% 40.9% Long-term financial targets4 30% 15% 50% 80% 21.4% 24.5% (1.9%) 12.6% 8.9% 27.2% 105.7% 87.0% 13.49 13.39 4.50 27.2% 27.9% 38.4% 23.7% 16.4% 37.4% 114.2% 97.6% 15.66 15.54 6.00 29.2% 29.2% 20.7% 20.7% 19.1% 47.3% 114.5% 111.5% 17.97 17.82 7.50 s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O Social performance Employees: North America Europe International Operations Japan & Oceania Total employees Employment impact worldwide (direct and indirect): North America Europe International Operations Japan & Oceania Total employment impact (direct and indirect) Ratios, scales and numbers Fulfilment of action points from facilitations of the NNWoM (%)6 Engaging culture (employee engagement) on a scale of 1–57 Diverse senior management teams (%)8 Warning letters and re-inspections LDCs9 where Novo Nordisk sells insulin according to the differential pricing policy (%) Company reputation with external key stakeholders on a scale of 0–10010 Environmental performance Diabetes care: Energy consumption (1,000 GJ) Water consumption (1,000 m3) CO2 emissions from energy consumption (1,000 tons) Biopharmaceuticals: Energy consumption (1,000 GJ) Water consumption (1,000 m3) CO2 emissions from energy consumption (1,000 tons) Other:11 Energy consumption (1,000 GJ) Water consumption (1,000 m3) CO2 emissions from energy consumption (1,000 tons) Ratios Energy consumption (% change compared to 2007) Water consumption (% change compared to 2007) CO2 emissions from energy consumption (% change compared to 2004) 2005 2006 2007 2008 2009 2,482 15,582 3,510 886 22,460 6,785 59,172 9,686 2,373 78,000 88 – – 1 64 2,850 15,577 4,199 987 23,613 7,466 61,160 11,616 2,507 82,700 88 4.0 – 0 68 3,940 16,100 4,943 1,025 26,008 10,522 54,384 14,085 2,583 81,600 91 4.1 – 0 72 3,727 16,721 5,587 1,033 27,068 10,004 58,770 17,148 2,604 88,500 92 4.2 43 0 64 4,076 17,686 6,557 1,010 29,329 10,896 61,533 21,429 2,616 96,500 93 4.3 50 0 74 74.3 73.8 74.0 72.4 76.3 – – – – – – – – – – – 9 1,916 2,625 164 335 186 32 461 184 33 – – 9 2,182 2,907 177 323 175 30 279 149 29 – – 12 1,803 2,377 146 302 166 28 428 141 41 (9) (17) 2 1,544 1,817 99 292 143 19 410 189 28 (19) (34) (31) 2008–2009 Change 349 965 970 (23) 2,261 892 2,763 4,281 12 8,000 Long-term social targets 80% or above up to 2014 4.0 or above up to 2014 100% by 2014 0 100% Improve (or maintain) Change (259) (560) (47) (10) (23) (9) (18) 48 (13) Long-term environmental targets 11% reduction by 2011 compared to 2007 11% reduction by 2011 compared to 2007 10% reduction by 2014 compared to 2004 1 Comparative sales figures for 2005 and 2006 have been adjusted in order to reflect a changed organisational structure from 1 January 2007 which transferred eight countries, including Bulgaria and Romania, from Region International Operations to Region Europe. 2 Excluding costs related to the discontinuation of pulmonary diabetes projects in 2007. 3 For definitions, please refer to p. 88. 4 The long-term financial targets were updated in January 2009. 5 In 2007, there was a stock split of the company’s A and B shares. The trade unit was changed from DKK 2 to DKK 1. The comparative figures for 2005 and 2006 have been updated accordingly. 6 NNWoM is an abbreviation of the Novo Nordisk Way of Management. 7 Based on eVoice, an employee survey using a scale of 1–5, with 5 being the best. 8 Diverse in terms of gender and nationality. 9 The Least Developed Countries as defined by the UN. 10 Company reputation is measured by an independent external consultancy firm. 11 ‘Other’ consists of consumption and emissions that cannot directly be linked to the production of either diabetes care or biopharmaceuticals. Novo Nordisk Annual Report 2009 15 s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O Pipeline progress In 2009, significant progress was made across Novo Nordisk’s clinical development pipeline. This overview illustrates key development activities: entries into the pipeline, progression of development compounds, exits from the pipeline and major regulatory approvals. Phase 1 Studies in a small group of healthy volunteers, and sometimes patients, usually between 10 and 100, to investigate how the body handles new medication and establish maximum tolerated dose. Phase 2 Testing a drug at various dose levels in a larger group of patients to learn about its effect on the condition and its side effects. Diabetes care Oral insulin (Type 1 and type 2 diabetes) Diabetes care Semaglutide (Type 2 diabetes) We are exploring the possibilities of an oral insulin preparation to improve convenience of treatment. A phase 1 trial involving 84 people was initiated in November 2009. Semaglutide is a long-acting human GLP-1 analogue designed to treat type 2 diabetes. The phase 2 clinical trial involving more than 400 people was completed in 2009. Biopharmaceuticals Recombinant factor XIII analogue (Cardiac surgery) We are developing a recombinant factor XIII analogue intended for the treatment of patients undergoing cardiac surgery with cardio- pulmonary bypass to reduce the need for allogenic blood transfusions. The phase 2 clinical trial, involving about 400 people, was initiated in 2009. Once-weekly growth hormone (Growth hormone deficiency) We are developing a long-acting growth hormone derivative intended to improve patient convenience by reducing the number of injections needed. In 2009, we completed a phase 2 clinical trial involving more than 30 adults with growth hormone deficiency and initiated a phase 2a trial involving approximately 30 children with growth hormone deficiency. Long-acting, recombinant factor VIIa derivative (Haemophilia patients with inhibitors) We are developing a long-acting, recombinant factor VIIa derivative. With its long duration of action, it is intended to enable the prevention of bleeding in haemophilia patients with inhibitors. The phase 2 clinical trial, begun in 2009, is expected to involve about 25 people. Fast-acting, recombinant factor VIIa analogue (Haemophilia patients with inhibitors) We are developing a fast-acting, recombinant factor VIIa analogue designed to deliver predictable, fast and sustainable clotting. The ongoing phase 2 clinical trial involves about 90 people. Oral GLP-1 (Type 2 diabetes) We are exploring the possibilities of an oral GLP-1 preparation to improve convenience of treatment. A phase 1 trial was initiated in January 2010 involving 155 people. GIC (Type 2 diabetes) GIC, a combination of a basal insulin and a GLP-1 analogue, is being developed for people with type 2 diabetes. The phase 1 clinical trial initiated in 2009 involves 24 people. NN9161 (Obesity) We are developing NN9161 for the treatment of obesity. A phase 1 trial was initiated during 2009 involving approximately 140 overweight or obese but otherwise healthy people. Biopharmaceuticals Anti-C5aR (Rheumatoid arthritis) We are developing anti-C5aR, a monoclonal antibody blocking the C5aR receptor, for the intended treatment of rheumatoid arthritis. The ongoing phase 1 trial involves about 50 people. NN8555 (Rheumatoid arthritis) NN8555 is a monoclonal antibody intended for the treatment of rheumatoid arthritis. The phase 1 clinical trial, which involves around 50 people, was initiated in 2009. Anti-IL20 (Psoriatic arthritis and rheumatoid arthritis) We are developing a monoclonal antibody for neutralising the interleukin 20 protein, for the intended treatment of psoriatic arthritis and rheumatoid arthritis. The ongoing phase 1 development programme is expected to involve about 80 people. Long-acting, recombinant factor IX derivative (Haemophilia B) We are devoloping a long-acting, recombinant factor IX derivative intended for the treatment of haemophilia B. The long duration of action is intended to support less frequent treatment administration and to enable the prevention of bleeding. The phase 1 clinical trial, begun in 2009, is expected to involve 15 people. Subcutaneous, long-acting, recombinant factor VIIa derivative (Haemophilia patients with inhibitors) We are investigating the bioavailability of subcutaneous injections of a long-acting, recombinant factor VIIa derivative intended to improve treatment convenience. The phase 1 clinical trial, begun in 2009, is expected to involve about 30 people. 16 Novo Nordisk Annual Report 2009 See more at novonordisk.com/investors/rd_pipeline/rd_pipeline. asp and clinicaltrials.gov. Phase 3 Studies in large groups of patients worldwide comparing the new medication with a commonly used drug or placebo for both safety and efficacy in order to establish its risk–benefit relationship. Filed/regulatory approval A New Drug Application is submitted for review by various government regulatory agencies. Diabetes care Degludec (insulin degludec) (Type 1 and type 2 diabetes) Diabetes care Victoza® (Type 2 diabetes) s t l u s e r d n a s t n e m h s i l p m o c c a 9 0 0 2 r u O Victoza®, the first once-daily human GLP-1 analogue, is targeted as a treatment for type 2 diabetes as an adjunct to diet and exercise, both as monotherapy and in combination with commonly used antidiabetic medications. The clinical development programme involved about 6,500 people. In 2009, Victoza® was approved and launched in Europe. It was approved in the US and Japan in January 2010 and regulatory approval is pending in other markets. Biopharmaceuticals Vagifem® low dose (Hormone replacement therapy) Vagifem® low dose is a topical product for vaginal application. It was approved in the US in November 2009 and in Europe in January 2010. We are developing a new generation of ultra-long-acting basal insulin analogue with a duration of action of more than 24 hours. Degludec is intended for the treatment of type 1 and type 2 diabetes in adults. A phase 3 development programme, BEGIN™, expected to involve 7,000 people, was initiated in 2009. DegludecPlus (insulin degludec/insulin aspart) (Type 1 and type 2 diabetes) We are developing a new generation of ultra-long-acting basal insulin with a bolus boost of rapid-acting insulin (NovoRapid®). DegludecPlus is intended for the treatment of type 1 and type 2 diabetes in adults. A phase 3 development programme, BOOST™, expected to involve 3,000 people, was initiated in 2009. Liraglutide (Obesity) We are investigating the use of liraglutide as an antiobesity treatment. The ongoing phase 3 programme is expected to involve around 5,000 people and will focus on weight loss and prevention of weight gain in people with type 2 diabetes. Biopharmaceuticals Recombinant factor VIII (Haemophilia A) We are developing a recombinant factor VIII intended for the treatment of haemophilia A. In 2009, Novo Nordisk initiated a phase 3 clinical trial expected to involve about 140 people. Recombinant factor XIII analogue (Congenital factor XIII deficiency) We are developing a recombinant factor XIII analogue intended to treat factor XIII deficiency. The phase 3 trial, fully enrolled in 2009, involves 40 people. Novo Nordisk Annual Report 2009 17 Diabetes care Novo Nordisk has been in the business of diabetes for 85 years and has pioneered many therapeutic breakthroughs in diabetes care. Today, diabetes remains our primary focus, accounting for 73% of 2009 sales. The company is the market leader with 51% of the total insulin market and 45% of the modern insulin (insulin analogue) market, based on volume, at year end. Diabetes is a metabolic disorder affecting the way our bodies use digested food for growth and energy. Much of the food we eat is broken down into glucose, the form of sugar in the blood. Glucose is the main source of fuel for the body. When we eat, the pancreas automatically produces the right amount of insulin to move glucose from blood into our cells. In people with diabetes, however, the pancreas either produces little or no insulin or the cells do not respond appropriately to the insulin that is produced. We are dedicated to creating value for patients by changing diabetes – changing how it is treated, how it is viewed around the world, and how the future of the disease evolves. While we seek to offer innovative solutions that fit the way people want to live, changing diabetes cannot be achieved through science alone. We have to effect change at every level: in research, in education, in public policy, and in humanitarian and outreach efforts. Range of treatment options Our edge in scientific discovery and our expertise with proteins make us uniquely positioned to address the issues at the core of the diabetes epidemic: insulin deficiency and the complexities of treating it. Our goal is to offer people with diabetes, and their healthcare providers, a wide range of treatment options. We are the only company with a full portfolio of modern insulins. We also produce the most widely used prefilled and durable insulin pen devices in the world. Beginning with the first patients treated with insulin in the 1920s, we have been dedicated to continuously improving the safety, effectiveness and convenience of diabetes treatment. Our leadership position within diabetes care is bolstered by the fact that we are the only company with two new-generation insulins in late-stage clinical development. If successful, this new generation of insulins is expected to offer even better treatment outcomes and convenience for people with diabetes. Novo Nordisk is looking at new ways to prevent type 2 diabetes by treating its prestages, including obesity, which is known to be a major risk factor in developing type 2 diabetes. We are conducting a phase 3 trial for liraglutide treatment of obesity. From a Photo: To improve treatment compliance and outcomes, we look for new ways to make it easier for people with diabetes to take insulin and make sure that products more closely resemble the body’s natural insulin curve. Ib Jonassen, senior principal scientist and project director, Diabetes Protein Engineering, is one of the inventors of Degludec, a new insulin under development. Ultra-long-acting Degludec is in phase 3 clinical trials. e r a c s e t e b a D i Creating value by improving treatment outcomes 18 Novo Nordisk Annual Report 2009 e r a c s e t e b a D i commercial perspective, moving into prediabetes and obesity treatment offers attractive potential, but also many challenges. also been granted in the US and Japan and we will launch the product in both markets in 2010. “Our commercial strategy is to expand our global leadership within modern insulin, gain GLP-1 leadership and continue to offer innovations, including devices, that address unmet medical needs,” says Kåre Schultz, executive vice president and chief operating officer. Modern insulin portfolio Victoza®: a treatment revolution Expert clinical practice shows that successful treatment of type 2 diabetes requires a patient-centred approach: focusing solely on glucose management is not enough. Many treatments for diabetes available up to now have involved trade-offs for patients and physicians. While effective at lowering blood glucose, many treatments can induce low blood sugar episodes (hypoglycaemia), weight gain and other side effects. It is known that some patients do not take their medicines regularly to reduce such side effects. GLP-1 gives patients and their healthcare providers an important new tool in managing the multiple aspects of diabetes. Glucagon-Like Peptide-1 (GLP-1) is a hormone from the human gut involved in glucose regulation. New GLP-1 therapies are a major innovation in the treatment of type 2 diabetes: they lower glucose while having a low risk of triggering hypoglycaemia, and in most patients also support weight loss. In type 2 diabetes, the ability of the pancreas to release insulin in the presence of glucose is impaired. GLP-1 therapies help address this defect by directly acting on the pancreas. Our new, long-acting, human GLP-1 analogue, Victoza® (liraglutide), was approved in the EU in 2009 on the basis of the LEAD™ phase 3 programme. LEAD™ (Liraglutide Effect and Action in Diabetes) comprised five randomised, controlled, double-blind studies involving 6,500 patients in 40 countries. LEAD™ demon- strated the strong safety and efficacy profile of Victoza® used alone or in combination with other diabetes therapies. Two of the trials with large patient populations, LEAD™ 2 and LEAD™ 3, have been extended for 18 months and three years, respectively. “Victoza® is off to a great start. Feedback from patients and physicians is extremely positive – and reveals how Victoza® delivers much more than reduced blood sugar,” explains Jakob Riis, senior vice president, Liraglutide. We launched Victoza® in nine European markets during the second half of 2009 and will continue the European roll-out throughout 2010. As of January 2010, regulatory approval has Diabetes is a progressive chronic disease and, to maintain blood glucose levels over time, insulin may be introduced following life- style changes and initiation of metformin or GLP-1 therapy. As a third step, treatment guidelines recommend transition to inten- sive insulin therapy to maintain glucose targets. Maintaining tight glucose control is associated with fewer serious complications and better treatment outcomes. By engineering proteins we have created a portfolio of modern insulins that offer options for individual treatment needs to achieve improved blood glucose control. For insulin initiation, treatment can include either a long-acting modern insulin or a modern premix insulin with dual release to cover both mealtime and basal requirements. Insulin treatment can also be intensified in two ways, either with a modern premix insulin or by adding a rapid-acting modern insulin to the long-acting insulin at mealtimes. Our portfolio of modern insulins includes: • Levemir®, a soluble, long-acting modern insulin for once-daily use. • NovoRapid® (NovoLog® in the US), the world’s most widely used rapid-acting insulin for use at mealtimes. • NovoMix® 70/50/30 (NovoLog® Mix 70/30 in the US), a dual- release modern insulin that covers both mealtime and basal requirements. Better glucose control The Treat-to-Target study for type 2 diabetes, published in the New England Journal of Medicine in October 2009, evaluated three different treatment regimens using Novo Nordisk insulins over three years1. DKK billion Diabetes care Sales development (cid:81)(cid:3)Modern insulins (cid:81)(cid:3)Human insulins (cid:81)(cid:3)Protein-related products (cid:81)(cid:3)Oral antidiabetic products (OAD) 2009 2008 2007 2006 2005 37.5 33.4 30.5 27.9 24.0 Modern insulins Sales development (cid:81)(cid:3)NovoRapid® (cid:81)(cid:3)NovoMix® (cid:81)(cid:3)Levemir® 0 10 20 30 40 DKK billion 2009 2008 2007 2006 2005 21.5 17.3 14.0 10.8 7.3 0 5 10 15 20 25 Novo Nordisk Annual Report 2009 19 e r a c s e t e b a D i The results demonstrated that patients with type 2 diabetes can achieve good blood glucose control sustained over three years with low rates of hypoglycaemia using Levemir®, NovoMix® and/or NovoRapid®. Patients starting on Levemir® had the lowest weight gain. “Tight blood glucose control is widely believed to be difficult to achieve because of a high risk of hypoglycaemia,” notes Mads Krogsgaard Thomsen, executive vice president and chief science officer. “The Treat-to-Target study shows that this need not be the case.” Continuous innovation As more people throughout the world develop diabetes, there is a growing need for more treatment options to help manage symptoms and arrest disease progression. Studies have found that convenience and safety are linked to higher rates of treat- ment compliance, which in turn is linked to better health outcomes. We are working on two new-generation insulin products, Degludec and DegludecPlus, which are intended to be even longer acting to improve treatment outcomes and provide more convenient insulin therapy with a possibility of fewer injections. Currently in phase 3 development, the Degludec and DegludecPlus development programmes will involve more than 10,000 patients from 39 countries around the world. The trial programme for Degludec is known as BEGIN™ and will involve more than 7,000 patients. Degludec has so far demonstrated an ultra-long duration of action of more than 24 hours, offering the potential of greater dosing flexibility and lower risk of hypoglycaemia. The trial programme for DegludecPlus is called BOOST™ and will recruit over 3,000 patients. DegludecPlus is the first soluble combination of an ultra-long-acting basal insulin with a boost of rapid-acting insulin (NovoRapid®). Oral formulations Most people would prefer a tablet to an injection. However, because insulin is a protein, it is rapidly destroyed or degraded in the gastrointestinal tract. The challenge is to move a purpose- designed insulin analogue through the gut to exert its therapeutic effect on blood glucose. At the end of 2009, we initiated a phase 1 clinical trial for an oral insulin analogue. This project combines our unique expertise with insulin design in a partnership with Merrion Pharmaceuticals, which has expertise in mechanisms for transporting proteins through the gastrointestinal tract. We also initiated a phase 1 clinical trial of an oral formulation of GLP-1 in January 2010. This formulation was designed in partnership with Emisphere Technologies. In addition, we have built on our internal capabilities in basic science and protein tablet formulation and have established tablet production facilities for these clinical development programmes. While the development of these new products is still at an early stage and many technological challenges remain, significant progress has been made, and both our partners and we are enthusiastic about the potential within this area. Safety profile In the summer of 2009, research studies linking certain insulin analogues to an increased risk of cancer were published in the 20 Novo Nordisk Annual Report 2009 official journal of the European Association for the Study of Diabetes, Diabetologia2. Insulin can bind to two different receptors in the body: insulin and IGF-1 (Insulin-like Growth Factor-1) receptors. It has long been known that certain insulin analogues are more likely to bind to IGF-1 receptors. For this reason, all Novo Nordisk insulin analogues developed during the past 20 years have been engineered with molecular safety in mind and rigorously tested for IGF-1 receptor binding in very early research phases. We have only proceeded to develop modern insulins with a molecular safety profile similar to, or better than, that of human insulin. While insulin can have a growth-promoting effect on cells, extensive clinical testing has provided evidence that Novo Nordisk’s modern insulins have clinical advantages for many patients with diabetes compared to human insulin, and each insulin has a molecular safety profile as good as or better than human insulin. All Novo Nordisk insulin analogues on the market have been investigated in many randomised, controlled trials and in observational studies, and they are also monitored for any safety signals through rigorous post-marketing safety surveillance. Device innovation In our device pipeline, we strive to continuously improve chronic disease therapy with more accurate, convenient and user-friendly devices. Convenience and simplicity can be factors in treatment compliance, with direct implications for health. FlexPen®, the world’s best-selling prefilled insulin pen3, is available for Levemir®, NovoRapid®/NovoLog® and NovoMix®/NovoLog® Mix. It eliminates the need to manually load insulin into a delivery device or use a separate vial and syringe. Once in use, the prefilled pen may be stored at room temperature for 14 days or more, which can be important to suit flexible lifestyles. FlexPen® is made of a recyclable plastic, which has the potential to reduce environmental impact. The new award-winning4 NovoTwist® needle was launched in Europe in 2009 and will be introduced to additional markets in 2010. NovoTwist® has a simple ‘just twist’ attachment and detachment that makes injection easier for people using FlexPen® or taking Victoza®5,6. Our newest device, NovoPen Echo™, is a colourful pen with dose settings in half-unit increments, suitable for children needing small doses. It features a simple and intuitive memory function that makes it easy to check, the time lapsed since the last dose was taken. NovoPen Echo™ was announced in Europe in 2009 and will be launched in 2010. Changing Diabetes® Diabetes and other chronic, non-communicable diseases are a leading threat to human health and development. Diabetes kills almost as many people as HIV/AIDS, disables millions of people and is already causing damage to the global economy. The International Diabetes Federation estimates that the number of people with diabetes will increase from 285 million today to 438 million in 20307. As a world leader in diabetes care, we have the potential and responsibility to make a difference for people with diabetes, facilitating change in addition to providing innovative treatments. We do this through a concerted effort called Changing Diabetes®, e r a c s e t e b a D i which includes programmes and engagement at global, regional and national levels. Our ambitions are to: • give people with diabetes a priority that reflects the scope and severity of the disease and its complications by supporting systemic change for chronic disease management Cooperation Centre of the Chinese Ministry of Health and the World Diabetes Foundation. It was organised by the Chinese Center for Diabetes Society and the Chinese Disease Control and Prevention, with the support of the Bureau of Disease Prevention and Control of the Chinese Ministry of Health, and the Inter- national Diabetes Federation. • drive healthcare outcomes for people with diabetes by promoting improved care and timely investment to prevent disease progression In 2010, we will organise Changing Diabetes® Leadership Forums with stakeholders in India, sub-Saharan and Northern Africa and the Middle East. • break the curve of the global diabetes epidemic by mobilising multi-stakeholder efforts to set clear targets and achieving concrete results. Giving people with diabetes priority To change the course of diabetes and improve treatment outcomes, we are working to put diabetes on public health agendas. To date, we have created 13 Changing Diabetes® briefing books for nine countries. These reports provide an overview of the diabetes state of each nation and a projection of the future diabetes burden if nothing is done to curb it. We have also engaged more than 5,000 key stakeholders through 19 Changing Diabetes® Leadership Forums and regional or national round-tables in 13 countries, helping to reach consensus about what it will take to change diabetes. According to the International Diabetes Federation, 285 million people worldwide have diabetes. By 2030, this will increase to 438 million people. In 2009, we sponsored the Changing Diabetes® Leadership Forum in China. One of a series of forums held across the world, the goal was to unite all key stakeholders in setting an agenda for improving access to care and quality of care for people with diabetes. Driving healthcare outcomes Our goals for the newly launched Changing Diabetes® Barometer website, changingdiabetesbarometer.com, include improving health outcomes for people with diabetes globally while bringing down total costs. The barometer is a collaboration with the International Diabetes Federation’s Diabetes Atlas, ensuring that all data gathered from the participating countries is included in the global reference for diabetes prevalence. By increasing transparency and highlighting areas where improvements are possible, the tool gives policy- makers and healthcare providers critical information to measure progress and drive change. Breaking the curve To address patient needs and deter the growth of the diabetes pandemic, we build partnerships around a shared vision of changing diabetes and implementing the UN Resolution on diabetes, engaging with governments, policy-makers, healthcare organisations, healthcare professionals, people with diabetes, patient associations, private enterprises, non-governmental organisations and the media. Our global campaign drives awareness of the personal and societal risks of diabetes. Through our National Changing Diabetes® programmes, we promote better education of healthcare profes- sionals and wider availability of screening for diabetes symptoms to help save lives and significant costs long term. The Changing Diabetes® Bus visited 16 countries in Europe and the Middle East during the year, providing 62,000 people with diabetes testing. On World Diabetes Day, 14 November, more than 315,000 people in 56 countries were engaged in different Novo Nordisk-sponsored activities, including fundraisers and educational programmes. Due to rapid economic and industrial development, urbanisation is spreading in China. Increasingly unhealthy lifestyles have caused a significant increase in the number of overweight and obese people, and a fivefold increase in the risk of getting diabetes in urban areas compared to rural areas. The Forum was jointly hosted by the International Health Exchange, the Over the past decade, we have published a series of possible future scenarios for diabetes, and have used these to engage stakeholders in dialogue about the diabetes pandemic. Our third edition of future scenarios, published in 2009, has two main focus areas. One scenario outlines how linking treatment outcomes and reimbursement will change healthcare. A second Improving diabetes care Stop pandemic Detect earlier Treat better earlier Delay progression Prevent complications Delay complications Prevention Screening Diagnosis Treatment and lifestyle modifi cation Treatment initiation Treatment intensifi cation Management of late- stage complications Novo Nordisk Annual Report 2009 21 e r a c s e t e b a D i scenario describes how communities and healthcare systems will be impacted as obesity, which can be a precursor of diabetes, becomes increasingly common around the world. countries continue to have high mortality rates, with life expec- tancies of less than one year in sub-Saharan Africa. Expanding access Building sustainable partnerships to expand access to diabetes treatment and develop healthcare system capacity is the primary goal of our long-term efforts to change the diabetes epidemic in developing countries. Our commitment extends to people who lack access to treatment, those who face barriers due to inadequate healthcare infrastructures and the high out-of-pocket costs that can be a part of having a progressive, chronic disease. Our significant contribution to the improvement of diabetes care in the developing world includes our continued long-term financial commitment to the World Diabetes Foundation, totalling 1.2 billion Danish kroner allocated over 15 years (see p 84.) The independent and non-profit foundation supports the prevention and treatment of diabetes where it is needed most, providing funding for local initiatives that improve healthcare capacity. Since it was founded by Novo Nordisk in 2001, it has supported 219 projects in 90 countries. The foundation’s annual report is online at worlddiabetesfoundation.org. Beyond our donations to the World Diabetes Foundation, our approach to expanding access builds on the right to health and aligns with the UN Millennium Development Goals, which offer a common vision for tackling some of the major challenges facing the world by 2015. Over the next decade, our emphasis will be on areas selected because of their ability to have an impact on current and future generations, with a long-term impact consistent with our role as a sustainable business. Our areas of emphasis support three of the UN Millennium Development Goals. Treating children with type 1 diabetes Despite progress, children with type 1 diabetes in developing To reduce child mortality – UN Millennium Development Goal 4 – Novo Nordisk has made an ambitious five-year, 25-million- dollar commitment to treat children with type 1 diabetes. The Changing Diabetes® in Children programme responds to the International Diabetes Federation’s call that no child should die of diabetes. Our goal is to work in cooperation with local partners, including governments and diabetes associations, to build sustainable national capacity in some of the world’s poorest countries and create well-functioning diabetes clinics for treatment of children with type 1 diabetes. The programme provides the necessary medical and laboratory equipment, organises training of healthcare professionals, puts in place diabetes patient education, and creates systems for adequate monitoring and follow-up. In addition, insulin and diabetes supplies are being provided free of charge for the duration of the programme. In Bangladesh, one of the countries in the world with the lowest healthcare spending per capita, the programme has been rolled out as a joint initiative with the Diabetic Association of Bangladesh (BADAS). As in most other developing countries, there are no existing facilities for treating children with diabetes. “Currently, children with diabetes are managed primarily by adult diabetes clinics or general medical outpatient clinics, but treating diabetes in children is different from treating diabetes in adults,” says Professor Azad Khan, president of BADAS. “They have other needs and delayed treatment can often lead to devastating complications.” More than 400 children were diagnosed and enrolled during 2009 in Bangladesh, Cameroon, Democratic Republic of Congo, Guinea, Tanzania and Uganda. Our ambition is to reach 10,000 children as we expand the programme into additional countries over the next few years. Diabetes in pregnancy Due to the decreasing age of onset for type 2 diabetes, growing numbers of women have diabetes prior to pregnancy. Diabetes makes pregnancies higher risk and can lead to long-term com - plications for both mother and child. Expanding access to care supports development goals Millennium Development Goal Target Novo Nordisk response Sustainability MDG 4 Reduce child mortality MDG 5 Improve maternal health Target 4: Reduce by two thirds the mortality rate among children under fi ve Treating children with type 1 diabetes Target 5a: Reduce by three quarters the maternal mortality ratio Target 5b: Achieve universal access to reproductive health Confronting diabetes in pregnancy MDG 8 Global partnership for development Target 8e: In cooperation with pharmaceutical companies, provide access to affordable essential drugs in developing countries Donations to support the World Diabetes Foundation Differential pricing y t i c a p a c d n a i s p h s r e n t r a p g n d i l i u B 22 Novo Nordisk Annual Report 2009 Over 10 million women develop gestational diabetes during pregnancy every year. More than half of women who develop gestational diabetes will go on to develop type 2 diabetes during the next decade, and their children have a substantially increased risk of developing type 2 diabetes. Supporting healthy pregnancies is therefore important to reverse the diabetes pandemic. In support of Millennium Development Goal 5, targeting maternal health, we are initiating activities to raise awareness of the impact of diabetes in pregnancy, address knowledge gaps, support community-based maternal health programmes and advocate for sustainable change, which ultimately will increase access to diabetes screening, treatment and lifestyle education. Through our commitment to address the needs of women with diabetes, we aim to improve the health outlook for women and their families today as well as for future generations. Pricing in developing countries The cost of therapy still constitutes a significant barrier for better healthcare in the developing world. In many countries, the availability of medicines at public health facilities is often very poor due to inadequate funding, lack of incentives for main- taining stocks, inability to forecast accurately or inefficiencies in procurement, supply and distribution. Among the targets for UN Millennium Development Goal 8 is a call for cooperation from pharmaceutical companies to provide access to affordable essential drugs in developing countries. Through our long-standing differential pricing policy for the least developed countries (LDCs), as defined by the United Nations, we sell insulin at or below 20% of the average prices for insulin in the Western world. Each year we offer differential pricing in all LDCs. In 2009, either governments or non-profit organisations in 36 of these countries chose to purchase at the differential prices. See p 93. Building partnerships and capacity The huge challenge of tackling development and diabetes poses numerous dilemmas for the developing world that require innovative approaches. While our strength is in diabetes care, working in partnership is crucial to help address organisational matters and increase the impact of our efforts. Novo Nordisk already has a long history of working in partnership with governments, ministries of health and other partners through our World Partner Project. Launched in 2001, the project focused on developing models for addressing diabetes healthcare in developing countries. Together with partners, the World Partner Project has had an impact through 31 programmes in eight countries (Bangladesh, Malaysia, Tanzania, Zambia, El Salvador, Costa Rica, China and India). Lessons from these projects continue to inform our approach for fostering sustain- able diabetes care. We continue to seek innovative partnerships to improve access to diabetes care for these vulnerable populations not being supported in their current system. Photo: To increase access to all people with diabetes, Mapoko Mbelenge Ilondo, programme director, Global Diabetes Partnerships, builds models for sustainable public–private partnerships in developing countries. In Tanzania, for example, Ilondo has worked with the health ministry and the diabetes association to integrate diabetes care into the country’s healthcare system. e r a c s e t e b a D i Novo Nordisk Annual Report 2009 23 Biopharma- ceuticals Our specialised expertise with proteins and our understanding of chronic disease are leveraged in our biopharmaceuticals business to develop innovative and improved ways to treat haemophilia and other rare coagulation disorders, growth hormone deficiency, the symptoms of menopause and inflammatory diseases. Commitment to haemophilia Haemophilia is an inherited or acquired coagulation disorder and people living with haemophilia lack, either partly or completely, an essential clotting factor necessary to form blood clots. The main danger is uncontrolled internal bleeding, which can cause stiffness, pain, severe joint damage, disability and even death. Novo Nordisk has a heritage of improving existing standards of care. For this reason, our haemophilia pipeline has expanded to include compounds targeting faster and more efficient treatment of episodic bleedings, long-acting compounds to allow for less frequent infusions and products administered by the more convenient subcutaneous route. We have a solid position in the treatment of haemophilia patients who have developed inhibitors, or antibodies, to their missing coagulation factor. NovoSeven® remains the only recombinant treatment option for these patients. Our pipeline includes two potential successors to NovoSeven®: a long-acting, recombinant factor VIIa derivative and a fast-acting, recombinant factor VIIa analogue. Both are in clinical development. “In the absence of a cure, the challenge is to provide effective, safe and convenient treatments that prevent bleeding as far as possible,” says Anne Prener, corporate project vice president of Haemostasis Management. Expanded pipeline Our ambition is to use our understanding of haemophilia to develop new compounds to offer improved treatment options for all people with haemophilia and for the treatment of many rare coagulation disorders. In order to improve upon existing treatments for haemophilia A using factor VIII, we had to first produce a third-generation factor VIII compound. We expect to launch this new recombinant factor VIII treatment for haemophilia within the next few years while we continue to develop a longer-acting formulation. Our goal is to Photo: Egon Persson, principal scientist, Haemostasis Biochemistry, is an inventor of a fast-acting, recombinant factor VIIa analogue currently in a phase 2 clinical trial. A potential successor to NovoSeven®, it is intended to deliver predictable, sustainable clotting fast, as shown in the diagram. s l a c i t u e c a m r a h p o B i Creating value by improving by improving treatment treatment convenience convenience 24 Novo Nordisk Annual Report 2009 improve treatment by developing a long-acting concentrated formula to reduce frequency and infusion times, which can be as long as 45 minutes every other day. During 2009, we initiated a phase 1 trial for a long-acting, recombinant factor IX compound for haemophilia B that is intended to be used once a week. This would offer patients greater convenience compared to current prophylactic treatments to help prevent bleeding, which have to be infused twice a week. In most of the world, patients with congenital factor XIII deficiency do not have any treatment options. The only treatment available in some countries is made from human plasma, which may involve risk of bloodborne viruses. Our phase 3 clinical trial for a safer recombinant factor XIII treatment involves 40 patients and is expected to be completed in 2010. We are investigating the same molecule to reduce the need for blood transfusions for cardiac surgery patients. New generation of NovoSeven® Novo Nordisk developed NovoSeven® for the 3,500 people with haemophilia who develop inhibitors, or antibodies, to other replacement factor therapies. Our factor VIIa product, NovoSeven®, was a significant innovation when launched and remains the only recombinant medication available for haemo- philia patients with inhibitors. It provides effective treatment for rapid control of bleeding episodes and has been a major advancement in the treatment of haemophilia patients who have developed inhibitors, for whom there were few other treatment options. NovoSeven® is also the only recombinant medication approved for the treatment of bleeding episodes in acquired haemophilia factor VII deficiency and, in Europe, Glanzmann’s thrombasthenia. Our continuous efforts to make NovoSeven® more convenient and more effective include the launch in 2008 of a NovoSeven® room temperature stable formulation that has a smaller infusion volume for added convenience. Because NovoSeven® room temperature stable does not need to be refrigerated, it is portable, which may allow bleeds to be treated faster8. After initial launch in the US in 2008, we successfully introduced the product in 24 markets in 2009. Novo Nordisk has a heritage of improving existing standards of care. Our long-term ambition is to develop more effective, safe and convenient treatment options for people with haemophilia. To develop new therapeutic approaches for prevention of bleeding based on the established efficacy of factor VIIa, we initiated a phase 2 clinical trial in 2009 for a long-acting derivative of recombinant factor VIIa. The same molecule is also being investigated for subcutaneous use. Another phase 2 trial is currently ongoing to determine the optimal dose and safety profile of a new recombinant factor VIIa analogue with an even s l a c i t u e c a m r a h p o B i Expanded pipeline for haemophilia and rare coagulation disorders Recombinant factor XIII analogue Recombinant factor VIIa single dose* ur activities in hilia and rare ulation disord ers d o p o m e a h n a p x E g a o c Long-acting, recombinant factor IX Recombinant factor VIII products Contin with re patie c o u e t o i m m n t s b i n p w a r i t n o t v Research and development commitment h f e i a t n c r h t e i o a b r t i t o r s m e n t s V I I a f o r Recombinant factor VIIa room temperature stable* Recombinant factor VIIa for prophylaxis* D a ti o evelop the next g e n e n t of treatments with r e c o m b i n h i b it o rs factor VIIa for patients w i t h i n r n a Subcutaneous administration * Not approved in all markets. Long-acting, recombinant factor VIIa derivative Fast-acting, recombinant factor VIIa analogue Novo Nordisk Annual Report 2009 25 s l a c i t u e c a m r a h p o B i faster onset of action than NovoSeven® and the ability to form even stronger clots in a shorter time. Expanding access to care As our focus on haemophilia has expanded, so has our commitment to the global haemophilia community. We established the Novo Nordisk Haemophilia Foundation in 2005 to address the significant need for improving haemophilia care and treatment in developing countries, where haemophilia is not a healthcare priority and many patients go undiagnosed or are inadequately treated. Our donations to the NNHF, including 15.4 million Danish kroner in 2009, support 28 projects and five fellowships in 24 developing and emerging countries. By working with partners across all areas of the haemophilia community with local ownership of projects, the NNHF aims to ensure the sustainability of development programmes. See nnhf.org for more information. Changing Possibilities in Haemophilia® Building on our long-standing concerted efforts in diabetes, called Changing Diabetes®, we launched a similar strategic initiative in late 2008 called Changing Possibilities in Haemophilia®. Under this umbrella, we seek to partner with physicians and the wider haemophilia community to help build a better tomorrow for people with haemophilia. We also collaborate with governments and healthcare policy-makers to track quality of life issues for people who have haemophilia, and help set standards for the level of treatment that this patient group receives. We partner with physicians and the wider haemophilia community to help build a better tomorrow for people with haemophilia. Collaboration with the haemophilia community To strengthen our collaboration with the global haemophilia community, we have embarked on a psychosocial study to determine how to best support the needs of those with haemophilia. A multi-disciplinary team of healthcare profes- sionals and patient representatives met in Montreal, Canada, in September 2009 to establish a global advisory board on psychosocial issues in haemophilia. Based on discussions from this meeting, we are beginning a structured process of enquiry, seeking a broad spectrum of input about life with haemophilia in the family, the school setting, the workplace and the wider community. Our hope is that findings from the study will uncover ways to improve the quality of life for people with haemophilia and those caring for them. The programme will be conducted in close collaboration with experts and patient representatives and is inspired by our existing DAWN™ (Diabetes Attitudes Wishes and Needs) programme. 26 Novo Nordisk Annual Report 2009 In 2009, we also made a commitment with the World Federation of Hemophilia to further the haemophilia cause each year on World Hemophilia Day as an official sponsor. Continued medical education Some types of haemophilia are particularly rare, so few health- care providers have extensive experience with treatment. Through the Novo Nordisk Haemophilia Grants & Awards programme, Access to Insight, we offer support to encourage doctors and scientists to enhance their understanding of haemophilia and share best practices for treatment to improve care. We also sponsor an accredited training programme and scientific sessions at major congresses such as the World Federation of Hemophilia and the International Society of Thrombosis and Haemostasis. Leadership and innovation In determining which businesses our company should be in, we consider our core strengths in protein engineering and chronic disease as well as the potential for global market leadership. Leadership and innovation in human growth hormone Through our expertise in protein synthesis based on recom- binant technology, Novo Nordisk has become one of the world’s leading producers of human growth hormone. Norditropin® builds on our 40-year commitment to growth hormone treat- ment and is a market leader because it is unique: it is the only liquid growth hormone product with a formulation that does not require refrigeration and is available in a prefilled, ready-to- use device. Growth hormone deficiency affects the pituitary gland, a small gland located at the base of the brain that produces growth hormone and other hormones. If the pituitary gland does not produce enough growth hormone, growth is slower than normal. Children need growth hormone to grow to normal height. In adults, growth hormone is needed to maintain the proper amounts of body fat, muscle and bone. Research shows that children with short stature are more likely to experience difficulty at school and adults with growth hormone deficiency have poorer-than-average health-related quality of life. Since human growth hormone is a protein that can work effec- tively only through injection, we have drawn on our technological expertise in injection devices to improve growth hormone delivery systems and products. We launched new devices in some markets in 2009, including an improved NordiFlex™ pen, which studies indicate has a 40% lower dose force. To further ease treatment for patients with this chronic deficiency, we are also developing a once-weekly growth hormone derivative to reduce the number and frequency of injections. A phase 2 trial of this compound was successfully completed in adult patients in 2009. Supporting improved treatment outcomes To improve treatment outcomes for people with growth hormone deficiency, we support healthcare provider education and scientific research. NordiScience® supports physicians with endocrine develop new treatments for these diseases. This work is conducted in Denmark and at our newly opened research centre in Seattle, Washington, US. The Seattle centre is part of an effort to further globalise research and development. s l a c i t u e c a m r a h p o B i research and educational services and support, including clinical symposia, fellowship grants and access to scientific publications. NordiNet®, an international outcome study including data from more than 5,000 patients, is one example of our commitment to long-term studies that track treatment success and safety. The NordiNet® platform is an electronic data-capturing tool for patient outcome evaluations that gives healthcare providers in certain countries access to software that determines bone age. Since human growth hormone is a protein that can work effectively only through injection, we have drawn on our technological expertise in injection devices to improve growth hormone delivery systems and products. Low-dose hormone replacement Novo Nordisk launched its first low-dose hormone replacement product, Activella®, in the US in 2008. It was introduced as Activelle® in Europe in 2009. Our low-dose topical hormone replacement treatment, Vagifem®, was approved in the US in November 2009 and by EU regulatory authorities in January 2010. These products build on our 25 years of experience with hormone treatment for menopausal symptoms. Our long-standing position is that hormone replacement therapy for women should be prescribed at the lowest effective doses and for the shortest time periods consistent with treatment goals and risks assessed for individual women. Development projects target inflammatory diseases Leveraging our protein expertise to help patients with other types of chronic disease and add to our clinical pipeline of products, we now have three projects in early clinical development targeting chronic inflammatory conditions. These projects target rheumatoid arthritis, psoriatic arthritis and systemic lupus erythematosus. By investing in early-stage research in this field we hope to find the underlying causes of different inflammatory conditions and DKK billion Biopharmaceuticals Sales development (cid:81) Haemostasis management (NovoSeven®) (cid:81)(cid:3)Growth hormone therapy (cid:81)(cid:3)Hormone replacement (cid:3)therapy (cid:81)(cid:3)Other products 2009 2008 2007 2006 2005 0 5 13.6 12.2 11.4 10.9 9.7 10 15 Novo Nordisk Annual Report 2009 27 How we work Making a difference to patients and society is what we are all about. If we can improve treatment outcomes for people with chronic diseases, keeping them healthy and productive, we can help not only individuals needing treatment but also their families and their communities. Our aspiration is to be the world’s leading diabetes care company and, ultimately, to defeat diabetes and leverage our expertise in the fight against other chronic, non-communicable diseases. This is our core business proposition, the essence of Novo Nordisk’s contribution to sustainable development and the heart of our vision. We accomplish this by expressing our values in all of our actions, focusing on patients first. Our impact on society is reflected by the number of patients who benefit from our products and our efforts to catalyse change in healthcare systems and train patients and healthcare providers. Novo Nordisk Way of Management The Novo Nordisk Way of Management, the framework within which we work, supports our culture of innovation and responsi- bility. Aligned with the principles of the United Nations Global Compact in the areas of human rights, labour, the environment and anti-corruption, the Novo Nordisk Way of Management ensures the long-term growth and welfare of our company and helps us find the right balance between compassion and competitiveness. In 2009, we continued to drive initiatives related to the UN Global Compact principles across our value chain. Many of these initiatives are described in the following pages. A comprehensive account is found in our annual Communication on Progress. See annualreport2009.novonordisk.com/governance-and-reporting/ un-global-compact.aspx. The Novo Nordisk Way of Management includes our vision, our values and our commitment to the Triple Bottom Line principle. A follow-up methodology for auditing and validating performance and policies in key areas supports cross-organisational under- standing and helps ensure implementation. While our values are global, they are also owned and lived at a local level, providing flexibility and fostering diversity in ideas. As our business grows, the Novo Nordisk Way of Management provides Photo: Our partnership approach to addressing climate change and preparing our business for a carbon-constrained future resulted in a new business model that has helped drive the market for renewable energy. Priya Matzen, programme director, Global TBL Management, has been a driving force behind our climate strategy. See pp 31 and 35. k r o w e w w o H Creating value for society by working transparently and responsibly 28 Novo Nordisk Annual Report 2009 a foundation to ensure that we stay on course, focused on innovating in ways that support our vision and are consistent with our values. “Achieving targets is only one aspect of performance. It is just as important that employees work in a way that expresses Novo Nordisk’s core values,” says Lars Rebien Sørensen, president and chief executive officer. The Novo Nordisk Way of Management’s follow-up methodology provides a tool to assess the degree to which values are embedded in our actions and operations. It also helps ensure that the frame- work can stand the test of time and different cultures. The entire framework for the Novo Nordisk Way of Management is detailed at novonordisk.com/about_us. Triple Bottom Line management We are committed to operating in a way that is financially, environmentally and socially responsible. Anchored in the company’s bylaws, the articles of association, and the Novo Nordisk Way of Management, our commitment to the Triple Bottom Line principle helps us balance short-term profitability with longer-term societal interests. Applying the Triple Bottom Line principle in decision-making serves two purposes. It builds trust and protects our licence to operate and it helps drive innovation and long-term growth. This is how Triple Bottom Line management generates value. We monitor trends that could impact our business success and proactively respond to stakeholder expectations and emerging Our vision • We will be the world’s leading diabetes care company. • We will offer products and services in other areas where we can make a difference. • We will achieve competitive business results. • A job here is never just a job. • Our values are expressed in all of our actions. Our values Each Novo Nordisk employee is expected to be: • Accountable • Ambitious • Responsible • Engaged with stakeholders • Open and honest • Ready for change. Our Triple Bottom Line approach Financially and economically responsible Patients k r o w e w w o H Socially responsible Environmentally responsible issues such as the right to health, business ethics and bioethics. We also take responsibility for addressing global challenges that are critical to our ability to manage a sustainable business for the long term. We focus on fighting the diabetes pandemic and confronting the climate change challenge. These are areas where we have an opportunity and an obligation to put effort behind making a real difference. Our impact goes beyond our own operations; by demonstrating results we can inspire others to join forces. We also seek to influence public policy and drive societal change towards more sustainable practices. Measuring values-based orientation As part of the follow-up methodology, we have a global facilitator team consisting of senior people with deep under- standing of our business and the business environment. They evaluate the extent to which business units operate in compliance with the Novo Nordisk Way of Management, and the team has a formal reporting line to the chairman of the Board. “Facilitation is the follow-up method used to document com- pliance regarding the Novo Nordisk Way of Management,” says Kim Bundegaard, senior vice president, Business Assurance. “It provides a systematic approach to gaining insight into how units in the organisation are living the Novo Nordisk Way of Management.” For some units, facilitations take place annually; for others, the process takes place once every three years. From 30 September 2008 to 30 September 2009, 70 facilitations were conducted, covering units with more than 12,000 employees. Of these, more than 3,000 employees were interviewed to determine how corporate values are being lived and implemented throughout the organisation. Observations from this process were reported to the Board in December 2009. To maintain a strong level of compliance, more than 300 recommendations or actions were issued during the 2009 facilitations. Areas identified for increased focus include future business direction and prioritising process improvement initiatives. Novo Nordisk Annual Report 2009 29 Our impact on society We hold ourselves accountable to shareholders and other stakeholders that may affect or be affected by the company’s activities. As a business, Novo Nordisk generates wealth for society and contributes to socioeconomic development through sustainable business practices, investment and employment. As a pharmaceutical innovator, we provide knowledge, research and development and healthcare products. Our outreach programmes also improve awareness, diagnosis and treatment. k r o w e w w o H Patients and those at risk Novo Nordisk’s products are sold to hospitals, doctors and healthcare professionals for treatment of their patients. Novo Nordisk has a 51% market share of the global insulin market (by volume). We also advocate on behalf of patients for systemic healthcare change to support chronic disease management. See pp 20–23 and p 93. Novo Nordisk Shareholders and business partners We aim to communicate openly with shareholders about the company’s fi nancial and business development as well as strategies and targets. See pp 47–49. We also purchase resources and inputs from more than 38,000 suppliers. See annualreport2009. novonordisk.com/social/responsible- sourcing.aspx. Our people Employees’ knowledge and productivity are a major part of the company’s intangible value. Our employees contribute to the communities in which we operate through volunteerism and payroll taxes. See pp 32–33 and annualreport2009.novonordisk.com/ social/employee-volunteering.aspx. Public sector Environment We use water, energy and other raw materials to produce therapies for patients. As a result of our operations, we produce emissions and waste. Managing our environmental impact and resource consumption reduces our costs and minimises our impact on the environment. See pp 93 and 95 and annualreport2009.novonordisk. com/environment.aspx. Communities As a business, Novo Nordisk generates wealth for society and contributes to socioeconomic development through its sustainable business practices, investment and employment (estimated direct and indirect impact amounting to 96,500 jobs globally). See p 94 and annualreport2009.novonordisk. com/social/donations.aspx. Tax payments fund services offered by the public sector. Novo Nordisk’s tax payments are an estimated 2.9% of corporate taxes in Denmark. In total, Novo Nordisk’s income taxes in Denmark for the year amounted to 854 million Danish kroner. See p 65 and annualreport2009.novonordisk. com/fi nancial-economics/tax.aspx. 30 Novo Nordisk Annual Report 2009 k r o w e w w o H Engaging stakeholders The burdens of chronic disease will grow and challenge societies in new ways as the global population expands and ages and increasing urbanisation contributes to more sedentary lifestyles. By involving stakeholders and working in partnership, we believe we can better understand these challenges and cocreate solutions that are more likely to succeed. Our key stakeholders are patients. We engage with all other stakeholders – including healthcare providers, payers, employees, investors, suppliers and other business partners – in support of improved treatment outcomes for people with diabetes and other chronic diseases. Examples of our stakeholder engagement and partnerships are included in this section, but other examples can be found throughout this report and online at annualreport2009. novonordisk.com/stakeholder-engagement.aspx. How we engage Long-term partnerships have for many years created value for Novo Nordisk and for society. We partner with others to address societal problems that are integral to our long-term business success, to leverage our assets and expertise to deal with the problem, to play a role in mobilising stakeholders and driving concerted action, and finally to measure and learn from results. Recognising the complexity of climate change, we have taken a partnership approach to address it, teaming up with others who have specialist knowledge in the field. Our CO2 reduction target was set in close collaboration with the World Wildlife Fund (WWF) under the WWF Climate Savers Programme. Our ongoing partner ship with DONG Energy (see p 36) has allowed us to find a cost-neutral way of converting power supplies for our Danish operations to wind energy, an important element in achieving the target. When setting the target, we shared internal data with WWF and had a very open dialogue. WWF challenged us to set the bar higher than we would have otherwise done. The UN Resolution on diabetes, adopted in December 2006 to increase awareness of the growing diabetes pandemic and develop policies for the prevention, treatment and care of diabetes, is one example of the kind of change that is possible through long-term partnerships. It was the result of a multi- stakeholder campaign led by the International Diabetes Federation in which Novo Nordisk was an active and supportive partner. It recognises the urgent need to pursue multilateral efforts to promote and improve human health and encourages UN member states to have strategies for diabetes prevention, diagnosis and treatment as part of the sustainable development of healthcare systems. Patient support Our core business is to help people, seeking to reduce suffering and improve health. Our commitment to patients is paramount, and engaging with patients and patient organisations and understanding their needs is an important part of how we work. An example of the value of patient dialogue is the DAWN™ programme – the largest global survey to uncover the psychosocial aspects of diabetes and the attitudes, wishes and needs of people with diabetes. Initiated by Novo Nordisk in 2001, the survey included people with diabetes and healthcare professionals from 13 countries. Today, DAWN™ serves as a patient advocacy platform, calling for concerted action to improve diabetes care in more than 30 countries and influencing academic research, educational programmes and new approaches to treatment at hospitals and clinics. In some countries, national task forces and coalitions are now coordinating efforts to implement patient-centred care and community initiatives inspired by DAWN™ surveys. Since the DAWN™ study started in 2001, other international studies have been completed, including the DAWN™ MIND study. The DAWN™ MIND study aims to implement monitoring of well-being in people with diabetes as part of routine diabetes care. Monitoring helps identify psychological needs that are otherwise likely to stay unrecognised. We are also launching a psychosocial survey of people with all types of haemophilia to better understand their needs and wishes and help support efforts to improve care. See p 26. Collaborating for innovation Our commercial focus is on a few mutually re-enforcing protein- based therapeutic areas. Within each, we are committed to improving the quality of life for people living with the particular disease. We search for innovative biologics at all stages of development, from early discovery to clinical phases. Always a pioneer in scientific innovation, we have entered into preliminary collaborations with biotechnology-based research companies, resulting in many technological advances. These include our work with research and development companies to formulate therapeutic proteins and generate human monoclonal antibodies. One example of our success in collaborating to drive innovation is our clinical development of oral insulin and GLP-1 formulations. See p 20. By involving stakeholders and working in partnership, we believe we can better understand healthcare challenges and cocreate solutions that are more likely to succeed. Our responsible sourcing programme is another example of how our commitment to partner with others is integrated in the way we do business. The programme also underpins the company’s commitment to the UN Global Compact and the Universal Declaration of Human Rights. We have established a methodology for assessing our supplier base, including screening principles and a model to map and manage social and environmental risks relevant for different types of procurement. Novo Nordisk Annual Report 2009 31 Bioethics dialogue Dialogue with stakeholders includes sharing views and knowledge about our bioethical work. This process, which includes engage- ment with non-governmental organisations, inter-governmental organisations, governments and regulators, researchers and patients, helps us reconcile ethical dilemmas about research and development and stay attuned to societal concerns. In 2009, our long-term efforts to build a partnership in Denmark to find ways to refine and reduce the use of animal experimen- tation were recognised with an award at the World Congress on Alternatives and Animal Use in the Life Sciences in Rome. The main focus of the collaboration of companies and universities is to do research in ways that consider animal welfare and to share information and ideas about alternatives to animal testing. Our people Looking at our projected growth, 75% of our people, the heart of our company, will be outside Denmark in 10 years’ time. Embracing diversity and embodying a global mindset are necessary to successfully manage the increasing globalisation of our business. To support sales growth, new product launches and a strong pipeline of future treatments, we hired 4,640 new employees in 2009. Our employees numbered 29,329 at year end, an increase of more than 8% compared to 2008. As we expect this rate of growth to continue for the forseeable future, the importance of ensuring that all employees understand and demonstrate the Novo Nordisk Way of Management is huge. We want to grow the company in a way that is consistent with our values and culture. Diversity and inclusion We believe diverse management teams and people with different perspectives are best suited to drive performance and foster innovative thinking. Our ambition is that within five years of the launch of our diversity strategy at the end of 2008, all senior management teams will include employees of both genders and different nationalities. At the end of 2009, diversity was reflected in 50% of senior management teams, compared to 43% at the end of 2008. While we have chosen to report on our progress annually, changing our organisational culture is a long-term objective that involves training and mentoring, talent management and succession planning. To help foster opportunity, greater transparency has been introduced into the succession-planning process. For all key positions, succession planning must consider and include employees of both genders as well as both local and non-local employees. Training in diversity and cultural inclusion is offered to all employees and is integrated into the company’s leadership development programmes for vice presidents, managers and young talent to build leadership capabilities. We have also established diversity networks in the US and Europe. Photo: Per Valstorp, senior vice president, Product Supply, has successfully fostered an innovation culture and mindset through the company’s cLEAN® programme. Implementation has been driven by an 80% focus on culture and mindset and 20% on operational and technical tools. k r o w e w w o H 32 Novo Nordisk Annual Report 2009 k r o w e w w o H Innovative culture In 2009, we undertook an assessment of the current state of our innovation systems and culture to determine how to build on and increase innovative activity. One example of how innovation is fostered throughout the organisation is our cLEAN® programme. cLEAN® is our version of LEAN – a well-known process optimisation philosophy. The ‘c’ stands for current and emphasises that working with cLEAN® is a continuous journey. The cLEAN® mindset is an example of our values in action, empowering employees to be accountable, ambitious and ready for change. The programme has also involved a substantial investment in training to improve capabilities at all levels as well as development of leadership competences to stimulate an innovation culture. Developed over the past six years, cLEAN® has allowed us to transform proprietary knowledge into value-optimising quality, delivery and cost. Progress toward many of our environmental targets and much of the recent improvement in our gross margin are attributable to cLEAN® process innovations. Savings from process innovations have been invested in research and devel- opment activities and sales force expansion, helping to secure the long-term future of the company. To challenge ourselves to continuously improve, we are intro- ducing new pilot programmes in 2010 to foster innovation in new ways. One project involves managing innovation across the value chain – from governance to incentives – to make launching innovative projects routine. Our ambition is that by 2014 all senior management teams will include employees of both genders and different nationalities. Life-changing careers Our global employer branding programme, Life-changing careers, launched in 2008, aims to attract and retain employees, particularly in countries where competition remains high. To attract and retain the talented people needed to drive our business, we must provide an attractive work environment. Novo Nordisk has consistently been named among the best places to work in Denmark. During 2009, we were also recognised as being among the best places to work in other markets, including Argentina, France, Poland, South Africa and the US. We now have a consistent, transparent target-setting and performance management process across our business which supports employee mobility across regions. Employees typically have two target appraisals a year when, together with their manager, they set goals for the year, assess achievements and also define a preferred career path. Talent and leadership programmes are in place targeting all levels, and several new programmes have been implemented to facilitate early talent-spotting. As our business grows, we have sought to ensure that all new managers with no prior management responsibility at Novo Nordisk complete leadership training within the first six months of their appointment. More than 500 managers completed this programme in 2009. Talent development programmes such as our Lighthouse programme for vice presidents and general managers use cooperative learning processes, including engagement with local hospitals, communities and non-governmental organisations. Participants are encouraged to find creative ways to implement Novo Nordisk’s commitment to patients, stakeholders and sustainable business practices. Working with integrity Maintaining and building trust is key to sustaining our licence to operate and innovate, and this requires that we operate ethically and with transparency across our value chain, from conducting clinical research to interactions with healthcare providers and patient organisations. Institutionalising ethical conduct requires more than codes and standards; it requires the fostering of a healthy corporate culture. The Novo Nordisk Way of Management (see p 28) outlines expectations for employee behaviour in all spheres, and adherence to the corporate values, which include accountability, is monitored as part of our ongoing facilitation process. Our business ethics policy is one of 13 policies that are part of the framework of the Novo Nordisk Way of Management. We have also implemented policies and procedures tailored to our operations and regulatory environment to provide guidance on governing the business conduct of our employees, agents and contractors. Our approach includes global procedures, backed by mandatory training and review by internal auditors. Establishing standards Our business ethics policy is implemented through three separate but complementary procedures. Two apply to everyone at Novo Nordisk, providing guidance on business ethics and interaction with third-party agents such as marketing consultants. The third outlines standards for interacting with healthcare professionals and applies to relevant employees. Performance management and leadership development Developing the leadership we need for long-term sustainable growth requires that we support our people to develop their qualifications, competences, employability and career opportunities. We also offer competitive remuneration and employment conditions. Increasingly, we are integrating performance management in leadership processes, moving towards performance leadership. The procedures explain minimum requirements to ensure adherence to standards and compliance with local laws. We continuously seek to strengthen and update standards to reflect the dynamic regulatory environment, and integration of new and updated policies and regulations is ongoing. The procedures were revised for the second time in four years at the end of 2009. Circumstances under which employees are obliged to report possible misconduct for investigation have been clarified. Novo Nordisk Annual Report 2009 33 We have further strengthened our global procedures governing clinical investigations and observational studies to prepare for significant growth in the number of participants who will be involved in our clinical research programmes in the next few years. To ensure that everyone involved in clinical development lives up to the new standards, we are launching an e-learning programme for clinical research ethics in 2010. In partnership with the University of Copenhagen and Henk ten Have, director of UNESCO’s Division of Ethics of Science and Technology, we are developing a set of online tools to support ethical decision-making for bioethics dilemmas. The tools will be launched in 2010 and it is our intention that they will be hosted by a third party and made widely available online. Training and implementation We are committed to all necessary steps of communicating and implementing the standards, policies and procedures, and this includes continual training on our ethical and legal obligations. As we grow, adding more than 4,000 new employees annually, ongoing training helps ensure that all new employees are familiar with their responsibilities. Training content is selected through an analysis of ethical trends and a formalised risk assessment. All staff involved in sales, marketing, regulatory affairs and public affairs must complete training that provides guidance, including examples of what constitutes unacceptable behaviour. Business ethics training was also required of all managers throughout the company for the first time in 2009. Of this group, 91% completed the required training. A global procedure ensures that in-house legal counsel and regulatory experts review and approve marketing materials and activities, and the review of promotional materials is documented in an electronic review system. The procedure, intended to be a minimum requirement, also involves a second-tier review at the affiliate k r o w e w w o H How we work with business ethics Leadership Board of Directors and Executive Management • Communication • Role models Programme oversight Business Ethics Steering Group • Monitor performance • Review resources Audit and assurance Group Internal Audit and facilitators • Audits • Assurance • Hotline • Facilitations • Investigations Implementation and sanctions Management • Leadership • Implementation • Sanctions • Role models Strategic development and compliance Business Ethics Compliance Offi ce • Policy and procedures • Strategy development • Compliance advice • Implementation tools • Training • Societal engagement • Investigations Local implementation Regional and local lawyers • Policy and procedures • Local trendspotting • Compliance advice • Training • Investigations 34 Novo Nordisk Annual Report 2009 k r o w e w w o H level to ensure compliance with local regulations in the market where materials will be used. another employee for good faith reports of potential or suspected violations of laws, regulations or company policies. Our dedicated internal website includes business ethics proce dures and other information in eight languages, including descriptions of controls and investigations and a toolbox with tools for local training. Monitoring and oversight We monitor adherence to ethical standards in several ways, ensuring a consistent, multifaceted approach. First, our facilitation process includes interviews with more than 3,000 employees throughout the organisation each year to monitor how our values are being lived and implemented throughout our business. Business ethics audits are conducted by Group Internal Audit, using risk assessments to determine which units to audit. These audits include on-site interviews and reviews of documentation to assess knowledge of Novo Nordisk’s business ethics procedures and how effectively those procedures are being implemented. More than 30 business ethics audits were conducted in 2009 and more than 100 findings have been issued. Maintaining and building trust is key to sustaining our licence to operate and innovate, and this requires that we operate ethically and with transparency in all aspects of our business. Investigations of suspected business ethics misconduct are also conducted by Group Internal Audit. Actions taken on substan- tiated cases have included training activities or disciplinary actions such as warnings and dismissal of employees. Employees are encouraged to ask questions about compliance issues. They also have an obligation to report possible or suspected misconduct. Employees can report misconduct to their immediate manager, through our internal compliance hotline, to the local or corporate counsel or to the Business Ethics Compliance Office, or to the investigations unit of Group Internal Audit, which has a formal reporting line to the Audit Committee of the Board of Directors. Fourteen business ethics cases were reported through the compliance hotline in 2009. Staff and stakeholders are also invited to confidentially report business ethics concerns and financial fraud to the Audit Committee through our global whistleblower system. Reports of misconduct are treated confidentially and employees who use the compliance hotline or the whistleblower system may choose to remain anonymous. Managers who receive reports of misconduct are obligated to report this directly to the Audit Committee Secretary or through the local counsel. While ethical issues can be reported anonymously, we also have a policy prohibiting retaliation by any employee against We investigate all reported allegations of misconduct and initiate corrective action where appropriate. Although each situation is considered individually, Novo Nordisk evaluates and implements the appropriate action to address inappropriate conduct and deter future violations. Disciplinary action may include retraining, dismissal or other appropriate discipline of the individual involved as well as discipline of the supervisor. The Business Ethics Steering Group sets strategy and oversees implementation of ethical standards, procedures and training by the Business Ethics Compliance Office. The steering group is comprised of senior executives from across the organisation and supports the development, operation and monitoring of ethics and compliance activities. Responsibility for implementing business ethics rests with the Business Ethics Compliance Office, which reports to the general counsel and has the authority to report directly to the Audit Committee. The Business Ethics Compliance Office identifies and assesses compliance risks, enforces procedures related to business ethics, provides advice to the organisation on compliance issues, and is responsible for developing and revising policies as necessary. Environmental responsibility This was a particularly notable year from a climate perspective, both for our company and the global community. At the end of 2009, we had exceeded our 2014 target of a 10% absolute reduction in CO2 emissions compared to 2004. Since 2004, emissions growth has been kept below the rate of production increases, and in 2008 we achieved an absolute emission reduction while production continued to grow. The reduction target was supported by key performance indicators tied to our internal Balanced Scorecard and our long-term incentive programme (described on p 39). A global climate framework Our commitment to reducing environmental impact goes beyond what we are able to accomplish in our own facilities. “The trans- formation to a carbon-neutral economy is necessary to secure global sustainable development,” says Lise Kingo, executive vice president and chief of staffs. “This will require collaboration between government, business and science to drive innovative change, supported by a long-term, stable policy framework that incentivises more sustainable practices.” To raise awareness of the need for a successful outcome of the UN Climate Change Conference held in Copenhagen in December 2009, Novo Nordisk provided seed money and was a driving force behind the World Business Summit on Climate Change held in May 2009. The summit was organised by the Copenhagen Climate Council and supported by the Danish government, UN Global Compact, and the World Business Council for Sustainable Development. The summit produced a list of six items that the business community believed to be necessary ingredients of an effective global climate agreement. Novo Nordisk Annual Report 2009 35 To manage water usage, we conducted an assessment of the water we use in our production processes and our impact on local water supplies, identifying areas of risk where greater control was needed as well as opportunities for additional reductions in consumption. The assessment identified oppor- tunities to reduce the amount of water used at our insulin filling plants. Total water consumption Water used at all production sites 1,000 m3 4.0 3.5 3.0 2.5 2.0 2005 2006 2007 2008 2009 At our Chartres production facility in France, our focused efforts led to a 50% drop in water usage at the site between 2005 and 2009. The amount of water used to produce each Penfill® 3 ml holder for NovoPen® 3 dropped to 0.75 liters from 2.5 liters, a reduction of 70%. Production at Chartres increased by 60% during this four-year period. During 2009, we conducted detailed water mapping and identified opportunities for water savings at our Montes Claros facility in Brazil. This is our largest insulin filling facility, and it is located in a water-stressed area. A number of projects to optimise water use have been initiated. Total output at Montes Claros is increasing, so we anticipate that water usage will still increase, but at a substantially lower rate. Water mapping of other production facilities continues. The additional production facility we are currently constructing in Tianjin, China, has been designed to optimise water and energy use and to be more water-efficient than the newest similar facility in Brazil. Reducing waste Performance improvements were seen in all of our environmental indicators in 2009 with the exception of waste. We are intent on reducing the impact of our operations and during 2009 we established a waste reduction plan, focusing on areas where we have the greatest opportunities for reducing waste from our production activities. To support waste reduction projects and facilitate knowledge sharing, we are launching an internal waste forum. Our plan is to develop longer-term waste reduction targets beginning in 2011. k r o w e w w o H We are, however, disappointed with the Copenhagen Accord, the final outcome of the climate summit in Copenhagen at the end of 2009. As a global business we had hoped for an ambitious, binding and long-term global framework that would help guide business decisions for future operations and chart the course towards a low-carbon global economy. We recognise, though, that it is at least a step in the right direction to have a formal agreement on the need for deep cuts in global emissions to hold the increase in global temperature below 2°C. For the business community, we find it now more urgent than ever to keep up momentum on initiatives that will mitigate climate change, contribute to adaptation and drive sustainable development. We will continue our work to develop a next- generation climate action strategy, taking into account signals from the summit process. Creating value by reducing emissions Savings from reduced energy consumption at our Danish production facilities have been earmarked to purchase electricity from a new offshore wind farm opened by our Danish energy supplier in September 2009. Our energy consumption in Denmark has dropped by 30 million kWh, and the cost savings from these cuts are enough to purchase sufficient wind electricity for all of the power needs at our Danish facilities once the new wind farm, Horns Rev 2, is fully operational in 2010. Switching to wind-generated electricity will result in an annual CO2 reduction of 90,000–100,000 tons. During 2009, we exceeded our long-term target of a 10% absolute reduction in CO2 emissions. Our commitment to reduce energy consumption and use alternative energy sources where possible is global in scope. Our Brazilian facility makes extensive use of hydroelectric energy and biomass. As a result, the site has the lowest CO2 emissions among Novo Nordisk production sites worldwide. We have participated in the Carbon Disclosure Project, which measures disclosure on climate risk management, since its inception in 2000. We are also a member of the project’s Nordic Carbon Disclosure Leadership Index. To further improve our disclosure and carbon risk management, we are extending our climate strategy focus from production areas to emissions from all transportation, including product distribution, company cars and business travel. During 2010, we will assess a baseline for emissions from company cars in our affiliates and consolidate plans to reduce emissions from the entire car fleet. Water usage We recognise widespread concerns about water scarcity and the potential effects of climate change on access to fresh water. In line with our efforts to effectively manage resources, we have intensified our focus on conserving water during the past two years. In 2009, our water usage fell by 20% compared to 2008. 36 Novo Nordisk Annual Report 2009 i p h s r e d a e l d n a e c n a n r e v o G Corporate governance Our company is part of the Novo Group, a family of independent companies with a common history and shared values. The Novo Group comprises a holding company, Novo A/S, wholly owned by the Novo Nordisk Foundation. The framework for our corporate governance system consists of internal principles as well as external regulation and codes, including compliance with applicable securities laws in Denmark, the US and the UK. We are also in full compliance with the Danish Corporate Governance Recommendations and are in general compliance with corporate governance standards as a foreign issuer listed on the New York Stock Exchange and the London Stock Exchange. We expect to receive approval to delist our shares from the London Stock Exchange during 2010. Novo Nordisk’s values are consistent with principles of good governance, and the Novo Nordisk Way of Management forms the internal values-based governance framework (see p 28). Governance Accountability to shareholders Novo Nordisk holds itself accountable to shareholders for its performance. The company seeks to enhance the accuracy, completeness and reliability of the information provided in the company’s annual financial and non-financial reporting through internal controls, assurance and independent audits. Reporting helps shareholders assess the actions of the Board and management. Shareholder rights Novo Nordisk’s share capital is divided into A shares and B shares. All A shares are held by Novo A/S, a Danish limited liability company wholly owned by the Novo Nordisk Foundation, which is a commercial, profit-making foundation. The B shares are traded on the stock exchanges in Copenhagen and London and in the form of ADRs on the New York Stock Exchange. The company will, however, apply for delisting from the London Stock Exchange in the first quarter of 2010. See p 48. Each A share (= nominal value 1 Danish krone) carries 1,000 votes and each B share (= nominal value 1 Danish krone) carries 100 votes (see p 48). Special rights attached to A shares include pre emptive subscription rights in case of an increase of the A share capital and preemptive purchase rights in case of a sale of A shares and priority dividend if the dividend is below 0.5%, while B shares take priority for dividend between 0.5% and 5% and B shares take priority for winding-up proceedings. We are not aware of the existence of any agreements with or between shareholders on the exercise of votes or control. Shareholders have ultimate authority over the company and exercise their right to make decisions regarding Novo Nordisk at general meetings, either in person or by proxy. Resolutions can generally be passed by a simple majority, while resolutions to amend the articles are subject to adoption by at least two-thirds of votes cast and capital represented unless stricter require- ments are imposed by Danish company law. At the annual general meeting, shareholders approve the annual report and any amendments to the company’s articles. They also elect board members and the independent auditor. All shareholders may, no later than 1 February, request that proposals for resolutions be included on the agenda. All shareholders may also ask questions at the general meetings. Simultaneous interpretation between English and Danish is available, and the meeting is webcast live. The Novo Nordisk Foundation The Foundation supports Novo Nordisk in achieving its vision and adhering to the Charter for Companies in the Novo Group. All strategic and operational matters are solely decided by the Board and the management of Novo Nordisk. Overlapping board memberships help to ensure that the Foundation and Novo Nordisk share a common vision and strategy. Board of Directors The company has a two-tier board structure consisting of the Board of Directors and Executive Management. The two bodies are separate and no person serves as a member of both. On behalf of the shareholders, the Board determines the company’s overall strategy and actively contributes to developing the company as a focused global pharmaceutical company. The Board supervises Executive Management in its decisions and operations and the company may issue new shares or buy back shares in accordance with authorisations granted by the general meeting and recorded in the minutes. The Board has 11 members, seven of whom are elected by shareholders at general meetings and four by employees. Shareholder-elected board members serve a one-year term and may be re-elected at the general meeting. Board members must retire at the first general meeting after reaching the age of 70. A proposal for nomination of Board members is presented by the Chairmanship to the Board, taking into account required competences and reflecting the result of a self-assessment process. The assessment process is based on written question- naires and evaluates whether each Board member and executive participates actively in board discussions and contributes with independent judgement. In nominating candidates, the Chairmanship seeks to achieve a balance between renewal and continuity. Four of the share- holder-elected board members are independent as defined by the Danish Corporate Governance Recommendations, while three shareholder-elected board members are related to the majority shareholder through board or executive positions, and two of these have also previously been executives in Novo Nordisk (see pp 43–45). Under Danish law, Novo Nordisk employees in Denmark are entitled to be represented by half of the total number of board members elected at the general meeting. Board members elected by employees serve a four-year term and have the same rights, duties and responsibilities as shareholder-elected board members. In 2009, the Board met seven times. Four meetings were attended by all board members; three of the members had to be excused from attending one meeting each during the year. With the exception of agenda items reserved for the Board’s internal discussion at each meeting, executives attend and may speak, without voting rights, at board meetings to ensure that the Board is adequately informed of the company’s operations. Executives’ regular feedback from meetings with investors allows board members an insight into major shareholders’ views of the company. Novo Nordisk Annual Report 2009 37 i p h s r e d a e l d n a e c n a n r e v o G Chairmanship A chairman and a vice chairman elected by the Board from among its members form the Chairmanship of the Board. In 2009, the Chairmanship held seven meetings and both members participated in all meetings. The Chairmanship carries out administrative tasks such as planning board meetings to ensure a balance between overall strategy-setting and financial and managerial supervision of the company. It also reviews the fixed asset investment portfolio. Other tasks include recom- mending the remuneration of directors and executives and suggesting candidates for election by the general meeting. In practice, the Chairmanship has the roles and responsibilities of a nomination committee and a remuneration committee. In March 2009, the Board re-elected Sten Scheibye chairman and Göran A Ando vice chairman. Research and development facilitator The Board has appointed a research and development facilitator to assist the Board and Executive Management in preparing the Board’s discussions about research and development. The key tasks are reviewing R&D strategies and evaluating the competitiveness of the R&D organisation, processes and projects. In March 2009, the Board re-elected Göran A Ando as R&D facilitator. Audit Committee The Audit Committee currently has three members elected by the Board from among its members. All members qualify as independent and have been designated as financial experts as defined by the US Securities and Exchange Commission (SEC). In addition, two members have been designated as financial experts under Danish law. In 2009, the Audit Committee held four meetings and all members participated in all meetings except for one occasion when one member was absent. The Audit Committee assists the Board of Directors with oversight of the external auditors, the internal audit function, complaints regarding financial fraud and business ethics, the financial reporting process and reviews of investments. The Audit Committee conducts a self-assessment annually, evaluating whether each member participates actively in discussions and contributes with independent judgement. In March 2009, the Board re-elected Kurt Anker Nielsen as chairman and re-elected Jørgen Wedel as a member of the Audit Committee. At the same time, Hannu Ryöppönen was elected to the Audit Committee as a new member. Whistleblower programme Concerns over possible breaches of ethical business conduct and financial fraud may be raised anonymously with the Audit Committee by telephone or on the web in eight languages, with no subsequent disciplinary or retaliatory action towards the whistleblower. The whistleblower system is managed by an external vendor. Employees may also report ethical misconduct to our internal compliance hotline. See p 35. Management of the company The Board has delegated responsibility for day-to-day management to Executive Management. Executive Management consists of the president and chief executive officer and four other executives (see p 46) and is responsible for organisation of the company as well as allocation of resources, determination and implementation of strategies and policies, direction-setting and ensuring timely reporting and provision of information to the Board and the stake holders of Novo Nordisk. Executive Management meets at least once a month and often more frequently. The Board appoints members of Executive Management and determines remuneration. The Chairmanship reviews the performance of the executives. The Novo Nordisk model of corporate governance Corporate governance codes and practices Novo Nordisk is in full compliance with the Danish Corporate Governance Recommendations and – as a foreign listed issuer – is in general compliance with the corporate governance standards of the stock exchanges in London and the New York Stock Exchange, where Novo Nordisk’s B shares and ADRs, respectively, are listed. We expect that our B shares will be delisted from the London Stock Exchange during 2010. The applicable corporate governance codes for each exchange and a detailed review of Novo Nordisk’s compliance are available at novonordisk. com/about_us. The Novo Nordisk corporate governance model sets the direction and is the framework within which the com pany is managed (see also p 28). 38 Novo Nordisk Annual Report 2009 Governance structure Framework Shareholders Assurance External codes and regulations Novo Nordisk Way of Management Board of Directors Chairmanship Audit Committee R&D facilitator Executive Management Organisation Financial audit and non-fi nancial assurance Facilitation Organisational audit Quality audit i p h s r e d a e l d n a e c n a n r e v o G Assurance External audit The company’s financial reporting and the internal controls over financial reporting processes are audited and assessed by an external auditor elected by the annual general meeting. The auditor acts in the interest of shareholders and the public (see p 106). The auditor reports any significant findings regarding accounting matters and any significant internal control deficien- cies via the Audit Committee to the Board and in the Auditor Long-Form report to the Board. As part of the company’s commitment to financial, environmental and social responsibility, Novo Nordisk voluntarily includes an assurance report for non-financial reporting in its annual report (see p 107). The assurance provider reviews whether the non- financial performance information included in the annual report is inclusive, covers aspects deemed to be material and is responsive to company stakeholders. Internal audit The internal audit function provides independent and objective assurance primarily within internal control and governance. To ensure that the function works independently of management, its charter, audit plan and budget are approved by the Audit Committee. The Audit Committee must approve the appointment, remuneration and dismissal of the head of the internal audit function. Internal control Novo Nordisk’s risk management and internal controls in relation to financial processes are designed with the purpose of effectively controlling the risk of material misstatements. A detailed description of the implemented internal controls and risk management system in relation to financial reporting processes is available at novonordisk.com/about_us/corporate_ governance/internal_control.asp. Novo Nordisk is in compliance with US Sarbanes–Oxley Act section 404, which requires detailed documentation of the design and operation of financial reporting processes. Novo Nordisk must ensure that there are no material weaknesses in the internal controls that could lead to a material misstatement in its financial reporting. The company’s conclusion and the auditor’s evaluation of these processes are included in its Form 20-F filing to the US Securities and Exchange Commission. Executive remuneration Board members The remuneration of the Board of Directors is aligned with other major Danish companies, and payments made to members of the Board are reported in detail on pp 78–80. The remuneration of board members is presented for approval by the annual general meeting. Under this separate agenda item, the actual remuneration of the Board of Directors for the previous year and the level for the current year are approved. Each board member receives a fixed fee per year. Board members receive a fixed amount (the base fee) while the chairman receives 2.5 times the base fee and the vice chairman 1.5 times. Service on the Audit Committee entitles members to additional payments of 0.5 times the base fee or, in the case of the committee chair, 1.25 times the base fee. Individual board members may take on specific ad hoc tasks outside the normal assigned duties. In such cases the Board determines a fixed fee for the work. This is the case for the R&D facilitator. Expenses, such as travel and accom- modation in relation to board meetings as well as relevant training, are reimbursed. It was decided at the 2009 Annual General Meeting that all board members residing outside Denmark are to be paid a fixed travel allowance per meeting attended in Denmark. No travel allowance is paid to board members when attending board meetings outside Denmark. Board members are not offered stock options, warrants or other incentive schemes. Executives Executive remuneration is proposed by the Chairmanship and requires the approval of the entire Board. Detailed reporting of 2009 executive pay appears on pp 76–80. Levels are evaluated annually against a Danish benchmark of large companies with international activities. This information is supplemented by information on remuneration levels for similar positions in the international pharmaceutical industry. Executive remuneration packages consist of a fixed base salary, a short-term cash bonus, a long-term share-based incentive, pensions and other benefits. For executives being expatriated at the request of the company, the remuneration package is based on current Danish remune- ration levels, including pension entitlements, while a specific expatriation package is added for the period of expatriation. The short-term cash incentive bonus may yield a maximum annual payout equal to four months’ fixed base salary plus pension contribution. The long-term incentive programme may result in a maximum allocation per year equal to eight months’ fixed base salary plus pension contribution. Fixed base salary The fixed base salary for each executive is between 40% and 60% of the total value of the remuneration package. Short-term incentive programme The short-term incentive programme consists of a cash bonus linked to the achievement of predefined functional and individual business targets for each executive. The targets for the chief executive officer are set by the chairman of the Board, while targets for executive vice presidents are set by the chief executive officer. The chairman of the Board evaluates the degree of target achievement for each executive and presents this, along with proposed cash bonus payments, for approval by the Board. Long-term incentive programme In January each year the Board decides whether to establish a long-term incentive programme for the calendar year. The programme is based on a calculation of shareholder value creation compared with budgeted performance. Aligned with Novo Nordisk’s long-term financial targets, the calculation of shareholder value creation is based on reported operating profit after tax reduced by a weighted average cost of capital-based return requirement on average invested capital. A proportion of the calculated shareholder value creation is allocated to a joint pool for the participants, which includes Executive Management and other members of the Senior Management Board. Novo Nordisk Annual Report 2009 39 i p h s r e d a e l d n a e c n a n r e v o G For executives the joint pool operates with a yearly maximum allocation per participant equal to eight months’ fixed base salary plus pension contribution. The joint pool may, subject to the Board’s assessment, be reduced in the event of lower-than-planned performance in significant research and development projects or key sustainability projects. Targets for non-financial performance may include achievement of certain milestones by set dates. Once the joint pool has been approved by the Board, the total cash amount is converted into Novo Nordisk B shares at market price. The market price is calculated as the average trading price for Novo Nordisk B shares on NASDAQ OMX Copenhagen in the open trading window following the release of financial results for the year prior to the bonus year. The shares in the joint pool are allocated to the participants on a pro rata basis: the chief executive officer has three units, executive vice presidents have two units each and other members of the Senior Management Board have one unit each. Joint pool shares for a given year are locked up for three years before they are transferred to participants. If a participant resigns during the lock-up period, his or her shares will remain in the joint pool to the benefit of the other participants. In the lock-up period, the Board may remove shares from the joint pool in the event of lower-than-planned value creation in subsequent years if, for example, the economic profit falls below a predefined threshold compared with the budget for a particular year. In the lock-up period the value of the joint pool will change depending on the development in the share price, aligning the interests of participants with those of shareholders. Pension The pension contribution for executives is between 25% and 30% of the fixed base salary including bonus. Other benefits Executives receive non-monetary benefits, such as a company car and phone. Such other benefits are approved by the Board by delegation of powers to the Chairmanship. The Chairmanship informs the Board of the process and outcome. In addition, the executives may participate in programmes that are offered to all Novo Nordisk employees. Expenses incurred by the executives in connection with business travel, conferences, education, etc, are reimbursed. Severance In addition to their notice period, executives are entitled, in the event of termination, whether by Novo Nordisk or by the individual due to a merger, acquisition or takeover of Novo Nordisk, to a severance payment of up to 36 months’ fixed base salary plus pension contribution. This amounts to between 14.3 million and 24.4 million Danish kroner per executive. The severance payment is three months’ fixed base salary plus pension contribution per year of employment as an executive, but in no event less than 12 or more than 36 months’ fixed base salary plus pension contribution. The Remuneration Policy for Novo Nordisk board members and Executive Management is available at novonordisk.com/about_us/ corporate_governance/remuneration.asp. Application of the Remuneration Policy in 2009 is described in notes 29 and 30 on pp 76–80. Remuneration for board members and Executive Management will be in accordance with this policy for 2010. This is also expected to be the case for 2011. Global remuneration strategy We aspire to be an employer of choice. The company’s remune- ration strategy aims to attract, retain and motivate employees 40 Novo Nordisk Annual Report 2009 around the world. Compensation is designed to be competitive and to align interests with those of shareholders. On a global basis, compensation packages are guided by five broad principles: • A total rewards approach In addition to base pay, incentives and benefits, non-financial remuneration such as continuing education, career progression and working environment are important elements of the ‘total rewards’ package. • Market linked Salaries, incentives and benefits are positioned and main- tained at the level required to be competitive in local markets, generally between the local market median and upper quartile. Novo Nordisk also provides adequate life insurance, healthcare and pension provisions irrespective of local competitive practice. • Performance linked There is a transparent, direct link between employee performance and remuneration. Variable pay is used to reward performance, with base pay increases reflecting market conditions. • Transparency Clear communication of remuneration programmes is a priority, and all costs associated with compensation practices are known and publicly disclosed. • Flexibility Subject to corporate governance or legal requirements, flexibility is encouraged. Flexible solutions must be cost neutral to Novo Nordisk, and adequate levels of insurance must be maintained. Risk management Executive Management, reporting to the Board of Directors, is responsible for maintaining and monitoring a systematic, integrated process to continually assess the risks of a wide range of issues. The Risk Management Board, representing senior managers from all parts of the value chain and chaired by the chief financial officer, sets the strategic direction for the risk management process and challenges the overall risk and control profile for Novo Nordisk. Risk management is also embedded in our governance system as a part of the policy framework of the Novo Nordisk Way of Management. Our policy for risk management is that risks are managed to enable the continued growth of our business and to protect our people, assets and reputation. This means we will: • utilise an effective and integrated risk management process while maintaining business flexibility • identify and assess material risk to enable continued growth of our business • monitor, manage and mitigate risks. Risk management process Each quarter, all major business areas in the company are required to report to the Risk Office their most significant risks, i p h s r e d a e l d n a e c n a n r e v o G considering both financial and non-financial risks, along with plans or processes to manage these risks. The risk identification process is both top down and bottom up, with risks escalated from all parts of the organisation. The Risk Office, acting as the secretariat for the Risk Management Board, challenges business areas about reported risks and encourages exploration of longer-term concerns. Reported risks are then consolidated into a ranking and assessment of the company’s key risks. This information is presented to the Risk Management Board and from here to Executive Management and the Board of Directors. Our policy for risk management is that risks are managed to enable the continued growth of our business and to protect our people, assets and reputation. All assessments of risk take into account the likelihood of an event and its potential impact on the business. Impacts are quantified and assessed in terms of potential financial loss and reputational damage. Risks are assessed both as gross risk and net risk. The assessment of gross risk assumes that no mitigating actions have been implemented, whereas net risk assessment takes into account mitigating actions and their anticipated effect. Enterprise risk management increases our ability to assess and understand risks separately and in relation to each other from a global perspective but with local control. The risks that we deem of greatest importance to our business are categorised and described below. They are not, however, ranked. Many of these issues are also discussed elsewhere in the report. Market risks Price pressures Novo Nordisk focuses on developing differentiated products that offer improved treatment options for patients and economic benefits to healthcare systems. As healthcare costs have risen, outstripping the pace of economic growth, there is increasing economic, political and regulatory pressure to contain pharma- ceutical prices. In the US, healthcare reform legislation under consideration at the beginning of 2010 targets drug prices, constituting a key risk for Novo Nordisk in the short term. We believe expanded access to healthcare will ultimately result in more people receiving treatment for chronic diseases such as diabetes. Documenting treatment benefits is critical to ensuring that innovation is properly valued. Novo Nordisk is increasing the number of clinical and health-economic studies to substantiate the benefits of its products to patients and society, particularly for improved diabetes treatment. Biosimilar competition The market for therapeutic proteins is becoming more attractive to biosimilar producers as more lenient regulatory rules in Europe have made it easier for producers to introduce biosimilar products when patent protection for branded products expires. More lenient rules have also been proposed in the US. The introduction of lower-priced, biosimilar products could potentially result in a significant reduction in net sales. Traditional, earlier generations of insulin products have been off patent for years so this is a risk with which Novo Nordisk is familiar and has considerable experience addressing. Biosimilar products have been present on the European market for several years but have had only a marginal impact. In countries such as India and China, where the company has long had biosimilar competition, Novo Nordisk has maintained an insulin volume market share of approximately 60%. R&D risks Bringing new products to market Continued growth in our business, particularly as patents expire, depends on the company’s ability to develop and offer better treatments or breakthrough products to patients. While we commit substantial effort and resources to research and development activities, certain challenges could delay the introduction of new products. These include an increasingly difficult regulatory environment, recruitment of patients for large-scale clinical trials and issues related to production processes. Regulatory approval Before a new treatment can be launched, it must receive regulatory approval based on its safety and efficacy. The approval process for new products is generally lengthy and can be subject to delays. Failure to obtain, or delays in obtaining, regulatory clearance to market products could adversely affect the results of operations. Even after a product is approved, it may be subject to regulatory action based on newly discovered findings about safety or efficacy. One example of such a potential risk could be the issue raised in Diabetologia, the journal of the European Association for the Study of Diabetes, concerning the potential carcinogenicity of certain insulin analogues2. Regulatory action may adversely affect product marketing, require changes to product labelling or even lead to withdrawal of regulatory approval. Production and quality risks Supply disruptions Failure or breakdown in any of the company’s vital production facilities could adversely affect the results of operations, as well as possibly causing employee injuries or infrastructure damage. Fire-prevention design, alarms and fire instructions, annual inspections, back-up facilities and safety inventories are aimed at mitigating this risk. To spread this risk geographically and optimise costs and supply logistics, we are expanding production capacity beyond the company’s European base to the US, Brazil and China. As our sourcing becomes more global, our supply chain expands, which increases risks involved in supply chain management. Risk of product recalls Product safety is directly linked to patient well-being, so safety and product quality are paramount concerns from both financial and reputational perspectives. While the gross risk is very high, with product safety having the potential to adversely affect operations, we believe that our vigorous efforts to manage and mitigate this risk effectively reduce the company’s net risk profile. We have a corporate quality system in place, with quality audits, quality improvement plans and systematic management reviews. Novo Nordisk Annual Report 2009 41 or reputational risk. Our reputation as a trusted healthcare partner is integral to effectively maintain and grow our business. At the same time, the regulatory context for marketing activity is constantly changing. A business ethics policy and global business ethics procedures, paired with close monitoring of performance and enhanced reporting requirements, all aim to mitigate these risks. The policy supplements long-standing local ethics and compliance policies. Significant resources are also dedicated to training marketing and sales people around the world. Legal risks Intellectual property Patent rights are a very important tool for promoting innovation, leading to new and better products and processes, and stimu- lating long-term economic growth and job creation. We will enforce our patent rights towards infringing parties if deemed advisable by Executive Management after having carefully analysed the commercial and legal aspects of such enforcement. Novo Nordisk patent rights will be defended against legal chal- lenges with respect to validity and enforceability if deemed advisable after a similar analysis. Legal issues related to intellectual property are included on pp 84–85. Other legal risks Legal issues related to product liability claims and business practices are included in the overview of current legal cases on pp 84–85. i p h s r e d a e l d n a e c n a n r e v o G People-related risks Attracting and retaining talented people Our ability to develop innovative products and ensure growth and high performance depends on our ability to attract and develop talented people. The global financial crisis has had significant impact on the labour market, which has been expressed in terms of more applicants to vacant positions across functional areas and geographies, as well as increased retention of employees. In most markets the turnover rates are lower than the local market bench- mark. We make substantial investments in training, and this makes our people attractive to other companies, particularly those seeking to build a strong platform within the diabetes segment. Appropriately managing remuneration, non-financial benefits and recognition are critical success factors in conjunction with offering our people the best development opportunities working for a good cause. This is critical to the company’s long-term success and is prioritised accordingly. Financial risks Exchange rates As a global business, fluctuations in currency exchange rates impact the reported performance. Novo Nordisk’s reporting currency and the functional currency of corporate operations is the Danish krone, which is closely linked to the euro in a narrow range of ±2.25%. However, the company has substantial exposure to other currencies, including the US dollar, Japanese yen, Chinese yuan and British pound. For information on how the company manages these risks, see note 28 in the financial statements on p 75. Ethical risks Marketing practices In a competitive environment with increasing public scrutiny and regulation, marketing practices can be the source of legal action Managing risks throughout our business External stakeholders Board of Directors Executive Management Risk Management Board The entire range of risks is consolidated and challenged every quarter. Key risks are identifi ed throughout the global organisation while control is maintained locally. t c a p m I Critical Major Moderate Minor Unlikely Possible Likely Likelihood Very likely • Gross assessment • Net assessment after mitigation 42 Novo Nordisk Annual Report 2009 i p h s r e d a e l d n a e c n a n r e v o G Board of Directors Sten Scheibye, picture 1 From 1995 to 2008, Mr Scheibye was president and CEO of Coloplast A/S, Denmark. Before joining Coloplast in 1993, Mr Scheibye served as senior vice president, sales and marketing in Leo Pharma A/S, Denmark. He joined Leo Pharma in 1981. Mr Scheibye is chairman of the Board of Directors of the Trade Council of Denmark and the Board of Governors of DTU (the Technical University of Denmark) and a member of the boards of Danske Bank A/S, Rambøll Gruppen A/S, DADES A/S, the Danish Industry Foundation and the Aase and Ejnar Danielsen Foundation, all in Denmark. Furthermore, he is chairman of the Denmark–America Foundation and vice chairman of the Danish Fulbright Commission. Mr Scheibye has an MSc in Chemistry and Physics from 1978 and a PhD in Organic Chemistry from 1981, both from the University of Aarhus, Denmark, and a BComm from the Copenhagen Business School, Denmark, from 1983. The special competences possessed by Mr Scheibye that are important for the performance of his duties are his knowledge of the healthcare industry, particularly in relation to patients requiring chronic care, and managerial skills relating to inter- national organisations. Dr Ando qualified as a medical doctor at Linköping Medical University, Sweden, in 1973, and as a specialist in general medicine at the same institution in 1978. The special competences possessed by Dr Ando that are important for the performance of his duties are his medical qualifications and his extensive executive background within the international pharmaceutical industry. Dr Ando became vice chairman of the Novo Nordisk A/S Board in 2006. Dr Ando has also been designated research and development facilitator by the Board of Novo Nordisk A/S. Henrik Gürtler, picture 3 Henrik Gürtler has been president and CEO of Novo A/S, Denmark, since 2000. He was employed by Novo Industri A/S, Denmark, as an R&D chemist in the Enzymes Division in 1977. After a number of years in various specialist and managerial positions within this area, Mr Gürtler was appointed corporate vice president of Human Resource Development in Novo Nordisk A/S in 1991, and in 1993 he was appointed corporate vice president of Health Care Production. From 1996 to 2000, he was a member of Corporate Management of Novo Nordisk A/S with special responsibility for Corporate Staffs. Mr Gürtler is chairman of the boards of Novozymes A/S, Copenhagen Airports A/S and COWI A/S, all in Denmark. Mr Scheibye became vice chairman of the Novo Nordisk A/S Board in 2004 and chairman in 2006. Mr Gürtler has an MSc in Chemical Engineering from DTU (the Technical University of Denmark) (1976). Göran A Ando, picture 2 Dr Ando was CEO of Celltech Group plc, UK, until 2004. He joined Celltech from Pharmacia, now Pfizer, US, where he was executive vice president and president of R&D with additional responsibilities for manufacturing, IT, business development and M&A from 1995 to 2003. From 1989 to 1995, Dr Ando was medical director, moving to deputy R&D director and then R&D director of Glaxo Group, UK. He was also a member of the Glaxo Group Executive Committee. Dr Ando is a specialist in general medicine and a founding fellow of the American College of Rheumatology in the US. Dr Ando serves as chairman of the Board of Novexel SA, France, as vice chairman of the Board of S*Bio Pte Ltd, Singapore, and as a board member of Novo A/S, Denmark, EDBI Pte Ltd, Singapore, NicOx SA, France, EUSA Pharma, UK, CBio Ltd, Australia, and Albea Pharmaceuticals AG, Switzerland. Dr Ando also serves as a senior advisor to Essex Woodlands Health Ventures UK Ltd. and is chairman of the Scientific Advisory Board, Southwest Michigan First, US. The special competences possessed by Mr Gürtler that are important for the performance of his duties are his knowledge of the Novo Group’s business and its policies and his knowledge of the inter- national biotech industry. Johnny Henriksen, picture 4 Johnny Henriksen joined Novo Nordisk in January 1986 and currently works as an environmental advisor in Product Supply. Mr Henriksen has an MSc in Biology from the University of Copenhagen, Denmark (1977). Pamela J Kirby, picture 5 From 2001 to 2003, Pamela J Kirby was CEO of the contract research organisation Quintiles Transnational Corporation, US, and before that Dr Kirby was director of Global Strategic Marketing of F. Hoffman-La Roche Limited, Switzerland, from 1998 to 2001. Name (male/female) Sten Scheibye (m) Göran A Ando (m) Henrik Gürtler (m) Johnny Henriksen2 (m) Pamela J Kirby (f) Anne Marie Kverneland2 (f) Kurt Anker Nielsen (m) Søren Thuesen Pedersen2 (m) Hannu Ryöppönen (m) Stig Strøbæk2 (m) Jørgen Wedel (m) First elected 2003 2005 2005 2002 2008 2000 2000 2006 2009 1998 2000 Term 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 2010 Nationality Danish Swedish Danish Danish British Danish Danish Danish Finnish Danish Danish Date of birth 03 Oct 1951 06 Mar 1949 11 Aug 1953 19 Apr 1950 23 Sep 1953 24 Jul 1956 08 Aug 1945 18 Dec 1964 25 Mar 1952 24 Jan 1964 10 Aug 1948 Independence3 Independent Not independent1 Not independent1 Not independent Independent Not independent Not independent1,4 Not independent Independent4 Not independent Independent4 1 Member of management or the Board of Novo A/S or the Novo Nordisk Foundation. 2 Elected by employees of Novo Nordisk. 3 In accordance with Section V4 of Recommendations for Corporate Governance designated by NASDAQ OMX Copenhagen. 4 Mr Nielsen, Mr Ryöppönen and Mr Wedel qualify as independent Audit Committee members as defined by the US Securities and Exchange Commission (SEC). Novo Nordisk Annual Report 2009 43 From 1996 to 1998, Dr Kirby was commercial director at British Biotech plc, UK, and from 1979 to 1996, Dr Kirby was employed by Astra (now AstraZeneca) in various international positions, most recently as regional director/vice president of Corporate Strategy, Marketing and Business Development. Dr Kirby is chairman of the Board of Scynexis Inc, US, and a board member of Smith & Nephew plc, UK, and Informa plc, Switzerland. Dr Kirby has a BSc in Pharmacology (1975) and a PhD in Clinical Pharmacology (1978), both from the University of London, UK. The special competences possessed by Dr Kirby that are important for the performance of her duties are her scientific qualifications and her extensive executive background within the international pharmaceutical and biotech industries, particularly as relates to marketing, strategic planning, clinical trials and life cycle manage- ment in relation to pharmaceutical products. Anne Marie Kverneland, picture 6 Anne Marie Kverneland joined Novo Nordisk in July 1981 as a laboratory technician and is currently working as a full-time shop steward. Ms Kverneland has a degree in medical laboratory technology from the Copenhagen University Hospital, Denmark (1980). Kurt Anker Nielsen, picture 7 Kurt Anker Nielsen was initially employed in Novo Industri A/S in 1974 as an economist. He served as CFO and deputy CEO of Novo Nordisk A/S until 2000, and from 2000 to 2003 he was CEO of Novo A/S. He serves as vice chairman of the Board of Novozymes A/S and as a member of the boards of the Novo Nordisk Foundation, LifeCycle Pharma A/S, Denmark, and ZymoGenetics, Inc, US. He is chairman of the Board of Reliance A/S, Denmark, and a member of the board of Vestas Wind Systems A/S, Denmark. He is also elected Audit Committee chairman for Novozymes A/S, LifeCycle Pharma A/S, ZymoGenetics, Inc. and Vestas Wind Systems A/S. Mr Nielsen serves as chairman of the Board of Directors of Collstrups Mindelegat, Denmark. Mr Nielsen has an MSc in Commerce and Business Administration from the Copenhagen Business School, Denmark (1972). The special competences possessed by Mr Nielsen that are important for the performance of his duties are his in-depth knowledge of Novo Nordisk A/S and its businesses, his working knowledge of the global pharmaceutical industry and his experience with accounting, financial and capital markets issues. Mr Nielsen has been chairman of the Audit Committee at Novo Nordisk A/S since 2004 and is also designated as financial expert (as defined by the SEC)9. Søren Thuesen Pedersen, picture 8 Søren Thuesen Pedersen joined Novo Nordisk in January 1994 and is currently working as a specialist in Global Quality Development. Mr Pedersen has been an employee-elected member of the Board of Directors of the Novo Nordisk Foundation since 2002. Mr Pedersen has a BSc in Chemical Engineering from the Danish Academy of Engineers (1988). Hannu Ryöppönen, picture 9 Hannu Ryöppönen was CFO and deputy CEO of Stora Enso Oyj, Finland, until 2009. Before that he was CFO and an executive in Royal Ahold, the Netherlands, from 2003 to 2005 and served on the Board 2 4 6 i p h s r e d a e l d n a e c n a n r e v o G 1 3 5 44 Novo Nordisk Annual Report 2009 of Directors of the ICA Group, Sweden, including the chairmanship of the Audit Committee. From 1999 to 2003, Mr Ryöppönen was finance director of Industri Kapital Group, UK. Mr Ryöppönen served as CFO of the IKEA Group, Denmark, from 1985 to 1998, including a position as deputy CEO in IKANO Asset Management from 1998 to 1999. From 1977 to 1985, Mr Ryöppönen held various management positions at Chemical Bank in the US and the UK, as well as at Alfa Laval in the US and Sweden. Mr Ryöppönen is the chairman of the Board of Directors of Tiimari Oyj, a member of the Board of Directors of Neste Oil Oyj, Amer Sports Oyj and Rautaruukki Oyj, all in Finland. Mr Ryöppönen is also the chairman of the Audit Committees of Amer Sports Oyj and Rautaruukki Oyj, and a member of the Audit Committee of Neste Oil Oyj. Finally, Mr Ryöppönen is chairman of the Board of Directors of the Altor private equity funds, Altor 2003 GP Limited, Altor Fund II GP Limited and Altor III GP Limited, Jersey, Channel Islands, and a member of the Board of Directors of the private equity fund Value Creation Investments Limited, Jersey, Channel Islands. Mr Ryöppönen has a BA in Business Administration (1976) from Hanken School of Economics, Helsinki, Finland. The special competences possessed by Mr Ryöppönen that are important for the performance of his duties are his international executive background and thorough understanding of managing finance operations in global organisations, in particular in relation to accounting, financing and capital markets issues, but also his experience within private equity and Mergers & Acquisitions (M&A). In March 2009, the Board of Directors of Novo Nordisk A/S elected Mr Ryöppönen as a member of the Audit Committee and designated him financial expert under both Danish and US law9. Stig Strøbæk, picture 10 Stig Strøbæk joined Novo Nordisk in 1992 as an electrician and is currently working as a full-time union steward. Stig Strøbæk has been an employee-elected member of the Board of Directors of the Novo Nordisk Foundation since 1998. Mr Strøbæk has a diploma in electrical engineering and a diploma in further training for board members from the Danish Employees’ Capital Pension Fund. Jørgen Wedel, picture 11 Jørgen Wedel was executive vice president of the Gillette Company, US, until 2001. He was responsible for Commercial Operations, International, and was a member of Gillette’s Corporate Management Group. From 2004 to 2008, he was a board member of ELOPAK AS, Norway. Mr Wedel has an MSc in Commerce and Business Administration from the Copenhagen Business School, Denmark (1972), majoring in accounting and financing, and an MBA from the University of Wisconsin, US (1974). The special competences possessed by Mr Wedel that are important for the performance of his duties are his background as a senior sales and marketing executive in a globally consumer-oriented company within the fast-moving consumer goods industry, as well as particular insight into the US market. In addition, he possesses competences in relation to auditing and accounting. Mr Wedel has been a member of the Audit Committee at Novo Nordisk A/S since 2005, and in March 2009 he was designated as financial expert under both Danish and US law 9. i p h s r e d a e l d n a e c n a n r e v o G 8 10 Novo Nordisk Annual Report 2009 45 7 9 11 Executive Management Lars Rebien Sørensen, picture A Lars Rebien Sørensen joined Novo Nordisk’s Enzymes Marketing in 1982. Over the years, he has been stationed in several countries, including the Middle East and the US. Mr Sørensen was appointed a member of Corporate Management in May 1994 and given special responsibility within Corporate Management for Health Care in December 1994. He was appointed president and CEO in November 2000. Mr Sørensen is a member of the boards of ZymoGenetics, Inc, US, DONG Energy A/S and Danmarks Nationalbank, both Denmark, as well as a member of the Bertelsmann AG Supervisory Board, Germany. Mr Sørensen received the French award Chevalier de l’Ordre National de la Légion d’Honneur in 2005. Mr Sørensen has an MSc in Forestry from the Royal Veterinary and Agricultural University (now the University of Copenhagen), Denmark, from 1981, and a BSc in International Economics from the Copenhagen Business School, Denmark, from 1983. Since October 2007, Mr Sørensen has been adjunct professor at the Life Sciences Faculty of the University of Copenhagen. Mr Sørensen is a Danish national, born on 10 October 1954. Jesper Brandgaard, picture B Jesper Brandgaard joined Novo Nordisk in 1999 as corporate vice president of Corporate Finance and was appointed CFO in November 2000. He serves as chairman of the boards of SimCorp A/S, NNE Pharmaplan A/S and NNIT A/S, all in Denmark. Mr Brandgaard has an MSc in Economics and Auditing from 1990 as well as an MBA from 1995, both from the Copenhagen Business School, Denmark. Mr Brandgaard is a Danish national, born on 12 October 1963. Lise Kingo, picture C Lise Kingo joined Novo Nordisk in 1988 and has worked over the years to build up the company’s Triple Bottom Line approach. Ms Kingo was appointed senior vice president in 1999 and executive vice president, Corporate Relations, in 2002. Ms Kingo serves as chair of the board of the Steno Diabetes Center A/S, Denmark. She is also associate professor at the Medical Faculty, Vrije Universiteit, Amsterdam, the Netherlands. Ms Kingo has a BA in Religions and a BA in Ancient Greek Art from the University of Aarhus, Denmark, from 1986, a BComm in Marketing Economics from the Copenhagen Business School, Denmark, from 1991, and an MSc in Responsibility and Business Practice from the University of Bath, UK, from 2000. Ms Kingo is a Danish national, born on 3 August 1961. Kåre Schultz, picture D Kåre Schultz joined Novo Nordisk in 1989 as an economist in Health Care, Economy & Planning. In November 2000, he was appointed chief of staffs. In March 2002, he took over the position of COO. Mr Schultz is a member of the Board of LEGO A/S, Denmark. Mr Schultz has an MSc in Economics from the University of Copenhagen, Denmark, from 1987. Mr Schultz is a Danish national, born on 21 May 1961. Mads Krogsgaard Thomsen, picture E Mads Krogsgaard Thomsen joined Novo Nordisk in 1991. He was appointed CSO in November 2000. He sits on the editorial boards of international journals and is a member of the Board of Cellartis AB, Sweden. Dr Thomsen has a DVM from the Royal Veterinary and Agricultural University (now the University of Copenhagen), Denmark, from 1986, where he also obtained a PhD in 1989 and a DSc in 1991, and became adjunct professor of pharmacology in 2000. He is a former president of the National Academy of Technical Sciences (ATV), Denmark. Dr Thomsen is a Danish national, born on 27 December 1960. i p h s r e d a e l d n a e c n a n r e v o G B D A C E Other members of the Senior Management Board Kim Bundegaard – Business Assurance Jesper Bøving – CMC Supply Flemming Dahl – Biopharmaceuticals Claus Eilersen – Japan & Korea* Peter Bonne Eriksen – Regulatory Affairs Lars Green – Corporate Finance Jerzy Gruhn – North America Susanne Hundsbæk-Pedersen – Devices & Sourcing Jesper Høiland – International Operations Lars Fruergaard Jørgensen – IT & Corporate Development Terje Kalland – Biopharmaceuticals Research Unit Lars Guldbæk Karlsen – Global Quality Jesper Kløve – Device Research & Development Per Kogut – NNIT Peter Kristensen – Global Development Peter Kurtzhals – Diabetes Research Unit Lars Christian Lassen – Corporate People & Organisation Patrick Loustau – Global Marketing Ole Ramsby – Legal Affairs Jakob Riis – Liraglutide Martin Soeters – Europe Kim Tosti – Diabetes Finished Products Per Valstorp – Product Supply Hans Ole Voigt – NNE Pharmaplan Henrik Wulff – Diabetes API * As of 1 January 2010, Korea is included as a region with Japan. Australia and New Zealand are included in International Operations. See p 63. 46 Novo Nordisk Annual Report 2009 Shares and capital structure We aim to communicate openly with stakeholders about the company’s financial and business development as well as strategies and targets. Through active dialogue, we seek to obtain fair and efficient pricing of Novo Nordisk shares. To keep investors updated on financial and operating performance as well as the progress of clinical programmes, Novo Nordisk hosts conference calls with Executive Management following key events and the release of financial results, which are also accessible by webcast. Executive Management and Investor Relations also travel extensively to ensure that all investors with a major holding of Novo Nordisk shares can meet with Novo Nordisk on a regular basis and that a high number of smaller investors or potential investors also have access to the company. Roadshows are primarily held in major European and North American financial centres. A wide range of other investor activities are held during the year. Investors and financial analysts are welcome to visit our headquar- ters in Bagsværd, Denmark, as well as our regional headquarters. In 2009, meetings with investor groups were held at regional headquarters in Princeton, US, Beijing, China, and Tokyo, Japan. Investors and analysts are also invited every year to presentations of the most recent scientific results in connection with the two major scientific diabetes conferences, the American Diabetes Association and the European Association for the Study of Diabetes. We expect to host similar investor events in 2010. Share price performance Novo Nordisk’s share price increased by 22.5% from its 2008 close of 271 Danish kroner to its 31 December 2009 close of 332 kroner. This was less than the 2009 performance of the NASDAQ OMX Copenhagen 20 Index, which increased by 36% following a significant decline in 2008, reflecting the non-cyclical nature of the pharmaceutical industry. In 2008, Novo Nordisk’s share price and the NASDAQ OMX Copenhagen 20 Index decreased by 19% and 47%, respectively. In 2009, Novo Nordisk’s share price performed better than the MSCI Europe Health Care Index, increasing by 14% measured in Danish kroner. Measured in US dollars, the price of the Novo Nordisk B share increased by 24%, above the dollar gain of 18% for the MSCI US Health Care Index. We believe the positive development of the company’s share price is a reflection of our relatively solid position in a growing market with strong operating performance and ongoing progress in research and development. In 2009, factors believed to have impacted the share price positively include a solid operating performance bolstered by steady sales growth, driven by modern insulins and NovoSeven®. Substantial productivity increases, achieved through the production efficiency improvement programme cLEAN®, also contributed to a solid improvement in the gross margin of around 1.8 percentage points in 2009. In Europe, Victoza® received marketing authorisation in June 2009 and was by the end of the year launched in Germany, the UK, Denmark, Ireland, Norway, Switzerland, the Netherlands, Greece and Sweden. Good launch performance, with GLP-1 leadership positions in Germany and Denmark by the end of 2009, is believed to have impacted the share price positively. Within research and development particular focus has been on developments related to liraglutide, the once-daily human GLP-1 analogue, primarily in the US and Europe. This has been reflected in the share price, which was negatively impacted by the discussions of liraglutide’s overall risk–benefit profile at the Advisory Committee meeting organised by the Food and Drug Administration on 2 April in connection with the regulatory approval process in the US. In January 2010, Victoza® was approved in both the US and Japan. Progress made with Degludec and DegludecPlus, Novo Nordisk’s two new-generation insulin projects, which initiated phase 3 clinical development in September 2009, is also believed to have had a positive impact on the share price. Capital structure The Board of Directors believes that the current capital and share structure of Novo Nordisk serves the interests of the shareholders n o i t a m r o f n i r o t s e v n I Price development and monthly turn- over of Novo Nordisk’s B shares on NASDAQ OMX Copenhagen 2009 Novo Nordisk’s B share closing prices in DKK (left) (cid:81) Turnover of B shares in DKK billion (right) DKK 500 400 300 200 100 0 DKK billion 15 12 9 6 3 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Index: 3 January 2005 = 100 Price development of Novo Nordisk’s B shares relative to the MSCI Europe Health Care Index measured in DKK (cid:3) Novo Nordisk’s B shares (prices in DKK) MSCI Europe Health Care Index 500 400 300 200 100 0 2005 2006 2007 2008 2009 Index: 3 January 2005 = 100 Price development of Novo Nordisk’s B shares relative to the MSCI US Health Care Index measured in USD (cid:3) Novo Nordisk’s B shares (prices in USD) MSCI US Health Care Index 500 400 300 200 100 0 2005 2006 2007 2008 2009 Novo Nordisk Annual Report 2009 47 n o i t a m r o f n i r o t s e v n I Dividend payments and payout ratio (cid:81) Dividend for the year (left) Payout ratio (right) * 2007 payout ratio adjusted for the AERx® discontinuation cost and the divestment of Dako’s business activities. DKK 10 8 6 4 2 0 2005 2006 2007* 2008 2009E % 50 45 40 35 30 Breakdown of shareholders % of capital (cid:81) Novo A/S, Bagsværd, Denmark 26% (72%)* (cid:81) Novo Nordisk A/S 5% (0%)* (cid:81) Other 69% (28%)* * % of votes, excl treasury shares. Geographical distribution of share capital % of capital (cid:81) Denmark 50% (cid:81) North America 24% (cid:81) UK 20% (cid:81) Other 6% and the company. “Our guiding policy is that any excess capital, after the funding of organic growth opportunities and potential acquisitions, is returned to investors,” says Jesper Brandgaard, executive vice president and chief financial officer. “We apply a pharmaceutical industry payout ratio to dividend payments complemented by long-term share repurchase programmes.” As decided at the Annual General Meeting 2009, a reduction of the company’s B share capital, corresponding to approximately 2% of the total share capital, was effected in June 2009 by cancellation of treasury shares. This enables Novo Nordisk to continue to buy back shares without exceeding the limit for a total holding of treasury shares of 10% of the total share capital. In 2009, we repurchased shares worth 6.5 billion Danish kroner, compared to 4.7 billion kroner in 2008. This completed the 19 billion kroner share repurchase programme for the period 2006–2009. For 2010, Novo Nordisk has initiated a new share repurchase programme with an expected total repurchase value of B shares amounting to a cash value of 7.5 billion kroner. Since 2008, the share repurchase programme has primarily been conducted in accordance with the provisions of the European Commission’s Regulation no 2273/2003 of 22 December 2003, also known as the ‘Safe Harbour Regulation’. This programme 48 Novo Nordisk Annual Report 2009 gives the selected financial institutions the mandate to purchase shares independently of Novo Nordisk A/S. As part of the agenda for the Annual General Meeting 2010, the Board of Directors will propose a reduction of the company’s B share capital, corresponding to approximately 3% of the total share capital, by cancellation of treasury shares. Share capital and ownership Our total share capital of 620,000,000 Danish kroner is divided into A share capital of nominally 107,487,200 kroner, and B share capital of nominally 512,512,800 kroner, of which 32,137,945 kroner is held as treasury shares (figures as of 31 December 2009). The company’s A shares (each 1 krone) are not listed and are held by Novo A/S, a Danish public limited liability company which is 100% owned by the Novo Nordisk Foundation. According to the Articles of Association of the Foundation, the A shares cannot be divested by Novo A/S or the Foundation. As of 31 December 2009, Novo A/S also held 50,612,800 kroner of B share capital. Each holding of 1 krone of the A share capital carries 1,000 votes. Each holding of 1 krone of the B share capital carries 100 votes. With 25.5% of the total share capital, Novo A/S controls 72.4% of the total number of votes, excluding treasury shares. The total market value of Novo Nordisk’s B shares excluding treasury shares was 159 billion kroner at the end of 2009. Novo Nordisk’s B shares are quoted on the NASDAQ OMX Copenhagen and the London Stock Exchange, and on the New York Stock Exchange in the form of ADRs. The B shares are traded in units of 1 krone and the ratio of Novo Nordisk’s B shares to ADRs is 1:1. The B shares are issued to the bearer but may, on request, be registered in the holder’s name in Novo Nordisk’s register of shareholders. As Novo Nordisk B shares are in bearer form, no official record of all shareholders exists. Based on available sources of information on the company’s shareholders as of 31 December 2009, it is estimated that shares were distributed as shown in the charts on this page. At the end of 2009, the free float was 69%. Novo Nordisk has decided to terminate its listing on the London Stock Exchange as the required international exposure is obtained through the listings on NASDAQ OMX Copenhagen and the New York Stock Exchange. The low volume of trade in the company’s shares on the London Stock Exchange is not believed to justify the listing. The delisting is expected to be effective upon approval by the regulatory body and the exchange, which is expected to take place in the first quarter of 2010. Form 20-F The Form 20-F Report for 2009 is expected to be filed with the United States Securities and Exchange Commission in February 2010. The report can be downloaded from novonordisk.com/ investors. Payment of dividends Shareholders’ enquiries concerning dividend payments, transfer of share certificates, consolidation of shareholder accounts and tracking of lost shares should be addressed to Novo Nordisk’s transfer agents (see back cover). Novo Nordisk does not pay a dividend on its holding of treasury shares. As illustrated in the figure above Novo Nordisk has consistently increased both the payout rate and the paid dividend over the last five years. The dividend for 2008 paid in March 2009 was 6.00 Danish kroner per share of 1 krone. The proposed dividend payments for Novo Nordisk shares are noted in the table below: Proposed dividend payment for 2009 A shares of DKK 1 B shares of DKK 1 ADRs DKK 7.50 DKK 7.50 DKK 7.50 Analyst coverage Our company is currently covered by about 30 analysts, including the major global investment banks that regularly produce research reports about Novo Nordisk. A list of analysts covering Novo Nordisk can be found at novonordisk.com/investors. Internet Our homepage for investors is novonordisk.com/investors. It includes historical and updated information about Novo Nordisk’s activities: press releases from 1995 onwards, financial and non-financial results, a calendar of investor-relevant events, investor presentations, background information and recent annual reports. Financial calendar 2010 Annual General Meeting 24 March 2010 Dividend Ex-dividend Record date Payment B shares 25 March 2010 29 March 2010 30 March 2010 ADRs 25 March 2010 29 March 2010 5 April 2010 Announcement of financial results First three months Half year First nine months Full year 27 April 2010 5 August 2010 27 October 2010 2 February 2011 n o i t a m r o f n i r o t s e v n I Novo Nordisk Annual Report 2009 49 Novo Nordisk at a glance Novo Nordisk is a focused healthcare company and a world leader in diabetes care. Key market figures for the diabetes care business are on p 19. In its other business segment, biopharmaceuticals, Novo Nordisk has a leading position within the therapeutic areas of haemostasis management, growth hormone therapy and hormone replacement therapy. See p 27 for key market figures. Europe Sales: 34% of total sales Insulin volume share: 54% of the total market Modern insulin volume share: 51% of the segment n o i t a m r o f n i r o t s e v n I Japan & Oceania* Sales: 11% of total sales Insulin volume share: 67% of the total market Modern insulin volume share: 59% of the segment North America Sales: 36% of total sales Insulin volume share: 42% of the total market Modern insulin volume share: 34% of the segment • Production sites Ain-Allah, Dely Brahim, Algeria Bagsværd, Denmark Chartres, France Clayton, North Carolina, US Gentofte, Denmark Hillerød, Denmark Hjørring, Denmark Kalundborg, Denmark Koriyama, Japan Køge, Denmark Mexico City, Mexico Montes Claros, Brazil Måløv, Denmark Tianjin, China Værløse, Denmark • R&D facilities Bagsværd, Denmark Beijing, China Gentofte, Denmark Hillerød, Denmark Måløv, Denmark Seattle, Washington, US • Clinical development centres Beijing, China Princeton, New Jersey, US Tokyo, Japan Zürich, Switzerland • Regional and business area offices • Representative offices • Affiliates International Operations Sales: 19% of total sales Insulin volume share: 56% of the total market Modern insulin volume share: 56% of the segment * As of 1 January 2010, Korea is included as a region with Japan. Australia and New Zealand are included in International Operations. See p 63. 50 Novo Nordisk Annual Report 2009 9 0 0 2 s t n e m e t a t s l a i c n a n i f - n o n d n a l a i c n a n i f d e t a d i l o s n o C Consolidated financial and non-financial statements 2009 52 Statement of comprehensive income 53 Balance sheet 54 Statement of cash flow 55 Statement of changes in equity 56 Notes to the Consolidated financial statements 88 Financial definitions 89 Statement of non-financial reporting 90 Notes to the Consolidated non-financial statement 96 Summary of financial data 2005 –2009 in EUR (unaudited) 97 Quarterly financial figures 2008 and 2009 (unaudited) 98 Financial statements of the Parent company 105 Management’s statement 106 Independent auditor’s reports Novo Nordisk Annual Report 2009 51 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C r e b m e c e D 1 3 d e d n e r a e y e h t r o f e m o c n i e v i s n e h e r p m o c f o t n e m e t a t S Statement of comprehensive income for the year ended 31 December DKK million Income statement Sales Cost of goods sold Gross profit Sales and distribution costs Research and development costs – hereof costs related to discontinuation of all pulmonary diabetes projects Administrative expenses Licence fees and other operating income, net Operating profit Share of profit or loss of associated companies, net of tax Financial income Financial expenses Profit before income taxes Income taxes Net profit for the year Earnings per share: Basic earnings per share (DKK) Diluted earnings per share (DKK) Statement of comprehensive income Net profit for the year Other comprehensive income Gains and losses arising from translating the financial statements of foreign operations and re-measuring available-for-sale financial assets Adjustment of cash flow hedges for the year Share of other comprehensive income of associated companies Other Income taxes relating to Other comprehensive income Other comprehensive income for the year, net of tax Note 2009 2008 2007 3, 4 5, 7 5, 7 5, 7 1 5, 6, 7 8 16 9 10 11 13 13 12 11 51,078 10,438 40,640 15,420 7,864 – 2,764 341 14,933 (55) 375 1,265 13,988 3,220 10,768 45,553 10,109 35,444 12,866 7,856 (325) 2,635 286 12,373 (124) 1,127 681 41,831 9,793 32,038 12,371 8,538 (1,325) 2,508 321 8,942 1,233 1,303 507 12,695 10,971 3,050 9,645 2,449 8,522 17.97 17.82 15.66 15.54 13.49 13.39 10,768 9,645 8,522 527 1,252 9 10 (25) 1,773 (482) (1,555) 39 (45) 81 (1,962) 65 271 (41) 21 (93) 223 Total comprehensive income for the year 12,541 7,683 8,745 52 Novo Nordisk Annual Report 2009 Balance sheet at 31 December DKK million Assets Intangible assets Property, plant and equipment Investments in associated companies Deferred income tax assets Other non-current financial assets Total non-current assets Inventories Trade receivables Tax receivables Other current assets Marketable securities and financial instruments Cash at bank and in hand Total current assets Total assets Equity and liabilities Share capital Treasury shares Retained earnings Other reserves Total equity Non-current debt Deferred income tax liabilities Retirement benefit obligations Provisions for other liabilities Total non-current liabilities Current debt and financial instruments Trade payables Tax payables Other current liabilities Provisions for other liabilities Total current liabilities Total liabilities Total equity and liabilities Note 2009 2008 14 15 16 23 17 18 17, 19 17, 20 17 17 21 21 17, 22 23 24 25 17 17 17, 26 25 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C r e b m e c e D 1 3 t a t e e h s e c n a a B l 1,037 19,226 176 1,455 182 22,076 10,016 7,063 799 1,962 1,530 11,296 32,666 54,742 620 (32) 34,435 711 35,734 970 3,010 456 1,157 5,593 418 2,242 701 6,813 3,241 13,415 19,008 54,742 788 18,639 222 1,696 194 21,539 9,611 6,581 1,010 1,704 1,377 8,781 29,064 50,603 634 (26) 33,433 (1,062) 32,979 980 2,404 419 863 4,666 1,334 2,281 567 5,853 2,923 12,958 17,624 50,603 Novo Nordisk Annual Report 2009 53 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C r e b m e c e D 1 3 d e d n e r a e y e h t r o f w o l f h s a c f o t n e m e t a t S Statement of cash flow for the year ended 31 December DKK million Net profit for the year Adjustments for non-cash items: Income taxes Depreciation, amortisation and impairment losses Interest income and interest expenses Other adjustments Income taxes paid Interest received Interest paid Cash flow before change in working capital (Increase)/decrease in trade receivables and other current assets (Increase)/decrease in inventories Increase/(decrease) in trade payables and other current liabilities Exchange rate adjustment Note 2009 2008 2007 10,768 9,645 8,522 11 7 9, 10 27 3,220 2,551 71 859 (1,998) 284 (98) 15,657 (740) (405) 921 (55) 3,050 2,442 (385) 614 (3,172) 656 (247) 2,449 3,007 (16) (37) (2,607) 295 (324) 12,603 11,289 (700) (591) 1,228 323 (638) (620) 331 (375) Cash flow from operating activities 15,378 12,863 9,987 Purchase of intangible assets and non-current financial assets Proceeds from sale of property, plant and equipment Purchase of property, plant and equipment Net change in marketable securities (maturity exceeding three months) Dividend received Cash flow from investing activities Repayment of non-current debt Purchase of treasury shares Proceeds from sale of treasury shares Dividends paid to the Parent company’s owners Cash flow from financing activities Net cash flow Unrealised gain/(loss) on exchange rates and marketable securities included in cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Additional information: Cash and cash equivalents at the end of the year Bonds with original term to maturity exceeding three months Undrawn committed credit facilities *) Financial resources at the end of the year Cash flow from operating activities + Cash flow from investing activities – Net change in marketable securities (maturity exceeding three months) Free cash flow 15 16 21 21 13 17 (433) 1 (2,632) – 18 (3,046) – (6,512) 117 (3,650) (10,045) (264) 18 (1,772) 466 170 (1,382) (153) (4,717) 295 (2,795) (7,370) (118) 40 (2,367) (541) 1,470 (1,516) (18) (4,835) 241 (2,221) (6,833) 2,287 4,111 1,638 21 2,308 8,726 11,034 11,034 1,013 4,465 16,512 15,378 (3,046) – 12,332 (2) (6) 4,109 4,617 8,726 8,726 997 7,451 1,632 2,985 4,617 4,617 1,486 7,457 17,174 13,560 12,863 (1,382) 466 11,015 9,987 (1,516) (541) 9,012 *) At year-end, the Group had an undrawn committed credit facility amounting to DKK 4,465 million (DKK 7,451 million in 2008). The undrawn committed credit facility is a EUR 600 million facility committed by a number of Danish and international banks. The facility matures in 2012. 54 Novo Nordisk Annual Report 2009 Statement of changes in equity at 31 December Share capital Treasury shares Retained earnings Other reserves Total Exchange rate adjust- ments Deferred gain/(loss) on cash flow hedges Other adjust- ments DKK million 2009 Balance at the beginning of the year Total comprehensive income for the year 634 (26) 33,433 10,768 (256) 527 (859) 1,252 53 (6) 32,979 12,541 Transactions with owners, recognised directly in equity: Dividends (refer to note 13) Share-based payments Purchase of treasury shares Sale of treasury shares Reduction of the B share capital Balance at the end of the year (22) 2 14 (32) (14) 620 (3,650) 259 (6,490) 115 (3,650) 259 (6,512) 117 – 34,435 271 393 47 35,734 Share capital Treasury shares Retained earnings Other reserves Total Exchange rate adjust- ments Deferred gain/(loss) on cash flow hedges Other adjust- ments DKK million 2008 Balance at the beginning of the year Total comprehensive income for the year 647 (26) 30,661 9,645 209 (465) 678 (1,537) 13 40 32,182 7,683 Transactions with owners, recognised directly in equity: Dividends (refer to note 13) Share-based payments Purchase of treasury shares Sale of treasury shares Reduction of the B share capital Balance at the end of the year (16) 3 13 (26) (13) 634 (2,795) 331 (4,701) 292 (2,795) 331 (4,717) 295 – 33,433 (256) (859) 53 32,979 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C r e b m e c e D 1 3 t a y t i u q e n i s e g n a h c f o t n e m e t a t S Novo Nordisk Annual Report 2009 55 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 1 Critical accounting estimates and judgements The preparation of financial statements in conformity with International Financial Reporting Standards requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s). Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgements about the reported carrying amounts of assets and liabilities and the reported amounts of revenues and expenses that may not be readily apparent from other sources. Actual results could differ from those estimates. Management believes the following are the critical accounting estimates and judgements used in the preparation of the consolidated financial state- ments. Sales rebate accruals and provisions Sales rebate accruals and provisions are established in the same period as the related sales. The sales rebate accruals and provisions are recorded as a reduction in sales and are included in Other current liabilities and Provisions for other liabilities. Sales rebates are predominately issued in region North America. The accruals and provisions are based upon historical rebate payments. They are calculated on the basis of a percentage of sales for each product as defined by the contracts with the various customer groups. Significant sales rebates and discounts amounts are rebates from sales covered by Medicaid and Medicare, the US public healthcare insurance system. Provisions for Medicaid and Medicare rebates have been calculated using a combination of historical experience, product and population growth, price increases, the impact of contracting strategies and specific terms in the individual agreements. For Medicaid, the calculation of rebates involves inter pretation of relevant regulations, which are subject to chal- lenge or change in interpretative guidance by government authorities. Although accruals are made for Medicaid and Medicare rebates at the time sales are recorded, the Medicare and Medicaid rebates related to the spe - cific sale will typically be invoiced to Novo Nordisk up to six months later. Due to the time lag, in any particular period the rebate adjustments to sales may incorporate revisions of accruals for prior periods. Customer rebates are offered to a number of managed healthcare plans. These rebate programmes provide that the customer receives a rebate after attaining certain performance parameters relating to product purchases, formulary status and pre-established market share milestones relative to competitors. Since they are contractually agreed upon, rebates are esti - mated according to the specific terms in each agreement, historical experi- ence, anticipated channel mix, product growth rates and market share information. Novo Nordisk considers the sales performance of products subject to managed healthcare rebates and other contract discounts and adjusts the provision periodically to reflect actual experience. Wholesaler charge-backs relate to contractual arrangements existing between Novo Nordisk and indirect customers, mainly in the US, whereby products are sold at prices lower than the list price charged to wholesalers. A wholesaler charge-back represents the difference between the invoice price to the wholesaler and the indirect customer’s contract price. Provisions are calculated for estimated charge-backs using a combination of factors such as historical experience, current wholesaler inventory levels, contract terms and the value of claims received but not yet processed. Wholesaler charge-backs are generally settled within one to three months of incurring the liability. Novo Nordisk believes that the accruals and provisions established for sales rebates are reasonable and appropriate based on current facts and circum- stances. However, the actual amount of rebates and discounts may differ from the amounts estimated by management. The following table is a reconciliation of gross sales to net sales for North America (the US and Canada): DKK million Gross sales Gross-to-net sales adjustments: Medicaid and Medicare rebates Managed healthcare rebates Wholesaler charge-backs Cash discounts Sales returns Other rebates and allowances 2009 2008 2007 27,890 22,639 20,109 (2,447) (2,121) (3,720) (567) (168) (588) (1,672) (1,543) (2,949) (433) (512) (376) (1,279) (1,333) (2,594) (381) (432) (344) Total gross-to-net sales adjustments (rebates) (9,611) (7,485) (6,363) Net sales 18,279 15,154 13,746 The carrying amount of sales rebate accruals and provisions is DKK 2,886 million as at 31 December 2009. Please refer to note 3 for disclosure of sales from business and geographic segments and note 4 and 25 for further information on sales provisions. Provisions and contingencies Pending litigations Management of the Group makes judgements about provisions and con tingencies, including the probability of pending and potential future litigation outcomes that in nature are dependent on future events that are inherently uncertain. In making its determinations of likely outcomes of litigations etc, management considers the evaluation of external counsel knowledgeable about each matter, as well as known outcomes in case law. Provisions for pending litigations are recognised under Provisions for other liabilities. Please refer to notes 25 and 32 for a description of significant litigations pending. Deferred income tax assets and liabilities Novo Nordisk recognises deferred income tax assets if it is probable that sufficient taxable income will be available in the future against which the temporary differences and unused tax losses can be utilised. Management has considered future taxable income in assessing whether deferred income tax assets should be recognised. The carrying amount of deferred income tax assets and deferred income tax liabilities is DKK 1,455 million and DKK 3,010 million, respectively, as at 31 December 2009. Please refer to note 23 for further information. Returned products As part of normal business, Novo Nordisk issues credit notes for expired goods. Consequently, a provision for future returns is made, based on historical statistical product returns. Revenue recognition for new product launches is based on specific facts and circumstances for the specific products, including estimated demand and acceptance rates from well-established products with similar market characteristics. In recent years, the products launched by Novo Nordisk have been comparable with either other products already on the market or products in therapy areas well known to Novo Nordisk, and therefore un - certainties surrounding product returns on new products launched have been limited. The carrying amount of provision for returned products is DKK 588 million as at 31 December 2009. Please refer to note 25 for further information. Indirect production costs (IPCs) Production costs for work in progress and finished goods include IPCs such as employee costs, depreciation, maintenance etc. IPCs are measured based on a standard cost method which is reviewed regularly in order to ensure relevant measures of utilisation, production lead time and other relevant factors. Changes in the parameters for calculation of IPCs, including utilisation levels, production lead time etc could have an impact on the gross margin and the overall valuation of inventories. The carrying amount of IPCs is DKK 5,046 million as at 31 December 2009. Please refer to note 18 for further information. 56 Novo Nordisk Annual Report 2009 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N Allowances for doubtful trade receivables Trade receivables are stated at amortised cost less allowances for potential losses on doubtful trade receivables. Novo Nordisk maintains allowances for doubtful trade receivables for estimated losses resulting from the subsequent inability of customers to make required payments. If the financial conditions of the customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required in future periods. Management specifically analyses trade receivables and examines historical bad debt, customer concentrations, customer creditworthiness, current economic trends and changes in the customer payment terms when evaluating the adequacy of the allowance for doubtful trade receivables. The carrying amount of allowances for doubtful trade receivables is DKK 600 million as at 31 December 2009. Please refer to note 19 for further information. Non-recurring costs related to discontinuation of all pulmonary diabetes projects Towards the end of 2007, Novo Nordisk conducted a detailed analysis of the future prospects for inhaled insulin and a review of the medical and commercial potential of the AERx ® iDMS inhaled insulin system (AERx ®). This analysis resulted in a non-recurring impairment cost regarding intangible assets and manufacturing activities related to the AERx ® system and cost of discontinuing all clinical development in the amount of DKK 1,325 million, which was recorded and negatively impacted operating profit in 2007. In April 2008, Novo Nordisk also decided to discontinue the remainder of its pulmonary activities. As a result of these decisions, an additional cost of DKK 325 million was expensed in 2008. In 2008 and 2007, Novo Nordisk recorded the following charges related to the impairment of pulmonary diabetes projects. No charges have been recorded in 2009 as all pulmonary activities have been closed down. DKK million 2009 2008 2007 Impairment of intangible assets Severance pay and other employee- related costs Impairment of tangible assets Commitments regarding clinical trials Lease and investment commitments Other costs related to closure of pulmonary diabetes projects Total costs – – – – – – – – 155 53 – 42 75 325 117 – 753 326 129 – 1,325 These charges were included in Research and development costs. In addi- tion, a cost of DKK 52 million, related to the AERx ® discontinuation, was included as financial expense in 2007. 2 Accounting policies The principal accounting policies applied to the preparation of the con - solidated financial statements are set out below. These policies have been applied consistently for all the years presented. Basis of preparation The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the Inter - national Accounting Standards Board (IASB) and with International Financial Reporting Standards as endorsed by the EU. Furthermore, the Annual Report is prepared in accordance with additional Danish disclosure requirements for annual reports for listed companies. The Financial statements of the Parent company, Novo Nordisk A/S, as presented on pps 98 –104, are prepared in accordance with The Danish Financial Statements Act. The Consolidated financial statements are prepared in accordance with the historical cost convention, as modified by the revaluation of available-for- sale financial assets, and financial assets and liabilities (derivatives) at fair value through profit or loss. Accounting standards effective in 2009 Novo Nordisk has adopted all new or amended and revised accounting standards and interpretations (‘IFRSs’) endorsed by the EU effective for the accounting period beginning on 1 January 2009. Based on an analysis made by Novo Nordisk, most of the IFRSs effective for 2009 have no material im- pact or are not relevant to the Group. However, the following revised standard has a material impact on the presentation and disclosure of the consolidated financial statements: • IAS 1 (Revised), ‘Presentation of Financial Statements’. The revised standard prohibits the presentation of items of income and expenses (that is ‘non-owner changes in equity’) in the statement of changes in equity, requiring ‘non-owner changes in equity’ to be presented separately from owner changes in equity (statement of comprehensive income). As a result the Group presents in the consolidated Statement of changes in equity all owner changes in equity, whereas all non-owner changes in equity are presented in Other comprehensive income. Comparative information has been re-presented so that it also conforms with the revised standard. Since the change in accounting policy only impacts presentation aspects, there is no impact on Operating profit, Equity or earnings per share. Amendments and interpretations to existing accounting standards that are not yet effective and have not been early adopted During 2009 IASB issued a number of IFRSs, amendments and interpre - tations which have been endorsed by the EU as per 31 December 2009 and are mandatory for the Group’s accounting periods beginning on or after 1 January 2010. Novo Nordisk has thoroughly assessed the impact of the IFRSs, amendments and interpretations that are not yet effective and determined that most of them will not have a material impact on the consolidated financial state- ments going forward. Consequently, no early adoption has been made. However, the following revised standard can in future have a material im- pact on the Consolidated financial statements: • IFRS 3 (Revised), ‘Business combinations’. The revised standard continues to apply the acquisition method to business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at fair value at the acquisition date, with contingent con- siderations classified as debt subsequently measured through the Income statement. IFRS 3(2008) is to be applied prospectively. Principles of consolidation The Consolidated Financial Statements include the financial statements of Novo Nordisk A/S (the Parent company) and all the companies in which Novo Nordisk A/S directly or indirectly owns more than 50% of the voting rights or in some other way has a controlling influence (subsidiaries). Novo Nordisk A/S and these companies are referred to as the Group. Companies that are not subsidiaries, but in which the Group holds 20% to 50% of the voting rights, or in some other way has a significant influence on the operational and financial management, are treated as associated companies. The Consolidated financial statements are based on the Financial state- ments of the Parent company and of the subsidiaries applying group accounting policies, and are prepared by combining items of a uniform nature and eliminating inter company transactions, shareholdings, balances and unrealised inter company profits and losses. Acquired and divested companies are included in the consolidation during the period of Novo Nordisk’s ownership. Comparative figures are not adjusted for disposed or acquired companies. Novo Nordisk Annual Report 2009 57 Forward exchange contracts and currency swaps hedging recognised as assets or liabilities in foreign currencies are measured at fair value at the end of the reporting period. Value adjustments are recognised in Other com - prehensive income, along with any value adjustments of the hedged asset or liability that is attributable to the hedged risk. The value adjustments on forward exchange contracts and interest rate swaps designated as hedges of forecasted transactions are recognised directly in Other comprehensive income, given hedge effectiveness. The cumulative value adjustment of these contracts is reclassified from Other comprehensive income to the Income statement as a reclassification adjust- ment under ‘Financial income’ or ‘Financial expenses’ when the hedged transaction is recognised in the Income statement. Currency swaps used to hedge net investments in subsidiaries are measured at fair value based on the difference between the swap exchange rate and the exchange rate at the end of the reporting period. The value adjustment is recognised in Other comprehensive income. Further to the above, the Group uses currency option hedges of forecasted transactions. Currency options are initially recognised at cost which equals fair value of considerations paid and subsequently re-measured at their fair values at the end of the reporting period. While providing effective eco - nomic hedges under the Group’s risk management policy, the current use of currency options does not meet the detailed requirements for allowing hedge accounting. Currency options are therefore recognised directly in the Income statement under Financial income or Financial expenses. The accumulated net fair value of derivatives is presented as Marketable securities and financial instruments, if positive, or Current debt and financial instruments, if negative. Determination of fair value The fair value of financial assets and liabilities is measured on the basis of quoted market prices of financial instruments traded in active markets. If an active market exists, fair value is based on the most recently observed market price at the end of the reporting period. If a financial instrument is quoted in a market that is not active, the Group bases its valuation on the most recent transaction price. Adjustment is made for subsequent changes in market conditions, for instance by including transactions in similar financial instruments that are assumed to be motiv - ated by normal business considerations. If an active market does not exist, the fair value of standard and simple finan cial instruments, such as interest rate and currency swaps and unlisted bonds, is measured according to generally accepted valuation techniques. Market-based parameters are used to measure fair value. Derecognition of hedging instrument When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the Income statement. When a fore- cast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the Income state- ment within Financial income or Financial expenses. Provisions Provisions, including tax and legal cases, are recognised where a legal or constructive obligation has been incurred as a result of past events and it is probable that it will lead to an outflow of resources that can be reliably estimated. In this connection, Novo Nordisk makes the estimate on the basis of an evaluation of the individual most likely outcome of the cases. In cases where a reliable estimate cannot be made, these are disclosed as contingent liabilities. Provisions are measured at the present value of the expenditures expected to be required to settle the legal or constructive obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense. s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N Significant accounting policies Novo Nordisk’s management considers the following to be the most signifi- cant accounting policies for the Group. Sales and revenue recognition Sales comprise the fair value of the sale of goods excluding value added tax and after deduction of provisions for returned products, rebates, trade discounts and allowances. Provisions and accruals for rebates to customers are provided for in the period the related sales are recorded. Historical data are readily available and reliable, and are used for estimating the amount of the reduction in sales. Sales are recognised when realised or realisable and earned. Revenues are considered to have been earned when Novo Nordisk has substantially accomplished what it must do to be entitled to the revenues. Revenue from the sale of goods is recognised when all the following specific conditions have been satisfied: • Novo Nordisk has transferred to the buyer the significant risk and rewards of ownership of the goods • Novo Nordisk retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold • The amount of revenue can be measured reliably • It is probable that the economic benefits associated with the transaction will flow to Novo Nordisk • The costs incurred or to be incurred in respect of the transaction can be measured reliably. These conditions are usually met by the time the products are delivered to the customers. Research and development Due to the long development period and significant uncertainties relating to the development of new products, including risks regarding clinical trials and regulatory approval, it is concluded that the Group’s internal develop- ment costs in general do not meet the capitalisation criteria. Consequently, the technical feasibility criteria are not considered fulfilled before regulatory filing. Therefore, all internal research and development costs are expensed in the Income statement as incurred. The same principles are used for property, plant and equipment developed as part of a research and development project. For acquired in-process research and development projects, the effect of probability is reflected in the cost of the asset and the probability recognition criteria are therefore always considered satisfied. As the cost of acquired in- process research and development projects can often be measured reliably, these projects fulfil the criteria for capitalisation as intangible assets upon acquisition. However, further internal development costs subsequent to acquisition are treated as other internal development costs. Property, plant and equipment used for general research and development purposes are capitalised and depreciated over their estimated useful lives. Financial instruments The Group uses forward exchange contracts, interest rate swaps and cur - rency swaps to hedge forecasted transactions, assets and liabilities, and net investments in foreign subsidiaries in foreign currencies in accordance with the specific rules of IAS 39 ‘Financial Instruments: Recognition and Measure ment’. Upon initiation of the contract, the Group designates each derivative finan- cial contract that qualifies for hedge accounting as either: • Hedges of the fair value of a recognised asset or liability or a firm commit- ment (fair value hedge), • Hedges of the fair value of a forecast financial transaction (cash flow hedge); or • Hedges of a net investment in a foreign operation (net investment hedge). All contracts are initially recognised at fair value and subsequently re- measured at their fair values based on current bid prices at the end of the reporting period. 58 Novo Nordisk Annual Report 2009 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N Other accounting policies Translation of foreign currencies Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (functional currency). The Consolidated financial statements are presented in Danish kroner (DKK), which is the functional and presentation currency of the Parent company. Translation of transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates ruling at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such trans - actions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income statement, except when deferred in Other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. Translation differences on non-monetary items, such as financial assets classified as available for sale, are included in the fair value reserve in Other comprehensive income. Translation of Group companies Financial statements of foreign subsidiaries are translated into Danish kroner at exchange rates ruling at the end of the reporting period for assets and liabilities and at average exchange rates for Income statement items. All exchange rate adjustments are recognised in the Income statement with the exception of exchange gains and losses arising from: • The translation of foreign subsidiaries’ net assets at the beginning of the year at the exchange rates at the end of the reporting period • The translation of foreign subsidiaries’ income statement using average exchange rates, whereas balance sheet items are translated using the exchange rates ruling at the end of the reporting period • The translation of non-current intercompany receivables that are con - sidered to be an addition to net investments in subsidiaries • The translation of investments in associated companies. The above exchange gains and losses are recognised in Other compre - hensive income. Licence fees and other operating income Licence fees and other operating income comprise licence fees and income of a secondary nature in relation to the main activities of the Group. Licence fees are recognised on an accrual basis in accordance with the terms and substance of the relevant agreement. Licence fees and other operating income also includes non-recurring income items in respect of sale of intel- lectual property. As a principal rule, sale of intellectual property rights is recorded as income at the time of the sale. Where the Group assumes an obligation in con - nection with a sale of intellectual property rights, the income is recognised in accordance with the term of the obligation. On the sale of intellectual property rights where the final sale is conditional on future events, the amount is deferred and recorded as income at the occurrence of such future events. Intangible assets Goodwill Goodwill represents any cost in excess of identifiable net assets, measured at fair value, in the acquired company. Goodwill recorded under Intangible assets is related to subsidiaries. Other intangible assets Patents and licences that include acquired patents and licences to in-process research and development projects are carried at historical cost less accu - mulated amortisation and any impairment loss. Amortisation is calculated using the straight-line method to allocate the cost of patents and licences over their estimated useful lives. The amortisation commences in the year in which the rights first generate sales. Internal development of software and other development costs related to major IT projects for internal use that are directly attributable to the design and testing of identifiable and unique software products controlled by the Group are recognised as intangible assets under Other intangible assets if the recognition criteria are met. Amortisation is provided under the straight- line method over the estimated useful life of 3–10 years. Property, plant and equipment Property, plant and equipment is measured at historical cost less accu - mulated depreciation and any impairment loss. The cost of self-constructed assets includes costs directly attributable to the construction of the assets. Subsequent cost is included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. In general, constructions of major invest ments are self-financed and thus no material interest on loans (borrowings) is capitalised as part of the cost. Depreciation is provided under the straight-line method over the estimated useful lives of the assets as follows: • Buildings: 12– 50 years • Plant and machinery: 5 –16 years • Other equipment: 3 –16 years • Land is not depreciated The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down to its recoverable amount if the asset’s carrying amount is higher than its estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised in the Income statement. Leases Leases of assets whereby the Group assumes substantially all the risks and rewards of ownership are capitalised as finance leases under Property, plant and equipment and depreciated over the estimated useful lives of the assets, according to the periods listed above. The corresponding finance lease liabilities are included in liabilities. Operating lease costs are charged to the Income statement on a current basis over the period of the lease. Investments in associated companies Investments in associated companies are accounted for under the equity method of accounting (ie at the respective share of the associated com - panies’ net asset value applying Group accounting policies). Goodwill relating to associated companies is recorded as part of the investment under Investments in associated companies. Impairment of assets Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation, such as intangible assets and other non-current assets, are reviewed for impairment whenever events or changes in circum- stances indicate that the carrying amount may not be recoverable. Factors considered material by the Group and that could trigger an impairment test include the following: • Development of a competing drug • Changes in the legal framework covering patents, rights or licences • Advances in medicine and/or technology that affect the medical treat- ments • Lower than predicted sales • Adverse impact on reputation and/or brand names • Change in the economic lives of similar assets • Relationship with other intangible or tangible assets • Changes or anticipated changes in participation rates or reimbursement policies If it is determined that the carrying amount of intangible assets, other non- current assets or goodwill exceeds its recoverable amount based upon the existence of one or more of the above indicators of impairment, any impair- ment is measured based on discounted projected cash flows. Intangible assets and other non-financial assets other than goodwill that have suffered impairment are reviewed for possible reversal of the impair- ment at each reporting date. Novo Nordisk Annual Report 2009 59 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N Financial assets The Group classifies its investments in the following categories: Financial assets at fair value through profit or loss (derivatives), Loans and receivables and Available-for-sale financial assets. The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments on initial recognition and re-evaluates this designation at the end of every reporting period to the extent that such a designation is permitted and required. If the expected sales price less completion costs and costs to execute sales (net realisable value) is lower than the carrying amount, a write-down is recognised for the amount by which the carrying amount exceeds its net realisable value. Tax Income taxes in the Income statement include tax payable for the year with addition of the change in deferred tax for the year. Financial assets at fair value through profit or loss Derivatives used for cash flow hedging purposes are classified as financial assets at fair value through profit or loss even though derivatives used for hedging purposes are recognised in Other comprehensive income. Assets in this category are classified as Current assets. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or deter- minable payments that are not quoted in an active market. If collection is expected in one year or less (or in the normal operating cycle of the business if longer), they are classified as Current assets. If not, they are presented as Non-current assets. Deferred income taxes arise from temporary differences between the accounting and taxable values of the individual consolidated companies and from realisable tax-loss carry-forwards, using the liability method. The tax value of tax-loss carry-forwards is included in deferred tax assets to the extent that the tax losses and other tax assets are expected to be utilised in the future taxable income. The deferred income taxes are measured according to current tax rules and at the tax rates expected to be in force on the elimination of the temporary differences. Unremitted earnings are retained by subsidiaries for reinvestment. No pro - vision is made for income taxes that would be payable upon the distribution of such earnings. Trade receivables and Other current assets are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. A provision for impairment of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Employee benefits Wages, salaries, social security contributions, paid annual leave and sick leave, bonuses and non-monetary benefits are accrued in the year in which the associated services are rendered by employees of the Group. Where the Group provides long-term employee benefits, the costs are accrued to match the rendering of the services by the employees concerned. The carrying amount of Trade receivables is reduced with the provision for impairment, and the amount of the loss is recognised in the Income state - ment within Sales and distribution costs. When a trade receivable is uncol - lectible, it is written off against the allowance account for trade receivables. Subsequent recoveries of amounts previously written off are credited against Sales and distribution costs in the Income statement. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either design ated in this category or not classified in any of the other categories. They are included in Other non-current assets unless management intends to dispose of the investment within 12 months of the end of the reporting period. Market able securities under current assets are classified as available- for-sale financial assets. Recognition and measurement Purchases and sales of investments are recognised on the settlement date. Investments are initially recognised at fair value plus transaction costs for all financial assets not classified as fair value through profit or loss. Currency options, available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method. Unrealised gains and losses arising from changes in the fair value of finan- cial assets classified as available-for-sale are recognised in Other com - prehensive income. When financial assets classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the Income statement. Fair value disclosures are made separately for each class of financial instru- ments at the end of the reporting period. The fair values of quoted investments (incl bonds) are based on current bid prices. Financial assets for which no active market exists are carried at cost if no reliable valuation model can be applied (unlisted shares). Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Inventories Inventories are stated at the lowest of cost and net realisable value. Cost is determined using the first-in, first-out method. Cost comprises direct pro- duction costs such as raw materials, consumables, energy and labour, and production overheads such as employee costs, depreciation, maintenance etc. The production overheads are measured based on a standard cost method which is reviewed regularly in order to ensure relevant measures of utilisation, production lead time etc. 60 Novo Nordisk Annual Report 2009 Pensions The Group operates a number of defined contribution plans throughout the world. In a few countries, the Group still operates defined benefit plans. The costs for the year for defined benefit plans are determined using the projected unit credit method. This reflects services rendered by employees to the dates of valuation and is based on actuarial assumptions primarily regarding discount rates used in determining the present value of benefits, projected rates of remuneration growth and long-term expected rates of return for plan assets. Discount rates are based on the market yields of high- rated corporate bonds in the country concerned. Actuarial gains and losses are recognised as income or expense when the net cumulative unrecognised actuarial gains and losses for each individual plan at the end of the previous reporting period exceed 10% of the higher of the defined benefit obligation and the fair value of plan assets at that date. These gains or losses are recognised over the expected average re- maining working lives of the employees participating in the plans. Past service costs are allocated over the average period until the benefits become vested. Pension assets are only recognised to the extent that the Group is able to derive future economic benefits in the way of refunds from the plan or reduc tions of future contributions. The Group’s contributions to the defined contribution plans are charged to the Income statement in the year to which they relate. Share-based compensation The Group operates equity-settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options or shares is recognised as an expense and allocated over the vesting period. The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or shares granted, excluding the impact of any non-market vesting conditions. The fair value is fixed at grant date. Non-market vesting conditions are included in assumptions about the number of options or shares that are expected to vest. At each reporting period end, the Group revises its estimates of the number of options or shares that are expected to vest. Novo Nordisk recognises the impact of the revision of the original estimates, if any, in the Income statement and a cor- responding adjustment to Equity (change in proceeds) over the remaining vesting period. Adjustments relating to prior years are included in the Income statement in the year of adjustment. Liabilities Generally, liabilities are stated at amortised cost unless specifically men- tioned otherwise. Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost; any differ- ence between the proceeds (net of transaction costs) and the redemption value is recognised in the Income statement over the period of the borrow- ings using the effective interest method. Borrowings are classified as Current debt unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the end of the reporting period. Equity Treasury shares Treasury shares are deducted from the share capital at their nominal value of DKK 1 per share. Differences between this amount and the amount paid for acquiring, or received for disposing of, treasury shares are deducted from retained earnings. Statement of cash flows The statement of cash flows and financial resources is presented in accor- dance with the indirect method commencing with net profit for the year. The statement shows cash flows for the year, the net change in cash and cash equivalents for the year, and cash and cash equivalents at the begin- ning and end of the year. Cash and cash equivalents consist of cash and marketable securities, with original maturity of less than three months, less short-term bank loans. Financial resources consist of cash and cash equivalents, bonds with original term to maturity exceeding three months, and undrawn committed credit facilities expiring after more than one year. s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N Novo Nordisk Annual Report 2009 61 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 3 Segment information Operating segments are reported in a manner consistent with the internal reporting provided to Executive Management and the Board of Directors. Business segments For management reporting purposes, the Group operates in two global business segments based on different therapies: Diabetes care The business segment includes discovery, development, manufacturing and marketing of products within the areas of insulin, GLP-1 and related delivery systems as well as oral antidiabetic products (OAD). Biopharmaceuticals The business segment includes discovery, development, manufacturing and marketing of products within the areas of haemophilia, growth hormone therapy, hormone replacement therapy, inflammation therapy and other therapy areas. No operating segments have been aggregated to form the above reportable operating segments. Management monitors the operating results of its business segments separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit consistent with the consolidated financial statements. Group financing (including financial expenses and financial income) and income taxes are managed on a Group basis and are not allocated to operating segments. Business segments DKK million Segment sales and results Sales Modern insulins (insulin analogues) Human insulins Protein-related sales Oral antidiabetic products (OAD) Diabetes care total NovoSeven ® Norditropin ® Hormone replacement therapy Other products Biopharmaceuticals total Sales Change in DKK (%) Change in local currencies (%) Cost of goods sold Sales and distribution costs Research and development costs – hereof costs related to discontinuation of all pulmonary diabetes projects Administrative expenses Licence fees and other operating income Operating profit Operating profit (excl costs related to discontinuation of all pulmonary diabetes projects) 2009 2008 2007 Diabetes care *) 21,471 11,315 2,064 2,652 37,502 17,317 11,804 1,844 2,391 14,008 12,572 1,749 2,149 33,356 30,478 37,502 12.4% 11.1% 9,001 12,877 5,257 – 2,044 187 8,510 8,510 33,356 9.4% 12.7% 8,705 10,497 4,791 (325) 1,936 142 7,569 7,894 30,478 9.4% 14.1% 8,404 9,962 6,116 (1,325) 1,916 179 4,259 5,584 Geographical information 2009 2008 2007 2009 2008 2007 DKK million Sales Change in DKK (%) Change in local currencies (%) Property, plant and equipment Total assets North America Europe **) 18,279 20.6% 15.2% 905 3,232 15,154 10.2% 17.7% 973 3,532 13,746 11.9% 21.8% 998 2,873 17,540 1.9% 5.2% 15,445 42,933 17,219 5.3% 6.7% 15,624 40,849 16,350 6.9% 6.8% 16,398 38,428 *) Total assets for the Diabetes care segment amounts to DKK 29.8 billion (DKK 30.5 billion and DKK 30.3 billion in 2008 and 2007, respectively) and for the Biopharmaceuticals segment DKK 8.1 billion (DKK 6.6 billion and DKK 6.7 billion in 2008 and 2007, respectively). The remaining part of total assets that has not been allocated to any of the two business segments includes Cash at bank and in hand, Marketable securities and financial instruments etc and amounts to DKK 16.8 billion (DKK 13.5 billion and DKK 10.7 billion in 2008 and 2007, respectively). **) Novo Nordisk’s country of domicile is Denmark which is included in the Europe geographic segment. 62 Novo Nordisk Annual Report 2009 There are no sales or other transactions between the business segments. Costs have been split between business segments based on a specific allocation with the addition of a minor number of corporate overheads allocated systematically to the segments. Other operating income has been allocated to the two segments based on the same principle. Segment assets comprise the assets that are applied directly to the activities of the segment, including intangible assets, property, plant and equipment, non- current financial assets, inventories, trade receivables and other receivables. No single customer represents more than 10% of the total revenue. Geographical information The Group operates in four geographical regions: • North America: The US and Canada • Europe: the EU, EFTA, Albania, Bosnia-Herzegovina, Croatia, Macedonia, Serbia, Montenegro and Kosovo • Japan & Oceania: Japan, Australia and New Zealand • International Operations: All other countries Sales are attributed to geographical regions based on the location of the customer. There are no sales between regions. Total assets and additions to property, plant and equipment, and intangible assets are based on the location of the assets. Effective 1 January 2010, changes to the regional structure have been made. Korea joins Japan to form Region Japan & Korea while Australia and New Zealand become part of International Operations. The change does not impact the segment reporting or other disclosures in the Annual Report 2009. 2009 2008 2007 2009 2008 2007 Biopharmaceuticals *) Total 21,471 11,315 2,064 2,652 37,502 7,072 4,401 1,744 359 13,576 51,078 12.1% 10.6% 10,438 15,420 7,864 – 2,764 341 14,933 14,933 17,317 11,804 1,844 2,391 14,008 12,572 1,749 2,149 33,356 30,478 6,396 3,865 1,612 324 5,865 3,511 1,668 309 12,197 11,353 45,553 8.9% 12.2% 10,109 12,866 7,856 (325) 2,635 286 12,373 12,698 41,831 8.0% 12.9% 9,793 12,371 8,538 (1,325) 2,508 321 8,942 10,267 7,072 4,401 1,744 359 13,576 13,576 11.3% 9.3% 1,437 2,543 2,607 – 720 154 6,423 6,423 6,396 3,865 1,612 324 5,865 3,511 1,668 309 12,197 11,353 12,197 7.4% 11.1% 1,404 2,369 3,065 – 699 144 4,804 4,804 11,353 4.4% 9.9% 1,389 2,409 2,422 – 592 142 4,683 4,683 2009 2008 2007 2009 2008 2007 2009 2008 2007 International Operations Japan & Oceania 9,826 16.6% 18.5% 2,686 7,537 8,425 15.5% 20.5% 1,827 5,267 7,295 12.3% 17.8% 2,031 5,648 5,433 14.3% 1.3% 190 1,040 4,755 7.1% 2.1% 215 955 4,440 (4.9%) 3.1% 178 782 51,078 12.1% 10.6% 19,226 54,742 Total 45,553 8.9% 12.2% 18,639 50,603 41,831 8.0% 12.9% 19,605 47,731 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N Novo Nordisk Annual Report 2009 63 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 4 Sales rebate accruals and provisions 7 Depreciation, amortisation and impairment losses DKK million At the beginning of the year Adjustments to previous year’s accruals and provisions Additional accruals and provisions Payments and grants of rebates used during the year Exchange rate adjustments At the end of the year Specification of sales rebate accruals and provisions: Other current liabilities Provisions for other liabilities Total sales rebate accruals and provisions 2009 2,400 (90) 6,119 (5,500) (43) 2,886 2008 2007 DKK million 2009 2008 2007 1,833 1,847 (209) 4,157 (168) 3,176 (3,469) 88 (2,835) (187) 2,400 1,833 Included in the Income statement: Cost of goods sold Sales and distribution costs Research and development costs *) Administrative expenses 1,851 43 528 129 1,831 38 473 100 1,652 31 1,205 119 Total depreciation, amortisation and impairment losses 2,551 2,442 3,007 *) In 2008 and 2007 cost related to discontinuation of pulmonary diabetes projects amounted to DKK 53 million and DKK 870 million, respectively. 263 2,623 2,886 119 2,281 89 1,744 2,400 1,833 8 Licence fees and other operating income (net) DKK million 2009 2008 2007 5 Employee costs DKK million 2009 2008 2007 Licence fees Net income from IT, engineering and other services Other income 11,775 10,541 9,792 Total licence fees and other operating income (net) 130 96 115 341 2009 313 62 – – 375 146 229 50 90 26 66 286 321 2008 2007 631 – 462 34 322 – 911 70 1,127 1,303 9 Financial income DKK million Interest income Foreign exchange gain (net) Foreign exchange gain on derivatives (net) Gains on currency options (net) Total financial income 10 Financial expenses DKK million 2009 2008 2007 Interest expenses Foreign exchange loss (net) Foreign exchange loss on derivatives (net) Loss on currency options (net) Capital loss on investments etc Other financial expenses 384 – 757 56 16 52 246 355 – – 28 52 324 71 – – 60 52 Total financial expenses 1,265 681 507 Wages and salaries Share-based payment costs (refer to note 29) Pensions – defined contribution plans Pensions – retirement benefit obligations (refer to note 24) Other contributions to social security Other employee costs 259 822 152 853 1,270 331 745 128 714 1,169 130 724 109 709 1,094 Total employee costs 15,131 13,628 12,558 Included in the Income statement: Cost of goods sold Sales and distribution costs Research and development costs Administrative expenses Included in the Balance sheet: Capitalised employee costs related to assets in course of construction Change in employee costs included in inventories 3,952 6,063 3,218 1,811 3,676 5,083 3,040 1,654 3,519 4,498 2,813 1,563 66 21 29 146 58 107 Total employee costs 15,131 13,628 12,558 In addition, employee costs of DKK 1,699 million (DKK 1,657 million in 2008 and DKK 1,442 million in 2007) from NNE Pharmaplan and NNIT are con - solidated in License fees and other operating income (net). Furthermore, employee costs of DKK 345 million (DKK 297 million in 2008 and DKK 264 million in 2007) from NNE Pharmaplan have been capitalised as assets in course of construction. For information on remuneration to the Board of Directors and Executive Management, please refer to note 30. Average number of full-time employees Year-end number of full-time employees 27,985 28,809 26,069 26,575 24,344 25,516 6 Fees to statutory auditors DKK million Statutory audit Audit-related services Tax advisory services Other services Total 2009 2008 2007 25 6 13 3 47 25 4 16 1 46 25 6 15 1 47 64 Novo Nordisk Annual Report 2009 11 Income taxes DKK million Current tax on profit for the year Deferred tax on profit for the year Tax on profit for the year Adjustments related to previous years – current tax Adjustments related to previous years – deferred tax Income taxes in the Income statement Computation of effective tax rate: Statutory corporate income tax rate in Denmark Deviation in foreign subsidiaries’ tax rates compared to the Danish tax rate (net) Non-tax income less non-tax deductible expenses (net) Effect on deferred tax related to change in the Danish tax rate in 2007 Other Effective tax rate Tax on exchange rate adjustment of investments in subsidiaries Tax on fair value adjustments on financial instruments Tax on other adjustments Income tax relating to Other comprehensive income 12 Components of other comprehensive income DKK million Adjustment of cash flow hedges for the year: Deferred gain/(loss) on cash flow hedge at the beginning of the year Effect of hedged forecast transactions transferred to the Income statement Fair value adjustments for the year on cash flow hedges Adjustment of cash flow hedges for the year through Other comprehensive income Deferred gain/(loss) on cash flow hedges at the end of the year 13 Earnings per share and dividend DKK million Net profit for the year Average number of shares outstanding *) Dilutive effect of outstanding share bonus pool and options ‘in the money’ **) in 1,000 shares in 1,000 shares Average number of shares outstanding including dilutive effect of options ‘in the money’ in 1,000 shares Basic earnings per share *) Diluted earnings per share *) DKK DKK In 2007, there was a stock split of the company’s A and B shares. The trade unit was changed from DKK 2 to DKK 1. *) **) For further information on outstanding share bonus pool and options, please refer to note 29 and 30. s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 2009 2,382 840 3,222 (54) 52 3,220 25.0% (2.2%) 0.2% – 0.0% 23.0% – 1 24 25 2008 2,233 851 3,084 (218) 184 3,050 25.0% (0.3%) (0.4%) – (0.3%) 2007 2,835 (347) 2,488 (11) (28) 2,449 25.0% 2.9% (3.2%) (2.0%) (0.4%) 24.0% 22.3% (8) (18) (55) (81) – 12 81 93 2009 2008 2007 (859) 900 352 1,252 393 696 (615) (940) (1,555) (859) 425 (363) 634 271 696 2009 10,768 599,197 5,126 604,323 17.97 17.82 2008 9,645 2007 8,522 615,780 4,947 631,783 4,639 620,727 636,422 15.66 15.54 13.49 13.39 Dividend At the end of 2009, proposed dividends (not yet declared) of DKK 4,400 million (DKK 7.50 per share) are included in Retained earnings. The declared dividend included in Retained earnings was DKK 3,650 million (DKK 6.00 per share) and DKK 2,795 million (DKK 4.50 per share) in 2008 and 2007, respectively. No dividend is declared on treasury shares. Novo Nordisk Annual Report 2009 65 14 Intangible assets DKK million 2009 Cost at the beginning of 2009 Additions during the year Disposals during the year Exchange rate adjustments Cost at the end of 2009 Amortisation and impairment losses at the beginning of 2009 Amortisation for the year Impairment losses for the year Amortisation and impairment losses reversed on disposals during the year Exchange rate adjustments Amortisation and impairment losses at the end of 2009 Carrying amount at the end of 2009 2008 Cost at the beginning of 2008 Additions during the year Disposals during the year Exchange rate adjustments Cost at the end of 2008 Amortisation and impairment losses at the beginning of 2008 Amortisation for the year Impairment losses for the year Amortisation and impairment losses reversed on disposals during the year Amortisation and impairment losses at the end of 2008 Carrying amount at the end of 2008 *) Includes primarily internally developed software and costs related to major IT projects. s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N Goodwill Patents and licences etc Other intangible assets *) 136 3 – – 139 65 – – – – 65 74 133 5 (2) – 136 65 – – – 65 71 700 277 (49) – 928 219 21 92 (49) – 283 645 520 172 – 8 700 153 16 50 – 219 481 609 113 (6) 11 727 373 40 – (6) 2 409 318 572 22 (7) 22 609 336 34 8 (5) 373 236 Total 1,445 393 (55) 11 1,794 657 61 92 (55) 2 757 1,037 1,225 199 (9) 30 1,445 554 50 58 (5) 657 788 The impairment test in 2009 and 2008 was based upon management’s projections and anticipated net present value of future cash flows from cash generating units. Management has determined the discount rates (WACC) used based on the risk inherent in the related activity’s current business model and industry comparisons. The used WACC is currency specific and dependent, among other things, on interest rate level and creditworthiness compared to DKK. Terminal values used are based on the expected life of products, forecasted life cycle and forecasted cash flow over that period and the useful live of the underlying assets. In 2009 Novo Nordisk in-licensed a monoclonal antibody developed by ZymoGenetics and capitalised an upfront payment of DKK 124 million (USD 24 million). In continuance hereof it was decided to close down the Anti-IFN-a project with Argos and recognise an impairment loss of DKK 40 million. In addition, Novo Nordisk has terminated the development activities of rFXIII within the cancer indication and recognised an impairment loss of DKK 26 million. In 2008, Novo Nordisk decided to exit the oncology area and recognised an impairment loss of DKK 50 million. 66 Novo Nordisk Annual Report 2009 Total 32,388 2,632 (328) – 519 35,211 13,749 2,243 155 (279) 117 15,985 19,226 32,608 1,772 (1,761) – (231) s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 15 Property, plant and equipment DKK million 2009 Cost at the beginning of 2009 Additions during the year Disposals during the year Transfer from/(to) other items Exchange rate adjustments Cost at the end of 2009 Depreciation and impairment losses at the beginning of 2009 Depreciation for the year Impairment losses for the year Depreciation and impairment losses reversed on disposals during the year Exchange rate adjustments Depreciation and impairment losses at the end of 2009 Land and buildings Plant and machinery Other equipment 12,280 232 (81) 190 234 15,699 259 (129) 615 265 12,855 16,709 3,792 528 100 (73) 40 4,387 8,471 1,418 52 (105) 77 9,913 2,620 179 (118) 54 5 2,740 1,486 297 3 (101) – 1,685 Payments on account and assets in course of construction 1,789 1,962 – (859) 15 2,907 – – – – – – Carrying amount at the end of 2009 8,468 6,796 1,055 2,907 2008 Cost at the beginning of 2008 Additions during the year Disposals during the year Transfer from/(to) other items Exchange rate adjustments Cost at the end of 2008 Depreciation and impairment losses at the beginning of 2008 Depreciation for the year Impairment losses for the year Depreciation and impairment losses reversed on disposals during the year Exchange rate adjustments Depreciation and impairment losses at the end of 2008 12,208 164 (448) 472 (116) 15,564 261 (335) 378 (169) 12,280 15,699 3,618 516 6 (333) (15) 3,792 7,317 1,399 92 (311) (26) 8,471 2,289 164 (183) 335 15 2,620 1,366 265 3 (152) 4 1,486 2,547 1,183 (795) (1,185) 39 1,789 32,388 702 – 53 (755) – 13,003 2,180 154 (1,551) (37) – 13,749 Carrying amount at the end of 2008 8,488 7,228 1,134 1,789 18,639 16 Investments in associated companies DKK million Carrying amount of investments at the beginning of the year Additions during the year Disposals during the year Share of profit/(loss) recognised in the Income statement Dividend received from associated companies *) Exchange rate adjustments and other equity movements Carrying amount of investments at the end of the year *) Dividend received from Harno Invest A/S (formerly Dako A/S). 2009 2008 222 15 – (55) (18) 12 176 500 – (18) (124) (170) 34 222 In 2009 the associated companies realised DKK 170 million in sales and generated a net loss of DKK 598 million. Total assets amounted to DKK 2,168 million whereas the total liabilities amounted to DKK 1,772 million. Values of shareholdings in listed associated companies: – ZymoGenetics, Inc. (NASDAQ symbol: ZGEN) – Innate Pharma SA (Euronext symbol: IPH) Please refer to note 34 for a list of Novo Nordisk associated companies. Carrying amount – 126 2009 Market value 693 100 Carrying amount 32 125 2008 Market value 331 48 Novo Nordisk Annual Report 2009 67 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 17 Financial assets and liabilities DKK million Assets at the end of the year 2009 Available-for-sale financial assets – Other non-current financial assets (equity investments) – Marketable securities *) Assets at fair value through profit and loss – Derivative financial instruments (refer to note 31) Loans and receivables – Other non-current financial assets – Trade receivables – Other current assets less prepayments – Cash at bank and in hand Total 2008 Available-for-sale financial assets – Other non-current financial assets (equity investments) – Marketable securities *) Assets at fair value through profit and loss – Derivative financial instruments (refer to note 31) Loans and receivables – Other non-current financial assets – Trade receivables – Other current assets less prepayments – Cash at bank and in hand Maturity < 1 year Maturity > 1 year < 5 years Maturity > 5 years Total 8 500 550 – 7,063 1,271 11,296 20,688 15 – 307 – 6,581 1,111 8,781 – 513 (33) – – – – 137 – – 37 – – – 480 174 – 997 58 – – – – 153 – 41 – – – 145 1,013 517 37 7,063 1,271 11,296 21,342 168 997 365 41 6,581 1,111 8,781 Total 16,795 1,055 194 18,044 *) Danish AAA-rated mortgage bonds issued by Danish credit institutions governed by The Danish Financial Supervisory Authority. Redemption yield on the bond portfolio is 1.79% (4.3% in 2008) which matured 1 January 2010 (DKK 500 million) and 1 January 2011 (DKK 513 million). DKK million Liabilities at the end of the year 2009 Financial liabilities at amortised cost – Non-current debt – Current debt – Trade payables – Other current liabilities less taxes and duties payable Derivatives used for hedging – Derivative financial instruments (refer to note 31) Total 2008 Financial liabilities at amortised cost – Non-current debt – Current debt – Trade payables – Other current liabilities less taxes and duties payable Derivatives used for hedging – Derivative financial instruments (refer to note 31) Total Maturity < 1 year Maturity > 1 year < 5 years Maturity > 5 years Total – 263 2,242 6,551 71 9,127 – 55 2,281 5,718 1,084 9,138 563 – – – 84 647 518 – – – 195 713 407 – – – – 407 462 – – – – 462 970 263 2,242 6,551 155 10,181 980 55 2,281 5,718 1,279 10,313 For a description of credit quality of financial assets such as Trade receivables, Cash at bank and in hand, Current debt and financial instruments, please refer to note 28 and 31. 68 Novo Nordisk Annual Report 2009 17 Financial assets and liabilities (continued) Financial assets that are measured in the Balance sheet at fair value can be categorised by the following fair value measurement hierarchy: DKK million 2009 Available-for-sale financial assets Other non-current financial assets (equity investments) Marketable securities (bonds) Assets at fair value through profit and loss Derivative financial instruments Total 2008 Available-for-sale financial assets Other non-current financial assets (equity investments) Marketable securities (bonds) Assets at fair value through profit and loss Derivative financial instruments Total Active market data *) Directly or indirectly observable market data **) Not based on observable market data ***) 8 1,013 – 1,021 15 997 – 1,012 – – 517 517 – – 365 365 137 – – 137 153 – – 153 Total 145 1,013 517 1,675 168 997 365 1,530 *) The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the current bid price. **) The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is determined by using valuation techniques. ***) If there is no observable market data, the instrument is included in the last category. There were no significant transfers in and out of the first two categories in 2008 and 2009. The following table presents the changes in the category “Not based on observable market data” for the year ended 31 December. DKK million Other non-current financial assets (equity investments) Balance at the beginning of the year Total gains/(losses) recognised in the Income statement Total unrealised gains/(losses) recognised in Other comprehensive income Purchases Balance at the end of the year 2009 2008 153 (33) – 17 137 98 (41) 3 93 153 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N Novo Nordisk Annual Report 2009 69 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 18 Inventories DKK million Raw materials and consumables Work in progress Finished goods Total inventories 20 Other current assets 2008 DKK million 1,279 6,659 1,673 9,611 Prepayments *) Interest receivable Amounts owed by affiliated companies Rent deposit Other receivables **) 2009 1,143 6,694 2,179 10,016 2009 2008 691 83 118 344 726 593 54 146 305 606 Total other current assets 1,962 1,704 *) Comprise prepayments to ongoing research and development activities and pay- ments made concerning subsequent financial years etc. **) Other receivables comprise VAT receivables, miscellaneous duties and work in progress for third parties etc. Indirect production costs included in work in progress and finished goods 5,046 4,633 Amount of write-down of inventories recognised as expense during the year Amount of reversal of write-down of inventories during the year 19 Trade receivables DKK million Trade receivables (gross) Allowances at the beginning of the year Change in allowance during the year Receivables written off during the year as uncollectible Allowances at the end of the year 314 115 733 48 2009 7,663 602 18 (20) 600 2008 7,183 542 69 (9) 602 Trade receivables (net) 7,063 6,581 Trade receivables (net) are equal to an average credit period of (days) Trade receivables (gross) can be specified as follows: – Not yet due – Overdue by between 1 and 179 days – Overdue by between 180 and 359 days – Overdue by more than 360 days Trade receivables (gross) 50 53 6,193 741 513 216 7,663 5,699 901 263 320 7,183 70 Novo Nordisk Annual Report 2009 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 21 Share capital DKK million Development in share capital: 2004 and before 2005 2006 2007 2008 At the beginning of the year 2009 At the end of the year A share capital B share capital Total share capital 107 – – – – 107 – 107 602 – (35) (27) (13) 527 (14) 513 709 – (35) (27) (13) 634 (14) 620 At the end of 2009, the share capital amounted to DKK 107,487,200 in A share capital (equal to 107,487,200 A shares of DKK 1) and DKK 512,512,800 in B share capital (equal to 512,512,800 B shares of DKK 1). Treasury shares Number of As % of share capital before cancellation B shares of DKK 1 As % of share capital after cancellation Market value DKK million Holding at the beginning of the year Cancellation of treasury shares 25,721,095 (14,000,000) 4.06% (2.21%) Holding of treasury shares, adjusted for cancellation 11,721,095 1.85% 1.89% Purchase during the year Sale during the year Value adjustment Holding at the end of the year 21,661,949 (1,245,099) – 32,137,945 6,970 (3,794) 3,176 6,512 (117) 1,099 3.49% (0.20%) 5.18% 10,670 Acquisition of treasury shares during the year is part of the 2006 –2009 share buy-back programs of Novo Nordisk B shares. The DKK 19 billion program was initiated in order to align the capital structure with the expected development in free cash flow. Sale of treasury shares relates to exercised share options and employee shares. At the end of the year 8,051,217 shares of the treasury B shareholding shares are regarded as hedges for the share-based incentive schemes and restricted stock awards to employees. 22 Non-current debt DKK million Mortgage debt and other secured loans *) Unsecured loans and other non-current loans **) Total non-current debt The debt is denominated in the following currencies: DKK EUR USD Total non-current debt 2009 2008 503 467 970 2 501 467 970 504 476 980 2 502 476 980 Adjustment of the above loans to market value at year-end 2009 would result in a loss of DKK 22 million (a loss of DKK 2 million at year-end 2008). *) Terms to maturity between 2016 and 2022 and a weighted average interest rate of 1.31%. **) Terms to maturity in 2011 and a weighted average interest rate of 0.35%. Novo Nordisk Annual Report 2009 71 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 23 Deferred income tax assets and liabilities DKK million At the beginning of the year Deferred tax on profit for the year Adjustment relating to previous years Deferred tax on items recognised in Other comprehensive income Exchange rate adjustments Total deferred tax assets/(liabilities), net 2009 (708) (840) (52) (14) 59 (1,555) DKK million Assets Liabilities Specification The deferred tax assets and liabilities are allocable to the various items in the Balance sheet as follows: Property, plant and equipment Intangible assets Indirect production costs Unrealised profit on intercompany sales Provisions for doubtful trade receivables Tax-loss carry-forward Other 165 475 – 2,106 101 44 288 3,179 (1,432) (5) (1,262) – – – (2,035) (4,734) 2009 Total (1,267) 470 (1,262) 2,106 101 44 (1,747) (1,555) Assets Liabilities 129 628 – 1,997 72 52 453 3,331 (1,502) (7) (1,158) – (2) – (1,370) (4,039) 2008 176 (851) (184) 108 43 (708) 2008 Total (1,373) 621 (1,158) 1,997 70 52 (917) (708) Netting of deferred tax assets and deferred tax liabilities related to income taxes for which there is a legally enforceable right to offset (1,724) 1,724 – (1,635) 1,635 – Total deferred tax assets/(liabilities), net 1,455 (3,010) (1,555) 1,696 (2,404) (708) Tax-losses carried forward Further to the above, the tax value of tax losses carried forward of DKK 285 million (DKK 276 million in 2008) has not been recognised in the Balance sheet due to the likelihood that the tax losses will not be realised in the future. 24 Retirement benefit obligations Most employees in the Group are covered by post-employment retirement plans in the form of primarily defined contribution plans or alternatively defined benefit plans. Group companies sponsor these plans either directly or by contributing to independently administered funds. The nature of such plans varies according to the legal regulations, fiscal requirements and economic conditions of the countries in which the employees are employed, and the benefits are generally based on the employees’ remuneration and years of service. The obligations relate both to existing retirees’ pensions and to pension entitlements of future retirees. The Group’s defined benefit plans are primarily located in Japan, Germany, the United States and Switzerland. Post-employment benefit plans are usually funded by payments from group companies and by employees to funds independent of the Group. Where a plan is unfunded, a liability for the retirement obligation is recognised in the Balance sheet. In accordance with the Accounting Policies, the costs recognised for post-employment benefits are included in Cost of goods sold, Sales and distribution costs, Research and development costs or Administrative expenses. Other post-employment benefits consist mostly of post-retirement healthcare plans, principally in the United States. The following shows a five-year summary reflecting the funding of retirement obligations and the impact of historical deviations between expected and actual return on plan assets and actuarial adjustments on plan liabilities: DKK million Retirement obligations Fair value of plan assets (Over)/under funding Unrecognised actuarial gains/(losses) Net retirement obligations recognised in the Balance sheet Actuarial (gain)/loss on plan assets Actuarial (gain)/loss on plan liabilities 2009 1,063 (620) 443 13 456 14 (29) 2008 2007 2006 2005 1,103 (649) 454 (35) 419 56 24 885 (566) 319 43 362 (3) (151) 938 (495) 443 (113) 330 (3) 7 875 (435) 440 (124) 316 6 77 72 Novo Nordisk Annual Report 2009 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 24 Retirement benefit obligations (continued) DKK million DKK million 2009 2008 Pension plans Medical benefits Total Total Changes in the retirement obligations At the beginning of the year Current service costs Interest cost Actuarial (gains)/losses Past service costs Benefits paid Curtailments Settlements Exchange rate adjustments Other At the end of the year 907 85 33 (26) (4) (50) (2) (104) 0 (7) 832 196 33 12 (3) 0 (3) – – (3) (1) 231 1,103 118 45 (29) (4) (53) (2) (104) (3) (8) 1,063 885 112 41 24 1 (52) 17 – 72 3 1,103 Costs recognised in the Income statement for the year Current service costs Interest cost on pension obligation Expected return on plan assets *) Actuarial (gains)/losses recognised in the year Curtailment/settlement gains Past service costs Total charge to the Income statement *) Actual return on plan assets was DKK 6 million in 2009 (a loss of DKK 33 million in 2008). The costs are recognised in the Income statement as employee costs by function and consist of: Defined benefit pension plans Post-employment medical benefits Total charge to the Income statement 2009 2008 118 45 (20) 30 (20) (1) 152 112 41 (24) (2) – 1 128 107 45 152 92 36 128 DKK million Changes in the fair value of plan assets of the year At the beginning of the year Expected return on plan assets Actuarial gains/(losses) Employer contributions Benefits paid to employees Curtailments Settlements Exchange rate adjustments Other At the end of the year DKK million Amounts recognised in the Balance sheet are determined as Present value of funded obligations Fair value of plan assets Net retirement obligations funded Present value of unfunded obligations (Over)/ under funding Unrecognised actuarial gains/(losses) on pension benefit plans (net) Unrecognised actuarial gains/(losses) on post-employment medical plans (net) Unrecognised past service costs Net obligation recognised in the Balance sheet 2009 2008 The Group expects to contribute DKK 67 million to its defined benefit pension plans in 2010. 649 20 (14) 68 (40) 3 (67) 1 0 620 566 24 (56) 81 (24) 11 – 44 3 649 Weighted average asset allocation of funded retirement obligations Equities Bonds Cash at bank Property 2009 2008 Total 2009 DKK million % DKK million 311 190 99 20 620 50% 31% 16% 3% 100% 142 376 98 33 649 2008 % 22% 58% 15% 5% 100% 832 (620) 212 231 443 (26) 37 2 456 870 (649) 221 233 454 (68) 36 (3) 419 DKK million 2009 2008 The weighted average assumptions used for computation and valuation of defined benefit plans and post-employment medical benefits are as follows Discount rate Projected return on plan assets Projected future remuneration increases Healthcare cost trend rate Inflation rate 4% 3% 3% 6% 2% 5% 4% 4% 6% 2% For all major defined benefit plans, actuarial computations and valuations are performed annually. The effect of one percentage point increase or decrease in the medical cost trend rate is shown below. The Group’s major postemployment medical plans are for US employees. Amounts recognised in the Balance sheet for post-employment defined benefit pension plans and medical benefits are predominantly non-current and are reported as Non-current debt. DKK million Changes in the retirement obligations recognised in the Balance sheet At the beginning of the year Recognised in the Income statement Employer contributions Benefit paid to employees (net) Settlements Curtailments Exchange rate adjustment At the end of the year DKK million 2009 2008 Current service cost and interest cost Defined benefit obligation Increase Decrease 2 13 (3) (14) 419 152 (68) (13) (37) 7 (4) 456 362 128 (81) (28) – 10 28 419 Novo Nordisk Annual Report 2009 73 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 25 Provisions for other liabilities DKK million At the beginning of the year Adjustments to previous year’s provisions Additional provisions Used during the year Exchange rate adjustments At the end of the year Specification of other provisions: Non-current Current Total provisions for other liabilities Provisions for returned products *) Provisions for sales rebates **) Other provisions ***) 594 (24) 245 (228) 1 588 – 588 588 2,281 (90) 4,933 (4,460) (41) 911 (33) 323 (50) 36 2,623 1,187 – 2,623 2,623 1,157 30 1,187 2009 Total 3,786 (147) 5,501 (4,738) (4) 4,398 1,157 3,241 4,398 2008 Total 3,640 (329) 3,975 (3,555) 55 3,786 863 2,923 3,786 *) Novo Nordisk issues credit notes for expired goods as a part of normal business. Consequently, a provision for future returns is made based on historical statistical product **) returns, which represents management’s best estimate. The provision is expected to be used within the normal operating cycle. In some countries, the actual rebates depend on which customers purchase the products. Factors complicating the rebate calculations are the identification of which products have been sold subject to a rebate, on which customer or government price terms apply, and the estimated time lag between sale and payment of the rebate. Please refer to notes 1 and 4 for further information on rebates deducted from sales. ***) Other provisions consist of various types of provisions, including provisions for legal disputes, which represent management’s best estimate. Please refer to note 32 for further information on commitments and contingencies. 26 Other current liabilities DKK million Employee costs payable Taxes and duties payable Deferred income Amounts owed to affiliated companies Other payables *) Total other current liabilities 2009 2,742 262 50 38 3,721 6,813 2008 2,272 135 78 79 3,289 5,853 *) Other payables primarily consist of accruals related to ongoing R&D clinical trials, royalty payments, staff accruals and interest accruals etc. 27 Other adjustments for non-cash items DKK million Share-based payment costs Increase/(decrease) in provisions and benefit obligations (Gain)/loss from sale of property, plant and equipment Change in provisions for doubtful trade receivables Unrealised (gain)/loss on shares and bonds etc Unrealised foreign exchange (gain)/loss Share of (profit)/loss in associated companies Other, including difference between average exchange rate and year-end exchange rate Other adjustments for non-cash items 2009 259 649 (3) 18 21 (253) 55 113 859 2008 2007 331 221 95 69 30 24 130 490 140 119 54 37 124 (1,233) (280) 614 226 (37) 74 Novo Nordisk Annual Report 2009 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 28 Financial risk Novo Nordisk has centralised the management of the Group’s financial risks. The overall objective and policies for the company’s financial risk manage- ment are outlined in the Treasury Policy, which is approved by the Board of Directors. The Treasury Policy consists of the Foreign Exchange Policy, the Investment Policy, the Financing Policy and the Policy regarding Credit Risk on Financial Counterparts, and includes a description of allowed financial instruments and risk limits. Novo Nordisk only hedges commercial exposures and consequently does not enter into derivative transactions for trading or speculative purposes. Novo Nordisk uses a fully integrated Treasury Management System to manage all financial positions. All positions are marked-to-market based on real-time quotes and risk is assessed using generally accepted standards. Foreign exchange risk Foreign exchange risk is the principal financial risk for Novo Nordisk and as such has a significant impact on the Income statement and the Balance sheet. The bulk of Novo Nordisk’s sales is in EUR, USD, JPY, CNY and GBP, while most production, research and development costs are carried in DKK. As a consequence, Novo Nordisk’s foreign exchange risk is most significant in USD, JPY, CNY and GBP, excluding EUR for which the exchange rate risk is regarded as low due to the Danish fixed-rate policy towards the EUR. The overall objective of foreign exchange risk management is to limit the short-term negative impact on earnings and cash flow from exchange rate fluctuations, thereby increasing the predictability of the financial results. Novo Nordisk hedges existing assets and liabilities in major currencies as well as future expected cash flows up to 24 months forward. Currency hedging is based upon expectations of future exchange rates and takes place using mainly foreign exchange forwards and foreign exchange options matching the due dates of the hedged items. Expected cash flows are continuously assessed using historical inflows, budgets and monthly sales forecasts. Hedge effectiveness is assessed on a regular basis. In 2009, the USD, the JPY and the CNY depreciated by 1.8%, 3.9%, and 1.7% versus DKK, respectively. In 2008, the USD, the JPY and the CNY appreciated by 4.1%, 30.3%, and 11.3% versus DKK, respectively. The GBP appreciated by 7.6% in 2009. In 2008, the GBP de preciated by 24.6%. At year-end 2009, Novo Nordisk covered the foreign exchange exposures on the Balance sheet together with 17 months of expected future cash flow in USD and CNY. For JPY and GBP, the equivalent cover was 15 months and 14 months of expected future cash flow, respectively. At the end of 2008, the USD and CNY cover was 15 months, and for JPY and GBP the cover was 13 months. A 5% increase/decrease in the following currencies will have a full-year impact on operating profit of approximately: DKK million USD JPY CNY GBP CAD Estimated for 2010 580 150 100 80 40 2009 530 150 80 80 40 At the end of 2009, a 5% increase in all other currencies versus EUR and DKK would result in a decrease of the value of the net financial instruments of the Group of approximately DKK 927 million (DKK 661 million in 2008). A 5% decrease in all other currencies versus EUR and DKK would result in an increase of the value of the net financial instruments of the Group of approximately DKK 977 million (DKK 669 million in 2008). The financial instruments included in the foreign exchange sensitivity analysis are the Group’s Cash, Accounts receivable and Account payable, Current and non-current loans, Current and non-current financial invest- ments, foreign exchange forwards and foreign exchange options hedging transaction exposure. Furthermore, interest rate swaps and cross-currency swaps are included. Not included are anticipated currency transactions, investments and fixed assets. Cross-currency swaps hedging translation exposure are excluded from the sensitivity analysis, as the effects of chang- ing exchange rates hereon are recognised directly in Other comprehensive income. Novo Nordisk only hedges invested equity in major foreign affiliates to a very limited extent. Equity hedging takes place using long-term cross- currency swaps. At the end of 2009, hedged equity made up 16% of the Group’s JPY equity. At the end of 2008, 12% of the Group’s JPY equity was hedged. Interest rate risk DKK and EUR interest rates fell during most of 2009, particularly during the first quarter of the year. The Danish two-year interest rate was 2.42% at the end of 2009, down from 3.57% at the end of 2008. Short-term interest rates fell even more. The three month Cibor was 1.55% at the end of 2009, down from 4.91% at the end of 2008. Changes in interest rates have an effect on Novo Nordisk’s financial instru- ments. At the end of 2009, an increase in the interest rate level of one percentage point would, everything else being equal, increase the fair value of Novo Nordisk’s financial instruments by DKK 19 million (DKK 19 million in 2008). The financial instruments included in the sensitivity analysis consist of Marketable securities, Deposits, Current and non-current loans, Interest rate swaps and cross-currency swaps. Not included are foreign exchange for- wards and foreign exchange options due to the limited effect that a parallel shift in interest rates in all currencies has on these instruments. Liquidity risk Novo Nordisk ensures availability of required liquidity through a combina- tion of cash management, highly liquid investment portfolios and uncom- mitted as well as committed facilities. Novo Nordisk uses cash pools for optimisation and centralisation of cash management. For non-cash pool affiliates, surplus cash above the balance required for working capital management is deposited with the parent company, who invests surplus cash in money market deposits and marketable securities. Counterparty risk The use of derivatives and money market deposits gives rise to counterparty exposure. To manage the credit risk on financial counterparties, Novo Nordisk only enters into derivative financial contracts and money market deposits with financial counterparties which have a satisfactory long-term credit rating assigned by both Standard and Poor’s and Moody’s. At the end of 2009, the majority of Novo Nordisk deposits are secured by the general Danish State guarantee until September 2010. Furthermore, maximum credit lines defined for each counterparty limit the overall counterparty risk. The credit risk on bonds is limited as investments are made in highly liquid bonds with solid credit ratings. Credit risk on Trade receivables and Other current assets is limited as Novo Nordisk has no significant concentration of credit risk, with exposure being spread over a large number of counterparties and customers. Capital structure Novo Nordisk’s capital structure is characterised by a substantial equity ratio. This is in line with the general capital structure of the pharmaceutical industry and reflects the inherent long-term investment horizons in an industry with typically more than 10 years’ development time for pharma- ceutical products. Novo Nordisk’s equity ratio, calculated as equity to total liabilities, was 65.3% at the end of the year (65.2% at the end of 2008). Novo Nordisk Annual Report 2009 75 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 29 Share-based payment schemes The total number of shares in the joint pools relating to the years 2007, 2008 and 2009: DKK million 2009 2008 2007 Year allocated to pool Number of shares Vesting Total share-based payment costs recognised in the Income statement Employee shares (DK-based employees) Employee shares (outside DK) Long-term share-based incentive programme (Senior Management Board) Long-term share-based incentive programme and share options (management group below Senior Management Board) *) Share-based payment expensed in the Income statement – 49 54 156 259 156 15 55 – 9 43 105 78 331 130 *) Includes long-term share-based incentive programme for 2007 to 2009 and share option programme for 2004 to 2006. Long-term share-based incentive programme For a description of the programme, please refer to the section Executive Remuneration on pp 39 – 40. In 2009, the allocation to the joint pool for members of the Senior Management Board amounted to DKK 54 million, corresponding to 7.0 months’ salary. This amount was expensed in 2009. The cash amount was converted into 177,066 Novo Nordisk B shares of DKK 1 using a share price of DKK 307, equal to the average trading price for Novo Nordisk B shares on NASDAQ OMX Copenhagen from 29 January to 12 February 2009. Based on the split of participants at the establishment of the joint pool, ap - proximately 30% of the pool will be allocated to the members of Executive Management and 70% to members of the Senior Management Board. The shares allocated to the joint pool for 2006 (261,500 shares) were released to the individual participants on 1 February 2010 following the approval of the Annual Report 2009 by the Board of Directors. For the management group below the Senior Management Board, a similar share-based incentive programme was introduced in 2007. For the service entities NNIT and NNE Pharmaplan separate share-based incentive pro- grammes have been setup which are similar to the general Novo Nordisk programme but operates with entity specific targets. For 2007, the total group below Senior Management Board including NNIT and NNE Pharmaplan consisted of about 500 employees. The allocation to the joint pool was DKK 135 million in 2007, corresponding to 527,665 shares. The cost of this allocation will be amortised equally over the period 2007–2010. For 2008, this group consisted of about 590 employees. The allocation to the joint pool was DKK 181 million corresponding to 570,390 shares. The cost of this allocation will be amortised equally over the period 2008 –2011. For 2009, this group consisted of about 675 employees. The allocation to the joint pool was DKK 186 million corresponding to 605,218 shares. The cost of this allocation will be amortised equally over the period 2009 –2012. Senior management board 2007 2008 2009 Management group below Senior management board 2007 2008 2009 Cancelled Total 166,292 171,492 177,066 514,850 527,665 570,390 605,218 (27,853) 1,675,420 2,190,270 2011 2012 2013 2011 2012 2013 Share options Novo Nordisk had established share option schemes in 1998 –2006 with the purpose of motivating and retaining a qualified management group and to ensure common goals for management and the owners. Each option gives the right to purchase one Novo Nordisk B share. All share options are hedged by treasury shares. No options have been granted since 2006 as the long-term incentive programme from 2007 onwards has been share-based. The options are exercisable three years after the issue date and will expire after eight years. The exercise price for options granted based on per - formance targets for the financial years 2000 –2006 was equal to the market price of the Novo Nordisk B share at the time when the plan was established. The options can only be settled in shares. Assumptions The market value of the Novo Nordisk B share options has been calculated using the Black-Scholes option pricing model. The expected volatility is calculated as one-year historic volatility – average of daily volatilities. The assumptions used are shown in the table below: Expected life of the option in years (average) Expected volatility Expected dividend per share (in DKK) Risk-free interest rate (based on Danish government bonds) Novo Nordisk B share price at the end of the year 2009 2008 2007 6 26% 7.50 6 29% 6.00 6 21% 4.50 2.00% 3.00% 4.25% 332 271 335 76 Novo Nordisk Annual Report 2009 201 289 201 201 201 201 201 201 201 201 137 137 137 137 137 137 137 137 137 189 1,535 201 (28) (32) (18) (45) (114) (31) (12) (3) (505) 948 (35) (15) (20) (25) (69) 0 (1) (14) 287 1,056 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N Average exercise price per option DKK Market value per option DKK Market value DKK million 29 Share-based payment schemes (continued) Outstanding share options in Novo Nordisk Outstanding at the end of 2007 Employee share options granted in 2008 *) Exercised in 2008: Of 1999 Ordinary share option plan Of 2000 Ordinary share option plan Of 2001 Ordinary share option plan Of 2003 Ordinary share option plan Of 2004 Launch share option plan Of 2005 Employee share options **) Expired in 2008 Cancelled in 2008 Value adjustment ***) Share options 7,638,748 694,500 (140,500) (159,525) (92,700) (225,225) (566,516) (156,380) (58,070) (16,000) 140 0 99 99 166 97.5 133.5 0 140 140 Outstanding at the end of 2008 6,918,332 133 Exercised in 2009: Of 2000 Ordinary share option plan Of 2001 Ordinary share option plan Of 2003 Ordinary share option plan Of 2004 Ordinary share option plan Of 2005 Ordinary share option plan Of 2008 Employee share options *) Expired in 2009 Cancelled in 2009 Value adjustment ***) Outstanding at the end of 2009 (258,341) (113,484) (148,255) (186,350) (500,225) (1,530) (5,000) (105,700) 99 166 97.5 133.5 153 0 99 133 5,599,447 135 *) Granted to all employees outside Denmark under the 2008 employee share option programme, with a benefit equal to the benefit obtained by the Danish-based employees under the employee share option programme. **) Granted to employees in certain countries outside Denmark under the 2005 employee share option programme, with a benefit equal to the benefit obtained by the Danish- based employees under the employee share option programme. ***) The market value has been calculated using the Black-Scholes model with the parameters existing at year-end of the respective year. Exercisable and outstanding share options in Novo Nordisk Issued share options Exercised share options 2000 Ordinary share option plan 2001 Ordinary share option plan 2003 Ordinary share option plan 2004 Ordinary share option plan 2005 Ordinary share option plan 1,526,000 1,369,960 2,185,000 1,618,832 1,640,468 (1,474,496) (846,064) (1,352,490) (752,866) (500,225) Expired Cancelled (5,000) – – – – (46,504) (95,788) (82,666) (118,000) (152,818) – 428,108 749,844 747,966 987,425 Outstanding/ exercisable share options Exercise price DKK Exercisable at the end of 2009 8,340,260 (4,926,141) (5,000) (495,776) 2,913,343 2006 Ordinary share option plan 2008 Employee share option 2,229,084 694,500 – (1,530) – – (166,500) (69,450) 2,062,584 623,520 Outstanding at the end of 2009 *) 11,263,844 (4,927,671) (5,000) (731,726) 5,599,447 *) All share options will vest if there is a change of control of Novo Nordisk A/S, please refer to note 32. Average market price of Novo Nordisk B shares per trading period in 2009 29 January – 12 February 30 April – 14 May 6 August – 20 August 29 October – 12 November Total exercised options 99 166 98 134 153 175 0 Exercise period 22/2/04 – 21/2/09 8/2/05 – 7/2/10 6/2/07 – 5/2/12 31/1/08 – 30/1/13 31/1/09 – 30/1/14 31/1/10 – 30/1/15 1/11/11 Average market price DKK 307 274 313 321 Exercised share options 839,996 52,159 195,400 120,630 1,208,185 Novo Nordisk Annual Report 2009 77 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 30 Management’s remuneration, share options and shareholdings For information on the Board of Directors, the members of Executive Management and other members of the Senior Management Board, please refer to pp 43 – 46 of this Annual Report. Fee to the Board of Directors and the Audit Committee In 2009, the base fee for members of the Board of Directors was DKK 400,000 (DKK 400,000 in 2008). DKK million Sten Scheibye (chairman of the Board) Göran A Ando (vice chairman of the Board and R&D facilitator) Kurt Anker Nielsen (chairman of the Audit Committee) Jørgen Wedel (Audit Committee member) Hannu Ryöppönen (Audit Committee member) Other members of the Board of Directors/Audit Committee Total Board of Directors Audit Committee 1.0 0.9 0.4 0.4 0.3 2.5 5.5 – – 0.5 0.2 0.2 – 0.9 2009 Total 1.0 0.9 0.9 0.6 0.5 2.5 6.4 Board of Directors Audit Committee 1.0 0.9 0.4 0.4 – 2.8 5.5 – – 0.5 0.2 – 0.1 0.8 2008 Total 1.0 0.9 0.9 0.6 – 2.9 6.3 Executive Management and other members of the Senior Management Board DKK million 2009 Executive Management: Lars Rebien Sørensen Jesper Brandgaard Lise Kingo Kåre Schultz Mads Krogsgaard Thomsen Executive Management in total Other members of the Senior Management Board in total *) Joint pool **) 2008 Executive Management: Lars Rebien Sørensen Jesper Brandgaard Lise Kingo Kåre Schultz ***) Mads Krogsgaard Thomsen Executive Management in total Other members of the Senior Management Board in total *) Joint pool **) Fixed salary Cash bonus Pensions Other benefits Share-based payment Total remuneration 6.5 4.2 3.8 4.5 4.2 23.2 59.5 6.3 3.9 3.5 4.9 3.9 22.5 55.3 1.6 1.4 1.3 1.2 1.0 6.5 2.0 1.4 1.2 1.6 1.3 7.5 0.3 0.3 0.3 0.3 0.3 1.5 20.5 19.6 10.6 2.1 1.4 1.2 1.8 1.4 7.9 2.1 1.3 1.2 1.5 1.3 7.4 17.1 17.3 0.3 0.3 0.3 0.9 0.3 2.1 8.1 – – – – – – – 54.4 – – – – – – – 54.5 10.4 7.3 6.6 7.6 6.8 38.7 110.2 54.4 10.8 6.9 6.2 9.1 6.9 39.9 97.8 54.5 *) The total remuneration for 2009 includes remuneration to 25 senior vice presidents. The total remuneration for 2008 includes remuneration to 26 senior vice presidents, two of whom resigned during the year. **) The joint pool is locked up for three years before it is transferred to the participants employed at the end of the three-year period. The value is the cash amount of the share bonus granted in the year using the grant date market value of Novo Nordisk B shares. Based on the split of participants at the establishment of the joint pool, approximately 30% of the pool will be allocated to the members of Executive Management and 70% to other members of the Senior Management Board (2008: 35% and 65%, respectively). In the lock-up period the joint pool may potentially be reduced in case of lower-than-planned value creation in subsequent years. ***) The total remuneration in 2008 reflects costs in relation to Kåre Schultz’ expatriation to Switzerland. Out of the total remuneration, approximately 8.9% is related to cost compensation and associated tax effects of being expatriated. 78 Novo Nordisk Annual Report 2009 30 Management’s remuneration, share options and shareholdings (continued) The shares allocated to the joint pool for 2006 (261,500 shares) were released to the individual participants following approval by the Board of Directors on 1 February 2010. Based on the share price at the end of 2009, the value of the released shares is as follows: Value per 31 December 2009 of shares released 1 February 2010 Executive Management: Lars Rebien Sørensen Jesper Brandgaard Lise Kingo Kåre Schultz Mads Krogsgaard Thomsen Executive Management in total Other members of the Senior Management Board in total **) *) The market value of the shares released in 2010 is based on Novo Nordisk B share price at the end of 2009 of DKK 332. **) In addition 34,872 shares (market value: DKK 11.6 million) were released to retired members of management. Number Market value *) DKK million of shares 26,138 17,430 17,430 17,430 17,430 95,858 130,770 8.6 5.8 5.8 5.8 5.8 31.8 43.4 Lars Rebien Sørensen serves as a member of the Board of Directors of Danmarks Nationalbank and retains the remuneration of DKK 10,000 in 2009 (not a member in 2008) and as a member of the Board of Directors of ZymoGenetics, Inc. and does not retain any compensation. Furthermore, Lars Rebien Sørensen serves as a member of the Supervisory Board of Bertelsmann AG and retains the remuneration of EUR 87,500 in 2009 (EUR 55,000 in 2008) and as a member of the Supervisory Board of DONG Energy A/S and retains the remuneration of DKK 175,000 in 2009 (DKK 168,750 in 2008). Jesper Brandgaard serves as chairman of the Board of SimCorp A/S and retains the remuneration of DKK 856,400 in 2009 (DKK 442,500 in 2008). Until March 2008 Lise Kingo served as a member of the Board of Directors of GN Store Nord A/S and retained the remuneration of DKK 100,000. Kåre Schultz serves as a member of the Board of Directors of Lego A/S and retains the remuneration of DKK 250,000 in 2009 (DKK 250,000 in 2008). Mads Krogsgaard Thomsen serves as a member of the Board of Directors of Cellartis AB and retains the remuneration of SEK 50,000 (SEK 50,000 in 2008). In 2008 Mads Krogsgaard Thomsen also served as a member of the Board of Directors of DTU and retained the remuneration of DKK 60,000. Management’s share options Share options in Novo Nordisk Executive Management: Lars Rebien Sørensen Jesper Brandgaard Lise Kingo Kåre Schultz Mads Krogsgaard Thomsen Executive Management in total At the beginning of the year Exercised during the year Additions during the year **) At the end of the year Market value *) DKK million 90,000 45,500 19,000 – 45,500 22,000 12,500 – – 12,500 200,000 47,000 – – – – – – 68,000 33,000 19,000 – 33,000 153,000 13.7 6.6 4.4 – 6.6 31.3 46.1 77.4 Other members of the Senior Management Board in total 276,950 42,750 8,750 242,950 Total 476,950 89,750 8,750 395,950 *) Calculation of market values at year-end has been based on the Black-Scholes option pricing model applying the assumptions shown in note 29. **) Additions during the year cover the holdings of share options by the Senior Management Board members appointed in 2009. s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N Novo Nordisk Annual Report 2009 79 30 Management’s remuneration, share options and shareholdings (continued) Management’s holdings of Novo Nordisk shares The internal rules for trading by board members, executives and certain employees in Novo Nordisk securities only permit trading in the 15-calendar-day period following each quarterly announcement. At the beginning of the year Addition during the year Sold/released during the year At the end Market value *) DKK million of the year Shares in Novo Nordisk Board of Directors: Sten Scheibye Göran A Ando Anne Marie Kverneland Henrik Gürtler Johnny Henriksen Jørgen Wedel Kurt Anker Nielsen Hannu Ryöppönen Pamela J Kirby Stig Strøbæk Søren Thuesen Pedersen Board of Directors in total Executive Management: Lars Rebien Sørensen Jesper Brandgaard Lise Kingo Kåre Schultz Mads Krogsgaard Thomsen s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 800 1,200 3,100 – 760 11,000 98,904 – – 420 585 – 400 – – – – – 600 – – – – – 328 – – – 15,200 – – – – 800 1,600 2,772 – 760 11,000 83,704 600 – 420 585 116,769 1,000 15,528 102,241 920 420 220 37,846 420 45,208 27,968 15,468 15,468 27,968 35,208 27,968 15,468 8,214 16,500 10,920 420 220 45,100 11,888 0.3 0.5 0.9 – 0.3 3.7 27.8 0.2 – 0.1 0.2 34.0 3.6 0.1 0.1 15.0 3.9 22.7 19.4 Executive Management in total 39,826 132,080 103,358 68,548 The Senior Management Board in total 29,450 151,666 122,792 58,324 Joint pool for Executive Management and other members of the Senior Management Board **) 736,324 177,066 186,750 726,640 ***) 241.2 Total 922,369 461,812 428,428 955,753 317.3 *) Calculation of the market value is based on the quoted share price of DKK 332 at the end of the year. **) The annual allocation to the joint pool is locked up for three years before it is transferred to the participants employed at the end of each three-year period. Based on the split of participants at the establishment of the joint pool, 30 –35% of the pool will be allocated to the members of Executive Management and 65–70% to other members of the Senior Management Board. In the lock-up period, the joint pool may potentially be reduced in case of lower-than-planned value creation in subsequent years. ***) Excludes 49,710 shares currently assigned for 4 retired members of management. 80 Novo Nordisk Annual Report 2009 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 31 Financial instruments Novo Nordisk uses a number of derivatives to hedge currency exposure. Novo Nordisk’s currency hedging activities are categorised into hedging of forecasted transactions (cash flow hedges), hedging of assets and liabilities (fair value hedges) and hedging of net investments. Hedging of forecasted transactions (cash flow hedge) The table below shows the fair value of cash flow hedging activities for 2009 and 2008 specified by hedging instrument and the major currencies. The fair value of the financial instruments qualifying for hedge accounting is recognised directly under Other comprehensive income until the hedged items are recognised in the Income statement. At year-end, a gain of DKK 388 million is deferred via Other comprehensive income (a loss of DKK 864 million in 2008). The fair values of the financial instruments not qualifying for hedge accounting are recognised directly in the Income statement. Hedging of forecasted transactions qualifying for hedge accounting 2009 2008 Contract amount at year-end Positive fair value at year-end Negative fair value at year-end Contract amount at year-end Positive fair value at year-end Negative fair value at year-end DKK million Forward contracts, net sales: USD JPY GBP Other Total forward contracts Cross-currency and interest rate swaps: EUR / EUR EUR/USD Total cross-currency and interest rate swaps 12,799 3,728 916 563 18,006 250 503 753 266 132 20 – 418 – – – Total hedging of forecasted transactions 18,759 418 Other forecast transaction hedges for which hedge accounting is not applied Cross currency and interest rate swaps: DKK / DKK EUR / EUR *) EUR / USD *) JPY/ DKK Total cross currency and interest rate swaps Currency options 310 – – 314 624 3,274 – – – 55 55 37 Total hedging of forecasted transactions 22,657 510 *) The contract value is disclosed only in the upper table. – – – 15 15 4 11 15 30 17 9 40 – 66 – 96 10,326 3,464 1,027 354 15,171 251 504 755 – – 163 31 194 5 – 5 550 511 – – 1,061 – 2 2 15,926 199 1,063 310 – – 314 624 1,080 – – – 40 40 17 15 8 32 – 55 – 17,630 256 1,118 The financial contracts existing at the end of the year (cash flow hedges) cover the expected future cash flow for the following number of months: USD JPY GBP 2009 2008 17 months 15 months 14 months 15 months 13 months 13 months The maturity of the swaps existing at the end of 2009 is December 2011 and December 2012 (December 2011 and December 2012 at the end of 2008). Novo Nordisk Annual Report 2009 81 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 31 Financial instruments (continued) Hedging of assets and liabilities (fair value hedge) The table below shows the fair value of fair value hedging activities for 2009 and 2008 specified by hedging instrument and the major currencies. All changes in fair values are recognised in the Income statement amounting to a loss of DKK 49 million in 2009 (a loss of DKK 34 million in 2008). As the hedges are highly effective, the net gain or loss on the hedged items is similar to the net loss or gain on the hedging instruments. DKK million Forward contracts, net sales: USD JPY GBP Other Total forward contracts Total hedging of assets and liabilities 2009 2008 Contract amount at year-end Positive fair value at year-end Negative fair value at year-end Contract amount at year-end Positive fair value at year-end Negative fair value at year-end 2,092 764 304 542 3,702 3,702 – – 7 – 7 7 25 13 – 18 56 56 1,235 669 326 448 2,678 2,678 2 – 51 56 109 109 – 143 – – 143 143 The financial contracts existing at the end of the year hedge the currency exposure on assets and liabilities in the Group’s major currencies other than DKK and EUR, ie primarily assets and liabilities in USD, JPY and GBP. Hedging of net investments in foreign subsidiaries (net investment hedge) The table below shows the fair value of hedging activities relating to net investments in foreign subsidiaries for 2009 and 2008 specified by hedging instrument and the major currencies. All changes in fair values relating to currency are recognised directly in Other comprehensive income, amounting to a loss of DKK 3 million in 2009 (a loss of DKK 18 million in 2008). All changes relating to interest rates are recognised in the Income statement, amounting to DKK 1 million in 2009 (DKK 1 million in 2008). DKK million Cross-currency swaps: JPY/ DKK Total hedging of net investments in foreign subsidiaries 2009 2008 Contract amount at year-end Positive fair value at year-end Negative fair value at year-end Contract amount at year-end Positive fair value at year-end Negative fair value at year-end 166 166 – – 3 3 100 100 – – 18 18 The maturity of the swap existing at the end of 2009 is November 2012 (October 2009, at the end of 2008). The financial contracts existing at the end of the year hedge the following share of the major net investments: DKK million USD JPY GBP EUR *) Other Total 2009 2008 Net investment % covered Net investment % covered 3,283 1,028 168 3,755 5,400 13,634 0% 16% 0% 0% 0% 2,423 1,013 153 4,301 3,782 11,672 0% 12% 0% 0% 0% *) Including subsidiaries with EUR as the functional currency regardless of the local currency in the subsidiary. 82 Novo Nordisk Annual Report 2009 31 Financial instruments (continued) Total hedging activities The table below summarises the fair values of all the hedging activities of Novo Nordisk. DKK million Currency-related instruments Forward contracts, cash flow hedges Forward contracts, fair value hedges Currency options, cash flow hedges Cross-currency swaps, cash flow hedges Cross-currency swaps, other forecast transaction hedges Cross-currency swaps, net investment hedging Total currency-related instruments Interest-related instruments Interest rate swaps, cash flow hedges Interest rate swaps, other forecast transaction hedges Total interest-related instruments Total derivatives included in Marketable securities and financial instruments and in Current debt and financial instruments The fair value adjustments are recognised in Income statement – Other forecast transaction hedges for which hedge accounting is not applied – Fair value hedges Other comprehensive income – Cash flow hedges – Net investment hedges (included in exchange rate adjustment) Total fair values 2009 2008 Contract amount at year-end Positive fair value at year-end Negative fair value at year-end Contract amount at year-end Positive fair value at year-end Negative fair value at year-end 18,006 3,702 3,274 503 314 166 25,965 250 310 560 418 7 37 – 55 – 517 – – – 15 56 – 11 40 3 125 4 26 30 15,171 2,678 1,080 504 314 100 19,847 251 310 561 194 109 17 – 40 – 360 5 – 5 1,061 143 – 2 32 18 1,256 – 23 23 26,525 517 155 20,408 365 1,279 92 7 418 – 517 66 56 30 3 155 57 109 199 – 365 55 143 1,063 18 1,279 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N Novo Nordisk Annual Report 2009 83 32 Commitments and contingencies Contingencies s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N DKK million Commitments Operating lease commitments The operating lease commitments below are related to non-cancellable operating leases primarily related to premises, company cars and office equipment. Approximately 55% of the commitments are related to leases outside Denmark. The lease costs for 2009 and 2008 were DKK 615 million and DKK 547 million, respectively. Lease commitments expiring within the following periods as from the end of the reporting period: Within one year Between one and two years Between two and three years Between three and four years Between four and five years After five years Total Purchase obligations The purchase obligations primarily relate to contractual obligations to investments in proper- ty, plant and equipment as well as purchase agreements regarding medical equipment and consumer goods. Novo Nordisk expects to fund these commitments with existing cash and cash flows from operations. Obligations relating to research and development projects Novo Nordisk has engaged in research and development projects with a number of external corporations. The major part of the obligations comprises fees on the phase 3 Decludec and DecludecPlus programmes. Other guarantees Other guarantees primarily relate to guarantees issued by Novo Nordisk in relation to rented property. 2009 2008 See note 1 for the principles for making accounting estimates and judge- ments about pending and potential future litigation outcomes. Pending litigation against Novo Nordisk As of 1 February 2010, Novo Nordisk Inc., along with a majority of the hormone therapy product manufacturers in the US, is a defendant in pro - duct liability lawsuits related to hormone therapy products. These lawsuits currently involve a total of 52 individuals (as compared to 50 individuals in January 2009) who allege to have used a Novo Nordisk hormone therapy product. These products (Activella ® and Vagifem®) have been sold and marketed in the US since 2000. Until July 2003, the products were sold and marketed exclusively in the US by Pharmacia & Upjohn Company (now Pfizer Inc.). According to information received from Pfizer, 63 individuals (as com- pared to 51 individuals in January 2009) currently allege, in relation to similar lawsuits against Pfizer Inc, that they also have used a Novo Nordisk hormone therapy product. Currently, Novo Nordisk does not have any trials scheduled in 2010. Novo Nordisk does not expect the pending claims to have a material impact on Novo Nordisk’s financial position, operating profit or cash flow. In November 2006, Novo Nordisk A/S and the Italian affiliate Novo Nordisk Farmaceutici S.P.A. were sued by A. Menarini Industrie Farmaceutiche Riunite s.r.l. and Laboratori Guidotti S.P.A. (‘Menarini’) in the Civil Court in Rome. Menarini alleges that Novo Nordisk breached an alleged contract with Menarini for the sale and distribution of insulin and insulin analogues in the Italian market or, in the alternative, has incurred a pre-contractual or extra-contractual liability arising from negotiations between the parties. Novo Nordisk disputes the claims made by Menarini. A hearing in the matter is scheduled to take place in January 2011. Novo Nordisk cannot predict how long the litigation will take or when it will be able to provide additional information. At this point in time, Novo Nordisk does not expect the pending claim to have a material impact on Novo Nordisk’s financial position, operating profit or cash flow. Novo Nordisk Inc. is currently a defendant in four separate cases filed in the US alleging that Novo Nordisk and a number of other pharmaceutical com- panies provided a false Average Wholesale Price for certain drugs covered by Medicaid. These cases have been brought by the State of Alabama and the counties of Oswego, Erie and Schenectady, New York. Novo Nordisk was dismissed from a similar action brought by the State of Mississippi. Further, in 2005, Novo Nordisk was dismissed in 38 similar cases brought by counties in the State of New York. Novo Nordisk does not expect the pending claims to have a material impact on Novo Nordisk’s financial position, operating profit or cash flow. 670 559 441 346 315 679 579 483 394 302 281 710 3,010 2,749 2,051 2,093 1,989 764 443 412 In addition to the above, the Novo Nordisk Group is engaged in certain litigation proceedings. In the opinion of management, settlement or continuation of these proceedings are not expected to have a material effect on Novo Nordisk’s financial position, operating profit or cash flow. Security for debt Land, buildings and equipment, etc at carrying amount. 1,459 1,401 World Diabetes Foundation At the Annual General Meeting of Novo Nordisk A/S in 2002, the share - holders agreed on a donation to the World Diabetes Foundation, obligating Novo Nordisk A/S for a period of 10 years from 2001 to make annual dona- tions to the Foundation of 0.25% of the net insulin sales of the Group in the preceding financial year. At the Annual General Meeting in 2008, a new donation in supplement to the existing obligation was agreed by the shareholders. According to the new donation, Novo Nordisk is obliged to make annual donations to the Foundation of 0.01% in the period 2008 –2010 and 0.125% in the period 2011–2017 of the net insulin sales of the Group in the preceding financial year. However, annual donations for 2010 shall not exceed the lower of DKK 70 million or 15% of the taxable income of Novo Nordisk A/S and from the period 2011–2017 the lower of DKK 80 million or 15% of the taxable income of Novo Nordisk A/S in the financial year in question. The donation of DKK 68 million in 2009 is recognised in the Income state- ment. 84 Novo Nordisk Annual Report 2009 Pending claims against Novo Nordisk and investigations involving Novo Nordisk In December 2005, the office of the US Attorney for the Eastern District of New York served Novo Nordisk with a subpoena calling for the production of documents relating to Novo Nordisk’s US marketing and promotional practices. Novo Nordisk assess that the investigation is limited to its insulin products. The subpoena indicates that the documents are necessary for the investigation of potential criminal offences relating to healthcare benefit programmes. Novo Nordisk is cooperating with the US Attorney in this investigation. At this point in time, Novo Nordisk cannot determine or pre- dict the outcome of the investigation. In addition, Novo Nordisk cannot predict how long the investigation will take or when the company will be able to provide additional information. In May 2009 Novo Nordisk entered into a Deferred Prosecution Agree - ment (DPA) for a three year period with the US Department of Justice relating to certain actions undertaken by Novo Nordisk under the Iraq Oil for Food Programme. Under the terms of the DPA Novo Nordisk must comply with the DPA (including US regulation related to the Foreign Cor - rupt Practices Act and Foreign Assets Control) in order for the case to be dismissed. If Novo Nordisk breaches the DPA, the prosecution may resume. In light of the DPA, Novo Nordisk has identified potential breaches of US Foreign Assets Control regulations. An investigation has been initiated in order to assess the significance and potential future implications. In January 2010, the Inspector General of the US Department of Defense issued a subpoena directed to Novo Nordisk to provide documents relating to NovoSeven ®. Novo Nordisk is cooperating with the Office of the Inspector General and the US Attorney’s Office for the District of Maryland in respond ing to the subpoena, but cannot, at this point of time, determine or predict the outcome of the investigation or when the next update related to this case will be available given the unpredictable nature of these investigations. In addition to the above, the Novo Nordisk Group is engaged in various on- going tax audits and investigations. In the opinion of management, these pending audits and investigations are not expected to have a material effect on Novo Nordisk’s financial position, operating profit or cash flow. Liability for the debts and obligations of Novozymes following the demerger of Novozymes in 2000 Novo Nordisk A/S and Novozymes A/S are subject to joint and several liabilities for any obligation which existed at the time of the announcement of the demerger in 2000. At the end of the year the remaining part of the joint and several liabilities in Novozymes A/S amounted to DKK 557 million (DKK 557 million in 2008). Debts and obligations pertaining to the period before 1 January 2000, which are recognised after 1 January 2000 and which cannot be clearly attributed to either Novo Nordisk A/S or Novozymes A/S, will be distributed proportionally between the two companies according to an agreement established in connection with the demerger in November 2000. Disclosure regarding Change of Control The EU Takeover Bids Directive, as partially implemented by the Danish Financial Statements Act, contains certain rules relating to listed companies on dis closure of information that may be of interest to the market and potential take-over bidders, in particular in relation to disclosure of change of control provisions. For information on the ownership structure of Novo Nordisk, please see Shares and capital structure on pp 47– 49. For information on change of control clauses in share option programmes, please see note 29 ‘Share- based payment schemes’ on pp 76 –77, and in relation to employee contracts of Executive Management of Novo Nordisk, please see ‘Executive remuneration’ on p 40. In addition, Novo Nordisk discloses that the Company has significant agree- ments to which the Company is a party and which take effect, alter or terminate upon a change of control of the Company following implementa- tion of a take-over bid. If effected, a takeover could – at the discretion of each relevant counterparty – lead to the termination of one or more of such agreements and a total loss of approximately 5% of Novo Nordisk’s sales, corresponding to approximately 5% of Novo Nordisk‘s gross profit. 33 Related party transactions Novo Nordisk A/S is controlled by Novo A/S (incorporated in Denmark), which owns 25.5% of the shares in Novo Nordisk A/S. The remaining shares are widely held. The ultimate parent of the Group is the Novo Nordisk Foundation (incorporated in Denmark). Both entities are considered related parties. Other related parties are considered to be the Novozymes Group due to joint ownership, associated companies, the directors and officers of these entities and management of Novo Nordisk A/S. Following the demerger of Novozymes in November 2000, Novo Nordisk A/S has access to certain assets of and may purchase certain services from Novo A/S and the Novozymes Group, and vice versa. All agreements relating to such assets and services are based on the list prices used for sales to third parties where such list prices exist, or the price has been set at what is regarded as market price. Most of these agreements cover one year. The Group has had the following material transactions with related parties: DKK million 2009 2008 2007 Novo Nordisk Foundation Donations to Novo Nordisk Novo A/S Services provided by Novo Nordisk Purchase of Novo Nordisk B shares Sale of treasury shares (related to share options) Novozymes Services provided by Novo Nordisk Services provided by Novozymes Associated companies Purchased intangible assets, fees and royalties etc paid to associated companies by Novo Nordisk Received intangible assets, fees and royalties etc from associated companies to Novo Nordisk (32) (29) (30) (8) 1,111 (2) (6) 1,016 (7) 2,090 (9) (8) (357) 118 (284) 147 (253) 159 184 40 – (12) 63 – There have not been any material transactions with any director or officer of Novo Nordisk, Novozymes, Novo A/S, the Novo Nordisk Founda tion or associated companies. For information on remuneration to the manage- ment of Novo Nordisk, please refer to note 30. There are no material un settled transactions with related parties at the end of the year. s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N Novo Nordisk Annual Report 2009 85 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N 34 Companies in the Novo Nordisk Group Country Year of incorporation / acquisition Issued share capital / paid-in capital Percentage of shares owned Activity l t n e m p o e v e d d n a h c r a e s e R • s t n e m t s e v n I / s e c i v r e S • g n i t e k r a m d n a l s e a S • n o i t c u d o r P • Parent company Novo Nordisk A/S Subsidiaries by region Denmark 1931 DKK 620,000,000 – • • • • Europe Novo Nordisk Pharma GmbH SA Novo Nordisk Pharma NV Novo Nordisk Pharma d.o.o. Novo Nordisk Pharma EAD Novo Nordisk Hrvatska d.o.o. Novo Nordisk s.r.o. Novo Nordisk Region Europe A/S Novo Nordisk Farma OY Novo Nordisk Pharmaceutique SAS Novo Nordisk Production SAS Novo Nordisk Pharma GmbH Novo Nordisk Hellas Epe Novo Nordisk Hungary Sales and Trading Ltd. Novo Nordisk Limited Novo Nordisk Farmaceutici S.P.A. UAB Novo Nordisk Pharma Novo Nordisk Farma dooel Novo Nordisk B.V. Novo Nordisk Scandinavia AS Novo Nordisk Pharma Sp. z.o.o. Novo Nordisk Comércio Produtos Farmace˜ uticos Limitada Novo Nordisk Farma S.R.L. Novo Nordisk Pharma d.o.o. Belgrade (Serbia) Novo Nordisk Slovakia s.r.o. Novo Nordisk, trzˇenje farmacevtskih izdelkov d.o.o. Novo Nordisk Pharma S.A. Novo Nordisk Scandinavia AB Novo Nordisk FemCare AG Novo Nordisk Health Care AG Novo Nordisk Pharma AG Novo Nordisk Holding Limited Novo Nordisk Limited 1974 Austria Belgium 1974 Bosnia and Herzegovina 2009 2005 Bulgaria 2004 Croatia 1997 Czech Republic 2002 Denmark 1972 Finland 2003 France 1959 France 1973 Germany 1979 Greece 1996 Hungary 1978 Ireland 1980 Italy 2005 Lithuania 2006 Macedonia 1983 Netherlands 1965 Norway 1996 Poland 1984 Portugal Romania 2005 Serbia and Montenegro 2005 2007 Slovakia 2006 Slovenia 1978 Spain 1971 Sweden 2003 Switzerland 2000 Switzerland 1968 Switzerland 1977 United Kingdom 1978 United Kingdom North America Novo Nordisk Canada Inc. Novo Nordisk Region North America A/S Novo Nordisk US Holdings Inc. Novo Nordisk Pharmaceutical Industries Inc. Novo Nordisk Inc. Japan & Oceania Novo Nordisk Pharmaceuticals Pty. Ltd. Novo Nordisk Region Japan & Oceania A/S Novo Nordisk Pharma Ltd. Novo Nordisk Pharmaceuticals Limited Canada Denmark United States United States United States Australia Denmark Japan New Zealand 1983 2003 2007 1991 1982 1985 2002 1980 1990 EUR EUR BAM BGN HRK CZK DKK EUR EUR EUR EUR EUR HUF EUR EUR LTL MKD EUR NOK PLN EUR RON EUR EUR EUR EUR SEK CHF CHF CHF GBP GBP CAD DKK USD USD USD 36,336 69,000 97,792 5,880,000 5,000,000 14,500,000 108,370,500 420,500 5,821,140 57,710,220 614,062 1,050,000 371,000,000 635 516,500 2,150,000 14,068,285 61,155 250,000 29,021,000 250,000 2,795,000 640,000 265,552 2,679,286 1,502,500 100,000 1,100,000 159,325,000 50,000 2,802,132 2,350,000 200 500,000 50,000 55,000,000 283,837,600 AUD DKK JPY NZD 500,001 15,500,000 2,104,000,000 1,000,000 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 86 Novo Nordisk Annual Report 2009 34 Companies in the Novo Nordisk Group (continued) Country Year of incorporation / acquisition Issued share capital / paid-in capital Percentage of shares owned 1994 1997 2007 2002 1990 2006 1994 Algeria Argentina Bangladesh Brazil Brazil Chile China International Operations Aldaph SpA Novo Nordisk Pharma Argentina S.A. Novo Nordisk Pharma (Private) Limited Novo Nordisk Produção Farmacêutica do Brasil Ltda. Novo Nordisk Farmacêutica do Brasil Ltda. Novo Nordisk Farmacêutica Limitada Novo Nordisk (China) Pharmaceuticals Co., Ltd. Beijing Novo Nordisk Pharmaceuticals Science & Technology Co., Ltd. Novo Nordisk Pharma Operations A/S Novo Nordisk Region International Operations A/S Novo Nordisk Egypt Pharmaceuticals Ltd. Novo Nordisk Hong Kong Limited Novo Nordisk India Private Limited PT. Novo Nordisk Indonesia Novo Nordisk Pars Novo Nordisk Ltd Novo Nordisk Pharma s.a.r.l Novo Nordisk Pharma (Malaysia) Sdn Bhd Novo Nordisk Mexico S.A. de C.V. Novo Nordisk Pharma SAS Novo Nordisk Pharma Limited Novo Nordisk Pharma (Private) Limited Novo Nordisk Pharmaceuticals (Philippines) Inc Novo Nordisk Limited Liability Company Novo Investment Pte Ltd. Novo Nordisk Pharma (Singapore) Pte Ltd. Novo Nordisk (Pty) Ltd Novo Nordisk Pharma Korea Ltd Novo Nordisk Pharma (Taiwan) Ltd Novo Nordisk Pharma (Thailand) Ltd. Novo Nordisk Tunisie SARL Novo Nordisk Saglik Ürünleri Tic. Ltd. Sti. Novo Nordisk Pharma Gulf FZ-LLC Novo Nordisk Venezuela Casa de Representación C.A. Venezuela 2006 China 2009 Denmark 2002 Denmark 2004 Egypt 2001 Hong Kong 1994 India 2003 Indonesia 2005 Iran 1997 Israel 2007 Lebanon 1992 Malaysia 2004 Mexico 2006 Morocco 2006 Nigeria 2005 Pakistan 1999 Philippines 2003 Russia 1994 Singapore 1997 Singapore 1959 South Africa 1994 South Korea 1990 Taiwan 1983 Thailand 2004 Tunisia Turkey 1993 United Arab Emirates 2005 2004 Other subsidiaries FeF Chemicals A/S NNIT A/S *) NNE Pharmaplan A/S *) Steno Diabetes Center A/S Associated companies Harno Invest A/S Innate Pharma S.A. ZymoGenetics, Inc. Denmark Denmark Denmark Denmark Denmark France United States 1989 1998 1989 2008 1992 2006 1988 *) In addition to the listed companies, NNIT A/S and NNE Pharmaplan A/S have their own subsidiaries. DZD ARS BDT BRL BRL CLP USD 1,742,650,000 7,465,150 17,500,000 896,834,727 84,727,136 758,271,200 289,124,617 2,000,000 USD 500,000 DKK 113,303,210 DKK 50,000 EGP 500,000 HKD 265,000,000 INR 827,900,000 IDR 10,000,000 IRR 100 ILS 600,000,000 LBP 200,000 MYR 387,816,547 MXN 2,597,000 MAD 10,000,000 NGN 43,000,000 PKR 50,000,000 PHP 188,243,360 RUB 12,000,000 SGD 200,000 SGD ZAR 8,000 KRW 6,108,400,000 TWD 9,000,000 15,500,000 THB TND 400,000 25,296,300 TRY 100,000 AED 2,250,000 VEF DKK DKK DKK DKK DKK EUR USD 10,000,000 1,000,000 500,000 1,000,000 70,419,910 1,295,600 797,623,000 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 49 100 100 100 100 100 100 100 100 30 15 30 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C s t n e m e t a t s l i a c n a n i f d e t a d i l o s n o C – s e t o N Activity g n i t e k r a m d n a l s e a S • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • n o i t c u d o r P • • • • • • l t n e m p o e v e d d n a h c r a e s e R • s t n e m t s e v n I / s e c i v r e S • • • • • • • • • • • • Novo Nordisk Annual Report 2009 87 s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C Financial definitions ADRs An American Depositary Receipt (or ADR) represents ownership in the shares of a non-US company and trades in US financial markets. Gross margin Gross profit as a percentage of sales. Net profit margin Net profit as a percentage of sales. Basic earnings per share (EPS) Net profit divided by the average number of shares outstanding. Number of shares outstanding The total number of shares excluding the holding of treasury shares. Cash to earnings Free cash flow as a percentage of net profit. Diluted earnings per share Net profit divided by the sum of average number of shares outstanding including the dilutive effect of share options ‘in the money’. The dilutive effect of share options ‘in the money’ is calculated as the difference between the following: 1) the number of shares that could have been acquired at fair value with proceeds from the exercise of the share options, and 2) the number of shares that would have been issued assuming the exercise of the share options. The difference (the dilutive effect) is added to the denominator as an issue of shares for no consideration. Operating profit Earnings before tax, financial income and expenses (net) and share of profit/loss in associated companies. Operating profit margin Operating profit as a percentage of sales. Other comprehensive income Other comprehensive income comprises all non-owner changes eg items of income and expense (including reclassification adjustments) that are not recognised in the Income statement. Payout ratio Total dividends for the year as a percentage of net profit. Effective tax rate Income taxes as a percentage of profit before income taxes. Return on equity Net profit for the year as a percentage of shareholders’ equity (average). Equity ratio Equity at year-end as a percentage of the sum of total liabilities and equity at year-end. Free cash flow The sum of cash flow from operating activities and cash flow from investing activities excluding net changes in marketable securities (maturity exceeding three months). ROIC (return on invested capital) Operating profit after tax (using the effective tax rate) as a percentage of average inventories, receivables, property, plant and equipment as well as intangible assets less non-interest-bearing liabilities including provisions (the sum of the above assets and liabilities at the beginning of the year and at year-end divided by two). 88 Novo Nordisk Annual Report 2009 Statement of non-financial reporting for the year ended 31 December Note 2009 2008 2007 Social performance Employees (total) Employee turnover (%) Absence (%) Frequency of occupational injuries (number/million working hours) Annual training costs per employee (DKK) Engaging culture (employee engagement) on a scale of 1–5 Diverse senior management teams Managers trained in business ethics (%) Fulfilment of action points from facilitations of the NNWoM (%) LDCs where Novo Nordisk sells insulin according to the differential pricing policy Healthcare professionals trained or educated in diabetes (1,000) People with diabetes trained (1,000) Company reputation with external key stakeholders on a scale of 0 –100 People participating in clinical trials Animals purchased Active patent families to date New patent families (first filings) Warning letters and re-inspections Employment impact worldwide (direct and indirect) R&D costs as share of sales Environmental performance Energy consumption (1,000 GJ) Water consumption (1,000 m3) Raw materials and packaging materials (1,000 tons) Volume of wastewater (1,000 m3) COD **) (tons) in wastewater Total waste (tons) Non-hazardous waste (% of total waste) CO2 emissions from energy consumption (1,000 tons) CO2 emissions from cooling agents (1,000 tons) CO2 emissions from energy consumption as share of sales in DKK (index 2003 = 100) Breaches of regulatory limit values *) See change in accounting policies. Hence the data is not comparable year on year. **) Chemical oxygen demand, which is a method to measure the amount of pollutants in the water. 2 2 5 5 2 2 2 3 4 6 6 6 7 8 9 14 14 10 15 15 11 12 13 16 16 17 17 18 18 18 19 29,329 8.3 2.6 4.3 13,283 4.3 14 91 93 27,068 12.1 2.2 5.4 13,192 4.2 12 – 92 26,008 11.6 2.7 5.9 13,130 4.1 – – 91 36 805 416 *) 32 380 1,755 *) 36 336 422 *) 76.3 11,130 57,315 905 55 0 96,500 15.4 2,246 2,149 79 2,062 617 21,019 64 146 5.8 37 10 72.4 74.0 13,822 57,253 890 71 0 88,500 16.5 2,533 2,684 132 2,542 891 20,346 70 215 – 60 28 11,915 54,675 1,003 116 0 81,600 17.2 2,784 3,231 152 2,764 813 17,576 66 236 – 72 22 t n e m e t a t s l a i c n a n i f - n o n d e t a d i l o s n o C r e b m e c e D 1 3 d e d n e r a e y e h t r o f g n i t r o p e r l a i c n a n i f - n o n f o t n e m e t a t S Novo Nordisk Annual Report 2009 89 t n e m e t a t s l a i c n a n i f - n o n d e t a d i l o s n o C t n e m e t a t s l i a c n a n i f - n o n d e t a d i l o s n o C – s e t o N 1 Summary of non-financial accounting policies For more information on Novo Nordisk’s voluntary reporting, see annualreport2009.novonordisk.com. The accounting policies applied to the preparation of the consolidated non- financial reporting have been consistently applied to the years presented, except as described below in ‘Change in non-financial accounting policies’. Standards for non-financial reporting The consolidated non-financial statement is prepared in accordance with the Danish Financial Statements Act, section 99a, effective as of 1 January 2009. Section 99a requires Novo Nordisk to account for the company’s activities on social responsibility, reporting on business strategies and activities on human rights, labour standards, environment and anti-corrup- tion. Companies that subscribe to the UN Global Compact and annually submit their Communication on Progress (CoP) will be in compliance with the new legislation, provided that the annual report includes a reference to where the CoP has been made publicly available. Novo Nordisk’s CoP 2009 can be found at annualreport2009.novonordisk.com/governance-and-re- porting/un-global-compact.aspx and at UN Global Compact’s website at un- globalcompact.org/COP. Novo Nordisk adheres to the following internationally acknowledged voluntary standards and principles: • AA1000 framework for accountability. The framework states that report- ing must provide a complete, accurate, relevant and balanced picture of the organisation’s approach to and impact on society. Novo Nordisk’s assurance process is designed according to AA1000AS(2008). • Global Compact. As a signatory to the United Nations Global Compact, a platform to promote good corporate principles and learning in the areas of human rights, labour, environment and anti-corruption, Novo Nordisk reports on actions during 2009 to implement the 10 principles in the CoP, which can be found at annualreport2009.novonordisk.com/governance- and-reporting/un-global-compact.aspx. • Global Reporting Initiative’s (GRI) Sustainability Reporting Guidelines (G3). The guidelines include the only internationally recognised set of indicators for economic, environmental and social aspects of business performance, which enable stakeholders to compare companies’ per- formance. Novo Nordisk’s reporting according to the reporting principles and guidance including required disclosures can be found at annualreport2009.novonordisk.com/governance-and-reporting/global-re- porting-initiative.aspx. Defining materiality Ongoing stakeholder engagement and trendspotting help identify new issues that are or could become material to Novo Nordisk. Following a review of the implications for Novo Nordisk’s long-term business, a strategy is framed for those issues that are deemed material and subsequently data, indicators and targets are identified. Management of the issue is embedded in the organisation, so that it eventually becomes fully integrated into business processes. The process is iterative as strategies are revisited as appropriate. It is Novo Nordisk’s responsibility to ensure that those areas are addressed in which the company has significant impact or where it has a responsibility and ability to act. Novo Nordisk has sought inspiration in AccountAbility’s materiality test to define what is material to Novo Nordisk’s business, what should be included in the annual report and on which grounds. Applying the materiality test as a tool, sustainability-related issues are prioritised to be reported either in the printed annual report (most material; business critical), online (material, often to cater for specific stakeholder interests) or not reported (not material). The same process applies for the assurance provider’s recommendations. The outcomes of formal reviews, research, stakeholder engagement and internal materiality discussions are presented as a proposal for the annual reporting to Executive Management and the Board of Directors, and sub - sequently approved. In addition, Novo Nordisk’s external assurance provider is requested to assure whether the non-financial performance included in the annual report covers the material aspects. The conclusion is available in the Independent Assurance Report on non-financial reporting 2009. Change in non-financial accounting policies In 2009, there were no significant changes to the accounting policies for non-financial data. The following accounting policies have been adjusted: • The accounting policy for ‘Fulfilment of action points from facilitations of the NNWoM’ has been adjusted to reflect how it is reported internally to Executive Management. Data reported for 2005 –2008 reflects the adjusted accounting policy. • The accounting policy for ‘People with diabetes trained or treated’ has previously been reported as an accumulated number but will from this year on be reported as the actual number of people with diabetes trained or treated within the given year. This adjustment is reflected in the data reported for 2007–2008. Further, it has been specified that people with diabetes who have been offered training as part of their treatment are not included, as this is not a direct Novo Nordisk activity. This year and going forward reporting on these activities will therefore be defined as ‘People with diabetes trained’. This adjustment is not reflected in the 2007–2008 data as it is not possible to separate the ‘trained’ and ‘treated’ in the historical data. Please refer to the specific accounting policies for further information. The non-financial statement has been reviewed and new disclosures added to reflect current priorities and enhance transparency: • Diverse senior management teams • Managers trained in business ethics • People participating in clinical trials • Volume of wastewater • Non-hazardous waste (% of total waste) • CO2 emissions from cooling agents. The review process also resulted in a decision to discontinue reporting on the following disclosures in the statement: • Opportunity to use and develop competences/skills • People from diverse backgrounds have equal opportunities • Employees in sales & marketing trained in business ethics • R&D expenditure to tangible investments • Total corporate tax as share of sales • Novo Nordisk exports as share of Danish exports • Nitrogen (wastewater) • Phosphorus (wastewater) • Organic solvents • EIR Water • EIR Energy • Number of accidental releases. The above measures are not used to drive performance, and hence do not qualify for inclusion as performance indicators. The review process furthermore resulted in a decision to only report the following disclosures in the notes instead: • Fatalities due to occupational injuries • Importance of social and environmental issues for the future of the company • Manager’s behaviour consistent with Novo Nordisk’s values • LDCs where Novo Nordisk operates • Recycling percentage (waste) Principles of non-financial disclosures The non-financial statement and disclosures cover Novo Nordisk A/S (the Parent company) and all the companies in which Novo Nordisk A/S directly or indirectly owns more than 50% of the voting rights or in some other way has a controlling influence (subsidiaries). Novo Nordisk A/S and these companies are referred to as the Group. The environmental disclosures cover the significant environmental impact 90 Novo Nordisk Annual Report 2009 t n e m e t a t s l a i c n a n i f - n o n d e t a d i l o s n o C t n e m e t a t s l i a c n a n i f - n o n d e t a d i l o s n o C – s e t o N from the Novo Nordisk Group’s production sites producing approved pro ducts for the market – 14 in total. The employee engagement is a simple average of answers given by the employees. The 10 questions are the same as in the previous years. Accounting policies To Novo Nordisk, AA1000APS(2008) is an essential component in creating a generally applicable approach to assessing and strengthening the credibility of the company’s public reporting of non-financial data. Novo Nordisk’s assurance process has been designed to ensure that the qualitative and quantitative information that documents sustainability performance as well as the systems that underpin the data and performance are assured. The principles outlined by AA1000APS(2008) have been applied as described below. 1. Inclusivity As a pharmaceutical company with global reach, Novo Nordisk is committed to being accountable to those on whom the organisation has an impact and those who have an impact on Novo Nordisk. Novo Nordisk continuously maps its stakeholders and has processes in place to ensure inclusion of stakeholder concerns and expectations. Stakeholder engagement results in stakeholders being involved in developing and accounting for strategic responses to sustainability challenges. 2. Materiality Key issues are identified through ongoing stakeholder engagement and addressed by programmes or action plans with clear and measurable targets. Stretch targets are set to guide the long-term efforts in strategic areas, such as climate action. The issues pre sented in the annual report are deemed to have a significant impact on the company’s future business performance and may support stakeholders in their decision- making and are therefore regarded as Novo Nordisk’s material issues. 3. Responsiveness The report reaches out to a wide range of stakeholders, each with their specific needs and interests. To most stakeholders, however, the annual report is just one element of interaction and communication with the com- pany. The annual report reflects how the company has addressed stake - holder concerns and interests in dealing with the dilemmas and issues. Stakeholder dialogue is an invaluable part of Novo Nordisk’s efforts as a responsible business, and readers are encouraged to give their feedback. This is the first year in which Novo Nordisk is reporting according to the AA1000APS(2008) and the assurance process has been carried out according to AA1000AS(2008). The new framework has not affected Novo Nordisk’s approach to sustainability and stakeholder engagement. Social performance Employees The number of employees at year-end includes all employees except externals, employees on unpaid leave, interns, bachelor and master thesis employees and substitutes. The number of fulltime employees (FTEs), is defined as employees with a working time ratio of 95% or more. Employee turnover The rate of turnover is calculated as the number of employees, excluding temporary employees, who left the Novo Nordisk Group during the financial year compared to the average number of employees, excluding temporary employees. Absence The rate of absence is calculated as absence due to the employee’s own illness, pregnancy-related sick leave and occupational injuries and illnesses per total average working hours in the year, adjusted for holidays. Frequency of occupational injuries The frequency of occupational injuries is calculated based on the number of injuries reported for all employees per million working hours, excluding externals, employees on unpaid leave, interns, bachelor and master thesis employees and substitutes. An occupational injury is any work-related injury causing at least one day of absence in addition to the day of the injury. Annual training costs per employee The annual training costs cover the internal and external training costs recorded directly linked to training. Costs related to on-the-job training, internal seminars and other activities are not included in the amount. Engaging culture (employee engagement) The employee engagement is measured on a scale of 1– 5, with 5 being the best, and is an average of respondents’ answers to 10 selected questions related to employees’ engagement in the annual employee survey, eVoice. Diverse senior management teams The number of diverse senior management teams is measured as the number of teams diverse in gender and nationality (locals and non-locals). A senior management team is defined as being diverse when it has people of both genders and includes both locals and non-locals. Managers trained in business ethics Managers trained in business ethics is based on registrations in a training database. It is measured as the percentage of managers completing business ethics e-learning. Fulfilment of action points from facilitations of the NNWoM The percentage of fulfilment of actions points arising from facilitations with respect to the Novo Nordisk Way of Management (NNWoM) is measured as an average of timely closure of action points issued in the current year and the two previous years. The reason for using a three-year average as basis for the calculation is that action lead time varies from typically a couple of months to more than a year. Least Developed Countries where Novo Nordisk sells insulin according to the differential pricing policy Least Developed Countries where Novo Nordisk sells insulin according to the differential pricing policy is measured as direct or indirect sales by Novo Nordisk via government tender or private market sales to wholesalers, distributors, NGOs etc. Healthcare professionals trained or educated in diabetes The estimated number of healthcare professionals (HCPs) trained or edu - cated in diabetes includes HCPs directly trained, educated, interacted with or reached through awareness campaigns. The estimated number is based on registrations by subsidiaries and corporate functions in Novo Nordisk. The number covers the total number of HCPs Novo Nordisk has engaged with since the National Changing Diabetes ® programmes were initiated in 2002. People with diabetes trained People with diabetes trained is measured as the total number of people with diabetes with whom Novo Nordisk has engaged during the year for educa- tional purposes. Training denotes activities conducted, organised or funded by Novo Nordisk and only relates to activities, that are non-product branded for at least 50% of the time. Company reputation Company reputation is measured as a mean brand score in four key markets (China, Germany, the UK and the US) according to primary care and secondary care physicians. The survey is performed by an independent external con sultancy firm. The mean brand score is based on company ratings (scale of 0 –100). For 2007 and 2008, the survey was conducted via telephone and face-to-face interviews with primary and secondary care professionals (target groups). For 2009, the survey was conducted via online interviews except for China (face-to-face interviews). People participating in clinical trials The number of people participating in clinical trials (phases 1–3) is measured as active participants in clinical trials during the year. Animals purchased The number of animals purchased is measured as animals in all studies performed by Novo Nordisk either in-house or at external contractors. Active patent families to date Active patent families to date is measured as the sum of all active patents in Novo Nordisk. New patent families (first filing) First filing is measured as all new patents that were approved within the year. Warning letters and re-inspections Warning letters and re-inspections are measured as the number of warning letters issued by the FDA in connection with GMP, GCP or GLP inspections, and the number of re-inspections issued to Novo Nordisk by any health Novo Nordisk Annual Report 2009 91  authority globally. Warning letters from the FDA regarding promotional materials are not included. 2 Employee statistics t n e m e t a t s l a i c n a n i f - n o n d e t a d i l o s n o C t n e m e t a t s l i a c n a n i f - n o n d e t a d i l o s n o C – s e t o N Employment impact worldwide (direct and indirect) Employment impact worldwide is an estimate of the direct and indirect jobs created by the Novo Nordisk Group. It is calculated using financial records and general statistics from public sources, such as Statistics Denmark, Up - dated Economic Multipliers for the US Economy (Economic Policy Institute) and China Statistical Yearbook. R&D expenditure as share of sales R&D expenditure as share of sales is calculated based on data from Novo Nordisk’s consolidated financial statements. Environmental performance Energy consumption Energy consumption (direct and indirect supply) includes both direct supply of energy (internally produced energy), ie natural gas, fuel oil and other types, and indirect supply of external energy (externally produced energy), for example electricity, steam and district heat. The consumption of fuel and externally produced energy is based on meter readings and invoices. Water consumption Water consumption is based on meter readings and invoices and includes consumption of drinking water, industrial water and steam. Raw materials and packaging materials Raw materials and packaging materials comprise materials for production and related processes and packaging of products. The consumption of raw materials and packaging is converted to tons. Data is based on registrations in Novo Nordisk’s stock system. Volume of wastewater The volume of wastewater comprises process wastewater and sanitary wastewater. Furthermore, drainage water from fortified areas is included. The total volume of wastewater is calculated based on input from the production sites either directly measuring the total sum of discharge to public sewer systems or by the total water consumption for the site minus registered evaporation from cooling systems (including cooling towers and other plants from which evaporation occurs), and any large amount of wastewater collected and treated as waste. COD in wastewater The quantity of COD is calculated based on in-house test results or standard factors. Total waste Total waste is measured as the sum of non-hazardous and hazardous waste. The amount of waste disposed of is registered based on weight receipts. Non-hazardous waste The percentage is calculated as the waste disposed of as non-hazardous of the total amount of waste disposed. CO2 emissions from energy consumption CO2 emissions from energy consumption are calculated according to the GHG protocol. Emissions of CO2 from energy (total) are based on standard factors for fuel and for energy on a three-year average of available emission factors from the external suppliers of energy. Hence, emission factors for 2009 are the three-year average of 2006 to 2008. CO2 emissions from cooling agents CO2 emissions from cooling agents are calculated based on standard factors. CO2 emissions from energy consumption as share of sales CO2 emissions from energy consumption as share of sales is calculated as an index using 2003 as baseline (index 100). Breaches of regulatory limit values Breaches of regulatory limit values are measured as all breaches reported to the authorities. Number Employees by gender – Female – Male Total 2009 2008 2007 14,514 14,815 29,329 13,432 13,636 12,845 13,163 27,068 26,008 Fulltime employees (FTEs) 28,809 26,575 25,516 The increase of 2,261 (8%) employees in 2009 from 1,060 (4%) in 2008 is as expected and reflects increased activities in most of the business areas and in particular in sales & marketing and R&D. In the regions the largest increase in employees is seen in Europe and International Operations. The rate of employee turnover decreased from 12.1% in 2008 to 8.3% in 2009. This decrease can be attributed to the general economic recession and the continuous focus on employee retention within Novo Nordisk. The annual training costs per employee stayed consistent, with a spend of DKK 13,283 in 2009 compared to DKK 13,192 in 2008. In the annual eVoice survey the response rate was 92%. The engagement rate increased from 4.2 in 2008 to 4.3 in 2009. Below are additional key questions and scores from the eVoice survey, which reconfirm the strong adherence to the company’s values and priorities. Living our values Scale 1– 5 2009 2008 2007 Importance of social and environmental issues for the future of the company Manager’s behaviour consistent with Novo Nordisk’s values 4.5 4.4 4.5 4.3 4.4 4.2 The number of diverse senior management teams increased from 12 in 2008 to 14, which means that at year-end 2009 50% of all the 28 senior management teams are diverse in terms of gender and nationality. The development is as expected. 3 Managers trained in business ethics In 2009, 91% of all managers were trained in business ethics via e-learning. This training has been conducted in the previous years but not systematically recorded. Besides e-learning, first-line sales managers in sales and marketing are trained face-to-face in business ethics. As above, the face-to-face training has been conducted in previous years but has not been systematically recorded. In 2009, 99% of all first line sales managers were trained in business ethics. 4 Fulfilment of action points from facilitations of the NNWoM In 2009, 93% of all actions points, based on a three-year average, were timely closed. This is a slight improvement compared to 2008, when 92% of all action points were timely closed. At year-end, three actions were in status ‘overdue’. Action plans have been agreed between the units and the facilitators to ensure closure of these actions. 92 Novo Nordisk Annual Report 2009 t n e m e t a t s l a i c n a n i f - n o n d e t a d i l o s n o C t n e m e t a t s l i a c n a n i f - n o n d e t a d i l o s n o C – s e t o N 5 Health and safety 8 People participating in clinical trials In 2009, there were no fatal occupational injuries and Novo Nordisk has not had any fatal occupational injuries since 2004. The rate of absence increased slightly in 2009 to 2.6% from 2.2% in 2008. The development is due to increased absence related to illness. The frequency of occupational injuries decreased by 1.1 from 5.4 in 2008 to 4.3 in 2009. The decrease is attributed to the continuous focus on health and safety. In 2009, implementation of Novo Nordisk’s occupational health & safety management system continued. The management system is certifiable according to OHSAS 18001. All sites in Denmark have implemented the system, and Product Supply globally is certified. The next step in the roll-out is R&D outside Denmark. R&D units in the US and China will implement the occupational health & safety management system. The number of people participating in clinical interventional trials decreased by 20% from 13,822 in 2008 to 11,130 in 2009. This was mainly due to the discontinuation of the pulmonary diabetes project in 2008 and also post- ponement of the initiation of the remaining part of the liraglutide obesity phase 3 programme. 9 Animals purchased Novo Nordisk sets goals to reduce, refine and replace experiments on animals and to improve animal welfare. Despite a significantly higher level of research activity in early phases, when animal experimentation is required, the number of animals purchased in 2009 increased only slightly to 57,315 animals, of which 96% were rodents. In 2009, the majority of the animals were housed in Denmark. However, for the first time, ever in-house studies were performed outside Denmark as the animal facility at NNST, Beijing, China, opened and in 2009 housed a small number of mice. 6 Access to health Novo Nordisk has formulated a differential pricing policy offering insulin to the world’s Least Developed Countries (LDCs) at or below a price of 20% of the average prices for insulin in the Western world. The Western world is defined as Europe (EU, Switzerland and Norway), the US, Canada and Japan. In 2009, Novo Nordisk operated in 37 of the 49 LDCs. For 2009, the dif - ferential pricing policy was offered, as part of the global health initiatives, to all LDCs as defined by the United Nations. During 2009, Novo Nordisk sold insulin to either governments or to the private market in a total of 36 countries according to the differential pricing policy compared to 32 in 2008. In Nepal the public authorities have been offered the opportunity to buy insulin at the policy price, but in 2009 the insulin was sold to the private market without using the policy price. In 12 countries Novo Nordisk does not sell insulin at all, for various reasons. In several cases, either the government has not responded to the offer, there are no private wholesalers or other partners with whom to work, or wars or political unrest make it impossible to do business. While Novo Nordisk prefers to sell insulin at the differential price through government tenders, the company is willing to sell to private distributors and agents. Novo Nordisk has no way of guaranteeing that the price at which Novo Nordisk sells the insulin will be reflected in the final price to the consumer. A measure of the company’s contribution to global health is the number of healthcare professionals directly trained, educated, interacted with or reached through awareness campaigns and the number of people with diabetes targeted with training or awareness. The aim is to continue activities for educating healthcare professionals and to train people with diabetes. Since 2002, 805,000 healthcare professionals have been trained, educated, interacted with or reached through awareness campaigns. The increase in numbers is due to more activities reaching a greater number of healthcare professionals and more diligent reporting from affiliates. The number of people with diabetes trained was 416,000 in 2009. As reporting this year does not include people treated, the 2009 number is not comparable to the 2007–2008 numbers. 7 Company reputation Company reputation, measured as the mean brand score, increased by 3.9 points from 72.4 in 2008 to 76.3 (on a scale of 0 –100) in 2009. The positive development can be attributed to a wide range of activities focusing on the product portfolio and on clinical trials, educational activities and involve- ment in the diabetes community. Number Mice and rats Guinea pigs Hamsters Rabbits Pigs Dogs Goats Non-human primates Other vertebrates *) Total 2009 2008 2007 54,714 84 6 559 1,170 240 2 540 0 57,315 54,484 150 16 770 808 276 6 593 150 51,940 290 0 1,029 1,001 62 3 350 0 57,253 54,675 *) Other vertebrates are fish, chickens and frogs. 10 Quality In 2009, as in 2008, no warning letters were issued to Novo Nordisk by the FDA in connection with GMP, GCP or GLP inspections. Nor were any re- inspections issued to Novo Nordisk. In total, 77 inspections were concluded in 2009 and the number of inspections was as expected. 11 Energy In 2009, the consumption of energy was 2,246,000 GJ, which is a decrease of 11% compared to 2,533,000 GJ in 2008. The reduced consumption was mainly due to optimisations at the insulin bulk production in Kalundborg, but the cLEAN ® programme and energysaving projects at many other sites have also contributed to the decrease in consumption. 12 Water The consumption of water decreased by 20% from 2,684,000 m 3 in 2008 to 2,149,000 m 3 in 2009. The decrease was mainly due to optimisations at the insulin bulk production in Kalundborg, but the cLEAN ® programme and water saving projects at several sites have also contributed to the decrease in consumption. 13 Raw materials and packaging materials The consumption of raw materials decreased by 40% from 132,000 tons in 2008 to 79,000 tons in 2009. The decrease was mainly due to optimisations of the insulin bulk production in Kalundborg, but the cLEAN ® programme has also contributed to the decrease in consumption. Novo Nordisk Annual Report 2009 93 t n e m e t a t s l a i c n a n i f - n o n d e t a d i l o s n o C t n e m e t a t s l i a c n a n i f - n o n d e t a d i l o s n o C – s e t o N 14 Patent families The development in the existing patent families and new patent families (first filing) is as expected. The number of Novo Nordisk patent families increased from 890 in 2008 to 905 in 2009. The number of new patent families established in 2009 was 55, which is a decrease of 23% compared to the filing activity of 2008, when 71 new patent families were established. This development is explained by changes in the focus areas of research and increased requirements when filing requires more resources per filing. The patent expiry dates for the product portfolio are shown in the table below. The dates provided are for expiry of patents in the US, Japan and major European markets *) on the active ingredient, unless otherwise indicated, and include extensions of patent term (including for paediatric extension where applicable). In many cases Novo Nordisk has exclusivity beyond the expiry of the active ingredient patent through later-expiring patents. For several products, in addition to the compound patent, Novo Nordisk holds other patents on manufacturing processes, formulations or uses that may extend exclusivity beyond the expiration of the product patent. Furthermore, data-based exclusivity may be available under pharmaceutical regulatory laws. Marketed products in key markets (active ingredients) Product Levemir ® NovoRapid ® (NovoLog ®) NovoMix ® 30 (NovoLog ® Mix 70/30) NovoNorm ® (Prandin ®) Norditropin ® (Norditropin ® SimpleXx ®) NovoSeven ® Victoza ® PrandiMet ® Major European markets are defined as Germany, France and the UK. Formulation patent until 2017. Exact date varies from country to country. *) **) ***) ****) Formulation. *****) Combination. 15 Socioeconomics Europe US Japan 2018 2011 **) 2014 –15 ***) 2009 2017 ****) 2010 –11 ***) Pending Pending 2019 2014 **) 2014 Expired Pending ****) 2010 Pending Pending 2010 **) 2014 Expired 2017 ****) Expired Pending 2018 *****) Pending In 2009, Novo Nordisk created 2,261 new positions globally and had 28,809 full-time positions measured as full-time equivalents (FTEs) compared to 2008, when 1,060 new positions were created with 26,575 FTEs. The number of jobs in 2009 translate into 96,500 direct and indirect jobs. Of these, 67,660 indirect global jobs are created in the supply chain from production needs and employees’ private consumption. The majority of these jobs created are due to production (47,904) but the effect of private consumption from Novo Nordisk employees is also significant (19,756). In 2008, the total number of jobs created was 88,500. R&D costs as a share of sales decreased from 16.5% in 2008 to 15.4% in 2009 reflecting non-recurring costs in 2008 related to closure of all pulmonary diabetes projects as well as the closure of further development activities in the low serum albumin in dialysis (LSAD) indication for growth hormone. Cash value distribution 2009 Customers Suppliers Company cash Employees Investors/funders Public sector Management Cash received from products and services (from sales) Cash payments for materials, facilities and services *) Cash added value (cash received minus cash payments) Remuneration Dividend, share repurchase and interest payments Taxes Future growth DKK million Cash received Cash added value 50,596 20,386 30,210 15,496 10,429 1,998 2,287 100% 40% 31% 21% 4% 4% 100% 51% 34% 7% 8% *) Investments in fixed assets and cash payments outside Novo Nordisk. The figure includes cash received from licence fees, realised exchange rate gains and interest income. 94 Novo Nordisk Annual Report 2009 16 Wastewater The total volume of wastewater decreased by 19% from 2,542,000 m3 in 2008 to 2,062,000 m 3 in 2009, primarily due to changes in production at the production facility in Kalundborg. In the same period, the discharged quantity of COD decreased by 31% from 891 tons in 2008 to 617 tons in 2009. This was due to improved data registration and changes in produc- tion in Kalundborg. 17 Waste In 2009, the total amount of waste increased by 3% compared to 2008. This is mainly due to a 24% increase in the quantity of hazardous waste, primarily because of a larger disposal of ethanol. The amount of non- hazardous waste decreased by 6% due to minor decreases in several fractions such as incinerated waste, plastic, and gland residues. Non- hazardous construction and demolition waste fractions increased. The recycling percentage remained at the same level as in 2008. Tons 2009 2008 2007 Non-hazardous waste – Recycled – Incinerated *) – Landfill – Special treatment Hazardous waste – Recycled ethanol **) – Incinerated ethanol ***) Total waste 13,432 58 21 5 17 7,587 40 21 21,019 14,240 57 20 6 17 6,106 38 19 11,604 48 26 13 13 5,972 18 40 20,346 17,576 Recycling percentage of total waste 51 51 38 99.3% with energy recovery. *) **) Ethanol recycled in eg biogas or wastewater treatment plants. ***) Incinerated at combined heat and power plants or at plants for special treatment of hazardous waste with energy recovery. 18 CO2 emissions to air The CO2 emissions from energy consumption decreased from 215,000 tons in 2008 to 146,000 tons in 2009 – a decrease of 32% (69,000 tons). Close to half of this reduction is due to the decrease in energy consumption of 11%. The other half is attributable to the partnership with DONG Energy in Denmark and the purchase of electricity from Horns Rev 2 – an offshore wind turbine farm in the North Sea. The CO2 emissions from cooling agents is a new focus area for Novo Nordisk and was measured consistently for the first time in 2009, when emissions totalled 5,841 tons. The CO2 emissions from energy consumption as share of sales in Danish kroner (measured as an index, with 2003 = 100) improved to 37 in 2009 compared to 60 in 2008. This demonstrates that Novo Nordisk has drama - tically reduced CO2 emissions from energy consumption from production as sales and production continue to increase. 19 Breaches of regulatory limit values Ensuring compliance with legal requirements on environment is a high priority for Novo Nordisk. The number of breaches of regulatory limit values decreased from 28 in 2008 to 10 in 2009, a decrease of 64%. This reduction and the low level of breaches is due to a continuous focus on this area. t n e m e t a t s l a i c n a n i f - n o n d e t a d i l o s n o C t n e m e t a t s l i a c n a n i f - n o n d e t a d i l o s n o C – s e t o N Novo Nordisk Annual Report 2009 95 ) d e t i d u a n u ( n o i t a m r o f n i y r a t n e m e p p u S l ) d e t i d u a n u ( R U E n i 9 0 0 2 – 5 0 0 2 a t a d l a i c n a n i f f o y r a m m u S Summary of financial data 2005 –2009 in EUR (unaudited) EUR million Sales Sales by business segment: Modern insulins (insulin analogues) Human insulins Protein-related sales Oral antidiabetic products (OAD) Diabetes care total NovoSeven ® Norditropin ® Hormone replacement therapy Other products Biopharmaceuticals total Sales by geographical segment: North America Europe *) International Operations *) Japan & Oceania Depreciation, amortisation and impairment losses Operating profit Operating profit (excl AERx ®) **) Net financials Profit before income taxes Income taxes Net profit Total assets Total current liabilities Total non-current liabilities Equity Investments in property, plant and equipment (net) Investments in intangible assets and non-current financial assets (net) Free cash flow ***) Net cash flow 2005 4,531 979 1,819 196 229 3,223 680 373 210 45 2006 5,194 1,451 1,804 215 266 3,736 755 444 215 44 2007 5,614 1,880 1,687 235 288 4,090 788 471 224 41 2008 6,109 2,323 1,583 247 321 4,474 858 518 216 43 1,308 1,458 1,524 1,635 1,279 1,882 738 632 259 1,085 1,085 20 1,105 318 787 5,624 1,418 502 3,704 492 (18) 649 (85) 1,646 2,051 871 626 287 1,223 1,223 6 1,229 364 865 5,994 1,362 592 4,040 374 33 631 62 1,845 2,194 979 596 404 1,200 1,378 272 1,472 328 1,144 6,401 1,427 658 4,316 304 16 1,210 220 2,032 2,309 1,130 638 328 1,660 1,704 43 1,703 409 1,294 6,792 1,739 627 4,426 235 35 1,478 552 2009 6,860 2,883 1,520 277 356 5,036 950 591 234 49 1,824 2,454 2,356 1,320 730 343 2,005 2,005 (126) 1,879 433 1,446 7,356 1,802 752 4,802 353 58 1,656 307 *) Comparative figures for 2005 and 2006 have been adjusted in order to reflect a changed organisational structure from 1 January 2007 which transfers eight countries, incl Bulgaria and Romania, from International Operations to Europe. **) Excluding costs related to discontinuation of all pulmonary diabetes projects. ***) For definitions, please refer to p 88. Key figures are translated into EUR as supplementary information – the translation of Income statement items is based on the average exchange rate in 2009 (EUR 1 = DKK 7.4463) and the translation of balance sheet items is based on the exchange rate at the end of 2009 (EUR 1 = DKK 7.4415). The figures in DKK reflect the economic substance of the underlying events and circumstances of the Group. 96 Novo Nordisk Annual Report 2009 ) d e t i d u a n u ( n o i t a m r o f n i y r a t n e m e p p u S l ) d e t i d u a n u ( 9 0 0 2 d n a 8 0 0 2 s e r u g i f l a i c n a n i f y l r e t r a u Q Quarterly financial figures 2008 and 2009 (unaudited) DKK million Sales Sales by business segment: Modern insulins (insulin analogues) Human insulins Protein-related sales Oral antidiabetic products (OAD) Diabetes care total NovoSeven ® Norditropin ® Hormone replacement therapy Other products Biopharmaceuticals total Sales by geographical segment: North America Europe International Operations Japan & Oceania Gross profit Sales and distribution costs Research and development costs Administrative expenses Licence fees and other operating income (net) Operating profit Net financials Profit before taxation Income taxes Net profit 2008 2009 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 10,614 11,110 11,246 12,583 12,498 13,001 12,517 13,062 3,821 2,939 443 640 4,103 2,966 460 478 4,365 2,806 464 671 5,028 3,093 477 602 4,990 3,004 484 691 5,414 2,879 492 675 5,353 2,747 519 650 5,714 2,685 569 636 7,843 8,007 8,306 9,200 9,169 9,460 9,269 9,604 1,440 878 385 68 1,648 986 391 78 1,534 941 394 71 1,774 1,060 442 107 1,805 1,034 409 81 1,874 1,122 435 110 1,651 1,074 440 83 1,742 1,171 460 85 2,771 3,103 2,940 3,383 3,329 3,541 3,248 3,458 3,450 4,061 2,096 1,007 8,201 2,975 1,858 627 88 2,829 39 2,868 688 3,467 4,400 2,069 1,174 8,556 3,178 1,980 626 74 2,846 405 3,251 780 3,759 4,305 2,074 1,108 8,640 3,155 1,579 633 51 3,324 182 3,506 842 4,478 4,453 2,186 1,466 10,047 3,558 2,439 749 73 3,374 (304) 3,070 740 4,532 4,195 2,513 1,258 9,990 3,844 1,744 679 87 3,810 4,710 4,375 2,532 1,384 10,391 3,837 1,849 693 78 4,090 4,527 4,376 2,288 1,326 9,832 3,502 1,884 666 34 3,814 4,510 4,594 2,493 1,465 10,427 4,237 2,387 726 142 3,219 (305) 3,505 806 (206) 3,884 893 (207) 3,607 852 (227) 2,992 669 2,180 2,471 2,664 2,330 2,699 2,991 2,755 2,323 Depreciation, amortisation and impairment losses 563 567 560 752 607 533 657 754 Total assets Total equity Financial ratios In percentage of sales Sales and distribution costs Research and development costs Administrative expenses Gross margin Operating profit margin Equity ratio Share ratios Basic earnings per share/ADR (in DKK) Diluted earnings per share/ADR (in DKK) Average number of shares outstanding (million) – basic Average number of shares outstanding (million) – diluted Employees 47,534 31,251 48,478 33,046 48,990 32,173 50,603 32,979 50,205 31,345 51,246 34,086 52,589 34,874 54,742 35,734 5.9% 28.0% 28.6% 28.1% 28.3% 17.5% 17.8% 14.0% 19.4% 6.0% 77.3% 77.0% 76.8% 79.8% 26.7% 25.6% 29.6% 26.8% 65.7% 68.2% 65.7% 65.2% 5.6% 5.6% 5.4% 30.8% 29.5% 28.0% 32.4% 14.0% 14.2% 15.1% 18.3% 5.6% 79.9% 79.9% 78.5% 79.8% 30.5% 31.5% 30.5% 24.6% 62.4% 66.5% 66.3% 65.3% 5.3% 5.3% 3.51 3.48 620.9 626.3 3.99 3.96 618.6 623.5 4.34 4.30 614.2 618.6 3.82 3.80 609.3 614.4 4.44 4.41 607.4 612.7 4.96 4.91 603.1 607.9 4.62 4.58 596.4 601.4 3.95 3.92 589.9 595.2 Number of full-time employees at the end of the period 25,765 26,060 26,360 26,575 27,429 27,998 28,497 28,809 Novo Nordisk Annual Report 2009 97 y n a p m o c t n e r a P e h t f o s t n e m e t a t s l a i c n a n i F Financial statements of the Parent company for 2009 99 Income statement 100 Balance sheet 101 Notes to the financial statements 98 Novo Nordisk Annual Report 2009 Income statement for the year ended 31 December DKK million Sales Cost of goods sold Gross profit Sales and distribution costs Research and development costs Administrative expenses Licence fees and other operating income (net) Operating profit Profit in subsidiaries Share of profit in associated companies Financial income Financial expenses Profit before income taxes Income taxes Net profit for the year Proposed appropriation of net profit: Dividends Net revaluation reserve according to the equity method Retained earnings Note 2 3 3 3 3, 4 9 9 5 5 6 2009 27,834 9,155 18,679 6,932 6,739 1,229 433 4,212 8,170 (55) 381 1,087 11,621 857 10,764 4,400 5,751 613 10,764 2008 27,145 8,069 19,076 7,654 5,633 1,243 409 4,955 5,318 71 1,098 635 10,807 1,165 9,642 3,650 (5,422) 11,414 9,642 y n a p m o c t n e r a p e h t f o s t n e m e t a t s l a i c n a n i F r e b m e c e D 1 3 d e d n e r a e y e h t r o f t n e m e t a t s e m o c n I Novo Nordisk Annual Report 2009 99 y n a p m o c t n e r a P e h t f o s t n e m e t a t s l a i c n a n i F r e b m e c e D 1 3 t a t e e h s e c n a a B l Balance sheet at 31 December DKK million Assets Intangible assets Property, plant and equipment Financial assets Total non-current assets Raw materials and consumables Work in progress Finished goods Inventories Trade receivables Amounts owed by affiliates Tax receivables Other receivables Receivables Marketable securities and financial instruments Cash at bank and in hand Total current assets Total assets Equity and liabilities Share capital Net revaluation reserve according to the equity method Retained earnings Exchange rate adjustments Total equity Deferred income tax liabilities Other provisions Total provisions Mortgage debt Other non-current debt Non-current liabilities Current debt and financial instruments Trade payables Amounts owed to affiliates Tax payables Other liabilities Current liabilities Total liabilities Total equity and liabilities 100 Novo Nordisk Annual Report 2009 Note 2009 2008 7 8 9 10 12 13 11 781 14,381 17,400 32,562 1,100 6,509 1,492 9,101 1,081 3,889 464 623 6,057 1,528 10,625 27,311 59,873 620 22,144 12,670 271 35,705 880 566 1,446 503 467 970 306 1,188 17,454 1 2,803 21,752 22,722 59,873 543 14,512 11,313 26,368 1,160 6,683 1,065 8,908 945 5,541 535 631 7,652 1,375 8,299 26,234 52,602 634 16,393 16,183 (256) 32,954 906 588 1,494 504 476 980 1,279 1,262 11,917 1 2,715 17,174 18,154 52,602 Net profit of subsidiaries less unrealised intercompany profits is recorded in the Income statement of the Parent company. Average number of full-time employees in Novo Nordisk A/S 1 Accounting policies The Financial statements for the Parent company have been prepared in accordance with the Danish Financial Statements Act (Class D), and other accounting regulations for companies listed on NASDAQ OMX Copen - hagen. The accounting policies for the Financial statements for the Parent company are unchanged compared to last financial year and are the same as for the Consolidated financial statements with the following additions. For a description of the accounting policies of the Group, please refer to note 1 Critical accounting estimates and judgements, pp 56 –57 and note 2 Accounting policies, pp 57– 61. Supplementary accounting policies for the Parent company Financial assets In the financial statements of the Parent company, Investments in sub- sidiaries and associated companies are recorded under the equity method, which is at the respective share of the net asset values in subsidiaries and associated companies. Any cost in excess of net assets in the acquired com- pany is capitalised in the Parent company under Financial assets as part of investments in subsidiaries (‘Goodwill’). Amortisation of goodwill is pro - vided under the straight-line method over a period not exceeding 20 years, based on estimated useful life. To the extent it exceeds declared dividends from such companies, net revaluation of investments in subsidiaries and associated companies is trans- ferred to net revaluation reserve according to the equity method under equity. Fair value adjustments of financial assets categorised as ‘Available for sale’ are recognised in the Parent company in the Income statement. The profit in subsidiaries is shown as profit after tax. Tax The Parent company is assessed jointly for Danish tax purposes with its Danish subsidiaries. The Danish jointly taxed companies are included in a Danish on-account tax payment scheme for Danish corporate income tax. All current taxes under the scheme are recorded in the individual com - panies. Cash flow statement No separate cash flow statement has been prepared for the Parent company – please refer to the Consolidated statement of cash flow on p 54. 2 Sales DKK million Sales by business segment *) Diabetes care total Biopharmaceuticals total Total sales Sales by geographical segment *) Europe North America International Operations Japan & Oceania Total sales 2009 2008 27,513 321 26,802 343 27,834 27,145 10,603 7,013 6,917 3,301 10,535 7,520 5,880 3,210 27,834 27,145 Sales are attributed to geographical segment based on location of the customer. *) For definitions of the segments, please refer to the Consolidated financial state- ments, note 3, pp 62– 63. y n a p m o c t n e r a P e h t f o s t n e m e t a t s l a i c n a n i F t n e m e t a t s e m o c n I – s e t o N 3 Employee costs DKK million Wages and salaries Share-based payment costs Pensions Other contributions to social security Other employee costs Total employee costs 2009 6,106 121 541 144 275 7,187 2008 5,521 257 504 95 338 6,715 Included in the Balance sheet as change in employee costs included in inventories 90 87 For information regarding remuneration to the Board of Directors and Executive Management, please refer to Consolidated financial statements, note 30, pp 78 –79. Reference is furthermore made to the Consolidated financial statements, note 29, p 76, and the Consolidated financial state- ments, note 30, pp 79 – 80, for information regarding share-based payment schemes to the Board of Directors, Executive Management and the Senior Management Board. 2009 2008 10,910 10,693 2009 2008 8 1 6 2 17 7 2 8 – 17 4 Remuneration to statutory auditors DKK million Statutory audit Audit-related services Tax advisory services Other services Total 5 Financial income and financial expenses DKK million 2009 2008 Interest income relating to subsidiaries Other financial income Financial income Interest expenses relating to subsidiaries Foreign exchange loss (net) Other financial expenses Financial expenses 24 357 381 157 57 873 1,087 164 934 1,098 410 68 157 635 6 Income taxes The Parent company paid DKK 1,370 million related to current year (DKK 1,663 million in 2008). Novo Nordisk Annual Report 2009 101 y n a p m o c t n e r a P e h t f o s t n e m e t a t s l a i c n a n i F t e e h s e c n a a B – l s e t o N 7 Intangible assets DKK million Cost at the beginning of the year Additions during the year Disposals during the year Cost at the end of the year Amortisation at the beginning of the year Amortisation during the year Impairment losses for the year Amortisation reversed on disposals during the year Amortisation at the end of the year Carrying amount at the end of the year 8 Property, plant and equipment Goodwill Patents and licences Software 51 – – 51 51 – – – 51 – 590 277 (48) 819 205 16 59 (48) 232 587 392 69 – 461 234 33 – – 267 194 2009 Total 1,033 346 (48) 1,331 490 49 59 (48) 550 781 2008 Total 831 202 – 1,033 401 31 58 – 490 543 DKK million Cost at the beginning of the year Additions during the year Disposals during the year Transfer from/(to) other items Cost at the end of the year Depreciation and impairment losses at the beginning of the year Depreciation for the year Impairment losses for the year Depreciation reversed on disposals during the year Depreciation and impairment losses at the end of the year Land and buildings Plant and machinery Other equipment 9,420 130 (47) 186 13,160 126 (90) 615 9,689 13,811 3,003 365 100 (44) 3,424 7,281 1,130 61 (65) 8,407 1,696 77 (40) 37 1,770 965 153 7 (31) 1,094 Payments on account and assets in course of construction 1,485 1,389 – (838) 2,036 – – – – – 2009 Total 2008 Total 25,761 1,722 (177) – 27,306 11,249 1,648 168 (140) 12,925 25,255 1,151 (645) – 25,761 10,013 1,672 152 (588) 11,249 Carrying amount at the end of the year 6,265 5,404 676 2,036 14,381 14,512 102 Novo Nordisk Annual Report 2009 9 Financial assets DKK million Cost at the beginning of the year Additions during the year Disposals during the year Cost at the end of the year Value adjustments at the beginning of the year Adjustments to prior year Profit/(loss) before tax Income taxes on profit for the year Amortisation and impairment of goodwill Dividends received Exchange rate adjustments Other adjustments Value adjustments at the end of the year Offset against amounts owed by subsidiaries at the beginning of the year Additions during the year At the end of the year Unrealised internal profit at the beginning of the year Change for the year Exchange rate adjustments At the end of the year Investments in subsidiaries Amounts owed by affiliates Investments in associated companies Other securities and investments 2009 Total 2008 Total 8,193 8 – 8,201 15,624 286 10,763 (2,363) – (2,650) 478 61 22,199 61 41 102 (13,274) (230) 45 (13,459) 83 5 (15) 73 – – – – – – – – – – – – – – – – 601 15 – 616 (116) (286) (55) – (3) (18) – 14 (464) – – – – – – – 463 25 – 488 (322) – – – – – – (34) (356) – – – – – – – 9,340 53 (15) 9,378 15,186 – 10,708 (2,363) (3) (2,668) 478 41 21,379 61 41 102 (13,274) (230) 45 (13,459) 7,187 2,197 (44) 9,340 20,853 – 8,036 (1,885) (3) (11,680) 455 (590) 15,186 164 (103) 61 (12,190) (762) (322) (13,274) y n a p m o c t n e r a P e h t f o s t n e m e t a t s l a i c n a n i F t e e h s e c n a a B – l s e t o N Carrying amount at the end of the year 17,043 73 152 132 17,400 11,313 Carrying amount of investments in subsidiaries does not include capitalised goodwill at the end of the year. Carrying amount of investments in associated companies includes net capitalised goodwill of DKK 58 million at the end of the year (DKK 61 million in 2008). No additions or disposals were made during the year. A list of companies in the Novo Nordisk Group is included in the Consolidated financial statements, note 34. 10 Statement of changes in equity DKK million Balance at the beginning of the year Appropriated from net profit for the year Proposed dividends Appropriated from net profit for the year to net revaluation reserve Purchase of treasury shares Sale of treasury shares Share-based payments Reduction of the B share capital Dividends paid Exchange rate adjustment of investments in subsidiaries Effect of hedged forecast transactions transferred to the Income statement Fair value adjustments for the year on cash flow hedges Other adjustments Share capital Net revaluation reserve Retained earnings Exchange rate adjustments 634 16,393 5,751 (14) 16,183 613 4,400 (6,512) 117 259 14 (3,650) 900 352 (6) 2009 Total 32,954 613 4,400 5,751 (6,512) 117 259 – (3,650) 523 900 352 (2) 2008 Total 32,160 11,414 3,650 (5,422) (4,717) 295 331 – (2,795) (473) (615) (940) 66 35,705 32,954 (256) 523 4 271 Balance at the end of the year 620 22,144 12,670 Regarding average number of shares please refer to the Consolidated financial statements, note 13, p 65. Regarding total number of A and B shares in Novo Nordisk A/S and treasury shares, please refer to the Consolidated financial statements, note 21, p 71. Novo Nordisk Annual Report 2009 103 y n a p m o c t n e r a P e h t f o s t n e m e t a t s l a i c n a n i F t e e h s e c n a a B – l s e t o N DKK million 2009 2008 11 Non-current liabilities 14 Commitments and contingencies Non-current liabilities falling due after more than five years from the balance sheet date amounts to DKK 407 million (DKK 462 million in 2008). At the end of 2009, none of the non-current liabilities was falling due within one year. 12 Deferred income tax liabilities DKK million 2009 2008 Commitments Lease commitments Contractual obligations relating to investments in property, plant and equipment Guarantees given for subsidiaries Obligations related to research and development projects Other guarantees and commitments The deferred tax assets and liabilities are allocated to the various balance sheet items as follows: Property, plant and equipment Indirect production costs Unrealised profit on intercompany sales Other 1,217 1,171 (1,587) 79 1,305 1,134 (1,541) 8 Lease commitments expiring within the following periods as from the balance sheet date Within one year Between one and five years After five years Total income tax liabilities 880 906 Total lease commitments The deferred income tax has been calculated using a tax rate of 25%. For a specification of deferred income tax posted directly in Other com - prehensive income, please refer to the Consolidated financial statements, note 11, p 65. The lease costs for 2009 and 2008 were DKK 250 million and DKK 223 million, respectively. Security for debt Land, buildings and equipment etc at carrying amount 809 260 1,346 1,989 1,373 144 387 278 809 600 99 2,184 764 1,793 109 247 244 600 1,196 1,255 13 Other provisions DKK million Specification of other provisions: Non-current Current Total other provisions For information on pending litigation and other contingencies, please refer to the Consolidated financial statements, note 32, pp 84 – 85. 15 Related party transactions For information on transactions with related parties, please refer to the Consolidated financial statements, note 33, p 85. 2009 2008 149 417 566 163 425 588 Provisions for pending litigations are recognised as other provisions. Further more, as part of normal business Novo Nordisk issues credit notes for expired goods. Consequently, a provision for future returns is made, based on historical statistical product returns. 104 Novo Nordisk Annual Report 2009 Statement by the Board of Directors and Executive Management on the Annual Report Today, the Board of Directors and Executive Management approved the Annual Report of Novo Nordisk A/S for the year 2009. The Consolidated financial statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IASB), and with the International Financial Reporting Standards as endorsed by the EU. The Financial statements of the Parent company, Novo Nordisk A/S, are prepared in accordance with the Danish Financial Statements Act. Further, the Consolidated financial statements, the Financial statements of the Parent company and Management’s Review are prepared in accordance with additional Danish disclosure requirements for listed companies. In our opinion, the Consolidated financial statements and the Financial statements of the Parent company give a true and fair view of the financial position at 31 December 2009, the results of the Group and Parent company operations and consolidated cash flows for the financial year 2009. Furthermore, in our opinion, Management’s Review includes a true and fair account of the development in the operations and financial circumstances, of the results for the year and of the financial position of the Group and the Parent company as well as a description of the most significant risks and elements of uncertainty facing the Group and the Parent company. Novo Nordisk’s non-financial statements have been prepared in accordance with the non-financial reporting principles of materiality, inclusivity and responsiveness of AA1000APS(2008). They give a balanced and reasonable presentation of the organisation’s economic, environmental and social performance. We recommend that the Annual Report be adopted at the Annual General Meeting. Gladsaxe, 1 February 2010 Executive Management Lars Rebien Sørensen President and CEO Jesper Brandgaard CFO Lise Kingo Kåre Schultz Mads Krogsgaard Thomsen Board of Directors Sten Scheibye Chairman Göran A Ando Vice chairman s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o C t n e m e t a t s t n e m e g a n a M Henrik Gürtler Johnny Henriksen Pamela J Kirby Anne Marie Kverneland Kurt Anker Nielsen Chairman of the Audit Committee Søren Thuesen Pedersen Hannu Ryöppönen Audit Committee member Stig Strøbæk Jørgen Wedel Audit Committee member Novo Nordisk Annual Report 2009 105 t r o p e r s ’ r o t i d u a t n e d n e p e d n I Independent auditor’s report on the Annual Report for 2009 To the shareholders of Novo Nordisk A/S We have audited the Annual Report of Novo Nordisk A/S for the financial year 2009, pp 2– 88 and pp 98 –105, which comprises Management Statement, Management’s review, Income Statement, Statement of Com - prehensive Income, Balance Sheet, Statement of Changes in Equity and Notes including significant accounting policies for the Group as well as for the Parent Company and Consolidated Cash Flow Statement. The Consolidated Financial Statements are prepared in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board, and International Financial Reporting Standards as endorsed by the EU. The Financial Statements of the Parent Company are prepared in accordance with the Danish Financial Statements Act. Moreover, the Annual Report is prepared in accordance with additional Danish disclosure requirements for listed companies. Management’s responsibility Management is responsible for the preparation and fair presentation of the Consolidated Financial Statements and the Financial Statements of the Parent Company in accordance with the above legislation and accounting standards This responsibility includes: designing, implementing and main- taining internal control relevant to the preparation and fair presentation of Consolidated Financial Statements and Financial Statements of the Parent Company that are free from material misstatement, whether due to fraud or error. The responsibility also includes selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Furthermore, Management is responsible for the preparation of a Management’s review that gives a true and fair account in accordance with Danish disclosure requirements for listed companies. Auditor’s responsibility Our responsibility is to express an opinion on the Annual Report based on our audit. We conducted our audit in accordance with International and Danish Auditing Standards. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance that the Annual Report is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Annual Report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Annual Report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Entity’s preparation and fair presentation of Consolidated Financial Statements and Financial Statements of the Parent Company and to the preparation of a Management’s review that gives a true and fair account in order to design audit procedures that are appropriate in the circumstances. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Manage - ment, as well as evaluating the overall presentation of the Annual Report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Our audit has not resulted in any qualification. Opinion In our opinion, the Annual Report gives a true and fair view of the financial position at 31 December 2009 of the Group and of the results of the Group’s operations and consolidated cash flows for the financial year 2009 in accordance with International Financial Reporting Standards as issued by the International Accounting Statements Board, and International Financial Reporting Standards as endorsed by the EU and additional Danish disclosure requirements for listed companies. Moreover, in our opinion the Annual Report gives a true and fair view of the financial position at 31 December 2009 of the Parent Company and of the results of the Parent Company’s operations for the financial year 2009 in accordance with the Danish Financial Statements Act and additional Danish disclosure requirements for listed companies. Furthermore, in our opinion the Management’s review gives a true and fair account in accordance with Danish disclosure require- ments for listed companies. Gladsaxe, 1 February 2010 PricewaterhouseCoopers Statsautoriseret Revisionsaktieselskab Mogens Nørgaard Mogensen Danish State Authorised Public Accountant Lars Baungaard Danish State Authorised Public Accountant 106 Novo Nordisk Annual Report 2009 Independent assurance report on the non-financial reporting for 2009 To the stakeholders of Novo Nordisk A/S We have reviewed the non-financial information in the Annual Report of Novo Nordisk A/S for the financial year 2009, which comprises Manage - ment’s Statement, Management’s Review, the non-financial accounting policies and the consolidated non-financial statement on pp 2– 50, 89 – 95 and 105. The assurance engagement has furthermore covered the nature and extent of Novo Nordisk A/S incorporation of the AA1000 AccountAbility (AA1000APS(2008)) principles (inclusivity, materiality and responsiveness) with respect to stakeholder dialogue. Criteria for the preparation of reporting on data The non-financial information is prepared in accordance with the accounting policies described on pp 90 – 92. Management’s responsibility Novo Nordisk A/S’ Management is responsible for preparing the non-finan- cial information, including for establishing data collection and registration, internal control systems with a view to ensuring reliable reporting, specify- ing acceptable reporting criteria and choosing data to be collected for intended users of the report. Also, adherence to AA1000APS(2008) and the three principles of inclusivity, materiality and responsiveness is the respons - ibility of Novo Nordisk A/S’ Management. Assurance provider’s responsibility Our responsibility is, on the basis of our work, to express a conclusion on the reliability of the non-financial information in the report. Furthermore, our responsibility is to express a conclusion on as well as to make recom- mendations for the nature and extent of Novo Nordisk A/S’ adherence to the AA1000APS principles. Our team of experts have competences in respect of assurance engage- ments related to non-financial information. In addition, our team have com- petences in assessing non-financial information and sustainability manage- ment, and thus qualify to conduct this independent assurance engagement. Also, we have not been responsible for the preparation of any part of the report, and we are independent as defined by the AA1000 Assurance Standard (AA1000AS (2008)). Scope, standards and criteria used We have planned and performed our work in accordance with the Inter - national Standard on Assurance Engagements (ISAE) 3000,“Assurance Engagements other than Audits or Reviews of Historical Financial Informa - tion”, to obtain limited assurance that the non-financial information in the Annual Report is free of material misstatements and that the information has been presented in accordance with the non-financial accounting policies. The assurance obtained is limited, as our work compared to that of an engagement with reasonable assurance has been limited to, principally, inquiries, interviews and analytical procedures related to registration and communication systems, data and underlying documentation. t r o p e r s ’ r o t i d u a t n e d n e p e d n I Moreover, we have planned and performed our work based on the AA1000AS(2008), using the criteria in the AA1000APS(2008), to perform a Type 2 engagement and to obtain a moderate level of assurance regarding the nature and extent of Novo Nordisk A/S’ adherence to the principles of inclusivity, materiality and responsiveness. Methodology, approach, limitation and scope of work Based on an assessment of materiality and risk, our work included: (i) Inquiries regarding procedures and methods to ensure that non-financial reporting includes data from the Group’s Business Unit operations, and that these data have been incorporated in compliance with the accounting policies. Through site visits to Hillerød, Kalundborg, Chartres and Montes Claros and based on requests and selected documentation, we have further more assessed the existing systems for data collection and registra- tion, and procedures to ensure reliable reporting; (ii) Inquiries and interviews with members of Executive Management, staff from the sustainability development department, as well as Management representing different functions in the Group, regarding Novo Nordisk A/S’ adherence to the principles of inclusivity, materiality and responsiveness, including Management’s commitment to the principles, the existence of systems and procedures to support adherence to the principles and the embedding of the principles at corporate level. Conclusion Based on our review, nothing has come to our attention which causes us not to believe that the non-financial performance information presented in the Annual Report 2009 (on pp 2– 50, 89– 95 and 105) is free of material misstatements and has been stated in accordance with the criteria men- tioned. Furthermore, nothing has come to our attention causing us to believe that Novo Nordisk A/S does not adhere to the AA1000APS(2008) principles. Observations and recommendations According to the Assurance Standard (AA1000AS(2008)), we are required to include observations and recommendations for improvements in relation to adherence to the AA1000APS(2008) principles: Novo Nordisk A/S’ Management has a strong commitment to inclusivity and stakeholder engagement. Also, the Company has in place systems and processes to ensure a continuous mapping of relevant stakeholders, as well as a structured and systematic approach to ensuring the inclusion of stakeholder concerns, demands and expectations at a corporate level. Novo Nordisk A/S’ Management systematically takes the principle of mate - riality into consideration when making decisions regarding sustainability at management level. Also, the Company has in place a number of relevant governance bodies to discuss, evaluate and determine the materiality of sustainability issues on ongoing basis. Novo Nordisk A/S is committed to being responsive to stakeholders as is evident from the wide range of media, forums and forms used by Novo Nordisk A/S to communicate on sustainability issues. We recommend that Novo Nordisk A/S continue to work on ensuring a systematic and structured approach to the AA1000APS(2008) principles at a local site level. Gladsaxe, 1 February 2010 PricewaterhouseCoopers Statsautoriseret Revisionsaktieselskab Mogens Nørgaard Mogensen Danish State Authorised Public Accountant Lars Baungaard Danish State Authorised Public Accountant Novo Nordisk Annual Report 2009 107 Index This index might be of help if you are looking for specific information. It explains how our reporting fulfils our commitment to report in accordance with the Global Reporting Initiative and the UN Global Compact. Additional information for topics covered in this report is available online, under the categories listed here, at annualreport2009.novonordisk.com. Topic Page(s) in this report Global Reporting Initiative Indicator UN Global Compact Principle Financial and economics Brand and reputation management 93 10 10 10 6 6 1–6, 10 6 10 1–6 6 3, 6 8, 9 8 8 7–9 . 0 1 0 2 y r a u r b e F , S / i A c i h p a r G g n d r o B : g n i t n i r P . s n o F n n i F : y h p a r g o t o h P . s c i h p a r G 2 m a e T : s e t o N d n a s t n u o c c A . s n o i t a c i n u m m o C c i m o t D A : n o i t c u d o r p d n a n g i s e D n o i t a m r o f n i l a n o i t i d d A Business ethics Economic footprint Financial performance Innovation Litigation Marketing practices Quality Share information Socioeconomics Tax Social Access to health Animal welfare Changing Diabetes® Clinical research Diversity Donations Health and safety Healthy workplace Human rights People strategy Public Affairs Responsible sourcing 29, 33–35, 38, 42, 92 30 SO2–3 EC1, EC9 7–10, 14, 52–55, 62–63, 96–97 2, 4–6, 19–20, 25–26, 31–33 42, 84–85 33–35 93 47–49 30, 94 30, 72 SO7 PR6–7 PR1–4 EC1, EC9 22–23, 26, 93 EC8 93 20–22 32–34 32, 92 22, 26, 84 93 93 28, 31 32–33 34 31 PR3 LA13 LA7 LA8 HR1–9, SO5 EC7, LA11–12 SO5-6 EC6, HR1–2 LA12 Talent attraction and development 32–33 Wages and benefi ts 39–40, 64, 78–80 EC5, LA3–4, LA12 Environment Climate action Environmental management 33–36 35–36 EN5, EN7, EN18 EN13, EN30 Environmental performance 11–12, 35–36, 92–95 EN1, EN3, EN4, EN8, EN16, EN20–23 Product stewardship 20 EN26 Stakeholder engagement Partnerships 4, 21, 31–33 Stakeholder engagement strategy 31 Governance and reporting Accountability Audit and assurance Board of Directors Capital structure Compliance Corporate governance Executive Management Executive remuneration Materiality Novo Nordisk Way of Management Risk management Our business About Novo Nordisk Biopharmaceuticals Diabetes care Pipeline Sustainability Triple Bottom Line 33, 37, 90 34, 90 43–45 48 29, 33–35, 37–39, 42 37–39 46 39–40, 76–80 90 28–29 40–42 1, 50 24–27 18–23 16–17 10, 22, 26, 28, 40 1, 4, 10, 28, 29, 31 108 Novo Nordisk Annual Report 2009 Our products This report makes reference to European product trade names. The list below provides an overview of European trade names with accompanying generic names. Trade and generic names may differ in other markets. Therapeutic area Trade name Generic name . 0 1 0 2 y r a u r b e F , S / i A c i h p a r G g n d r o B : g n i t n i r P . s n o F n n i F : y h p a r g o t o h P . s c i h p a r G 2 m a e T : s e t o N d n a s t n u o c c A . s n o i t a c i n u m m o C c i m o t D A : n o i t c u d o r p d n a n g i s e D Diabetes care Modern insulins GLP-1 Human insulins Diabetes devices Oral antidiabetic agents Biopharmaceuticals Haemostasis Human growth hormone HRT References n o i t a m r o f n i l a n o i t i d d A Levemir® NovoRapid® NovoMix® 30 NovoMix® 50 NovoMix® 70 Victoza® Insulatard® Actrapid® Mixtard® 30 FlexPen® NovoPen® 4 Insulin detemir Insulin aspart Biphasic insulin aspart Biphasic insulin aspart Biphasic insulin aspart Liraglutide Insulin human Insulin human Insulin human Prefilled insulin delivery system Durable insulin delivery system NovoPen Echo® Durable insulin delivery system InnoLet® NovoFine® NovoTwist® GlucaGen® NovoNorm® PrandiMet® NovoSeven® Norditropin® NordiFlex™ Prefilled insulin delivery system Needle Needle Glucagon Repaglinide Repaglinide/metformin Recombinant factor VIIa Somatropin (rDNA origin) Prefilled multidose delivery system NordiFlex PenMate® Automatic needle insertion accessory NordiPen® Prefilled multidose delivery system NordiPenMate® Prefilled multidose delivery system NordiLet® Activelle® Estrofem® Novofem® Vagifem® Prefilled multidose delivery system Estradiol/norethisterone acetate Estradiol Estradiol/norethisterone acetate Estradiol hemihydrate 1 Three-Year Efficacy of Complex Insulin Regimens in Type 2 Diabetes: Holman R et al, New England Journal of Medicine; 361; 18; 29 October, 2009 2 diabetologia-journal.org 3 Estimated number of patients using FlexPen®, based on worldwide sales in numbers of packs sold, IMS worldwide data Q3’09 and Daily Defined Dosage (DDD) for insulin as stipulated by WHO 4 g-mark.org/english/archive/2009/outline.html 5 Sommavilla et al. Expert Opin Pharmacother 2008; 9: 2223–32 6 Lytzen & Ostfeldt. American Diabetes Association 69th Scientific Sessions; 2009; 1 7 International Diabetes Federation, Diabetes Atlas, 5th edition, 2009 8 NovoSeven® room temperature stable must be stored at temperatures between 3°C and 25°C (38°F and 77°F). 9 Mr Nielsen, Mr Ryöppönen and Mr Wedel qualify as independent Audit Committee members as defined by the US Securities and Exchange Commission (SEC). N o v o N o r d i s k A / S A n n u a l R e p o r t 2 0 0 9 This report is about how we do business. When it comes to building relations, that is what Novo Nordisk people across the globe do every day. We value stakeholders’ reviews of our reporting and we welcome questions or comments about this report or our performance. Visit the corporate website at novonordisk.com Headquarters Novo Nordisk A/S Novo Allé 2880 Bagsværd Denmark Tel +45 4444 8888 webmaster@novonordisk.com Transfer agents Shareholders’ enquiries concerning dividend payments, transfer of share certificates, consolidation of shareholder accounts and tracking of lost shares should be addressed to Novo Nordisk’s transfer agents: Danske Bank Holmens Kanal 2–12 1092 Copenhagen K Denmark Tel +45 3344 0000 In North America: JP Morgan Chase & Co PO Box 64504 St Paul, MN 55164-0504 USA Tel +1 800 990 1135 Tel +1 651 453 2128 for enquiries from outside the United States Cover photo: Development of the GLP-1 molecule that eventually led to the creation of Victoza® was initiated by Lotte Bjerre Knudsen, senior principal chemist. GLP-1, a natural hormone found in the body and released after eating, lowers blood glucose and suppresses appetite. Victoza® is an analogue of natural GLP-1 with the crucial difference that it works actively for 24 hours. CVR number 24 25 67 90 novonordisk.com 

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