Novo Resources Annual Report 2016

FY2016 Annual Report · Novo Resources

Loading PDF…

novo nordisk
ANNUAL REPORT
2016

A NEW ERA
OF DIABETES
TREATMENT?

DEFINING TIMES
FOR THE US BUSINESS

RISK MANAGEMENT
– Protecting long-term
value creation

“MY DREAM IS
TO ENCOURAGE
OTHER PEOPLE
WITH DIABETES
AND TELL THEM
THAT YOU CAN
LIVE A VERY
GOOD LIFE; EVEN
BECOME A
PROFESSIONAL
CYCLIST!”

MANATO OHARA
Manato Ohara lives in Kanagawa,
Japan, and was diagnosed with type 1
diabetes when he was 10 years old. He
is now 12 years old and in first grade
of junior high school. He likes playing
football and racing his bike in the hope
of taking part in the Talent ID Camps
designed for juniors by Team Novo
Nordisk.

CONTENTS

ACCOMPLISHMENTS
AND RESULTS 2016

01 Letter from the Chairman

02 Letter from the former CEO

03 Letter from the new CEO

04 Novo Nordisk at a glance

06 2016 performance and 2017 outlook

14 Performance highlights

OUR BUSINESS

16 Our strategy

18 Doing business

the Novo Nordisk Way

20 Pipeline overview

22 Changing Diabetes®

24 A new era of diabetes treatment?

26 Changing diabetes – One city at a time

28 Living with the stigma of obesity

30 Changing haemophilia

32 Defining times for the US business

36 The only constant in International

Operations is change

40 Risk management

– Protecting long-term value creation

GOVERNANCE,
LEADERSHIP AND
SHARES

44 Shares and capital structure

46 Corporate governance

50 Remuneration

54 Board of Directors

56 Executive Management

FINANCIAL, SOCIAL
AND ENVIRONMENTAL
STATEMENTS

58 Consolidated financial, social
and environmental statements

107 Management’s statement
and Auditor’s reports

ADDITIONAL
INFORMATION

112 Product overview

113 More information and references

The patients portrayed in this Annual Report have participated of
their own accord and solely to express their personal opinions on
topics referred to in the articles in which they appear. Use of their
pictures as illustrations is in no way intended to associate them with
the promotion of any Novo Nordisk products. Any and all views and
opinions expressed by patients in this report are solely their own. They
have been invited to be included, and were in no way coerced. The
views and opinions they express are entirely their own, and do not
necessarily reflect the views and opinions of Novo Nordisk.

All references can be found on p 113.

The Management review, as defined by the Danish Financial Statements Act, is found on pp 1–56 and 97.

This Annual Report is Novo Nordisk’s full statutory Annual Report pursuant to Section 149 of the Danish Financial
Statements Act. A printed extract of this statutory Annual Report is available in English upon request. Further, a
shortened printed version, consisting of the Management review and excerpts from the consolidated statements, is
available in Danish upon request. In the event of any discrepancies, the full statutory Annual Report shall prevail.

A CHALLENGING YEAR
LETTER FROM THE CHAIRMAN

ACCOMPLISHMENTS AND RESULTS 2016

For Novo Nordisk‘s shareholders, 2016 was not a good year. We
started the year on a share price of 399.9 kroner and ended on
254.7. That is the brutal fact. The drop was caused by lowered
growth expectations for our business in the US, which accounts for
around half of Novo Nordisk’s total sales, and the resulting revision of
the company’s long-term financial targets.

What we experienced in the US in 2016 was the interplay of several
related developments; with the large and increasing number of
people with diabetes in the US, diabetes care has become a major
cost driver for insurers and health plans which, in turn, are pushing
hard for better deals with healthcare providers and pharmaceutical
companies in order to curb costs. The organisations with which Novo
Nordisk negotiates rebates and access for its products are the
pharmaceutical benefit managers (PBMs), which have seen their
negotiating power increase due to a wave of consolidation that has
left only a handful of very large PBMs. At the same time, competition
among the pharmaceutical companies within diabetes care
intensified as new products entered an increasingly crowded
marketplace.

International Operations, continued in this role, but with
responsibility for all territories except for North America.

Both Jakob Riis and Maziar Mike Doustdar are very experienced
leaders who, throughout their careers with Novo Nordisk, have
demonstrated their ability to lead their organisations through
challenging times. On pp 32–35 and 36–39, you can read more
about their plans for the US and International Operations respectively.

Following these changes, two EVPs, Jesper Høiland and Jerzy Gruhn,
decided to pursue careers outside of Novo Nordisk. I thank them for
their commitment and significant contributions to Novo Nordisk over
many years and wish them all the best.

Based on Novo Nordisk’s performance in 2016, the Board will at the
Annual General Meeting propose a final dividend of 4.60 kroner per
share, in addition to the 3 kroner which was paid as an interim
dividend in August 2016. Furthermore, the Board has decided to
initiate a new share repurchase programme of up to 16 billion kroner,
which will commence in February 2017.

As a consequence of these developments, and as we announced in
our half-year financial statement, contract negotiations for 2017
resulted in higher-than-anticipated rebates to obtain broader
coverage for our products.

On behalf of the Board, I would like to express my appreciation for
the leadership shown by Novo Nordisk’s management, the hard work
and dedication of the entire Novo Nordisk organisation, and the
support of our shareholders in what proved to be a challenging year.

Göran Ando
Chairman of the Board of Directors

Due to the uncertainty it created regarding Novo Nordisk’s growth
prospects in the US in the coming years, this was not well received by
investors. Management has responded to this new situation through
a number of measures aimed at prioritising the activities and
innovative products with the greatest potential for making a positive
change for the people whose lives and well-being depend on our
medicines.

On 1 September, the Board of Directors announced a number of
changes to Novo Nordisk’s Executive Management, including a
change of CEO. After more than 34 years with the company, the past
16 of which as CEO, Lars Rebien Sørensen retired on 31 December,
passing on the baton to Lars Fruergaard Jørgensen, who joined Novo
Nordisk in 1991 and most recently held the post of executive vice
president (EVP) in charge of Corporate Development.

The Board had been planning the CEO succession for some years,
carefully evaluating a number of candidates for the role, and the
Board unanimously found Lars Fruergaard Jørgensen to be the best
candidate. He has a very successful 25-year track record at Novo
Nordisk, during which he has time and again demonstrated his
business acumen and his ability as a strategist, problem solver and
great people leader. Furthermore, he personifies the Novo Nordisk
Way in every conceivable manner, always bearing in mind what is
best for our patients, employees and shareholders in the long run.

During his 16 years as CEO, Lars Rebien Sørensen spearheaded Novo
Nordisk’s transformation into a global, very successful and highly
respected pharmaceutical company. On behalf of the Board of
Directors, I want to thank him for his outstanding leadership, steady
course and commitment to Novo Nordisk through both good and
more challenging times during his 34 years with the company.

Two other changes announced on 1 September took place with
immediate effect: Jakob Riis, then EVP and head of Region China,
Pacific & Marketing, was appointed EVP and head of North America
Operations, while Maziar Mike Doustdar, then EVP and head of

ACCOMPLISHMENTS AND RESULTS 2016

REFLECTIONS ON 2016
LETTER FROM LARS REBIEN SØRENSEN,
CEO UNTIL 31 DECEMBER 2016

In my letter in last year’s Annual Report, I predicted that 2016 would be
another exciting and challenging year for Novo Nordisk. And indeed it
was. The excitement stems from the important advances we made in
R&D during the year, while our main challenge was related to our US
business.

Despite this challenge, we ended the year growing sales by 6% and
adjusted operating profit by 6%, both in local currencies. This was
within the range we had announced at the beginning of the year,
when we predicted sales growth of 5–9% and adjusted operating
profit growth of 5–9%, both in local currencies.

Sales growth was primarily driven by Victoza®, Tresiba® and Saxenda®
– key products which we expect to be major growth drivers in the
coming years.

Measured in local currencies, Victoza® accounted for 36% of sales
growth and remains the market leader in the GLP-1 segment for the
treatment of adults with type 2 diabetes. Tresiba® accounted for 47%
of sales growth and continues to do well in all the markets in which it is
competing with other insulin products on equal reimbursement terms.
Sales of Saxenda® are developing according to plan following its launch
in the US in 2015, and the product has now been launched in 15
countries.

Looking at how sales developed from a regional perspective, the short
version is that we had disappointing sales in the US, Region China
rebounded to double-digit growth, while the rest of our regions

performed in line with our plans. In the US, sales of insulin

and NovoSeven® did not meet our expectations. Insulin
sales decreased by 2% in local currencies, primarily

due to lower NovoLog® and NovoLog® Mix 70/30
prices and the loss of a major contract for these
two products at the beginning of the year.
NovoSeven® sales decreased in the US, as
some patients using the product entered
clinical trials with a competing product in
development. For more details, see the
performance report on pp 6–13.

In 2017, we will see lower net prices in the US as we had to increase
the rebates we offer the pharmaceutical benefit managers (PBMs) in
order to ensure broad market access for our products.

In response, we took several measures to align our costs to this new
reality. Regrettably, this also meant we had to lay off close to 1,000 of
our 42,000 colleagues in the autumn. This was a difficult decision, but
with employee costs being by far the largest cost item at Novo Nordisk,
there was no way of avoiding it. I would like to thank and wish our
former colleagues all the best in their future careers.

While it was our challenges in the US and the related consequences
mentioned above that attracted most attention in 2016, we also had
exciting news from our pipeline that will further strengthen our
product portfolio in the coming years. I would like to highlight three
developments:

• At the annual American Diabetes Association (ADA) congress in

June, we presented data from the LEADER study demonstrating that
Victoza® significantly reduces the risk of major cardiovascular events
and death in adults with type 2 diabetes. The results were also
published in The New England Journal of Medicine and have been
submitted to the FDA and the EMA for label update considerations.

• In September, the results of the SUSTAIN 6 study were presented at
the European diabetes conference (EASD) and published in The New
England Journal of Medicine. These showed that semaglutide, our
investigational glucagon-like peptide-1 (GLP-1) analogue injected
once weekly, significantly reduces the risk of major adverse cardio -
vascular events in adults with type 2 diabetes at high cardiovascular
risk.

• In November, the headline results of the DEVOTE trial in people with
type 2 diabetes demonstrated the safe cardiovascular profile and
reduced risk of severe hypoglycaemia of Tresiba® compared to insulin
glargine U100.

The above data further strengthen the clinical profile of our key
products, Victoza® and Tresiba®. The SUSTAIN trial has now been
successfully completed, and in December we filed for regulatory
approval of semaglutide in the US and in the EU for the treatment of
type 2 diabetes. It is advances such as these, through which we find
new ways to improve the treatment of people with diabetes and other
serious chronic conditions, that have given me immense job satisfaction
throughout my years at Novo Nordisk.

On this note, I would like to thank Novo Nordisk’s employees for their
contributions to our results in 2016, the people who use our products
for their confidence in us, our partners and other stakeholders for their
collaboration and our shareholders for their continued support. It has
been an honour to work for this company for 34 years, the last 16 as
its CEO. I owe many people thanks for the support they have given me
over the years. I wish you and Novo Nordisk all the best.

Lars Rebien Sørensen
President and chief executive officer
until 31 December 2016

THE ROAD AHEAD
LETTER FROM THE CEO

ACCOMPLISHMENTS AND RESULTS 2016

In one area I personally think we need to do better: we should be
more agile.

We have grown tremendously over the past decade, and with that
comes new procedures, new governance bodies, new this, new
that, all well intended, but at some point it just becomes too much.
In the process, individual accountability risks getting lost and
decision-making processes risk becoming too long. One of my
priorities for 2017 is to simplify our way of working and thereby
make the organisation more agile.

At Novo Nordisk, we have a big responsibility for the 415 million
people in the world with diabetes, the millions more who have
obesity and the thousands who live with haemophilia or growth
disorders. They are our reason for being.

My vision is that, under my tenure as CEO, Novo Nordisk will solidify
its position as the world’s leading diabetes care company, be the
world’s leading company within medical treatment of obesity, be
among the leading companies in haemophilia, and be recognised by
our employees, the patients we serve, our shareholders and other
external stakeholders as an outstanding company, both for what we
do and how we do it.

I thank you all for your support.

Lars Fruergaard Jørgensen
President and chief executive officer
from 1 January 2017

I am proud and humbled to have been trusted by the Board of
Directors to succeed Lars Rebien Sørensen as CEO of Novo Nordisk.
When the leadership change was announced on 1 September 2016,
I said that I love challenges and therefore cannot think of a more
exciting time to be offered this job. On the one hand, Novo Nordisk
has never had a stronger product portfolio, and on the other hand
we are facing intense pressure from payers and competitors.

The challenges are reflected in our share price development in 2016.
I remain confident that my management team and the Novo Nordisk
organisation have what it takes to overcome them. A short-term
priority will naturally be to grow market shares for our key products
while carefully managing our cost base.

Since September, I have spent a lot of time meeting with employees,
patients, healthcare professionals, policymakers, investors and
professional organisations around the world to understand how
they see us and what they expect from us going forward. It was a
very rewarding experience. Despite the current challenges, it left me
in no doubt that Novo Nordisk is a very special company and that
one of my key responsibilities is to keep it that way.

With this in mind, I would like to share my core beliefs regarding
what it will take for Novo Nordisk to remain a successful and special
company:

Product innovation is and will be the key to our success. If we fail to
discover and develop new and better products for people with
diabetes and other serious chronic conditions, we will not be
successful. I acknowledge that there is an increasing unwillingness
to pay for innovation in cost-pressured healthcare systems, but this
should not be an excuse for halting innovation, because there is a
huge need for better medical treatments. It does, however, have
other implications for us: we have to ‘raise the innovation bar’ –
focusing on projects with the highest chance of delivering break-
through innovation, we have to source more innovation from
out side our own organisation through collaborations with academia
and biotech companies, and…

…we have to innovate the way we commercialise our products. Not
only pharmaceutical companies but healthcare providers in general
are being met with demands from payers to link the prices of their
products and services to documented, improved health outcomes
for patients. Creating such outcomes-based contracts is easier said
than done, but we are working on it as you can read in the article
about our business in the US on pp 32–35. It is also in this light that
our recent partnerships with technology companies such as IBM
Watson Health and Glooko should be seen. These partnerships aim
to improve diabetes care via insights from real-time, real-world
evidence of the clinical benefits of Novo Nordisk’s diabetes
treatments and devices.

It is not just what we do, but also how we do it that makes Novo
Nordisk a special company. The ‘Novo Nordisk Way’ describes who
we are, where we want to go and the values that characterise our
company. Over the years, it has become clear to me that the Novo
Nordisk Way is the reason why many of our employees are working
here and not somewhere else. It is about always having patients’
interests in mind, about always doing what is best in the long run
and about doing business in accordance with the ‘Triple Bottom
Line’ business principle, which means that we always consider the
financial, environmental and social impacts of our decisions.

ACCOMPLISHMENTS AND RESULTS 2016

NOVO NORDISK
AT A GLANCE

Novo Nordisk is a global healthcare company, headquartered in Denmark, 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.

A GLOBAL ORGANISATION WITH A LOCAL PRESENCE

42,446
EMPLOYEES

AFFILIATES OR
OFFICES IN
77 COUNTRIES

RESEARCH AND
DEVELOPMENT
FACILITIES ON
3 CONTINENTS

16 PRODUCTION
SITES ON
5 CONTINENTS

PRODUCTS MARKETED
IN AROUND 170
COUNTRIES

STRATEGIC FOCUS AREAS

Expand leadership
in diabetes

Pursue leadership
in obesity

Pursue leadership
in haemophilia

Expand leadership
in growth disorders

87.3

DKK BILLION
DIABETES SALES

1.6

DKK BILLION
OBESITY SALES

10.5

DKK BILLION
HAEMOPHILIA SALES

8.8

DKK BILLION
HUMAN GROWTH
HORMONE SALES

415

MILLION PEOPLE LIVE WITH
DIABETES1

600

MILLION PEOPLE LIVE WITH
OBESITY2

420

THOUSAND PEOPLE LIVE
WITH HAEMOPHILIA3

OUT OF 10,000 CHILDREN LIVE
WITH GROWTH HORMONE
DEFICIENCIES4

NOVO NORDISK ANNUAL REPORT 2016OUR 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.

ACCOMPLISHMENTS AND RESULTS 2016

RESOURCES

FOCUS

VALUE CREATED

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

WE DISCOVER, DEVELOP AND MANUFACTURE
INNOVATIVE BIOLOGICAL MEDICINES AND
MAKE THEM ACCESSIBLE TO PATIENTS
THROUGHOUT THE WORLD

Diabet e

i
t

s
er

o w t h disord

PATIENTS

hilia

G r

OUR 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

THE TRIPLE BOTTOM LINE

9.9

DKK BILLION EXPENSED ON
COMPANY INCOME TAX
(+14%)

FINANCIALLY
RESPONSIBLE

37.9

DKK BILLION IN
NET PROFIT
(+9%)

MILLION PATIENTS
USE OUR DIABETES
CARE PRODUCTS
(+4%)

59/41

% MEN/WOMEN
IN MANAGEMENT
(0%)

PATIENTS

3,293

THOUSAND TONS OF
CO2 EMISSIONS
(–14%)

THOUSAND M3
WATER CONSUMPTION
(+5%)

SOCIALLY
RESPONSIBLE

ENVIRONMENTALLY
RESPONSIBLE

For more information, visit us on novonordisk.com or

NOVO NORDISK ANNUAL REPORT 20166

ACCOMPLISHMENTS AND RESULTS 2016

2016 PERFORMANCE
AND 2017 OUTLOOK

FINANCIAL PERFORMANCE

Novo Nordisk’s 2016 performance for sales
and adjusted operating profit growth were
both in line with the guidance provided in
February 2016, although in the lower end
of the ranges reflecting a more challenging
competitive situation in the USA. The free
cash flow exceeded the outlook provided in
February 2016, explained by a positive
effect from settlement of tax cases related
to prior years. Capital expenditure and
other results were in line with the latest
guidance provided in October 2016.

SALES DEVELOPMENT
Sales increased by 6% measured in local
currencies and by 4% in Danish kroner.
Sales growth was realised within both
diabetes care and biopharmaceuticals, with
the majority of growth originating from
Tresiba®, Victoza®, Saxenda® and
Norditropin® while sales of modern
insulin and NovoSeven® declined.

All regions contributed to sales growth;
however, the USA was the largest
contributor with 37% share of growth
measured in local currencies, followed by
International Operations and Region China
contributing 32% and 19% respectively.
Sales growth of 4 % in the USA was

positively impacted by approximately
1 percentage point primarily due to
non-recurring adjustments to rebates in
the Medicaid patient segment related to
Norditropin®. Sales growth in International
Operations of 14% measured in local
currencies was positively impacted by
approximately 2.5 percentage points due
to the significant inflationary effects in
Argentina and Venezuela.

In the following sections, unless otherwise
noted, market data are based on moving
annual total (MAT) from November 2016
and November 2015 provided by the
independent data provider IMS Health.

DIABETES CARE SALES
DEVELOPMENT
Sales of diabetes and obesity care products
increased by 6% measured in local curren -
cies and by 4% in Danish kroner to DKK
88,949 million. Novo Nordisk is the world
leader in diabetes care with a global value
market share of 27%.

INSULIN
Sales of insulin increased by 3% measured
in local currencies and were unchanged in
Danish kroner at DKK 63,059 million.

SALES GROWTH

• In local currencies
• In DKK as reported

SALES BY SEGMENT

 Biopharmaceuticals
 Diabetes and obesity care

2012 2013 2014 2015 2016

DKK billion

125

100

2012 2013 2014 2015 2016

Measured in local currencies, sales growth
was driven by International Operations and
Region China. Novo Nordisk is the global
leader with 46% of the total insulin market
and 45% of the market for modern insulin
and new-generation insulin, both measured
in volume.

Sales of new-generation insulin (Tresiba®,
Xultophy® and Ryzodeg®) reached DKK
4,459 million compared with DKK 1,438
million in 2015.

Sales of Tresiba® (insulin degludec), the
once-daily new-generation insulin, reached
DKK 4,056 million compared with DKK
1,270 million in 2015. The roll-out of
Tresiba® continues and the product has
now been launched in 52 countries. In the
USA, where Tresiba® was launched broadly
in January 2016, the feedback from
patients and prescribers is encouraging,
and the product has achieved wide com -
mercial and Medicare Part D formulary
coverage. By the end of 2016, Tresiba® had
captured a 5.5% market share of the US
basal insulin market measured by weekly
total prescriptions. In Japan, where Tresiba®
was launched in March 2013 with similar
reimbursement as insulin glargine U100, its
share of the basal insulin market has grown

SHARE OF GROWTH
IN LOCAL CURRENCIES

 Pacific
 Region China
 International Operations
 Europe
 USA

100

2012* 2013 2014* 2015 2016
* In 2012 and 2014, Japan & Korea contributed –1% to

the total growth.

NOVO NORDISK ANNUAL REPORT 2016ACCOMPLISHMENTS AND RESULTS 2016

DEVELOPMENT IN COSTS
Costs in % of sales

• Sales and distribution
• Cost of goods sold
• Research and development
• Administration

OPERATING PROFIT

 Operating profit

NET PROFIT

• Net profit margin (right)
 Net profit (left)

DKK billion

2012 2013 2014 2015 2016

steadily, and Tresiba® has now captured
39% of the basal insulin market measured
by monthly value market share. Similarly,
Tresiba® has shown solid penetration in
other markets with reimbursement at a
similar level to insulin glargine U100,
whereas penetration remains modest in
markets with restricted market access.

Xultophy® (IDegLira), a once-daily single-
injection combination of insulin degludec
(Tresiba®) and liraglutide (Victoza®), is
currently marketed in nine countries, and
launch activities are progressing as
planned. In November 2016, Xultophy®
100/3.6 was approved by the US Food and
Drug Administration (FDA) and Novo
Nordisk plans to launch the product in first
half of 2017.

Ryzodeg®, a soluble formulation of insulin
degludec and insulin aspart, has now been
marketed in 10 countries, and feedback
from patients and prescribers is encour-
aging.

Sales of modern insulin decreased by 3% in
local currencies and by 5% in Danish kroner
to DKK 47,510 million. Sales declined in the
USA, Europe and Pacific partly offset by a
positive contribution from International
Operations and China. Sales of modern
insulin and new-generation insulin in total
constitute 82% of Novo Nordisk’s sales of
insulin measured in value.

VICTOZA®
(GLP-1 THERAPY FOR TYPE 2 DIABETES)
Victoza® sales increased by 12% in local
currencies and by 11% in Danish kroner to
DKK 20,046 million. Sales growth is driven
by the USA and International Operations.
The GLP-1 segment’s value share of the
total diabetes care market has increased to

9.8% compared with 8.0% in 2015.
Victoza® is the market leader in the GLP-1
segment with a 58% value market share.

OTHER DIABETES AND OBESITY CARE
Sales of other diabetes and obesity care,
which predominantly consists of needles,
oral antidiabetic products and Saxenda®,
increased by 26% in local currencies and
by 24% in Danish kroner to DKK 5,844
million. Saxenda®, liraglutide 3 mg for
weight management, was launched in
May 2015 and sales were DKK 1,577
million in 2016 compared with DKK 460
million in 2015. In the USA, promotional
activities are progressing as planned, and
Saxenda® is now the market-leading
anti-obesity medication measured in value.
Saxenda® has now been launched in 15
countries.

BIOPHARMACEUTICAL
SALES DEVELOPMENT
Sales of biopharmaceutical products
increased by 4% measured in local curren -
cies and by 2% in Danish kroner to DKK
22,831 million. Sales growth is primarily
driven by International Operations, the
USA, Europe and Pacific.

HAEMOPHILIA
(BLEEDING DISORDERS THERAPY)
Sales of haemophilia products were
unchanged in local currencies and
decreased by 2% in Danish kroner to DKK
10,472 million. The sales development was
negatively impacted by lower NovoSeven®
sales in the USA due to increased compe-
tition and patients participating in clinical
trials with competing drugs, partly offset
by the roll-out of NovoEight® in Europe
and the USA and by sales growth for
NovoSeven® in Pacific.

2012 2013 2014 2015 2016

NORDITROPIN®
(GROWTH HORMONE THERAPY)
Sales of Norditropin® increased by 14%
measured in local currencies and by 12% in
Danish kroner to DKK 8,770 million. The
sales growth is primarily derived from the
USA reflecting a significant positive non-
recurring adjustment to rebates in the
Medicaid patient segment relating to the
period 2010–2015. This positive impact has
been partly offset by lower volumes. Novo
Nordisk is the leading company in the
global growth hormone market with a
23% market share measured in volume.

OTHER BIOPHARMACEUTICALS
Sales of other products within biopharma-
ceuticals, which predominantly consist of
hormone replacement therapy-related
(HRT) products, declined by 6% measured
in local currencies and by 7% in Danish
kroner to DKK 3,589 million. The sales
decline reflected a negative impact from
the launch of a generic version of Vagifem®
in the USA in the fourth quarter.

DEVELOPMENT IN COSTS
AND OPERATING PROFIT
The cost of goods sold increased by 6%
to DKK 17,183 million, resulting in a gross
margin of 84.6%, compared with 85.0%
in 2015 measured in Danish kroner. The
gross margin was negatively impacted
by a negative product mix due to lower
NovoSeven® sales partly countered by
higher Victoza® sales and a negative price
impact reflecting lower modern insulin
prices in the USA, which was partly offset
by the positive contribution from the non-
recurring Medicaid rebate adjustment.

CONTINUED

NOVO NORDISK ANNUAL REPORT 20168

ACCOMPLISHMENTS AND RESULTS 2016

Sales and distribution costs increased by
3% in local currencies and were unchanged
in Danish kroner to DKK 28,377 million.
The modest increase in costs is driven by
sales force investments in selected
countries in International Operations and
promotional activities in selected countries
within Pacific and Europe, partly offset by
lower sales and distribution costs in the
USA reflecting cost management.

Research and development costs increased
by 7% in both local currencies and Danish
kroner to DKK 14,563 million. The increase
in costs reflects higher research costs for
diabetes and obesity projects as well as
impairment charges of intangible assets
related to a number of early-stage projects
in connection with the updated research
and development strategy. Development
costs increased due to the initiation of the
PIONEER programme for oral semaglutide,
where all 10 planned trials have been
initiated, and the fast-acting insulin aspart
phase 3b development programme. The
increase in development costs was partly
countered by lower costs related to the
completion of the cardiovascular outcomes
trial DEVOTE and the SWITCH phase 3b
development programme, both for insulin
degludec, as well as the phase 3a pro-
gramme SUSTAIN for the once-weekly
GLP-1 analogue semaglutide and lower
Biopharmaceuticals development costs.

Administration costs increased by 5% in
local currencies and by 3% in Danish
kroner to DKK 3,962 million. The higher
administrative costs are mainly related to
higher employee-related costs in Inter-
national Operations.

Other operating income (net) was DKK 737
million compared with DKK 3,482 million in
2015. The lower level of income reflects the
non-recurring income from the partial
divestment of NNIT, an IT service and
consultancy company, in connection with
the Initial Public Offering on Nasdaq
Copenhagen as well as non-recurring
income related to the out-licensing of
assets for inflammatory disorders, both
in 2015.

Operating profit was unchanged in local
currencies and decreased by 2% in Danish

OUTLOOK 2017

The current expectations for 2017 are summarised in the table below:

EXPECTATIONS ARE AS REPORTED,
IF NOT OTHERWISE STATED

EXPECTATIONS
2 FEBRUARY 2017

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

–1% to 4%
Around 2 percentage points higher

–2% to 3%
Around 2 percentage points higher

Loss of around DKK 2.4 billion

21%–23%

Around DKK 10.0 billion

Around DKK 3.0 billion

DKK 29–33 billion

kroner to DKK 48,432 million. Adjusted for
the income related to the partial divestment
of NNIT (DKK 2,376 million) and the income
related to the out-licensing of assets for
inflammatory disorders (DKK 449 million),
both in 2015.

FINANCIAL ITEMS (NET)
AND TAX
Financial items (net) showed a net loss of
DKK 634 million compared with a net loss
of DKK 5,961 million in 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 con -
tracts. The foreign exchange result was a
loss of DKK 576 million compared with a
loss of DKK 5,898 million in 2015. The
result in 2016 reflects loss on foreign
exchange hedging involving especially the
US dollar, Japanese yen and Chinese yuan
versus the Danish krone.

The effective tax rate for 2016 was 20.7%.
The higher tax rate compared with the
2015 level of 19.8% reflects the tax-free
gain from the partial divestment of NNIT in
2015, offset by a positive effect from
settlement of tax cases related to prior
years and the reduction of the corporate
income tax rate in Denmark from 23.5% in
2015 to 22.0% in 2016.

CAPITAL EXPENDITURE AND
FREE CASH FLOW

Net capital expenditure for property, plant
and equipment was DKK 7.1 billion com -
pared with DKK 5.2 billion in 2015. Net
capital expenditure was primarily related to
investments in a new production facility for
a range of diabetes active pharmaceutical
ingredients, a new diabetes care filling
capacity and an expansion of the manu-
facturing capacity for biopharmaceutical
products.

Free cash flow was DKK 40.0 billion com-
pared with DKK 34.2 billion in 2015. The
17% increase compared with 2015 primarily
reflects higher cash flow from operating
activities including a lower level of tax
payments in 2016 due to a positive effect
from settlement of tax cases related to prior
years. The higher free cash flow is further
positively impacted by a higher net profit in
2016, partly countered by a planned
increase in inventory levels and trade
receivables as well as the non-recurring cash
impact from the partial divestment of NNIT
in 2015.

OUTLOOK 2017
For 2017, sales growth is expected to be in
the range of a decline of 1% to a growth of
4%, measured in local currencies. This
reflects expectations for continued robust
performance for Victoza® and Tresiba® as
well as a contribution from Saxenda® and
Xultophy®. These sales drivers are expected
to be partly countered by an impact from
lower realised prices in the USA, especially in
the basal insulin and growth hormone
segments, the loss of exclusivity for products
within hormone replacement therapy in the
USA, further intensifying competition within
diabetes and biopharmaceuticals especially
in the USA, as well as adverse macro-
economic conditions in several markets in

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 2,100 million

DKK 320 million

DKK 200 million

DKK 90 million

DKK 80 million

12
*
9

* Chinese yuan traded offshore (CNH) used as proxy when hedging Novo Nordisk’s CNY currency exposure.

NOVO NORDISK ANNUAL REPORT 2016PERFORMANCE AGAINST
LONG-TERM FINANCIAL TARGETS

Operating profit growth

Operating profit growth adjusted*

Operating profit after tax to net operating assets

Cash to earnings

Cash to earnings (three-year average)

2016

Target

(2.0%)

3.9%

150.2%

105.4%

102.4%

125%

90%

* Growth in operating profit for 2015 and 2016 are adjusted for DKK 2,376 million for the partial divestment of NNIT and

DKK 449 million for the income related to the out-licensing of assets for inflammatory disorders, both in 2015.

International Operations. Growth in 2017 is
expected to be unevenly distributed across
the quarters as growth is expected to be
impacted by two non-recurring events; the
adjustment to Medicaid rebates in 2016 for
Norditropin®, which primarily impacts the
first quarter of 2017, and the launch of a
generic version of Vagifem® in the USA,
which impacts the first three quarters of
2017. Given the current level of exchange
rates versus the Danish krone, growth
reported in DKK is expected to be around
2 percentage points higher than the local
currency level.

For 2017, operating profit growth is
expected to be in the range of a decline of
2% to a growth of 3%, measured in local
currencies. The expectation for operating
profit growth primarily reflects the modest
outlook for sales growth. The outlook also
reflects a modest increase in both sales and
distribution costs to support continued
launch activities and 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 2 percentage points higher
than the local currency level.

For 2017, Novo Nordisk expects financial
items (net) to be a loss of around DKK 2.4
billion. The current expectation reflects
losses associated with foreign exchange
hedging contracts, mainly related to the US
dollar, Japanese yen and Chinese yuan
versus the Danish krone.

The effective tax rate for 2017 is expected to
be in the range of 21–23%, a level broadly
similar to the statutory corporate tax rate in
Denmark of 22%.

Capital expenditure is expected to be
around DKK 10.0 billion in 2017, primarily
related to investments in additional capacity
for active pharmaceutical ingredient
production within diabetes care, a capacity
expansion of the diabetes care filling and an
expansion of the manufacturing capacity for
biopharmaceutical products. Depreciation,
amortisation and impairment losses are
expected to be around DKK 3.0 billion. Free

cash flow is expected to be DKK 29–33
billion. The lower level of free cash flow
compared with the DKK 40.0 billion in free
cash flow in 2016 reflects increased capital
expenditures in 2017 and a low level of tax
payments in 2016 due to settlement of tax
cases related to prior years.

All of the above expectations are based on
the assumptions that the global economic
and political environment will not significantly
change business conditions for Novo Nordisk
during 2017, 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, move-
ments in key invoicing currencies will impact
Novo Nordisk’s operating profit as outlined
in the table on the opposite page.

FORWARD-LOOKING
STATEMENT
Novo Nordisk’s reports filed with or
furnished to the US Securities and Exchange
Commission (SEC), including this document
and the Form 20-F, both expected to be
filed with the SEC in February 2017, and
written information released, or oral
statements made, to the public in the future
by or on behalf of Novo Nordisk, may
contain forward-looking statements. Words
such as ‘believe’, ‘expect’, ‘may’, ‘will’, ‘plan’,
‘strategy’, ‘prospect’, ‘foresee’, ‘estimate’,
‘project’, ‘anticipate’, ‘can’, ‘intend’, ‘target’
and other words and terms of similar
meaning in connection with any discussion
of future operating or financial performance
identify forward-looking statements.
Examples of such forward-looking state-
ments include, but are not limited to:

• statements of targets, plans, objectives or
goals for future operations, including
those related to Novo Nordisk’s products,
product research, product development,
product introductions and product
approvals as well as cooperation in
relation thereto

ACCOMPLISHMENTS AND RESULTS 2015

• statements containing projections of or
targets for revenues, costs, income (or
loss), earnings per share, capital expen d-
itures, dividends, capital structure, net
financial 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 ‘2016 performance and 2017
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
exchange rate fluctuations, delay or failure
of projects related to research and/or
development, unplanned loss of patents,
interruptions of supplies and production,
product recalls, unexpected contract
breaches or terminations, government-
mandated or market-driven price decreases
for Novo Nordisk’s products, introduction of
competing products, reliance on information
technology, Novo Nordisk’s ability to
successfully market current and new
products, exposure to product liability
and legal proceedings and investigations,
changes in governmental laws and related
interpretation thereof, including on
reimbursement, intellectual property
protection and regulatory controls on
testing, approval, manufacturing and
marketing, perceived or actual failure to
adhere to ethical marketing practices,
investments in and divestitures of domestic
and foreign companies, unexpected growth
in costs and expenses, failure to recruit and
retain the right employees, and failure to
maintain a culture of compliance.

Please also refer to the overview of risk
factors in ‘Risk management – Protecting
long-term value creation’ on pp 40–43.

Unless required by law, Novo Nordisk is
under no duty and undertakes no obli gation
to update or revise any forward-looking
statement after the distribution
of this document, whether as a result of
new information, future events or otherwise.

NOVO NORDISK ANNUAL REPORT 201610 ACCOMPLISHMENTS AND RESULTS 2016

RESEARCH AND DEVELOPMENT
RESEARCH AND DEVELOPMENT
RESEARCH AND DEVELOPMENT

2016 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
development projects. On pp 20–21, the
pipeline overview shows all the compounds
in clinical development, and further details
on clinical trials can be found in the com -
pany announcements and press releases
published by Novo Nordisk during 2016,
which are available on novonordisk.com.

UPDATED R&D STRATEGY
In October 2016, Novo Nordisk updated its
R&D strategy and priorities to reflect the
increasingly challenging payer environment,
particularly in the US market, by applying an
even higher innovation threshold for pro -
gressing R&D projects. Novo Nordisk will
further intensify exploration of current assets
in adjacent disease areas of high unmet need
as well as identify new assets using our
existing technology platform. In addition
to the other areas, NASH (non-alcoholic
steatohepatitis), diabetic kidney disease and
cardiovascular disease are new areas to be
pursued, both in research and development.

As a result of the updated R&D strategy and
priorities, Novo Nordisk decided not to
progress its current development projects
within oral insulin and combinations
involving oral insulin. In addition, a number
of changes to the portfolio of early-stage
projects were also implemented. Further-
more, Novo Nordisk intends to strengthen
its activities for in-licensing of early- and
mid-stage projects as well as external
academic collaborations. Novo Nordisk’s
current late-stage development portfolio
was not affected by the changes.

DIABETES

In January and February 2016, the results
from the two double-blinded phase 3b trials
SWITCH 1 and 2 were announced. The
primary endpoint of the SWITCH 1 trial was
met by showing a statistically significantly
lower rate of severe or blood glucose
confirmed symptomatic hypoglycaemia
during the maintenance period of 11% for
people with type 1 diabetes treated with
Tresiba® compared to insulin glargine U100.
The primary endpoint of the SWITCH 2 trial
was also met by showing a statistically
significantly lower rate of severe or blood
glucose confirmed symptomatic hypo-
glycaemia during the maintenance period
of 30% for people with type 2 diabetes
treated with Tresiba® compared to insulin
glargine U100.

In February 2016, Novo Nordisk initiated the
first phase 3a trial with oral semaglutide, an
oral formulation of Novo Nordisk’s long-
acting GLP-1 analogue semaglutide using
Emisphere Eligen® technology. The global
PIONEER programme comprises 10 clinical
trials in total.

In March 2016, Novo Nordisk announced
that, in the LEADER study, Victoza® signi -
ficantly reduced the risk of the composite
primary endpoint of cardiovascular (CV)
death, non-fatal myocardial infarction
and non-fatal stroke by 13%, and the
secondary endpoint of CV mortality was
also signi ficantly reduced by 22% versus
placebo, when added to standard of care
in 9,340 adults with type 2 diabetes at
high CV risk.

In April 2016, Novo Nordisk announced
results from the SUSTAIN 6 trial, where
semaglutide, a GLP-1 analogue admin-
istered once weekly, when added to
standard of care, statistically significantly
reduced the risk of the composite primary
endpoint of cardiovascular death, non-fatal
myocardial infarction and non-fatal stroke
by 26% compared to placebo in a study
with 3,297 adults with type 2 diabetes with
elevated cardiovascular risk. In December
2016, Novo Nordisk filed semaglutide for
regulatory approval in the US and the EU,
based on the results from the six SUSTAIN
trials.

In October 2016, Novo Nordisk announced
that it had received a Complete Response
Letter (CRL) from the US Food and Drug
Administration (FDA) regarding the New
Drug Application (NDA) for fast-acting
insulin aspart. In the letter, the FDA
requested additional information related to
the assay for the immunogenicity and the
assay used to generate the clinical phar-
maco kinetics data before the review of the
NDA could be completed. Novo Nordisk
expects to resubmit the fast-acting insulin
aspart NDA as a class II re-submission within
the next three months. In January 2017,
Novo Nordisk announced that the European
Commission had granted marketing
authorisation for Fiasp® for the treatment of
diabetes in adults and that Novo Nordisk
had also received marketing authorisation
for Fiasp® from Health Canada.

In November 2016, Novo Nordisk an-
nounced that the FDA had approved the
New Drug Application (NDA) for Xultophy®
100/3.6, a once-daily, single-injection fixed
combination of long-acting insulin degludec
(Tresiba®) and the GLP-1 analogue lira-
glutide (Victoza®). Xultophy® 100/3.6 is

indicated as an adjunct to diet and exercise
to improve glycaemic control in adults with
type 2 diabetes inadequately controlled on
basal insulin (less than 50 units daily) or
liraglutide (less than or equal to 1.8 mg
daily).

In November 2016, Novo Nordisk an-
nounced the headline results from the
DEVOTE trial, a long-term, randomised,
double-blinded and event-driven trial
conducted to confirm the cardiovascular
safety of Tresiba® (insulin degludec)
compared to insulin glargine U100 when
added to standard of care. In the trial, more
than 7,500 people with type 2 diabetes at
high risk of major adverse cardiovascular
events were treated for a period of approx -
imately two years. The primary endpoint of
the DEVOTE study was defined as the
MACE composite outcome of the first
occurrence of cardiovascular death, non-
fatal myocardial infarction or non-fatal
stroke and showed a hazard ratio of 0.91 in
favour of Tresiba® relative to insulin glargine
U100, with no statistically significant
difference between the two treatments. In
the trial, Tresiba® demonstrated superiority
on the secondary confirmatory endpoint of
severe hypoglycaemia: 27% fewer patients
in the Tresiba® treated group experienced
an episode of severe hypoglycaemia,
resulting in a 40% overall reduction in total
episodes of adjudicated severe hypoglycae-
mia with Tresiba® compared to insulin
glargine U100.

OBESITY AND OTHER
AREAS

In November 2016, Novo Nordisk initiated a
phase 2 dose-finding trial in patients with
NASH (non-alcoholic steatohepatitis) to
investigate the effect of subcutaneous
semaglutide once daily for 72 weeks on the
histological resolution of NASH. The trial
will include 372 patients globally random-
ised to one of three doses of semaglutide
or placebo and is planned to conclude in
2019.

HAEMOPHILIA

In first half of 2016, Novo Nordisk sub-
mitted the Marketing Authorisation
Application (MAA) to the European
Medicines Agency (EMA) and the Biologics
Licence Application (BLA) to the FDA 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, developed for patients with
haemophilia B.

NOVO NORDISK ANNUAL REPORT 2016SOCIAL PERFORMANCE

Social performance has three dimensions:
improving access to medical treatment and
quality of care for patients, offering a
healthy and engaging working environ-
ment, and providing assurance that
responsible business practices are in place,
with the aim of contributing to the
communities in which the company
operates.

at or below the pricing policy price in the
LDCs decreased from 411,000 in 2015 to
349,000 in 2016. Beyond this scheme, Novo
Nordisk sells human insulin at similar prices
in low-income countries. In 2016, an
estimated 6.5 million people were treated
with insulin below the LDC ceiling price
worldwide compared with 5.5 million
people in 2015.

PATIENTS
Of the 415 million people living with
diabetes worldwide, three out of four live in
low- and middle-income countries with
weak healthcare systems, implying that
millions of people have inadequate access
to diabetes care.

Novo Nordisk’s strategy for global access to
diabetes care addresses this unmet need.
The company’s long-term target is to reach
40 million people with its diabetes care
products by 2020 – double the 2010 base -
line number.

Novo Nordisk provided medical treatments
to an estimated 28 million people with
diabetes worldwide in 2016, compared with
26.8 million in 2015. This 4% increase was
driven by sales of human insulin (0.6 million
people) and modern and new-generation
insulin (0.5 million people).

Current projections show that it will not be
possible to reach this target. This is due to a
more challenging market environment than
anticipated in 2013 when the long-term
target was set. Novo Nordisk remains
committed to continuing its efforts to reach
more patients and improve diabetes care. In
2016, the company announced a new Novo
Nordisk Access to Insulin Commitment with
a broader scope to replace the longstanding
differential pricing policy. It provides low-
income countries and humanitarian relief
organisations with an effective guarantee
that Novo Nordisk will ensure availability of
low-priced human insulin at a lower ceiling
price than the previous pricing policy. In
2017, the price will be 4 US dollars per vial.

Novo Nordisk sold human insulin according
to the company’s differential pricing policy
in 22 of the 48 Least Developed Countries
in 2016, compared with 23 countries in
2015. The pricing policy is offered through
government tenders or private market
distributors to all Least Developed Countries
(LDCs) as defined by the UN. In 2016, the
ceiling price for insulin treatment per patient
per day was USD 0.18, while the average
realised price for insulin sold under the
programme was USD 0.15. The total
number of people treated with insulin sold

By the end of 2016, solid progress had been
achieved by Changing Diabetes® pro-
grammes in reaching more people with
diabetes and building healthcare capacity.
The Changing Diabetes® in Children
programme, launched in 2009, operates in
nine countries and reaches more than
14,000 children, who receive insulin
treatment free of charge. A total of 108
clinics have been set up, and more than
7,000 healthcare professionals have been
trained or retrained. In 2017, the pro-
gramme will be expanded to include
another five low-income countries, with a
new ambition of reaching 20,000 children.
The Changing Diabetes® in Pregnancy
programme, also launched in 2009, has
screened more than 48,000 women for
gestational diabetes, and more than 4,800
women have been diagnosed and subse-
quently treated. The Base of the Pyramid
programme has been expanded in Kenya,
Nigeria and Ghana, and in 2017 the
programme will be rolled out in Senegal.

In 2014, Novo Nordisk launched Cities
Changing Diabetes as a response to the
dramatic rise of type 2 diabetes in cities,
also called ‘urban diabetes’. It is a partner-
ship programme with University College
London and Steno Diabetes Center plus a
range of local partners, including diabetes
and health communities, city governments,
academic institutions, city experts and civil
society organisations. The aim is to map the
problem, share solutions and drive concrete
action to fight the diabetes challenge in
cities around the world. The partner cities
are Copenhagen, Houston, Johannesburg,
Mexico City, Shanghai, Tianjin, Vancouver
and Rome, representing more than 70
million citizens.

Donations through the World Diabetes
Foundation (WDF) in 2016 amounted to
85 million Danish kroner. 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 sustainable initiatives
to build healthcare capacity, with the aim of
improving prevention and treatment of
diabetes in developing countries. Since
2002, WDF has provided 122 million US
dollars in funding to 486 projects in 115

ACCOMPLISHMENTS AND RESULTS 2016

countries. 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 2016, the company
donated 21 million Danish kroner to the
Novo Nordisk Haemophilia Foundation,
established in 2005. The foundation
supports projects and fellowships in
developing and emerging economies.
Initiatives focus on capacity building,
awareness, diagnosis and patient registries.
Read more on nnhf.org.

EMPLOYEES
In November 2016, Novo Nordisk reduced
its global workforce by 2% across its
organisation. The decision was one of
several actions to reduce operating costs in
response to a challenging competitive
environment, especially in the USA. The
workforce reductions affected R&D units,
headquarter staff functions and positions in
the global commercial organisation mainly
in the USA. At the end of 2016, the total
number of employees was 42,446, corres -
ponding to 41,971 full-time positions, which
is a 3% increase compared with 2015. The
growth is primarily driven by expansion
within the International Operations sales
region and in Product Supply. Employee
turnover increased from 9.2% in 2015 to
9.7% in 2016.

Measured on a scale from 1 to 5, with 5
being the best score, the consolidated score
in the annual employee survey, eVoice, was
4.4 in 2016, compared with 4.3 in 2015.
The survey was conducted in the second
quarter of 2016 and measures the extent to
which the organisation is working in accord-
ance with the Novo Nordisk Way. The 2016
result reflects a strong culture and commit-
ment to the company’s values.

By the end of 2016, gender diversity among
managers was 59% men and 41% women.
Of the newly promoted managers, 43%
were women. All management teams, from
entry level upwards, strive for enhanced
diversity, with the aim of ensuring a robust
pipeline of talent for management positions.

The average frequency rate of occupational
accidents with absence in 2016 was 3.0 per
million working hours, unchanged from
2015. One Novo Nordisk employee in
Pakistan died in a work-related accident.
Novo Nordisk is working with a zero-injury
mindset and has a long-term commitment

CONTINUED

NOVO NORDISK ANNUAL REPORT 201612 ACCOMPLISHMENTS AND RESULTS 2016

to continuously improve safety perform ance.
The link between company values and safety
behaviour is emphasised to ensure that
employees always make the safe choice.

ASSURANCE
Training in business ethics is mandatory and
a high priority. Annual business ethics
training is required for all employees, includ -
ing new hires. Business ethics training is
therefore a key element of the onboarding
programmes. In 2016, 99% of all relevant
employees completed and documented
their training and passed the related tests,
compared with 98% in 2015. This high level
is attributed to the constant focus on and
communication by senior management of
the importance of business ethics com-
pliance.

A total of 52 business ethics reviews were
completed in 2016 with 234 findings,
compared with 49 reviews in 2015 with
183 findings. It is Group Internal Audit’s
assessment that the level of compliance is
sound. Closure of findings progressed as
planned, and there were no overdue
findings as of 31 December 2016.

The global facilitator team conducted 84
audits of units’ adherence to the Novo
Nordisk Way. These facilitations covered
approximately 25,000 employees, 12% of
whom were interviewed, while feedback
was collected from almost 1,000 stake-
holders. The facilitations in 2016, as in
2015, showed a high level of compliance
with the Novo Nordisk Way. Corrective
actions and corresponding deadlines were
agreed with local management for all
actions. See the article on p 18 and
novonordisk.com/about-novo-nordisk/
novo-nordisk-way.html for further
information. A total of 223 supplier audits,
compared with 240 audits in 2015, were
conducted in 2016 to assess suppliers’ level

PATIENTS REACHED WITH
DIABETES CARE PRODUCTS
Estimate

• Realised
Target (2020)

Million
50

of compliance with the company’s
standards for suppliers. These relate to
quality as well as to Novo Nordisk’s
responsible sourcing policy covering the
environment, labour, human rights and
business ethics.

These audits are undertaken by Novo
Nordisk’s Corporate Quality organisation.
Of the audits carried out in 2016, 27
concerned responsible sourcing criteria, on
par with 2015. Only high-risk suppliers,
identified through a robust risk assessment,
are selected for responsible sourcing audits.
There were no critical findings in 2016.

Novo Nordisk had six product recalls from
the market in 2016, of which one was
critical, compared with two in 2015. Two of
the recalls were due to inappropriate
product storage in the external distribution
chain while four were due to products that
did not fully meet specifications. Local
health authorities were informed in all
instances to ensure that distributors, phar -
macies, doctors and patients received
appropriate information. Read more on
pp 41 and 51.

In 2016, as in 2015, there were no failed
inspections by regulatory authorities among
those resolved at year-end. A total of 74
inspections were conducted in 2016 at
Novo Nordisk’s sites, at clinics conducting
investigations for Novo Nordisk or for
voluntary ISO 9001 certification, compared
with 82 inspections in 2015. At year-end,
49 inspections had been passed and 25
were unresolved.

Novo Nordisk acts on its responsibility to
respect human rights as set out in the UN
Guiding Principles on Business and Human
Rights, and observes due diligence. Novo
Nordisk recognises that the company has a
number of potential impacts with regard to
human rights in its operations and business

relationships. Actions are taken focusing on
salient issues beyond those already
addressed by existing programmes such
as global labour standards and employee
health and safety, bioethics, responsible
sourcing and business ethics. In 2016, the
focus was on human biosamples for
research use, patient safety and security.
The company has also strengthened con -
sult ations with patients. As of this year,
reporting on respect of human rights, using
the UN Guiding Principles Reporting
Framework, is available in the Communi-
cation on Progress at novonordisk.com/
annualreport.

The consolidated reputation score was 79.2
in 2016, compared with 82.4 in 2015. Data
was collected from January through October
2016. Although still a strong score, the
decline reflects a general trend across the
healthcare sector. Reputation among key
stakeholders – people with diabetes, general
practitioners, diabetes specialists and
employees – is an indicator of the extent to
which the company lives up to their expect -
ations and the likelihood that they will trust,
support and engage with the company.

LONG-TERM SOCIAL
TARGETS
Novo Nordisk has set three long-term social
targets to support long-term financial
performance, balancing responsibility with
profitability, with the aim of creating
sustainable value for shareholders and other
stakeholders. The social targets reflect
strategic priorities to be a sustainable
business: helping people live better lives,
working the Novo Nordisk Way and safe -
guarding the reputation of the company.

For further information about social
performance, see the social statement on
pp 98–101 and the Communication on
Progress at novonordisk.com/annualreport.

WORKING THE NOVO NORDISK WAY
Average score in annual employee survey

COMPANY REPUTATION
Mean score among key stakeholders

• Realised
Target

Scale

• Realised
Target

Scale

100

2012 2013 2014 2015 2016

2012 2013* 2014 2015 2016

* In 2013, data for people with diabetes and employees

are not included due to lack of availability.

NOVO NORDISK ANNUAL REPORT 2016ACCOMPLISHMENTS AND RESULTS 2016

ENVIRONMENTAL PERFORMANCE

Novo Nordisk measures environmental
performance across four dimensions: use of
resources, emissions, organic residues and
waste. All of Novo Nordisk’s production
facilities are certified according to ISO
14001. The production of active pharma-
ceutical ingredients in Kalundborg,
Denmark, is also certified according to
ISO 50001.

In line with expectations, use of resources
and waste increased, while organic residues
and CO2 emissions from energy use at
production sites and product distribution
decreased.

RESOURCES
Despite a sharp focus on process optimi-
sations, energy use increased by 6% and
water use by 5% due to increases in
production, increased capacity and
expansions to meet market demands. Two
facilities are located in regions subject to
high water stress, consuming 6% of the
total water consumption used at Novo
Nordisk sites. There were no water short -
age incidents and, overall, water consump-
tion at these facilities decreased in 2016.

EMISSIONS, ORGANIC
RESIDUES AND WASTE
Novo Nordisk’s climate action programme
aims to reduce CO2 emissions throughout
the value chain. The current focus includes
energy used in production, distribution of
products, company cars and business
flights. As of 2015, indirect emissions from
the supply chain are included in the climate
action programme. Novo Nordisk engages

with strategic suppliers with the aim of
increasing energy efficiency and shifting to
renewable energy.

LONG-TERM
ENVIRONMENTAL TARGETS

While energy consumption increased, the
overall CO2 emissions from energy con sump-
tion decreased from 107,000 tons to 92,000
tons. This is a result of ongoing conversion
to less CO2 intensive energy sources as part
of the effort to grow the share of renewable
energy. At the end of 2016, 78% of all
power for production came from renewable
sources. All but one production site in
Denmark use gas from biogas plants, and
the facility in Brazil makes steam from
certified wood. The remaining production
facilities use natural gas.

CO2 emissions from product distribution
decreased by 12% to 38,000 tons due to
continuous conversion from air transport to
distribution by sea.

Organic residues, a by-product of the
production of active pharmaceutical
ingredients (API), decreased slightly due to
changes in the product mix of API. The
energy in these residues is first recovered in
biogas plants, and the digested slurry is
then used as fertiliser on local farmland.

Waste increased by 9% compared with
2015, mainly due to increased pilot
production where regeneration of ethanol
is not possible. Reducing ethanol waste is a
high priority for Novo Nordisk, and efficient
regeneration plants enable repeated reuse
of the ethanol.

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
increase in sales in local currencies,
measured as a three-year average. In 2016,
sales increased by 6% in local currencies
while energy consumption increased by 6%
and water consumption increased by 5%.
The lower sales growth reflects the chal -
lenging business environment in 2016,
while the increased consumption of energy
and water is the result of new capacity
building to meet market demands. Under
these circumstances, it is not feasible to
meet the current targets for the foresee-
able future. New targets are being
developed to replace them.

In 2015, Novo Nordisk set a target for all
production sites to use electricity from
renewable sources by 2020. The company
has signed up to the RE100 initiative, a
coalition of companies, committed to
100% renewable electricity led by The
Climate Group in partnership with CDP, a
not-for-profit that runs the global disclosure
system for environmental impacts.

Novo Nordisk plans to set targets for other
focus areas under the climate ambition
programme. The ambition is to align the
targets with the goals of the Paris Agree-
ment to keep the rise in global temperature
well below 2 degrees Celcius.

For additional information about environ-
mental performance, see the environmental
statement on pp 104–106 and the Commu-
ni cation on Progress at novonordisk.com/
annualreport.

ENERGY CONSUMPTION

WATER CONSUMPTION

SHARE OF RENEWABLE POWER
FOR PRODUCTION

• Realised
Target (not to exceed)

• Realised
Target

1,000,000 GJ

1,000,000 m3

100

2012 2013 2014 2015 2016

NOVO NORDISK ANNUAL REPORT 201614 ACCOMPLISHMENTS AND RESULTS 2016
14 ACCOMPLISHMENTS AND RESULTS 2016

PERFORMANCE HIGHLIGHTS

2012

2013

2014

2015

2016

2015–2016

FINANCIAL PERFORMANCE
Net sales

78,026

83,572

88,806

107,927

111,780

Sales growth in local currencies1
Currency effect (local currency impact)

11.6%
6.0%

11.9%
(4.8%)

8.3%
(2.0%)

8.4%
13.1%

5.5%
(1.9%)

Net sales growth as reported

17.6%

7.1%

6.3%

21.5%

3.6%

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/S

LONG-TERM FINANCIAL TARGETS
Operating proﬁ t growth
Operating proﬁ t growth adjusted
Operating proﬁ t growth in local currencies
Operating proﬁ t after tax to net operating assets1
Cash to earnings (three-year average)

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%

3,193
48,432
(634)
47,798
37,925

97,539
45,269

7,061
39,991

99.7%
25.4%
13.0%
3.5%

84.6%
33.9%
20.7%
46.4%
82.2%
105.4%
50.2%

45.3%

47.1%

48.7%

50.0%

50.2%

31.7%
31.7%
20.2%
99.0%
103.7%

6.9%
6.9%
14.6%
97.2%
93.9%

9.5%
9.5%
12.7%
101.0%
93.1%

43.3%
35.2%2
20.6%
148.7%
96.8%

(2.0%)
3.9%2
0.2%
150.2%
102.4%

Change
4%

8%
(2%)
(89%)
10%
9%

6%
(4%)

36%
17%

Targets
5%

125%
90%

1. For deﬁ nitions, please refer to p 96. 2. Adjusted for DKK 2,376 million from the partial divestment of NNIT and DKK 449 million from the income related to the out-licensing of
assets for inﬂ ammatory disorders, both in 2015.

SALES BY GEOGRAPHIC REGION
SALES BY GEOGRAPHIC REGION
(cid:74) Paciﬁc
 Pacific
(cid:74) Region China
 Region China
(cid:74) International Operations
 International Operations
(cid:74) Europe
 Europe
(cid:74) USA
 USA

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 insulin
 Modern insulin
(cid:74) Human insulins
 Human insulin

BIOPHARMACEUTICALS SALES
BIOPHARMACEUTICALS SALES
(cid:74) Other biopharmaceuticals
 Other biopharmaceuticals
(cid:74) Human growth hormone
 Human growth hormone
(cid:74) Haemophilia
 Haemophilia

DKK billion
DKK billion

125
125

100
100

75
75

50
50

25
25

0
0

2012 2013 2014 2015 2016
2012 2013 2014 2015 2016

NOVO NORDISK ANNUAL REPORT 2016

DKK billion
DKK billion

100
100

80
80

60
60

40
40

20
20

0
0

2012 2013 2014 2015 2016
2012 2013 2014 2015 2016

DKK billion
DKK billion

2012 2013 2014 2015 2016

NOVO NORDISK ANNUAL REPORT 2016

ACCOMPLISHMENTS AND RESULTS 2016
ACCOMPLISHMENTS AND RESULTS 2016

15
15

2012

2013

2014

2015

2016

2015–2016

SOCIAL PERFORMANCE
Least developed countries where Novo Nordisk sells
insulin according to the differential pricing policy
Donations (DKK million)3
New patent families (ﬁ rst ﬁ lings)

Employees (total)
Employee turnover
Gender in Management (ratio men:women)
Relevant employees trained in business ethics
Product recalls
Failed inspections

LONG-TERM SOCIAL TARGETS
Patients reached with Novo Nordisk diabetes
care products (estimate in millions)
Working the Novo Nordisk Way (scale 1– 5)
Company reputation (scale 0 –100)

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 of renewable power for production

SHARE PERFORMANCE
Basic earnings per share/ADR in DKK1, 7
Diluted earnings per share/ADR in DKK1, 7
Total number of shares (million), 31 December
Treasury shares (million), 31 December
Share capital (DKK million)
Dividend per share in DKK7
Total dividend (DKK million)
Share repurchases (DKK million)
Closing share price (DKK)7

35
84
65

34,7314
9.1%
61:39
99%
6
1

22.8
4.3
N/A

2,433
2,475

122
99,209
19,213

11%
16%
74%

7.82
7.77
2,800
87
560
3.60
9,715
12,162
183.30

35
83
77

38,4364
8.1%
61:39
97%
6
0

32
84
93

41,4504
9.0%
60:40
98%
2
0

23
105
77

41,122
9.2%
59:41
98%
2
0

22
106
74

42,446
9.7%
59:41
99%
6
0

24.3
4.4
82.95

24.4
4.3
80.8

26.8
4.3
82.4

28.0
4.4
79.2

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

2,935
3,293

92
114,805
37,940

Change

(4%)
1%
(4%)

200%
–

Targets

40 by 2020
4.0
≥80

Change
6%
5%

(14%)
(7%)
9%

6%
8%
74%

9.40
9.35
2,750
103
550
4.50
11,866
13,989
198.80

(1%)
10%
73%

9%
6%
78%

6%
5%
78%

Targets
Not to exceed 4%6
Not to exceed 4%6
100% by 2020

10.10
10.07
2,650
57
530
5.00
12,905
14,728
260.30

13.56
13.52
2,600
52
520
6.40
16,230
17,229
399.90

14.99
14.96
2,550
46
510
7.608
19,0488
15,057
254.70

Change
11%
11%
(2%)
(12%)
(2%)
19%
17%
(13%)
(36%)

3. Donations to the World Diabetes Foundation and the Novo Nordisk Haemophilia Foundation, which are working to increase healthcare capacity in developing countries. 4. Includes
employees in NNIT A/S. 5. Data for people with diabetes and employees are not included due to lack of availability. 6. The 4% equals 50% of the business growth measured as the
increase in sales in local currencies as a three-year average. For detailed target deﬁ nition, please refer to p 13. 7. Share performance-related key ﬁ gures have been calculated reﬂ ecting
a trading unit of DKK 0.20. 8. Total dividend for the year including interim dividend of DKK 3.00 per share which was paid in August 2016. The remaining DKK 4.60 per share,
corresponding to DKK 11,448 million, has not yet been paid.

EMPLOYEES (TOTAL)
EMPLOYEES (TOTAL)
(cid:74) Paciﬁc
 Pacific
(cid:74) Region China
 Region China
(cid:74) International Operations
 International Operations
(cid:74) Europe
 Europe
(cid:74) USA
 USA

Thousand
Thousand

2012 2013 2014 2015 2016

SALES AND CO2 EMISSIONS
SALES AND CO2 EMISSIONS
(2012 = INDEX 100)
(2012 = INDEX 100)
• Index sales Mill DKK
• Index sales in DKK
• Index CO2
• Index CO2 emissions

Index
Index

150
150

120
120

90
90

60
60

30
30

0
0

2012 2013 2014 2015 2016
2012 2013 2014 2015 2016

CASH DISTRIBUTION TO
CASH DISTRIBUTION TO
SHAREHOLDERS
SHAREHOLDERS
(cid:74) Share repurchases in the calendar year
 Share repurchases in the calendar year
(cid:74) Interim dividend for 2016
 Interim dividend for 2016
(cid:74) Dividend for prior year
 Dividend for prior year

DKK billion
DKK billion

2012 2013 2014 2015 2016

NOVO NORDISK ANNUAL REPORT 2016

16 OUR BUSINESS
16

OUR STRATEGY

With a sharp focus on four selected therapeutic areas where the company has unique expertise
and capabilities and a values-based management system, Novo Nordisk’s corporate strategy is
framed by the company’s purpose to defeat diabetes and other serious chronic conditions.

Expand leadership
in diabetes

Diabet e

i
t

Pursue leadership
in haemophilia

hilia

PATIENTS

s
r
e

G r o w t h disord

Pursue leadership
in obesity

Expand leadership
in growth disorders

Driving change
to defeat
diabetes and
other serious
chronic
conditions

Novo Nordisk Way

THE FOUR STRATEGIC PRIORITIES

1. EXPAND LEADERSHIP
IN DIABETES

more products have entered or are due to
enter the market, especially within the insulin
segment.

According to the International Diabetes
Federation, 415 million people worldwide are
living with diabetes today, and this number is
predicted to increase to 642 million by 2040.
This corresponds to more than 10% of the
world’s adult population.1

The global market for diabetes care products
is estimated by IMS to amount to more than
450 billion Danish kroner, of which Novo
Nordisk products account for approximately
27%.5 Historically, there has been a strong
growth trend due to the increasing number
of people with diabetes and the availability
of new and better treatments on the market.
However, the competitive environment,
especially in the important US market,
has become tougher in the past year as
commercial payers have consolidated and

Diabetes care is by far Novo Nordisk’s largest
business area, accounting for approximately
80% of the company’s total sales. Since
2007, all efforts in diabetes care have been
focused on protein-based products, such as
insulin and GLP-1, and today Novo Nordisk is
the leader in both segments, with a market
share of more than 40% of the insulin market
and close to 60% of the GLP-1 market,
measured in value.5

Novo Nordisk’s ambition is to expand its
leadership within these two segments, with
the aim of improving treatment for people
with type 1 diabetes and serving the growing
number of people with type 2 diabetes.
Key to achieving this ambition is the new
generation of insulin and insulin combination
products, Tresiba®, Xultophy®, Ryzodeg®,

and Fiasp® as well as the once-daily GLP-1
analogue Victoza®. All these products have
very competitive clinical profiles and are
delivered in convenient injection devices.
Furthermore, Novo Nordisk will pursue label
updates based on the positive results from
the cardiovascular outcomes trials reported
in 2016: the LEADER trial with Victoza® and
the DEVOTE trial with Tresiba®. Read more on
pp 24–25.

Novo Nordisk’s research and development
pipeline includes several innovative products.
These include the once-weekly injectable
GLP-1 analogue semaglutide which, in
a clinical trial, has also demonstrated a
significant reduction in major cardiovascular
events in adults with type 2 diabetes at high
cardiovascular risk, and a once-daily tablet
version of semaglutide set to become the first
orally available peptide for the treatment of
type 2 diabetes. Read more on pp 20–21 and
24–25.

NOVO NORDISK’S STRATEGYSTRATEGIC FOCUS AREASPURPOSENOVO NORDISK ANNUAL REPORT 20162. PURSUE LEADERSHIP
IN OBESITY

3. PURSUE LEADERSHIP
IN HAEMOPHILIA

4. EXPAND LEADERSHIP
IN GROWTH DISORDERS

OUR BUSINESS

17
17

Novo Nordisk has been active in the
treatment of growth hormone deficiency
for four decades. The global market for
growth disorder treatments is estimated
to be 18 billion kroner.5 Novo Nordisk’s
growth hormone, Norditropin®, is the
global market leader, with a market share of
37%5, measured by value. The company’s
ambition is to expand its leadership in the
growth hormone market. A key project is
Novo Nordisk’s long-acting growth hormone
product, which is in phase 3 development.

Obesity is known to be a major risk factor for
developing serious diseases such as type 2
diabetes and was therefore a natural
therapeutic area for Novo Nordisk to enter.
Obesity has reached pandemic-like propor-
tions, with more than 600 million adults2
worldwide having clinical obesity (defined as
having a Body Mass Index (BMI) of 30 or
above).2 However, according to our estimate,
only 10 million people currently receive
pharmacological treatment5 as there are few
pharmaceutical treatment options available
for obesity, and reimbursement for these
medications is limited.

In 2015, Novo Nordisk entered the obesity
market with Saxenda® (liraglutide 3 mg),
starting in the US. Today, the product is
launched in 15 countries. By the end of 2016,
Saxenda® has gained market leadership, with
35% of the value market share in the US.5
Novo Nordisk’s ambition is to pursue
leadership in obesity, by bringing products
to market with an even better weight loss
profile. The company has a strong pipeline
to support this ambition and is working with
stakeholders to increase recognition of
obesity as a chronic disease. Read more on
pp 28–29.

Haemophilia is an inherited or acquired
bleeding disorder that prevents blood from
clotting. An estimated 493,000 people
worldwide are living with severe or moderate
haemophilia.5 The global haemophilia
pharmaceutical market has a value of 64
billion kroner and is expected to grow.5

Novo Nordisk entered the haemophilia
market in 1996 with NovoSeven® for the
treatment of people with haemophilia
who develop antibodies (inhibitors) against
traditional treatments. In 2014, Novo Nordisk
expanded into the wider haemophilia market
with NovoEight® for people with haemophilia
A and with NovoThirteen® for long-term
prevention of bleeding in patients with
congenital factor XIII A-subunit deficiency.
In 2016, the company submitted its long-
acting factor IX (N9-GP) for the treatment
of haemophilia B, for approval in Europe
and the US. Furthermore, the company has
a long-acting version of factor VIII (N8-GP),
in phase 3 development for haemophilia A.
Building on this strong base, Novo Nordisk’s
ambition is to pursue leadership within
haemophilia. Read more on pp 30–31.

REVISED R&D STRATEGY FOCUSES ON PATIENTS’ UNMET
MEDICAL NEEDS

Since 1923, Novo Nordisk has been in business to help people with
diabetes live with this condition in a way that does not prevent
them from pursuing their dreams of a fulfilling life.

can fulfil unmet medical needs in areas that we didn’t think of
originally.”

Today, scientific advances have brought much progress, but living
well with diabetes is still only a reality for
a worryingly small proportion of people,
with just 6% of people with diabetes
estimated to live a life free from diabetes-
related complications.6 The need for
innovation remains as essential as ever
before.

But innovation has a price. It often takes
more than 12 years to develop a new
biological medicine, and millions of work
hours are spent on the diligent process
of testing a drug candidate for safety
and efficacy before it is available on the
pharmacy shelves.

“In today’s constrained economy, the
threshold is higher for what payers are
willing to pay for innovation. As a
consequence, all R&D projects must be much more rigorously
scrutinised and subjected to thorough evaluation of their
commercial viability before they advance through the pipeline,”
explains Mads Krogsgaard Thomsen, chief science officer at Novo
Nordisk. “Meanwhile, we have the opportunity to investigate
whether our newest innovations – for example semaglutide –

Based on this, Novo Nordisk announced in October 2016 that it
will now apply an even higher innovation threshold for progressing

“IN TODAY’S
CONSTRAINED
ECONOMY,
THE THRESHOLD
IS HIGHER FOR WHAT
PAYERS ARE WILLING
TO PAY FOR
INNOVATION.”

Mads Krogsgaard Thomsen
Executive vice president
and chief science officer at Novo Nordisk

R&D projects and more intensely explore how to
utilise its current key products and new molecules
in adjacent disease areas where there are high
unmet patient needs, including NASH (non-
alcoholic steatohepatitis), diabetic kidney disease
and cardiovascular disease.

As a result, early-stage research projects have been
re-evaluated, and some development projects
within oral insulin and combinations involving oral
insulin will not be progressed any further, despite
encouraging clinical data.

“With insulin prices being under pressure, the sad
fact is that we can’t create an economically viable
case for launching oral insulin; we’ll never recoup
that investment. By stopping these projects, we’ve
liberated resources to focus on other projects,”
Mads Krogsgaard Thomsen says.

More attention is now on new drug targets, including in-licensing
of early- and mid-stage projects as well as external academic
collaborations. Novo Nordisk’s current late-stage development
portfolio is not affected by the updated strategy (see pipeline on
pp 20–21).

NOVO NORDISK ANNUAL REPORT 201618

DOING BUSINESS THE
NOVO NORDISK

Through times of change, it is more important than ever to stand on solid ground. The Novo
Nordisk Way including the Triple Bottom Line business principle remain the foundation of the
company’s vision, strategy and way of doing business.

“The Novo Nordisk Way describes the
values-based management principle we’ve
established and benefited from over many
years,” President and Chief Executive
Officer (CEO) Lars Fruergaard Jørgensen
explains. “In just one page, it outlines what
we wish to achieve as an organisation, as
well as the behaviours that are expected of
all Novo Nordisk employees.

“In a fast-growing global organisation, our
people have to make the right decisions on
difficult matters on a daily basis – always
bearing in mind what is best for patients,
employees and shareholders in the long
term. We need to provide clear and simple
guidance to all employees that is consist-
ently understood anywhere in the world.
This is what the Novo Nordisk Way does.”

The Novo Nordisk Way includes 10
Essentials that set out specific behaviours
stakeholders can expect to see from Novo
Nordisk and its employees. All employees
are held accountable for putting them into
practice by ‘living the Novo Nordisk Way’,
and managers at every level are responsible
for ensuring that they lead their units in

NOVO NORDISK ANNUAL REPORT 2016

adherence with the Novo Nordisk Way. This
is assured through a rigorous internal audit
process called facilitation (see box on p 19).

“It is well known that adherence to values,
consistent behaviours and good govern-
ance are vital for high performance, and
the value of a strong company culture
should never be underestimated,” says
Lars Fruergaard Jørgensen.

“When we meet with investors, they want
to understand the company’s risks and how
we pursue our strategy. They also ask
about the quality of our management,
whether we have the right management
composition, and how we develop skills
and nurture our people’s talents. A strong
corporate culture and stewardship are
enablers for future performance.”

CREATING VALUE IN A SUSTAINABLE WAY
The Triple Bottom Line principle, anchored
in the company’s Articles of Association
and in the Novo Nordisk Way, is a lens for
decision-making to ensure that effects on
people, communities and the environment
are accounted for and considered.

The aim is to ensure long-term profitability
by reducing risks related to business
activities and to enhance the positive
societal contributions from Novo Nordisk’s
global operations.

“The Triple Bottom Line principle reminds
us how we do business: we always strive to
conduct our activities in a financially,
environmentally and socially responsible
way, because we know this is a prerequisite
for a sustainable business and long-term
value creation,” Lars Fruergaard Jørgensen
explains.

“We have an interest in maintaining
sustainable growth and contributing to a
prosperous society. And Novo Nordisk has
a lot to offer, in particular when it comes to
addressing the UN Global Goals ‘health and
well-being for all, of all ages’ and ‘respon-
sible production and consumption’. One
example of how we’re tackling these
challenges is our partnership platform,
Cities Changing Diabetes,” says Lars
Fruergaard Jørgensen (see pp 26–27).

CORPORATE RESPONSIBILITY

Novo Nordisk has global policies and
programmes in place to ensure that:
business is conducted ethically and
responsibly at all times; activities or products
do not harm people, communities or the
environment; health and fair employment
terms are safeguarded for employees of
Novo Nordisk and suppliers; and the
company meets its responsibilities as a
corporate citizen through tax contributions
and community support. Novo Nordisk
adheres to the standards set by the UN
Guiding Principles on Business and Human
Rights and subscribes to the UN Global
Compact’s 10 principles of responsible
business conduct. A detailed account of the
company’s performance can be found at
novonordisk.com/annualreport.

Novo Nordisk continuously optimises
business performance to make a positive
contribution to sustainable development
and to create and document shared value.
For example, the company has the goal of
all its production sites to be 100% powered
by renewable energy by 2020 and has
intensified focus on reducing its CO2
foot print throughout the value chain. See
more examples of how Novo Nordisk creates
shared value through its presence in growth
economies, such as Algeria and Indonesia, at
novonordisk.com/sustainability.

Furthermore, Novo Nordisk supports the
achievement of the UN Sustainable
Development Goals. These are a platform
for companies to engage stakeholders at
local, national and international levels in
the pursuit of business goals that have an
implication for global sustainable
development.

“WE NEED TO
PROVIDE CLEAR AND
SIMPLE GUIDANCE TO
ALL EMPLOYEES THAT IS
CONSISTENTLY
UNDERSTOOD
ANYWHERE IN THE
WORLD.”

Lars Fruergaard Jørgensen
President and chief executive officer

Samira Salhi
Laboratory technician,
Global Research,
Denmark

NOVO NORDISK WAY

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.

ESSENTIALS

We create value by having a patient-centred business approach.

2. We set ambitious goals and strive for excellence.

3. We are accountable for our financial, environmental and social

performance.

4. We provide innovation to the benefit of our stakeholders.

5. We build and maintain good relations with our key

stakeholders.

6. We treat everyone with respect.

We focus on personal performance and development.

8. We have a healthy and engaging working environment.

We optimise the way we work and strive for simplicity.

10. We never compromise on quality and business ethics.

SAFEGUARDING ADHERENCE TO THE VALUES

Since 1997, Novo Nordisk has had a well-established process in
place to ensure that the organisation adheres to the Novo Nordisk
Way. Facilitations, which are a kind of values audit, measure how
behaviours are conducted at unit level on an ongoing basis. Read
more at novonordisk.com/about-novo-nordisk/novo-nordisk-way.
html.

Facilitations cover more than one-third of the global organisation
each year. A consolidated annual report on findings, trends and
recommendations for improvement is presented to Executive
Management and the Board of Directors. In 2016, the report,
covering facilitations of 84 units and almost 25,000 employees,
concluded that there was a consistent high level of compliance,
with 60% of units rated ‘high level’ and 40% ‘satisfactory level’.
However, the report also points to areas that require attention – in
particular ensuring focus on people management, simplicity and
balancing available resources with a strong performance culture
(see p 103).

20 OUR BUSINESS

PIPELINE OVERVIEW

Phase 1

Phase 2

Phase 3

Filed/
regulatory
approval

2017 KEY MILESTONES

Tresiba®

Victoza®

Label extension with SWITCH data in the US and the EU

Submission of DEVOTE data

Label extension with LEADER data in the US and the EU

Semaglutide – diabetes

Feedback from regulatory authorities

Semaglutide – diabetes

Completion of SUSTAIN 7 trial

Fast-acting insulin aspart

US resubmission

Semaglutide – obesity

Phase 2 data

N9-GP

Feedback from regulatory authorities

DIABETES AND OBESITY CARE

Compound

Indication

Description

DIABETES

Fast-acting
insulin aspart
NN1218

Type 1 and 2
diabetes

A new formulation of insulin aspart intended to accelerate
onset of action, with the potential to dose both before and
after meals.

Semaglutide
NN9535

Type 2
diabetes

A once-weekly GLP-1 analogue intended to offer people with
type 2 diabetes the clinical benefits of a GLP-1 analogue with
less frequent injections.

OG217SC
NN9924

Type 2
diabetes

A long-acting oral GLP-1 analogue intended as a once-daily
tablet treatment for people with type 2 diabetes.

Anti-IL-21 T1D
NN9828

Type 1
diabetes

A beta-cell preservation treatment intended for people newly
diagnosed with type 1 diabetes.

LAI287
NN1436

Mealtime
NN1406

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

A liver-preferential mealtime insulin analogue.

Type 2
diabetes

An appetite-regulating hormone, peptide YY, 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.

NOVO NORDISK ANNUAL REPORT 2016OUR BUSINESS

Compound

Indication

Description

Phase 1

Phase 2

Phase 3

Filed/
regulatory
approval

OBESITY AND OTHER AREAS

Semaglutide
NN9536

AM833
NN9838

G530S
NN9030

PYY 1562
NN9747

GG-co-agonist
1177
NN9277

Semaglutide
NASH
NN9931

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 sema-
glutide, is intended for the treatment of obesity.

An appetite-regulating hormone, peptide YY, which, alone or
in combination with semaglutide, is intended for the treatment
of obesity.

Obesity

A novel glucagon and GLP-1 co-agonist intended for the
treatment of obesity.

NASH

A long-acting GLP-1 analogue intended as a once-daily
treatment for non-alcoholic steatohepatitis (NASH).

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 for once-
weekly injections.

Read more at novonordisk.com/investors and clinicaltrials.gov.

Phase 3

Filed/regulatory approval

Studies in large groups of patients (usually 1,000–3,000) comparing a new
medication with a commonly used drug or placebo for both safety and
efficacy. Phase 3a covers trials conducted after efficacy is demonstrated
and prior to regulatory submission. Phase 3b covers clinical trials completed
during and after regulatory submission. In small therapeutic areas such
as haemophilia, regulatory guidelines may allow the design of single-arm
therapeutic confirmatory trials or trials that compare against historical
control, for example, instead of existing treatment or placebo.

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 201622 OUR BUSINESS

CHANGING
DIABETES®

More than 415 million people in the world
are living with diabetes,1 but almost half of
these people have not been diagnosed.6
The longer it takes to diagnose diabetes,
the more likely it is that complications will
arise – including damage to the eyes,
kidneys, nerves and heart. The ‘Rule of
Halves’ highlights that very few people

who receive the appropriate therapy
achieve their treatment targets, putting the
rest at risk of developing diabetes-related
complications later in life.

opment of medicines. Together with
partners, Novo Nordisk is addressing the
biggest unmet needs in diabetes through
a number of initiatives worldwide.

Changing Diabetes® is Novo Nordisk’s
response to the global diabetes challenge,
and goes beyond the discovery and devel -

Learn more at novonordisk.com/
changingdiabetes.

415

MILLION ADULTS ARE LIVING
WITH DIABETES.1

BY 2040, THIS IS PROJECTED TO
INCREASE TO 642 MILLION.1

65% OF ADULTS WITH
DIABETES LIVE IN CITIES – THIS
IS PROJECTED TO INCREASE TO
74% BY 2040.1

193 MILLION ADULTS WITH
DIABETES HAVE NOT BEEN
DIAGNOSED.1

50% OF ADULTS WITH
DIABETES ARE NOT
DIAGNOSED UNTIL THE
DISEASE HAS PROGRESSED
TO THE EXTENT THAT
THEY HAVE AT LEAST ONE
COMPLICATION AT THE TIME
OF DIAGNOSIS.8

ADDRESSING
THE RISK FACTORS

EARLY
DIAGNOSIS

• Many people who live in cities are developing type 2
diabetes, due partly to the impact of urbanisation on
health.1

• Through the Cities Changing Diabetes programme,
Novo Nordisk has made some striking discoveries
concerning cultural and social factors that not only
increase people’s vulnerability to diabetes but also stand
in the way of diagnosis and achieving good outcomes.

• These insights have inspired action in eight cities,

representing more than 70 million inhabitants.7 Find out
which cities have joined the programme on p 26.

• Novo Nordisk is advocating for early diagnosis of diabetes

through risk-based screening initiatives.

• On World Diabetes Day 2016, more than 180,000

people participated in blood glucose screenings or risk
assessment activities.

• The company is also involved in providing free screening
through mobile clinics and programmes such as the
Changing Diabetes® in Pregnancy programme which,
since 2009, have screened 48,142 women for gestational
diabetes.

OF THE ESTIMATED
415 MILLION PEOPLE
WITH DIABETES…

RULE OF HALVES 6

The Rule of Halves illustrates the
global diabetes situation. Actual
rates of diagnosis, treatment,
targets and outcomes vary in
different countries.

ABOUT 50% ARE
DIAGNOSED…

OUR BUSINESS

OF WHOM
ABOUT 50%
ACHIEVE DESIRED
OUTCOMES,
MEANING THAT
ONLY AROUND 6%
OF PEOPLE WITH
DIABETES LIVE A
LIFE FREE FROM
DIABETES-RELATED
COMPLICATIONS.

OF WHOM ABOUT
50% RECEIVE CARE…

OF WHOM ABOUT
50% ACHIEVE
TREATMENT
TARGETS…

50 MILLION PEOPLE WITH
DIABETES LACK ACCESS
TO INSULIN.9

5 MILLION DEATHS ARE
CAUSED BY DIABETES
ANNUALLY.1

3 IN 4 PEOPLE
WITH DIABETES LIVE IN
LOW- AND MIDDLE-
INCOME COUNTRIES.1

IN PEOPLE WITH TYPE 2
DIABETES, LOWERING
AVERAGE BLOOD SUGAR
LEVELS (HbA1c) REDUCES THE
RISK OF COMPLICATIONS.10

ACCESS
TO CARE

BETTER
OUTCOMES

• Novo Nordisk’s renewed Access to Insulin Commit-

• Novo Nordisk provides medical treatment to an

ment guarantees provision of low-priced human insulin
to least developed countries, low-income countries and
organisations working in humanitarian relief situations.

estimated 28 million people with diabetes worldwide.
However, it takes more than medicine for people with
diabetes to achieve good health outcomes.

• Novo Nordisk is building health capacity for diabetes and
addressing medicine distribution challenges through the
Changing Diabetes® in Children (CDiC) and Base of
the Pyramid programmes. Approximately 14,000
children with type 1 diabetes received care through
CDiC in 2016.

• The World Diabetes Foundation (WDF) is an inde-
pendent non-profit organisation established by Novo
Nordisk to help expand access to care. Donations through
the WDF amounted to 85 million kroner in 2016.

• Novo Nordisk is engaged in educating healthcare
professionals and patients in the management of
diabetes, and also driving awareness of the psychosocial
aspects of living with this condition. Through the
Changing Diabetes® in Children (CDiC) programme, Novo
Nordisk has facilitated the training of more than 7,000
healthcare professionals since 2009.

• With Team Novo Nordisk, a global all-diabetes sports
team, spearheaded by a professional cycling team the
company hopes to inspire, educate and empower people
living with diabetes.

Jesper Lau
Vice president,
responsible for protein
and peptide chemistry

A NEW ERA
OF DIABETES
TREATMENT?

Cardiovascular risks associated with diabetes are a
concern for patients, healthcare professionals and
payers. However, following recent clinical trial results
for two Novo Nordisk GLP-1 analogues, hopes for
improved treatment outcomes are growing.

Major adverse cardiovascular events (MACE)
– including heart attack (myocardial infarc -
tion) and stroke – have long been known to
be the leading cause of death and large
vessel complications in people with type 2
diabetes.11 According to the American Heart
Association, at least 68% of people aged 65
or over with diabetes die from some form of
heart disease and 16% die from stroke.12
Furthermore, adults with diabetes are 2–4
times more likely to have heart disease or a
stroke than adults without diabetes.12 Yet
standard type 2 diabetes treatments have
not addressed this increased risk of cardio -
vascular (CV) disease.

“I’ve been concerned about the increased
risk of cardiovascular disease associated with
diabetes for more than 20 years,” says Dr
Steven Marso, medical director for cardio-
logy, HCA Midwest Health, US. “Current
diabetes therapies are effective at lowering
blood glucose levels but there is, without
doubt, an unmet need for a diabetes treat -
ment that also addresses the associated CV
risk. I believe a treatment that does both
would ease the burden for people with
diabetes and set a new standard for clinical
care.”

TRESIBA®: CARDIOVASCULAR
SAFETY AND HYPO GLY-
CAEMIC BENEFIT CONFIRMED
IN DEVOTE TRIAL5
In November 2016, Novo Nordisk
announced the results of DEVOTE, a
cardiovascular (CV) outcomes trial to
confirm the CV safety of Tresiba®
(insulin degludec).

In addition to demonstrating the CV
safety profile of Tresiba®, DEVOTE also
showed the superiority of this basal
insulin in reducing the rate of severe
adverse hypoglycaemia events, when
compared to insulin glargine U100.

DEVOTE FACTS:
• A long-term, randomised, double-blinded, parallel group and event-driven trial

conducted to confirm the CV safety of Tresiba® compared to insulin glargine U100,
when added to standard of care.

• A total of 7,637 people with type 2 diabetes at high risk of major adverse CV events
participated at more than 400 sites across 20 countries for approximately two years.

• The trial achieved its primary endpoint, demonstrating non-inferiority of major

adverse cardiovascular events (MACE) with Tresiba® compared to insulin glargine
U100.

• The trial’s primary endpoint was defined as the MACE composite outcome of the first

occurrence of CV death, non-fatal myocardial infarction or non-fatal stroke and
showed a hazard ratio of 0.91 in favour of Tresiba® compared to insulin glargine
U100, with no statistically significant difference between the two treatments.

• In the trial, Tresiba® demonstrated superiority on the secondary endpoint of severe
hypoglycaemia: 27% fewer patients in the group treated with Tresiba® experienced
an episode of severe hypoglycaemia, resulting in a 40% overall reduction in total
episodes of adjudicated severe hypoglycaemia, and 54% experienced a relative
reduction in the rate of nocturnal severe hypoglycaemia. These differences were all
statistically significant.

Meeting the needs of patients – and their
doctors – is at the core of Novo Nordisk’s
clinical research programme into more
innovative treatments that deliver additional
benefits with fewer risks. Research into the
long-term effects of Victoza® (liraglutide),
the company’s GLP-1 analogue for the
treatment of type 2 diabetes, has produced
some exciting results in this regard.

“I’VE BEEN
CONCERNED
ABOUT THE
INCREASED RISK OF
CARDIOVASCULAR
DISEASE
ASSOCIATED WITH
DIABETES FOR
MORE THAN 20
YEARS.”
Dr Steven Marso

Medical director for cardiology,
HCA Midwest Health, US

“We knew from previous research that
Victoza® effectively reduces blood glucose
levels in people with type 2 diabetes,” says
Dr Alan Moses, senior vice president and
chief medical officer at Novo Nordisk, “but
the results of the LEADER study show that
Victoza®, amongst other outcomes, also
significantly reduces – by 22% – the risk of
cardiovascular death in adults with type 2
diabetes who are at high risk of major
cardiovascular events.”13

LEADER compared Victoza® treatment to
placebo, both in addition to standard of care
comprising lifestyle modifications, glucose-
lowering treatments and cardiovascular
medications. The study found that Victoza®
significantly reduced the risk of the com -
bined outcome (composite primary end -
point) of CV death, heart attack or non-fatal
stroke by 13%13 compared to placebo in
9,340 adults with type 2 diabetes at high
CV risk.

“The results of the study, which we reported
in June 2016, are exciting on three fronts.
Participants taking Victoza® experienced an
early and sustained reduction in blood
glucose levels, persistent weight loss, and a
reduction in CV death and non-fatal
myocardial infarction and stroke,” Dr Moses
points out, adding that the safety profile of
Victoza® in a large population for a long
period of time has also been affirmed.
“Altogether, the results further underline
that Victoza® is an important treatment
option for adults with type 2 diabetes.”

To date, Victoza® is the only marketed GLP-1
analogue to demonstrate a superior
reduction in major CV events in a cardio-
vascular outcomes trial.14 In October 2016,
Novo Nordisk announced the submission of
a supplemental New Drug Application
(NDA) to the US Food and Drug Admin-
istration (FDA) and a Type II Variation
application to the European Medicines
Agency (EMA) to include data from LEADER
in the product information for Victoza®.

REDUCED RISK OF
CARDIOVASCULAR EVENTS
The good news from Novo Nordisk’s GLP-1
analogue research continued with the
results from the SUSTAIN 6 trial of
once-weekly semaglutide. In the first
dedicated premarketing cardiovascular
outcomes trial in people with type 2

diabetes at high CV risk, semaglutide was
shown to significantly reduce the risk of the
composite primary endpoint of time to first
occurrence of either CV death, heart attack
or non-fatal stroke by 26% compared to
placebo, when added to standard of care in
3,297 adults with type 2 diabetes at high
CV risk.15

Furthermore, the trial showed that partici-
pants experienced significantly reduced
blood sugar levels and superior and sus -
tained weight loss compared to standard
of care.15

“The results of SUSTAIN 6 were profound
and exceeded our expectations,” says Dr
Moses. “This study was designed to
demonstrate the cardiovascular safety of
semaglutide, but it went beyond that and
proved an actual and significant risk
reduction in the composite cardiovascular
events, even with the relatively small study
population and short trial duration.”

Novo Nordisk submitted semaglutide for
regulatory approval at the end of 2016.

PAVING THE WAY FOR IMPROVED
TREATMENT OUTCOMES
Mads Krogsgaard Thomsen, executive vice
president and chief science officer of Novo
Nordisk, has high hopes for the company’s
GLP-1 analogues: “The positive findings
from LEADER and SUSTAIN 6 give us
reason to believe we can take type 2
diabetes treat ment to a new level by
offering glycaemic control, weight loss
and a reduction in cardiovascular events
for people with diabetes at risk of
cardiovascular events.

“This marks the beginning of a new era
where our R&D focus in diabetes will look
much further than just glucose control,”
he adds.

NOVO NORDISK ANNUAL REPORT 2016

CHANGING DIABETES
– ONE CITY AT A TIME

Rapid urbanisation is fuelling the rise in non-communicable diseases in a
phenomenon described by the World Health Organization (WHO) as the new
urban epidemic. Now in its third year, the Cities Changing Diabetes pro-
gramme is working in partnerships to halt the rise in type 2 diabetes in cities
by focusing on some of the most vulnerable communities.

“The main reason I studied medicine was to
help people. I really feel that I’ve done that
here – in every sense of the word.” The
pride in the voice of Leslie Coria, one of
3,000 healthcare professionals involved in
by Mexico City’s El Médico en Tu Casa (the
doctor in your home) initiative, is unmistak-
able. Speaking between home visits, she
provides door-to-door care to people less
able to access health services. “When you
go to patients’ homes, you get to know
their persona. You detect what’s wrong
and can really hit the nail on the head to
treat the condition well.”

“MY INTENTION
IS TO HELP
AND TO PLAY MY PART
IN EACH OF THEIR
LIVES.”

Leslie Coria
Health care professional, El Médico en Tu Casa

The initiative is in high demand. One-third
of Mexico City’s 20 million citizens are
either living with diabetes or have blood
glucose levels that indicate prediabetes.1,7
Research for Cities Changing Diabetes,
undertaken by the National Institute of
Public Health (INSP), has unearthed a
complex set of social and cultural factors
in Mexico City that increase the risk of
diabetes and thwart its effective
management.16

Explaining the rationale behind El Médico
en Tu Casa, Minister of Health for Mexico
City Dr Armando Ahued says: “The Cities
Changing Diabetes research results sur -
prised us and demonstrated that we need
to continue educating our people in how to

take care of their own health. They also
showed that a lot of people are having
difficulties going to a doctor or health
centre. By initiating diabetes screening in
people’s homes, we increase our chances
of encountering the 29% of people who
are living with diabetes without knowing
it.”16

FROM MEXICO CITY TO COPENHAGEN
While the challenge faced by Mexico City is
particularly acute, the world’s fourth largest
city is not alone in its fight against diabetes.
Globally, more than two-thirds of people
living with this chronic condition are urban
residents – a proportion expected to rise to
three-quarters by 2040.1 Even in a city such
as Copenhagen, dotted with green spaces,
criss-crossed by cycle lanes and syno nym-
ous with healthy urban living, the Mayor’s
office recognises the need to reach people
at increased risk of diabetes.

Research for the Cities Changing Diabetes
initiative conducted in Copenhagen has
discovered emerging health inequalities and
vulnerable communities. People without
work, living alone or from a non-Western
background are becoming increasingly
isolated and are often beyond the reach of
the healthcare system and health promo-
tion initiatives. To identify and engage
people with diabetes, the city therefore
launched a new Center for Diabetes in
2016 in conjunction with the Danish
Diabetes Association. Furthermore, in
partnership with Denmark’s largest trade
union, 3F, the city initiated a peer support
scheme for men over the age of 45 at high
risk of developing diabetes. In its first year,
the scheme provided invaluable support
through social interactions with several
hundred men, ranging from one-off
conversations to regular get-togethers.

Having overseen the new interventions in
the city, Ninna Thomsen, Health Mayor of
Copenhagen, is convinced of the benefits
of collaborative working to improve public
health. “Working with a range of partners
has provided a fresh perspective on our
city’s diabetes challenge and has enabled

us to act with absolute conviction,” she
says. “We’re optimistic for the future and
will continue to work in partnerships to
deliver initiatives that benefit Copen-
hageners and inspire others.”

TACKLING AN INTERNATIONAL
HEALTH CHALLENGE
For Novo Nordisk, playing the role of key
partner in an international public health
movement has been rewarding, as
President and Chief Executive Officer Lars
Fruergaard Jørgensen reflects: “Making a
contribution to society beyond our core
business of discovering and developing
innovative medicines is part of the fabric of
Novo Nordisk. Through Cities Changing
Diabetes, we’ve been able to expand our
network beyond the traditional reach of a
healthcare company and are making
valuable contributions to tackle one of the
most pressing public health issues of our
time.”

Across the globe, Cities Changing Diabetes
continues to grow and evolve to address
local differences. Action is underway in
Tianjin, China, where approximately 300
primary care physicians are receiving
training in how to manage diabetes. In
Houston, US, more than 70 community
partners, including faith organisations, are
contributing to the movement to tackle
urban diabetes. In 2016, Johannesburg,
South Africa, and Vancouver, Canada,
enrolled in the Cities Changing Diabetes
programme and commenced their own
mapping of urban diabetes. In early 2017,
Rome, Italy, will follow suit.

El Médico en Tu Casa itself has grown and
is now being replicated in cities across
Mexico and in Asia and South America. But
Leslie Coria’s focus remains closer to home
as she works to improve the lives of the
people of Mexico City. Looking back on an
afternoon during which she cared for three
elderly ladies living with diabetes, she
reflects: “My intention is to help and to
play my part in each of their lives. It’s very
rewarding – and has changed my life both
professionally and personally.”

COPENHAGEN
Local partners pursuing four initiatives that support
vulnerable citizens at high risk of developing type 2
diabetes.

HOUSTON
More than 70 organisations collaborating to change
citizens’ perception of their own health, while
improving trust in a more navigable health system.

JOHANNESBURG
By researching the scale and nature of the city’s
diabetes challenge, partners are setting the scene
for action.

MEXICO CITY
Partners working to improve diabetes care by
establishing a specialised clinic, training doctors and
including diabetes screening in the El médico en Tu
Casa programme.

ROME
Due to join the programme officially in 2017, an
extensive multi-stakeholder coalition is already in
place working to map the diabetes challenge and
identify actions.

SHANGHAI
Partners working to build local diabetes manage-
ment capacity by training healthcare professionals
in 240 community health centres.

TIANJIN
Partners working to improve diabetes care through
the training of 300 primary care physicians.

VANCOUVER
Based on new research, the partners are working
to map the diabetes situation further and design
actions to tackle the challenges.

Initiated in 2014 by Novo Nordisk, University
College London and the Steno Diabetes Center,
Cities Changing Diabetes is a response to the
dramatic rise in type 2 diabetes in cities across the
world. It is a first-of-its-kind partnership platform
for cross-disciplinary, cross-sector collaboration.

No one organisation and no one company can
solve the challenge of urban diabetes alone, so the
programme is built on public–private partnerships
between businesses, city leaders, planners,
architects, healthcare professionals, academics,
community leaders and others with a stake in the
outcome. Working together, partners are setting
out to create cities which help citizens live more
healthily, and where people with diabetes can live
life to the full.

Mexico City, where one-third of
citizens have diabetes or
prediabetes, is one of the cities
enrolled in the Cities Changing
Diabetes programme.

LIVING WITH
THE STIGMA
OF OBESITY

WHAT IS OBESITY?
Obesity is defined as abnormal or excessive fat accu-
mulation that may impair health in people with a body
mass index (BMI) greater than or equal to 30.2 BMI
provides the most convenient population-level measure of
overweight and obesity currently available. 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
their height in metres (kg/m2).

ACCORDING TO THE WHO,
OBESITY HAS REACHED
PANDEMIC PROPORTIONS,
WITH UP TO 1.9 BILLION ADULTS
(18 YEARS AND OLDER) BEING
OVERWEIGHT.2

OF THESE, APPROXIMATELY 600
MILLION HAVE CLINICAL OBESITY
2
(BMI ≥ 30).

OUR BUSINESS

“You choose what you eat, so obesity is self-inflicted,
right?” Novo Nordisk knows that battling this pre-
conception will take time – but gaining recognition
of obesity as a chronic disease is the first hurdle to
effective treatment.

“Obesity is one of the last remaining
socially acceptable forms of prejudice: it’s
still OK to make fun of fat people,” says
Marty Enokson, Chair of the Canadian
Obesity Network Public Engagement
Committee and a paralegal from
Edmonton, Canada, who has had obesity
since childhood. “I’ve been called every
hateful name imaginable and I experience
discrimination daily. Yes, I’m obese. Yes, I’m
fat. But it doesn’t define who I am. People
need to realise that nobody chooses to be
obese. Why would you? It’s disabling – try
moving your body when it’s 505 pounds! I
just want to be treated the same as other
people: with dignity and respect.”

A CHRONIC DISEASE
Unfortunately obesity is all too often seen as
a sign of weak character or as a ‘lifestyle
choice’. This view, coupled with the
awkwardness many doctors feel about
talking to people about their weight, means
that doctors rarely prescribe medication for
obesity – instead relying on the ‘eat less,
exercise more’ philosophy for weight loss.

“This simple mantra is relevant advice, but
obesity is very complex as it can be caused
by genetic, physiological, environmental or
psychological factors. So, for some people,
behavioural modifications are not enough,”
explains Heather Millage, vice president for
the GLP-1 portfolio for Novo Nordisk in the
US.

In fact, clinical studies have shown that
almost 80% of people who are overweight
or have obesity experience weight regain
after following a regimen of diet and
exercise alone.17 But with health organ-
isations, including the World Health
Organization (WHO), American Medical
Association and Canadian Medical
Association, now recognising obesity as a
chronic disease requiring long-term
management, treatment options that help
people with obesity achieve and maintain
weight loss are greatly needed.

IT’S NOT ABOUT THE WAY YOU LOOK
“I hope the designation of obesity as a
chronic disease will make more people
aware that the medical treatment of
obesity is not about the cosmetic impact of
reducing a number on the scales. Obesity is
associated with weight-related comorbid-
ities such as hypertension, dyslipidaemia,
type 2 diabetes and some types of cancer,”
says Heather Millage. “This is why it’s
important that we develop medical
treatment options for obesity.”

Historically, pharmacotherapy treatment
options for obesity were limited, and so
Novo Nordisk’s GLP-1 receptor agonist
Saxenda® (liraglutide 3 mg) has been widely
welcomed, Heather Millage reports.
“Clinical trials have shown that Saxenda®
delivers significant weight loss in some
people who are overweight or have obesity
and, importantly, that this weight loss is
sustained.18 The uptake of Saxenda® in
countries where it’s not covered by medical
insurance demonstrates the demand for
this product.”

In addition to Saxenda®, Novo Nordisk is
committed to identifying and developing
new treatment options for people with
obesity. The company is currently invest-
igating five new obesity treatments: a
glucagon analogue, an amylin analogue,
an appetite-regulating hormone (peptide
tyrosine) and a glucagon and GLP-1
co-agonist in phase 1 trials, and a
long-acting GLP-1 receptor agonist in
phase 2 trials. Furthermore, dedicated
researchers at Novo Nordisk’s head-
quarters in Denmark and at its obesity
research unit in Seattle, US, are working
to identify new targets for treatment and
increase the scientific understanding of
existing drug targets.

RECOGNISING THE DISEASE
However, until there is wider recognition of
obesity as a disease, effective treatment
will not gain ground. Obesity has long been
an issue for developed countries, but with
its prevalence now also increasing rapidly in
developing countries, this pandemic can no
longer be ignored – particularly as treating
obesity-related comorbidities is placing a
significant burden on healthcare systems
worldwide. Treating the cause rather than
the symptoms therefore makes financial as
well as ethical sense, points out Heather
Millage.

“Obesity awareness and understanding is
where type 2 diabetes was 20 years ago.
We need to educate people and increase
recognition of obesity as a disease, as it’s
one of the world’s critical health issues.
Novo Nordisk is in a strong position to do
this because we have decades of experi-
ence of doing exactly that with diabetes
– and also because obesity is so closely
linked to type 2 diabetes,” she says.

“We know that it‘ll take many years to get
care and treatment of obesity to where we
are with diabetes, but we’re committed to
doing so.”

NOVO NORDISK ANNUAL REPORT 2016

Marty Enokson
has obesity and lives
in Canada.

CHANGING
HAEMOPHILIA

Novo Nordisk is working for a future where everyone
with haemophilia is diagnosed, has access to care and
can live a life with as few limitations as possible.

“Growing up, I heard stories of climbing
big mountains from my uncle and had
dreams of my own expeditions. A few years
ago, I committed to climbing the Seven
Summits – the highest peaks on each
continent. To date, I’ve climbed five and
will continue this quest over the next few
years. It’s about living a life of my choosing
– a life that isn’t limited by my haemo-
philia,” explains Chris Bombardier, a moun -
tain climber and community advocate from
the US.

ADDING LIFE TO YEARS
Chris was diagnosed at birth with severe
haemophilia B, which he says has played a
dramatic role in his life path. “Haemophilia
literally runs in my blood, and I couldn’t
imagine my life without it. I live with a
condition that’s almost impossible to
describe to others; they just can’t relate.
I have to fight through pain, feelings of
isolation and being different from my
peers, and face my fear of needles – I’m
terrified of them!” he admits.

“I recently heard someone say ‘The goal of
treatment is not simply to add years to the
life of a person with haemophilia, but to
add life to their years’, and this really struck
a chord with me. I take pride in living the
life I’ve always dreamed when I could so
easily have given in to my condition.
Haemophilia can make things more com -
plicated and difficult, but with today’s
treatment I really am adding so much life
to my years.”

NOVO NORDISK ANNUAL REPORT 2016

REDUCING LIMITATIONS
Adding life to years is a sentiment that also
resounds with Novo Nordisk, as the com -
pany has been committed to changing
haemophilia for more than three decades.
“We want to improve the lives of people
living with haemophilia by providing
treatment that will help them achieve
greater independence and give them the
opportunity to make even more choices,”
explains Paul Huggins, who heads Novo
Nordisk’s global marketing of biopharma-
ceuticals.

Novo Nordisk’s clinical development pro -
gramme focuses on the unmet needs in this
area, including the need for even better
clinical outcomes, fewer intravenous
infusions, lower risk of inhibitor formation
and better treatment options for less
common bleeding disorders.

“Despite advances in treatment and care,
bleeding in the joints remains among the
most common complications of haemo-
philia. Being in constant pain and living
with restricted movement invariably has a
psychological impact too. Improving joint
health and mobility is therefore essential to
reduce the limitations for people living with
haemophilia – and to achieve this they
need more treatment choices,” Paul
Huggins continues.

RISING TO THE CHALLENGE
Novo Nordisk’s most recent product launch
for haemophilia is NovoEight®, which gives

people with haemophilia A the option of a
treatment based on a well-researched
molecule that is stable at room tempera-
ture. “This provides an extra degree of
portability which they don’t have with all
other products,” Paul Huggins points out.
“There’s actually been a proliferation of
products for this patient community in the
last few years, and competition in the
marketplace has intensified. This is great
news for patients and payers – and a
challenge for us! But NovoEight® has been
well received; we have confidence in our
product and are building momentum
worldwide.”

Novo Nordisk’s first-ever treatment for
haemophilia, NovoSeven®, is also facing
tough competition as a competitor product
has reached the latter stages of clinical
development. “NovoSeven® treats bleeds in
people with haemophilia with inhibitors
when they happen. The competitor product
is a weekly prophylactic, or preventive,
treatment for patients with haemophilia A
with inhibitors, which is obviously an
option that this community of patients
looks forward to,” explains Paul Huggins.

“While we don’t yet know if this compe ti-
tor product will successfully complete
clinical development and receive regulatory
approval, we’re already feeling its impact as
the community of people with inhibitors is
relatively small and a significant number are
taking part in the clinical trial – some of
whom would normally use NovoSeven®.

Chris Bombardier
has haemophilia B.

“I especially love the
challenges that climbing
provides. It’s not only the
physical struggle to push
my body farther than I can
imagine but also the mental
challenge. You get up crazy
early, it might be snowing or
raining, and your mind wants
to tell you it’s stupid to be
outside but somehow you
push through. The reward:
spectacular sunrises, epic
views, the simplicity and
peacefulness of the wilder-
ness, and the satisfaction that
you achieved your goal.”

CHRIS BOMBARDIER,
WHO HAS HAEMOPHILIA B

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 admin-
istered when bleeding occurs or,
increasingly, on a preventive basis
(prophylactic treatment). People
with haemophilia A, an estimated
350,0003 have absent, decreased
or defective production of the
blood clotting factor VIII. People
with haemophilia B, of whom there
are some 70,00020 have deficiencies
in producing clotting factor IX. Both
types are inherited.

However, I strongly believe there’s space for
both products on the market. And we
shouldn’t forget that NovoSeven® has had a
truly well-established safety profile in
clinical trials for more than 30 years. So
we’ll continue to fight for our market share,
to ensure that people with haemophilia
have an effective product to treat the
bleeds that may occur even when they are
already on a prophylactic regimen.”

INCREASING TREATMENT CHOICES
Treatment choices for people with
haemophilia B could also increase in the
near future, as Novo Nordisk submitted its
long-acting factor IX (N9-GP) for approval
in Europe and the US in 2016. In clinical
trials, once-weekly N9-GP was found to be
efficacious in routine prophylaxis, treat-
ment of bleeding episodes and surgery
for adults, adolescents and children, and
showed potential in preventing bleeds
in target joints. “It’s noteworthy that
participants reported a significant
improvement in quality of life during
the trial,” Paul Huggins points out.

Novo Nordisk expects to submit its
long-acting version of factor VIII (N8-GP)
for regulatory approval in 2018, providing
even more treatment options for people
with haemophilia A. In addition, conci-
zumab (a monoclonal antibody against
Tissue Factor Pathway Inhibitor) is in phase 1
development for haemophilia A and B (see
R&D pipeline on pp 20–21).

BEYOND MEDICINE
While treatment choices in developed
countries are increasing, many people with
haemophilia in developing countries are still
not being diagnosed or do not receive
proper care and treatment. That is why
Novo Nordisk’s commitment to haemophilia
goes beyond products. In 2005, the com -
pany founded the Novo Nordisk Haemo-
philia Foundation (NNHF), which is driven
by the vision that all people with haemo-
philia or allied bleeding disorders should
receive care and treatment wherever they
live (see box).

“Our commitment to changing haemophilia
goes beyond the discovery and develop-
ment of medicines,” explains Paul Huggins.
“The NNHF, along with the HERO study,
our advocacy work and partnerships, are
just a few examples of what we’re doing to
help enable people with haemophilia to live
the life they want, with as few limitations
as possible.”

NOVO NORDISK
HAEMOPHILIA FOUNDATION
Founded in 2005, the Novo Nordisk
Haemophilia Foundation (NNHF) is a
non-profit organisation dedicated to
defining and funding sustainable pro-
grammes which improve access to quality
care benefitting people with haemophilia
and allied bleeding disorders in the
developing world.

In collaboration with local partners and
internationally renowned experts, the NNHF
addresses three focus areas: capacity
building, diagnosis and registry, and
education and empowerment.

To date,* the NNHF has supported more
than 200 programmes in 68 countries,
trained more than 28,000 healthcare
professionals, diagnosed or retested almost
20,000 patients and reached more than
32,000 patients and family members with
educational and empowering activities. Read
more at nnhf.org.

HAEMOPHILIA EXPERIENCES,
RESULTS AND OPPORTUNITIES
The Haemophilia Experiences, Results and
Opportunities (HERO) study provides a deeper
understanding of the psychosocial impact of
living with haemophilia and the unmet needs
of the haemophilia community.

ACCORDING TO THE HERO STUDY, 50% OF
PEOPLE WITH HAEMOPHILIA ARE IN CONSTANT
PAIN AND 59% HAVE LIMITED MOBILITY.19

* Status on 31 December 2016.

DEFINING TIMES
FOR THE US BUSINESS

The US is by far Novo Nordisk’s largest market, accounting for approximately half of
the company’s total sales. It is a hugely complex healthcare market that is changing
rapidly. For Novo Nordisk, this means challenges and opportunities ahead.

Novo Nordisk’s US organisation is a leader
in diabetes, a pioneer in obesity treatment
and a trusted partner in haemophilia and
growth hormone disorders. It has around
6,000 employees in the US. With the rising
prevalence of both diabetes and obesity,
the company’s mission to drive change to
improve patients’ lives has never been more
important.

“WE’VE NEEDED TO
TAKE A FRESH LOOK
ACROSS THE BOARD
TO MAKE SURE THAT
WE OPERATE
EFFECTIVELY AND
THAT OUR MEDICINES
ARE ACCESSIBLE TO
THE PATIENTS WHO
CAN BENEFIT FROM
THEM.“

Jakob Riis
Executive vice president,
North America Operations

Today, Novo Nordisk is at a crossroads of
challenges and opportunities in the US.
On the one hand, the company has a solid
portfolio and pipeline of innovative
medicines, and there is tremendous unmet
need among the patient populations it
serves, yet on the other hand it is becoming
increasingly tough for patients to access
medicines and for the business to achieve
the desired sales growth. After year upon
year of double-digit growth, market
conditions have changed, and volume
growth does not always translate into sales
growth. As the US healthcare system has
transformed over the last few years, so
tightening competition and pricing pressure
have become flashpoints for the pharma-
ceutical industry. Novo Nordisk is tackling
the situation head on.

In September 2016, Jakob Riis, who has
been with the company for more than 20
years and has a proven track record of
leading businesses through adverse times,

was appointed head of North America
Operations. He is no stranger to the US
business and brings with him a new vision
for the future.

”This is a defining time for our business,”
explains Jakob Riis. “We’ve needed to take a
fresh look across the board to make sure
that we operate effectively and that our
medicines are accessible to the patients
who can benefit from them. This requires
courage and openness to new approaches,
as well as deep understanding of this
evolving market and our customers’ needs.”

UNDERSTANDING THE COMPLEX US
OPERATING ENVIRONMENT
This fresh look starts with embracing the
realities of the market environment. The US
healthcare system is recognised as one of the
most, if not the most, complex – from deliv -
ery of care to the cost of care. Navigating a
pharmaceutical business through this envi -
ronment is equally complex.

Manufacturers, wholesalers, payers,
pharmacy benefit managers (PBMs),
healthcare professionals (HCPs) and
patients are some of the many stakeholders
in what is referred to as the value chain.
These different stakeholders bring different
perspectives and, with these, various levels
of change. Healthcare reform has put
everyone on notice that quality and effi -
ciency are paramount, and the pressure
to deliver cost savings for a nation with
limited healthcare dollars is intense.

According to Senior Vice President, Market
Access in the US, Doug Langa, “We con -
tinue to see consolidation, especially at the
payer level. There used to be over a dozen
major payers; today that number has been
cut in half. Transversely, more competitors
are developing more medicines, including
biosimilars, today, especially in the diabetes
area. This translates to greater bargaining
power for payers and pricing pressure on
pharmaceutical companies. We’re also
seeing more exclusive contracts, which
potentially means less choice for patients
and prescribers. There’s a higher bar on
innovation and payers taking on a ‘good
enough’ mentality when deciding on
formulary access. It’s no longer enough
to have superior data from clinical trials.

There’s a heightened demand for ‘real-
world’ data, and that’s why innovative
contracting is so important.”

In some cases, innovative contracting
means negotiating the price of a pharma-
ceutical product based on the actual
improved health outcome it delivers for
the patient, rather than on an up-front
assessment of its clinical value.

“What many may not appreciate is that
creating such outcomes-based contracts
is not easy. Requirements regarding
regulatory compliance, data collection,
product labelling as well as new oper-
ational and administrative processes that
need to be in place are just some of the
factors that add to the complexity, not just
for us, but for the payers who want these
contracts. But we continue to try new
approaches and test new models because
we know it can and must be done,” Doug
Langa stresses.

CHALLENGES WITH ACCESS AND
AFFORDABILITY
The complexity of the US market is also
reflected in the price of medicines – a topic
of heated debate. As the graphic on p 33
illustrates, numerous entities are involved in
the process, and that means that different
people pay different prices for medicines,
depending on insurance coverage and
other factors. So how does it work?

Manufacturers set the ‘list price’ and
have full accountability for those prices.
However, after the list price is set, drug
manufacturers negotiate with payers in
order for medicines to stay on their
preferred drug list, or formulary. The
revenue that companies receive after
rebates, fees and other price concessions
given to the payer is the ‘net price’. The net
price more closely reflects actual company
sales. Across Novo Nordisk insulin prod -
ucts, net price increases year over year have
been mid-single digit. This brings the net
price development closer to the Consumer
Price Index – Urban, a common measure of
the average price of goods.

Yet the access and affordability issue is real.
“We’re hearing from more and more
people living with diabetes about the

Jakob Riis
Executive vice president,
North America Operations

THE EQUATION:
FROM LIST PRICE TO
NET PRICE IN THE US

LIST PRICE
(set by the manufacturer)

Those exposed to the list price include:

• patients without insurance

• patients who have insurance with a high

deductible or are exposed to the Medicare
coverage gap.

DEDUCT

REBATES/DISCOUNTS

• Payments made to pharmacy benefit
managers (PBMs) and/or insurance
companies to ensure placement on drug
formularies.

• Significant discounts mandated for

government programmes (eg Medicaid).

• Additional discounts negotiated.

DEDUCT

WHOLESALER FEES

• Payments made to wholesalers to support

stocking and distributing medicines
through their supply chain networks
(eg pharmacy, hospital).

DEDUCT

ADDITIONAL PRICE
CONCESSIONS

• Coupon, co-pay assistance programmes
(especially for patients with deductibles).

• Administrative fees to group purchasing

organisations and PBMs.

EQUAL

NET PRICE
(manufacturer’s realised price)

Implications of the net price:

• Insured patients, on average, have a co-pay
of approximately 1–1.40 dollars per day for
our insulin.5

• Required for coverage of our medicines

through government programmes
(Medicaid, Veterans Affairs, Department of
Defense, Medicare etc).

• Support broad patient access to medicines.

challenges they face affording healthcare,
including the medicines we make. We take
this issue seriously and are working to do
more to better support patients. This is a
responsibility that needs to be shared
among all those involved in healthcare, and
we’re going to do our part,” affirms Jakob
Riis. The company recently took a position
on pricing, outlining the three areas it
intends to focus on to better address the
issue:

• Transforming the complex pricing system

• Creating more pricing predictability,
including a commitment to limit any
possible future list price increases to no
more than single-digit percentages
annually

• Reducing the burden of out-of-pocket

costs.

“We’re serious about doing more, but we
can’t do it alone,” Jakob Riis continues.
“That’s why we welcome and will actively
seek collaborations leading to sustainable
solutions based on these three tenets,
which we believe are key to making a
positive impact on affordability for patients.

CONTINUED

OUR BUSINESS

“The pricing system needs to be simplified,
which includes making it more transparent.
We also see value in creating more pricing
predictability, so customers like pharmacy
benefit managers and payers can effect-
ively anticipate and budget for any possible
price increases. With patients, we know
that there’s a growing number of people
with high-deductible health plans – health
coverage with lower premiums – who face
higher costs at the pharmacy counter, and
we continue to see more cost sharing being
pushed to patients.

“The other challenge we’re facing in the
market is around uptake of new medicines.
Traditionally, you launched innovative
medicines aggressively in terms of timing
and investment, and within six months you
knew the growth trajectory. That’s not
necessarily the case in today’s market.
Uptake is slower and we need to adjust our
launch strategies and spending accordingly.

“All of these dynamics are forcing us to
change how we approach the market and
how we operationalise the US business.
That means keeping our finger on the pulse
of the market, building new capabilities
and refining our internal infrastructure
to achieve efficiency and agility.”

SIMPLIFY AND PRIORITISE
While many pharmaceutical companies
have been experiencing layoffs for a
number of years, this has not been the case
at Novo Nordisk. However, the market
conditions and business realities in 2016
meant that the company needed to align
its costs with expected future revenues and
ensure it could invest in future oppor-
tunities. As part of this process, a decision
was taken to reduce the US workforce.
In October 2016, approximately 480
employees were notified that their
positions had been eliminated.

“This was a difficult decision, but a
necessary one,” explains Jakob Riis. “We
can be proud of the professionalism of our
employees and their dedication to patients
throughout the process. We were also
fortunate that some of those employees

found new roles in the company.”
When approaching the organisational
changes, key considerations for Novo
Nordisk were aligning resources around
the most significant commercial priorities,
simplifying the structure and reducing
complexity.

For example, the company reassessed how
it would approach its payer customers in
future. “We used to have market access
work being conducted across several
different areas of the company, so we saw
an opportunity to optimise and simplify
by centralising that expertise under one
market access function,” notes Doug
Langa. “The new market access structure is
in place and is responsible for leading our
strategy by identifying customer value,
securing profitable access and establishing
innovative approaches with customers.
We’re already seeing the benefits. This
unified team is much more powerful and
helps us stay ahead of emerging business
trends and customer payment models.”

IMPORTANT REGULATORY
AND COMMERCIAL
MILESTONES ACHIEVED IN 2016
Novo Nordisk made significant strides in
2016 with regard to regulatory and
commercial opportunities in the US. It
launched Tresiba® (insulin degludec), the
new-generation, once-daily, long-acting
basal insulin, and later also received a
paediatric indication. The US Food & Drug
Administration (FDA) also approved
Xultophy® 100/3.6 (insulin degludec 100
units/ml and liraglutide 3.6 mg/ml), a
once-daily combination of Tresiba® and
Victoza® for the treatment of type 2
diabetes.

“We feel good about the scientific
advance ments we’re bringing forward
and the progress we continue to make in
meeting the medical needs of patients,”
states Anne Phillips, MD, SVP Clinical
Development, Medical & Regulatory Affairs
in the US. “We have some additional work
to do with our fast-acting insulin aspart
filing as we received a Complete Response
Letter from the FDA in October. However,

US HEALTHCARE SPENDING & INSURANCE TRENDS

HEALTHCARE
SPENDING
IN THE US
ACCOUNTS FOR
3.2 TRILLION
DOLLARS –
9,990 DOLLARS
PER PERSON.21

89.1% OF PEOPLE LIVING IN THE US
HAD HEALTH INSURANCE IN Q3 2016,
REPRESENTING A HISTORICAL HIGH.
MORE PEOPLE LIVING IN THE US
ARE ENROLLING IN HIGH-DEDUCTIBLE
PLANS – PLANS DESIGNED TO HAVE
LOWER PREMIUMS, BUT HIGHER
OUT-OF-POCKET COSTS FOR PATIENTS.22

HIGH-DEDUCTIBLE PLANS
ARE LEADING TO INCREASED
PATIENT HEALTHCARE
COSTS. BETWEEN 2006 AND
2015, OUT-OF-POCKET COSTS
INCREASED BY NEARLY 230%
FOR PEOPLE WITH HIGH-
DEDUCTIBLE HEALTH PLANS.23

NOVO NORDISK ANNUAL REPORT 2016

PRESCRIPTION MEDICINES
ACCOUNT FOR
10% OF TOTAL US
HEALTHCARE SPENDING24

10% Prescription drugs

32% Hospital care

20% Physician & clinical services

Home health & nursing
home care

Govt admin & net cost
of private health insurance

22% Other

we’re working with the agency to address
its questions, as we believe fast-acting
insulin aspart is an important option for
patients who need improved blood glucose
control around meals.”

Within haemophilia, Novo Nordisk sub -
mitted a biologics licence application (BLA)
for the approval of the long-acting factor
IX N9-GP (nonacog beta pegol) for people
with haemophilia B.

2016 was equally eventful on the data
front. At the annual American Diabetes
Association (ADA) Scientific Sessions,
the company presented 53 data abstracts,
including the highly anticipated LEADER
study, which demonstrated that Victoza®
significantly reduces the risk of major
cardiovascular events and death in adults
with type 2 diabetes. The results were also
published in The New England Journal of
Medicine and have been submitted to the
FDA for label consider ation.

The results of the SWITCH studies
demonstrating favourable outcomes in
terms of reduction in hypoglycaemic
occurrences with Tresiba® in people with
type 1 and type 2 diabetes were also
presented at ADA and submitted to
the FDA for label consideration.

The headline results of the DEVOTE trial
with Tresiba® involving more than 7,500
people with type 2 diabetes demonstrated
a safe cardiovascular profile and a reduced
risk of severe hypoglycaemia with Tresiba®
compared to insulin glargine U100.

The results of the SUSTAIN 6 study showing
that semaglutide, an invest igational

DIABETES IN THE US

OBESITY IN THE US

OUR BUSINESS

$245bn

$190bn

ABOUT 1 IN 11 US ADULTS
(9.3%), OR MORE THAN
29 MILLION PEOPLE,
HAVE DIABETES.25

THE ESTIMATED TOTAL
COST OF DIAGNOSED
DIABETES WAS
245 BILLION DOLLARS
IN 2012.26

WITHOUT MAJOR
CHANGES, AS MANY
AS 1 IN 3 US ADULTS
COULD HAVE
DIABETES BY 2050.25

OBESITY IS A CHRONIC
PROGRESSIVE DISEASE.
MORE THAN 1 IN 3 US
ADULTS (36.5%), OR
NEARLY 79 MILLION
ADULTS, LIVE WITH
OBESITY.27

THE ESTIMATED ANNUAL
MEDICAL COST OF
OBESITY IN THE US WAS
190 BILLION DOLLARS
IN 2012.28

RESEARCH SUGGESTS
A 33% INCREASE IN
OBESITY PREVALENCE
OVER THE NEXT TWO
DECADES.29

glucagon-like peptide-1 (GLP-1) analogue
administered once weekly, significantly
reduces the risk of major adverse
cardiovascular events in adults with type 2
diabetes at high cardiovascular risk, were
published in The New England Journal of
Medicine. In December, the company
submitted a New Drug Application (NDA)
for semaglutide to the FDA.

THE WAY FORWARD
“In 2016, we took decisions about where
we need our business to go in 2017. We’ll
continue to strengthen and simplify our
organisation and focus on the products
that will drive growth, such as Tresiba®,
Victoza® and Saxenda®. We have some
exciting innovations and new data that we
believe will make a difference for patients,”

says Jakob Riis, who notes that Novo
Nordisk will also be launching Xultophy®
100/3.6 on the US market in the first half
of 2017. “The FDA’s review of the supple-
mental NDAs for the LEADER and SWITCH
studies is expected to conclude in 2017 and
may support the value propositions for
Victoza® and Tresiba® respectively. We also
have FDA action dates for both the sema -
glutide and N9-GP applications,” adds
Anne Phillips.

“We’ll build on the strong progress we’ve
made with outcomes-based contracting and
look forward to new partnerships with
customers that demonstrate the value of our
medicines and make a meaningful difference
for patients. This includes ongoing efforts
and new collaborations to address the

pricing and affordability issue in the US with
sustainable solutions,” continues Jakob Riis.
He also highlights the new opportunities
emerging in ‘digital health’, where Novo
Nordisk is partnering with technology
companies including IBM Watson Health
and Glooko to develop digital solutions for
people with diabetes. “We’re excited about
the opportunities coming from combining
Novo Nordisk’s deep knowledge of
diabetes with our partners’ digital plat-
forms and data analytics expertise. Despite
the current challenges and changes in the
US healthcare system, I’m optimistic about
our future. We have the products, the
people and the passion to be a successful
business and realise our mission to drive
change to improve patients’ lives,” Jakob
Riis concludes.

R&D AND PRODUCTION IN THE US

Novo Nordisk continues to expand its research, develop-
ment and production footprint in the US. The company’s
clinical, medical and regulatory activities are based at the
headquarters in Plainsboro, New Jersey. In addition, Novo
Nordisk has research centres in Indianapolis, Indiana, and
Seattle, Washington, and two production sites in Clayton,
North Carolina, and West Lebanon, New Hampshire.

Novo Nordisk is currently investing nearly 2 billion dollars
in a new production facility in Clayton, which will produce

active pharmaceutical ingredients for the company’s
diabetes care products. This facility will play a vital role in
enabling Novo Nordisk to meet the needs of people living
with diabetes in the US for years to come and create 700
new jobs. The facility is expected to be operational by
2020.

Today, Novo Nordisk employs around 6,000 people
in the US.

Novo Nordisk’s production facility
in Clayton, North Carolina.

36 OUR BUSINESS

THE ONLY CONSTANT IN
INTERNATIONAL OPERATIONS
IS CHANGE

International Operations – Novo Nordisk’s newly established commercial unit – covers
five geographical regions and more than 190 countries. This immensely diverse unit is
united by a common goal: to deliver innovative solutions to fight the global diabetes
epidemic.

“IT GOES WITHOUT SAYING THAT
INTERNATIONAL OPERATIONS IS A
DIVERSE UNIT WITH DIFFERENT
CHALLENGES AND OPPORTUNITIES
ACROSS ITS FIVE REGIONS.”

Maziar Mike Doustdar
Executive vice president, International Operations

On 1 January 2017, Novo Nordisk con-
solidated its sales regions into two com -
mercial units covering the entire world:
International Operations (IO) and North
America. The company previously had five
sales regions, as reflected in the 2016
financial statements on pp 68–69.

IO is responsible for around half of Novo
Nordisk’s total revenue. Covering 95% of
the world’s population, it is clustered into

five regions: Europe, Latin America,
AAMEO (Africa, Asia, Middle East &
Oceania), Japan & Korea and Region
China.7 This new organisational structure,
which was implemented in September
2016, is a recognition that success in
international markets will be a key factor
for Novo Nordisk’s long-term growth.

“It goes without saying that IO is a diverse
unit, with different challenges and

opportunities across its five regions,” says
Maziar Mike Doustdar, executive vice
president and head of International
Operations. “In Region Europe and Region
Japan & Korea, economic growth and
government budgets are under pressure, in
particular from the higher costs associated
with increased life expectancy.31 Region
China and Region Latin America have
transitioned from low- to middle-income
economies and are now seeking to

NOVO NORDISK ANNUAL REPORT 2016THE NEW INTERNATIONAL OPERATIONS

EUROPE
Total
population:

540m7

Adults
with diabetes:

28m1

Latin America
Total
population:

634m7

Adults
with diabetes:

49m1

AAMEO
Total
population:

4,225m7

Adults
with diabetes:

184m1

OUR BUSINESS

JAPAN &
KOREA
Total
population:

177m7

Adults
with diabetes:

11m1

CHINA
Total
population:

1,384m7

Adults
with diabetes:

112m1

enhance economic development in the face
of global competition.31 And with its more
than 100 countries,5 Region AAMEO has
large economic and cultural variations and
holds many opportunities.

“Solid local relationships will therefore be
imperative to the success of International
Operations, as we need to be a strong
part of each community where we
ope rate,” he continues. “Ultimately, we
need to be agile, flexible and attuned to
change, whether we’re talking about
currency fluctuations, political risks or
healthcare reforms. After all, the only
constant in IO is change.”

However, Maziar Mike Doustdar also
recognises common themes across IO:
“What we’re seeing across the world is
a desire from governments to optimise
healthcare systems and control expend-
itures. Our new commercial structure will
allow us to share best practices and
processes – something that’s increasingly
important as global pharmaceutical pricing
becomes more transparent and subject to
international referencing. Above all though,
there are two issues all our regions have in
common: the fact that more and more
people are getting diabetes and the need
for innovative solutions to address this
challenge.”

IMPROVING AWARENESS AND ACCESS
The International Diabetes Federation (IDF)
estimates that around 384 million adults
with diabetes live in countries covered by
IO, and this figure is expected to rise to
close to 600 million people by 2040.1
Maziar Mike Doustdar sees a clear role for
IO in providing treatment for those people
who need it so that they can live their lives
to the full. “Only around half of the people
living with diabetes around the world are
diagnosed, and only half of these people
receive treatment. We therefore have an
obligation and an opportunity to increase
awareness and access to care across the
globe.”

Increasing sales volumes will be a major
growth driver in IO, and improving access
to Novo Nordisk’s portfolio of novel
diabetes products will be a key focus
area. Modern insulin, Victoza® and new-
generation insulin already account for 60%
of sales, and the trend away from human
insulin is set to continue.5

“With one of the broadest product
portfolios in the industry, we’re well
positioned to accommodate all market
needs in IO,” points out Maziar Mike
Doustdar. “We can supply high-quality
human insulin at very affordable prices in
low-income markets, and modern and

new-generation insulin and GLP-1 in
markets with an ability and willingness to
pay for innovative products with improved
patient outcomes. It’s crucial that we have
a clear strategy to find the balance
between volume increases and value
upgrades.”

Novo Nordisk is currently market leader in
diabetes in IO, supplying half of all insulin
and holding a 23% share of the total
diabetes value market.5 However, Maziar
Mike Doustdar wants to do even better:
“With our strong product pipeline,
dedicated colleagues and commercial
capabilities, I have no doubt that we’ll
continue to expand Novo Nordisk’s
diabetes leadership in IO.”

With 20 different time zones and employ-
ees of 125 different nationalities, IO literally
never sleeps – which Maziar Mike Doustdar
says makes it an exciting unit in which to
work. “What gets me up in the morning is
the great potential we have as a company
to deliver better treatment for millions of
people around the world,” he says. “We
have a great opportunity to launch inno -
vative products across IO, whether for
people with diabetes, obesity, haemophilia
or growth disorders. What matters is that
we get it right each time and improve
access to care for patients.”

CONTINUED

NOVO NORDISK ANNUAL REPORT 2016REGION
AAMEO

Africa, Asia, Middle East & Oceania

REGION
EUROPE

Selected events from around IO.

REGION
CHINA

4,255m7
• Total population:
• GDP per capita:
USD 3,34032
• Healthcare cost per capita: USD 18133
184m1
• Adults with diabetes:
~7.5%1
• Adult diabetes prevalence:
48.4%1
• Diagnosis rate:
~4,600
• Employees*:

540m7
• Total population:
• GDP per capita:
USD 32,45032
• Healthcare cost per capita: USD 3,61333
28m1
• Adults with diabetes:
~7.0%1
• Adult diabetes prevalence:
60.7%1
• Diagnosis rate:
~3,000
• Employees*:

1,384m7
• Total population:
• GDP per capita:
USD 8,58032
• Healthcare cost per capita: USD 42033
112m1
• Adults with diabetes:
• Adult diabetes prevalence: ~10.6%1
47.3%1
• Diagnosis rate:
~3,000
• Employees*:

AAMEO is a geographically and culturally
diverse region across four continents and
more than 100 countries. Markets in
AAMEO cover a broad range of economic
development and healthcare systems and,
as such, provide a wide array of challenges
and opportunities. In 2016, countries in
AAMEO were particularly susceptible to
commodity price decreases and currency
fluctuations. Furthermore, continued
macroeconomic issues could place pressure
on government expenditure in countries
that are net exporters of energy and other
commodities.34 AAMEO is also home to
numerous countries with heightened
political and security risks,35 and these risks
are likely to continue in 2017. There are,
however, distinct and diverse opportunities
across the region in spite of economic and
market access risks. One priority will be to
upgrade more patients from human to
modern insulin, particularly in Least
Developed Countries (LDCs), in order to
ensure better treatment for people with
diabetes. There will continue to be a focus
on launching novel products, including
Victoza®, private market launches of
Saxenda® and the introduction of new-
generation insulin such as Tresiba®,
Xultophy® and Ryzodeg® across multiple
markets. There will also be ongoing
investments in manufacturing facilities in
Iran, Algeria and Russia as part of Novo
Nordisk’s strategy to ensure product supply
and deepen stakeholder ties in strategic
markets in AAMEO.

NOVO NORDISK ANNUAL REPORT 2016

Constituting around 40% of total sales
within the new IO commercial unit, Europe
will continue to be a key market for Novo
Nordisk. The region is typified by developed
healthcare systems in which strong
competitive and price pressures persist.36
The market access environment has been
challenging over the last decade, with
governments seeking to optimise health-
care expenditures in response to slower
economic growth and ageing populations.30
Novo Nordisk expects these trends to
continue, in particular ongoing pricing
negotiations in markets across the region
and challenges from biosimilar products.
Despite these challenges, 2017 will offer
numerous opportunities to continue
providing patients across Europe with
innovative products for both diabetes and
haemophilia. There is potential for an
expanded label for Victoza® following
strong cardiovascular data from the
LEADER study (see pp 24–25 for details),
further strengthening Novo Nordisk’s
leading position in the GLP-1 market.
Further launches of Tresiba® and Xultophy®
are planned, which will serve to cement
uptake of new-generation insulin in the
region and strengthen the company’s
presence in the basal segment. There will
also be opportunities to broaden the
biopharmaceuticals business through
further launches of the recombinant factor
VIII, NovoEight®.

China has been impacted by lower-than-
previous rates of economic growth.37 The
primary consequence for Novo Nordisk’s
business has been increased price pressure
as the government seeks to rationalise
health expenditure at national and pro -
vincial levels.37 There has also been stiffer
competition, in particular from local
producers of both human and modern
insulin. Competitors will continue to seek
additional market share and share of voice
through launches of new products and
investment in provincial markets. Novo
Nordisk has thus far been able to success-
fully navigate this challenging environment
by focusing on defending its insulin market
share. In 2017, there will be opportunities
to further develop the GLP-1 market in
which Victoza® has established its leader-
ship, potentially through enhanced re -
imbursement coverage. There is also
potential to capture the positive trend of
upgrading from human to modern insulin,
improving treatment outcomes for
thousands of patients. This will occur
within the broader context of continued
strong growth in an insulin market where
Novo Nordisk holds a leadership position.
Novo Nordisk will seek to improve access
to care through further reimbursement
negotiations and other programmes
intended to improve access to care and
optimise use of modern insulin.

* Employee numbers only cover regional sales organisations.

“THERE ARE TWO
ISSUES ALL OUR
REGIONS HAVE IN
COMMON: THE FACT
THAT MORE AND
MORE PEOPLE ARE
GETTING DIABETES
AND THE NEED FOR
INNOVATIVE
SOLUTIONS TO
ADDRESS THIS
CHALLENGE.”

Maziar Mike Doustdar
Executive vice president,
International Operations

IO IN SHORT

95%

OF THE
WORLD’S
POPULATION IS
COVERED BY IO

IO COVERS FIVE
CONTINENTS

MORE THAN
190 COUNTRIES

20 TIME ZONES

EMPLOYEES
OF 125
NATIONALITIES

REGION
JAPAN &
KOREA

Selected events from around IO.

REGION LATIN
AMERICA

177m7
• Total population:
• GDP per capita:
USD 30,98032
• Healthcare cost per capita: USD 3,23833
11m1
• Adults with diabetes:
~7.9%1
• Adult diabetes prevalence:
50.5%1
• Diagnosis rate:
~1,100
• Employees*:

634m7
• Total population:
• GDP per capita:
USD 8,43032
• Healthcare cost per capita: USD 71433
49m1
• Adults with diabetes:
• Adult diabetes prevalence: ~12.0%1
62.5%1
• Diagnosis rate:
~900
• Employees*:

Japan and Korea are mature markets with
the associated challenges of slow economic
growth, ageing populations and increased
competition. One particular challenge in
this region is a growing preference for oral
antidiabetics, leading to negative insulin
volume development.5 Similarly, wider
competitive pressure within the GLP-1 and
insulin segments is set to intensify, with
further competitor launches and biosimilar
entries over the next two years. Despite
these competitive challenges, Novo Nordisk
maintains a promising outlook in the region
across its portfolio, in particular in relation
to its novel products. Tresiba® has already
established basal leadership in Japan and
been successfully launched in Korea,
helping strengthen leadership in the
broader insulin market. Opportunities will
arise from launches of Ryzodeg® in both
markets as well as longer-term strategic
concentration on increased use of insulin.
Due to high growth in the GLP-1 segment,
Novo Nordisk is in a strong position to
maximise Victoza® in advance of prepar-
ations for the launch of semaglutide in
Japan and to target reimbursement of
Victoza® in Korea. There will also be
opportunities to strengthen leadership in
biopharmaceuticals, with continued focus
on growth disorders and further uptake of
NovoEight® among people with haemo-
philia A following its launch in Japan in
2014.

Latin America was the fastest-growing
business area under the company’s 2016
commercial structure. Strong performance
has been underpinned by market share
gains across the diabetes portfolio, in
particular in the basal segment. The
primary opportunity in 2017 will be to
harness demand across the region for Novo
Nordisk’s novel portfolio, including Victoza®
and new-generation insulin such as Tresiba®
and Ryzodeg®. There will also be scope to
broaden access to Saxenda®, which was
launched in 2016 in both Mexico and
Brazil, paving the way for further entries
into the obesity market. While Latin
America will provide business opportunities
across the portfolio, the region will operate
under macroeconomic challenges similar to
those faced in 2016. A significant
proportion of government revenues across
the region are derived from exports of
commodities,39 and any deterioration in
commodity prices could create cost
pressures in the healthcare sector.
Continuing inflationary issues are also likely
to have an impact on planning and pricing
discussions. Despite these challenges, Latin
America will continue to provide growth
opportunities through increases in market
share and a market access environment
that remains conducive to further
penetration with Novo Nordisk’s novel
portfolio.

* Employee numbers only cover regional sales organisations.

NOVO NORDISK ANNUAL REPORT 2016

RISK MANAGEMENT
– PROTECTING LONG-TERM
VALUE CREATION

2016 was a year of significant changes for Novo Nordisk, including from a risk
management perspective. Some risks emerged faster and with a higher impact than
expected, while others all but disappeared from Novo Nordisk’s risk ‘heat map’.

Jesper Brandgaard, Novo Nordisk’s chief
financial officer and chair of the company’s
Risk Management Board, rarely fails to
remind investors and analysts that there are
risks associated with investing in
Novo Nordisk. 2016 was a case in point.

The most prominent market risk
materialising in 2016 was a more chal-
lenging business environment in the US.
This was caused by a combination of
several factors: through a wave of mergers
and acquisitions, the main purchasers of
medicines – pharmaceutical benefit
managers (PBMs) – had strengthened their
negotiating power, forcing pharmaceutical
companies to either increase their rebates
to get their products onto the PBMs’ lists of
approved, reimbursed products – or lose
the contract. Novo Nordisk experienced
both in 2016, during which other factors
also put the US business under pressure.
One such factor was the imminent launch
of biosimilar basal insulin, which further
strengthened the payers’ negotiating
position. Another was the loss of market

shares in the haemophilia business due to
patients switching from NovoSeven® to
enter clinical trials with a potential new
competing product.

As a result, Novo Nordisk’s financial
performance in 2016 ended in the lower
end of the range than guided at the
beginning of the year, and the company’s
long-term targets had to be lowered.

Reflecting on the market risks Novo Nordisk
faced in 2016, Jesper Brandgaard
acknowledges that while contract losses
and higher rebate levels in the US had been
identified as risks in the company’s risk
management process, the impact and
speed at which they had materialised had
come as a surprise.

In some other markets, the opposite
happened, with the business developing
more favourably than expected, for
example in China, where market growth
was higher and price pressure more modest
than expected.

“It just shows that while the pharma
industry is considered a safe haven in times
of change, there is no such thing as a safe
haven,” comments Jesper Brandgaard. “All
industries have their individual risks.”

RESEARCH & DEVELOPMENT RISKS
A set of risks specific to the pharmaceutical
industry are those associated with the
testing of new medicines for safety and
efficacy during a rigorous process that can
last more than 10 years. At any point in
time in the process, there is the risk of
studies showing that the potential new
product is not sufficiently efficacious or
that it has unacceptable side effects.

In terms of Novo Nordisk’s R&D risks, 2016
was unique on account of an extra-
ordinarily high number of data releases and
regulatory milestones.

LONG-TERM RISKS
Novo Nordisk aspires to be a sustainable business and
takes an active role in dealing with risks related to global
development and long-term prosperity, such as global health,
climate change, water scarcity and inequality. This includes
setting science-based targets aligned with international
agreements and thorough due diligence to ensure adherence
to universally accepted standards for responsible business
practices. Actions are reported to investor-led indices, such as
CDP on climate risks, ATMI on access to medicines and DJSI on
economic, environmental and social performance.

Find elaborate descriptions of Novo Nordisk’s climate action
initiatives, water stewardship, respect for human rights,
access to health, diversity and inclusion, business ethics and
responsible tax in the Communication on Progress report and
read more about sustainability management at novonordisk.
com/sustainability.

NOVO NORDISK ANNUAL REPORT 2016

NOVO NORDISK’S RISK MANAGEMENT POLICY
At 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
governance at novonordisk.com/about-novo-nordisk/
corporate-governance/risk-management.html.

“THERE IS NO SUCH THING
AS A SAFE HAVEN.”

Jesper Brandgaard
Chief financial officer
and chair of Novo Nordisk’s Risk Management Board

“From an R&D perspective, the most
significant potential risks, which would be
disappointing results from the LEADER,
DEVOTE and SUSTAIN key trials with
Victoza®, Tresiba® and semaglutide
respectively, did not materialise. In fact,
results were even better than we’d hoped
for,” says Jesper Brandgaard. He also notes
two risks that did materialise in 2016: delays
in the US approvals of fast-acting insulin
aspart and Xultophy®. “However, this can in
no way change the picture that our overall
R&D risk profile improved considerably
during 2016.”

SUPPLY, QUALITY AND
PRODUCT SAFETY RISKS
In terms of the company’s ability to ensure
a steady supply of high-quality products to
its customers, no significant risks mate ri-
alised in 2016. “As always, we had many
inspections from regulatory authorities
during the year, but we’ve passed all the
inpections that have been reported back
to us at this point, and the findings that
inspectors have made are some we know

how to deal with and which we don’t
expect will limit our ability to supply,”
he continues.

Product recalls due to potential safety
issues are not uncommon in the pharma-
ceutical industry, and in 2016 Novo Nordisk
had to make one critical recall from the
market. It concerned one of the company’s
smallest products, an emergency kit used
by people with diabetes when experiencing
an episode of dangerously low blood sugar
(severe hypoglycaemia). In September,
certain batches of the product, GlucaGen®
Hypokit, were recalled in 31 countries
because it was found that a small percent-
age of needles (0.006%) were detached
from the syringe. “It may seem like a small
risk given the small percentage of faulty
products, but when it comes to patient
safety, we can’t compromise,” says Jesper
Brandgaard.

LEGAL RISKS
At any given point in time, a pharma-
ceutical company of Novo Nordisk’s size

is likely to be facing legal risks, for example
related to lawsuits filed by competitors or
customers, or investigations by authorities
into certain business practices. A summary
of Novo Nordisk’s ongoing cases can be
found on p 80 of this Annual Report.

Jesper Brandgaard urges investors to pay
attention to such cases, as they can have
significant financial or market impacts. As
an example, he mentions a patent dispute
between Novo Nordisk and Baxalta (now
Shire) regarding the haemophilia product
NovoEight®. Had Novo Nordisk lost the
case, it could have been forced to withdraw
the product from the US market, which
would not only have affected the people
using the product, but also led to a loss of
reputation and future business for Novo
Nordisk within haemophilia.

The two companies settled the case out of
court in September, and NovoEight® can
thus remain on the US market.

CONTINUED

RISK PROFILE AND MITIGATING ACTIONS
As a global business, Novo Nordisk is exposed to risks through-
out its value chain, which stretches from early discovery of new
medicines to patients taking their daily dose of life-saving
medicine at home. Some risks can be foreseen well in advance
so that actions can be taken, for example ensuring back-up
facilities and inventories. Some can be calculated, such as the
risk of not achieving superior clinical results and a promising
product candidate having to be abandoned. Others may come
from unseen angles, such as intruders into data systems, and
may cause business disruptions.

See an overview of Novo Nordisk’s key risks in the table on
pp 42–43.

ENTERPRISE RISK MANAGEMENT
Risk management is an enterprise-wide effort, and risks are
assessed both in terms of potential financial loss and potential
reputational damage. The goal is to increase transparency and
communication to senior management on key risks, so that
risks can be anticipated early and responded to proactively in
order to protect and enhance assets, people, performance and
reputation. Management teams in all organisational areas are
responsible for continuous identification, assessment, miti-
gation and reporting of current and emerging risks. The most
significant risks are presented to the Board of Directors on a
quarterly basis. Read more at novonordisk.com/about-novo-
nordisk/corporate-governance/risk-management.html.

NOVO NORDISK ANNUAL REPORT 2016

42 OUR BUSINESS

NOVO NORDISK’S KEY RISKS

DELAYS OR FAILURE OF
PRODUCTS IN PIPELINE

SUPPLY
DISRUPTIONS

COMPETITION AND
MARKET DEVELOPMENTS

COMPROMISES TO PRODUCT
QUALITY AND SAFETY

WHAT IS
THE RISK?

Failures or delays may occur
at production sites or
throughout the extensive
global supply chain, relating
to procurement of ingre-
dients and components
as well as distribution of
products.

The development of a
product candidate can take
more than 10 years and
may be delayed, or even
abandoned, at substantial
expense. The process
involves non-clinical tests
and clinical trials, commer-
cial product planning and
regulatory approval,
including approval of
the production facilities.

WHAT IS
THE IMPACT?

Patients would not benefit
from innovative treatments
and Novo Nordisk’s future
position as a leader could
be jeopardised if the
company is unable to bring
innovative products to
market. Any delays or
failures of new products
could have an adverse
impact on sales, profits and
market position.

Pharmacies and hospitals
could face product
shortages, with potential
implications for patients’
daily treatment needs, if
Novo Nordisk is prevented
from supplying products to
markets. This could be due
to breakdowns or quality
failures at company sites or
at key suppliers’ production
facilities.

WHAT
ACTIONS
ARE TAKEN?

Insights into patients’
unmet needs inform the
selection of new product
candidates. Clinical trials are
run to demonstrate safety
and efficacy. Assessments
of commercial viability
determine progress through
stage gates. Consultations
are held with regulators to
review clinical findings and
obtain guidance on clinical
programmes.

Annual inspections by
regulatory authorities
document GMP com-
pliance, and alternative
supply sites for critical raw
materials and back-up
facilities are in place for
key production plants and
safety inventories, to
prevent and respond to
accidents or other
disruptions to supplies.
Global production reduces
supply risks.

See more on pp 20–21
and 24–25.

See more on p 103.

Governments and private
payers take measures to
limit spending on medicines
by driving down prices,
demanding higher rebates
and restricting access to
and reimbursement of new
products. In some markets,
political instability, conflict
or weak enforcement of the
rule of law may affect sales.
At any time, established or
new competitors may bring
new products to market,
leading to increased
competition.

Patients would not have
access to the clinical
benefits of new products if
Novo Nordisk is prevented
from launching new
products due to reimburse-
ment restrictions. Lower
average prices are expected
in the US. In other markets,
prices could also come
under pressure, while
newer products could be
niched for use in narrow
sub-populations.

Clinical trial data
demonstrate the added
value of new products.
Real-world evidence is
introduced to show health
economic benefits. Nego -
tiations with payers aim to
ensure patients’ access to
the clinical benefits of new
products.

See more on pp 32–35
and 36–39.

Product quality and safety
may be compromised if, for
example, a production
facility is found to be in
non-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 a longer
period of time.

Patients’ health and lives
could be put at risk and
Novo Nordisk’s reputation
and licence to operate
could be damaged if
regulatory compliance
is not ensured.

A robust quality manage-
ment system, improvement
plans and systematic senior
management reviews are in
place. Authority inspections
and internal quality audits
are conducted at sites.
When issues are found with
production processes or
marketed products, root
causes are identified and
corrected and, if necessary,
products are recalled.

See more on pp 46–49
and 103.

NOVO NORDISK ANNUAL REPORT 2016OUR BUSINESS

INFORMATION
TECHNOLOGY SECURITY
BREACHES

Disruption to IT systems,
such as breaches of data
security or failure to inte -
grate new systems, may
happen across the global
value chain, where well-
functioning IT systems and
infrastructure are critical for
the company’s ability to
operate effectively.

CURRENCY IMPACT
AND TAX DISPUTES

BREACH OF LEGISLATION
OR ETHICAL STANDARDS

LOSS OF INTELLECTUAL
PROPERTY RIGHTS

Exchange rate fluctuations
and transfer pricing dis -
putes with tax authorities
are external factors that
may occur at any time.
Novo Nordisk’s foreign
exchange risk is most
significant in USD, CNY
and JPY, while the EUR
exchange rate risk is
regarded as low due to
Denmark’s fixed-rate policy
vis-à-vis the euro.

In a tightly regulated
industry, breach of
legislation, industry codes
or company policies may
occur in connection with
business interactions, such
as with healthcare profes-
sionals, business partners
or other stakeholders. This
could lead to lawsuits
against Novo Nordisk or
investigations by the
authorities.

The validity of patents that
are critical for protecting
Novo Nordisk’s commercial
products and candidates in
the R&D pipeline may be
challenged by competitors.

Patients’ or other individ-
uals’ privacy could be com -
promised if confidential
information is disclosed,
and breaches of IT security
could have a severe impact
on Novo Nordisk’s ability to
maintain operations and
hence on its financial
situation. In production
environments, for example,
breaches of IT security could
impact Novo Nordisk’s
ability to produce and
safeguard product quality.

Novo Nordisk’s cash flow
and income statement
would be negatively
impacted if the local
currency value in key sales
regions depreciated against
the Danish krone. Loss of
major tax cases could result
in significant tax adjust-
ments and fines and could
lead to a higher-than-
expected tax level for the
company.

An information security
strategy is in place to
prevent intruders from
causing damage to systems
and gaining access to
critical data and systems.
Awareness campaigns,
access controls and
intrusion detection and
prevention systems have
been implemented. Internal
audits of IT security are
conducted to detect and
mitigate any breaches.

Expected future cash flows
for selected currencies are
hedged to mitigate expo -
sures. An integrated
Treasury Management
System is in place. Applic-
able taxes are paid in
jurisdictions where business
activity generates profits.
Multi-year transfer pricing
agreements with tax
authorities have been
negotiated in key markets.
Hedging activities and
calculation of transfer
pricing are subject to
internal audit.

See more on pp 72–73
and 83.

Breaches of legislation or
ethical standards could
compromise the integrity of
the individuals involved and
could cause damage to
Novo Nordisk’s reputation
and financial situation.

Loss of exclusivity for
existing and pipeline
products could impact Novo
Nordisk’s market position
and valuation.

Due diligence, standard
procedures and training are
in place to ensure com-
pliance with laws and
regulations and prevent
breaches of standards,
with legal defence where
relevant. Compliance with
business ethics standards is
subject to internal audit.

See more on pp 18–19
and 102–103.

Throughout the process of
drafting, filing and prose -
cuting a patent application,
internal controls are in place
to minimise vulnerability to
invalidity actions. Patents at
high risk of invalidity chal -
lenge are proactively
identified to prepare to
defend Novo Nordisk’s
intellectual property rights.

See more on pp 74
and 101.

NOVO NORDISK ANNUAL REPORT 201644 GOVERNANCE, LEADERSHIP AND SHARES

SHARES
AND CAPITAL STRUCTURE

Through open and proactive communication, the company aims to
provide the basis for fair and efficient pricing of its shares.

SHARE CAPITAL AND OWNERSHIP
Novo Nordisk’s total share capital of DKK
510,000,000 is divided into an A share capital
of nominally DKK 107,487,200 and a B share
capital of nominally DKK 402,512,800. 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 objective: 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 2016,
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. No
complete record of all shareholders exists;
however, based on available sources of
information about the company’s share-
holders, as of 31 December 2016 it is
estimated that shares were geographically
distributed as shown in the chart on the
opposite page. As of 31 December 2016, the
free float of listed B shares was 89.6% (of
which approximately 11.5% are listed as
ADRs), excluding the Novo A/S holding and
Novo Nordisk’s holding of treasury shares
which, as of 31 December 2016, was DKK
9,133,450 nominally. For details about the
share capital, see note 4.1 on pp 81–82.

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
strategy offers a good balance between
long-term shareholder value creation and
competitive shareholder return in the short
term. Novo Nordisk’s guiding principle is that
any excess capital, after the funding of
organic growth opportunities, investments
and acquisitions, should be returned to
investors. The company’s dividend policy
applies a pharmaceutical industry benchmark
to ensure a competitive payout ratio for

dividend payments, which are complemented
by share repurchase programmes. As illu -
strated on the opposite page, Novo Nordisk
has continuously increased both the payout
ratio and the dividend paid over the last five
years. The dividend for 2015 paid in March
2016 was equal to DKK 6.40 per A and B
share of DKK 0.20 as well as for ADRs. This
corresponds to a payout ratio of 46.6%,
which is slightly below the 2015 pharma peer
group average of 56%. In August 2016, an
interim dividend was introduced and a DKK
3.00 dividend per A and B share of DKK 0.20
as well as for ADRs was paid. For 2016, the
Board of Directors will propose a final
dividend of DKK 4.60 to be paid in March
2017, equivalent to a total dividend for 2016
of DKK 7.60 and a payout ratio of 50.2%. The
company expects to distribute an interim
dividend in August 2017 and further informa -
tion regarding such interim dividend will be
announced in connection with the financial
report for the first six months of 2017. Novo
Nordisk does not pay a dividend on its
holding of treasury shares. Shareholders’
enquiries concerning dividend payments and
shareholder accounts should be addressed
to Investor Service. Read more on the back
cover.

During the 12-month period beginning 30
January 2016, Novo Nordisk repurchased
shares worth DKK 15 billion. The share
repurchase programme has primarily been
conducted in accordance with Article 5 of
Regulation No 596/2014 of the European
Parliament and Council of 16 April 2014
(MAR). 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 2017/2018
For the next 12 months, Novo Nordisk has
decided to implement a new share repurchase
programme. The expected total repurchase
value of B shares amounts to a cash value of
up to DKK 16 billion. Novo Nordisk expects to
conduct the majority of the new share re -
purchase programme according to the Safe
Harbour Rules in MAR. In March 2017, at the
Annual General Meeting, the Board of
Directors will propose a further reduction in
the company’s B share capital, corresponding
to approximately 2% of the total share
capital, by cancelling 50,000,000 treasury
shares. After the implementation of the share

capital reduction, Novo Nordisk’s share capital
will amount to DKK 500,000,000, divided
into A share capital of DKK 107,487,200 and
B share capital of DKK 392,512,800.

SHARE PRICE DEVELOPMENT
Novo Nordisk’s share price decreased by
36.3% between its 2015 close of DKK 399.9
and the 30 December 2016 close of DKK
254.7. For comparison, the Danish OMXC20
CAP stock index decreased by 1.9% and the
pharma peer group increased by 6.4%
during 2016. The decrease in Novo Nordisk’s
share price during 2016 reflects Novo
Nordisk’s competitive challenges in the
US during 2016 as well as the significant
changes in the US pricing environment
leading to a revision of the long-term
financial targets in October 2016.
Throughout 2016 several positive results
from Novo Nordisk’s late-stage devel -
opment portfolio were reported, including
results from the SWITCH, LEADER and
DEVOTE studies. The total market value
of Novo Nordisk’s B shares, excluding
treasury shares, was DKK 513 billion as
of 30 December 2016.

COMMUNICATION WITH SHAREHOLDERS
To keep investors updated about per-
formance and the progress of clinical
development 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 potential 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’. Other information which can be
accessed via this website includes company
announcements from 1995 onwards,
financial, social and environmental results,
a calendar of investor-relevant events,
investor presentations and background
information.

NOVO NORDISK ANNUAL REPORT 2016SHARE AND OWNERSHIP STRUCTURE

OWNERSHIP STRUCTURE

Novo Nordisk
Foundation

Novo A/S

Institutional and
private investors

75.4% of votes
27.5% of capital

24.6% of votes
72.5% of capital

A shares
537m shares

B shares
2,013m shares

Novo Nordisk A/S

GOVERNANCE, LEADERSHIP AND SHARES

GEOGRAPHIC DISTRIBUTION OF SHAREHOLDERS*
% of share capital

 2015  2016

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

DKK

630

540

450

360

270

180

Mar

Jun
2015

Sep

Dec Mar

Sep

Dec

Jun
2016

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2016

* Pharma peers comprise: AstraZeneca, Bristol-Myers Squibb, Eli Lilly,

GlaxoSmithKline, J&J, Merck & Co, Novartis, Pfizer, Roche, Sanofi and Teva.

CASH DISTRIBUTION TO SHAREHOLDERS

CASH DISTRIBUTION TO SHAREHOLDERS
 Share repurchases in the calendar year  Interim dividend

 Dividend for prior year Free cash flow

DKK billion

DEVELOPMENT IN SHARE CAPITAL

 Share capital

DKK million

600

550

500

450

400

(–4%)

(–2%)

2013

2014

2015

2016

2017E

2013

2014

2015

2016

2017E

Note: Dividends are allocated to the year of dividend pay. Interim 2017 dividend is
estimated based on financial outlook.

NOVO NORDISK ANNUAL REPORT 2016
46 GOVERNANCE, LEADERSHIP AND SHARES
46

CORPORATE
GOVERNANCE

GOVERNANCE STRUCTURE
SHAREHOLDERS
Shareholders have ultimate authority over
the company and exercise their rights to
make decisions at general meetings. At the
annual general meeting, shareholders
approve the annual report and any amend-
ments to the company’s Articles of Asso-
ciation. Shareholders also elect board
members and the independent auditor.

Resolutions can generally be passed by a
simple majority. However, resolutions to
amend the Articles of Association require
two-thirds of the votes cast and capital
represented, unless other adoption
requirements are imposed by the Danish
Companies Act.

Novo Nordisk’s share capital is divided into
A shares, which are not listed, and B
shares, which are listed.* The A shares
constitute 21% of the share capital and
each A share carries 200 votes. The B
shares constitute the rest of the capital and
each B share carries 20 votes. The Danish
company Novo A/S, which is wholly owned
by the Novo Nordisk Foundation, holds all
the A shares and, as of 31 December 2016,
Novo A/S also holds approximately 8.1% of
the B share capital, meaning that Novo A/S
holds approximately 27.5% of the total
share capital and 75% of the votes. The
remaining B shares are held by a wide
group of shareholders and, consequently,
Novo A/S has the voting majority at the
annual general meeting. However, all
strategic and operational matters are solely
decided by the Board of Directors and
Executive Management of Novo Nordisk

A/S. Read more about shares and capital
structure on pp 44–45 and on
novonordisk.com.

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 perform-
ance, ensures adequate management and
organisation and, as such, actively contri b-
utes to developing the company as a
focused, sustainable, global pharmaceutical
company. The Board of Directors supervises
Executive Management in its decisions and
operations. The Board of Directors may also
distribute extraordinary dividends, issue new
shares or buy back shares in accordance with
authorisations granted by the annual general
meeting and recorded in the meeting
minutes. For the minutes of annual general
meetings, see novonordisk.com/about_us.
The Board of Directors has 11 members,
seven of whom are elected by shareholders
and four by employees in Denmark. Novo
Nordisk’s Board of Directors met eight times
during 2016.

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. Two board members are members of the
Board of Directors of Novo A/S and may be
regarded as representing the interests of the
controlling shareholder, while five of the

seven shareholder-elected board members
are independent as defined by the Danish
Corporate Governance Recommendations.
Read more on pp 54–55.

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’ compe-
tence profile and reflecting the results 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 inde-
pendent judgement.

The self-assessment conducted in 2016 was
facilitated internally and revealed good
collaboration between the Board of Directors
and Executive Management. The process
also resulted in increased focus by the Board
on the research strategy and sales in the US
as well as on strengthening the processes in
relation to board nomination and executive
succession. In order to support continued
fulfilment of the Novo Nordisk Way, criteria
for board members include integrity,
accountability, fairness, financial literacy,
commitment and desire for innovation.
Members are also expected to have
experience of managing major companies
that develop, manufacture and market
products and services globally. The
competence profile, which includes the
nomination criteria, is available at
novonordisk.com/about_us.

* 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. A shares take priority for dividends below 0.5% and B shares take priority for dividends between 0.5 and 5%.

NOVO NORDISK ANNUAL REPORT 2016Shareholder Meeting 2016

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 five of the seven shareholder-
elected board members are non-Nordic. In
2016, the Board of Directors adjusted its
diversity ambition and set out new targets
with the aim that by 2020 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 three shareholder-
elected board members of each gender.
In accordance with section 99b of the
Danish Financial State ments Act, Novo
Nordisk discloses its diversity policy, targets
and current perform ance in the UN Global
Compact Communi cation on Progress,
which is available at novonordisk.com/
annualreport.

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 reviewing
the fixed asset investment portfolio. In
March 2016, the Annual General Meeting
re-elected the Chairman, Göran Ando, and
the Vice Chair man, Jeppe Christiansen.
In 2016, the Chair manship particularly
discussed the succession of the CEO
and the reorganisation of the Executive
Management as well as the company’s
research strategy and perform ance in the
US. 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. One member is an
employee representative. Pursuant to the US
Securities Exchange Act, two members
qualify as independent while two members
rely on an exemption from 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 a financial expert. The
Audit Committee assists the Board of
Directors with oversight of the external
auditors, the internal audit function, the
procedure for handling complaints, financial,
social and environmental reporting, business
ethics compliance, significant investment
projects (post-completion review), long-term
incentive programmes, information security
and other tasks. In 2016, the Board of
Directors elected Liz Hewitt as Chairman
and Jeppe Christiansen, Sylvie Grégoire and
Stig Strøbæk as members. In 2016, the Audit
Committee particularly discussed accounting
policies and estimates, including tax, as well
as internal controls and management of key

CONTINUED

Shareholder
Meeting 2016

risks, such as informa tion security. See
novonordisk.com/about_us for a report on
the Audit Committee’s activities.

NOMINATION COMMITTEE
The Nomination Committee consists of four
members. Two members qualify as inde-
pendent, 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 com -
mittees, and other tasks on an ad hoc basis
as specifically decided by the Board. In 2016,
the Board of Directors elected Göran Ando
as Chairman and Bruno Angelici, Liz Hewitt
and Liselotte Hyveled as members. In 2016,
the Nomination Committee particularly
discussed long-term succession and profiles
of potential candidates in addition to inter -
viewing candidates. See novonordisk.com/
about_us for a report on the Nomination
Committee’s activities.

REMUNERATION COMMITTEE
The Remuneration Committee consists of
four members. One member qualifies as
independent, while one member is an
employee representative. The Remuneration
Committee assists the Board with oversight
of the remuneration policy as well as the
actual remuneration of board members,
board committees and Executive Manage-
ment. In 2016, the Board of Directors elected
Göran Ando as Chairman and Jeppe
Christiansen, Søren Thuesen Pedersen and

Mary Szela as members. In 2016, the
Remuneration Committee particularly
discussed remuneration levels for the
executives following the reorganisation of
Executive Management. See novonordisk.
com/about_us for a report on the
Remuneration Committee’s activities.

EXECUTIVE MANAGEMENT
Executive Management is responsible for the
day-to-day management of the company. In
2016, the Board of Directors decided to
reorganise Executive Management, following
which the president & CEO, Lars Rebien
Sørensen, retired from the company at the
end of 2016 and was succeeded by Lars
Fruergaard Jørgensen, previously executive
vice president of Corporate Development. In
addition, two executives left the company.
The executives Jakob Riis and Maziar Mike
Doustdar, who are based outside Denmark
with responsibility for North America
Operations and International Operations
respectively, are not registered with the
Danish Business Authority. Executive
Management now consists of the president
& CEO plus five 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 implemen t-
ation 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 their remu-
neration. The Chairmanship reviews the
performance of the executives. To ensure
the organisational implementation of the
strategy, Executive Management has
established a Senior Management Board
consisting of the chief executive officer,
executive vice presidents and senior vice
presidents.

ASSURANCE
The company’s financial reporting and the
internal controls of financial reporting
processes are audited by an independent
audit firm elected at the annual general
meeting. As part of Novo Nordisk’s com -
mitment 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 pro -
vides independent and objective assurance,
primarily within internal control of financial
processes, IT and business ethics. To ensure
that the internal financial audit function
operates independently of Executive
Management, its charter, audit plan and

GOVERNANCE, LEADERSHIP AND SHARES

CORPORATE GOVERNANCE CODES AND PRACTICES

COMPLIANCE

GOVERNANCE STRUCTURE

Danish and
foreign laws
and regulations

Corporate
governance
standards

Novo Nordisk Way

Shareholders

Board of Directors

Chairmanship*

Audit
Committee

Nomination
Committee

Remuneration
Committee

Executive Management

Organisation

ASSURANCE

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)

* The Chairmanship is directly elected by the annual general meeting.

budget are approved by the Audit Com-
mittee. The Audit Committee must approve
the appointment, remuneration and dis mis -
sal of the head of the internal audit
function.

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 accordance
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.
Today, 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.

• Two executive employment contracts
entered into before 2008 allow for
severance payments of more than 24
months’ fixed base salary plus pension
contribution.

• The majority of the members of the Audit
Committee, the Nomination Committee
and the Remuneration Committee
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 indepen dence 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.

50 GOVERNANCE, LEADERSHIP AND SHARES

REMUNERATION: BOARD OF DIRECTORS
At the Annual General Meeting in March 2016 an update of the remuneration composition for the
Board of Directors for 2016/2017 was approved. The fixed base fee was left unchanged whereas
the fees for the Nomination Committee and the Remuneration Committee were aligned, the travel
allowance level and use for board members were increased and the remuneration of the Chairman
of the Board would include separate compensation for board committee work. In consequence,
the total increase in the remuneration level for 2016/2017 for the board members was an average
of approximately 31% compared to the actual total remuneration for 2015/2016.

REMUNERATION COMPOSITION
The remuneration of Novo Nordisk’s Board
of Directors comprises a fixed base fee, a
multiplier of the fixed base fee for the
Chairmanship and members of the board
committees, fees for ad hoc tasks and a
travel allowance. The fee for ad hoc tasks
depends on the nature of the task. Further
information on the remuneration of the
Board of Directors is available at
novonordisk.com/about_us.

TRAVEL AND EXPENSES
All board members are paid a fixed travel
allowance for each board meeting and per
board committee meeting: 5,000 euros per
meeting in the member’s home country
with 5 hours or more travel, 5,000 euros
per meeting outside the member’s home
country but on home country continent
and 10,000 euros per meeting in another
continent than the home country of the
member.

Expenses such as travel and accommodation
in relation to board meetings as well as those

associated with continuing education are
reimbursed and paid in addition to the travel
allowance. Novo Nordisk also pays social
security taxes imposed by foreign authorities.
Further information on travel and expenses is
available at novonordisk.com/about_us.

The company’s remuneration principles
provide guidance for the remuneration of the
Board of Directors and Executive Manage-
ment. These principles are available at
novonordisk.com/about-novo-nordisk/
corporate-governance/remuneration.html.

BOARD AND COMMITTEE FEE LEVELS 2016

BOARD

AUDIT
COMMITTEE

NOMINATION
COMMITTEE

REMUNERATION
COMMITTEE

Multiplier

DKK

Multiplier

DKK

Multiplier

DKK

Multiplier

Chair

Vice chair

Member

3.00

2.00

1.00

1,800,000

1,200,000

600,000

1.00

N/A

0.50

600,000

N/A

300,000

0.50

N/A

0.25

300,000

N/A

150,000

0.50

N/A

0.25

DKK

300,000

N/A

150,000

ACTUAL BOARD REMUNERATION 2016

DKK million

Göran Ando3 (BC, NC and RC)
Jeppe Christiansen (BV, AM and RM)
Bruno Angelici (NM)
Brian Daniels1
Sylvie Grégoire1 (AM)
Liz Hewitt (AC and NM)
Liselotte Hyveled1 (NM)
Anne Marie Kverneland
Søren Thuesen Pedersen (RM)
Stig Strøbæk (AM)
Mary Szela1 (RM)
Thomas Paul Koestler2
Eivind Kolding1, 2
Former members2

Total

2016

Fixed
base fee

Fee for
ad hoc tasks and
committee work

Travel
allowance

Total

Fixed
base fee

2015

Fee for
ad hoc tasks and
committee work

Travel
allowance

Total

1.8
1.2
0.6
0.5
0.6
0.6
0.6
0.6
0.6
0.6
0.6
0.1
0.1
–

8.5

0.5
0.4
0.2
–
0.3
0.7
0.2
–
0.1
0.3
0.2
–
–
–

2.9

0.5
0.2
0.3
0.3
0.4
0.4
0.1
0.1
0.1
0.1
0.4
0.1
–
–

3.0

2.8
1.8
1.1
0.8
1.3
1.7
0.9
0.7
0.8
1.0
1.2
0.2
0.1
–

14.44

1.7
1.2
0.6
–
0.5
0.6
0.6
0.6
0.6
0.6
0.5
0.6
0.5
0.2

8.8

–
0.3
0.1
–
0.2
0.7
0.1
–
0.1
0.3
0.2
0.1
–
0.2

2.3

0.1
–
0.1
–
0.2
0.1
–
–
–
–
0.2
0.2
–
0.2

1.1

1.8
1.5
0.8
–
0.9
1.4
0.7
0.6
0.7
0.9
0.9
0.9
0.5
0.6

12.24

BC = Board chairman, BV = Board vice chairman, AC = Audit Committee chairman, AM = Audit Committee member, NC = Nomination Committee chairman, NM = Nomination Committee member,
RC = Remuneration Committee chairman, RM = Remuneration Committee member.

1. Sylvie Grégoire, Eivind Kolding and Mary Szela were ﬁ rst elected in March 2015. Brian Daniels was ﬁ rst elected in March 2016. 2. Thomas Paul Koestler and Eivind Kolding resigned as of March 2016.
Former members includes fees to Helge Lund and Hannu Ryöppönen, who resigned as of March 2015. 3. Novo Nordisk provides secretarial assistance to the chairman in Denmark and the UK. 4. Excluding
social security taxes paid by Novo Nordisk amounting to less than DKK 1 million (less than DKK 1 million in 2015).

NOVO NORDISK ANNUAL REPORT 2016

GOVERNANCE, LEADERSHIP AND SHARES

REMUNERATION: EXECUTIVE MANAGEMENT
In 2016, the cash bonus for the chief executive officer under the short-term cash-based incentive
programme was 50% of the maximum cash bonus, while the average cash bonus for the other
members of Executive Management was 55% of their maximum cash bonus. The cash bonuses
for Executive Management have been discretionarily adjusted based on business performance in
2016. The members of Executive Management received 27% of the maximum share allocation
under the long-term share-based incentive programme. The deduction in the share allocation was
a result of the company not meeting the targets for sales performance but also reflecting that
some of the non-financial targets have not been met.

2016 PERFORMANCE

In February 2016, the Board of Directors
decided to have the same structure for the
2016 long-term share-based incentive pro -
gramme as for the 2015 programme and
established the specific targets for 2016. The
targets and structure of the programme have
not been changed since February 2016.

In 2016, Novo Nordisk marginally exceeded
the planned incentive target for economic
value creation by 1.8%, primarily due to a
favourable net impact from currencies and a
lower than planned level of average invested
capital. Sales were 1.3% below the target
level in local currencies. Some of the non-
financial targets were not met; among others
the complete response letter received for
fast-acting insulin aspart in the US, slower
progress of the early-stage research portfolio
than planned, the critical product recall of
GlucaGen® Hypokit across 31 countries and a
lower than targeted reputation amongst key
stakeholders. On this basis, 27% of the
maximum share allocation will be granted to
the participants in the long-term share-based
incentive programme. Thus, the chief
executive officer will receive shares equalling
3.2 months’ fixed base salary plus pension
contribution, while the other members of
Executive Management will receive shares
equalling 2.4 months’ fixed base salary plus
pension contribution.

In 2016, the predefined functional and
individual business targets for the short-term
cash-based incentive programme were to a
large extent achieved by each executive.
However, all executive cash bonuses have
been discretionarily adjusted by the Board of
Directors based on business performance in
2016. Consequently, the cash bonus for the
chief executive officer for 2016 was 50% of
the maximum cash bonus equalling 6 months’
fixed base salary plus pension contribution,
while the average cash bonus for the other
members of Executive Management was
55% of their maximum cash bonus equalling
4.5 months’ fixed base salary plus pension
contribution.

REMUNERATION
COMPOSITION
Novo Nordisk’s Remuneration Principles
provide the frame for the remuneration of the
Executive Management. Remuneration has

LONG-TERM INCENTIVE – PERFORMANCE 2016

Performance

Incentive
impact

Months of base
salary equivalent

CEO

EVPs

Long-term incentive target basis
(index 100)

Economic value creation1

101.8%

18%

Incentive performance based on
economic value creation

Sales adjustment2

98.7%

(13%)

Total incentive based on financial
targets

Non-financial targets achievement3

52.5%

(47.5%)

Total incentive performance

Maximum performance

Performance as percentage of maximum

Performance as percentage of target

6.0

1.1

7.1

(0.9)

6.1

(2.9)

3.2

27%

53%

4.5

0.8

5.3

(0.7)

4.6

(2.2)

2.4

27%

53%

1. ±10% incentive impact for each percentage point performance above/below 100% until max 110% and min 90%.
2. ±10% incentive impact for each percentage point performance above/below 100% until max 103% and min 97%.
3. Reduction, if performance is below 85%, is deducted from incentive performance based on financial targets.

TOTAL REMUNERATION COMPOSITION AND
PERFORMANCE OVERVIEW FOR CEO AND EVPs

 Base salary  Benefits  Bonus  Pension  LTIP performance

DKK million

100% of
maximum

59% of
maximum

100% of
maximum

64% of
maximum

2015
Maximum

2015
Actual

2016
Maximum

2016
Actual

2015
Maximum

2015
Actual

2016
Maximum

2016
Actual

Chief executive ofﬁcer

Other registered members of
Executive Management1

1. Includes executives who have been registered with the Danish Business Authority in both 2015 and 2016 full year.

CONTINUED

NOVO NORDISK ANNUAL REPORT 2016
52 GOVERNANCE, LEADERSHIP AND SHARES

been designed to align the interests of the
executives with those of the shareholders.

Based on benchmark data, the Board of
Directors decided to maintain the structure
and level of the remuneration packages for
Executive Management in 2016. Remunera-
tion packages for executives comprise a fixed
base salary, a cash-based incentive, a long-
term share-based incentive, a pension
contribution and other benefits. For exec u-
tives on international assignments, the
remuneration package is generally based on
an equalised host country net salary during
the length of the assignment and relocation
benefits including accommodation and school
arrangements. 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, busi -
ness decisions to meet the company’s
objectives. All incentives are subject to
claw-back if it is subsequently determined
that payment was based on information that
was manifestly misstated. The remuneration
principles are available at novonordisk.com/
about-novo-nordisk/corporate-governance/
remuneration.html.

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 perform-
ance. The incentive is dependent on the
achievement of predefined short-term
financial, process, people and customer
targets relating to the executive’s functional
area and linked to the company’s Balanced
Scorecard and the achievement of personal
targets relating to the individual executive.
The Chairmanship evaluates the degree of
achievement for each member of Executive
Management, based on input from the chief
executive officer.

In February 2016, the Board of Directors
determined that the 2016 maximum bonus
would be a maximum of 12 months’ fixed
base salary plus pension contribution for the
chief executive officer, a maximum of 8.5
months’ fixed base salary plus pension
contribution for executives on international
assignments and a maximum of 8 months’
fixed base salary plus pension contribution
for the remaining members of Executive
Management based in Denmark.

SHARE-BASED INCENTIVE
The long-term share-based incentive
programme is designed to promote the
collective performance of Executive
Management and align the interests of
executives and shareholders. Share-based
incentives are linked to both financial and
non-financial targets. The long-term incentive
programme is based on a calculation of
economic value creation compared with

planned 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
capital-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
payout derived from the economic value
created can thus be adjusted in a negative
or positive direction if the sales performance
is lower or higher than the target level. The
calculated economic value creation is further
adjusted if certain non-financial targets are
not met. Non-financial targets are deter-
mined on the basis of an assessment
of the objectives regarded as particularly
important for the fulfilment of the
company’s long-term performance. The
non-financial targets are linked to the
company’s Balanced Scorecard within the
categories of research and development,
reputation and patients, quality, people and
environment. 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,
execution 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 emissions
of CO2 from energy consumption for pro -
duction. Based on these principles, a pro -
portion of the calculated economic value
creation is allocated to a joint pool for the
participants, who include Executive

Management and other members of the
Senior Management Board.

If the targets for economic value creation and
sales growth are met, and at least 85%
performance is reached for non-financial
targets, the allocation to the joint pool will
correspond to 6 months’ base salary plus
pension contribution for the chief executive
officer and 4.5 months’ base salary plus
pension contribution for the other members
of Executive Management. In February 2016,
the Board of Directors determined that the
2016 maximum share allocation would be up
to 12 months’ fixed base salary plus pension
contribution for the chief executive officer
and up to 9 months’ fixed base salary plus
pension contribution for the other members
of Executive Management. Further informa-
tion on Novo Nordisk’s share-based incentives
is available at novonordisk.com/about_us.

PENSION
The pension contribution is up to 25% of the
fixed base salary including bonus.

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.
Executives may terminate their employment
by giving Novo Nordisk 6 months’ notice. In
addition to the notice period, executives are
entitled to a severance payment as described
in the overview of the executive remuneration
package components. Further information on
Novo Nordisk’s severance payments is
available at novonordisk.com/about_us.

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

Pension

Travel allowance and
other expenses

Other benefits

Severance payment

Accounts for approximately 25–50% of the total
value of the remuneration package.*

Up to 12 months‘ fixed base salary + pension
contribution per year.

25% of fixed base salary and cash-based
incentive.

( )

Executive Management receives a minor tax-
based 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
contribution. Executive Management 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’.

NOVO NORDISK ANNUAL REPORT 2016
GOVERNANCE, LEADERSHIP AND SHARES

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
Executive Management
Lars Rebien Sørensen1, 5
Lars Rebien Sørensen1, 5
Lars Fruergaard Jørgensen1
Lars Fruergaard Jørgensen1
Jesper Brandgaard
Jesper Brandgaard
Jakob Riis2
Jakob Riis2
Mads Krogsgaard Thomsen
Mads Krogsgaard Thomsen
Henrik Wulff3
Henrik Wulff3
Non-registered members of
Non-registered members of
Executive Management4
Executive Management4
Former members of
Former members of
Executive Management:
Executive Management:
Kåre Schultz5
Kåre Schultz5
Former non-registered members of
Former non-registered members of
Executive Management6
Executive Management6
Share-based incentive
Share-based incentive

Executive Management in total
Executive Management in total

Other members of the Senior
Other members of the Senior
Management Board in total6,7
Management Board in total6,7

2016
2016

Fixed
Fixed
base
base
salary8
salary8

Cash
Cash
bonus
bonus

Pension
Pension

Share-
Share-
based
based
Beneﬁ ts incentive9
Beneﬁ ts incentive9

11.9
11.9
5.5
5.5
6.1
6.1
3.6
3.6
6.2
6.2
4.9
4.9

6.2
6.2

–
–

8.3
8.3
–
–
52.78
52.78

6.0
6.0
1.8
1.8
2.0
2.0
1.8
1.8
2.0
2.0
1.7
1.7

2.8
2.8

–
–

4.1
4.1
–
–

4.5
4.5
1.8
1.8
2.0
2.0
1.4
1.4
2.0
2.0
1.6
1.6

2.9
2.9

–
–

3.4
3.4
–
–

22.2
22.2

19.6
19.6

0.3
0.3
0.3
0.3
0.3
0.3
0.2
0.2
0.3
0.3
0.3
0.3

0.4
0.4

–
–

0.4
0.4
–
–

2.5
2.5

–
–
–
–
–
–
–
–
–
–
–
–

–
–

–
–
11.4
11.4

11.4
11.4

Total
Total

22.7
22.7
9.4
9.4
10.4
10.4
7.0
7.0
10.5
10.5
8.5
8.5

12.3
12.3

–
–

16.2
16.2
11.4
11.4

108.4
108.4

2015
2015

Fixed
Fixed
base
base
salary8
salary8

Cash
Cash
bonus
bonus

Pension
Pension

Share-
Share-
based
based
Beneﬁ ts incentive9
Beneﬁ ts incentive9

10.6
10.6
5.2
5.2
6.0
6.0
5.2
5.2
6.0
6.0
3.2
3.2

10.6
10.6

2.5
2.5

–
–
–
–
49.38
49.38

10.6
10.6
3.5
3.5
4.0
4.0
2.8
2.8
4.0
4.0
2.6
2.6

9.4
9.4

1.3
1.3

–
–
–
–

5.3
5.3
2.2
2.2
2.5
2.5
2.0
2.0
2.5
2.5
1.3
1.3

4.9
4.9

1.0
1.0

–
–
–
–

38.2
38.2

21.7
21.7

0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.3
0.2
0.2

0.6
0.6

0.1
0.1

–
–
–
–

2.4
2.4

–
–
–
–
–
–
–
–
–
–
–
–

–
–

–
–
44.0
44.0

44.0
44.0

Total
Total

26.8
26.8
11.2
11.2
12.8
12.8
10.3
10.3
12.8
12.8
7.3
7.3

25.5
25.5

4.9
4.9

–
–
44.0
44.0

155.6
155.6

77.78
77.78

22.5
22.5

25.2
25.2

20.1
20.1

15.0
15.0

160.5
160.5

73.18
73.18

20.6
20.6

22.2
22.2

18.3
18.3

47.8
47.8

182.0
182.0

1. Lars Rebien Sørensen, president and chief executive ofﬁ cer, retired from Novo Nordisk at the end of 2016. He was succeeded by Lars Fruergaard Jørgensen, previously executive vice president and head
1. Lars Rebien Sørensen, president and chief executive ofﬁ cer, retired from Novo Nordisk at the end of 2016. He was succeeded by Lars Fruergaard Jørgensen, previously executive vice president and head
of Corporate Development, effective 1 January 2017. 2. Effective 1 September 2016, Jakob Riis was appointed executive vice president and head of North America Operations. In light of his new role, Jakob
of Corporate Development, effective 1 January 2017. 2. Effective 1 September 2016, Jakob Riis was appointed executive vice president and head of North America Operations. In light of his new role, Jakob
Riis is no longer registered with the Danish Business Authority as an executive in Novo Nordisk A/S. Amounts in the table for 2016 include remuneration from January to August 2016. Remuneration from
Riis is no longer registered with the Danish Business Authority as an executive in Novo Nordisk A/S. Amounts in the table for 2016 include remuneration from January to August 2016. Remuneration from
September to December 2016 is included within Non-registered members of Executive Management. 3. Effective 1 September 2016, Henrik Wulff was registered with the Danish Business Authority as an
September to December 2016 is included within Non-registered members of Executive Management. 3. Effective 1 September 2016, Henrik Wulff was registered with the Danish Business Authority as an
executive in Novo Nordisk A/S. Respective amounts in the table include remuneration for the full year. 4. Includes remuneration for Jakob Riis (September to December 2016) and Maziar Mike Doustdar.
executive in Novo Nordisk A/S. Respective amounts in the table include remuneration for the full year. 4. Includes remuneration for Jakob Riis (September to December 2016) and Maziar Mike Doustdar.
Amounts include taxes paid by Novo Nordisk due to the members’ international employment terms. In addition, Jakob Riis and Maziar Mike Doustdar received beneﬁ ts in accordance with Novo Nordisk’s
Amounts include taxes paid by Novo Nordisk due to the members’ international employment terms. In addition, Jakob Riis and Maziar Mike Doustdar received beneﬁ ts in accordance with Novo Nordisk’s
International Assignment Guidelines, such as accommodation, children’s school fees, international health insurance and other types of insurance, spouse allowance and tax-ﬁ ling support, all offered net
International Assignment Guidelines, such 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 assignees. Including tax paid by Novo Nordisk, the beneﬁ ts received in 2016 not included in the above table amount to DKK 3.3 million (DKK 1.8 million in 2015). 5. As of 31 December 2016,
of tax to the assignees. Including tax paid by Novo Nordisk, the beneﬁ ts received in 2016 not included in the above table amount to DKK 3.3 million (DKK 1.8 million in 2015). 5. As of 31 December 2016,
President and CEO Lars Rebien Sørensen retired from Novo Nordisk. The remuneration of Lars Rebien Sørensen for 2016 is included in the table above, whereas the severance payment of DKK 65.7 million,
President and CEO Lars Rebien Sørensen retired from Novo Nordisk. The remuneration of Lars Rebien Sørensen for 2016 is included in the table above, whereas the severance payment of DKK 65.7 million,
including participation in the share-based incentive programme for 2017, is not included. The remuneration of Kåre Schultz up to April 2015 is included in the table above, whereas the severance payment
including participation in the share-based incentive programme for 2017, is not included. The remuneration of Kåre Schultz up to April 2015 is included in the table above, whereas the severance payment
of DKK 72.7 million, including participation in the share-based incentive programme for 2015 and part of 2016, is not included. 6. Effective 1 September 2016, Jerzy Gruhn and Jesper Høiland stepped
of DKK 72.7 million, including participation in the share-based incentive programme for 2015 and part of 2016, is not included. 6. Effective 1 September 2016, Jerzy Gruhn and Jesper Høiland stepped
down from the Executive Management of Novo Nordisk A/S. Respective amounts in the table include remuneration for January to August 2016. Remuneration for September to December 2016 is included
down from the Executive Management of Novo Nordisk A/S. Respective amounts in the table include remuneration for January to August 2016. Remuneration for September to December 2016 is included
as part of Other members of the Senior Management Board. In addition, Jerzy Gruhn and Jesper Høiland received beneﬁ ts in accordance with Novo Nordisk’s International Assignment Guidelines, such
as part of Other members of the Senior Management Board. In addition, Jerzy Gruhn and Jesper Høiland received beneﬁ ts in accordance with Novo Nordisk’s International Assignment Guidelines, such
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 assignees. Including tax paid by
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 assignees. Including tax paid by
Novo Nordisk, the beneﬁ ts received in 2016 not included in the above table amount to DKK 4.3 million (DKK 3.6 million in 2015). 7. The total remuneration for 2016 includes remuneration of 33 Senior
Novo Nordisk, the beneﬁ ts received in 2016 not included in the above table amount to DKK 4.3 million (DKK 3.6 million in 2015). 7. The total remuneration for 2016 includes remuneration of 33 Senior
Vice Presidents (34 in 2015), four of whom have retired or left the company (three in 2015). The 2016 remuneration for the retired Senior Vice Presidents is included in the table above, whereas severance
Vice Presidents (34 in 2015), four of whom have retired or left the company (three in 2015). The 2016 remuneration for the retired Senior Vice Presidents is included in the table above, whereas severance
payments of DKK 69.0 million (DKK 25.8 million in 2015) are not included. 8. Excluding social security taxes paid amounting to DKK 1.9 million (DKK 1.3 million in 2015) for Executive Management and
payments of DKK 69.0 million (DKK 25.8 million in 2015) are not included. 8. Excluding social security taxes paid amounting to DKK 1.9 million (DKK 1.3 million in 2015) for Executive Management and
DKK 2.2 million (DKK 1.4 million in 2015) for other members of the Senior Management Board. 9. The joint pool of shares is locked up for three years before it is transferred to the participants employed at
DKK 2.2 million (DKK 1.4 million in 2015) for other members of the Senior Management Board. 9. 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 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
the end of the three-year period. The value is the cash amount of the share bonus granted in the year using the grant-date market value of Novo Nordisk B shares. During the lock-up period, the joint pool
may 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
may 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 establishment of the pool.
time of establishment of the pool.

MANAGEMENT’S LONG-TERM INCENTIVE PROGRAMME
MANAGEMENT’S LONG-TERM INCENTIVE PROGRAMME
The shares allocated to the joint pool for 2013 (254,513 shares) were released to the individual participants subsequent to approval
The shares allocated to the joint pool for 2013 (254,513 shares) were released to the individual participants subsequent to approval
of the Annual Report 2016 by the Board of Directors and the announcement of the full-year ﬁ nancial result for 2016 on 2 February
of the Annual Report 2016 by the Board of Directors and the announcement of the full-year ﬁ nancial result for 2016 on 2 February
2017. Based on the share price at the end of 2016, the value of the released shares is as follows:
2017. Based on the share price at the end of 2016, the value of the released shares is as follows:

Value as of 31 December 2016 of shares released on 2 February 2017
Value as of 31 December 2016 of shares released on 2 February 2017

Executive Management
Executive Management
Lars Rebien Sørensen
Lars Rebien Sørensen
Lars Fruergaard Jørgensen
Lars Fruergaard Jørgensen
Jesper Brandgaard
Jesper Brandgaard
Mads Krogsgaard Thomsen
Mads Krogsgaard Thomsen
Henrik Wulff
Henrik Wulff
Non-registered members of Executive Management3
Non-registered members of Executive Management3
Executive Management in total2
Executive Management in total2
Other members of the Senior Management Board in total2
Other members of the Senior Management Board in total2

Number
Number
of shares
of shares

Market value1
Market value1
(DKK million)
(DKK million)

25,578
25,578
10,637
10,637
14,392
14,392
14,392
14,392
5,708
5,708
10,637
10,637

81,344
81,344

86,009
86,009

6.5
6.5
2.7
2.7
3.7
3.7
3.7
3.7
1.4
1.4
2.7
2.7

20.7
20.7

21.9
21.9

1. The market value of the shares released in 2017 is based on the Novo Nordisk B share price of DKK 254.70 at the end of 2016. 2. In addition, 87,160 shares (market value: DKK 22.2 million) were
1. The market value of the shares released in 2017 is based on the Novo Nordisk B share price of DKK 254.70 at the end of 2016. 2. In addition, 87,160 shares (market value: DKK 22.2 million) were
released to retired Executive Management and Senior Management Board members. 3. Not registered with the Danish Business Authority as members of the Executive Management of Novo Nordisk A/S.
released to retired Executive Management and Senior Management Board members. 3. Not registered with the Danish Business Authority as members of the Executive Management of Novo Nordisk A/S.
In addition, 1,785 shares were released to a non-registered member of Executive Management who was not included in the joint pool for 2013 for the Senior Management Board.
In addition, 1,785 shares were released to a non-registered member of Executive Management who was not included in the joint pool for 2013 for the Senior Management Board.

Lars Rebien Sørensen serves as a board member of Carlsberg A/S, from which he received remuneration of DKK 1,050,000 in 2016 (DKK 838,306 as of March 2015); and as a board member of Thermo
Lars Rebien Sørensen serves as a board member of Carlsberg A/S, from which he received remuneration of DKK 1,050,000 in 2016 (DKK 838,306 as of March 2015); and as a board member of Thermo
Fisher Scientiﬁ c Inc, from which he received remuneration of USD 67,376 in 2016 (USD 223,865 in 2015). Jesper Brandgaard serves as chairman of the Board of Directors of SimCorp A/S, from which he
Fisher Scientiﬁ c Inc, from which he received remuneration of USD 67,376 in 2016 (USD 223,865 in 2015). Jesper Brandgaard serves as chairman of the Board of Directors of SimCorp A/S, from which he
received remuneration of DKK 1,035,257 in 2016 (DKK 730,488 in 2015); and as chairman of the board of NNIT A/S, from which he received remuneration of DKK 750,000 in 2016 (DKK 562,500 in 2015).
received remuneration of DKK 1,035,257 in 2016 (DKK 730,488 in 2015); and as chairman of the board of NNIT A/S, from which he received remuneration of DKK 750,000 in 2016 (DKK 562,500 in 2015).
The NNIT remuneration is included in the remuneration of Executive Management presented above. Mads Krogsgaard Thomsen serves as a board member of the University of Copenhagen, from which he
The NNIT remuneration is included in the remuneration of Executive Management presented above. Mads Krogsgaard Thomsen serves as a board member of the University of Copenhagen, from which he
received remuneration of DKK 82,215 in 2016 (DKK 81,606 in 2015). Jakob Riis serves as a board member of ALK-Abelló A/S, from which he received remuneration of DKK 415,000 in 2016 (DKK 415,000
received remuneration of DKK 82,215 in 2016 (DKK 81,606 in 2015). Jakob Riis serves as a board member of ALK-Abelló A/S, from which he received remuneration of DKK 415,000 in 2016 (DKK 415,000
in 2015). Henrik Wulff serves as a board member of AMBU A/S, from which he received remuneration of DKK 300,000 in 2016 (DKK 0 in 2015).
in 2015). Henrik Wulff serves as a board member of AMBU A/S, from which he received remuneration of DKK 300,000 in 2016 (DKK 0 in 2015).

NOVO NORDISK ANNUAL REPORT 2016

54 GOVERNANCE, LEADERSHIP AND SHARES

BOARD OF DIRECTORS

GÖRAN
ANDO

Chairman

JEPPE
CHRISTIANSEN

Vice chairman

BRUNO
ANGELICI

Formerly chief executive officer 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.

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
Linköping Medical University, Sweden.

Chief executive officer of Fondsmæglerselskabet
Maj Invest A/S, Maj Invest Holding A/S and Emlika
ApS, all in Denmark. Member of the executive
management of Maj Invest Equity A/S, Denmark.
Member and vice chair of the Board of Novo
Nordisk A/S since 2013. Member of the Remu-
neration Committee and Audit Committee since
2015.

Management duties: Haldor Topsøe A/S (chair),
Maj Bank A/S (vice chair), and member of the
boards of Novo A/S, KIRKBI A/S and Symphogen
A/S and member of the board of governors of Det
Kgl. Vajsenhus, all in Denmark.

Special competences: Executive background and
extensive 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,
UK (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, UK
(chair), member of the board of Smiths Group plc,
UK, member of the Supervisory Board of Wolters
Kluwer, Netherlands, and member of the Global
Advisory Board of Takeda Pharmaceutical
Company Limited, Japan.

Special competences: Extensive global expe -
rience with two companies in the fields of pharma -
ceuticals 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.

BRIAN
DANIELS

SYLVIE
GRÉGOIRE

LIZ
HEWITT

Senior advisor with the Boston Consulting Group
and venture partner with 5AM Venture Manage -
ment, LLC, both in the US. Member of the Board
of Novo Nordisk A/S since 2016.

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.

Special competences: Extensive experience in
clinical development, medical affairs and
corporate strategy across a broad range of
therapeutics areas within the pharmaceutical
industry, especially in the US.

Education: MD (1987) from Washington
University, St. Louis, US, BSc in Life Sciences
(1981) and MA in Metabolism and Nutritional
Biochemistry (1981), both from Massachusetts
Institute of Technology, Cambridge, US.

Management duties: Corvidia Therapeutics Inc.,
US (chair), Metriopharm, Switzerland (executive
chair) and member of the boards of Galenica AG,
Switzerland, and Perkin Elmer Inc., US.

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
into 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. External member of and chair of
the audit committee of the House of Lords
Commission, 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).

Name (male/female)

First elected

Göran Ando (m)
Jeppe Christiansen (m)
Bruno Angelici (m)
Brian Daniels (m)
Sylvie Grégoire (f)
Liz Hewitt (f)

2005
2013
2011
2016
2015
2012

Term

2017
2017
2017
2017
2017
2017

Nationality

Born

Swedish
Danish
French
American
Canadian/American
British

March 1949
November 1959
April 1947
February 1959
November 1961
November 1956

Independence1

Not independent2
Not independent2,4
Independent
Independent
Independent4,5
Independent4,5

1. As designated by Nasdaq Copenhagen in accordance with section 3.2.1 of Recommendations on Corporate Governance (updated 2014). 2. Member of the Board of Novo A/S.
3. Elected by employees of Novo Nordisk.

NOVO NORDISK ANNUAL REPORT 2016

GOVERNANCE, LEADERSHIP AND SHARES

LISELOTTE
HYVELED

ANNE MARIE
KVERNELAND

SØREN
THUESEN
PEDERSEN

Project vice president of Novo Nordisk’s
mealtime insulin projects fast-acting insulin
aspart and liver-preferential mealtime insulin in
Global Development. Member of the Board of
Novo Nordisk A/S since 2014 and member of the
Nomination Committee since 2015.

Education: MSc in pharmaceutical science
(1992) from Copenhagen University and Master
of Medical Business Strategies (2011) from
Copenhagen Business School, both in
Denmark.

Laboratory technician and full-time union
representative. Member of the Board of Novo
Nordisk A/S since 2000.

Management duties: Member of the board of
the Novo Nordisk Foundation since 2014.

Education: Degree in Medical Laboratory
Technology (1980) from Copenhagen University
Hospital, Denmark.

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.

STIG
STRØBÆK

MARY
SZELA

Electrician and full-time union representative.
Member of the Board of Novo Nordisk A/S since
1998 and member of the Audit Committee since
2013.

Chief executive officer of Novelion Therapeutics
Inc., US. Member of the Board of Novo Nordisk
A/S and the Remuneration Committee since
2015.

Education: Qualified electrician. Diploma in
further training for board members (2003) from
the Danish Employees’ Capital Pension Fund (LD).

Management duties: Member of the boards of
Coherus Biosciences, Inc., Novelion Therapeutics
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 expe-
rience.

Education: MBA (1991) from the University of
Illinois at Chicago, US, and BSc nursing degree
(1985) from the University of Illinois at Chicago,
US.

Name (male/female)

First elected

Liselotte Hyveled (f)
Anne Marie Kverneland (f)
Søren Thuesen Pedersen (m)
Stig Strøbæk (m)
Mary Szela (f)

2014
2000
2006
1998
2015

Term

2018
2018
2018
2018
2017

Nationality

Born

Danish
Danish
Danish
Danish
American

January 1966
July 1956
December 1964
January 1964
May 1963

Independence1

Not independent3
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 from 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 2016

56 GOVERNANCE, LEADERSHIP AND SHARES

EXECUTIVE MANAGEMENT

LARS
REBIEN
SØRENSEN

President and chief
executive officer
(CEO) until 31
December 2016

LARS
FRUERGAARD
JØRGENSEN

President and chief
executive officer (CEO)
from 1 January 2017

JESPER
BRANDGAARD

Executive vice president
and chief financial
officer (CFO)

Lars Rebien Sørensen joined Novo Nordisk’s
Enzymes Marketing in 1982. He was appointed
president and chief executive officer in
November 2000.

Other management duties: Vice chair of the
board of Carlsberg A/S, Denmark, and member
of the board of Thermo Fisher Scientific Inc., US.

Born: October 1954.

Lars Fruergaard Jørgensen joined Novo Nordisk in
1991 as an economist. He was appointed executive
vice president of IT, Quality & Corporate Develop-
ment in January 2013, and in November 2014 he
took over responsibility for Corporate People &
Organisation and Business Assurance and became
chief of staff. In January 2017, he was appointed
president and chief executive officer (CEO).

Other management duties: Chair of the board of
NNE A/S, Denmark.

Born: November 1966.

Jesper Brandgaard joined Novo Nordisk in 1999
as senior vice president of Corporate Finance. He
was appointed executive vice president and chief
financial officer in November 2000.

Other management duties: Chair of the
boards of SimCorp A/S and NNIT A/S, both in
Denmark.

Born: October 1963.

MAZIAR
MIKE
DOUSTDAR*

Executive vice
president, International
Operations

JAKOB RIIS*

Executive vice president,
North America
Operations

MADS
KROGSGAARD
THOMSEN

Executive vice president,
chief science officer
(CSO)

Maziar Mike Doustdar joined Novo Nordisk in
1992 as an office clerk in Vienna, Austria. He was
appointed senior vice president of Novo Nordisk’s
International Operations in 2013 and executive
vice president with responsibility for International
Operations in April 2015. In September 2016, he
assumed additional geographical responsibility
and was promoted to executive vice president of
an expanded International Operations.

Born: August 1970.

Jakob Riis joined Novo Nordisk in 1996 as a health
economist. He was appointed senior vice president
of International 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. In September 2016,
he was appointed executive vice president of North
America Operations.

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.

Other management duties: Vice chair of the
board of the University of Copenhagen, Denmark,
and member of the editorial boards of inter-
national, peer-reviewed journals.

Born: December 1960.

HENRIK
WULFF

Executive vice
president, Product
Supply

Henrik Wulff joined Novo Nordisk in 1998 in the
logistic and planning function. He was appointed
senior vice president of Product Supply in 2013
and executive vice president of Product Supply in
April 2015.

Other management duties: Chair of the board
of Novo Nordisk Pharmatech A/S, and member
of the boards of NNE A/S and Ambu A/S, all in
Denmark.

Born: November 1970.

* Not registered with the Danish Business Authority as a member of Executive Management of Novo Nordisk A/S.

NOVO NORDISK ANNUAL REPORT 2016CONSOLIDATED
FINANCIAL, SOCIAL
AND ENVIRONMENTAL
STATEMENTS

2016

CONSOLIDATED
FINANCIAL
STATEMENTS

CONSOLIDATED
SOCIAL STATEMENT
(SUPPLEMENTARY INFORMATION)

CONSOLIDATED
ENVIRONMENTAL
STATEMENT
(SUPPLEMENTARY INFORMATION)

98 Statement of social
performance

99 Notes to the Consolidated

social statement

104 Statement of environmental

performance

104 Notes to the Consolidated

environmental statement

58 Income statement
and Statement of
comprehensive income

59 Balance sheet

60 Statement of cash flows

61 Statement of changes in

equity

62 Notes to the Consolidated
financial statements

Novo Nordisk remains committed to reporting its performance through
its integrated reporting. In line with the Novo Nordisk Triple Bottom Line
principle, the Consolidated financial, social and environmental statements
are presented 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 2016

58 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

2016

2015

2014

2.1, 2.2
2.2

111,780
17,183

107,927
16,188

2.2
2.2, 2.3
2.2
2.2, 2.5
2.5

94,597

91,739

28,377
14,563
3,962
737
–

28,312
13,608
3,857
3,482
2,376

88,806
14,562

74,244

23,223
13,762
3,537
770
–

48,432

49,444

34,492

4.8
4.8

92
726

85
6,046

167
563

47,798

43,483

34,096

2.6

9,873

8,623

7,615

37,925

34,860

26,481

4.1
4.1

14.99
14.96

13.56
13.52

10.10
10.07

DKK million

Note

2016

2015

2014

STATEMENT OF COMPREHENSIVE INCOME

Net proﬁ t for the year

37,925

34,860

26,481

Other comprehensive income:
Items that will not be reclassiﬁ ed subsequently to the Income statement:
Remeasurements of deﬁ ned beneﬁ t plans

Items that will be reclassiﬁ ed subsequently to the Income statement:
Exchange rate adjustments of investments in subsidiaries
Cash ﬂ ow hedges, realisation of previously deferred (gains)/losses
Cash ﬂ ow hedges, deferred gains/(losses) incurred during the period
Other items
Tax on other comprehensive income, income/(expense)

3.5

(205)

(37)

(247)

4.3
4.3

2.6

(7)
682
(1,911)
(74)
324

(669)
2,216
(681)
366
(87)

(39)
(1,229)
(2,225)
111
977

(2,652)

Other comprehensive income for the year, net of tax

(1,191)

1,108

Total comprehensive income for the year

36,734

35,968

23,829

NOVO NORDISK ANNUAL REPORT 2016

INCOME STATEMENT

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

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

Note

2016

2015

3.1
3.2
5.7
2.6
4.7

3.3
3.4, 4.7

4.7
4.2, 4.4, 4.7
4.2, 4.3, 4.7
4.2, 4.4, 4.7

4.1
4.1

2.6
3.5
3.6

4.4, 4.7
4.7

3.7, 4.7
4.3, 4.7
3.6

2,714
30,179
809
2,683
1,388

2,158
25,545
811
6,806
1,339

37,773

36,659

14,341
20,234
1,552
2,411
2,009
529
18,690

12,758
15,485
3,871
2,257
3,542
304
16,923

59,766

55,140

97,539

91,799

510
(9)
46,111
(1,343)

520
(10)
46,816
(357)

45,269

46,969

13
1,451
3,370

4,834

229
6,011
3,976
14,181
2,578
20,461

47,436

52,270

6
1,186
2,765

3,957

1,073
4,927
3,777
12,655
1,382
17,059

40,873

44,830

97,539

91,799

BALANCE SHEET

NOVO NORDISK ANNUAL REPORT 2016

60 CONSOLIDATED FINANCIAL STATEMENTS

STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER

DKK million

Net proﬁ t for the year

Note

2016

2015

2014

37,925

34,860

26,481

Reversal of 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
Dividend received from associated company

Net cash used in investing activities

Purchase of treasury shares, net
Dividends paid

Net cash used in ﬁ nancing activities

2.6
3.1, 3.2

2.5
4.6
4.5

2.6

2.5
3.1

3.2

5.4

4.1
4.1

9,873
3,193

–
3,882
(3,708)
114
(66)
(2,899)

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)

48,314

38,287

31,692

–
(1,199)
7
(7,068)
23
(112)
2,064
(531)
26

2,303
(1,182)
15
(5,224)
32
(9)
1,500
(3,533)
–

(6,790)

(6,098)

–
(321)
4
(3,990)
35
(24)
2,232
–
–

(2,064)

(15,057)
(23,830)

(17,196)
(12,905)

(14,667)
(11,866)

(38,887)

(30,101)

(26,533)

Net cash generated from activities

2,637

2,088

3,095

Cash and cash equivalents at the beginning of the year
Exchange gains/(losses) on cash and cash equivalents

4.4

15,850
(26)

13,676
86

Cash and cash equivalents at the end of the year

4.4

18,461

15,850

10,513
68

13,676

NOVO NORDISK ANNUAL REPORT 2016

STATEMENT OF CASH FLOWS

STATEMENT OF CHANGES IN EQUITY
AT 31 DECEMBER

CONSOLIDATED FINANCIAL STATEMENTS

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

2014
Balance at the beginning of the year

550

(21)

41,137

(209)

1,233

(121)

903

42,569

Net proﬁ t for the year
Other comprehensive income for the year

26,481
(247)

(39)

(3,454)

1,088

(2,405)

26,481
(2,652)

Total comprehensive income for the year

26,234

(39)

(3,454)

1,088

(2,405)

23,829

Transactions with owners:
Dividends (note 4.1)
Share-based payments (note 5.1)
Tax 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

(20)

530

(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

2015
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

1,145

34,860
1,108

1,145

35,968

Balance at the end of the year

(10)

520

2016
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 related to restricted stock units (note 2.6)
Purchase of treasury shares (note 4.1)
Reduction of the B share capital (note 4.1)

Balance at the end of the year

(10)

510

(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

37,925
(205)

37,720

(23,830)
368
85
(15,048)

(9)
10

(7)

(1,229)

250

(986)

37,925
(1,191)

(986)

36,734

(23,830)
368
85
(15,057)
–

(9)

46,111

(924)

(1,915)

1,496

(1,343)

45,269

STATEMENT OF CHANGES IN EQUITY

NOVO NORDISK ANNUAL REPORT 2016

62 CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Basis of preparation

Results for the year

Operating assets
and liabilities

Capital structure and
ﬁ nancing items

Other disclosures

SECTION 1 BASIS OF PREPARATION
1.1 Principal accounting policies and key accounting estimates, p 63
1.2 Changes in accounting policies and disclosures, p 64
1.3 General accounting policies, p 64

SECTION 2 RESULTS FOR THE YEAR
2.1 Net sales and rebates, p 65
2.2 Segment information, p 67
2.3 Research and development costs, p 70
2.4 Employee costs, p 71
2.5 Other operating income, net, p 71
2.6 Income taxes and deferred income taxes, p 72

SECTION 3 OPERATING ASSETS AND
LIABILITIES
3.1 Intangible assets, p 74
3.2 Property, plant and equipment, p 75
3.3 Inventories, p 77
3.4 Trade receivables, p 77
3.5 Retirement beneﬁ t obligations, p 78
3.6 Provisions and contingent liabilities, p 79
3.7 Other liabilities, p 80

SECTION 4 CAPITAL STRUCTURE AND
FINANCING ITEMS
4.1 Share capital, distribution to shareholders and earnings per share, p 81
4.2 Financial risks, p 83
4.3 Derivative ﬁ nancial instruments, p 85
4.4 Cash and cash equivalents, ﬁ nancial resources and free cash ﬂ ow, p 86
4.5 Change in working capital, p 86
4.6 Other non-cash items, p 87
4.7 Financial assets and liabilities, p 87
4.8 Financial income and expenses, p 89

SECTION 5 OTHER DISCLOSURES
5.1 Share-based payment schemes, p 90
5.2 Management’s holdings of Novo Nordisk shares, p 92
5.3 Commitments, p 93
5.4 Related party transactions, p 94
5.5 Fee to statutory auditors, p 94
5.6 Subsequent events, p 94
5.7 Companies in the Novo Nordisk Group, p 95
5.8 Financial deﬁ nitions, p 96

NOVO NORDISK ANNUAL REPORT 2016

SECTIONS IN THE CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

SECTION 1 BASIS OF PREPARATION

Basis of preparation

Results for the year

Operating assets
and liabilities

Capital structure and
ﬁ nancing items

Other disclosures

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 International
Financial Reporting Standards (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 as endorsed by the EU and further Danish disclosure
requirements for annual reports of listed companies.

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 regarding valuation 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 Con solidated ﬁ nancial statements.

Measurement basis

The Consolidated ﬁ nancial statements have been prepared on the historical
cost basis except for derivative ﬁ nancial instruments, equity investments
and marketable securities which are 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.

The key accounting 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.

In addition, Management makes judgements in the process of applying the
entity’s accounting policies, for example regarding recognition of deferred
income tax assets or the classiﬁ cation of transactions.

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 rebates
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

Estimate of sales deductions and provisions for sales rebates
–
–
Judgement regarding deferred income tax assets and provision for
uncertain tax positions
–
Estimate of indirect production costs capitalised
Estimate of allowance for doubtful trade receivables
Estimate of ongoing legal disputes, litigations and investigations

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.

BASIS OF PREPARATION

NOVO NORDISK ANNUAL REPORT 2016

64 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 the International
Accounting Standards Board (IASB), and IFRSs endorsed by the European
Union effective on or after 1 January 2016, it has been assessed that the
application of these new IFRSs has not had a material impact on the
Consolidated ﬁ nancial statements in 2016, 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. In general, the following standards are expected to have
the most signiﬁ cant impact on current accounting regulation:

• IASB has issued IFRS 9 ‘Financial Instruments’, with effective date

1 January 2018. This was endorsed by the EU in 2016, and Novo Nordisk
plans to adopt it on the effective date. IFRS 9 is part of 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. The standard was endorsed by the EU in
2016, and Novo Nordisk plans to adopt it on the effective date. IFRS 15
is part of the convergence project with FASB to replace IAS 18 and other
standards, and the new standard will establish a single, comprehensive
framework for revenue recognition. Novo Nordisk has performed an
analysis of the impact, including areas such as variable considerations,
right of return, licences and agent relationships. Based on the analysis,
it is assessed that the standard will not have any signiﬁ cant impact on
the revenue recognition or measurement. However, implementation is
expected to result in extended disclosures regarding types of revenue and
related risks.

• IASB has issued IFRS 16 ‘Leases’ with effective date 1 January 2019. It

currently awaits EU endorsement. Novo Nordisk plans to adopt it on the
effective date. The changes in lease accounting requires capitalisation
of the majority of the Group’s operating lease contracts representing
approximately 4–6% of the total assets. This will have an impact on the
Group’s assets and an equivalent impact on liabilities. Hence, it will affect
the ﬁ nancial ratios related to the balance sheet. 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.
However, the impact on net proﬁ t will be immaterial.

1.3 GENERAL ACCOUNTING POLICIES

Principles of consolidation

The Consolidated ﬁ nancial statements incorporate the ﬁ nancial statements
of the parent company 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
transactions 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.

These speciﬁ c exchange rate adjustments are recognised in Other
com prehensive income.

NOVO NORDISK ANNUAL REPORT 2016

BASIS OF PREPARATION

SECTION 2 RESULTS FOR THE YEAR

Basis of preparation

Results for the year

Operating assets
and liabilities

Capital structure and
ﬁ nancing items

Other disclosures

CONSOLIDATED FINANCIAL STATEMENTS

This section comprises notes related to the results for the year and
hence provides information related to Novo Nordisk’s long-term ﬁ nancial
target for growth in operating proﬁ t. Operating proﬁ t decreased by 2% in
2016 (increase of 43% in 2015).

Sales increased by 4% driven by market share gain in selected markets,
underlying market volume growth and changes in product mix, for example
upgrade to next-generation products such as new-generation insulin and
GLP-1. The global net impact of pricing has been moderately negative
across the portfolio in 2016. Hence, the overall growth in local currency net
sales is related to volume growth and changes in product mix rather than
changes in price.

Pricing mechanisms in the US market

In the USA, signiﬁ cant sales rebates are paid in connection with public
healthcare insurance programmes, namely Medicare and Medicaid, as well
as rebates to pharmacy beneﬁ ts managers (PBMs) and managed healthcare
plans.

Key customers in the USA include private payers, PBMs and government
payers. Increasingly, PBMs and managed healthcare plans 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 by the health plans’ formularies. 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 payers has led to increasing pricing

pressure for pharmaceutical companies.

In 2016, payers have continued to leverage their size and inﬂ uence to
demand higher rebates. Moreover, actions by companies in the diabetes
care market to increase list prices have been limited, and the introduction of
new products by competitors has further increased the downward pressure
on prices.

2.1 NET SALES AND REBATES

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
receivable. 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.

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.

Operating proﬁ t in 2015 was positively affected by the divestment of
NNIT A/S, explaining the decrease from 2015 to 2016. Further, the
development reﬂ ects a modest increase in sales countered by a negative
currency impact and increased research and development costs related to
pipeline activities and build-up of research sites in the USA.

The article ‘2016 performance and 2017 outlook’ on p 6 includes
Management’s review of the results for the year, which is not part of the
audited ﬁ nancial statements.

US HEALTH INSURANCE 2016

(cid:81)(cid:3)Express Scripts (cid:81)(cid:3)CVS Health (cid:81)(cid:3)OptumRx
(cid:81)(cid:3)Prime (cid:81)(cid:3)All other PBMs

10%

32%

24%

26%

Chart represents percentage of insured lives
PBM: Pharmacy Beneﬁt Manager
Source: Health Strategies Group (www.healthstrategies.com)

Key accounting estimate of sales deductions and

provisions for sales rebates
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 not all conditions are known at the time of sale, for example
total sales volume to a given customer.

The 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.

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.

RESULTS FOR THE YEAR

NOVO NORDISK ANNUAL REPORT 2016

(4,845)

(5,064)

(4,105)

DKK million

66 CONSOLIDATED FINANCIAL STATEMENTS

2.1 NET SALES AND REBATES (CONTINUED)

GROSS-TO-NET SALES RECONCILIATION

DKK million

Gross sales

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

2016

2015

2014

198,924

182,779

131,841

(40,874)
(25,416)
(10,862)
(5,147)

(33,235)
(22,030)
(9,838)
(4,685)

(17,522)
(12,858)
(5,578)
(2,972)

Total gross-to-net sales adjustments

(87,144)

(74,852)

(43,035)

Net sales

111,780

107,927

88,806

Sales discounts and sales rebates are predominantly issued in Region USA.
As such, rebates amount to 59% of gross sales in Region USA (56% in
2015 and 48% in 2014).

In addition, political pressure to contain healthcare costs has led several
other countries to impose signiﬁ cant price reductions on pharmaceutical
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, Paciﬁ c and major
countries in Region International Operations.

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.

Other US discounts and sales returns
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.

PROVISIONS FOR SALES REBATES

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

2016

2015

2014

16,508

11,002

7,950

56,954
(53,217)

45,190
(40,958)

26,107
(23,876)

(822)
548

–
1,274

(220)
1,041

At the end of the year

19,971

16,508

11,002

Unsettled rebates are recognised as Provisions when the timing or amount
is uncertain. Where absolute amounts are known, the rebates are
recognised as Other liabilities. Wholesaler charge-backs are netted against
trade receivable balances. Hence, provisions for sales rebates include US
Managed Care, Medicare, Medicaid and other minor rebate types, as well
as rebates in Canada.

In 2016 the Centers for Medicare & Medicaid Services (CMS) in the USA
published its ﬁ nal rule implementing Affordable Care Act including
changes to reimbursement under the Medicaid programme impacting the
adjustment for prior years provision.

PROVISIONS FOR SALES REBATES

(cid:81) US Managed Care (cid:81) US Medicare (cid:81) US Medicaid
(cid:81) Other sales rebates

DKK million

10,000

8,000

6,000

4,000

2,000

2014

2015

2016

NOVO NORDISK ANNUAL REPORT 2016

RESULTS FOR THE YEAR

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,
development, manufacturing and marketing of products within the areas of
insulin, GLP-1 and related delivery systems, oral antidiabetic products (OAD)
and obesity.

The Biopharmaceuticals business segment includes research, development,
manufacturing and marketing of products within the areas of haemophilia,
growth hormone therapy and hormone replacement therapy.

CONSOLIDATED FINANCIAL STATEMENTS

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 in 2015 was not 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
– of which Saxenda®

2016

2015

2014

2016

2015

2014

2016

2015

2014

Diabetes and obesity care

Biopharmaceuticals

Total

4,459
19,945
10,482
17,083
47,510
11,090
20,046
5,844
1,577

1,438
20,720
11,144
18,300
50,164
11,231
18,027
4,730
460

658
17,449
9,871
14,217
41,537
10,298
13,426
4,061
–

Diabetes and obesity care total sales

88,949

85,590

69,980

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

10,472
8,770
3,589

10,647
7,820
3,870

9,304
6,506
3,016

22,831

22,337

18,826

88,949
3.9%
6.0%

14,337
24,387
11,481
3,128
486

–
36,102
40.6%

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%

22,831
2.2%
3.6%

22,337
18.6%
6.3%

18,826
3.9%
6.2%

111,780
3.6%
5.5%

107,927
21.5%
8.4%

2,846
3,990
3,082
834
251

2,463
3,386
3,133
806
618

–
12,330
54.0%

–
13,167
58.9%

2,080
2,850
4,444
747
254

–
8,959
47.6%

17,183
28,377
14,563
3,962
737

–
48,432
43.3%

16,188
28,312
13,608
3,857
1,106

2,376
49,444
45.8%

88,806
6.3%
8.3%

14,562
23,223
13,762
3,537
770

–
34,492
38.8%

2,674

2,514

2,438

519

445

997

3,193

2,959

3,435

6,144

4,991

3,245

2,123

1,415

1,066

8,267

6,406

4,311

55,081

46,444

40,748

14,798

11,759

10,914

69,879
27,660
97,539

58,203
33,596
91,799

51,662
25,400
77,062

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.

RESULTS FOR THE YEAR

NOVO NORDISK ANNUAL REPORT 2016

68 CONSOLIDATED FINANCIAL STATEMENTS

2.2 SEGMENT INFORMATION (CONTINUED)

Geographical areas

In 2016, Novo Nordisk operated in ﬁ ve geographical regions:

with Australia and New Zealand (previously included in International
Operations). Comparative ﬁ gures have been updated to reﬂ ect the new
regional structure.

• USA
• Europe: the EU, EFTA, Albania, Bosnia-Hercegovina, Macedonia, Serbia,

Montenegro and Kosovo

• Region China: China, Hong Kong and Taiwan
• Paciﬁ c: Japan, South Korea, Canada, Australia and New Zealand
• International Operations: all other countries.

As of 1 January 2016, the geographical regions were changed to align with
management structure. As such, the USA became a separate region, and
Canada joined Japan and South Korea to form Region Paciﬁ c, together

As of 1 January 2017, International Operations has been expanded to cover
all territories except for the USA and Canada. It is organised in the
following ﬁ ve regions: Europe; Latin America; Africa, Asia, Middle East &
Oceania; Japan & Korea; and Region China.

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.

GEOGRAPHICAL AREAS

DKK million

Sales by business segment:
New-generation insulin
NovoRapid® / NovoLog®
NovoMix® / NovoLog® Mix
Levemir®
Total modern insulin
Human insulin
Victoza®
Other diabetes and obesity care
– of which Saxenda®

Diabetes and obesity care total

Haemophilia
Norditropin® (human growth hormone)
Other biopharmaceuticals

2016

2015

2014

2016

2015

2014

(cid:74) USA

(cid:74) Europe

2,246
11,058
2,032
12,247
25,337
1,827
14,146
2,142
1,366

33
12,184
2,779
12,982
27,945
1,884
12,570
1,237
452

–
9,822
2,421
9,088
21,331
1,772
8,674
680
–

886
4,200
2,025
2,503
8,728
2,103
3,391
677
28

545
4,239
2,181
2,929
9,349
2,014
3,394
680
1

223
3,999
2,317
2,939
9,255
2,222
3,130
786
–

45,698

43,669

32,457

15,785

15,982

15,616

4,710
4,495
2,291

5,086
3,625
2,559

4,348
2,750
1,794

2,520
1,661
716

2,405
1,675
736

2,189
1,654
691

Biopharmaceuticals total

11,496

11,270

8,892

4,897

4,816

4,534

Total sales by business and geographical segment

57,194

54,939

41,349

20,682

20,798

20,150

Sales growth in local currencies1
Currency effect (local currency impact)

Total sales growth as reported

Property, plant and equipment
Trade receivables
Allowance for doubtful trade receivables
Total assets

1. Additional non-IFRS measure; please refer to p 96 for deﬁ nition.

SALES BY BUSINESS SEGMENT 2016
(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

80%

4.0%
0.1%

11.0%
21.9%

11.5%
(0.0%)

1.5%
(2.1%)

1.6%
1.6%

0.2%
0.2%

4.1%

32.9%

11.5%

(0.6%)

3.2%

0.4%

4,599
10,426
(41)
18,349

3,047
6,456
(25)
12,594

2,211
4,175
(20)
8,842

22,040
3,304
(166)
63,407

19,097
3,203
(139)
64,590

17,411
3,314
(194)
53,974

GROWTH ANALYSIS

Local currencies

New-generation insulin
Modern insulin
Human insulin
Victoza®
Other diabetes and obesity care

Growth

212%
(3%)
2%
12%
26%

Share of
growth

51%
(25%)
4%
36%
21%

Diabetes and obesity care

87%

Haemophilia
Norditropin® (human growth hormone)
Other biopharmaceuticals

Biopharmaceuticals

Total sales

0%
14%
(6%)

(1%)
18%
(4%)

13%

100%

NOVO NORDISK ANNUAL REPORT 2016

RESULTS FOR THE YEAR

CONSOLIDATED FINANCIAL STATEMENTS

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. 99.7% of total sales are
realised outside Denmark.

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 4.8 for more
details on hedging.

Sales to external customers attributed to the USA are collectively the most
material to the Group. The USA is the only country where sales contribute
more than 10% of total sales.

In 2016, Novo Nordisk had three major wholesalers distributing products,
representing 21%, 13% and 12% respectively of total net sales (21%, 12%
and 11% in 2015 and 18%, 10% and 11% in 2014). Net sales to the ﬁ rst
two wholesalers are within both diabetes and biopharmaceuticals, whereas
the third is only within diabetes.

For patent expiry in key markets by product, please refer to note 2.5 to the
Consolidated social statement.

2016

2015

2014

2016

2015

2014

2016

2015

2014

(cid:74) International Operations

(cid:74) Region China

(cid:74) Paciﬁ c

558
1,971
2,183
1,258
5,412
3,240
1,141
546
70

365
1,852
2,227
1,391
5,470
3,172
926
620
–

118
1,519
1,858
1,265
4,642
2,564
790
628
–

–
1,059
3,363
547
4,969
3,361
255
1,697
–

–
866
3,036
410
4,312
3,537
213
1,594
–

–
618
2,338
334
3,290
3,051
171
1,388
–

769
1,657
879
528
3,064
559
1,113
782
113

495
1,579
921
588
3,088
624
924
599
7

317
1,491
937
591
3,019
689
661
579
–

10,897

10,553

8,742

10,282

9,656

7,900

6,287

5,730

5,265

1,936
1,079
138

1,998
1,107
153

1,694
843
128

3,153

3,258

2,665

158
15
3

176

195
15
5

215

171
13
4

188

1,148
1,520
441

963
1,398
417

902
1,246
399

3,109

2,778

2,547

14,050

13,811

11,407

10,458

9,871

8,088

9,396

8,508

7,812

13.8%
(12.1%)

16.7%
4.4%

15.3%
(10.3%)

11.5%
(5.6%)

4.1%
17.9%

13.3%
(0.4%)

4.6%
5.8%

4.6%
4.3%

(0.3%)
(6.8%)

1.7%

21.1%

5.0%

5.9%

22.0%

12.9%

10.4%

8.9%

(7.1%)

1,283
4,126
(1,011)
8,343

953
3,539
(997)
7,251

1,144
3,390
(776)
7,199

2,095
1,773
0
5,697

2,291
1,541
0
5,603

2,230
1,538
0
5,629

162
605
(5)
1,743

157
746
(5)
1,761

140
624
(5)
1,418

SALES BY GEOGRAPHICAL AREA 2016
(cid:81)(cid:3)USA (cid:81)(cid:3)Europe (cid:81)(cid:3)International Operations
(cid:81)(cid:3)Region China (cid:81)(cid:3)Paciﬁc

13%

51%

19%

GROWTH ANALYSIS

Local currencies

USA
Europe
International Operations
Region China
Paciﬁ c

Total sales

Growth

Share of
growth

4%
2%
14%
12%
5%

37%
5%
32%
19%
7%

100%

RESULTS FOR THE YEAR

NOVO NORDISK ANNUAL REPORT 2016

70 CONSOLIDATED FINANCIAL STATEMENTS

2.3 RESEARCH AND DEVELOPMENT COSTS

RESEARCH AND DEVELOPMENT COST BY BUSINESS
SEGMENT (NOTE 2.2)

Accounting policies

Novo Nordisk’s research and development is focused on therapeutic
proteins within the class of insulins and GLP-1s for diabetes treatment,
blood-clotting factors for haemophilia and human growth hormone for
growth deﬁ ciency disorders, as well as proteins for weight management.
The research activities utilise biotechnological methods based on genetic
engineering, advanced protein chemistry and protein engineering. These
methods have played a key role in the development of the production
technology used 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, USA and China,
while research and development trials are carried out all over the world.
Novo Nordisk also enters into partnerships 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

DKK million

2016

2015

2014

Diabetes and obesity care
Biopharmaceuticals

11,481
3,082

10,475
3,133

9,318
4,444

Total

14,563

13,608

13,762

RESEARCH AND DEVELOPMENT COSTS

DKK million

2016

2015

2014

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)

7,494
6,149

7,352
5,584

7,646
5,200

427

493

247

425

491

Total research and development costs

14,563

13,608

13,762

As percentage of sales

13.0%

12.6%

15.5%

For a review of the development in research and development costs, refer
to p 7 and p 10, ‘2016 performance and 2017 outlook’, which is not part of
the audited ﬁ nancial statements.

RESEARCH AND DEVELOPMENT COSTS RATIO

(cid:81)(cid:3)Research (cid:81)(cid:3)Development

• Royalty expenses paid to partnerships after regulatory approval are

DIABETES AND OBESITY CARE

expensed as Cost of goods sold

• Royalty income received from partnerships is recognised as part of Other

20–30%

operating income, net

• Contractual research and development obligations to be paid in the

future are disclosed separately as Commitments in note 5.3.

BIOPHARMACEUTICALS

20–30%

70–80%

In general, 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.

In 2016, development within Diabetes and obesity care comprises
approximately 72% (75% in 2015 and 81% in 2014), and development
within Biopharmaceuticals comprises approximately 74% (69% in 2015
and 67% in 2014).

Research costs include the costs of the very early stages of the drug
development cycle from the initial drug discovery until the drug is ready for
administration 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; these are the 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.

NOVO NORDISK ANNUAL REPORT 2016

RESULTS FOR THE YEAR

EMPLOYEE COSTS

Executive Management in total1,2,3

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 companyd 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.

DKK million

2016

2015

2014

Wages and salaries
Share-based payment costs (note 5.1)
Pensions – deﬁ ned contribution plans
Pensions – deﬁ ned beneﬁ t plans
Other social security contributions
Other employee costs

24,651
368
1,829
145
1,853
2,110

23,289
442
1,715
154
1,783
2,117

21,306
371
1,607
142
1,617
1,944

Total employee costs for the year

30,956

29,500

26,987

Employee costs capitalised as
intangible assets and property, plant
and equipment1
Change in employee costs capitalised
as 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

(1,258)

(957)

(866)

(127)

(191)

(206)

29,571

28,352

25,915

7,841
12,447
6,149
2,721
413

7,239
12,231
5,584
2,658
640

6,224
10,334
5,200
2,426
1,731

29,571

28,352

25,915

1. This reﬂ ects annual employee costs capitalised as intangible assets and property,
plant and equipment that will subsequently be included in depreciation and
impairment losses.

Average number of full-time employees2
41,993
Year-end number of full-time employees2 41,971

40,342
40,638

40,164
40,957

2. The number from 2014 includes approximately 2,400 full-time equivalent employees

in NNIT A/S.

CONSOLIDATED FINANCIAL STATEMENTS

REMUNERATION TO EXECUTIVE MANAGEMENT AND
BOARD OF DIRECTORS

DKK million

2016

2015

2014

Salary and cash bonus
Pension
Beneﬁ ts4
Share-based incentive
Severance payments1,4

Fee to Board of Directors

Total

77
20
10
11
66

184

198

89
22
7
44
73

235

247

71
18
2
27
32

150

159

1. Please refer to note 5.1 and ’Remuneration’, pp 50 –53, for further information.
2. As of 31 December 2016, president and CEO Lars Rebien Sørensen retired from

Novo Nordisk. The 2016 remuneration for Lars Rebien Sørensen is included in the
above table together with a severance payment of DKK 65.7 million. EVPs Jerzy
Gruhn and Jesper Højland stepped down from the Executive Management of
Novo Nordisk. The 2016 remuneration for Jerzy Gruhn and Jesper Høiland is
included in the above table. EVP Kåre Schultz left Novo Nordisk as of 30 April 2015.
The 2015 remuneration for Kåre Schultz is included in the above table together
with a severance payment 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 a severance payment of DKK 32.2 million.

3. Total remuneration for registered members of Executive Management amounts to

DKK 138 million (DKK 108 million in 2015).

4. Beneﬁ ts are included in Other employee costs, and severance payments are included

in Wages and salaries in the table to the left.

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. Operating proﬁ t from the wholly
owned subsidiary NNE A/S, not related to Novo Nordisk’s main activities,
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 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.

In March 2015, Novo Nordisk A/S disposed of 74.5% of its 100% interest
in NNIT A/S. In total, DKK 2,376 million of non-recurring income from the
partial divestment after cost of DKK 150 million was recorded as Other
operating income in 2015. A total consideration of DKK 2,303 million was
received and recorded in the cash ﬂ ow statement.

RESULTS FOR THE YEAR

NOVO NORDISK ANNUAL REPORT 2016

INCOME TAXES EXPENSED

DKK million

2016

2015

2014

Current tax on proﬁ t for the year
Deferred tax on proﬁ t for the year

8,981
3,014

9,648
(1,130)

8,562
(748)

Tax on proﬁ t for the year
Adjustments recognised for
current tax of prior years
Adjustments recognised for
deferred tax of prior years

Income taxes in the
Income statement

11,995

8,518

7,814

(3,191)

(313)

1,069

102

114

9,873

8,623

7,615

Current tax on Other comprehensive
income for the year
Deferred tax on Other comprehensive
income for the year

(28)

–

(296)

(1,076)

Tax on other comprehensive income
for the year, (income)/expense

(324)

(977)

Adjustments recognised for prior years include adjustments caused by
events that occurred in the current year related to current and deferred tax
of prior years. Such adjustments predominantly arise from tax payments
regarding tax disputes and reversal of associated tax liability recognised in
prior years.

DKK million

2016

2015

2014

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)
Others, including adjustment of
prior years

22.0%

23.5%

24.5%

0.2%

(2.9%)

(1.9%)

–

(1.3%)

–

0.1%

(0.0%)

(1.6%)

0.4%

(0.3%)

Effective tax rate

20.7%

19.8%

22.3%

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.

72 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
adjustments 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 Other comprehensive
income.

Ongoing tax disputes, primarily related to transfer pricing cases, are
included as part of Deferred tax assets, Tax receivables and Tax payables.

Management judgement regarding recognition of
deferred income tax assets and provision for uncertain
tax positions
Novo Nordisk is subject to income taxes around the world. Signiﬁ cant
judgement and estimates are 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 and used judgement in assessing
whether deferred income tax assets should be recognised.

In the course of conducting business globally, tax and 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.

Tax approach

Novo Nordisk’s tax approach is to pursue a competitive tax level in a
responsible way. This means paying tax in jurisdictions where business
activity generates proﬁ ts. As a general rule, Novo Nordisk subsidiaries pay
corporate taxes in the countries in which they operate. ‘Competitive tax
level’ implies achieving a tax level around the peer-group average.
‘Responsible way’ implies doing business in a way that meets expectations
of a good corporate citizen. This means paying taxes where proﬁ ts are
earned in accordance with international transfer pricing rules. It means
having a balanced tax risk proﬁ le and not engaging in tax-avoidance
activities. Accordingly, a well-established subsidiary of Novo Nordisk will,
in general, pay taxes in the country in which it operates.

Advance pricing agreements

To create certainty regarding tax payments, Novo Nordisk has applied for
so-called advance pricing agreements (APAs) in key countries. An APA is an
up-front agreement between the tax authorities in two (or more) countries,
covering the pricing methodologies for relevant intercompany transactions,
thereby determining the taxable income for the countries in question.
An APA typically covers a future period of ﬁ ve tax years. Novo Nordisk’s APA
programme currently covers the USA and Japan.

NOVO NORDISK ANNUAL REPORT 2016

RESULTS FOR THE YEAR

CONSOLIDATED FINANCIAL STATEMENTS

2.6 INCOME TAXES AND DEFERRED
INCOME TAXES (CONTINUED)

DEFERRED INCOME TAXES

Accounting policies

INCOME TAXES PAID

DKK million

2016

2015

2014

Income taxes paid in Denmark for
current year
Income taxes paid outside Denmark
for current year
Income taxes paid/
repayments relating to prior years

5,506

5,926

5,538

2,645

3,040

2,282

(5,252)

408

Total income taxes paid

2,899

9,374

7,907

The income taxes paid in 2016 relating to prior years include both
repayments and adjustments arising from tax disputes primarily regarding
transfer pricing.

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 elimination of the temporary differences. In general, the Danish tax
rules related to company dividends 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 330 million for 2016 (DKK 288 million in 2015).

Tax on currency adjustments relating to internal proﬁ t on inventories
is recognised in Other comprehensive income. The value of future tax
deductions in relation to share programmes is recognised as deferred tax
until the shares are paid out to the employees. Any difference between
the estimated tax deduction and costs realised in the Income statement is
charged to Equity.

DEVELOPMENT IN DEFERRED INCOME TAX ASSETS AND LIABILITIES

DKK million

2016
Net deferred tax asset/(liability) at 1 January
Income/(charge) to the Income statement
Income/(charge) to Other comprehensive income
Income/(charge) to Equity1
Effect of 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 other
liabilities

Other,
including
tax loss
carry-
forwards

(337)
(23)
–
–
1

3,593
(2,390)
(27)
–
–

2,559
(632)
54
–
24

1,750
(850)
269
(355)
–

(765)
(188)
–
–
(13)

(966)

(359)

1,176

2,005

814

–

2,670

Offset
within
countries

–

Total

6,800
(4,083)
296
(355)
12

183
(1,149)

96
(455)

2,400
(1,224)

2,081
(76)

930
(116)

(3,007)
3,007

2,683
(13)

1. Deferred tax related to value adjustment of restricted stock units. In addition, DKK 440 million related to current tax has also been charged to Equity. The net charge to Equity is

DKK 85 million.

2015
Net deferred tax asset/(liability) at 1 January
Income/(charge) to the Income statement
Income/(charge) to Other comprehensive income
Income/(charge) to Equity
Effect of 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

(715)
(18)
–
–
(32)

(765)

219
(984)

15
(368)
–
–
16

2,668
689
236
–
–

2,053
362
8
–
136

1,371
363
(331)
356
(9)

–

5,392
1,028
(87)
356
111

(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)

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

2016

2015

235

19
–
216

243

–
7
236

RESULTS FOR THE YEAR

NOVO NORDISK ANNUAL REPORT 2016

74 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 3 OPERATING ASSETS AND LIABILITIES

Basis of preparation

Results for the year

Operating assets
and liabilities

Capital structure and
ﬁ nancing 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 a deﬁ nition please refer to p 96.

For 2016, OPAT/NOA amounts to 150%, representing an increase of more
than 70 percentage points over the last ﬁ ve years. The increase is explained
by the low level of acquired intangible assets and a stable operating asset
base despite signiﬁ cant business growth. The fact that Novo Nordisk, in line
with industry practice, does not capitalise internal development costs also
impacts OPAT/NOA. 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 rebates in the USA

A signiﬁ cant factor in the development of net operating assets relates to the
provision for sales rebates in the USA, presented as Provisions under current
liabilities in the Balance sheet. The increase in 2016 reﬂ ects the combined
increase in the Managed care and Medicare Part D rebates and is related to
contract enhancements and price protection. This is countered by the effect
of faster collection from pharmacy beneﬁ t managers and authorities.

3.1 INTANGIBLE ASSETS

Accounting policies

Patents and licences, including acquired patents and licences for ongoing
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
15 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, for
example 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 –15 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 charged in full to the consolidated income
statement in the period in which they are incurred. Consistent with industry
practice, internal development costs are also expensed until regulatory
approval is obtained or highly probable; please refer to note 2.3.

For acquired ongoing 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
ongoing 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.

DEVELOPMENT IN OPERATING PROFIT
AFTER TAX TO NET OPERATING ASSETS

(cid:81) Net operating assets (average) (cid:81) Operating proﬁt after tax
• OPAT/NOA (right hand scale)

DKK million

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

2014

2015

2016

180

160

140

120

100

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 a 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 to other intangible assets or property, plant and equipment
• Changes or anticipated changes in participation rates or reimbursement

policies.

If the carrying amount of intangible assets exceeds the recoverable
amount based 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.

NOVO NORDISK ANNUAL REPORT 2016

OPERATING ASSETS AND LIABILITIES

3.1 INTANGIBLE ASSETS (CONTINUED)

DEVELOPMENT IN CAPITAL EXPENDITURE

CONSOLIDATED FINANCIAL STATEMENTS

(cid:81) Capital expenditure, net • Capital expenditure / sales

2016

2015

DKK million

1,591
1,123

1,139
1,019

2,714

2,158

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

INTANGIBLE ASSETS

DKK million

Patents and licences
Ongoing and developed software

Total

Additions to intangible assets amounts to DKK 1,199 million related to
research and development projects within biopharmaceuticals (DKK 1,182
million in 2015 research and development projects within diabetes and
obesity care).

In 2016, an impairment loss of DKK 416 million (DKK 243 million in 2015)
related to patents and licences was recognised.

Intangible assets not yet in use amount to DKK 1,247 million (DKK 1,261
million in 2015), primarily patents and licences in relation to research and
development projects. Impairment tests in 2016 and 2015 of patents
and licences not yet in use are based on Management’s projections and
anticipated net present value of estimated future cash ﬂ ows from
marketable products. Management has used a pre-tax discount rate
(WACC) of 7% 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

2016

2015

Cost of goods sold
Sales and distribution costs
Research and development costs
Administrative expenses
Other operating income, net

Total amortisation and impairment losses

186
11
427
3
8

635

127
11
247
0
7

392

3.2 PROPERTY, PLANT AND EQUIPMENT

Accounting policies

Property, plant and equipment is measured at historical cost less
accu mulated depreciation and any impairment loss. The cost of self-
constructed assets includes costs directly and indirectly attributable to the
construction of the assets. Subsequent cost is included in the asset’s
carrying amount or recognised as a separate asset only when it is probable
that future economic beneﬁ ts associated with the item will ﬂ ow to
Novo Nordisk and the cost of the item can be measured reliably. In general,
construction of major investments is self-ﬁ nanced and thus no interest on
loans is capitalised as part of the cost. Depreciation is based on the straight-
line method over the estimated useful lives of the assets:

• Buildings: 12 – 50 years
• Plant and machinery: 5 –16 years
• Other equipment: 3 –10 years
• Land: not depreciated.

The depreciation commences when the asset is available for use, in other
words 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.

2014

2015

2016

Capital expenditure in 2016 was primarily related to investments in new
production facilities for active pharmaceutical ingredients for diabetes care,
new diabetes care ﬁ lling capacity, expansion of the manufacturing capacity
for biopharmaceutical products and the construction of new research
facilities.

In August 2014, Novo Nordisk acquired a production plant in New
Hampshire, USA. The ambition is that the new facility will increase
production capacity for active pharmaceutical ingredients for the
biopharmaceuticals portfolio, and it is intended to be operational in 2018.

In May 2015, Novo Nordisk initiated the construction of a new facility in
Kalundborg, Denmark, for producing active pharmaceutical ingredients for
NovoSeven® and future products for treating haemophilia. The facility is
intended to be operational by the end of 2020.

In August 2015, Novo Nordisk announced the intention to construct new
facilities in Clayton, USA, and Måløv, Denmark. The facilities in Clayton will
produce active pharmaceutical ingredients, and the facility in Måløv will
be for tableting and packaging of oral products. The facilities are intended
to be operational during 2020.

In November 2015, Novo Nordisk initiated the construction of new insulin
facility in Hillerød, Denmark. The ambition is that the facility will serve as
a backup production facility for the US market and act as a launch site for
new injectable diabetes products. The facility is intended to be operational
during 2019.

ADDITIONS TO PROPERTY, PLANT AND
EQUIPMENT BY GEOGRAPHICAL AREA 2016

(cid:81)(cid:3)USA (cid:81)(cid:3)Europe (cid:81)(cid:3)International Operations (cid:81)(cid:3)Region China

4% 2%

25%

69%

OPERATING ASSETS AND LIABILITIES

NOVO NORDISK ANNUAL REPORT 2016

76 CONSOLIDATED FINANCIAL STATEMENTS

3.2 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

PROPERTY, PLANT AND EQUIPMENT

DKK million

2016
Cost at the beginning of the year
Additions during the year
Disposals during the year
Transfer from/(to) other items
Effect of exchange rate adjustment

Cost at the end of the year

Land and
buildings

Plant and
machinery

Other
equipment

Assets in
course of
construction

18,003
1,434
(196)
738
211

22,035
280
(429)
1,069
210

3,516
433
(111)
243
49

7,616
4,921
–
(2,050)
52

Total

51,170
7,068
(736)
0
522

20,190

23,165

4,130

10,539

58,024

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

7,448
786
11
(174)
111

15,900
1,342
37
(392)
192

2,277
304
78
(104)
29

Depreciation and impairment losses at the end of the year

8,182

17,079

2,584

–
–
–
–
–

–

25,625
2,432
126
(670)
332

27,845

Carrying amount at the end of the year

12,008

6,086

1,546

10,539

30,179

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

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

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

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

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

2016

1,952
51
493
57
5

2,558

2015

2,008
54
425
53
27

2,567

NOVO NORDISK ANNUAL REPORT 2016

OPERATING ASSETS AND LIABILITIES

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,
depreciation, maintenance etc.

If the expected sales price less completion costs to execute sales (net
realisable value) is lower than the carrying amount, a write-down is
recognised for the amount by which the carrying amount exceeds its net
realisable value.

Inventory manufactured prior to regulatory approval (pre-launch inventory)
is capitalised but immediately provided for, until there is a high probability
of regulatory approval for the product. Before that point, a write-down is
made against the carrying amount of inventory at its recoverable amount
and recorded as research and development costs. Once there is a high
probability of regulatory approval being obtained, the write-down recorded
is reversed, up to no more than the original cost.

Key accounting estimate of indirect production

costs capitalised
Indirect production costs account for 50% of the net inventory value,
reﬂ ecting a lengthy production process compared with low direct raw
material costs. 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 at Novo Nordisk and the 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

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 of allowance for

doubtful trade receivables
Novo Nordisk’s customer base comprises government agencies, wholesalers,
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.

Signiﬁ cant sales to countries within International Operations, and the
fact that many of these countries have low credit ratings, mean that the
relative impact of countries within International Operations on the
allowance for doubtful trade receivables is increasing. Instability and sharp
currency depreciation are impacting the political climate in Russia and
Argentina, and 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.

The increase in trade receivables compared with 2015 is mainly caused by
the USA where payment terms for major customers have been extended
across the industry. Novo Nordisk has used a trade receivable programme to
partly reduce the impact.

Please refer to note 2.2 for a geographical split of trade receivables and
allowance for doubtful trade receivables and note 4.2 for the trade
receivable programme.

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)

2016

2015

TRADE RECEIVABLES

2,285
9,379
4,035

2,020
8,549
3,608

15,699

14,177

1,358

1,419

14,341

12,758

7,103
50%

6,436
50%

DKK million

Trade receivables (gross)
Allowance for doubtful trade receivables

Trade receivables (net)

Trade receivables (net) equals a credit period
of 66 days (52 days in 2015).

Age analysis of trade receivables
– Not yet due
– Overdue by between 1 and 179 days
– Overdue by between 180 and 360 days

2016

2015

21,457
1,223

16,651
1,166

20,234

15,485

18,980
1,079
175

14,605
880
0

MOVEMENTS IN INVENTORY
WRITE-DOWNS
Inventory write-downs at the beginning of the year
Inventory write-downs during the year
Utilisation of inventory write-downs
Reversal of inventory write-downs

1,419
861
(672)
(250)

1,165
978
(472)
(252)

Inventory write-downs at the end of the year

1,358

1,419

All write-downs in both 2015 and 2016 relate to fully impaired inventory.

Trade receivables with credit risk exposure

20,234

15,485

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

1,166
(13)
(9)
117
(38)

995
(28)
(26)
257
(32)

Allowance at the end of the year

1,223

1,166

OPERATING ASSETS AND LIABILITIES

NOVO NORDISK ANNUAL REPORT 2016

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.

78 CONSOLIDATED FINANCIAL STATEMENTS

3.5 RETIREMENT BENEFIT OBLIGATIONS

Accounting policies

Deﬁ ned contribution plans
Novo Nordisk operates a number of deﬁ ned contribution plans throughout
the world. These plans are externally funded in entities that are legally
separate from the Group. Novo Nordisk’s contributions to the deﬁ ned
contribution plans are charged to the Income statement in the year to
which they relate.

Deﬁ ned beneﬁ t plans
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.

In Germany and Switzerland, the deﬁ ned beneﬁ t plans 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 limited to
counterparty risk against Allianz.

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 USA is structured as
a post-retirement healthcare plan covering all employees. From 2012, this
plan was frozen such that it no longer credited future service or admitted
new participants and a new deﬁ ned contribution plan was established
covering all employees in USA.

Recognition of deﬁ ned beneﬁ t plans
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.

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
Effect of 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)1
Employer contributions
Plan participant contributions etc
Beneﬁ ts paid to employees
Effect of exchange rate adjustment

At the end of the year

Net retirement beneﬁ t obligations
at the end of the year

763
27
–
18
145
–
(5)
(3)

945

472
12
–
(3)
23
–
(5)
(2)

497

344
37
(34)
3
5
11
(17)
1

350

223
2
–
–
26
11
(17)
1

246

370
31
–
4
15
–
(23)
23

420

296
3
–
(2)
26
–
(23)
19

319

USA

433
24
–
18
–
–
(11)
14

478

–
–
–
–
11
–
(11)
–

–

Other

358
38
(15)
8
35
5
(11)
–

418

91
3
(6)
–
16
5
(11)
–

2016
Total

2,268
157
(49)
51
200
16
(67)
35

2015
Total

1,975
148
(46)
47
44
25
(34)
109

2,6112

2,2682

1,082
20
(6)
(5)
102
16
(67)
18

944
20
(22)
7
96
22
(34)
49

1,160

1,082

448

104

101

478

320

1,451

1,186

1. Net remeasurement of DKK 205 million (DKK 37 million in 2015) primarily related to changes in ﬁ nancial assumptions, is included in Other comprehensive income.
2. The present value of partly funded retirement beneﬁ t obligations amounts to DKK 1,887 million (DKK 1,711 million in 2015). The present value of unfunded retirement beneﬁ t

obligations amounts to DKK 724 million (DKK 557 million in 2015).

NOVO NORDISK ANNUAL REPORT 2016

OPERATING ASSETS AND LIABILITIES

CONSOLIDATED FINANCIAL STATEMENTS

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 regarding ongoing legal

disputes, litigations and investigations
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.

3.5 RETIREMENT BENEFIT OBLIGATIONS
(CONTINUED)

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.

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 (not considering plan assets) 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

1 %-point
increase

1 %-point
decrease

Discount rate (decrease)/increase
Future remuneration (decrease)/increase

(404)
106

509
(94)

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
assumption, although this is not always the case.

3.6 PROVISIONS AND CONTINGENT
LIABILITIES

Accounting policies

Provisions for sales rebates and discounts granted to government agencies,
wholesalers, retail pharmacies, managed care and other customers
are recorded at the time the related revenues are recorded or when the
incentives are offered. Provisions are calculated based on historical
experience and the speciﬁ c terms in the individual agreements. Unsettled
rebates are recognised as Provisions when the timing or amount is
uncertain. Where absolute amounts are known, the rebates are recognised
as Other liabilities. Please refer to note 2.1 for further information on sales
rebates and provisions.

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

16,508
56,954
(53,217)
(822)
548

1,397
963
(53)
(428)
36

At the end of the year

Non-current liabilities
Current liabilities

19,971

1,915

–
19,971

1,915
–

803
323
(416)
56
1

767

460
307

2016
Total

19,824
58,688
(53,991)
(1,291)
601

2015
Total

13,631
46,618
(41,721)
(56)
1,352

1,116
448
(305)
(97)
16

1,178

23,831

19,824

995
183

3,370
20,461

2,765
17,059

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. In the case of provisions
for legal disputes, the time of settlement cannot be determined.

OPERATING ASSETS AND LIABILITIES

NOVO NORDISK ANNUAL REPORT 2016

80 CONSOLIDATED FINANCIAL STATEMENTS

3.6 PROVISIONS AND CONTINGENT
LIABILITIES (CONTINUED)

Contingent liabilities

Novo Nordisk is currently involved in pending litigations, claims and
investigations 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 investigations, 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

As of 31 January 2017, Novo Nordisk, along with the majority of incretin-
based product manufacturers in the USA, is a defendant in product liability
lawsuits related to use of incretin-based medications. To date, 224 plaintiffs
have named Novo Nordisk in product liability lawsuits, predominantly
claiming damages for pancreatic cancer that allegedly developed as
a result of using Victoza® and other GLP-1/DPP-IV products. 149 of the
Novo Nordisk plaintiffs have also named other defendants in their lawsuits.
Most Novo Nordisk plaintiffs have ﬁ led suit in California federal and
state courts.

In November 2015, the California federal and state courts overseeing the
vast majority of cases in the incretin-based products liability litigation
issued an order granting the defendants’ motion for summary judgment on
federal pre-emption in all pancreatic cancer cases before those courts as
of mid-Q4 2015. As a result of these rulings, 219 of the pancreatic cancer
claims naming Novo Nordisk have been dismissed or stayed pending
the outcome of an appeal. Currently, Novo Nordisk does not have any
individual trials scheduled in 2017. Novo Nordisk does not expect the
pending litigations to have a material impact on Novo Nordisk’s ﬁ nancial
position, operating proﬁ t or cash ﬂ ow.

On 11 January 2017, a class action lawsuit was ﬁ led against Novo Nordisk,
former CEO Lars Rebien Sørensen and CFO Jesper Brandgaard in the United
States District Court for the District of New Jersey by the Lehigh County
Employees’ Retirement System on behalf of all purchasers of Novo Nordisk
American Depository Receipts (ADRs) between April 2015 and October
2016. The lawsuit alleges that Novo Nordisk colluded with other insulin
manufacturers to increase drug prices, artiﬁ cially inﬂ ated its ﬁ nancial
results and made materially misleading statements to potential investors.
Subsequently, two other class action lawsuits were ﬁ led against
Novo Nordisk, former CEO Lars Rebien Sørensen and CFO Jesper
Brandgaard, in the same court. These lawsuits contain broadly similar
allegations as the lawsuit ﬁ led on 11 January 2017. Novo Nordisk does not
expect the litigation to have a material impact on Novo Nordisk’s ﬁ nancial
position, operating proﬁ t or cash ﬂ ow.

On 30 January 2017, a class action lawsuit was ﬁ led against Novo Nordisk,
Eli Lilly and Sanoﬁ in the United States District Court for the District of
Massachusetts on behalf of a U.S. class of purchasers of insulin products,
who allege that their out-of-pocket costs for insulin products (Novolog®
and Levemir® for Novo Nordisk) were based on artiﬁ cially inﬂ ated
benchmark prices. The lawsuit alleges that insulin manufacturers, including
Novo Nordisk, negotiated signiﬁ cantly discounted prices with Pharmacy
Beneﬁ t Managers at the expense of the class members, and concealed the
existence of these rebates. Novo Nordisk does not expect the litigation 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 U.S. Attorney’s Ofﬁ ce for the District of
Massachusetts 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.

In November 2014 and March 2016, the Washington State Attorney
General’s Ofﬁ ce served Novo Nordisk with two Civil Investigative Demands
calling for the production of documents and information regarding
Novo Nordisk’s haemophilia-related patient support programme,
SevenSECURE®, as well as information relating to the marketing and
promotion of NovoSeven®RT. Novo Nordisk continues to cooperate with
the Washington State Attorney in this investigation. Novo Nordisk does
not expect the investigation to have a material impact on Novo Nordisk’s
ﬁ nancial position, operating proﬁ t or cash ﬂ ow.

In March 2016, the United States Department of Justice (‘DOJ‘) served
Novo Nordisk with a Civil Investigative Demand calling for the production
of documents and information regarding Novo Nordisk’s haemophilia-
related patient support programmes, as well as information relating to the
marketing and promotion of NovoSeven® RT. The investigation is being
conducted by DOJ in conjunction with the U.S. Attorney’s Ofﬁ ce for the
Western District of Oklahoma. Novo Nordisk continues to cooperate with
DOJ and the U.S. Attorneys’ Ofﬁ ce in this investigation. Novo Nordisk does
not expect the investigation to have a material impact on Novo Nordisk’s
ﬁ nancial position, operating proﬁ t or cash ﬂ ow.

In March 2016, the U.S. Attorney’s Ofﬁ ce for the Southern District of New
York served Novo Nordisk with a Civil Investigative Demand calling for
the production of documents and information regarding Novo Nordisk’s
contracts and business relationships with pharmacy beneﬁ ts managers
(PBMs) concerning NovoLog®, Novolin® and Levemir®. Novo Nordisk
continues to cooperate with the U.S. Attorney’s Ofﬁ ce for the Southern
District of New York 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.

On 18 January 2017, the Minnesota State Attorney General’s ofﬁ ce served
Novo Nordisk with a Civil Investigative Demand calling for the production of
documents and information relating to pricing and trade practices for
Novo Nordisk’s long acting insulin products, including Levemir® and
Tresiba®, from 1 January 2008 until now. Novo Nordisk is cooperating with
the Minnesota Attorney General in this investigation. Novo Nordisk does
not expect the investigation to have a material impact on Novo Nordisk’s
ﬁ nancial position, operating proﬁ t or cash ﬂ ow.

In 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
Sales rebates payable
VAT and duties payable
Payables regarding clinical trials
Amount owed to associated company
Other payables

2016

2015

5,068
4,911
1,718
1,072
324
245
843

4,545
4,285
1,555
896
532
259
583

Total other liabilities

14,181

12,655

NOVO NORDISK ANNUAL REPORT 2016

OPERATING ASSETS AND LIABILITIES

SECTION 4 CAPITAL STRUCTURE AND FINANCING ITEMS

Basis of preparation

Results for the year

Operating assets
and liabilities

Capital structure and
ﬁ nancing items

Other disclosures

CONSOLIDATED FINANCIAL STATEMENTS

This section provides 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 future investments in Novo Nordisk and distribution to shareholders
without consuming prior years’ cash creation retained in the company.

CASH DISTRIBUTION TO SHAREHOLDERS

(cid:74) Share repurchases in the calendar year
(cid:74) Interim dividend for 2016
(cid:74) Dividend for prior year • Payout ratio (right hand scale)

DKK billion

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.

Management asseses that 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.

Cash distribution to shareholders

In August 2016, Novo Nordisk introduced an interim dividend resulting in
a higher cash payment in 2016. The net cash distribution to shareholders in
the form of dividends and share repurchases amounts to DKK 38.9 billion,
compared with free cash ﬂ ow of DKK 40.0 billion. This is in line with the
guiding principle of paying out excess capital to investors after funding
organic growth and potential acquisitions.

2014

2015

2016

Dividends are allocated to the year of payment.

4.1 SHARE CAPITAL, DISTRIBUTION TO SHAREHOLDERS AND EARNINGS PER SHARE

SHARE CAPITAL

DKK million

Development in share capital:
Share capital 2012
Cancelled in 2013
Cancelled in 2014
Cancelled in 2015

Share capital at the beginning of the year

Cancelled in 2016

Share capital at the end of the year

A share
capital

B share
capital

Total share
capital

107
–
–
–

107

–

107

453
(10)
(20)
(10)

413

(10)

403

560
(10)
(20)
(10)

520

(10)

510

At the end of 2016, the share capital amounted to DKK 107 million in A share capital and DKK 403 million in B share capital (equal to 2,013 million B shares
of DKK 0.20).

CAPITAL STRUCTURE AND FINANCIAL ITEMS

NOVO NORDISK ANNUAL REPORT 2016

82 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 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

2.0%
(1.9%)

0.1%

20,862
(19,995)

867
(1,760)
15,057
–
(2,533)

11,631

0.1%
(0.2%)
1.9%
–
–

1.8%

2016

Number of
B shares
of DKK 0.20
(million)

2015

Number of
B shares
of DKK 0.20
(million)

52
(50)

2
(4)
48
–
–

57
(50)

7
(1)
48
(2)
–

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 2015 share repurchase programme totalling DKK 1.6 billion and the
DKK 15 billion share repurchase programme of Novo Nordisk B shares for 2016, of which DKK 1.5 billion is outstanding at year-end. The programme ends on
31 January 2017. Transfer of treasury shares relates to the long-term share-based incentive programme and restricted stock units to employees.

The holding of treasury shares amounts to 45,667,252 shares of DKK 0.20 at year-end, corresponding to DKK 9 million of the share capital (52,168,703 shares
and DKK 10 million of the share capital in 2015). At year-end, 4.6 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.

CASH DISTRIBUTION TO SHAREHOLDERS

DKK million

Interim dividend for the year
Dividend for prior year
Share repurchases for the calendar year

Total

2016

2015

2014

7,600
16,230
15,057

–
12,905
17,196

–
11,866
14,667

38,887

30,101

26,533

The total dividend for 2016 amounts to DKK 19,048 million (DKK 7.60 per share). At the end of 2016, ﬁ nal dividend of DKK 11,448 million (DKK 4.60 per
share) is included in Retained earnings. The interim dividend of DKK 7,600 million (DKK 3.00 per share) was paid in August 2016. The declared dividend for
2015 included in Retained earnings was DKK 16,230 million (DKK 6.40 per share) which was paid in March 2016. 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 joint share pool. Please refer to ‘Financial deﬁ nitions’ on p 96 for a description of the calculation of the dilutive effect.

DKK million

Net proﬁ t for the year

2016

2015

2014

37,925

34,860

26,481

Average number of shares outstanding
Dilutive effect of outstanding joint share pool1

in 1,000 shares
in 1,000 shares

2,529,945
4,784

2,571,219
6,479

2,621,226
8,992

Average number of shares outstanding, including dilutive effect of
outstanding joint share pool

in 1,000 shares

2,534,729

2,577,698

2,630,218

Basic earnings per share
Diluted earnings per share

DKK
DKK

14.99
14.96

13.56
13.52

10.10
10.07

1. For further information on the outstanding joint share pool, please refer to note 5.1.

NOVO NORDISK ANNUAL REPORT 2016

CAPITAL STRUCTURE AND FINANCIAL ITEMS

4.2 FINANCIAL RISKS

KEY CURRENCIES

CONSOLIDATED FINANCIAL STATEMENTS

Exchange rate DKK per 100

2016

2015

2014

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
706
3.4%

673
683
11.6%

562
612
13.1%

101
102
(2.9%)

107
105
6.1%

91
99
11.2%

6.21
6.03
6.3%

5.56
5.67
10.7%

5.32
5.12
(0.4%)

911
869
(14.0%)

1,028
1,011
6.2%

508
524
6.5%

527
492
(6.6%)

925
952
6.7%

509
527
4.4%

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
2017

2,100
320
200
90
80

2016

2,000
300
150
85
70

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 use of 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. The foreign exchange risk is most signiﬁ cant in USD, CNY and JPY,
while the EUR exchange rate risk is regarded as low because of 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 2016, the hedging horizon varied between 9 and 14 months for
USD, CNY, JPY, GBP and CAD. Currency hedging is based on 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.

The ﬁ nancial contracts existing at year-end cover the expected future cash
ﬂ ow for the following number of months:

USD
CNY1
JPY
GBP
CAD

2016

2015

12 months
9 months
14 months
12 months
11 months

11 months
11 months
12 months
12 months
11 months

1. Chinese yuan traded offshore (CNH) is used as a proxy when hedging Novo Nordisk’s

CNY currency exposure.

CAPITAL STRUCTURE AND FINANCIAL ITEMS

NOVO NORDISK ANNUAL REPORT 2016

84 CONSOLIDATED FINANCIAL STATEMENTS

4.2 FINANCIAL RISKS (CONTINUED)

Credit exposure on Cash at bank and on hand, Marketable securities and
Derivative ﬁ nancial instruments (market value)

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

2016
Other comprehensive income
Income statement

Total

2015
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

(2,477)
94

(2,383)

(2,135)

(2,061)

2,478
(89)

2,389

2,250

(96)

2,154

The foreign exchange sensitivity analysis comprises effects from the Group’s
cash, Trade receivables and Trade payables, current and non-current loans,
current and non-current ﬁ nancial investments, foreign exchange forwards
and foreign exchange options at year-end 2016. 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 2016, a 1 percentage point increase in the interest rate level would,
all else being equal, result in a decrease in the fair value of Novo Nordisk’s
ﬁ nancial instruments of DKK 3 million (a decrease in the fair value of
DKK 22 million in 2015).

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 because of the limited
effect that a parallel shift in interest rates in all currencies would have on
these instruments.

DKK million

2016
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

2,007

309
220

12,442
5,971
83

194

Total

2,007
12,751
6,191
83

196

Total

18,690

2,009

529

21,228

2015
AAA-range
AA-range
A-range
BBB-range
Not rated or
below BBB-range

6,797
9,959
101

1,027
2,513

133
171

1,027
9,443
10,130
101

Total

16,923

3,542

304

20,769

1. Net yield on the bond portfolio is – 0.05% (– 0.10% in 2015).

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 programmes

Novo Nordisk’s subsidiaries in Japan and USA 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:

Liquidity risk

The liquidity risk is considered to be low, and Novo Nordisk has no debt
ﬁ nancing. Novo Nordisk ensures the availability of the required liquidity
through a combination 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.

DKK million

Japan
USA

2016

2015

2014

2,259
2,754

1,899
945

1,669
0

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.

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 21,228 million (2015: DKK 20,769 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 22,974
million (2015: DKK 18,202 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.

NOVO NORDISK ANNUAL REPORT 2016

CAPITAL STRUCTURE AND FINANCIAL ITEMS

CONSOLIDATED FINANCIAL STATEMENTS

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.

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.

Novo Nordisk uses forward exchange contracts and currency options to
hedge forecast transactions, assets and liabilities. The overall policy is to
hedge approximately 75% of total currency exposure.

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.

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.

HEDGING ACTIVITIES

DKK million

Forward contracts USD
Forward contracts CNH, JPY, GBP and other currencies

Forward contracts, cash ﬂ ow hedges

Currency options USD
Currency options JPY

Currency options, cash ﬂ ow hedges1

Forward contracts USD
Forward contracts CNH, JPY, GBP and other currencies

Forward contracts, fair value hedges

Contract
amount
at year-end

36,579
10,070

46,649

588
190

778

9,953
3,087

13,040

Time value of currency options (hedge accounting not applied)

–

2016

Positive
fair value
at year-end

16
199

215

50
11

223
79

302

Negative
fair value
at year-end

2,081
110

2,191

–
–

–

300
87

387

–

Contract
amount
at year-end

34,279
7,351

41,630

5,285
248

5,533

1,891
862

2,753

–

2015

Positive
fair value
at year-end

Negative
fair value
at year-end

85
117

202

20
3

42
17

819
92

911

–
–

–

400
71

471

–

Total hedging activities

60,467

580

2,578

49,916

327

1,382

Recognised in the Income statement
Recognised in Other comprehensive income2

Presented in the Balance sheet as:
Derivative ﬁ nancial instruments (current assets/liabilities)
Cash at bank

304
276

529
51

387
2,191

2,578

102
225

304
23

471
911

1,382

1. Includes expired currency options of DKK 51 million deferred for realisation in 2017.
2. Realisation in 2016 of previously deferred loss amounts to DKK 682 million, as the remaining DKK 4 million will not be realised until 2017. Furthermore, an additional loss of

DKK 1,911 million as of 31 December 2016 has been deferred for realisation in 2017 and 2018.

CAPITAL STRUCTURE AND FINANCIAL ITEMS

NOVO NORDISK ANNUAL REPORT 2016

86 CONSOLIDATED FINANCIAL STATEMENTS

4.3 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

The above ﬁ nancial contracts regarding cash ﬂ ow hedging 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 with the fair value then being transferred to Financial income
or Financial expenses. The cash ﬂ ow impact is an immediate consequence of the reclassiﬁ cation

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

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, in other words 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,
the 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 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 year.

DKK million

2016

2015

2014

CASH AND CASH EQUIVALENTS

2016

Positive
fair value
at year-end

Negative
fair value
at year-end

236
40

276

2,191
–

2,191

FREE CASH FLOW

2015

Positive
fair value
at year-end

Negative
fair value
at year-end

225
–

225

907
4

911

DKK million

2016

2015

2014

Net cash generated from
operating activities
Net cash used in investing activities
Net purchase of marketable securities

48,314
(6,790)
(1,533)

38,287
(6,098)
2,033

31,692
(2,064)
(2,232)

Free cash ﬂ ow2

39,991

34,222

27,396

2. Additional non-IFRS measure; please refer to p 96 for deﬁ nition.

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

2016

2015

2014

Inventories
Trade receivables
Other receivables and prepayments
Trade payables
Other liabilities
Adjustment for the partial divestment
of NNIT A/S

(1,583)
(4,749)
(154)
1,084
1,526

(1,401)
(2,444)
493
(23)
1,604

(1,805)
(2,134)
(296)
858
1,665

–

(207)

–

Cash at bank and on hand (note 4.2)
Current debt (bank overdrafts)

18,690
(229)

16,923
(1,073)

14,396
(720)

Change in working capital before
exchange rate adjustments

(3,876)

(1,978)

(1,712)

Cash and cash equivalents
at the end of the year

FINANCIAL RESOURCES

18,461

15,850

13,676

Exchange rate adjustments

168

(179)

(436)

Cash ﬂ ow change in working capital

(3,708)

(2,157)

(2,148)

Cash and cash equivalents
Marketable securities (note 4.7)
Undrawn committed credit facility1

18,461
2,009
8,178

15,850
3,542
8,209

13,676
1,509
8,188

Total ﬁ nancial resources

28,648

27,601

23,373

1. The undrawn committed credit facility in 2016 is a EUR 1,100 million facility

(EUR 1,100 million in 2015 and EUR 1,100 million in 2014) committed by a portfolio
of international banks. The facility matures in 2019.

NOVO NORDISK ANNUAL REPORT 2016

CAPITAL STRUCTURE AND FINANCIAL ITEMS

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

OTHER NON-CASH ITEMS

DKK million

Reversals of non-cash income statement items
Interest income and interest expenses, net (note 4.8)
Capital gain on investments etc (note 4.8)
Result of associated company (note 4.8)
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
Exchange rate adjustments on working capital
Other, primarily exchange rate adjustments

Total other non-cash items

2016

2015

2014

13
(16)
(24)
368

4,007
265
(205)

11
(15)
(14)
442

6,193
155
(37)

(168)
(358)

179
(1,006)

(62)
(34)
–
371

3,138
343
(247)

436
218

3,882

5,908

4,163

4.7 FINANCIAL ASSETS AND LIABILITIES

Accounting policies

Depending on the purpose, Novo Nordisk classiﬁ es investments 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.

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.

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.

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.

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
marketable 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. In that case, the current part
is included in Other receivables and prepayments.

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.

CAPITAL STRUCTURE AND FINANCIAL ITEMS

NOVO NORDISK ANNUAL REPORT 2016

88 CONSOLIDATED FINANCIAL STATEMENTS

4.7 FINANCIAL ASSETS AND LIABILITIES (CONTINUED)

FINANCIAL ASSETS BY CATEGORY

DKK million

2016

Other ﬁ nancial assets
Trade receivables (note 3.4)
Other receivables
– less prepayments and VAT receivables
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

699

2,009

Financial
assets
measured at
fair value
through the
Income
statement

Loans
and
receivables

Cash
and cash
equivalents

689
20,234
2,411
(1,584)

529

18,690

Total

1,388
20,234
2,411
(1,584)
2,009
529
18,690

Total ﬁ nancial assets at the end of the year by category1

2,708

529

21,750

18,690

43,677

Total ﬁ nancial assets at the end of the year by category, 2015

4,279

304

17,151

16,923

38,657

1. Financial assets are all due within one year except for DKK 72 million due in 2018.

FINANCIAL LIABILITIES BY CATEGORY

DKK million

2016

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
amortised
cost

229
6,011
14,181
(1,072)

2,578

Total

229
6,011
14,181
(1,072)
2,578

Total ﬁ nancial liabilities at the end of the year by category2

2,578

19,349

21,927

2. All ﬁ nancial liabilities are due within one year except for DKK 79 million due in 2018.

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)

1,073
4,927
12,655
(896)

1,073
4,927
12,655
(896)
1,382

1,382

Total ﬁ nancial liabilities at the end of the year by category3

1,382

17,759

19,141

3. All ﬁ nancial liabilities are due within one year.

For a description of the credit quality of ﬁ nancial assets such as Trade receivables, Cash at bank and on hand, Marketable securities, Current debt and
Derivative ﬁ nancial instruments, refer to notes 4.2 and 4.3.

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

2016

2,675
529
33

3,237

–
2,578
–

2,578

2015

4,279
304
–

4,583

–
1,382
–

1,382

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 2016 or 2015. There are no intangible assets or items of
property, plant and equipment measured at fair value.

NOVO NORDISK ANNUAL REPORT 2016

CAPITAL STRUCTURE AND FINANCIAL ITEMS

4.8 FINANCIAL INCOME AND EXPENSES

FINANCIAL IMPACT FROM FORWARD CONTRACTS
AND CURRENCY OPTIONS, SPECIFIED

CONSOLIDATED FINANCIAL STATEMENTS

DKK million

2016

2015

2014

Forward contracts
Income/(loss) transferred from
Other comprehensive income
Value adjustment of transferred
contracts
Unrealised fair value adjustments of
forward contracts
Foreign exchange gain/loss on forward
contracts

Financial income/(expense) from
forward contracts

Currency options
Realised income/(loss) transferred from
Other comprehensive income
Value adjustment of transferred options
Foreign exchange gain/loss on currency
options

Financial income/(expense) from
currency options

(705)

(2,237)

1,104

(3,212)

(1,160)

(85)

(412)

(355)

570

629

286

(158)

(5,232)

(125)

23
0

21
(12)

(106)

(171)

125
(12)

(81)

(83)

(162)

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

2016

2015

2014

Interest income
Financial gain from currency
options (net)
Capital gain on investments etc
Result of associated company

Total ﬁ nancial income

FINANCIAL EXPENSES

–
16
24

–
15
14

101

32
34
–

167

DKK million

2016

2015

2014

Interest expenses
Foreign exchange loss (net)1
Financial loss from forward
contracts (net)
Financial loss from currency
options (net)
Other ﬁ nancial expenses

65
335

67
504

158

5,232

83
85

162
81

Total ﬁ nancial expenses

726

6,046

1. Primarily related to trade receivables, other receivables and trade payables.

39
288

125

–
111

563

CAPITAL STRUCTURE AND FINANCIAL ITEMS

NOVO NORDISK ANNUAL REPORT 2016

90 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 5 OTHER DISCLOSURES

Basis of preparation

Results for the year

Operating assets
and liabilities

Capital structure and
ﬁ nancing 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 50 –53.

Senior Management Board
On 1 February 2017, the Board of Directors approved the transfer of a
total of 96,705 Novo Nordisk B shares to a joint pool for the ﬁ nancial year
2016. This allocation amounts on average to 3.2 months’ ﬁ xed base salary
plus pension contribution for the CEO, 2.4 months’ ﬁ xed base salary plus
pension contribution per member of Executive Management as of 1 March
2016 and 2.1 months’ ﬁ xed base salary for Senior Vice Presidents,
corresponding to a value at launch of the programme of DKK 29 million.
The full amount was expensed in 2016, as the shares will remain in the joint
pool if a member of the Senior Management Board leaves Novo Nordisk.
The expense for 2016 reﬂ ects those shares that vested based on service and
performance.

The grant date of the programme was February 2016, and the share price
used for the conversion was the average share price (DKK 330) for Novo
Nordisk B shares on Nasdaq Copenhagen in the period 3 –17 February
2016, adjusted for expected dividend. Based on the split of participants
when the joint pool was established, approximately 35% of the pool will
be allocated to members of Executive Management and 65% to other
members of the Senior Management Board.

The shares allocated to the joint pool for 2013 were released to the
individual participants subsequent to approval of the Annual Report 2016
by the Board of Directors and after the announcement of the 2016 full-year
ﬁ nancial results on 2 February 2017. The shares allocated correspond to
a value at launch of the programme of DKK 51 million, expensed in 2013.

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
2016, a total of 224,055 shares were allocated to the pool for this group,
corresponding to a value at launch of the programme (adjusted for
expected dividends) of DKK 68 million. The costs of the 2016 programme
are amortised over the vesting period from 2016 –2019 at an annual
amount of DKK 17 million.

The shares allocated to the pool for 2013 were released to the individual
participants subsequent to approval of the Annual Report 2016 by the
Board of Directors and after the announcement of the 2016 full-year
ﬁ nancial results on 2 February 2017. The shares allocated correspond to
a value at launch of the programme of DKK 126 million amortised over
the period 2013–2016. The number of shares to be transferred (501,824
shares) is lower than the original number of shares allocated to the share
pool, as some participants had left the company before the programme’s
release conditions 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
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 shares granted, excluding the impact of
any non-market vesting conditions. The fair value is ﬁ xed at the grant date,
and adjusted for expected dividends during the vesting period. Non-market
vesting conditions are included in assumptions about the number
of 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

2016

2015

2014

Restricted stock units to employees
Long-term share-based incentive
programme (Senior Management
Board)1, 2
Long-term share-based incentive
programme (management group below
Senior Management Board)3

Share-based payment expensed
in the Income statement

245

135

141

108

199

164

368

442

371

1. Expense for the year reﬂ ects the full value at launch of the programme (adjusted for

expected dividend) for the year as vesting conditions are met.

2. The programme includes former members of Senior Management Board with a total

value of DKK 3 million (DKK 16 million in 2015 and DKK 0 million in 2014).

3. Expense for the year reﬂ ects the value at launch (adjusted for expected dividend) of

the last four programmes, amortised over four years.

Restricted stock units to employees

To commemorate the Group’s net sales passing DKK 100 billion for the
ﬁ rst time in 2015, all employees in the Company (excluding NNE A/S and
Steno Diabetes Center A/S) as of January, 2016 were offered 50 restricted
stock units. A restricted stock unit gives the holder the right to receive one
Novo Nordisk B share free of charge in February 2019 subject to continued
employment. The cost of the DKK 508 million programme is amortised over
the vesting period.

On 1 April 2016, restricted stock units from the 90th anniversary
programme from 2013 were granted to Novo Nordisk employees. The cost
of the DKK 467 million programme has been amortised over the vesting
period.

NOVO NORDISK ANNUAL REPORT 2016

OTHER DISCLOSURES

CONSOLIDATED FINANCIAL STATEMENTS

5.1 SHARE-BASED PAYMENT SCHEMES (CONTINUED)

GENERAL TERMS AND CONDITIONS OF LAUNCHED PROGRAMMES

Restricted stock units to employees

Shares for Senior Management Board

Shares for management group below
Senior Management Board

2016

2015

2014

2016

2015

2014

2016

2015

2014

Number of shares awarded in
the year
Value per share at launch (DKK)
Vesting period
Allocated to recipients
Total market value at launch
(DKK million)
Expensed in the Income
statement (DKK million)
Amortisation period of
the programme

1,465,411
346
3 years
Feb. 2019

508

169
2016 to
2019

–
–
–

–

–
–
–

–

96,705
304
3 years
Feb. 2020

378,943
285
3 years
Feb. 2019

293,044
226
3 years
Feb. 2018

224,055
304
3 years
Feb. 2020

879,988
285
3 years
Feb. 2019

683,728
226
3 years
Feb. 2018

108

251

155

29
Expensed
in 2016

108
Expensed
in 2015

66
Expensed
in 2014

17
2016 to
2019

63
2015 to
2018

37
2014 to
2017

OUTSTANDING RESTRICTED STOCK UNITS

Outstanding at the beginning of the year

Released restricted stock units to employees
Released shares from 2012 Management pool
Released shares from 2012–2014 Management pools1
Cancelled shares from Management pool
Allocated restricted stock units to employees (2013 programme)
Allocated restricted stock units to employees (2016 programme)
Shares allocated to Management pools

Outstanding at the end of the year

1. Released 2012–2014 programme following the partial divestment of NNIT A/S.

OUTSTANDING RESTRICTED
STOCK UNITS

Issued1

Released

Cancelled
(accumulated)

Outstanding

Value at
launch date
DKK million

Restricted stock units to employees
2013 Restricted stock units
2016 Restricted stock units

2,590,000
1,465,411

(2,590,000)
–

4,055,411

(2,590,000)

–
–

–

–
1,465,411

467
508

1,465,411

Outstanding restricted stock units
to employees

Shares allocated to joint pools
for Senior Management Board
2012 Shares allocated to joint pool
2013 Shares allocated to joint pool
2014 Shares allocated to joint pool
2015 Shares allocated to joint pool
2016 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
2012 Shares allocated to pool
2013 Shares allocated to pool
2014 Shares allocated to pool
2015 Shares allocated to pool
2016 Shares allocated to pool3

487,730
254,513
293,044
378,943
96,705

(487,730)
(8,993)2
(9,369)2

–
–

–
–
–
(522)
–

0
245,520
283,675
378,421
96,705

1,510,935

(506,092)

(522)

1,004,321

1,559,235
622,190
683,728
879,988
224,055

(1,366,594)
(22,620)2
(34,061)2

–
–

(177,262)
(97,746)
(76,704)
(72,415)
–

15,379
501,824
572,963
807,573
224,055

73
51
66
108
29

234
126
155
251
68

2016

2015

7,158,636

7,960,080

(2,590,000)
(1,808,729)
–
(174,552)
220,000
1,465,411
320,760

–
(1,787,640)
(120,638)
(152,097)
–
–
1,258,931

4,591,526

7,158,636

Vesting date

Q2 2016
Q1 2019

Q1 2016
Q1 2017
Q1 2018
Q1 2019
Q1 2020

Outstanding shares in pool for management
group below Senior Management Board

3,969,196

(1,423,275)

(424,127)

2,121,794

Outstanding at the end of 2016

9,535,542

(4,519,367)

(424,649)

4,591,526

1. All restricted stock units and shares allocated to Management pools are hedged by treasury shares.
2. Released shares from 2013–2014 Management pools relate to NNIT employees following the IPO of NNIT A/S.
3. 2016 programme released subsequent to approval of the Annual Report 2016 on 1 February 2017.

OTHER DISCLOSURES

NOVO NORDISK ANNUAL REPORT 2016

92 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
Brian Daniels
Liz Hewitt
Liselotte Hyveled
Anne Marie Kverneland
Sylvie Grégoire
Søren Thuesen Pedersen
Stig Strøbæk
Mary Szela

Board of Directors in total

13,000
2,500
3,529
–
2,725
4,948
10,471
875
1,615
1,950
935

2,100

4,750
1,200

2,100
100

200
100

(100)

(1,093)
(282)

15,000
2,500
8,279
1,200
2,725
5,955
10,289
875
1,815
2,050
935

3.8
0.7
2.1
0.3
0.7
1.5
2.6
0.2
0.5
0.5
0.2

42,548

10,550

(1,475)

51,623

13.1

Lars Rebien Sørensen
Lars Fruergaard Jørgensen
Jesper Brandgaard
Mads Krogsgaard Thomsen
Henrik Wulff
Non-registered members of Executive Management

392,365
101,360
186,205
280,355
73,810
102,530

41,210
13,765
27,435
27,435
13,765
26,965

(30,000)
(5,000)
(27,335)
(10,070)

(8,000)

403,575
110,125
186,305
297,720
87,575
121,495

Executive Management in total

1,136,625

150,575

(80,405)

1,206,795

Other members of the Senior Management Board

645,187

236,030

(352,028)

529,189

Joint pool for Executive Management and
other members of the Senior Management Board3

994,777

86,769

(313,305)

768,2414

Total

2,819,137

483,924

(747,213)

2,555,848

102.8
28.1
47.5
75.8
22.3
30.9

307.4

134.8

195.7

651.0

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 2015.

2. Calculation of market value is based on the quoted share price of DKK 254.70 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 35% of the pool will be allocated to the members of Executive Management and approximately 65% 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. The joint pool includes the 2013 programme released on 2 February 2017 but excludes 236,080 shares assigned to retired Executive Management and Senior Management Board

members.

NOVO NORDISK ANNUAL REPORT 2016

OTHER DISCLOSURES

2016

DKK million

Retirement beneﬁ t
obligations

Total non-current
liabilities recognised
in the Balance sheet

Operating leases1
Research and
development obligations
Purchase obligations
relating to investments
in property, plant and
equipment
Other purchase
obligations

Total obligations
not recognised in the
Balance sheet

Total contractual
obligations

2015

DKK million

Retirement beneﬁ t
obligations

Total non-current
liabilities recognised
in the Balance sheet

Operating leases1
Research and
development obligations
Purchase obligations
relating to investments
in property, plant and
equipment
Other purchase
obligations

Total obligations
not recognised in the
Balance sheet

Total contractual
obligations

5.3 COMMITMENTS

Commitments

Total contractual obligations and recognised non-current debt can be
speciﬁ ed as follows (payments due by period):

Within
1 year

1–3
years

3 –5
years

More
than
5 years

Total

1,247

1,451

CONSOLIDATED FINANCIAL STATEMENTS

The operating lease commitments are related to non-cancellable operating
leases primarily for premises, company cars and ofﬁ ce equipment.
Approximately 79% of the commitments are related to leases outside
Denmark. The lease costs for 2016 and 2015 were DKK 1,513 million and
DKK 1,293 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.

1,247

1,451

DKK million

1,214

2,061

1,697

2,329

7,301

2,199

1,069

138

–

3,406

Other guarantees
Other guarantees primarily related to guarantees
issued by Novo Nordisk in relation to rented
property

2016

2015

808

748

521

–

4,335

2,166

926

–

521

7,427

Security for debt
Land, buildings and equipment etc at carrying
amount

8,269

5,296

2,761

2,329

18,655

8,312

5,379

2,839

3,576

20,106

Within
1 year

1–3
years

3 –5
years

More
than
5 years

Total

134

118

863

1,186

134

118

863

1,186

1,084

1,631

1,248

2,390

6,353

1,586

691

180

–

2,457

586

3,835

1,769

795

112

6,511

7,091

4,091

2,223

2,502

15,907

7,162

4,225

2,341

3,365

17,093

World Diabetes Foundation (WDF)

At the Annual General Meeting in 2014, a new donation was agreed to by
the shareholders. According to this agreement, Novo Nordisk A/S is obliged
to make annual donation to the Foundation in the period 2015 to 2024
of 0,01% of the net insulin sales of the Group. The annual donation in the
period 2015 to 2016 cannot exceed DKK 8 million per year.

The new donation is given in addition to the existing donation from 2008,
according to which Novo Nordisk A/S is obliged to make annual donation to
the Foundation of 0,125% of the net insulin sales of the Group. The annual
donation in the period 2012–2017 cannot 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.

The total donation per year according to the two donation programmes
will not exceed the lower of DKK 88 million or 15% of the taxable income
of Novo Nordisk A/S in the ﬁ nancial year in question.

For the years 2018 –2024 the donation is 0,1% of the net insulin sales of
the Group. The annual donation in this period cannot exceed the lower of
DKK 90 million or 15% of the taxable income of Novo Nordisk A/S in the
ﬁ nancial year in question.”

In 2016, the donation amounts to DKK 85 million (DKK 86 million in 2015
and DKK 66 million in 2014), 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 relation to employee
contracts for Executive Management of Novo Nordisk, please refer to
‘Remuneration’ on pp 50 –53.

In addition, Novo Nordisk discloses that the Group does not have any
signiﬁ cant agreements to which the Group is a party and that take effect,
alter or terminate upon a change of control of the Group following
implementation of a takeover bid.

1. No material ﬁ nance lease obligations exist in 2016 or 2015.

OTHER DISCLOSURES

NOVO NORDISK ANNUAL REPORT 2016

94 CONSOLIDATED FINANCIAL STATEMENTS

5.4 RELATED PARTY TRANSACTIONS

5.5 FEE TO STATUTORY AUDITORS

DKK million

2016

2015

2014

Statutory audit
Audit-related services
Tax advisory services
Other services

Total fee to statutory auditors

24
4
9
4

24
4
8
7

24
4
8
11

5.6 SUBSEQUENT EVENTS

Subsequent to 31 December 2016, two class action lawsuits were ﬁ led and
a Civil Investigative Demand was served. Please refer to note 3.6 for details
on the cases. Novo Nordisk does not expect these cases, or other
subsequent events, to have a material impact on Novo Nordisk’s ﬁ nancial
position, operating proﬁ t or cash ﬂ ow.

Novo Nordisk A/S is controlled by Novo A/S (incorporated in Denmark),
which owns 27.5% of the share capital in Novo Nordisk A/S, representing
75.4% 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 Group is
considered a related party. Due to joint ownership, associated companies
and Management of Novo Nordisk A/S, the Novozymes Group and Xellia
Pharmaceuticals are also considered related parties.

The Group has had the following material transactions with related parties:

DKK million

2016

2015

2014

Novo Nordisk Foundation
Donations to Steno Diabetes
Center A/S via Novo Nordisk
Services provided by Novo Nordisk
Services provided by Novo Nordisk
Foundation

Novo A/S
Services provided by Novo Nordisk
Sale of NNIT A/S B shares
Dividend payment from Novo Nordisk

NNIT Group
Services provided by Novo Nordisk
Services provided by NNIT
Dividend payment from NNIT

Novozymes Group
Services provided by Novo Nordisk
Services provided by Novozymes

Xellia Pharmaceuticals
Services provided by Novo Nordisk

(69)
(3)

–

(51)
–

–

(2)
–
5,052

(3)
(797)
2,687

(5)
–
2,418

(30)
1,239
(26)

(32)
1,316
–

–
–
–

(163)
150

(185)
165

(189)
142

(108)

(11)

(28)

Novo Nordisk has transferred the activities of Steno Diabetes Center to
Capital Region of Denmark as of 1 January 2017.

There have not been any transactions with the Board of Directors
or Executive Management of NNIT A/S, Novozymes A/S, Novo A/S, the
Novo Nordisk Foundation, Xellia Pharmaceuticals ApS or associated
companies. In Novo Nordisk A/S, there have been no transactions with the
Board of Directors or Executive Management besides remuneration.

For information on remuneration to the Management of Novo Nordisk,
please refer to ‘Remuneration’ on pp 50 –53 and note 2.4, ‘Employee costs’.
There are no loans to the Board of Directors or Executive Management in
2016, nor were there in 2015 or 2014.

There are no material unsettled transactions with related parties at the end
of the year.

NOVO NORDISK ANNUAL REPORT 2016

OTHER DISCLOSURES

5.7 COMPANIES IN THE NOVO NORDISK GROUP

Activity: • Sales and marketing • Production • Research and development • Services/investments

CONSOLIDATED FINANCIAL STATEMENTS

Percentage of
shares owned Activity

Company and country

Percentage of
shares owned Activity

Novo Nordisk Research Center Indianapolis, Inc., United States 100

•

Novo Nordisk India Private Limited, India

Company and country

Parent company

Novo Nordisk A/S, Denmark

Subsidiaries by region

USA

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 •

•

Paciﬁ c

Novo Nordisk Pharmaceuticals Pty. Ltd., Australia

Novo Nordisk Canada Inc., Canada

Novo Nordisk Region Paciﬁ c A/S, Denmark

Novo Nordisk Pharma Ltd., Japan

Novo Nordisk Pharmaceuticals Ltd., New Zealand

Novo Nordisk Pharma Korea Ltd., South Korea

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 •
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

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

Novo Nordisk Region Europe Pharmaceuticals A/S, Denmark

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

•

International Operations

– • • • •

Aldaph SpA, Algeria

Novo Nordisk Pharma Argentina S.A., Argentina

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 Service Centre (India) Pvt. Ltd., India

PT. Novo Nordisk Indonesia, Indonesia

Novo Nordisk Pars, Iran

Novo Nordisk Ltd, Israel

•

Novo Nordisk Kenya Ltd., Kenya

Novo Nordisk Pharma SARL, Lebanon

•

100 • •
100 •
100
100 •
100 •
100 •
100

100
100 •
100 •
100
100 •
100 •
100 •
100 •
100 •
100 •
100
100 •
100

100
100 •
100 •
100 •
100
100 •
100 •
100

•

100
100 •
100 •

•
•

•

•
•

•

Novo Nordisk Pharma (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 Pharma Limited, Nigeria

Novo Nordisk Pharma (Private) Limited, Pakistan

Novo Nordisk Panama S.A., Panama

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

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 •

•

Other subsidiaries and associated companies

NNE A/S, Denmark

NNIT A/S, Denmark

100

•
•

Companies without signiﬁ cant activities are not included in the list. In
addition to the companies listed above, NNE A/S has its own subsidiaries.

OTHER DISCLOSURES

NOVO NORDISK ANNUAL REPORT 2016

96 CONSOLIDATED FINANCIAL STATEMENTS

5.8 FINANCIAL DEFINITIONS

ADR
An American Depositary Receipt (or ADR) represents ownership of 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
• 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.

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)’.

Sales growth in local currencies
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 2016

OTHER DISCLOSURES

PART OF MANAGEMENT’S REVIEW

NOT AUDITED

QUARTERLY FINANCIAL FIGURES 2015 AND 2016

DKK million

Net sales

Sales by business segment:
New-generation insulin
Modern insulin
Human insulin
Victoza®
Other diabetes and obesity care

2015

2016

25,200

27,059

26,792

28,876

27,212

27,459

27,537

29,572

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

626
11,715
2,725
4,591
1,374

983
11,806
2,667
4,952
1,391

1,143
11,770
2,760
5,106
1,513

1,707
12,219
2,938
5,397
1,566

Diabetes and obesity care total

19,818

21,279

21,551

22,942

21,031

21,799

22,292

23,827

Haemophilia
Norditropin® (human growth hormone)
Other biopharmaceuticals

2,734
1,830
818

2,757
2,083
940

2,371
1,842
1,028

2,785
2,065
1,084

2,836
2,407
938

2,530
2,158
972

2,285
2,003
957

2,821
2,202
722

Biopharmaceuticals total

5,382

5,780

5,241

5,934

6,181

5,660

5,245

5,745

Sales by geographical segment:
USA
Europe
International Operations
Region China
Paciﬁ c

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
Net ﬁ nancials
Proﬁ t before income taxes
Income taxes

12,011
4,977
3,423
2,847
1,942

21,326
6,147
3,250
854
2,782
2,376
13,857
(1,372)
12,485
2,609

13,820
5,222
3,596
2,284
2,137

23,200
7,175
3,035
887
379
–
12,482
(1,934)
10,548
2,205

13,939
5,200
3,111
2,415
2,127

22,945
6,951
3,289
952
227
–
11,980
(1,844)
10,136
1,753

15,169
5,399
3,681
2,325
2,302

24,268
8,039
4,034
1,164
94
–
11,125
(811)
10,314
2,056

13,730
5,016
3,516
2,875
2,075

22,978
6,741
3,304
908
284
–
12,309
(356)
11,953
2,498

13,947
5,298
3,331
2,509
2,374

23,414
6,867
3,331
873
154
–
12,497
105
12,602
2,634

14,174
5,093
3,326
2,534
2,410

23,551
6,860
3,458
1,015
202
–
12,420
(119)
12,301
2,498

15,343
5,275
3,877
2,540
2,537

24,654
7,909
4,470
1,166
97
–
11,206
(264)
10,942
2,243

Net proﬁ t

9,876

8,343

8,383

8,258

9,455

9,968

9,803

8,699

Depreciation, amortisation and impairment losses

663

648

633

1,015

624

717

736

1,116

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

77,457
32,108

81,313
39,111

85,195
43,109

91,799
46,969

82,368
37,284

88,269
42,585

87,340
41,327

97,539
45,269

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%

24.8%
12.1%
3.3%
84.4%
45.2%
45.3%

25.0%
12.1%
3.2%
85.3%
45.5%
48.2%

24.9%
12.6%
3.7%
85.5%
45.1%
47.3%

26.7%
15.1%
3.9%
83.4%
37.9%
46.4%

Basic earnings per share/ADR (in DKK)1
Diluted earnings per share/ADR (in DKK)

3.80
3.79

3.24
3.23

3.27
3.26

3.25
3.24

3.72
3.71

3.93
3.92

3.88
3.87

3.46
3.46

Average number of shares outstanding (million) – basic
Average number of shares outstanding (million) – diluted

2,597
2,604

2,578
2,584

2,566
2,572

2,553
2,560

2,544
2,550

2,536
2,541

2,527
2,531

2,513
2,517

EMPLOYEES

Number of full-time employees at the end of the period

39,062

39,658

40,261

40,638

41,571

42,265

42,605

41,971

1. For deﬁ nitions, please refer to p 96.

QUARTERLY FINANCIAL FIGURES 2015 AND 2016

NOVO NORDISK ANNUAL REPORT 2016

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 millions)
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 (ratio 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. Includes approximately 2,400 employees in NNIT A/S.

Note

2016

2015

2014

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
4.6

28.0

26.8

24.4

22
106
77,920
74

23
105
67,240
77

32
84
64,533
93

42,446
9.7%
4.4
59:41
3.0

41,122
9.2%
4.3
59:41
3.0

41,4501
9.0%
4.3
60:40
3.2

99%
52
95%
223
6
0
79.2

98%
49
94%
240
2
0
82.4

98%
42
95%
224
2
0
80.8

NOVO NORDISK ANNUAL REPORT 2016

STATEMENT OF SOCIAL PERFORMANCE

SUPPLEMENTARY INFORMATION

CONSOLIDATED SOCIAL STATEMENT

NOTES TO THE CONSOLIDATED SOCIAL STATEMENT

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 three long-term targets: reach more patients with diabetes
care products, ensure that the organisation is working in accordance with
the Novo Nordisk Way and company reputation (read more on pp 11, 12
and 15).

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.

Renewed long-term commitment to providing access
to affordable insulin
Novo Nordisk has renewed its long-term commitment to providing access
to affordable insulin with an expanded scope. Human insulin will be offered
at a guaranteed ceiling price (4 US dollars per vial in 2017) to least
developed and low-income countries as well as to selected humanitarian
relief organisations. The new commitment replaces the long-standing
differential pricing policy.

Novo Nordisk’s long-term target to reach 40 million people with its diabetes
care products in 2020 is intended to enhance access to quality of care.
In 2016, the estimated number reached was 28 million patients, compared
with 26.8 million in 2015, a 4% increase.

Current projections show that it will not be possible to reach the target, of
40 million patients by 2020, which was set in 2013 from a baseline of
20 million in 2010. This is due to a more challenging market environment
than anticipated. Novo Nordisk remains committed to continuing its
efforts to reach more patients and to improve diabetes care. In 2016, the
company announced a new Novo Nordisk Access to Insulin Commitment.
This provides low-income countries and selected humanitarian
organisations with an effective guarantee that Novo Nordisk will ensure
availability of low-priced human insulin, and provides a lower ceiling price
than the previous differential pricing policy.

SECTION 1 BASIS OF PREPARATION

General reporting standards and principles

The Consolidated social statement has been prepared in accordance with
the Danish Financial Statements Act (FSA), sections 99a and 99b.
Section 99a requires Novo Nordisk to account for the company’s activities
relating to social responsibility, reporting on business model, signiﬁ cant
risks, 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. A detailed discussion of risks, policies and performance is available
in Novo Nordisk’s annual Communication on Progress to the UN Global
Compact 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):

• The International Integrated Reporting Framework, , developed by
the International Integrated Reporting Council. The framework consists
of a set of content elements and guiding principles intended to improve
the quality of information available to providers of ﬁ nancial capital.

• The UN Global Compact is 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. As a signatory, Novo Nordisk reports
on progress during 2016 in its Communication on Progress, which can
be found at novonordisk.com/annualreport.

PATIENTS REACHED WITH INSULIN SOLD AT OR BELOW
THE DIFFERENTIAL PRICING POLICY PRICE

Million

2014

2015

2016

• 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 has designed processes to ensure that the qualitative and
quantitative information that documents the social and environmental
dimensions of performance is assured, as well as the systems that underpin
the data and performance. 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. From a social responsibility perspective, the key stakeholder
groups are patients who rely on Novo Nordisk products, employees at
Novo Nordisk and throughout the Group’s value chain, and local
communities. 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.

STATEMENT OF SOCIAL PERFORMANCE

NOVO NORDISK ANNUAL REPORT 2016

100 CONSOLIDATED SOCIAL STATEMENT

SUPPLEMENTARY INFORMATION

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.

Responsiveness
The report reaches out to a wide range of stakeholders, each with speciﬁ c
needs and interests. To most stakeholders, however, the Annual Report is
just one element of interaction and communication with the company. The
Annual Report reﬂ ects how the company is managing operations in ways
that respond to and consider stakeholder concerns and interests.

Applying materiality

Novo Nordisk leans on the International Integrated Reporting Council’s
deﬁ nition of materiality, which states that ‘a matter is material if it is
of such relevance and importance that it could substantively inﬂ uence the
assessments of providers of ﬁ nancial capital with regard to the
organisation’s ability to create value over the short, medium and long term’.
In determining whether a matter is material, Executive Management and
the Board of Directors consider whether the matter could substantively
affect the company’s strategy, its business model, its ability to access
required resources or its key stakeholders. The most material matters are
included in the Annual Report.

In assessing which information to include in the Annual Report, legal
requirements and disclosure commitments made by Novo Nordisk are
considered. Furthermore, it is assessed whether information is tied directly
or indirectly to Novo Nordisk’s ability to create value over the short,
medium and long term.

The outcomes of formal reviews, research, stakeholder engagement and
internal materiality discussions are presented to Executive Management
and the Board of Directors as a proposal for content in the Management
review, while disclosures in the Financial, Social and Environmental
statements are approved by the Audit Committee.

SECTION 2 PATIENTS

2.1 PATIENTS REACHED WITH NOVO
NORDISK DIABETES CARE PRODUCTS
(ESTIMATE)

Accounting policies

The number of full-year patients reached with Novo Nordisk diabetes care
products, excluding devices and PrandiMet ®, is estimated by dividing
Novo Nordisk’s annual sales volume by the annual usage dose per patient
for each product class as deﬁ ned by the World Health Organisation (WHO).
PrandiMet ® is not included as no WHO-deﬁ ned dosage exists.

The WHO-deﬁ ned daily dosage has not changed since 1982 and may not
reﬂ ect the recommended or prescribed daily dose accurately. Actual doses
are based on individual characteristics (eg age and weight) and
pharmacokinetic considerations. Despite this uncertainty, Novo Nordisk
assesses this to be the most consistent way of reporting.

Development
The estimated number of full-year patients reached with Novo Nordisk’s
diabetes care products increased from 26.8 million in 2015 to 28.0 million
in 2016. The development reﬂ ects an overall increase in the number of
people treated with Novo Nordisk’s insulin products, and was mainly driven
by human insulin (0.6 million people) and modern and new-generation
insulin (0.5 million people).

The conclusion from the external assurance provider is available in the
Independent assurance report on p 111.

Principles of consolidation

The Consolidated social statement and disclosures cover the Novo Nordisk
Group comprising Novo Nordisk A/S and entities controlled by
Novo Nordisk A/S.

SOCIAL ACCOUNTING POLICIES

The accounting policies set out below and in the notes have been applied
consistently in the preparation of the Consolidated social statement for all
the years presented.

Changes to accounting policies and disclosures

There have been no material changes to the accounting policies and
disclosures for 2016.

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.
For 2016, the eVoice response rate was 96%, compared with 91% in 2015.

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 postdocs. 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.

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 USA, 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.

NUMBER OF LDCs

2016

2015

2014

Total LDCs
LDCs not buying according
to pricing policy
LDCs with no sales

Total LDCs buying insulin
according to pricing policy

4
22

3
22

2
14

NOVO NORDISK ANNUAL REPORT 2016

STATEMENT OF SOCIAL PERFORMANCE

SUPPLEMENTARY INFORMATION

CONSOLIDATED SOCIAL STATEMENT

101

2.2 LEAST DEVELOPED COUNTRIES
WHERE NOVO NORDISK SELLS INSULIN
ACCORDING TO THE DIFFERENTIAL
PRICING POLICY (CONTINUED)

Novo Nordisk sold human insulin according to the company’s differential
pricing policy in 22 of the world’s 48 LDCs, compared with 23 in 2015. The
total estimated number of people treated with insulin sold at or below the
differential pricing policy price in the LDCs was approximately 349,000 in
2016, compared with approximately 411,000 in 2015. The decline is mainly
attributed to lower sales in Sudan and sales exceeding the ceiling price in
the Democratic Republic of Congo (DRC).

In 2016, an estimated 6.5 million people were treated with insulin for less
than 0.18 US dollar per day worldwide, compared with 5.5 million people
in 2015.

Novo Nordisk operated in Cambodia, Laos, Myanmar and the DRC, but
did not sell insulin at the differential price here. The governments in those
countries were offered the opportunity to buy insulin at the differential
price, but the insulin sold there in 2016 was sold to the private market.

Novo Nordisk is unable to guarantee that the price at which the company
sells the insulin will be reﬂ ected in the price to the consumer. Printing the
price on the actual product is one initiative to avoid mark-ups on price.
While Novo Nordisk prefers to sell insulin at the differential price through
government tenders, the company is willing to sell to private distributors
and agents.

2.3 DONATIONS

Accounting policies

Donations by Novo Nordisk to the World Diabetes Foundation and the
Novo Nordisk Haemophilia Foundation are recognised as an expense when
the donation is paid out or when an unconditional commitment to donate
has been made. For additional information regarding the World Diabetes
Foundation, please refer to note 5.3 in the Consolidated ﬁ nancial
statements.

DKK million

2016

2015

2014

World Diabetes Foundation
Novo Nordisk Haemophilia Foundation

85
21

86
19

Total donations

106

105

66
18

2.4 ANIMALS PURCHASED FOR RESEARCH

Accounting policies

Animals purchased for research is recorded as the number of animals
purchased for all research undertaken by Novo Nordisk either in-house or
by external contractors. The number of animals purchased is based on
internal registration of purchased animals and yearly reports from external
contractors.

ANIMALS PURCHASED

2016

2015

2014

Mice, rats and other rodents
Pigs
Rabbits
Dogs
Non-human primates
Other vertebrates

76,049
891
347
227
406
0

65,335
939
443
214
302
7

62,423
818
574
374
344
0

77,920

67,240

64,533

The number of animals purchased for research in 2016 increased by 16%
compared with 2015 due to an increase in early-phase research. In all, 98%
of the animals purchased were rodents. The variation in the purchase of
large animals from year to year reﬂ ects the different development phases
the research projects have reached.

2.5 NEW PATENT FAMILIES (FIRST FILINGS)

Accounting policies

New patent families (ﬁ rst ﬁ lings) is recorded as the number of new patent
applications that were ﬁ led during the year.

Development
A total of 74 new patent families were established in 2016, a slight
decrease of 4% compared with ﬁ ling activity in 2015, when 77 patent
families were established.

The patent expiry dates for the product portfolio are shown in the table
below. The dates provided are for expiry in the USA, Germany, China and
Japan of patents on the active ingredient, unless otherwise indicated,
and include extensions of patent term (including for paediatric extension,
where applicable). For several products, in addition to the compound
patent, Novo Nordisk holds other patents on manufacturing processes,
formulations or uses that may be relevant for exclusivity beyond the
expiration of the active ingredient patent. Furthermore, regulatory data
protection may apply.

2.5 MARKETED PRODUCTS IN KEY MARKETS (ACTIVE INGREDIENTS)

USA

Germany

China

Japan

Diabetes care:
NovoRapid ® (NovoLog ®)
NovoMix ® 30 (NovoLog ® Mix 70/30)
Levemir ®
NovoNorm® (Prandin®)
Victoza®2
Tresiba®
Ryzodeg ®
Xultophy ®

Obesity:
Saxenda®

Biopharmaceuticals:
Norditropin® (Norditropin® SimpleXx ®)
NovoSeven®
NovoEight ®
NovoThirteen® (TRETTEN ®)
Vagifem® 10 mcg

Expired1
Expired1
2019
Expired
2022
2029
2029
2029

Expired1
Expired
2019
Expired
2022
2028
2028
2028

Expired1
Expired
Expired
Expired
2017
2024
2024
2024

Expired1
Expired
2019
2016
2022
2027
2027
2027

2022

2017

20173
Expired4
N/A5
20216
20227, 8

20173
Expired4
N/A5
Expired
20217

20174
Expired4
N/A5
N/A
N/A

20173
Expired4
N/A5
Expired
20217

1. Formulation patent until 2017.
2. In January 2017, TEVA ﬁ led an Abbreviated New Drug Application (“ANDA”) for
Liraglutide Injection, 18 mg/3 ml (6 mg/ml) (“Liraglutide”) with the USFDA.

3. Formulation patent providing exclusivity to the composition of excipients used in the

drug products.

4. Room temperature-stable formulation patent until 2023.
5. Process patents until 2028 in China, Germany and Japan and until 2030 in the US.
6. Data protection runs until 2025.
7. Patent covers low-dose treatment regimen.
8. Licensed to three generic manufacturers from October 2016.

STATEMENT OF SOCIAL PERFORMANCE

NOVO NORDISK ANNUAL REPORT 2016

102 CONSOLIDATED SOCIAL STATEMENT

SUPPLEMENTARY INFORMATION

SECTION 3 EMPLOYEES

3.1 EMPLOYEES

Accounting policies

The number of employees is recorded as all employees except externals,
employees on unpaid leave, interns, bachelor and master thesis employees,
and substitutes at year-end.

The rate of turnover is measured as the number of employees, excluding
temporary employees, who left the Group during the ﬁ nancial year
compared with the average number of employees, excluding temporary
employees.

Diversity in Novo Nordisk is reported as the percentage split by gender in
all managerial positions and for newly appointed managers. Managerial
positions are deﬁ ned as all managers in Novo Nordisk (global job level incl
CEO, EVP, SVP, CVP, VP, Director, Manager and Team Leader). New
managers are deﬁ ned as all employees who have moved to a managerial
position within the last 12 months – both promoted and externally hired.

EMPLOYEES

2016

2015

2014

USA
Europe
– of which in Denmark
International Operations
Paciﬁ c
Region China

6,128
22,529
18,221
7,875
1,558
4,356

6,193
21,871
17,398
7,198
1,471
4,389

6,205
22,136
17,664
6,550
1,462
5,097

Total employees

42,446

41,122

41,4501

Full-time employees

41,971

40,638

40,9571

Employee turnover

9.7%

9.2%

9.0%

Increase in employees

(1%)

Share of women among newly
appointed managers

43%

44%

42%

1. Includes approximately 2,400 employees in NNIT A/S.

In November 2016, Novo Nordisk reduced its workforce by 2% across its
global organisation. The decision taken was one of several actions to reduce
operating costs in response to a challenging competitive environment in
2017, especially in its large US market. The reductions primarily affected
R&D units, headquarter staff functions as well as positions in the global
commercial organisation, mainly in the USA. Around half of the lay-offs
were in Denmark. At the end of 2016, the total number of employees was
42,446, corresponding to 41,971 full-time positions, which is a 3% increase
compared with 2015. The growth is primarily driven by expansion within
the International Operations sales region and in Product Supply.

SECTION 4 ASSURANCE

4.1 BUSINESS ETHICS REVIEWS

The number of business ethics reviews is recorded as the number of
business ethics reviews and trend reports performed by Group Internal
Audit in afﬁ liates, production sites and headquarter areas. Any gaps
between procedures and behaviour are identiﬁ ed and presented to
Management and the Board of Directors as ﬁ ndings. An action plan for the
closure of ﬁ ndings is agreed upon, and Group Internal Audit follows up
on the implementation of the agreed actions before closing the ﬁ ndings.

GENDER IN MANAGEMENT 2016

(cid:81)(cid:3)Men (cid:81)(cid:3)Women

100

EVP/SVP

CVP/VP/GM

Managers

Total

Among employees as a whole, the gender split was approximately 50:50 in
2016, which is the same as in 2015.

3.2 FREQUENCY OF OCCUPATIONAL
ACCIDENTS

Accounting policies

The frequency of occupational accidents with absence is measured as the
internally reported number of accidents using full-time employees,
excluding externals, employees on unpaid leave, interns, bachelor and
master thesis employees, and substitutes, per million nominal working
hours. An occupational accident with absence is any work-related accident
causing at least one day of absence in addition to the day of the accident.

Development
The average frequency rate of occupational accidents with absence in 2016
was 3.0 per million working hours, unchanged from 2015. The number of
occupational accidents with absence increased by 1% compared with 2015.
One Novo Nordisk employee in Pakistan died in a work-related accident.
Novo Nordisk works with a zero-injury mindset and has a long-term
commitment to continuously improving safety performance. The link
between company values and safety behaviour is emphasised to ensure that
employees always make the safe choice.

Development
A total of 52 business ethics reviews were completed in 2016 with 234
ﬁ ndings, compared with 49 reviews with 183 ﬁ ndings in 2015. It is Group
Internal Audit’s assessment that the overall business ethics compliance
level is sound. Closure of ﬁ ndings progressed as planned, and there were
no overdue ﬁ ndings as of 31 December 2016.

NOVO NORDISK ANNUAL REPORT 2016

STATEMENT OF SOCIAL PERFORMANCE

SUPPLEMENTARY INFORMATION

CONSOLIDATED SOCIAL STATEMENT

103

4.2 FULFILMENT OF ACTION POINTS
FROM FACILITATIONS OF THE NOVO
NORDISK WAY

Accounting policies

Facilitation is the internal audit process for assessing compliance with the
Novo Nordisk Way. The assessment is based on review of documentation
followed by an on-site visit where randomly selected employees,
management and stakeholders are interviewed. Any identiﬁ ed gaps related
to Novo Nordisk Way are identiﬁ ed and presented to Management as
ﬁ ndings. The facilitator and management agree on an action plan to close
the ﬁ ndings. The percentage of fulﬁ lment of action points is measured as
an average of timely closure of action points issued in the current year and
the two previous years. The reason for using a three-year average as the
basis for the calculation is that action lead times typically vary from a few
months to more than a year.

FACILITATIONS AND FINDINGS

2016

2015

2014

Fulﬁ lment of action points

95%

94%

95%

Facilitations
Findings

84
283

65
257

69
213

A total of 84 units were facilitated covering approximately 25,000
employees, 12% of whom were interviewed. In addition, feedback on
those units was collected from almost 1,000 stakeholders. Overall, the
facilitations in 2016, as in 2015, showed a ‘high level’ of compliance with
the Novo Nordisk Way. Corrective actions and corresponding deadlines
were agreed with local management for all actions. The main areas of
improvement identiﬁ ed, covering more than half of all ﬁ ndings, concerned
Essential 2 ‘We set ambitious goals and strive for excellence’, Essential 7
‘We focus on personal performance and development’ and Essential 9
‘We optimise the way we work and strive for simplicity’. The ten Essentials
are part of the Novo Nordisk Way. Read more on page p 19.

4.3 SUPPLIER AUDITS

Accounting policies

4.4 PRODUCT RECALLS

Accounting policies

The number of product recalls is recorded as the number of times
Novo Nordisk has instituted a recall and includes recalls in connection with
clinical trials. A recall can affect various countries but only counts as one
recall.

Development
In 2016, Novo Nordisk had six instances of product recalls compared with
two in 2015; one was critical. Two of the recalls were due to inappropriate
product storage in the external distribution chain while four were due to
products that did not fully meet speciﬁ cations. Local health authorities were
informed in all instances to ensure that distributors, pharmacies, doctors
and patients received appropriate information.

4.5 FAILED INSPECTIONS

Accounting policies

The number of failed inspections is measured in relation to the US Food
& Drug Administration (USFDA), European Medicines Agency (EMA), the
Japanese Pharmaceuticals & Medical Devices Agency (PMDA), Lloyd’s
Register Quality Assurance (LRQA) and domestic authorities for strategic
manufacturing sites. Failed inspections are deﬁ ned as inspections where
Warning Letters or EMA non-compliance letters related to GMP inspections
are received, GMP/ISO certiﬁ cates for strategic sites are lost, pre-approval
inspections result in a Warning Letter, study conclusions are changed
due to GCP/GLP inspection issues, or marketing or import authorisations
are withdrawn due to inspection issues. Strategic sites are deﬁ ned as the
manufacturing sites in Brazil, China, Denmark, France and the USA.

Development
In 2016, as in 2015, there were no failed inspections among those resolved
at year-end. In 2016, 74 inspections were conducted compared with 82
in 2015. At year-end, 49 inspections had been passed and 25 were
unresolved, as ﬁ nal inspection reports had not been received or the ﬁ nal
authority acceptance was pending, which is normal. All but ﬁ ve 2015
inspections have been explicitly passed; among the unresolved were two
USFDA GMP inspections.

The number of supplier audits concluded by Novo Nordisk’s Supplier Audit
department includes the number of responsible sourcing audits and quality
audits conducted in the areas of direct and indirect spend materials.

4.6 COMPANY REPUTATION

Accounting policies

BY TYPE OF AUDIT

2016

2015

2014

Responsible sourcing audits
Quality audits

Total supplier audits

27
196

223

28
212

240

25
199

224

The number of audits concluded in 2016 decreased by 7% compared with
2015. More audits were conducted in 2015, mainly due to Management’s
decision to build new factories. There were no critical ﬁ ndings in 2016.

Company reputation is measured annually using the RepTrak® methodology
developed by Reputation Institute. The total score is measured as the mean
company reputation score among people with diabetes, general
practitioners, diabetes specialists and employees across 15 key markets.
Reputation is measured on a scale of 0 –100, with 100 being the best
possible score. A score above 80 is considered excellent; a score between
70 and 80 is considered strong. Data was collected from January through
October 2016.

The data for external stakeholders are collected through annual surveys
carried out by external consultancy ﬁ rms. The employee data are collected
from the annual employee survey. For a few of the markets, historical data
are not available for all the external stakeholder groups included. This has
been assessed as having no material impact on the numbers reported nor
on development trends.

COMPANY REPUTATION
BY STAKEHOLDER GROUP

People with diabetes
Employees
General practitioners
Diabetes specialists

Total score

2016

2015

2014

73.8
82.7
79.5
80.8

79.2

73.9
83.8
85.4
86.4

82.4

71.9
84.0
82.2
85.1

80.8

The decline in score among general practitioners and diabetes specialists
reﬂ ects a general trend across the pharmaceutical sector.

STATEMENT OF SOCIAL PERFORMANCE

NOVO NORDISK ANNUAL REPORT 2016

104 CONSOLIDATED ENVIRONMENTAL STATEMENT

SUPPLEMENTARY INFORMATION

STATEMENT OF ENVIRONMENTAL
PERFORMANCE
FOR THE YEAR ENDED 31 DECEMBER

RESOURCES

Energy consumption (1,000 GJ)
Water consumption (1,000 m3)

EMISSIONS, ORGANIC RESIDUES AND WASTE

Share of renewable power for production
CO2 emissions from energy consumption (1,000 tons)
CO2 emissions from transport (1,000 tons)
Organic residues (tons)
Waste (tons)
Non-hazardous waste (ratio)
Breaches of regulatory limit values

Note

2016

2015

2014

2.1
2.2

3.1
3.1
3.1
3.2
3.3
3.3
3.4

2,935
3,293

2,778
3,131

2,556
2,959

78%
92
38
114,805
37,940
34%
42

78%
107
43
124,049
34,715
42%
28

73%
120
57
110,095
30,720
50%
9

NOTES TO THE CONSOLIDATED ENVIRONMENTAL STATEMENT

Basis of preparation

Resources

Emissions, organic residues and waste

In the Consolidated environmental statement, Novo Nordisk reports on
performance in terms of resources and emissions, organic residues and
waste. Progress is reported against the long-term targets to continuously
reduce environmental impacts. Read more on pp 13 and 15.

To support the three long-term targets, the environmental statement
contains additional performance information of strategic importance such as
organic residue, waste and breaches of regulatory limit values.

Signiﬁ cant reductions in CO2 emissions from energy
consumption
In 2015, Novo Nordisk set a bold target pledging that all production
sites will run on electricity from renewable sources by 2020. The share of
electricity from renewable sources remained at 78% in 2016, in volume
283 million kWh. Of the 16 production sites, 11 are now fully supplied with
electricity from renewable sources. With regard to fuel used for steam

and heat production, seven of the eight production sites in Denmark use
bio-natural gas, which is biogas produced from liquid manure, food waste
and organic waste from the industry. The biogas is upgraded to meet the
quality requirements of natural gas and feeds into the natural gas
distribution system. The facility in Brazil uses certiﬁ ed wood to produce
the steam used in production. The remaining production facilities use
natural gas.

NOVO NORDISK ANNUAL REPORT 2016

STATEMENT OF ENVIRONMENTAL PERFORMANCE

SUPPLEMENTARY INFORMATION

CONSOLIDATED ENVIRONMENTAL STATEMENT

105

SECTION 1 BASIS OF PREPARATION

General reporting standards and principles

ENVIRONMENTAL ACCOUNTING POLICIES

The Consolidated environmental statement has been prepared in
accordance with the same standards as those for the Consolidated social
statement. Read more in section 1 ‘Basis of preparation’ of the Consolidated
social statement on p 99.

Principles of consolidation

The Consolidated environmental statement covers the production sites
including ofﬁ ce buildings and R&D at the sites, except for CO2 emissions
from transport, which covers external suppliers used to distribute
Novo Nordisk products.

The accounting policies set out below have been consistently applied in
preparation of the Consolidated environmental statement for all the years
presented.

Changes to accounting policies and disclosures

The following disclosure change has been made to align with Management
priorities:

• ‘Share of renewable power for production’ has been added, as it is a

strategic focus area.

SECTION 2 RESOURCES

2.1 ENERGY CONSUMPTION

2.2 WATER CONSUMPTION

Accounting policies

Energy consumption is measured as both direct supply of energy (internally
produced energy), which is energy Novo Nordisk produces from mainly
biogas, natural gas and wood, and indirect supply of external energy
(externally produced energy), which is electricity, steam and district heat.
The consumption of fuel (internally produced energy) and externally
produced energy is based on meter readings and invoices.

ENERGY CONSUMPTION
IN 1,000 GJ

Diabetes and obesity care
Biopharmaceuticals
Not allocated1

2016

2015

2014

2,050
460
425

2,006
322
450

1,816
316
424

Total energy consumption

2,935

2,778

2,556

1. Not allocated consists of consumption that cannot be directly linked to the

production of either Diabetes and obesity care or Biopharmaceuticals, ie ofﬁ ce
buildings and research activities.

In 2016, energy consumption increased by 6% compared with 2015,
primarily due to the new biopharmaceutical production facility in New
Hampshire, USA, which was included in the corporate reporting for the ﬁ rst
time. In addition, production increased within some areas in both Diabetes
and obesity care and Biopharmaceuticals.

Water consumption is measured based on meter readings and invoices. It
includes drinking water, industrial water and steam.

WATER CONSUMPTION
IN 1,000 M3

Diabetes and obesity care
Biopharmaceuticals
Not allocated1

2016

2015

2014

2,866
260
167

2,753
213
165

2,568
209
182

Total water consumption

3,293

3,131

2,959

1. Not allocated consists of consumption that cannot be directly linked to the

production of either Diabetes and obesity care or Biopharmaceuticals, ie ofﬁ ce
buildings and research activities.

In 2016, water consumption increased by 5% compared with 2015,
primarily due to increased production within some areas in both
Diabetes and obesity care and Biopharmaceuticals, including a new
biopharmaceuticals facility in New Hampshire, USA. More than half of the
water is used at the production site in Kalundborg, Denmark.

Two facilities are located in regions subject to high water stress, consuming
6% of the total water used at Novo Nordisk sites. There have been no
water shortage incidents and overall, water consumption at these facilities
decreased in 2016.

SECTION 3 EMISSIONS, ORGANIC RESIDUES AND WASTE

3.1 CO2 EMISSIONS

Accounting policies

Share of renewable power for production
Share of renewable power is reported according to the Greenhouse Gas
(GHG) Protocol Scope 2 Guideline. It is calculated as the sum of electricity
in each country that comes from 100% renewable sources, either sourced
from the market or self-produced.

CO2 emissions from energy consumption
The amount of CO2 emissions from energy consumption covers
consumption at production sites measured in metric tons. CO2 emissions
from energy consumption are calculated according to the GHG Protocol
and based on emission factors from the previous year.

CO2 emissions from transport (product distribution)
CO2 emissions from product distribution are calculated by external
transportation suppliers as the estimated emissions from product
distribution in metric tons. CO2 emissions are calculated as the worldwide
distribution of semi-ﬁ nished and ﬁ nished products, raw materials and
components by air, sea and road between production sites and from
production sites to afﬁ liates, direct customers and importing distributors.
CO2 emissions from product distribution from afﬁ liates to pharmacies,
hospitals and wholesalers are not included.

STATEMENT OF ENVIRONMENTAL PERFORMANCE

NOVO NORDISK ANNUAL REPORT 2016

106 CONSOLIDATED ENVIRONMENTAL STATEMENT

SUPPLEMENTARY INFORMATION

3.1 CO2 EMISSIONS (CONTINUED)

3.3 WASTE

CO2 EMISSIONS IN 1,000 TONS

2016

2015

2014

Accounting policies

Share of renewable power
for production

CO2 emissions from energy
consumption
– Diabetes and obesity care
– Biopharmaceuticals
– Not allocated1
CO2 emissions from transport

Total CO2 emissions

78%

73%

92
78
11
3
38

130

107
88
6
13
43

150

120
94
10
16
57

177

1. Not allocated consists of consumption that cannot be directly linked to the

production of either Diabetes and obesity care or Biopharmaceuticals, ie ofﬁ ce
buildings and research activities.

The share of renewable electricity remained stable at 78% in 2016.
Novo Nordisk has a target of reaching 100% electricity for production from
renewable sources by 2020. Overall, 11 out of 16 production sites now use
electricity exclusively from renewable sources.

While energy consumption increased in order to meet market demands, the
overall CO2 emissions from energy consumption for production decreased
by 14% in 2016 compared with 2015. This is a result of the efforts to
increase the use of renewable energy and the ongoing conversion to less
CO2 intensive energy sources.

Emissions from transport (product distribution) decreased by 12%
compared with 2015, due to increased distribution by sea as opposed to
air transport. 79% of the emissions from transport are from air transport.
Distributing as many products as possible by sea remains a priority for
Novo Nordisk, as sea transport reduces both CO2 emissions and costs.

3.2 ORGANIC RESIDUES

Accounting policies

Organic residues consist of recycled biomass and ethanol from the
production of the active pharmaceutical ingredients (API). The biomass is
measured in m3 and converted to tons. The amount of ethanol is
calculated based on volume and concentration and then converted to tons.
The residues are primarily used in biogas plants where energy is recovered.
The digested slurry is then used as fertilizers on local farmland after it has
been used in biogas production.

ORGANIC RESIDUES (TONS)

2016

2015

2014

Biomass
Recyclable ethanol

108,751
6,054

113,453
10,596

101,729
8,366

Total organic residues

114,805

124,049

110,095

The total amount of organic residues, a by-product of production of API,
decreased by 7% due to changes in the product mix of API. Ethanol
decreased by 43% from a relative high level in 2015 when impurities in the
ethanol waste resulted in lower regeneration.

Waste is measured as the sum of non-hazardous and hazardous waste
disposed of based on weight receipts.

Non-hazardous waste (ratio) is calculated as a percentage of the total
amount of waste disposed of.

TONS OF WASTE

Non-hazardous waste
Hazardous waste

2016

2015

2014

13,077
24,863

14,500
20,215

15,492
15,228

Total waste

37,940

34,715

30,720

Non-hazardous waste (ratio)

34%

42%

50%

The total amount of waste increased by 9% compared with 2015.
Non-hazardous waste decreased by 10% while hazardous waste increased
by 23%. This is mainly due to higher pilot production at a multi purpose
production plant in Denmark where regeneration of ethanol is not possible
due to risk of contamination. The ethanol, not suitable for biogas, is
categorised as hazardous waste and disposed of as ‘special treatment’. It is
transported to a third-party manufacturing plant that can reuse the ethanol.
Reducing ethanol waste is a high priority for Novo Nordisk, and efﬁ cient
regeneration plants at API sites enable repeated reuse of the ethanol.

WASTE DISPOSAL
(cid:81)(cid:3)Recycling (cid:81)(cid:3)Incineration with energy recovery
(cid:81)(cid:3)Incineration without energy recovery (cid:81)(cid:3)Special treatment (cid:81)(cid:3)Landﬁlling

100

2014

2015

2016

3.4 BREACHES OF REGULATORY LIMIT
VALUES

Accounting policies

Breaches of regulatory limit values cover all breaches reported to the
environmental authorities.

Development
Incidents with breaches of regulatory limit values increased from 28 in 2015
to 42 in 2016. The majority of the breaches were related to wastewater,
with minor impacts on the environment. As in 2015, most of the breaches
are related to pH and COD/BOD at one facility. A new neutralisation plant
is intended to solve the pH issue, and in relation to COD/BOD, a root cause
analysis has been conducted and an action plan prepared.

NOVO NORDISK ANNUAL REPORT 2016

STATEMENT OF ENVIRONMENTAL PERFORMANCE

MANAGEMENT STATEMENT

CONSOLIDATED FINANCIAL STATEMENTS

107

STATEMENT BY THE BOARD OF DIRECTORS AND
EXECUTIVE MANAGEMENT ON THE ANNUAL REPORT

Today, the Board of Directors and Executive Management approved the
Annual Report of Novo Nordisk A/S for the year 2016. The Board of
Directors and Executive Management are jointly responsible for ensuring
the integrity and quality of the report.

The Annual Report has been prepared in accordance with the International
Integrated Reporting Framework.

The Consolidated ﬁ nancial statements have been prepared in accordance
with International Financial Reporting Standards as adopted by the EU
and further requirements in the Danish Financial Statements Act.

Further, the Financial statements of the parent company and Management’s
Review have been prepared in accordance with the Danish Financial
Statements Act.

In our opinion, the Consolidated ﬁ nancial statements and the Financial
statements of the parent company give a true and fair view of the ﬁ nancial
position at 31 December 2016, the results of the Group’s and parent
company’s operations, and consolidated cash ﬂ ows for the ﬁ nancial year
2016. Furthermore, in our opinion, Management’s Review includes a
true and fair account of the development in the operations and ﬁ nancial
circumstances, of the results for the year, and of the ﬁ nancial position
of the Group and the parent company as well as a description of the most
signiﬁ cant risks and elements of uncertainty facing the Group and the
parent company.

Novo Nordisk’s Consolidated social and environmental statements have
been prepared in accordance with the reporting principles of materiality,
inclusivity and responsiveness of AA1000APS(2008) and social and
environmental accounting policies. They give a true and fair account and
a balanced and reasonable presentation of the organisation’s social and
environmental performance in accordance with these principles.

We recommend that the Annual Report be adopted at the Annual General
Meeting.

Bagsværd, 1 February 2017

Registered Executive
Management

Lars Fruergaard Jørgensen
President and CEO

Jesper Brandgaard
CFO

Mads Krogsgaard Thomsen

Henrik Wulff

Board of Directors

Göran Ando
Chairman

Jeppe Christiansen
Vice chairman

Bruno Angelici

Brian Daniels

Sylvie Grégoire

Liz Hewitt

Liselotte Hyveled

Anne Marie Kverneland

Søren Thuesen Pedersen

Stig Strøbæk

Mary Szela

MANAGEMENT STATEMENT

NOVO NORDISK ANNUAL REPORT 2016

108 INDEPENDENT AUDITOR’S REPORT

INDEPENDENT AUDITOR’S REPORT

To the shareholders of Novo Nordisk A/S

Our opinion
In our opinion, the Consolidated ﬁ nancial statements give a true and fair
view of the Group’s ﬁ nancial position at 31 December 2016 and of the
results of the Group’s operations and cash ﬂ ows for the ﬁ nancial year
1 January to 31 December 2016 in accordance with International Financial
Reporting Standards as adopted by the EU and further requirements in the
Danish Financial Statements Act.

Moreover, in our opinion, the Financial statements of the Parent Company
give a true and fair view of the Parent Company’s ﬁ nancial position at
31 December 2016 and of the results of the Parent Company’s operations
for the ﬁ nancial year 1 January to 31 December 2016 in accordance with
the Danish Financial Statements Act.

What we have audited
Novo Nordisk A/S’ Consolidated ﬁ nancial statements and the Financial
statements of the parent company for the ﬁ nancial year 1 January to
31 December 2016, pp 57– 96 and pp 114 –118, comprise income
statement, balance sheet, statement of changes in equity, and notes to
the ﬁ nancial statements including summary of signiﬁ cant accounting
policies for the Group as well as for the Parent Company and statement
of comprehensive income and statement of cash ﬂ ow for the Group.
Collectively referred to as the “ﬁ nancial statements”.

Basis for Opinion
We conducted our audit in accordance with International Standards on
Auditing (ISAs) and the additional requirements applicable in Denmark.
Our responsibilities under those standards and requirements are further
described in the Auditor’s Responsibilities for the Audit of the ﬁ nancial
statements section of our report. We believe that the audit evidence
we have obtained is sufﬁ cient and appropriate to provide a basis for our
opinion.

Independence
We are independent of the Group in accordance with the International
Ethics Standards Board for Accountants’ Code of Ethics for Professional
Accountants (IESBA Code) and the ethical requirements that are relevant to
our audit of the ﬁ nancial statements in Denmark. We have also fulﬁ lled our
other ethical responsibilities in accordance with the IESBA Code.

Key Audit Matters
Key audit matters are those matters that, in our professional judgment,
were of most signiﬁ cance in our audit of the ﬁ nancial statements for 2016.
These matters were addressed in the context of our audit of the ﬁ nancial
statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.

Key Audit Matter

How our audit addressed the Key Audit Matter

Revenue recognition relating to rebates and discounts in the US business
The Group sells to various customers in the USA, which can fall under
certain commercial and government mandated contracts and
reimbursement arrangements, of which the most signiﬁ cant are Managed
Care, Medicare, Medicaid and charge-backs to wholesalers.

These arrangements result in deductions to gross sales in arriving at net
sales and give rise to obligations for the Group to provide customers with
rebates, discounts and allowances, which for unsettled amounts are
recognised as an accrual.

We have focused on this area as rebates, discounts and allowances are
complex and because establishing an appropriate accrual requires
signiﬁ cant judgement and estimation by Management. This judgement is
particularly complex in a US healthcare environment in which competitive
pricing pressure and product discounting are growing trends.

Refer to Note 2.1.

Litigations
The pharmaceutical industry is heavily regulated, which increases inherent
litigation risk, and litigation and contingent liabilities may arise from
product-speciﬁ c and general legal proceedings, from guarantees, marketing
practices, unethical behaviour or government investigations connected
with the Group’s activities.

We have focused on this area as the amounts involved are potentially
material and the valuation of the provision is based on application of
material judgement and estimation, and is therefore associated with
uncertainty. Accordingly, unexpected adverse outcomes could signiﬁ cantly
impact the Group’s reported proﬁ t and statement of ﬁ nancial position.

Refer to Note 3.6.

We have tested relevant controls including applicable information systems
and Management’s review controls.

We have obtained Management’s calculations for accruals under applicable
schemes and assessed the signiﬁ cance of assumptions applied by
comparing them to the Group’s stated commercial policies, the terms of the
applicable contracts, third party data and historical levels of paid rebates
and discounts in the US business.

We have compared the assumptions to contracted prices, historical
rebates, discounts, allowances and to current payment trends. We have
also considered the historical accuracy of the Group’s estimates in previous
years.

We have formed an independent assessment of the most signiﬁ cant
elements of the accrual at 31 December 2016 using third party data and
compared this expectation to the actual accrual recognised by the Group.

We have tested relevant controls regarding capture of data and
completeness and how Management assesses the need for a provision.

We have discussed the status of signiﬁ cant known actual and potential
litigation with in-house legal counsel. We have obtained and substantively
tested evidence to support the decisions and rationale for provisions held
or decisions not to recognise provisions, including correspondence with
legal counsel and other counter-parties to litigation and considered
Management’s assessment of the probability of defending any litigation
and the reliability of estimating any provisions.

We have developed an independent expectation of the litigation provision
based on product litigation history and other available evidence to assess
the valuation and completeness of the provisions recognised by the Group.
We have obtained conﬁ rmations from external legal counsel to conﬁ rm our
understanding of settled and outstanding litigation and asserted claims. We
have evaluated signiﬁ cant adjustments to legal provisions recorded during
the year to determine if they were indicative of management bias.

We have tested the completeness of the external legal counsels from whom
we have asked for direct conﬁ rmation by testing legal expenses on a sample
basis and comparing to internal documents.

NOVO NORDISK ANNUAL REPORT 2016

INDEPENDENT AUDITOR’S REPORT

Uncertain tax positions
The Group operates in a complex multinational tax environment and there
are open tax and transfer pricing cases with domestic and foreign tax
authorities.

We have focused on this area as the amounts involved are potentially
material and the valuation of tax assets and liabilities is associated with
uncertainty and judgement.

Refer to Note 2.6.

Statement on Management’s Review
Management is responsible for Management’s Review (pp 1– 56 and p 97).

Our opinion on the ﬁ nancial statements does not cover Management’s
Review, and we do not express any form of assurance conclusion thereon.

In connection with our audit of the ﬁ nancial statements, our responsibility
is to read Management’s Review and, in doing so, consider whether
Management’s Review is materially inconsistent with the ﬁ nancial
statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated.

Moreover, we considered whether Management’s Review includes the
disclosures required by the Danish Financial Statements Act.

Based on the work we have performed, in our view, Management’s
Review is in accordance with the Consolidated ﬁ nancial statements and the
Financial statements of the Parent Company and has been prepared in
accordance with the requirements of the Danish Financial Statements Act.
We did not identify any material misstatement in Management’s Review.

Management’s Responsibility for the Financial Statements
Management is responsible for the preparation of Consolidated ﬁ nancial
statements that give a true and fair view in accordance with International
Financial Reporting Standards as adopted by the EU and further
requirements in the Danish Financial Statements Act and for the
preparation of Financial statements of the Parent Company that give a
true and fair view in accordance with the Danish Financial Statements Act,
and for such internal control as Management determines is necessary to
enable the preparation of ﬁ nancial statements that are free from material
misstatements, whether due to fraud or error.

In preparing the ﬁ nancial statements, Management is responsible for
assessing the Group’s and Parent Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and
using the going concern basis of accounting unless Management either
intends to liquidate the Group or Parent Company or to cease operations,
or has no realistic alternative but to do so.

INDEPENDENT AUDITOR’S REPORT

109

We have tested relevant controls regarding capture of data and
completeness and how Management assesses the need for a provision.

In understanding and evaluating Management’s judgements, we have
considered the status of recent and current tax authority audits and
enquiries, the outcome of previous claims, judgemental positions taken in
tax returns and current year estimates and developments in the tax
environment.

In addition, we have used our own local and international tax specialists,
evaluated the adequacy of Management’s key assumptions and read
correspondence with tax authorities to assess the valuation of tax assets
and liabilities.

Auditor’s Responsibilities for the Audit of the Financial
Statements
Our objectives are to obtain reasonable assurance about whether the
ﬁ nancial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs and the
additional requirements applicable in Denmark will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error
and are considered material if, individually or in the aggregate, they could
reasonably be expected to inﬂ uence the economic decisions of users taken
on the basis of these ﬁ nancial statements.

As part of an audit in accordance with ISAs and the additional requirements
applicable in Denmark, we exercise professional judgement and maintain
professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the ﬁ nancial
statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is
sufﬁ cient and appropriate to provide a basis for our opinion. The risk of
not detecting a material misstatement resulting from fraud is higher
than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations or the override of internal
control.

• Obtain an understanding of internal control relevant to the audit in order
to design audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Group’s and the Parent Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the

reasonableness of accounting estimates and related disclosures made by
Management.

• Conclude on the appropriateness of Management’s use of the going

concern basis of accounting and based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that
may cast signiﬁ cant doubt on the Group’s and the Parent Company’s
ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the ﬁ nancial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our Auditor’s
Report. However, future events or conditions may cause the Group or the
Parent Company to cease to continue as a going concern.

INDEPENDENT AUDITOR’S REPORT

NOVO NORDISK ANNUAL REPORT 2016

110

INDEPENDENT AUDITOR’S REPORT

• Evaluate the overall presentation, structure and content of the ﬁ nancial

statements, including the disclosures, and whether the ﬁ nancial
statements represent the underlying transactions and events in a manner
that achieves fair presentation.

• Obtain sufﬁ cient appropriate audit evidence regarding the ﬁ nancial
information of the entities or business activities within the Group to
express an opinion on the Consolidated ﬁ nancial statements. We
are responsible for the direction, supervision and performance of the
group audit. We remain solely responsible for our audit opinion.

We communicate with those charged with governance (the Board of
Directors) regarding, among other matters, the planned scope and timing
of the audit and signiﬁ cant audit ﬁ ndings, including any signiﬁ cant
deﬁ ciencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we
have complied with relevant ethical requirements regarding independence,
and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable,
related safeguards.

From the matters communicated with those charged with governance,
we determine those matters that were of most signiﬁ cance in the audit of
the ﬁ nancial statements of the current period and are therefore the key
audit matters. We describe these matters in our Auditor’s Report unless
law or regulation precludes public disclosure about the matter or when, in
extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so
would reasonably be expected to outweigh the public interest beneﬁ ts of
such communication.

Bagsværd, 1 February 2017

PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab (CVR no. 3377 1231)

Mogens Nørgaard Mogensen
State Authorised Public Accountant

Torben Jensen
State Authorised Public Accountant

NOVO NORDISK ANNUAL REPORT 2016

INDEPENDENT AUDITOR’S REPORT

INDEPENDENT LIMITED ASSURANCE REPORT ON THE SOCIAL
AND ENVIRONMENTAL REPORTING

INDEPENDENT ASSURANCE REPORT

111

To the Stakeholders of Novo Nordisk A/S

We have undertaken a limited assurance engagement of the consolidated
social and environmental information of the Annual Report (the report) of
Novo Nordisk A/S for 2016 which comprises parts of the Management’s
Review (pp 11–13, and 15) and the Consolidated social and environmental
statements on pp 98 –106. The assurance engagement have also covered
the nature and extent of Novo Nordisk’s adherence to the AA1000
AccountAbility Principles Standard (2008) (AA1000APS) principles
(inclusivity, materiality and responsiveness) with respect to stakeholder
dialogue.

Novo Nordisk’s responsibility for the consolidated social
and environmental information
Novo Nordisk’s management is responsible for preparation of the
consolidated social and environmental information (the information) in
accordance with the accounting policies described on pp 99 –106 and
for the Novo Nordisk approach towards adherence to AA1000APS. This
responsibility includes design, implementation and maintenance of internal
controls relevant to ensure that data are free from material misstatements,
whether due to fraud or error.

Our independence and quality control
We have complied with the Code of Ethics for Professional Accountants
issued by the International Ethics Standards Board for Accountants, which
includes independence and other ethical requirements founded on
fundamental principles of integrity, objectivity, professional competence
and due care, conﬁ dentiality and professional behavior. We also qualify
as independent as deﬁ ned by the AA1000 Assurance Standard (2008)
(AA1000AS). The ﬁ rm applies International Standard on Quality Control 1
and accordingly maintains a comprehensive system of quality control includ-
ing documented policies and procedures regarding compliance with ethical
requirements, professional standards and applicable legal and regulatory
requirements. Our work was carried out by an independent multidisciplinary
team with experience in sustainability reporting and assurance.

Our responsibility
Our responsibility is to express a limited assurance conclusion on the
information in the report based on the procedures we have performed
and the evidence we have obtained. Furthermore, our responsibility is, by
applying the AA1000AS, to express a moderate assurance conclusion
and make recommendations for the nature and extent of Novo Nordisk’s
adherence to the AA1000APS principles.

We conducted our limited assurance engagement in accordance with
International Standard on Assurance Engagements 3000, “Assurance
Engagements other than Audits or Reviews of Historical Financial
Information”, issued by the International Auditing and Assurance Standards
Board. ISAE 3000 requires that we plan and perform this engagement
to obtain limited assurance about whether the information are free from
material misstatement.

A limited assurance engagement undertaken in accordance with ISAE 3000
involves assessing the suitability of Novo Nordisk’s use of stated accounting
policies as the basis for the preparation of the information. Furthermore,
it involves assessing the risks of material misstatement of the information
whether due to fraud or error, responding to the assessed risks as
necessary in the circumstances, and evaluating the overall presentation of
the information. A limited assurance engagement is substantially less in
scope than a reasonable assurance engagement in relation to both the risk
assessment procedures, including an understanding of internal control, and
the procedures performed in response to the assessed risks.

Moreover, we have planned our work based on the AA1000AS to perform a
Type 2 engagement and to obtain moderate assurance regarding the nature
and extent of Novo Nordisk’s adherence to the principles of inclusivity,
materiality and responsiveness.

The procedures we performed were based on our professional judgment
and included inquiries, observation of processes performed, inspection of
documents, analytical procedures, evaluating the appropriateness of
quantiﬁ cation methods and reporting policies, and agreeing or reconciling
with underlying records.

We conducted interviews with members of Executive Management,
Corporate Sustainability, Region North America and an external stakeholder
engaged in the Cities Changing Diabetes programme in Houston, USA.
We have assessed Novo Nordisk’s adherence to the principles of inclusivity,
materiality and responsiveness and conﬁ rmed the existence of systems and
procedures to support Novo Nordisk’s Triple Bottom Line governance and
stakeholder relationships. Our work focused on how the UN Sustainable
Development Goals (SDGs) are aligned with the business strategy and the
Cities Changing Diabetes programme.

The procedures performed in a limited assurance engagement vary in
nature and timing from, and are less in extent than for, a reasonable
assurance engagement. Consequently, the level of assurance obtained
in a limited assurance engagement is substantially lower than the assurance
that would have been obtained had we performed a reasonable
assurance engagement. Accordingly, we do not express a reasonable
assurance opinion about whether Novo Nordisk’s consolidated social and
environmental information have been prepared, in all material respects, in
accordance with the social and environmental accounting policies applied
and stated on pp 99 –106.

Limited assurance conclusion
Based on the procedures we have performed and the evidence we have
obtained, nothing has come to our attention that causes us to believe that
the consolidated social and environmental information presented in
Novo Nordisk’s 2016 annual report are not prepared, in all material aspects,
in accordance with the social and environmental accounting policies as
stated on pp 99 –106.

Furthermore, nothing has come to our attention causing us to believe that
Novo Nordisk does not adhere to the AA1000APS principles.

Observations and recommendations
According to AA1000AS, we are required to include observations and
recommendations for improvements in relation to adherence to the
AA1000APS principles. We have no signiﬁ cant recommendations regarding
inclusivity, materiality and responsiveness.

Regarding inclusivity
Novo Nordisk continues to demonstrate a strong commitment to account-
ability with systems and processes in place to support stakeholder engage-
ment around sustainability issues. Stakeholder inclusivity is integrated
across the business and in new initiatives. Novo Nordisk has continued to
engage and include stakeholders in the initiatives to help citizens at risk
of diabetes and people living with diabetes. Stakeholder engagement has
also been extended to address the relevant SDGs.

Regarding materiality
Novo Nordisk continues to discuss, evaluate and determine material issues
on an ongoing basis through a number of core business processes. The
Social and Environmental Committee further strengthens the alignment
of business strategy and the material societal challenges as set out in the
SDGs. Work is ongoing to quantify the impacts of Novo Nordisk’s activities
and contribution to the delivery on the SDGs.

Regarding responsiveness
Novo Nordisk’s commitment to being responsive to stakeholder needs and
concerns is evident from the increasing involvement and focus, at both
international, country and city level, on care and prevention of diabetes and
other chronic diseases and also on responding to the SDGs. Novo Nordisk is
considered to be understanding of and responsive to stakeholder concerns
within the Cities Changing Diabetes programme and other strategic
stakeholder engagement activities.

Bagsværd, 1 February 2017

PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab (CVR no. 3377 1231)

Mogens Nørgaard Mogensen
State Authorised Public Accountant

Torben Jensen
State Authorised Public Accountant

INDEPENDENT ASSURANCE REPORT

NOVO NORDISK ANNUAL REPORT 2016

112 ADDITIONAL INFORMATION

PRODUCT
OVERVIEW

DIABETES CARE

A selection of
Novo Nordisk‘s injection devices.

NEW-GENERATION INSULIN AND COMBINATIONS
• Tresiba®, insulin degludec
• Ryzodeg®, insulin degludec/insulin aspart
• Xultophy®, insulin degludec/liraglutide

OTHER INSULIN DELIVERY SYSTEMS
• PumpCart®, NovoRapid® cartridge to be used in pump
• Cartridge
• Vial

MODERN INSULIN
• Levemir®, insulin detemir
• NovoRapid®, insulin aspart
• NovoRapid® PumpCart®, pre-filled insulin pump cartridge
• NovoMix® 30, biphasic insulin aspart
• NovoMix® 50, biphasic insulin aspart
• NovoMix® 70, biphasic insulin aspart

HUMAN INSULIN
• Insulatard®, isophane (NPH) insulin
• Actrapid®, regular human insulin
• Mixtard® 30, biphasic human insulin
• Mixtard® 40, biphasic human insulin
• Mixtard® 50, biphasic human insulin

GLUCAGON-LIKE PEPTIDE-1
• Victoza®, liraglutide

OTHER PRE-FILLED INSULIN DELIVERY SYSTEMS
• FlexTouch®, U100, U200
• FlexPen®
• InnoLet®

OBESITY CARE

GLUCAGON-LIKE PEPTIDE-1
• Saxenda®, liraglutide 3 mg

BIOPHARMACEUTICALS

HAEMOPHILIA
• NovoSeven®, recombinant factor VIIa, also available with pre-filled

syringe in an increasing number of countries

• NovoEight®, recombinant factor VIII
• NovoThirteen®, recombinant factor XIII

HUMAN GROWTH HORMONE
• Norditropin®, somatropin (rDNA origin)
• Norditropin® FlexPro®, pre-filled multidose delivery system
• Norditropin® NordiFlex®, pre-filled multidose delivery system
• Norditropin® NordiLet®, pre-filled multidose delivery system
• Norditropin® SimpleXx®, durable multidose delivery system
• NordiPen®
• PenMate®, automatic needle inserter (for NordiPen®

and NordiFlex®)

INSULIN PENS
• NovoPen® 5
• NovoPen® 4
• NovoPen® 3
• NovoPen Echo®, with memory function

NEEDLES
• NovoFine® Plus
• NovoFine®
• NovoTwist®
• NovoFine® AutoCover

ORAL ANTIDIABETIC AGENTS
• NovoNorm®, repaglinide

GLUCAGON
• GlucaGen®, glucagon for diagnostic use
• GlucaGen® Hypokit, glucagon emergency kit for severe

hypoglycaemia

HORMONE REPLACEMENT THERAPY
• Vagifem®, estradiol hemihydrate
• Activelle®, estradiol/norethisterone acetate
• Kliogest®, estradiol/norethisterone acetate
• Novofem®, estradiol/norethisterone acetate
• Trisequens®, estradiol/norethisterone acetate
• Estrofem®, estradiol

The product overview on this page makes reference to our 2016 product offering. The names used are European product trade
names with accompanying generic names. Trade and generic names may differ in other markets.

NOVO NORDISK ANNUAL REPORT 2016
MORE INFORMATION
AND REFERENCES
ADDITIONAL REPORTING

Novo Nordisk provides additional disclosure to satisfy legal
requirements and stakeholder interests. Additional reports
can be downloaded from novonordisk.com/annualreport.

MATERIALITY
Information deemed material for providers of financial
capital in their decision-making is included in the Annual
Report, ie of such relevance and importance that it could
substantively influence their assessments of Novo Nordisk’s
ability to create value over the short, medium and long term.

ANNUAL REPORT
The full statutory Annual Report is available online at
novonordisk.com/annualreport.

A printed extract excluding the financial statements of
the parent company is available in English.

This Annual Report is prepared in accordance with the
International Financial Reporting Standards and the
Danish Financial Statements Act. Moreover, it meets the
requirements of an integrated report, as per the Inter -
national Integrated Reporting Framework.

An shortened, printed version, consisting of the Manage-
ment review and excerpts from the consolidated state -
ments, is available in Danish.

NEWS AND UPDATES

FOR MORE NEWS FROM NOVO NORDISK, VISIT
novonordisk.com/investors
novonordisk.com/media
novonordisk.com/sustainability

FORM 20-F
The Form 20-F is filed using a standardised reporting
form so that investors can evaluate the company
alongside US domestic equities. It is an annual reporting
requirement by the US Securities and Exchange
Commission (SEC) for foreign private issuers with equity
shares listed on exchanges in the United States.

CORPORATE GOVERNANCE REPORT
The corporate governance report discloses Novo
Nordisk’s compliance with Danish Corporate Governance
Recommendations to meet requirements of the Danish
Financial Statements Act.

UNITED NATIONS GLOBAL COMPACT
The Communication on Progress to the UN Global
Compact is a voluntary reporting on performance
towards its 10 principles on human rights, labour rights,
environment and anti-corruption and additional progress
reporting on corporate sustainability leadership and UN
goals. It complements the Annual Report to meet the
requirements of the Danish Financial Statements Act,
sections 99a and 99b, on corporate responsibility and
gender diversity. It also adheres to the UN Guiding
Principles Reporting Framework on respect of human
rights.

References: 1. International Diabetes Federation. IDF Diabetes Atlas, 7th edn. Brussels, Belgium. International Diabetes Federation 2015. 2. World Health Organization.
Obesity and Overweight. Fact sheet No 311. January 2015. 3. Stonebraker JS, et al. A study of variations in the reported haemophilia A prevalence around the world.
Haemophilia, 2010; 16:20–32.4. EFPIA (n.d.). Growth Problems. From http://www.efpia.eu/diseases/68/59/Growth-Problems. 5. Novo Nordisk. Internal data on file. 2016. 6.
Hart JT. Rule of Halves: implications of increasing diagnosis and reducing dropout for future workload and prescribing costs in primary care. Br J Gen Pract 1992; 42(356):116–
119. 7. United Nations, Department of Economic and Social Affairs. Population Division 2014. World Urbanization Prospects: The 2014 Revision, Highlights (ST/ESA/
SER.A/352). 8. UK Prospective Diabetes Study (UKPDS). Diabetologia, 1991; 34(12):877–890. 9. ACCISS (2015). Fact Sheet on Inequities and Inefficiencies in the global insulin
market. Health Action International. From http://haiweb.org/wp-content/uploads/2015/11/ACCISS-Fact-Sheet-1-Inequalities-in-Insulin-Market.pdf. Accessed September
2016.10. Stratton IM. Association of glycaemia with macrovascular and microvascular complications of type 2 diabetes (UKPDS 35): prospective observational study. BMJ 321.
2000;(7258):405–412. 11. Matheus AS, Tannus LR, Cobas RA, Palma CC, Negrato CA, Gomes & MB. Impact of diabetes on cardiovascular disease: an update. Int J Hypertens
2013; 2013:653789–653789. 12. American Heart Association (4 November 2016). Cardiovascular Disease & Diabetes. From http://www.heart.org/HEARTORG/Conditions/
More/Diabetes/WhyDiabetesMatters/Cardiovascular-Disease-Diabetes_UCM_313865_Article.jsp#.WHN54dIrKUk. 13. Marso SP, et al. Liraglutide and Cardiovascular
Outcomes in Type 2 Diabetes. New England Journal of Medicine 2016; 375(18):1797–1799. 14. Pfeffer MA, et al. Lixisenatide in Type 2 Diabetes and Acute Coronary
Syndrome. New England Journal of Medicine 2016; 374(11):1094–1096. 15. Marso SP, et al. Semaglutide and Cardiovascular Outcomes in Patients with Type 2 Diabetes. New
England Journal of Medicine 2016; 375:1834–44. 16. Cities Changing Diabetes (2015). Urban Diabetes. Understanding the Challenges and Opportunities. 17. Rosenbaum M,
Kissileff HR, Mayer LE, et al. Energy intake in weight-reduced humans. Brain Res. 2010; 1350:95–102. 18. Wadden TA, et al. Weight maintenance and additional weight loss
with liraglutide after low-calorie-diet-induced weight loss: The SCALE Maintenance randomized study.International Journal of Obesity 2013; 37(11):1443–1451. doi:10.1038/
ijo.2013.120. 19. Garrido C, et al. Quality of life (QOL) and well-being of haemophilia patients and parents managing haemophilia: Hero study analysis. Haemophilia 2012;
18(3):177. 20. Stonebraker JS, Bolton-Maggs PHB, Michael Soucie JM, Walker I & Brooker M. A study of variations in the reported haemophilia B prevalence around the world.
Haemophilia, 2012; 18(3):e91–4. 21. Center for Medicare and Medicaid Services (July 2016). National Health Expenditures Fact Sheet. From https://www.cms.gov/
research-statistics-data-and-systems/statistics-trends-and-reports/nationalhealthexpenddata/nhe-fact-sheet.html. 22. Gallup-Healthways (October 2016). Gallup-
Healthways Well-Being Index. From http://www.well-beingindex.com/ 23. Kaiser Family Foundation (22 September 2015). 2015 Employer Health Benefits Survey – Summary
Of Findings. From http://kff.org/report-section/ehbs-2015-summary-of-findings/. 24. Pharma (2015). Prescription Medicines: Cost in Context. From http://phrma-docs.
phrma.org/sites/default/files/pdf/prescription-medicines-costs-in-context.pdf. 25. Centers for Disease Control and Prevention (25 July 2016). Diabetes. Working to Reverse
the US Epidemic: At A Glance 2016. From https://www.cdc.gov/chronicdisease/resources/publications/aag/diabetes.htm. 26. American Diabetes Association. Economic costs
of diabetes in the U.S. in 2012. Diabetes Care 2013; 36:1033–1046. 27. Centers for Disease Control and Prevention (1 September 2016). Adult Obesity Facts. From https://
www.cdc.gov/obesity/data/adult.html. 28. Cawley J & Meyerhoefer C. The medical care costs of obesity: an instrumental variables approach. Journal of Health Economics.
2012; 31(1):219–230. 29. Finkelstein EA, et al. Obesity and Severe Obesity Forecasts Through 2030. American Journal of Preventive Medicine 2012; 42(6), 56 3–570. 30.
Deloitte (2016). Battling Costs While Improving Care. 2016 Global Healthcare Outlook. 31. OECD Development Centre (2015). Latin American Economics Outlook 2016. From
http://www.oecd-ilibrary.org/development/latin-american-economic-outlook-2016_9789264246218-en 32. International Monetary Fund (October 2016). World Economic
Outlook Database. From www.imf.org. 33. World Health Organization (2014). From www.who.int 34. World Bank Group. 2017. Global Economic Prospects, January 2017.
Weak Investment in Uncertain Times. Washington, DC: World Bank. 35. Worldwide Governance Indicators (2017). From info.worldbank.org/governance/wgi/#home. 36.
European Commission. Joint Report on Health Care and Long-Term Care Systems & Fiscal Sustainability. Institutional Paper 037. October 2016. 37. China Joint Study
Partnership (2016). Deepening Health Reform in China. Policy Summary. 38. International Monetary Fund (27 April 2016). Regional Economic Outlook, Western Hemisphere,
Managing Transitions and Risks. World Economic and Financial Surveys.

Market data on pp 16, 17 and 37 are from IMS MIDAS Health 2016.

Design and production: ADtomic Communications. Accounts and notes: Team2Graphics. Printing: Bording PRO as, February 2017. Photography: Yasuhiro
Nakaoka, Jesper Edvardsen, Ulrik Jantzen, Jesper Westley Jørgensen, Tobias Selnæs Markussen, Gerardo Larios García, Thomas Larsen, Ted Fahn, Rob Taub, Jennifer
Ludwig, Bruce McCarthy and Willi Hansen.

FINANCIAL
CALENDAR
2017

23 MARCH
2017

Annual General
Meeting 2017

24 MARCH
2017

Ex-dividend

27 MARCH
2017

Record date

28 MARCH
2017

Payment, B shares

4 APRIL
2017

Payment, ADRs

3 MAY
2017

Financial Statements
for the first three
months of 2017

9 AUGUST
2017

Financial Statements
for the first six months
of 2017

18 AUGUST
2017

Ex-dividend

21 AUGUST
2017

Record date

22 AUGUST
2017

Payment, B shares

29 AUGUST
2017

Payment, ADRs

1 NOVEMBER
2017

Financial Statements
for the first nine
months of 2017

FINANCIAL
CALENDAR
2018

1 FEBRUARY
2018

Financial Statement for
the full year 2017

114

FINANCIAL STATEMENTS OF THE PARENT COMPANY

FINANCIAL STATEMENTS OF
THE PARENT COMPANY 2016

The following pages comprise the ﬁ nancial statements of the parent company, being the legal entity Novo Nordisk A/S. Apart from ownership of the
subsidiaries in the Novo Nordisk Group, the activity within the parent company mainly comprises sales, research and development, production, corporate
activities and support functions.

INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER

BALANCE SHEET
AT 31 DECEMBER

DKK million

Note

2016

2015

DKK million

Note

2016

2015

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

Proﬁ t in subsidiaries, net of tax
Financial income
Financial expenses

Proﬁ t before income taxes

Income taxes

2
3

3
3
3

9
4
4

68,671
11,496

65,911
11,974

57,175

53,937

19,768
11,974
1,736
1,861

14,528
11,265
1,686
3,644

–

1,732

ASSETS

Intangible assets
Property, plant and equipment
Financial assets

Total ﬁ xed assets

Raw materials
Work in progress
Finished goods

25,558

30,102

Inventories

17,817
192
847

14,800
554
6,099

42,720

39,357

Trade receivables
Amounts owed by afﬁ liated companies
Tax receivables
Other receivables

4,929

4,734

Receivables

Net proﬁ t for the year

37,791

34,623

Deferred income tax assets
Marketable securities
Derivative ﬁ nancial instruments
Cash at bank and on hand

Total current assets

Total assets

EQUITY AND LIABILITIES

Share capital
Net revaluation reserve according to
the equity method
Development costs reserve
Retained earnings

Total equity

Deferred income tax liabilities
Other provisions

Total provisions

Current debt
Derivative ﬁ nancial instruments
Trade payables
Amounts owed to afﬁ liated companies
Tax payables
Other liabilities

Current liabilities

Total liabilities

7
8
9

1,775
20,825
22,166

1,918
17,797
16,057

44,766

35,772

1,809
7,284
2,090

1,541
6,503
1,524

11,183

9,568

1,648
13,112
1,209
807

1,729
10,752
3,708
624

16,776

16,813

268
2,007
529
17,560

1,668
3,539
304
15,493

48,323

47,385

93,089

83,157

510

520

8,948
962
34,278

4,977
860
40,001

44,698

46,358

6
10

–
800

800

19
2,578
2,266
37,134
163
5,431

15
717

732

778
1,382
2,288
26,380
188
5,051

47,591

36,067

47,591

36,067

NOVO NORDISK ANNUAL REPORT 2016

THE PARENT COMPANY

Total equity and liabilities

93,089

83,157

FINANCIAL STATEMENTS OF THE PARENT COMPANY

115

STATEMENT OF CHANGES IN EQUITY

DKK million

Balance at the beginning of the year
Appropriated from Net proﬁ t for the year
Total dividend
Appropriated from Net proﬁ t for the year to Net revaluation reserve
Effect of cash ﬂ ow hedges transferred to the Income statement
Fair value adjustments of cash ﬂ ow hedges for the year
Interim dividends paid during the year
Dividends paid for previous year
Share-based payments (note 3)
Tax credit related to restricted stock units
Purchase of treasury shares
Sale of treasury shares
Reduction of the B share capital
Exchange rate adjustments of investments in subsidiaries
Development costs
Other adjustments

Share
capital

Net
revaluation
reserve

Development
cost reserve

520

4,977

860

3,971

(10)

102

Retained
earnings

40,001
14,772
19,048

614
(1,742)
(7,600)
(16,230)
163
102
(15,057)
–
10
(7)
(102)
306

2016

2015

46,358
14,772
19,048
3,971
614
(1,742)
(7,600)
(16,230)
163
102
(15,057)
–
–
(7)
–
306

40,294
21,443
16,230
(3,050)
2,162
(614)
–
(12,905)
246
9
(17,229)
33
–
(669)
–
408

Balance at the end of the year

510

8,948

962

34,278

44,698

46,358

Proposed appropriation of net proﬁ t:
Interim dividend for the year
Final dividend for the year
Appropriated to Net revaluation reserve
Transferred to Retained earnings

Distribution of net proﬁ t

7,600
11,448
3,971
14,772

–
16,230
(3,050)
21,443

37,791

34,623

Please refer to note 4.1 to the Consolidated ﬁ nancial statements regarding average number of shares, treasury shares and total number of A and B shares in
Novo Nordisk A/S.

THE PARENT COMPANY

NOVO NORDISK ANNUAL REPORT 2016

3 EMPLOYEE COSTS

DKK million

Wages and salaries
Share-based payment costs
Pensions
Other social security contributions
Other employee costs

2016

2015

11,032
163
996
230
326

10,012
246
902
216
335

Total employee costs for the year

12,747

11,711

Employee costs capitalised as intangible assets
and property, plant and equipment
Change in employee costs capitalised as inventories

(236)
(145)

(103)
(145)

Total employee costs in the Income statement

12,366

11,463

For information regarding remuneration to the Board of Directors and
Executive Management, please refer to ‘Remuneration’ on pp 50 –53 and
note 2.4 to the Consolidated ﬁ nancial statements.

Average number of full-time
employees in Novo Nordisk A/S

2016

2015

16,683

15,437

4 FINANCIAL INCOME AND
FINANCIAL EXPENSES

DKK million

2016

2015

Interest income relating to subsidiaries
Income from associate company
Other ﬁ nancial income

Total ﬁ nancial income

Interest expenses relating to subsidiaries
Foreign exchange loss (net)
Other ﬁ nancial expenses

Total ﬁ nancial expenses

5 INCOME TAXES

111
64
17

192

50
324
473

847

88
47
419

554

16
648
5,435

6,099

Uncertain tax positions are presented individually as part of Tax receivables/
Tax payables.

116

FINANCIAL STATEMENTS OF THE PARENT COMPANY

NOTES

1 ACCOUNTING POLICIES

The ﬁ nancial statements of the parent company have been prepared in
accordance with the Danish Financial Statements Act (Class D) and other
accounting regulations for companies listed on NASDAQ Copenhagen.

The accounting policies for the ﬁ nancial statements of the parent company
are unchanged from the last ﬁ nancial year. The accounting policies are the
same as for the Consolidated ﬁ nancial statements with the adjustments
described below. For a description of the accounting policies of the Group,
please refer to the Consolidated ﬁ nancial statements, pp 63– 64.

No separate statement of cash ﬂ ows has been prepared for the parent
company; please refer to the Statement of cash ﬂ ows for the Group on p 60.

SUPPLEMENTARY ACCOUNTING POLICIES FOR
THE PARENT COMPANY

Financial assets

In the ﬁ nancial statements of the parent company, investments in
subsidiaries are recorded under the equity method, using the respective
share of the net asset values in subsidiaries. Net proﬁ t of subsidiaries less
unrealised intra-Group proﬁ ts is recorded in the Income statement of the
parent company.

To the extent net proﬁ t exceeds declared dividends from such companies,
net revaluation of investments in subsidiaries is transferred to Net
revaluation reserve under Equity according to the equity method. Proﬁ ts in
subsidiaries are disclosed as proﬁ t after tax.

Fair value adjustments of ﬁ nancial assets categorised as ‘Available for sale’
are recognised in the Income statement.

Tax

For Danish tax purposes, the parent company is assessed jointly with its
Danish subsidiaries. The Danish jointly taxed companies are included in a
Danish on-account tax payment scheme for Danish corporate income tax.
All current taxes under the scheme are recorded in the individual
companies. Novo Nordisk A/S and its Danish subsidiaries are included in
the joint taxation of the parent company, Novo A/S.

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 can be utilised.

Equity

The new Danish Financial Statements Act effective from 1 January 2016
requires an equity reserve corresponding to capitalised development costs.
The effect at the beginning of the year is DKK 860 million, which is the
carrying amount of development costs prior to 1 January 2016.

2 SALES

DKK million

Sales by business segment
Diabetes and obesity care
Biopharmaceuticals

Total sales

Sales by geographical segment
USA
Europe
International Operations
Region China
Paciﬁ c

Total sales

2016

2015

68,472
199

65,665
246

68,671

65,911

33,398
13,197
9,609
7,234
5,233

32,234
13,861
9,184
6,316
4,316

68,671

65,911

Sales are attributed to geographical segment based on location of the
customer. For deﬁ nitions of segments, please refer to note 2.2 to the
Consolidated ﬁ nancial statements.

NOVO NORDISK ANNUAL REPORT 2016

THE PARENT COMPANY

6 DEFERRED INCOME TAX ASSETS/(LIABILITIES)

DKK million

Net deferred tax asset/(liability) at 1 January
Income/(charge) to the Income statement
Income/(charge) to Equity

Net deferred tax asset/(liability) at 31 December

FINANCIAL STATEMENTS OF THE PARENT COMPANY

117

2016

1,653
(1,375)
(10)

268

2015

1,484
94
75

1,653

The Danish corporate tax rate was 22% in 2016 (23.5% in 2015). Deferred tax has been calculated based on expected realisation, reﬂ ecting the reduction in
the Danish corporate tax rate. The effect of the change, DKK 0 million (DKK 102 million in 2015), is included in total deferred income tax.

7 INTANGIBLE ASSETS

DKK million

Cost at the beginning of the year
Additions during the year
Disposals during the year

Cost at the end of the year

Amortisation at the beginning of the year
Amortisation during the year
Impairment losses for the year
Amortisation and impairment losses reversed on disposals during the year

Amortisation at the end of the year

Carrying amount at the end of the year

2016

3,363
414
–

3,777

1,445
141
416
–

2,002

2015

2,205
1,158
–

3,363

1,081
121
243
–

1,445

1,775

1,918

Intangible assets primarily relate to patents and licences, internally developed software, and costs related to major IT projects.

8 PROPERTY, PLANT AND EQUIPMENT

DKK million

Cost at the beginning of the year
Additions during the year
Disposals during the year
Transfer from/(to) other items

Land and
buildings

Plant and
machinery

Other
equipment

Assets in
course of
construction

2016

2015

12,805
1,217
(138)
611

16,638
161
(401)
884

2,303
234
(30)
209

6,209
3,172
–
(1,704)

37,955
4,784
(569)
–

34,571
3,856
(472)
–

Cost at the end of the year

14,495

17,282

2,716

7,677

42,170

37,955

Depreciation and impairment losses at the beginning of the year
Depreciation for the year
Impairment losses for the year
Depreciation reversed on disposals during the year

5,715
538
10
(127)

12,871
898
19
(369)

1,572
167
78
(27)

20,158
1,603
107
(523)

18,885
1,653
48
(428)

Depreciation and impairment losses at the end of the year

6,136

13,419

1,790

–

21,345

20,158

Carrying amount at the end of the year

8,359

3,863

926

7,677

20,825

17,797

THE PARENT COMPANY

NOVO NORDISK ANNUAL REPORT 2016

118

FINANCIAL STATEMENTS OF THE PARENT COMPANY

9 FINANCIAL ASSETS

DKK million

Cost at the beginning of the year
Investments during the year
Divestments during the year

Cost at the end of the year

Value adjustments at the beginning of the year
Proﬁ t/(loss) before tax
Share of result after tax in associated companies
Income taxes on proﬁ t for the year
Market value adjustment
Dividends received
Divestments during the year
Effect of exchange rate adjustment
Other adjustments

Investments
in subsidiaries

Amounts
owed by
afﬁ liates

Investment
in associated
company

Other
securities
and
investments

8,779
75
–

8,854

27,709
17,050

(4,936)

(13,587)
–
(105)
(252)

1,467
2,592
(619)

3,440

(106)

153

(26)

367
50
(48)

369

373

(77)

38
(1)

2016

2015

10,766
2,717
(667)

10,357
1,354
(945)

12,816

10,766

28,023
17,050
64
(4,936)
(77)
(13,613)
38
(16)
(252)

28,527
20,719
47
(3,882)
351
(17,408)
(472)
(12)
153

Value adjustments at the end of the year

25,879

(16)

333

26,281

28,023

Unrealised internal proﬁ t at the beginning of the year
Change for the year – charged to Income statement
Effect of exchange rate adjustment

Unrealised internal proﬁ t at the end of the year

(22,732)
5,703
98

(16,931)

–

Carrying amount at the end of the year

17,802

3,424

(22,732)
5,703
98

(19,945)
(2,037)
(750)

–

238

–

(16,931)

(22,732)

702

22,166

16,057

Carrying amount of investments in subsidiaries does not include capitalised goodwill at the end of the year. For a list of companies in the Novo Nordisk Group,
please refer to note 5.6 to the Consolidated ﬁ nancial statements.

10 OTHER PROVISIONS

13 COMMITMENTS AND CONTINGENCIES

2016

2015

DKK million

2016

2015

DKK million

Non-current
Current

Total other provisions

800
241

1,041

717
277

994

Provisions for pending litigations are recognised as Other provisions.
Furthermore, as part of normal business Novo Nordisk issues credit notes for
expired goods. Consequently, a provision for future returns is made, based
on historical product return statistics.

For information on pending litigations, please refer to note 3.6 to the
Consolidated ﬁ nancial statements.

11 RELATED PARTY TRANSACTIONS

For information on transactions with related parties, please refer to note 5.4
to the Consolidated ﬁ nancial statements.

12 FEE TO STATUTORY AUDITORS

DKK million

Statutory audit
Audit-related services
Tax advisory services
Other services

2016

2015

8
3
3
1

8
2
3
2

Total fee to statutory auditors

Commitments
Operating leases
Research and development obligations
Purchase obligations relating to investments
in property, plant and equipment
Other purchase obligations
Guarantees given for subsidiaries
Other guarantees

Operating leases expiring
within the following periods
from the balance sheet date
Within one year
Between one and ﬁ ve years
After ﬁ ve years

Total operating leases

The operating lease costs for 2016 and 2015 were
DKK 327 million and DKK 293 million respectively.

Security for debt
Land, buildings and equipment etc
at carrying amount

1,303
3,406

818
4,485
10,661
192

1,255
2,457

893
4,296
6,418
227

228
709
366

209
642
404

1,303

1,255

Novo Nordisk A/S and its Danish subsidiaries are jointly taxed with the
Danish companies in the Novo A/S Group. The joint taxation also covers
withholding taxes in the form of dividend tax, royalty tax and interest
tax. The Danish companies are jointly and individually liable for the joint
taxation. Any subsequent adjustments to income taxes and withholding
taxes may lead to a larger liability. The tax for the individual companies is
allocated in full on the basis of the expected taxable income.

For information on pending litigation and other contingencies, please refer
to notes 3.6 and 5.3 to the Consolidated ﬁ nancial statements.

NOVO NORDISK ANNUAL REPORT 2016

THE PARENT COMPANY

Manato Ohara lives in
Kanagawa, Japan, and
has type 1 diabetes.

N
O
V
O
N
O
R
D
S
K
A

/
S

A
N
N
U
A
L

R
E
P
O
R
T

2
0
1
6

Headquarters
Novo Nordisk A/S
Novo Allé
2880 Bagsværd
Denmark
Tel +45 4444 8888
CVR number 24 25 67 90
novonordisk.com

Investor Service
Enquiries and feedback concerning the
Annual Report should be addressed to:
annualreport@novonordisk.com

Shareholders’ enquiries concerning
dividend payments and shareholder
accounts should be addressed to:
shareholder@novonordisk.com

ADR holders’ enquiries concerning dividend
payments, transfer of ADR certificates,
consolidation of accounts and tracking
of ADRs should be addressed to:

JP Morgan Chase Bank, N.A.
PO Box 64504
4 New York Plaza, Floor 12
New York, NY 1004, USA
Attention: Depositary Receipts Group
Tel +1 800 990 1135
Tel +1 651 453 2128
(From outside the United States)
jpmorgan.adr@wellsfargo.com