novo nordisk
annual report
2014
A CURE FOR TYPE 1 DIABETES
– dream or potential reality?
CITIES NEED TO
FIGHT DIABETES
– but how?
STAY FOCUSED, THINK LONG-TERM
– Novo Nordisk’s business strategy
THE STRUGGLE TO LOSE WEIGHT
– obesity is a major public health issue
LETTER FROM
THE CHAIRMAN
6 2014 PERFORMANCE
AND 2015 OUTLOOK
CONTENTS
16 BUSINESS STRATEGY
– STAY FOCUSED,
THINK LONG-TERM
ACCOMPLISHMENTS AND
RESULTS 2014
GOVERNANCE, LEADERSHIP
AND SHARES
20 NOVO NORDISK
AROUND THE
WORLD
28 THE CHALLENGE OF
CHANGING DIABETES
34 CITIES FIGHT
URBAN DIABETES
1 Letter from the Chairman
44 Shares and capital structure
2 Letter from the CEO
46 Corporate governance
4 Novo Nordisk at a glance
49 Remuneration
6 2014 performance and
2015 outlook
14 Performance highlights
52 Board of Directors
54 Executive Management
OUR BUSINESS
16 Business strategy
– stay focused, think long-term
20 Novo Nordisk around the world
26 Pipeline overview
28 The challenge of changing diabetes
30 Wanted:
more treatment options
32 Type 1 diabetes
– in search of a cure
34 Cities fight urban diabetes
FINANCIAL, SOCIAL AND
ENVIRONMENTAL
STATEMENTS
55 Consolidated financial, social and
environmental statements
105 Financial statements
of the parent company
109 Management’s statement
and Auditor’s reports
ADDITIONAL
INFORMATION
36 The struggle to lose weight
112 Product overview
38 When blood doesn’t clot
113 More information
39 Growth matters
40 The people side of the business
42 Be aware of the risk
36
THE STRUGGLE
TO LOSE WEIGHT
The Management review, as defined by the Danish Financial Statements Act (FSA), is found on pp 1–54 and 95.
This Annual Report is published in English only. A shorter version, consisting of the Management review and excerpts from
the consolidated statements, is available in Danish. In the event of any discrepancies, the English version shall prevail.
LETTER FROM
THE CHAIRMAN
1
In my letter in last year’s annual report, I expressed the Board of
Directors’ confidence that Novo Nordisk would continue to do very
well despite having been faced with several challenges in 2013.
Today, writing this year’s letter, I feel we have even more reason to
be confident. 2014 has shown that Novo Nordisk responds well to
challenges.
The Product Supply and Quality organisations have done an excellent
job in addressing the findings raised by the US Food and Drug
Administration (FDA) in 2012 in connection with the inspection of a
production plant in Denmark, while at the same time expanding
output to meet the increasing demand for Novo Nordisk’s products.
Well ahead of the original timeline, the Global Development
organisation has recruited all the patients needed for the DEVOTE
study which was initiated in response to a request from the FDA in
February 2013 for more data regarding Tresiba®. As a result, Novo
Nordisk would potentially be able to resubmit an application for
approval as early as 2015.
Novo Nordisk’s US organisation responded quickly and professionally
to what was a very tough start to 2014 when the effect of a major
contract loss in 2013 in particular meant that sales in the first quarters
fell short of expectations.
The Global Research organisation has swiftly aligned itself with our
decision to discontinue research within inflammatory disorders. As a
result, Novo Nordisk is able to increase its research within diabetes
prevention and treatment, obesity and diabetes complications.
The above four cases are just examples, but important ones, that
show me and the rest of the Board that Novo Nordisk has retained
the agility to deal effectively with both challenges and opportunities,
despite having grown into a large, global company over the past 10
years.
Like we do every year, the Board has reviewed the company’s long-
term strategy, and we have found it to be sound – ambitious, yet
realistic and a solid basis for future growth. We have also evaluated
the strength of the company’s executive leadership and senior
management. Together with the executive team we have assessed
the company’s organisational strengths and weaknesses. Whenever
we have identified issues that could become a significant obstacle to
meeting the company’s long-term goals, we have agreed on a plan
of action.
We are confident that with Chief Executive Officer Lars Rebien
Sørensen and his management team, we have the leadership needed
to execute Novo Nordisk’s strategy effectively. In 2014, I had the
pleasure of working more closely with Chief Operating Officer Kåre
Schultz, who was appointed President in January 2014 as a reflection
of the importance and complexity of his organisation and his
successful management of it. The two newest members of the team,
Lars Fruergaard Jørgensen and Jakob Riis, have both been given
greater responsibilities in recognition of the strong leadership they
have shown of their organisations. This, unfortunately, meant that
Lise Kingo, whose remit became narrower as a result, decided to
leave after a long and successful career at Novo Nordisk. I wish her
all the best.
Chairman of the Board of Directors
Göran Ando at Novo Nordisk’s
Annual General Meeting, March 2014.
The Board intends to set up a Remuneration Committee in 2015 to
ensure that Novo Nordisk’s incentive schemes are appropriate for
recruiting, motivating and retaining senior executives with the
competences needed to drive the company’s strategy successfully.
In 2014, sales grew by 8% and operating profit by 13%, both in local
currencies. At the same time, significant progress was made on the
key development projects. Of special note is FDA’s approval of
Saxenda® for weight management on 23 December.
Against this background, the Board will propose an 11% increase in
dividend to 5.00 Danish kroner per share at the Annual General
Meeting. The Board has further decided to initiate a new share
repurchase programme of up to 15 billion kroner.
On behalf of the Board of Directors, I would like to express my
appreciation for the leadership shown by Lars Rebien Sørensen and
his management team, and the hard work and dedication of the
entire Novo Nordisk organisation.
Göran Ando
Chairman of the Board of Directors
LETTER FROM
THE CEO
2014 ended much better than it started for Novo Nordisk. I must admit
that I felt a bit uneasy during the first couple of months when following
the development of our sales in the United States. We knew that it
would not be plain sailing because some things had happened in 2013
that would put pressure on sales there, but we could not be absolutely
sure how it would play out.
We knew sales would be negatively impacted by the loss of
reimbursement for two of our main diabetes products with a large
pharmacy benefit manager, which took effect in January 2014. We
were also expecting that more Americans would seek medical
coverage under Medicare Part D, a government-funded insurance
scheme to which we give very high rebates. This would, of course, put
pressure on our average net sales prices. We also knew that sales of
our product Prandin® would be much lower after the product was
exposed to generic competition in August 2013. On top of these
events, we experienced some of our wholesalers reducing their
inventories in the first quarter of 2014.
Together, this meant that 47 quarters of double-digit sales growth
(measured in local currencies) – both for our US business and the
company as a whole – came to an end in the first quarter, and we had
to lower our sales guidance for the full year a notch.
Once we got the first quarter behind us, things started looking better;
both because some of the developments stabilised and, as our
chairman Göran Ando points out in his letter, because our organisation
responded very professionally to the new scenario in the US. We
ended the year growing our North American sales by 11% and our
global sales by 8% in local currencies, which is within the range we
had originally forecasted. What is more, we delivered 13% growth in
operating profit in local currencies, which was better than forecasted.
Two products – Levemir® and Victoza® – accounted for more than
three-quarters of the sales growth, but I am also encouraged by the
very positive development in sales of our human growth hormone
Norditropin®, and Tresiba®, our new long-acting insulin.
Measured in local currencies, Tresiba® accounted for 8% of sales
growth and continues to do well in all the markets in which it is
competing on an equal footing in terms of reimbursement status with
other insulin products. Tresiba® was launched in Japan in March 2013,
and by the end of 2014 it had claimed more than 26% of the segment
for long-acting insulin (basal insulin) measured in value.
From a regional perspective, North America accounted for 61% of
sales growth, followed by International Operations and Region China.
It is also in these regions that we expect to see most of the growth in
the coming years. Our sales growth, combined with continuous focus
on the efficiency of our operations, resulted in operating profit growth
of 10% reported and 13% in local currencies, as I mentioned earlier.
Growth in net profit was 5% and, measured on an earnings per share
basis, the increase was 8%. I consider this to be a solid financial
performance in a year characterised by all forms of cost-containment
measures by the payers of pharmaceuticals – whether these are
governments, employers or their intermediaries.
rather than the exception for years. In the US – the world’s largest
market for pharmaceuticals – pressure has been growing very
significantly in the past two years, and this trend will surely continue.
That is the main reason why our sales are unlikely to return to previous
double-digit growth levels in 2015. At the end of January, as I write
this letter, our forecast is that sales will grow between 6 and 9%
measured in local currencies.
Looking further ahead, more than anything else it is our ability to
discover, develop and launch new and better products that can change
the lives of people with chronic diseases such as diabetes that will
determine our success as a company. We have therefore maintained
our high level of spending on research and development in 2014, and
we have no intention of cutting back in the coming years. Against this
background, I am happy that we reached several important milestones
in 2014 and that 2015 will bring an unprecedented news flow from
our pipeline. You will find much more on this later in this annual report.
The space available here only allows me to highlight a few important
events:
• In September 2014, the European Commission granted marketing
authorisation for Xultophy® for the treatment of type 2 diabetes in
adults. Xultophy® is a fixed combination of insulin degludec (Tresiba®)
and liraglutide (Victoza®) offering a new way to intensify treatment
and improve blood glucose control. In January 2015, Switzerland
was the first country to launch Xultophy®, and more countries will
follow during the year.
• By the end of 2014, all the patients needed for the Tresiba® DEVOTE
study had been recruited. Based on interim results from this study,
Novo Nordisk would potentially be able to resubmit an application
for approval as early as 2015. The decision whether to do so will be
taken in the first half of the year.
• 2015 will also bring very important study results for other key
development projects within diabetes: the remaining phase 3a data
for faster-acting insulin aspart; all phase 3a results for the use of
Victoza® in people with type 1 diabetes; the first phase 3a results for
semaglutide, a once-weekly GLP-1 analogue; and phase 2 results for
an oral (tablet) formulation of GLP-1.
• Our new treatment for people with obesity, liraglutide 3 mg
(Saxenda®), was approved in the US in December 2014 and received
a positive opinion from the European Medicines Agency’s expert
committee in January 2015. We expect to launch Saxenda® in the US
in the first half of 2015.
• Within our haemophilia area, we launched recombinant factor VIII
(NovoEight®) in Japan and some European countries for the
treatment of people with haemophilia A. The product has been very
well received and will be launched in the US in 2015. To ensure
sufficient production capacity for our haemophilia products in the
coming years, we acquired a plant in New Hampshire in August
2014, which will commence operation during 2015.
Of course, pressure on prices and reimbursement restrictions for new
products is not a new phenomenon. In Europe it has been the norm
In September 2014, we decided to discontinue our research and
development activities within inflammatory disorders. The decision
was made after our most advanced compound, anti-IL-20 for the
3
treatment of rheumatoid arthritis, had failed to show effectiveness in
a phase 2 trial. Without it we could not expect to launch a product in
this area before the late 2020s. In this light, we concluded that it
would serve the company and its shareholders best to reallocate the
resources we were spending within inflammation to other areas,
especially within diabetes, where we have a greater chance of success.
2015 will be one of the most exciting and challenging years in Novo
Nordisk’s 92-year history. As always, I take great pleasure in working
with my Executive Management team, our Senior Management Board
and the Board of Directors on making the most of the opportunities
and dealing with the challenges ahead. Special thanks from me go to
Lise Kingo, executive vice president of Corporate Relations, who
decided to leave the company following a reorganisation in November.
She pioneered many important initiatives at Novo Nordisk, and I wish
her all the best in her future endeavours.
I would like to thank everyone in the Novo Nordisk organisation for
their contribution to our results in 2014, the people who use our
products for their confidence in us, our stakeholders and partners for
their collaboration and our shareholders for their continued support.
Lars Rebien Sørensen
Chief executive officer
Chief Executive Officer Lars Rebien
Sørensen at Novo Nordisk’s Annual
General Meeting, March 2014.
NOVO NORDISK
AT A GLANCE
THE NOVO NORDISK WAY
EMPLOYEES IN
75
COUNTRIES
PRODUCTS
MARKETED IN
180
COUNTRIES
In 1923, our Danish founders began a journey to change diabetes.
• We never compromise on quality and business ethics.
Today, we are thousands of employees across the world with the
passion, the skills and the commitment to continue this journey
to prevent, treat and ultimately cure diabetes.
• Our business philosophy is one of balancing financial, social
and environmental considerations – we call it the Triple
Bottom Line.
• Our ambition is to strengthen our leadership in diabetes.
• We are open and honest, ambitious and accountable, and
• We aspire to change possibilities in haemophilia and other
serious chronic conditions where we can make a difference.
• We offer opportunities for our people to realise their potential.
treat everyone with respect.
• Our key contribution is to discover and develop innovative
biological medicines and make them accessible to patients
throughout the world.
Every day we must make difficult choices, always keeping in mind
what is best for patients, our employees and our shareholders in
the long run.
• Growing our business and delivering competitive financial
results is what allows us to help patients live better lives, offer
an attractive return to our shareholders and contribute to our
communities.
It’s the Novo Nordisk Way.
THE PEOPLE WE FOCUS ON
DIABETES
OBESITY
HAEMOPHILIA
GROWTH DISORDERS
387 million people
live with diabetes1*
600 million people live
with obesity2
0.4 million people live with
haemophilia3
2 million people live
with growth disorders4
* All footnotes can be found on p 113.
2014 PROGRESS ON STRATEGIC FOCUS AREAS
MILESTONES
SALES DKK billion
• Tresiba® launched in additional
14 countries.
70.0
(+7%)
65.5
DIABETES
• Ryzodeg® launched in Mexico
as the first country.
• Patient recruitment finalised for
DEVOTE, a cardiovascular outcomes
trial designed to provide the data for
Tresiba® requested by the FDA.
• Xultophy® approved in Europe.
OBESITY
• Saxenda® approved in the US
in December 2014 and received a
positive opinion from the European
Medicines Agency’s expert
committee (CHMP) in January 2015.
• NovoEight® launched in eight
countries.
HAEMOPHILIA
• N8-GP (a long-acting recombinant
coagulation factor VIII derivative)
completed first phase 3 trial, whereas
filing was postponed to 2018.
• Manufacturing facility acquired in
New Hampshire, US.
• NN8640 (a once-weekly human
growth hormone) entered into
phase 3 development.
GROWTH
DISORDERS
THE TRIPLE BOTTOM LINE
5
GLOBAL
MARKET
SHARE value
27%
(–1%)
New-generation insulin (+360%)
Oral antidiabetic products (–23%)
Protein-related products (–3%)
Victoza® (+15%)
Human insulins (–5%)
Modern insulins (+9%)
2013
2014
9.3
9.1
(–1%)
2013
2014
NovoSeven®
6.1
6.5
(+6%)
2013
2014
Norditropin®
34%
(+3%)
88.8
DKK billion
in sales
(+6%)
FINANCIALLY
RESPONSIBLE
26.5
DKK billion in
net profit
(+5%)
24.4
million patients use our
diabetes care products
(+0.4%)
41,450
employees worldwide
(+8%)
PATIENTS
120
thousand tons of
CO2 emissions
(–4%)
2,959
thousand m3 water
consumption
(+10%)
SOCIALLY
RESPONSIBLE
ENVIRONMENTALLY
RESPONSIBLE
6
ACCOMPLISHMENTS AND RESULTS 2014
2014 PERFORMANCE
AND 2015 OUTLOOK
SALES GROWTH
• In DKK as reported
• In local currencies
%
25
20
15
10
5
0
2010 2011 2012 2013 2014
SALES BY SEGMENT
Biopharmaceuticals
Diabetes care
DKK billion
100
80
60
40
20
0
2010 2011 2012 2013 2014
SHARE OF GROWTH
IN LOCAL CURRENCIES
Japan & Korea
Region China
International Operations
Europe
North America
%
100
80
60
40
20
0
2010 2011 2012* 2013 2014*
* In 2012 and 2014 Japan & Korea contributed –1% to the total growth.
FINANCIAL
PERFORMANCE
Novo Nordisk’s 2014 performance on
operating profit and free cash flow exceeded
both the outlook for the year provided in
January and the
latest guidance from
October. Sales growth, capital expenditure
and other results are in line with the latest
guidance provided in October.*
SALES DEVELOPMENT
Sales increased by 8% measured in local
currencies and by 6% in Danish kroner. North
America was the main contributor with 61%
share of growth measured in local currencies,
followed by International Operations and
Region China. Sales growth was realised
within both diabetes care and biopharma-
ceuticals, with the majority of growth
originating from modern insulin and Victoza®.
Sales growth has been negatively impacted by
around 4 percentage points, primarily due to
events in North America, notably the partial
loss of reimbursement with a large pharmacy
benefit manager, generic competition to
Prandin® as well as expanded Medicaid and
Medicare Part D utilisation.
In the following sections, unless otherwise
noted, market data are based on moving
annual total (MAT) from November 2014 and
November 2013 provided by the independent
data provider IMS Health.
DIABETES CARE
SALES DEVELOPMENT
Sales of diabetes care products increased by
9% measured in local currencies and by 7%
in Danish kroner to DKK 69,980 million. Novo
Nordisk is the world leader in diabetes care
and now holds a global value market share of
27% compared to 28% at the same time last
year.
INSULIN AND
PROTEIN-RELATED PRODUCTS
Sales of insulin and protein-related products
increased by 8% in local currencies and by
6% in Danish kroner to DKK 54,826 million.
Measured in local currencies, sales growth
was driven by North America, International
Operations and Region China. Novo Nordisk
is the global leader with 47% of the total
insulin market and 46% of the market for
modern insulin and new-generation insulin,
both measured in volume.
Sales of new-generation insulin reached DKK
658 million compared with DKK 143 million
in 2013.
The roll-out of Tresiba® (insulin degludec), the
once-daily new-generation insulin with an
ultra-long duration of action, continues and
the product has now been launched in 23
countries, most recently in Italy. In Japan,
where Tresiba® was launched in March 2013
with the same level of reimbursement as
insulin glargine, its share of the basal insulin
market has grown steadily and Tresiba® has
now captured 26% of the basal insulin
market measured in monthly value market
share. Similarly, Tresiba® has shown solid
penetration in other markets with reimburse-
ment at a similar level to insulin glargine,
whereas penetration remains modest in
markets with
restricted market access
compared to insulin glargine.
Ryzodeg®, a soluble formulation of insulin
degludec and insulin aspart, has in addition
to Mexico now also been launched in India.
Launch activities
in both countries are
progressing as planned and early feedback
from patients and prescribers is encouraging.
Sales of modern insulin increased by 11% in
local currencies and by 9% in Danish kroner
to DKK 41,537 million. North America
accounted for 63% of the growth, followed
by
International Operations and Region
China. Sales of modern insulin and new-
generation insulin now constitute 80% of
Novo Nordisk’s sales of insulin.
VICTOZA®
(GLP-1 THERAPY FOR TYPE 2 DIABETES)
Victoza® sales increased by 16% in local
currencies and by 15% in Danish kroner to
DKK 13,426 million. Sales growth is driven by
North America and reflects a lower GLP-1
volume growth and the impact of the partial
loss of reimbursement with a large pharmacy
benefit manager in the US. Despite the lower
volume growth, the GLP-1 segment’s value
share of the total diabetes care market has
increased to 7.0% compared to 6.7% in
2013. Victoza® is market leader in the GLP-1
segment with a 71% value market share,
which is comparable to the share in 2013.
NOVO NORDISK ANNUAL REPORT 2014
* Please refer to the company announcement of 30 January
2015 for explanation of results compared with the latest
expectations.
ACCOMPLISHMENTS AND RESULTS 2014
7
NOVONORM®/PRANDIN®/PRANDIMET®
(ORAL ANTIDIABETIC PRODUCTS)
Sales of oral antidiabetic products decreased
by 22% in local currencies and by 23% in
Danish kroner to DKK 1,728 million. The
negative sales development reflects an
impact from generic competition in the US
since August 2013.
BIOPHARMACEUTICALS
SALES DEVELOPMENT
Sales of biopharmaceutical products in-
creased by 6% measured in local currencies
and by 4% in Danish kroner to DKK 18,826
million. Sales growth was primarily driven by
North America and International Operations.
NOVOSEVEN®
(BLEEDING DISORDERS THERAPY)
Sales of NovoSeven® remained unchanged in
local currencies and decreased by 1% in
Danish kroner to DKK 9,142 million. The
stagnant sales development reflects growth
in International Operations, which is being
offset by lower sales in Europe, Japan and
North America. The market for NovoSeven®
remains volatile as it depends on the number
of critical bleeding episodes and surgical
procedures undertaken on haemophilia
patients with inhibitors.
NORDITROPIN®
(GROWTH HORMONE THERAPY)
Sales of Norditropin® increased by 10% in
local currencies and by 6% in Danish kroner
at DKK 6,506 million. The sales growth is
primarily derived from North America and is
driven by contractual wins, increased demand
driven by the prefilled FlexPro® device as well
as the support programmes that Novo
Nordisk offers healthcare professionals and
patients. Novo Nordisk is the leading com-
pany in the global growth hormone market
with a 33% market share measured in
volume.
OTHER BIOPHARMACEUTICALS
Sales of other products within biopharma-
ceuticals, which predominantly consist of
hormone replacement therapy-related (HRT)
products, increased by 17% in local currencies
and by 16% in Danish kroner to DKK 3,178
million. Sales growth is primarily driven by a
positive impact from pricing of Vagifem® in
the US and the launch of NovoEight® in
Europe and Japan.
DEVELOPMENT IN COSTS
AND OPERATING PROFIT
The cost of goods sold increased by 3% to
DKK 14,562 million, resulting in a gross
margin of 83.6% compared to 83.1% in
2013. This development reflects an under-
lying improvement driven by favourable price
development in North America and a positive
impact from product mix, primarily due to
increased sales of modern
insulin and
Victoza®.
Sales and distribution costs increased by 1%
in local currencies and decreased by 1% in
Danish kroner to DKK 23,223 million. The
modest increase in costs reflects sales force
investments in the US, China and selected
countries in International Operations, which
is being partly offset by lower promotional
spend in the US and Europe.
Research and development costs increased
by 18% in local currencies and by 17% in
Danish kroner to DKK 13,762 million. The
significant increase in costs reflects the
progression of the late-stage diabetes care
portfolio and the associated increase in
headcount as well as the discontinuation of
activities within
inflammatory disorders
announced in September 2014. Within the
late-stage diabetes care portfolio, costs are
primarily driven by the phase 3a programme
the once-weekly GLP-1
SUSTAIN®
analogue semaglutide, clinical trials with
Tresiba®, including the cardiovascular out-
comes trial DEVOTE, the phase 3a programme
onset® for faster-acting insulin aspart as well
as the ongoing phase 2 trial for the oral
formulation of semaglutide.
for
Administration costs increased by 2% in local
currencies and by 1% in Danish kroner to
DKK 3,537 million.
Other operating income (net) was DKK 770
million compared to DKK 682 million in 2013.
Operating profit increased by 10% in Danish
kroner to DKK 34,492 million. In local curren-
cies the growth was 13%.
NET FINANCIALS AND TAX
Net financials showed a net loss of DKK 396
million compared to a net income of DKK
1,046 million in 2013.
In line with Novo Nordisk’s treasury policy,
the most significant foreign exchange risks
for the Group were hedged, primarily
through foreign exchange forward contracts.
The foreign exchange result was an expense
of DKK 381 million compared to an income
of DKK 1,146 million in 2013. This develop-
ment primarily reflects losses on non-hedged
commercial balances, following especially the
depreciation of the Russian rouble and the
DEVELOPMENT IN COSTS
Costs in % of sales
• Sales and distribution
• Cost of goods sold
• Research and development
• Administration
%
40
30
20
10
0
2010 2011 2012 2013 2014
OPERATING PROFIT
Operating profit (left)
• Operating profit margin (right)
DKK billion
40
30
20
10
0
2010 2011 2012 2013 2014
NET PROFIT
Net profit (left)
• Net profit margin (right)
DKK billion
40
30
20
10
0
2010 2011 2012 2013 2014
%
40
30
20
10
0
%
40
30
20
10
0
CONTINUED
NOVO NORDISK ANNUAL REPORT 2014
8
ACCOMPLISHMENTS AND RESULTS 2014
Argentinian peso during 2014. As of 31
December 2014, foreign exchange hedging
losses of around DKK 2,200 million have
been deferred for recognition in the income
statement in 2015.
The effective tax rate for 2014 was 22.3%.
CAPITAL EXPENDITURE AND
FREE CASH FLOW
Net capital expenditure for property, plant
and equipment was DKK 4.0 billion com-
pared to DKK 3.2 billion in 2013. Net capital
expenditure was primarily related to invest-
ments in filling capacity in the US and Russia,
expansion of a pilot plant facility, prefilled
device production facilities in the US and
Denmark as well as additional GLP-1 manu-
facturing capacity.
Free cash flow was DKK 27.4 billion
compared to DKK 22.4 billion in 2013. The
increase of 23% compared to 2013 primarily
reflects the impact of non-recurring tax
payments in 2013 related to transfer pricing
disputes and the underlying growth in net
profit.
CAPITAL EXPENDITURE, NET
Capital expenditure, net (left)
• Capital expenditure, net to sales (right)
%
8
6
4
2
0
DKK billion
4
3
2
1
0
2010 2011 2012 2013 2014
FREE CASH FLOW
Free cash flow
DKK billion
30
25
20
15
10
5
0
2010 2011 2012 2013 2014
NOVO NORDISK ANNUAL REPORT 2014
OUTLOOK 2015
The current expectations for 2015 are summarised in the table below:
EXPECTATIONS ARE AS REPORTED,
IF NOT OTHERWISE STATED
EXPECTATIONS
30 JANUARY 2015
Sales growth
• in local currencies
• as reported
Operating profit growth
• in local currencies
• as reported
Net financials
Effective tax rate
Capital expenditure
Depreciation, amortisation and impairment losses
Free cash flow
6–9%
Around 12 percentage points higher
Around 10%
Around 19 percentage points higher
Loss of around DKK 5 billion
Around 22%
Around DKK 5.0 billion
Around DKK 3.0 billion
DKK 29–31 billion
Sales growth for 2015 is expected to be
6–9% measured in local currencies. This
reflects expectations for continued robust
performance for the portfolio of modern
insulin, Victoza® and Tresiba® as well as a
modest sales contribution from the launches
of Saxenda® and Xultophy®. These sales
drivers are expected to be partly countered
by an impact from increased rebate levels in
the US,
intensifying competition within
diabetes and biopharmaceuticals as well as
macroeconomic conditions in a number of
markets in International Operations. Given
the current level of exchange rates versus the
Danish krone, the reported sales growth is
now expected to be around 12 percentage
points higher than growth measured in local
currencies.
in
For 2015, operating profit growth is expected
to be around 10% measured
local
currencies. The expectations for operating
profit growth above the level of sales growth
reflect expectations for modest growth in
selling, distribution and administration costs
as well as declining research and development
costs reflecting the 2014 cost impact of the
decision to discontinue all activities within
inflammatory disorders. Given the current
level of exchange rates versus the Danish
krone, the reported operating profit growth
is now expected to be around 19 percentage
points higher than growth measured in local
currencies equivalent to a reported operating
profit growth of around 29%.
For 2015, Novo Nordisk expects a net
financial loss of around DKK 5 billion. The
current expectation primarily reflects losses
associated with foreign exchange hedging
contracts, particularly following the appre-
ciation of the US dollar versus the Danish
krone compared to the average prevailing
exchange rates in 2014. As a consequence of
these significant hedging losses, the reported
pre-tax profit is expected to grow approx-
imately 16%.
The effective tax rate for 2015 is expected to
be around 22%.
Capital expenditure is expected to be around
DKK 5.0 billion in 2015, primarily related to
investments in an expansion of the manu-
facturing capacity for biopharmaceutical
products, additional capacity for insulin
active pharmaceutical ingredient production,
construction of new research facilities and an
expansion of the insulin filling capacity.
Depreciation, amortisation and impairment
losses are expected to be around DKK 3.0
billion. Free cash flow is expected to be DKK
29–31 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
2015, and that currency exchange rates,
especially the US dollar, will remain at the
current level versus the Danish krone.
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. The financial impact from
foreign exchange hedging is included in ‘Net
financials’.
KEY INVOICING ANNUAL IMPACT ON NOVO NORDISK’S OPERATING
PROFIT OF A 5% MOVEMENT IN CURRENCY
CURRENCIES
HEDGING PERIOD
(MONTHS)
USD
CNY
JPY
GBP
CAD
DKK 1,600 million
DKK 260 million
DKK 115 million
DKK 80 million
DKK 60 million
11
*
11
12
11
11
* USD used as proxy when hedging Novo Nordisk’s CNY currency exposure.
LONG-TERM FINANCIAL TARGETS
Novo Nordisk introduced four long-term
financial targets in 1996 to balance short- and
long-term considerations, thereby ensuring
a focus on shareholder value creation. The
targets have subsequently been revised and
updated on several occasions, most recently
in connection with the release of the financial
statement for 2012. The targets have been
selected to ensure focus on growth, profit-
ability, efficient use of capital and cash flow
generation.
The targets are based on an assumption
of a continuation of the current business
environment. Significant changes to the
business environment, including the structure
of the US healthcare system, regulatory
requirements, pricing and contracting
environment, competitive environment,
healthcare reforms and exchange rates, may
significantly impact the time horizon for
achieving the long-term targets or require
them to be revised.
LONG-TERM FINANCIAL TARGET
Operating profit growth
Operating margin
Operating profit after tax to net operating assets
Cash to earnings
Cash to earnings (three-year average)
Result
2014
10%
39%
101%
103%
93%
Target
15%
40%
125%
90%
%
ACCOMPLISHMENTS AND RESULTS 2014
9
GROWTH IN OPERATING PROFIT
• Realised
Target
%
40
30
20
10
0
2010 2011 2012 2013 2014
OPERATING MARGIN
• Realised
Target
FORWARD-LOOKING
STATEMENTS
Novo Nordisk’s
filed with or
reports
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 2015, 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 targets, 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 cooperation in
relation thereto
• statements containing projections of
or targets for revenues, costs, income
(or loss), earnings per share, capital
expenditures, dividends, capital structure,
net financials and other financial measures
• statements regarding future economic
performance, future actions and outcome
of contingencies such as legal proceedings
• statements regarding the assumptions
underlying or relating to such statements.
In this document, examples of forward-
looking statements can be found under
the heading ‘2014 performance and 2015
outlook’ and elsewhere.
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.
40
35
30
25
or
breaches
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 recalls, unexpected
contract
terminations,
government-mandated or market-driven
price decreases for Novo Nordisk’s products,
introduction of competing products, re-
liance on information technology, Novo
to successfully market
Nordisk’s ability
current and new products, exposure to
product liability and legal proceedings and
investigations, changes in governmental laws
and related interpretation thereof, including
intellectual property
on
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.
reimbursement,
Please also refer to the overview of risk
factors on pp 42–43.
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.
2010 2011 2012 2013 2014
OPERATING PROFIT AFTER TAX
TO NET OPERATING ASSETS
• Realised
Target
%
125
100
75
50
2010 2011 2012 2013 2014
CASH TO EARNINGS
Three-year average
• Realised
Target
%
120
90
60
30
0
2010 2011 2012 2013 2014
NOVO NORDISK ANNUAL REPORT 2014
10
ACCOMPLISHMENTS AND RESULTS 2014
RESEARCH AND
DEVELOPMENT
In 2014, Novo Nordisk made important
advances in its product development pipeline.
The high level of activity in 2014 is underscored
by the number of patients in clinical trials
with Novo Nordisk products. As seen from
the graph, the total number of patient years
increased from 16,000 in 2013 to more than
26,000 in 2014.
Below are highlights from key late-stage
development projects. The pipeline overview
on pp 26–27 shows all compounds in clinical
development, and further details on clinical
trial results can be found in the company
announcements and press releases published
by Novo Nordisk during 2014, which are
available on novonordisk.com.
DIABETES
The cardiovascular outcomes trial for Tresiba®
(insulin degludec), DEVOTE, was initiated
in October 2013 in response to a request
from the FDA. Recruitment of the 7,500 trial
participants with type 2 diabetes who have
existing, or high risk of, cardiovascular disease
was completed by the end of 2014 and by the
end of January 2015 the required number of
major adverse cardiovascular events (MACE)
for the prespecified interim analysis had been
accumulated.
Novo Nordisk expects to decide during the
first half of 2015 whether to submit the result
of this interim analysis to the FDA or to await
completion of the DEVOTE trial. The result
PATIENT YEARS IN CLINICAL TRIALS*
Japan & Korea
Region China
International Operations
Europe
North America
Thousand
30
25
20
15
10
5
0
2010 2011 2012 2013 2014
* A patient year is measured as the total number of months
a patient is enrolled in a clinical trial divided by 12.
NOVO NORDISK ANNUAL REPORT 2014
of an interim analysis carries a higher level
of uncertainty than the final study results
as this preliminary estimate is built on a
lower number of observations. Accordingly,
a relative risk estimate that is derived from
an interim analysis may or may not support
resubmission regardless of the final trial
result. A possible decision not to submit the
interim analysis to the FDA will not in itself
indicate a cardiovascular safety issue related
to the use of Tresiba®. Safety of patients in the
DEVOTE trial is overseen by an independent
Data Monitoring Committee, which would
recommend that the trial is stopped should a
safety concern arise.
At present, the DEVOTE trial remains blinded
to regulatory authorities. In Novo Nordisk
only a small team will have access to the
data. This team will interact with FDA and
will decide whether to resubmit the degludec
file including the interim data. Novo Nordisk
management will not have access to the
unblinded results of the interim analysis, and
the result of the interim analysis will not be
communicated when the decision whether to
submit the interim analysis to the FDA is taken.
The full DEVOTE trial is now expected to be
completed in the second half of 2016.
In September 2014, the European Commis-
sion granted marketing authorisation for
Xultophy®, a once-daily single-injection com-
bination of insulin degludec (Tresiba®) and
liraglutide (Victoza®). Xultophy® is indicated
for the treatment of adults with type 2
diabetes to improve glycaemic control in
combination with oral glucose-lowering
medicinal products when these alone or
combined with basal insulin do not provide
adequate glycaemic control. Xultophy® is
administered independently of meals and has
shown consistent results in strongly improving
glycaemic control in both insulin-naïve people
and people with type 2 diabetes that are
uncontrolled on basal insulin. Xultophy® was
launched in Switzerland in January 2015 and
will be launched in other European countries
during 2015.
OBESITY
In December 2014, the US Food and Drug
Administration (FDA) approved the New Drug
Application (NDA) for Saxenda® (liraglutide
3 mg), the first once-daily human glucagon-
like peptide-1 (GLP-1) analogue for the treat-
ment of obesity. Saxenda® is indicated as
an adjunct to a reduced-calorie diet and
increased physical activity for chronic weight
management in adults with obesity (BMI ≥30)
or who are overweight (BMI ≥27) with at least
one weight-related comorbidity such as type
2 diabetes and cardiovascular disease. Novo
Nordisk expects to launch Saxenda® in the US
in the first half of 2015.
from
In January 2015, Saxenda® received a positive
the European Medicines
opinion
Agency’s expert committee. The
final
marketing authorisation from the European
Commission is expected within approximately
three months.
HAEMOPHILIA
During 2014, Novo Nordisk completed 3 of 4
phase 3a trials with long-acting recombinant
factor VIII, N8-GP (turoctocog alfa pegol), for
haemophilia A patients, investigating N8-GP
as a treatment for adults, children, during
surgical procedures and as prophylactic
treatment. The data reported so far confirm
the efficacy of N8-GP, which also appeared
safe and well tolerated in the trials.
New data were reported from phase 3a
long-acting
trials with a glycoPEGylated
recombinant factor IX, N9-GP, for people
with haemophilia B. The data reported so
far confirm the efficacy of N9-GP, which also
appeared safe and well tolerated in the trials.
Novo Nordisk expects to submit N9-GP for
approval to the regulatory authorities in the
second half of 2015.
GROWTH HORMONE
In November 2014, patients with Adult
Growth Hormone Deficiency (AGHD) were
treated in the first phase 3a trial with a once-
weekly human growth hormone, NN8640.
INFLAMMATORY DISORDERS
In September 2014, Novo Nordisk decided to
discontinue all its research and development
activities within inflammatory disorders and
instead increase its efforts within diabetes
prevention and treatment, obesity and dia-
betes complications. The decision followed
a review of Novo Nordisk’s strategic position
within
the
company’s most advanced compound, anti-
IL-20 for the treatment of rheumatoid arthritis,
failed to show efficacy in a phase 2 trial.
Without this product, Novo Nordisk’s earliest
possible entrance into the market for anti-
inflammatory therapeutics would be delayed
to the late 2020s.
inflammatory disorders after
SOCIAL
PERFORMANCE
Social performance has three dimensions:
improving access to medical treatment
and quality of care for patients, offering a
healthy and engaging working environment,
and providing assurance that responsible
business practices are in place, with the aim
of contributing to the communities in which
the company operates.
PATIENTS
Of the 387 million people living with diabetes1
it is known that just over half of them are
diagnosed and many of those diagnosed do
not receive medical treatment.5
As part of Novo Nordisk’s strategy for global
access to diabetes care, the company has set
a long-term target to reach 40 million people
in 2020 with its diabetes care products, a
doubling from the baseline number in 2010.
The aim is to enable more people with
diabetes to receive medical treatment.
In 2014, Novo Nordisk provided medical
treatments to an estimated 24.4 million
people with diabetes worldwide, compared
with 24.3 million in 2013. The estimated
number is calculated based on WHO’s
recommended daily doses for diabetes
medicines. The number reflects an increase
in the number of people treated with
modern and new-generation insulins, coun-
tered by a decline in the number of people
treated with human insulin, following the
loss of a large tender contract. Novo Nordisk
is committed to expanding access to medical
treatment and care for people with diabetes
throughout the world and has several pro-
grammes specifically targeting people in
low-income settings, while also focusing on
enhancing quality of care through product
innovation.
Novo Nordisk sold human insulin according
to the company’s differential pricing policy
in 32 of the world’s 48 poorest countries,
compared to 35 countries in 2013. Accord-
ing to this policy the price should not exceed
20% of the average insulin price in the
western world (defined as the EU, Norway,
Switzerland, the US, Canada and Japan). The
pricing policy is offered through government
tenders or private market distributors to all
of the countries listed by the UN as Least
Developed Countries (LDC). In 2014 the
LDC ceiling price for insulin treatment per
patient per day was USD 0.24, while the
average realised price for insulin sold under
the programme was USD 0.16.
in 2009,
reaching more
By the end of 2014, important progress
had been achieved on Changing Diabetes®
programmes reaching people with dia-
betes and building capacity. The Changing
Diabetes®
in Children programme has
been rolled out in nine countries since
than
launch
13,000 children. By now, 108 clinics have
been established and more than 5,700
healthcare professionals have been trained.
The Changing Diabetes® in Pregnancy pro-
in 2009, has
launched
gramme, also
screened 27,700 women for gestational
diabetes mellitus and 2,700 women have
been diagnosed and subsequently treated.
The Base of the Pyramid programme has,
since launch in 2011, established seven
Diabetes Support Centres in Nigeria and
four in Ghana. The programme has been
scaled up in Kenya in terms of capacity-
building and ensuring supply.
Donations through the World Diabetes
Foundation (WDF) amounted to DKK 66
million in 2014. The WDF is an independent
non-profit organisation established in 2002
by Novo Nordisk to help expand access to
diabetes care. The foundation invests in
sustainable initiatives to build healthcare
capacity with the aim to improve prevention
and treatment of diabetes in developing
countries. In 2014 the WDF supported 38
new projects. Among these are projects with
a focus on avoiding diabetes complications
and others aimed at reaching people in the
most remote rural areas. Read more on
worlddiabetesfoundation.org.
Novo Nordisk also provides financial sup-
port to improve global access to haemo-
philia care. In 2014 the company donated
DKK 18 million to the Novo Nordisk
Haemophilia Foundation, established
in
2005. The foundation supports projects
and fellowships in developing and emerging
economies. Initiatives focus on capacity-
building, awareness, diagnosis and regis-
tries. Read more on nnhf.org.
In 2014 Novo Nordisk was ranked second in
the Access to Medicine Index, climbing four
places since the 2012 Index. Novo Nordisk’s
ranking is a reflection of the company’s
consideration of access to medicine within
its core business, including equitable pri-
local capability-building
cing strategies,
and integrating donations into business
activities.
ACCOMPLISHMENTS AND RESULTS 2014
11
EMPLOYEES
At the end of 2014, the total number of
employees was 41,450, corresponding to
40,957 full-time positions, which is an 8%
increase compared with 2013. This growth
is primarily driven by expansion within
International Operations and in Denmark,
primarily within research & development
and production.
Employee turnover increased from 8.1% in
2013 to 9.0%. This level is in line with recent
years, with turnover rates of 8–10%.
The consolidated score
in the annual
employee survey, eVoice, was 4.3, measured
on a scale of 1 to 5, with 5 being the best
score. The survey measures the extent
to which the organisation is working in
accordance with the Novo Nordisk Way.
The 2014 result reflects a strong culture
and commitment to the company’s values,
despite a slight decrease compared with the
4.4 score in 2013.
By the end of 2014 a total of 76% of the 33
senior management teams were composed
of a diverse group, with members of
both genders and different nationalities,
compared with 70% in 2013. As a result of
targeted efforts, 32 of the senior manage-
ment teams now have gender diversity,
while diversity of nationalities in some
management teams has proven more diffi-
cult to achieve. The aspiration was to reach
100% by the end of 2014, but this has not
yet been achievable. This reflects that while
diversity is a priority in the selection of
candidates for recruitment and promotions,
it is also a principle to always choose
the best person for the job. To ensure a
robust pipeline of talent for management
positions, a new aspiration has been set that
requires all management teams, including
entry-level and middle management, to
enhance diversity in terms of both gender
and nationality.
In 2014, the average frequency rate of
occupational accidents with absence de-
creased to 3.2 per million working hours,
compared with 3.5 in 2013, as a result of
continued roll-out in the global organisation
of uniform occupational health and safety
management procedures.
CONTINUED
NOVO NORDISK ANNUAL REPORT 2014
12
ACCOMPLISHMENTS AND RESULTS 2014
PATIENTS REACHED WITH
DIABETES CARE PRODUCTS
Estimate
• Realised
Target (2020)
Million
50
40
30
20
10
0
2010 2011 2012 2013 2014
WORKING
THE NOVO NORDISK WAY
Average score in annual employee survey
• Realised
Target
Scale
5
4
3
2
1
2010 2011 2012 2013 2014
DIVERSE
SENIOR MANAGEMENT TEAMS
• Realised
Target (2014)*
%
100
80
60
40
20
0
2010 2011 2012 2013 2014
* All senior management teams must comply with the target
to be diverse in terms of gender and nationality or explain
why this has not yet been achievable.
NOVO NORDISK ANNUAL REPORT 2014
ASSURANCE
Training in business ethics is mandatory
and a high priority. Annual business ethics
training is required for all employees, includ-
ing new hires. Business ethics training
is also a key element in the onboarding
programmes. In 2014, 98% of all relevant
employees completed and documented their
training and passed the related tests. This
is a slight increase from 97% in 2013. The
high level is attributed to the constant focus
and communication by senior manage-
ment on the importance of business ethics
compliance.
Adherence to the company’s global stan-
dards
for ethical behaviour must be
observed and is monitored. Internal business
ethics assurance activities are conducted
using on-site interviews and documentation
reviews to assess compliance with legal
requirements and
internal procedures.
During 2014, 42 business ethics assurance
reviews were conducted, compared with 45
in 2013.
During the year, the global facilitator
team conducted 69 audits of units’ adher-
ence to the Novo Nordisk Way, so-called
facilitations, covering approximately 16,500
employees, which is close to 40% of the
entire workforce. The facilitations con-
ducted in 2014 showed a high level of
compliance with the Novo Nordisk Way.
A facilitation consists of document review
and interviews with local management,
employees and stakeholders to determine
the level of adherence to corporate values
and expected behaviours spelled out in the
Novo Nordisk Way.
Best practices are shared internally while
findings of non-compliance are reported
to local management, which must subse-
quently implement corrective actions. In
2014, 95% of actions were closed on time.
A summary report, presented to the Board
of Directors, outlines key observations
and trends across all facilitations, and the
conclusion is that there is a high level of
compliance in 2014 with the Novo Nordisk
Way across the organisation.
A total of 224 supplier audits were conducted
to assess their level of compliance with the
company’s standards for suppliers. These
relate to quality as well as environment,
labour, human rights and business ethics, in
line with Novo Nordisk’s responsible sourc-
ing policy.
These audits are undertaken by Novo
Nordisk’s global quality organisation. The
level of audit activity was on par with 2013.
Of the audits in 2014, 25 were focused
on responsible sourcing criteria, which is
the same level as in 2013. Only high-risk
suppliers, identified through a robust risk
assessment, are selected for responsible
sourcing audits. In 2014, no critical findings
were identified.
In 2014, Novo Nordisk had two product
recalls from the market compared with six
in 2013. One recall was due to inappropriate
product storage in the external distribution
chain. The other concerned a packaging
issue. Local health authorities were informed
in both instances to ensure that distributors,
pharmacies, doctors and patients received
appropriate information.
In 2014 no Warning Letters were issued
to Novo Nordisk and there were no re-
inspections. A total of 112 inspections
were conducted by regulatory authorities
or certified bodies at Novo Nordisk sites,
investigations for
at clinics conducting
Novo Nordisk or for voluntary ISO 9001
certification compared with 84 inspections
in 2013. Of the 112 inspections, 59 were
either ISO inspections or inspections by the
US Food & Drug Administration (FDA), by
the Japanese PMDA or by members of the
European EMA, of which 32 were passed
and 27 were unresolved at year-end.
LONG-TERM
SOCIAL TARGETS
Novo Nordisk has chosen three long-term
social targets to support long-term financial
performance, balancing responsibility with
profitability, with the aim of creating
sustainable value for shareholders and
other stakeholders. The social
targets
reflect aspirations expressed in the Novo
Nordisk Way: helping people live better
lives, working the Novo Nordisk Way and
nurturing a diverse working environment.
The long-term patient target is expected
to be reached. Development year on year
will vary, reflecting gains and losses of
large tenders and contracts. The diversity
target expired at the end of 2014 and a new
aspiration has been set that expands the
scope to focus on enhancing diversity in all
management teams.
ENVIRONMENTAL
PERFORMANCE
Novo Nordisk measures environmental per-
formance on four dimensions: consumption of
water, consumption of energy, CO2 emissions
from energy consumption and waste.
ENERGY AND WATER
In 2014, 2,556,000 GJ energy and 2,959,000 m3
water were consumed at production sites
around the world. Energy consumption
decreased by 1% despite increased production
as a result of the focus on optimisations in the
production processes.
Water consumption increased by 10% com-
pared with 2013. This development reflects
the increased production volume, as well as
raised internal requirements regarding the
quality of water used in production. 70% of
the water is used at production sites located
in water-scarce regions in Brazil, China and
Denmark. These sites have particular focus on
water stewardship.
CO2 EMISSIONS
Novo Nordisk met its long-term target of
reducing CO2 emissions from energy con-
sumption for production by 10% in absolute
measures from 2004 to 2014. In 2014 these
emissions amounted to 120,000 tons of CO2.
This equals a 4% decrease compared with
2013 and a 45% reduction compared with
2004. The decrease in 2014 is a result of
decreasing energy consumption overall and a
change at a filling plant to a supplier with less
CO2-intensive power production.
Since 2004, Novo Nordisk has reduced CO2
emissions from energy consumption for
production by 97,000 tons, equal to 45%,
while in the same period the company has
grown by 206% measured in sales. Key drivers
have been process optimisations, conversion
to renewable energy supplies and more than
700 energy-saving projects, which have led to
a total reduction in CO2 emissions of 45,000
tons annually.
Novo Nordisk is now expanding its scope
of reporting to include CO2 emissions from
business flights and leased company cars. In
2014, business flights resulted in estimated
emissions of CO2 of 68,000 tons, which is 6%
less than in 2013. This is the result of a focus
on keeping costs low. The estimated CO2
emissions from leased company cars increased
by 1% from 71,000 tons to 72,000 tons. The
increase is due to a growing workforce.
WASTE
In 2014, Novo Nordisk generated 30,720
tons of waste, which is an increase of 51%
compared with 2013. This increase reflects
the fact that the company has chosen to apply
the precautionary principle and dispose of
specific wastewater fractions as hazardous
waste for treatment in incineration plants
rather than discharging them to wastewater
treatment plants. Moreover, non-recyclable
ethanol waste increased due to extraordinary
challenges with regeneration of used ethanol
in diabetes care.
More than half the waste volume is recycled or
recovered; 26% of the total waste is recycled,
and 30% is incinerated with energy recovery.
Only 3% of waste is sent to landfill.
LONG-TERM
ENVIRONMENTAL TARGETS
Novo Nordisk has chosen three long-term
environmental targets to support long-term
financial performance, balancing respon-
sibility with profitability, with the aim of
creating sustainable value for shareholders
and other stakeholders. The efforts to reduce
consumption of energy and water and CO2
emissions contribute to optimising production
efficiency and reducing environmental im-
pacts. The targets are ambitious and reflect
the aspiration of continuous decoupling
of environmental
impacts from business
growth, measured as increase in sales in local
currencies.
The targets for energy and water consumption
have been set as a maximum 50% increase
compared with business growth, measured as
a three-year average. This will be particularly
challenging in years of production expansion
and running-in of new plants or production
lines. The target for consumption of water is
challenging, as stricter internal requirements
for water quality and introduction of new
production lines lead to relatively higher
increases in water consumption. The target for
consumption of energy is expected to be met.
In 2015, Novo Nordisk will evaluate whether
a new reduction target for CO2 emissions
from energy consumption for production will
continue to support business priorities.
ACCOMPLISHMENTS AND RESULTS 2014
13
ENERGY CONSUMPTION
• Realised
Target (not to exceed)*
1,000,000 GJ
4
3
2
1
0
2010 2011 2012 2013 2014
* From 2007 to 2011 the target was set as an accumulated
reduction over four years from a 2007 baseline.
WATER CONSUMPTION
• Realised
Target (not to exceed)*
1,000,000 m3
4
3
2
1
0
2010 2011 2012 2013 2014
* From 2007 to 2011 the target was set as an accumulated
reduction over four years from a 2007 baseline.
CO2 EMISSIONS FROM
ENERGY CONSUMPTION
• Realised
Target (not to exceed by 2014)
1,000 tons
200
150
100
50
0
2010 2011 2012 2013 2014
NOVO NORDISK ANNUAL REPORT 2014
ACCOMPLISHMENTS AND RESULTS 2014
14
14 ACCOMPLISHMENTS AND RESULTS 2014
PERFORMANCE HIGHLIGHTS
PERFORMANCE HIGHLIGHTS
2010
2011
2012
2013
2014
2013–2014
FINANCIAL PERFORMANCE
Net sales
60,776
66,346
78,026
83,572
88,806
Underlying sales growth in local currencies
Currency effect (local currency impact)
13.0%
6.0%
11.4%
(2.2%)
11.6%
6.0%
11.9%
(4.8%)
8.3%
(2.0%)
Net sales growth as reported
19.0%
9.2%
17.6%
7.1%
6.3%
Depreciation, amortisation and impairment losses
Operating profi t
Net fi nancials
Profi t before income taxes
Net profi t for the year
Total assets
Equity
Capital expenditure, net
Free cash fl ow1
FINANCIAL RATIOS
Percentage of sales
Sales outside Denmark
Sales and distribution costs
Research and development costs
Administrative costs
Gross margin1
Net profi t margin1
Effective tax rate1
Equity ratio1
Return on equity1
Cash to earnings1
Payout ratio1
LONG-TERM FINANCIAL TARGETS
Operating margin1
Operating profi t growth
Operating profi t after tax to net operating assets1
Cash to earnings (three-year average)
2,467
18,891
(605)
18,286
14,403
61,402
36,965
3,308
17,013
99.4%
29.9%
15.8%
5.0%
80.8%
23.7%
21.2%
60.2%
39.6%
118.1%
39.6%
31.1%
26.5%
63.6%
115.6%
2,737
22,374
(449)
21,925
17,097
64,698
37,448
3,003
18,112
99.3%
28.6%
14.5%
4.9%
81.0%
25.8%
22.0%
57.9%
46.0%
105.9%
45.3%
33.7%
18.4%
77.9%
112.8%
2,693
29,474
(1,663)
27,811
21,432
65,669
40,632
3,319
18,645
99.4%
27.6%
14.0%
4.2%
82.7%
27.5%
22.9%
61.9%
54.9%
87.0%
45.3%
37.8%
31.7%
99.0%
103.7%
2,799
31,493
1,046
32,539
25,184
70,337
42,569
3,207
22,358
99.4%
28.0%
14.0%
4.2%
83.1%
30.1%
22.6%
60.5%
60.5%
88.8%
47.1%
37.7%
6.9%
97.2%
93.9%
3,435
34,492
(396)
34,096
26,481
77,062
40,294
3,986
27,396
99.5%
26.2%
15.5%
4.0%
83.6%
29.8%
22.3%
52.3%
63.9%
103.5%
48.7%
38.8%
9.5%
101.0%
93.1%
Change
6%
23%
10%
N/A
5%
5%
10%
(5%)
24%
23%
Targets
40%
15%
125%
90%
SALES BY GEOGRAPHIC REGION
Japan & Korea
Region China
International Operations
Europe
North America
DKK billion
100
80
60
40
20
0
DIABETES CARE SALES
New-generation insulin
Oral antidiabetic products (OAD)
Protein-related products
Victoza®
Human insulins
Modern insulins (insulin analogues)
DKK billion
100
80
60
40
20
0
BIOPHARMACEUTICALS SALES
Other products
Norditropin®
NovoSeven®
DKK billion
20
16
12
8
4
0
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
NOVO NORDISK ANNUAL REPORT 2014
NOVO NORDISK ANNUAL REPORT 2014
eng12 - 29.01 - 14-15.indd 14
31/01/15 20.48
14 ACCOMPLISHMENTS AND RESULTS 2014
PERFORMANCE HIGHLIGHTS
FINANCIAL PERFORMANCE
Net sales
60,776
66,346
78,026
83,572
88,806
Underlying sales growth in local currencies
Currency effect (local currency impact)
13.0%
6.0%
11.4%
(2.2%)
11.6%
6.0%
11.9%
(4.8%)
8.3%
(2.0%)
Net sales growth as reported
19.0%
9.2%
17.6%
7.1%
6.3%
Depreciation, amortisation and impairment losses
Operating profi t
Net fi nancials
Profi t before income taxes
Net profi t for the year
Total assets
Equity
Capital expenditure, net
Free cash fl ow1
FINANCIAL RATIOS
Percentage of sales
Sales outside Denmark
Sales and distribution costs
Research and development costs
Administrative costs
Gross margin1
Net profi t margin1
Effective tax rate1
Equity ratio1
Return on equity1
Cash to earnings1
Payout ratio1
LONG-TERM FINANCIAL TARGETS
Operating margin1
Operating profi t growth
Operating profi t after tax to net operating assets1
Cash to earnings (three-year average)
2,467
18,891
(605)
18,286
14,403
61,402
36,965
3,308
17,013
99.4%
29.9%
15.8%
5.0%
80.8%
23.7%
21.2%
60.2%
39.6%
118.1%
39.6%
31.1%
26.5%
63.6%
115.6%
2,737
22,374
(449)
21,925
17,097
64,698
37,448
3,003
18,112
99.3%
28.6%
14.5%
4.9%
81.0%
25.8%
22.0%
57.9%
46.0%
105.9%
45.3%
33.7%
18.4%
77.9%
112.8%
2,693
29,474
(1,663)
27,811
21,432
65,669
40,632
3,319
18,645
99.4%
27.6%
14.0%
4.2%
82.7%
27.5%
22.9%
61.9%
54.9%
87.0%
45.3%
37.8%
31.7%
99.0%
103.7%
2,799
31,493
1,046
32,539
25,184
70,337
42,569
3,207
22,358
99.4%
28.0%
14.0%
4.2%
83.1%
30.1%
22.6%
60.5%
60.5%
88.8%
47.1%
37.7%
6.9%
97.2%
93.9%
3,435
34,492
(396)
34,096
26,481
77,062
40,294
3,986
27,396
99.5%
26.2%
15.5%
4.0%
83.6%
29.8%
22.3%
52.3%
63.9%
103.5%
48.7%
38.8%
9.5%
101.0%
93.1%
Change
6%
23%
10%
N/A
5%
5%
10%
(5%)
24%
23%
Targets
40%
15%
125%
90%
2010
2011
2012
2013
2014
2013–2014
2010
2011
2012
2013
2014
2013–2014
ACCOMPLISHMENTS AND RESULTS 2014
ACCOMPLISHMENTS AND RESULTS 2014
15
15
SOCIAL PERFORMANCE
Least developed countries where Novo Nordisk sells
insulin according to the differential pricing policy
Donations (DKK million)2
New patent families (fi rst fi lings)
Employees (total)
Employee turnover
Relevant employees trained in business ethics
Product recalls
Warning Letters and re-inspections
Company reputation with external
key stakeholders (scale 1–7)
LONG-TERM SOCIAL TARGETS
Patients reached with Novo Nordisk diabetes
care products (estimate in million)
Working the Novo Nordisk Way (scale 1– 5)
Diverse senior management teams
ENVIRONMENTAL PERFORMANCE
Energy consumption (1,000 GJ)
Water consumption (1,000 m3)
CO2 emissions from energy consumption (1,000 tons)
Organic residues (tons)
Waste (tons)
LONG-TERM ENVIRONMENTAL TARGETS
Energy consumption (vs prior year)
Water consumption (vs prior year)
CO2 emissions from energy consumption
(vs 2004 baseline)
SHARE PERFORMANCE
Basic earnings per share/ADR in DKK1, 5
Diluted earnings per share/ADR in DKK1, 5
Total number of shares (million), 31 December
Treasury shares (million), 31 December
Share capital (DKK million)
Net asset value per share in DKK5
Dividend per share in DKK5
Total dividend (DKK million)
Closing share price (DKK)5
33
84
62
36
81
80
35
84
65
35
83
77
32
84
93
30,483
9.1%
32,632
9.8%
34,731
9.1%
38,436
8.1%
41,450
9.0%
98%
5
0
N/A
N/A
N/A
54%
99%
5
0
5.6
20.9
4.3
62%
99%
6
1
5.7
22.8
4.3
66%
97%
6
1
5.8
24.3
4.4
70%
98%
2
0
5.8
24.4
4.3
76%
2,234
2,047
95
65,332
18,280
2,187
2,136
94
71,685
18,695
2,433
2,475
122
99,209
19,213
2,572
2,685
125
110,228
20,387
2,556
2,959
120
110,095
30,720
(1%)
(5%)
(56%)
(2%)
4%
(57%)
11%
16%
(44%)
6%
8%
(42%)
(1%)
10%
(45%)
4.96
4.92
3,000
141
600
12.32
2.00
5,700
125.80
6.05
6.00
2,900
122
580
12.91
2.80
7,742
132.00
7.82
7.77
2,800
87
560
14.51
3.60
9,715
183.30
9.40
9.35
2,750
103
550
15.48
4.50
11,866
198.80
10.10
10.07
2,650
57
530
15.21
5.00
12,9056
260.30
Change
(9%)
1%
21%
8%
(67%)
Targets
40 by 2020
4.0
100% by 20143
Change
(1%)
10%
(4%)
0%
51%
Targets
Not to exceed 5%4
Not to exceed 5%4
10% reduction
by 2014
Change
7%
8%
(4%)
(45%)
(4%)
(2%)
11%
9%
31%
1. For defi nitions, please refer to p 94. 2. Donations to the World Diabetes Foundation and the Novo Nordisk Haemophilia Foundation, which are working to increase healthcare capacity
in developing countries. 3. By the end of 2014, all senior management teams had to comply with the target to be diverse in terms of both gender and nationality or explain why this has
not yet been achievable. 4. The 5% equals 50% of the business growth measured as the increase in sales in local currencies as a three-year average. For detailed target defi nition, please
refer to p 13. 5. Share performance-related key fi gures have been calculated refl ecting a trading unit of DKK 0.20. 6. Proposed dividends for the year (not yet declared).
EMPLOYEES (TOTAL)
Japan & Korea
Region China
International Operations
Europe
North America
ORGANIC RESIDUES AND WASTE
• Organic residues
• Waste
NET CASH DISTRIBUTION
TO SHAREHOLDERS
Dividends
Share repurchases
Thousand
1,000 tons
DKK billion
50
40
30
20
10
0
150
120
90
60
30
0
30
25
20
15
10
5
0
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
2010 2011 2012 2013 2014
NOVO NORDISK ANNUAL REPORT 2014
NOVO NORDISK ANNUAL REPORT 2014
NOVO NORDISK ANNUAL REPORT 2014
eng12 - 29.01 - 14-15.indd 14
31/01/15 20.48
eng12 - 29.01 - 14-15.indd 15
31/01/15 20.48
16
OUR BUSINESS
BUSINESS STRATEGY
STAY FOCUSED,
THINK LONG-TERM
Over the past 15 years, Novo Nordisk has delivered results above those of most other
pharmaceutical companies. A key reason is that – despite many temptations to deviate
– it has stuck to a highly focused long-term strategy.
Novo Nordisk is a strong believer in maintaining focus on what it
does best and is therefore not easily tempted to stray from its core
business. As a result, its main business area today is the same as
when it was founded: diabetes. Its main product then was insulin;
the main product now is – insulin.
This is not to say that Novo Nordisk is not innovating. In fact, it
typically spends 13–15% of its revenue on researching and developing
new products within its core areas, which, in addition to diabetes,
are haemophilia, growth disorders and a venture into treatment of
obesity.
As a result, Novo Nordisk has become a leading player in the first
three mentioned areas. In all areas the company has a pipeline of
drug candidates that hold the promise of future growth.
Until recently, Novo Nordisk had a fifth strategic focus area, which
was to establish a presence within inflammatory disorders. However,
in September 2014 the company decided to discontinue all its
research and development activities within this area and instead
increase its efforts within diabetes prevention and treatment, obesity
and diabetes complications.
The decision followed a review of Novo Nordisk’s strategic position
within inflammatory disorders after the company’s most advanced
compound, anti-IL-20 for the treatment of rheumatoid arthritis,
failed to show efficacy in a phase 2 trial. Without this product, Novo
Nordisk’s earliest possible entrance into the market for anti-
inflammatory therapeutics would be delayed to the late 2020s.
The sharp focus on a few selected therapeutic areas is a key element
of Novo Nordisk’s strategy. Another is the strong focus on the
constant development of five core capabilities that Novo Nordisk has
built up over the years, and continues to leverage in all four strategic
focus areas (see chart on opposite page). The third element in Novo
Nordisk’s strategic framework is its values-based management
system, the Novo Nordisk Way (read more on p 4), in which the Triple
Bottom Line business principle is so central that it was written into
the company’s Articles of Association in 2004.
In the following, we take a closer look at Novo Nordisk’s ambitions
within its strategic focus areas.
A CHALLENGING BUSINESS ENVIRONMENT
The current business environment is characterised by slow
economic growth and austerity measures in some parts of the
world, and rapid economic growth and urbanisation with
alarming implications for public health in others.
In high-income countries with ageing populations, governments
and private payers are reluctant to pay a premium for new,
innovative therapies. Low- and middle-income countries fight
a double burden of poverty and poor health, and access to
care is inadequate and unevenly distributed. Many countries
with largely publicly funded healthcare systems are introducing
market restrictions for new medications, and, in the US,
pharmaceutical companies, including Novo Nordisk, are facing
increasingly tough pricing negotiations with managed care
organisations and pharmacy benefit managers.
Novo Nordisk has decided to continue making large invest-
ments in research and development, strategic products and
growth markets. The decision is based on a firm belief that
significant unmet medical needs remain to be addressed, not
least within diabetes, a disease that is growing at an alarming
rate all over the world. Read more on pp 28–29.
To meet increasing demands for data about its products’
health-economic benefits, capabilities are being further
strengthened within the company’s market access functions.
Moreover, Novo Nordisk is expanding its field force in countries
where there are significant opportunities for market expansion.
It is also exploring new ways of reaching people with unmet
healthcare needs. For example, pilot programmes in low-
income countries such as Kenya and Bangladesh have helped
improve access to diabetes care products for people living in
rural areas.
OUR BUSINESS
17
Expand leadership in DIABETES
Establish presence in OBESITY
Pursue leadership in HAEMOPHILIA
Expand leadership in GROWTH DISORDERS
The Novo Nordisk Way
THE FOUR STRATEGIC
FOCUS AREAS
1. EXPAND LEADERSHIP
IN DIABETES
As many as 387 million people worldwide are living with diabetes,
and it is predicted that by 2035 more than 10% of the world’s adult
population – 592 million people worldwide – will have diabetes.1
Read more about the diabetes pandemic on pp 28–29.
The global market for diabetes care products amounts to 283 billion
Danish kroner, of which Novo Nordisk products account for about
27%. The market has grown by around 12% annually in the last
decade and is expected to experience continued solid growth driven
by an increased prevalence of diabetes and the need for better
treatments. Of this global market, insulin accounts for 55%, oral
diabetes products for 38% and GLP-1 products for 7%.
Diabetes care is Novo Nordisk’s largest and fastest-growing business
area. It accounts for 79% of the company’s total sales, most of which
comes from the insulin and GLP-1 product portfolios. Novo Nordisk
is well positioned to address the unmet medical needs in diabetes.
THE INSULIN PORTFOLIO
The insulin portfolio includes:
• Tresiba®, a new-generation once-daily basal insulin analogue with
a duration of action beyond 42 hours and a flat and stable action
profile that compared with insulin glargine reduces the rate of
hypoglycaemia and increases dosing flexibility when needed. Read
more about Tresiba® on pp 30–31.
• Ryzodeg®, a soluble coformulation of the basal analogue insulin
degludec (Tresiba®) and insulin aspart (NovoRapid®, or NovoLog®
in the US, a rapid-acting mealtime insulin), which reduces the risk
of hypoglycaemia compared with premix insulin.
• NovoRapid® (marketed as NovoLog® in the US), the world’s most
widely used rapid-acting insulin for use at mealtimes.
• Levemir® (insulin detemir), a soluble, long-acting modern insulin
for once-daily use. It provides glucose control with a favourable
weight profile.
• NovoMix® 70/50/30 (NovoLog® Mix 70/30 in the US), dual-release
modern insulins that cover both mealtime and basal requirements.
These insulins can be used either to initiate or intensify insulin
therapy.
The primary goal of Novo Nordisk’s diabetes research is to discover
new therapies that lower blood glucose while reducing the risk of
low blood sugar. A recent example of this is Xultophy®, a fixed
combination of insulin degludec and liraglutide (the latter being the
active ingredient in Victoza®). Xultophy® was approved in the EU in
September 2014 and launched in Switzerland as the first country in
January 2015. Read more about Xultophy® on p 31.
Novo Nordisk is also developing a new faster-acting formulation of
insulin aspart to be taken at mealtimes, and recently initiated an
extensive phase 3a programme. In addition to new and improved
injectable insulins, Novo Nordisk is developing formulations of insulin
that, if successful, can be taken as tablets.
GLP-1 (GLUCAGON-LIKE PEPTIDE-1)
With the launch of Victoza® in 2009, Novo Nordisk entered the GLP-
1 therapy segment. Victoza® is a human GLP-1 analogue with 97%
similarity to the natural gut hormone. Victoza® is taken once daily
and, like natural GLP-1, works by stimulating the beta cells in the
pancreas to release insulin only when blood sugar levels are high.
GLP-1 therapy is a significant advance in the treatment of type 2
diabetes because it lowers glucose with a limited risk of triggering
low blood sugar. Victoza® is approved for adults with type 2 diabetes
who are unable to achieve blood glucose goals with lifestyle changes
and other initial treatments for type 2 diabetes. Within two years,
Victoza® became the leading GLP-1 treatment globally and steadily
expanded the market for GLP-1 treatment. The market is currently
valued at around 20 billion kroner, of which Victoza® accounts for
72%. Available in around 80 markets, it is estimated that Victoza® is
now used by approximately 900,000 people worldwide.
Based on the expertise Novo Nordisk has gained through the
development of Victoza®, the company is building a GLP-1 portfolio
with the intention of providing an even broader range of treatment
options. For example, Victoza® is being investigated in clinical trials
for use as adjunct to insulin in people with type 1 diabetes. Other key
development projects include a once-weekly GLP-1 analogue, sema-
glutide, which is in phase 3a development. Novo Nordisk is also
developing formulations of GLP-1 that, if successful, can be taken as
tablets.
CONTINUED
Engineering, formulating, developing and delivering protein-based treatmentsDeep disease under-standing Efficient large-scale production of proteins Planning and executing global launches of new productsBuilding and maintaining a leading position in emerging marketsNOVO NORDISK’S STRATEGYSTRATEGIC FOCUS AREASCORE CAPABILITIES 18
OUR BUSINESS
2. ESTABLISH A PRESENCE
IN OBESITY
According to the World Health Organization (WHO), obesity has
reached pandemic proportions, with up to 1.9 billion adults (18 years
and older) being overweight. Of these, approximately 260 million
men and 340 million women are clinically obese (ie BMI ≥30).2
Obesity is known to be a major risk factor in developing serious
diseases such as type 2 diabetes and cardiovascular diseases.
Despite the growing prevalence of obesity globally, there are only a
few pharmaceutical treatment options currently available, and
reimbursement for these medications is limited. The pharmaceutical
market for obesity products currently amounts to 4–5 billion kroner.
Novo Nordisk expects to launch its first product in this segment,
Saxenda® (liraglutide 3 mg), in key markets during 2015. In the US,
the product was approved by the FDA in December 2014 for chronic
weight management of people with obesity with a BMI of 30 or
greater, or 27 or greater in the presence of at least one weight-
related comorbidity. In January 2015, Saxenda® received a positive
opinion from the European Medicines Agency’s expert committee
(CHMP). Read more about obesity on pp 36–37.
3. PURSUE LEADERSHIP
IN HAEMOPHILIA
Haemophilia is an inherited or acquired bleeding disorder that
prevents blood from clotting. An estimated 420,000 people live with
haemophilia.3 Only about 180,000 of these are diagnosed, 120,000
of whom have moderate or severe haemophilia A or B, and therefore
need treatment.4 The global haemophilia drug market is estimated at
56 billion kroner and has grown by more than 5% annually in recent
years. Novo Nordisk entered the haemophilia market in 1996 when
it introduced NovoSeven® for the treatment of haemophilia patients
who form antibodies against traditional treatments.
The launch of NovoEight® in 2014 was a significant milestone in the
company’s ambition of moving from this niche into the main
haemophilia A market. With two long-acting clotting factors in
phase 3 development, the ambition is to expand into haemophilia A
and B and achieve a leadership position in these segments. Read
more about haemophilia on p 38.
4. EXPAND LEADERSHIP
IN GROWTH DISORDERS
Novo Nordisk has been active in the treatment of growth hormone
deficiency for almost four decades. Growth hormone therapy is most
frequently used in developed countries. Globally, it is estimated that
more than 2 million people meet the criteria for growth hormone
therapy.4 The market for growth disorder treatments is estimated at
16 billion kroner and has grown by around 2% annually since 2010.
Novo Nordisk’s growth hormone Norditropin® (somatropin) is the
market leader with a global market share of 34% measured by value.
Novo Nordisk’s strategy in growth hormone therapy is to expand its
leadership by providing innovative and convenient products and
devices. Novo Nordisk’s newest injection device for growth hormone
is Norditropin® FlexPro®, which has an easy-touch dosing mechanism.
Novo Nordisk is also developing a once-weekly growth hormone
product, which has recently entered phase 3 trials. Read more about
growth disorders on p 39.
THE CORE CAPABILITIES
ENGINEERING, FORMULATING, DEVELOPING
AND DELIVERING PROTEIN-BASED TREATMENTS
Novo Nordisk has dedicated research and development facilities in
Denmark, China, the US and India. More than 7,000 employees are
involved in research and development activities throughout the
company, many of them working in partnerships with external
biotech and academic researchers. Novo Nordisk’s researchers have
years of experience with formulation technology, protein engineering,
expression and delivery, enabling the company to continuously
improve the properties of therapeutic proteins such as insulin and
GLP-1. Furthermore, since 1985, when Novo Nordisk launched the
world’s first insulin injection device – NovoPen® – the company has
developed world-class expertise in designing and producing simple
and convenient devices for administration of protein therapeutics.
Today, Novo Nordisk offers the world’s most widely used durable
and disposable devices for insulin and GLP-1, NovoPen® 4 and
FlexPen®, and is currently introducing its latest innovations, NovoPen® 5
and FlexTouch®, in many markets. The development of injection
devices is based on extensive studies of how patients experience
their daily injections and what they want from their device. It is an
area where Novo Nordisk can make a difference by developing
devices that are simple and user-friendly.
DEEP DISEASE UNDERSTANDING
Serving people with diabetes for decades has given Novo Nordisk a
deep understanding of the medical needs associated with this
condition and of what it takes to live well with it. Together with
strong relationships and numerous collaborations with external
researchers and clinicians, this provides a solid foundation for the
company’s research, development and marketing activities.
in an
EFFICIENT LARGE-SCALE PRODUCTION OF PROTEINS
A high-quality, cost-effective global manufacturing infrastructure is
a prerequisite for competing successfully
increasingly
competitive pharmaceutical market. It also enables Novo Nordisk to
make treatments available at very low prices in developing countries.
Novo Nordisk has a global production set-up with facilities
strategically located in five countries across four continents:
• The production of active pharmaceutical ingredients (API) is a
highly specialised process that takes place in Denmark. In 2014,
Novo Nordisk acquired an existing biopharmaceutical API facility in
New Hampshire, US, and expects to initiate production of
haemophilia products for clinical purposes at the site in 2015.
• The production of diabetes finished products takes place in five
countries: Denmark, France, the US, Brazil and China. Each of the
strategic production sites are approved for and able to export to
other markets.
• In addition, Novo Nordisk has a number of smaller manufacturing
plants that support local demand in selected countries.
• All production facilities operate under one global quality
management system with centrally deployed standard operating
procedures for all involved employees. This ensures a uniform and
high quality standard for all products delivered to patients across
the world.
All manufacturing sites have ambitious targets and performance
measures to minimise their impact on the environment. These
measures include energy and water consumption, CO2 emissions and
waste generated during production processes.
PLANNING AND EXECUTING
GLOBAL LAUNCHES OF NEW PRODUCTS
Due to the high and increasing costs associated with developing,
obtaining approval for and marketing a new medicine, most
pharmaceuticals must be launched globally to optimise the return on
investment. And, importantly, such launches must happen over a
relatively short time so there is a reasonable period left before the
product’s patents expire. Through the launches of Victoza® in mul-
tiple markets over the past years, Novo Nordisk has refined this
capability, which is now being utilised in connection with the launch
of Tresiba® and other products.
BUILDING AND MAINTAINING
A LEADING POSITION IN EMERGING MARKETS
Many years of experience have helped Novo Nordisk understand the
needs of new markets and form partnerships with stakeholders to
address systemic challenges such as lack of awareness, education,
distribution and clinics. The company’s strategy has always been to
establish a local organisation early – as soon as there are signs of a
market developing – and to grow organically as the market develops.
This has enabled Novo Nordisk to build a highly skilled sales force,
long-term relationships and a sustainable market presence, which
are key reasons behind Novo Nordisk’s success in rapidly developing
markets. Read more about Novo Nordisk’s five regions on pp 20–25.
THE NOVO NORDISK WAY
Novo Nordisk has a values-based management system formalised in
the Novo Nordisk Way (see p 4). A key element of the Novo Nordisk
Way is the Triple Bottom Line business principle, which was written
into the company’s Articles of Association at the Annual General
Meeting in 2004. It states that Novo Nordisk ‘strives to conduct its
activities in a financially, environmentally and socially responsible
way’.
The Triple Bottom Line business principle frames Novo Nordisk’s
long-term strategy to be a sustainable business. It obligates everyone
in the company to always consider how decisions and actions may
affect people, communities and the environment. The aim is to
ensure long-term profitability by reducing risks caused by business
activities, and to enhance the positive contributions to society from
the company’s global operations.
Working with a Triple Bottom Line requires systematic and respectful
engagements with stakeholders to stay attuned to their interests and
expectations. This, in turn, makes the company more adaptive to
changes in its business environment and offers opportunities for
competitive advantage. Novo Nordisk proactively engages with
stakeholders to address global and systemic challenges that could
affect the company’s success in the long term. One example is an
active engagement in the framing of a new set of global sustainable
development goals by the United Nations.
OUR BUSINESS
19
RESPONSIBLE BUSINESS PRACTICES
Novo Nordisk has responsible management practices in place
throughout the global organisation such as anti-corruption measures
and standards for business ethics. A compliance hotline offers an
opportunity for employees and external stakeholders to confidentially
report suspected misconduct such as serious non-compliance with
the Novo Nordisk Way, financial fraud, conflict of interest, corruption
or other serious misconduct.
In 2014, particular focus was given to continued due diligence to
ensure that respect of human rights is integrated into processes
throughout the value chain. Moreover, in the light of continued
growth, the emphasis is placed on equipping managers with
guidance on and tools for how to make decisions that consider
impacts for people, communities and the environment, and seek to
balance the interests of stakeholders with the company’s commercial
objectives.
Financial, social and environmental targets for performance help
steer the business towards sustainable growth. Read more on p 9
and pp 12–13.
CONTRIBUTIONS TO SOCIETY
Changing Diabetes® is Novo Nordisk’s commitment to prevent, treat
and ultimately cure diabetes. It is both an obligation and a business
opportunity for Novo Nordisk to engage in the fight against diabetes.
The ambition is to break the ’Rule of Halves’ – to help ensure that
people can live their lives to the full with diabetes, that people have
access to quality care, that they are diagnosed, and that people at
risk become aware of diabetes and what can be done to prevent or
delay its onset. Read more on pp 28–29.
It is estimated that close to half of all people with diabetes are
undiagnosed, and millions are left untreated and in poor control.5
Novo Nordisk’s strategy for Global Access to Diabetes Care addresses
the disparities in diabetes care. It aims to provide better care for
those who need it and currently do not have access to it. Its main
focus is on the two-thirds of the total diabetes population who live
in low- and middle-income countries1 – countries that are ill-equipped
to tackle the daunting human, social and economic impacts of the
epidemic rise in diabetes prevalence. The long-term goal is to reach
40 million people in 2020 with diabetes care products.
The company is engaged in the prevention of diabetes through the
promotion of healthy living, and is working to improve awareness,
diagnosis and treatment of diabetes. An example is the World
Diabetes Foundation, which Novo Nordisk founded in 2002 with the
objective to support prevention and treatment of diabetes in
developing countries. Read more on worlddiabetesfoundation.org.
Another example is from 2014, when Novo Nordisk launched Cities
Changing Diabetes, a global initiative to fight diabetes in cities. Read
more on pp 34–35.
THE STRATEGIC PLANNING PROCESS
Novo Nordisk’s Board and Management revisit the corporate
strategy each year. The discussion is informed by 10-year
forecasts and scenarios prepared on the basis of trend analyses,
market data and information about current and emerging
changes. The updated strategic plan, which is approved by the
Board each year in June, sets the long-term priorities and is
translated into annual business and organisational plans,
Balanced Scorecards and performance targets to ensure
efficient execution.
NOVO NORDISK
AROUND
THE WORLD
In the United States, the average spending on healthcare is close to 9,000 US
dollars per citizen. In some developing countries, it is less than 100 dollars.6 So of
course there are huge differences in what countries’ healthcare systems offer their
citizens and how they work. Having said that, the trends in how healthcare
systems are developing are very similar all over the world.
Read more on the following pages.
(+11%)
Sales in North America
DKK billion
50
40
30
20
10
0
2010 2011 2012 2013 2014
KEY DIABETES FACTS
North
America
Europe
International
Operations
Region
China**
Japan
& Korea
Number of people with diabetes (million)*
Diagnosis rate*
Diabetes prevalence*
* The 2014 data are based on IDF Atlas, 6th Edition 2014 revision.
** Data from IMS Health, IDF and The World Bank include China only.
29
72%
11%
34
66%
8%
215
53%
8%
99
47%
9%
10
46%
8%
21
50
Sales in Europe
40
DKK billion
30
20
10
0
(+0%)
2010 2011 2012 2013 2014
50
40
Sales in International
Operations
30
DKK billion
20
10
0
(+4%)
2010 2011 2012 2013 2014
50
40
30
Sales in Region China
20
DKK billion
(+13%)
2010 2011 2012 2013 2014
10
0
50
40
30
Sales in Japan & Korea
20
DKK billion
10
0
(–8%)
2010 2011 2012 2013 2014
Cameron Hubbard lives in the US
and was diagnosed with type 1
diabetes when he was six years old.
ORGANISATION
Novo Nordisk is a firm believer in
having wholly owned affiliates and
expanding them organically as the
market develops. While other pharma-
ceutical companies may build a
presence through the acquisition of
local companies, joint ventures or
rented sales forces, Novo Nordisk
prefers to hire its own people and
train them to become the best. This is
also seen as the best way to convey
and preserve a strong company
culture.
CREATING VALUE
FOR CUSTOMERS
Novo Nordisk markets its products
the same way globally by sharing
clinical knowledge about the products
with doctors, so that they can make
an informed choice about whether
these products are right for their
patients. At the same time, payers
and administrators – typically public
health systems and private health
plans – are presented with evidence
about the cost-efficiency of the
products, in order to make informed
decisions
and
reimbursement. Moreover, Novo
supports
Nordisk organises and
education of healthcare professionals
in managing diabetes, and engages in
activities aimed at improving aware-
ness, prevention and diagnosis of the
disease.
pricing
about
Kåre Schultz is Novo Nordisk’s president
and chief operating officer. In this
capacity he is in charge of the company’s
operations in 180 countries. He sees the
same trends in almost all the countries
he visits in the course of a year.
“It’s becoming more difficult to get market
access for new products, the interactions
between the industry and healthcare pro-
fessionals are becoming heavily regulated, and
the battle with competitors for ‘share of voice’
and market share just gets tougher and
tougher. That’s the short version,” says Kåre
Schultz.
All over the world, payers – governments and
insurance companies representing employers
– try to limit the growth in healthcare costs
that follow from ageing populations and
demands for higher quality of care. Drug prices
and reimbursement are often among the first
areas to be targeted by such efforts. In the US
and other countries where large parts of the
market are based on free pricing, this leads to
tougher rebate negotiations with the large
purchasing organisations. In Europe, where
healthcare is largely government-funded, a
wide array of measures are taken to limit prices
and restrict reimbursement. Obtaining market
access in Europe on conditions that offer a
reward for the investments made in research
and development has become a complicated
affair.
However, Kåre Schultz does not agree with the
widespread notion that the business model of
the pharmaceutical industry is undergoing
fundamental changes as a result. “Our business
model and reason for being is, and will
continue to be, developing new and better
medical treatments and making them available
to the patients who need them. What has
changed is that the market access hurdle has
become higher and that there are stricter rules
and regulations governing how the industry
may interact with healthcare professionals. In
response we are strengthening market access
capabilities throughout the company, so that
we are better able to demonstrate the cost-
efficiency of our new medicines, and we have
implemented comprehensive programmes
aimed at ensuring we are in compliance with
regulations. But these are tactical measures,
not a fundamental change of our business
model.”
Despite the pressures on the
industry,
Kåre Schultz remains convinced that the
pharmaceutical companies that prove capable
of developing new and better products will be
in business for many years to come. “Ultimately
this industry, like other industries, is driven by
supply and demand. And the demand for
better treatment options will only increase as
more people in developing countries get
access to healthcare as economies grow.”
The following pages present an overview
of Novo Nordisk’s business in the five
regions into which it has organised its global
operations.
COMPETITORS
In its all-important insulin market,
Novo Nordisk’s main competitors are
the same all over the world: Eli Lilly
and Sanofi. In addition, there are local
competitors in some countries such as
China and India. However, they are
not innovation-based and primarily
offer human insulin. So far, these
companies have not been able to gain
significant market shares.
In the biopharmaceuticals business,
Novo Nordisk faces competition from
a broader group of pharmaceutical
companies, in some markets including
producers of biosimilar medicines
(products that are similar but not
identical to an original medicine). So
far, biosimilar competition has not
had a dramatic impact on the busi-
ness, which has continued to grow at
a global level.
Sona Rastogi works in
Global Marketing as
global product manager.
NORTH AMERICA
The North American region consists of the
US and Canada and is Novo Nordisk’s largest
in terms of sales. Novo Nordisk has expe-
rienced tremendous growth in the US in
recent years. Since 2010, sales in North
America have grown from 23.5 billion
Danish kroner (4.3 billion US dollars) to 43
billion kroner (7.8 billion US dollars) in 2014.
Sales in the US account for more than 90%
of the region’s total sales. In the same
period, Novo Nordisk’s organisation in the
US, including research, development and
production, has grown from close to 4,500
employees to more than 6,500.
The main drivers of sales have been – and
continue to be – the portfolio of modern
insulin and Victoza®. In 2014, sales of
diabetes care products increased by 11% in
local currencies in North America. This
reflects continued market penetration by the
modern insulins, especially Levemir®, and 20%
growth in sales of Victoza®, measured in
local currencies. Sales of biopharmaceut-
icals – NovoSeven® and Norditropin® being
the main products – grew by 9% in 2014,
measured in local currencies. Norditropin® in
particular did well, due to both the FlexPro®
injection device and the very comprehensive
support programmes that Novo Nordisk
offers both healthcare professionals and
patients.
A COMPLEX HEALTHCARE SYSTEM
The US healthcare system is complex as it
involves multiple payers and intermediaries
with complex interactions. Roughly half of all
Americans are insured by their employers
and one-third through public programmes
such as Medicare and Medicaid, while
around 15% are uninsured.7 The number of
people insured through public programmes
is expected to grow, while the number of
uninsured is expected to drop in the coming
years, among other reasons due to the
Affordable Care Act, which is currently being
implemented. To manage the purchase and
delivery of healthcare, employers and the
government contract with intermediaries
such as health plans and pharmacy benefit
managers (PBMs). These are often referred
to as ‘payers’, but are in most cases managers
of healthcare costs on behalf of payers.
Health plans contract with providers such as
physician, hospital and pharmacy networks
to provide the required service. They provide
different levels of coverage based on the
payers’ willingness to pay for selected
services for their employees. A PBM is an
intermediary that contracts with payers and
health plans to manage the pharmacy
benefit for a specific population. The health
plans use various methods for managing the
use and cost of pharmaceuticals. Among
the most widely used interventions are
generic substitution, quantity limits, prior
authorisation (which means that a medi-
cation will only be covered under certain
conditions and subject to individual approval
by the health plan) and tightly controlled
Preferred Drug Lists.
The managed care segment has seen several
mergers and acquisitions in recent years,
which have led to fewer, more powerful
players. As a result rebate negotiations have
become tougher for the pharmaceutical
industry. Contracts are generally of shorter
duration than previously and often have
price protection mechanisms built in, which
means that list price increases automatically
trigger an increased rebate level.
Another trend of note is the increasing
number of people obtaining coverage
through Medicare Part D. The rebates that
pharmaceutical companies must offer for
these contracts are in general significantly
higher than for private market contracts.
Together these developments mean that
Novo Nordisk expects
the US price
environment to become more challenging.
GROWING MARKET
FOR DIABETES PRODUCTS
Novo Nordisk holds around 29% of the total
US market for diabetes care medications and
37% of the insulin market, measured in
value. The insulin market is expected to
continue growing in volume in the coming
years due to the increasing number of people
with diabetes, many of whom will require
insulin treatment. Moreover, in the US, only
around 46% of insulin volume is delivered in
a pen system, while the figure is more than
95% in Europe. This means there is still
significant potential to upgrade treatment
in the US. In 2014, Novo Nordisk launched
the basal insulin Levemir® in its newest
pen system, FlexTouch®, which has helped
Levemir® grow its share of total scripts for
basal insulins to an all-time high of 23%.
The US GLP-1 market growth decelerated in
2014, mainly due to competition from a new
class of diabetes drugs, SGLT-2s. The GLP-1
segment’s value share of the total diabetes
care market was stable at around 8% in
2014. Victoza® is market leader in the GLP-1
segment with a 69% value market share
compared to 67% in 2013.
It is Novo Nordisk’s ambition to consolidate
its leadership position in the diabetes market
by driving volume growth of Levemir®,
NovoLog® (NovoRapid®) and Victoza®.
PREPARING FOR A NEW MARKET
Novo Nordisk’s US affiliate is preparing to
enter a new market for the medical treatment
of obesity with Saxenda® (liraglutide 3 mg),
which was filed for regulatory review with
the US Food and Drug Administration (FDA)
in December 2013 and was approved by the
FDA in December 2014. Read more about
obesity on pp 36–37.
OUR BUSINESS
23
DEVELOPMENTS TO LOOK OUT FOR
Tresiba® (insulin degludec) is key to Novo
Nordisk’s growth in the coming years. In
February 2013, the FDA requested more
data on the cardiovascular safety profile of
Tresiba® before it could complete its review
of Novo Nordisk’s application. In response,
Novo Nordisk is conducting a cardiovascular
outcomes trial, DEVOTE. During the first
half of 2015, Novo Nordisk will decide
whether to submit the result of an interim
analysis to the FDA.
Other factors that may have an impact on
the insulin market pertain to Sanofi’s basal
insulin product, insulin glargine, which will
lose US patent protection in 2015. Sanofi is
developing a new formulation of insulin
glargine, and Eli Lilly has submitted a
biosimilar version of insulin glargine for
regulatory approval. However, Sanofi has
sued Lilly for alleged patent infringement.
How, and to what extent, these events will
change the market dynamics is not possible
to predict at present. In the GLP-1 segment,
two new products entered the market in
2014. This will increase competition in the
GLP-1 segment, but may also help revitalise
growth of the segment.
EUROPE
Europe is Novo Nordisk’s second-largest
region in terms of sales. Sales growth has
been modest in recent years – in the low
single-digit range. To a large extent, this is a
result of the depressed economy in many
European countries in the wake of the
financial crisis. This has led governments to
implement cost-cutting measures, both
through price cuts on medicines and by
limiting access to new medicines. Tresiba®
has been affected by such measures in
countries such as the UK and Denmark.
In 2014, Novo Nordisk’s sales of diabetes
care products in Europe increased by 1% in
local currencies. Sales of insulin and protein-
related products in Europe were unchanged.
The development reflects a contracting
premix insulin segment and declining human
insulin sales, which are only partly offset by
the penetration of Tresiba® and the continued
progress of NovoRapid®. The use of devices
for insulin injections is very high, with 96%
of Novo Nordisk’s insulin volume being used
in devices, primarily NovoPen® and FlexPen®.
Sales of Victoza® increased by 7% in local
currencies. Sales growth was primarily driven
by Germany and Spain. The GLP-1 class’s
share of the total diabetes care market in
value increased to 8.0% compared with
7.6% in 2013. Victoza® is the GLP-1 market
leader with a value market share of 78%.
There are no signs of a return to significantly
higher sales growth rates in the coming
years as government cost-cutting measures
are expected to continue. Moreover, the
diabetes market is well developed, diagnosis
CONTINUED
NOVO NORDISK ANNUAL REPORT 2014
24
OUR BUSINESS
rates are high, birth rates low and Novo
Nordisk already has an insulin market share
of 48% measured by volume. This means
there are limits as to how much Novo Nordisk
can grow in Europe.
increased by 14% in local currencies, driven
by all three modern insulins. Moreover,
Tresiba®, which has now been launched in 10
countries in the region, has been well
received.
are being rolled out to smaller cities and rural
areas.
In 2014, Novo Nordisk’s sales of diabetes
care products in Region China increased by
13% in local currencies. The sales growth
was driven by all three modern insulins,
while sales of human insulins only grew
modestly. Currently, 98% of Novo Nordisk’s
insulin volume in China is used in devices,
primarily the durable device NovoPen®. In
China the GLP-1 class is generally not
reimbursed and represents 0.7% of the total
diabetes care market. Victoza® holds a GLP-1
value market share of 58%.
The Chinese government is implementing
widespread reforms of the healthcare system
with a view to extending both its reach and
quality and, as in many other countries,
several measures are being taken to limit
spending on pharmaceuticals. One way to
do this is by creating lists of essential
pharmaceuticals that are purchased from
companies in large quantities at low prices.
Pharmaceuticals on this list are primarily
older products that have gone off patent,
such as human insulin. However, there is also
a growing market for newer and higher-
priced pharmaceuticals in China as both the
health awareness and the purchasing power
of many Chinese families increase. Modern
reimbursed widely. Novo
insulins are
Nordisk’s growth in the coming years is
expected to primarily come from the port-
folio of modern
insulins and Victoza®.
Growth is partly driven by the continuing
expansion of the company’s reach into an
increasing number of county hospitals, and
from Victoza®.
Currently, 61% of Novo Nordisk’s insulin
volume in the major private markets is used
in devices. Novo Nordisk’s insulin volume
market share is around 55%. Victoza® is
becoming an increasingly important product
in International Operations. Sales grew by
16% measured in local currencies in 2014
and the product was marketed in 38 coun-
tries by the end of 2014.
The GLP-1 class’s share of the diabetes care
market in value has contracted to 2.3% from
2.6% in 2013. This reflects a declining share
for the GLP-1 class in Brazil following strong
initial penetration. Victoza® is the GLP-1
market leader across International Operations
with a value market share of 76%.
Growth in International Operations will
continue to be driven by the increasing
number of people with diabetes in the
region and the fact that more of them will
have access
treatment as
to medical
economies develop. Novo Nordisk’s key
priorities are to increase the use of modern
insulins, launch Tresiba® in more countries,
continue the roll-out of Victoza® and ensure
that more people are treated with insulin
sooner than is the case today. To support
growth, Novo Nordisk is expanding its
organisation in many of the key growth
markets and making significant investments
in building healthcare capacity within
diabetes.
REGION CHINA
JAPAN & KOREA
With sales of 8.1 billion Danish kroner in
2014 and average annual sales growth of
around 16% since 2010, China has been a
major contributor to Novo Nordisk’s growth
in recent years. This is predicted to be the
case in the coming years too, partly due to
the rapidly increasing number of people with
diabetes in China. According to the latest
estimates from the International Diabetes
Federation, more than 99 million people in
China have diabetes today.1 With China’s
economic growth comes urbanisation, with
urbanisation come sedentary lifestyles – and
diabetes follows. This is the same pattern
seen in other rapidly developing countries,
but on a much larger scale in a country with
an ageing population of 1.3 billion.8
On top of this, there is another challenge.
Twenty years ago, very few doctors in China
knew how to treat diabetes, and outside the
bigger cities this is often still the case. Novo
Nordisk established its own affiliate in China
in 1994 and, to this day, the company’s main
focus has therefore been to educate doctors
and patients
in proper diabetes care,
including how to use insulin effectively and
safely. While these initiatives primarily took
place in the biggest cities at first, today they
With a 52% market share measured in
volume, Novo Nordisk is the clear insulin
market leader in Japan. The use of devices
remains high in Japan, with 98% of Novo
Nordisk’s insulin volume being used in
devices, primarily FlexPen® and FlexTouch®. In
2014, Novo Nordisk’s sales of diabetes care
products in Japan & Korea decreased by 2%
in local currencies. This reflects a declining
Japanese insulin volume market and chal-
lenging underlying market dynamics, which
are partly offset by the strong uptake of
Tresiba®. Tresiba® was launched in March
2013 with broad market access. Since then
Tresiba® has steadily expanded its share of
the basal insulin market in Japan and now
represents 26% of this market measured in
monthly value market share.
Novo Nordisk expects very little growth
in Japan in the coming years due to price
reductions and the overall low growth of
the total insulin market. In 2015, the focus
will be on the further penetration of Tresiba®
and NovoEight® (turoctocog alfa). The latter
product, which is indicated for treatment of
haemophilia A, was launched in 2014 and
has been well received.
The key to accelerated growth is primarily
expected to be Tresiba® as it becomes
available to more patients, and Xultophy®,
the fixed combination of insulin degludec
(Tresiba®) and liraglutide (Victoza®) for treat-
ment of type 2 diabetes. Xultophy® was
launched in Switzerland in January 2015 and
will be rolled out in more countries during
the year. Moreover, sales of NovoEight® are
expected to contribute to growth as the
product gains share in the market for
haemophilia A products.
Saxenda® (liraglutide 3 mg) for treatment of
obesity received a positive opinion from the
European Medicines Agency’s expert com-
mittee (CHMP) in January 2015. Based on
this, approval by the EU Commission is
expected during the spring of 2015 following
which Saxenda® will be launched in the first
European countries.
INTERNATIONAL
OPERATIONS
imagination, though.
With sales of 12.5 billion Danish kroner in
2014 and average annual sales growth of
around 12% since 2010,
International
Operations continues to be Novo Nordisk’s
main contributor to growth after North
America. Thinking of International Oper-
ations as one business region requires a
stretch of the
It
encompasses 153 countries all over the
world with more than 4.6 billion people –
Latin America, Africa, the Middle East, the
Gulf, most of Asia, Australia, Oceania and
New Zealand. A region of extraordinary
diversity, it covers some of the world’s
poorest countries and some of the richest.
This means that Novo Nordisk must be able
to meet demand for both standard therapy
in the form of human insulin in vials at very
low prices and advanced modern insulin
products
in sophisticated pen systems,
which are sold at prices similar to those seen
in Europe and the US.
Within many of the countries in International
Operations, there is both a public and a
private market. In most cases the public
market only reimburses use of human insulin
vials, while the private market primarily
comprises modern insulin paid for by people
who either have private insurance or can pay
out of their own pockets. What these
countries have in common is that the
incidence of diabetes is increasing, and many
of them are enjoying economic growth
above what is being seen in the western
world. This means they can afford to extend
the reach and quality of their healthcare
systems.
In 2014, Novo Nordisk’s sales of diabetes
care products in International Operations
NOVO NORDISK ANNUAL REPORT 2014
MODERN INSULINS
Global value market share by brand in its
respective insulin segment*
• NovoMix®
• NovoRapid®
• Levemir®
%
* Levemir® in the long-acting segment, NovoRapid® in the
rapid-acting segment and NovoMix® in the dual-release
segment.
DIABETES CARE
Value market share by geographic region
• North America
• Europe
• International Operations
• Region China
• Japan & Korea
%
Ngan Chu Kim
is a Novo Nordisk sales
representative in
Ho Chi Minh City, Vietnam.
KEY REGIONAL FACTS
Population (million)*
North
America
351
Europe
540
GDP per capita (USD)*
52,924
35,697
Healthcare spend per capita (USD)*
8,578
3,375
Physicians per 1,000 people*
Novo Nordisk total sales (DKK billion)
Insulin value market share**
Insulin volume market share**
2.4
43.1
37%
37%
3.3
20.1
46%
48%
International
Operations
Region
China***
Japan &
Korea
4,635
4,547
269
1.0
12.5
47%
55%
1,365
6,972
320
1.9
8.0
55%
58%
178
35,054
3,889
2.3
4.9
52%
49%
* The World Bank. ** IMS Health, IMS MIDAS Customized Insights, November 2014. *** Data from IMS Health, IDF and The World Bank include China only.
2010201120122013201402040608020102011201220132014010203040 2626
OUR BUSINESS
PIPELINE OVERVIEW
DIABETES AND OBESITY CARE
Compound
Indication
Description
Phase 1
Phase 2
Phase 3
Filed/
regulatory
approval
Diabetes
Tresiba®
(insulin degludec)
NN1250
Type 1 and 2
diabetes
A new-generation once-daily basal insulin analogue with a
duration of action beyond 42 hours and a flat and stable action
profile that compared with insulin glargine reduces the rate of
hypoglycaemia and increases dosing flexibility when needed.
Launched in the EU, Japan and other markets. Additional data
required by the US FDA are being generated for the planned
resubmission.
Ryzodeg®
(insulin degludec
and insulin aspart)
NN5401
Type 1 and 2
diabetes
A soluble coformulation of the basal analogue insulin degludec
(Tresiba®) and insulin aspart (NovoRapid®, or NovoLog® in the
US, a rapid-acting mealtime insulin), which reduces the risk of
hypoglycaemia compared with premix insulin. Approved in the
EU, Japan and other markets. Additional data required by the
US FDA are being generated for the planned resubmission.
Type 2
diabetes
A combination of insulin degludec and liraglutide in a once-
daily single injection. Approved in the EU.
Xultophy®
(a fixed combination
of insulin degludec
and liraglutide)
NN9068
Faster-acting
insulin aspart
NN1218
Type 1 and 2
diabetes
Faster-acting insulin aspart is insulin aspart in a new formulation
designed to accelerate the onset of action with the potential
for improved meal-time glucose control.
Type 2
diabetes
Type 1
diabetes
Type 2
diabetes
Type 2
diabetes
Type 2
diabetes
A once-weekly GLP-1 analogue intended to offer the clinical
benefits of a GLP-1 analogue with less frequent injections.
Liraglutide, a once-daily GLP-1 analogue, intended to offer
clinical benefits as adjunct to insulin therapy in type 1 diabetes.
A long-acting oral GLP-1 analogue intended as once-daily
tablet treatment.
A long-acting oral GLP-1 analogue intended as once-daily
tablet treatment.
A long-acting oral GLP-1 analogue intended as once-daily
tablet treatment.
Type 1 and 2
diabetes
A long-acting basal insulin analogue intended for once-weekly
dosing.
Type 1 and 2
diabetes
A long-acting basal insulin analogue intended for daily
administration.
Type 1 and 2
diabetes
A long-acting oral basal insulin analogue intended as once-
daily tablet treatment.
Semaglutide
NN9535
LATIN T1D
NN9211
OG217SC
NN9924
OG987GT
NN9926
OG987SC
NN9927
LAI287
NN1436
LAI338
NN1438
OI338GT
NN1953
Phase 1
Studies in a small group (usually 10–100) of healthy volunteers, and sometimes
patients, to investigate how the body handles, distributes and eliminates new
medication and establish maximum tolerated dose.
NOVO NORDISK ANNUAL REPORT 2014
Phase 2
Studies of various dose levels in a larger group of patients (usually 100–
1,000) to learn about the new medication’s effect on the condition and its
side effects. In phase 2, clinical trials are carried out to evaluate efficacy (and
safety) in specified populations of patients. The outcome of phase 2 trials is
clinical proof of concept and the selection of dose for evaluation in phase 3
trials.
OUR BUSINESS
2727
Compound
Indication
Description
Phase 1
Phase 2
Phase 3
Filed/
regulatory
approval
Obesity
Saxenda®
(liraglutide 3 mg)
NN8022
Obesity
A once-daily GLP-1 analogue for use as adjunct to lifestyle
changes offering weight loss for people with obesity or
overweight in combination with weight-related comorbidities.
Approved in the US and under regulatory review in the EU and
a number of other countries.
NN9838
Obesity
A novel long-acting amylin analogue intended for treatment
of obesity.
G530L
NN9030
Obesity
A novel glucagon analogue, which in combination with lira-
glutide is intended for treatment of obesity.
BIOPHARMACEUTICALS
Haemophilia
N8-GP
NN7088
N9-GP
NN7999
Haemophilia A A glycoPEGylated long-acting recombinant coagulation factor
VIII intended to offer prophylaxis and treatment of bleeds.
Haemophilia B A glycoPEGylated long-acting recombinant coagulation factor
IX intended to offer prophylaxis and treatment of bleeds.
Concizumab
NN7415
Haemophilia
A, B and with
inhibitors
A monoclonal antibody against Tissue Factor Pathway Inhibitor
(TFPI) intended for bleeding prevention after subcutaneous
administration.
Growth disorders
NN8640
Growth
disorders
A once-weekly human growth hormone.
Read more at novonordisk.com/investors and clinicaltrials.gov.
2015 KEY MILESTONES
Tresiba®
Faster-acting
insulin aspart
LATIN T1D
DEVOTE interim analysis
Remaining phase 3a results
All phase 3a results
Semaglutide
First phase 3a results
OG217SC
Phase 2 results
Phase 3
Filed/regulatory approval
Studies in large groups of patients (usually 1,000–3,000) comparing a new
medication with a commonly used drug or placebo for both safety and
efficacy. Phase 3a covers trials conducted after efficacy is demonstrated
and prior to regulatory submission. Phase 3b covers clinical trials completed
during and after regulatory submission. In small therapeutic areas such as
haemophilia, regulatory guidelines may allow the design of single-arm
therapeutic confirmatory trials or trials that compare against eg historical
control instead of existing treatment or placebo.
The phase in which a product is undergoing regulatory authority review.
Products listed under this phase are currently under regulatory review in at
least one of the triad markets: the US, the EU and Japan.
NOVO NORDISK ANNUAL REPORT 2014
POTENTIAL
COMPLICATIONS
OF UNCONTROLLED
DIABETES
AMPUTATION
Diabetes is a leading
cause of non-traumatic
lower-limb amputations
TOTAL KIDNEY FAILURE
Total kidney failure is
three times as likely
HEART ATTACK
Heart attack is three times as
likely and heart disease is up
to four times as likely
STROKE
Strokes are up to
four times as likely
BLINDNESS
Diabetes is a leading
cause of blindness
WHAT IS DIABETES?
Diabetes affects the way the body uses food
for growth and energy. There are two main
forms of diabetes: type 1 and type 2. Type 1
diabetes is a lifelong autoimmune disease
that develops when the body produces an
immune response against its own cells,
destroying the insulin-producing beta cells
in the pancreas. As a result, the pancreas
stops producing insulin, often – but not
always – at a young age. Far more common
is type 2 diabetes, which accounts for
around 90% of all people with diabetes9
and is caused by a combination of lifestyle
and genetic factors. People with type 2
diabetes may still produce their own insulin,
but the amount is insufficient to restore the
balance of glucose in the blood and will
often decrease over time, and the insulin is
not used effectively by the body. Most of
the long-term health complications asso-
ciated with diabetes are due to persistently
high blood glucose levels, which can cause
damage to the kidneys, neurological system,
cardiovascular system, retina and feet and
legs through effects on both large and small
blood vessels.
HOW IS DIABETES TREATED?
People with type 1 diabetes need to start
taking insulin as soon as they are diagnosed
and must continue to do so for the rest of
their lives. People with type 2 diabetes
need different treatments as the disease
progresses. Initially, lifestyle changes, includ-
ing diet and exercise, and one or more oral
medicines may be sufficient. If treatment
goals are not met, medicines such as GLP-1
therapy or basal insulin (long-acting insulin)
may be added to better balance the blood
glucose level round the clock. If treatment
targets are still not achieved, intensive insulin
treatment may be necessary. This may include
adding a rapid-acting insulin at mealtimes, in
addition to a basal insulin, to counter the rise
in glucose that follows a meal. In total,
approximately 45–50 million people world-
wide are using insulin.4 A significant challenge
in managing diabetes with insulin is to
maintain appropriate blood glucose levels,
adjusting insulin dosing as necessary to
balance the impact of food and exercise to
avoid either high blood glucose
levels
(hyperglycaemia), which can lead to long-
term complications such as blindness and
amputations, or low blood glucose levels
(hypoglycaemia), which can lead to seizures,
unconsciousness or, in rare cases, death.
THE ‘RULE OF HALVES’
According to the Rule of Halves5, only around 6% of people with diabetes live
a life free from diabetes-related complications.
Of the
estimated
387 million
people with
diabetes
About
50% are
diagnosed*
Of whom
about 50%
receive
care*
Of whom
about 50%
achieve
treatment
targets*
Of whom
about 50%
achieve
desired
outcomes*
Diabetes
Diagnosed
Receive care
Achieve
treatment
targets
Achieve
desired
outcomes
* Actual rates of diagnosis, treatment, targets and outcomes vary in different countries.
29
THE
CHALLENGE
OF CHANGING DIABETES
387 million people in the world have diabetes today
– a number predicted to grow to around 592 million by 2035.
No wonder it has been called an emergency in slow motion.
its
On World Diabetes Day, 14 November 2014,
the International Diabetes Federation (IDF)
announced
latest forecast for how
diabetes will develop in the coming years:
IDF estimates that 387 million people in the
world have diabetes today and that the
number will grow to around 592 million by
2035.1 77% of the total number affected
live in low- and middle-income countries,
where the pandemic is gathering pace at
alarming rates due to the lifestyle changes
associated with economic growth and
urbanisation.1
Just as worrying is the fact that very few
people with diabetes will have a life free
from diabetes-related complications. The
situation can best be illustrated by what
has become known as the ‘Rule of Halves’5
(see opposite page). It illustrates that only
half of the many millions of people with
diabetes have been diagnosed. Of those
who are diagnosed, only half receive
treatment from a qualified healthcare
professional and, again, just half of these
people achieve their treatment targets. Yet
it does not end there. Only half of this
relatively small group actually achieve the
desired outcome and live a life free from
diabetes-related complications.
REGIONAL DIFFERENCES
The Rule of Halves estimates a global
average. For some countries, for example
Vietnam, Kenya and China, diagnosis rates
are even lower than 50%.1 For some,
treatment may be almost non-existent,
while in other countries a key issue is that
even those people who are diagnosed and
treated do not reach their treatment targets
and therefore have a high risk of developing
complications.
Findings from a landmark study in the UK
showed that reducing blood sugar levels by
approximately 1% may reduce diabetes-
related deaths by more than 20% and
reduce microvascular complications by
nearly 40%.10 Microvascular complications
include diabetic retinopathy, which causes
more than 12,000 cases of blindness
annually in the US alone.11
CANNOT BE IGNORED
In human as well as financial terms, the
burden of diabetes is high, being a factor in
4.9 million deaths and accounting for some
612 billion US dollars1 in health spending
(11% of the total spend worldwide)12 in
2014, according to the IDF.
What all countries have in common is that
the diabetes pandemic cannot be ignored.
From both the human and economic
perspective, it is important that countries
have a plan for how to address their own
Rule of Halves with a view to minimising
both the personal strains and the financial
burdens of diabetes.
Novo Nordisk is working with governments
and non-governmental organisations
in
many countries to help address these
challenges – often with the participation of
the World Diabetes Foundation, an inde-
pendent non-profit organisation estab-
lished and co-funded by Novo Nordisk with
the objective to support prevention and
treatment of diabetes in developing countries.
WHAT IS CHANGING DIABETES®?
Changing Diabetes® is Novo Nordisk’s response to the global diabetes challenge. It
comprises a wide range of activities aimed at helping as many people as possible live a
good life with diabetes. The company’s key contribution is to discover and develop
innovative biological medicines and make them accessible to people with diabetes all
over the world. However, Novo Nordisk is well aware that its products only do part of
the job: it takes more than medicine to change diabetes. One of the latest initiatives
that addresses this is Cities Changing Diabetes (read more on pp 34–35) and at
novonordisk.com/about_us/changing-diabetes.
Kobra Beiglou
has type 2 diabetes
and lives in Iran.
NOVO NORDISK ANNUAL REPORT 2014
WANTED
MORE TREATMENT OPTIONS
In diabetes, there is no such thing as a ‘one-size-fits-all’ treatment. What suits one person’s needs
may not be the right treatment for someone else, and what works well for a person today may
become ineffective over time. A range of treatment options is therefore needed to ensure the
best possible blood glucose control and quality of life for each individual with diabetes.
Finding the optimal medical therapy for a person with diabetes can
be very challenging, as no two people with diabetes have an identical
response to the same medication, due to their personal physiology,
genetic make-up and lifestyle. In addition, treatment of type 2
diabetes often has to be intensified over time as the function of the
insulin-producing beta cells progressively declines. Novo Nordisk has
long been aware of these challenges and offers a range of treatment
options. What the new treatments have in common is that they are
intended to make the life of people living with diabetes easier, by
providing medical therapy that meets individual needs.
FLEXIBILITY WHEN NEEDED
When a person with diabetes requires insulin therapy, the first treat-
ment chosen is often a once-daily injection of basal insulin. The
challenge with basal insulins has always been the variable speed at
which the insulin is absorbed. It can change from day to day, and may
not always provide the intended 24-hour coverage, which means that
injections must be taken at precisely the same time of day, every day.
Novo Nordisk’s new-generation once-daily basal insulin analogue
Tresiba® (insulin degludec) is different, in that it has a duration of
action of more than 42 hours with a flat, stable action profile that
compared with insulin glargine reduces the rate of hypoglycaemia
and increases dosing flexibility when needed. This gives the user
flexibility when needed, without compromising on the desired effect
NOVO NORDISK ANNUAL REPORT 2014
TRESIBA®: A UNIQUE MOLECULE
Tresiba® (insulin degludec) is a once-daily, long-acting basal
insulin with a duration of action beyond 42 hours. It is the only
insulin to form multi-hexamers upon subcutaneous injection,
resulting in a soluble depot from which it is slowly and
continuously absorbed into the blood stream. This absorption
process allows for a flexible dosing interval of between eight
and 40 hours while maintaining the low risk of hypoglycaemia
associated with Tresiba®.
31
or the safety of the treatment. “To be able to change the time you
inject from day to day, if the situation requires, gives a remarkable
sense of freedom for patients,” says Dr Alan Moses, global chief
medical officer at Novo Nordisk. “Moreover, studies show that
people using Tresiba® experience fewer episodes of low blood sugar,
particularly at night, than those on another basal insulin, insulin
glargine.
”This is important,” notes Dr Moses, “because the fear of low blood
sugar means that many people with type 2 diabetes are not treating
their condition intensively enough to lower blood sugar to the
recommended level. This increases their risk of developing severe
long-term complications.”
MANY NEW LAUNCHES AHEAD
Jakob Riis, executive vice president of Marketing, Medical Affairs and
Stakeholder Engagement, reports that Tresiba® is being made available
in more and more countries: “By the end of 2014, we had launched
Tresiba® in 22 countries, and we aim to have more than 30 launches
over the next two years. Furthermore, we hope to submit interim data
from our large cardiovascular outcomes study, DEVOTE, to the US
Food and Drug Administration in the first half of 2015, which could
potentially lead to the approval of Tresiba® for the US market by 2016.”
See box for information on DEVOTE.
A GOOD COMBINATION
Due to the progressive nature of type 2 diabetes, within the first year
after basal therapy initiation more than seven out of 10 people using
basal insulin do not reach their treatment goal.13 When basal insulin
alone is no longer enough to ensure good blood glucose control, the
next step can be to intensify treatment by changing to an insulin
product that contains both fast-acting and basal insulins in one
injection. Novo Nordisk’s new insulin, Ryzodeg®, taken twice a day, is
such a combination insulin.
“Ryzodeg® is a combination of the once-daily insulin degludec Tresiba®
and the fast-acting insulin aspart NovoRapid®. The latter lowers the
spikes in blood glucose around mealtimes,” explains Dr Moses.
Mexico was the first country to launch Ryzodeg® in September 2014,
and more launches are planned for 2015.
AN INTERESTING ALTERNATIVE
However, Novo Nordisk also has a unique third treatment option in
its degludec family of treatments. In clinical studies of once-daily
Xultophy®, a combination of Tresiba® and the human GLP-1 analogue
liraglutide (Victoza®), fewer patients experienced low blood sugar than
patients using Tresiba®. Moreover, fewer of the patients on Xultophy®
had the weight gain that often comes with insulin therapy. Xultophy®
was approved in the EU in September 2014 and launched in Switzerland
as the first country in January 2015.
“Xultophy® offers people a new way to intensify treatment and
improve their blood glucose control, without increasing the number of
injections,” Dr Moses points out. “In fact, as Xultophy® has been
shown to produce a greater reduction in blood sugar levels than
Tresiba® and Victoza® on their own and an even lower rate of hypo-
glycaemia than Tresiba® on its own, Xultophy® could be an attractive
treatment option for people with type 2 diabetes.”
”We’re very excited about the recent launch of Xultophy® in Switzerland
as well as the upcoming launches in the EU in the first half of 2015,”
adds Jakob Riis. ”It’s the latest example of Novo Nordisk’s ambition of
driving innovation to create more treatment options for people with
diabetes.”
WHAT IS DEVOTE?
Tresiba® was approved in the EU in January 2013, and by the
end of 2014 it had been launched in 22 countries, both within
and outside Europe. In February 2013, Novo Nordisk received
a Complete Response Letter from the US Food and Drug
Administration (FDA), in which the agency requested additional
cardiovascular safety data from a dedicated cardiovascular
outcomes trial before the review of the New Drug Application
could be completed. While Novo Nordisk remains confident
about the cardiovascular safety profile of Tresiba® based on
both its own interpretation of the data derived from the clinical
development programme and reviews by the European and
Japanese regulatory authorities, the company also recognises
the importance of reassuring the FDA about the cardiovascular
safety of the product.
Hence, in October 2013, the dedicated clinical trial DEVOTE
was initiated to assess cardiovascular risk. DEVOTE is a double-
blind trial, using insulin glargine as comparator, which includes
around 7,500 people with type 2 diabetes who have existing
or high risk of cardiovascular disease.
NOVO NORDISK ANNUAL REPORT 2014
TYPE 1 DIABETES
IN SEARCH
OF A CURE
Since Novo Nordisk was founded more than 90 years ago, the
company has been committed to improving the lives of people
with diabetes. Nothing would change the life of a child with
type 1 diabetes more than a cure for this lifelong serious
condition, but is a cure just a dream – or a potential reality?
Worryingly, the incidence of type 1 diabetes
is growing, and unlike type 2 diabetes, no
one really knows why. Yet type 1 diabetes is
rarely in the spotlight, as the world focuses
on the type 2 diabetes pandemic instead.
“It’s a matter of numbers,” points out
Dr Matthias von Herrath, head of Novo
Nordisk’s type 1 diabetes research unit in
Seattle, US. “Yes, there are many more
cases of type 2 diabetes, but we can’t ignore
the special needs of the children and adults
with type 1 diabetes.”
A COMPLEX DISEASE
Novo Nordisk has for many years been
conducting research into delaying the onset
of type 1 diabetes. “This is no small chal-
lenge,” explains Matthias von Herrath. “It’s
only in the last five years that we’ve begun
to understand the underlying mechanisms
behind this disease. One reason is that the
human pancreas isn’t as accessible as a
mouse pancreas due to its location in the
body. It’s also a sensitive organ that doesn’t
react well to interference, so it’s difficult to
derive information from it – and that inhibits
our understanding of what causes type 1
diabetes.”
What is known is that, in a person with type
1 diabetes, the body’s immune system is
triggered, which results in the body pro-
ducing lymphocytes which attack – and
destroy – the insulin-producing beta cells in
the pancreas. Multiple factors are thought
to play a role in the onset of the autoimmune
reaction, including the environment and
viruses. In addition, there is a heredity
factor, which can be seen with genetically
identical twins: if one twin develops type 1
diabetes, the other twin has a 35% risk of
developing it too.14
A WINDOW OF OPPORTUNITY
While the underlying cause of type 1
diabetes remains unclear, recent research
has led to important insights. “It has now
been discovered that, even late after onset,
some people with type 1 diabetes still have
functioning beta cells – they haven’t all been
destroyed. We’ve even seen people 50 years
past diagnosis who have some beta cell
WHAT IS TYPE 1 DIABETES?
Type 1 diabetes is a lifelong condition that develops when the body creates antibodies
against its own insulin-producing beta cells in the pancreas. This autoimmune reaction
destroys the beta cells and so the pancreas stops producing insulin or cannot produce
enough insulin on its own. Type 1 diabetes most often occurs in people under 20 years
old. It is treated with injections of insulin, with the aim of restoring the balance of
glucose in the blood. Left untreated or without the proper treatment, glucose levels
can become either too high or too low, leading to complications such as blindness,
kidney failure, limb amputation and ultimately coma and death.
Novo Nordisk’s research centre in Seattle,
Washington, is part of Novo Nordisk’s Global Research
unit, which has sites in Denmark, the US and China.
function.15 This indicates that the speed of
the attack on the beta cells varies – which is
therapeutically important as it gives us a
window where we can possibly preserve the
beta cells and delay the clinical onset of the
disease,” says Matthias von Herrath.
Novo Nordisk has a number of ongoing
research projects looking into delaying the
onset of type 1 diabetes. “We want to re-
educate the immune system not to attack
the beta cells. We’re looking at combination
therapy to increase the efficacy of the
treatments while at the same time reducing
any side effects. One of our projects involves
both immune-active and metabolic-active
compounds. The data are very strong and
we’re making good progress: we hope to
move into human trials in the next year or
so,” says Matthias von Herrath.
THE PROMISE OF STEM CELLS
Novo Nordisk is also investigating the use of
stem cells as a potential cure for type 1
diabetes. “For many years we’ve been
working to find a method to develop
embryonic stem cells into beta cells, which
could then be transplanted into a person
with diabetes to replace their destroyed
beta cells,” explains Ole Dragsbæk Madsen,
senior principal scientist at Novo Nordisk.
“If we could make them work in the body
for long periods of time, that would in effect
be a cure. Production of a theoretically
limitless supply of beta cells from a stem cell
line is what we’re hoping to achieve one
day, but the process is extremely com-
plicated,” he continues. “Nevertheless, it
seems that some media report scientific
breakthroughs in stem cell research with
OUR BUSINESS
33
increasing frequency, hinting that a cure for
type 1 diabetes will soon be available. And,
without doubt, breakthroughs are being
made, but so far no one has developed fully
functioning beta cells in vitro. I believe Novo
Nordisk could be one of the first companies
to do so.”
SLOWLY BUT STEADILY
Yet this will be just the start of developing a
cure. At some point, the body will recognise
and attack the transplanted beta cells, just
as it did with the original beta cells in the
pancreas. It will always have this memory
that beta cells are a foreign element that
should be destroyed. Therefore, the beta
cells must be encapsulated in a way that
protects them from the lymphocytes while
still enabling them to have access to the
blood supply where they monitor glucose
levels and excrete insulin. Once this obstacle
has been overcome, a ‘cell factory’ will be
needed to manufacture the encapsulated
beta cells – and a factory of this type has
never been built before.
“When will a cure be available? That’s the
million dollar question,” says Matthias von
Herrath. “Our research is like stepping stones
– we build on the positive results to get to
the next step – but it’s a long path. There are
no short cuts. However, Novo Nordisk has
core expertise in protein engineering and cell
culturing, a deep understanding of drug
development and the willingness to work
with academia to drive innovation within
diabetes. We’re therefore in a strong position
to make a cure for type 1 diabetes a reality
one day. It’s only a question of time.”
STEM CELLS
Stem cells have the ability to develop
into many different cell types, which
means they have great therapeutic
potential. Cells found in the early
embryo can give rise to pluripotent
embryonic stem cell cultures that
maintain the ability to mature into any
cell type – including insulin-producing
beta cells – while stem cells in the adult
body can normally only mature into a
limited number of specialised cells. As
it has not yet been demonstrated that
the same scientific results can be
obtained using adult stem cells, Novo
Nordisk is using human embryonic
stem cells in order to progress the
company’s research into developing
beta cells for potential transplantation
into patients as a cure for diabetes.
IF ONE TWIN DEVELOPS TYPE 1 DIABETES
THE OTHER TWIN HAS A
35% RISK
OF DEVELOPING IT TOO
Dr Matthias von Herrath (centre)
leads Novo Nordisk’s type 1 diabetes
research activities in Seattle.
NOVO NORDISK ANNUAL REPORT 2014
CITIES FIGHT
URBAN DIABETES
Urbanisation is fuelling the type 2 diabetes pandemic.
Cities Changing Diabetes is Novo Nordisk’s new partnership
programme to tackle the issue.
city brings its unique challenges and core
capabilities to the table. Through leader-ship,
a strong coalition is formed that can inspire a
global movement against urban diabetes. In
Mexico City, for example, thanks to a
concerted community effort, the growth in
prevalence of overweight and obesity has
been reduced significantly in the adult
population in the period 2006–2012.18 Still,
further efforts are needed to reduce the
prevalence of obesity. In Copenhagen,
known as one of the world’s best cities for
cycling, the municipality has declared war on
inequalities in health, tackling the large
differences in diabetes mortality and mor-
bidity in different parts of the city.
In Houston, the fourth-largest city in the US,
Mayor Annise D Parker launched Healthy
Houston in 2012 to tackle the high pre-
valence of obesity and diabetes in the city.
Finally, in Tianjin and Shanghai – home to
some 4 million people with diabetes – deci-
sive action has been taken to bring down
the prevalence and burden of obesity and
diabetes.
A PARTNERSHIP PROGRAMME
In addition to a range of local partners
including academia, city authorities, urban
planners, community leaders and busi-
nesses, Cities Changing Diabetes has been
developed in partnership with University
College London (UCL), UK, and Steno
Diabetes Center, Denmark.
“A partnership approach is essential as
urban diabetes
is a big and complex
challenge. We need a multi-pronged, cross-
disciplinary approach, which requires ex-
pertise in epidemiology, geography, climate,
economics, politics and preventive medicine
– to name just a few of the specialties
involved,” explains Professor John Nolan,
director and CEO of Steno Diabetes Center.
“At Steno, our major focus is prevention and
early diagnosis of diabetes, and we’ve been
looking at how the setting, such as home,
work, family and means of transport, and
our biological vulnerability, impact diabetes
evolution. This is the expertise we bring to
Cities Changing Diabetes.”
For the first time in history, more than half
of the world’s population live in cities – by
2050 this will rise to almost 70%.16 People
move to cities for opportunities – for
security, jobs and education. Unfortunately,
urban living also poses a health risk. In Sub-
Saharan Africa, for example, moving from a
rural area into a city poses a 2–5 times
increased risk of developing type 2 diabetes.17
There are many reasons for this, including
rising wealth, a more sedentary lifestyle and
increasing food consumption. Today, two-
thirds of people with diabetes live in cities –
around 252 million urban dwellers.1
Cities are growing the fastest in low- and
middle-income countries, which are also
experiencing a dramatic increase in the
prevalence of diabetes. This places a huge
burden on health services in countries with
emerging economies that are already under
significant strain.
In 2014, Novo Nordisk launched Cities
Changing Diabetes – a partnership pro-
gramme to identify and address the root
cause of urban diabetes in major cities
around the world.
“Novo Nordisk is at the forefront of one of
today’s great health challenges, and we’re
committed to playing our part in the global
fight against diabetes. We launched Cities
Changing Diabetes because we believe we
can use our expertise and knowledge to
beat ‘urban diabetes’ – the rise of type 2
diabetes in cities. We want to stop urban
diabetes from ruining millions more lives,”
says Lars Rebien Sørensen, chief executive
officer at Novo Nordisk.
ALL CITIES HAVE UNIQUE CHALLENGES
Cities Changing Diabetes was first launched
with Mexico City, one of the
largest
metropolitan areas in the world. Mayor of
Mexico City Dr Miguel Ángel Mancera
Espinosa calls diabetes its number one
health challenge: “This initiative is a catalyst
for sharing and learning about the dynamics
of urban diabetes, and is a spur to concerted
action from all of us who can make a differ-
ence across my city and beyond.”
Other cities that have joined are Copen-
hagen, Houston, Tianjin and Shanghai. Each
NOVO NORDISK ANNUAL REPORT 2014
Downtown Tianjin, China.
A city with 11 million people of
whom 1 million have diabetes.
35
65%
OF PEOPLE WITH DIABETES
LIVE IN URBAN AREAS1
60%
600 URBAN CENTRES
GENERATE ABOUT
OF GLOBAL GDP19
GATHERING EVIDENCE
The Cities Changing Diabetes programme will comprise three phases:
mapping the challenge, sharing solutions and taking action. During
2014–2015, the partners are working together to better understand
the dynamics of urban diabetes, including the interplay of social,
economic and environmental factors in the study cities. By the end of
this phase, key barriers and future priorities will be identified.
“At UCL we have increasingly been looking at the impacts of
urbanisation and how to shape cities for health, so we’re delighted
to use our expertise to support research that will underpin Cities
Changing Diabetes by working on the ground to gather data across
the globe which will set a baseline for the challenge of diabetes,”
says David Napier, professor of Medical Anthropology at University
College London.
The knowledge gained during the mapping phase of the programme
will be shared globally, to build knowledge and collaboration and to
inform the global health agenda. “We aim to provide urban planners
and politicians worldwide with a better understanding of how to
integrate prevention and treatment of diabetes into urban planning,
so that cities can be created that help us live healthier lives,” explains
Lars Rebien Sørensen.
TRANSFORMATIVE ACTION
Once the root causes of urban diabetes have been identified and
understood, concerted and focused action plans will be developed in
the cities in collaboration with policymakers, health authorities and
the private and voluntary sectors. “Diabetes and obesity pose a
significant health threat to our city,’’ said Houston Mayor Annise D
Parker when her city joined Cities Changing Diabetes. “We look
forward to collaborating with partners locally and around the world
to develop solutions to this global epidemic.”
The Cities Changing Diabetes programme could potentially be
transformative for diabetes care, believes Professor John Nolan: “The
authorities in the participating cities are acknowledging that
something needs to be done at the macro level. This is a complete
change to the common approach to diabetes, where usually very
little is done until a patient presents with symptoms. We have
inverted the Rule of Halves approach, as we’ll be doing something
about diabetes before people have developed it. This is a visionary
project with huge scope to make a difference.”
Lars Rebien Sørensen hopes that Cities Changing Diabetes will be
life-changing for everyone involved: “With this initiative, more
people with diabetes will be diagnosed and treated – which will be
good for patients, society and Novo Nordisk’s business. But ultimately
we hope to prevent diabetes. This is what drives me and motivates
our employees. In the past, the world has come together to take
concerted action to stop global threats such as smallpox, HIV and
malaria. Massive public health campaigns have been launched to
raise awareness, mobilise resources and fight these killer diseases.
Now we need to take similar action against diabetes.”
THE STRUGGLE TO LOSE
WEIGHT
With the planned launch of Saxenda® (liraglutide 3 mg)
in 2015, there will be a new treatment option for
people with obesity.
THE NUMBER OF ADULTS
WITH OBESITY HAS MORE
THAN DOUBLED SINCE
1980*
600 million
1980
2014
Worldwide rates of obesity have doubled since
1980, with more than 600 million adults classified
as obese in 2014 – more than 10% of the world’s
adult population
* WHO. Obesity and overweight. Fact sheet 311, 2015.
WHAT IS OBESITY?
Obesity is defined as abnormal or
excessive fat accumulation that may
impair health for people with a BMI
over 30. BMI provides the most con-
venient population-level measure of
overweight and obesity currently
available.2 BMI itself, however, does
not define health risk.
Body mass index (BMI) is a simple
weight-for-height index that is com-
monly used to classify overweight and
obesity in adults. It is defined as a
person’s weight in kilograms divided
by the square of his height in meters
(kg/m2).
For some people lifestyle changes
– healthy diet and increased
physical activity – are not enough
to achieve a sustained weight loss.
37
Obesity has become a public health issue with huge implications for
national healthcare systems all over the world. In the US alone, it is
estimated that 35% of adults, or 80 million people,20 have obesity,
and that obesity-related illness accounts for 27.5% of the total US
healthcare budget.21
The problem is that obesity can have many serious – even life-
threatening – health consequences, including type 2 diabetes, heart
disease, high blood pressure, obstructive sleep apnoea and some
types of cancer. Although not all people with obesity will have these
health problems, a BMI of 35 and above is associated with a
significantly greater risk of health complications.22 All told, obesity is
linked to a decreased life expectancy.23
LIFESTYLE CHANGES ARE NOT ALWAYS ENOUGH
Lifestyle changes – healthy diet and increased physical activity –
should always be part of the treatment for people with obesity.
However, for some people, this is not enough, and achieving a
sustained weight loss and keeping weight off is a challenge. To make
things worse, popular opinion is that people who are not able to lose
weight simply lack willpower. Yet the ability to lose weight is, to a
great extent, genetically predestined, and several underlying
physiological factors make achieving and maintaining weight loss
extremely difficult.
Professor Robert F Kushner from Northwestern University Feinberg
School of Medicine, Chicago, US, an expert in the care of people
who are overweight or obese, explains: “There are many bio-
logical reasons why it’s difficult to lose weight. The body is
preprogrammed to continually fight weight loss, as it’s
naturally defending itself in a famine-like situation. So when
you eat less, your metabolism will slow down and you’ll get
hungrier and hungrier as your body subconsciously tries to
make you eat more. This is a very powerful feeling. It’s also
very difficult for us to change our behaviours, to burn extra
calories when our lifestyles don’t push us to extend
ourselves physically or to limit calorie intake in a world of
plenty. To be on a diet is to go against social convention,
society and the ‘norm’.”
Adding to the problem is that people with obesity may
take medications to treat comorbidities (type 2 diabetes,
for example) – and some of these treatments can lead
to weight gain. In many respects, a person with
obesity is therefore fighting a tough battle when it
comes to weight loss. “Sure, everyone can apply
themselves to a healthier lifestyle, but there’s
definitely a need for some people to also
treat their obesity medically,” stresses
Robert Kushner.
30 or greater, or 27 or greater in the presence of at least one weight-
related comorbidity. In January 2015, Saxenda® received a positive
opinion from the European Medicines Agency’s expert committee
(CHMP).
“With Saxenda®, we’re building on part of the body’s own appetite-
regulating mechanisms. The active molecule, liraglutide, has 97%
similarity to naturally occurring human GLP-1, a gut hormone
involved in appetite regulation that our body releases when we eat.
So, just like GLP-1, Saxenda® regulates how much we eat by
decreasing hunger and increasing feelings of fullness,” says Mads
Krogsgaard Thomsen, executive vice president and chief science
officer at Novo Nordisk.
SUSTAINED WEIGHT LOSS
Clinical trials have shown that in people with obesity Saxenda®, in
combination with diet and exercise, enables nine out of 10 people to
lose weight, with an average weight loss of 8% after 56 weeks and
with 33% of people losing more than 10%. Furthermore, in a
separate trial focused on weight loss maintenance, people were
initially put on a low-calorie diet to achieve a minimum of 5% weight
loss, at which point they were given Saxenda®.24 81% of those
treated with Saxenda® were able to maintain the initially achieved
5% weight loss after 56 weeks. “As a weight loss of 5–10% has
significant health benefits for people with obesity, we’re really
pleased with these results,”25 says Mads Krogsgaard Thomsen.
“Our aim is to reduce the risks of certain comorbidities associated
with obesity, rather than ‘just’ what you see when you step on the
scales,” says Jakob Riis, executive vice president of Marketing,
Medical Affairs and Stakeholder Engagement at Novo Nordisk.
“We’re therefore focusing on a subset of people with obesity who,
we believe, stand to benefit most from treatment with Saxenda®.”
THE TREATMENT CHALLENGE
Even when Saxenda® has been approved by regulators in a country,
a number of hurdles must still be overcome to ensure access to this
treatment.
“The current commercial market for antiobesity treatment is very
small,” Jakob Riis points out. “Furthermore, this is a new area for us.
Even though obesity is now recognised as a disease, national health-
care systems generally aren’t yet willing to pay for treatment. We
hope that, by targeting Saxenda® for the treatment of a subset of
people who unquestionably need treatment, we can ultimately
change this. Until then, we will initially be focusing on private insurers
to ensure reimbursement for Saxenda®. A further challenge is that
only a small number of physicians currently prescribe antiobesity
medications. Our focus will therefore be to work with these
physicians while our ultimate goal is obviously to expand this group.”
Saxenda® (liraglutide 3 mg), Novo
Nordisk’s once-daily human glucagon-
like peptide-1 (GLP-1) analogue for
the treatment of obesity, may
become a new treatment option
for some of these people. In the
US, the product was approved
by the FDA in December
2014 for chronic weight
management
in people
with obesity with a BMI of
BROADENING TREATMENT OPTIONS
“With the planned launch of Saxenda®, a new option to treat obesity
will become available, but Novo Nordisk doesn’t plan to stop there,”
says Mads Krogsgaard Thomsen. “We’re continuing to investigate
the potential of Saxenda®, and we have other drug candidates in our
research and development pipeline which could possibly become
stand-alone antiobesity treatments or be used in combination with
Saxenda®. We’re using our knowledge of protein chemistry, under-
standing of hormones and disease insight to break new ground. Our
research is taking us into a new era of possibilities, and I believe we’re
only at the beginning of the innovation curve.”
38
OUR BUSINESS
Bintang and Biondi benefit from the
educational programme, which is part of
the NNHF-supported project in Indonesia.
WHEN BLOOD
DOESN’T CLOT
With the recent launch of NovoEight® (recombinant factor
VIII) and the development of long-acting versions of factor
VIII and factor IX, Novo Nordisk is acting on its commitment
to people with haemophilia.
Eighteen years ago, Novo Nordisk launched
NovoSeven®, meeting a significant unmet
medical need and establishing itself as an
innovator in the haemophilia market. Today,
NovoSeven® is still a very important treatment
option for the community of approximately
4,000–5,000 people with haemophilia A or
B who form inhibitors against the standard
treatment.26
Novo Nordisk remains committed to creating
recombinant therapies for rare bleeding
disorders: the research organisation is work-
ing on ways to improve prophylactic treat-
ment for people with haemophilia with
inhibitors; NovoSeven® has now been
approved in the US and the EU for use in
people with Glanzmann’s thrombasthenia
refractory to platelets; and in 2013 the
company launched NovoThirteen® for con-
genital factor XIII deficiency. “We’re fully
committed to people with bleeding disorders,
as can be seen from the products we have
already launched and our clinical development
programme – which is one of the broadest in
the industry,” says Stephanie Seremetis,
corporate vice president and chief medical
officer for haemophilia.
SERVING THE WIDER
HAEMOPHILIA COMMUNITY
In 2014, Novo Nordisk launched NovoEight®,
the first new recombinant factor VIII treat-
ment for people with haemophilia A in over a
decade and the company’s first treatment for
the wider haemophilia community. Tech-
NOVO NORDISK ANNUAL REPORT 2014
nically a different product from other
recombinant factor VIII treatments on the
market, NovoEight® has a production process
that provides a new, highly purified and well-
defined molecule using
cutting-edge
technology, which Stephanie Seremetis
believes is important for both safety and
efficacy.
”NovoEight® has been well received in Europe
and Japan,” says Paul Huggins, corporate
vice president
for bringing
responsible
NovoEight® to the market. “So far it has
exceeded our market expectations, as a sub-
stantial number of patients are now choosing
it in an area where patients don’t usually
switch treatment.” Novo Nordisk plans to
launch NovoEight® in the US in the second
quarter of 2015.
LIGHTENING THE TREATMENT BURDEN
Treatment for haemophilia currently relies on
intravenous
infusions, which are often
needed every other day, can take 40 minutes
each and can be very painful. “The treatment
burden for haemophilia exceeds just about
any other condition,” reports Stephanie
Seremetis. “That’s why I’m excited about the
clinical trial results of our
long-acting
recombinant factor IX, N9-GP, which is being
developed to reduce the frequency of
infusion.”
N9-GP, for haemophilia B, completed the last
part of the phase 3a programme in 2014 and
has been shown in clinical trials to be well
WHAT IS HAEMOPHILIA?
Haemophilia is an inherited or acquired
bleeding disorder that prevents blood
from clotting. People with haemophilia
lack, either partially or completely, an
essential clotting factor needed to
form stable blood clots. Without treat-
ment, uncontrolled internal bleeding
can cause stiffness, pain, severe joint
damage and even death. Treatment
with replacement clotting factors may
be administered when bleeding occurs
or,
increasingly, on a preventive
basis (prophylactic treatment). People
with haemophilia A, an estimated
350,000,27 have absent, decreased or
defective production of the blood
clotting
factor VIII. People with
haemophilia B, of which there are
some 70,000,28 have deficiencies in
producing clotting factor IX. Both
types are inherited.
Foundation
NOVO NORDISK
HAEMOPHILIA
FOUNDATION
On 25 January 2015, the Novo Nordisk
Haemophilia
(NNHF)
celebrated its 10th anniversary. The
NNHF is a grant-making non-profit
organisation that strives to improve
access to care for people with haemo-
philia and allied bleeding disorders.
Since it was established, the NNHF has
supported 168 programmes in 63
countries in the developing world
where many people with bleeding
disorders still lack proper diagnosis or
adequate care. Read more on nnhf.org.
tolerated, and once-weekly injections have
been shown to reduce bleeding at least on
par with treatments requiring more frequent
injections. Furthermore, patients treated pro-
phylactically reported an improvement in
quality of life during the trial. “With N9-GP
we hope to be able to offer people with
haemophilia B a new way of treatment,”
adds Stephanie Seremetis. Novo Nordisk
hopes to submit N9-GP for regulatory
approval in the US and Europe in the second
half of 2015.
The company’s
long-acting recombinant
factor VIII, N8-GP, which clinical trials
suggest will offer effective prophylactic
treatment with reduced injection frequency
for people with haemophilia A, has also
completed phase 3 clinical trials. The com-
pany hopes to submit N8-GP for regulatory
approval in 2018. To ensure a robust product
supply for N8-GP and N9-GP, in September
2014 Novo Nordisk acquired a production
plant in New Hampshire, US, which will
expand production capacity for its haemo-
philia products.
GROWTH
MATTERS
Early diagnosis and treatment of growth disorders is important for a child’s physical
and psychosocial health. Novo Nordisk’s goal is to provide the best and easiest
treatment solution for children and adults who need growth hormone therapy.
Growth hormone is not only responsible for
height; it is crucial for normal growth and
development, has a lifelong effect on the
body’s organs, bones, muscles and fat, and
promotes general well-being and energy
in
levels. Growth hormone deficiency
children impacts the body’s composition,
which
longitudinal
growth and may negatively affect the heart,
lungs, bones, brain, quality of life and life
expectancy. Growth is therefore an import-
ant indicator of health and well-being in
children.
insufficient
causes
for
reasons
Yet many children and adults who have a
medical need for growth hormone treatment
are not treated well enough. There are two
main
this, explains Mads
Krogsgaard Thomsen, executive vice pres-
ident and chief science officer: “Growth
disorders are often diagnosed late, because
symptoms are hard to distinguish from what
is ‘normal’. Approximately 80% of a child’s
adult height is completed prior to puberty;
however, investigations are often not made
until after this time. But early treatment can
have a significant impact on the course of a
person’s life. The second problem is that once
diagnosed, many find it tough to inject every
day and therefore skip injections. Research
has shown that approximately 25% of
children on growth hormone treatment miss
more than two injections per week.”29
PATIENT FOCUS AND SUPPORT
Novo Nordisk has been a pioneer in growth
hormone therapy for more than 40 years.
less frequently is therefore a strong desire
among people who need growth hormone
therapy.
in 2014 entered
In response, Novo Nordisk is developing a
once-weekly growth hormone, NN8640,
which
into phase 3
development. “We’ve used our experience
and knowledge in protein engineering to
add a side chain to the growth hormone
molecule, which prolongs the effect of the
hormone – the same as we have done, for
example, with Tresiba®, our long-acting
insulin,” says Mads Krogsgaard Thomsen.
“The data we have so far indicate
that NN8640 has an
efficacious
well-tolerated
profile.”
and
The company was the first to develop a
liquid human growth hormone in a pen
device and today is the global market leader
with Norditropin®.
“We listen to the needs of the children, their
families and the physicians,” says Mads
Krogsgaard Thomsen. “As a result, we now
have growth hormone with
room-
temperature stability, which means that it
can be kept by the bedside, rather than in
the fridge, making injections more con-
venient – particularly if the family is on
holiday. We have also used our device
technology to continuously improve the
injection pen, and today we have FlexPro®,
which aims to make injections as easy,
accurate and painless as possible.”
In recent years, Norditropin® has been doing
particularly well in the US. Eddie Williams,
senior vice president for Novo Nordisk’s
biopharmaceuticals business
in the US,
believes that it is the company’s unwavering
commitment and heritage in this area that
have led to the success. “We’re unparalleled
in our patient focus and support to the
growth hormone community.”
DESIRE FOR A
LONG-ACTING GROWTH HORMONE
While the administration of growth hormone
has been simplified with liquid growth
hormone in an injection pen, daily injections
are still daunting for children and adults who
need growth hormone therapy. A long-
acting growth hormone that can be injected
GROWTH DISORDERS
Growth hormone deficiency occurs when the pituitary gland does not make enough
growth hormone for the normal development and maintenance of the body. While
some growth-related disorders may be diagnosed at birth, others may not become
obvious until later in childhood.
Acquired growth hormone deficiency first appears in adulthood and can be the
result of damage to the pituitary gland due to disease, head injury or blockage of
the blood supply. Damage may also result from previous surgical or radiotherapy
treatment of the pituitary gland.
The standard of care for growth hormone deficiency in children and adults
is once-daily growth hormone injections, usually administered in the
evening. In some countries, growth hormone is also approved for the
treatment of other causes of growth disorders.
Brian Lang lives in the US and has
growth hormone disorder. He was nine
years old when this picture was taken.
THE PEOPLE SIDE
OF THE BUSINESS
Novo Nordisk is growing, which means more career opportunities for new and
existing employees. Yet growth brings challenges – and the company knows that
attracting and developing key talents is crucial in order to drive future success.
stakeholders expect of them. They must exercise individual judge-
ment and work with colleagues from different functional areas and
countries.
”We expect a very high standard,” he acknowledges. That is why
ensuring diversity has priority. “It is our aspiration to enhance diversity
in all management teams. Our objective is to have a high-performing
organisation where everyone has the opportunity to realise their
potential. We need to attract the best talent across genders and
cultural backgrounds. I think we’re achieving this with our new recruits,
but less so higher up the ranks. We’re a Danish company, so it’s natural
that historically we employed more Danes who’ve now become
leaders. As we’re growing outside Denmark, we want more managers
of other nationalities. While we’re making progress, we have a leaking
pipeline of women for senior management positions, and this simply
isn’t good enough. We value diversity of perspectives and should be a
leader – but we aren’t yet,” he concludes.
Novo Nordisk currently employ more than 41,000 people, and this
figure is expected to rise to 60,000 in the next decade. Yet with the
majority of the company’s growth taking place outside Denmark – in
countries where Novo Nordisk is not a household name – attracting
talented employees can be a challenge. “In Denmark we’re a big,
well-known company, fishing for talent in a small pond. But we’re
only just becoming visible in other countries, so attracting the best
international talent isn’t always easy,” explains Executive Vice
President and Chief of Staff Lars Fruergaard Jørgensen.
WANTED: TOP TALENTS
One solution to this recruitment challenge is Novo Nordisk’s global
Graduate Programme, which attracted over 10,000 applicants from
120 countries for 60 positions last year. “The Graduate Programme is
a great way for us to source global talents from different backgrounds
for specialised functional areas. This is a fantastic opportunity for
new graduates, as it provides a deep understanding of the organ-
isation, a global perspective of our business and the opportunity to
work with different cultures. We have former participants from the
Programme in many high-level roles throughout the company –
including me!” says Lars Fruergaard Jørgensen, who took part in the
very first Graduate Programme in 1991.
Finding the right people is no easy matter. “We work in a highly
regulated industry and operate in a complex business environment.
Every patient needs dedicated treatment and every country is
different. So on top of strong professional competences our employ-
ees must have a good understanding of societal dynamics and what
ENHANCING DIVERSITY
Novo Nordisk’s aspiration is to ‘enhance
diversity in all management teams’. To
monitor progress, two performance
indicators will be followed: percentage
of males/females and percentage of
local/non-local nationality across three
layers of management: entry level
(team leaders, managers), middle man-
agement (vice presidents, corporate
vice presidents, general managers) and
senior management (senior vice pres-
idents and executive vice presidents).
Year-end 2014 data will be used as the
baseline. No targets have been set as
this would be considered a discrim-
inatory practice in some countries.
Giulia Schivardi is a graduate
in Novo Nordisk’s Product
Supply organisation.
MOST INNOVATIVE PHARMACEUTICAL
COMPANY IN EUROPE
In Denmark, research and development is
the highest area of growth for Novo Nordisk,
requiring many new talented individuals. “In
the last decade, Copenhagen has become a
hot spot for diabetes and protein research.
We nurture local talent, but the challenge
is also to attract international talents to
work at our headquarters,” explains Mads
Krogsgaard Thomsen, executive vice pres-
ident and chief science officer.
“We therefore offer a number of PhD and
post-doctoral fellowships and fund research
programmes to translate basic research into
real medicine. I think that the ample funding
for our projects, access to state-of-the-art
technology and large pipeline of patient-
focused product candidates are what attract
talented researchers to work here,” he says.
Jacob Fuglsbjerg
Jeppesen, who was
appointed senior scientist at Novo Nordisk
last year, agrees: “After almost 10 years
doing basic research in physiology and
metabolism, I wanted to get closer to where
it matters for patients. My impression was
that Novo Nordisk was an
innovative,
focused and leading company within these
areas, so it was an obvious choice for me.”
In 2014, Novo Nordisk was ranked number
two in Science Careers Top Employers
Survey and the most innovative pharma-
ceutical company
in Europe by survey
participants. “Accolades such as this will
raise our profile globally and help us attract
the best people in the industry,” adds Mads
Krogsgaard Thomsen.
GLOBAL RECOGNITION
For many years, Novo Nordisk has been
ranked highly in surveys of the best workplaces
in countries including Denmark, the US, Brazil,
Australia, India and Mexico. “Today, people
want to work in a company that provides a
good blend of opportunities so that they can
achieve their career aspirations, but they also
want a meaningful job in a values-based com-
pany – and this is what we offer,” says Lars
Fruergaard Jørgensen.
Alan John Michelich, an R&D engineer from
the US who was employed at the company’s
headquarters in Denmark last year, believes
Novo Nordisk is on the right track: “I think
Novo Nordisk is unique in the way it attracts
talent, especially those from the millennial
generation such as me. New graduates are
looking for more than just a job; they’re
looking for a cause to believe in. They want
to work for a company that treats its
employees like real people, and not just
expendable entities. Novo Nordisk encom-
passes all of this.”
DEVELOPING FUTURE LEADERS
Novo Nordisk promises employees a life-
changing career: working here provides the
OUR BUSINESS
41
Group exercise at a
graduate recruitment event
in Denmark, April 2014.
opportunity to help improve quality of life
for millions of people around the world.
However, there is another dimension to this
promise too. Employees have the oppor-
tunity to take charge of their own careers. A
recent survey of new employees showed
that future career prospects, and learning
and development opportunities were the
two top attractions that drew them to
working for Novo Nordisk.
‘Learning by doing’ is at the heart of Novo
Nordisk’s development framework, with
70% of learning achieved through direct
experience, such as projects, job rotations
and extended business trips, 20% through
exposure, including mentorships and per-
formance feedback, and the last 10% via
traditional training courses.
“Real-life training is far superior to class-
room training,” points out Lars Fruergaard
Jørgensen. “Yes, learning tools in the class-
room are valuable, but we want employees
to get a deeper understanding of our
business and develop solid relationships
with internal stakeholders – this can only be
achieved through real-world experience.”
In 2014, the company appointed more than
1,500 employees to leadership positions,
and this figure is expected to grow. “It’s
critically important that we spot and develop
future leaders. I think being a front-line
manager is the most challenging task in the
company, as they’re squeezed between
employees and senior management. I think
we sometimes underprioritise training of
employees when they’re first promoted to a
management position and perhaps don’t
support them enough. This is something
we’ll be looking at going forward,” promises
Lars Fruergaard Jørgensen.
THE CULTURE CHALLENGE
Novo Nordisk has a strong culture and
values built by its employees over the last 90
years. In addition to driving long-term busi-
ness success, the company’s values attract
many employees to work for Novo Nordisk
– as was the case for Mirko Ceriani, who
joined Novo Nordisk’s European Busi-ness
Management Graduate Programme in 2014:
“What was, and still is, appealing to me
about being a Novo Nordisk employee is the
idea of working for a global company that
isn’t ‘simply’ the leader of the market it
operates in, but also achieves its business
success in a sustainable way – socially,
financially and environmentally.”
This approach also plays a significant factor
in keeping employees working at Novo
Nordisk. “We retain about 96% of our high
performers, and we need to maintain this as
we grow. We’re becoming a more attractive
employer, but we need to ensure that we
maintain our values, business ethics and
culture, as this is what makes us special,”
concludes Lars Fruergaard Jørgensen.
NOVO NORDISK:
SECOND-BEST SCIENCE
EMPLOYER IN THE WORLD
In October 2014, Novo Nordisk rank-
ed second in the Science Careers Top
Employers Survey, up from 11th posi-
tion in 2013.
The survey is based on 5,394 responses
from readers of Science and from
employees in the biotechnology and
pharmaceutical industry, who were
asked to rank the 20 best employers
based on a number of characteristics.
The driving characteristics, listed in
descending order of impact on overall
employer rankings, were:
1. Innovative leader in the industry
2. Treats employees with respect
3. Loyal employees
4. Socially responsible
5. Work culture values aligned.
NOVO NORDISK ANNUAL REPORT 2014
BE AWARE OF THE
RISK
There are, and always will be, risks associated
with Novo Nordisk’s business – risks that all
investors should be aware of.
One of the roles that come with Jesper
Brandgaard’s job as Novo Nordisk’s chief
financial officer is that of chairman of the
company’s Risk Management Board.
In this capacity he must ensure that key risks
are effectively
identified, assessed and
managed so that they will not affect the
company’s ability to achieve its business
objectives.
Due to the nature of its business, the
pharmaceutical industry is associated with
many potentially serious risks that investors
should keep in mind when making invest-
ment decisions. When asked about what he
sees as the main changes to Novo Nordisk’s
risk profile during 2014, Jesper Brandgaard
cites increased market risks caused by
stronger pressure on prices and reimburse-
ment – especially in the all-important US
market – and a lower risk of supply disrup-
tions. “We had a tight supply situation for
some products early in the year while we
were in the process of upgrading and
upscaling certain production plants, but
since mid-2014 we’ve seen a much better
supply–demand balance,”
Jesper
Brandgaard.
says
The US market situation is covered in
more detail in the article on p 23. Jesper
Brandgaard emphasises that competitive
pressures that increase the risk of lower
profitability of contracts with the large
purchasing organisations in the US are not a
new phenomenon: “There’s always been
competitive pressure – that’s the nature of
business. Is competition in the basal insulin
segment tougher today than it was a couple
of years ago? Certainly, but it’s not as if it’s
something that has happened overnight, as
some seem to think. In connection with all
our quarterly financial reports in 2014, I’ve
said that the pricing and rebating envir-
onment has become tougher, and it was
evident even before that. Our loss of a large
NOVO NORDISK ANNUAL REPORT 2014
contract with ESI [a pharmacy benefit
manager, ed.] for Victoza® and NovoLog®
back in 2013 is a case in point.”
The following is an overview of the main
types of risk that Novo Nordisk faces.
DELAYS OR FAILURE
OF PIPELINE PRODUCTS
Developing a new pharmaceutical product
is an expensive undertaking that can take
more than 10 years. It includes extensive
non-clinical tests and clinical trials as well as
an elaborate regulatory approval process,
including approval of
the production
facilities. During the process, various hurdles
may delay the development of a potential
product candidate and add substantial
expenses. In some cases, significant ob-
stacles could lead to the company eventually
deciding to abandon the development of
the potential product candidate. In Novo
Nordisk’s experience, there is a less than
35% chance of a diabetes product candidate
in phase 1 clinical trials ultimately being
approved for marketing, while the chance of
success is around 40% for products in phase
2 trials, rising to around 70% for products in
phase 3 trials. However, there is significant
uncertainty
timing and
success of the regulatory approval process.
regarding
the
MARKET RISKS
The principal market risks Novo Nordisk
experiences are:
• Price pressure and reimbursement
restrictions by payers
• The launch of new products by
established competitors
• Increased competition from producers of
biosimilar medicines in key markets.
Europe, China and the US are all main
markets for Novo Nordisk where payers –
both governments and private payers – take
measures to limit spending on medicines,
typically by driving down prices, demanding
higher rebates and/or restricting access to
and reimbursement of products. This is
unlikely to change in the foreseeable future.
For Novo Nordisk, reimbursement restrictions
pose a significant risk when launching a
new product such as Tresiba®. Despite the
patient benefits and data supporting the
health-economic benefits of this new basal
insulin, which has a duration of action
beyond 42 hours, it is not always possible to
obtain market access on what Novo Nordisk
considers reasonable conditions. In some
countries, the company may therefore not
launch Tresiba® or other new products
under the current conditions.
New products from established or new
competitors are another inherent market
risk. In 2014, competitors launched new
GLP-1 products and, within the insulin
segment, new products are under way,
including a biosimilar version of the best-
selling modern insulin product. How and to
what extent such events will change the
market dynamics is not possible to predict at
present. In addition to these global risks, in
some countries in the International Oper-
ations region, political instability or armed
conflicts may pose a risk to Novo Nordisk’s
business for varying lengths of time.
SUPPLY DISRUPTIONS
Failure or breakdown at one of Novo
Nordisk’s or the company’s key suppliers’
vital production facilities could adversely
affect operations and potentially cause
employee injuries or infrastructure damage.
Mitigating actions
include measures to
prevent and respond to fires, annual
inspections, back-up facilities and safety
inventories. To reduce supply risks and
optimise costs and logistics, Novo Nordisk
has established production sites in several
countries.
43
NOVO NORDISK’S RISK
MANAGEMENT POLICY
“In Novo Nordisk we will proactively
manage risk to ensure continued
growth of our business and to protect
our people, assets and reputation.
This means that we will:
• utilise an effective and integrated
risk management system while
maintaining business flexibility
• identify and assess material risks
associated with our business
• monitor, manage and mitigate
risks.”
Read more about Novo Nordisk’s risk
management process at novonordisk.
com/about_us.
marketing of NovoSeven®. As part of the
settlement, Novo Nordisk’s US affiliate
entered into a five-year Corporate Integrity
Agreement with the Office of the Inspector
General of the US Department of Health
and Human Services. Under that agreement,
the US affiliate added additional reporting
and other procedures to its already robust
compliance programme. Also in the US,
Novo Nordisk is a defendant in product
liability lawsuits related to hormone therapy
products and Victoza®. Read more about
these and other pending litigations against
Novo Nordisk and investigations involving
the company in note 3.7 on pp 77–78.
The cases mentioned above underline the
potential business ethics risks associated
with being a pharmaceutical company. To
minimise the risk of violating national and
international
regulations, Novo Nordisk
has, over the past decade, strengthened
its global and regional business ethics
compliance programmes. Global governance,
a business ethics policy and global business
ethics procedures, together with elaborate
training programmes and tests for em-
ployees, close monitoring of performance,
reporting requirements and audits, all aim to
mitigate business ethics risks.
stimulating
Protection of intellectual property through
patents is very important for promoting
innovation and
long-term
economic growth and job creation. Novo
Nordisk’s business model
is based on
developing new, innovative products, and
when the company makes significant new
inventions, it will typically seek to patent
them. Intellectual property risks occur if, for
example, a government does not recognise
the validity of patents or is unable to uphold
patent rights, or if a competitor infringes a
Novo Nordisk patent or challenges
its
validity.
NOVO NORDISK ANNUAL REPORT 2014
QUALITY AND PRODUCT SAFETY ISSUES
Quality and product safety issues may arise
if, for example, a production facility is not
continuously in compliance, a product is not
within specifications or if side effects that
were not detected in clinical trials become
apparent when a product is used for long
periods of time. Novo Nordisk proactively
manages such risks through its quality
management system, a key priority of which
is to safeguard product quality and minimise
risks to patient safety. The quality man-
agement system aims to ensure that the
company is in compliance with all regulatory
requirements, and
includes standard
it
operating procedures, quality and release
controls, quality audits, quality improvement
plans and systematic senior management
reviews.
FINANCIAL RISKS
Novo Nordisk’s main financial risks relate to
exchange rates and tax disputes. Novo
Nordisk’s reporting currency and the func-
tional currency of corporate operations is
the Danish krone, which is closely linked to
the euro within a narrow range of ±2.25%.
However, the majority of the company’s
sales are in US dollars, Chinese yuan,
Japanese yen and British pounds. Exchange
rate risk is therefore the company’s biggest
financial risk, and the risk has grown in
importance as the size of international
markets and the share of sales in different
currencies have increased. To manage this
risk, the company hedges expected future
cash flows for selected key currencies. Read
more about how Novo Nordisk manages
this risk in notes 4.2 and 4.3 on pp 81–84.
In the course of conducting business
globally, transfer pricing disputes with tax
authorities may occur. Novo Nordisk’s policy
is to pursue a competitive tax level, meaning
at or below the average for the company’s
peer group, in a responsible way. This means
paying relevant tax in jurisdictions where its
business activity generates profits. As a
general rule, Novo Nordisk’s affiliates pay
corporate taxes in the countries in which
they operate. To manage uncertainties
regarding tax, Novo Nordisk has negotiated
multi-year transfer pricing agreements with
tax authorities in key markets. Read more
about the taxes paid by Novo Nordisk in
2014 in note 2.6 on pp 69–70.
INFORMATION TECHNOLOGY RISKS
Well-functioning IT systems are critical for
Novo Nordisk’s ability to operate effectively.
Furthermore, they hold confidential infor-
mation that, if disclosed, could have a severe
impact on Novo Nordisk’s competitive
situation. An information security strategy is
in place to mitigate the risk of intruders
causing damage to systems and gaining
access to critical data and systems. Specific
measures include awareness campaigns,
access controls, and intrusion detection and
prevention systems.
BUSINESS ETHICS AND LEGAL RISKS
Business ethics violations, patent and
contract disputes are the main risks in this
area. The pharmaceutical industry is tightly
regulated in many respects, including what
promotional claims it can make about its
products and how it can interact with
doctors and other healthcare professionals.
In China,
the government announced
measures in 2013 to crack down on illegal
business activities in the pharmaceutical
industry, and several companies, including
Novo Nordisk, were
inspected by the
authorities as part of this effort. The
inspections concluded so far relating to
Novo Nordisk resulted in a few observations
that had no material impact on the com-
pany’s business in China.
In the US, Novo Nordisk settled two civil
cases with the US Department of Justice in
improper
June 2011 regarding alleged
SHARES
AND CAPITAL STRUCTURE
Through open and proactive communication, Novo Nordisk seeks
to provide the basis for fair and efficient pricing of its shares.
limited
SHARE CAPITAL AND OWNERSHIP
Novo Nordisk’s total share capital of DKK
530,000,000 is divided into an A share
capital of nominally DKK 107,487,200 and
a B share capital of nominally DKK
422,512,800. The company’s A shares are
not listed and are held by Novo A/S, a
liability company
Danish public
wholly owned by
the Novo Nordisk
Foundation. The Foundation has a dual
objective: to provide a stable basis for
commercial and research activities con-
ducted by the companies within the Novo
Group (of which Novo Nordisk is the largest),
and to support scientific and humanitarian
purposes. According to the Articles of
Association of the Foundation, the A shares
cannot be divested.
As of 31 December 2014, Novo A/S also
held a nominal value of DKK 32,762,800 of
B share capital. Novo Nordisk’s B shares are
listed on Nasdaq Copenhagen and on the
New York Stock Exchange as American
Depository Receipts (ADRs). Novo Nordisk’s
A and B shares are calculated in units of DKK
0.20. Each A share carries 200 votes and
each B share carries 20 votes. As Novo
Nordisk’s B shares are in bearer form, no
complete record of all shareholders exists.
Based on available sources of information
about the company’s shareholders as of 31
December 2014, it is estimated that shares
were geographically distributed as shown in
the chart on the next page. As of 31
December 2014, the free float of listed B
shares was 89.6%, excluding the Novo A/S
holding and Novo Nordisk’s holding of
treasury shares, which as of 31 December
2014 was DKK 11,361,431 nominally. For
details on share capital, see note 4.1 on pp
79–80.
CAPITAL STRUCTURE
AND DIVIDEND POLICY
Novo Nordisk’s Board of Directors and
Executive Management consider that the
current capital and share structure of Novo
Nordisk serves the interests of the share-
holders and the company well, as it provides
strategic flexibility to pursue Novo Nordisk’s
vision and a good balance between long-
term shareholder value creation and com-
petitive shareholder return in the short term.
Novo Nordisk’s guiding principle is that any
excess capital, after the funding of organic
and
opportunities
potential
growth
acquisitions, should be returned to investors.
The company applies a pharmaceutical
industry payout ratio to dividend payments,
which are complemented by share repurchase
programmes. As illustrated on the right,
Novo Nordisk has continuously increased
both the payout ratio and the dividend paid
over the last five years. The dividend for 2013
recorded in March 2014 was equal to DKK
4.50 per A and B share of DKK 0.20, as well
as for ADRs. This corresponds to a payout
ratio of 47.1%, which is in line with the 2013
peer group average of 48.0%. For 2014, the
Board of Directors will propose a dividend of
5.00 DKK, which corresponds to a payout
ratio of 48.7%, and an increase of 11% vs
last year. Novo Nordisk does not pay a
dividend on its holding of treasury shares.
Shareholders’ enquiries concerning dividend
payments and shareholder accounts should
be addressed to Investor Service. Read more
on the back cover.
During the 12-month period beginning 30
January 2014, Novo Nordisk repurchased
shares worth DKK 15 billion. Since 2008,
the share
repurchase programme has
primarily been conducted in accordance
with the provisions of European Commission
Regulation No 2273/2003 of 22 December
2003 (also known as the Safe Harbour
Regulation). In the programme a financial
institution is appointed as lead manager to
execute the repurchases independently and
without influence from Novo Nordisk.
SHARE REPURCHASE PROGRAMME FOR
30 JANUARY 2015 TO 2 FEBRUARY 2016
For the next 12 months, Novo Nordisk has
decided to implement a new share repurchase
programme. The expected total repurchase
value of B shares amounts to a cash value of
up to DKK 15 billion. Novo Nordisk expects to
implement the major part of the new share
repurchase programme according to the Safe
Harbour Regulation. At the 2015 Annual
General Meeting, the Board of Directors will
propose a further reduction of the company’s
B share capital, corresponding to approx-
imately 1.9% of the total share capital, by
cancelling 50 million treasury shares.
After the implementation of the share
capital reduction, Novo Nordisk’s share
capital will amount to DKK 520,000,000
divided into an A share capital of DKK
107,487,200 and a B share capital of DKK
412,512,800.
SHARE PRICE DEVELOPMENT
Novo Nordisk’s share price increased by
31% from its 2013 close of DKK 198.8 to its
31 December 2014 close of DKK 260.3. For
comparison the Danish OMXC20 CAP stock
index grew 18% and the pharma peer group
grew 12% during 2014. The increase in
Novo Nordisk’s share price during 2014 is
assumed to reflect its sustained leadership
position
in the growing diabetes care
market, coupled with a continued improve-
ment in operating margins and the pro-
gression of key R&D projects, including the
approvals of Xultophy®
in Europe and
Saxenda® in the US. The total market value
of Novo Nordisk’s B shares, excluding
treasury shares, was DKK 535 billion at the
end of 2014.
COMMUNICATION
WITH SHAREHOLDERS
To keep investors updated on performance
and the progress of clinical development
programmes, Novo Nordisk hosts conference
calls with Executive Management following
the release of financial results and at other
key events. Executive Management and
Investor Relations also travel extensively to
ensure that all investors with a major holding
of Novo Nordisk shares can meet with the
company on a regular basis and other
shareholders and potential investors also
have access to the company’s Management
and Investor Relations.
ANALYST COVERAGE
Novo Nordisk is currently covered by 34 sell-
side analysts, including the major global
investment banks that regularly produce
research reports on Novo Nordisk. A list of
analysts covering Novo Nordisk can be
found at novonordisk.com/investors, where
Annual Reports and Form 20F are available
from 2000 onwards, company announce-
ments and Annual General Meeting in-
formation as of 2005. The most recent
financial, social and environmental results, a
calendar of investor-relevant events, investor
presentations, background information, and
so on are also available.
45
300
240
180
120
60
0
SHARE AND OWNERSHIP STRUCTURE
OWNERSHIP STRUCTURE
Novo Nordisk
Foundation
Novo A/S
Institutional and
private investors
74.5% of votes
26.5% of capital
25.5% of votes
73.5% of capital
A shares
537m shares
B shares
2,113m shares
Novo Nordisk A/S
GEOGRAPHIC DISTRIBUTION OF SHAREHOLDERS*
% of share capital
2013 2014
%
40
30
20
10
0
Note: Treasury shares included in share capital but have no voting right.
* Calculated using shareholders’ registered home countries.
Denmark
North
America
UK and
Ireland
Other
SHARE PRICE PERFORMANCE
SHARE PRICE PERFORMANCE
Novo Nordisk share price and indexed peers
Novo Nordisk Pharmaceutical industry peers* OMXC20 CAP
PRICE DEVELOPMENT AND MONTHLY TURNOVER
OF NOVO NORDISK B SHARES
Turnover of B shares (left) Novo Nordisk’s B share
closing prices (right)
DKK
300
270
240
210
180
DKK billion
25
20
15
10
5
0
Mar
Jun
2013
Sep
Dec Mar
Sep
Dec
Jun
2014
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2014
* Pharma peers comprise AstraZeneca, Bristol-Myers Squibb, Eli Lilly,
GlaxoSmithKline, Lundbeck, Merck, Novartis, Pfizer, Roche and Sanofi.
CASH RETURN TO SHAREHOLDERS
ANNUAL CASH RETURN TO SHAREHOLDERS
DEVELOPMENT IN SHARE CAPITAL
Dividend Share repurchase Free cash flow
Share capital
DKK billion
DKK million
35
28
21
14
7
0
(–3%)
(–2%)
(–4%)
(–2%)
600
550
500
450
400
2011
2012
2013
2014
2015E
2011
2012
2013
2014
2015E
Note: Dividends are allocated to the year of dividend pay.
CORPORATE
GOVERNANCE
In 2014, the focus has been to further develop the governance of the company. The yearly
board evaluation facilitated by external consultants revealed strong governance and
performance by the Board of Directors and Executive Management. The process also resulted
in clearer delimitation of the roles and responsibilities of the Board of Directors and Executive
Management, establishment of a continued development programme for the Board of
Directors as well as a decision to establish a Remuneration Committee in 2015.
GOVERNANCE STRUCTURE
SHAREHOLDERS
Shareholders have ultimate authority over the company and exercise
their rights to make decisions at general meetings. Resolutions can
generally be passed by a simple majority.
However, resolutions to amend the Articles of Association require
two-thirds of votes cast and capital represented, unless other
adoption requirements are imposed by the Danish Companies Act.
At the annual general meeting, shareholders approve the annual
report and any amendments to the company’s Articles of Association.
Shareholders also elect board members and the independent auditor.
Novo Nordisk’s share capital is divided into A shares and B shares.
Special rights attached to A shares include pre-emptive subscription
rights in the event of an increase in the A share capital, pre-emptive
purchase rights in the event of a sale of A shares, while B shares take
priority for liquidation proceedings.* Read more about shares and
capital structure on pp 44–45.
BOARD OF DIRECTORS
Novo Nordisk has a two-tier management structure consisting of the
Board of Directors and Executive Management. The two bodies are
separate and no one serves as a member of both. The Board of
Directors determines the company’s overall strategy and follows up
on its implementation, supervises the performance, ensures adequate
management and organisation and, as such, actively contributes to
developing the company as a focused, sustainable, global pharma-
ceutical company. The Board of Directors supervises Executive Man-
agement in its decisions and operations. The Board of Directors may
also issue new shares or buy back shares in accordance with
authorisations granted by the annual general meeting and recorded
in the meeting minutes. For minutes from annual general meetings,
see novonordisk.com/about_us. The Board of Directors has 11
members, seven of whom are elected by shareholders and four by
employees in Denmark. Novo Nordisk’s Board of Directors met seven
times during 2014.
Shareholder-elected board members serve a one-year term and may
be re-elected. Members must retire at the first annual general
meeting after reaching the age of 70. Five of the seven shareholder-
elected board members are independent as defined by the Danish
Corporate Governance Recommendations. Read more on pp 52–53.
A proposal for nomination of board members is presented by the
Nomination Committee to the Board of Directors, taking into account
required competences as defined by the Board of Directors’
competence profile and reflecting the result of a self-assessment
process facilitated by internal or external consultants. The assessment
process is based on written questionnaires and evaluates the Board
of Directors’ composition and the skills of its members, including
whether each board member and executive participates actively in
board discussions and contributes with independent judgement.
To ensure that discussions include multiple perspectives representing
the complex, global pharmaceutical environment, the Board of
Directors aspires to be diverse in gender and nationality. Currently,
one shareholder-elected board member is female and six of the
seven shareholder-elected board members are non-Danes. In 2013,
the Board of Directors increased its diversity ambition and set out
new targets with the aim that by 2017 it will consist of at least two
shareholder-elected board members with Danish nationality and at
least two shareholder-elected board members with a nationality
other than Danish – and at least two shareholder-elected board
members of each gender. In accordance with section 99b of the
Danish Financial Statements Act, Novo Nordisk discloses its diversity
policy, targets and current performance in the UN Global Compact
Communication on Progress, which is available at novonordisk.com/
annualreport.
* A shares take priority for dividends below 0.5%. B shares take priority for dividends between
0.5% and 5%. However, in practice, A shares and B shares receive the same amount of
dividend per share of DKK 0.01.
Novo Nordisk’s new headquarters
in Bagsværd, Denmark, were
inaugurated in February 2014.
47
The Board of Directors’ self-assessment conducted in 2014 was
facilitated by external consultants and revealed strong governance
and performance by the Board and Executive Management. The
process also resulted in clearer delimitation of the roles and
responsibilities of the Board and Executive Management, establish-
ment of a continued development programme for the Board as well
as a decision to establish a Remuneration Committee in 2015. In
order to support continued fulfilment of the Novo Nordisk Way,
criteria for board members include integrity, accountability, fairness,
financial literacy, commitment and desire for innovation. Members
are also expected to have experience of managing major companies
that develop, manufacture and market products and services
globally. The competence profile, which includes the nomination
criteria, is available at novonordisk.com/about_us. Under Danish law,
Novo Nordisk’s employees in Denmark are entitled to be represented
by half of the total number of board members elected at the annual
general meeting. In 2014, employees elected four board members
from among themselves – two male and two female, all Danes.
Board members elected by employees serve a four-year term and
have the same rights, duties and responsibilities as shareholder-
elected board members.
CHAIRMANSHIP
The annual general meeting directly elects the chairman and the vice
chairman of the Board of Directors. The Chairmanship carries out
administrative tasks such as planning board meetings to ensure a
balance between overall strategy-setting and financial and man-
agerial supervision of the company. Other tasks include reviewing
the fixed asset investment portfolio and recommending the
remuneration of board members and Executive Management. In
practice, the Chairmanship has up until now had the role and
responsibility of a Remuneration Committee, though the Board of
Directors has decided to establish a Remuneration Committee in
2015. In March 2014, the Annual General Meeting re-elected the
chairman, Göran Ando, and the vice chairman, Jeppe Christiansen.
See novonordisk.com/about_us for a report on the Chairmanship’s
activities.
AUDIT COMMITTEE
The four members of the Audit Committee are elected by the Board
of Directors from among its members. Three members qualify as
independent and have been designated as financial experts as
defined by the US Securities and Exchange
Commission (SEC). Under Danish law,
three members qualify as
financial experts
and as
independent. One member is an employee representative. The Audit
Committee assists the Board of Directors with oversight of the
external auditors, the internal audit function, the procedure for
handling complaints regarding accounting, internal accounting
controls, auditing or financial reporting matters and business ethics
matters, financial, social and environmental reporting, business
ethics compliance, post-completion reviews and post-investment
reviews, long-term incentive programmes and IT security. In 2014,
the Board of Directors re-elected Hannu Ryöppönen as chairman
and Liz Hewitt and Stig Strøbæk as members of the Audit Committee
and, furthermore, elected Helge Lund as a new member. See
novonordisk.com/about_us for a report on the Audit Committee’s
activities.
NOMINATION COMMITTEE
The Nomination Committee consists of four members. Two members
qualify as independent, while one member is an employee
representative. The Nomination Committee assists the Board with
oversight of the competence profile and composition of the Board,
nomination of members and committees, and other tasks on an ad
hoc basis as specifically decided by the Board. In 2014, the Board of
Directors elected Göran Ando as chairman and Bruno Angelici, Liz
Hewitt and Søren Thuesen Pedersen as members of the Nomination
Committee. See novonordisk.com\about_us for a report on the
Nomination Committee’s activities.
EXECUTIVE MANAGEMENT
Executive Management is responsible for the day-to-day manage-
ment of the company. In November 2014, one executive left and
Executive Management now consists of the chief executive officer,
the president plus four executives. They are responsible for overall
conduct of the business and all operational matters, the 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
of Directors and Novo Nordisk’s stakeholders. Executive Management
meets at least once a month and often more frequently. The Board
of Directors appoints members of Executive Management and
determines remuneration. The Chairmanship reviews the perform-
ance of the executives.
CONTINUED
CORPORATE GOVERNANCE CODES AND PRACTICES
COMPLIANCE
GOVERNANCE STRUCTURE
ASSURANCE
Danish and foreign laws
and regulations
SHAREHOLDERS
BOARD OF DIRECTORS
Corporate governance
standards
CHAIRMANSHIP*
AUDIT
COMMITTEE
NOMINATION
COMMITTEE
Novo Nordisk Way
EXECUTIVE MANAGEMENT
ORGANISATION
* The Chairmanship is directly elected by the annual general meeting.
Audit of financial data
and review of social
and environmental data
(internal and external)
Facilitation and
organisational audit
(internal)
Quality audit and
inspections (internal
and external)
ASSURANCE
The company’s financial reporting and the internal controls over
financial reporting processes are audited by an independent audit
firm elected at the annual general meeting. As part of Novo Nordisk’s
commitment to its social and environmental responsibility, the
company voluntarily includes an assurance report for social and
environmental reporting in the annual report. The assurance provider
reviews whether the social and environmental performance
information covers aspects deemed to be material and verifies the
internal control processes for the information reported.
Novo Nordisk’s internal audit function provides independent and
objective assurance, primarily within internal control of financial
processes and business ethics. To ensure that the internal financial
audit function works independently of Executive Management, its
charter, audit plan and budget are approved by the Audit Committee.
Three other types of assurance activity – quality audits, organisational
audits and values audits, called facilitations – help ensure that the
company adheres to high quality standards and operates in accord-
ance with the Novo Nordisk Way.
COMPLIANCE
Novo Nordisk’s B shares are listed on Nasdaq Copenhagen and on
the New York Stock Exchange (NYSE) as American Depository
Receipts (ADRs). The applicable corporate governance codes for each
stock exchange and a review of Novo Nordisk’s compliance are
available at novonordisk.com/about_us.
In accordance with section 107b of the Danish Financial Statements
Act, Novo Nordisk discloses its mandatory corporate govern-
ance report at novonordisk.com/about_us/corporate_governance/
compliance.asp. Novo Nordisk adheres to all but the following
recommendations:
• The Board of Directors has not established a Remuneration
Committee (as mentioned above a Remuneration Committee will
be established in 2015).
• Current employment contracts for Executive Management allow in
some instances for severance payments of more than 24 months’
fixed base salary plus pension contribution.
• The majority of the Nomination Committee’s members are not
independent. Two members are not independent, including the
Chairman, and two members are independent.
Novo Nordisk complies with the corporate governance standards of
NYSE applicable to foreign listed private issuers. As a controlled
company, Novo Nordisk is not obliged to comply with all the
standards established by NYSE. Furthermore, Novo Nordisk, as a
foreign private issuer, is permitted to follow home country practice,
which is the case in relation to independence requirements, audit
committee, equity compensation plans, code of business conduct
and ethics, and CEO certification. A summary of the significant ways
in which Novo Nordisk’s corporate governance practices differ from
the NYSE corporate governance listing standards can be found
in the corporate governance report at novonordisk.com/about_us/
corporate_governance/compliance.asp.
Novo Nordisk is part of the Novo Group and adheres to the Charter
for Companies in the Novo Group, which is available at novo.dk.
However, all strategic and operational matters are solely decided by
the Board of Directors and Executive Management of Novo Nordisk.
Read more about the Novo Group on p 44.
REMUNERATION
49
The long-term share-based incentive pro-
gramme for Executive Management has,
until now, been based on a calculation of
economic value creation compared with
planned performance and adjusted if certain
non-financial targets were not met. As the
sales growth to a large extent drives the
financial development of the company and
hence shareholder return, a new adjustment
factor was introduced in 2014.
Remuneration of the Board of Directors and
Executive Management is assessed on an
annual basis against a benchmark of Nordic
companies as well as European pharma-
ceutical companies that are similar to Novo
Nordisk in size, complexity and market
capitalisation. The results are presented to
the Board of Directors by the Chairman at its
October meeting. The company strives for
simplicity when devising the remuneration
package, and its remuneration principles
provide guidance for the remuneration of
the Board of Directors and Executive Man-
agement. These principles are available at
novonordisk.com /about _us /corporate_
governance/remuneration.asp.
BOARD OF DIRECTORS’ REMUNERATION
The remuneration of Novo Nordisk’s Board
of Directors comprises a fixed base fee,
a multiplier of the fixed base fee for the
Chairmanship and members of
the
company’s Audit Committee and Nomina-
tion Committee, fees for ad hoc tasks and a
travel allowance. At the December meeting,
the Board of Directors agrees on recom-
mendations for remuneration levels for the
next financial year. In connection with the
approval of the annual report, the Board of
Directors endorses the actual remuneration
for the past financial year and the recom-
mendation on remuneration levels for the
current financial year. These are then
presented to the annual general meeting for
approval.
TRAVEL AND OTHER EXPENSES
All board members who reside outside
Denmark are paid a fixed travel allowance
per board meeting: 3,000 euros for Europe-
based board members and 6,000 euros for
board members based outside Europe.
Otherwise, no travel allowance is paid to
board members when attending board
meetings outside Denmark. Expenses such
as travel and accommodation in relation to
board meetings as well as those associated
with continuing education are reimbursed.
Novo Nordisk also pays social security taxes
imposed by foreign authorities.
VARIABLE REMUNERATION
Board members are not offered stock
options, warrants, restricted stock or parti-
cipation in other incentive schemes.
EXECUTIVE
MANAGEMENT’S REMUNERATION
The
remuneration of Novo Nordisk’s
Executive Management is proposed by the
Chairmanship and approved by the Board of
Directors. Remuneration packages for exec-
utives comprise a fixed base salary, a cash-
based incentive, a share-based incentive, a
pension contribution and other benefits.
The split between fixed and variable remun-
eration is intended to result in a reasonable
part of the salary being linked to perform-
ance, while promoting sound, long-term
business decisions to meet the company’s
objectives. All incentives are subject to claw-
back if it is subsequently determined that
payment was based on information that
was manifestly misstated.
FIXED BASE SALARY
The fixed base salary is intended to attract
and retain executives with the professional
and personal competences required to drive
the company’s performance.
CONTINUED
BOARD OF DIRECTORS
IN 2014, THE BASE FEE FOR MEMBERS OF THE BOARD OF DIRECTORS WAS DKK 500,000 (DKK 500,000 IN 2013)
DKK million
2014
2013
Fee for
ad hoc tasks
and com-
base fee mittee work
Fixed
Travel
allowance
Total
Fee for
ad hoc tasks
and com-
base fee mittee work
Fixed
Travel
allowance
Total
1.5
1.0
0.5
Göran Ando3, 4 (chairman of the Board and
of the Nomination Committee)
Jeppe Christiansen1 (vice chairman of the Board)
Hannu Ryöppönen (chairman of the Audit Committee)
Liz Hewitt (member of the Audit Committee and
0.5
the Nomination Committee)
Helge Lund1 (member of the Audit Committee)
0.4
0.5
Stig Strøbæk (member of the Audit Committee)
0.5
Bruno Angelici (member of the Nomination Committee)
Liselotte Hyveled1
0.4
0.5
Thomas Paul Koestler
Anne Marie Kverneland
0.5
Søren Thuesen Pedersen (member of the Nomination Committee) 0.5
Henrik Gürtler2
0.1
Ulrik Hjulmand-Lassen2
0.1
Sten Scheibye2
–
Kurt Anker Nielsen2
–
Total
7.0
–
–
0.5
0.4
0.2
0.3
0.1
–
–
0.0
0.1
–
–
–
–
1.6
0.1
–
0.1
0.1
0.1
–
0.1
–
0.3
–
–
–
–
–
–
0.8
1.6
1.0
1.1
1.0
0.7
0.8
0.7
0.4
0.8
0.5
0.6
0.1
0.1
–
–
9.45
1.4
0.8
0.5
0.5
–
0.5
0.5
–
0.5
0.5
0.5
0.5
0.5
0.4
0.1
7.2
–
–
0.5
0.3
–
0.2
0.1
–
–
0.1
–
–
–
–
0.1
1.3
0.1
–
0.1
0.1
–
–
0.1
–
0.3
–
–
–
–
–
–
0.7
1.5
0.8
1.1
0.9
–
0.7
0.7
–
0.8
0.6
0.5
0.5
0.5
0.4
0.2
9.25
1. Jeppe Christiansen was fi rst elected at the Annual General Meeting in March 2013. Helge Lund and Liselotte Hyveled were fi rst elected in March 2014. 2. Sten Scheibye
and Kurt Anker Nielsen resigned as of March 2013. Henrik Gürtler and Ulrik Hjulmand-Lassen resigned as of March 2014. 3. Novo Nordisk provides secretarial assistance to
the chairman in Denmark and the UK. 4. As Göran Ando also holds the position of chairman of the Board, he has not received a fee as chairman of the Nomination Committee.
5. Excluding social security taxes paid by Novo Nordisk amounting to less than DKK 1 million (less than DKK 1 million in 2013).
NOVO NORDISK ANNUAL REPORT 2014
eng08 - 31.01 - 49-51.indd 2
31/01/15 20.49
CASH-BASED INCENTIVE
The cash-based incentive is designed to
incentivise individual performance and the
achievement of a number of predefined
short-term functional and individual busi-
ness targets linked to goals in the company’s
Balanced Scorecard. Short-term targets for
the chief executive officer are set by the
Chairman of the Board of Directors, while
the targets for the other members of
Executive Management are set by the CEO.
The Chairmanship evaluates the degree of
achievement for each member of Executive
Management based on input from the CEO.
In March 2014, the Board of Directors
determined that the 2014 maximum bonus
would be up to 12 months’ fixed base salary
plus pension contribution for the CEO and
up to nine months’ fixed base salary plus
pension contribution for the remaining five
members of Executive Management.
is designed
to promote
SHARE-BASED INCENTIVES
The long-term share-based incentive pro-
gramme
the
collective performance of Executive Man-
agement and align the interests of executives
and shareholders. Share-based incentives
are linked to both financial and non-financial
targets. The long-term incentive programme
is based on a calculation of economic value
creation compared with planned perform-
ance. In line with Novo Nordisk’s long-term
financial targets, the calculation of economic
value creation
reported
operating profit after tax reduced by a
weighted average cost of capital-based
return requirement on average invested
capital.
is based on
Given that the sales growth to a large extent
drives the financial development of the
company and hence economic value crea-
tion, a new adjustment factor was intro-
duced in 2014 related to this. The calculated
economic value creation is further adjusted
if certain non-financial targets are not met.
Non-financial targets are determined on the
basis of an assessment of the objectives
regarded as particularly important for the
long-term
fulfilment of the company’s
performance. Besides financial and sales
growth targets, the 2014 targets consisted
of 16 targets linked to the company’s
Balanced Scorecard within the categories of
research and development, quality, patients,
employees, environment and reputation.
Targets within research and development
were related to specific milestones such as
execution of trials, product approvals and
product launches.
Based on these principles, a proportion of
the calculated economic value creation is
allocated to a joint pool for the participants,
who include Executive Management and
other members of the Senior Management
Board.
In March 2014, the Board of Directors
determined that the 2014 maximum for
Executive Management would be 12 months
for the CEO and nine months for the other
members of Executive Management. If the
targets are met for economic value creation
and sales growth, and at
least 85%
performance is reached for non-financial
targets, the allocation to the joint pool
would correspond to six months’ base salary
plus pension contribution for the CEO and
four and a half months’ base salary plus
pension contribution for the other members
of Executive Management. Further informa-
tion on Novo Nordisk’s share-based incent-
ives is available at novonordisk.com/about_us.
PENSION
Pension contributions are paid to enable
income for
executives to build up an
retirement.
OTHER BENEFITS
Other benefits are added to ensure that
overall remuneration is competitive and
aligned with local practice. Such benefits
are approved by the Board of Directors via
delegation of powers to the Chairmanship.
In addition, executives may participate in
employee benefit programmes such as
employee share purchase programmes.
contracts allow
SEVERANCE PAYMENT
Novo Nordisk may terminate employment by
giving executives 12 months’ notice.
Executives may terminate their employment
by giving Novo Nordisk six months’ notice. In
addition to the notice period, executives are
entitled to a severance payment. Current
severance
employment
payments of up to 36 months’ fixed base
salary plus pension contribution in the event
of a merger, acquisition or takeover of Novo
Nordisk. If an executive’s employment is
terminated by Novo Nordisk for other reasons,
the severance payment is three months’ fixed
base salary plus pension contribution per year
of employment as an executive, taking into
account previous employment history. In no
event will the severance payment be less than
12 months’ or more than 36 months’ fixed
base salary plus pension contribution.
The existing employment contracts will not
be changed. For the two executives who
joined Executive Management in 2013 and
for all future employment contracts for
executives, the severance payment will be no
more than 24 months’ fixed base salary plus
pension contribution, which will bring Novo
Nordisk into alignment with the Danish
Corporate Governance Recommendations in
the long term.
COMPOSITION OF EXECUTIVE REMUNERATION
2014 ON-TARGET PERFORMANCE
Fixed base salary Cash bonus Share-based incentive Pensions Benefits
CEO
Other members of Executive Management
0
10
20
30
40
50
60
70
80
90
100%
REMUNERATION PACKAGE COMPONENTS
Remuneration
Board of
Directors
Executive
Management
Comments relating
to Executive Management
Fixed fee/base salary
Fee for committee work
Fee for ad hoc tasks
Cash bonus
Share-based incentive
Pensions
Travel allowance and
other expenses
Benefits
Severance payment
Accounts for approximately 25–50% of the
total value of the remuneration package*
Up to 6–12 months’ fixed base salary + pension
per year
Up to 9–12 months’ fixed base salary + pension
contribution per year
25–30% of fixed base salary and cash-based
incentive
Executive Management receives a minor travel
allowance equal to that of all other Denmark-
based employees
Non-monetary benefits such as company car
and phone
Up to 24 months’ fixed base salary + pension.
The employment contracts entered into before
2008 exceed the 24-month limit, though will
not exceed 36 months’ fixed base salary plus
pension contribution
* The interval 25–50% states the span between ‘maximum performance’ and ‘on-target performance’.
SALES BELOW INCENTIVE TARGET REDUCE SHARE ALLOCATION FOR 2014
While Novo Nordisk exceeded the planned target for economic value creation in 2014, the company did not meet its sales growth objective
established for the share-based long-term incentive programme.
The sales growth in local currencies was realised at 8.3% versus an incentive target of 10.0%. As a consequence, the allocation of shares
under the long-term incentive programme has been reduced to reflect the lower sales performance. The performance for non-financial
targets in 2014 did meet the predefined targets and hence no further reduction in allocation has been applied.
51
REMUNERATION OF EXECUTIVE MANAGEMENT AND OTHER MEMBERS
OF THE SENIOR MANAGEMENT BOARD
REMUNERATION OF EXECUTIVE MANAGEMENT AND OTHER MEMBERS
OF THE SENIOR MANAGEMENT BOARD
2014
2013
DKK million
DKK million
Executive Management
Lars Rebien Sørensen
Executive Management
Jesper Brandgaard
Lars Rebien Sørensen
Lars Fruergaard Jørgensen
Jesper Brandgaard
Lise Kingo1
Lars Fruergaard Jørgensen
Jakob Riis
Lise Kingo1
Kåre Schultz
Jakob Riis
Mads Krogsgaard Thomsen
Kåre Schultz
Mads Krogsgaard Thomsen
Executive Management in total
Executive Management in total
Other members of the Senior
Management Board in total2
Other members of the Senior
Management Board in total2
Share allocation3
Fixed
base
salary
Fixed
base
salary
10.4
5.8
10.4
4.4
5.8
4.8
4.4
4.4
4.8
7.3
4.4
5.8
7.3
5.8
42.9
42.9
83.34
Cash
bonus
Cash
bonus
9.5
3.9
9.5
2.2
3.9
2.0
2.2
1.8
2.0
4.3
1.8
3.9
4.3
3.9
27.6
27.6
28.7
2014
Pension
Benefi ts
Pension
Benefi ts
Share-
based
incentive
Share-
based
incentive
5.0
2.5
5.0
1.6
2.5
1.7
1.6
1.5
1.7
3.1
1.5
2.5
3.1
2.5
17.9
17.9
21.9
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
2.1
2.1
21.6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
Total
25.2
12.5
25.2
8.5
12.5
8.8
8.5
8.0
8.8
15.0
8.0
12.5
15.0
12.5
90.5
90.5
155.5
Fixed
base
salary
Fixed
base
salary
10.1
5.7
10.1
4.1
5.7
5.1
4.1
4.1
5.1
6.3
4.1
5.7
6.3
5.7
41.1
41.1
82.74
Cash
bonus
Cash
bonus
5.1
2.4
5.1
1.4
2.4
1.9
1.4
1.4
1.9
2.7
1.4
2.4
2.7
2.4
17.3
17.3
32.3
2013
Pension
Benefi ts
Pension
Benefi ts
Share-
based
incentive
Share-
based
incentive
3.8
2.0
3.8
1.4
2.0
1.8
1.4
1.4
1.8
2.4
1.4
2.0
2.4
2.0
14.8
14.8
25.5
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
2.1
2.1
14.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
Total
19.3
10.4
19.3
7.2
10.4
9.1
7.2
7.2
9.1
11.7
7.2
10.4
11.7
10.4
75.3
75.3
154.9
83.34
28.7
21.9
21.6
–
66.2
155.5
66.2
82.74
32.3
25.5
14.4
–
51.5
154.9
51.5
Share allocation3
51.5
1. Following a change in the distribution of responsibilities among the members of Executive Management, it has been decided to reduce the number of executive positions
from seven to six. In this connection EVP Lise Kingo has decided to leave Novo Nordisk as of November 2014. The 2014 remuneration for Lise Kingo is included in the above
1. Following a change in the distribution of responsibilities among the members of Executive Management, it has been decided to reduce the number of executive positions
table, wheras severance payments of DKK 32.2 million are not included. 2. The total remuneration for 2014 includes remuneration to 31 senior vice presidents (33 in 2013),
from seven to six. In this connection EVP Lise Kingo has decided to leave Novo Nordisk as of November 2014. The 2014 remuneration for Lise Kingo is included in the above
none of whom have retired or left the company (fi ve in 2013). 3. The joint pool of shares is locked up for three years before it is transferred to the participants employed at the
table, wheras severance payments of DKK 32.2 million are not included. 2. The total remuneration for 2014 includes remuneration to 31 senior vice presidents (33 in 2013),
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
none of whom have retired or left the company (fi ve in 2013). 3. The joint pool of shares is locked up for three years before it is transferred to the participants employed at the
of participants at the establishment of the joint pool, approximately 40% of the pool will be allocated to the members of Executive Management and 60% to other members
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 the Senior Management Board (2013: 40% and 60% respectively). In the lock-up period, the joint pool may potentially be reduced in the event of lower-than-planned value
of participants at the establishment of the joint pool, approximately 40% of the pool will be allocated to the members of Executive Management and 60% to other members
creation in subsequent years. 4. Including social security taxes paid amounting to DKK 2.7 million (DKK 2.0 million in 2013).
of the Senior Management Board (2013: 40% and 60% respectively). In the lock-up period, the joint pool may potentially be reduced in the event of lower-than-planned value
creation in subsequent years. 4. Including social security taxes paid amounting to DKK 2.7 million (DKK 2.0 million in 2013).
66.2
66.2
51.5
MANAGEMENT’S LONG-TERM INCENTIVE PROGRAMME
MANAGEMENT’S LONG-TERM INCENTIVE PROGRAMME
The shares allocated to the joint pool for 2011 (448,560 shares) were released to the individual participants subsequent to the
approval of the Annual Report 2014 by the Board of Directors and the announcement on 30 January 2015 of the full-year
The shares allocated to the joint pool for 2011 (448,560 shares) were released to the individual participants subsequent to the
fi nancial results for 2014. Based on the share price at the end of 2014, the value of the released shares is as follows:
approval of the Annual Report 2014 by the Board of Directors and the announcement on 30 January 2015 of the full-year
fi nancial results for 2014. Based on the share price at the end of 2014, the value of the released shares is as follows:
Value as at 31 December 2014 of shares released on 30 January 2015
Value as at 31 December 2014 of shares released on 30 January 2015
Executive Management
Lars Rebien Sørensen
Executive Management
Jesper Brandgaard
Lars Rebien Sørensen
Lars Fruergaard Jørgensen
Jesper Brandgaard
Jakob Riis
Lars Fruergaard Jørgensen
Kåre Schultz
Jakob Riis
Mads Krogsgaard Thomsen
Kåre Schultz
Mads Krogsgaard Thomsen
Executive Management in total2
Executive Management in total2
Other members of the Senior Management Board in total2
Number
of shares
Number
of shares
Market value1
(DKK million)
Market value1
(DKK million)
37,515
25,010
37,515
12,505
25,010
12,505
12,505
25,010
12,505
25,010
25,010
25,010
137,555
137,555
203,825
9.7
6.5
9.7
3.3
6.5
3.3
3.3
6.5
3.3
6.5
6.5
6.5
35.8
35.8
53.1
Other members of the Senior Management Board in total2
53.1
1. The market value of the shares released in 2015 is based on the Novo Nordisk B share price of DKK 260.30 at the end of 2014. 2. In addition, 107,180 shares (market value:
DKK 27.9 million) were released to retired Executive Management and Senior Management Board members.
1. The market value of the shares released in 2015 is based on the Novo Nordisk B share price of DKK 260.30 at the end of 2014. 2. In addition, 107,180 shares (market value:
DKK 27.9 million) were released to retired Executive Management and Senior Management Board members.
Lars Rebien Sørensen serves as a member of the Supervisory Board of Bertelsmann AG, from which he received remuneration of EUR 117,000 in 2014 (EUR 122,000 in 2013)
and as a board member of Thermo Fisher Scientifi c Inc, from which he received remuneration of USD 299,063 in 2014 (USD 314,786 in 2013). Jesper Brandgaard serves as
Lars Rebien Sørensen serves as a member of the Supervisory Board of Bertelsmann AG, from which he received remuneration of EUR 117,000 in 2014 (EUR 122,000 in 2013)
chairman of the Board of Directors of SimCorp A/S, from which he received remuneration of DKK 913,500 in 2014 (DKK 871,068 in 2013). Kåre Schultz serves as a board
and as a board member of Thermo Fisher Scientifi c Inc, from which he received remuneration of USD 299,063 in 2014 (USD 314,786 in 2013). Jesper Brandgaard serves as
member of LEGO A/S, from which he received remuneration of DKK 400,000 in 2014 (DKK 350,000 in 2013). Kåre Schultz also serves as chairman of the Board of Directors
chairman of the Board of Directors of SimCorp A/S, from which he received remuneration of DKK 913,500 in 2014 (DKK 871,068 in 2013). Kåre Schultz serves as a board
of Royal Unibrew A/S, from which he received remuneration of DKK 625,000 in 2014 (DKK 625,000 in 2013). Mads Krogsgaard Thomsen serves as a board member of the
member of LEGO A/S, from which he received remuneration of DKK 400,000 in 2014 (DKK 350,000 in 2013). Kåre Schultz also serves as chairman of the Board of Directors
University of Copenhagen, from which he received remuneration of DKK 81,200 in 2014 (DKK 40,500 in 2013). Jakob Riis serves as a board member of ALK-Abelló A/S, from
of Royal Unibrew A/S, from which he received remuneration of DKK 625,000 in 2014 (DKK 625,000 in 2013). Mads Krogsgaard Thomsen serves as a board member of the
which he received remuneration of DKK 375,000 in 2014 (DKK 375,000 in 2013).
University of Copenhagen, from which he received remuneration of DKK 81,200 in 2014 (DKK 40,500 in 2013). Jakob Riis serves as a board member of ALK-Abelló A/S, from
which he received remuneration of DKK 375,000 in 2014 (DKK 375,000 in 2013).
203,825
eng08 - 31.01 - 49-51.indd 3
eng08 - 31.01 - 49-51.indd 3
31/01/15 20.49
31/01/15 20.49
52
GOVERNANCE, LEADERSHIP AND SHARES
BOARD OF DIRECTORS
Göran Ando (chair)
Jeppe Christiansen (vice chair)
Bruno Angelici
Formerly CEO of Celltech Group plc, UK (retired).
Member of the Board of Novo Nordisk A/S since
2005, vice chair since 2006, chair since 2013 and
chair of the Nomination Committee since 2013.
Management duties: Symphogen A/S, Denmark
(chair), member of the boards of Novo A/S,
Denmark, Molecular Partners AG, Switzerland,
and RAND Health, US. Senior advisor to Essex
Woodlands Health Ventures Ltd., UK.
Special competences: Medical qualifications
and extensive executive background within the
international pharmaceutical industry.
Education: Specialism in general medicine (1978)
and degree in medicine (1973), both from
Linköping Medical University, Sweden.
Chief executive officer of Fondsmæglerselskabet
Maj Invest A/S, Denmark. Member and vice chair
of the Board of Novo Nordisk A/S since 2013.
Management duties: Haldor Topsøe A/S (vice
chair), member of the boards of Novo A/S, KIRKBI
A/S and Symphogen A/S, all in Denmark.
Special competences: Extensive background
and experience within the financial sector, in
particular in relation to financial and capital
market issues, as well as insight into the investor
perspective.
Education: MSc in Economics (1985) from the
University of Copenhagen, Denmark.
Formerly executive vice president of AstraZeneca
(retired). Member of the Board of Novo Nordisk
A/S since 2011 and member of the Nomination
Committee since 2013.
Management duties: Vectura Group plc (chair),
member of the boards of Smiths Group plc, UK,
and Wolters Kluwer, the Netherlands. Member of
the Global Advisory Board of Takeda Pharma-
ceutical Company Limited, Japan.
Special competences: Extensive global expe-
rience with two companies in the fields of
pharmaceuticals and medical devices, and in-
depth knowledge of strategy, sales, marketing
and governance of major companies.
Education: AMP (1993) from Harvard Business
School and MBA (1978) from Kellogg School of
Management at Northwestern University, both in
the US. Law degree (1973) from Reims University
and BA in Business Administration (1971) from École
Supérieure de Commerce de Reims, both in France.
Liz Hewitt
Liselotte Hyveled
Thomas Paul Koestler
Formerly Group Director Corporate Affairs of
Smith & Nephew plc, UK (retired). Member of the
Board of Novo Nordisk A/S since 2012, and
member of the Audit Committee since 2012 and
of the Nomination Committee since 2013.
Management duties: Member of the boards of
Melrose Industries plc and Savilles plc, both in the
UK. External member of the audit committee of
the House of Lords, UK.
Special competences: Extensive experience
within the field of medical devices, significant
financial knowledge and knowledge of how large
international companies operate.
Education: BSc
(1977) from
University College London, UK, and FCA (UK
Institute of Chartered Accountants) (1982).
(Hons)
(Econ)
Project vice president for Novo Nordisk’s prandial
insulin projects Faster-acting insulin aspart and
Prandial BioEdge in Insulin, GH & Devices in
Global Development. Member of the Board of
Novo Nordisk A/S since 2014.
Education: Master of Science
(1992) from
Copenhagen University, and Master of Medical
Business Strategies (2011) from Copenhagen
Business School, both in Denmark.
Executive with Vatera Holdings LLC, US. Member
of the Board of Novo Nordisk A/S since 2011.
Management duties: Melinta Therapeutics Inc.,
US (chair). Member of the boards of Momenta
Pharmaceuticals Inc., ImmusanT Inc., Arisaph
Pharmaceuticals
Inc. and Edgemont Pharma-
ceuticals LLC, all in the US.
Special competences: Extensive R&D knowledge,
both generally and within the field of regulatory
affairs. Significant know-how about the pharma-
ceutical
large
international corporations operate. Additional
knowledge of the US market.
Education: PhD in Medicine & Pathology (1982)
from the Roswell Park Memorial Institute and BSc
in Biology (1975) from Daemen College, both in
the US.
in general and how
industry
Name (male/female)
First elected
Göran Ando (m)
Jeppe Christiansen (m)
Bruno Angelici (m)
Liz Hewitt (f)
Liselotte Hyveled (f)
Thomas Paul Koestler (m)
2005
2013
2011
2012
2014
2011
Term
2015
2015
2015
2015
2018
2015
Nationality
Born
Swedish
Danish
French
British
Danish
American
March 1949
November 1959
April 1947
November 1956
January 1966
June 1951
Independence1
Not independent2
Not independent2
Independent
Independent4,5
Not independent3
Independent
1. As designated by Nasdaq Copenhagen in accordance with section 3.2.1 of Recommendations on Corporate Governance (updated 2014). 2. Member of the Board of Novo A/S.
3. Elected by employees of Novo Nordisk.
NOVO NORDISK ANNUAL REPORT 2014
GOVERNANCE, LEADERSHIP AND SHARES
53
Anne Marie Kverneland
Helge Lund
Søren Thuesen Pedersen
Laboratory technician and full-time shop steward.
Member of the Board of Novo Nordisk A/S since
2000.
Management duties: Member of the Novo
Nordisk Foundation since 2014.
Education: Degree in Medical Laboratory Tech-
nology
(1980) from Copenhagen University
Hospital, Denmark.
Formerly CEO of Statoil ASA, Norway. Chief
executive officer of BG Group, UK, with effect
from 2 March 2015. Member of the Board of
Novo Nordisk A/S and the Audit Committee since
2014.
Special competences: Extensive executive and
board experience in large multinational companies
headquartered in Scandinavia within regulated
markets, and significant financial knowledge.
Education: MA in Economics (1987) from the
Norwegian School of Economics & Business
Administration (NHH) and MBA from INSEAD
(1991), France.
External Affairs director in Quality Intelligence.
Member of the Board of Novo Nordisk A/S since
2006 and member of the Nomination Committee
since 2014.
Management duties: Member of the boards of
HOFOR A/S, HOFOR Forsyning Holding PS,
HOFOR Forsyning Komplementar A/S and HOFOR
Forsyning A/S, all in Denmark.
Education: BSc in Chemical Engineering (1988)
from the Engineering Academy of Denmark.
Hannu Ryöppönen
Stig Strøbæk
Electrician and full-time shop steward. Member
of the Board of Novo Nordisk A/S since 1998 and
member of the Audit Committee since 2013.
Education: Qualified electrician. Diploma in
further training for board members (2003) from
the Danish Employees’ Capital Pension Fund (LD).
Formerly CFO and deputy CEO of Stora Enso Oyj,
Finland (retired). Member of the Board of Novo
Nordisk A/S since 2009 and chair of the Audit
Committee since 2012 (member since 2009).
Management duties: Private equity funds Altor
2003 GP Limited (chair), Altor Fund II GP Limited
(chair) and Altor III GP Limited (chair), all in Jersey,
Channel Islands. Member of the boards of Amer
Sports Oyj, Finland, and the private equity fund
Value Creation Investments Limited II, Jersey,
Channel Islands. Chair of the audit committee of
Amer Sports Oyj, Finland.
Special competences: International executive
background and thorough understanding of
managing finance operations in global organ-
isations, in particular in relation to accounting,
financial and capital market issues, but also
experience in private equity and mergers &
acquisitions (M&A).
Education: BA in Business Administration (1976)
from Hanken School of Economics, Helsinki, Finland.
Name (male/female)
First elected
Anne Marie Kverneland (f)
Helge Lund (m)
Søren Thuesen Pedersen (m)
Hannu Ryöppönen (m)
Stig Strøbæk (m)
2000
2014
2006
2009
1998
Term
2018
2015
2018
2015
2018
Nationality
Born
Danish
Norwegian
Danish
Finnish
Danish
July 1956
October 1962
December 1964
March 1952
January 1964
Independence1
Not independent3
Independent4,5
Not independent3
Independent4,5
Not independent3
4. Mr Ryöppönen, Mr Lund and Ms Hewitt qualify as independent Audit Committee members as defined by the US Securities and Exchange Commission (SEC). 5. Mr Ryöppönen, Mr Lund and Ms
Hewitt qualify as independent Audit Committee members as defined under part 8 of the Danish Act on Approved Auditors and Audit Firms.
NOVO NORDISK ANNUAL REPORT 2014
54
GOVERNANCE, LEADERSHIP AND SHARES
EXECUTIVE
MANAGEMENT
Lars Rebien Sørensen
Chief executive officer
Kåre Schultz
President and chief operating officer
Jesper Brandgaard
Chief financial officer
completed
Lars Rebien Sørensen joined Novo Nordisk’s
Enzymes Marketing in 1982. Over the years, he
several overseas postings,
has
including in the Middle East and the US. He was
appointed a member of Corporate Management
in May 1994, and in December 1994 was given
special responsibility within Corporate Manage-
ment for Health Care. He was appointed president
and chief executive officer in November 2000.
Other management duties: Member of the
boards of Thermo Fisher Scientific Inc., US, and
Bertelsmann AG, Germany.
Born: October 1954.
Kåre Schultz joined Novo Nordisk in 1989 as an
economist in Health Care, Economy & Planning. In
November 2000, he was appointed executive vice
president and chief of staff. In March 2002, he
took over the position of executive vice president
and chief operating officer. In February 2014, he
was appointed president and chief operating
officer.
Other management duties: Chair of the board
of Royal Unibrew A/S and member of the board
of LEGO A/S, both in Denmark.
Born: May 1961.
Jesper Brandgaard joined Novo Nordisk in 1999
as senior vice president of Corporate Finance. He
was appointed executive vice president and chief
financial officer in November 2000.
Other management duties: Chair of the boards
of SimCorp A/S and NNIT A/S, both in Denmark.
Born: October 1963.
Lars Fruergaard Jørgensen
Executive vice president of Corporate
Development and chief of staff
Jakob Riis
Executive vice president of Marketing, Medical
Affairs and Stakeholder Engagement
Mads Krogsgaard Thomsen
Chief science officer
Lars Fruergaard Jørgensen joined Novo Nordisk in
1991 as an economist in Health Care, Economy &
Planning and has, over the years, completed
overseas postings in the US and Japan. In 2004,
he was appointed senior vice president for IT &
Corporate Development. In January 2013, he was
appointed executive vice president and chief
information officer, assuming responsibility for IT,
Quality & Corporate Development. In November
2014, he also took over responsibility for Corp-
orate People & Organisation and Business
Assurance.
Other management duties: Chair of the board
of NNE Pharmaplan A/S and member of the board
of NNIT A/S, both in Denmark.
Born: November 1966.
Jakob Riis joined Novo Nordisk in 1996 as a health
economist in marketing, and has over the years
completed overseas postings in the US and Japan.
In 2005, he was appointed senior vice president
for Marketing. In January 2013, he was appointed
executive vice president, assuming responsibility
for Marketing & Medical Affairs. In November
2014, he took over responsibility for Corporate
Stakeholder Engagement.
Other management duties: Chair of the board
of Copenhagen Institute of Interaction Design
and member of the board and audit committee of
ALK-Abelló A/S, both in Denmark.
Born: April 1966.
Mads Krogsgaard Thomsen joined Novo Nordisk
in 1991 as head of Growth Hormone Research.
He was appointed executive vice president and
chief science officer in November 2000. He is a
member of the editorial boards of international
journals. He has served as president of the
National Academy of Technical Sciences (ATV),
Denmark. He is adjunct professor of pharmacology
at the Faculty of Health and Medical Sciences of
the University of Copenhagen, Denmark.
Other management duties: Chair of the board
of Steno Diabetes Center A/S and member of the
board of the University of Copenhagen, both in
Denmark.
Born: December 1960.
NOVO NORDISK ANNUAL REPORT 2014
CONSOLIDATED
FINANCIAL,
SOCIAL AND
ENVIRONMENTAL
STATEMENTS 2014
CONSOLIDATED FINANCIAL
STATEMENTS
56 Income statement and Statement
of comprehensive income
57 Balance sheet
58 Statement of cash flows
59 Statement of changes in equity
60 Notes to the Consolidated financial statements
CONSOLIDATED SOCIAL STATEMENT
(SUPPLEMENTARY INFORMATION)
96 Statement of social performance
97 Notes to the Consolidated social statement
CONSOLIDATED ENVIRONMENTAL
STATEMENT
(SUPPLEMENTARY INFORMATION)
102 Statement of environmental performance
102 Notes to the Consolidated environmental
statement
As Novo Nordisk’s business continues to develop, the company
remains committed to reporting its performance through its integrated
reporting. In line with the Novo Nordisk Triple Bottom Line principle,
the Consolidated financial, social and environmental statements are
presented separately along with the related notes.
Within each of the financial, social and environmental statements, the
notes are grouped into sections based on how Novo Nordisk views
its business. Each of the sections has an introduction explaining the
link between long-term targets, business priorities, and how this
is reflected in Novo Nordisk’s financial, social and environmental
statements. To provide transparency on the disclosed amounts, each
note includes the relevant accounting policy, key accounting estimates
and numerical disclosure.
Novo Nordisk’s research
centre in Beijing, China.
56 CONSOLIDATED FINANCIAL STATEMENTS
INCOME STATEMENT
AND STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER
DKK million
INCOME STATEMENT
Net sales
Cost of goods sold
Gross profi t
Sales and distribution costs
Research and development costs
Administrative costs
Other operating income, net
Operating profi t
Financial income
Financial expenses
Profi t before income taxes
Income taxes
Net profi t for the year
EARNINGS PER SHARE
Basic earnings per share (DKK)
Diluted earnings per share (DKK)
Note
2014
2013
2012
2.1, 2.2
2.2, 2.4
88,806
14,562
83,572
14,140
2.2, 2.4
2.2, 2.3, 2.4
2.2, 2.4
2.2, 2.4, 2.5
74,244
69,432
23,223
13,762
3,537
770
23,380
11,733
3,508
682
34,492
31,493
4.7
4.7
167
563
1,702
656
78,026
13,465
64,561
21,544
10,897
3,312
666
29,474
125
1,788
34,096
32,539
27,811
2.6
7,615
7,355
6,379
26,481
25,184
21,432
4.1
4.1
10.10
10.07
9.40
9.35
7.82
7.77
DKK million
Note
2014
2013
2012
STATEMENT OF COMPREHENSIVE INCOME
Net profi t for the year
26,481
25,184
21,432
Other comprehensive income:
Remeasurements of defi ned benefi t plans
3.6
Items that will not subsequently be reclassifi ed to the Income statement
Exchange rate adjustments of investments in subsidiaries
Cash fl ow hedges, realisation of previously deferred (gains)/losses
Cash fl ow hedges, deferred gains/(losses) incurred during the period
Other items
Items that will be reclassifi ed subsequently to the Income statement
when specifi c conditions are met
Other comprehensive income before tax
(247)
(247)
(39)
(1,229)
(2,225)
111
(3,382)
(3,629)
Tax on other comprehensive income, income/(expense)
2.6
977
Other comprehensive income for the year, net of tax
(2,652)
54
54
(435)
(809)
1,195
75
26
80
(211)
(131)
(281)
(281)
(172)
1,182
849
35
1,894
1,613
(587)
1,026
Total comprehensive income for the year
23,829
25,053
22,458
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 56
eng26 - 31.01 - 55-111.indd 56
31/01/15 20.44
31/01/15 20.44
BALANCE SHEET
AT 31 DECEMBER
DKK million
ASSETS
Intangible assets
Property, plant and equipment
Deferred income tax assets
Other fi nancial assets
Total non-current assets
Inventories
Trade receivables
Tax receivables
Other receivables and prepayments
Marketable securities
Derivative fi nancial instruments
Cash at bank and on hand
Total current assets
Total assets
EQUITY AND LIABILITIES
Share capital
Treasury shares
Retained earnings
Other reserves
Total equity
Deferred income tax liabilities
Retirement benefi t obligations
Provisions
Total non-current liabilities
Current debt
Trade payables
Tax payables
Other liabilities
Derivative fi nancial instruments
Provisions
Total current liabilities
Total liabilities
Total equity and liabilities
CONSOLIDATED FINANCIAL STATEMENTS
57
Note
2014
2013
3.1
3.2
2.6
4.6
3.3
3.4
3.5
4.2, 4.6
4.3
4.2, 4.4
4.1
4.1
2.6
3.6
3.7
4.6
4.6
3.8
4.3
3.7
1,378
23,136
5,399
856
30,769
11,357
13,041
3,210
2,750
1,509
30
14,396
46,293
1,615
21,882
4,231
551
28,279
9,552
10,907
3,155
2,454
3,741
1,521
10,728
42,058
77,062
70,337
530
(11)
41,277
(1,502)
550
(21)
41,137
903
40,294
42,569
7
1,031
2,041
3,079
720
4,950
2,771
11,051
2,607
11,590
33,689
36,768
672
688
2,183
3,543
215
4,092
2,222
9,386
–
8,310
24,225
27,768
77,062
70,337
eng26 - 31.01 - 55-111.indd 57
eng26 - 31.01 - 55-111.indd 57
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
58 CONSOLIDATED FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER
DKK million
Net profi t for the year
Adjustment for non-cash items:
Income taxes
Depreciation, amortisation and impairment losses
Other non-cash items
Change in working capital
Interest received
Interest paid
Income taxes paid
Net cash generated from operating activities
Proceeds from sale of other fi nancial assets
Purchase of intangible assets and other fi nancial assets
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Sale/(purchase) of marketable securities
Net cash used in investing activities
Repayment of loans
Purchase of treasury shares, net
Dividends paid
Note
2014
2013
2012
26,481
25,184
21,432
2.6
3.1, 3.2
5.3
4.5
2.6
3.1, 4.6
3.2
7,615
3,435
4,163
(2,148)
131
(78)
(7,907)
7,355
2,799
584
(265)
131
(39)
(9,807)
6,379
2,693
2,181
274
207
(61)
(10,891)
31,692
25,942
22,214
35
(345)
4
(3,990)
2,232
29
(406)
31
(3,238)
811
(2,064)
(2,773)
–
(250)
53
(3,372)
(501)
(4,070)
4.1
4.1
–
(14,667)
(11,866)
–
(13,924)
(9,715)
(502)
(11,896)
(7,742)
Net cash used in fi nancing activities
(26,533)
(23,639)
(20,140)
Net cash generated from activities
3,095
(470)
(1,996)
Cash and cash equivalents at the beginning of the year
Exchange gains/(losses) on cash and cash equivalents
10,513
68
11,053
(70)
13,057
(8)
Cash and cash equivalents at the end of the year
4.4
13,676
10,513
11,053
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 58
eng26 - 31.01 - 55-111.indd 58
31/01/15 20.44
31/01/15 20.44
STATEMENT OF CHANGES IN EQUITY
AT 31 DECEMBER
CONSOLIDATED FINANCIAL STATEMENTS
59
DKK million
Share
capital
Treasury
shares
Retained
earnings
Other reserves
Exchange
rate
adjust-
ment
Cash
fl ow
hedges
Tax and
other
items
Total
other
reserves
Total
2014
Balance at the beginning of the year
550
(21)
41,137
(209)
1,233
(121)
903
42,569
Net profi t for the year
Other comprehensive income for the year
26,481
(247)
(39)
(3,454)
1,088
(2,405)
26,481
(2,652)
Total comprehensive income for the year
26,234
(39)
(3,454)
1,088
(2,405)
23,829
Transactions with owners:
Dividends (note 4.1)
Share-based payments (note 5.1)
Tax credit related to share option scheme
Purchase of treasury shares (note 4.1)
Sale of treasury shares (note 4.1)
Reduction of the B share capital (note 4.1)
Balance at the end of the year
2013
Balance at the beginning of the year
Net profi t for the year
Other comprehensive income for the year
Total comprehensive income for the year
Transactions with owners:
Dividends (note 4.1)
Share-based payments (note 5.1)
Tax credit related to share option scheme
Purchase of treasury shares (note 4.1)
Sale of treasury shares (note 4.1)
Reduction of the B share capital (note 4.1)
Balance at the end of the year
2012
Balance at the beginning of the year
(11,866)
371
58
(14,717)
60
(11)
1
20
(11,866)
371
58
(14,728)
61
–
(11)
41,277
(248)
(2,221)
967
(1,502)
40,294
(20)
530
560
(17)
39,001
226
847
15
1,088
40,632
25,184
54
25,238
(9,715)
409
114
(13,974)
64
(15)
1
10
(435)
(435)
386
386
(136)
(185)
25,184
(131)
(136)
(185)
25,053
(9,715)
409
114
(13,989)
65
–
(21)
41,137
(209)
1,233
(121)
903
42,569
(10)
550
580
(24)
37,111
398
(1,184)
567
(219)
37,448
Net profi t for the year
Other comprehensive income for the year
21,432
(281)
(172)
2,031
(552)
1,307
21,432
1,026
Total comprehensive income for the year
21,151
(172)
2,031
(552)
1,307
22,458
Transactions with owners:
Dividends (note 4.1)
Share-based payments (note 5.1)
Tax credit related to share option scheme
Purchase of treasury shares (note 4.1)
Sale of treasury shares (note 4.1)
Reduction of the B share capital (note 4.1)
Balance at the end of the year
(20)
560
(7,742)
308
56
(12,147)
264
(15)
2
20
(7,742)
308
56
(12,162)
266
–
(17)
39,001
226
847
15
1,088
40,632
eng26 - 31.01 - 55-111.indd 59
eng26 - 31.01 - 55-111.indd 59
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
60 CONSOLIDATED FINANCIAL STATEMENTS
NOTES
SECTIONS IN THE CONSOLIDATED FINANCIAL STATEMENTS
SECTION 1 BASIS OF PREPARATION
Read this section to get an overview of the fi nancial accounting policies in
general and an overview of Management’s key accounting estimates.
1.1 Summary of signifi cant accounting policies, p 61
1.2 Summary of key accounting estimates, p 61
1.3 Changes in accounting policies and disclosures, p 62
1.4 General accounting policies, p 62
SECTION 2 RESULTS FOR THE YEAR
Read this section to get more details on the results for the year, including
operating segments, taxes and employee costs.
SECTION 4 CAPITAL STRUCTURE AND
FINANCING ITEMS
Read this section to gain an insight into the capital structure, cash fl ow and
fi nancing items.
4.1 Share capital, distribution to shareholders and earnings per share, p 79
4.2 Financial risks, p 81
4.3 Derivative fi nancial instruments, p 82
4.4 Cash and cash equivalents, fi nancial resources and free cash fl ow, p 84
4.5 Change in working capital, p 84
4.6 Financial assets and liabilities, p 84
4.7 Financial income and expenses, p 86
2.1 Net sales and sales deductions, p 63
2.2 Segment information, p 65
2.3 Research and development costs, p 66
2.4 Employee costs, p 68
2.5 Other operating income, net, p 69
2.6 Income and deferred income taxes, p 69
SECTION 3 OPERATING ASSETS AND
LIABILITIES
Read this section to get more details on the assets that form the basis for
the activities of Novo Nordisk, and the related liabilities.
3.1 Intangible assets, p 71
3.2 Property, plant and equipment, p 72
3.3 Inventories, p 74
3.4 Trade receivables, p 74
3.5 Other receivables and prepayments, p 75
3.6 Retirement benefi t obligations, p 75
3.7 Provisions and contingent liabilities, p 77
3.8 Other liabilities, p 78
SECTION 5 OTHER DISCLOSURES
Read this section for more details on the statutory notes that have
secondary importance from the perspective of Novo Nordisk.
5.1 Share-based payment schemes, p 87
5.2 Management’s holdings of Novo Nordisk shares, p 89
5.3 Other non-cash items, p 90
5.4 Commitments, p 91
5.5 Related party transactions, p 92
5.6 Fee to statutory auditors, p 92
5.7 Companies in the Novo Nordisk Group, p 93
5.8 Financial defi nitions, p 94
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 60
eng26 - 31.01 - 55-111.indd 60
31/01/15 20.44
31/01/15 20.44
SECTION 1
BASIS OF PREPARATION OF THE
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
61
Novo Nordisk presents its Consolidated fi nancial statements on the basis of
the latest developments in international fi nancial reporting and strives for
early adoption of EU-endorsed IFRS accounting standards. All entities in the
Novo Nordisk Group follow the same Group accounting policies. This section
gives a summary of the signifi cant accounting policies, Management’s key
accounting estimates, new IFRS requirements and other accounting policies
in general. A detailed description of accounting policies and key accounting
estimates related to specifi c reported amounts is presented in each note to
the relevant fi nancial items.
1.1 SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The Consolidated fi nancial statements included in this Annual Report
have been prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board
(IASB), in accordance with IFRS as endorsed by the European Union and also
in accordance with additional Danish disclosure requirements for annual
reports of listed companies.
Measurement basis
The Consolidated fi nancial statements have been prepared on the historical
cost basis except for derivative fi nancial instruments, equity investments and
marketable securities measured at fair value.
The principal accounting policies set out below have been applied
consistently in the preparation of the Consolidated fi nancial statements for
all the years presented.
Principal accounting policies
Novo Nordisk’s accounting policies are described in each of the individual
notes to the Consolidated fi nancial statements. Considering all the
accounting policies applied, Management regards the following as the most
signifi cant accounting policies for the recognition and measurement of
reported amounts:
• Net sales and sales deductions (notes 2.1 and 3.7)
Revenue is only recognised when, in Management’s judgement, the
signifi cant risks and rewards of ownership have been transferred and
when the Group does not retain managerial involvement in or effective
control over the goods sold. To arrive at net sales, rebates and discounts
to government agencies, wholesalers, health insurance companies,
managed healthcare organisations and retail customers are deducted from
gross sales. These deductions include estimates of unsettled obligations,
requiring the use of judgement when estimating the effect of these sales
deductions on gross sales for a reporting period.
• Research and development (notes 2.3, 3.1 and 3.2)
Internal research costs are fully charged to the consolidated income
statement in the period in which they are incurred, consistent with industry
practice. Novo Nordisk considers that regulatory and other uncertainties
inherent in the development of new products preclude the capitalisation
of internal development costs as an intangible asset until marketing
approval from the regulatory authority in a relevant major market is
obtained or highly probable. The same principles are applied to plant and
equipment with no alternative use developed as part of a research and
development project. However, plant and equipment with alternative use
or used for general research and development purposes is capitalised and
depreciated over its estimated useful life as research and development
costs.
For acquired in-process research and development projects, the probability
effect is refl ected in the cost of the asset, and the probability recognition
criteria are therefore always considered satisfi ed. As the cost of acquired
in-process research and development projects can often be measured
reliably, these projects fulfi l the capitalisation criteria as intangible assets
upon acquisition. However, further internal development costs subsequent
to acquisition are treated in the same way as other internal development
costs.
• Derivative fi nancial instruments (note 4.3)
Novo Nordisk hedges commercial exposures, with foreign exchange risk
being the principal fi nancial risk for the Group. The overall objective of
foreign exchange risk management is to limit the short-term negative
impact on net profi t and cash fl ow from exchange rate fl uctuations,
thereby increasing the predictability of the fi nancial results. The purpose
of hedge accounting is to match the impact of the hedged item and the
hedging instrument in the consolidated income statement. Management
has chosen to classify the result of hedging activities as part of fi nancial
items. Thus, as the majority of Novo Nordisk’s sales are in USD, EUR,
CNY, JPY, GBP and CAD, net sales will be impacted by exchange rate
fl uctuations whereas the impact of exchange rate fl uctuations on Profi t
before income taxes depends on the results of the hedging activities and
the development in non-hedged currencies
In addition, the following other accounting policies are considered relevant
to an understanding of the Consolidated fi nancial statements:
• Income taxes (note 2.6)
• Property, plant and equipment including impairment (note 3.2)
• Inventories (note 3.3)
• Trade receivables and allowance for doubtful trade receivables (note 3.4)
• Provisions for legal disputes (note 3.7).
Applying materiality
The Consolidated fi nancial statements are a result of processing large
numbers of transactions and aggregating those transactions into classes
according to their nature or function. When aggregated, the transactions are
presented in classes of similar items in the Consolidated fi nancial statements.
If a line item is not individually material, it is aggregated with other items
of a similar nature in the Consolidated fi nancial statements or in the notes.
There are substantial disclosure requirements throughout IFRS. Management
provides specifi c disclosures required by IFRS unless the information is
considered immaterial to the economic decision-making of the users of these
fi nancial statements or not applicable.
1.2 SUMMARY OF KEY ACCOUNTING
ESTIMATES
The use of reasonable estimates is an essential part of the preparation of the
Consolidated fi nancial statements. Given the uncertainties inherent in Novo
Nordisk’s business activities, Management must make certain estimates and
judgements that affect the application of accounting policies and reported
amounts of assets, liabilities, sales, costs, cash fl ows and related disclosures
at the date(s) of the Consolidated fi nancial statements.
Management bases its estimates on historical experience and various other
assumptions that are held to be reasonable under the circumstances. The
estimates and underlying assumptions are reviewed on an ongoing basis
and, if necessary, changes are recognised in the period in which the estimate
is revised. Management considers the carrying amounts recognised in
relation to the key accounting estimates mentioned below to be reason-
able and appropriate based on currently available information. However, the
actual amounts may differ from the amounts estimated as more detailed
information becomes available.
eng26 - 31.01 - 55-111.indd 61
eng26 - 31.01 - 55-111.indd 61
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
62 CONSOLIDATED FINANCIAL STATEMENTS
Management regards the following as the key accounting estimates and
assumptions used in the preparation of the Consolidated fi nancial state-
ments:
• Sales deductions and provisions for sales rebates (notes 2.1 and 3.7)
• Indirect production costs (note 3.3)
• Allowance for doubtful trade receivables (note 3.4)
• Income taxes (note 2.6)
• Provisions for legal disputes (note 3.7).
Please refer to the specifi c notes for further information on the key
accounting estimates and assumptions applied.
1.4 GENERAL ACCOUNTING POLICIES
Principles of consolidation
The Consolidated fi nancial statements incorporate the fi nancial statements
of Novo Nordisk A/S and entities controlled by Novo Nordisk A/S. Control
exists when Novo Nordisk owns more than 50% of the voting rights or has
the power to govern the entity in some other way.
Where necessary, adjustments are made to the fi nancial statements of
subsidiaries to bring their accounting policies into line with Novo Nordisk
Group policies. All intra-Group transactions, balances, income and expenses
are eliminated in full when consolidated.
1.3 CHANGES IN ACCOUNTING POLICIES
AND DISCLOSURES
The results of subsidiaries acquired or disposed of during the year are
included in the consolidated income statement from the effective date
of acquisition and up to the effective date of disposal, as appropriate.
Comparative fi gures are not restated for disposed or acquired companies.
Adoption of new or amended IFRSs
Based on an assessment of new or amended and revised accounting
standards and interpretations (‘IFRS’) issued by IASB and IFRS endorsed
by the European Union effective on or after 1 January 2014, it has been
assessed that the application of these new IFRSs has not had a material
impact on the Consolidated fi nancial statements in 2014, and Management
does not anticipate any signifi cant impact on future periods from the
adoption of these new IFRS.
New or amended IFRSs that have been issued but have not yet come
into effect and have not been early adopted
In addition to the above, IASB has issued a number of new or amended and
revised accounting standards and interpretations that have not yet come into
effect. The following standards are in general expected to change current
accounting regulation most signifi cantly:
• IASB has issued IFRS 9 ‘Financial Instruments’, with effective date 1 January
2018. It currently awaits EU endorsement. IFRS 9 is part of the IASB’s
project to replace IAS 39, and the new standard will substantially change
the classifi cation and measurement of fi nancial instruments and hedging
requirements. Novo Nordisk has assessed the impact of the standard and
determined that it will not have any signifi cant impact on the Consolidated
fi nancial statements.
• IASB has issued IFRS 15 ‘Revenue from contracts with customers’, with
effective date 1 January 2017. It currently awaits EU endorsement. IFRS 15
is part of the convergence project with FASB to replace IAS 18. The new
standard will establish a single, comprehensive framework for revenue
recognition. Novo Nordisk has assessed the impact of the standard and
determined that it will not have any signifi cant impact on the Consolidated
fi nancial statements.
• IASB has issued a re-exposure draft on IAS 17 ‘Leasing’. Depending on the
wording of the fi nal standard, the change in lease accounting is expected
to require capitalisation of the majority of the Group’s operational lease
contracts, representing less than 10% of total assets, with a minor impact
on the Group’s assets, liabilities and fi nancial ratios, and no signifi cant
impact on net profi t.
Translation of foreign currencies
Functional and presentation currency
Items included in the fi nancial statements of each of Novo Nordisk’s entities
are measured using the currency of the primary economic environment in
which the entity operates (functional currency). The Consolidated fi nancial
statements are presented in Danish kroner (DKK), which is also 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 prevailing at the transaction dates. 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.
Translation differences on non-monetary items, such as fi nancial assets
classifi ed as available for sale including equity investments, are recognised in
Other comprehensive income.
Translation of Group companies
Financial statements of foreign subsidiaries are translated into Danish kroner
at the exchange rates prevailing at the end of the reporting period for
balance sheet items, and at average exchange rates for income statement
items.
All effects of exchange rate adjustments are recognised in the Income
statement, with the exception of exchange rate adjustments of investments
in subsidiaries arising from:
• the translation of foreign subsidiaries’ net assets at the beginning of the
year to the exchange rates at the end of the reporting period
• the translation of foreign subsidiaries’ statement of comprehensive income
from average exchange rates to the exchange rates at the end of the
reporting period
• the translation of non-current intra-Group receivables that are considered
to be an addition to net investments in subsidiaries.
These specifi c exchange rate adjustments are recognised in Other com-
prehensive income.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 62
eng26 - 31.01 - 55-111.indd 62
31/01/15 20.44
31/01/15 20.44
CONSOLIDATED FINANCIAL STATEMENTS
63
SECTION 2
RESULTS FOR THE YEAR
This section comprises notes related to the results for the year, such as sales
including details on gross-to-net sales and segment information, research
and development costs, employee costs as well as details on income and
deferred income taxes. Consequently, this section provides information
related to performance against two of Novo Nordisk’s four long-term
fi nancial targets: Operating profi t margin and Growth in operating profi t.
26.5
DKK BILLION
IN NET PROFIT
(+5.2%)
Novo Nordisk’s growth in sales is a result of continued growth in the number
of patients due to the diabetes pandemic, Novo Nordisk’s ability to bring
innovative products to the market and the global commercial presence of
our business.
CURRENCY IMPACT ON GROWTH
Growth DKK
Growth local currencies
%
15
12
9
6
3
0
The growth in operating profi t and margin refl ects not only growth in
sales but also the increase in gross margin primarily driven by a favourable
pricing development, and a positive product mix due to increased sales of
modern insulins and Victoza®, offset by a negative impact from productivity.
Additionally a modest increase in administrative costs and tight cost
management within sales and marketing has been realised. Research and
development costs have been growing faster than sales, refl ecting an
expanding research and development portfolio.
The article ‘2014 performance and 2015 outlook’ on p 6 includes Manage-
ment’s review of the results for the year.
Currency fl uctuations impact reported sales growth
Novo Nordisk maintains a solid growth in local currencies, though currency
fl uctuation has a direct impact on reported Net sales and reported
Operating profi t. In 2014 the reported growth in Net sales and Operating
profi t has been reduced by 2% (5% in 2013) and 3% (8% in 2013)
compared with growth in local currencies. The impact of currency
fl uctuations in the key currencies (USD, JPY, CNY, GBP and CAD) is
mitigated through hedging contracts, the result of which is included in
Financial income and expenses. Hence reported Net profi t is only impacted to
a limited degree by key currency fl uctuations.
However, hedging is not considered feasible for emerging market
currencies. Consequently, such currency fl uctuations have a direct impact
on both reported Net sales and Net profi t.
Notes 4.2 and 4.3 include information on the foreign exchange risk and
sensitivity analysis for the key currencies.
2013
2014
2013
2014
Net sales
Operating profit
2.1 NET SALES AND SALES DEDUCTIONS
Accounting policies
Revenue from goods sold is recognised when Novo Nordisk has transferred
the signifi cant risks and rewards to the buyer, and the amount of revenue
can be measured reliably.
Sales are measured at the fair value of the consideration received or receiv-
able. When sales are recognised, Novo Nordisk also records estimates for a
variety of sales deductions, including rebates, discounts, refunds, incentives
and product returns. Sales deductions are recognised as a reduction of gross
sales to arrive at net sales. Where contracts contain customer acceptance
provisions, Novo Nordisk recognises sales when the acceptance criteria are
satisfi ed.
Revenue recognition for new product launches is based on specifi c facts
and circumstances relating to those products, including estimated demand
and acceptance rates for well-established products with similar market
characteristics. Where shipments of new products are made on a sale or
return basis, without suffi cient historical experience for estimating sales
returns, revenue is only recorded when there is evidence of consumption or
when the right of return has expired.
Key accounting estimates – Sales deductions
Sales discounts and sales rebates are predominantly issued in Region North
America. In this region, signifi cant sales rebates are paid in connection
with US public healthcare insurance programmes, namely Medicare and
Medicaid, as well as rebates to pharmacy benefi t managers and managed
healthcare plans. The most signifi cant discounts are offered under contracts
with government programmes such as Medicaid. In addition, political
pressure to contain healthcare costs has led several other countries to
impose signifi cant price reductions on pharmaceutical products. As such,
concerted austerity measures have been implemented by governments in
countries in Region Europe, while government-mandated price cuts have
been introduced in Region China, Japan and major countries in Region
International Operations.
US wholesaler charge-backs
Wholesaler charge-backs relate to contractual arrangements between Novo
Nordisk and indirect customers in the US whereby products are sold at
contract prices lower than the list price originally 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 30 days of the liability being incurred.
eng26 - 31.01 - 55-111.indd 63
eng26 - 31.01 - 55-111.indd 63
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
GROSS-TO-NET SALES RECONCILIATION
DKK million
Gross sales
US managed care and Medicare
US wholesaler charge-backs
US Medicaid rebates
US discounts and sales returns
Non-US rebates, discounts and
sales returns
2014
2013
2012
131,841
115,906
103,948
(17,522)
(12,858)
(5,578)
(2,972)
(12,504)
(10,126)
(3,851)
(2,063)
(9,239)
(8,196)
(3,418)
(1,872)
(4,105)
(3,790)
(3,197)
Total gross-to-net sales adjustments
(43,035)
(32,334)
(25,922)
Net sales
88,806
83,572
78,026
Provisions for sales rebates are adjusted to actual amounts as rebates and
discounts are processed. Please refer to note 3.7 for further information on
sales-related provisions.
64 CONSOLIDATED FINANCIAL STATEMENTS
2.1 NET SALES AND SALES DEDUCTIONS
(CONTINUED)
US Medicaid, Medicare and managed healthcare rebates
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 specifi c terms in the individual agree-
ments. For Medicaid, the calculation of rebates also involves interpretation
of relevant regulations that are subject to changes in interpretative guidance
from government authorities. Although provisions are made for Medicaid
and Medicare rebates at the time sales are recorded, the actual rebates
related to the specifi c sale will typically be invoiced to Novo Nordisk 6 –9
months later. Due to the time lag, the rebate adjustments to sales in any
particular period may incorporate adjustments of provisions for prior periods.
For managed care, rebates are offered to a number of pharmacy benefi t
managers and managed healthcare plans. These rebate programmes
allow the customer to receive a rebate after attaining certain performance
parameters relating to formulary status or pre-established market shares
relative to competitors. Rebates are estimated according to the specifi c terms
in each agreement, historical experience, anticipated channel mix, growth
rates and market share information. Novo Nordisk adjusts the provision
periodically to refl ect actual sales performance.
Discounts, sales returns and other rebates
Other discounts are provided to wholesalers, hospitals, pharmacies etc, and
are usually linked to sales volume or provided as cash discounts. Sales returns
are related to damaged or expired products. Accruals are calculated based
on historical data, and recorded as a reduction in gross sales at the time the
related sales are recorded.
Arrangements with certain healthcare providers may require Novo Nordisk to
make refunds to the healthcare providers if anticipated treatment outcomes
do not meet predefi ned targets.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 64
eng26 - 31.01 - 55-111.indd 64
31/01/15 20.44
31/01/15 20.44
2.2 SEGMENT INFORMATION
Accounting policies
Operating segments are reported in a manner consistent with the internal
reporting provided to Executive Management and the Board of Directors.
We consider Executive Management to be the operating decision-making
body as all signifi cant decisions regarding business development and direction
are taken in that forum.
Business segments
Novo Nordisk operates in two business segments based on therapies:
Diabetes care and Biopharmaceuticals.
The Diabetes care business segment includes research, development,
manufacturing and marketing of products within the areas of insulin, GLP-1
and related delivery systems, oral antidiabetic products (OAD) and obesity.
The Biopharmaceuticals business segment includes research, development,
manufacturing and marketing of products within the areas of haemophilia,
growth hormone therapy, hormone replacement therapy, infl ammation
therapy and other therapy areas. In addition, non-recurring costs in relation
to the discontinuation of infl ammatory disorders are included in the
Biopharmaceuticals business segment in 2014. Please refer to note 2.3.
CONSOLIDATED FINANCIAL STATEMENTS
65
Segment performance is evaluated on the basis of operating profi t consistent
with the Consolidated fi nancial statements. Financial income and expenses
and income taxes are managed at Group level and are not allocated to
business segments.
There are no sales or other transactions between the business segments.
Costs have been split between business segments according to a specifi c
allocation with the addition of a minor number of corporate overhead
costs allocated systematically between 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,
other fi nancial assets, inventories, trade receivables, and other receivables
and prepayments.
No single customer represents more than 10% of the total sales and no
operating segments have been aggregated to form the reported business
segments.
BUSINESS SEGMENTS
DKK million
Segment sales
New-generation insulin
NovoRapid® / NovoLog®
NovoMix® / NovoLog® Mix
Levemir®
Total modern insulins
Human insulins
Victoza®
Protein-related products
Oral antidiabetic products (OAD)
2014
2013
2012
2014
2013
2012
2014
2013
2012
Diabetes care
Biopharmaceuticals
Total
658
17,449
9,871
14,217
41,537
10,298
13,426
2,333
1,728
143
16,848
9,759
11,546
38,153
10,869
11,633
2,412
2,246
–
15,693
9,342
9,786
34,821
11,302
9,495
2,511
2,758
Diabetes care total sales
69,980
65,456
60,887
NovoSeven®
Norditropin®
Other products
Biopharmaceuticals total sales
Segment key fi gures
Total net sales
Change in DKK (%)
Change in local currencies (%)
Cost of goods sold
Sales and distribution costs
Research and development costs
Administrative costs
Other operating income, net
Operating profi t
Operating margin
Depreciation, amortisation and
impairment losses expensed
Additions to Intangible assets and
Property, plant and equipment
Assets allocated to business segments
Assets not allocated to business
segments1
Total assets
9,142
6,506
3,178
9,256
6,114
2,746
8,933
5,698
2,508
18,826
18,116
17,139
69,980
6.9%
8.8%
12,482
20,373
9,318
2,790
516
25,533
36.5%
65,456
7.5%
12.0%
11,909
20,584
7,786
2,767
510
22,920
35.0%
60,887
20.7%
14.5%
11,435
18,894
7,322
2,604
464
21,096
34.6%
18,826
3.9%
6.2%
2,080
2,850
4,444
747
254
8,959
47.6%
18,116
5.7%
11.5%
2,231
2,796
3,947
741
172
8,573
47.3%
17,139
7.7%
2.4%
2,030
2,650
3,575
708
202
8,378
48.9%
88,806
6.3%
8.3%
14,562
23,223
13,762
3,537
770
34,492
38.8%
83,572
7.1%
11.9%
14,140
23,380
11,733
3,508
682
31,493
37.7%
78,026
17.6%
11.6%
13,465
21,544
10,897
3,312
666
29,474
37.8%
2,438
2,209
2,167
997
3,245
2,651
2,800
1,066
590
990
526
770
3,435
2,799
2,693
4,311
3,641
3,570
40,748
36,436
36,030
10,914
10,525
9,119
51,662
46,961
45,149
25,400
77,062
23,376
70,337
20,520
65,669
1. The part of total assets that remains unallocated to either of the two business segments includes Cash at bank and on hand, Marketable securities, Derivative fi nancial instruments,
Deferred income tax assets, Tax receivables and Other fi nancial assets.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 65
eng26 - 31.01 - 55-111.indd 65
31/01/15 20.44
31/01/15 20.44
66 CONSOLIDATED FINANCIAL STATEMENTS
2.2 SEGMENT INFORMATION (CONTINUED)
Geographical areas
Novo Nordisk operates in fi ve geographical regions:
• North America: the US and Canada
• Europe: the EU, EFTA, Albania, Bosnia-Hercegovina, Macedonia, Serbia,
Montenegro and Kosovo
• Japan & Korea: Japan and South Korea
• Region China: China, Hong Kong and Taiwan
• International Operations: all other countries.
GEOGRAPHICAL AREAS
DKK million
Sales by business segment:
NovoRapid® / NovoLog®
NovoMix® / NovoLog® Mix
Levemir®
Modern insulins (insulin analogues)
Human insulins
Victoza®
Other diabetes care
Diabetes care total
NovoSeven®
Norditropin®
Other biopharmaceuticals
Biopharmaceuticals total
Sales are attributed to geographical regions according to the location of
the customer. Allocation of property, plant and equipment, trade receivables,
allowance for trade receivables and total assets goes back to allocation based
on the location of the assets.
The country of domicile is Denmark, which is part of Region Europe.
Denmark is immaterial to Novo Nordisk’s activities in terms of geographical
size and the operational business segments. More than 99.5% of total
sales are realised outside Denmark.
2014
2013
2012
2014
2013
2012
North America
Europe
10,191
2,483
9,386
22,060
1,997
9,046
846
9,953
2,694
6,823
19,470
1,976
7,537
1,590
9,033
2,488
5,290
16,811
1,959
5,930
1,998
3,999
2,317
2,939
9,255
2,222
3,130
1,009
3,819
2,450
2,909
9,178
2,427
2,896
885
3,707
2,544
2,833
9,084
2,642
2,427
965
33,949
30,573
26,698
15,616
15,386
15,118
4,415
2,750
2,009
4,459
2,273
1,719
4,397
1,721
1,404
2,111
1,654
769
2,294
1,729
654
2,206
1,741
642
9,174
8,451
7,522
4,534
4,677
4,589
Total sales by business and geographical segment
43,123
39,024
34,220
20,150
20,063
19,707
Underlying sales growth in local currencies1
Currency effect (local currency impact)
10.8%
(0.3%)
17.8%
(3.8%)
19.2%
9.5%
0.2%
0.2%
2.5%
(0.7%)
2.0%
0.8%
Total sales growth as reported
10.5%
14.0%
28.7%
0.4%
1.8%
2.8%
Property, plant and equipment
Trade receivables
Allowance for doubtful trade receivables
Total assets
1. Additional non-IFRS measure; please refer to p 94 for defi nition.
2,215
4,359
(20)
9,131
1,571
3,076
(20)
7,057
1,500
2,278
(18)
5,867
17,411
3,866
(194)
54,526
16,801
3,779
(245)
51,205
16,200
3,688
(239)
47,663
2.3 RESEARCH AND DEVELOPMENT COSTS
Accounting policies
Novo Nordisk’s research and development is focused on therapeutic proteins
within insulins, GLP-1, blood clotting factors and human growth hormone.
The research activities utilise biotechnological methods based on genetic
engineering, advanced protein chemistry and protein engineering. These
methods have played a key role in the development of the production
technology used in the manufacture of insulin, GLP-1, recombinant blood
clotting factors, human growth hormone and glucagon.
In line with industry practice, Novo Nordisk expenses all internal research
costs. Internal development costs are also expensed as incurred as these do
not qualify for capitalisation as intangible assets until marketing approval by
a regulatory authority is obtained or highly probable, due to regulatory and
other uncertainties inherent in the development of new products.
Research and development activities are carried out by Novo Nordisk’s
research and development centres, mainly in Denmark, the US and China,
while research and development trials are carried out all over the world.
Without establishing joint ventures or operations, Novo Nordisk also
enters into partnership agreements to a limited extent, primarily in terms of
development and licence agreements.
Research and development costs primarily comprise employee costs, internal
and external costs related to execution of studies including manufacturing
costs, facility costs of the research centres, and amortisation depreciation
and impairment losses related to intangible assets and property, plant and
equipment used in the research and development activities.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 66
eng26 - 31.01 - 55-111.indd 66
31/01/15 20.44
31/01/15 20.44
CONSOLIDATED FINANCIAL STATEMENTS
67
Sales to external customers attributed to the US are collectively the most
material to the Group. The US is the only country where sales contribute
more than 10% of total sales, and sales to the US represent more than 90%
of sales in Region North America.
For patent expiry in key markets by products, please refer to note 2.5 in the
social statement.
2014
2013
2012
2014
2013
2012
2014
2013
2012
International Operations
Region China
Japan & Korea
1,802
2,077
1,344
5,223
2,660
799
820
1,639
1,875
1,290
4,804
2,954
741
692
9,502
9,191
1,891
900
247
1,716
853
247
1,408
1,708
1,106
4,222
3,073
613
632
8,540
1,526
780
234
3,038
2,816
2,540
618
2,338
334
3,290
3,051
171
1,388
486
1,951
236
2,673
3,022
128
1,163
370
1,574
171
2,115
2,860
70
1,181
7,900
6,986
6,226
171
13
4
188
158
13
4
175
158
14
4
176
839
656
214
1,709
368
280
656
3,013
554
1,189
149
951
789
288
2,028
490
331
471
3,320
629
1,246
122
1,175
1,028
386
2,589
768
455
493
4,305
646
1,442
224
1,892
1,997
2,312
12,540
12,007
11,080
8,088
7,161
6,402
4,905
5,317
6,617
14.4%
(10.0%)
17.0%
(8.6%)
16.2%
2.1%
13.3%
(0.4%)
12.7%
(0.8%)
16.3%
11.7%
(0.8%)
(6.9%)
(0.1%)
(19.5%)
(1.5%)
7.8%
4.4%
8.4%
18.3%
12.9%
11.9%
28.0%
(7.7%)
(19.6%)
6.3%
1,145
2,978
(776)
6,821
1,292
2,196
(716)
5,945
1,508
2,177
(710)
6,660
2,230
1,538
0
5,629
2,078
1,587
0
5,108
2,157
1,161
(54)
4,490
135
300
(5)
955
140
269
(8)
1,022
174
335
(3)
989
A very limited part of the research and development activities is recognised
outside Research and development costs:
RESEARCH AND DEVELOPMENT COSTS
• Up-front payments and milestones paid to partnerships prior to or upon
regulatory approval are capitalised as intangible assets and amortised as
Cost of goods sold over the useful life
• Royalty expenses paid to partnerships after regulatory approval are
expensed as Cost of goods sold
• Royalty income received from partnerships is recognised as part of Other
operating income, net
• Contractual research and development obligations to be paid in the future
are disclosed separately as Commitments in note 5.4.
DKK million
2014
2013
2012
Internal and external research and
development costs
Employee costs (note 2.4)
Amortisation and impairment losses,
intangible assets (note 3.1)
Depreciation and impairment losses,
property, plant and equipment (note 3.2)
7,646
5,200
6,587
4,680
6,136
4,298
425
491
126
340
47
416
Total research and development costs
13,762
11,733
10,897
As percentage of sales
15%
14%
14%
For a review of development in research and development costs, refer to p 7
and 10, ‘2014 performance and 2015 outlook’.
BY BUSINESS SEGMENT
(NOTE 2.2)
Diabetes care
Biopharmaceuticals
9,318
4,444
7,786
3,947
7,322
3,575
Total
13,762
11,733
10,897
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 67
eng26 - 31.01 - 55-111.indd 67
31/01/15 20.44
31/01/15 20.44
68 CONSOLIDATED FINANCIAL STATEMENTS
2.3 RESEARCH AND DEVELOPMENT COSTS
(CONTINUED)
2.4 EMPLOYEE COSTS
Accounting policies
HISTORICAL RATIO OF RESEARCH AND DEVELOPMENT
COSTS
% of costs by business segment
Research
Development
Wages, salaries, social security contributions, annual leave and sick leave,
bonuses and non-monetary benefi ts are recognised in the year in which
the associated services are rendered by employees of Novo Nordisk. Where
Novo Nordisk provides long-term employee benefi ts, the costs are accrued to
match the rendering of the services by the employees concerned.
Diabetes care
Biopharmaceuticals
Total
15–25%
25–35%
75–85%
65–75%
EMPLOYEE COSTS
20–30%
70–80%
DKK million
The split between research and development will fl uctuate in individual years
depending on the composition of the clinical development portfolio. Costs
incurred up until fi rst human dose trials are considered as research costs.
NON-RECURRING COSTS RELATED TO DISCONTINUATION
OF ACTIVITIES WITHIN INFLAMMATORY DISORDERS
In September 2014, Management decided to discontinue all research and
development activities within infl ammatory disorders. This decision was not
based on safety concerns.
The decision to discontinue all research and development within infl am-
matory disorders followed a review of Novo Nordisk’s strategic position in the
therapeutic area after the discontinuation of the most advanced compound
within infl ammation, anti-IL-20 for the treatment of rheumatoid arthritis.
The fi nancial impact is a non-recurring impairment cost regarding intangible
and tangible assets and other costs such as project closures and severance
payments.
In total, a cost of DKK 600 million has been recorded as part of research and
development costs and negatively impacted operating profi t in 2014 in the
Biopharmaceuticals business segment.
DKK million
Impairment of intangible assets
Impairment of property, plant and equipment
Clinical trials etc
Employee costs, incl severance payment
Total costs
2014
395
85
40
80
600
Wages and salaries
Share-based payment costs (note 5.1)
Pensions – defi ned contribution plans
Pensions – retirement benefi t
obligations (note 3.6)
Other social security contributions
Other employee costs
2014
2013
2012
21,306
371
1,607
142
1,617
1,944
19,077
409
1,428
113
1,489
1,891
17,301
308
1,302
150
1,358
1,779
Total employee costs for the year
26,987
24,407
22,198
Employee costs included in intangible
assets and property, plant and
equipment1
Change in employee costs included
in inventories
(866)
(772)
(533)
(206)
(29)
(70)
Total employee costs
25,915
23,606
21,595
Included in the Income statement:
Cost of goods sold
Sales and distribution costs
Research and development costs
Administrative costs
Other operating income, net
6,224
10,334
5,200
2,426
1,731
5,160
9,831
4,680
2,250
1,685
4,627
8,784
4,298
2,205
1,681
Total employee costs
25,915
23,606
21,595
1. This refl ects annual gross employee costs included in intangible assets and property,
plant and equipment that will subsequently be included in depreciation and
impairment losses.
Average number of full-time employees
Year-end number of full-time employees
40,164
40,957
36,144
37,978
33,061
34,286
REMUNERATION TO EXECUTIVE MANAGEMENT AND
BOARD OF DIRECTORS
DKK million
2014
2013
2012
Salary and cash-based incentive
Pension
Other benefi ts
Executive Management in total1, 2
Fee to Board of Directors3
71
18
2
91
9
58
15
2
75
9
37
9
1
47
9
1. Excluding share-based payments, as these are allocated in the joint pool between
Executive Management and other members of the Senior Management Board. Please
refer to note 5.1 and ’Remuneration’, pp 49 – 51, for further information.
2. In November 2014 EVP Lise Kingo decided to leave Novo Nordisk. The 2014
remuneration for Lise Kingo is included in the above table. In addition severance
payments of DKK 32.2 million were also paid.
3. Excluding social security taxes paid amounting to less than DKK 1 million (less than
DKK 1 million in 2013).
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 68
eng26 - 31.01 - 55-111.indd 68
31/01/15 20.44
31/01/15 20.44
2.5 OTHER OPERATING INCOME, NET
Accounting policies
Other operating income (net) comprises licence income and income of a
secondary nature in relation to the main activities of Novo Nordisk. Licence
income is recognised on an accrual basis in accordance with the terms and
substance of the relevant agreement. Net profi t, not related to Novo Nordisk,
from the two wholly owned subsidiaries NNE Pharmaplan A/S and for NNIT
A/S is recognised as other operating income. Other operating income also
include income from sale of intellectual property rights.
2.6 INCOME AND DEFERRED INCOME
TAXES
Income taxes
Accounting policies
The tax expense for the period comprises current and deferred tax and
interest on tax cases ongoing or settled during the year, including adjust-
ments to previous years and changes in provision for uncertain tax positions.
Tax is recognised in the Income statement, except to the extent that it relates
to items recognised in Other comprehensive income.
Ongoing tax disputes, primarily related to transfer pricing cases, are included
individually as part of deferred tax assets, tax receivables and tax payables.
Key accounting estimate – Income taxes
Novo Nordisk is subject to income taxes around the world. Signifi cant
judgement is required in determining the worldwide accrual for income
taxes, deferred income tax assets and liabilities, and provision for uncertain
tax positions. Novo Nordisk recognises deferred income tax assets if it
is probable that suffi cient 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. In the course of con ducting
business globally, transfer pricing disputes with tax authorities may occur,
and Management judgement is applied to assess the possible outcome of
such disputes. Novo Nordisk believes that the provision made for uncertain
tax positions not yet settled with local tax authorities is adequate. However,
the actual obligation may deviate and is dependent on the result of
litigations and settlements with the relevant tax authorities.
INCOME TAXES EXPENSED
DKK million
2014
2013
2012
CONSOLIDATED FINANCIAL STATEMENTS
69
Adjustments recognised for prior periods include adjustments caused by
events that occurred in the current year related to current and deferred tax of
prior periods. Such adjustments predominantly arise from tax payments on
tax disputes related to transfer pricing and reversal of associated tax liability
recognised in prior periods.
DKK million
2014
2013
2012
Computation of effective tax rate:
Statutory corporate income tax rate
in Denmark
Deviation in foreign subsidiaries’
tax rates compared with the Danish
tax rate (net)
Non-taxable income less non-tax-
deductible expenses (net)
Effect on deferred tax related to
change in the Danish corporate tax rate
Other
24.5%
25.0%
25.0%
(1.9%)
(2.0%)
(2.1%)
0.0%
0.0%
0.1%
–
(0.3%)
(0.3%)
(0.1%)
–
(0.1%)
Effective tax rate
22.3%
22.6%
22.9%
Computation of effective tax amount:
Corporate income tax at tax rate
in Denmark
Impact from deviation in foreign
subsidiaries’ tax rates compared with
the Danish tax rate (net)
Non-taxable income less
non-tax-deductible expenses (net)
Effect on deferred tax related to
change in the Danish corporate tax rate
Other
8,354
8,135
6,953
(623)
(636)
(571)
(12)
–
(104)
(8)
(99)
(37)
28
–
(31)
Effective tax amount
7,615
7,355
6,379
INCOME TAXES PAID
DKK million
2014
2013
2012
Income taxes paid in Denmark
Income taxes paid outside Denmark
4,936
2,971
7,363
2,444
7,895
2,996
Total income taxes paid
7,907
9,807
10,891
The income taxes paid in Denmark in 2012 and 2013 include adjustments
arising from ongoing tax disputes primarily related to transfer pricing from
prior periods.
Current tax on profi t for the year
Deferred tax on profi t for the year
8,562
(748)
8,540
(682)
6,001
645
Deferred income taxes
7,814
7,858
6,646
Accounting policies
Tax on profi t for the year
Adjustments recognised for
current tax of prior periods
Adjustments recognised for
deferred tax of prior periods
Income taxes in the
Income statement
(313)
(74)
4,042
114
(429)
(4,309)
7,615
7,355
6,379
Tax on other comprehensive income
for the year, (income)/expense
(977)
211
587
Tax on other comprehensive income for the year relates to tax on deferred
(gains)/losses on cash fl ow hedges and internal profi t in inventories. This is
offset by currency adjustment of DKK 99 million (DKK 48 million in 2013)
recognised as current tax in Other comprehensive income in 2014.
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
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 elimina-
tion of the temporary differences. In general the Danish tax rules related
to company distributions provide exemption from tax for most repatriated
profi ts. No provision is made for income taxes that would be payable upon
the distribution of unremitted earnings unless a concrete distribution of
earnings is planned.
eng26 - 31.01 - 55-111.indd 69
eng26 - 31.01 - 55-111.indd 69
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
70 CONSOLIDATED FINANCIAL STATEMENTS
2.6 INCOME AND DEFERRED INCOME TAXES (CONTINUED)
DEVELOPMENT IN DEFERRED INCOME TAX ASSETS AND LIABILITIES
DKK million
Property,
plant and
equipment
Intangible
assets
Inventories
Tax-loss
carry-
forward
2014
Net deferred tax asset/(liability) at 1 January
Income/(charge) to the Income statement1
Income/(charge) to Other comprehensive income
Exchange rate adjustment
(853)
163
(25)
Net deferred tax asset/(liability) at 31 December
(715)
64
(57)
8
15
1,761
733
174
–
2,668
Classifi ed as follows:
Deferred tax asset at 31 December
Deferred tax liability at 31 December
229
(944)
286
(271)
3,665
(997)
2013
Net deferred tax asset/(liability) at 1 January
Prior-year adjustment - Tax receivables/Tax payables
Income/(charge) to the Income statement1, 2
Income/(charge) to Other comprehensive income
Exchange rate adjustment
141
3
Net deferred tax asset/(liability) at 31 December
(853)
(997)
133
1,336
(44)
(25)
64
593
(168)
–
1,761
Classifi ed as follows:
Deferred tax asset at 31 December
Deferred tax liability at 31 December
109
(962)
378
(314)
2,637
(876)
1. Of which DKK (114) million (DKK 429 million in 2013) relates to re-assessments of prior-year estimates.
2. Including effect related to change in the Danish corporate tax rate.
54
(19)
(3)
32
32
–
66
(7)
(5)
54
54
–
Offset
within
countries
–
–
Other
2,533
(186)
902
143
3,392
Total
3,559
634
1,076
123
5,392
3,460
(68)
(2,273)
2,273
5,399
(7)
974
1,330
428
(91)
(108)
2,533
–
–
3,567
(1,034)
(2,514)
2,514
1,512
1,330
1,111
(259)
(135)
3,559
4,231
(672)
The tax value of the tax-loss carry-forward of DKK 215 million (DKK 182 million in 2013) has not been recognised in the Balance sheet due to the likelihood that
the tax losses will not be realised in the future. None of the unrecognised tax-loss carry-forward expires within one year. DKK 8 million expires within two to fi ve
years and DKK 207 million after more than fi ve years.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 70
eng26 - 31.01 - 55-111.indd 70
31/01/15 20.44
31/01/15 20.44
SECTION 3
OPERATING ASSETS AND LIABILITIES
CONSOLIDATED FINANCIAL STATEMENTS
71
This section presents details on the operating assets that form the basis
for the activities of Novo Nordisk, and related liabilities. These net assets
impact Novo Nordisk’s long-term target for ‘Operating profi t after tax to net
operating assets (OPAT/NOA)’.
For 2014, OPAT/NOA amounts to 97.2%, representing an increase of more
than 50% over the last fi ve years and refl ecting the growth in Operating
profi t after tax generated on a stable base of net operating assets.
This is driven by Novo Nordisk’s organic growth strategy with limited
acquisition of intangible assets or businesses in general. It also refl ects the
fact that, in line with industry practice, Novo Nordisk does not capitalise
internal development costs.
The overall approach to managing operating assets is to retain assets for
research, development and production activities under the company’s own
control, and generally to lease non-core assets related to administration and
distribution. This is a key factor in maintaining high quality in the company’s
products. Furthermore, being able at all times to deliver products to
customers is a key priority; consequently the total production capacity
refl ects this priority and the inventory level includes a level of safety stock.
IMPACT OF US REBATES
A signifi cant factor in net operating assets also relates to movement in the
provision for sales rebates in the US, presented as Short-term provisions in
the balance sheet. The movement in 2014 refl ects growth in US sales, and
changes in product and rebate programme mix, countered by the effect of
faster collection from pharma benefi t managers and authorities. The increase
in inventory level partly refl ects additional safety stock. Trade receivables and
fi xed assets have developed in line with Operating profi t.
3.1 INTANGIBLE ASSETS
Accounting policies
Patents and licences, including acquired patents and licences for in-process
research and development projects, are carried at historical cost less
accumulated amortisation and any impairment loss. Amortisation is based on
the straight-line method over the estimated useful life, which is the shorter
of the legal duration and the economic useful life, not exceeding 10 years.
The amortisation of patents and licences begins after regulatory approval has
been obtained.
Internal development of computer software and other directly attributable
development costs related to major IT projects for internal use are recognised
as intangible assets if the recognition criteria are met, ie a signifi cant
business system where the expenditure leads to the creation of a durable
asset. Amortisation is based on the straight-line method over the estimated
useful life of 3 –10 years. The amortisation begins when the asset is in the
location and condition necessary for it to be capable of operating in the
manner intended by Management.
Impairment of assets
Intangible assets with an indefi nite useful life and intangible assets not yet
available for use are not subject to amortisation but are tested annually for
impairment, irrespective of whether there is any indication that they may be
impaired.
101% OPERATING PROFIT
AFTER TAX TO NET
OPERATING ASSETS
MAIN MOVEMENTS IN NET OPERATING ASSETS
Net operating assets
Fixed assets
Inventories
Receivables
Liabilities and US rebates
DKK billion
35
28
21
14
7
0
2013
2014
Assets that are subject to amortisation, such as intangible assets in use
or with defi nite useful life, and other non-current assets are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Factors considered material that
could trigger an impairment test include the following:
• Development of a competing drug
• Changes in the legal framework covering patents, rights and licences
• Advances in medicine and/or technology that affect the medical
treatments
• Lower-than-predicted sales
• Adverse impact on reputation and/or brand names
• Changes in the economic lives of similar assets
• Relationship with other intangible assets or property, plant and
equipment
• Changes or anticipated changes in participation rates or reimbursement
policies.
If the carrying amount of intangible assets exceeds the recoverable amount
based upon the existence of one or more of the above indicators of
impairment, any impairment is measured based on discounted projected
cash fl ows. Impairments are reviewed at each reporting date for possible
reversal.
eng26 - 31.01 - 55-111.indd 71
eng26 - 31.01 - 55-111.indd 71
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
72 CONSOLIDATED FINANCIAL STATEMENTS
3.1 INTANGIBLE ASSETS (CONTINUED)
3.2 PROPERTY, PLANT AND EQUIPMENT
Accounting policies
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 and indirectly attributable to the construction
of the assets. Subsequent cost is included in the asset’s carrying amount or
recognised as a separate asset only when it is probable that future economic
benefi ts associated with the item will fl ow to Novo Nordisk and the cost
of the item can be measured reliably. In general, construction of major
investments is self-fi nanced and thus no interest on loans is capitalised as
part of the cost. Depreciation is based on the straight-line method over the
estimated useful lives of the assets:
• Buildings: 12 – 50 years
• Plant and machinery: 5 –16 years
• Other equipment: 3 –10 years
• Land: not depreciated.
The depreciation commences when the asset is available for use, ie when it
is in the location and condition necessary for it to be capable of operating in
the manner intended by Management.
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 (please refer to note 3.1 for
a description of impairment of assets). Gains and losses on disposals are
determined by comparing the proceeds with the carrying amount and are
recognised in the Income statement.
INTANGIBLE ASSETS
DKK million
Cost at the beginning of the year
Additions during the year
Disposals during the year
Effect of exchange rate adjustment
Cost at the end of the year
Amortisation and impairment losses
at the beginning of the year
Amortisation for the year
Impairment losses for the year
Amortisation and impairment losses reversed
on disposals during the year
Effect of exchange rate adjustment
Amortisation and impairment losses
at the end of the year
2014
2013
3,099
321
(527)
14
2,712
403
–
(16)
2,907
3,099
1,484
143
423
(527)
6
1,217
166
113
–
(12)
1,529
1,484
Carrying amount at the end of the year
1,378
1,615
Specifi ed as:
Patents and licences
Internally developed software and software
under development
Total
454
924
810
805
1,378
1,615
In 2014, an impairment loss of DKK 423 million (DKK 113 million in
2013) related to patents and licences has been recognised primarily due
to discontinuation of all infl ammation development projects.
Intangible assets not yet in use amount to DKK 656 million (DKK 831 million
in 2013), primarily patents and licences in relation to development projects.
Impairment tests in 2014 and 2013 of patents and licences not yet in use
are based upon Management’s projections and anticipated net present value
of future cash fl ows from cash-generating units. Management has used a
pre-tax discount rate (WACC) of 8% based on the risk inherent in the related
activity’s current business model and industry comparisons. Terminal values
used are based on the expected life of products, forecasted life cycle and
cash fl ow over that period, and the useful life of the underlying assets.
AMORTISATION AND IMPAIRMENT LOSSES
DKK million
2014
2013
2012
Cost of goods sold
Sales and distribution costs
Research and development costs
Other operating income, net
Total amortisation and
impairment losses
105
28
425
8
97
41
126
15
81
50
47
14
566
279
192
For further information regarding impairment of infl ammation projects,
please refer to note 2.3.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 72
eng26 - 31.01 - 55-111.indd 72
31/01/15 20.44
31/01/15 20.44
3.2 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
CONSOLIDATED FINANCIAL STATEMENTS
73
PROPERTY, PLANT AND EQUIPMENT
DKK million
2014
Cost at the beginning of the year
Additions during the year
Disposals during the year
Transfer from/(to) other items
Effect of exchange rate adjustment
Cost at the end of the year
Land and
buildings
Plant and
machinery
Other
equipment
Assets in
course of
construction
16,184
234
(392)
1,156
209
18,964
459
(324)
1,168
143
3,457
384
(279)
250
70
5,432
2,913
–
(2,574)
30
Total
44,037
3,990
(995)
0
452
17,391
20,410
3,882
5,801
47,484
Depreciation and impairment losses at the beginning of the year
Depreciation for the year
Impairment losses for the year1
Depreciation and impairment losses reversed on disposals during the year
Effect of exchange rate adjustment
6,267
855
94
(297)
14
13,614
1,436
42
(265)
83
2,274
362
80
(260)
49
Depreciation and impairment losses at the end of the year
6,933
14,910
2,505
–
–
–
–
–
–
22,155
2,653
216
(822)
146
24,348
Carrying amount at the end of the year
10,458
5,500
1,377
5,801
23,136
2013
Cost at the beginning of the year
Additions during the year
Disposals during the year
Transfer from/(to) other items
Effect of exchange rate adjustment
Cost at the end of the year
15,345
521
(195)
804
(291)
18,022
581
(655)
1,283
(267)
3,359
230
(259)
186
(59)
5,878
1,906
–
(2,273)
(79)
42,604
3,238
(1,109)
0
(696)
16,184
18,964
3,457
5,432
44,037
Depreciation and impairment losses at the beginning of the year
Depreciation for the year
Impairment losses for the year
Depreciation and impairment losses reversed on disposals during the year
Effect of exchange rate adjustment
5,881
688
4
(192)
(114)
12,975
1,464
22
(643)
(204)
2,209
337
5
(243)
(34)
Depreciation and impairment losses at the end of the year
6,267
13,614
2,274
–
–
–
–
–
–
21,065
2,489
31
(1,078)
(352)
22,155
Carrying amount at the end of the year
9,917
5,350
1,183
5,432
21,882
DEPRECIATION AND IMPAIRMENT LOSSES
DKK million
Cost of goods sold
Sales and distribution costs
Research and development costs
Administrative costs
Other operating income, net
Total depreciation and impairment losses
1. For further information regarding impairment of infl ammation projects, please refer to note 2.3.
2014
2013
2,141
36
491
83
118
2,869
1,984
37
340
59
100
2,520
2012
1,909
46
416
53
77
2,501
eng26 - 31.01 - 55-111.indd 73
eng26 - 31.01 - 55-111.indd 73
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
74 CONSOLIDATED FINANCIAL STATEMENTS
3.3 INVENTORIES
Accounting policies
Inventories are stated at the lower of cost and net realisable value. Cost
is determined using the fi rst-in, fi rst-out method. Cost comprises direct
production costs such as raw materials, consumables and labour as well as
indirect production costs. Production costs for work in progress and fi nished
goods include indirect production costs such as employee costs, deprecia-
tion, maintenance etc.
If the expected sales price less completion costs to execute sales (net realis-
able 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.
Inventory manufactured prior to regulatory approval (pre-launch inventory)
is capitalised but immediately provided for, until there is a high probability
of regulatory approval of the product. Before that point, a provision is
made against the carrying amount of inventory to its recoverable amount
and recorded as research and development costs. At the point when a high
probability of regulatory approval is obtained, the provision recorded is
reversed, up to no more than the original cost.
Key accounting estimate – Indirect production costs
Indirect production costs account for more than 50% of the net inventory
value, refl ecting a lengthy production process compared with low direct
raw material cost. The production of both diabetes care and biopharma-
ceuticals products is highly complex from fermentation to purifi cation
and formulation, including quality control of all production processes.
Furthermore, the process is very sensitive to manufacturing conditions.
These factors all infl uence the parameters for capitalisation of indirect
production costs in Novo Nordisk and full cost of the products. Indirect
production costs are measured using a standard cost method, which is
reviewed regularly to ensure relevant measures of capacity utilisation,
production lead time, cost base and other relevant factors, hence inventory is
valuated at actual cost. When calculating total inventory, Management must
make certain judgements about cost of production, standard cost variances
and idle capacity in estimating indirect production costs for capitalisation.
Changes in the parameters for calculation of indirect production costs could
have an impact on the gross margin and the overall valuation of inventories.
3.4 TRADE RECEIVABLES
Accounting policies
Trade receivables are recognised initially at fair value and subsequently
measured at amortised cost using the effective interest method, less
allowance for doubtful trade receivables.
The allowance is deducted from the carrying amount of Trade receivables
and the amount of the loss is recognised in the Income statement under
Sales and distribution costs. Subsequent recoveries of amounts previously
written off are credited against Sales and distribution costs.
Key accounting estimate –
Allowance for doubtful trade receivables
The customer base of Novo Nordisk comprises government agencies, whole-
salers, retail pharmacies, managed care and other customers. Management
makes allowance for doubtful trade receivables in anticipation of estimated
losses resulting from the subsequent inability of customers to make required
payments. If the fi nancial circumstances of customers were to deteriorate,
resulting in an impairment of their ability to make payments, an additional
allowance could be required in future periods. When evaluating the
adequacy of the allowance for doubtful trade receivables, Management
analyses trade receivables and examines historical bad debt, customer
concentrations, customer creditworthiness and payment history, current
economic trends and changes in customer payment terms. Please refer to
note 4.2 for a general description of credit risk.
As a result of the signifi cant sales to countries within Region International
Operations, and the fact that many of these countries have low credit ratings,
the relative impact of countries within Region International Operations
on the allowance for doubtful trade receivables is increasing. The political
climate in Russia and Argentina is impacted by instability and sharp currency
depreciation. Novo Nordisk monitors the development closely. Novo Nordisk
also continues to monitor the credit exposure related to region Europa due
to the generally troubled economic climate in Europe and the Eurozone
countries, Payment history as well as current economic conditions and
indicators are taken into account in the valuation of trade receivables.
Please refer to note 2.2 for a geographical split of trade receivables and
allowance for doubtful trade receivables.
INVENTORIES
DKK million
Raw materials
Work in progress
Finished goods
2014
2013
1,723
7,539
3,260
1,660
6,227
2,625
TRADE RECEIVABLES
DKK million
Trade receivables (gross)
Allowance for doubtful trade receivables
Total inventories (gross)
12,522
10,512
Trade receivables (net)
Inventory write-downs at year-end
1,165
960
Total inventories (net)
11,357
9,552
Indirect production costs included in work
in progress and fi nished goods
Share of total inventories (net)
5,759
51%
4,834
51%
Trade receivables (net) equals a credit period
of 54 days (48 days in 2013).
Age analysis of trade receivables
Non-impaired trade receivables
– Not yet due
– Overdue by between 1 and 179 days
– Overdue by between 180 and 360 days
– Overdue by more than 360 days
2014
2013
14,036
995
11,896
989
13,041
10,907
12,664
337
40
0
9,985
844
78
0
MOVEMENTS IN INVENTORY
WRITE-DOWNS
Inventory write-downs at the beginning of the year
Inventory write-downs during the year
Utilisation of inventory write-downs
Reversal of inventory write-downs
960
467
(123)
(139)
864
465
(156)
(213)
Trade receivables with credit risk exposure
13,041
10,907
Allowance for doubtful trade receivables
995
989
Trade receivables (gross)
14,036
11,896
Inventory write-downs at the end of the year
1,165
960
There is no inventory carried at net realisable value at 31 December for either
2013 or 2014.
MOVEMENT IN ALLOWANCE FOR
DOUBTFUL TRADE RECEIVABLES
Carrying amount at the beginning of the year
Confi rmed losses
Reversal of allowance for confi rmed losses
Allowance for possible losses during the year
Effect of exchange rate adjustment
Allowance at the end of the year
989
(13)
(11)
57
(27)
995
1,024
(8)
(10)
51
(68)
989
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 74
eng26 - 31.01 - 55-111.indd 74
31/01/15 20.44
31/01/15 20.44
3.5 OTHER RECEIVABLES AND
PREPAYMENTS
Accounting policies
Other receivables and prepayments are recognised initially at fair value
and subsequently measured at amortised cost using the effective interest
method. Prepayments relate to ongoing research and development activities
such as clinical trials and costs concerning subsequent fi nancial years. Other
receivables comprise miscellaneous duties and work in progress for third
parties etc.
OTHER RECEIVABLES AND PREPAYMENTS
DKK million
Prepayments
Interest receivable
Amounts owed by related parties
Deposit
VAT receivable
Other receivables
2014
2013
1,222
26
138
251
350
763
1,110
75
141
232
197
699
Total other receivables and prepayments
2,750
2,454
CONSOLIDATED FINANCIAL STATEMENTS
75
3.6 RETIREMENT BENEFIT OBLIGATIONS
Accounting policies
Novo Nordisk operates a number of defi ned contribution plans throughout
the world. Novo Nordisk’s contributions to the defi ned contribution plans
are charged to the Income statement in the year to which they relate. In a
few countries, Novo Nordisk still operates defi ned benefi t plans. The defi ned
benefi t plans for Germany cover all employees employed before November
2003. Obligations relating to employees employed after 2003 are covered by
a defi ned contribution plan. In Switzerland the employee pension scheme is
setup as a combined defi ned benefi t plan and a defi ned contribution plan.
The plan in Switzerland is mandatory. The plan in Japan covers all employees
and is set up as a combined cash balance plan and a defi ned contribution
plan. The plan in the US is structured as a post-retirement healthcare plan
covering all employees. Since 2012 all employees are covered by a defi ned
contribution plan.
The costs for the year for defi ned benefi t plans are determined using the
projected unit credit method. This refl ects services rendered by employees to
the valuation dates and is based on actuarial assumptions primarily regarding
discount rates used in determining the present value of benefi ts and
projected rates of remuneration growth. Discount rates are based on the
market yields of high-rated corporate bonds in the country concerned.
Actuarial gains and losses arising from experience adjustments and changes
in actuarial assumptions are charged or credited to Other comprehensive
income in the period in which they arise. Past service costs are recognised
immediately in the Income statement.
Pension assets are only recognised to the extent that Novo Nordisk is able to
derive future economic benefi ts such as refunds from the plan or reductions
of future contributions.
The Group’s defi ned benefi t plans are pension plans and medical plans and
are usually funded by payments from Group companies and by employees
to funds independent of Novo Nordisk. Where a plan is unfunded, a liability
for the retirement obligation is recognised in the Balance sheet. Costs
recognised for post-employment benefi ts are included in Cost of goods
sold, Sales and distribution costs, Research and development costs, and
Administrative costs.
The net obligation recognised in the Balance sheet is reported as non-current
liabilities.
eng26 - 31.01 - 55-111.indd 75
eng26 - 31.01 - 55-111.indd 75
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
76 CONSOLIDATED FINANCIAL STATEMENTS
3.6 RETIREMENT BENEFIT OBLIGATIONS (CONTINUED)
RETIREMENT BENEFIT OBLIGATIONS
DKK million
Germany
Switzerland
Japan
At the beginning of the year
Current service costs
Settlements
Interest costs
Remeasurement (gains)/losses1
Plan participant contributions etc
Benefi ts paid to employees
Exchange rate adjustment
At the end of the year
FAIR VALUE OF PLAN ASSETS
At the beginning of the year
Interest income
Settlements
Remeasurement gains/(losses)
Employer contributions
Plan participant contributions etc
Benefi ts paid to employees
Exchange rate adjustment
At the end of the year
Net retirement benefi t obligations
at the end of the year
519
20
–
19
157
–
(4)
(1)
710
414
16
–
(7)
21
2
(4)
(1)
441
213
26
–
5
8
9
(18)
3
246
154
4
–
(2)
20
9
(18)
2
169
288
28
–
4
9
–
(10)
(1)
318
221
2
–
15
23
–
(10)
(1)
250
US
285
22
–
14
31
–
(8)
37
381
–
–
–
–
8
–
(8)
–
–
Other
239
25
(2)
7
45
6
(1)
1
320
67
2
–
(3)
13
6
(1)
–
84
2014
Total
1,544
121
(2)
49
250
15
(41)
39
2013
Total
1,664
129
(127)
44
(33)
16
(52)
(97)
1,9752
1,5442
856
24
–
3
85
17
(41)
–
944
904
23
(92)
21
89
18
(52)
(55)
856
269
77
68
381
236
1,031
688
1. Remeasurement relates primarily to changes in fi nancial assumptions.
2. Present value of partly funded retirement benefi t obligations amounts to DKK 1,478 million (DKK 1,115 million in 2013). Present value of unfunded retirement benefi t obligations
amounts to DKK 497 million (DKK 429 million in 2013).
NET RETIREMENT BENEFIT OBLIGATIONS
DKK million
2014
2013
WEIGHTED AVERAGE ASSET ALLOCATION OF FUNDED
RETIREMENT OBLIGATIONS
At the beginning of the year
Costs recognised in the Income statement1
Remeasurements recognised in
Other comprehensive income
Employer contributions
Exchange rate adjustment recognised in
Other comprehensive income2
688
142
247
(85)
39
760
113
(54)
(89)
(42)
At the end of the year
1,031
688
1. Employee costs comprising service costs, net interest, settlements and other. Please
refer to note 2.4.
2. As part of exchange rate adjustments in subsidiaries.
Please refer to note 5.4 for maturity analysis of net retirement benefi t
obligation.
Novo Nordisk does not expect the contributions over the next fi ve years to
differ signifi cantly from current contributions.
2014
2013
DKK
million
632
204
76
21
11
%
67%
22%
8%
2%
1%
DKK
million
584
167
78
17
10
%
68%
20%
9%
2%
1%
Coverage insurance1
Bonds
Equities
Cash at bank
Property
Total
944
100%
856
100%
1. Novo Nordisk’s defi ned benefi t plans mainly in Germany and Switzerland are
reimbursed by the international insurer Allianz regardless of the value of the plan
assets. The risk related to the funding in these countries is therefore counterparty risk
against Allianz.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 76
eng26 - 31.01 - 55-111.indd 76
31/01/15 20.44
31/01/15 20.44
3.6 RETIREMENT BENEFIT OBLIGATIONS
(CONTINUED)
ASSUMPTIONS USED FOR VALUATION
Discount rate
Projected future remuneration increases
Medical cost trend rate
Infl ation rate
2014
2013
Weighted Weighted
average
average
2%
2%
6%
2%
3%
2%
4%
2%
Actuarial valuations are performed annually for all major defi ned benefi t
plans. Assumptions regarding future mortality are based on actuarial advice
in accordance with published statistics and experience in each country.
Signifi cant actuarial assumptions for the determination of the retirement
benefi t obligation are discount rate and expected future remuneration
increases. The sensitivity analyses below have been determined based on
reasonably likely changes in the assumptions occurring at the end of the
period.
CONSOLIDATED FINANCIAL STATEMENTS
77
Novo Nordisk issues credit notes for expired goods as a part of normal
business. Where there is historical experience or a reasonably accurate
estimate of expected future returns can otherwise be made, a provision for
estimated product returns is recorded. The provision is measured at gross
sales value.
Provisions are measured at the present value of the anticipated expenditure
for settlement of the legal or constructive obligation using a pre-tax discount
rate that refl ects current market assessments of the time value of money and
the risks specifi c to the obligation. The increase in the provision due to the
passage of time is recognised as a fi nancial expense.
Key accounting estimate – Provisions for sales rebates
Novo Nordisk records provisions for expected sales rebates, wholesaler
charge-backs and other rebates, including Medicaid and Medicare in the US.
Such estimates are based on analyses of existing contractual obligations and
historical experience. Provisions are calculated on the basis of a percentage
of sales for each product as defi ned by the contracts with the various
customer groups.
Provisions for sales rebates are adjusted to actual amounts as rebates,
discounts and returns are processed. Please refer to note 2.1 for further
information on sales rebates and provisions.
DKK million
Discount rate
Future remuneration
1 %-point
increase
1 %-point
decrease
(296)
77
274
(54)
Novo Nordisk considers the provisions established for sales rebates to be
reasonable and appropriate based on currently available information.
However, the actual amount of rebates and discounts may differ from the
amounts estimated by Management as more detailed information becomes
available.
The sensitivities above consider the single change shown with the other
assumptions assumed to be unchanged. In practice, changes in one
assumption may be accompanied by offsetting changes in another assump-
tion (although this is not always the case).
3.7 PROVISIONS AND CONTINGENT
LIABILITIES
Accounting policies
Provisions for sales rebates and discounts granted to government agencies,
wholesalers, retail pharmacies, managed care and other customers are
recorded at the time the related revenues are recorded or when the incentives
are offered. Provisions are calculated based on historical experience and the
specifi c terms in the individual agreements.
Provisions for legal disputes are recognised where a legal or constructive
obligation has been incurred as a result of past events and it is probable that
there will be an outfl ow of resources that can be reliably estimated. In this
case, Novo Nordisk arrives at an estimate on the basis of an evaluation of the
most likely outcome. Disputes for which no reliable estimate can be made
are disclosed as contingent liabilities.
Key accounting estimate – Provisions for legal disputes
Provisions for legal disputes consist of various types of provision linked to
ongoing legal disputes. Management makes judgements about provisions
and contingencies, including the probability of pending and potential future
litigation outcomes which, by their very nature, are dependent on inherently
uncertain future events. When determining likely outcomes of litigations etc,
Management considers the input of external counsels on each case, as well
as known outcomes in case law.
Although Management believes that the total provisions for legal
pro ceedings are adequate based upon currently available information, there
can be no assurance that there will not be any changes in facts or matters or
that any future lawsuits, claims, proceedings or investigations will not
be material.
PROVISIONS
DKK million
Provisions
for sales
rebates
Provisions
for legal
disputes
Provisions
for product
returns
Other
provisions1
At the beginning of the year
Additional provisions, including increases to existing provisions
Amount used during the year
Adjustments, including unused amounts reversed during the year
Effect of exchange rate adjustment
At the end of the year
Non-current liabilities
Current liabilities
7,950
26,107
(23,876)
(220)
1,041
11,002
–
11,002
1,151
310
(283)
(306)
64
936
936
–
681
365
(305)
53
3
797
478
319
2014
Total
10,493
27,208
(24,754)
(462)
1,146
2013
Total
9,563
17,078
(15,493)
(267)
(388)
711
426
(290)
11
38
896
13,631
10,493
627
269
2,041
11,590
2,183
8,310
1. Other provisions consist of various types of provision, including employee benefi ts such as jubilee benefi ts, company-owned life insurance etc. Assets related to company-owned
life insurance are presented as part of Other fi nancial assets.
eng26 - 31.01 - 55-111.indd 77
eng26 - 31.01 - 55-111.indd 77
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
78 CONSOLIDATED FINANCIAL STATEMENTS
3.7 PROVISIONS AND CONTINGENT
LIABILITIES (CONTINUED)
Contingent liabilities
Novo Nordisk is currently involved in pending litigations, claims and investiga-
tions arising out of the normal conduct of its business. While provisions that
Management deems to be reasonable and appropriate have been made for
probable losses, there are uncertainties connected with these estimates.
Novo Nordisk does not expect the pending litigations, claims and investiga-
tions, individually and in the aggregate, to have a material impact on Novo
Nordisk’s fi nancial position, operating profi t or cash fl ow in addition to the
amounts accrued as provision for legal disputes.
Pending litigation against Novo Nordisk
In November 2006, Novo Nordisk A/S and the Italian affi liate Novo Nordisk
Farmaceutici S.p.A. were sued by two Italian companies in the pharma-
ceutical sectors (the “Italian Companies”) in the Civil Court in Rome. The
Italian Companies claims that Novo Nordisk breached an alleged contract for
the sale and distribution of insulin and insulin analogues in the Italian market
or, alternatively, has incurred a pre-contractual or extra-contractual liability
arising from negotiations between the parties. Novo Nordisk disputes the
claims made by the Italian Companies. The parties have now entered into
and performed a mutually acceptable settlement. As a consequence, the
Court of Appeal of Rome is expected to declare the extinguishment of the
case in Q1 2015. The settlement does not have a material impact on Novo
Nordisk’s fi nancial position, operating profi t or cash fl ow.
A number of claims alleging pancreatic cancer and pancreatitis have been
fi led in U.S. courts against various incretin-class manufactures, including
Novo Nordisk. Novo Nordisk is currently named in 120 product liability
cases related to Victoza®, predominantly related to pancreatic cancer. On
26 August 2013, a request for centralisation of all federal pancreatic cancer
cases was granted, and a single multidistrict litigation (MDL) court is now
presiding over all federal cases. Novo Nordisk does not expect the pending
claims to have a material impact on Novo Nordisk’s fi nancial position,
operating profi t or cash fl ow.
Novo Nordisk, along with 93 other defendants, has been named in a lawsuit
fi led in 2009 in the United States by the Republic of Iraq. The lawsuit alleges
damages related to the defendants’ participation in the United Nations’
defunct Oil for Food Program. Novo Nordisk does not expect the pending
claim to have a material impact on Novo Nordisk’s fi nancial position,
operating profi t or cash fl ow.
In addition to the above, the Novo Nordisk Group is engaged in certain
litigation proceedings. In the opinion of Management, settlement or con-
tinuation of these proceedings is not expected to have a material effect on
Novo Nordisk’s fi nancial position, operating profi t or cash fl ow.
Pending claims against Novo Nordisk and investigations
involving Novo Nordisk
In February 2011, the offi ce of the US Attorney for the District of Massa-
chusetts served Novo Nordisk with a subpoena calling for the production
of documents regarding potential civil and criminal offences relating to the
company’s marketing and promotional practices for the following products:
NovoLog®, Levemir® and Victoza®. This matter is now being conducted by
the US Attorney for the District of Columbia. Novo Nordisk is cooperating
with the US Attorney in this investigation. Novo Nordisk does not expect
the investigation to have a material impact on Novo Nordisk’s fi nancial
position, operating profi t or cash fl ow.
In October 2014, the offi ce of the US Attorney for the District of Massa-
chusetts served Novo Nordisk with a subpoena calling for the production
of documents regarding potential manufacturing issues within certain
production units located in Kalundborg, Denmark. Novo Nordisk is
cooperating with the US Attorney in this investigation. Novo Nordisk does
not expect the investigation to have a material impact on Novo Nordisk’s
fi nancial position, operating profi t or cash fl ow.
Previously pending before the District Court for the Eastern District of
Michigan was a consolidated class action (fi led in May, 2010) where a
putative class of direct purchasers of Prandin® asserteds that Novo Nordisk
has violated US antitrust laws in delaying the entry of generic versions of
Prandin®. On 5 September 2014, the parties agreed to settle this litigation.
On 20 January 2015, the Court approved the settlement.
In addition to the above, the Novo Nordisk Group is engaged in various
ongoing 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 fi nancial position, operating profi t or cash fl ow.
3.8 OTHER LIABILITIES
OTHER LIABILITIES
DKK million
Employee costs payable
Accruals
Accrued rebates
VAT and duties payable
Research and Development clinical trials
Other payables
2014
2013
4,454
3,684
912
744
763
494
3,962
3,155
649
761
410
449
Total other liabilities
11,051
9,386
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 78
eng26 - 31.01 - 55-111.indd 78
31/01/15 20.44
31/01/15 20.44
SECTION 4
CAPITAL STRUCTURE AND FINANCING ITEMS
CONSOLIDATED FINANCIAL STATEMENTS
79
The notes in this section provide an insight into Novo Nordisk’s capital
structure, earnings per share, free cash fl ow and fi nancing items. The free
cash fl ow impacts Novo Nordisk’s long-term target for ‘Cash to earnings
(three-year average)’. Cash to earnings is defi ned as ‘free cash fl ow as a
percentage of net profi t’. Free cash fl ow is the cash amount generated that
are available for further investments in Novo Nordisk and distribution to
shareholders without consuming prior years cash creation retained in the
company.
Novo Nordisk has a low debt-to-equity ratio refl ecting growth based on
limited debt fi nancing. This is also in line with the long-term investment
horizon generally applied in the pharmaceutical industry with typically more
than 10 years’ development time. Further information on the company’s
capital structure can be found in ´Shares and capital structure’ on pp 44 – 45.
The main fi nancial risk is foreign exchange exposure, where Novo Nordisk
aims to reduce the short-term impact from movements in key currencies by
hedging future cash fl ows. Notes 4.2 and 4.3 include more information in
this respect.
NET PROFIT AND FREE CASH FLOW
Net profit
Free cash flow
Billion DKK
30
24
18
12
6
0
2013
2014
Net cash distribution to shareholders
In 2014, the net cash distribution to shareholders in the form of dividends
and share buy-backs amounts to DKK 26.5 billion compared with a free cash
fl ow of DKK 27.4 billion in line with the guiding principle of paying out
excess capital to investors after funding of organic growth and potential
acquisitions.
97% NET CASH DISTRIBUTED
TO SHAREHOLDERS IN
PERCENT OF FREE CASH FLOW
4.1 SHARE CAPITAL, DISTRIBUTION TO SHAREHOLDERS AND EARNINGS PER SHARE
SHARE CAPITAL
DKK million
Development in share capital:
2010
2011
2012
2013
At the beginning of the year
2014
At the end of the year
A share
capital
B share
capital
Total share
capital
107
–
–
–
107
–
107
493
(20)
(20)
(10)
443
(20)
423
600
(20)
(20)
(10)
550
(20)
530
A stock split of the company’s B shares was conducted with effective date 2 January 2014, changing the trading unit from DKK 1 to DKK 0.20. At the end
of 2014, the share capital amounted to DKK 107 million in A share capital and DKK 423 million in B share capital (equal to 2,113 million B shares of DKK 0.20).
eng26 - 31.01 - 55-111.indd 79
eng26 - 31.01 - 55-111.indd 79
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
80 CONSOLIDATED FINANCIAL STATEMENTS
4.1 SHARE CAPITAL, DISTRIBUTION TO SHAREHOLDERS AND EARNINGS PER SHARE
(CONTINUED)
TREASURY SHARES
Accounting policies
Treasury shares are deducted from the share capital upon cancellation at their nominal value of DKK 0.20 per share. Differences between this amount and the
amount paid to acquire or received for disposing of treasury shares are deducted directly in equity.
Holding at the beginning of the year
Cancellation of treasury shares
Holding of treasury shares, adjusted for cancellation
Transfer regarding options and restricted stock units
Purchase during the year
Sale during the year
Value adjustment
Holding at the end of the year
Market value
DKK million
As % of share
capital before
cancellation
As % of share
capital after
cancellation
3.7%
(3.6%)
0.1%
20,446
(19,880)
566
(360)
14,728
(61)
(86)
14,787
0.1%
(0.1%)
2.2%
(0.1%)
2.1%
2014
Number of
B shares
of DKK 0.20
(million)
2013
Number of
B shares
of DKK 0.20
(million)
103
(100)
3
(2)
59
(3)
–
57
87
(50)
37
(3)
73
(4)
–
103
The purchase of treasury shares during the year relates to the remaining part of the 2013 share repurchase programme totalling DKK 1.0 billion and the DKK 15
billion share repurchase programme of Novo Nordisk B shares for 2014 of which DKK 1.3 billion remains at year-end. The programme ends on 28 January 2015.
The purpose of the programmes is to reduce the company’s share capital. Transfer of treasury shares relates to exercised share options, long-term share-based
incentive programme and employee share-savings programmes.
At year-end the holding of treasury shares amounts to 56,807,153 shares corresponding to DKK 11 million of the share capital (102,852,025 shares in 2013 or
DKK 21 million of the share capital). At year-end 8.9 million shares of the holding of treasury B shares are regarded as hedges for the long-term share-based
incentive programme and share options to employees.
NET CASH DISTRIBUTION TO SHAREHOLDERS
DKK million
Dividends
Share repurchases
Total
2014
2013
2012
11,866
14,667
9,715
13,924
7,742
11,896
26,533
23,639
19,638
At the end of 2014, proposed dividends (not yet declared) of DKK 12,905 million (DKK 5.00 per share) are included in Retained earnings. The declared dividend
included in Retained earnings was DKK 11,866 million (DKK 4.50 per share) in 2013 and DKK 9,715 million (DKK 3.60 per share) in 2012. No dividend is
declared on treasury shares.
EARNINGS PER SHARE
Accounting policies
Earnings per share is presented as both basic and diluted earnings per share. Basic earnings per share is calculated as net profi t divided by the average number
of shares outstanding. Diluted earnings per share is calculated as net profi t divided by the sum of average number of shares outstanding, including the dilutive
effect of outstanding share bonus pool and options ‘in the money’. Please refer to ‘Financial defi nitions’ on p 94 for a description of the calculation of the dilutive
effect.
DKK million
Net profi t for the year
2014
2013
2012
26,481
25,184
21,432
Average number of shares outstanding
Dilutive effect of outstanding share bonus pool and options ‘in the money’1
in 1,000 shares
in 1,000 shares
2,621,226
8,992
2,679,362
14,263
2,741,690
16,650
Average number of shares outstanding, including dilutive effect of options ‘in the money’
in 1,000 shares
2,630,218
2,693,625
2,758,340
Basic earnings per share
Diluted earnings per share
DKK
DKK
10.10
10.07
9.40
9.35
7.82
7.77
1. The dilutive effect is reduced as the exercise period for options related to the 2005 program is matured. For further information on outstanding share bonus pool and options, refer to
note 5.1.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 80
eng26 - 31.01 - 55-111.indd 80
31/01/15 20.44
31/01/15 20.44
4.2 FINANCIAL RISKS
Novo Nordisk has centralised management of the Group’s fi nancial risks. The
overall objectives and policies for the company’s fi nancial risk management
are outlined in an internal 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 permitted fi nancial
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
fi nancial 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 fi nancial risk for Novo Nordisk and as
such has a signifi cant impact on the Income statement, Other comprehensive
income, Balance sheet and Statement of cash fl ows.
CONSOLIDATED FINANCIAL STATEMENTS
81
Foreign exchange sensitivity analysis:
A 5% increase/decrease in the following currencies will impact Novo
Nordisk’s operating profi t as outlined in the table below:
DKK million
USD
CNY
JPY
GBP
CAD
Estimated for
2015
1,600
260
115
80
60
2014
1,300
220
145
75
60
At year-end a 5% increase/decrease in all other currencies versus EUR and
DKK would affect the hedging instruments’ impact on Other comprehensive
income and the Income statement as outlined in the table below:
DKK million
5% increase in all
currencies against
DKK and EUR
5% decrease in all
currencies against
DKK and EUR
The overall objective of foreign exchange risk management is to reduce the
short-term negative impact of exchange rate fl uctuations on earnings and
cash fl ow, thereby increasing the predictability of the fi nancial results.
2014
Other comprehensive income
Income statement
The majority of Novo Nordisk’s sales are in USD, EUR, CNY, JPY, GBP and
CAD. Consequently, Novo Nordisk’s foreign exchange risk is most signifi cant
in USD, CNY, JPY, GBP and CAD, while the EUR exchange rate risk is regarded
as low due to Denmark’s fi xed-rate policy towards EUR.
Novo Nordisk hedges existing assets and liabilities in key currencies as well as
future expected cash fl ows up to a maximum of 24 months forward. During
2014, the hedging horizon varied between 10 and 14 months for USD, CNY,
JPY, GBP and CAD. Currency hedging is based upon expectations of future
exchange rates and mainly uses foreign exchange forwards and foreign
exchange options matching the due dates of the hedged items. Expected
cash fl ows are continually assessed using historical infl ows, budgets and
monthly sales forecasts. Hedge effectiveness is assessed on a regular basis.
KEY CURRENCIES
USD
CNY
JPY
GBP
CAD
562
612
13.1%
91
99
11.2%
5.32
5.12
(0.4%)
925
952
6.7%
509
527
4.4%
Exchange rate
DKK per 100
2014
Average
Year-end
Year-end change
2013
Average
Year-end
Year-end change
Total
2013
Other comprehensive income
Income statement
Total
(1,724)
124
(1,600)
(1,318)
(76)
(1,394)
1,729
(107)
1,622
1,397
54
1,451
The foreign exchange sensitivity analysis comprises effects from the Group’s
Cash, Trade receivables and Trade payables, Current and non-current loans,
Current and non-current fi nancial investments and Foreign exchange
forwards and Foreign exchange options.
Not included are anticipated currency transactions, investments and non-
current assets.
Interest rate risk
Changes in interest rates affect Novo Nordisk’s fi nancial instruments. At the
end of 2014, a 1 percentage point increase in the interest rate level would,
all else being equal, result in a decrease in the fair value of Novo Nordisk’s
fi nancial instruments of DKK 3 million (a decrease in the fair value of DKK
20 million in 2013).
562
541
(4.4%)
91
89
(2.2%)
5.77
5.14
(21.8%)
878
892
(2.3%)
545
505
(11.2%)
The fi nancial instruments included in the sensitivity analysis consist of
marketable securities and non-current loans. Foreign exchange forwards and
foreign exchange options are not included due to the limited effect that a
parallel shift in interest rates in all currencies has on these instruments.
The fi nancial contracts existing at year-end cover the expected future cash
fl ow for the following number of months:
USD
CNY1
JPY
GBP
CAD
2014
2013
11 months
11 months
13 months
11 months
11 months
12 months
12 months
14 months
12 months
10 months
1. USD used as proxy when hedging Novo Nordisk’s CNY currency exposure.
Liquidity risk
Novo Nordisk ensures the availability of required liquidity through a
com bination of cash management, highly liquid investment portfolios and
uncommitted as well as committed facilities. Novo Nordisk uses cash pools
for optimisation and centralisation of cash management.
Credit risk
Credit risk arises from the possibility that transactional counterparties may
default on their obligations, causing fi nancial losses for the Group. Novo
Nordisk considers its maximum credit risk on fi nancial counterparties to be
DKK 15,935 million (2013: DKK 15,990 million). In addition, Novo Nordisk
considers its maximum credit risk on Trade receivables, Other receivables less
prepayments and Other fi nancial assets to be DKK 15,425 million (2013:
DKK 12,802 million). Please refer to note 4.6 for details of the Group’s total
fi nancial assets.
eng26 - 31.01 - 55-111.indd 81
eng26 - 31.01 - 55-111.indd 81
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
82 CONSOLIDATED FINANCIAL STATEMENTS
4.2 FINANCIAL RISKS (CONTINUED)
4.3 DERIVATIVE FINANCIAL INSTRUMENTS
To manage credit risk on fi nancial counterparties, Novo Nordisk only enters
into derivative fi nancial contracts and money market deposits with fi nancial
counterparties possessing a satisfactory long-term credit rating from two
out of the three selected ratings agencies: Standard and Poor’s, Moody’s
and Fitch. Furthermore, maximum credit lines defi ned for each counterparty
diversify the overall counterparty risk. The credit risk on bonds is limited as
investments are made in highly liquid bonds with solid credit ratings. The
table below shows Novo Nordisk’s credit exposure on cash, fi xed-income
marketable securities and fi nancial derivatives.
Credit exposure on Cash at bank and on hand, Marketable securities and
Derivative fi nancial instruments (market value)
Accounting policies
The derivative fi nancial instruments are used to manage the exposure to
market risk. None of the derivatives are held for trading. However, not all
derivatives are designated for hedge accounting.
Novo Nordisk uses forward exchange contracts and currency options to
hedge forecast transactions, assets and liabilities. Currently, net investments
in foreign subsidiaries are not hedged.
Upon initiation of the contract, Novo Nordisk designates each derivative
fi nancial contract that qualifi es for hedge accounting as one of:
Cash at
bank or
on hand
Marketable
securities1
Derivative
fi nancial
instruments
• hedges of the fair value of a recognised asset or liability or a fi rm
commitment (fair value hedge)
Total
• hedges of the fair value of a forecast fi nancial transaction (cash fl ow
hedge).
DKK million
2014
AAA-range
AA-range
A-range
BBB-range
Not rated or
below BBB-range
6,501
7,641
183
71
1,004
502
3
20
10
1,004
7,023
7,651
183
74
Total
14,396
1,509
30
15,935
2013
AAA-range
AA-range
A-range
BBB-range
Not rated or
below BBB-range
6,497
3,999
141
91
2,726
1,013
2
544
977
2,726
8,054
4,976
141
93
Total
10,728
3,741
1,521
15,990
1. Redemption yield on the bond portfolio is 0.35% (0.41% in 2013).
Novo Nordisk has no signifi cant concentration of credit risk related to
Trade receivables or Other receivables and prepayments, as the exposure is
spread over a large number of counterparties and customers. Novo Nordisk
continues to monitor the credit exposure in Region International Operations
due to the increasing sales and low credit ratings of many countries in this
region. Novo Nordisk also continues to focus in the development in the
outstanding trade receivables in the Eurozone.
Asset securitisation
Novo Nordisk’s Japanese subsidiary employs an asset securitisation
programme in the form of a full non-recourse off-balance sheet arrange-
ment to improve liquidity and take advantage of market opportunities by
receiving funds prior to scheduled payment dates. At year-end, the Group
had derecognised receivables without recourse having due dates after
31 December amounting to:
DKK million
2014
2013
2012
Sold trade receivables
1,669
1,685
2,027
In addition, full non-recourse off-balance sheet factoring arrangement
programmes are occasionally applied by Novo Nordisk affi liates around the
world with limited impact on the Group’s trade receivables.
Please refer to note 2.2 for split of allowance for trade receivables by
geographical segment.
All contracts are initially recognised at fair value and subsequently
remeasured at fair value based on current bid prices at the end of the
reporting period.
Value adjustments of fair value hedges are recognised in the Income
statement along with any value adjustments of the hedged asset or liability
that is attributable to the hedged risk.
Value adjustments of cash fl ow hedges are recognised directly in Other
comprehensive income, given hedge effectiveness. The cumulative value
adjustment of these contracts is transferred from Other comprehensive
income to the Income statement as a reclassifi cation adjustment under
Financial income or Financial expenses when the hedged transaction is
recognised in the Income statement.
Furthermore, Novo Nordisk uses currency option hedges of forecast trans-
actions. Currency options are initially recognised at cost, which equals fair
value of considerations paid, and subsequently remeasured at fair value
at the end of the reporting period. The cumulative value adjustment of
the currency options for which hedge accounting is applied, which is
the intrinsic value of the options, is transferred from Other comprehensive
income to the Income statement as a reclassifi cation adjustment under
Financial income or Financial expenses when the hedged transaction is
recognised in the Income statement. Gains and losses on currency options
that do not meet the criteria for hedge accounting are recognised directly in
the Income statement under Financial income or Financial expenses.
The fair value of derivative fi nancial instruments is measured on the basis of
quoted market prices of fi nancial 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 fi nancial instrument is quoted in a market that is not active, Novo
Nordisk 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 fi nancial instruments assumed to be
motivated by normal business considerations.
If an active market does not exist, the fair value of standard and simple
fi nancial instruments, such as foreign exchange forward contracts, interest
rate swaps, currency swaps and unlisted bonds, is measured according to
generally accepted valuation techniques. Market-based parameters are used
to measure fair value.
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
forecast transaction is no longer expected to occur, the cumulative gain or
loss that was reported in equity is immediately transferred to the Income
statement under Financial income or Financial expenses.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 82
eng26 - 31.01 - 55-111.indd 82
31/01/15 20.44
31/01/15 20.44
CONSOLIDATED FINANCIAL STATEMENTS
83
4.3 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
HEDGING ACTIVITIES
DKK million
Forward contracts, cash fl ow hedges
Currency options, cash fl ow hedges
Forward contracts, fair value hedges
Total hedging activities2
Total fair value adjustments recognised in the
Income statement
Total fair value adjustments recognised in Other
comprehensive income1
Presented in the Balance sheet as:
Derivative fi nancial instruments (current assets)
Derivative fi nancial instruments (current liabilities)
Equity, Other reserves
Contract
amount
at year-end
32,095
2,429
3,490
38,014
2014
Positive
fair value
at year-end
Negative
fair value
at year-end
10
29
–
39
8
31
30
9
2,252
–
355
2,607
355
2,252
2,607
Contract
amount
at year-end
26,982
2,195
3,508
2013
Positive
fair value
at year-end
1,104
148
365
32,685
1,617
384
1,233
1,521
96
Negative
fair value
at year-end
–
–
–
–
1. Realisation in 2014 of previously deferred gain amounts to DKK 1,229 million.
2. Fair values at year-end are presented as net amount for each currency or sum of currencies, within the respective hedging activity.
HEDGING OF FORECAST TRANSACTIONS (CASH FLOW HEDGE)
DKK million
Hedging of forecast transactions qualifying
for hedge accounting
USD
JPY, GBP and other currencies
Total forward contracts (forecasted cash fl ow)
USD
JPY
Total currency options (forecasted cash fl ow)
Total cash fl ow hedges for which hedge
accounting is applied
Other forecast transaction hedges for which
hedge accounting is not applied
Currency options for which hedge
accounting is not applied
Total contracts of forecast transactions
Contract
amount
at year-end
2014
Positive
fair value
at year-end
Negative
fair value
at year-end
Contract
amount
at year-end
2013
Positive
fair value
at year-end
Negative
fair value
at year-end
26,540
5,555
32,095
2,051
378
2,429
–
10
10
–
21
21
2,252
–
2,252
–
–
–
22,020
4,962
742
362
26,982
1,104
1,739
456
2,195
33
96
129
34,524
31
2,252
29,177
1,233
–
34,524
8
39
–
–
19
2,252
29,177
1,252
–
–
–
–
–
eng26 - 31.01 - 55-111.indd 83
eng26 - 31.01 - 55-111.indd 83
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
84 CONSOLIDATED FINANCIAL STATEMENTS
4.3 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)
HEDGING OF ASSETS AND LIABILITIES (FAIR VALUE HEDGE)
DKK million
USD
JPY, GBP and other currencies
Total forward contracts
Contract
amount
at year-end
2,367
1,123
3,490
2014
Positive
fair value
at year-end
Negative
fair value
at year-end
Contract
amount
at year-end
–
–
–
333
22
355
1,355
2,153
3,508
2013
Positive
fair value
at year-end
141
224
365
Negative
fair value
at year-end
–
–
–
The table above shows the fair value of fair value-hedging activities for 2014 and 2013 specifi ed by hedging instrument and the major currencies. All changes in
fair values are recognised in the Income statement, amounting to a net loss of DKK 355 million in 2014 (a net gain of DKK 365 million in 2013).
The fi nancial contracts existing at the end of the year hedge the currency exposure on assets and liabilities in the Group’s major currencies excluding DKK and
EUR. The contract amounts of other currencies at year-end are JPY at DKK 310 million (DKK 539 million in 2013), GBP at DKK 313 million (DKK 449 million
in 2013), and ‘other’ comprising AUD at DKK 56 million (DKK 525 million in 2013), CAD at DKK 444 million (DKK 208 million in 2013) and PLN at DKK 0 million
(DKK 432 million in 2013).
4.4 CASH AND CASH EQUIVALENTS,
FINANCIAL RESOURCES AND FREE CASH
FLOW
Accounting policies
Cash and cash equivalents consist of cash offset by short-term bank loans.
Financial resources consist of cash and cash equivalents, marketable
securities with original maturity of less than three months and undrawn
committed credit facilities expiring after more than one year. The Statement
of cash fl ows is presented in accordance with the indirect method com-
mencing with Net profi t for the year.
DKK million
2014
2013
2012
CASH AND CASH EQUIVALENTS
Cash at bank and on hand (note 4.2)
Current debt (bank overdrafts)
14,396
(720)
10,728
(215)
11,553
(500)
Cash and cash equivalents
at the end of the year
FINANCIAL RESOURCES
Cash and cash equivalents
Marketable securities
Undrawn committed credit facility1
13,676
1,509
8,188
10,513
3,741
4,849
11,053
4,552
4,849
Total fi nancial resources
23,373
19,103
20,454
1. The undrawn committed credit facility in 2014 is a EUR 1,100 million facility (2013 and
2012: EUR 650 million) committed by a portfolio of international banks. The facility
matures in 2019.
FREE CASH FLOW
Net cash generated from
operating activities
Net cash used in investing activities
Net purchase of marketable securities
4.5 CHANGE IN WORKING CAPITAL
Accounting policies
Working capital is defi ned as current assets less current liabilities and
measures the liquid assets Novo Nordisk has available for the business.
CHANGE IN WORKING CAPITAL
DKK million
2014
2013
2012
Trade receivables
Other receivables and prepayments
Inventories
Trade payables
Other liabilities
(2,134)
(296)
(1,805)
858
1,665
(1,268)
251
(9)
233
404
(290)
(329)
(110)
568
448
Change in working capital before
exchange rate adjustments
(1,712)
(389)
287
Exchange rate adjustments
(436)
124
(13)
274
4.6 FINANCIAL ASSETS AND LIABILITIES
Accounting policies
Depending on the purpose of each investment, Novo Nordisk classifi es these
into the following categories:
• Available-for-sale fi nancial assets
• Loans and receivables
• Financial assets at fair value through the Income statement (derivatives).
Management determines the classifi cation of its investments on initial
recognition and re-evaluates this at the end of every reporting period to the
extent that such a classifi cation is permitted and required.
13,676
10,513
11,053
Cash fl ow change in working capital
(2,148)
(265)
31,692
(2,064)
(2,232)
25,942
(2,773)
(811)
22,214
(4,070)
501
Recognition and measurement
Purchases and sales of investments are recognised on the settlement date.
Investments are initially recognised at fair value.
Free cash fl ow2
27,396
22,358
18,645
2. Additional non-IFRS measure; please refer to p 94 for defi nitions.
Available-for-sale fi nancial assets and fi nancial assets at fair value are
subsequently carried at fair value. Loans and receivables are carried at
amortised cost based on the effective interest method.
Fair value disclosures are made separately for each class of fi nancial
instruments at the end of the reporting period.
Derecognition
Investments are derecognised when the rights to receive cash fl ows from the
investments have expired or have been transferred, and Novo Nordisk has
transferred substantially all the risks and rewards of ownership.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 84
eng26 - 31.01 - 55-111.indd 84
31/01/15 20.44
31/01/15 20.44
4.6 FINANCIAL ASSETS AND LIABILITIES
(CONTINUED)
Available-for-sale fi nancial assets
Available-for-sale fi nancial assets consist of equity investments and market-
able securities. Equity investments are included in Other fi nancial assets
unless Management intends to dispose of the investment within 12 months
of the end of the reporting period. If that is the case, the current part is
included in Other receivables and prepayments.
Unrealised gains and losses arising from changes in the fair value of fi nancial
assets classifi ed as available for sale are recognised in Other comprehensive
income. When fi nancial assets classifi ed as available for sale are sold or
impaired, the accumulated fair value adjustments are included in the Income
statement.
The fair values of quoted investments (including marketable securities) are
based on current bid prices at the end of the reporting period. Financial
assets for which no active market exists are carried at fair value based on
a valuation methodology or at cost if no reliable valuation model can be
applied.
FINANCIAL ASSETS BY CATEGORY
DKK million
2014
Other fi nancial assets
Trade receivables (note 3.4)
Other receivables (note 3.5)
- less prepayments (note 3.5)
Marketable securities (bonds) (note 4.2)
Derivative fi nancial instruments (note 4.3)
Cash at bank and on hand (note 4.4)
CONSOLIDATED FINANCIAL STATEMENTS
85
Loans and receivables
Loans and receivables are non-derivative fi nancial assets with fi xed or
deter minable payments that are not quoted in an active market. If collection
is expected within one year (or in the normal operating cycle of the business
if longer), they are classifi ed as Current assets. If not, they are presented as
Non-current assets.
Trade receivables and Other receivables are recognised initially at fair value
and subsequently measured at amortised cost using the effective interest
method, less provision for allowance. Provision for allowance is made for
Trade receivables when there is objective evidence that Novo Nordisk will
not be able to collect all amounts due according to the original terms of the
receivables.
The provision for allowance is deducted from the carrying amount of Trade
receivables and the amount of the loss is recognised in the Income statement
under Sales and distribution costs. When a trade receivable is uncollectible,
it is written off against the allowance account for trade receivables. Sub-
sequent recoveries of amounts previously written off are credited against
Sales and distribution costs in the Income statement.
Available-
for-sale
fi nancial
assets at
fair value
366
1,509
Financial
assets
measured at
fair value
through the
Income
statement
Loans
and
receivables
Cash
and cash
equivalents
490
13,041
2,750
(1,222)
30
14,396
Total
856
13,041
2,750
(1,222)
1,509
30
14,396
Total fi nancial assets at the end of the year by category
1,875
30
15,059
14,396
31,360
Total fi nancial assets at the end of the year by category, 2013
3,916
1,521
12,627
10,728
28,792
FINANCIAL LIABILITIES BY CATEGORY
DKK million
2014
Current debt
Trade payables
Other liabilities (note 3.8)
– less VAT and duties payable (note 3.8)
Derivative fi nancial instruments (note 4.3)
Financial
liabilities
measured at
fair value
through the
Income
statement
Financial
liabilities
measured at
fair value
through Other
comprehensive
income
Financial
liabilities
measured at
amortised
cost
720
4,950
11,051
(744)
2,607
Total
720
4,950
11,051
(744)
2,607
Total fi nancial liabilities at the end of the year by category1
2,607
15,977
–
18,584
2013
Current debt
Trade payables
Other liabilities (note 3.8)
– less VAT and duties payable (note 3.8)
215
4,092
9,386
(761)
215
4,092
9,386
(761)
Total fi nancial liabilities at the end of the year by category1
–
12,932
–
12,932
1. All fi nancial liabilities are due within one year.
For a description of the credit quality of fi nancial assets such as Trade receivables, Cash at bank and on hand, Marketable securities, Current debt and Derivative
fi nancial instruments, refer to notes 4.2 and 4.3.
eng26 - 31.01 - 55-111.indd 85
eng26 - 31.01 - 55-111.indd 85
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
86 CONSOLIDATED FINANCIAL STATEMENTS
4.6 FINANCIAL ASSETS AND LIABILITIES
(CONTINUED)
FAIR VALUE MEASUREMENT HIERARCHY
DKK million
Active market data
Directly or indirectly observable market data
Not based on observable market data
2014
2013
1,870
30
5
3,908
1,521
8
Total fi nancial assets at fair value
1,905
5,437
4.7 FINANCIAL INCOME AND EXPENSES
Accounting policies
Financial assets and liabilities and borrowings generate Novo Nordisk’s
fi nancial income and expenses. The net fi nancials in the Income statement
are mainly related to foreign exchange elements and can be specifi ed as
follows:
FINANCIAL INCOME
DKK million
2014
2013
2012
Active market data
Directly or indirectly observable market data
Not based on observable market data
Total fi nancial liabilities at fair value
–
2,607
–
2,607
Interest income
Financial gain from forward
contracts (net)
Financial gain from currency
options (net)
Capital gain on investments etc.
Income from other fi nancial assets
–
–
–
–
101
56
124
–
1,631
32
34
–
–
–
15
–
–
–
1
Financial assets and liabilities measured at fair value can be categorised
using the fair value measurement hierarchy above. There have not been
any transfers between the categories ’Active market data’ and ’Directly
or indirectly observable market data’ during 2014 or 2013. There are no
intangible assets or items of property, plant and equipment measured at fair
value.
Total fi nancial income
167
1,702
125
FINANCIAL EXPENSES
DKK million
2014
2013
2012
Interest expenses
Foreign exchange loss (net)1
Financial loss from forward
contracts (net)
Financial loss from currency
options (net)
Capital loss on investments etc.
Other fi nancial expenses
Total fi nancial expenses
39
288
125
–
–
111
563
55
435
58
161
–
1,289
50
20
96
79
118
83
656
1,788
1. Primarily related to trade receivables, other receivables and trade payables.
FINANCIAL IMPACT FROM FORWARD CONTRACTS
AND CURRENCY OPTIONS, SPECIFIED
DKK million
2014
2013
2012
Forward contracts
Transferred from Other comprehensive
income
Value adjustment of transferred
contracts
Foreign exchange gain/loss on forward
contracts
Financial income/(expense) from
forward contracts
Currency options
Transferred from Other comprehensive
income
Value adjustment of transferred options
Foreign exchange gain/loss on currency
options
Financial income/(expense) from
currency options
1,104
809
(1,250)
(1,160)
(69)
678
144
(10)
(29)
(125)
1,631
(1,289)
125
(12)
–
25
68
–
(81)
(75)
(147)
32
(50)
(79)
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 86
eng26 - 31.01 - 55-111.indd 86
31/01/15 20.44
31/01/15 20.44
CONSOLIDATED FINANCIAL STATEMENTS
87
SECTION 5
OTHER DISCLOSURES
This section provides details on notes that by their nature are of statutory or
secondary importance for understanding the fi nancial performance of Novo
Nordisk. A list of subsidiaries in the Novo Nordisk Group is also included in
this section.
5.1 SHARE-BASED PAYMENT SCHEMES
Accounting policies
Share-based compensation
Novo Nordisk 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 fi xed at the
grant date. Non-market vesting conditions are included in assumptions
about the number of options or shares that are expected to vest. At the end
of each reporting period, Novo Nordisk revises its estimates of the number
of options or shares expected to vest. Novo Nordisk recognises the impact of
the revision of the original estimates, if any, in the Income statement and in a
corresponding 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.
SHARE-BASED PAYMENT
Expensed in the Income statement
DKK million
2014
2013
2012
Long-term share-based incentive programme
For a description of the programme, please refer to ‘Remuneration’ in
‘Governance, leadership and shares’, pp 49 –51.
Senior Management Board
On 29 January 2014, the Board of Directors approved the establishment, for
members of the Senior Management Board, of a joint pool for the fi nancial
year 2014 by allocating a total of 293,044 Novo Nordisk B shares. This
allocation amounts on average to 7.4 months of fi xed base salary plus
pension contribution for the CEO, 5.6 months of fi xed base salary plus
pension contribution per member of Executive Management and 5.0 months
of fi xed base salary for Senior Vice Presidents, corresponding to a value at
launch of the programme of DKK 66 million. This amount was expensed in
2014. The share price used for the conversion was the average share price
(DKK 226) for Novo Nordisk B shares on NASDAQ OMX Copenhagen in the
period 30 January – 13 February 2014. Based on the split of participants
when the joint pool was established, approximately 40% of the pool will be
allocated to members of Executive Management and 60% to other members
of the Senior Management Board.
The shares allocated to the joint pool for 2011 (448,560 shares) were
released to the individual participants subsequent to the approval of the
Annual Report 2014 by the Board of Directors and after the announcement of
the 2014 full-year fi nancial results on 30 January 2015. The shares allocated
correspond to a value at launch of the programme of DKK 57 million,
expensed in 2011.
141
188
66
51
50
73
Management group below Senior Management Board
The management group below the Senior Management Board has a
share-based incentive programme with similar performance criteria. For
2014, a total of 683,728 shares were allocated to the pool for this group
corresponding to a value at launch of the programme of DKK 155 million.
Restricted stock units to employees
Long-term share-based incentive
programme (Senior Management
Board)1
Long-term share-based incentive
programme (management group below
Senior Management Board)2
164
170
185
Share-based payment expensed
in the Income statement
371
409
308
1. Expense for the year refl ects the full value at launch of the programme for the year.
2. Expense for the year refl ects the value at launch of the last four programmes,
amortised over four years.
Restricted stock units to employees
Following the 90th anniversary in 2013, all employees in the company
(excl NNE Pharmaplan and NNIT) were offered 100 restricted stock units.
A restricted stock unit gives the right to receive one Novo Nordisk B share
free of charge on 1 April 2016 subject to continued employment and average
sales growth of at least 5% per year measured in DKK in the period 2012–
2015. The cost of the DKK 440 million programme is amortised over the
period 2013–2016 at an annual amount of DKK 135 million.
The shares allocated to the pool for 2011 (1,485,665 shares) were released to
the individual participants subsequent to the approval of the Annual Report
2014 by the Board of Directors and after the announcement of the 2014 full-
year fi nancial results on 30 January 2015. The shares allocated correspond
to a value at launch of the programme of DKK 188 million amortised over
the period 2011–2014. The number of shares to be transferred (1,343,235)
is lower than the original number of shares allocated to the share pool as
some participants have left the company before the release conditions of the
programme were met.
Share options
No share options have been granted since 2006 as the long-term incentive
programme from 2007 onwards has been share-based.
The 2006 share options were exercisable three years after the issue date and
will expire after eight years. The exercise price for options granted based on
performance targets for the fi nancial year 2006 was equal to the market
price of the Novo Nordisk B share at the time the plan was established. The
options can only be settled in shares. Each option gives the right to purchase
one Novo Nordisk B share.
At the end of 2014 a total of 955,570 options at strike 35 are outstanding.
The options will be exercised on 30 January 2015. The value at year end was
DKK 215 million calculated as the difference between the market value on
31 December 2014 and the strike price.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 87
eng26 - 31.01 - 55-111.indd 87
31/01/15 20.44
31/01/15 20.44
88 CONSOLIDATED FINANCIAL STATEMENTS
5.1 SHARE-BASED PAYMENT SCHEMES
(CONTINUED)
EXERCISABLE SHARE OPTIONS
2014
2013
Exercisable at the beginning of the year
2,801,920
5,040,700
OUTSTANDING RESTRICTED
STOCK UNITS
2014
2013
Exercised
Cancelled
(1,787,350)
(59,000)
(2,017,700)
(221,080)
Outstanding at the beginning of the year
10,528,372
12,374,845
Exercisable at the end of the year
955,5701
2,801,9201
Released restricted stock units to employees
Released shares from 2010
Management pools
Cancelled shares from Management pool
Issued restricted stock units to employees
Shares allocated to Management pools
(24,500)
(1,356,000)
(3,341,692)
(178,872)
0
976,772
(3,529,670)
(207,410)
2,370,000
876,607
Outstanding at the end of the year
7,960,080
10,528,372
1. Average exercise price per option (excluding restricted stock units) amounts to DKK 35
(DKK 34 in 2013), and calculated fair value per option amounts to DKK 225 (DKK 161
in 2013).
OUTSTANDING RESTRICTED
STOCK UNITS AND EXERCISABLE
SHARE OPTIONS
Restricted stock units to employees
2012 Restricted stock units – NNIT
2013 Restricted stock units
Outstanding restricted stock units to
employees at the end of 2014
Shares allocated to joint pools
for Senior Management Board
2010 Shares allocated to joint pool
2011 Shares allocated to joint pool
2012 Shares allocated to joint pool
2013 Shares allocated to joint pool
2014 Shares allocated to joint pool2
Outstanding shares in joint pool for
Senior Management Board
Shares allocated to pools
for management group below
Senior Management Board
2010 Shares allocated to pool3
2011 Shares allocated to pool
2012 Shares allocated to pool
2013 Shares allocated to pool
2014 Shares allocated to pool2
Issued1
Released
Cancelled
(accumulated)
Outstanding
Value at
launch date
DKK million
35,300
2,370,000
(24,500)
–
(10,800)
–
0
2,370,000
2,405,300
(24,500)
(10,800)
2,370,000
842,880
448,560
487,730
254,513
293,044
(842,880)
–
–
–
–
2,326,727
(842,880)
–
–
–
–
–
–
0
448,560
487,730
254,513
293,044
1,483,847
2,814,320
1,485,665
1,559,235
622,190
683,728
(2,498,812)
–
–
–
–
(303,318)
(142,430)
(89,790)
(24,555)
–
12,190
1,343,235
1,469,445
597,635
683,728
64
57
73
51
66
208
188
234
126
155
Outstanding shares in pool for management
group below Senior Management Board
7,165,138
(2,498,812)
(560,093)
4,106,233
Vesting date
1/12/14
1/04/16
30/1/14
Q1 2015
Q1 2016
Q1 2017
Q1 2018
30/1/14
Q1 2015
Q1 2016
Q1 2017
Q1 2018
Issued1
Exercised
Cancelled
Exercisable
Exercise
price DKK
Exercise period
Exercisable share options
2005 Share options
2006 Share options
8,202,340
11,145,420
(7,358,750)
(9,209,585)
(843,590)
(980,265)
0
955,570
30.6
35.0
31/01/09 – 30/01/14
31/01/10 – 30/01/15
Exercisable share options at the end of 2014 19,347,760
(16,568,335)
(1,823,855)
955,570
Outstanding/exercisable
at the end of 2014
31,244,925
(19,934,527)
(2,394,748)
8,915,650
1. All restricted stock units, shares allocated to Management pools and share options are hedged by treasury shares.
2. 2014 programme released subsequent to approval of the Annual Report 2014 on 30 January 2015.
3. Including joint pool related to prior years, not yet released.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 88
eng26 - 31.01 - 55-111.indd 88
31/01/15 20.44
31/01/15 20.44
CONSOLIDATED FINANCIAL STATEMENTS
89
5.1 SHARE-BASED PAYMENT SCHEMES (CONTINUED)
AVERAGE MARKET PRICE OF NOVO NORDISK B SHARES PER TRADING PERIOD IN 2014
30 January – 13 February
1 May – 15 May
7 August – 21 August
30 October – 13 November
Total exercised options
Average
market price
DKK
226
235
249
263
Exercised
share
options
1,065,812
230,562
131,850
359,126
1,787,350
5.2 MANAGEMENT’S HOLDINGS OF NOVO NORDISK SHARES AND SHARE OPTIONS
The internal rules for trading in Novo Nordisk securities by board members, executives and certain employees only permit trading in the 15-calendar-day period
following each quarterly announcement.
MANAGEMENT’S HOLDING OF SHARES
At the beginning
of the year
Additions
during the year
Sold/transferred
during the year
At the end
of the year
Market value1
DKK million
Göran Ando
Bruno Angelici
Jeppe Christiansen
Liz Hewitt
Liselotte Hyveled
Thomas Paul Koestler
Anne Marie Kverneland
Helge Lund
Søren Thuesen Pedersen
Hannu Ryöppönen
Stig Strøbæk
Board of Directors in total
Lars Rebien Sørensen
Jesper Brandgaard
Lars Fruergaard Jørgensen
Jakob Riis
Kåre Schultz
Mads Krogsgaard Thomsen
13,000
2,500
–
2,000
3,255
8,000
11,735
–
1,615
11,250
1,950
725
4,000
8,000
3,000
(3,400)
(636)
13,000
2,500
–
2,725
3,855
16,000
11,099
3,000
1,615
11,250
1,950
55,305
15,725
(4,036)
66,994
324,850
198,215
90,860
52,150
320,000
257,420
75,085
49,990
24,995
24,995
49,990
54,600
(45,085)
(62,000)
(20,000)
(5,000)
(39,990)
(32,885)
354,850
186,205
95,855
72,145
330,000
279,135
Executive Management in total
1,243,495
279,655
(204,960)
1,318,190
Other members of the Senior Management Board
557,945
515,885
(389,933)
683,897
3.4
0.7
–
0.7
1.0
4.1
2.9
0.8
0.4
2.9
0.5
17.4
92.3
48.5
25.0
18.8
85.9
72.6
343.1
178.0
Joint pool for Executive Management and
other members of the Senior Management Board2
1,744,909
293,044
(803,840)
1,234,1133
321.3
Total
3,601,654
1,104,309
(1,402,769)
3,303,194
859.8
1. Calculation of the market value is based on the quoted share price of DKK 260.30 at the end of the year.
2. 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 when the joint pool was established, approximately 40% of the pool will be allocated to the members of Executive Management and approximately 60% to other
members of the Senior Management Board. In the lock-up period, the joint pool may potentially be reduced in the event of lower-than-planned value creation in subsequent years.
3. Joint pool includes 2011 programme released on 30 January 2015 and excludes 249,734 shares assigned to retired Executive Management and Senior Management Board members.
MANAGEMENT’S HOLDING OF SHARE OPTIONS
Share options in Novo Nordisk
Executive Management
Other members of the Senior Management Board
At the
beginning
of the year
–
161,500
Exercised
during
the year
–
74,000
Total
161,500
74,000
87,500
1. The fair value has been calculated as the difference between the strike price of DKK 35 and the market value at the end of the year.
At the end
of the year
Fair value1
DKK million
–
87,500
–
20
20
eng26 - 31.01 - 55-111.indd 89
eng26 - 31.01 - 55-111.indd 89
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
90 CONSOLIDATED FINANCIAL STATEMENTS
5.3 OTHER NON-CASH ITEMS
For the purpose of presenting the Statement of cash fl ows, non-cash items with effect on the Income statement must be reversed to identify the actual cash fl ow
effect from the Income statement. The adjustments are specifi ed as follows:
OTHER NON-CASH ITEMS
DKK million
Reversals of non-cash income statement items
Interest income and interest expenses, net (note 4.7)
Share-based payment costs (note 5.1)
Changes in non-cash balance sheet items
Increase/(decrease) in provisions (note 3.7)
Increase/(decrease) in retirement benefi t obligations (note 3.6)
Of which remeasurements of retirement benefi t obligations
Other adjustments
(Gains)/losses from sale of property, plant and equipment
Unrealised (gain)/loss from other fi nancial assets
Reclassifi cation from working capital (other liabilities)
Exchange rate adjustments on working capital
Other, including unrealised exchange (gain)/loss etc
Total other non-cash items
2014
2013
2012
(62)
371
3,138
343
(247)
1
–
–
436
183
4,163
(1)
409
930
(72)
54
(1)
(17)
–
(124)
(594)
584
(66)
308
1,299
321
(281)
21
43
739
13
(216)
2,181
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 90
eng26 - 31.01 - 55-111.indd 90
31/01/15 20.44
31/01/15 20.44
5.4 COMMITMENTS
Commitments
Total contractual obligations and recognised non-current debt can be
specifi ed as follows (payments due by period):
2014
DKK million
Less
than
1 year
1–3
years
3 –5
years
More
than
5 years
Total
Retirement benefi t
obligations
Total non-current
liabilities recognised
in the Balance sheet
Operating leases1
Purchase obligations
Research and develop-
ment obligations
Total obligations
not recognised in the
Balance sheet
Total contractual
obligations
52
98
88
793
1,031
52
98
88
793
1,031
1,060
2,175
1,613
1,551
1,260
1,061
2,356
–
6,289
4,787
1,896
1,490
305
–
3,691
5,131
4,654
2,626
2,356
14,767
5,183
4,752
2,714
3,149
15,798
2013
DKK million
Less
than
1 year
1–3
years
3 –5
years
More
than
5 years
Total
Retirement benefi t
obligations
Total non-current
liabilities recognised
in the Balance sheet
Operating leases1
Purchase obligations
Research and develop-
ment obligations
Total obligations
not recognised in the
Balance sheet
Total contractual
obligations
28
53
49
558
688
28
53
49
558
688
924
1,969
1,452
369
1,072
44
2,426
–
5,874
2,382
2,612
1,875
789
–
5,276
5,505
3,696
1,905
2,426
13,532
5,533
3,749
1,954
2,984
14,220
1. No material fi nance lease obligations exist in 2014 and 2013.
CONSOLIDATED FINANCIAL STATEMENTS
91
The operating lease commitments are related to non-cancellable
operating leases primarily for premises, company cars and offi ce equipment.
Approximately 68% of the commitments are related to leases outside
Denmark. The lease costs for 2014 and 2013 were DKK 1,310 million and
DKK 1,175 million respectively.
The purchase obligations primarily relate to contractual obligations in
connection with investments in property, 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 fl ow from operations.
Research and development obligations entail uncertainties in relation to the
period in which payments are due because a proportion of the obligations
are dependent on milestone achievements. The due periods disclosed
are based on Management’s best estimate. Novo Nordisk has engaged in
research and development projects with a number of external enterprises.
Most of these obligations relate to the cardiovascular outcomes study for
Tresiba®, the DEVOTE programme.
DKK million
Other guarantees
Other guarantees primarily relate to guarantees
issued by Novo Nordisk in relation to rented
property
Security for debt
Land, buildings and equipment etc at carrying
amount
2014
2013
960
830
237
230
World Diabetes Foundation (WDF)
At the Annual General Meeting in 2008, a new donation was agreed to
by the shareholders. According to this agreement, Novo Nordisk is obliged
to make annual donations to the Foundation in the period 2011–2017 of
0.125% of the net insulin sales of the Group in the preceding fi nancial year.
The annual donation in the period 2012–2017 will not exceed the lower of
DKK 80 million or 15% of the taxable income of Novo Nordisk A/S in the
fi nancial year in question.
In 2014, the donation amounts to DKK 66 million (DKK 64 million in both
2013 and 2012), which is recognised in Administrative costs in the Income
statement. The 2012 donation included an extra donation of DKK 11 million
to support predetermined WDF activities.
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 disclosure of information that may be of interest to the market and
potential takeover bidders, in particular in relation to disclosure of change
of control provisions.
The company’s A shares are not listed and are held by Novo A/S, a Danish
public limited liability company wholly owned by the Novo Nordisk
Foundation. According to the Articles of Association of the Foundation, the
A shares cannot be divested. For information on the ownership structure of
Novo Nordisk, please refer to ‘Shares and capital structure’ on pp 44 – 45.
For information on change of control clauses in share option programmes,
please refer to note 5.1, ‘Share-based payment schemes’, and in relation to
employee contracts for Executive Management of Novo Nordisk, please refer
to ‘Remuneration’ on pp 49 –51.
In addition, Novo Nordisk discloses that the Group has one signifi cant
agreement with a supplier which takes effect, alter or terminate upon
a change of control of the Group. If effected, a take-over could – at the
discretion of the relevant counterparty – lead to the termination of such
agreement. Given the ownership structure of Novo Nordisk the risk is
considered remote and with limited fi nancial impact.
eng26 - 31.01 - 55-111.indd 91
eng26 - 31.01 - 55-111.indd 91
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
92 CONSOLIDATED FINANCIAL STATEMENTS
5.5 RELATED PARTY TRANSACTIONS
5.6 FEE TO STATUTORY AUDITORS
DKK million
2014
2013
2012
Statutory audit
Audit-related services
Tax advisory services
Other services
Total fee to statutory auditors
24
4
8
11
47
24
4
11
5
44
25
4
12
6
47
Novo Nordisk A/S is controlled by Novo A/S (incorporated in Denmark), which
owns 26.5% of the share capital in Novo Nordisk A/S, representing 74.5%
of the total number of votes, excluding treasury shares. 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 and Xellia
Pharmaceuticals due to joint ownership, associated companies, the directors
and offi cers of these entities, and Management of Novo Nordisk A/S.
In 2014, Novo Nordisk A/S did not acquire new B shares from Novo A/S
In 2013, Novo Nordisk A/S acquired 12,750,000 B shares, worth DKK 2.5
billion, from Novo A/S as part of the DKK 14.0 billion share repurchase
programme. The transaction price was DKK 196.4 per share and was
calculated as the average market price from 1 May to 3 May 2013 in the
open window following the announcement of the fi nancial results for the
fi rst quarter of 2013.
In 2012, Novo Nordisk A/S acquired 25,500,000 B shares, worth DKK 4.2
billion, from Novo A/S as part of the DKK 12.0 billion share repurchase
programme. The transaction price was DKK 164.6 per share and was
calculated as the average market price from 27 April to 1 May 2012 in the
open window following the announcement of the fi nancial results for the
fi rst quarter of 2012.
The Group has had the following material transactions with related parties,
(income)/expense:
DKK million
2014
2013
2012
Novo Nordisk Foundation
Donations to Steno Diabetes
Center A/S via Novo Nordisk
Novo A/S
Services provided by Novo Nordisk
Purchase of Novo Nordisk B shares
Novozymes A/S
Services provided by Novo Nordisk
Services provided by Novozymes
Xellia Pharmaceuticals
Services provided by Novo Nordisk
(51)
(45)
(46)
(5)
0
(4)
2,504
(2)
4,198
(189)
142
(214)
109
(255)
92
(28)
(0)
(0)
There have not been any transactions with the Board of Directors or
Executive Management of Novo Nordisk A/S, Novozymes A/S, Novo
A/S, the Novo Nordisk Foundation, Xellia Pharmaceuticals or associated
companies. For information on remuneration to the Management of Novo
Nordisk, please refer to ‘Remuneration’, pp 49 –51, and note 2.4, ‘Employee
costs’. There have not been and are no loans to the Board of Directors or
Executive Management in 2014, 2013 or 2012.
There are no material unsettled transactions with related parties at the end
of the year.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 92
eng26 - 31.01 - 55-111.indd 92
31/01/15 20.44
31/01/15 20.44
5.7 COMPANIES IN THE NOVO NORDISK GROUP
Activity: • Sales and marketing • Production • Research and development • Services/investments
CONSOLIDATED FINANCIAL STATEMENTS
93
Percentage of
shares owned Activity
Company and country
Percentage of
shares owned Activity
Company and country
PARENT COMPANY
Novo Nordisk A/S, Denmark
Subsidiaries by region
EUROPE
Novo Nordisk Pharma GmbH, Austria
S.A. Novo Nordisk Pharma N.V., Belgium
Novo Nordisk Pharma d.o.o., Bosnia-Hercegovina
Novo Nordisk Pharma EAD, Bulgaria
Novo Nordisk Hrvatska d.o.o., Croatia
Novo Nordisk s.r.o., Czech Republic
FeF Chemicals A/S, Denmark
Novo Nordisk Region Europe A/S, Denmark
Steno Diabetes Center A/S, Denmark
Novo Nordisk Farma OY, Finland
Novo Nordisk, France
Novo Nordisk Production SAS, France
Novo Nordisk Pharma GmbH, Germany
Novo Nordisk Hellas Epe., Greece
Novo Nordisk Hungária Kft., Hungary
Novo Nordisk Limited, Ireland
Novo Nordisk S.P.A., Italy
UAB Novo Nordisk Pharma, Lithuania
Novo Nordisk Farma dooel, Macedonia
Novo Nordisk B.V., Netherlands
Novo Nordisk Scandinavia AS, Norway
Novo Nordisk Pharmaceutical Services Sp. z.o.o., Poland
Novo Nordisk Comércio Produtos Farmace˜ uticos Lda., Portugal
Novo Nordisk Farma S.R.L., Romania
Novo Nordisk Pharma d.o.o. Belgrade (Serbia), Serbia
Novo Nordisk Slovakia s.r.o., Slovakia
Novo Nordisk d.o.o., Slovenia
Novo Nordisk Pharma S.A., Spain
Novo Nordisk Scandinavia AB, Sweden
Novo Nordisk FemCare AG, Switzerland
Novo Nordisk Health Care AG, Switzerland
Novo Nordisk Pharma AG, Switzerland
Novo Nordisk Holding Limited, United Kingdom
Novo Nordisk Limited, United Kingdom
NORTH AMERICA
Novo Nordisk Canada Inc., Canada
Novo Nordisk Region North America II A/S, Denmark
Novo Nordisk US Bio Production, Inc., United States
Novo Nordisk US Holdings Inc., United States
Novo Nordisk Pharmaceutical Industries Inc., United States
Novo Nordisk Inc., United States
JAPAN & KOREA
Novo Nordisk Region Japan & Korea A/S, Denmark
Novo Nordisk Pharma Ltd., Japan
Novo Nordisk Pharma Korea Ltd., South Korea
100 •
100
•
100
100
•
•
•
100
100 • •
•
100
100 • •
100 •
INTERNATIONAL OPERATIONS
– • • • •
Aldaph SpA, Algeria
•
• •
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 •
Novo Nordisk Pharma Argentina S.A., Argentina
Novo Nordisk Pharmaceuticals Pty. Ltd., Australia
Novo Nordisk Pharma (Private) Limited, Bangladesh
Novo Nordisk Produção Farmacêutica do Brasil Ltda., Brazil
Novo Nordisk Farmacêutica do Brasil Ltda., Brazil
Novo Nordisk Farmacêutica Limitada, Chile
Novo Nordisk Colombia SAS, Colombia
Novo Nordisk Pharma Operations A/S, Denmark
Novo Nordisk Region International Operations A/S, Denmark
Novo Nordisk Egypt LLC, Egypt
Novo Nordisk India Private Limited, India
Novo Nordisk Service Centre (India) Pvt. Ltd., India
PT. Novo Nordisk Indonesia, Indonesia
Novo Nordisk Pars, Iran
Novo Nordisk Ltd, Israel
Novo Nordisk Pharma SARL, Lebanon
Novo Nordisk Pharma (Malaysia) Sdn Bhd, Malaysia
Novo Nordisk Pharma Operations (BAOS) Sdn Bhd, Malaysia
Novo Nordisk Mexico S.A. de C.V., Mexico
Novo Nordisk Servicios Profesionales S.A. de C.V., Mexico
Novo Nordisk Farmacéutica S.A. de C.V., Mexico
Novo Nordisk Pharma SAS, Morocco
Novo Nordisk Pharmaceuticals Ltd., New Zealand
Novo Nordisk Pharma Limited, Nigeria
Novo Nordisk Pharma (Private) Limited, Pakistan
Novo Nordisk Pharmaceuticals (Philippines) Inc., Philippines
Novo Nordisk Limited Liability Company, Russia
Novo Nordisk Production Support LLC, Russia
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
•
•
•
•
•
•
•
•
Novo Investment Pte Limited, Singapore
Novo Nordisk (Pty) Limited, South Africa
Novo Nordisk Pharma (Thailand) Ltd., Thailand
Novo Nordisk Pharma (Singapore) Pte Ltd., Singapore
100
100 •
100 •
49 •
100 •
100 •
100 •
Novo Nordisk Pharma Gulf FZ-LLC, United Arab Emirates
Novo Nordisk Venezuela Casa de Representación C.A., Venezuela 100 •
Novo Nordisk Saglik Ürünleri Tic. Ltd. Sti., Turkey
Novo Nordisk Tunisie SARL, Tunisia
•
•
•
REGION CHINA
Novo Nordisk (China) Pharmaceuticals Co., Ltd., China
100 • •
Beijing Novo Nordisk Pharmaceuticals Science & Technology Co., 100
Ltd., China
Novo Nordisk Region China A/S, Denmark
Novo Nordisk Hong Kong Limited, Hong Kong
Novo Nordisk Pharma (Taiwan) Ltd., Taiwan
100
100 •
100 •
•
•
OTHER SUBSIDIARIES
NNIT A/S1, Denmark
NNE Pharmaplan A/S1, Denmark
100
100
•
•
1. In addition to the listed companies, NNIT A/S and NNE Pharmaplan A/S have their
own subsidiaries.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 93
eng26 - 31.01 - 55-111.indd 93
31/01/15 20.44
31/01/15 20.44
94 CONSOLIDATED FINANCIAL STATEMENTS
5.8 FINANCIAL DEFINITIONS
ADR
An American Depositary Receipt (or ADR) represents ownership in the shares
of a non-US company and trades in US fi nancial markets.
Basic earnings per share (EPS)
Net profi t divided by the average number of shares outstanding.
Diluted earnings per share
Net profi t divided by 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
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.
Effective tax rate
Income taxes as a percentage of profi t before income taxes.
Equity ratio
Total equity at year-end as a percentage of total assets at year-end.
Gross margin
Gross profi t as a percentage of sales.
Net profi t margin
Net profi t as a percentage of sales.
Number of shares outstanding
The total number of shares, excluding the holding of treasury shares.
Operating margin
Operating profi t as a percentage of sales.
Other comprehensive income (OCI)
Other comprehensive income comprises all items recognised in Equity for the
year other than those related to transactions with owners of the com pany.
Examples of items that are required to be presented in OCI are:
• Exchange rate adjustments of investments in subsidiaries
• Remeasurements of defi ned benefi t plans
• Changes in fair value of fi nancial instruments in a cash fl ow hedge.
Payout ratio
Total dividends for the year as a percentage of net profi t.
Return on equity (ROE)
Net profi t for the year as a percentage of shareholders’ equity (average).
Non-IFRS fi nancial measures
In the Annual Report, Novo Nordisk discloses certain fi nancial measures of
the Group’s fi nancial performance, fi nancial position and cash fl ows that
refl ect adjustments to the most directly comparable measures calculated and
presented in accordance with IFRS. These non-IFRS fi nancial measures may
not be defi ned and calculated by other companies in the same manner, and
may thus not be comparable with such measures.
The non-IFRS fi nancial measures presented in the Annual Report are:
• Cash to earnings
• Financial resources at the end of the year
• Free cash fl ow
• Operating profi t after tax to net operating assets
• Underlying sales growth in local currencies.
Cash to earnings
Cash to earnings is defi ned as ‘free cash fl ow as a percentage of net profi t’.
Financial resources at the end of the year
Financial resources at the end of the year is defi ned as the sum of cash and
cash equivalents at the end of the year, bonds with original term to maturity
exceeding three months and undrawn committed credit facilities.
Free cash fl ow
Novo Nordisk defi nes free cash fl ow as ‘net cash generated from operating
activities less net cash used in investing activities’ excluding ‘Net change in
marketable securities’.
Net asset value per share
Defi ned as the company value per share, calculated by dividing the total
net asset value of Novo Nordisk A/S by the number of shares outstanding.
Operating profi t after tax to net operating assets
(OPAT/NOA)
Operating profi t after tax to net operating assets is defi ned as ‘operating
profi t after tax (using the effective tax rate) as a percentage of average
inventories, receivables, property, plant and equipment, intangible assets and
deferred tax assets less non-interest-bearing liabilities including provisions
and deferred tax liabilities (where average is the sum of the above assets and
liabilities at the beginning of the year and at year-end divided by two)’.
Underlying sales growth in local currencies
Underlying sales growth in local currencies is defi ned as sales for the year
measured at prior-year average exchange rates compared with sales for the
prior year measured at prior-year average exchange rates.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 94
eng26 - 31.01 - 55-111.indd 94
31/01/15 20.44
31/01/15 20.44
Part of Management’s review
QUARTERLY FINANCIAL FIGURES 2013 AND 2014
95
QUARTERLY FINANCIAL FIGURES 2013 AND 2014
DKK million
Net sales
Sales by business segment:
New-generation insulin
Modern insulins (insulin analogues)
Human insulins
Victoza®
Protein-related products
Oral antidiabetic products (OAD)
Diabetes care total
NovoSeven®
Norditropin®
Other biopharmaceuticals
Biopharmaceuticals total
Sales by geographical segment:
North America
Europe
International Operations
Region China
Japan & Korea
Gross profi t
Sales and distribution costs
Research and development costs
Hereof costs related to discontinuation of activities within
infl ammatory disorders
Administrative costs
Other operating income, net
Operating profi t
Net fi nancials
Profi t before income taxes
Income taxes
2013
2014
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
19,983
21,380
20,511
21,698
20,343
21,629
22,249
24,585
9
8,991
2,824
2,678
597
694
24
9,626
2,779
2,877
619
681
42
9,393
2,572
2,847
624
504
68
10,143
2,694
3,231
572
367
80
9,377
2,573
2,916
587
426
141
10,351
2,475
3,059
579
452
175
10,641
2,478
3,441
571
382
262
11,168
2,772
4,010
596
468
15,793
16,606
15,982
17,075
15,959
17,057
17,688
19,276
2,027
1,537
626
2,542
1,479
753
2,428
1,436
665
2,259
1,662
702
2,247
1,500
637
2,292
1,509
771
2,057
1,686
818
2,546
1,811
952
4,190
4,774
4,529
4,623
4,384
4,572
4,561
5,309
9,009
4,761
3,094
1,880
1,239
16,374
5,530
2,657
–
801
176
7,562
207
7,769
1,787
10,038
5,123
3,077
1,774
1,368
17,774
5,834
2,715
–
815
175
8,585
96
8,681
1,947
9,763
4,994
2,697
1,745
1,312
16,986
5,529
2,795
–
822
152
7,992
307
8,299
1,884
10,214
5,185
3,139
1,762
1,398
18,298
6,487
3,566
–
1,070
179
7,354
436
7,790
1,737
9,265
4,703
3,032
2,171
1,172
16,877
5,086
3,168
–
805
215
8,033
268
8,301
1,843
10,561
4,989
2,968
1,947
1,164
17,958
5,559
3,075
–
795
204
8,733
256
8,989
1,995
11,133
5,045
2,938
1,881
1,252
18,823
5,899
3,654
600
870
169
8,569
(115)
8,454
1,954
12,164
5,413
3,602
2,089
1,317
20,586
6,679
3,865
–
1,067
182
9,157
(805)
8,352
1,823
Net profi t
5,982
6,734
6,415
6,053
6,458
6,994
6,500
6,529
Depreciation, amortisation and impairment losses
691
676
643
789
657
667
1,183
928
Total assets
Total equity
FINANCIAL RATIOS
As percentage of sales
Sales and distribution costs
Research and development costs
Administrative costs
Gross margin1
Operating margin1
Equity ratio1
SHARE RATIOS
62,447
33,801
64,289
35,357
68,134
39,125
70,337
42,569
63,241
33,583
63,681
36,661
71,283
37,967
77,062
40,294
27.7%
13.3%
4.0%
81.9%
37.8%
54.1%
27.3%
12.7%
3.8%
83.1%
40.2%
55.0%
27.0%
13.6%
4.0%
82.8%
39.0%
57.4%
29.9%
16.4%
4.9%
84.3%
33.9%
60.5%
25.0%
15.6%
4.0%
83.0%
39.5%
53.1%
25.7%
14.2%
3.7%
83.0%
40.4%
57.6%
26.5%
16.4%
3.9%
84.6%
38.5%
53.3%
27.2%
15.7%
4.3%
83.7%
37.2%
52.3%
Basic earnings per share/ADR (in DKK)
Diluted earnings per share/ADR (in DKK)
2.21
2.20
2.50
2.49
2.41
2.39
2.28
2.27
2.44
2.43
2.66
2.66
2.49
2.47
2.51
2.51
Average number of shares outstanding (million) – basic
Average number of shares outstanding (million) – diluted
2,708
2,724
2,689
2,703
2,668
2,682
2,653
2,667
2,642
2,653
2,629
2,637
2,614
2,622
2,600
2,608
EMPLOYEES
Number of full-time employees at the end of the period
35,154
35,869
36,851
37,978
39,579
40,226
40,700
40,957
1. For defi nitions, please refer to p 94.
eng26 - 31.01 - 55-111.indd 95
eng26 - 31.01 - 55-111.indd 95
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
96 CONSOLIDATED SOCIAL STATEMENT
Supplementary information
STATEMENT OF SOCIAL PERFORMANCE
FOR THE YEAR ENDED 31 DECEMBER
PATIENTS
Patients reached with Novo Nordisk diabetes care products (estimate in million)
Least developed countries where Novo Nordisk sells insulin according
to the differential pricing policy
Donations (DKK million)
Animals purchased for research
New patent families (fi rst fi lings)
EMPLOYEES
Employees
Employee turnover
Working the Novo Nordisk Way (scale 1– 5)
Diverse senior management teams
Frequency of occupational accidents (number/million working hours)
ASSURANCE
Relevant employees trained in business ethics
Business ethics reviews
Fulfi lment of action points from facilitations of the Novo Nordisk Way
Supplier audits
Product recalls
Warning Letters and re-inspections
Company reputation (scale 1–7)
Note
2014
2013
2012
2.1
2.2
2.3
2.4
2.5
3.1
3.1
3.1
3.2
4.1
4.2
4.3
4.4
24.4
24.3
22.8
32
84
64,533
93
35
83
72,662
77
41,450
9.0%
4.3
76%
3.2
38,436
8.1%
4.4
70%
3.5
98%
42
95%
224
2
0
5.8
97%
45
96%
221
6
1
5.8
35
84
73,601
65
34,731
9.1%
4.3
66%
3.6
99%
48
94%
219
6
1
5.7
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 96
eng26 - 31.01 - 55-111.indd 96
31/01/15 20.44
31/01/15 20.44
Supplementary information
NOTES
PATIENTS, EMPLOYEES AND ASSURANCE
CONSOLIDATED SOCIAL STATEMENT
97
In the Consolidated social statement, Novo Nordisk reports on three
dimensions of performance: patients, employees and assurance. Progress is
reported on three long-term targets: reach more patients with diabetes care
products, ensure that the organisation is working the Novo Nordisk Way and
nurture a diverse working environment.
To support the three long-term targets the social statement contains
additional performance information of strategic importance, such as Least
developed countries buying insulin according to the differential pricing
policy, employee turnover, training of employees in business ethics, supplier
audits and product quality.
Enhancing diversity
Diversity is a key priority for Novo Nordisk and at the end of 2014, 76%
of the senior management teams were diverse in terms of both gender
and nationality. The graph on the right shows that 32 of the 33 senior
management teams are diverse in terms of gender and that diversity in terms
of nationality is also prominent, but not satisfactory. To ensure a robust
pipeline of talent for management positions, a new diversity aspiration has
been set with a focus on enhancing diversity in all management teams.
DIVERSE SENIOR MANAGEMENT TEAMS
Gender
Nationality
Both gender and nationality
Target
Number of senior management teams
40
32
24
16
8
0
Product recalls signifi cantly reduced
In 2014, Novo Nordisk signifi cantly reduced the number of product recalls to
two from six in 2013 despite sales growth of 6%. The reduction is attributed
to continuous focus on ensuring a high level of quality in the production and
packaging of products.
6 IN 20132
PRODUCT RECALLS
DOWN FROM
2013
2014
SECTION 1
BASIS OF PREPARATION
General reporting standards and principles
The Consolidated social statement has been prepared in accordance with the
Danish Financial Statements Act (FSA), sections 99a and 99b. Section 99a
requires Novo Nordisk to account for the company’s activities relating to
social responsibility, reporting on business strategies, and activities in the
areas of human rights, labour standards, environment, anti-corruption and
climate. Companies that subscribe to the UN Global Compact and annually
submit their Communication on Progress will be in compliance with
the FSA, provided that the annual report includes a reference to where
the information has been made publicly available. Read Novo Nordisk’s
Communication on Progress 2014 at novonordisk.com/annualreport and
on UN Global Compact’s website at unglobalcompact.org/COP. Section 99b
requires Novo Nordisk to account for the gender diversity at Board level by
reporting on targets and policies ensuring increased gender diversity over
time.
Novo Nordisk adheres to the following internationally recognised voluntary
reporting standards and principles (for overview, read more on p 113):
• UN Global Compact. As a signatory to the UN Global Compact, a strategic
policy initiative for businesses that are committed to aligning their
operations and strategies with 10 universally accepted principles in the
areas of human rights, labour, environment and anti-corruption, Novo
Nordisk reports on progress during 2014 in its Communication on Progress,
which can be found at novonordisk.com/annualreport. As a member of
UN Global Compact LEAD, a platform for a select group of companies
to drive leadership to the next generation of sustainability performance,
Novo Nordisk demonstrates its sustainability governance and management
processes through the Blueprint for Corporate Sustainability Leadership,
which is also part of the Communication on Progress.
• AA1000 framework for accountability. The framework (AA1000APS(2008)
and AA1000AS(2008)) states that reporting must provide a complete,
accurate, relevant and balanced picture of the organisation’s approach to
and impact on society.
To Novo Nordisk, AA1000APS(2008) is a component in creating a generally
applicable approach to assessing and strengthening the credibility of the
Group’s public reporting of social and environmental information. Novo
Nordisk’s assurance process has been designed to ensure that the qualitative
and quantitative information that documents the social and environmental
dimensions of performance as well as the systems that underpin the data
and performance are assured. The principles outlined in AA1000APS(2008)
have been applied as described below.
Inclusivity
As a pharmaceutical business with global reach, Novo Nordisk is committed
to being accountable to those stakeholders who are impacted by the
organisation. Novo Nordisk maps its stakeholders and has processes in place
to ensure inclusion of stakeholder concerns and expectations. In addition,
Novo Nordisk continuously develops its stakeholder engagement and
sustainability capacity at corporate and affi liate levels.
Materiality
Key issues are identifi ed through ongoing stakeholder engagement and
trendspotting, and are addressed by programmes or action plans with clear
and measurable targets. Long-term targets are set to guide performance in
strategic areas. The issues presented in the annual report are deemed to have
a signifi cant impact on the Group’s future business performance and may
support stakeholders in their decision-making.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 97
eng26 - 31.01 - 55-111.indd 97
31/01/15 20.44
31/01/15 20.44
98 CONSOLIDATED SOCIAL STATEMENT
Supplementary information
Other accounting policies
Working the Novo Nordisk Way
Working the Novo Nordisk Way is an employee assessment measured on a
scale of 1– 5, with 5 being the best, and is a simple average of respondents’
answers to all mandatory questions in the annual employee survey, eVoice,
covering the Novo Nordisk Way. For 2014, the eVoice response rate was 94%
compared with 89% in 2013.
Relevant employees trained in business ethics
The mandatory business ethics training is based on globally applicable
e-learning, standard operating procedures (SOPs) and related tests released
annually by the Novo Nordisk Business Ethics Compliance Offi ce. The target
groups for the individual SOPs vary in size and are defi ned by Novo Nordisk
in each SOP. The employees in the target groups cover all employees in Novo
Nordisk at the end of the reporting period except employees on leave,
student assistants, PhDs and post docs. The percentage of employees
completing the training is calculated as the percentage of completion of
both the SOPs and the related tests, based on internal registrations.
Business ethics reviews
The number of business ethics reviews is recorded as the number of
conducted business ethics reviews performed by Group Internal Audit in
affi liates, production sites and headquarter areas. Furthermore, the number
includes other business ethics assurance activities such as trend reports and
review of third parties.
Company reputation
Company reputation with external key stakeholders is measured as the mean
corporate brand score in the top seven markets (the US, Canada, China,
Japan, Germany, the UK and France), weighted in accordance with actual
sales of diabetes products (excluding oral antidiabetic products). The mean
corporate brand score is based on company ratings (on a scale of 1–7, with
7 being the best) of peers collected through interviews with primary and
secondary healthcare professionals who are current prescribers of Novo
Nordisk injectable diabetes products. Each market is surveyed every year. The
survey is carried out by an independent external consultancy fi rm.
Responsiveness
The report reaches out to a wide range of stakeholders, each with their
specifi c 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 refl ects how the company is managing operations
in ways that respond to and consider stakeholder concerns and interests.
In addition, Novo Nordisk reports with reference to the content elements
and guiding principles of the International Integrated Reporting Framework
developed by the International Integrated Reporting Council. The frame-
work, which was released in a fi nal version in December 2013, is being
piloted by a group of companies, including Novo Nordisk.
Defi ning materiality
It is Novo Nordisk’s responsibility to ensure that Management priorities and
those areas in which the Group has signifi cant impact are addressed. Issues
with respect to social and environmental reporting are prioritised, and the
issues considered most material are included in the annual report.
In assessing which information to include in the annual report, legal require-
ments and disclosure commitments made by Novo Nordisk are considered.
Furthermore, it is assessed whether information is tied directly or indirectly to
Novo Nordisk’s ability to create value. Short- and long-term value creation is
taken into consideration.
The outcomes of formal reviews, research, stakeholder engagement and
internal materiality discussions are presented as a proposal for annual
reporting content to Executive Management and the Board of Directors.
The conclusion from the external assurance provider is available in the
Independent assurance report on p 111.
Principles of consolidation
The Consolidated social statement and disclosures cover the Novo Nordisk
Group comprising Novo Nordisk A/S and entities controlled by Novo Nordisk
A/S.
Social accounting policies
The accounting policies set out below and in the notes have been applied
consistently in the preparation of the Consolidated social statement for all
the years presented.
Disclosures taken out
The following disclosures have been taken out to align with Management
priorities:
• ‘Annual training costs per employee’ has been taken out as it is not used as
Management information at a consolidated level.
• ‘Employment impact’ has been taken out as it is not used as Management
information.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 98
eng26 - 31.01 - 55-111.indd 98
31/01/15 20.44
31/01/15 20.44
Supplementary information
SECTION 2
PATIENTS
2.1 PATIENTS REACHED WITH NOVO
NORDISK DIABETES CARE PRODUCTS
(ESTIMATE)
Accounting policies
The number of full-year patients reached with Novo Nordisk diabetes care
products, except devices and PrandiMet ®, is estimated by dividing Novo
Nordisk’s annual sales volume by the annual usage dose per patient for each
product class as defi ned by the WHO. PrandiMet ® is not included as no
WHO-defi ned dosage exists.
The WHO-defi ned daily dosage has not changed since 1982 and it may not
refl ect the recommended or prescribed daily dose precisely. Actual doses are
based on individual characteristics (eg age and weight) and pharmacokinetic
considerations. Despite this uncertainty, it is Novo Nordisk’s assessment that
this is the most consistent way of reporting.
Development
The estimated number of full-year patients reached with Novo Nordisk’s
diabetes care products increased from 24.3 million in 2013 to 24.4 million
in 2014. The net increase in patients refl ects an underlying development
with more patients treated with modern and new-generation insulin and
Victoza®, countered by fewer patients treated with human insulin due to loss
of a large tender contract.
2.2 LEAST DEVELOPED COUNTRIES
WHERE NOVO NORDISK SELLS INSULIN
ACCORDING TO THE DIFFERENTIAL
PRICING POLICY
Accounting policies
Novo Nordisk has formulated a differential pricing policy for the least
developed countries (LDCs) as defi ned by the UN. The differential pricing
policy is part of Novo Nordisk’s global initiative to promote access to
healthcare for all LDCs. The purpose of the policy is to offer human insulin in
vials to all LDCs at or below a market price of 20% of the average prices for
human insulin in vials in the western world. The western world is defi ned as
Europe (the EU, Switzerland and Norway), the US, Canada and Japan. The
number of LDCs where Novo Nordisk sells human insulin in vials according
to the differential pricing policy is measured by direct or indirect sales by
Novo Nordisk via government tender or private market sales to wholesalers,
distributors or non-governmental organisations. In 2014, 48 countries were
on the UN LDC list against 49 countries in 2013 and 2012.
NUMBER OF LDCs
2014
2013
2012
Total LDCs
LDCs not buying according
to pricing policy
LDCs with no sales
Total LDCs buying insulin
according to pricing policy
48
2
14
32
49
3
11
35
49
2
12
35
Novo Nordisk operated in Angola and Myanmar but did not sell insulin at the
differential price here. The governments in those two countries were offered
the opportunity to buy insulin at the differential price but the insulin sold
there in 2014 was sold to the private market.
CONSOLIDATED SOCIAL STATEMENT
99
Novo Nordisk is unable to guarantee that the price at which the company
sells the insulin will be refl ected in the fi nal price to the consumer. Printing
the price on the actual product has been one initiative tried to avoid mark-
ups on price. 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.
In 14 LDCs Novo Nordisk had no sales in 2014 for various reasons. In several
cases, the government did not respond to the offer, there were no private
wholesalers or other partners to work with, or war or political unrest made it
impossible to do business.
2.3 DONATIONS
Accounting policies
Donations by Novo Nordisk to the World Diabetes Foundation and the Novo
Nordisk Haemophilia Foundation are recognised as an expense when the
donation is paid out or when an unconditional commitment to donate
has been made. For additional information regarding the World Diabetes
Foundation, please refer to note 5.4 in the Consolidated fi nancial state-
ments.
DONATIONS IN DKK MILLION
2014
2013
2012
World Diabetes Foundation
Novo Nordisk Haemophilia Foundation
Total donations
66
18
84
64
19
83
64
20
84
2.4 ANIMALS PURCHASED FOR RESEARCH
Accounting policies
Animals purchased for research is recorded as the number of animals
purchased for all research undertaken by Novo Nordisk either in-house or
by external contractors. The number of animals purchased is based on
internal registration of purchased animals and yearly reports from external
contractors.
ANIMALS PURCHASED
2014
2013
2012
Mice and rats
Pigs
Rabbits
Dogs
Non-human primates
Other rodents1
62,034
818
574
374
344
389
69,741
1,177
1,124
238
240
142
70,668
1,170
691
434
355
283
Total animals purchased
64,533
72,662
73,601
1. Other rodents are gerbils, guinea pigs and hamsters.
The number of animals purchased for research in 2014 decreased by 11%
compared with 2013 due to the discontinuation of infl ammation research.
In all, 97% of the animals purchased were rodents and the variation in the
purchase of large animals from year to year refl ects the different development
phases the research projects have reached.
eng26 - 31.01 - 55-111.indd 99
eng26 - 31.01 - 55-111.indd 99
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
100 CONSOLIDATED SOCIAL STATEMENT
Supplementary information
2.5 NEW PATENT FAMILIES (FIRST FILINGS)
Accounting policies
New patent families (fi rst fi lings) is recorded as the number of new patent applications that were fi led during the year. Active patent families is recorded as the
total number of single inventions covered by at least one pending or issued patent in one or more countries.
Development
A total of 93 new patent families were established in 2014, an increase of 21% compared with the fi ling activity in 2013 when 77 patent families were
established. The increase was driven by a higher level of patent-fi ling activity in the device area. By the end of 2014, Novo Nordisk had 776 active patent families
compared with 796 in 2013, refl ecting a slight decrease in the patent estate of 3% resulting from ongoing pruning of the patent portfolio.
The patent expiry dates for the product portfolio are shown in the table below. The dates provided are for expiry in the US, Germany, China and Japan of patents
on the active ingredient, unless otherwise indicated, and include extensions of patent term (including for paediatric extension, where applicable). For several
products, in addition to the compound patent, Novo Nordisk holds other patents on manufacturing processes, formulations or uses that may be relevant for
exclusivity beyond the expiration of the active ingredient patent. Furthermore, regulatory data protection may apply.
MARKETED PRODUCTS IN KEY MARKETS (ACTIVE INGREDIENTS)
US
Germany
China
Japan
Diabetes care:
NovoRapid ® (NovoLog ®)
NovoMix ® 30 (NovoLog ® Mix 70/30)
Levemir ®
NovoNorm® (Prandin®)
PrandiMet ®
Victoza®
Tresiba®
Ryzodeg ®
Xultophy ®
Obesity:
Saxenda®
Biopharmaceuticals:
Norditropin® (Norditropin® SimpleXx ®)
NovoSeven®
NovoEight ®
NovoThirteen® (TRETTEN ®)
Vagifem® 10 mcg
Expired1
Expired1
2019
Expired
N/A
2022
20302
20302
20302
Expired1
2015
2018
Expired
N/A
2022
20282
20282
20282
Expired1
Expired
Expired
Expired
N/A
2017
2024
2024
2024
Expired1
Expired
2019
2016
N/A
2022
2027
2027
2027
2022
2022
2017
2022
20173
Expired4
N/A5
20216
20227, 8
20173
Expired4
N/A5
Expired9
20217
20173
Expired4
N/A5
N/A9
N/A
20173
Expired4
N/A5
N/A9
20217
1. Formulation patent until 2017. It has been revoked in China, but the decision has
been appealed.
2. Current estimate.
3. Formulation patent providing exclusivity to the composition of excipients used in the
drug products.
4. Room temperature-stable formulation patent until 2024.
5. Process patents until 2028 in China, Germany and Japan and until 2030 in the US.
6. Data protection runs until 2025.
7. Patent covers low-dose treatment regimen.
8. Validity of the US patent is challenged in litigation.
9. Formulation patent expiring in 2016.
SECTION 3
EMPLOYEES
3.1 EMPLOYEES
Accounting policies
The number of employees is recorded as all employees except externals,
employees on unpaid leave, interns, bachelor and master thesis employees,
and substitutes at year-end.
The rate of turnover is measured as the number of employees, excluding
temporary employees, who left the Group during the fi nancial year compared
with the average number of employees, excluding temporary employees.
Diverse senior management teams is measured as the percentage of teams
that are diverse in terms of both gender and nationality. A senior manage-
ment team includes all managers and executive assistants reporting directly
to an executive vice president/senior vice president.
EMPLOYEES
2014
2013
2012
North America
Europe
– of which in Denmark
International Operations
Japan & Korea
Region China
6,465
22,136
17,664
6,666
1,086
5,097
6,162
20,286
16,027
6,054
1,084
4,850
5,758
18,715
14,792
5,143
1,071
4,044
Total employees
41,450
38,436
34,731
Employees (FTEs)
40,957
37,978
34,286
Employee turnover
9.0%
8.1%
9.1%
Increase in employees
8%
11%
6%
The growth in headcount is in line with expectations and is primarily driven
by expansion of International Operations and in the research & development
and production organisations, primarily in Denmark. Employee turnover
increased slightly overall.
Diversity in the company’s senior management teams increased from 70%
(23 of 33 teams) in 2013 to 76% (25 of 33 teams), and 32 of the teams
were diverse in terms of gender by the end of 2014. Among employees as a
whole, the gender split was approximately 50/50 in 2014, which is the same
as in 2013.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 100
eng26 - 31.01 - 55-111.indd 100
31/01/15 20.44
31/01/15 20.44
Supplementary information
CONSOLIDATED SOCIAL STATEMENT
101
Development
In 2014, as in 2013, there were no work-related fatalities. The number of
occupational accidents with absence decreased by 2% compared with 2013
despite company growth, and the frequency of occupational accidents
decreased from 3.5 per million working hours in 2013 to 3.2 per million
working hours in 2014. The improved performance is attributed to the
continued focus on health and safety and implementation of uniform
procedures.
4.3 PRODUCT RECALLS
Accounting policies
The number of product recalls is recorded as the number of times Novo
Nordisk has instituted a recall and includes recalls in connection with clinical
trials. A recall can affect various countries but only counts as one recall.
Development
In 2014, Novo Nordisk had two instances of product recalls compared
with six in 2013. One recall was due to inappropriate product storage
in the external distribution chain. The other was due to a packaging
issue. Local health authorities were informed in both instances to ensure
that distributors, pharmacies, doctors and patients received appropriate
information.
4.4 WARNING LETTERS AND
RE-INSPECTIONS
Accounting policies
The number of Warning Letters is measured as the number of Warning
Letters received from the US Food & Drug Administration (FDA).
The number of re-inspections is measured as the number of re-inspections at
Novo Nordisk sites performed by an ISO-certifying body, FDA, EMA or PMDA
in connection with GxP-regulated and ISO-certifi ed areas with global reach
and high business impact.
The number of inspections is measured as the total number of authority
inspections at Novo Nordisk sites as well as at clinics/hospitals performing
clinical studies for Novo Nordisk.
Development
In 2014 no Warning Letters were issued to Novo Nordisk and no re-inspections
were conducted.
In 2014, 59 inspections were conducted by an ISO-certifying body, FDA,
EMA or PMDA in connection with GxP-regulated and ISO-certifi ed areas.
32 inspections were passed and for the remaining 27 inspections, the
fi nal inspection reports had not been received at year-end or the fi nal
authority acceptance was pending. In all, 53 inspections were conducted by
other authorities, bringing the total number of inspections to 112 in 2014,
compared with 84 in 2013.
3.2 FREQUENCY OF OCCUPATIONAL
ACCIDENTS
Accounting policies
The frequency of occupational accidents with absence is measured as the
internally reported number of accidents for all employees, excluding externals,
employees on unpaid leave, interns, bachelor and master thesis employees,
and substitutes, per million nominal working hours. An occupational
accident with absence is any work-related accident causing at least one
day of absence in addition to the day of the accident.
SECTION 4
ASSURANCE
4.1 FULFILMENT OF ACTION POINTS
FROM FACILITATIONS OF THE NOVO
NORDISK WAY
Accounting policies
Facilitation is the internal audit process for assessing compliance with the
Novo Nordisk Way. The assessment is based on review of documentation
followed by an on-site visit where randomly selected employees and
management are interviewed. Any gaps between the Novo Nordisk Way
and performance of the processes are identifi ed and presented to manage-
ment as fi ndings. The facilitator and management agree upon an action plan
to close the fi ndings. The percentage of fulfi lment of action points arising
from facilitations of the Novo Nordisk Way 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 the basis for the
calculation is that action lead times typically vary from a couple of months
to more than a year.
FACILITATIONS AND FINDINGS
2014
2013
2012
Fulfi lment of action points from
facilitations of the Novo Nordisk Way
Facilitations
Findings
95%
96%
94%
69
213
75
178
61
166
A total of 69 units were facilitated covering approximately 16,500 employees
of which 16% were interviewed. Overall, the facilitations in 2014 show a
’high level’ of compliance with the Novo Nordisk Way. Corrective actions
and corresponding deadlines have been agreed with local management for
all fi ndings. The main areas of improvement identifi ed concerned Essential
7 (’personal performance and development’), Essential 8 (’healthy and
engaging working environment’) and Essential 9 (’we strive for simplicity’).
The Essentials, of which there are ten, are the basis for the implementation
of the Novo Nordisk Way.
4.2 SUPPLIER AUDITS
Accounting policies
The number of supplier audits concluded by Novo Nordisk’s Supplier Audit
department includes the number of responsible sourcing audits and quality
audits conducted in the areas of direct and indirect spend on materials.
BY TYPE OF AUDIT
2014
2013
2012
Responsible sourcing audits
Quality audits
Total supplier audits
25
199
224
25
196
221
45
174
219
The level of audits concluded in 2014 was stable compared with 2013. No
critical fi ndings were identifi ed in 2014.
eng26 - 31.01 - 55-111.indd 101
eng26 - 31.01 - 55-111.indd 101
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
102 CONSOLIDATED ENVIRONMENTAL STATEMENT
Supplementary information
STATEMENT OF ENVIRONMENTAL
PERFORMANCE
FOR THE YEAR ENDED 31 DECEMBER
RESOURCES
Energy consumption (1,000 GJ)
Water consumption (1,000 m3)
EMISSIONS, ORGANIC RESIDUES AND WASTE
CO2 emissions from energy consumption (1,000 tons)
CO2 emissions from refrigerants (1,000 tons)
CO2 emissions from transport (1,000 tons)
Organic residues (tons)
Waste (tons)
Non-hazardous waste (ratio)
Breaches of regulatory limit values
NOTES
Note
2014
2013
2012
2.1
2.2
3.1
3.1
3.1
3.2
3.3
3.3
3.4
2,556
2,959
2,572
2,685
2,433
2,475
120
1
57
110,095
30,720
50%
9
125
1
59
110,228
20,387
63%
14
122
2
55
99,209
19,213
61%
27
RESOURCES, EMISSIONS, ORGANIC RESIDUES AND WASTE
In the Consolidated environmental statement, Novo Nordisk reports on
performance in terms of inputs of resources and outputs in the form of
emissions, organic residues and waste. Progress is reported against the long-
term targets to continuously reduce environmental impacts.
DEVELOPMENT IN ENERGY AND
WATER CONSUMPTION VERSUS SALES
Energy
Water
Sales in local currencies
To support the three long-term targets, the environmental statement
contains additional performance information of strategic importance such
as organic residue, waste and breaches of regulatory limit values.
Challenges in decoupling water consumption from sales
Decoupling energy and water consumption from sales is a priority and
water remains a challenge. Novo Nordisk has strict requirements regarding
the quality of water used in production, and as a result water usage is
relatively high. Coupled with production increases, water consumption rose
by 10% in 2014. There is particular focus on water stewardship at the
production plant in Kalundborg, where 56% of the water is consumed, as
well as at the production plants in Montes Claros, Brazil, and Tianjin, China,
where water is scarce.
%
15
12
9
6
3
0
CO2 emission target reached
By the end of 2014, CO2 emissions from energy consumption amounted to
120,000 tons of CO2, a reduction of 5,000 tons compared with 2013, or
4%. This improvement is largely attributed to reduced energy consumption
globally and conversion to less CO2-intensive energy supply at one of the
fi lling plants.
As a result, the target to reduce CO2 emissions by 10% compared with 2004
was reached with a substantial margin.
NOVO NORDISK ANNUAL REPORT 2014
2013
2014
5,000
TONS REDUCTION OF CO2
EMISSIONS FROM ENERGY
CONSUMPTION (–4%)
eng26 - 31.01 - 55-111.indd 102
eng26 - 31.01 - 55-111.indd 102
31/01/15 20.44
31/01/15 20.44
Supplementary information
CONSOLIDATED ENVIRONMENTAL STATEMENT
103
SECTION 1
BASIS OF PREPARATION
General reporting standards and principles
The Consolidated environmental statement is prepared in accordance with
the same standards as those for the Consolidated social statement. Read
more in section 1 ‘Basis of preparation’, of the Consolidated social statement
on p 97.
New disclosure
‘Organic residues’ has been added as a separate disclosure. It was previously
included in the waste volume, but since organic residues are considered
valuable by-products, it is now reported separately. The accounting policy
and data reported as waste have been adjusted accordingly.
Principles of consolidation
The Consolidated environmental statement covers the production sites
including offi ce buildings, except for CO2 emissions from transport, which
covers forwarders used to distribute Novo Nordisk products.
Environmental accounting policies
The accounting policies set out below have been consistently applied in
preparation of the Consolidated environmental statement for all the years
presented except ‘Waste’, for which please refer to the information below.
Disclosures taken out
The following disclosures have been taken out to align with Management
priorities:
• ‘Wastewater’ has been taken out as it is not used as Management
information.
• ‘Chemical oxygen demand (COD)’ has been taken out as it is not used as
Management information.
SECTION 2
RESOURCES
2.1 ENERGY CONSUMPTION
2.2 WATER CONSUMPTION
Accounting policies
Accounting policies
Energy consumption is measured as both direct supply of energy (internally
produced energy), which is energy Novo Nordisk produces from mainly
natural gas and wood, and indirect supply of external energy (externally
produced energy), which is electricity, steam and district heat. The consump-
tion of fuel (internally produced energy) and externally produced energy is
based on meter readings and invoices.
ENERGY CONSUMPTION
IN 1,000 GJ
Diabetes care
Biopharmaceuticals
Not allocated1
2014
2013
2012
1,816
316
424
1,762
362
448
1,680
316
437
Total energy consumption
2,556
2,572
2,433
1. Not allocated consists of consumption that cannot be directly linked to the production
of either diabetes care or biopharmaceuticals, ie offi ce buildings and research
activities.
In 2014, energy consumption decreased by 1%, compared with 2013 despite
increased production within diabetes care and biopharmaceuticals to meet
market demands. Process optimisations, optimised utility supply and weather
fl uctuations explain the decrease.
Water consumption is measured based on meter readings and invoices. It
includes drinking water, industrial water and steam.
WATER CONSUMPTION
IN 1,000 M3
Diabetes care
Biopharmaceuticals
Not allocated1
2014
2013
2012
2,568
209
182
2,261
244
180
2,156
201
118
Total water consumption
2,959
2,685
2,475
1. Not allocated consists of consumption that cannot be directly linked to the production
of either diabetes care or biopharmaceuticals, ie offi ce buildings and research
activities.
In 2014, water consumption increased by 10% compared with 2013. This
development refl ects the increased production volume, as well as raised
internal requirements regarding the quality of water used in production.
70% of the water is used at production sites located in water-scarce regions
in Brazil, China and Denmark. These sites have particular focus on water
stewardship.
eng26 - 31.01 - 55-111.indd 103
eng26 - 31.01 - 55-111.indd 103
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
104 CONSOLIDATED ENVIRONMENTAL STATEMENT
Supplementary information
SECTION 3
EMISSIONS, ORGANIC RESIDUES AND WASTE
3.1 CO2 EMISSIONS
Accounting policies
CO2 emissions from energy consumption
The amount of CO2 emissions from energy consumption covers consumption
related to production measured in metric tons. CO2 emissions from energy
consumption is calculated according to the Greenhouse Gas (GHG) Protocol
and based on emission factors from the previous year.
CO2 emissions from refrigerants
CO2 emissions from refrigerants is calculated by converting to metric tons
using standard factors. The calculations are based on GWP100 factors as
specifi ed in the GHG Protocol guidelines.
CO2 emissions from transport (product distribution)
CO2 emissions from product distribution is calculated by external trans-
portation suppliers as the estimated emissions from product distribution in
metric tons. It is calculated as the worldwide distribution of semi-fi nished
and fi nished products, raw materials and components by air, sea and
road between production sites and from production sites to affi liates,
direct customers and importing distributors. CO2 emissions from product
distribution from affi liates to pharmacies, hospitals and wholesalers are not
included.
CO2 EMISSIONS IN 1,000 TONS
2014
2013
2012
– Diabetes care
– Biopharmaceuticals
– Not allocated1
CO2 emissions from energy consumption
CO2 emissions from refrigerants
CO2 emissions from transport
Total CO2 emissions
94
10
16
120
1
57
178
96
11
18
125
1
59
185
95
9
18
122
2
55
179
1. Not allocated consists of consumption that cannot be directly linked to the production
of either diabetes care or biopharmaceuticals, ie offi ce buildings and research
activities.
CO2 emissions from energy consumption decreased by 4% in 2014
compared with an increase of 2% in 2013. The decrease in CO2 is a result
of decreasing energy consumption overall and one of the fi lling plants having
changed to a supplier with less CO2 intensive power production.
ORGANIC RESIDUES (TONS)
2014
2013
2012
Biomass
Ethanol
101,729
8,366
104,324
5,904
93,813
5,396
Total organic residues
110,095
110,228
99,209
Biomass decreased by 2% in 2014 compared with 2013 due to a change in
the product mix produced, while ethanol waste increased by 42% mainly due
to extraordinary challenges with regeneration of used ethanol in diabetes
care production.
3.3 WASTE
Accounting policies
Waste is measured as the sum of non-hazardous and hazardous waste
disposed of based on weight receipts.
Non-hazardous waste is calculated as a percentage of the total amount of
waste disposed of.
TONS OF WASTE
Non-hazardous waste
Hazardous waste
2014
2013
2012
15,492
15,228
12,813
7,574
11,744
7,469
Total waste
30,720
20,387
19,213
Non-hazardous waste (ratio)
50%
63%
61%
WASTE TREATMENT
2014
2013
2012
Recycling
Incineration with energy recovery
Incineration without energy recovery
Special treatment1
Landfi lling
26%
30%
5%
36%
3%
28%
42%
3%
22%
5%
31%
36%
3%
24%
6%
Total waste treatment
100%
100%
100%
The emission from refrigerants is as expected due to leaks and evaporation
from cooling systems.
1. Waste handled by companies specialised in chemical waste disposal. In 2014, 40%
was wastewater requiring special treatment and 33% was ethanol not suitable for
recycling.
CO2 emissions from transport (product distribution) decreased slightly
despite increased distribution volumes. The decrease is due to increased
distribution via sea freight, which accounted for 72% of selected freight
routes where sea freight is possible (for selected products where Novo
Nordisk can meet requirements within packaging and is able to fulfi l product
temperature requirements during transport). Distributing as many products
as possible by sea is a priority for Novo Nordisk, as it reduces both CO2
emissions and costs.
3.2 ORGANIC RESIDUES
Accounting policies
Organic residues, consisting of biomass and ethanol, from the production
of the active ingredients are used for recycling. The biomass is measured in
m3 and converted to tons. The amount of ethanol is calculated based on
volume and concentration and then converted to tons. The residues are
primarily used in biogas plants where energy is recovered. Approximately
39% of the organic residues are treated at facilities in Novozymes before
ending up in NovoGro®30. The biomass and NovoGro®30 are used as
fertilizers on local farmland.
Waste increased by 51% from 2013 to 2014 primarily due to a change in the
disposal method of water waste, which was previously treated at wastewater
treatment plants but is now disposed of as hazardous waste and treated in
incineration plants. In addition, the amount of non-recyclable ethanol waste
increased due to extraordinary challenges with regeneration of used ethanol
in diabetes care production.
The increase in non-hazardous waste was mainly due to increased disposal of
paper and cardboard as well as other wastes for recycling and mixed waste
for incineration.
3.4 BREACHES OF REGULATORY LIMIT
VALUES
Accounting policies
Breaches of regulatory limit values covers all breaches reported to the
environmental authorities.
Development
Breaches of regulatory limit values decreased by 36% in 2014 to nine breaches
compared with 14 breaches in 2013. All breaches are minor violations related
to wastewater with no signifi cant impact on the environment.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 104
eng26 - 31.01 - 55-111.indd 104
31/01/15 20.44
31/01/15 20.44
FINANCIAL STATEMENTS OF
THE PARENT COMPANY 2014
FINANCIAL STATEMENTS OF THE PARENT COMPANY
105
The following pages encompass the fi nancial statements of the parent
company being the legal entity Novo Nordisk A/S. Apart from ownership
of the subsidiaries in the Novo Nordisk Group, the activity within the parent
company mainly comprises sales, research and development, production,
corporate activities and support functions.
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER
BALANCE SHEET
AT 31 DECEMBER
DKK million
Note
2014
2013
DKK million
Note
2014
2013
ASSETS
Intangible assets
Property, plant and equipment
Financial assets
7
8
10
1,124
15,686
18,939
1,299
15,221
19,848
Total non-current assets
35,749
36,368
Sales
Cost of goods sold
Gross profi t
Sales and distribution costs
Research and development costs
Administrative costs
Other operating income, net
Operating profi t
Profi t in subsidiaries, net of tax
Financial income
Financial expenses
2
3
3
3
3
55,739
12,260
49,500
11,711
43,479
37,789
10,715
11,737
1,627
932
10,483
9,903
1,560
832
20,332
16,675
10
4
4
10,963
160
788
12,134
1,573
394
Profi t before income taxes
30,667
29,988
Income taxes
5
4,254
4,798
Raw materials
Work in progress
Finished goods
Inventories
Trade receivables
Amounts owed by affi liates
Tax receivables
Other receivables
Net profi t for the year
26,413
25,190
Receivables
Proposed appropriation of net profi t:
Dividends
Net revaluation reserve according to
the equity method
Retained earnings
12,905
11,866
(1,856)
15,364
2,255
11,069
Deferred income tax assets
Marketable securities
Derivative fi nancial instruments
Cash at bank and on hand
Total current assets
26,413
25,190
Total assets
6
EQUITY AND LIABILITIES
Share capital
Net revaluation reserve according to
the equity method
Retained earnings
1,327
5,828
1,254
1,279
4,894
1,220
8,409
7,393
1,950
10,272
3,053
780
1,490
9,332
3,021
794
16,055
14,637
1,484
1,505
30
13,268
–
3,739
1,521
9,605
40,751
36,895
76,500
73,263
530
550
8,696
31,068
10,591
31,428
Total equity
9
40,294
42,569
Deferred income tax liabilities
Other provisions
6
11
Total provisions
Current debt
Derivative fi nancial instruments
Trade payables
Amounts owed to affi liates
Tax payable
Other liabilities
Current liabilities
Total liabilities
–
565
565
462
2,607
2,231
25,404
186
4,751
171
776
947
1
–
1,901
23,724
183
3,938
35,641
29,747
35,641
29,747
Total equity and liabilities
76,500
73,263
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 105
eng26 - 31.01 - 55-111.indd 105
31/01/15 20.44
31/01/15 20.44
106 FINANCIAL STATEMENTS OF THE PARENT COMPANY
NOTES
1 ACCOUNTING POLICIES
The fi nancial statements of 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 Copenhagen.
The accounting policies for the fi nancial statements of the parent com-
pany are unchanged from the last fi nancial year and are the same as for
the Consolid ated fi nancial statements with the following additions. For a
description of the accounting policies of the Group, please refer to the
Consolidated fi nancial statements, pp 61– 62.
No separate statement of cash fl ows has been prepared for the parent
company; please refer to the Statement of cash fl ows for the Group on p 58.
Supplementary accounting policies for the parent company
Financial assets
In the fi nancial statements of the parent company, investments in subsidiaries
are recorded under the equity method, which is at the respective share of the
net asset values in subsidiaries. Net profi t of subsidiaries less unrealised intra-
Group profi ts is recorded in the Income statement of the parent company.
To the extent it exceeds declared dividends from such companies, net
revaluation of investments in subsidiaries is transferred to Net revaluation
reserve under Equity according to the equity method. Profi ts in subsidiaries
are disclosed as profi t after tax.
Fair value adjustments of fi nancial assets categorised as ‘Available for sale’ in
the parent company are recognised in the Income statement.
Tax
For Danish tax purposes, the parent company is assessed jointly 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 companies.
Novo Nordisk A/S and its Danish subsidiaries are included in the joint taxation
of the parent company, Novo A/S.
2 SALES
DKK million
Sales by business segment
Diabetes care
Biopharmaceuticals
Total sales
Sales by geographical segment
North America
Europe
International Operations
Japan & Korea
Region China
Total sales
55,476
263
49,275
225
55,739
49,500
23,961
13,764
8,985
2,472
6,557
20,829
12,978
8,370
2,377
4,946
55,739
49,500
Sales are attributed to geographical segment based on location of the
customer. For defi nitions of segments, please refer to note 2.2 to the
Consolidated fi nancial statements.
3 EMPLOYEE COSTS
DKK million
Wages and salaries
Share-based payment costs
Pensions
Other social security contributions
Other employee costs
2014
2013
9,080
172
829
219
313
7,792
174
727
192
300
Total employee costs
10,613
9,185
Change in employee costs included in inventories
157
37
For information regarding remuneration to the Board of Directors and
Executive Management, please refer to ‘Remuneration’ on pp 49 –51 and
note 2.4 to the Consolidated fi nancial statements.
Average number of full-time
employees in Novo Nordisk A/S
2014
2013
14,821
12,849
4 FINANCIAL INCOME AND
FINANCIAL EXPENSES
DKK million
Interest income relating to subsidiaries
Other fi nancial income
Total fi nancial income
Interest expenses relating to subsidiaries
Foreign exchange loss (net)
Other fi nancial expenses
Total fi nancial expenses
5 INCOME TAXES
2014
2013
64
96
42
1,531
160
1,573
18
540
230
788
25
308
61
394
Novo Nordisk A/S and its Danish subsidiaries’ tax contribution to the joint
taxation in 2014 amounts to DKK 5,082 million (DKK 4,251 million in 2013).
In 2014, Novo Nordisk A/S paid income taxes of DKK 5,520 million related to
the current year (DKK 4,753 million in 2013) and received DKK 603 million
in taxes regarding prior years (paid DKK 2,550 million in 2013). Furthermore,
DKK 19 million has been paid in income taxes by Danish subsidiaries (a
payment of DKK 60 million in 2013).
6 DEFERRED INCOME TAX
ASSETS/(LIABILITIES)
DKK million
2014
2013
The deferred tax assets/liabilities are allocated
to the various balance sheet items as follows:
Property, plant and equipment
Indirect production costs
Unrealised internal profi t
Other
(690)
(1,007)
2,760
421
(776)
(876)
2,024
(543)
Total income tax assets/(liabilities)
1,484
(171)
The Danish corporate tax rate was 24.5% in 2014. Deferred tax has been
calculated based on expected realisation, refl ecting the reduction in the
Danish corporate tax rate (down to 22% in 2016). The effect of the change
DKK 119 million (DKK 109 million in 2013) is included in the total deferred
income tax.
2014
2013
Uncertain tax positions are presented individually as part of Tax receivables/
Tax payables.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 106
eng26 - 31.01 - 55-111.indd 106
31/01/15 20.44
31/01/15 20.44
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 and impairment losses reversed on disposals during the year
Amortisation at the end of the year
Carrying amount at the end of the year
FINANCIAL STATEMENTS OF THE PARENT COMPANY
107
2014
2,351
317
(463)
2,205
1,052
98
394
(463)
2013
1,991
360
–
2,351
838
101
113
–
1,081
1,052
1,124
1,299
Intangible assets primarily relate to patents and licences, internally developed software and costs related to major IT projects.
8 PROPERTY, PLANT AND EQUIPMENT
DKK million
Cost at the beginning of the year
Additions during the year
Disposals during the year
Transfer from/(to) other items
Land and
buildings
Plant and
machinery
Other
equipment
Payments
on account
and assets
in course of
construction
2014
2013
11,661
156
(329)
863
15,458
253
(243)
625
1,974
148
(68)
161
3,571
1,990
–
(1,649)
32,664
2,547
(640)
–
31,071
2,384
(791)
–
Cost at the end of the year
12,351
16,093
2,215
3,912
34,571
32,664
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
4,813
632
27
(237)
11,250
1,054
2
(187)
1,380
161
55
(65)
–
17,443
1,847
84
(489)
16,443
1,738
31
(769)
Depreciation and impairment losses at the end of the year
5,235
12,119
1,531
–
18,885
17,443
Carrying amount at the end of the year
7,116
3,974
684
3,912
15,686
15,221
9 STATEMENT OF CHANGES IN EQUITY
DKK million
Balance at the beginning of the year
Appropriated from Net profi t for the year
Proposed dividends
Appropriated from Net profi t for the year to Net revaluation reserve
Effect of hedged forecast transactions transferred to the Income statement
Fair value adjustments of cash fl ow hedges for the year
Dividends paid
Share-based payments (note 3)
Tax credit related to share option scheme
Purchase of treasury shares
Sale of treasury shares
Reduction of the B share capital
Exchange rate adjustments of investments in subsidiaries
Other adjustments
Share
capital
Net
revaluation
reserve
550
10,591
(1,856)
(20)
(39)
Retained
earnings
31,428
15,364
12,905
(1,201)
(2,162)
(11,866)
172
54
(14,728)
61
20
4
1,017
2014
2013
42,569
15,364
12,905
(1,856)
(1,201)
(2,162)
(11,866)
172
54
(14,728)
61
0
(35)
1,017
40,632
11,069
11,866
2,255
(832)
1,205
(9,715)
174
57
(13,989)
65
0
(454)
236
Balance at the end of the year
530
8,696
31,068
40,294
42,569
Please refer to note 4.1 to the Consolidated fi nancial statements regarding average number of shares, treasury shares and total number of A and B shares in
Novo Nordisk A/S.
eng26 - 31.01 - 55-111.indd 107
eng26 - 31.01 - 55-111.indd 107
31/01/15 20.44
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
108 FINANCIAL STATEMENTS OF THE PARENT COMPANY
10 FINANCIAL ASSETS
DKK million
Cost at the beginning of the year
Investments during the year
Divestments during the year
Cost at the end of the year
Value adjustments at the beginning of the year
Profi t/(loss) before tax
Income taxes on profi t for the year
Reclassifi cation to unrealised internal profi t
Amortisation and impairment
Reclassifi cation effect of uncertain tax positions
Dividends received
Divestments during the year
Effect of exchange rate adjustment
Other adjustments
Value adjustments at the end of the year
Unrealised internal profi t at the beginning of the year
Change for the year – charged to Income statement
Change for the year – charged to Equity
Reclassifi cation to value adjustment
Effect of exchange rate adjustment
Investments
in subsidiaries
Amounts
owed by
affi liates
Other
securities
and
investments
2014
2013
8,879
101
(244)
210
960
(31)
514
78
(110)
9,603
1,139
(385)
8,736
1,139
482
10,357
(4)
(342)
26,000
17,077
(3,339)
–
(3)
–
(11,154)
(551)
832
(335)
(3)
77
150
8
4
9,713
530
(640)
9,603
19,667
15,533
(2,564)
4,219
(26)
637
(10,423)
107
(1,020)
(130)
(118)
28,527
26,000
(15,755)
(2,775)
(706)
–
(709)
(11,334)
(835)
(37)
(4,219)
670
26,346
17,077
(3,339)
(11,154)
(628)
674
(335)
28,641
(15,755)
(2,775)
(706)
(709)
Unrealised internal profi t at the end of the year
(19,945)
–
–
(19,945)
(15,755)
Carrying amount at the end of the year
17,432
1,143
364
18,939
19,848
Carrying amount of investments in subsidiaries does not include capitalised goodwill at the end of the year. A list of companies in the Novo Nordisk Group is
found in note 5.7 to the Consolidated fi nancial statements.
11 OTHER PROVISIONS
13 COMMITMENTS AND CONTINGENCIES
2014
2013
DKK million
2014
2013
DKK million
Non-current
Current
Total other provisions
565
332
897
776
–
776
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 product return statistics.
For information on pending litigations, please refer to note 3.7 to the
Consolidated fi nancial statements.
12 RELATED PARTY TRANSACTIONS
For information on transactions with related parties, please refer to note 5.5
to the Consolidated fi nancial statements.
Commitments
Lease commitments
Contractual obligations relating to
investments in property, plant and equipment
Guarantees given for subsidiaries
Obligations relating to research and
development projects
Other guarantees and commitments
Lease commitments expiring
within the following periods
from the balance sheet date
Within one year
Between one and fi ve years
After fi ve years
Total lease commitments
The lease costs for 2014 and 2013 were
DKK 285 million and DKK 315 million respectively.
Security for debt
Land, buildings and equipment etc
at carrying amount
1,525
1,664
244
4,529
3,691
3,879
404
4,390
5,276
1,677
217
681
627
201
659
804
1,525
1,664
80
90
Novo Nordisk A/S and its Danish subsidiaries are jointly taxed with the
Danish companies in the Novo A/S Group. The joint taxation also covers
wit holding taxes in the form of dividend tax, royalty tax and interest tax. The
Danish companies are jointly and individually liable for the joint taxation. Any
subsequent adjustments to income taxes and withholding taxes may lead to
a larger liability. The tax for the individual companies is allocated in full on
the basis of the expected taxable income.
For information on pending litigation and other contingencies, please refer
to notes 3.6 and 5.4 to the Consolidated fi nancial statements.
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 108
eng26 - 31.01 - 55-111.indd 108
31/01/15 20.44
31/01/15 20.44
Management statement
CONSOLIDATED FINANCIAL STATEMENTS
109
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 2014.
The Consolidated fi nancial statements have been prepared in accordance
with International Financial Reporting Standards as issued by the International
Accounting Standards Board (IASB), and International Financial Reporting
Standards as endorsed by the EU. The Financial statements of the parent
company, Novo Nordisk A/S, have been prepared in accordance with the
Danish Financial Statements Act.
Further, the Consolidated fi nancial statements, the Financial statements
of the parent company and Management’s Review have been prepared in
accordance with additional Danish disclosure requirements for listed
companies.
fi nancial position at 31 December 2014, the results of the Group’s and
parent company’s operations, and consolidated cash fl ows for the fi nancial
year 2014. Furthermore, in our opinion, Management’s Review includes a
true and fair account of the development in the operations and fi nancial
circumstances, of the results for the year, and of the fi nancial position of
the Group and the parent company as well as a description of the most
signifi cant risks and elements of uncertainty facing the Group and the parent
company.
Novo Nordisk’s Consolidated social and environmental statements have
been prepared in accordance with the reporting principles of materiality,
inclusivity and responsiveness of AA1000APS(2008). They give a balanced
and reasonable presentation of the organisation’s social and environmental
performance.
In our opinion, the Consolidated fi nancial statements and the Financial
statements of the parent company give a true and fair view of the
We recommend that the Annual Report be adopted at the Annual General
Meeting.
Bagsværd, 29 January 2015
Executive Management
Lars Rebien Sørensen
CEO
Kåre Schultz
President and COO
Jesper Brandgaard
CFO
Lars Fruergaard Jørgensen
Mads Krogsgaard Thomsen
Jakob Riis
Board of Directors
Göran Ando
Chairman
Jeppe Christiansen
Vice chairman
Bruno Angelici
Liz Hewitt
Audit Committee member
Liselotte Hyveled
Thomas Paul Koestler
Anne Marie Kverneland
Helge Lund
Audit Committee member
Søren Thuesen Pedersen
Hannu Ryöppönen
Chairman of
the Audit Committee
Stig Strøbæk
Audit Committee member
eng26 - 31.01 - 55-111.indd 109
31/01/15 20.44
NOVO NORDISK ANNUAL REPORT 2014
110
INDEPENDENT AUDITOR’S REPORT
INDEPENDENT AUDITOR’S REPORTS
To the Shareholders of Novo Nordisk A/S
Report on Consolidated fi nancial statements and
Financial statements of the Parent Company
We have audited the Consolidated fi nancial statements and the Financial
statements of Novo Nordisk A/S for the fi nancial year 2014, pp 55 – 94 and
pp 105 –108, which comprise Income Statement, Balance Sheet, Statement
of Changes in Equity and Notes including accounting policies for the Group
as well as for the Parent Company and Statement of Comprehensive Income
and Cash Flow Statement for the Group.
The Consolidated fi nancial 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,
both the Consolidated fi nancial statements and the Financial statements
of the Parent Company are prepared in accordance with additional Danish
disclosure requirements for listed companies.
Management’s Responsibility for the Consolidated
fi nancial statements and the Financial statements of the
Parent Company
The Management is responsible for the preparation of the Consolidated
fi nancial statements and the Financial statements of the Parent Company
that give a true and fair view in accordance with the above legislation
and accounting standards, and for such internal control as Management
determines is necessary to enable preparation of Consolidated fi nancial
statements and Financial statements of the Parent Company that are free
from material misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express an opinion on the Consolidated fi nancial
statements and the Financial statements of the Parent Company based
on our audit. We conducted our audit in accordance with International
standards on Auditing and additional requirements under Danish Audit
regulation. This requires that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance about whether the
Consolidated fi nancial statements and the Financial statements of the Parent
Company are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about
the amounts and disclosures in the Consolidated fi nancial statements and
the Financial statements of the Parent Company. The procedures selected
depend on the auditor’s judgement, including the assessment of the risks
of material misstatement of the Consolidated fi nancial statements and
the Financial statements of the Parent Company, whether due to fraud
or error. In making those risk assessments, the auditor considers internal
control relevant to the Company’s preparation of Consolidated fi nancial
statements and Financial statements of the Parent Company that give a true
and fair view 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 the Management, as well as evaluating the overall presentation of
the Consolidated fi nancial statements and the Financial statements of the
Parent Company.
We believe that the audit evidence we have obtained is suffi cient and
appropriate to provide a basis for our audit opinion.
Our audit has not resulted in any qualifi cation.
Opinion
In our opinion, the Consolidated fi nancial statements give a true and fair
view of the fi nancial position at 31 December 2014 of the Group and of
the results of the Group’s operations and consolidated cash fl ows for the
fi nancial year 2014 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 and
additional Danish disclosure requirements for listed companies. Moreover, in
our opinion the Financial statements of the Parent Company give a true and
fair view of the fi nancial position at 31 December 2014 and of the results of
the Parent Company’s operations for the fi nancial year 2014 in accordance
with the Danish Financial Statements Act and additional Danish disclosure
requirements for listed companies.
Statement on Management’s Review
We have read Management’s Review, pp 1– 54 and p 95 in accordance with
the Danish Financial Statements Act.
On this basis, it is our opinion that the information provided in the Manage-
ment’s Review is consistent with the Consolidated fi nancial statements and
the Financial statements of the Parent Company.
Bagsværd, 29 January 2015
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
Lars Holtug
State Authorised Public
Accountant
Torben Jensen
State Authorised Public
Accountant
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 110
31/01/15 20.44
INDEPENDENT ASSURANCE REPORT ON THE SOCIAL
AND ENVIRONMENTAL REPORTING FOR 2014
INDEPENDENT ASSURANCE REPORT
111
To the Stakeholders of Novo Nordisk A/S
We have reviewed the Consolidated social and environmental informa-
tion in the Annual Report of Novo Nordisk A/S for the fi nancial year 2014,
which comprises Management’s Review and the Consolidated social and
environmental statements on pp 1– 54, 95 and 96 –104.
The assurance engagement has furthermore covered the nature and
extent of Novo Nordisk’s incorporation of the AA1000 AccountAbility
Principles Standard (AA1000APS (2008)) principles (inclusivity, materiality
and responsiveness) with respect to stakeholder dialogue.
Criteria for the preparation of reporting on data
The Consolidated social and environmental information is prepared in
accordance with the social accounting policies and environmental
accounting policies described on pp 97–101 and 103–104.
Management’s Responsibility
The Management is responsible for preparing the social and environmental
information, including for establishing data collection and registration,
internal control systems with a view to ensuring reliable information,
specifying acceptable reporting criteria and choosing data to be collected
for intended users of the report. Also, adherence to AA1000APS (2008)
i.e. the three principles of inclusivity, materiality and responsiveness is the
responsibility of Management.
Assurance provider’s Responsibility
Our responsibility is, on the basis of our work, to express a conclusion on the
reliability of the Consolidated social and environmental information in the
Annual Report. Furthermore, our responsibility is, by applying the AA1000
Assurance Standard (AA1000AS (2008)), to express a conclusion on as well
as to make recommendations for the nature and extent of Novo Nordisk’s
adherence to the AA1000APS (2008) principles.
Our team has competences in respect of assurance engagements related to
Consolidated social and environmental information. In addition, our team
has competences in assessing social and environmental information and
sustainability management, and thus qualifi es to conduct this independent
assurance engagement. During 2014 we have not performed any tasks
or services to Novo Nordisk or other clients that would confl ict with our
independence, nor have we been responsible for the preparation of any
part of the report; and therefore qualify as independent as defi ned by in
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
Information’, to obtain limited assurance that the Consolidated social
and environmental information in the Annual Report is free of material
misstatements and that the information has been presented in accordance
with the social accounting policies and environmental accounting policies
here for. 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.
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’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 social and
environmental information include data from the Group’s affi liates, and that
these data have been incorporated in compliance with the social accounting
policies and environmental accounting policies. Furthermore, based on
our assessment of materiality and risk, we have selected and conducted
interviews with data and reporting responsible personnel, and based
on requests and selected documentation, we have assessed the existing
systems for data collection and registration, and procedures to ensure
reliable information;
(ii) Inquiries and interviews with members of the Executive Management,
Corporate Stakeholder Engagement, Corporate Sustainability, Product
Supply, as well as Management of affi liates in Russia, China, US and Turkey,
regarding Novo Nordisk’s commitment and adherence to the principles of
inclusivity, materiality and responsiveness, the existence of systems and
procedures to support integration of ‘the Triple Bottom Line (TBL) business
principle’ in the business and in key decision making processes.
Conclusion
Based on our review, nothing has come to our attention which causes us
not to believe that the Consolidated social and environmental information
presented in the Annual Report of Novo Nordisk A/S for 2014 (on pp 1– 54,
95 and 96 –104) is free of material misstatements and has been stated
in accordance with the social accounting policies and environmental
accounting policies here for.
Furthermore, nothing has come to our attention causing us to believe that
Novo Nordisk does not adhere to the AA1000APS (2008) principles.
Observations and recommendations
According to AA1000AS (2008), we are required to include observations
and recommendations for improvements in relation to adherence to the
AA1000APS (2008) principles:
Regarding inclusivity
Novo Nordisk continues to demonstrate a strong commitment to
accountability with systems and processes in place to support stakeholder
engagement around sustainability issues at corporate level. Stakeholder
inclusivity is integrated across the business. Novo Nordisk has further
developed its approach to stakeholder engagement at Group and Country
level to support execution on business strategy. In 2014 key opinion leaders
were invited to challenge and inform future strategic priorities.
We have no signifi cant recommendations regarding inclusivity.
Regarding materiality
Novo Nordisk continues to discuss, evaluate and determine the materiality
of sustainability issues on an ongoing basis through a number of relevant
governance bodies and core business processes, involving senior manage-
ment input from across the business. Embedding of the TBL principle is
supported via guidance to line managers and anchored in Changing
Diabetes programmes.
We have no signifi cant recommendations regarding materiality.
Regarding responsiveness
Novo Nordisk’s commitment to being responsive to stakeholder needs and
concerns is evident from Senior Management’s increasing engagement in
dialogue, at both international and country level, on care and prevention of
diabetes and other chronic diseases. At country level Changing Diabetes and
the Rule of Halves inform Novo Nordisk’s stakeholder engagements.
We have no signifi cant recommendations regarding responsiveness.
Novo Nordisk continues to develop its sustainability strategy at global and
country level. We recommend that Novo Nordisk continues to explore
opportunities for Senior Management to engage with ’non-traditional’
stakeholders and on new external platforms.
Bagsværd, 29 January 2015
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
Lars Holtug
State Authorised Public
Accountant
Torben Jensen
State Authorised Public
Accountant
NOVO NORDISK ANNUAL REPORT 2014
eng26 - 31.01 - 55-111.indd 111
31/01/15 20.44
112 ADDITIONAL INFORMATION
PRODUCT OVERVIEW
DIABETES CARE
NEW-GENERATION INSULINS
• Tresiba®, insulin degludec
• Ryzodeg®, insulin degludec/insulin aspart
• Xultophy®, insulin degludec/liraglutide
GLUCAGON-LIKE PEPTIDE-1
• Victoza®, liraglutide
MODERN INSULINS
• Levemir®, insulin detemir
• NovoRapid®, insulin aspart
• NovoRapid® PumpCart®, prefilled insulin pump cartridge
• NovoMix® 30, biphasic insulin aspart
• NovoMix® 50, biphasic insulin aspart
• NovoMix® 70, biphasic insulin aspart
HUMAN INSULINS
• Insulatard®, isophane (NPH) insulin
• Actrapid®, regular human insulin
• Mixtard® 30, biphasic human insulin
• Mixtard® 40, biphasic human insulin
• Mixtard® 50, biphasic human insulin
BIOPHARMACEUTICALS
DIABETES DEVICES
• FlexTouch®, prefilled insulin delivery system
• FlexPen®, prefilled insulin delivery system
• NovoPen Echo®, durable insulin delivery system with
memory function
• NovoPen® 5, durable insulin delivery system with
memory function
• NovoPen® 4, durable insulin delivery system
• InnoLet®, prefilled insulin delivery system
• NovoFine® Plus, needle
• NovoFine® AutoCover®, needle
• NovoFine®, needle
• NovoTwist®, needle
• GlucaGen®, glucagon
• GlucaGen® Hypokit, glucagon
ORAL ANTIDIABETIC AGENTS
• NovoNorm®, repaglinide
• PrandiMet®, repaglinide/metformin
HAEMOSTASIS
• NovoSeven®, recombinant factor VIIa, also available with
prefilled syringe in an increasing number of countries
• NovoThirteen®, recombinant factor XIII
• NovoEight®, recombinant factor VIII
HORMONE REPLACEMENT THERAPY
• Vagifem®, estradiol hemihydrate
• Activelle®, estradiol/norethisterone acetate
• Estrofem®, estradiol
• Novofem®, estradiol/norethisterone acetate
HUMAN GROWTH HORMONE
• Norditropin®, somatropin (rDNA origin)
• Norditropin® FlexPro®, prefilled multidose delivery system
• Norditropin® NordiFlex®, prefilled multidose delivery system
• NordiPen®, durable multidose delivery system
• NordiLet®, prefilled multidose delivery system
• PenMate®, automatic needle inserter (available for Norditropin®
FlexPro®, NordiFlex® and SimpleXx®)
A selection of Novo Nordisk injection
devices. From the front: NovoPen® 5,
Tresiba® FlexTouch®, Victoza®
and Norditropin® FlexPro®.
ADDITIONAL INFORMATION
113
MORE INFORMATION
FINANCIAL CALENDAR 2015
DIVIDEND
ANNOUNCEMENT OF FINANCIAL RESULTS
20
March
2015
23
March
2015
24
March
2015
31
March
2015
30
April
2015
6
August
2015
29
October
2015
3
February
2016
Ex-dividend
Record
date
Payment,
B shares
Payment,
ADRs
First
three months
Half
year
First nine
months
Full
year
19
March
2015
Annual
general
meeting
NEWS AND UPDATES
ADDITIONAL REPORTING
FOR MORE NEWS FROM NOVO NORDISK, VISIT
novonordisk.com/investors
novonordisk.com/press
novonordisk.com/sustainability
FOLLOW NOVO NORDISK ON SOCIAL MEDIA
facebook.com/novonordisk
twitter.com/novonordisk
linkedin.com/company/novo-nordisk
pinterest.com/novonordisk
youtube.com/novonordisk
In addition to the Annual Report, Novo Nordisk provides disclosure in
separate reports to satisfy specific legal requirements and stakeholder
interests. Additional reports can be downloaded at novonordisk.
com/annualreport.
FORM 20-F
Annual reporting requirement by the US Securities and Exchange
Commission (SEC) for foreign private issuers with equity shares listed
on exchanges in the United States. Form 20-F is filed using a
standardised reporting form so that investors can evaluate the
company alongside US domestic equities.
CORPORATE GOVERNANCE REPORT
Requirement according to the Danish Financial Statements Act.
Reporting of compliance with Danish Corporate Governance
Recommendations.
UNITED NATIONS GLOBAL COMPACT
Voluntary Communication on Progress reporting in the form of the
United Nations and its 10 principles in the areas of human rights,
labour rights, environment and anti-corruption. As a LEAD member,
Novo Nordisk provides additional progress reporting on corporate
sustainability leadership and UN goals. This reporting also fulfils the
requirements of the Danish Financial Statements Act, sections 99a
and 99b, on policies and actions for corporate responsibility and
progress against targets for diversity in management.
Design and production: ADtomic Communications. Accounts and notes: Team2Graphics. Printing: Bording PRO as, February 2015. Photography: Gerardo Larios, ADtomic Communications, Willi
Hansen, NASA, Aliyar Rasti, George Doyle/Getty Images, Jesper Westley, Silvina Benedetto, Carl Larson, Michael Fortner, Christian Alsing, Kim Vadskær, Benjamin Benschneider, Nakean Wickliff, Rasmus
Daniel Taun, Oleksiy Marks/Shutterstock, Jens Lindhe and Martin Juul.
References: 1. International Diabetes Federation. IDF Diabetes Atlas, 6th edn update, poster. International Diabetes Federation, 2014. 2. World Health Organization. Obesity and overweight. Fact sheet
No 311. World Health Organization, January 2015. 3. World Federation of Haemophilia. About Bleeding Disorders, Haemophilia. World Federation of Haemophilia, May 2012. 4. Novo Nordisk. Internal
data on file. 2014. 5. Hart JT. Rule of Halves: implications of increasing diagnosis and reducing dropout for future workload and prescribing costs in primary care. Br J Gen Pract 1992; 42(356):116–119, and
Smith WCS, Lee AJ, Crombie IK, Tunstall-Pedoe H. Control of blood pressure in Scotland: the rule of halves. BMJ 1990; 300:981–983. 6. World Bank. Health expenditure per capita (current US$). 2014. 7.
Kaiser Family Foundation. Health Insurance Coverage of the Total Population. 2014. 8. World Bank. Population, total. 2014. 9. WHO. Definition, diagnosis and classification of diabetes mellitus and its
complications. Part 1: Diagnosis and classification of diabetes mellitus. World Health Organization, 1999. 10. Stratton IM, Adler AI, Neil HA, Matthews DR, Manley SE, Cull CA, Hadden D, Turner RC, Holman
RR, for the United Kingdom Prospective Diabetes Study Group. Association of glycaemia with macrovascular and microvascular complications of type 2 diabetes (UKPDS 35): prospective observational
study. BMJ 2000; 321(7258):405–412. 11. Shah CP & Chen C. Review of Therapeutic Advances in Diabetic Retinopathy. Ther Adv Endocrinol Metab 2011; 2(1):39–53. 12. International Diabetes Federation.
IDF Diabetes Atlas, 6th edn update, PowerPoint. International Diabetes Federation, 2014. 13. Holman RR1, Thorne KI, Farmer AJ, Davies MJ, Keenan JF, Paul S, Levy JC, for the 4-T Study Group. Addition
of biphasic, prandial, or basal insulin to oral therapy in type 2 diabetes. N Engl J Med 2007; 357(17):1716–1730. 14. Redondo MJ, Jeffrey J, Fain PR, Eisenbarth GS, Orban T. Concordance for islet autoimmunity
among monozygotic twins. N Engl J Med 2008; 359(26):2849–2850. 15. Keenan HA1, Sun JK, Levine J, Doria A, Aiello LP, Eisenbarth G, Bonner-Weir S, King GL. Residual insulin production and pancreatic
ß-cell turnover after 50 years of diabetes: Joslin Medalist Study. Diabetes 2010; 59(11):2846–2853. 16. United Nations, Department of Economic and Social Affairs, Population Division. World Urbanization
Prospects: The 2014 Revision, Highlights. United Nations, 2014. 17. Mbanya JC, Motala AA, Sobngwi E, Assah FK, Enoru ST. Diabetes in sub-Saharan Africa. Lancet 2010; 375(9733):2254–2266. 18.
National Institute of Public Health. National Health and Nutrition Examination Survey. National Institute of Public Health, 2012. Original title: Encuesta Nacional de Salud y Nutrición. 19. Dobbs R, Smit S,
Remes J, Manyika J, Roxburgh C, Restrepo A. Urban world: Mapping the economic power of cities. McKinsey Global Institute, 2011. 20. Ogden CL, Carroll MD, Kit BK, Flegal KM. Prevalence of Childhood
and Adult Obesity in the United States, 2011–2012. JAMA 2014; 311:806–814. 21. Cawley J, Meyerhoefer C, Biener A, Hammer M, Wintfeld N. Savings in Medical Expenditures Associated with Reductions
in Body Mass Index Among US Adults with Obesity by Diabetes Status. Pharmacoeconomics 2014 [prior to printing]. 22. Guh DP, Zhang W, Bansback N, Amarsi Z, Birmingham CL, Anis AH. The incidence
of co-morbidities related to obesity and overweight: A systematic review and meta-analysis. BMC Public Health 2009; 9:88. 23. Berrington de Gonzalez A, Hartge P, Cerhan JR et al. Body-Mass Index and
Mortality among 1.46 Million White Adults. N Engl J Med 2010; 363:2211–2219. 24. Greenway F, Le Roux C, Lau D, et al. Additional analyses of the weight-lowering efficacy of liraglutide 3.0 mg in
overweight and obese adults: the SCALE Obesity and Prediabetes randomized trial. Obesity Week 2014. Oral presentation. 25. Jensen MD, Ryan DH, Apovian CM, et al. Guideline for the Management of
Overweight and Obesity in Adults: A Report of the American College of Cardiology/American Heart Association Task Force on Practice Guidelines and The Obesity Society. Circulation 2014; 129:S102–S138.
26. World Federation of Haemophilia. Report on the Annual Global Survey 2013. World Federation of Haemophilia, 2014. 27. Stonebraker JS, Bolton-Maggs PHB, Soucie JM, Walker I, Brooker M. A study
of variations in the reported haemophilia A prevalence around the world. Haemophilia 2010; 16, 20–32. 28. Stonebraker JS, Bolton-Maggs PH, Michael Soucie J, Walker I, Brooker M. A study of variations
in the reported haemophilia B prevalence around the world. Haemophilia 2012;18 (3):e91-4. 29. Kapoor RR, Burke SA, Sparrow SE, Hughes IA, Dunger DB, Ong KK, Acerini CL. Monitoring of concordance
in growth hormone therapy. Arch Dis Child 2008; 93:147–148.
Market data on pp 5, 17, 18, 23, 24 and 25 are from IMS Health, IMS MIDAS Customized Insights (November 2014) and shown as MAT November 2014 unless stated otherwise. Market definition for
retail: Algeria, Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Colombia, Czech Republic, Denmark, Egypt, Estonia, Finland, Germany, Greece, Hungary, India, Ireland, Italy, Japan, Korea,
Latvia, Lithuania, Luxembourg, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Saudi Arabia, Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, Turkey, UK and US.
Market definition for hospitals: Australia, Bulgaria, Canada, China, Czech Republic, Denmark, Finland, Germany, Hungary, Italy, Japan, Latvia, Lithuania, New Zealand, Norway, Poland, Romania, Russia,
Slovakia, Slovenia, South Africa, Spain, Sweden, Switzerland, UK and US. Retail data for France are sourced from GERS (November 2014).
NOVO NORDISK ANNUAL REPORT 2014
Headquarters
Novo Nordisk A/S
Novo Allé
2880 Bagsværd
Denmark
Tel +45 4444 8888
CVR number 24 25 67 90
novonordisk.com
Investor Service
Enquiries and feedback on the Annual
Report should be addressed to:
annualreport@novonordisk.com
Shareholders’ enquiries concerning
dividend payments and shareholder
accounts should be addressed to:
shareholder@novonordisk.com
ADR holders’ enquiries concerning dividend
payments, transfer of ADR certificates,
consolidation of accounts and tracking
of ADRs should be addressed to:
JP Morgan Chase Bank, N.A.
PO Box 64504
4 New York Plaza, Floor 12
New York, NY 1004
Attention: Depositary Receipts Group
Tel +1 800 990 1135
Tel +1 651 453 2128
(From outside the United States)
jpmorgan.adr@wellsfargo.com
Mexico City is one of the biggest metropolitan
areas in the world with around 21 million people.
Urbanisation is driving the rise in type 2 diabetes
worldwide, but little is known about what to do
about it. Novo Nordisk and the government of
Mexico City are working together to find out.