More annual reports from Novo Resources:
2023 ReportPeers and competitors of Novo Resources:
Venture Life Group Plc OBESITY How do you market a
treatment for a disease that many
doctors don’t even acknowledge?
GLP-1
Small protein,
big potential
GLOBAL DEMAND for
diabetes products triggers
major production investments
WHY DO SO
MANY PEOPLE
IN CITIES GET
DIABETES?
06
2015 PERFORMANCE
and 2016 outlook
26
GLP-1
– Small protein, big potential
28
OBESITY CARE
– Building the market from scratch
30
Tackling the rise of
DIABETES IN CITIES
CONTENTS
ACCOMPLISHMENTS
AND RESULTS 2015
01 Letter from the Chairman
02 Letter from the CEO
04 Novo Nordisk at a glance
06 2015 performance and 2016 outlook
14 Performance highlights
OUR BUSINESS
16 Our strategy
18 Novo Nordisk Way
20 Pipeline overview
22 193 million people do not know they
have diabetes – Are you one of them?
24 Future diabetes medicines
– What’s next from Novo Nordisk’s labs?
26 GLP-1
– Small protein, big potential
28 Obesity care
– Building the market from scratch
30 Tackling the rise of diabetes in cities
32 30 years of changing haemophilia
33 The people behind it all
34 The future of pharmaceuticals
38 Global demand triggers major
production investments
40 Environmental strategy
– Doing more with less
42 Managing risks
GOVERNANCE,
LEADERSHIP AND
SHARES
44 Shares and capital structure
46 Corporate governance
49 Remuneration
52 Board of Directors
54 Executive Management
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
112 Product overview
113 More information and references
38
GLOBAL DEMAND
triggers major production
investments
All references can be found on p 113.
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.
A GOOD YEAR
LETTER FROM THE CHAIRMAN
1
2015 was a good year for Novo Nordisk. This is how the Board of
Directors sees it when taking stock of the year that is now behind us.
I hope that you will agree with us.
In a difficult and changing environment for the pharmaceutical
industry, Novo Nordisk delivered on the forecasts it made at the
beginning of the year, both in terms of sales growth and profit
growth. Equally important was the encouraging progress in the
company’s pipeline of new and upcoming products, which bodes
well for the future.
In his review of the year on the following pages, President and CEO Lars
Rebien Sørensen highlights some of the key developments and achieve-
ments in 2015, including the launch of Saxenda® for the treatment of
obesity, the flow of encouraging phase 2 and 3 data regarding sema-
glutide in both an injectable and an oral version for type 2 diabetes, and,
of course, the long-awaited approval of Tresiba® in the US.
These achievements are the result of a very robust long-term strategy
and excellent execution by the entire Novo Nordisk organisation.
Every year we spend a considerable amount of time in board
meetings and in meetings with members of Executive Management
reviewing this strategy – challenging assumptions and bringing in
new perspectives to be sure not only that the company’s strategic
priorities are the right ones, but also that the organisation has the
capabilities needed to execute them.
If you have been following Novo Nordisk for some years, you will
notice from the article on pages 16–17 that we have not made any
significant changes to the strategy in 2015. This means the company
will retain its sharp focus on just four disease areas: diabetes, obesity,
haemophilia and growth disorders. Many of our discussions last year
focused on how best to ensure that Novo Nordisk can continue its
track record of innovation within these areas, so that we will have
new and better medicines also in the coming decades for people
with these serious chronic conditions. This requires further expansion
of our research organisations in Europe, the US and China, and also
that we become even more active in forming partnerships with
biotech companies and universities that have knowledge and
technologies that complement what we have in-house.
One of the main responsibilities of a board is to ensure that the
company has the right executive leadership and that there are solid
succession plans in place for top management. In April, we
announced significant changes to the organisation’s leadership,
elevating the heads of our commercial activities in the US, Europe
and International Operations, and of Product Supply to Executive
Management. Moreover, Jakob Riis, executive vice president,
Marketing, Medical Affairs and Stakeholder Engagement, was given
additional responsibility for China, Japan, Korea, Australasia and
Canada. The Board also decided that CEO Lars Rebien Sørensen
should remain in his role until he approaches the end of his contract,
which expires in 2019.
These changes enhance the visibility of Novo Nordisk’s international
business operations to the Board at a time when the company is
preparing for global launches of several key products and embarking
on an unprecedented investment programme in new production
facilities. In addition, they support the further development of our
key leadership talent.
As a result of the changes, Kåre Schultz, president and COO, decided to
continue his professional career outside Novo Nordisk. I wish him all the
best and thank him for his achievements over many years at Novo
Nordisk. Lars Rebien Sørensen now has the additional role of chairman
of the Operations Committee, with Lars Fruergaard Jørgensen, executive
vice president, Corporate Development, as vice chair.
In light of Novo Nordisk’s solid performance in 2015, the Board will at
the Annual General Meeting propose a 28% increase in dividend to
6.40 Danish kroner per share. Furthermore, the Board has decided to
initiate a new share repurchase programme of up to 14 billion kroner,
which will commence in February 2016, and intends to introduce an
interim dividend for 2016 in August 2016.
With the financial results for 2015, we have achieved the long-term
financial targets that we last revised in January 2013. In light of the
significant improvement in operating margin
during the past years and the need
to invest in sustaining sales
growth, further improvement
of the operating margin is
not a strategic priority
in the coming years.
Reflecting this, we have
set the long-term target
for operating profit
growth at 10%, under-
lining our confidence in
the growth outlook for
the company.
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 for the hard work and
dedication of the entire Novo
Nordisk organisation.
Göran Ando
Chairman of the Board of Directors
IT’S ALL ABOUT
INNOVATION
LETTER FROM THE CEO
In my letter in last year’s Annual Report, I predicted that 2015 would
be one of the most exciting and challenging years in Novo Nordisk’s
92-year history. And indeed it has been. As it turned out, there were
many reasons to be excited, and we successfully dealt with most of
the challenges.
I will return to the challenges later. Let us start with the excitement
which, to a large extent, was related to new developments in our
product pipeline. The fact is that if our pipeline does not progress
well, if we fail to discover and develop new, innovative products for
people with diabetes and other serious chronic conditions, then we
will not be successful in the long term. So let us look at the highlights
from our pipeline in 2015:
• Tresiba® (insulin degludec) – our new-generation long-acting
insulin – was approved in the US in September and launched in
January 2016 for the treatment of type 1 and type 2 diabetes.
• Xultophy® – the combination of insulin degludec and liraglutide for
type 2 diabetes – was launched in the first European countries and
filed for approval in the US.
• Following successful completion of the phase 3a studies, we filed
for regulatory approval of faster-acting insulin aspart in both the
EU and the US for the management of blood glucose around
meals for both type 1 and 2 diabetes patients.
• Injectable semaglutide – a once-weekly GLP-1-analogue for type 2
diabetes – showed superior efficacy over the comparator products
in four phase 3 trials announced during the year.
• A once-daily oral formulation of semaglutide showed very
encouraging results in a proof-of-concept phase 2 trial, and we
subsequently decided to take this product into phase 3
development.
• We launched Saxenda® (liraglutide 3 mg) in the US and in the first
markets outside the US. Saxenda® is our first product for chronic
weight management, an undeveloped market despite the huge
and growing burden of obesity all over the world.
• We launched NovoEight® in the US for people with haemophilia
A, and in January 2016 we filed our long-acting factor IX
(nonacog beta pegol) for the treatment of haemophilia B for
approval in Europe. We expect to file in the US in the first half
of 2016.
With the number of projects we have in our pipeline these days,
one would also expect a number of setbacks. However, we were
privileged to have only one significant disappointment in 2015: the
results of phase 3 trials showed that liraglutide (Victoza®), as
adjunct to insulin therapy, met the primary end-point of improving
blood glucose control for people with type 1 diabetes, but
unfortunately without the hypoglycaemic benefit experienced in
type 2 diabetes. We therefore decided not to submit an application
to expand the label of Victoza® for use in type 1 diabetes.
Our expectation is that there will continue to be increasing demand for
our products for many years to come. That is why, in 2015, we decided
on an unprecedented expansion of our production capacity for diabetes,
obesity and haemophilia products. This includes investing close to 2
billion US dollars in a new site in Clayton, North Carolina, which will
produce active pharmaceutical ingredients for both oral semaglutide
and a range of Novo Nordisk’s current and future diabetes care products.
While developing and making such products will always remain our
number one priority, our efforts to change diabetes go beyond
medicine. In 2014, we launched Cities Changing Diabetes – a
partnership programme to identify and address the root causes of
type 2 diabetes in major cities around the world. I was very happy to
see the progress already made when we hosted the inaugural Cities
Changing Diabetes Summit in Copenhagen in November 2015.
When I referred to 2015 as a challenging year in the opening of my
letter, I was referring to the challenges of obtaining access to the
market for our new products.
In 2015, we found ourselves in increasingly tougher negotiations with
payers in the US to get our products onto their formularies. In Europe,
China, Japan and many other countries, we are experiencing continued
strong pressure on prices and reimbursement restrictions for new
products. In one case, for Tresiba® in Germany, we had to make the
difficult decision to discontinue the product following the negative
outcome of price negotiations with the statutory health insurance
funds. We were offered a price at the level of ordinary human insulin,
a product which was launched in the 1980s. If we were to accept this
price, we would undermine our ability to research and develop medical
innovations for people with diabetes.
This is an extreme case, but it serves as an example of what could
become an unsustainable future for research-based pharmaceutical
companies if payers and producers cannot find common ground when
determining the value of a medicinal product. There is no doubt that
we at Novo Nordisk, and in the industry at large, need to become
better at demonstrating the value that our new products bring. It is in
this light that our new partnership with IBM Watson Health should be
seen. Announced in December, this partnership will explore possibilities
for improved diabetes care via insights from real-time, real-world
evidence of Novo Nordisk diabetes treatments and devices.
Despite market access challenges, we ended the year growing sales by
8% and operating profit by 21%, both in local currencies. Sales growth
was primarily driven by Victoza®, aided by the high growth of the GLP-1
market, but other products also did well, including Levemir®,
NovoRapid®, Tresiba® and our human growth hormone, Norditropin®.
Measured in local currencies, new-generation insulin accounted for
10% sales growth, and Tresiba® continues to do well in all the markets
in which it is competing on an equal footing with other insulin products
in terms of reimbursement status. Tresiba® was launched in Japan as the
first country in February 2013, and by the end of 2015 it had claimed
more than 33% of the segment for long-acting insulin (basal insulin) in
Japan, measured in value.
3
From a regional perspective, North America accounted for 62% 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, although we have had to lower our
short-term growth projections for China due to a combination of
lower economic growth, pricing reforms and increased competition
from both local and global competitors.
In the performance review starting on page 6 and in subsequent
articles in this Annual Report, you can read more about some of the
topics I have mentioned in my letter. I hope they will give you a good
sense of why, despite the challenging business environment for the
pharmaceutical industry, I remain optimistic about the future for Novo
Nordisk. The need for medical treatment and better pharmaceuticals
is there, not least in many emerging economies. We will do our best to
meet these needs and, in doing so, create value for our shareholders
and for society at large by the knowledge we generate, the taxes we
pay and the jobs we create.
So what about 2016? I predict another exciting and challenging
year. There will be an intense news flow from our pipeline, including
the results of the two large cardiovascular outcomes trials: LEADER
regarding Victoza® and DEVOTE regarding insulin degludec. Plus,
of course, there will be a lot of attention on how Tresiba® performs
in the all-important US market. You will find a table of key pipeline
events on page 21 and our financial outlook for 2016 on page 8.
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. As mentioned by our Chairman, Göran Ando,
in his letter, we had a reorganisation of Executive Management in
2015, which led to Kåre Schultz, our chief operating officer for many
years, seeking new opportunities outside Novo Nordisk. I have
worked with Kåre for as long as I can remember and have great
respect for his capabilities and what he has done for Novo Nordisk
over the years. I wish him all the best in his new career.
Last but not least, I would like to thank everyone in the Novo Nordisk
organisation for their contributions to our results in 2015, 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
President and chief executive officer
NOVO
NORDISK
AT A GLANCE
Novo Nordisk is a global healthcare company with more than 90 years of innovation and
leadership in diabetes care. This heritage has given us experience and capabilities that also
enable us to help people defeat other serious chronic conditions: haemophilia, growth
disorders and obesity. For more information, visit novonordisk.com, Twitter, LinkedIn,
YouTube and Facebook.
OUR BUSINESS MODEL
HOW NOVO NORDISK CREATES AND SUSTAINS VALUE
Taking a patient-centred approach, Novo Nordisk provides innovation
for the benefit of all of the company’s stakeholders. The Triple
Bottom Line principle, anchored in the Novo Nordisk Way, is the
foundation that makes it possible to optimise the use of resources
and maximise value creation in a sustainable way.
RESOURCES
EXTERNAL
Capital provided
by investors
Insights from patients
and expertise from
academic and
educational institutions
Raw materials
INTERNAL
Financial resources
to invest in R&D,
production capacity
and customer outreach
A skilled and
diverse workforce
FOCUS
VALUE CREATED
WE DISCOVER, DEVELOP AND MANUFACTURE
INNOVATIVE BIOLOGICAL MEDICINES AND
MAKE THEM ACCESSIBLE TO PATIENTS
THROUGHOUT THE WORLD
s
Diabet e
O
b
e
s
i
t
y
PATIENTS
H
a
e
m
o
p
hilia
s
er
o w t h disord
G r
CORPORATE STRATEGY
Improved health and
quality of life for
people with diabetes
and other serious
chronic diseases
Return to
shareholders
Contributions
to communities
Tax contributions
Job creation
and productivity
Biological research and
manufacturing facilities
NOVO NORDISK WAY
Capacity and
competence building
A GLOBAL ORGANISATION WITH A LOCAL PRESENCE
5
HEADQUARTERED
IN DENMARK
ESTABLISHED IN 1923
PRODUCTS MARKETED
IN 180+ COUNTRIES
AFFILIATES OR
OFFICES IN
75 COUNTRIES
RESEARCH AND
DEVELOPMENT
FACILITIES ON
3 CONTINENTS
THE TRIPLE BOTTOM LINE
THE PEOPLE WE FOCUS ON
8.6
DKK billion expensed
in company income
tax (+13%)
34.9
DKK billion
in net profit
(+32%)
FINANCIALLY
RESPONSIBLE
SOCIALLY
RESPONSIBLE
ENVIRONMENTALLY
RESPONSIBLE
41,122
employees
(+5%)*
26.8
million patients use our
diabetes care products
(+10%)
107
thousand tons
of CO2 emissions
(–11%)
3,131
thousand m3 water
consumption
(+6%)
* Excluding employees in NNIT A/S, witch was divested in 2015.
415
MILLION PEOPLE LIVE WITH
DIABETES1
600
MILLION PEOPLE LIVE WITH
OBESITY2
0.4
MILLION PEOPLE LIVE WITH
HAEMOPHILIA3
3
OUT OF 10,000 CHILDREN LIVE WITH
GROWTH DISORDERS4
6
ACCOMPLISHMENTS AND RESULTS 2015
2015 PERFORMANCE
AND 2016 OUTLOOK
FINANCIAL PERFORMANCE
Novo Nordisk’s 2015 performance was in line
with the latest guidance provided in October.
SALES DEVELOPMENT
Sales increased by 22% in Danish kroner and
by 8% measured in local currencies. North
America was the main contributor with 62%
share of growth measured in local currencies,
followed by International Operations with
26%. Sales growth was realised within both
diabetes care and biopharmaceuticals, with
the majority of growth originating from
modern insulin and Victoza®.
In the following sections, unless otherwise
noted, market data are based on moving
annual total (MAT) from November 2015
and November 2014 provided by the inde-
pendent data provider IMS Health.
DIABETES AND OBESITY
CARE, SALES DEVELOPMENT
Sales of diabetes and obesity care products
increased by 22% measured in Danish
kroner and by 9% in local currencies to DKK
85,590 million. Novo Nordisk is the world
leader in diabetes care and holds a global
value market share of 28%, compared to
27% at the same time last year. Sales of
new-generation insulin (Tresiba®, Ryzodeg®
and Xultophy®) reached DKK 1,438 million,
compared with DKK 658 million in 2014.
INSULIN
The roll-out of Tresiba® (insulin degludec),
the once-daily new-generation basal insu-
lin, continues and the product has now
been launched in 39 countries, including
Spain and the US, with initial encouraging
market access. 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 captured
33% of the market measured in monthly
value market share. Similarly, Tresiba® has
shown solid penetration in other markets
with reimbursement at a similar level to
insulin glargine, whereas penetration re-
mains modest in markets with restricted
market access compared with
insulin
glargine. Novo Nordisk has ceased distri-
bution of Tresiba® in Germany in January
2016 as a result of the negative outcome
from price negotiations with the National
Association of Statutory Health Insurance
Funds (GKV-SV).
Ryzodeg®, a soluble formulation of insulin
degludec and insulin aspart, was recently
launched in Japan as the third market
following launches in Mexico and India.
Launch activities are progressing as planned
and early feedback from patients and pre-
scribers is encouraging.
Xultophy®, a once-daily single-injection com-
bination of insulin degludec (Tresiba®) and
liraglutide (Victoza®), has been marketed in
Switzerland, Germany, the UK and Sweden.
Launch activities are progressing as planned,
and also here, early feedback from patients
and prescribers is encouraging.
Sales of modern insulin increased by 21% in
Danish kroner and by 7% in local currencies
to DKK 50,164 million. North America
accounted for 66% of the growth, followed
by International Operations and Region
China. Sales of modern insulin and new-
generation insulin now constitute 82% of
Novo Nordisk’s sales of insulin.
VICTOZA®
(GLP-1 THERAPY FOR TYPE 2 DIABETES)
Victoza® sales increased by 34% in Danish
kroner and by 18% in local currencies to
DKK 18,027 million. Sales growth is driven
by North America as well as positive
contributions from Europe, Japan & Korea
and International Operations. The GLP-1
segment’s value share of the total diabetes
care market has increased to 7.8%, com-
pared with 7.0% in 2014. Victoza® is the
market leader in the GLP-1 segment, with a
67% value market share.
OTHER DIABETES AND OBESITY CARE
Sales of other diabetes and obesity care
products, which predominantly consist of
oral antidiabetic products, needles and
Saxenda®, increased by 16% in Danish
kroner and by 5% in local currencies to
SALES GROWTH
• In local currencies
• In DKK as reported
SALES BY SEGMENT
Biopharmaceuticals
Diabetes and obesity care
%
25
20
15
10
5
0
2011 2012 2013 2014 2015
DKK billion
125
100
75
50
25
0
SHARE OF GROWTH
IN LOCAL CURRENCIES
Japan & Korea
Region China
International Operations
Europe
North America
%
100
80
60
40
20
0
2011 2012 2013 2014 2015
2011 2012* 2013 2014* 2015
* In 2012 and 2014, Japan & Korea contributed –1% to the total growth.
NOVO NORDISK ANNUAL REPORT 2015 DEVELOPMENT IN COSTS
Costs in % of sales
• Sales and distribution
• Cost of goods sold
• Research and development
• Administration
%
40
30
20
10
0
ACCOMPLISHMENTS AND RESULTS 2015
7
OPERATING PROFIT
• Operating profit margin (right)
Operating profit (left)
NET PROFIT
• Net profit margin (right)
Net profit (left)
DKK billion
50
40
30
20
10
0
%
50
40
30
20
10
0
DKK billion
40
30
20
10
0
%
40
30
20
10
0
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
DKK 4,730 million. This reflects a significant
positive contribution from the US launch of
Saxenda®, liraglutide 3 mg for weight
management, in May 2015. In the US,
Saxenda® has broad market access in the
commercial segment, launch activities are
progressing as planned and feedback from
patients and prescribers is encouraging.
Declining sales of needles
in Europe
and oral anti-diabetics in North America
and International Operations partly offset
sales growth.
BIOPHARMACEUTICALS
SALES DEVELOPMENT
Sales of biopharmaceutical products in-
creased by 19% measured in Danish kroner
and by 6% in local currencies to DKK 22,337
million. Sales growth is primarily driven by
North America, International Operations
and Europe.
OTHER BIOPHARMACEUTICALS
Sales of other products within biopharma-
ceuticals, which predominantly consist of
hormone replacement therapy-related (HRT)
products, increased by 28% in Danish
kroner and by 13% in local currencies to
DKK 3,870 million. Sales growth is driven by
a positive impact from pricing of Vagifem®
in the US.
DEVELOPMENT IN COSTS
AND OPERATING PROFIT
The cost of goods sold increased by 11% to
DKK 16,188 million, resulting in a gross
margin of 85.0%, compared with 83.6% in
2014. This reflects a positive currency impact
of 1.5 percentage points and a positive
impact from the product mix, primarily due
to increased sales of Victoza® and modern
insulin. This is countered by ramp-up costs
for new manufacturing capacity.
HAEMOPHILIA
Sales of haemophilia products increased by
14% in Danish kroner and by 3% in local
currencies to DKK 10,647 million. The growth
in local currencies is primarily driven by the
roll-out of NovoEight® in Europe, Japan and
the US as well as by NovoSeven® in Inter-
national Operations, partly offset by lower
NovoSeven® sales in the US and Japan.
Sales and distribution costs increased by
22% in Danish kroner and by 9% in local
currencies to DKK 28,312 million. The
increase in costs is driven by US launch costs
related to Saxenda® and NovoEight® and by
preparations for the Tresiba® launch in the
US, sales force investments in selected
countries in International Operations as well
as adjustments to legal provisions.
NORDITROPIN®
(GROWTH HORMONE THERAPY)
Sales of Norditropin® increased by 20% in
Danish kroner and by 8% in local currencies
to DKK 7,820 million. The sales growth is
primarily derived from North America,
reflecting favourable pricing and increased
demand driven by the pre-filled FlexPro®
device as well as Latin American and Middle
East markets in International Operations.
Novo Nordisk is the leading company in the
global growth hormone market, with a 32%
market share measured in volume.
Research and development costs decreased
by 1% in Danish kroner and by 6% in local
currencies to DKK 13,608 million. Excluding
all costs related to inflammatory disorders,
an area which Novo Nordisk exited in
September 2014, research and development
costs increased by 8% compared to 2014.
The increase in underlying costs reflects the
progression of the late-stage diabetes care
portfolio and is primarily driven by the
cardiovascular outcomes trial DEVOTE for
insulin degludec and the phase 3a pro-
gramme SUSTAIN for the once-weekly GLP-1
2011 2012 2013 2014 2015
analogue semaglutide. The increase in costs
is partly offset by lower costs related to
faster-acting insulin aspart following the
completion of the phase 3a development
programme onset in August 2015.
Administration costs increased by 9% in
Danish kroner and by 4% in local currencies
to DKK 3,857 million.
Other operating income (net) was DKK
3,482 million, compared with DKK 770
million in 2014. The increase is driven by the
DKK 2,376 million non-recurring income
from the partial divestment of NNIT A/S, an
IT service and consultancy company, in
connection with the Initial Public Offering
on Nasdaq Copenhagen under the symbol
‘NNIT’ (ISIN DK0060580512) as well as the
DKK 449 million non-recurring income
related to the out-licensing of assets for
inflammatory disorders.
Operating profit increased by 43% in Danish
kroner to DKK 49,444 million. In local
currencies the growth was 21%, which is
slightly higher than the latest guidance for
operating profit growth measured in local
currencies for 2015 of ‘around 20%’. Adjusted
for the
income related to the partial
divestment of NNIT A/S, the growth in
operating profit was 14% in local currencies.
NET FINANCIALS AND TAX
Net financials showed a net loss of DKK
5,961 million, compared with a net loss of
DKK 396 million in 2014. The reported net
financial loss in 2015 is larger than the latest
guidance of
‘around DKK 5.6 billion’,
primarily reflecting higher than expected
losses on commercial balances following the
depreciation of the Argentine peso in
December 2015 as well as an effect from
the depreciation of the Russian rouble and
the Brazilian real during the fourth quarter
of 2015.
CONTINUED
NOVO NORDISK ANNUAL REPORT 2015 8
ACCOMPLISHMENTS AND RESULTS 2015
In line with Novo Nordisk’s treasury policy,
the most significant foreign exchange risks
for the Group have been hedged, primarily
through foreign exchange forward contracts.
The foreign exchange result was a loss of
DKK 5,898 million compared with a loss of
DKK 381 million in 2014. This development
reflects losses on foreign exchange hedging
involving especially the US dollar due to its
appreciation versus the Danish krone com-
pared with the prevailing exchange rates in
2014. As of 31 December 2015, foreign ex-
change hedging losses of around DKK 700
million have been deferred for recognition in
the income statement in 2016.
The effective tax rate for 2015 was 19.8%,
which is in line with the latest guidance of a
tax rate of ‘around 20%’ for the full year
2015. The lower tax rate compared with the
2014 level of 22.3% primarily reflects the
tax-free gain from the partial divestment of
NNIT A/S, the gradual reduction of the
corporate income tax rate in Denmark from
24.5% in 2014 to 23.5% in 2015 as well as
changes in provisions related to international
tax cases.
CAPITAL EXPENDITURE
AND FREE CASH FLOW
Net capital expenditure for property, plant
and equipment was DKK 5.2 billion, compared
with DKK 4.0 billion in 2014, which is in line
with the latest guidance of ‘around DKK 5.0
billion’. Net capital expenditure was primarily
related to investments in additional insulin
filling capacity, expansion of the manu fac-
turing capacity for biopharmaceutical pro d-
ucts and the construction of new re search
facilities.
Free cash flow was DKK 34.2 billion, com-
pared with DKK 27.4 billion in 2014, which
is in line with the latest guidance of ’DKK
33–35 billion’. The increase of 25% com-
pared with 2014 primarily reflects the
increased cash flow from operating activities
as well as the non-recurring proceeds from
the partial divestment of NNIT A/S.
OUTLOOK 2016
Sales growth for 2016 is expected to be
5–9% measured in local currencies. This
reflects expectations for continued robust
performance for the portfolio of modern
insulin, Victoza® and Tresiba® as well as a
OUTLOOK 2016
The current expectations for 2016 are summarised in the table below:
EXPECTATIONS ARE AS REPORTED,
IF NOT OTHERWISE STATED
EXPECTATIONS
3 FEBRUARY 2016
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
5–9%
Around 1 percentage point lower
5–9%
Around 1 percentage point lower
Loss of around DKK 1.3 billion
20–22%
Around DKK 7.0 billion
Around DKK 3.0 billion
DKK 36–39 billion
* Adjusted DKK 2,376 million for the partial divestment of NNIT A/S and DKK 449 million for the income related to the out-licensing
of assets for inflammatory disorders, both in 2015.
contribution from Saxenda® and Xultophy®.
These sales drivers are expected to be partly
countered by an impact from a contract loss
in the US, healthcare reforms, the loss of
exclusivity for products within hormone
replacement therapy, intensifying compe-
tition within diabetes and biopharmaceuticals
as well as macroeconomic conditions in
China and a number of markets in Inter-
national Operations. Given the current level
of exchange rates versus the Danish krone,
growth reported in DKK is expected to be
around 1 percentage point lower than the
local currency level.
For 2016, operating profit growth
is
expected to be 5–9% measured in local
currencies, adjusted by DKK 2,376 million
for the partial divestment of NNIT A/S and
by DKK 449 million for the income related to
the out-licensing of assets for inflammatory
disorders, both in 2015. The expectations
for operating profit growth reflect growth
in selling and distribution costs to support
continued launch activities as well as in
research and development costs to support
the progress of Novo Nordisk’s pipeline.
Given the current level of exchange rates
versus the Danish krone, growth reported in
DKK is expected to be around 1 percentage
point lower than the local currency level.
For 2016, Novo Nordisk expects a net financial
loss of around DKK 1.3 billion. The current
expectation primarily reflects losses associat-
ed with foreign exchange hedging contracts,
mainly related to the appreciation of the US
dollar versus the Danish krone compared to
the prevailing exchange rates in 2015.
The effective tax rate for 2016 is expected to
be in the range of 20–22%.
Capital expenditure is expected to be around
DKK 7.0 billion in 2016, primarily related to
investments in an expansion of the manu-
facturing capacity for biopharmaceutical
products, additional capacity for active
pharmaceutical ingredient production within
diabetes care, an expansion of the insulin
filling capacity and construction of new
research facilities. Depreciation, amortisation
and impairment losses are expected to be
around DKK 3.0 billion. Free cash flow is
expected to be DKK 36–39 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
2016, 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 to the left.
LONG-TERM
FINANCIAL TARGETS
long-term considerations,
Novo Nordisk introduced four long-term
financial targets in 1996 to balance short-
and
thereby
ensuring a focus on shareholder value
creation. The targets were subsequently
revised and updated on several occasions,
most recently in connection with the annual
results for 2012 released in January 2013.
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 2,000 million
DKK 300 million
DKK 150 million
DKK 85 million
DKK 70 million
12
*
11
12
11
11
* USD and Chinese yuan traded offshore (CNH) used as proxy when hedging Novo Nordisk’s CNY currency exposure.
NOVO NORDISK ANNUAL REPORT 2015
ACCOMPLISHMENTS AND RESULTS 2015
9
PERFORMANCE AGAINST
LONG-TERM FINANCIAL TARGETS
Operating profit growth
Operating margin
Operating profit after tax to net operating assets
Cash to earnings
Cash to earnings (three-year average)
Result
2015
43%
46%
149%
98%
97%
Average
2012–2015*
Previous
target
Updated
target
23%
40%
111%
97%
15%
40%
125%
10%
N/A**
125%
90%
90%
* Calculated as a simple average. ** A new target has not been established, as operating margin is expected to remain around 44%.
In 2015, Novo Nordisk reached these four
long-term financial targets and consequently,
the Board of Directors has approved three
long-term financial targets to
updated
guide Novo Nordisk’s performance. The
targets have been revised based on an
assumption of a continuation of the current
business environment. Significant changes
including
to the business environment,
the structure of the US healthcare system,
regulatory requirements, pricing and mar ket
access environment, competitive environ-
ment, healthcare reforms, exchange rates
and changes to accounting standards may
significantly impact the time horizon for
achieving the long-term targets or require
them to be revised.
The target level for long-term operating profit
growth has been set at 10%, reflecting the
current outlook for organic sales growth and
opportunities for operating margin leverage.
Novo Nordisk’s current operating margin level
of 43.6% (adjusted for the effect of the partial
divestment of NNIT A/S) has been achieved by
continuous improvement in manufacturing
efficiency, positive pricing impact, sales and
distribution leverage, reprioritisation of focus
areas within research and development
as well as administrative efficiencies. It is
a strategic priority to continue to invest
in future organic sales growth, and as a
consequence operating margin improvement
is not expected to be a major contributor to
operating profit growth. This expectation
reflects an expanded product portfolio, a
significant number of product launches and
continued investments within research and
development. Consequently, no target for
operating margin has been established, as
the operating margin is expected to remain
at the current level around 44%.
The target level for operating profit after
tax to net operating assets is unchanged
at 125%. The target reflects the expecta-
tion of a continued robust operating profit
growth combined with a stable effective
tax rate and gradual increase in net operat-
ing assets, partly related to an expanded
fixed asset investment to sales ratio to ac-
commodate future sales growth, primarily
within diabetes care.
The target level for the cash to earnings ratio
is maintained at 90%, as expected contin-
ued growth in International Operations and
expanding investment priorities will gradually
impact net operating assets. As previously,
and given the inherent volatility in this ratio,
the target will be pursued looking at the
average over a three-year period.
FORWARD-LOOKING
STATEMENTS
filed with or
reports
Novo Nordisk’s
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 2016, 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’,
‘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
statements.
identify
Examples of such forward-looking state-
ments include, but are not limited to:
forward-looking
‘expect’,
‘may’,
‘will’,
• 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
‘2015 performance and 2016
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.
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 ex-
change rate fluctuations, delay or failure of
projects related to research and/or devel-
opment, unplanned loss of patents, inter-
ruptions of supplies and production, product
recalls, unexpected contract breaches or
terminations, government-mandated or
market-driven price decreases for Novo
Nordisk’s products, introduction of compe t-
ing products, reliance on information tech-
nology, Novo Nordisk’s ability to successfully
market current and new products, exposure
to product liability and legal proceedings
and investigations, changes in governmental
laws and related interpretation thereof,
including on reimbursement, intellectual
property protection and regulatory controls
on testing, approval, manufacturing and
marketing, perceived or actual failure to
adhere
to ethical marketing practices,
investments in and divestitures of domestic
and foreign companies, unexpected growth
in costs and expenses, failure to recruit and
retain the right employees, and failure to
maintain a culture of compliance.
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 docu-
ment, whether as a result of new infor-
mation, future events or otherwise.
NOVO NORDISK ANNUAL REPORT 2015 10 ACCOMPLISHMENTS AND RESULTS 2015
RESEARCH AND DEVELOPMENT
2015 was a year in which Novo Nordisk
made significant progress in its research and
development pipeline and reached several
milestones.
Below are the highlights from the key devel-
opment projects. On p 20, the pipeline
overview shows all the compounds
in
clinical development, and further details on
clinical trials can be found in the company
announcements and press releases pub-
lished by Novo Nordisk during 2015, which
are available on novonordisk.com.
DIABETES
In March 2015, Novo Nordisk decided to
resubmit New Drug Applications (NDA) of
Tresiba® and Ryzodeg® 70/30 in the US.
The resubmission was based on the interim
analysis of the cardiovascular outcomes trial
for Tresiba®, DEVOTE. In order to preserve
the integrity of the ongoing DEVOTE trial,
only a small team within Novo Nordisk had
access to the data and made the decision
to resubmit the NDA. Novo Nordisk man-
agement does not have access to the results
of the interim analysis. The DEVOTE trial is
expected to be completed in mid-2016 and
the results are expected to be announced in
the second half of 2016.
Based on the class II resubmission, the
US Food and Drug Administration (FDA)
approved Tresiba® and Ryzodeg® 70/30
for the treatment of diabetes in adults in
September 2015. Following the approval,
Tresiba® was introduced to diabetes care
specialists in the US during November 2015
and was launched broadly in January 2016.
PATIENT YEARS IN CLINICAL TRIALS*
Japan & Korea
Region China
International Operations
Europe
North America
Thousand
30
25
20
15
10
5
0
2011 2012 2013 2014 2015
* A patient year is measured as the total number of months
a patient is enrolled in a clinical trial divided by 12.
In January 2016, the results from the
double-blinded phase 3b trial SWITCH 2
were announced. The primary endpoint of
the trial was met by showing a statisti cally
significantly lower rate of severe or blood
glucose confirmed symptomatic hypogly-
caemia during the maintenance period
of 30% for people treated with Tresiba®
compared to insulin glargine.
In August 2015, Novo Nordisk decided to
initiate a phase 3a programme with oral
semaglutide, a once-daily oral formulation
of the long-acting GLP-1 analogue sema -
glutide. The decision followed the encour-
aging results of the proof-of-concept phase
2 trial announced in February 2015 and the
subsequent consultations with regulatory
authorities. The successful phase 2 trial
results mark a significant milestone for Novo
Nordisk in its ambition to deliver protein-
based medicine, like semaglutide, in the
form of a tablet and producing it in large
scale.
Novo Nordisk intends to initiate a global
phase 3a programme, named PIONEER,
comprising ten trials with more than 9,000
people with type 2 diabetes. The PIONEER
programme will include nine safety and
efficacy trials and one trial for evaluating the
cardiovascular safety of oral semaglutide.
In September 2015, Novo Nordisk filed the
NDA to the US FDA for Xultophy®, the first
once-daily
single-injection combination
of Tresiba® (insulin degludec) and Victoza®
(liraglutide). The submission is currently
being reviewed under the US FDA’s Prescrip-
tion Drug User Fee Act V (PDUFA V).
During the second half of 2015, Novo
Nordisk completed four out of six phase
3a trials with semaglutide in the SUSTAIN
programme. Semaglutide is a new GLP-1
analogue administered subcutaneously once
weekly for the treatment of type 2 diabetes
in adults. The data reported so far confirm
the strong efficacy profile of semaglutide,
which also appeared safe and well tolerated
in the trials.
In December 2015, Novo Nordisk submitted
the Marketing Authorisation Application
(MAA) to the European Medicines Agency
(EMA) and the NDA to the US FDA for faster-
acting insulin aspart. Faster-acting insulin
aspart is a mealtime insulin for improved
control of postprandial glucose excursions
and has been developed for the treatment
of people with type 1 and type 2 diabetes.
The filing of faster-acting insulin aspart is
based on the results from the onset clinical
trial programme, which involved around
2,100 people with type 1 and 2 diabetes.
In the onset programme, people treated
with faster-acting insulin aspart achieved
improvements in postprandial control versus
NovoRapid® and an HbA1c reduction on par
with NovoRapid®. Across the onset trials,
faster-acting insulin aspart had a safe and
well-tolerated profile, with the most common
adverse event being hypoglycaemia similar
to the levels observed with NovoRapid®.
OBESITY
In March 2015, the European Commis-
sion granted marketing authorisation
for Saxenda® (liraglutide 3 mg) for the
treatment of obesity. Saxenda® is the first
once-daily human glucagon-like peptide-1
(GLP-1) analogue for the treatment of
in Europe. Saxenda®
obesity approved
is indicated in the EU as an adjunct to a
reduced-calorie diet and increased physical
activity for weight management in adult
patients with an initial Body Mass Index
(BMI) of ≥30 kg/m2 (obese), or ≥27 kg/m2
to <30 kg/m2 (overweight) in the presence
of at least one weight-related comorbidity
such as dysglycaemia, hypertension, dys-
li pidaemia or obstructive sleep apnoea.
Saxenda® was launched in Denmark in
August 2015. Earlier in the year, during
May, Saxenda® had already been launched
in the US, following the US FDA appro-
val in December 2014. Novo Nordisk will
continue the global roll-out of Saxenda®
during 2016 and expects to launch it in up
to ten countries.
HAEMOPHILIA
In January 2016, Novo Nordisk submitted
the MAA to the EMA for the approval of
long-acting factor IX, nonacog beta pegol.
Nonacog beta pegol is a glycopegylated
recombinant factor IX with a significantly
improved pharmacokinetic (PK) profile, de-
veloped for patients with haemophilia B.
Novo Nordisk expects to file the Biologics
License Application (BLA) for nonacog beta
pegol to the US FDA during the first half
of 2016.
New data for
long-acting recombinant
factor VIII, N8-GP (turoctocog alfa pegol)
was reported from the first part of the
pathfinder™2 extension trial in November
2015. The reported data provide additional
support that N8-GP (turoctocog alfa pegol)
appeared to have a safe and well-tolerated
profile, and that 95% of mild to moderate
bleeds can be managed with 1–2 infusions.
NOVO NORDISK ANNUAL REPORT 2015
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
Just over half of the 415 million people living
with diabetes1 are diagnosed, and many of
those diagnosed do not receive medical
treatment.
As part of Novo Nordisk’s strategy for global
access to diabetes care, the company has set
itself the long-term target of reaching 40
million people with its diabetes care products
by 2020, which is double the baseline number
in 2010. The aim is to enable more people
with diabetes to receive medical treatment.
In 2015, Novo Nordisk provided medical
treatments to an estimated 26.8 million pa-
ti ents with diabetes worldwide, compared
with 24.4 million in 2014, calculated based
on WHO’s recommended daily doses for
diabetes medicines. The number reflects
an overall increase in the number of pa-
ti ents treated with Novo Nordisk’s insulin
products and was driven by human insulin
in International Operations (1.2 million pa-
ti ents) and modern and new-generation in-
sulins globally (0.9 million patients). Novo
Nordisk focuses on enhancing quality of care
through product innovation, while remaining
committed to expanding access to medical
treatment and care for patients with diabe-
tes throughout the world. The company has
several programmes specifically targeting
people in low- and middle-income countries
who have limited access to health services.
Novo Nordisk sold human insulin according
to the company’s differential pricing policy in
23 of the world’s 48 poorest countries (the
Least Developed Countries – LDC), compared
with 32 countries in 2014. According 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). In 2015, the LDC
ceiling price for insulin treatment per patient
per day was USD 0.19, while the average
realised price for insulin sold under the
programme was USD 0.15, corresponding to
USD 3.85 per vial. The decline is attributed
to fewer insulin tenders in 2015 and lack
of response from governments or private
wholesalers and other partners to Novo
Nordisk’s offer. The total number of patients
treated with insulins sold at or below ceiling
price was approximately 411,000 in 2015,
which is a slight decrease compared with
approximately 431,000 in 2014. Beyond this
scheme, Novo Nordisk sells human insulin
at similar prices in low-income countries. In
2015, an estimated 5.5 million patients have
been treated with insulin for USD 0.19 per day
or less, corresponding to a price per vial of
USD 4.81 or less. In comparison, an estimated
4.3 million patients were treated with insulin
at or below the ceiling price in 2014.
By the end of 2015, continued progress
had been achieved by Changing Diabetes®
programmes with the aim of reaching
more people with diabetes and building
capacity. The Changing Diabetes® in Children
programme has been rolled out in nine
countries since its launch in 2009, reach-
ing more than 3,400 children, who receive
insulin treatment free of cost. A total of 108
clinics have been established, and more
than 6,500 healthcare professionals have
been trained or re-trained. The Changing
Diabetes® in Pregnancy programme, also
launched in 2009, has since screened more
than 33,300 women for gestational diabetes
mellitus, and more than 3,800 women have
been diagnosed and subsequently treated.
The Base of the Pyramid programme has,
since its launch in 2011, established seven
Diabetes Support Centres in Nigeria and six in
Ghana. The programme has been scaled up
in Kenya to build capacity and ensure supply.
Furthermore, two new Centres of Excellence
in Diabetes care were launched in the Kenyan
public sector at county level in 2015.
launched Cities
In 2014, Novo Nordisk
Changing Diabetes – a cross-disciplinary and
cross-sector partnership programme to iden -
tify and address the root causes of the
rise in type 2 diabetes in urban areas. The
programme is currently running in Mexico
City, Copenhagen, Houston, Tianjin and
Shanghai, representing more than 60 million
inhabitants. In 2016, they will be joined by
Vancouver and Johannesburg. The aim of the
programme is to drive transformative action
through new research focusing on cultural
determinants and social factors that will
facilitate the implementation of integrated
and sustainable solutions in cities.
Donations through the World Diabetes
Foundation (WDF) amounted to DKK 78
million in 2015. The WDF is an independent
non-profit organisation established by Novo
Nordisk in 2002 to help expand access to
diabetes care. The foundation invests in
ACCOMPLISHMENTS AND RESULTS 2015
11
sustainable initiatives to build healthcare
capacity, with the aim of improving pre-
vention and treatment of diabetes in de-
veloping countries. In 2015, the WDF sup-
ported 22 new projects. These included
projects with a focus on prevention and
others aimed at reaching people in the
most remote rural areas. Read more on
worlddiabetesfoundation.org.
Novo Nordisk also provides financial support
to improve global access to haemophilia
care. In 2015, the company donated DKK
19 million to the Novo Nordisk Haemo-
philia Foundation, established in 2005. The
foundation supports projects and fellow -
ships in developing and emerging econ-
omies. Initiatives focus on capacity building,
awareness, diagnosis and patient registries.
Read more on nnhf.org.
EMPLOYEES
At the end of 2015, the total number of
employees was 41,122, corresponding to
40,638 full-time positions, which is a 1%
decrease compared with 2014 due to the
divestment of NNIT A/S in March 2015.
The underlying growth (5%) is primarily
driven by expansion within the sales region
International Operations and in Denmark,
primarily within research & development
and production.
Employee turnover increased from 9.0% in
2014 to 9.2% and was primarily driven by
Region China. In previous years the turnover
rate has been 8–10%.
The consolidated score in the annual em-
ployee survey, eVoice, was 4.3 as in 2014,
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 2015 result reflects a strong culture and
commitment to the company’s values.
To ensure a robust pipeline of talent for
management positions, a new aspiration has
been set that strives for enhanced diversity in
all management teams, including entry-level
and middle management. By the end of 2015,
the gender diversity among managers was
59% men and 41% women. Of the newly
promoted managers, 44% were women.
Tragically, a sales representative in India died
in a traffic accident while on duty in 2015. The
2015 average frequency rate of occupational
accidents with absence decreased to 3.0
per million working hours, compared with
CONTINUED
CONTINUED
NOVO NORDISK ANNUAL REPORT 2015 12 ACCOMPLISHMENTS AND RESULTS 2015
PATIENTS REACHED WITH
DIABETES CARE PRODUCTS
Estimate
WORKING
THE NOVO NORDISK WAY
Average score in annual employee survey
• Realised
Target (2020)
Million
50
40
30
20
10
0
• Realised
Target
Scale
5
4
3
2
1
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
3.2 in 2014. Novo Nordisk is working with
a zero-injury mindset, and the long-term
commitment is to continuously improve per-
formance. Focus is on strengthening risk
awareness and preventing occupational acci-
dents for all employees.
ASSURANCE
Training in business ethics is mandatory
and a high priority. Annual business ethics
training is required for all employees, in-
cluding new hires. Business ethics training
is also a key element of the onboarding
programmes. In 2015, as in 2014, 98%
of all relevant employees completed and
documented their training, and passed the
related tests. This high level is attributed to
the constant focus and communication by
senior management on the importance of
business ethics compliance.
Adherence to the company’s global stan-
dards for ethical behaviour must be ob-
ser ved and is monitored. Internal business
ethics assurance activities are conducted
using on-site interviews and documentation
reviews to assess adherence to compliance
requirements and
internal proce dures.
During 2015, 49 business ethics assurance
reviews were conducted, com pared with 42
in 2014.
During the year, the global facilitator team
conducted 65 audits of units’ adherence
to the Novo Nordisk Way, so-called fa cil -
itations, covering approximately 18,500
employees, 15% of whom were interviewed.
The facilitations conducted in 2015 showed
a high level of compliance with the Novo
Nordisk Way. A facilitation consists of
docu ment review and interviews with local
management, employees and stakeholders
to determine the level of adherence to the
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 subsequently
implement corrective actions. In 2015, 94%
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 was a high level of compliance with the
Novo Nordisk Way across the organisation in
2015. The Essentials, of which there are 10,
are the basis for the implementation of the
Novo Nordisk Way. See the article on p 18
and novonordisk.com/about-novo-nordisk/
novo-nordisk-way for additional information.
A total of 240 supplier audits were conducted
to assess their level of compliance with the
company’s standards for suppliers. These
relate to quality as well as the environment,
labour, human rights and business ethics,
in line with Novo Nordisk’s responsible
sourcing policy.
These audits are undertaken by Novo
Nordisk’s global quality organisation. The
level of audit activity was up from 224 audits
in 2014 due to Management’s decision to
build new factories. Of the audits carried
out in 2015, 28 were focused on responsible
sourcing criteria, which is a slight increase
compared with 25 audits in 2014. Only high-
risk suppliers, identified through a robust
risk assessment, are selected for responsible
sourcing audits. One critical finding was
identified in connection with a quality audit
in 2015. A continuous improvement and
engagement programme has been initiated
with the supplier in order to address the issue.
In 2015, as in 2014, Novo Nordisk had
two product recalls from the market. Both
recalls were related to incorrect labelling
of products. Local health authorities were
informed in both instances to ensure that
distributors, pharmacies, doctors and pa-
ti ents received appropriate information.
In 2015, as in 2014, there were no failed
inspections among those resolved at year-
end. Inspections are measured in relation
to the US Food & Drug Administration,
European Medicines Agency (EMA), the
Japanese Pharmaceuticals & Medical Devices
Agency (PMDA), Lloyd’s Register Quality
Assurance (LRQA) and domestic authorities
for strategic manufacturing sites. A total
of 82 inspections were conducted in 2015
at Novo Nordisk sites, at clinics conducting
investigations for Novo Nordisk or for
voluntary ISO 9001 certification, compared
with 59 inspections in 2014. At year-end, 57
inspections had been passed and 25 were
unresolved.
Novo Nordisk is implementing its commi t -
ment to respect human rights as set out
in the UN Guiding Principles on Business
and Human Rights. The human rights
due diligence started with a Group-wide
human rights impact assessment against
all internationally recognised human rights.
Novo Nordisk recognises that the company
has a number of potential impacts with
regard to a range of human rights, right
to health, right to privacy, right to a living
wage, and safe and healthy working
conditions. The assessment has shown that
strong management systems are in place.
Vigilance and continuous improvements are
part of ongoing efforts.
A company’s reputation with its key stake-
holders is an indicator of the extent to which
the company lives up to expectations. The
better the reputation, the more likely it is
that these stakeholders will trust, support
and engage with the company. Novo
Nordisk measures its reputation with key
stakeholders annually using the RepTrak®
methodology developed by Reputation In-
stitute. Reputation is measured on a scale of
0–100 and a score above 80 is considered
excellent. In 2015, the score was 82.4, com-
pared with 80.8 in 2014.
LONG-TERM
SOCIAL TARGETS
Novo Nordisk has chosen two long-term
social targets to support long-term finan-
cial performance, balancing responsibility
with profitability, with the aim of creating
sustainable value for shareholders and other
stakeholders. The social targets reflect aspira-
tions expressed in the Novo Nordisk Way:
helping people live better lives and working
the Novo Nordisk Way. The long-term patient
target is expected to be met. Development
year on year will vary, reflecting gains and
losses of large tenders and contracts.
For additional information about the social
performance, see the social statement on pp
96–101 and the UNGC Communication on
Progress at novonordisk.com/annualreport.
NOVO NORDISK ANNUAL REPORT 2015 ACCOMPLISHMENTS AND RESULTS 2015
13
ENVIRONMENTAL PERFORMANCE
Novo Nordisk measures environmental per-
formance on four dimensions: consumption
of energy, consumption of water, CO2 emis-
sions from energy consumption and waste.
ENERGY AND WATER
In 2015, 2,778,000 GJ energy and 3,131,000
m3 water were used at production sites
around the world. In spite of a high focus
on process optimisations,
the energy
consumption increased by 9% and the water
consumption by 6%. This development
reflects increased production and capacity.
Of the water used at production sites,
14% is in water-scarce regions in Brazil and
China. These sites have a particular focus on
good water stewardship.
CO2 EMISSIONS
While the main focus of Novo Nordisk’s
climate action programme has been to re-
duce CO2 emissions from production as well
as emissions from distribution of products,
Novo Nordisk is now extending the scope
of the climate programme to encompass
indirect emissions from relevant business
activities. The initial focus is on the supply
chain, and emissions from company cars
and business travel. Refer to p 40 for more
information on the climate ambition.
The CO2 emissions related to consumption
of energy at the production facilities de-
creased by 11%, despite the increase in
energy use of 9%. The production plant in
Tianjin, China, has started sourcing wind
power from a windfarm in Inner Mongolia,
and the Danish production facilities are
now sourcing bio-natural gas. This is biogas
produced from liquid manure, food waste
and organic waste from the industry. The
biogas is upgraded to meet the quality re-
quirements of natural gas and feeds into the
natural gas distribution system.
CO2 emissions from transport
(product
distribution) decreased significantly, by 25%,
compared with 2014. This is mainly due
to an increase in the volume of products
distributed via sea from 72% in 2014 to
83% in 2015. In 2015, CO2 emissions from
sea freight accounted for 16%, transport via
trucks accounted for 5% and air transport
accounted for 79% of total emissions. Distri-
buting as many products as possible by sea
is a priority for Novo Nordisk, as it reduces
both CO2 emissions and costs.
Novo Nordisk also aims to reduce CO2
emissions from business flights and company
cars. In 2015, business flights resulted in
estimated CO2 emissions of 74,000 tons,
which is an increase of 9% compared with
2014. The estimated CO2 emissions from
leased company cars decreased by 7%, from
72,000 tons in 2014 to 67,000 tons in 2015.
WASTE
In 2015, Novo Nordisk generated 34,715
tons of waste, which is an increase of 13%
compared with 2014. This is mainly due
to an increase in non-recyclable ethanol
used in purification processes for insulin
production. Reducing ethanol waste is a
high priority for the company, and efficient
regeneration plants enable the ethanol to
be re-used many times.
LONG-TERM
ENVIRONMENTAL TARGETS
The long-term ambition is to decouple
consumption of water and energy from
sales growth. The current target is set as
a maximum of half of the percentage in-
cre ase in sales in local currencies, measured
as a three-year average. In 2015, sales
increased by 8% in local currencies while
energy consumption increased by 9% and
water consumption by 6%. The target is
challenged by production expansion and
lower sales growth rates.
NEW LONG-TERM TARGET
FOR CO2 EMISSIONS
Novo Nordisk has set a new long-term target
to reduce CO2 emissions. A key element
of the strategy is increasing the share of
renewable energy. In 2020, production
sites worldwide will be 100% powered by
renewable electricity. As part of the We
Mean Business Coalition, Novo Nordisk
has signed the RE100 initiative led by The
Climate Group in partnership with CDP.
This is a collaborative initiative of influential
businesses committed to 100% renewable
electricity that is working to increase cor-
porate demand for renewable energy.
For additional information on environmental
performance, see the environmental state-
ment on pp 102–104 and the UNGC Com-
munication on Progress at novonordisk.
com/annualreport.
ENERGY CONSUMPTION
WATER CONSUMPTION
• Realised
Target (not to exceed)*
• Realised
Target (not to exceed)*
1,000,000 GJ
1,000,000 m3
4
3
2
1
0
4
3
2
1
0
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
* From 2007 to 2011, the target was set as an accumulated
reduction over four years from a 2007 baseline.
* From 2007 to 2011, the target was set as an accumulated
reduction over four years from a 2007 baseline.
NOVO NORDISK ANNUAL REPORT 2015
14 ACCOMPLISHMENTS AND RESULTS 2015
14 ACCOMPLISHMENTS AND RESULTS 2015
PERFORMANCE HIGHLIGHTS
FINANCIAL PERFORMANCE
Net sales
66,346
78,026
83,572
88,806
107,927
Excl
NNIT A/S2
Change
22%
2011
2012
2013
2014
2015
2014–2015
Underlying sales growth in local currencies1
Currency effect (local currency impact)
11.4%
(2.2%)
11.6%
6.0%
11.9%
(4.8%)
8.3%
(2.0%)
8.4%
13.1%
Net sales growth as reported
9.2%
17.6%
7.1%
6.3%
21.5%
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
Payout ratio adjusted for the partial divestment
of NNIT A/S4
LONG-TERM FINANCIAL TARGETS
Operating profi t growth
Operating profi t growth in local currencies
Operating margin1
Operating profi t after tax to net operating assets1
Cash to earnings (three-year average)
(14%)
43%
N/A
28%
32%
19%
17%
31%
25%
36%
21%
22%
17%
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%
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%
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%
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%
2,959
49,444
(5,961)
43,483
34,860
91,799
46,969
5,209
34,222
99.7%
26.2%
12.6%
3.6%
85.0%
32.3%
19.8%
51.2%
79.9%
98.2%
46.6%
45.3%
45.3%
47.1%
48.7%
50.0%
18.4%
22.1%
33.7%
77.9%
112.8%
31.7%
20.2%
37.8%
99.0%
103.7%
6.9%
14.6%
37.7%
97.2%
93.9%
9.5%
12.7%
38.8%
101.0%
93.1%
43.3%
20.6%
45.8%
148.7%
96.8%
2015 targets3
15%
40%
125%
90%
1. For defi nitions, please refer to p 94. 2. Adjusted for non-recurring income from the partial divestment of NNIT A/S of DKK 2,376 million and non-recurring proceeds in free cash fl ow
of DKK 2,303 million. 3. The long-term fi nancial targets were updated in February 2016. Please refer to ‘2016 Outlook’ on p 8. 4. The net profi t impact from the partial divestment of
NNIT A/S was returned to Novo Nordisk’s shareholders through a DKK 2.5 billion increase in the share repurchase programme announced in April 2015.
SALES BY GEOGRAPHIC REGION
SALES BY GEOGRAPHIC REGION
(cid:74) Japan & Korea
Japan & Korea
(cid:74) Region China
Region China
(cid:74) International Operations
International Operations
(cid:74) Europe
Europe
(cid:74) North America
North America
DIABETES AND OBESITY CARE SALES
DIABETES AND OBESITY CARE SALES
(cid:74) Other diabetes and obesity care
Other diabetes and obesity care
(cid:74) Victoza®
Victoza®
(cid:74) New-generation insulin
New-generation insulin
(cid:74) Modern insulins (insulin analogues)
Modern insulins (insulin analogues)
(cid:74) Human insulins
Human insulins
BIOPHARMACEUTICALS SALES
BIOPHARMACEUTICALS SALES
(cid:74) Other Biopharmaceuticals
Other biopharmaceuticals
(cid:74) Norditropin®
Norditropin®
(cid:74) Haemophilia
Haemophilia
DKK billion
DKK billion
125
125
100
100
75
75
50
50
25
25
0
0
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
NOVO NORDISK ANNUAL REPORT 2015
DKK billion
DKK billion
100
100
80
80
60
60
40
40
20
20
0
0
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
DKK billion
DKK billion
25
25
20
20
15
15
10
10
5
5
0
0
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
NOVO NORDISK ANNUAL REPORT 2015
ACCOMPLISHMENTS AND RESULTS 2015
ACCOMPLISHMENTS AND RESULTS 2015
15
15
2011
2012
2013
2014
2015
2014–2015
SOCIAL PERFORMANCE
Least developed countries where Novo Nordisk sells
insulin according to the differential pricing policy
Donations (DKK million)5
New patent families (fi rst fi lings)
Employees (total)6
Employee turnover
Gender in Management (men/women)
Relevant employees trained in business ethics
Product recalls
Failed inspections
Company reputation (scale 0 –100)
LONG-TERM SOCIAL TARGETS
Patients reached with Novo Nordisk diabetes
care products (estimate in million)
Working the Novo Nordisk Way (scale 1– 5)
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)
SHARE PERFORMANCE
Basic earnings per share/ADR in DKK1, 9
Diluted earnings per share/ADR in DKK1, 9
Total number of shares (million), 31 December
Treasury shares (million), 31 December
Share capital (DKK million)
Net asset value per share in DKK1, 9
Dividend per share in DKK9
Total dividend (DKK million)
Share repurchases (DKK million)
Closing share price (DKK)9
36
81
80
35
84
65
35
83
77
32
84
93
23
97
77
32,632
9.8%
63%/37%
34,731
9.1%
61%/39%
38,436
8.1%
61%/39%
41,450
9.0%
60%/40%
41,122
9.2%
59%/41%
99%
5
0
N/A
20.9
4.3
99%
6
1
N/A
22.8
4.3
97%
6
0
82.97
24.3
4.4
98%
2
0
80.8
24.4
4.3
98%
2
0
82.4
26.8
4.3
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
2,778
3,131
107
124,049
34,715
(2%)
4%
11%
16%
6%
8%
(1%)
10%
9%
6%
6.05
6.00
2,900
122
580
12.91
2.80
7,742
10,839
132.00
7.82
7.77
2,800
87
560
14.51
3.60
9,715
12,162
183.30
9.40
9.35
2,750
103
550
15.48
4.50
11,866
13,989
198.80
10.10
10.07
2,650
57
530
15.21
5.00
12,905
14,728
260.30
13.56
13.52
2,600
52
520
18.07
6.4010
16,23010
17,229
399.90
Change
(28%)
15%
(17%)
(1%)
–
–
2015 targets
40 by 2020
4.0
Change
9%
6%
(11%)
13%
13%
2015 targets
Not to exceed 4%8
Not to exceed 4%8
Change
34%
34%
(2%)
(9%)
(2%)
19%
28%
26%
17%
54%
5. Donations to the World Diabetes Foundation and the Novo Nordisk Haemophilia Foundation, which are working to increase healthcare capacity in developing countries. 6. 2015 data
exclude employees in NNIT A/S, which was divested in 2015 (approximately 2,400 employees in NNIT A/S in 2014; had these employees been included, the growth would have been
5%). 7. Data for people with diabetes and employees are not included due to lack of availability. 8. The 4% equals half 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. 9. Share performance-related key fi gures have been calculated refl ecting a trading unit of DKK 0.20.
10. Proposed dividends for the year (not yet declared).
EMPLOYEES (TOTAL)
EMPLOYEES (TOTAL)
(cid:74) Japan & Korea
Japan & Korea
(cid:74) Region China
Region China
(cid:74) International Operations
International Operations
(cid:74) Europe
Europe
(cid:74) North America
North America
Thousand
Thousand
50
50
40
40
30
30
20
20
10
10
0
0
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
SALES AND CO2 EMISSIONS
SALES AND CO2 EMISSIONS
(2004 = INDEX 100)
(2004 = INDEX 100)
• Index sales in DKK
• Index sales in DKK
• Index CO2 emissions
• Index CO2 emissions
NET CASH DISTRIBUTION
NET CASH DISTRIBUTION
TO SHAREHOLDERS
TO SHAREHOLDERS
(cid:74) Dividends
Dividends
(cid:74) Share repurchases
Share repurchases
Index
Index
400
400
320
320
240
240
160
160
80
80
0
0
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
DKK billion
DKK billion
50
50
40
40
30
30
20
20
10
10
0
0
2011 2012 2013 2014 2015
2011 2012 2013 2014 2015
NOVO NORDISK ANNUAL REPORT 2015
NOVO NORDISK ANNUAL REPORT 2015
16 OUR BUSINESS
OUR STRATEGY
The ingredients that make up Novo Nordisk’s corporate strategy are a sharp focus on four
therapeutic areas, five core capabilities and a clear purpose, all anchored in a values-based
management system.
Expand leadership
in DIABETES
Establish presence
in OBESITY
Pursue leadership
in HAEMOPHILIA
Expand leadership in
GROWTH DISORDERS
Engineering,
formulating,
developing
and
delivering
protein-
based
treatments
Deep
disease
under-
standing
Efficient
large-scale
production
of proteins
Planning and
executing
global
launches of
new
products
Building and
maintaining
a leading
position
in emerging
markets
Driving change
to defeat diabetes
and other serious
chronic conditions
Novo Nordisk Way
Since it was founded in Denmark more than
90 years ago, Novo Nordisk has been changing
diabetes. This heritage has given the company
experience and capabilities that also enable it
to help people defeat other serious chronic
conditions: haemophilia, growth disorders
and obesity. Today, Novo Nordisk is a leading
company within diabetes, haemophilia and
growth disorders, and is well on its way to
building a presence within obesity.
This sharp focus on a few selected thera-
peutic areas is a key part of Novo Nordisk’s
corporate 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 therapeutic areas. The final ingre-
dient of the strategy is the values-based
management system, the Novo Nordisk
Way. All of which serves the pur pose of
driving change to defeat diabetes and other
serious chronic conditions. Read more about
the Novo Nordisk Way on p 18.
THE FOUR STRATEGIC PRIORITIES
1. EXPAND LEADERSHIP
IN DIABETES
According to the International Diabetes Fed-
eration, 415 million people worldwide are
living with diabetes, and it is predicted that
by 2040 more than 10% of the world’s adult
population – 642 million people worldwide
– will have diabetes.1
The global market for diabetes care products
amounts to 353 billion Danish kroner, of
which Novo Nordisk products account for
approximately 27%. The mar ket has grown
by around 10% annually in the last decade,
and all indications are that it will continue to
grow as a result of the increasing number of
people with diabetes and the need for
better treatments. Of this global market,
insulin accounts for 56%, oral diabetes
products (tablet-based medi cations) account
for 37% and GLP-1 products account for
7%, measured in value.
Diabetes care is by far Novo Nordisk’s
largest business area, accounting for 79%
of the company’s total sales. In 2007, the
company decided to focus all its efforts in
diabetes care on protein-based products,
such as insulin and GLP-1. As a result, today
Novo Nordisk is the leader in both seg-
ments, with market shares of 40% and
75% respectively, measured in value.
Novo Nordisk’s ambition is to further expand
its leadership within the insulin and GLP-1
segments. Key to achieving this ambition
are the new generation of insulin products,
Tresiba®, Xultophy® and Ryzodeg®, and the
once-daily GLP-1 analogue Victoza®, all of
which have been or will be launched in
such as
injection devices,
convenient
FlexTouch®. Significant projects in the re-
search and development pipeline include a
new faster-acting formulation of insulin
aspart, a once-weekly injectable GLP-1 ana-
logue semaglutide and a once-daily tablet
version of semaglutide.
NOVO NORDISK’S STRATEGYSTRATEGIC FOCUS AREASCORE CAPABILITIESPURPOSENOVO NORDISK ANNUAL REPORT 2015 Innovative biological medicines such as
these are Novo Nordisk’s key contribution
to defeating diabetes. However,
the
company is well aware that its products
only do part of the job: it takes more than
medicine to change diabetes. That is why
Novo Nordisk, with Changing Diabetes®, is
engaged in other activities aimed at cre-
ating awareness of type 2 diabetes and
promoting healthy lifestyles and societal
changes that are needed to curb the
alarming rise in new cases of the disease. A
recent example is Cities Changing Diabetes,
a global initiative to tackle diabetes in the
world’s big cities. Read more about:
Novo Nordisk’s pipeline of
products in development, p 20
GLP-1 products, p 26
The challenge of fighting diabetes, p 22
Cities Changing Diabetes, p 30.
2. ESTABLISH A
PRESENCE IN OBESITY
Obesity is known to be a major risk factor in
developing serious diseases such as type 2
diabetes and, as such, is a natural therapeutic
area for Novo Nordisk to enter. Obesity has
reached pandemic proportions, with more
than 600 million adults having clinical
obesity (defined as having a Body Mass
Index of 30 or above).2 However, currently
there are few pharmaceutical treatment
options available to treat obesity, and
reimbursement for these medications is
limited. The global pharmaceutical market
for obesity products currently amounts to
around 10 billion kroner.
In 2015, Novo Nordisk entered the obesity
market with Saxenda® (liraglutide 3 mg),
which was launched in the US in April and is
now also available in Denmark and Canada.
Novo Nordisk’s ambition is to build a long-
term presence in the obesity market, and
Saxenda® is seen as the first of several steps
towards achieving this. Read more about
Novo Nordisk’s obesity strategy on p 28.
3. PURSUE LEADERSHIP
IN HAEMOPHILIA
Haemophilia is an inherited or acquired
bleeding disorder that prevents blood from
clotting. An estimated 420,000 people
worldwide are living with severe or moderate
haemophilia.3 The global haemophilia phar-
maceutical market has a value of around 75
billion kroner and has grown by around 5%
annually in recent years.5
Novo Nordisk entered the haemophilia market
in 1996 with NovoSeven® for the treatment of
people with haemophilia who form antibodies
against traditional treat ments.
The launch of NovoEight® in 2014 was a
significant milestone
in the company’s
ambition to move from this niche into the
main haemophilia A market. In January
2016, Novo Nordisk filed for regulatory
approval of long-acting factor IX in the EU
for the treatment of haemophilia B. Fur-
thermore, the company has a long-acting
clotting factor in phase 3 development for
haemophilia A. Novo Nordisk’s ambition is
to achieve a leadership position within both
haemophilia A and haemophilia B.Read
more about Novo Nordisk’s activities within
haemophilia on p 32.
4. EXPAND LEADERSHIP
IN GROWTH DISORDERS
Novo Nordisk has been active in the treatment
of growth hormone deficiency for almost
four decades. The global market for growth
disorder treatments is estimated to be 16
billion kroner. Novo Nordisk’s growth hor-
mone, Norditropin®, is the global market
leader, with a market share of 35% measured
by value. The company’s ambition is to
expand its leadership in the growth hormone
market. A key project in this respect is Novo
Nordisk’s long-acting growth hormone pro d-
uct which is in phase 3 development.
ENGINEERING, FORMULATING,
DEVELOPING AND DELIVERING
PROTEIN-BASED TREATMENTS
1920
Nordisk Insulinlaboratorium (1923) and
Novo Terapeutisk Laboratorium (1925)
founded.
1940
Nordisk develops isophane insulin (NPH),
a neutral insulin with prolonged action.
1980
NovoPen® is launched – an injection
system similar in appearance to a
fountain pen.
Novo starts production of human
insulin with the help of genetically
engineered yeast cells.
Nordisk markets Norditropin® – genetically
engineered human growth hormone.
1990
NovoSeven® is launched – for the
treatment of haemophilia patients
with inhibitor reaction.
NovoRapid® – the company’s first
modern insulin – is marketed.
2000
Victoza® – a human GLP-1 analogue
for once-daily treatment of type 2
diabetes – is launched.
2010
Tresiba® – the company’s first new-
generation insulin – is launched.
OUR BUSINESS
17
FIVE CORE
CAPABILITIES
Novo Nordisk’s core capabilities have been
developed and refined over many years.
ENGINEERING, FORMULATING,
DEVELOPING AND DELIVERING
PROTEIN-BASED TREATMENTS
Novo Nordisk’s researchers are among the
world’s best within protein engineering,
formulation technology, expression and de-
livery, enabling the company to continuously
improve
therapeutic
proteins such as insulin and GLP-1 and the
injection devices needed. Recently, Novo
Nordisk has built new capabilities in for-
mulating protein-based products into tablets.
the properties of
DEEP DISEASE UNDERSTANDING
Striving for decades to meet the medical
needs of people with diabetes has given
Novo Nordisk a deep understanding of what
it is like to live with this condition. Together
with strong relationships and collaborations
with external researchers and clinicians, this
understanding provides a solid foundation
for the company’s research, development
and marketing activities.
EFFICIENT LARGE-SCALE
PRODUCTION OF PROTEINS
A high-quality, cost-effective global manu-
facturing infrastructure is a prerequisite for
competing successfully in an increasing ly
competitive pharmaceutical market. Novo
Nordisk is the world’s largest producer of
insulin and has been developing its expertise
in the production of protein-based pharma-
ceuticals since 1923. Read more about new
investments in production on p 38.
PLANNING AND EXECUTING GLOBAL
LAUNCHES OF NEW PRODUCTS
Due to the high and increasing costs associated
with developing and launching new medicines,
most products are launched globally over a
relatively short period to ensure a reasonable
time before patent expiration. Through the
global launch of Victoza®, Novo Nordisk has
refined this capability, which is now being
used for the launch of new products, such as
Tresiba® and NovoEight®.
BUILDING AND MAINTAINING
A LEADING POSITION
IN EMERGING MARKETS
Many years of experience have helped Novo
Nordisk understand the needs of emerging
markets as their healthcare systems develop.
The company’s strategy has always been to
establish a local organisation early and to
grow organically as the market develops.
This has enabled Novo Nordisk to build a
highly skilled sales force, long-term rela-
tionships and a sustainable market presence
in emerging markets.
NOVO NORDISK ANNUAL REPORT 2015 18
OUR BUSINESS
NOVO
NORDISK
WAY
Through its approach to business,
Novo Nordisk aims to create shared
value with its stakeholders.
Novo Nordisk’s values-based management system, the Novo Nordisk
Way, is a key ingredient in the company’s corporate strategy. “It
describes who we are, where we want to go and the values that
characterise our company,” explains President and Chief Executive
Officer (CEO) Lars Rebien Sørensen.
He argues that it is an effective means of
governing a fast-growing global orga n i-
sation such as Novo Nordisk: “There’s no
way we could have a written rule for
everything we do in this company. In
many cases we have to rely on our people
making the right decisions, and this is
why the Novo Nordisk Way is so im-
portant. It applies to and sets the direc-
tion for all employees at Novo Nordisk –
no matter what they do or where they
work. It’s a promise we make to each
other and to our external stakeholders.”
Lars Rebien Sørensen mentions some of
the ways the company ensures that the
Novo Nordisk Way becomes part of
every employee, from traditional means
such as employee induction programmes
and leadership training to a unique
feature called ‘facilitations’. A group of
senior employees have been appointed
facilitators and they travel the global
organisation to interview employees,
managers and internal stakeholders of
the organisational units they are faci l-
itating, while also looking into docu-
ments and local business practices.
Ultimately, this forms the basis for an
assessment of the degree to which each
particular unit is operating in accordance
with the Novo Nordisk Way.
NOVO NORDISK ANNUAL REPORT 2015
In 1923, our Danish founders began a journey to change
diabetes. 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 ambition is to strengthen our leadership in diabetes.
• We aspire to change possibilities in haemophilia and other
serious chronic conditions where we can make a difference.
• Our key contribution is to discover and develop
innovative biological medicines and make them
accessible to patients throughout the world.
• 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.
• We never compromise on quality and business ethics.
• Our business philosophy is one of balancing financial,
social and environmental considerations – we call it the
Triple Bottom Line.
• We are open and honest, ambitious and accountable,
and treat everyone with respect.
• We offer opportunities for our people to realise their
potential.
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.
It’s the Novo Nordisk Way.
The end product is a report evaluating the unit’s performance
against the Novo Nordisk Way and an action plan agreed with local
management for how to do even better. Just as the facilitators can
identify areas for improvement, they also identify best practices
which can be shared throughout the company. Both Executive
Management and the Board of Directors regularly receive reports on
how well the organisation is living up to the Novo Nordisk Way.
THE TRIPLE BOTTOM LINE
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 obliges 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 profit -
a bility by reducing risks related to business activities and
to enhance the positive contributions to society from
Novo Nordisk’s global operations.
Lars Rebien Sørensen underlines that the Triple Bottom
Line principle is about maximising the value of the
company in the long term. “Because,” as he said in a
recent interview with Harvard Business Review, “in the
long term, social and environmental issues become
financial issues. There’s really no hocus pocus about
this. And Novo Nordisk is part-owned by a Danish
foundation that obliges us to maximise the value of
the company for the long term.
“When we convert to renewable energy, we reduce
costs. When we provide a safe workplace and chal-
lenges for each individual, employees can realise
OUR BUSINESS
1919
their potential. When we provide affordable medicines in the world’s
poorest countries, we strengthen our business and repu tation. And
when we contribute to our communities, we earn stakeholder trust,”
he adds.
CREATING SHARED VALUE
Lars Rebien Sørensen is a firm believer that Novo Nordisk’s long-term
success depends on its ability to create both economic and societal
development: “If we’re not seen as creating value for the local
communities in which we have a presence and the countries in which
we do business, we will not be successful in the long run.”
Contributions to communities are often measured in economic
terms, such as job creation and tax payments. Novo Nordisk pays
taxes in all jurisdictions where the company is present. It has a policy
to ‘pursue a competitive tax level in a responsible way’, reflecting a
continued focus on value creation without compromising business
ethics. To manage uncertainties regarding tax payments, multi-year
agreements, known as Advance Pricing Agreements, are negotiated
in key jurisdictions and fully disclosed to tax authorities.
But there are more ways to generate value beyond commercial
transactions. Often referred to as creating shared value, companies
can earn returns in a sustainable way by developing solutions for the
benefit of society. One example is in Kalundborg, Denmark, where
Novo Nordisk’s largest production site is located. Here, the company
works with local stakeholders to promote sustainable development
in the municipality. Its aim is to ensure that Kalundborg will develop
into an even more attractive place to live and work, and a place
where businesses will flourish.
Novo Nordisk’s initiatives at country level aim to create value for
society on a larger scale, for example by building capabilities in the
healthcare system and improving access to healthcare. When
successful, this strengthens the company’s stakeholder relations,
reputation and ultimately its chances of business success in that
country.
An example of this philosophy in action can be seen in Algeria,
one of Novo Nordisk’s fastest-growing markets, where the com-
pany has had a successful partnership with the Ministry of Health
for many years. Outcomes from this partnership include a Changing
Diabetes® mobile clinic, which improves the competences of local
healthcare professionals, and access to diabetes screening and
care for underserved populations, and the Algerian Changing
Diabetes® Barometer, which measures progress in the fight against
diabetes.
DRIVING CHANGE ON A GLOBAL SCALE
Novo Nordisk proactively engages in dialogue on sustainable
development with relevant partners worldwide. Since the Rio+20
Conference in 2012, the company has participated in the process
leading up to the approval of the United Nations Sustainable
Development Goals (SDGs), or, as they are often referred to, the
Global Goals for Sustainable Development.
“The Global Goals are important for Novo Nordisk, not least because
non-communicable diseases
including diabetes are explicitly
mentioned in the goal to provide ‘health and well-being for all, of all
ages’,” says Lars Rebien Sørensen. “The Global Goals give us a
platform from which we can engage local, national and international
stakeholders in discussions on diabetes and sustainable development,
but also on many other topics on our agenda.”
NOVO NORDISK ANNUAL REPORT 2015 Phase 1
Phase 2
Phase 3
Filed/
regulatory
approval
20 OUR BUSINESS
PIPELINE OVERVIEW
DIABETES AND OBESITY CARE
Compound
Indication
Description
Diabetes
Xultophy®
NN9068
Type 2
diabetes
A combination of insulin degludec and liraglutide in a once-
daily single injection. Approved in Europe.
Faster-acting
insulin aspart
NN1218
Type 1 and 2
diabetes
A new formulation of insulin aspart intended to accelerate
onset of action, with the potential for increased flexibility of
dosing.
Semaglutide
NN9535
Type 2
diabetes
A once-weekly GLP-1 analogue intended to offer the clinical
benefits of a GLP-1 analogue with less frequent injections to
people with type 2 diabetes.
OG217SC
NN9924
OI338GT
NN1953
Type 2
diabetes
A long-acting oral GLP-1 analogue intended as a once-daily
tablet treatment for people with type 2 diabetes.
Type 1 and 2
diabetes
A long-acting basal insulin analogue intended to offer the
clinical benefits of a basal insulin analogue in a once-daily
tablet.
Anti-IL-21 T1D
NN9828
Type 1
diabetes
Intended as a beta-cell preservation treatment for people who
are newly diagnosed with type 1 diabetes.
Dual-agonist
NN9709
Type 2
diabetes
A GLP-1/GIP dual-agonist intended as a once-daily treatment
for people with type 2 diabetes.
LAI287
NN1436
Mealtime
NN1406
OI320GT
NN1957
PYY 1562
NN9748
Phase 1
Type 1 and 2
diabetes
A long-acting basal insulin analogue intended for once-weekly
dosing.
Type 1 and 2
diabetes
Type 2
diabetes
Type 2
diabetes
A liver-preferential mealtime insulin analogue.
A long-acting basal insulin in an oral formulation intended as a
once-daily tablet treatment.
An appetite-regulating hormone, peptide tyrosine, for the
treatment of diabetes.
Phase 2
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 the maximum tolerated dose.
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.
Phase 3
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 historical
control, for example, instead of existing treatment or placebo.
Filed/regulatory approval
The phase in which a product undergoes 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 2015 OUR BUSINESS
21
Compound
Indication
Description
Phase 1
Phase 2
Phase 3
Filed/
regulatory
approval
Obesity
Semaglutide
NN9536
AM833
NN9838
G530L
NN9030
PYY 1562
NN9747
Obesity
Obesity
Obesity
Obesity
A long-acting GLP-1 analogue intended as a once-daily treat-
ment for obesity.
A novel amylin analogue intended as a once-weekly treatment
for obesity.
A novel glucagon analogue which, in combination with lira-
glutide, is intended for the treatment of obesity.
An appetite-regulating hormone, peptide tyrosine, which,
alone or in combination with semaglutide, is intended for the
treatment of obesity.
BIOPHARMACEUTICALS
Haemophilia
N9-GP
NN7999
N8-GP
NN7088
Haemophilia B A glycopegylated long-acting recombinant coagulation factor IX
intended to offer prophylaxis and treatment of bleeds.
Haemophilia A A glycopegylated long-acting recombinant coagulation factor
VIII intended to offer prophylaxis and treatment of bleeds.
Concizumab
NN7415
Haemophilia
A and B
A monoclonal antibody against Tissue Factor Pathway Inhibitor
(TFPI) intended for bleeding prevention after subcutaneous
administration.
Growth disorders
Somapacitan
NN8640
Growth
disorders
A long-acting human growth hormone intended to offer once-
weekly injections.
Read more at novonordisk.com/investors and clinicaltrials.gov.
2016 KEY MILESTONES
Tresiba®
Victoza®
SWITCH and DEVOTE results
LEADER results
Semaglutide
Phase 3a completion
Oral semaglutide
Phase 3a initiation
Xultophy®
Faster-acting insulin aspart
Expected feedback from regulatory
filing in the US
Expected feedback from regulatory
filing in the US
N9-GP
Regulatory filing in the US
NOVO NORDISK ANNUAL REPORT 2015 193 MILLION PEOPLE DO NOT
KNOW THEY HAVE DIABETES
ARE YOU
ONE OF
THEM?
Early diagnosis and optimal control of blood
sugar are key to avoiding long-term
complications from diabetes.
The International Diabetes Federation (IDF)
estimates that, of the 415 million people in
the world living with diabetes, almost half
have not been diagnosed.1 This means that
approximately 193 million people are going
about their everyday lives not realising the
damage that is being done to their bodies:
the longer it takes to diagnose diabetes, the
more likely it is that complications will have
arisen – including damage to the eyes,
kidneys, nerves and heart. Furthermore,
people with undiagnosed diabetes are at
significantly higher risk of stroke and car dio-
vascular disease.
Alarmingly, the UK Prospective Diabetes
Study (UKPDS) found that complications
were already present in up to 50% of people
at the time of diabetes diagnosis.6 With
almost 642 million people estimated to be
living with diabetes by 20401, the number of
people who remain undiagnosed is a major
cause for concern.
“Traditionally, people only go to the doctor
when they have a problem – which means
that by the time they’re diagnosed with
diabetes a lot of damage has already been
done, as someone can have diabetes for a
long time before they experience any
symptoms from complications,” explains
Professor Stephen Gough, senior principal
clinical scientist at Novo Nordisk and former
head of department at the Oxford Centre for
Diabetes Endocrinology & Metabolism
(OCDEM). “If we are to reduce the burden of
diabetes, we must diagnose people earlier –
timing is crucial.”
RISK-BASED SCREENING
The diabetes ’Rule of Halves’ illustrates that
only half of the many millions of people with
diabetes have been diagnosed (see graphic).
The first – and perhaps the most crucial –
step to breaking this rule is therefore to
ensure that people with diabetes are diag-
nosed earlier.
President of the IDF, Dr Shaukat Sadikot,
stresses how important it is that diagnosis
rates are increased: “Wider screening would
enable us to catch diabetes at an earlier stage
of progression when it’s easier to manage
and treat well with less intensive therapy. But
unfortunately the reality is that universal
screening is not possible, because of popu-
lation sizes and the costs involved.”
However, there are a number of well-known
risk factors associated with developing type 2
diabetes (see box), and screening only those
people who have one or more of these risk
factors would, in many countries, be a man-
ageable task.
“Screening people who are at higher risk of
having diabetes, before they exhibit any
symptoms, would have a major impact on
THE ‘RULE
OF HALVES’
ACCORDING TO THE RULE OF HALVES7, ONLY AROUND
6% OF PEOPLE WITH DIABETES LIVE A LIFE FREE FROM
DIABETES-RELATED COMPLICATIONS.*
Of the estimated
415 million people
with diabetes…
about 50% are
diagnosed*…
of whom about
50% receive
care*…
of whom about
50% achieve
treatment
targets**…
of whom about 6%
live a life free from
diabetes-related
complications.
Diabetes
100%
Diagnosed
50%
Receive care
25%
Achieve
treatment
targets
12.5%
Achieve
desired
outcomes
≈ 6%
* Actual rates of diagnosis, treatment, targets and outcomes vary in different countries. ** That is, recommended glucose levels.
health outcomes,” points out Dr Sadikot.
“Not only would we be able to catch people
at an early stage of diabetes who would
respond well to routine management, we
would also be able to help people who are
borderline for diabetes – who have impaired
glucose tolerance, for example – and help
them to delay the onset of diabetes through
lifestyle changes.”
With Changing Diabetes® (see box), Novo
Nordisk is promoting earlier diagnosis of
diabetes through risk-based screening pro-
grammes, so that the risk of diabetes com-
plications is reduced and people with dia-
betes are able to live their lives with as few
limitations as possible.
OPTIMAL CARE
However, even when diagnosed with
diabetes, the Rule of Halves highlights that
only about 12.5% of people receive the ap-
propriate therapy to achieve their treatment
targets. This means that very few can live
their lives free from complications.
Professor Stephen Gough explains that the
problem is that people with diabetes are
often prescribed the simplest treatment, or a
treatment that is not intensive enough to
enable the optimal target to be reached for
the disease stage. “The next step in treatment
is then not taken until blood glucose levels
increase to an unacceptable level,” he says.
“In an ideal world, optimal control of
diabetes is keeping blood glucose, lipid
profiles and blood pressure the same as in
someone without diabetes. This requires
that treatment is initiated earlier and op-
timised continuously. Many people, how-
ever, may stop taking their medicine,
because such tight control can lead to an
increase
in hypoglycaemic attacks and
weight gain,” he continues. “This is where
the new advanced and better-tolerated
treatments come in. They have been de-
signed to minimise some of the unwanted
effects of optimal control and are therefore
easier for people to use to reach and
maintain their targets.”
THE BURDEN OF DIABETES
The diabetes pandemic is a severe burden on
people and society. According to the IDF,
diabetes was a factor in 5 million deaths and
accounted for 673 billion US dollars in health
expenditure, or 11.6% of the total healthcare
spend worldwide, in 2015.1 Added to this is
the impact of reduced employment and
productivity, which together put a significant
economic burden on people living with
diabetes, their families and society. Evidence
shows that early detection, even before
symptoms are evident, and optimal control of
diabetes lead to fewer and less serious
complications, and increased life expectancy.
Studies supporting the cost-effectiveness of
screening and optimising treatment have
proven that, while short-term costs of
treatment and management may increase,
long-term costs for healthcare systems will
substantially decrease.9,10,11 Furthermore, evi-
dence suggests that, in the long term, the
society gain will be three times the initial
investment costs of optimising treatment.12
Enhanced treatment is therefore not only
cost-effective; it may also be cost-saving –
and, ultimately, life-saving.
23
RISK FACTORS FOR
TYPE 2 DIABETES8
Risk factors for type 2 diabetes
include:
• Family history of diabetes
• Overweight
• Unhealthy diet
• Physical inactivity
• Increasing age
• High blood pressure
• Ethnicity
• Impaired glucose tolerance
• History of gestational diabetes
• Poor nutrition during pregnancy.
CHANGING DIABETES®
Changing Diabetes® is Novo Nordisk’s
response to the global diabetes chal-
lenge. The company’s key contribution
is to discover and develop better bio-
logical medicines, but more is needed
to help people defeat diabetes – to live
a life with as few limitations as possible.
Changing Diabetes® addresses the big-
gest unmet needs and focuses on three
priorities: more people with diabetes
must be diagnosed earlier, more people
with diabetes must achieve optimal
control, and diabetes must be on the
agenda of those managing cities, where
two out of three people with diabetes
live today. Read more on p 30. For more
information, visit novonordisk.com/
about-novo -nordisk /changing-
diabetes.
POTENTIAL
COMPLICATIONS OF
UNCONTROLLED DIABETES
STROKE
Strokes are up to
four times as likely
BLINDNESS
Diabetes is a leading
cause of blindness
HEART ATTACK
Heart attack is three times
as likely and heart disease
is up to four times as likely
KIDNEY FAILURE
Total kidney failure
is three times as likely
AMPUTATION
Diabetes is a leading
cause of non-traumatic
lower-limb amputations
FUTURE
DIABETES
MEDICINES
WHAT’S NEXT FROM NOVO NORDISK’S LABS?
“At Novo Nordisk, it’s our fundamental belief that the
future of diabetes treatment is not simply ‘more of the
same’ – it’s something new, innovative and exciting.”
PETER KURTZHALS
HEAD OF GLOBAL RESEARCH
shared his views and wishes with Novo
Nordisk researchers. “I think it’s incredibly
beneficial for people with diabetes to be
engaged with pharmaceutical companies,
so that treatments address not just the
physical burden, but also the psychosocial
burden of this disease. I believe there are
many exciting medicines on the horizon, but
it’s important they hone in on the accuracy
of treatment so that the anxiety of regulating
blood sugar levels is eliminated,” he says. “I
want to be able to compete in a swim meet
and not worry about my blood sugar.”
Within the field of insulin therapy, Novo
Nordisk is developing a faster-acting insulin
and once-weekly long-acting insulins, with
the aim of meeting the needs of people
living with diabetes.
Although a once-weekly injection of insulin
will appeal to many people with diabetes,
some may still prefer to forego injections
entirely – which is why Novo Nordisk started
working on the development of insulin in
tablet form a few years ago. But this is no
easy task, as Peter Kurtzhals explains: “Oral
insulin, as we call it, is a huge challenge, as
we have to figure out a way to protect the
insulin molecule so that it isn’t digested in
the gut, then find a way for this large protein
molecule to pass into the blood stream in
the correct quantities and for it to remain in
the blood for the right amount of time. But
we have high aspirations and are excited
about having brought an oral insulin com-
pound into phase 2 development.”
To further its knowledge and expertise in
the field of protein delivery devices, Novo
Nordisk recently announced a three-year
research collaboration with the Langer
Laboratory at Massachusetts Institute of
Technology, which Peter Kurtzhals has great
hopes for: “Professor Robert Langer and his
team have a phenomenal track record of
being innovative at the interface of bio-
pharmaceuticals and technology. They are
world-leading experts
in creating new
approaches for delivering peptides and
proteins across complex barriers in the body,
such as the intestine. This collaboration
highlights our commitment to oral treatment
options, and we’re already researching the
next generation of oral insulin.” This part-
nership is yet another example of a research
Researchers at Novo Nordisk
are working on new protein-
based medicines which hold
great promise for diabetes
treatment.
Treatment options for diabetes have come a
long way since insulin was first used in 1922,
but the ultimate goal of conveniently
achieving normal blood glucose levels –
with, for example, no risk of hypoglycaemia
or weight gain – has still not been reached.
“The reality is that we’re not there yet –
there are still challenges to overcome with
current diabetes therapy,” explains Peter
Kurtzhals, senior vice president and head of
Global Research at Novo Nordisk. “This is
why we have hundreds of world-class
scientists, based in our cutting-edge research
facilities in Denmark, the US and China,
doing what we do best: finding new and
better protein-based therapeutics. This is a
very exciting time as we have so many
promising leads for new innovative diabetes
medicines.”
INSULIN: THE ULTIMATE TREATMENT
While insulin remains the ultimate therapy13
for many people with diabetes today, much
more can be done to improve insulin
treatment with regard to both efficacy and
convenience – and who knows better than
people with diabetes? Tanner Barton, an
American student-athlete who has type 1
diabetes, was part of a Novo Nordisk patient
workshop in Seattle in 2015, where he
OUR BUSINESS
25
collaboration agreement with a high-profile
academic institution that Novo Nordisk has
recently entered into; other examples include
Oxford University and the Karolinska Institute
in Stockholm, where several joint post-doc
programmes are now in place. “Colla bor-
ations between academia and industry will
be increasingly important to translate new
discoveries into medicines for people with
diabetes,” says Peter Kurtzhals.
THE POTENTIAL OF GLP-1
Novo Nordisk is also continuing its research
into GLP-1 (glucagon-like peptide-1), a class
of medicine which has substantial innovation
potential (see p 26). The company has a
once-weekly GLP-1 analogue semaglutide
in phase 3 and will soon take its once-daily
oral GLP-1 into phase 3 development. More-
over, it is researching next-generation GLP-1
products as well as new combinations with
insulin to improve treatment outcomes.
To further expand the company’s portfolio
of projects, Novo Nordisk recently an-
nounced its acquisition of a research port-
folio from two biotech companies based in
the US. “These companies are a great
addition to our competences, particu larly in
protein chemistry, and will further strength-
en our pipeline, not least within GLP-1 and
insulin research,” Peter Kurtzhals says.
FINDING A CURE
No matter the advances in diabetes treat-
ment options, the biggest wish for people
with diabetes is still for a cure to be found.
“Because I’m such a passionate type 1
diabetes advocate, I’ve participated in some
amazing outreach opportunities, but don’t
get me wrong – I absolutely want a cure!”
emphasises Tanner Barton. “And I think the
potential for finding a cure in my lifetime is
within reach, if the great minds in this world
come together and work as one.”
Novo Nordisk is committed to finding a cure,
and the company is continuing its stem cell
research in this area. “We’re getting closer
than ever to this goal, but we don’t want to
raise expectations. It’s an extremely difficult
task and we’re investing for the very long
term,” stresses Peter Kurtzhals.
A powerful intervention, although not a
cure per se, is also being investigated by
Novo Nordisk in the form of a compound
that may conserve beta cell function – and
thereby prevent the progression of type 1
diabetes.
“At Novo Nordisk, it’s our fundamental
belief that the future of diabetes treatment
is not simply ‘more of the same’ – it’s
something new, innovative and exciting.
We stand by our aspiration and belief that
we can continue doing better than what’s
on offer now. With each step, we’re getting
closer to the summit and to helping people
with diabetes live a life with as few
limitations as possible,” Peter Kurtzhals
concludes.
NOVO NORDISK ANNUAL REPORT 2015
GLP-1
SMALL PROTEIN, BIG POTENTIAL
Glucagon-like peptide-1 (GLP-1) analogues are a relatively new
therapy for diabetes – but Novo Nordisk has been researching them
for almost a quarter of a century. “GLP-1 is an extremely exciting
peptide,” Executive Vice President and Chief Science Officer Mads
Krogsgaard Thomsen explains. (Peptide is the scientific term for a
small protein.) “We’ve known about its significant role in metabolism
for some time, but only recently have we come to understand some
other roles it plays in the human body. This is opening up new
avenues of research for us.”
Today, Novo Nordisk is the market leader in the GLP-1 segment for
the treatment of type 2 diabetes. Its compound is liraglutide, a GLP-1
analogue marketed under the brand name Victoza® and delivered as
a daily injection. In 2015, the company launched a higher-dose
version of liraglutide under the brand name Saxenda® for the
treatment of obesity. But what excites Mads Krogsgaard Thomsen
most is the pipeline of potential GLP-1 analogue therapies that his
people are working on and which are aimed at diabetes and obesity
as well as other indications.
A POWERFUL LITTLE PROTEIN
Lotte Bjerre Knudsen, scientific vice president within Global Research,
has been a driving force in Novo Nordisk’s GLP-1 research since the
company first became interested in this peptide. “What makes GLP-1
so powerful is that it does several things at the same time – including
lowering blood glucose levels with little risk of hypoglycaemia and
reducing appetite, which may lead to weight loss,” she says.
However, the hormone in its natural state is not a suitable drug
candidate. “GLP-1 has a half-life of less than two minutes in the blood
and therefore can’t be used as a medical therapy in its natural form, so
we needed to use our protein engineering expertise to create a
modified version – an analogue – that will work for 24 hours. We’ve
achieved this by attaching a natural fatty acid to the GLP-1 peptide
that inhibits the elimination of GLP-1. The molecule was named
liraglutide. We first synthesised it in 1997 and were all very proud
when it entered clinical trials,” explains Lotte Bjerre Knudsen.
PIONEERING THERAPY
Liraglutide, which is 97% similar to the naturally occurring human
GLP-1, went on to be launched in 2009 for people with type 2
diabetes and was the first once-daily GLP-1 treatment on the market.
“I didn’t think of the potential market when we began working on
GLP-1; I just knew this molecule had a very interesting biology and I
was focused on doing what we do best, to make it a useful compound
for people with diabetes,” Lotte Bjerre Knudsen says.
Today, over 1 million people with type 2 diabetes globally use
Victoza®. And in 2015, Saxenda® was launched in the US, Canada
and Denmark for the treatment of obesity.
27
27
HOW GLP-1 WORKS
Glucagon-like peptide-1 (GLP-1) is produced by the gut and the brain in response to eating. GLP-1 interacts with
the pancreas to increase the amount of insulin in the body. It stimulates insulin secretion in the beta cells in the
pancreas and reduces glucagon in the alpha cells. It does so in a glucose-dependent manner, which helps lower
fasting and postprandial blood glucose. At the same time, GLP-1 increases feelings of satiety and reduces feelings
of hunger – leading to a reduction in food intake.
counterpart. Oral semaglutide may therefore have the power of GLP-1
combined with the convenience of a tablet.”
NEW AVENUE OF RESEARCH
The potential of GLP-1 analogues for the treatment of conditions
other than diabetes and obesity is also being investigated. Novo
Nordisk plans to initiate a phase 2 clinical programme in 2016 to
investigate semaglutide for the treatment of non-alcoholic steato-
hepatitis (NASH).
A common liver disease with no approved treatments currently,
NASH may progress to cirrhosis, hepatocellular carcinoma and liver
failure. NASH is currently the third most common cause for liver
transplantation and is projected to be the leading cause for liver
transplantation in 2020.14 “The liver handles both glucose and fat
metabolism. GLP-1 therapy therefore appears to be an attractive
approach to treating this type of fatty liver disease because of its dual
effect on blood glucose control and weight loss,” says Mads
Krogsgaard Thomsen.
“Today, we know that GLP-1 plays a key role in many of the biological
processes in our body,” he adds. “I truly believe
that we have so much more to understand,
discover and develop in this area.”
EVEN GREATER POTENTIAL
In the more than six years since Victoza® entered the market, Novo
Nordisk has continued to study the GLP-1 molecule and has sub-
sequently created semaglutide – another GLP-1 analogue that has
shown great potential in phase 2 and 3 clinical trials.
The company’s ever-growing expertise in protein engineering has
enabled researchers to modify the fatty acid attached to the GLP-1
molecule, with the result that semaglutide remains in the blood
plasma longer than liraglutide. This means that semaglutide can be
taken once a week compared with the once-daily administration of
liraglutide.
“I believe that once-weekly semaglutide has great potential as a
treatment for type 2 diabetes,” says Mads Krogsgaard Thomsen.
“The results from phase 2 as well as four phase 3a clinical trials
underscore how powerful this molecule might be.” Semaglutide is
currently completing phase 3a trials for type 2 diabetes and under-
going phase 2 trials for obesity.
NEXT-GENERATION GLP-1
The development of semaglutide has also, for the first time, provided
the opportunity for Novo Nordisk to develop a GLP-1 analogue that
can be taken as a tablet. “When we first began working on GLP-1
analogues, people joked about creating a tablet version, as it was
deemed impossible,” explains Lotte Bjerre Knudsen. “One of the
problems is that the uptake of a protein molecule is greatly reduced
when it’s taken orally – which is a huge problem because you’ll need
to administer a much larger amount, and there’ll be too big a
variability in how it works from day to day in the individual patient.
But because semaglutide is a stable molecule, we’ve been able to get
it to work in a tablet.”
Once-daily oral semaglutide for type 2 diabetes will enter
phase 3 clinical development in February
2016. Mads Krogsgaard Thomsen
says: “Our phase 2 data were
re ally exciting, with oral sema-
glutide efficacy data
matching its injectable
OBESITY CARE
BUILDING THE MARKET
FROM SCRATCH
How do you market a treatment for a disease that many
doctors do not even acknowledge? That is the challenge
facing Novo Nordisk following the launch of Saxenda®,
the company’s therapy for chronic weight management.
For those living with obesity, stigmatisation is
a painful reality of day-to-day life. It is an ugly
societal trope that begins with the bullies in
the school playground, and ends with an
unsympathetic doctor refusing to prescribe
anything other than “eat less, exercise more”.
It is also the main hurdle Novo Nordisk must
overcome if the company is to make a success
of Saxenda® (liraglutide 3 mg), its first foray
into the obesity pharmacotherapy space.
Although the product was recently launched
in the US, where around 35% of the
population has obesity,15 it is by no means
expected to become an overnight success.
“Yes, Saxenda® has huge potential, but it’s
certainly not going to be an instant block-
buster,” explains Jakob Riis, executive vice
president of China, Pacific & Marketing.
“One day, hopefully, but the horizon is much
longer than it is when we’re taking a product
into an established market where prescription
habits are already there.
“You have to remember that many people –
including some doctors and healthcare pro-
fessionals – simply don’t accept that obesity
is a disease. Until we can convince them
otherwise, we’ll struggle to make Saxenda®
live up to its full potential.”
That is why Novo Nordisk has taken a very
focused approach when bringing Saxenda®
to the market, as Jakob Riis explains: “Our
focus is solely on people with a BMI of 35 or
more, as they often need to lose weight
quickly.”
TEN-YEAR PLAN
Novo Nordisk has a 10-year ambition that
starts by educating doctors and payers
about the scientifically proven benefits of
Saxenda®, and culminates in Novo Nordisk
Michael Battaglia
lives in the US and
works as a contractor.
Michael’s BMI is 35.
establishing a leading position within the
treatment of obesity.
scribers and payers that this product actually
does what we say it does.”
“Our first aim is to make sure obesity is
widely recognised as a chronic disease and
that even a moderate weight loss of 5–10%
could have an impact on weight-related
comorbidities,” Jakob Riis explains.
Novo Nordisk’s ambition is to develop a
leading obesity portfolio and pipeline that in
10 years’ time will include several phase 3
programmes – with at least one promising
even greater weight loss efficacy.
One man who knows all about patient
needs is Joe Nadglowski, chief executive
officer of the Obesity Action Coalition (OAC)
– a 50,000 member-strong patient orga n i-
sation dedicated to giving a voice to those
living with obesity across the US. For him,
Novo Nordisk is already making a big
difference – and he is proud to call the com-
pany a partner in his organisation’s fight to
help improve the lives of the 78.6 million
adult Americans affected by the disease.15
“These are fairly daunting tasks and, of
course, we’ll have to fine-tune our strategy
as we go along,” he admits. “However, we
think this ambition – set out over a 10-year
horizon – strikes the right balance between
being ambitious and being achievable.”
It is a plan that has already been put into
action in the US, where Saxenda® was
launched in April 2015. Thanks to the efforts
of Novo Nordisk’s field sales force, who have
been on the road educating potential
prescribers about the product’s safety and
efficacy profile since day one, Saxenda® is
starting to reach those who need it the
most.
“Novo Nordisk is laying the groundwork to
be seen as industry leader in the obesity
space for many years to come,” he says. “In
the US, patients are looking for new options
to treat obesity, so to now have weight-loss
medications approved and available is a
huge boon for those living with the disease.
“But more importantly, Novo Nordisk recog-
nises the fact that not every therapy will
work for every patient, and is therefore
investing in a whole pipeline of future obe-
sity treatments. Couple this with a genuine
desire to engage with and listen to the
patient community, and it’s a recipe for
lasting success.”
PATIENTS BEFORE PROFITS
Although Saxenda® may not be generating
huge amounts of revenue for the company
just yet, Jakob Riis is clear that – initially, at
least – success will not be measured in
dollars and cents.
THE BEGINNING OF THE BEGINNING
So what is next on the obesity agenda?
According to Executive Vice President and
Chief Science Officer Mads Krogsgaard
Thomsen, Saxenda® is just the beginning of
an exciting new chapter for Novo Nordisk.
“In the short term, we’ll be measuring
success more in terms of the benefits it
provides to patients – are they happy with
the level of weight loss? We’ll also be
seeking acknowledgement from both pre-
“With Saxenda®, we can help people under-
stand that obesity is a disease often requiring
medical intervention and gradually build the
market,” he says. “My hope is then that our
Seattle research site, together with our strong
29
academic network, will be able to pick up
new targets and begin creating new bio l-
ogics which can make an even bigger dif-
fe rence in terms of both physical health and
quality of life for people with obesity.”
One molecule already showing great poten-
tial is semaglutide (see p 26). Like lira glutide,
it is a long-acting glucagon-like peptide-1
(GLP-1) analogue, but recent phase 3 study
results suggest it may be significantly more
effective for the treatment of obesity.
According to Mads Krogsgaard Thomsen,
the most impressive results may ultimately be
derived from combination therapies – an area
he describes as ’the playground’ of Novo
Nordisk R&D.
“Ten years down the road we have some very
strong ambitions for new obesity medicines
– specifically, combination therapies that
work synergistically,” he adds.
A glance at the pipeline gives a hint of what
is in store. Aside from semaglutide, there are
already three promising new candidates in
development at Novo Nordisk for the treat-
ment of obesity: NN9030, a novel glucagon
analogue designed to be used in combination
with liraglutide, NN9838, a novel long-acting
amylin analogue, and NN9747, a novel long-
acting PYY analogue (PYY is a human
peptide, secreted in response to a meal, that
has been shown to reduce appetite).
“This is only the beginning of the beginning,”
Mads Krogsgaard Thomsen says. “With our
obesity pipeline and strategy, we’re in a
fantastic position to secure a leadership
position within the field for many years to
come, to the benefit of people who are
struggling with obesity.”
WHAT IS OBESITY?
Obesity is defined as abnormal or excessive fat accumulation that may impair health
for people with a body mass index (BMI) of more than 30. BMI provides the most
convenient population-level measure of overweight and obesity currently available.2
BMI itself, however, does not define health risk. BMI is a simple weight-for-height
index that is commonly used to classify overweight and obesity in adults. It is
calculated by dividing a person’s weight in kilograms by the square of the person’s
height in metres (kg/m2).
OF THE US ADULT POPULATION
(OVER THE AGE OF 20)
HAS OBESITY (BMI >30)*
* Ogden CL, Carroll MD, Kit BK & Flegal KM. Prevalence of Childhood and Adult Obesity in the United States,
2011–2012. The Journal of the American Medical Association 2014; 311(8):806–814.
TACKLING THE RISE OF
DIABETES
IN CITIES
What makes people in cities vulnerable to diabetes, and how
can we prevent people from getting diabetes in the first place?
The inaugural Cities Changing Diabetes Summit saw these
questions and many more discussed, as over 250 international
delegates descended on Copenhagen in November 2015.
Copenhagen, Houston, Mexico City, Shang-
hai and Tianjin. In 2016, Johannesburg and
Vancouver will join the effort to identify,
understand and address the root causes of
diabetes in cities.
UNDERSTANDING THE CHALLENGE
The Cities Changing Diabetes programme
has a three-phase strategy – to map the
challenge, to share learnings with cities
around the world and to act as a catalyst for
action to defeat the rise of diabetes in cities.
The mapping phase provides a foundation
for future interventions, as Jakob Riis,
executive vice president at Novo Nordisk,
explains: “We know that certain urban diets
and lifestyles are driving diabetes, but we
can’t hope to address these issues without
first understanding what lies behind them.
In the same way that Sherlock Holmes asked
‘why didn’t the dog bark?’, so our research
needs to ask intelligent, new questions to
bring about a deeper knowledge of this
unprecedented challenge.”
Cities are home to two-thirds of the world’s
415 million people living with diabetes and,
as the number of people with diabetes
reaches 642 million, it is projected that this
proportion will rise to three in four people
by 2040.1 Whilst cities have the potential to
bring about significant health benefits for
residents, the vast human and economic
burden of diabetes is currently being driven
by the way people live in cities.
In its second year of responding to this
challenge, the Cities Changing Diabetes part-
nership has gathered momentum. Founding
partners Novo Nordisk, University College
London (UCL) and Steno Diabetes Center
have been joined by five study cities –
In 2015, the initial mapping phase resulted
in the completion of the world’s largest
study on urban diabetes, led by UCL in
collaboration with leading researchers in
the five study cities. Trained fieldworkers
under took more than 550 interviews with
people at risk or already diagnosed with
diabetes. This
research
found that vulnerability to diabetes in cities
around the world is influenced far more
than previously thought by social and
cultural factors.
first-of-its-kind
Multiple examples of these factors were
found in each study location and frequently
came as a surprise to experienced re-
searchers. In Mexico City, gender roles
OF PEOPLE WITH DIABETES
LIVE IN URBAN AREAS
1
were seen to directly influence vulnerability
to diabetes as women neglected their own
health to avoid being seen as burdensome.
In Shanghai, the cultural trend for the
denial of hardship meant that people with
diabetes were less likely to seek help from
friends, family or healthcare professionals.
Such was the strength of social and cultural
factors
in Houston that the findings
challenged the traditional notion of dis-
advantage being equal to vulnerability, as
segments of society both with and without
financial constraints had an increased risk
of diabetes.
Importantly for future research and inter-
vention strategies, the findings will be useful
across the diabetes spectrum – from initial
risk through to diagnosis and treat ment.
Furthermore, although the factors manifest
themselves uniquely in different cities, they
will help build a framework that will enable
a consistent approach to under standing
diabetes in other cities around the world.
David Napier, professor of Medical Anthro-
pology, UCL and global academic lead,
believes that the research has moved
traditional thinking about urban diabetes
forward: “For the first time, we can con-
fidently say that we have a holistic under-
standing of vulnerability to diabetes in cities.
In particular, our new-found appreciation of
the cultural and social drivers of the
condition means that we can consider how
and why past interventions may have fallen
short, and consider new solutions for tradi-
tional problems such as diet and inactivity.”
TRANSITION TO ACTION
The Cities Changing Diabetes Summit
marked the first major milestone for the
partnership and provided the first op-
portunity for the partners to come together
to discuss the findings and share local
learnings and experiences. It also provided a
forum for transition, as delegates from 27
countries turned their minds to the action
phase of the programme. To facilitate this
step, keynote speakers and workshops
focused not only on diabetes but also on
urban planning, collaborative working and
peer support.
of Copenhagen,
After opening the Summit, Frank Jensen,
commented:
Mayor
“Through this partnership, we have – on the
one hand – been reaffirmed on why
Copenhagen has succeeded in becoming
such a liveable city. But we’ve also – on the
other hand – realised in which areas we need
to act in order to improve the health and
well-being of our citizens. Having come
together with colleagues from other cities,
partners and expert contributors at this
Summit, we’re now ready to put in place new
solutions that safeguard and improve the
health of our citizens in Copenhagen.”
Across the five cities, the action phase has
been gathering pace throughout 2015.
Through town hall meetings, the partners
have already engaged hundreds of sta ke-
holders, including non-governmental or gani-
sations (NGOs), faith-based groups, employ-
ers, health providers and beyond, to share
local learnings and insights and to form
31
16
action plans. In order to drive the prevention,
early detection and improved treatment of
diabetes, upon leaving the Summit, delegates
voted to focus action on areas including
community-level inter ventions beyond the
traditional scope of clinical care and the
integration of health within urban planning
and municipal policies.
For Novo Nordisk’s part, a further 20 million
US dollars of expert resource and research
funds has been committed to the fight
against urban diabetes by 2020. In addition,
a partnership with C40 – the world’s largest
network of megacities – was announced in
December 2015 to move health up the
agenda of those managing and designing
the world’s urban environments.
Looking ahead, President and CEO of Novo
Nordisk Lars Rebien Sørensen reflected: “We
remain convinced that addressing diabetes in
the urban setting is the right thing to do –
both by our company and by the global
community which we serve. We’re commit-
ted to changing diabetes, and preventing the
rise of this condition through healthy cities is
fundamental to this objective.” Read more
about the Cities Changing Diabetes part-
nership, visit citieschangingdiabetes.com.
30 YEARS
OF CHANGING
HAEMOPHILIA
Building on its experience with NovoSeven®,
Novo Nordisk has in recent years expanded its
presence in haemophilia with NovoThirteen®
and NovoEight®, underscoring its commitment
to help defeat this serious condition.
Not so long ago, the outlook for a person who developed antibodies
(inhibitors) against standard haemophilia treatments was very bleak,
but in June 1985, Novo Nordisk began a groundbreaking project
to develop recombinant factor VIIa – the active ingredient in
NovoSeven®. After more than a decade of development, NovoSeven®
was launched, enabling the blood of inhibitor patients to form stable
clots without the use of standard blood factor treatments. As
NovoSeven® is not derived from human blood plasma, this innovative
product also addressed concerns at the time regarding safety in
relation to blood contamination.
Paul Huggins, who heads Novo Nordisk’s global marketing of bio-
pharmaceuticals in Zurich, Switzerland, appreciates what a big – and
risky – step the development of NovoSeven® was for the com pany.
“The business case was not convincing as the patient popu lation was
only a few thousand people globally. But the company’s management
decided nevertheless that it couldn’t ignore the unmet medical need
as Novo Nordisk had the capabilities to develop a compound that
would potentially meet this need,” he explains.
NovoSeven® went on to become a very important treatment option,
used for the on-demand treatment of bleeding episodes and the
management of bleeding during surgery for people with haemophilia
with inhibitors, acquired haemophilia, factor VII deficiency and
Glanzmann’s thrombasthenia.
GIVING PEOPLE A CHOICE
By the mid-2000s, Novo Nordisk started developing new and
innovative factor VIII, IX and XIII treatments for bleeding disorders.
WHAT IS HAEMOPHILIA?
Haemophilia is an inherited or acquired bleeding disorder that prevents
the blood from clotting. People with haemophilia either partially or
completely lack an essential clotting factor needed to form stable
blood clots. Without treatment, 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 350,000,17 have absent,
decreased or defective production of the blood clotting factor VIII.
People with haemophilia B, of whom there are some 70,000,18 have
deficiencies in producing clotting factor IX. Both types are inherited.
“In 2012, we launched NovoThirteen®, which is marketed as Tretten®
in some countries, for a very small and vulnerable community of
people with congenital factor XIII deficiency, which is an extremely
rare and serious bleeding disorder affecting only about 1,300 people
globally,” says Paul Huggins. “We then had two products for patient
communities which hadn’t previously attracted a lot of attention
from companies engaged in haemophilia – which made the launch
of NovoEight® last year very important to us, as it was our first
treatment for the wider haemophilia community.”
At the time of approval, NovoEight® was the first new recombinant
factor VIII treatment for people with haemophilia in Europe and
Japan for over a decade. It was launched in Europe and Japan in
2014 and in the US in 2015. “NovoEight® has been very well received
in the US; the uptake has exceeded our expectations. Patients like
– and deserve – a choice, which is why I think the haemophilia
community has welcomed NovoEight®,” explains Paul Huggins.
THREE DECADES OF RESEARCH AND DEVELOPMENT
Thirty years on, and Novo Nordisk’s commitment to the haemophilia
community – which began with NovoSeven® – is undiminished.
With its long-acting versions of factor IX (N9-GP) and VIII
(N8-GP), which Novo Nordisk expects to submit for regulatory
approval in 2016 and 2018 respectively, the company aims
to provide even more options for people with haemophilia.
Novo Nordisk also has a long-acting version of a re com bi-
nant factor VIIa in pre-clinical development, which it
hopes will make routine prophylaxis the norm for
people with inhibitors. Moreover, the company is
developing a monoclonal antibody against Tissue Fac-
tor Pathway Inhibitor (TFPI), which is intended for
prophylactic treatment after subcutaneous admin-
i stration (see R&D pipeline on p 21).
NOVO NORDISK HAEMOPHILIA FOUNDATION
On 25 January 2015, the Novo Nordisk Haemophilia Foundation cele-
brated its 10th anniversary. The Foundation is a grant-making non-profit
organisation that strives to improve access to care for people with
haemophilia and allied bleeding disorders. Since it was established, the
Foundation 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.
Carl lives with his mother, father and little sister
in Lyngby, Denmark. Carl is 8 years old and in 2nd
grade and was diagnosed with haemophilia at birth.
OUR BUSINESS
33
Behind every great company are great people. In Novo Nordisk’s case that’s 40,000+
people who day in, day out, play their part in making the complex machinery of a
global organisation work smoothly – with competence, commitment and a passion for
improving the lives of people with diabetes and other serious chronic conditions. Here
are a few numbers about the people behind Novo Nordisk.
EMPLOYEE DEVELOPMENT*
■ Denmark ■ Outside Denmark
40,000
30,000
20,000
10,000
0
2010
2011
2012
2013
2014
2015
PROGRESS IN GENDER DIVERSITY IN MANAGEMENT
Women
Men
Managers/
Team Leaders
Corporate Vice
Presidents/
Vice Presidents/
General Managers
Executive Vice
Presidents/
Senior Vice
Presidents
2015
42%
58%
2010
39%
61%
2015
30%
70%
2010
26%
74%
2015
14%
86%
2010
11%
89%
Total
2015
41%
59%
2010
37.5%
62.5%
MANAGEMENT APPOINTMENTS **
1,373
2015
44%
WOMEN
56%
MEN
1,827
INTERNAL PROMOTIONS ***
2015
51%
WOMEN
49%
MEN
OVERALL
RETENTION RATE ****
ENGAGEMENT
SCORE *****
90.8% 4.3
* Development in the number of employees excl NNIT A/S. ** All appointments to management positions, incl internal promotions and external hires in 2015 excl NNIT A/S. *** Employees moving to
a job at a higher level within a 12-month period excl NNIT A/S. **** Retention of employees excl NNIT A/S. ***** Working the Novo Nordisk Way (scale 1–5).
NOVO NORDISK ANNUAL REPORT 2015 34 OUR BUSINESS
THE FUTURE OF
PHARMACEUTICALS
Most financial analysts and other observers of the pharmaceutical industry
agree on one thing: the industry is changing. In fact, the way most healthcare
products and services are being delivered and paid for is undergoing rapid
change – nowhere more so than in the US, the world’s largest economy and
healthcare market. This article takes a closer look at the changes in the global
healthcare market and how they may affect Novo Nordisk.
THE PHARMACEUTICAL
MARKET’S FOUR HURDLES
NOVO NORDISK ANNUAL REPORT 2015
NOVO NORDISK ANNUAL REPORT 2015 OUR BUSINESS
35
THE GLOBAL PHARMA MARKET IS FORECASTED TO GROW 6% ANNUALLY IN THE
PERIOD 2014–2020: THIS BRINGS THE TOTAL MARKET TO USD 1.4 TRILLION IN 2020.
Global market sales (2014–2020) • US • Emerging markets • Europe • China • Japan • Others
700
Sales (USD billion)
600
500
400
300
200
100
0
CAGR %
(2014–2020)
6.8%
7.4%
3.4%
7.6%
1.3%
4.2%
2014
2015
2016
2017
2018
2019
2020
Source: IMS Market Prognosis Global Sept 2015. At ex-manufacturer price levels, not including rebates and discounts.
All over the world, governments, healthcare professionals, patients,
pharmaceutical companies and a host of intermediaries are engaged in
heated debates and tough negotiations about which patients should
have access to which products and services, at what cost and, let us not
forget, who should foot the bill.
Some will argue (and rightly so) that this is not a new discussion. For as
long as there have been healthcare systems, there have been discussions
about how to balance access, cost and quality – the three foundational
elements of a healthcare system. However, what many patients have
experienced in recent years is that cost containment has become the
dominant consideration when healthcare systems implement new
initiatives or reforms. One consequence is that more patients are
finding themselves denied access to pharmaceuticals and healthcare
services that they would previously have expected to be covered by
their public healthcare system or insurance.
The pharmaceutical industry is feeling the effects of the strong focus on
cost containment in the form of ever-tougher pricing and reimbursement
negotiations, sometimes resulting in reimbursement being denied by a
public healthcare system or, in the US, exclusion from the formularies of
managed care organisations.
When introducing new products, research-based companies are facing
what has become known as the ‘fourth hurdle’ – being required by
payers to demonstrate that their new products, in addition to being of
good quality, effective and safe, also represent good value for money.
To clear this fourth hurdle, companies need to show that their products
are more effective than relevant comparators and that the increased
cost is offset by savings elsewhere in the healthcare system. While this
may not sound like an unreasonable demand, it is often difficult to
meet. One reason is that the benefits of using a newer product may
only become apparent years later – which, for someone charged with
making ends meet in this year’s budget, is not an attractive proposition.
Diabetes drugs serve as a case in point: a new treatment may help a
person with diabetes achieve better control of their blood glucose than
an older product. In the short term, this may give the person a better
quality of life – which is important – but the biggest cost savings are
likely to come much later, from the reduced risk of developing serious
long-term complications from diabetes: blindness, amputations and
nerve damage. In the US, for example, it has been estimated that of the
total healthcare spending on diagnosed diabetes, hospital inpatient
care account for 43%, medicines to treat complications 18%, diabetes
medicines and supplies 12% and other costs 27%.
REAL-WORLD EVIDENCE
Novo Nordisk Executive Vice President Jakob Riis, whose respon-
sibilities include ensuring market access for the company’s products,
mentions another complicating factor when pharmaceutical com-
panies and payers negotiate the pricing and reimbursement of a
product: “There’s no commonly agreed standard for evaluating
whe ther a new treatment will lead to an improved health outcome
for certain patients and the financial value of this. Each healthcare
system seems to do this in its own way.”
One general trend, though, is that payers want more ‘real-world
evidence’ of the benefits of a new product in addition to the data on
efficacy and safety from the clinical trials that formed the basis of its
approval by health authorities. Payers want to know whether similar
results can be achieved in real life, when patients are not part of a
clinical trial.
“We’ll have to find ways to collect and analyse real-world evidence in
a way that satisfies payers. This will be a focus area for our development
and market access organisations in the coming years,” says Jakob Riis.
In this context, he mentions the opportunities presented by an
increasingly digitalised healthcare system and, as an example,
highlights a partnership Novo Nordisk formed with IBM Watson
Health in December 2015: “By combining our leadership in diabetes
care with the analytical power of IBM Watson Health’s cognitive
computing capability, we’ll explore possibilities for improving
diabetes care through the gathering and analysis of real-time, real-
world evidence from current diabetes treatment. If successful, this
will not only help improve the lives of people with diabetes by making
CONTINUED
NOVO NORDISK ANNUAL REPORT 2015 36 OUR BUSINESS
HEALTHCARE PROFESSIONALS ARE CONSOLIDATING
INTO INTEGRATED DELIVERY NETWORKS IN THE US
The pressures on healthcare
professionals and market trends
point in the same direction:
towards organisation and
corporatisation of primary care
PRESSURE TO REDUCE COSTS
MISALIGNED INCENTIVES
HEALTH INFORMATION TECHNOLOGY
FEDERAL & STATE HEALTH REFORM
NEW MODELS OF CARE DELIVERY
Traditional model
Independent practices
and hospitals paid on a
fee-for-service basis
New model
Fully integrated delivery networks
paid for delivering certain
performance or outcome targets
Patient management
GROWING PATIENT EMPOWERMENT
Population management
the management of the condition more simple, effective and
measurable, but will also help satisfy the payers’ demand for real-
world evidence of the benefits of our products.”
THE IMPORTANCE OF INNOVATION
Despite market access challenges and price pressure, the phar ma-
ceutical industry is still expected to grow. The need for more and
better pharmaceuticals keeps growing with ageing populations and
the increasing prevalence of chronic diseases, such as type 2 diabetes,
that come with age, unhealthy eating habits and too little exercise.
At the same time, economic growth in some countries will allow for
more funds to be invested in better healthcare. Given this landscape,
IMS Health, a leading global information provider, predicts that the
pharmaceutical industry will grow global sales by 6% per year
between now and 2020.
Not all companies will do equally well and, for some, the only option
is to let themselves be acquired or merged with another company. In
October 2015, Thomson Reuters reported that more than 850 billion
US dollars of merger and acquisition transactions had been an-
nounced since the start of 2014.
“Novo Nordisk has no plans to engage in such industry consolidation,”
says President and CEO Lars Rebien Sørensen. “I appreciate that such
moves can help boost profits when sales are under pressure, but only
short term. The only way to drive value in the long term is by innovation.
As long as our research and development organisation can continue to
discover new treatments that are first in a new class or significantly
better than products in an existing class, we’ll be able to grow. We
currently have a very strong pipeline of products that we’ll be launching
in the coming years. Our main challenge will be to make them accessible
to as many patients as possible while obtaining a price that reflects the
clinical value the new products bring. That’s no easy task in today’s
healthcare environment, but it’s one we’re determined to carry out.”
The following is an overview of the world’s main pharmaceutical
markets.
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 – this is known as the
managed care segment. One-third is insured through public
programmes, such as Medicare and Medicaid, while around 9% of
Americans are uninsured. The number of people insured through
public programmes is expected to grow, while the number of people
uninsured is expected to drop in the coming years due, among other
reasons, to the public exchanges that were established as part of the
Affordable Care Act. To manage the purchase and delivery of
healthcare, employers and the government contract with inter-
mediaries 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 to manage the use and cost of
pharmaceuticals. Among the most widely used interventions are
generic substitution, quantity limits, prior authorisation (which
means that a medication will only be covered under certain conditions
and subject to individual approval by the health plan) and tightly
controlled Preferred Drug Lists.
FOCUS IS SHIFTING TO VALUE
While, for many years, healthcare in the US was delivered by small,
independent practices and hospitals, and paid for as a fee-for-
service, more and more healthcare providers are now becoming part
of fully integrated delivery networks. Moreover, new payment
models are emerging, with a growing number of accountable care
organisations being paid for delivering certain performance or
outcome targets rather than a fee-for-service.
UNITED STATES
The US is the world’s largest market for pharmaceuticals, accounting
for roughly 44% of global sales. Product success is largely based on
competition on efficacy, safety, quality and price.
At the same time, the managed care segment is consolidating,
leading to fewer, more powerful payers. As a result, rebate nego-
tiations have become tougher for the pharmaceutical industry.
Contracts are generally of shorter duration than before and often
NOVO NORDISK ANNUAL REPORT 2015 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 contracts under this scheme are generally
higher than for private market contracts. Nevertheless, the US, which
in 2015 accounted for 51% of total Novo Nordisk sales, is where the
company expects to generate most of its growth in the coming
years. The main growth drivers are expected to be market share
gains in the insulin market, upgrades to new-generation insulin
products and the continued penetration of GLP-1 products for the
treatment of diabetes and obesity.
EUROPE
Europe has been a market with no or very limited growth for most
pharmaceutical companies for quite some years. This is partly the result
of the depressed economy in many European countries in the wake of
the financial crisis, which has led governments to implement cost-
cutting measures in many shapes and forms. There are currently no
signs that this will change significantly in the near future. IMS predicts
low single-digit growth in the coming years, with almost all growth
coming from speciality drugs. Novo Nordisk also expects very modest
growth in Europe due to the above-mentioned factors, increasing
competition and its high market share in the insulin segment.
CHINA
China is the world’s second largest healthcare market. Annual
growth rates of 15–20% were the norm until recently, as the Chinese
government invested heavily in expanding access to healthcare,
especially in larger cities. Investments came in response to growing
demands from an ageing population increasingly prone to diabetes
and other chronic diseases that often come with urban lifestyles.
However, all signs are that double-digit growth rates are history.
With the slowdown in China’s economic growth in 2014 and 2015,
the government now has a stronger focus on cost containment.
Increased use of essential drug lists and a new drug price review
process serve to force prices down. Moreover, specific measures have
been taken to reduce hospitals’ reliance on drug sales as a source of
income and limit pharmaceutical companies’ access to healthcare
professionals.
China is Novo Nordisk’s second largest market. An estimated 110
million Chinese have diabetes and less than a quarter of them receive
medical care, so despite the factors mentioned above – as well as
increasing competition from international and local competitors –
Novo Nordisk expects continued growth in the coming years, albeit
not at the double-digit growth rates seen in the past.
EMERGING MARKETS
China is far from the only country facing the growing burden of
chronic diseases. Growing economies in Asia, the Middle East, Africa
OUR BUSINESS
37
DIABETES CARE
Value market share by geographic region
• North America
• Europe
• International Operations
• Region China
• Japan & Korea
%
and Latin America are experiencing exactly the same phenomenon.
IMS predicts that close to 50% of pharmaceutical market growth in
2015–2020 will come from these countries as populations grow and
age, and economic growth makes it possible for more people to get
some form of healthcare. At Novo Nordisk, these countries are
grouped under International Operations – a vast and diverse region
of more than 140 countries.
Next to the US, the countries in International Operations represent
Novo Nordisk’s largest growth opportunity in the coming years. Half
of all people with diabetes live in this region, and the number is
growing faster than anywhere else. In many of the countries, there is
both a public and a private market. The public market typically only
reimburses the use of low-priced human insulin vials, while the private
market typically comprises modern insulin and Victoza® paid for by
people who either have private insurance or who can pay out of their
own pockets at prices similar to those in more developed markets.
JAPAN
In Japan, the government will be implementing price revisions,
which, together with the increased utilisation of generics, means
that IMS predicts a flat market. Furthermore, the insulin market is
declining due to the increased use of new oral antidiabetics, which is
why Novo Nordisk, despite success with Tresiba® and Victoza® and
with the launch of Ryzodeg®, expects very modest growth in Japan
in the coming years.
”We currently have a very strong pipeline of products that we’ll be
launching in the coming years. Our main challenge will be to make them
accessible to as many patients as possible while obtaining a price that
reflects the clinical value the new products bring.”
LARS REBIEN SØRENSEN
PRESIDENT AND CEO
20112012201320142015010203040 GLOBAL
DEMAND TRIGGERS
MAJOR PRODUCTION
INVESTMENTS
In 2015, Novo Nordisk announced plans for
major investments in new production plants.
Manufacturing proteins, such as insulin, is a
highly sophisticated
task. While other
pharmaceuticals are manufactured through
a series of chemical syntheses, proteins are
bigger, more complex molecules, and
producing them relies on large investments
in sterile production facilities and an
understanding of working with living cells,
such as yeast, to produce a pure, uniform
product.
“Novo Nordisk is the world’s largest pro-
ducer of insulin and has developed its
production expertise over almost nine
decades,” says Henrik Wulff, executive vice
president and head of Product Supply.
“We’ve been manufacturing insulin since
the 1920s, and the efficient large-scale
production of proteins is one of our core
competences.
“There have been many innovations over
the years as we continuously strive to make
our production processes even more ef-
ficient and stable,” he continues, “and our
focus has stayed the same – on increasing
ambitions: delivering high-quality products
in regulatory compliance and meeting the
increasing global demand for our products.”
Novo Nordisk insulin production
plant in Kalundborg, Denmark.
MEETING GLOBAL DEMAND
The year 2015 was an exciting time for
Product Supply, as Novo Nordisk announced
several plans for major investments in new
production plants over the next five years.
This will also be evident from Novo
Nordisk’s accounts in the coming years,
according to Novo Nordisk’s chief financial
officer, Jesper Brandgaard. Commenting
on investments at Novo Nordisk’s Capital
Markets Day in November 2015, he said:
“Demands to support future product
supply are
rising, and we expect
investments relative to sales will increase in
the years to come.”
investment
largest planned
The
is a
diabetes API (Active Pharmaceutical Ingre-
dient) production site in Clayton, North
Carolina, USA. The site is expected to be
operational in 2020 and is estimated to
create close to 700 new production and
engineering jobs in Clayton, where Novo
Nordisk already employs more than 700
people. A further 100 new jobs will be
created at a new drug product plant in
Måløv, Denmark. Novo Nordisk plans to
invest 2 billion US dollars in these two
facilities in the next five years.
Among other major expansion projects
announced in 2015 is a filling facility in
Hillerød, Denmark, which will produce
me dicines for the treatment of diabetes and
obesity. This 10,300 m2 production facility is
expected to be operational in 2019 and will
add 450 new production and engineering
jobs to the 1,900 jobs already there.
“These and other investments in our manu-
facturing capacity are a response to the
increasing demand for Novo Nordisk’s prod-
ucts, which is mainly driven by the growing
global
incidence of diabetes,” ex plains
Henrik Wulff.
“With the initiation of these large invest-
ments, we plan to have sufficient capacity
for current and future diabetes products
well into the next decade,” he says, “and
with the new facility in Måløv, we’ll be able
to produce protein-based medicines such as
semaglutide in tablet form on a large scale.
This is something only few believed would
be possible just a couple of years ago.”
39
NOVO NORDISK PRODUCTION SITES AROUND THE WORLD
DENMARK
USA
FRANCE
RUSSIA
JAPAN
CHINA
ALGERIA
BRAZIL
STRATEGIC SITES
A strategic site is established
for high-volume production
and can supply worldwide
LOCAL SITES
A local site is established
to meet specific local
requirements
considerable manufacturing expertise and
knowledge, to ensure that we maintain
consistently high standards in our production
processes globally.”
THE ADDED COMPLEXITY
OF AN EXPANDING PORTFOLIO
The complexity of Novo Nordisk’s manu-
facturing has increased in the past few years
as new products have been added to the
company’s existing portfolio at a faster rate
than at any time previously. In addition, new
products are typically more sophis ticated
molecules than first-generation products,
generally demanding more com plex pro-
duction processes.
“Our growing capacity and production
complexity require best-in-class planning
and execution capabilities,” Henrik Wulff
points out. “Product Supply works 24
hours a day, 365 days a year, and has to
fulfil many important tasks worldwide
every day to ensure we succeed in ensuring
high-quality products for more and more
patients.
“Ultimately, it all comes back to the needs
of our patients. They expect high-quality
products and we have to make sure we can
deliver them – on time and in compliance
with the requirements of the authorities –
both now and in the future.”
ADDRESSING LOCAL NEEDS
Meeting local needs is also a priority for
Product Supply, which is why, in April, Novo
Nordisk opened a new insulin formulation
and filling facility in Russia and, in September,
announced that it would be the first western
pharmaceutical company to build a manu-
facturing plant in Iran, for pre-filled insulin
injection devices.
“Local plants allow us to react fast to local
requirements and support our business in
future key markets,” Henrik Wulff says.
SECURING A HIGH-QUALITY SUPPLY
The compliance and quality of products are
the primary focus for all employees in
Product Supply. Every Novo Nordisk ma nu-
facturing facility, no matter where it is
located, must comply fully with international
and national regulations as well as adhere to
the company’s global quality management
system.
“We have a very robust quality management
system at Novo Nordisk, which we rely on
when building competences and organi-
sations across the world,” explains Henrik
Wulff. “We use this system, along with our
ENVIRONMENTAL STRATEGY
DOING
MORE
WITH LESS
By 2020, all Novo Nordisk production facilities
worldwide will be run on renewable power,
but what about its suppliers’ CO2 emissions?
For decades, Novo Nordisk has been fo cus-
ing on reducing its impact on the envi-
ronment, and in 1993 it became one of the
first global companies to report annually on
its environmental performance and set
targets for future improvements.
The environmental strategy has changed
over time since Novo Nordisk’s first Envi-
ronment Department was established in
1973. Initially, the focus was on decreasing
emissions of pollutants to air and water
through so-called end-of-pipe solutions to
ensure compliance. “Today, we have good
systems and controls in place,” says Henrik
Wulff, executive vice president in charge of
Product Supply. “Energy-, water- and waste-
reducing initiatives are part of our normal
operations.”
GHG PROTOCOL
The Greenhouse Gas (GHG) Protocol Initiative is working with
businesses, non-governmental organisations and governments with
the mission to develop internationally accepted GHG accounting and
reporting standards.
The Protocol defines three scopes to help define direct and indirect
emission sources:
1. Direct GHG emissions from sources that are owned or controlled
by the company, for example from production processes.
2. Indirect GHG emissions from the generation of purchased
electricity consumed by the company.
3. Other indirect GHG emissions which are a consequence of the
company’s activities but occur from sources not owned or
controlled by the organisation. This includes emissions associated
with waste, water, business travel, commuting and procurement.
In 2010, Jing Tommy Wan started working as Filling
Professional in Tianjin, China, and in August 2015, he
joined Novo Nordisk Production in Hillerød, Denmark.
OUR BUSINESS
41
FOCUS OF THE NEW CLIMATE AMBITION
RAW MATERIALS
Glucose, ethanol,
plastic, glass
PURCHASED GOODS
Office supplies,
IT equipment
SERVICES
Business flights,
company cars
PRODUCTION
Electricity,
steam, facilities
DISTRIBUTION
Road, air,
sea
WASTE
Production waste,
product waste
For the past 10 years, the environmental
strategy has had a strong focus on reducing
CO2 emissions from Novo Nordisk’s own
production plants. So much so that the
company announced a long-term target in
2006: Novo Nordisk committed to cutting its
production-related CO2 emissions by 10%
within 10 years, using 2004 data as the
baseline.
“At the time, this was a really ambitious
target, which we knew would be difficult to
achieve,” says Vibeke Burchard, senior
global project manager for Novo Nordisk’s
environmental strategy. “We were and still
are a growing company, and forecasts
sho wed our energy consumption would
in crease threefold in this period – yet we
committed to reducing emissions by 10% in
absolute terms.”
RENEWABLE POWER
This focus on emissions from production
sites proved very successful. By implementing
energy efficiency programmes and using
more renewable power – including switch-
ing all its production plants in Denmark to
renewable power from wind farms in the
North Sea – Novo Nordisk actually went on
to achieve this ambition in 2010.
Since then, the company has refined and
optimised its energy management even fur-
ther, and recently announced a bold, new
target: that all Novo Nordisk production
facilities worldwide would be run on renew-
able power by 2020.
“Setting an absolute target of zero CO2
emissions from power used at production
sites in just five years is very ambitious, as
our production is growing to meet the
increasing global demand for our products.
We’ve
renewable
sour ces, including wind and solar power, for
all our production facilities,” says Dorethe
Nielsen, senior director of Corporate Envi-
ronmental Management.
identifying
started
Novo Nordisk recently signed a wind power
contract for its production site in Tianjin,
China, and is currently investigating the use
of renewable power for its plants in Clayton,
North Carolina in the US, and Chartres in
France.
Once all its power consumption comes from
renewable sources, the company aims to
replace the steam supply in its production
facilities, which is currently based on fossil
sources such as coal or gas, with renewable
sources such as biomass or biogas.
The realisation of this ambition recently came
a bit closer when DONG Energy, an energy
company supplying Novo Nordisk with steam
for insulin production in Denmark, initiated a
feasibility study to shift from coal to biomass.
A positive outcome to this study will mean
renewable steam supply from 2019 onwards.
The feasibility study is the result of a partner-
ship with other local companies.
CLIMATE IN FOCUS
Now the company is ready to take the next
step in its environmental strategy. “Once
we’re using renewable energy in all our
production facilities, we’ll have done as much
as we can with direct carbon emis sions,”
Dorethe Nielsen explains. “We’re therefore
broadening the scope of our strategy and will
work on reducing the CO2 impact from so-
called indirect emissions – these are emissions
from sources not controlled by us, such as the
goods and services we purchase, from raw
materials to business flights.”
Novo Nordisk will focus on specific types of
indirect emission, as categorised by the
internationally accepted Greenhouse Gas
Protocol (see box). “We’ll prioritise areas
where we believe there are significant op-
portunities for us to reduce CO2 emissions.
Working closely with our largest suppliers
will be vital, to find out how they’re reducing
emissions and if there’s scope for impro ve-
ment,” she says.
While indirect emissions are a relatively
new area for Novo Nordisk, the company is
already working with key suppliers of raw
materials to promote energy efficiency and
the use of renewable energy.
From recent analyses, Novo Nordisk has
also acquired a good understanding of two
other types of indirect emission: business
flights and leased company cars, and,
according to Dorethe Nielsen, is planning
initiatives to reduce emissions from these
sources. For the other categories, the focus
will initially be on getting solid data based
on which decisions about CO2 reduction
initiatives can be made.
Jakob Riis, executive vice president, is the
chairman of Novo Nordisk’s Social & Envi-
ronmental Committee. He explains the
rationale for the broader scope of the
company’s environmental strategy: “While
we’ll continue to challenge ourselves and
improve in the areas of energy and water
consumption, waste reduction and direct
carbon emissions, we’re ready to broaden
the scope of our responsibility to include
indirect CO2 emissions. With overwhelming
scientific evidence of the increased rate
and impact of climate change, we simply
must set ourselves ambitious targets in this
area,” he says.
“Which indicators to use for measuring
performance is a tricky matter,” he ack-
nowledges. “With all our plants soon
using renewable energy for power, it’s
impossible to keep lowering CO2 emissions
in absolute terms when our company is
growing as much as it is. We have con-
cluded that the best way to measure our
CO2 performance
is to measure CO2
emissions relative to the number of
patients treated with our products, or CO2
emissions per treated patient if you will.
Our ambition is to bring that number
down.”
NOVO NORDISK ANNUAL REPORT 2015
42
MANAGING
RISKS
The pharmaceutical industry is associated
with potentially serious risks that investors
should keep in mind when making investment
decisions. Novo Nordisk is no exception.
Effective enterprise risk management is all about identifying risks
early, assessing them accurately and taking action to mitigate them
so that they will not prevent the company from achieving its business
objectives. Sounds easy, but of course it is more complicated in
reality. Fact is that a well-functioning risk management process is key
to ensuring Novo Nordisk’s long-term business success because risks
are everywhere and some of them can cause serious damage if
managed poorly.
In the pharmaceutical industry, most risks fall into one of the seven
categories listed on the notepad. And while Novo Nordisk’s overall
risk profile – the consolidated assessment of all the risks facing Novo
Nordisk – seldom changes significantly from year to year, individual
risks do.
Jesper Brandgaard, Novo Nordisk’s chief financial officer, heads the
company’s Risk Management Board. As an example of a risk that has
increased in both likelihood and potential impact during 2015, he
cites pressure on Novo Nordisk’s modern insulin prices in China,
which is likely to grow in 2016 due to a new bidding reform which
was implemented in June 2015.
Asked about risks that have become smaller during the year, Jesper
Brandgaard mentions a regulatory risk associated with Tresiba®:
“When we entered the year, we did not know whether the US FDA
would approve Tresiba® based on interim data from the DEVOTE study.
When it turned out that they did, we could remove that risk from our
risk grid.” At the same time, he stresses that the final result of the
DEVOTE study will not be known before the second half of 2016.
As another example, he mentions a specific legal risk, the product
liability lawsuits in the US targeting incretin-based products, in-
cluding Victoza®. In November, a federal judge handling most of the
cases dismissed the cases against Novo Nordisk and other phar-
maceutical companies. Although the ruling has been appealed, this
means the likelihood of a significant financial impact from these
cases has been reduced.
The following is an overview of the seven main types of risk that
Novo Nordisk faces.
DELAYS OR FAILURE OF PIPELINE PRODUCTS
Development of 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 obstacles could lead to the company eventually
deciding to abandon the development of the potential product
candidate. Data from the pharmaceutical industry indicate that there
is a less than 35% likelihood of a biologic diabetes product candidate
in phase 1 ultimately being approved for marketing, while the like li-
hood of success is around 60% for products in phase 2, rising to
around 80% for products in phase 3. However, there is significant
uncertainty regarding the timing and success of the regulatory
approval process.
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.
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 reim-
bursement of products. This is unlikely to change in the fore seeable
future. For Novo Nordisk, reimbursement restrictions pose a sig-
nificant risk when launching a new product such as Tresiba®. Despite
the patient benefits and data supporting the health-eco nomic bene-
fits of this new basal insulin, it is not always possible to obtain market
access under what Novo Nordisk considers reason able conditions. In
some countries, the company may therefore decide not to launch
Tresiba® or other new products unless conditions change.
New products from established or new competitors are another
inherent market risk. In the basal insulin segment, a competitor
launched a biosimilar version of the best-selling modern insulin
product in some markets in 2015 and is likely to launch in the US by
the end of 2016. How and to what extent these events will change
the market dynamics is difficult to assess at present. In addition to
these global risks, in some countries in the International Operations
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 business
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.
QUALITY AND PRODUCT SAFETY ISSUES
Quality and product safety issues may arise if, for example, a production
facility is not continuously in regulatory 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 longer 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 management
system aims to ensure that the company is in
compliance with all regulatory requirements. It
includes standard operating procedures, quality
and release controls, quality audits, quality impro ve-
ment plans and systematic senior manage ment
reviews.
FINANCIAL RISKS
Novo Nordisk’s main financial risks relate to exchange
rates and tax disputes. Novo Nordisk’s reporting currency
and the functional 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 around the average for the company’s
peer group, in a responsible way. This means paying relevant taxes 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 2015 in note 2.6 on pp 70–71.
INFORMATION TECHNOLOGY RISKS
Well-functioning IT systems are critical for Novo Nordisk’s ability to
operate effectively. Furthermore, they hold confidential information
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 aware-
ness campaigns, access controls, and intrusion detection and pre-
vention 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 the US, Novo Nordisk settled two civil cases with the US Depart-
ment of Justice in June 2011 regarding alleged improper 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. Read more about these and other pending
litigations against Novo Nordisk and investigations involving the
company in note 3.7 on p 78.
The case mentioned above underlines the potential business ethics
or legal 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.
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’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.
44 GOVERNANCE, LEADERSHIP AND SHARES
SHARES
AND CAPITAL STRUCTURE
Through open and proactive communication, the company seeks
to provide the basis for fair and efficient pricing of its shares.
SHARE CAPITAL AND OWNERSHIP
Novo Nordisk’s total share capital of DKK
520,000,000 is divided into an A share capital
of nominally DKK 107,487,200 and a B share
capital of nominally DKK 412,512,800. 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. The Foundation has a dual ob-
jective: to provide a stable basis for the
commercial and research activities conducted
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 2015, Novo A/S also held
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 2015, it is
estimated that shares were geographically
distributed as shown in the chart on the
opposite page. As of 31 December 2015, the
free float of listed B shares was 89.5% (of
which approximately 13.1% are listed as
ADRs), excluding the Novo A/S holding and
Novo Nordisk’s holding of treasury shares
which, as of 31 December 2015, was DKK
10,433,741 nominally. For details about the
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, providing
strategic flexibility to pursue Novo Nordisk’s
vision. Novo Nordisk’s capital structure stra t-
egy offers 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
growth opportunities and potential acqui-
sitions, should be returned to investors. The
company’s dividend policy applies a pharma-
ceutical industry benchmark to ensure a
competitive payout ratio for dividend pay-
ments, which are complemented by share
repurchase programmes. The Board of Dir-
ectors plans to introduce an interim dividend
in August, 2016. 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 2014
recorded in March 2015 was equal to DKK
5.00 per A and B share of DKK 0.20 as well as
for ADRs. This corresponds to a payout ratio
of 48.7%, which is broadly in-line with the
2014 pharma peer group average of 54%.
For 2015, the Board of Directors will propose
a dividend of DKK 6.40, which corresponds
to a payout ratio of 46.6%. Adjusting for the
partial divestment of NNIT A/S, where the
net profit impact was returned to share-
holders through a DKK 2.5 billion expansion
of the 2015 share repurchase programme,
the payout ratio will be 50.1%. Novo Nordisk
does not pay a dividend on its holding of
treasury shares. Shareholders’ enquiries
concerning dividend payments and share-
holder accounts should be addressed to
Investor Service. Read more on the back cover.
share
During the 12-month period beginning 30
January 2015, Novo Nordisk repurchased
shares worth DKK 17.5 billion. Since 2008,
repurchase programme has
the
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 such a programme, financial
institutions are appointed as lead managers
to execute the repurchases independently
and without influence from Novo Nordisk.
SHARE REPURCHASE
PROGRAMME FOR 2016/2017
For the next 12 months, Novo Nordisk has
decided to implement a new share re-
purchase programme. The expected total
repurchase value of B shares amounts to a
cash value of up to DKK 14 billion. Novo
Nordisk expects to implement the majority
of the new share repurchase programme
according to the Safe Harbour Regulation.
The size of the 2016 share repurchase
programme is adjusted for the impact of the
interim dividend. In March 2016, at the
Annual General Meeting, the Board of
Directors will propose a further reduction in
the company’s B share capital, corresponding
to approximately 1.92% of the total share
capital, by cancelling 50,000,000 treasury
shares. After the imple mentation of the
share capital reduction, Novo Nordisk’s
share
to DKK
510,000,000, divided into A share ca pital of
DKK 107,487,200 and B share capital of
DKK 402,512,800.
capital will amount
SHARE PRICE DEVELOPMENT
Novo Nordisk’s share price increased by
54% between its 2014 close of DKK 260.3
and the 30 December 2015 close of DKK
399.9. For comparison, the Danish OMXC20
CAP stock index increased by 29% and the
pharma peer group increased by 4% during
2015. The increase in Novo Nordisk’s share
price during 2015 reflects its sustained
leadership position in the growing diabetes
care market, coupled with a continued
improvement in operating margins and the
progress of key R&D projects, including the
approval of Tresiba® in the US and the cli n-
ical progress with the novel GLP-1 analogue
semaglutide. The total market value of
Novo Nordisk’s B shares, excluding treasury
sha res, was DKK 804 billion as of 30
December 2015.
COMMUNICATION
WITH SHAREHOLDERS
To keep investors updated about perfor m-
ance and the progress of clinical devel-
opment programmes, Novo Nordisk hosts
conference calls with Executive Management
following key events and the release of
financial results. 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
that a number of other investors and poten-
tial investors also have access to the company’s
Management and Investor Relations.
ANALYST COVERAGE
Novo Nordisk is currently covered by 37 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 under ‘Investors’.
Company announcements
from 1995
onwards, financial, social and environmental
results, a calendar of
investor-relevant
events, investor presentations, background
information and so on are also available.
NOVO NORDISK ANNUAL REPORT 2015 SHARE AND OWNERSHIP STRUCTURE
OWNERSHIP STRUCTURE
Novo Nordisk
Foundation
Novo A/S
Institutional and
private investors
75.0% of votes
27.0% of capital
25.0% of votes
73.0% of capital
A shares
537m shares
B shares
2,063m shares
Novo Nordisk A/S
GOVERNANCE, LEADERSHIP AND SHARES
45
GEOGRAPHIC DISTRIBUTION OF SHAREHOLDERS*
% of share capital
2014 2015
%
50
40
30
20
10
0
Note: Treasury shares are 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
420
360
300
240
180
DKK billion
25
20
15
10
5
0
450
360
270
180
90
0
Mar
Jun
2014
Sep
Dec Mar
Sep
Dec
Jun
2015
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015
* Pharma peers comprise: AstraZeneca, Bristol-Myers Squibb, Eli Lilly,
GlaxoSmithKline, J&J, Merck & Co, Novartis, Pfizer, Roche, Sanofi and Teva.
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
40
32
24
16
8
0
(–2%)
(–4%)
(–2%)
(–2%)
600
550
500
450
400
2012
2013
2014
2015
2016E
2012
2013
2014
2015
2016E
Note: Dividends are allocated to the year of dividend pay.
NOVO NORDISK ANNUAL REPORT 2015
CORPORATE
GOVERNANCE
In 2015, the Board of Directors reached its
diversity targets as set out in 2013 and
consequently increased its diversity ambition
even further by setting out new targets for
2019. The Board of Directors established a
Remuneration Committee to enhance the
process for preparing proposals for the
remuneration of the Board of Directors and
Executive Management. Furthermore, the
Board of Directors decided to reorganise
Executive Management to enhance the
Board’s visibility of Novo Nordisk’s
international business operations and support
further development of key leadership talents.
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 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 and 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 p 44.
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 12 mem-
bers, eight of whom are elected by shareholders and four by
employees in Denmark. Novo Nordisk’s Board of Directors met seven
times during 2015.
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 eight 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
* 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. The dividend per share approved at the Annual
General Meeting in March 2015 was DKK 5 for all shares
of DKK 0.20, equivalent to a dividend percentage of
2,500%, making the dividend differentiation in the
Articles of Association less relevant.
47
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,
three shareholder-elected board members are female and six of the
eight shareholder-elected board members are non-Danes. In 2015, the
Board of Directors increased its diversity ambition further and set out
new targets with the aim that by 2019 it will consist of at least two
shareholder-elected board members with Nordic nationality and at
least two shareholder-elected board members with a nationality other
than Nordic – and at least four 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.
The self-assessment conducted in 2015 was facilitated internally and
revealed continued strong performance by the Board and Executive
Management. The process also resulted in the identification of a
number of areas within research, manufacturing and sales where
more insight will be provided to the Board. 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 avai l-
able at novonordisk.com/about_us.
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. Pursuant to the US Securities
Exchange Act, two members qualify as independent while two
members rely on an exemption to the independence requirements.
In addition, two members have been designated as financial experts
as defined by the US Securities and Exchange Commission (SEC).
Under Danish law, two members qualify as independent – of whom
one also qualifies as financial expert. 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 infor-
mation security. In 2015, the Board of Directors elected Liz Hewitt as
Chairman and Jeppe Christiansen, Sylvie Grégoire and Stig Strøbæk
as members. Eivind Kolding was elected as an observer on the Audit
Committee. See novonordisk.com/about_us for a report on the
Audit Committee’s activities.
NOMINATION COMMITTEE
The Nomination Committee consists of five members. Three 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 2015, the Board of Directors elected
Göran Ando as Chairman and Bruno Angelici, Liz Hewitt, Liselotte
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
managerial supervision of the company. Other tasks include review-
ing the fixed asset investment portfolio. In March 2015, the Annual
Hyveled and Mary Szela as members. See novonordisk.com\about_us
for a report on the Nomination Committee’s activities.
REMUNERATION COMMITTEE
The Board of Directors established a Remuneration Committee in
2015. The Remuneration Committee consists of five members. Two
members qualify as independent, while one member is an employee
representative. The chairman of the committee is not independent.
The Remuneration Committee assists the Board with oversight of the
remuneration policy as well as the actual remuneration of board
members, its committees and Executive Management. In 2015, the
Board of Directors elected Göran Ando as Chairman and Jeppe
Christiansen, Thomas Paul Koestler, Søren Thuesen Pedersen and
Mary Szela as members. See novonordisk.com\about_us for a report
on the Remuneration Committee’s activities.
CONTINUED
48 GOVERNANCE, LEADERSHIP AND SHARES
EXECUTIVE MANAGEMENT
Executive Management is responsible for the day-to-day management
of the company. In 2015, one executive left and four executives were
appointed by the Board of Directors. The four new executives were
elevated from leaders of the commercial activities in the US, Europe
and International Operations and of Product Supply to executive vice
presidents and members of Executive Management. The four new
executives are not registered with the Danish Business Authority.
Executive Management now consists of the president & CEO, plus
eight executives. They are responsible for the overall conduct of the
business and all operational matters, the organisation of the
company, 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 its
remuneration. The Chairmanship reviews the performance of the
executives.
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
Remuneration
Committee
Novo Nordisk Way
* The Chairmanship is directly elected by the annual general meeting.
Executive Management
Organisation
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, IT 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 accor d-
ance with the Novo Nordisk Way.
COMPLIANCE WITH
CORPORATE GOVERNANCE CODES
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 governance report at
novonordisk.com/about-novo-nordisk /corporate-governance/
Recommendations-and-practices.html. Novo Nordisk adheres to all but
the following recommendations:
• The responsibility for the remuneration policy applicable to the
employees in general lies with Executive Management and not with
the Remuneration Committee.
• Three employment contracts for Executive Management entered
into before 2008 allow for severance payments of more than 24
months’ fixed base salary plus pension contribution.
• The majority of the Audit Committee’s members and the
Remuneration Committee’s members respectively are not
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-novo-nordisk /corporate-governance/
Recommendations-and-practices.html.
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.
NOVO NORDISK ANNUAL REPORT 2015
REMUNERATION
At the Annual General Meeting in March
2015, the fixed base fee of the Board of
Directors was increased from DKK 500,000 to
DKK 600,000 after not having been adjusted
for four years.
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 pharmaceutical
companies that are similar to Novo Nordisk in
size, complexity and market capitalisation. The
results are presented to the Board of Directors
by the Remuneration Committee at its Oc-
tober meeting. The company strives for sim-
plicity when devising
remuneration
package, and its remuneration principles pro-
vide guidance for the remuneration of the
Board of Directors and Executive Management.
These principles are available at novonordisk.
c o m /a b o u t- n o v o - n o r d i s k /c o r p o r a t e -
governance/remuneration.html.
the
At the October meeting, the Board of
Directors agrees on recommendations for
remuneration levels for the next financial
year. In connection with the approval of the
annual report, the Board endorses the
actual remuneration for the past financial
year and the recommendation on remu-
neration levels for the current financial year.
These are then presented to the annual
general meeting for approval.
TRAVEL AND EXPENSES
All board members who reside outside of
Denmark are paid a fixed travel allowance
for each board meeting. 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. Further in-
formation on travel and expenses is available
at novonordisk.com/about_us.
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 Chair-
manship and members of the company’s
committees, fees for ad hoc tasks and a
travel allowance. Further information on the
remuneration of the Board of Directors is
available at novonordisk.com/about_us.
EXECUTIVE MANAGEMENT’S
REMUNERATION
The remuneration of Novo Nordisk’s Exec-
utive Management is proposed by the Re-
muneration Committee and approved by
the Board of Directors. Remuneration pa ck-
ages for executives comprise a fixed base
salary, a cash-based incentive, a share-based
incentive, a pension contribution and other
GOVERNANCE, LEADERSHIP AND SHARES
49
benefits. For executives on international
assignments, the remuneration package is
generally based on an equalised host co un-
try net salary during the length of the
assignment and relocation benefits includ-
ing accommodation and school arrange-
ments. The split between fixed and variable
remuneration is intended to result in a
reasonable part of the salary being linked to
performance, while promoting sound, long-
term business decisions to meet the com-
pany’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.
CASH-BASED INCENTIVE
The short-term cash-based incentive is
designed to incentivise individual perfor m-
ance. The incentive is dependent on the
achievement of a number of predefined
short-term financial, process, people and
customer targets relating to the executive’s
functional area and linked to goals in the
company’s Balanced Scorecard as well as
the achievement of a number of personal
CONTINUED
BOARD OF DIRECTORS
IN 2015, THE BASE FEE FOR MEMBERS OF THE BOARD OF DIRECTORS WAS DKK 600,000 (DKK 500,000 IN 2014).
DKK million
Göran Ando3,4 (BC, NC and RC)
Jeppe Christiansen (BV, AM and RM)
Bruno Angelici (NM)
Sylvie Grégoire1 (AM)
Liz Hewitt (AC and NM)
Liselotte Hyveled1 (NM)
Thomas Paul Koestler (RM)
Eivind Kolding1 (AO)
Anne Marie Kverneland
Søren Thuesen Pedersen (RM)
Stig Strøbæk (AM)
Mary Szela1 (NM and RM)
Helge Lund2
Hannu Ryöppönen2
Henrik Gürtler2
Ulrik Hjulmand-Lassen2
Total
2015
Fixed
base fee
Fee for
ad hoc tasks and
committee work
Travel
allowance
Total
Fixed
base fee
2014
Fee for
ad hoc tasks and
committee work
Travel
allowance
Total
1.7
1.2
0.6
0.5
0.6
0.6
0.6
0.5
0.6
0.6
0.6
0.5
0.1
0.1
–
–
8.8
–
0.3
0.1
0.2
0.7
0.1
0.1
–
–
0.1
0.3
0.2
0.1
0.1
–
–
2.3
0.1
–
0.1
0.2
0.1
–
0.2
–
–
–
–
0.2
0.1
0.1
–
–
1.1
1.8
1.5
0.8
0.9
1.4
0.7
0.9
0.5
0.6
0.7
0.9
0.9
0.3
0.3
–
–
12.25
1.5
1.0
0.5
–
0.5
0.4
0.5
–
0.5
0.5
0.5
–
0.4
0.5
0.1
0.1
7.0
–
–
0.1
–
0.4
–
–
–
–
0.1
0.3
–
0.2
0.5
–
–
1.6
0.1
–
0.1
–
0.1
–
0.3
–
–
–
–
–
0.1
0.1
–
–
0.8
1.6
1.0
0.7
–
1.0
0.4
0.8
–
0.5
0.6
0.8
–
0.7
1.1
0.1
0.1
9.45
BC = Board chairman, BV = Board vice chairman, AC = Audit Committee chairman, AM = Audit Committee member, AO = Audit Committee observer, NC = Nomination Committee
chairman, NM = Nomination Committee member, RC = Remuneration Committee chairman, RM = Remuneration Committee member.
1. Liselotte Hyveled was fi rst elected in March 2014. Sylvie Grégoire, Eivind Kolding and Mary Szela were fi rst elected in March 2015. 2. Helge Lund and Hannu Ryöppönen resigned
as of March 2015. 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 and the Remuneration Committee. 5. Excluding
social security taxes paid by Novo Nordisk amounting to less than DKK 1 million (less than DKK 1 million in 2014).
NOVO NORDISK ANNUAL REPORT 2015
50 GOVERNANCE, LEADERSHIP AND SHARES
targets relating to the individual executive
and their position. 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 June 2015, the Board of Directors de-
termined that the 2015 maximum bonus
would be a maximum of 12 months’ fixed
base salary plus pension contribution for
the CEO, a maximum of eight-and-a-half
months’ fixed base salary plus pension
contribution for executives on international
assignments and a maximum of eight
months’ fixed base salary plus pension
contribution for the remaining members of
Executive Management based in Denmark.
SHARE-BASED INCENTIVES
The long-term share-based incentive pro-
gramme is designed to promote the collective
performance of Executive Management and
align the interests of executives and share-
holders. 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 com-
pared with planned performance. In line with
Novo Nordisk’s long-term financial targets,
the calculation of economic value creation is
based on reported operating profit after tax,
reduced by a weighted average cost of
cap i tal-based return requirement on average
invested capital.
To a large extent, the sales growth drives the
financial development of the company and
hence economic value creation. The economic
value created can thus be adjusted in a
negative direction if the sales performance is
lower than budgeted sales. 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 re-
garded as particularly important for the
fulfilment of the company’s long-term per -
for m ance. Besides financial and sales growth
targets, the 2015 targets consisted of 16 tar-
gets linked to the company’s Balanced Score-
card 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 submission of
product files to the regulatory authorities in
the US and Europe within a certain time frame,
achievement of marketing authorisations, ex-
ecution of trials and a defined number of
product candidates to enter development
from discovery. Targets within quality related
to recalls and warning letters, and targets
within environment related to the emission of
CO2 from energy consumption for production.
Based on these principles, a proportion of the
calculated economic value creation is allo-
cated to a joint pool for the participants, who
include Executive Management and other
members of the Senior Management Board.
In March 2015, the Board of Directors deter-
mined that the 2015 maximum for Executive
Management as per 1 March 2015 would be
12 months’ fixed base salary including
pension contribution for the CEO and up to
nine months’ fixed base salary plus pension
contribution for the other members of Exec-
utive 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 allo-
cation 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 con-
tribution for the other members of Executive
Management. Further information on Novo
Nordisk’s share-based incentives is available
at novonordisk.com/about_us.
PENSION
Pension contributions are paid to enable
executives to build up an income for retire-
ment.
OTHER BENEFITS
Other benefits are added to ensure that
overall remuneration is competitive and
aligned with local practices.
SEVERANCE PAYMENT
Novo Nordisk may terminate employment by
giving executives 12 months’ notice. Exec-
utives may terminate their employment by
giving Novo Nordisk six months’ notice. In
addition to the notice period, executives are
entitled to a severance payment as described
in the overview of the composition of
executive remuneration. Further information
on Novo Nordisk severance payment is
available at novonordisk.com/about_us.
COMPOSITION OF EXECUTIVE REMUNERATION
2015 ON-TARGET PERFORMANCE
Fixed base salary Cash bonus Share-based incentive Pensions Benefits
CEO
Other registered 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-based incentive
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 eight-and-a-half months’ fixed base salary +
pension per year for executives on international
assignments.
8–12 months’ fixed base salary + pension per year
for executives based in Denmark.
9–12 months’ fixed base salary incl pension per
year.**
25% of fixed base salary and cash-based incentive.
Executive Management receives a minor travel
allowance equal to that of all other employees.
Executive Management receives non-monetary
benefits, such as company cars, phones, etc.
Executives on international assignments may
receive relocation benefits.
Up to 24 months’ fixed base salary + pension.
Three 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’.
** Executives as per 1 March 2015.
NOVO NORDISK ANNUAL REPORT 2015
GOVERNANCE, LEADERSHIP AND SHARES
51
2015 PERFORMANCE TRIGGERS MAXIMUM SHARE ALLOCATION
In 2015, Novo Nordisk exceeded the planned target for economic value creation by more than the 10% incentive threshold. Sales growth in local
currencies was realised at 8.4%, thereby also exceeding the incentive target, while the threshold for the achievement of non-financial targets
was met. Together, this means that participants in the share-based long-term incentive programme will receive the maximum share allocation.
REMUNERATION OF EXECUTIVE MANAGEMENT AND OTHER MEMBERS
REMUNERATION OF EXECUTIVE MANAGEMENT AND OTHER MEMBERS
OF THE SENIOR MANAGEMENT BOARD
OF THE SENIOR MANAGEMENT BOARD
DKK million
DKK million
Executive Management
Lars Rebien Sørensen
Executive Management
Jesper Brandgaard
Lars Rebien Sørensen
Lars Fruergaard Jørgensen
Jesper Brandgaard
Jakob Riis
Lars Fruergaard Jørgensen
Mads Krogsgaard Thomsen
Jakob Riis
Non-registered members of
Mads Krogsgaard Thomsen
Executive Management1, 2
Non-registered members of
Retired members of
Executive Management1, 2
Executive Management:
Retired members of
Kåre Schultz3
Executive Management:
Lise Kingo3
Kåre Schultz3
Share-based incentive
Lise Kingo3
Share-based incentive
Executive Management in total
Fixed
base
Fixed
salary5
base
salary5
10.6
6.0
10.6
5.2
6.0
5.2
5.2
6.0
5.2
6.0
13.8
13.8
2.5
–
2.5
–
–
–
49.35
Cash
bonus
Cash
bonus
Pension
Pension
10.6
4.0
10.6
3.5
4.0
2.8
3.5
4.0
2.8
4.0
12.0
12.0
1.3
–
1.3
–
–
–
38.2
5.3
2.5
5.3
2.2
2.5
2.0
2.2
2.5
2.0
2.5
6.2
6.2
1.0
–
1.0
–
–
–
21.7
2015
2015
Share-
based
Share-
Benefi ts incentive6
based
Benefi ts incentive6
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.8
0.8
0.1
–
0.1
–
–
–
2.4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
44.0
–
44.0
44.0
Fixed
base
Fixed
salary5
base
salary5
10.4
5.8
10.4
4.4
5.8
4.4
4.4
5.8
4.4
5.8
–
–
7.3
4.8
7.3
–
4.8
–
42.95
Total
Total
26.8
12.8
26.8
11.2
12.8
10.3
11.2
12.8
10.3
12.8
32.8
32.8
4.9
–
4.9
44.0
–
44.0
155.6
Cash
bonus
Cash
bonus
Pension
Pension
9.5
3.9
9.5
2.2
3.9
1.8
2.2
3.9
1.8
3.9
–
–
4.3
2.0
4.3
–
2.0
–
27.6
5.0
2.5
5.0
1.6
2.5
1.5
1.6
2.5
1.5
2.5
–
–
3.1
1.7
3.1
–
1.7
–
17.9
2014
2014
Share-
based
Share-
Benefi ts incentive6
based
Benefi ts incentive6
Total
Total
25.2
12.5
25.2
8.5
12.5
8.0
8.5
12.5
8.0
12.5
–
–
15.0
8.8
15.0
27.3
8.8
27.3
117.8
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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
27.3
–
27.3
27.3
42.95
49.35
2.1
2.4
17.9
21.7
27.6
21.9
27.3
47.8
47.8
28.7
18.3
18.3
20.6
20.6
22.2
22.2
38.2
44.0
117.8
73.15
73.15
155.6
172.0
172.0
80.65
80.65
Executive Management in total
Other members of the Senior
Management Board in total4
Other members of the Senior
Management Board in total4
191.7
1. Effective 30 April 2015, Novo Nordisk’s Executive Management was expanded to include four new members: Maziar Mike Doustdar, Jerzy Gruhn, Jesper Høiland and Henrik Wulff,
none of whom are registered with the Danish Business Authority as members of Executive Management of Novo Nordisk A/S. Respective amounts in the table include remuneration for
1. Effective 30 April 2015, Novo Nordisk’s Executive Management was expanded to include four new members: Maziar Mike Doustdar, Jerzy Gruhn, Jesper Høiland and Henrik Wulff,
May to December 2015, with the exception of cash bonus, which covers the full year. 2. Amounts include taxes paid by Novo Nordisk due to the members’ international employment
none of whom are registered with the Danish Business Authority as members of Executive Management of Novo Nordisk A/S. Respective amounts in the table include remuneration for
terms. In addition, Maziar Mike Doustdar, Jerzy Gruhn and Jesper Høiland received benefi ts in 2015 in accordance with Novo Nordisk’s International Assignment Guidelines, such
May to December 2015, with the exception of cash bonus, which covers the full year. 2. Amounts include taxes paid by Novo Nordisk due to the members’ international employment
as accommodation, children’s school fees, international health insurance and other types of insurance, spouse allowance and tax-fi ling support, all offered net of tax to the
terms. In addition, Maziar Mike Doustdar, Jerzy Gruhn and Jesper Høiland received benefi ts in 2015 in accordance with Novo Nordisk’s International Assignment Guidelines, such
assignees. Including tax paid by Novo Nordisk, the benefi ts received in 2015 not included in the above table amount to DKK 5.4 million. 3. Following a change in the distribution of
as accommodation, children’s school fees, international health insurance and other types of insurance, spouse allowance and tax-fi ling support, all offered net of tax to the
responsibilities among the members of Executive Management, President and COO Kåre Schultz left Novo Nordisk as of April 2015. The remuneration of Kåre Schultz up to April
assignees. Including tax paid by Novo Nordisk, the benefi ts received in 2015 not included in the above table amount to DKK 5.4 million. 3. Following a change in the distribution of
2015 is included in the above table, whereas severance payment, including participation in the share-based incentive programme for 2015 and part of 2016, of DKK 72.7 million is not
responsibilities among the members of Executive Management, President and COO Kåre Schultz left Novo Nordisk as of April 2015. The remuneration of Kåre Schultz up to April
included. The remuneration of Lise Kingo for 2014 is also included in the above table, whereas severance payment, including participation in the share-based incentive programme for
2015 is included in the above table, whereas severance payment, including participation in the share-based incentive programme for 2015 and part of 2016, of DKK 72.7 million is not
2015, of DKK 32.2 million is not included. 4. The total remuneration for 2015 includes remuneration of 34 Senior Vice Presidents (31 in 2014), three of whom have retired or left the
included. The remuneration of Lise Kingo for 2014 is also included in the above table, whereas severance payment, including participation in the share-based incentive programme for
company (none in 2014). The 2015 remuneration for the retired Senior Vice Presidents is included in the table above, whereas severance payments of DKK 26 million are not included.
2015, of DKK 32.2 million is not included. 4. The total remuneration for 2015 includes remuneration of 34 Senior Vice Presidents (31 in 2014), three of whom have retired or left the
5. Excluding social security taxes paid amounting to DKK 1.3 million (DKK 0.0 million in 2014) for Executive Management and DKK 1.4 million (DKK 2.7 million in 2014) for other
company (none in 2014). The 2015 remuneration for the retired Senior Vice Presidents is included in the table above, whereas severance payments of DKK 26 million are not included.
members of the Senior Management Board. 6. The joint pool of shares is locked up for three years before it is transferred to the participants employed at the end of the three-year
5. Excluding social security taxes paid amounting to DKK 1.3 million (DKK 0.0 million in 2014) for Executive Management and DKK 1.4 million (DKK 2.7 million in 2014) for other
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. During the lock-up period, the joint pool may
members of the Senior Management Board. 6. The joint pool of shares is locked up for three years before it is transferred to the participants employed at the end of the three-year
potentially be reduced in the event of lower-than-planned value creation in subsequent years. The split between Executive Management and other members is based on the split of
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. During the lock-up period, the joint pool may
participants at the time of the establishment of the pool.
potentially be reduced in the event of lower-than-planned value creation in subsequent years. The split between Executive Management and other members is based on the split of
participants at the time of the establishment of the pool.
191.7
38.9
38.9
28.7
21.6
21.6
21.9
MANAGEMENT’S LONG-TERM INCENTIVE PROGRAMME
MANAGEMENT’S LONG-TERM INCENTIVE PROGRAMME
The shares allocated to the joint pool for 2012 (487,730 shares) were released to the individual participants subsequent to the approval
of the Annual Report 2015 by the Board of Directors and the announcement on 3 February 2016 of the full-year fi nancial results for
The shares allocated to the joint pool for 2012 (487,730 shares) were released to the individual participants subsequent to the approval
2015. Based on the share price at the end of 2015, the value of the released shares is as follows:
of the Annual Report 2015 by the Board of Directors and the announcement on 3 February 2016 of the full-year fi nancial results for
2015. Based on the share price at the end of 2015, the value of the released shares is as follows:
Value as at 31 December 2015 of shares released on 3 February 2016
Value as at 31 December 2015 of shares released on 3 February 2016
Executive Management
Lars Rebien Sørensen
Executive Management
Jesper Brandgaard
Lars Rebien Sørensen
Lars Fruergaard Jørgensen
Jesper Brandgaard
Jakob Riis
Lars Fruergaard Jørgensen
Mads Krogsgaard Thomsen
Jakob Riis
Non-registered members of Executive Management2
Mads Krogsgaard Thomsen
Non-registered members of Executive Management2
Executive Management in total3
Executive Management in total3
Other members of the Senior Management Board in total3
Number
of shares
Number
of shares
Market value1
(DKK million)
Market value1
(DKK million)
41,110
27,335
41,110
13,665
27,335
13,665
13,665
27,335
13,665
40,995
27,335
40,995
164,105
164,105
176,530
16.4
10.9
16.4
5.5
10.9
5.5
5.5
10.9
5.5
16.4
10.9
16.4
65.6
65.6
70.6
Other members of the Senior Management Board in total3
70.6
1. The market value of the shares released in February 2016 is based on the Novo Nordisk B share price of DKK 399.90 at the end of 2015. 2. Including members of Executive
Management not registered with the Danish Business Authority. In addition, 4,000 shares were released to a non-registered member of Executive Management not part of the
1. The market value of the shares released in February 2016 is based on the Novo Nordisk B share price of DKK 399.90 at the end of 2015. 2. Including members of Executive
joint pool for 2012 for the Senior Management Board. 3. In addition, 147,095 shares (market value: DKK 58.8 million) were released to retired Executive Management and Senior
Management not registered with the Danish Business Authority. In addition, 4,000 shares were released to a non-registered member of Executive Management not part of the
Management Board members.
joint pool for 2012 for the Senior Management Board. 3. In addition, 147,095 shares (market value: DKK 58.8 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 31,897 until May 2015 (EUR 117,000 in 2014); as
a board member of Thermo Fisher Scientifi c Inc, from which he received remuneration of USD 223,865 until May 2015 (USD 299,063 in 2014); and as a board member of Carlsberg
Lars Rebien Sørensen serves as a member of the Supervisory Board of Bertelsmann AG, from which he received remuneration of EUR 31,897 until May 2015 (EUR 117,000 in 2014); as
A/S, from which he received remuneration of DKK 838,306 as of March 2015. Jesper Brandgaard serves as chairman of the Board of Directors of SimCorp A/S, from which he received
a board member of Thermo Fisher Scientifi c Inc, from which he received remuneration of USD 223,865 until May 2015 (USD 299,063 in 2014); and as a board member of Carlsberg
remuneration of DKK 730,488 in 2015, including share-based payment for Q1 2015 (DKK 913,500 in 2014, including share-based payment for the full year); and as chairman of the
A/S, from which he received remuneration of DKK 838,306 as of March 2015. Jesper Brandgaard serves as chairman of the Board of Directors of SimCorp A/S, from which he received
board of NNIT A/S, from which he received remuneration of DKK 562,500 as of March 2015 following the IPO of NNIT A/S (DKK 0 in 2014). The remuneration received from NNIT A/S is
remuneration of DKK 730,488 in 2015, including share-based payment for Q1 2015 (DKK 913,500 in 2014, including share-based payment for the full year); and as chairman of the
part of the remuneration of Executive Management presented above. Mads Krogsgaard Thomsen serves as a board member of the University of Copenhagen, from which he received
board of NNIT A/S, from which he received remuneration of DKK 562,500 as of March 2015 following the IPO of NNIT A/S (DKK 0 in 2014). The remuneration received from NNIT A/S is
remuneration of DKK 81,606 in 2015 (DKK 81,200 in 2014). Jakob Riis serves as a board member of ALK-Abelló A/S, from which he received remuneration of DKK 415,000 in 2015
part of the remuneration of Executive Management presented above. Mads Krogsgaard Thomsen serves as a board member of the University of Copenhagen, from which he received
(DKK 375,000 in 2014). Henrik Wulff serves as a board member of AMBU A/S as of December 2015 but did not receive remuneration in 2015.
remuneration of DKK 81,606 in 2015 (DKK 81,200 in 2014). Jakob Riis serves as a board member of ALK-Abelló A/S, from which he received remuneration of DKK 415,000 in 2015
(DKK 375,000 in 2014). Henrik Wulff serves as a board member of AMBU A/S as of December 2015 but did not receive remuneration in 2015.
176,530
52 GOVERNANCE, LEADERSHIP AND SHARES
BOARD OF DIRECTORS
GÖRAN
ANDO
JEPPE
CHRISTIANSEN
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, chair
of the Nomination Committee since 2013 and chair
of the Remuneration Committee since 2015.
Chief executive officer of Fondsmæglerselskabet
Maj Invest A/S, Denmark. Member and vice chair
of the Board of Novo Nordisk A/S since 2013.
Member of the Remuneration Committee and
Audit Committee since 2015.
Management duties: Symphogen A/S, Denmark
(chair), member of the boards of Novo A/S,
Denmark, Molecular Partners AG, Switzerland,
EUSA Pharma Ltd., UK, and ICMEC, 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 Lin-
köping Medical University, Sweden.
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 Pharmaceutical
Company Limited, Japan.
Special competences: Extensive global experience
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.
SYLVIE
GRÉGOIRE
LIZ
HEWITT
LISELOTTE
HYVELED
Formerly president of Human Genetic Therapies,
Shire plc, US and Switzerland (retired). Member of
the Board of Novo Nordisk A/S and the Audit
Committee since 2015.
Management duties: Member of the boards of
Galenica AG, Switzerland and Perkin Elmer Inc.,
US. Chairman of the strategic committee of Tarix
Orphan LLC., US. Advisor to the financial and
biotech community.
Special competences: In-depth knowledge of
the regulatory environment in both the US and
the EU, having experience of all phases of the
product life cycle, including discovery, registration,
pre-launch and managing the life cycle while on
the market. In addition, she has financial insight
from i.a. P&L responsibility.
Education: Pharmacy Doctorate degree (1986)
from the State University of NY at Buffalo, US, BA
in Pharmacy (1984) from Laval University, Canada,
and Science College degree (1980) from Séminaire
de Sherbrooke, Canada.
Formerly Group Director Corporate Affairs of Smith
& Nephew plc, UK (retired). Member of the Board of
Novo Nordisk A/S since 2012, chair of the Audit
Committee since 2015 (member since 2012) and
member of the Nomination Committee since 2013.
Management duties: Member of the board and
chair of the audit committee of Savills plc, and
member of the board and chair of the nomination
committee of Melrose Industries plc, both in the
UK. Senior external member of the audit commit-
tee 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 (Econ) (Hons) (1977) from University
College London, UK, and FCA (UK Institute of
Chartered Accountants) (1982).
Project vice president for Novo Nordisk’s mealtime
insulin projects faster-acting insulin aspart and
liver-preferential mealtime
in Global
Development. Member of the Board of Novo
Nordisk A/S since 2014 and member of the
Nomination Committee since 2015.
insulin
Education: Master of Science (1992) from
Copenhagen University, and Master of Medical
Business Strategies (2011) from Copenhagen
Business School, both in Denmark.
Name (male/female)
First elected
Göran Ando (m)
Jeppe Christiansen (m)
Bruno Angelici (m)
Sylvie Grégoire (f)
Liz Hewitt (f)
Liselotte Hyveled (f)
2005
2013
2011
2015
2012
2014
Term
2016
2016
2016
2016
2016
2018
Nationality
Born
Swedish
Danish
French
Canadian/American
British
Danish
March 1949
November 1959
April 1947
November 1961
November 1956
January 1966
Independence1
Not independent2
Not independent2,4
Independent
Independent4,5
Independent4,5
Not independent3
1. As designated by Nasdaq Copenhagen in accordance with section 3.2.1 of Recommendations on Corporate Governance (updated 2014). 2. Member of Management or the Board of Novo A/S.
3. Elected by employees of Novo Nordisk.
NOVO NORDISK ANNUAL REPORT 2015
GOVERNANCE, LEADERSHIP AND SHARES
53
THOMAS
PAUL
KOESTLER
EIVIND
KOLDING
ANNE MARIE
KVERNELAND
Executive with Vatera Holdings LLC, US. Member
of the Board of Novo Nordisk A/S since 2011 and
member of the Remuneration Committee since
2015.
Management duties: Melinta Therapeutics Inc.,
US (chair). Member of the boards of Momenta
Pharmaceuticals Inc., ImmusanT Inc., Arisaph Phar-
maceuticals Inc. and Edgemont Pharmaceuticals
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 industry in general and how large inter-
national corporations operate. Additional know l-
edge 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.
CEO of Novo A/S, Denmark. Member of the
Board of Novo Nordisk A/S and observer on the
Audit Committee since 2015.
Laboratory technician and union representative.
Member of the Board of Novo Nordisk A/S since
2000.
Management duties: Member of the boards of
NNIT A/S and the Sonion Group, both in Denmark.
Management duties: Member of the Novo
Nordisk Foundation since 2014.
Special competences: Extensive executive expe-
rience in large multinational companies head-
quartered in Denmark within regulated markets,
and significant financial knowledge.
Education: AMP (1994) from Wharton Business
School, US, and Master of Law (1983) from the
University of Copenhagen, Denmark.
Education: Degree in Medical Laboratory Tec h-
nology
(1980) from Copenhagen University
Hospital, Denmark.
SØREN
THUESEN
PEDERSEN
STIG
STRØBÆK
MARY
SZELA
External Affairs director in Quality Intelligence.
Member of the Board of Novo Nordisk A/S since
2006 and member of the Remuneration Committee
since 2015.
Management duties: Member of the boards of
HOFOR A/S, HOFOR Forsyning Holding PS, HOFOR
Forsyning Komplementar A/S and HOFOR Forsyning
A/S (Copenhagen Utilities), all in Denmark.
Education: BSc in Chemical Engineering (1988)
from the Engineering Academy of Denmark.
Electrician and union representative. 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).
CEO of Aegerion Pharmaceuticals, Inc., US.
Member of the Board of Novo Nordisk A/S, the
Remuneration Committee and the Nomination
Committee since 2015. Member of the boards of
Coherus Biosciences, Inc., Receptos Pharma-
ceuticals, Inc., Suneva Medical, Inc. and Aegerion
Pharmaceuticals, Inc., all in the US.
Management duties: Member of the boards of
Coherus Biosciences, Inc., Receptos Pharmaceuticals,
Inc. and Suneva Medical Inc., all in the US.
Special competences: In-depth understanding
of the clinical, regulatory and marketing aspects
of the pharmaceutical industry in North America,
having both operational and strategic experience.
Education: MBA (1991) from the University of
Illinois at Chicago, US, and a BSc nursing degree
(1985) from the University of Illinois at Chicago, US.
Name (male/female)
First elected
Thomas Paul Koestler (m)
Eivind Kolding (m)
Anne Marie Kverneland (f)
Søren Thuesen Pedersen (m)
Stig Strøbæk (m)
Mary Szela (f)
2011
2015
2000
2006
1998
2015
Term
2016
2016
2018
2018
2018
2016
Nationality
Born
American
Danish
Danish
Danish
Danish
American
June 1951
November 1959
July 1956
December 1964
January 1964
May 1963
Independence1
Independent
Not independent2
Not independent3
Not independent3
Not independent3,4
Independent
4. Pursuant to the US Securities Exchange Act, Ms Hewitt and Ms Grégoire qualify as independent Audit Committee members while Mr Christiansen and Mr Strøbæk rely on an exemption to the
independence requirements. 5. Ms Hewitt and Ms Grégoire 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 2015
54 GOVERNANCE, LEADERSHIP AND SHARES
EXECUTIVE MANAGEMENT
LARS
REBIEN
SØRENSEN
President and chief
executive officer
(CEO)
JESPER
BRANDGAARD
Executive vice president
and chief financial
officer (CFO)
MAZIAR
MIKE
DOUSTDAR*
Executive vice
president,
International
Operations
Lars Rebien Sørensen joined Novo Nordisk’s En-
zymes Marketing in 1982. He was appointed
president and chief executive officer in November
2000.
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: Vice chair of the
board of Carlsberg A/S, Denmark.
Other management duties: Chair of the boards
of SimCorp A/S and NNIT A/S, both in Denmark.
Born: October 1954.
Born: October 1963.
Maziar Mike Doustdar joined Novo Nordisk in
1992 as an office clerk in Vienna, Austria. He was
appointed senior vice president of International
Operations in 2013, and in April 2015 he was
appointed executive vice president with respon-
sibility for International Operations.
Born: August 1970.
JERZY
GRUHN
Executive vice
president, Europe
JESPER
HØILAND
Executive vice
president, US
LARS
FRUERGAARD
JØRGENSEN
Executive vice president
and chief of staff
Jerzy Gruhn joined Novo Nordisk in 1996 as
National Sales Manager in Poland. He was appoint-
ed senior vice president of Europe in 2013, and in
April 2015 he was appointed executive vice presi-
dent with responsibility for Europe.
Born: June 1963.
Jesper Høiland joined Novo Nordisk in 1987 as
assistant area manager for the US, Canada,
Australia and New Zealand. He was appointed
senior vice president of North America in 2013,
and in April 2015 he was appointed executive vice
president with responsibility for the US.
Born: September 1960.
Lars Fruergaard Jørgensen joined Novo Nordisk in
1991 as an economist. He was appointed executive
vice president for IT, Quality & Corporate Devel-
opment in January 2013, and in November 2014 he
took over the responsibilities for Corporate People
& Organisation and Business Assurance.
Other management duties: Chair of the board of
NNE Pharmaplan A/S, Denmark.
Born: November 1966.
JAKOB RIIS
Executive vice president,
China, Pacific &
Marketing
MADS
KROGSGAARD
THOMSEN
Executive vice president,
chief science officer
(CSO)
HENRIK
WULFF
Executive vice
president, Product
Supply
Jakob Riis joined Novo Nordisk in 1996 as a health
economist in Marketing. He was appointed senior
vice president for Marketing in 2005. In January
2013, he was appointed executive vice president
and in 2015 he took over responsibility for sales in
the China and Pacific regions.
Other management duties: Chair of the board
of Copenhagen Institute of Interaction Design and
member of the board and chair of the 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 senior vice president of
Diabetes R&D in 1994 and executive vice president
and chief science officer in November 2000.
Henrik Wulff joined Novo Nordisk in 1998 as a
chemist. He was appointed senior vice president
of Product Supply in 2013, and in April 2015 he
was appointed executive vice president of Product
Supply.
Other management duties: Chair of the board
of Steno Diabetes Center A/S and vice chair of the
board of the University of Copenhagen, both in
Denmark.
Other management duties: Chair of the board
of NN Pharmatech A/S and member of the boards
of NNE Pharmaplan A/S and Ambu A/S, all in
Denmark.
Born: December 1960.
Born: November 1970.
* Not registered with the Danish Business Authority as member of Executive Management of Novo Nordisk A/S.
NOVO NORDISK ANNUAL REPORT 2015
CONSOLIDATED FINANCIAL STATEMENTS
55
CONSOLIDATED
FINANCIAL, SOCIAL
AND ENVIRONMENTAL
STATEMENTS 2015
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
Novo Nordisk remains committed to report 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 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 and
business priorities, and how this is reflected in Novo Nordisk’s financial, social
and environmental statements. To provide transparency in the disclosed amounts,
each note includes the relevant accounting policy, key accounting estimates and
numerical disclosure.
NOVO NORDISK ANNUAL REPORT 2015
Novo Nordisk Headquarters, in
Bagsværd north of Copenhagen
in Denmark, designed by
Henning Larsen Architects.
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
– Non-recurring income from the partial divestment of NNIT A/S
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
2015
2014
2013
2.1, 2.2
2.2
107,927
16,188
88,806
14,562
91,739
74,244
2.2
2.2, 2.3
2.2
2.2, 2.5
2.5
28,312
13,608
3,857
3,482
2,376
23,223
13,762
3,537
770
–
83,572
14,140
69,432
23,380
11,733
3,508
682
–
49,444
34,492
31,493
4.9
4.9
85
6,046
167
563
1,702
656
43,483
34,096
32,539
2.6
8,623
7,615
7,355
34,860
26,481
25,184
4.1
4.1
13.56
13.52
10.10
10.07
9.40
9.35
DKK million
Note
2015
2014
2013
STATEMENT OF COMPREHENSIVE INCOME
Net profi t for the year
34,860
26,481
25,184
Other comprehensive income:
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
Remeasurements of defi ned benefi t plans
Items that will not subsequently be reclassifi ed to the Income statement
Other comprehensive income before tax
4.3
4.3
3.5
(669)
2,216
(681)
366
(39)
(1,229)
(2,225)
111
1,232
(3,382)
(37)
(37)
(247)
(247)
1,195
(3,629)
Tax on other comprehensive income, income/(expense)
2.6
(87)
977
Other comprehensive income for the year, net of tax
1,108
(2,652)
(435)
(809)
1,195
75
26
54
54
80
(211)
(131)
Total comprehensive income for the year
35,968
23,829
25,053
NOVO NORDISK ANNUAL REPORT 2015
BALANCE SHEET
AT 31 DECEMBER
DKK million
ASSETS
Intangible assets
Property, plant and equipment
Investment in associated company
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
2015
2014
3.1
3.2
4.8
2.6
4.7
3.3
3.4
4.7
4.2, 4.4, 4.7
4.2, 4.3, 4.7
4.2, 4.4
4.1
4.1
2.6
3.5
3.6
4.4, 4.7
4.7
3.7, 4.7
4.2, 4.3, 4.7
3.6
2,158
25,545
811
6,806
1,339
36,659
12,758
15,485
3,871
2,257
3,542
304
16,923
55,140
1,378
23,136
–
5,399
856
30,769
11,357
13,041
3,210
2,750
1,509
30
14,396
46,293
91,799
77,062
520
(10)
46,816
(357)
530
(11)
41,277
(1,502)
46,969
40,294
6
1,186
2,765
3,957
1,073
4,927
3,777
12,655
1,382
17,059
40,873
44,830
7
1,031
2,041
3,079
720
4,950
2,771
11,051
2,607
11,590
33,689
36,768
91,799
77,062
NOVO NORDISK ANNUAL REPORT 2015
58 CONSOLIDATED FINANCIAL STATEMENTS
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER
DKK million
Net profi t for the year
Note
2015
2014
2013
34,860
26,481
25,184
Adjustment for non-cash items:
Income taxes in Income statement
Depreciation, amortisation and impairment losses
Non-recurring income from the partial divestment of NNIT A/S
included in ‘other operating income’
Other non-cash items
Change in working capital
Interest received
Interest paid
Income taxes paid
Net cash generated from operating activities
Proceeds from the partial divestment of NNIT A/S
Purchase of intangible assets
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Proceeds from sale of other fi nancial assets
Purchase of other fi nancial assets
Sale of marketable securities
Purchase of marketable securities
2.6
3.1, 3.2
2.5
4.6
4.5
2.6
2.5
3.1
3.2
8,623
2,959
(2,526)
5,908
(2,157)
55
(61)
(9,374)
7,615
3,435
–
4,163
(2,148)
131
(78)
(7,907)
7,355
2,799
–
584
(265)
131
(39)
(9,807)
38,287
31,692
25,942
2,303
(1,182)
15
(5,224)
32
(9)
1,500
(3,533)
–
(321)
4
(3,990)
35
(24)
2,232
–
–
(403)
31
(3,238)
29
(3)
811
–
(2,773)
Net cash used in investing activities
(6,098)
(2,064)
Purchase of treasury shares, net
Dividends paid
4.1
4.1
(17,196)
(12,905)
(14,667)
(11,866)
(13,924)
(9,715)
Net cash used in fi nancing activities
(30,101)
(26,533)
(23,639)
Net cash generated from activities
Cash and cash equivalents at the beginning of the year
Exchange gains/(losses) on cash and cash equivalents
2,088
3,095
(470)
13,676
86
10,513
68
11,053
(70)
Cash and cash equivalents at the end of the year
4.4
15,850
13,676
10,513
NOVO NORDISK ANNUAL REPORT 2015
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-
ments
Cash
fl ow
hedges
Tax and
other
items
Total
other
reserves
Total
2015
Balance at the beginning of the year
530
(11)
41,277
(248)
(2,221)
967
(1,502)
40,294
Net profi t for the year
Other comprehensive income for the year
34,860
(37)
(669)
1,535
Total comprehensive income for the year
34,823
(669)
1,535
279
279
1,145
34,860
1,108
1,145
35,968
Transactions with owners:
Dividends (note 4.1)
Share-based payments (note 5.1)
Tax credit related to restricted stock units
(note 2.6)
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
2014
Balance at the beginning of the year
(12,905)
442
366
(17,219)
32
(10)
1
10
(12,905)
442
366
(17,229)
33
–
(10)
46,816
(917)
(686)
1,246
(357)
46,969
(10)
520
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 restricted stock units
(note 2.6)
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 restricted stock units
(note 2.6)
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
(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
NOVO NORDISK ANNUAL REPORT 2015
(10)
550
60 CONSOLIDATED FINANCIAL STATEMENTS
NOTES SECTIONS IN THE CONSOLIDATED FINANCIAL STATEMENTS
Basis of preparation
Results for the year
Operating assets
and liabilities
Capital structure and
financing items
Other disclosures
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 Principal accounting policies and key accounting estimates, p 61
1.2 Changes in accounting policies and disclosures, p 62
1.3 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.
2.1 Net sales and sales deductions, p 63
2.2 Segment information, p 65
2.3 Research and development costs, p 68
2.4 Employee costs, p 69
2.5 Other operating income, net, p 69
2.6 Income taxes and deferred income taxes, p 70
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 72
3.2 Property, plant and equipment, p 73
3.3 Inventories, p 75
3.4 Trade receivables, p 75
3.5 Retirement benefi t obligations, p 76
3.6 Provisions and contingent liabilities, p 77
3.7 Other liabilities, p 78
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 Other non-cash items, p 85
4.7 Financial assets and liabilities, p 85
4.8 Investment in associated company, p 87
4.9 Financial income and expenses, p 87
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 88
5.2 Management’s holdings of Novo Nordisk shares, p 90
5.3 Commitments, p 91
5.4 Related party transactions, p 92
5.5 Fee to statutory auditors, p 92
5.6 Companies in the Novo Nordisk Group, p 93
5.7 Financial defi nitions, p 94
NOVO NORDISK ANNUAL REPORT 2015
SECTION 1 BASIS OF PREPARATION
Basis of preparation
Results for the year
Operating assets
and liabilities
Capital structure and
financing items
Other disclosures
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 PRINCIPAL ACCOUNTING POLICIES
AND KEY ACCOUNTING ESTIMATES
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, associated company,
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 ones listed in the
table below as the most signifi cant accounting policies for the recognition
and measurement of reported amounts.
Key accounting estimates and judgements
The use of reasonable estimates and judgements 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. The estimates identifi ed are those that have a signifi cant risk of
resulting in a material adjustment.
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
reasonable and appropriate based on currently available information.
However, the actual amounts may differ from the amounts estimated as
more detailed information becomes available.
Management regards those listed below to be the key accounting estimates
and judgements used in the preparation of the Consolidated fi nancial
statements.
Please refer to the specifi c notes for further information on the key
accounting estimates and judgements as well as assumptions applied.
Principal accounting policies
Key accounting estimates and judgements
Note
Net sales and sales deductions
Research and development
Derivative fi nancial instruments
Income taxes and deferred income taxes
Property, plant and equipment including impairment
Inventories
Trade receivables
Provisions and contingent liabilities
Sales deductions – estimate of unsettled obligations
–
–
Provision for uncertain tax positions, accrual for income taxes
and deferred tax assets and liabilities
–
Indirect production costs capitalised
Allowance for doubtful trade receivables
Provisions for sales rebates and ongoing legal disputes
2.1
2.3, 3.1 and 3.2
4.3
2.6
3.2
3.3
3.4
3.6
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.
NOVO NORDISK ANNUAL REPORT 2015
62 CONSOLIDATED FINANCIAL STATEMENTS
1.2 CHANGES IN ACCOUNTING POLICIES
AND DISCLOSURES
Adoption of new or amended IFRSs
Based on an assessment of new or amended and revised accounting
standards and interpretations (‘IFRSs’) issued by IASB, and IFRSs endorsed
by the European Union effective on or after 1 January 2015, it has been
assessed that the application of these new IFRSs has not had a material
impact on the Consolidated fi nancial statements in 2015, and Management
does not anticipate any signifi cant impact on future periods from the
adoption of these new IFRSs.
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 2018. 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 completed a preliminary assessment of the
impact of the standard and judged that it will not have any signifi cant
impact on the Consolidated fi nancial statements.
• IASB has issued IFRS 16 ‘Leasing’ with effective date 1 January 2019.
The change in lease accounting requires capitalisation of the majority of
the Group’s operational lease contracts, representing up to 10% of
total assets, which will have an impact on the Group’s assets, and a
corresponding impact on the liabilities. Hence this will affect the fi nancial
ratios related to the balance sheet. The change will have a minor impact
on net profi t as IFRS 16 requires the lease payments to be split between a
depreciation charge included in operating costs and an interest expense on
lease liabilities included in fi nance costs.
1.3 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 has effective power over the entity and has the
right to variable returns from the entity.
Where necessary, adjustments are made to the fi nancial statements of
subsidiaries to bring their accounting policies in line with Novo Nordisk
Group policies. All intra-Group transactions, balances, income and expenses
are eliminated in full when consolidated.
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.
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 equity investments
classifi ed as fi nancial assets available for sale, 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’ statements 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 2015
SECTION 2 RESULTS FOR THE YEAR
Basis of preparation
Results for the year
Operating assets
and liabilities
Capital structure and
financing items
Other disclosures
CONSOLIDATED FINANCIAL STATEMENTS
63
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 Novo Nordisk’s long-term fi nancial target for growth in operating
profi t.
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.
The growth in operating profi t and margin refl ects not only growth in sales,
but also currency impact and the increase in gross margin primarily driven
by a positive product mix due to increased sales of Victoza® and modern
insulins. Further, non-recurring income from the divestment of NNIT A/S has
affected operating profi t positively. There has been a decrease in research
and development costs refl ecting the discontinuation of activities within
infl ammatory disorders in 2014.
The article ‘2015 performance and 2016 outlook’ on p 6 includes Manage-
ment’s review of the results for the year.
Currency fl uctuations impact reported sales growth
Currency fl uctuations have a direct impact on reported Net sales and
reported Operating profi t, though impact on Net profi t is limited. In 2015,
the currency impact on growth in Net sales and Operating profi t is an
increase of 13% point and 23% point respectively (2% point and 3% point
decrease in 2014), 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, which are included in Financial income
and expenses. Hence, reported Net profi t is impacted only 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 a
sensitivity analysis for the key currencies.
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, the Group no longer has
managerial involvement, 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 product returns as well as rebates
and discounts to government agencies, wholesalers, health insurance
companies, managed healthcare organisations and retail customers. 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.
107.9
107.9
34.9
DKK BILLION IN
NET SALES
(+22%)
DKK BILLION
IN NET SALES
(+22%)
49.4
DKK BILLION
IN NET PROFIT
(+32%)
DKK BILLION IN
OPERATING PROFIT
(+43%)
CURRENCY IMPACT ON GROWTH
CURRENCY IMPACT ON GROWTH
Growth local currencies
(cid:81) Growth local currencies (cid:81) Growth DKK
(cid:81) Share of growth regarding NNIT A/S divestment
Share of growth regarding NNIT divestment
Growth DKK
%
%
50
50
40
40
30
30
20
20
10
10
0
0
2014
2014
2015
2015
2014
2014
2015
2015
Net sales
Net sales
Operating profit
Operating profit
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 deductions are estimated and provided for at the time the related
sales are recorded. These estimates of unsettled obligations require use of
judgement, as all conditions are not known at the time of sale, for example
total sales volume to a given customer. Provisions for sales rebates are
adjusted to actual amounts as rebates and discounts are processed.
NOVO NORDISK ANNUAL REPORT 2015
64 CONSOLIDATED FINANCIAL STATEMENTS
2.1 NET SALES AND SALES DEDUCTIONS
(CONTINUED)
Sales discounts and sales rebates are predominantly issued in Region North
America. In addition, political pressure to contain healthcare costs has led
several other countries to impose signifi cant price reductions on pharma-
ceutical products. As such, governments in countries in Region Europe have
implemented concerted austerity measures, while government-mandated
price cuts have been introduced in Region China, Japan and major countries
in Region International Operations.
In the US, signifi cant sales rebates are paid in connection with public
healthcare insurance programmes, namely Medicare and Medicaid, as well
as rebates to pharmacy benefi t managers (PBMs) and managed healthcare
plans.
Key customers in the US include private payers, PBMs and government
payers. Increasingly, PBMs play a key role in negotiating price concessions
with drug manufacturers on behalf of private payers for both the commercial
and government channels, and determining the list of drugs covered in the
Health Plan’s formulary. Specifi cally, there are two primary drivers:
• Payer pressure to reduce the overall drug costs has resulted in greater
focus on negotiating higher rebates from drug manufacturers. Private
payers are increasingly keen to adopt narrow formularies that exclude
certain drugs, while securing higher rebates from the preferred brand.
• Recent industry consolidation among private payers and PBMs has led to
increasing pricing pressure for pharmaceutical companies.
US Managed Care and Medicare
For Managed Care and Medicare, rebates are offered to a number of
PBMs 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.
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. Accruals 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.
US Medicaid
Medicaid is a government insurance programme, and Medicaid rebates have
been calculated using a combination of historical experience, product and
population growth, price increases, and the impact of contracting strategies.
Further, the calculation involves interpretation of relevant regulations that are
subject to changes in interpretative guidance from government authorities.
Although provisions are made for Medicaid 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 from prior periods.
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. Accruals
are calculated based on historical data, and recorded as a reduction in gross
sales at the time the related sales are recorded. Sales returns are related to
damaged or expired products.
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.
GROSS-TO-NET SALES RECONCILIATION
DKK million
Gross sales
2015
2014
2013
182,779
131,841
115,906
US Managed Care and Medicare
US wholesaler charge-backs
US Medicaid rebates
Other US discounts and sales returns
Non-US rebates, discounts and
sales returns
(33,235)
(22,030)
(9,838)
(4,685)
(17,522)
(12,858)
(5,578)
(2,972)
(12,504)
(10,126)
(3,851)
(2,063)
(5,064)
(4,105)
(3,790)
Total gross-to-net sales adjustments
(74,852)
(43,035)
(32,334)
Net sales
107,927
88,806
83,572
Please refer to note 3.6 for further information on sales-related provisions.
NOVO NORDISK ANNUAL REPORT 2015
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 and obesity care and Biopharmaceuticals.
The Diabetes and obesity care business segment includes research, develop-
ment, 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 and hormone replacement therapy. In addition,
costs in relation to infl ammatory disorders were included in the Biopharma-
ceuticals 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. Further, non-recurring income from the partial
divestment of NNIT A/S has not been allocated to 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 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 insulin
Human insulin
Victoza®
Other diabetes and obesity care
2015
2014
2013
2015
2014
2013
2015
2014
2013
Diabetes and obesity care
Biopharmaceuticals
Total
1,438
20,720
11,144
18,300
50,164
11,231
18,027
4,730
658
17,449
9,871
14,217
41,537
10,298
13,426
4,061
143
16,848
9,759
11,546
38,153
10,869
11,633
4,658
Diabetes and obesity care total sales
85,590
69,980
65,456
Haemophilia
Norditropin® (human growth hormone)
Other biopharmaceuticals
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
Income from partial divestment of
NNIT A/S (not allocated to segments)
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
Non-allocated assets1
Total assets
10,647
7,820
3,870
9,304
6,506
3,016
9,266
6,114
2,736
22,337
18,826
18,116
18,116
5.7%
11.5%
107,927
21.5%
8.4%
85,590
22.3%
8.9%
13,725
24,926
10,475
3,051
488
–
33,901
39.6%
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%
22,337
18.6%
6.3%
2,463
3,386
3,133
806
618
–
13,167
58.9%
18,826
3.9%
6.2%
2,080
2,850
4,444
747
254
–
8,959
47.6%
2,514
2,438
2,209
445
997
4,991
3,245
2,651
1,415
1,066
2,231
2,796
3,947
741
172
–
8,573
47.3%
590
990
46,444
40,748
36,436
11,759
10,914
10,525
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%
16,188
28,312
13,608
3,857
1,106
2,376
49,444
45.8%
2,959
3,435
2,799
6,406
4,311
3,641
58,203
33,596
91,799
51,662
25,400
77,062
46,961
23,376
70,337
1. The part of total assets that remains unallocated to either of the two business segments includes Investment in associated company, Deferred income tax assets, Other fi nancial assets,
Tax receivables, Marketable securities, Derivative fi nancial instruments and Cash at bank and on hand.
NOVO NORDISK ANNUAL REPORT 2015
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.
As of 1 January 2016, the geographical regions have been changed to align
with management structure. As such, the US will become a separate region,
and Canada will join Japan and South Korea to form Region Pacifi c, together
with Australia and New Zealand (previously included in International
Operations).
GEOGRAPHICAL AREAS
DKK million
Sales by business segment:
NovoRapid® / NovoLog®
NovoMix® / NovoLog® Mix
Levemir®
Modern insulins (insulin analogues)
Human insulins
Victoza®
Other diabetes and obesity care
Diabetes and obesity care total
Haemophilia
Norditropin® (human growth hormone)
Other biopharmaceuticals
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 is 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.
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.
2015
2014
2013
2015
2014
2013
(cid:74) North America
(cid:74) Europe
12,576
2,837
13,295
28,708
2,094
13,014
1,442
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
4,239
2,181
2,929
9,349
2,014
3,394
1,225
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
45,258
33,949
30,573
15,982
15,616
15,386
5,208
3,626
2,765
4,449
2,750
1,975
4,467
2,273
1,711
2,405
1,675
736
2,189
1,654
691
2,296
1,729
652
Biopharmaceuticals total
11,599
9,174
8,451
4,816
4,534
4,677
Total sales by business and geographical segment
56,857
43,123
39,024
20,798
20,150
20,063
Underlying sales growth in local currencies1
Currency effect (local currency impact)
10.7%
21.1%
10.8%
(0.3%)
17.8%
(3.8%)
1.6%
1.6%
0.2%
0.2%
2.5%
(0.7%)
Total sales growth as reported
31.8%
10.5%
14.0%
3.2%
0.4%
1.8%
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.
3,050
6,618
(25)
12,854
2,215
4,359
(20)
9,131
1,571
3,076
(20)
7,057
19,097
3,856
(139)
65,241
17,411
3,866
(194)
54,526
16,801
3,779
(245)
51,205
SALES BY BUSINESS SEGMENT
(cid:81)(cid:3)Diabetes and obesity care (cid:81)(cid:3)Haemophilia (cid:81)(cid:3)Human growth hormone
(cid:81)(cid:3)Other Biopharmaceuticals
4%
7%
10%
GROWTH ANALYSIS
Local currencies
New generation insulin
Modern insulin
Human insulin
Victoza®
Other diabetes and obesity care
Growth
109%
7%
(1%)
18%
5%
Share of
growth
10%
41%
(1%)
32%
3%
Diabetes and obesity care
9%
85%
Haemophilia
Human growth hormone
Other biopharmaceuticals
Biopharmaceuticals
Total sales
3%
8%
13%
3%
7%
5%
6%
15%
8%
100%
79%
NOVO NORDISK ANNUAL REPORT 2015
CONSOLIDATED FINANCIAL STATEMENTS
67
In 2015, Novo Nordisk had three major wholesalers distributing products
representing respectively 21%, 12% and 11% of total net sales (18%, 10%
and 11% in 2014 and 16%, 11% and 9% in 2013). Net sales to the fi rst two
wholesalers are within both diabetes and biopharmaceuticals, whereas the
third is only within diabetes.
Net sales will be impacted by exchange rate fl uctuations, whereas Financial
income and Financial expenses will be impacted by the corresponding results
of hedging activities. Please refer to notes 4.2, 4.3 and 4.9 for more details
on hedging.
For patent expiry in key markets by product, please refer to note 2.5 to the
Consolidated social statement.
2015
2014
2013
2015
2014
2013
2015
2014
2013
(cid:74) International Operations
(cid:74) Region China
(cid:74) Japan & Korea
2,151
2,458
1,473
6,082
3,262
937
1,058
1,802
2,077
1,344
5,223
2,660
799
820
1,639
1,875
1,290
4,804
2,954
741
692
866
3,036
410
4,312
3,537
213
1,594
618
2,338
334
3,290
3,051
171
1,388
486
1,951
236
2,673
3,022
128
1,163
888
632
193
1,713
324
469
849
839
656
214
1,709
368
280
656
951
789
288
2,028
490
331
471
11,339
9,502
9,191
9,656
7,900
6,986
3,355
3,013
3,320
2,196
1,165
266
1,893
900
245
1,716
853
247
3,627
3,038
2,816
195
15
5
215
171
13
4
188
158
13
4
175
643
1,339
98
602
1,189
101
629
1,246
122
2,080
1,892
1,997
14,966
12,540
12,007
9,871
8,088
7,161
5,435
4,905
5,317
15.4%
4.0%
14.4%
(10.0%)
17.0%
(8.6%)
4.1%
17.9%
13.3%
(0.4%)
12.7%
(0.8%)
5.3%
5.5%
(0.8%)
(6.9%)
(0.1%)
(19.5%)
19.4%
4.4%
8.4%
22.0%
12.9%
11.9%
10.8%
(7.7%)
(19.6%)
953
3,015
(997)
6,765
1,145
2,978
(776)
6,821
1,292
2,196
(716)
5,945
2,291
1,532
0
5,594
2,230
1,538
0
5,629
2,078
1,587
0
5,108
154
464
(5)
1,345
135
300
(5)
955
140
269
(8)
1,022
SALES BY GEOGRAPHICAL AREA
(cid:81)(cid:3)North America (cid:81)(cid:3)Europe (cid:81)(cid:3)International Operations
(cid:81)(cid:3)Region China (cid:81)(cid:3)Japan & Korea
5%
9%
14%
19%
53%
GROWTH ANALYSIS
Local currencies
North America
Europe
International Operations
Region China
Japan & Korea
Total sales
Growth
Share of
growth
11%
2%
15%
4%
5%
62%
4%
26%
4%
4%
8%
100%
NOVO NORDISK ANNUAL REPORT 2015
68 CONSOLIDATED FINANCIAL STATEMENTS
2.3 RESEARCH AND DEVELOPMENT COSTS
BY BUSINESS SEGMENT (NOTE 2.2)
Accounting policies
Novo Nordisk’s research and development is focused on therapeutic proteins
within insulins for diabetes treatment, 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 develop-
ment of the production technology used to manufacture 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.
A very limited part of the research and development activities is recognised
outside 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 5.3.
RESEARCH AND DEVELOPMENT COSTS
DKK million
2015
2014
2013
Diabetes and obesity care
Biopharmaceuticals
10,475
3,133
9,318
4,444
7,786
3,947
Total
13,608
13,762
11,733
HISTORICAL RATIO OF RESEARCH AND DEVELOPMENT
COSTS 2015
(cid:81)(cid:3)Research (cid:81)(cid:3)Development
DIABETES AND OBESITY CARE
20–30%
BIOPHARMACEUTICALS
25–35%
70–80%
65–75%
In total, research comprises 20 –30% and development 70 – 80% of research
and development costs.
The split between research and development will fl uctuate in individual years
depending on the composition of the clinical development portfolio.
Research costs include the costs of the very early stages of the drug
development cycle from the initial drug discovery to the fi rst administration of
the drug to humans. The activities initially focus on identifying a single drug
candidate with a profi le that will support a decision to initiate development
activities. Before selection of the fi nal drug candidate, it is tested in animals
to gather effi cacy, toxicity and pharmacokinetic information.
Development costs are incurred from the start of phase 1, when the drug is
administered to humans for the fi rst time, ie projects captured in the pipeline
overview on p 20. The fi nal product is being developed, and subsequent
clinical trials (phase 2 and 3) are conducted to further test the drug in
humans, using the results from these trials to attempt to obtain marketing
authorisation, permitting Novo Nordisk to market and sell the developed
products.
DKK million
2015
2014
2013
ACTIVITIES WITHIN INFLAMMATORY DISORDERS
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)
7,352
5,584
7,646
5,200
6,587
4,680
247
425
425
491
126
340
Total research and development costs
13,608
13,762
11,733
As percentage of sales
12.6%
15.5%
14.0%
For a review of development in research and development costs, refer to p 7
and p 10, ‘2015 performance and 2016 outlook’.
In September 2014, Management decided to discontinue all research and
development activities within infl ammatory disorders. This was a strategic
decision and as such not based on safety concerns.
In total, a cost of DKK 600 million was recorded as part of research and
development costs in 2014 and negatively impacted operating profi t in 2014
in the Biopharmaceuticals business segment.
NOVO NORDISK ANNUAL REPORT 2015
2.4 EMPLOYEE COSTS
Accounting policies
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.
EMPLOYEE COSTS
DKK million
2015
2014
2013
Wages and salaries
Share-based payment costs (note 5.1)
Pensions – defi ned contribution plans
Pensions – defi ned benefi t plans
(note 3.5)
Other social security contributions
Other employee costs
23,289
442
1,715
21,306
371
1,607
154
1,783
2,117
142
1,617
1,944
19,077
409
1,428
113
1,489
1,891
Total employee costs for the year
29,500
26,987
24,407
Employee costs included in intangible
assets and property, plant and
equipment1
Change in employee costs included
in inventories
Total employee costs
in the Income statement
Included in the Income statement:
Cost of goods sold
Sales and distribution costs
Research and development costs
Administrative costs
Other operating income, net
Total employee costs
in the Income statement
(957)
(866)
(772)
28,352
25,915
23,606
7,239
12,231
5,584
2,658
640
6,224
10,334
5,200
2,426
1,731
5,160
9,831
4,680
2,250
1,685
28,352
25,915
23,606
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 employees2
40,342
Year-end number of full-time employees2 40,638
40,164
40,957
36,144
37,978
2. Full-time equivalent employees in 2014 in NNIT A/S was approximately 2,400.
(191)
(206)
(29)
DKK 108 million.
4. Benefi ts is included in Other employee costs and severance payments is included in
wages and salaries in the table to the left.
CONSOLIDATED FINANCIAL STATEMENTS
69
REMUNERATION TO EXECUTIVE MANAGEMENT AND
BOARD OF DIRECTORS
Effective 30 April 2015, Novo Nordisk’s Executive Management was expanded
to include four new members. Remuneration to the new members has been
included from 30 April 2015.
DKK million
2015
2014
2013
Salary and cash bonus
Pension
Benefi ts4
Share-based incentive
Severance payments1,4
Executive Management in total1,2,3
Fee to Board of Directors
Total
89
22
7
44
73
235
12
247
71
18
2
27
32
150
9
58
15
2
21
–
96
9
159
105
1. Please refer to note 5.1 and ’Remuneration’, pp 49 –51, for further information.
2. EVP Kåre Schulz left Novo Nordisk as of 30 April 2015. The 2015 remuneration for
Kåre Schultz is included in the above table together with severance payments of
DKK 72.7 million. In November 2014 EVP Lise Kingo decided to leave Novo Nordisk.
The 2014 remuneration for Lise Kingo is included in the above table together with
severance payments of DKK 32.2 million.
3. Total remuneration for registered members of Executive Management amounts to
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 wholly owned subsidiary NNE Pharmaplan A/S is
recognised as Other operating income. Other operating income also includes
income from sale of intellectual property rights.
Divested subsidiaries are recognised in the consolidated income statement
until the time when control is lost. Net gain or loss on divestments is
determined as the difference between the sales proceeds and the carrying
amount of net assets.
FINANCIAL IMPACT OF PARTIAL DIVESTMENT OF NNIT A/S
As a result of the Initial Public Offering of NNIT A/S on 6 March 2015, Novo
Nordisk A/S disposed of 74.5% of the 100% interest held in the company.
DKK million
Sales proceeds from partial divestment
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Retained 25.5% investment in NNIT A/S
Fair value revaluation of retained investment
Non-recurring income from divestment of 74.5%
of NNIT A/S
Costs related to the divestment
Net gain recognised in the Income statement as part of
‘Other operating income, net’
Sales proceeds from partial divestment
Cash balance disposed
Consideration received recognised in the
Cash fl ow statement
2015
2,328
(431)
(836)
67
601
153
644
2,526
(150)
2,376
2,328
(25)
2,303
NOVO NORDISK ANNUAL REPORT 2015
70 CONSOLIDATED FINANCIAL STATEMENTS
2.6 INCOME TAXES 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 Equity or 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. The most probable outcome is used as the measurement
method, and 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
2015
2014
2013
Current tax on profi t for the year
Deferred tax on profi t for the year
9,648
(1,130)
8,562
(748)
8,540
(682)
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
8,518
7,814
7,858
3
(313)
(74)
102
114
(429)
DKK million
2015
2014
2013
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 from partial
divestment of NNIT A/S
Non-taxable income less non-tax-
deductible expenses (net)
Effect on deferred tax related to
change in the Danish corporate tax rate
Other
23.5%
24.5%
25.0%
(2.9%)
(1.9%)
(2.0%)
(1.3%)
–
–
0.1%
(0.0%)
(0.0%)
–
0.4%
–
(0.3%)
(0.3%)
(0.1%)
Effective tax rate
19.8%
22.3%
22.6%
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 from partial
divestment of NNIT A/S
Non-taxable income less
non-tax-deductible expenses (net)
Effect on deferred tax related to
change in the Danish corporate tax rate
Other
10,218
8,354
8,135
(1,240)
(623)
(636)
(558)
–
6
(12)
–
197
–
(104)
–
(8)
(99)
(37)
Effective tax amount
8,623
7,615
7,355
The impact of the deviation in foreign subsidiaries’ tax rates compared with
the Danish tax rate is mainly driven by Swiss and US business activities.
INCOME TAXES PAID
DKK million
2015
2014
2013
Income taxes paid in Denmark
Income taxes paid outside Denmark
5,469
3,905
4,936
2,971
7,363
2,444
Total income taxes paid
9,374
7,907
9,807
8,623
7,615
7,355
The income taxes paid in Denmark in 2013 include adjustments arising from
ongoing tax disputes primarily related to transfer pricing from prior periods.
Tax on other comprehensive income
for the year, (income)/expense
87
(977)
211
DEFERRED INCOME TAXES
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
regarding tax disputes related to transfer pricing and reversal of associated
tax liability recognised in prior periods.
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 loss
is offset by currency adjustment of DKK 99 million in 2014 recognised as
current tax in Other comprehensive income in 2015.
Accounting policies
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 on the
distribution of unremitted earnings unless a concrete distribution of earnings
is planned. The potential withholding tax amounts to DKK 288 million for
2015 (DKK 212 million in 2014).
NOVO NORDISK ANNUAL REPORT 2015
2.6 INCOME AND DEFERRED INCOME TAXES (CONTINUED)
DEVELOPMENT IN DEFERRED INCOME TAX ASSETS AND LIABILITIES
CONSOLIDATED FINANCIAL STATEMENTS
71
DKK million
2015
Net deferred tax asset/(liability) at 1 January
Income/(charge) to the Income statement
Income/(charge) to Other comprehensive income
Tax credit related to restricted stock units1
Exchange rate adjustment
Net deferred tax asset/(liability) at 31 December
Classifi ed as follows:
Deferred tax asset at 31 December
Deferred tax liability at 31 December
Property,
plant and
equipment
Intangible
assets
Inventories
Provisions
and
accrued
expenses
Other,
including
tax loss
carry-
forwards
Offset
within
countries
–
Total
5,392
1,028
(87)
356
111
(715)
(18)
–
–
(32)
(765)
219
(984)
15
(368)
–
–
16
2,668
689
236
–
–
2,053
362
8
–
136
1,371
363
(331)
356
(9)
(337)
3,593
2,559
1,750
–
6,800
186
(523)
4,650
(1,057)
2,566
(7)
1,897
(147)
(2,712)
2,712
6,806
(6)
1. In addition, DKK 10 million is recorded related to current tax on restricted stock units charged to equity.
2014
Net deferred tax asset/(liability) at 1 January
Income/(charge) to the Income statement
Income/(charge) to Other comprehensive income
Tax credit related to restricted stock units
Exchange rate adjustment
Net deferred tax asset/(liability) at 31 December
Classifi ed as follows:
Deferred tax asset at 31 December
Deferred tax liability at 31 December
(853)
163
–
–
(25)
(715)
229
(944)
64
(57)
–
–
8
15
1,761
733
174
–
–
1,656
168
69
–
160
931
(373)
833
–
(20)
2,668
2,053
1,371
–
–
3,559
634
1,076
–
123
5,392
286
(271)
3,665
(997)
2,057
(4)
1,435
(64)
(2,273)
2,273
5,399
(7)
SPECIFICATION OF TAX LOSS CARRY-FORWARDS AT 31 DECEMBER
DKK million
Recognised deferred tax loss carry-forwards
Unrecognised tax loss carry-forwards
Classifi ed as follows:
Expiry within one year
Expiry within two to fi ve years
Expiry after more than fi ve years
2015
2014
34
243
0
7
236
32
215
0
8
207
NOVO NORDISK ANNUAL REPORT 2015
72 CONSOLIDATED FINANCIAL STATEMENTS
SECTION 3 OPERATING ASSETS AND LIABILITIES
Basis of preparation
Results for the year
Operating assets
and liabilities
Capital structure and
financing items
Other disclosures
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 2015, OPAT/NOA amounts to 148.7%, representing an increase of more
than 70 percentage points 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 the movement
in the provision for sales rebates in the US, presented as provisions under
current liabilities in the Balance sheet. The movement in 2015 refl ects growth
in US sales, national expansion of the Medicaid programme and changes in
product and rebate programme mix. This is countered by the effect of faster
collection from pharmacy benefi t managers and authorities. The increase in
inventory level partly refl ects additional safety stock and new products. Trade
receivables and fi xed assets have developed in line with net sales.
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.
Research and development projects
Internal research costs are fully charged to the consolidated income
statement in the period in which they are incurred, consistent with industry
practice; please refer to note 2.3.
NOVO NORDISK ANNUAL REPORT 2015
148.7% OPERATING PROFIT
149%
AFTER TAX TO NET
OPERATING ASSETS
OPERATING PROFIT AFTER TAX
TO NET OPERATING ASSETS
MAIN MOVEMENTS IN NET OPERATING ASSETS
Net operating assets
Fixed assets
Inventories
MAIN MOVEMENTS IN NET OPERATING ASSETS
Receivables
Provisions and liabilities
(cid:81) Net operating assets (cid:81) Fixed assets (cid:81) Inventories
(cid:81) Receivables (cid:81) Provisions and liabilities
DKK billion
40
DKK billion
40
30
30
20
20
10
10
0
0
2014
2014
2015
2015
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
on acquisition. However, further internal development costs subsequent to
acquisition are treated in the same way as other internal development costs.
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.
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.
3.1 INTANGIBLE ASSETS (CONTINUED)
3.2 PROPERTY, PLANT AND EQUIPMENT
CONSOLIDATED FINANCIAL STATEMENTS
73
If the carrying amount of intangible assets exceeds the recoverable amount
based on 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.
INTANGIBLE ASSETS
DKK million
Patents and licences
In-process and developed software
Total
2015
2014
1,139
1,019
454
924
2,158
1,378
In 2015, an impairment loss of DKK 243 million (DKK 423 million in 2014)
related to patents and licences was recognised.
Intangible assets not yet in use amount to DKK 1,261 million (DKK 656
million in 2014), primarily patents and licences in relation to research and
development projects. Impairment tests in 2015 and 2014 of patents
and licences not yet in use are based on Management’s projections and
anticipated net present value of estimated future cash flows from
marketable products. 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
2015
2014
Cost of goods sold
Sales and distribution costs
Research and development costs
Other operating income, net
Total amortisation and impairment losses
127
11
247
7
392
105
28
425
8
566
For further information regarding 2014 impairment of infl ammation projects,
please refer to note 2.3.
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. If the asset’s carrying
amount is higher than its estimated recoverable amount, it is written down
to the 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.
Plant and equipment with no alternative use developed as part of a research
and development project is expensed. However, plant and equipment with
an alternative use or used for general research and development purposes
is capitalised and depreciated over its estimated useful life as research and
development costs.
NOVO NORDISK ANNUAL REPORT 2015
74 CONSOLIDATED FINANCIAL STATEMENTS
3.2 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
DKK million
2015
Cost at the beginning of the year
Additions during the year
Disposals during the year
Disposals related to partial divestment of NNIT A/S
Transfer from/(to) other items
Effect of exchange rate adjustment
Land and
buildings
Plant and
machinery
Other
equipment
Assets in
course of
construction
17,391
334
(159)
(188)
658
(33)
20,410
456
(366)
(2)
1,565
(28)
3,882
222
(228)
(657)
264
33
5,801
4,212
–
–
(2,487)
90
Total
47,484
5,224
(753)
(847)
0
62
Cost at the end of the year
18,003
22,035
3,516
7,616
51,170
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
Depreciation reversed related to partial divestment of NNIT A/S
Effect of exchange rate adjustment
6,933
761
8
(140)
(61)
(53)
14,910
1,381
65
(332)
(2)
(122)
2,505
328
24
(215)
(387)
22
Depreciation and impairment losses at the end of the year
7,448
15,900
2,277
–
–
–
–
–
–
–
24,348
2,470
97
(687)
(450)
(153)
25,625
Carrying amount at the end of the year
10,555
6,135
1,239
7,616
25,545
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
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
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 year
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
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
2015
2,008
54
425
53
27
2,567
2014
2,141
36
491
83
118
2,869
NOVO NORDISK ANNUAL REPORT 2015
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 50% of the net inventory value,
refl ecting a lengthy production process compared with low direct raw
material cost. The production of both diabetes and obesity care and
Biopharmaceutical 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 valued 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.
CONSOLIDATED FINANCIAL STATEMENTS
75
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 is monitoring developments closely. 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
Total inventories (gross)
Inventory write-downs at year-end
Total inventories (net)
Indirect production costs included in
work in progress and fi nished goods
Share of total inventories (net)
TRADE RECEIVABLES
DKK million
Trade receivables (gross)
Allowance for doubtful trade receivables
Trade receivables (net)
Trade receivables (net) equals a credit period
of 52 days (54 days in 2014).
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
2015
2014
2,020
8,549
3,608
1,723
7,539
3,260
14,177
12,522
1,419
1,165
12,758
11,357
6,436
50%
5,759
51%
2015
2014
16,651
1,166
14,036
995
15,485
13,041
14,605
880
0
12,664
337
40
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
1,165
698
(192)
(252)
960
467
(123)
(139)
Inventory write-downs at the end of the year
1,419
1,165
There is no inventory carried at net realisable value at 31 December for either
2014 or 2015, except for the fully impaired inventory disclosed in the table.
Trade receivables with credit risk exposure
15,485
13,041
MOVEMENTS 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
995
(28)
(26)
257
(32)
1,166
989
(13)
(11)
57
(27)
995
NOVO NORDISK ANNUAL REPORT 2015
76 CONSOLIDATED FINANCIAL STATEMENTS
3.5 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 set up as a combined defi ned benefi t and defi ned contribution plan,
and is mandatory. The plan in Japan covers all employees and is set up as a
combined defi ned benefi t and defi ned contribution plan. The plan in the US
is structured as a post-retirement healthcare plan covering all employees.
From 2012 this plan was changed into a defi ned contribution plan covering
all US employees.
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 plan 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. Novo Nordisk manages the allocation and
investment of pension plan assets with the purpose of meeting the long-
term objectives. The main objectives are to meet present and future benefi t
obligations, provide suffi cient liquidity to meet such payment requirements
and provide a total return that maximises the ratio of the plan assets to the
plan liabilities by maximising return on the assets at an appropriate level of
risk.
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 benefi t obligation is recognised in the Balance sheet. Costs
recognised for retirement 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.
RETIREMENT BENEFIT OBLIGATIONS
DKK million
Germany
Switzerland
Japan
At the beginning of the year
Current service costs
Past service costs and 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
710
28
–
18
10
–
(5)
2
763
441
12
–
1
22
–
(5)
1
472
246
31
(11)
4
39
11
(4)
28
344
169
3
–
–
24
11
(4)
20
223
318
31
–
3
1
–
(17)
34
370
250
2
–
6
28
–
(17)
27
296
US
381
26
–
15
(24)
–
(9)
44
433
–
–
–
–
9
–
(9)
–
–
Other
320
32
(35)
7
18
14
1
1
358
84
3
(22)
–
13
11
1
1
91
2015
Total
1,975
148
(46)
47
44
25
(34)
109
2014
Total
1,544
121
(2)
49
250
15
(41)
39
2,2682
1,9752
944
20
(22)
7
96
22
(34)
49
1,082
856
24
–
3
85
17
(41)
–
944
291
121
74
433
267
1,186
1,031
1. Remeasurement relates primarily to changes in fi nancial assumptions.
2. Present value of partly funded retirement benefi t obligations amounts to DKK 1,711 million (DKK 1,478 million in 2014). Present value of unfunded retirement benefi t obligations
amounts to DKK 557 million (DKK 497 million in 2014).
NOVO NORDISK ANNUAL REPORT 2015
3.5 RETIREMENT BENEFIT OBLIGATIONS
(CONTINUED)
3.6 PROVISIONS AND CONTINGENT
LIABILITIES
NET RETIREMENT BENEFIT OBLIGATIONS
Accounting policies
CONSOLIDATED FINANCIAL STATEMENTS
77
DKK million
2015
2014
At the beginning of the year
Costs recognised in the Income statement1
Remeasurements recognised in
Other comprehensive income
Employer contributions
Exchange rate adjustment2
1,031
154
37
(96)
60
688
142
247
(85)
39
At the end of the year
1,186
1,031
1. Employee costs comprising service costs, net interest, settlements and plan participant
contributions etc. Please refer to note 2.4.
2. As part of exchange rate adjustments in subsidiaries recognised in Other com-
prehensive income.
Please refer to note 5.3 for a maturity analysis of the 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.
WEIGHTED AVERAGE ASSET ALLOCATION OF FUNDED
RETIREMENT OBLIGATIONS
2015
2014
DKK
million
695
244
91
36
16
%
64%
23%
8%
3%
2%
DKK
million
632
204
76
21
11
%
67%
22%
8%
2%
1%
Coverage insurance1
Bonds
Equities
Cash at bank
Property
Total
1,082
100%
944
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 plan assets in these countries is therefore counterparty
risk against Allianz.
KEY ASSUMPTIONS USED FOR VALUATION
Discount rate
Projected future remuneration increases
2015
2014
Weighted Weighted
average
average
2%
2%
2%
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. Other
assumptions such as medical cost trend rate and infl ation are also considered
in the calculation.
Signifi cant actuarial assumptions for the determination of the retirement
benefi t obligation are discount rate and expected future remuneration
increases. The sensitivity analysis below has been determined based on
reasonably likely changes in the assumptions occurring at the end of the
period.
DKK million
Discount rate
Future remuneration
1 %-point
increase
1 %-point
decrease
(323)
94
414
(84)
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).
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 based on an evaluation of the most
likely outcome. Disputes for which no reliable estimate can be made are
disclosed as contingent liabilities.
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, including Medicaid
and Medicare in the US. Expected rebates are recognised as Provisions when
timing or amount is uncertain. Where absolute amounts are known, the
rebates are recognised as Other liabilities.
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.
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.
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 on 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.
NOVO NORDISK ANNUAL REPORT 2015
78 CONSOLIDATED FINANCIAL STATEMENTS
3.6 PROVISIONS AND CONTINGENT LIABILITIES (CONTINUED)
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
11,002
45,190
(40,958)
–
1,274
936
602
(126)
(52)
37
At the end of the year
Non-current liabilities
Current liabilities
16,508
1,397
–
16,508
1,397
–
797
319
(313)
–
–
803
482
321
2015
Total
13,631
46,618
(41,721)
(56)
1,352
2014
Total
10,493
27,208
(24,754)
(462)
1,146
896
507
(324)
(4)
41
1,116
19,824
13,631
886
230
2,765
17,059
2,041
11,590
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.
For non-current liabilities, provisions for product returns will be utilised in 2017 and 2018 and other provisions will be utilised in 2017. For provisions for legal
disputes, the time of settlement cannot be determined.
PROVISIONS FOR SALES REBATES
(cid:81)(cid:3)2014 (cid:81)(cid:3)2015
DKK million
7500
6000
4500
3000
1500
0
US Medicaid
US Medicare
US Managed
Care
Other Sales
Rebates
On 21 January 2016, the Centers for Medicare & Medicaid Services (CMS)
in the US published its fi nal rule implementing Affordable Care Act changes
to the Medicaid Drug Rebate Program and Medicaid reimbursement for
covered outpatient drugs. The rule creates a regulatory defi nition for
Average Manufacturer Price, the key metric for determining manufacturer
rebates and pharmacy reimbursement under the Medicaid programme,
including Norditropin®. Management has reviewed the implications of the
fi nal rule and assessed that the rule does not have a material impact on
Novo Nordisk’s fi nancial position, operating profi t or cash fl ow for the period
ended 31 December 2015.
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 the US, a number of claims alleging pancreatic cancer and pancreatitis
have been fi led against various incretin-based product manufacturers,
including Novo Nordisk. As of 1 February 2016, Novo Nordisk was named
by 194 plaintiffs in product liability cases related to Victoza® and other
GLP-1/DPP-IV products, predominantly alleging pancreatic cancer. 134 of the
Novo Nordisk plaintiffs have also named other defendants in their lawsuits.
NOVO NORDISK ANNUAL REPORT 2015
Judgement of dismissal has been entered in Novo Nordisk’s favour in the
vast majority of cases naming the company as a defendant. A notice of
appeal has been fi led in both state and federal cases. Currently, Novo Nordisk
does not have any individual trials scheduled in 2016. 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.
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 being conducted by the US
Attorney for the District of Columbia. Novo Nordisk continues to cooperate
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.
Following the launch of NovoEight® (‘N8’) in April 2015, Baxter (now Baxalta)
fi led a complaint regarding patent infringement with the US International
Trade Commission (‘ITC’). The Baxalta patents, which expire in June 2018,
all relate to manufacturing therapeutic protein products, such as Factor VIII.
A parallel lawsuit is pending in the US District Court for the District of New
Jersey but has been stayed pending resolution of the matter in the ITC. Novo
Nordisk does not expect these matters 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 and various ongoing audits and investigations. In
the opinion of Management, neither settlement or continuation of such
proceedings nor such pending audits and investigations are expected to have
a material effect on Novo Nordisk’s fi nancial position, operating profi t or
cash fl ow.
3.7 OTHER LIABILITIES
OTHER LIABILITIES
DKK million
Employee costs payable
Accruals
Accrued rebates
VAT and duties payable
Research and development clinical trials
Amount owed to associated company
Other payables
2015
2014
4,545
4,285
1,555
896
532
259
583
4,454
3,684
912
744
763
–
494
Total other liabilities
12,655
11,051
SECTION 4 CAPITAL STRUCTURE AND FINANCING ITEMS
Basis of preparation
Results for the year
Operating assets
and liabilities
Capital structure and
financing items
Other disclosures
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
is 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. 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 cash distribution to shareholders
In 2015, the net cash distribution to shareholders in the form of dividends
and share repurchases amounts to DKK 30.1 billion compared with free
cash fl ow of DKK 34.2 billion in line with the guiding principle of paying
out excess capital to investors after funding organic growth and potential
acquisitions.
NET PROFIT AND FREE CASH FLOW
NET PROFIT AND FREE CASH FLOW
(cid:81) Net profit (cid:81)(cid:3)Free cash flow
Net profit
Free cash flow
DKK billion
DKK billion
40
40
30
30
20
20
10
10
0
0
2014
2014
2015
2015
88%
88% NET CASH DISTRIBUTED
TO SHAREHOLDERS IN
PERCENT OF FREE CASH FLOW
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:
Share capital 2011
Cancelled in 2012
Cancelled in 2013
Cancelled in 2014
Share capital at the beginning of the year
Cancelled in 2015
Share capital at the end of the year
A share
capital
B share
capital
Total share
capital
107
–
–
–
107
–
107
473
(20)
(10)
(20)
423
(10)
413
580
(20)
(10)
(20)
530
(10)
520
At the end of 2015, the share capital amounted to DKK 107 million in A share capital and DKK 413 million in B share capital (equal to 2,063 million B shares
of DKK 0.20).
NOVO NORDISK ANNUAL REPORT 2015
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 on 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
2.1%
(1.8%)
0.3%
14,787
(13,015)
1,772
(242)
17,229
(33)
2,136
20,862
0.3%
0.0%
1.8%
(0.1%)
–
2.0%
2015
Number of
B shares
of DKK 0.20
(million)
2014
Number of
B shares
of DKK 0.20
(million)
57
(50)
7
(1)
48
(2)
–
52
103
(100)
3
(2)
59
(3)
–
57
Treasury shares are primarily acquired to reduce the company’s share capital. In addition, a limited part is used to fi nance Novo Nordisk’s long-term share-based
incentive programme (restricted stock units) and restricted stock units to employees.
Novo Nordisk’s guiding principle is that any excess capital, after the funding of organic growth opportunities and potential acquisitions, should be returned
to investors. Novo Nordisk applies a pharmaceutical industry payout ratio to dividend payments, which are complemented by share repurchase programmes.
The purchase of treasury shares during the year relates to the remaining part of the 2014 share repurchase programme totalling DKK 1.0 billion and the DKK
17.5 billion share repurchase programme of Novo Nordisk B shares for 2015, of which DKK 1.6 billion remains at year-end. The programme ends on 1 February
2016. Transfer of treasury shares relates to exercised share options, long-term share-based incentive programme and restricted stock units to employees.
The holding of treasury shares amounts to 52,168,703 shares of DKK 0.20 at year-end, corresponding to DKK 10 million of the share capital (56,807,153 shares
and DKK 11 million of the share capital in 2014). At year-end, 7.2 million shares of the holding of treasury B shares are regarded as hedges for the long-term
share-based incentive programme and restricted stock units to employees.
NET CASH DISTRIBUTION TO SHAREHOLDERS
DKK million
Dividends
Share repurchases
Total
2015
2014
2013
12,905
17,196
11,866
14,667
9,715
13,924
30,101
26,533
23,639
At the end of 2015, proposed dividends (not yet declared) of DKK 16,230 million (DKK 6.40 per share) are included in Retained earnings. The declared dividend
included in Retained earnings was DKK 12,905 million (DKK 5.0 per share) in 2014 and DKK 11,866 million (DKK 4.50 per share) in 2013. 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 the 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
2015
2014
2013
34,860
26,481
25,184
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
2,571,219
6,479
2,621,226
8,992
2,679,362
14,263
Average number of shares outstanding, including dilutive effect of options ‘in the money’
in 1,000 shares
2,577,698
2,630,218
2,693,625
Basic earnings per share
Diluted earnings per share
DKK
DKK
13.56
13.52
10.10
10.07
9.40
9.35
1. The dilutive effect has been reduced as the exercise period for options related to the 2006 programme has matured. For further information on the outstanding share bonus pool and
options, please refer to note 5.1.
NOVO NORDISK ANNUAL REPORT 2015
4.2 FINANCIAL RISKS
The fi nancial contracts existing at year-end cover the expected future cash
fl ow for the following number of months:
CONSOLIDATED FINANCIAL STATEMENTS
81
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.
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.
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 and JPY, 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.
Hedge accounting is applied 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.
During 2015, the hedging horizon varied between 10 and 13 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
Exchange rate DKK per 100
2015
2014
2013
USD
CNY1
JPY
GBP
CAD
2015
2014
11 months
11 months
12 months
12 months
11 months
11 months
11 months
13 months
11 months
11 months
1. USD and Chinese yuan traded offshore (CNH) are used as proxies when hedging Novo
Nordisk’s CNY currency exposure.
Foreign exchange sensitivity analysis:
A 5% increase/decrease in the following currencies would impact Novo
Nordisk’s operating profi t as outlined in the table below:
DKK million
USD
CNY
JPY
GBP
CAD
Estimated for
2016
2,000
300
150
85
70
2015
1,600
260
115
80
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
2015
Other comprehensive income
Income statement
Total
2014
Other comprehensive income
Income statement
Total
5% increase
in all other
currencies against
DKK and EUR
5% decrease
in all other
currencies against
DKK and EUR
(2,135)
74
(2,061)
(1,724)
124
(1,600)
2,250
(96)
2,154
1,729
(107)
1,622
USD
Average
Year-end
Year-end change
CNY
Average
Year-end
Year-end change
JPY
Average
Year-end
Year-end change
GBP
Average
Year-end
Year-end change
CAD
Average
Year-end
Year-end change
673
683
11.6%
562
612
13.1%
562
541
(4.4%)
107
105
6.1%
91
99
11.2%
91
89
(2.2%)
5.56
5.67
10.7%
5.32
5.12
(0.4%)
5.77
5.14
(21.8%)
The foreign exchange sensitivity analysis estimated for 2016 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 at year-end 2015.
Anticipated currency transactions, investments and non-current assets are
not included.
Interest rate risk
Changes in interest rates affect Novo Nordisk’s fi nancial instruments. At the
end of 2015, 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 22 million (a decrease in the fair value of DKK
3 million in 2014).
1,028
1,011
6.2%
925
952
6.7%
878
892
(2.3%)
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.
527
492
(6.6%)
509
527
4.4%
545
505
(11.2%)
Liquidity risk
Novo Nordisk ensures the availability of the 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.
NOVO NORDISK ANNUAL REPORT 2015
82 CONSOLIDATED FINANCIAL STATEMENTS
4.2 FINANCIAL RISKS (CONTINUED)
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 20,769 million (2014: DKK 15,935 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 18,202 million (2014:
DKK 15,425 million). Please refer to note 4.7 for details of the Group’s total
fi nancial assets.
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)
DKK million
2015
AAA-range
AA-range
A-range
BBB-range
Not rated or
below BBB-range
Cash at
bank and
on hand
Marketable
securities1
Derivative
fi nancial
instruments
6,797
9,959
101
66
1,027
2,513
2
133
171
Total
1,027
9,443
10,130
101
68
Total
16,923
3,542
304
20,769
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
1. Net yield on the bond portfolio is – 0.10% (+0.35% in 2014).
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.
Trade receivable programme
Novo Nordisk’s Japanese and US subsidiaries employ trade receivable
programmes where trade receivables are sold on a full non-recourse term
to optimise working capital.
At year-end, the Group had derecognised receivables without recourse
having due dates after 31 December amounting to:
DKK million
Japan
US
2015
2014
2013
1,899
945
1,669
0
1,685
0
In December 2015 Novo Nordisk initiated the programme in the US. The
programme is expected to grow in size over the coming year, when a full year
of trade receivables will be covered.
NOVO NORDISK ANNUAL REPORT 2015
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 the split of allowance for trade receivables by
geographical segment.
4.3 DERIVATIVE FINANCIAL INSTRUMENTS
Accounting policies
Use of derivative fi nancial instruments
The derivative fi nancial instruments are used to manage the exposure to
market risk. None of the derivatives are held for trading.
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.
Initial recognition and measurement
On initiation of the contract, Novo Nordisk designates each derivative
fi nancial contract that qualifi es for hedge accounting as one of:
• hedges of the fair value of a recognised asset or liability (fair value hedge)
• hedges of the fair value of a forecast fi nancial transaction (cash fl ow
hedge).
All contracts are initially recognised at fair value and subsequently
remeasured at fair value at the end of the reporting period.
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.
Fair value hedges
Value adjustments of fair value hedges are recognised in the Income
statement along with any value adjustments of the hedged asset or liability
that are attributable to the hedged risk.
Cash fl ow hedges
Value adjustments of the effective part of cash fl ow hedges are recognised
directly in Other comprehensive income. The cumulative value adjustment
of these contracts is transferred from Other comprehensive income to the
Income statement under Financial income or Financial expenses when the
hedged transaction is recognised in the Income statement. For options, this
cumulative value adjustment is refl ected in the value of the option.
Discontinuance of cash fl ow hedging
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.
Fair value determination
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, the 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 the fair value.
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 hedges1
Forward contracts, fair value hedges
Total hedging activities
Total fair value adjustments recognised in the
Income statement
Total fair value adjustments recognised in Other
comprehensive income2
Presented in the Balance sheet as:
Derivative fi nancial instruments (current assets)
Derivative fi nancial instruments (current liabilities)
Cash at bank
Contract
amount
at year-end
41,630
5,533
2,753
49,916
2015
Positive
fair value
at year-end
202
66
59
327
102
225
304
23
Negative
fair value
at year-end
911
–
471
Contract
amount
at year-end
32,095
2,429
3,490
1,382
38,014
471
911
1,382
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
1. Includes expired currency options of DKK 23 million deferred for realisation in 2016.
2. Realisation in 2015 of previously deferred loss amounts to DKK 2,216 million as the remaining DKK 5 million was not realised until 2016. Furthermore, an additional loss of DKK
681 million per 31 December 2015 is deferred for realisation in 2016.
HEDGING OF FORECAST TRANSACTIONS (CASH FLOW HEDGE)
DKK million
Hedging of forecast transactions qualifying
for hedge accounting
USD
CNH, JPY, GBP and other currencies
Total forward contracts (forecast cash fl ow)
USD
JPY
Total currency options (forecast 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 for forecast transactions
Contract
amount
at year-end
2015
Positive
fair value
at year-end
Negative
fair value
at year-end
Contract
amount
at year-end
2014
Positive
fair value
at year-end
Negative
fair value
at year-end
34,279
7,351
41,630
5,285
248
5,533
85
117
202
20
3
23
819
92
911
–
–
–
26,540
5,555
32,095
2,051
378
2,429
–
10
10
–
21
21
2,252
–
2,252
–
–
–
47,163
225
911
34,524
31
2,252
–
47,163
43
268
–
911
–
34,524
8
39
–
2,252
The above fi nancial contracts are expected to impact the Income statement within the periods shown below. The split is based on an estimate of when the cash
fl ow hedges are expected to be reclassifi ed to fair value hedges, and the fair value thereby transferred to Financial income or Financial expenses.
DKK million
Expected timing of Income statement impact
0 –12 months
More than 12 months
Total cash fl ow hedges for which hedge accounting is applied
2015
Positive
fair value
at year-end
Negative
fair value
at year-end
2014
Positive
fair value
at year-end
Negative
fair value
at year-end
225
–
225
907
4
911
28
3
31
2,251
1
2,252
NOVO NORDISK ANNUAL REPORT 2015
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 fair value contracts
Contract
amount
at year-end
1,891
862
2,753
2015
Positive
fair value
at year-end
42
17
59
Negative
fair value
at year-end
Contract
amount
at year-end
400
71
471
2,367
1,123
3,490
2014
Positive
fair value
at year-end
–
–
–
Negative
fair value
at year-end
333
22
355
The table above shows the fair value of fair value-hedging activities for 2015 and 2014. Value adjustments of fair value hedges are recognised in Financial
income and Financial expenses along with any value adjustments to the hedged asset or liability that are attributable to the hedged risk. The changes in fair
values recognised in the Income statement amount to a net loss of DKK 412 million in 2015 (a net loss of DKK 355 million in 2014).
The portfolio of fair value hedges also includes the recycled fair value of cash fl ow hedges as the hedged transactions are recognised as assets or liabilities at
year-end.
The fi nancial contracts existing at year-end 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 91 million (DKK 310 million in 2014), GBP at DKK 329 million (DKK 313 million in 2014), and
‘other’ comprising CAD at DKK 190 million (DKK 444 million in 2014) and AUD at DKK 252 million (DKK 56 million in 2014).
4.4 CASH AND CASH EQUIVALENTS,
FINANCIAL RESOURCES AND FREE CASH
FLOW
Accounting policies
The Statement of cash fl ows shows how income and changes in balance
sheet items affect cash and cash equivalents, ie the cash generated or used
in the period.
Cash from operating activities converts income statement items from the
accrual basis of accounting to cash basis. As such, starting with net profi t,
non-cash items are reversed and actual payments included. Further, change
in working capital is taken into account as this shows the development
in money tied up in the balance sheet. Cash from investing activities
shows payments related to the purchase and sale of Novo Nordisk’s long-
term investments. This includes fi xed assets such as construction of new
production sites, intangible assets such as patents and licences, and fi nancial
assets. Cash from fi nancing activities reports purchase and sale of Novo
Nordisk’s own shares and payment of dividends.
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 commencing with
Net profi t for the year. Cash fl ows in foreign currencies are translated to DKK
at the average exchange rate for the respective month.
DKK million
2015
2014
2013
CASH AND CASH EQUIVALENTS
Cash at bank and on hand (note 4.2)
Current debt (bank overdrafts)
16,923
(1,073)
14,396
(720)
10,728
(215)
FREE CASH FLOW
DKK million
2015
2014
2013
Net cash generated from
operating activities
Net cash used in investing activities
Net purchase of marketable securities
38,287
(6,098)
2,033
31,692
(2,064)
(2,232)
25,942
(2,773)
(811)
Free cash fl ow2
34,222
27,396
22,358
2. Additional non-IFRS measure; please refer to p 94 for defi nitions.
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
2015
2014
2013
Inventories
Trade receivables
Other receivables and prepayments
Trade payables
Other liabilities
Adjustment for the partial divestment
of NNIT A/S
Change in working capital before
exchange rate adjustments
(1,401)
(2,444)
493
(23)
1,604
(1,805)
(2,134)
(296)
858
1,665
(9)
(1,268)
251
233
404
(207)
–
–
(1,978)
(1,712)
(389)
Cash and cash equivalents
at the end of the year
FINANCIAL RESOURCES
15,850
13,676
10,513
Cash fl ow change in working capital
(2,157)
(2,148)
(265)
Exchange rate adjustments
(179)
(436)
124
Cash and cash equivalents
Marketable securities (note 4.2)
Undrawn committed credit facility1
15,850
3,542
8,209
13,676
1,509
8,188
10,513
3,741
4,849
Total fi nancial resources
27,601
23,373
19,103
1. The undrawn committed credit facility in 2015 is a EUR 1,100 million facility (EUR 1,100
million in 2014 and EUR 650 million in 2013) committed by a portfolio of international
banks. The facility matures in 2019.
NOVO NORDISK ANNUAL REPORT 2015
4.6 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:
CONSOLIDATED FINANCIAL STATEMENTS
85
OTHER NON-CASH ITEMS
DKK million
Reversals of non-cash income statement items
Interest income and interest expenses, net (note 4.9)
Share-based payment costs (note 5.1)
Changes in non-cash balance sheet items
Increase/(decrease) in provisions (note 3.6)
Increase/(decrease) in retirement benefi t obligations (note 3.5)
Remeasurements of retirement benefi t obligations (note 3.5)
Other adjustments
(Gains)/losses from sale of property, plant and equipment
Result of associated company (note 4.8)
Exchange rate adjustments on working capital
Other, primarily exchange rate adjustment of provisions etc
2015
2014
2013
11
442
6,193
155
(37)
(2)
(14)
179
(1,019)
(62)
371
3,138
343
(247)
1
–
436
183
(1)
409
930
(72)
54
(1)
(17)
(124)
(594)
584
Total other non-cash items
5,908
4,163
4.7 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.
Recognition and measurement
Purchases and sales of investments are recognised on the settlement date.
Investments are initially recognised at fair value.
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.
Disposal of investments
Investments are removed from the balance sheet 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.
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.
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.
NOVO NORDISK ANNUAL REPORT 2015
86 CONSOLIDATED FINANCIAL STATEMENTS
4.7 FINANCIAL ASSETS AND LIABILITIES (CONTINUED)
FINANCIAL ASSETS BY CATEGORY
DKK million
2015
Other fi nancial assets
Trade receivables (note 3.4)
Other receivables
– less prepayments
Marketable securities (bonds) (note 4.2)
Derivative fi nancial instruments (note 4.3)
Cash at bank and on hand (note 4.4)
Available-
for-sale
fi nancial
assets at
fair value
737
3,542
Financial
assets
measured at
fair value
through the
Income
statement
Loans
and
receivables
Cash
and cash
equivalents
602
15,485
2,257
(879)
304
16,923
Total
1,339
15,485
2,257
(879)
3,542
304
16,923
Total fi nancial assets at the end of the year by category1
4,279
304
17,465
16,923
38,971
Total fi nancial assets at the end of the year by category, 2014
1,875
30
15,029
14,396
31,360
FINANCIAL LIABILITIES BY CATEGORY
DKK million
2015
Current debt (note 4.4)
Trade payables
Other liabilities (note 3.7)
– less VAT and duties payable (note 3.7)
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
1,073
4,927
12,655
(896)
1,382
Total
1,073
4,927
12,655
(896)
1,382
Total fi nancial liabilities at the end of the year by category1
1,382
17,759
–
19,141
2014
Current debt (note 4.4)
Trade payables
Other liabilities (note 3.7)
– less VAT and duties payable (note 3.7)
Derivative fi nancial instruments (note 4.3)
720
4,950
11,051
(744)
2,607
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
1. All fi nancial assets and 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.
FAIR VALUE MEASUREMENT HIERARCHY
DKK million
Active market data
Directly or indirectly observable market data
Not based on observable market data
Total fi nancial assets at fair value
Active market data
Directly or indirectly observable market data
Not based on observable market data
Total fi nancial liabilities at fair value
2015
4,279
304
–
4,583
–
1,382
–
1,382
2014
1,870
30
5
1,905
–
2,607
–
2,607
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 2015 or 2014. There are no intangible assets or items of
property, plant and equipment measured at fair value.
NOVO NORDISK ANNUAL REPORT 2015
4.8 INVESTMENT IN ASSOCIATED
COMPANY
Accounting policies
Investments in associated companies
An associated company is an entity in which Novo Nordisk has signifi cant
infl uence, but not control, which in general will be when holding 20% to
50% of the voting rights. Such investment is accounted for using the equity
method of accounting. The investment is adjusted by Novo Nordisk’s share
of the results after tax of the associated company.
Novo Nordisk’s share of the results is recognised in the Income statement
as fi nancial items i.e. outside operating profi t. The share of results will
be recognised based on the associated company’s full-year outlook, with
adjustment for actual full-year result in the fi rst quarter of the following year.
Disposal of subsidiaries
When Novo Nordisk ceases to have control over a subsidiary, the assets
and liabilities of the subsidiary are removed from the Balance sheet. Any
retained equity interest in the entity is revalued at fair value on the date
when control is lost with the revaluation gain or loss being recognised in the
Income statement.
The fair value revaluation is allocated to the entity’s identifi able assets and
liabilities, and any excess value is recognised as goodwill. The identifi ed
assets are amortised over their estimated useful life, and goodwill is subject
to impairment testing.
INVESTMENT IN ASSOCIATED COMPANY
DKK million
Carrying amount of investment at the beginning of the period
Additions during the period
Share of profi t/(loss), recognised in the Income statement
Amortisation of intangible assets
Carrying amount of investment at the end of the year
2015
–
797
48
(34)
811
As a result of Novo Nordisk A/S’s divestment of 74.5% of the shares in NNIT
A/S on 6 March 2015, NNIT A/S has changed status from a subsidiary to an
associated company of Novo Nordisk A/S. At the time of the disposal, the
retained investment of 25.5% was revalued at fair value based on an active
market price of DKK 125 per share. The revaluation value was allocated to
identifi able assets such as order backlog and customer relationships, and the
remaining part is classifi ed as goodwill.
INITIAL FAIR VALUE OF RETAINED INVESTMENT
IN NNIT A/S
DKK million
Carrying amount of 25.5% of net assets in NNIT A/S
Fair value revaluation of retained investment
Initial fair value of investment in associated company
2015
153
644
797
The market value at 31 December 2015 of shareholdings in NNIT A/S
amounts to DKK 1,202 million, based on a list price of DKK 189.
CONSOLIDATED FINANCIAL STATEMENTS
87
4.9 FINANCIAL INCOME AND EXPENSES
Accounting policies
As described in note 4.2, Management has chosen to classify the result
of hedging activities as part of fi nancial items in the Income statement.
Financial items are primarily related to foreign exchange elements and are
mainly impacted by the cumulative value adjustment of cash fl ow hedges
transferred from Other comprehensive income to the Income statement
when the hedged transaction is recognised in the Income statement. Further,
value adjustments of fair value hedges are recognised in Financial income
and Financial expenses along with any value adjustments of the hedged asset
or liability that are attributable to the hedged risk. Finally, value adjustments
of assets and liabilities in non-hedged currencies will impact Financial income
and Financial expenses.
FINANCIAL INCOME
DKK million
2015
2014
2013
Interest income
Financial gain from forward
contracts (net)
Financial gain from currency
options (net)
Capital gain on investments etc
Financial gain/(loss) from other
fi nancial assets
Result of associated company
Total fi nancial income
FINANCIAL EXPENSES
56
–
–
15
–
14
85
101
56
–
1,631
32
34
–
–
–
15
167
1,702
DKK million
2015
2014
2013
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
67
504
5,232
162
–
81
6,046
39
288
125
–
–
111
563
55
435
–
50
20
96
656
1. Primarily related to trade receivables, other receivables and trade payables.
FINANCIAL IMPACT FROM FORWARD CONTRACTS
AND CURRENCY OPTIONS, SPECIFIED
DKK million
2015
2014
2013
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
(2,237)
1,104
(3,212)
(1,160)
217
(69)
809
678
144
(5,232)
(125)
1,631
21
(12)
125
(12)
–
25
(171)
(81)
(75)
Financial income/(expense) from
currency options
(162)
32
(50)
NOVO NORDISK ANNUAL REPORT 2015
88 CONSOLIDATED FINANCIAL STATEMENTS
SECTION 5 OTHER DISCLOSURES
Basis of preparation
Results for the year
Operating assets
and liabilities
Capital structure and
financing items
Other disclosures
This section provides details on notes that are statutory or by their nature
of secondary importance for understanding the fi nancial performance of
Novo Nordisk. A list of subsidiaries in the Novo Nordisk Group is also included
here.
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 2 February 2016, the Board of Directors approved the establishment, of a
joint pool for the fi nancial year 2015 by allocating a total of 378,943 Novo
Nordisk B shares. This allocation amounts on average to 12 months’ fi xed
base salary plus pension contribution for the CEO, 9 months’ fi xed base
salary plus pension contribution per member of Executive Management as
per 1 March 2015 and 8 months’ fi xed base salary for Senior Vice Presidents,
corresponding to a value at launch of the programme of DKK 108 million.
This amount was expensed in 2015. The share price used for the conversion
was the average share price (DKK 285) for Novo Nordisk B shares on
NASDAQ Copenhagen in the period 30 January – 13 February 2015.
Based on the split of participants when the joint pool was established,
approximately 50% of the pool will be allocated to members of Executive
Management and 50% to other members of the Senior Management Board.
The shares allocated to the joint pool for 2012 were released to the
individual participants subsequent to the approval of the Annual Report
2015 by the Board of Directors and after the announcement of the 2015 full-
year fi nancial results on 3 February 2016. The shares allocated correspond to
a value at launch of the programme of DKK 73 million, expensed in 2012.
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
2015, a total of 879,988 shares were allocated to the pool for this group
corresponding to a value at launch of the programme of DKK 251 million.
The shares allocated to the pool for 2012 were released to the individual
participants subsequent to the approval of the Annual Report 2015 by
the Board of Directors and after the announcement of the 2015 full-year
fi nancial results on 3 February 2016. The shares allocated correspond to a
value at launch of the programme of DKK 234 million amortised over the
period 2012–2015. The number of shares to be transferred (1,355,153
shares) is lower than the original number of shares allocated to the share
pool as some participants had left the company before the release conditions
of the programme were met.
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 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
2015
2014
2013
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
135
141
188
108
66
51
199
164
170
Share-based payment expensed
in the Income statement
442
371
409
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) 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. As the sales growth has been
achieved, the shares will be granted to the employees on 1 April 2016.
NOVO NORDISK ANNUAL REPORT 2015
CONSOLIDATED FINANCIAL STATEMENTS
89
5.1 SHARE-BASED PAYMENT SCHEMES (CONTINUED)
OUTSTANDING RESTRICTED
STOCK UNITS
2015
2014
EXERCISABLE SHARE OPTIONS
2015
2014
Exercisable at the beginning of the year
955,570
2,801,920
Outstanding at the beginning of the year
7,960,080
10,528,372
Released restricted stock units to employees
Released shares from 2011
Management pools1
Released shares from 2012–2014
management pools2
Cancelled shares from Management pool1
Shares allocated to Management pools
0
(24,500)
Exercised
Cancelled
(930,570)1
(25,000)
(1,787,350)
(59,000)
(1,787,640)
(3,341,692)
Exercisable at the end of the year
0
955,5702
(120,638)
(152,097)
1,258,931
(178,872)
976,772
1. For exercised share options, the average market price of Novo Nordisk B shares for the
trading period 30 January to 13 February 2015 was DKK 285 per share.
2. Average exercise price per option (excluding restricted stock units) amounted to
DKK 35 in 2014, and calculated fair value per option amounted to DKK 225 in 2014.
Outstanding at the end of the year
7,158,636
7,960,080
1. Includes 10,000 shares released and 2,190 shares cancelled related to Management
pools from previous years.
2. Realised 2012–2014 programme following the partial divestment of NNIT A/S.
OUTSTANDING RESTRICTED
STOCK UNITS
Issued1
Released2
Cancelled
(accumulated)
Outstanding
Value at
launch date
DKK million
Restricted stock units to employees
2013 Restricted stock units
Outstanding restricted stock units to
employees at the end of 2015
Shares allocated to joint pools
for Senior Management Board
2011 Shares allocated to joint pool
2012 Shares allocated to joint pool
2013 Shares allocated to joint pool
2014 Shares allocated to joint pool
2015 Shares allocated to joint pool3
Outstanding shares in joint pool for
Senior Management Board
Shares allocated to pools
for management group below
Senior Management Board
2011 Shares allocated to pool
2012 Shares allocated to pool
2013 Shares allocated to pool
2014 Shares allocated to pool
2015 Shares allocated to pool3
2,370,000
2,370,000
–
–
448,560
487,730
254,513
293,044
378,943
(448,560)
(10,435)
(8,993)
(9,369)
–
–
–
–
–
–
2,370,000
2,370,000
0
477,295
245,520
283,675
378,943
1,862,790
(477,357)
–
1,385,433
1,485,665
1,559,235
622,190
683,728
879,988
(1,329,080)
(35,160)
(22,620)
(34,061)
–
(156,585)
(168,922)
(54,701)
(26,474)
–
0
1,355,153
544,869
623,193
879,988
Outstanding shares in pool for management
group below Senior Management Board
5,230,806
(1,420,921)
(406,682)
3,403,203
Outstanding at the end of 2015
9,463,596
(1,898,278)
(406,682)
7,158,636
57
73
51
66
108
188
234
126
155
251
Vesting date
1/04/16
Q1 2015
Q1 2016
Q1 2017
Q1 2018
Q1 2019
Q1 2015
Q1 2016
Q1 2017
Q1 2018
Q1 2019
1. All restricted stock units and shares allocated to Management pools are hedged by treasury shares.
2. Released shares from 2012 to 2014 Management pools relates to NNIT A/S employees following the Initial Public Offering of NNIT A/S.
3. 2015 programme released subsequent to approval of the Annual Report 2015 on 2 February 2016. The programme includes former members of Senior Management Board with a
total value of DKK 16.2 million.
NOVO NORDISK ANNUAL REPORT 2015
90 CONSOLIDATED FINANCIAL STATEMENTS
5.2 MANAGEMENT’S HOLDINGS OF NOVO NORDISK SHARES
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 year1
Additions
during the year
Sold/transferred
during the year
At the end
of the year
Market value2
DKK million
Göran Ando
Bruno Angelici
Jeppe Christiansen
Liz Hewitt
Liselotte Hyveled
Thomas Paul Koestler
Anne Marie Kverneland
Sylvie Grégoire
Søren Thuesen Pedersen
Eivind Kolding
Stig Strøbæk
Mary Szela
Board of Directors in total
Lars Rebien Sørensen
Jesper Brandgaard
Maziar Mike Doustdar
Lars Fruergaard Jørgensen
Jerzy Gruhn
Jesper Høiland
Jakob Riis
Mads Krogsgaard Thomsen
Henrik Wulff
13,000
2,500
–
2,725
3,855
16,000
11,099
–
1,615
–
1,950
–
3,529
2,030
2,000
875
3,850
935
(937)
(628)
13,000
2,500
3,529
2,725
4,948
18,000
10,471
875
1,615
3,850
1,950
935
5.2
1.0
1.4
1.1
2.0
7.2
4.2
0.3
0.6
1.5
0.8
0.4
52,744
13,219
(1,565)
64,398
25.7
354,850
186,205
13,815
95,855
2,600
60,015
72,145
279,135
64,105
37,515
25,010
4,065
12,505
47,505
12,505
12,505
26,830
12,505
(25,010)
(7,000)
(4,500)
(25,610)
(2,800)
392,365
186,205
17,880
101,360
45,605
72,520
84,650
280,355
73,810
156.9
74.5
7.2
40.5
18.2
29.0
33.9
112.1
29.5
501.8
280.4
Executive Management in total
1,128,725
190,945
(64,920)
1,254,750
Other members of the Senior Management Board
554,337
242,570
(95,690)
701,217
Joint pool for Executive Management and
other members of the Senior Management Board3
1,110,309
329,309
(347,898)
1,091,7204
436.6
Total
2,846,115
776,043
(510,073)
3,112,085
1,244.5
1. Following the change in the Board of Directors and the retirement of members of Executive Management and the Senior Management Board, the holding of shares at the beginning
of the year has been updated compared with the Annual Report 2014.
2. Calculation of the market value is based on the quoted share price of DKK 399.90 at the end of the year.
3. 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 50% of the pool will be allocated to the members of Executive Management and approximately 50% 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.
4. Joint pool includes the 2012 programme released on 2 February 2016 and excludes 293,713 shares assigned to retired Executive Management and Senior Management Board
members.
NOVO NORDISK ANNUAL REPORT 2015
5.3 COMMITMENTS
Commitments
Total contractual obligations and recognised non-current debt can be
specifi ed as follows (payments due by period):
2015
DKK million
Within
1 year
1–3
years
3 –5
years
More
than
5 years
Total
71
134
118
863
1,186
71
134
118
863
1,186
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 78% of the commitments are related to leases outside
Denmark. The lease costs for 2015 and 2014 were DKK 1,293 million and
DKK 1,310 million respectively.
The purchase obligations primarily relate to 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.
1,084
4,421
1,631
1,769
1,248
795
2,390
112
6,353
7,097
DKK million
1,586
691
180
–
2,457
7,091
4,091
2,223
2,502
15,907
7,162
4,225
2,341
3,365
17,093
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
2015
2014
748
960
78
237
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
2014
DKK million
Within
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
1. No material fi nance lease obligations exist in 2015 and 2014.
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 2015, the donation amounts to DKK 78 million (DKK 66 million in 2014
and DKK 64 million in 2013), which is recognised in Administrative costs in
the Income statement.
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 does not have any
signifi cant agreements to which the Group is a party and which take
effect, alter or terminate upon a change of control of the Group following
implementation of a takeover bid.
NOVO NORDISK ANNUAL REPORT 2015
92 CONSOLIDATED FINANCIAL STATEMENTS
5.4 RELATED PARTY TRANSACTIONS
5.5 FEE TO STATUTORY AUDITORS
DKK million
2015
2014
2013
Statutory audit
Audit-related services
Tax advisory services
Other services
Total fee to statutory auditors
24
4
8
7
43
24
4
8
11
47
24
4
11
5
44
Novo Nordisk A/S is controlled by Novo A/S (incorporated in Denmark), which
owns 27.0% of the share capital in Novo Nordisk A/S, representing 75.0%
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.
Being an associated company of Novo Nordisk A/S, NNIT A/S is considered
a related party. Other related parties are considered to be the Novozymes
Group and Xellia Pharmaceuticals due to joint ownership, associated
companies and Management of Novo Nordisk A/S.
Novo Nordisk A/S did not acquire new B shares from Novo A/S in 2014 or
2015.
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.
The Group has had the following material transactions with related parties,
(income)/expense:
DKK million
2015
2014
2013
Novo Nordisk Foundation
Donations to Steno Diabetes
Center A/S via Novo Nordisk
Services provided by Novo Nordisk
Novo A/S
Services provided by Novo Nordisk
Purchase of Novo Nordisk B shares
Sale of NNIT A/S B shares
NNIT A/S1
Services provided by Novo Nordisk
Services provided by NNIT A/S
Novozymes
Services provided by Novo Nordisk
Services provided by Novozymes
Xellia Pharmaceuticals
Services provided by Novo Nordisk
(69)
(3)
(51)
–
(45)
–
(3)
–
(797)
(32)
1,316
(5)
–
–
–
–
(4)
2,504
–
–
–
(185)
165
(189)
142
(214)
109
(11)
(28)
–
1. Amounts stated for 2015 regard services provided during the entire year. Before the
partial divestment of NNIT A/S in March 2015 NNIT A/S was consolidated as a fully
owned subsidiary.
There have not been any transactions with the Board of Directors or
Executive Management of NNIT A/S, Novo Nordisk A/S, Novozymes A/S, Novo
A/S, the Novo Nordisk Foundation, Xellia Pharmaceuticals ApS or associated
companies. For information on remuneration to the Management of Novo
Nordisk, please refer to ‘Remuneration’ on 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 2015, 2014 or 2013.
There are no material unsettled transactions with related parties at the end
of the year.
NOVO NORDISK ANNUAL REPORT 2015
5.6 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
International Operations
– • • • •
Aldaph SpA, Algeria
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
Novo Nordisk Pharmatech A/S, Denmark
Novo Nordisk Region Europe A/S, Denmark
100 •
100 •
100 •
100 •
100 •
100 •
100 • •
100
•
• •
•
Novo Nordisk, France
Novo Nordisk S.P.A., Italy
Novo Nordisk Limited, Ireland
Novo Nordisk B.V., Netherlands
Novo Nordisk Farma OY, Finland
Novo Nordisk Hellas Epe., Greece
Steno Diabetes Center A/S, Denmark
UAB Novo Nordisk Pharma, Lithuania
Novo Nordisk Production SAS, France
Novo Nordisk Hungária Kft., Hungary
Novo Nordisk Scandinavia AS, Norway
Novo Nordisk Farma dooel, Macedonia
Novo Nordisk Pharma GmbH, Germany
100
100 •
100 •
100
100 •
100 •
100 •
100 •
100 •
100 •
100 •
100 •
100 •
100 •
Novo Nordisk Pharmaceutical Services Sp. z.o.o., Poland
Novo Nordisk Comércio Produtos Farmace˜ uticos Lda., Portugal 100 •
100 •
Novo Nordisk Farma S.R.L., Romania
100 •
100 •
100 •
100 •
100 •
100 •
100 •
100
100 •
Novo Nordisk Pharma d.o.o. Belgrade (Serbia), Serbia
Novo Nordisk Holding Limited, United Kingdom
Novo Nordisk Health Care AG, Switzerland
Novo Nordisk Limited, United Kingdom
Novo Nordisk Scandinavia AB, Sweden
Novo Nordisk Pharma AG, Switzerland
Novo Nordisk Slovakia s.r.o., Slovakia
Novo Nordisk Pharma S.A., Spain
Novo Nordisk, d.o.o., Slovenia
North America
Novo Nordisk Canada Inc., Canada
Novo Nordisk Invest 3 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
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 (BASEA) 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
Novo Investment Pte Limited, Singapore
Novo Nordisk Pharma (Singapore) Pte Ltd., Singapore
Novo Nordisk (Pty) Limited, South Africa
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 Region International Operations AG, Switzerland 100
Novo Nordisk Tunisie SARL, Tunisia
Novo Nordisk Pharma (Thailand) Ltd., Thailand
Novo Nordisk Saglik Ürünleri Tic. Ltd. Sti., Turkey
49 •
100 •
100 •
100 •
Novo Nordisk Pharma Gulf FZ-LLC, United Arab Emirates
Novo Nordisk Venezuela Casa de Representación C.A., Venezuela 100 •
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 •
•
•
Novo Nordisk Research Center Indianapolis, Inc., United States 100
•
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 •
Other subsidiaries and associated companies
NNIT A/S, Denmark
•
NNE Pharmaplan A/S1, Denmark
25.5
100
•
•
1. In addition to the companies listed above, NNE Pharmaplan A/S has its own
subsidiaries.
NOVO NORDISK ANNUAL REPORT 2015
94 CONSOLIDATED FINANCIAL STATEMENTS
5.7 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 the outstanding restricted stock units.
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 2015
Part of Management’s review
QUARTERLY FINANCIAL FIGURES 2014 AND 2015
95
QUARTERLY FINANCIAL FIGURES 2014 AND 2015
DKK million
Net sales
Sales by business segment:
New-generation insulin
Modern insulin (insulin analogues)
Human insulin
Victoza®
Other diabetes and obesity care
2014
2015
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
20,343
21,629
22,249
24,585
25,200
27,059
26,792
28,876
80
9,377
2,573
2,916
1,013
141
10,351
2,475
3,059
1,031
175
10,641
2,478
3,441
953
262
11,168
2,772
4,010
1,064
271
11,498
2,897
3,957
1,195
330
12,604
2,784
4,486
1,075
376
12,500
2,772
4,680
1,223
461
13,562
2,778
4,904
1,237
Diabetes and obesity care total
15,959
17,057
17,688
19,276
19,818
21,279
21,551
22,942
Haemophilia
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
Non-recurring income from the partial divestment of NNIT A/S
Operating profi t
Net fi nancials
Profi t before income taxes
Income taxes
2,255
1,500
629
2,327
1,509
736
2,112
1,686
763
2,610
1,811
888
2,734
1,830
818
2,757
2,083
940
2,371
1,842
1,028
2,785
2,065
1,084
4,384
4,572
4,561
5,309
5,382
5,780
5,241
5,934
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
12,455
4,977
3,684
2,847
1,237
21,326
6,147
3,250
–
854
2,782
2,376
13,857
(1,372)
12,485
2,609
14,325
5,222
3,884
2,284
1,344
23,200
7,175
3,035
–
887
379
–
12,482
(1,934)
10,548
2,205
14,415
5,200
3,406
2,415
1,356
22,945
6,951
3,289
–
952
227
–
11,980
(1,844)
10,136
1,753
15,662
5,399
3,992
2,325
1,498
24,268
8,039
4,034
–
1,164
94
–
11,125
(811)
10,314
2,056
Net profi t
6,458
6,994
6,500
6,529
9,876
8,343
8,383
8,258
Depreciation, amortisation and impairment losses
657
667
1,183
928
663
648
633
1,015
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
63,241
33,583
63,681
36,661
71,283
37,967
77,062
40,294
77,457
32,108
81,313
39,111
85,195
43,109
91,799
46,969
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%
24.4%
12.9%
3.4%
84.6%
55.0%
41.5%
26.5%
11.2%
3.3%
85.7%
46.1%
48.1%
25.9%
12.3%
3.6%
85.6%
44.7%
50.6%
27.8%
14.0%
4.0%
84.0%
38.5%
51.2%
Basic earnings per share/ADR (in DKK)1
Diluted earnings per share/ADR (in DKK)
2.44
2.43
2.66
2.66
2.49
2.47
2.51
2.51
3.80
3.79
3.24
3.23
3.27
3.26
3.25
3.24
Average number of shares outstanding (million) – basic
Average number of shares outstanding (million) – diluted
2,642
2,653
2,629
2,637
2,614
2,622
2,600
2,608
2,597
2,604
2,578
2,584
2,566
2,572
2,553
2,560
EMPLOYEES
Number of full-time employees at the end of the period
39,579
40,226
40,700
40,957
39,062
39,658
40,261
40,638
1. For defi nitions, please refer to p 94.
NOVO NORDISK ANNUAL REPORT 2015
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 (total)
Employee turnover
Working the Novo Nordisk Way (scale 1– 5)
Gender in Management (men/women)
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
Failed inspections
Company reputation (scale 0–100)
1. 2015 data exclude employees in NNIT A/S, which was divested in 2015.
2. Data for people with diabetes and employees are not included due to lack of availability.
Note
2015
2014
2013
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
4.5
26.8
24.4
24.3
23
97
67,240
77
32
84
64,533
93
35
83
72,662
77
41,1221
9.2%
4.3
59%/41%
3.0
41,450
9.0%
4.3
60%/40%
3.2
38,436
8.1%
4.4
61%/39%
3.5
98%
49
94%
240
2
0
82.4
98%
42
95%
224
2
0
80.8
97%
45
96%
221
6
0
82.92
NOVO NORDISK ANNUAL REPORT 2015
Supplementary information
CONSOLIDATED SOCIAL STATEMENT
97
NOTES PATIENTS, EMPLOYEES AND ASSURANCE
Basis of preparation
Patients
Employees
Assurance
In the Consolidated social statement, Novo Nordisk reports on three
dimensions of performance: patients, employees and assurance. Progress is
reported on two long-term targets: reach more patients with diabetes care
products and ensure that the organisation is working the Novo Nordisk Way.
To support the 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, gender diversity, training of employees in business ethics, supplier
audits and product quality.
Access to quality care
Novo Nordisk’s long-term target to reach 40 million people in 2020 with its
diabetes care products is intended to enhance access to quality care.
This commitment is pursued through a focus on product innovation and a
promise to always provide affordable insulin. The graph on the right shows
the expanded reach of Novo Nordisk’s products: an estimated 26.8 million
patients with diabetes worldwide, compared with 24.4 million in 2014. This
growth refl ects increased sales of human insulin in low- and middle-income
countries and modern and new-generation insulins globally.
Differential pricing policy
Novo Nordisk sold human insulin according to the company’s differential
pricing policy in 23 of the world’s 48 poorest countries, compared with 32
countries in 2014. The decline is attributed to fewer insulin tenders in 2015,
and lack of response to the offer.
SECTION 1 BASIS OF PREPARATION
PATIENTS REACHED WITH DIABETES CARE PRODUCTS
Million
30
24
18
12
6
0
2014
2015
23
LDC COUNTRIES, DOWN FROM 32 IN 2014
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. 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. 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 2015 at novonordisk.com/annualreport and on
the UN Global Compact’s website at unglobalcompact.org/COP.
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 2015 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 2015
98 CONSOLIDATED SOCIAL STATEMENT
Supplementary information
Changes to accounting policies and disclosures
The following disclosure changes have been made to align with Management
priorities:
• ‘Diverse senior management teams’ is replaced by ‘Gender in Management
(men/women)’ to refl ect the updated policy focus on all managerial
levels. External reporting on diversity in terms of nationality has been
discontinued as it is not legal in the US to record employees’ nationality.
Ensuring a diverse workforce remains a focus area for Novo Nordisk.
• ‘Warning Letters and re-inspections’ is replaced by ‘Failed inspections’ for
consistency with conformance indicators.
• ‘Company reputation’ is reported using a new methodology covering more
stakeholders.
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 2015, the eVoice response rate was
91%, compared with 94% in 2014.
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 target groups are 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
third-party reviews.
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.
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 uses the content elements and guiding principles
of the International Integrated Reporting Framework,
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