Novo Resources Annual Report 2017

FY2017 Annual Report · Novo Resources

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novo nordisk
ANNUAL
REPORT
2017

A STRATEGY TO
DRIVE CHANGE FOR
PATIENTS’ LIVES

RAISING THE
INNOVATION HEIGHT

GOOD DIABETES
CARE REQUIRES
MORE THAN BLOOD
GLUCOSE CONTROL

WHY SOME PEOPLE
WITH OBESITY NEED
MEDICAL TREATMENT

"I'M VERY FOCUSED
ON IMPROVING MY
HEALTH WITH DIET
CONTROL, EXERCISE,
FOLLOWING MY
MEDICATION
DIRECTIONS FROM
MY DOCTOR AND
THINKING POSITIVE
THOUGHTS. MY
MATERNAL GREAT-
GRANDMOTHER
LIVED UNTIL SHE
WAS 103 YEARS OLD
AND SHE WAS VERY
HEALTHY – I WANT
TO BE HER!"

SHIRLEY ADELIA STEWART

Shirley Adelia Stewart lives in New Orleans,
Louisiana, US, and was diagnosed with type
2 diabetes when she was 40 years old. Both
of her parents died from complications with
diabetes, and all her seven brothers and
sisters have also been identified as having
type 2 diabetes.

Shirley is 68 years old, is an arts and music
teacher of elementary school children, a
member of the New Orleans Opera House
Chorus and a diligent soloist in her neigh-
bourhood churches.

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, which do not
necessarily reflect the views and opinions of Novo Nordisk. Use of
their pictures as illustrations is in no way intended to associate them
with the promotion of any Novo Nordisk products.

CONTENTS

ACCOMPLISHMENTS
AND RESULTS 2017

01 Letter from the Chairman

02 Letter from the CEO

04 Novo Nordisk at a glance

06 2017 performance and 2018 outlook

14 Performance highlights

OUR BUSINESS

Leading the Novo Nordisk Way

18 A strategy to improve patients' lives

20 Raising the innovation height

22 Pipeline overview

24 Good diabetes care requires more than

blood glucose control

It takes more than medicine to defeat
diabetes

28 Why some people with obesity need

medical treatment

30 Building the biopharm business

32 Building a bolder and more competitive

US business

36 Novo Nordisk's International Operations

40 The risks of doing business

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

57 Consolidated financial, social and

environmental statements

107 Management’s statement and

Auditor’s reports

ADDITIONAL
INFORMATION

112 Product overview

113 More information and references

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 a printed extract of the Novo Nordisk statutory Annual Report pursuant to section 149 of the Danish
Financial Statements Act (FSA). The full statutory Annual Report, including the financial statements of the parent company,
will be submitted to the Danish Business Authority, and is available at novonordisk.com/annualreport.

The full statutory Annual Report is published in English only. 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.

The Annual Report 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, significant 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 more elaborate 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. For formal
compliance with sections 99a and b of the Danish Financial Statements Act, Novo Nordisk refers to its Communication on
Progress 2017.

ACCOMPLISHMENTS AND RESULTS 2017

A YEAR OF CHANGE
AND PROGRESS
LETTER FROM THE CHAIRMAN

years, was previously senior vice president, Finance and Operations,
in North America.

Camilla Sylvest was appointed head of Commercial Strategy &
Corporate Affairs. She joined Novo Nordisk in 1996 and most
recently held the position of senior vice president in charge of
Novo Nordisk's operations in Region China.

With these changes, and the appointment in 2016 of Maziar Mike
Doustdar as head of an expanded International Operations area,
we have strengthened the commercial capabilities of what is now a
renewed and yet very experienced executive leadership team.

Based on Novo Nordisk’s performance in 2017, at the Annual
General Meeting the Board will propose a total dividend of 7.85
Danish kroner per share. Furthermore, the Board has decided to
initiate a new share repurchase programme of up to 14 billion
kroner, which will commence in February 2018.

For me personally, 2017 was my last full year on the Board of
Directors, as I have decided not to seek re-election at the Annual
General Meeting in 2018. As a member of the Board since 2005
and its chairman since 2013, it has been my privilege to be part of
Novo Nordisk’s exciting journey. At the Annual General Meeting, the
Board will propose the election of Helge Lund
as the new chairman. Helge has a
successful record in managing
complex global companies in
highly regulated industries,
and I wish him all the best in
his new role.

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.

For Novo Nordisk, 2017 ended much better than it started. Follow-
ing the revision of our long-term financial target for operating
profit growth in the autumn of 2016, we have been focusing on
rebuilding confidence with our external stakeholders as well as with
our employees.

I believe that we are on the right track. Two factors in particular
have been important for our shareholders: quarter by quarter, we
delivered on our promises in terms of financial performance, and we
made significant progress in terms of new, positive clinical data and
regulatory milestones passed for some of our key products.

Lars Fruergaard Jørgensen assumed the role of president & CEO on
1 January 2017. He will give you more details in his letter on the
following pages. What is important for me to say is that the Board
of Directors is very pleased with how he, his leadership team and
the organisation at large have responded to the challenges that
gradually surfaced during 2016. The challenges, especially as they
relate to the pricing environment in the long-acting insulin market in
the US, have materialised in 2017 and are expected to persist.

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. This is still a fact, and so is
the increasing negotiating power of the pharmaceutical benefit
managers (PBMs), the large purchasing organisations with which
Novo Nordisk negotiates rebates and access for its products in the
US. At the same time, competition among the pharmaceutical
companies within diabetes care is continuing to intensify in an
already crowded marketplace.

Under Lars Fruergaard Jørgensen’s leadership, Novo Nordisk
has started a change process that will make the company more
competitive in the new business reality. Resources have been
directed towards the key growth drivers, an updated R&D strategy
is being implemented, focused on delivering more breakthrough
innovation from both in-house labs and external partners, and costs
have been managed tightly, all while maintaining a high level of
employee engagement. Already in his first year at the helm, Lars has
shown that he can lead an organisation in challenging times.

During 2017, three new members joined his executive management
team:

Doug Langa assumed responsibility for North America Operations.
Prior to his promotion, he was senior vice president, Market Access,
and a member of Novo Nordisk's US leadership team, and he brings
more than 25 years’ experience in the US pharmaceutical and
medical device industries into this role. Doug took over from Jakob
Riis, who decided to leave for a CEO job outside of the pharma
industry. We wish him all the best.

Lars Green was appointed head of Business Services and
Compliance, responsible for IT, quality, HR and business assurance.
Lars Green, who has been with Novo Nordisk for more than 25

Göran Ando
Chairman of the Board of Directors

NOVO NORDISK ANNUAL REPORT 20172

ACCOMPLISHMENTS AND RESULTS 2017

CREATING A PLATFORM
FOR SUSTAINABLE GROWTH
LETTER FROM THE CEO

2017 was my first year as CEO of Novo Nordisk, and what an
experience it has been.

I have spent a lot of time travelling the world to meet employees,
patients, healthcare professionals, payers, investors, politicians,
NGOs and other stakeholders who are all important for Novo
Nordisk. And it has been worth every minute. It is very clear to me
from all these exchanges that Novo Nordisk, despite the growing
competitive pressure we are experiencing these days, has a very
strong platform for future success – and a very important purpose.

Our employees want the company to do well and are deeply
engaged in helping patients live better lives. Our portfolio
of pharmaceutical products, both on the market and in our
pipeline, provide important clinical benefits compared with other
medications. And there are millions of people with diabetes and
other serious chronic diseases who need better treatment.

That is a strong foundation to build on and a huge responsibility for
Novo Nordisk to live up to. I will revert to what we are doing to live
up to expectations, but allow me first to recap some highlights from
2017.

Novo Nordisk grew sales by 2% and operating profit by 5%, both in
local currencies. Sales were within and operating profit was above
the range we had announced at the beginning of the year, when
we predicted that sales would grow between -1% and 4% and
operating profit between -2% and 3%, both in local currencies.

Sales growth was primarily driven by Tresiba®, Victoza® and
Saxenda®. These are all strategic products which we expect to be
major growth drivers in the coming years together with Ozempic®,
our new once-weekly, injectable GLP-1 treatment for adults with
type 2 diabetes. Looking at the sales development from a regional
perspective, it is encouraging to note that our two operational
units, North America Operations and International Operations, both
performed according to our plans. Despite strong pressure on prices,
North America managed to keep sales at the same level as 2016,
while International Operations grew by 5%.

2017 was a year characterised by a high flow of new clinical data,
which led to regulatory approvals and label updates for several
key products. Most important of all was the approval in the US
of Ozempic®, followed by a recommendation for approval by the
European Medicines Agency’s expert committee, both in December
2017.

Other highlights were:
• Approvals in the EU and the US of Fiasp®, a new fast-acting
mealtime insulin, for the treatment of adults with diabetes.
• A label update for Tresiba® in the EU, based on data from trials
demonstrating a clinically relevant reduction in hypoglycaemia
compared with insulin glargine U100.

• Label updates for Victoza® in the EU and the US, reflecting the
product’s ability to reduce the risk of cardiovascular events in
adults with type 2 diabetes and at high risk of cardiovascular
disease.

Additional milestones include important label updates for Saxenda®,
the approval of our long-acting factor IX product for haemophilia B
(Refixia®/Rebinyn®) in both the EU and the US, and the submission
of applications in the EU and the US for including data from
the DEVOTE trial in the Tresiba® label. Moreover, to increase the
likelihood of making ground-breaking innovations in the years
to come, we have updated our R&D strategy. You will find more
on this topic on pp 20–21, where you can also read about the
exciting possibilities we see for semaglutide, the molecule on which
Ozempic® is based.

Based on the strong clinical data and approvals obtained over the
past year, we have an important task ahead of us in making sure
that as many patients as possible benefit from them. This means
ensuring optimal market access for our products and making sure
that prescribers and patients understand the benefits our products
provide.

As you will see from the article about our US business on pp 32–35,
during 2017 we implemented many changes to ensure that we can
operate effectively in the world’s largest pharmaceutical market.

International Operations, which covers more than 190 countries,
is taking a ‘market fit’ approach to grow its business. This means
tailoring the portfolio, market access strategy and sales strategy to
the needs of each individual country. You can read more about what
it takes in the article on pp 36–39.

Allowing our affiliates around the world the autonomy to decide
which approach is best for their markets, requires a shared
understanding of what we want to achieve as a company, our
overall strategic priorities and ‘how we do business’ at Novo
Nordisk.

The starting point is having a clear purpose. Ours is to drive change
to defeat diabetes and other serious chronic diseases. This is what
makes us relevant to patients, healthcare professionals and society
at large. You can read more about how we do business (we call it
the Novo Nordisk Way) on pp 16–17 and about our overall strategic
priorities on pp 18–19.

NOVO NORDISK ANNUAL REPORT 2017

NOVO NORDISK ANNUAL REPORT 2017ACCOMPLISHMENTS AND RESULTS 2017

There are huge unmet medical needs in all disease areas in which
Novo Nordisk is active. Take diabetes and obesity as examples:
despite many advances in medical treatment over the past decades,
only few people with diabetes are achieving the desired blood sugar
levels, and many still have a higher risk of cardiovascular disease
despite being treated with drugs that lower cholesterol and blood
pressure. When it comes to obesity, there have not been many
advances in medical treatment. And the sad fact is that obesity is
not even recognised as a disease for which some people require
medical help.

In both these areas, Novo Nordisk has products on the market
and in the pipeline that can help address this poor state of affairs.
However, we also recognise that it takes more than medicine
to achieve the desired results. In diabetes, it requires more
public–private partnerships to contain the rise of diabetes before
it becomes unmanageable, and giving more people access to
diagnosis and treatment where it does not currently exist. On
pp 26–27, you can learn more about what Novo Nordisk does in
this regard.

With the decisions we have made in 2017, I believe that we have
created a solid platform for sustainable, long-term growth for Novo
Nordisk. In 2018, our focus will be on implementing the strategies
we have developed and started executing on in 2017. Prices will still
be under pressure, especially in the US. The increase in the number
of people with chronic diseases such as diabetes and the cost of
treating them put healthcare budgets under pressure, and this
especially affects the prices of our insulin products. We therefore
expect modest sales growth in 2018, despite our ambition to gain
market share.

At Novo Nordisk, we have a big responsibility for the

more than 425 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, during my tenure
as CEO, Novo Nordisk will solidify its
position as the world’s leading diabetes
care company, be the world’s leading

company in the 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 stakeholders as an
outstanding company, both for what we do
and how we do it.

I would like to thank everyone in the Novo
Nordisk organisation for their contribution to
our results in 2017, the people who use our products

for their confidence in us, our stakeholders and partners
for their collaboration and our shareholders for their continued

support.

Lars Fruergaard Jørgensen
President & CEO

NOVO NORDISK ANNUAL REPORT 20174

ACCOMPLISHMENTS AND RESULTS 2017

NOVO NORDISK
AT A GLANCE

Novo Nordisk is a global healthcare company, headquartered in Denmark. We are 42,682
employees in 79 countries united in the pursuit of the company’s purpose: driving change to
defeat diabetes and other serious chronic diseases. Our key contribution is to discover and
develop innovative biological medicines and make them accessible to patients throughout the
world. We aim to lead in all disease areas in which we are active.

STRATEGIC FOCUS AREAS

TOTAL NET SALES*
DKK 111,696 MILLION

SHARE OF SALES (GROWTH)

DIABETES CARE 81% (+3%)

HAEMOPHILIA 9% (0%)

GROWTH DISORDERS 6% (-24%)

OBESITY 2% (+60%)

OTHER SERIOUS CHRONIC DISEASES 0%

* Including other biopharmaceuticals (2%). See sales and growth analyses by business segment and by

geographical area on pp 68–69.

BUSINESS MODEL

THE RESOURCES WE RELY ON

THE CAPABILITIES WE APPLY

EXTERNAL

INTERNAL

Capital
provided by
investors

Insights from
patients and
expertise from
academic and
educational
institutions

Financial resources
to invest in R&D,
production
capacity and
customer outreach

Biological
research and
manufacturing
facilities

Engineering, formulating, developing
and delivering protein-based treatments
Research & development facilities in Denmark,
China and the US

Efficient large-scale production of proteins
16 production sites on 5 continents

Global commercial reach and leader in
chronic disease care
Products marketed in more than 170 countries

Raw materials,
water and energy

A skilled and
diverse workforce

Deep disease understanding

NOVO NORDISK ANNUAL REPORT 2017
NOVO NORDISK ANNUAL REPORT 2017

ACCOMPLISHMENTS AND RESULTS 2017

FINANCIALLY
RESPONSIBLE

PATIENTS

BUSINESS APPROACH

The Triple Bottom Line principle is anchored in
the company’s Articles of Association and the
Novo Nordisk Way as the way we do business.
It is applied to ensure that business decisions
balance financial, social and environmental
considerations, always keeping in mind the
best interests of the patients we serve.

NOVO NORDISK’S AMBITION IS TO BE A
SUSTAINABLE BUSINESS. BY THIS WE MEAN:

• creating long-term value for patients,

employees, partners and shareholders by
developing innovative and competitive
solutions to patients’ unmet needs

• doing business in a financially, environmentally

and socially responsible way

• anticipating, adapting to and creating new
business opportunities from changes in our
business environment.

SOCIALLY
RESPONSIBLE

ENVIRONMENTALLY
RESPONSIBLE

See the account for financial, social and environmental performance on pp 6–13 and pp 57–106. The articles on pp 16–53
elaborate on the company’s strategy and actions to be a sustainable business. More information can be found at
novonordisk.com/sustainable-business.

THE VALUE WE CREATE

EXAMPLES OF VALUE CREATED

Improved health and quality of life for
people with diabetes and other serious
chronic diseases

Job creation and productivity

27.7 MILLION people use Novo Nordisk
diabetes care products

60,000 (approx) direct and indirect jobs
created in Denmark

Contributions to communities

Production based on 79% renewable power

Tax contributions

DKK 10.6 BILLION expensed on company income taxes

Capacity and competence building

4,800 (approx) investigator sites active in Novo Nordisk-
sponsored clinical trials

Return to shareholders

DKK 7.85 total dividend per share in 2017

For more information, visit us on novonordisk.com or

NOVO NORDISK ANNUAL REPORT 2017
NOVO NORDISK ANNUAL REPORT 2017

ACCOMPLISHMENTS AND RESULTS 2017

2017 PERFORMANCE
AND 2018 OUTLOOK

FINANCIAL PERFORMANCE

Novo Nordisk’s 2017 performance for sales
growth measured in local currencies was in
line with the outlook provided in February
2017, while operating profit growth
measured in local currencies exceeded
the outlook provided in February 2017
reflecting overall cost containment. The free
cash flow and effective tax rate were in line
with the outlook provided in February 2017,
while Capital expenditure was moderately
lower than the outlook provided in February
2017.

7% measured in local currencies was 9
percentage points positively impacted by
inflationary price effects in countries with
high inflation. Sales in North America
Operations were negatively impacted by
approximately 4 percentage points due
to the negative effect from the launch of
a generic version of Vagifem® and the
non-recurring adjustments to rebates in
the Medicaid patient segment in the first
quarter of 2016 predominantly related to
Norditropin®, both in the USA.

SALES DEVELOPMENT
Sales remained broadly unchanged
measured in Danish kroner and increased
by 2% in local currencies. Sales growth
was realised within diabetes care and
obesity with the majority of growth
originating from Tresiba®, Victoza®,
Saxenda® and NovoRapid®, partly offset
by declining sales of Levemir®. Sales within
biopharmaceuticals declined, predominantly
reflecting lower sales of growth disorder
products and Vagifem®.

Sales growth in local currencies was
driven by International Operations while
sales in North America Operations were
broadly unchanged. Within International
Operations, the main growth contributors
were Region AAMEO (Africa, Asia,
Middle East and Oceania), Region Europe,
Region China and Region Latin America.
Sales growth in Region Latin America of

In the following sections, unless otherwise
noted, market data are based on moving
annual total (MAT) from November 2017
and November 2016 provided by the
independent data provider IQVIA (formerly
IMS Health).

DIABETES CARE AND
OBESITY, SALES
DEVELOPMENT
Sales of diabetes care and obesity products
increased by 4% measured in Danish kroner
and by 7% in local currencies to DKK
92,877 million. Novo Nordisk is the world
leader in diabetes care with a global value
market share of 27%.

INSULIN
Sales of insulin remained unchanged
measured in Danish kroner and increased
by 3% in local currencies to DKK 63,119

SALES GROWTH

• In local currencies
• In DKK as reported

SALES BY SEGMENT

 Biopharmaceuticals
 Diabtes care and obesity

%
25

DKK billion
125

100

million. Measured in local currencies,
sales growth was driven by International
Operations where Region AAMEO, Region
China, Region Europe and Region Latin
America contributed to growth. Novo
Nordisk is the global leader with 47% 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®, Ryzodeg® and Fiasp®) reached
DKK 8,647 million compared with DKK
4,459 million in 2016.

Sales of Tresiba® (insulin degludec), the
once-daily new-generation insulin, reached
DKK 7,327 million compared with DKK
4,056 million in 2016. The roll-out of
Tresiba® continues and the product has
now been launched in 62 countries. In the
USA where Tresiba® was launched broadly
in January 2016, the product maintains
wide commercial and Medicare Part D
formulary coverage. Generally, Tresiba®
has shown solid penetration in markets
with reimbursement at a similar level to
insulin glargine U100, whereas penetration
remains modest in markets with restricted
market access. In September 2017, Novo
Nordisk obtained the approval of Tresiba®
in China. Novo Nordisk expects to launch
Tresiba® in China without reimbursement
and with limited market access in the first
quarter of 2018.

SHARE OF GROWTH
IN LOCAL CURRENCIES
 Region Latin America
 Region Japan & Korea
 Region China
 Region AAMEO
 Region Europe
 North America Operations
%
100

2013 2014 2015 2016 2017

2013 2014* 2015 2016 2017*
* In 2014, Japan & Korea contributed -1% to the total growth.
In 2017, North America contributed -5% to the total growth.

NOVO NORDISK ANNUAL REPORT 2017DEVELOPMENT IN COSTS
Costs in % of sales

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

ACCOMPLISHMENTS AND RESULTS 2017

OPERATING PROFIT

 Operating profit

NET PROFIT

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

DKK billion

2013 2014 2015 2016 2017

Sales of Xultophy®, a once-daily
combination of insulin degludec (Tresiba®)
and liraglutide (Victoza®), reached DKK
729 million compared with DKK 207
million in 2016. Sales growth was driven
by both International Operations, where
predominantly Region Europe contributed
to growth, and North America Operations.
Xultophy® has now been launched in 18
countries; in the USA, it was launched
in May 2017 under the brand name
Xultophy® 100/3.6.

Sales of Ryzodeg®, a soluble formulation
of insulin degludec and insulin aspart,
reached DKK 492 million compared with
DKK 196 million in 2016. Sales growth
was driven by International Operations,
where Region Japan & Korea and Region
AAMEO contributed to growth. Ryzodeg®
has now been marketed in 18 countries,
and feedback from patients and prescribers
remains encouraging.

The novel mealtime insulin Fiasp®, fast-
acting insulin aspart, received marketing
authorisation from the European
Commission in the first quarter of 2017 and
approvals were also received in Norway,
Iceland and Canada. In September 2017,
Novo Nordisk received the approval of
Fiasp® in the USA. Fiasp® is expected
to launch in the USA imminently and
has now been launched in 17 countries
including recent launches in France and the
Netherlands.

Sales of modern insulin decreased by 7% in
Danish kroner and by 4% in local currencies
to DKK 44,400 million. The decline reflects
lower sales in North America Operations
of Levemir® due to price pressure in the
basal insulin segment as well as the impact
following the introduction of the new-
generation insulin Tresiba® and lower
NovoMix® sales, as the pre-mix insulin
market continues to decline. The decline
was partly offset by sales growth within
International Operations, where Region

AAMEO, Region China and Region Latin
America were the main contributors to
growth. Sales of modern insulin and new-
generation insulin in total constitute 84%
of Novo Nordisk’s global sales of insulin
measured in value.

VICTOZA®
(GLP-1 THERAPY FOR TYPE 2 DIABETES)
Victoza® sales increased by 16% in Danish
kroner and by 18% in local currencies
to DKK 23,173 million. Sales growth is
predominantly driven by North America
Operations comprising 90% share of
growth. The GLP-1 segment’s value share of
the total diabetes care market has increased
to 11.8% compared with 9.7% 12 months
ago. Victoza® is the market leader in the
GLP-1 segment with a 50% value market
share.

OTHER DIABETES CARE
Sales of other diabetes care products, which
predominantly consist of oral antidiabetic
products and needles, declined by 6% in
Danish kroner and by 3% in local currencies
to DKK 4,023 million. Declining sales were
seen in International Operations, where
all regions apart from Region AAMEO and
Region Latin America experienced lower
sales, partly offset by higher sales in North
America Operations.

SAXENDA® (OBESITY)
Sales of Saxenda®, liraglutide 3 mg for
weight management, increased by 62%
in Danish kroner and by 64% in local
currencies to DKK 2,562 million. Sales
growth was driven by both North America
Operations and International Operations,
where Region Latin America, especially
Brazil, Region AAMEO and Region Europe
contributed to growth. Saxenda® was
launched in May 2015 in the USA and
has obtained broad commercial formulary
market access, but generally with prior
authorisation requirements. Saxenda® has
now been launched in 25 countries.

BIOPHARMACEUTICALS
SALES DEVELOPMENT

Sales of biopharmaceutical products
declined by 18% measured in Danish kroner
and by 16% in local currencies to DKK
18,819 million. Sales of DKK 8,155 million
in North America Operations declined by
30% measured in local currencies reflecting
a negative impact of 21 percentage points
from a generic version of the hormone
replacement therapy product Vagifem®
and from rebate adjustments for growth
hormone in Q1 2016, both in the USA.
Sales in International Operations declined
by 2% in Danish kroner and remained
unchanged in local currencies.

HAEMOPHILIA
Sales of haemophilia products remained
unchanged in Danish kroner and increased
by 2% in local currencies to DKK 10,469
million. The sales increase in local currencies
was primarily driven by NovoSeven® and
the roll-out of NovoEight® in Region Europe
and North America Operations. This was
partly offset by lower NovoSeven® sales in
Region Latin America and Region Japan &
Korea.

GROWTH DISORDERS
Sales of growth disorder products
decreased by 24% measured in Danish
kroner and by 22% in local currencies to
DKK 6,655 million. The sales decline reflects
the significant positive non-recurring
adjustment in the USA in the first quarter
of 2016, related to rebates in the Medicaid
patient segment for the period 2010-
2015, as well as an impact from intensified
competition impacting realised prices and
to some extent volumes in the USA. Sales
in International Operations were broadly
unchanged in local currencies reflecting
lower sales in Region AAMEO and Region
Europe offset by sales growth in Region
Japan & Korea and Region Latin America.
Novo Nordisk is the leading company in the

CONTINUED

NOVO NORDISK ANNUAL REPORT 20178

ACCOMPLISHMENTS AND RESULTS 2017

global growth disorder market with a 27%
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 53% measured
in Danish kroner and by 52% in local
currencies to DKK 1,695 million. The sales
decline reflects a negative impact from the
launch of a generic version of Vagifem® in
the USA in the fourth quarter of 2016.

DEVELOPMENT IN COSTS
AND OPERATING PROFIT

The cost of goods sold increased by 3%
in both Danish kroner and local currencies
to DKK 17,632 million, resulting in a gross
margin of 84.2% measured in Danish
kroner compared with 84.6% in 2016. The
decline in gross margin reflects a negative
currency impact of 0.3 percentage point. In
addition, the gross margin was negatively
impacted by lower prices primarily reflecting
intensified competition in the insulin
segment and the non-recurring Medicaid
rebate adjustments in 2016, both in the
USA. The negative gross margin impact was
partly offset by a positive contribution from
product mix due to higher Victoza® and
Tresiba® sales, countered by lower sales of
Vagifem® following the launch of a generic
version in the USA.

Sales and distribution costs remained
broadly unchanged in Danish kroner and
increased by 2% in local currencies to
DKK 28,340 million. The increase in sales
and distribution costs measured in local
currencies reflects increased sales force and
promotional costs in Region AAMEO and
Region Latin America as well as increased
costs related to legal cases partly offset by
reduced manning in the US and broad cost
control initiatives.

Research and development costs decreased
by 4% in Danish kroner and by 3% in
local currencies to DKK 14,014 million.
The decline reflects the discontinuation of
a number of research projects following
the updated R&D strategy announced in
October 2016 leading to lower research
costs. This development was partially
offset by an increase in development
costs due to the PIONEER programme for
oral semaglutide, where all 10 planned
trials have now been fully recruited,

OUTLOOK 2018

The current expectations for 2018 are summarised in the table below:

EXPECTATIONS ARE AS REPORTED,
IF NOT OTHERWISE STATED

EXPECTATIONS
1 FEBRUARY 2018

Sales growth
•

in local currencies

• as reported

Operating profit growth
•

in local currencies

• as reported

Financial items (net)

Effective tax rate

Capital expenditure

Depreciation, amortisation and impairment losses

Free cash flow

partly countered by an impact related
to the completion of the cardiovascular
outcomes trial DEVOTE and by lower
biopharmaceuticals development costs
following the completion of the regulatory
process for N9-GP.

Administration costs decreased by 4%
in Danish kroner and by 3% in local
currencies to DKK 3,784 million. The lower
administrative costs are mainly related to
general cost control initiatives.

Other operating income (net) was DKK
1,041 million compared with DKK 737
million in 2016. The increase in Other
operating income reflects the positive
contribution from the divestment of the
C5aR inflammation asset to Innate Pharma
in the third quarter of 2017.

Operating profit increased by 1% in Danish
kroner and by 5% in local currencies to
DKK 48,967 million.

FINANCIAL ITEMS (NET)
AND TAX

Financial items (net) showed a loss of DKK
287 million compared with a loss of DKK
634 million in 2016.

In line with Novo Nordisk’s treasury policy,
Novo Nordisk hedges the most significant
foreign exchange risks for the Group
mainly through foreign exchange forward
contracts. The foreign exchange (net) result

2% to 5%
Around 7 percentage points lower than in
local currencies

1% to 5%
Around 10 percentage points lower than in
local currencies
Gain of around DKK 2.5 billion

20% to 22%

Around DKK 9.5 billion

Around DKK 3 billion

DKK 27-32 billion

was a loss of DKK 187 million compared
with a loss of DKK 576 million in 2016.

The financial items (net) for 2017 is after a
positive market value of financial contracts
as per the end of December 2017 of
approximately DKK 2 billion has been
deferred for income recognition in 2018.

The effective tax rate for 2017 was 21.7%.

CAPITAL EXPENDITURE
AND FREE CASH FLOW

Net capital expenditure for property,
plant and equipment was DKK 8.7 billion
compared with DKK 7.1 billion in 2016. Net
capital expenditure was primarily related to
investments in a new production facility for
a range of diabetes active pharmaceutical
ingredients in Clayton, North Carolina,
USA, a new diabetes care filling capacity
in Hillerød, Denmark and an expansion of
the manufacturing capacity for biopharma-
ceutical products in Kalundborg, Denmark.

Free cash flow was DKK 32.6 billion
compared with DKK 40.0 billion in 2016.
The decrease of 19% compared to 2016
primarily reflects a negative impact from
lower income taxes paid in 2016 due
to one-offs as well as increased capital
expenditure in 2017.

OUTLOOK 2018
For 2018, sales growth is expected to
be in the range of 2% to 5% growth,
measured in local currencies. This reflects
expectations for robust performance for
the portfolio of new-generation insulin and
the GLP-1 portfolio, now comprising both
Victoza® and Ozempic® as well as a solid
contribution from Saxenda®. Sales growth
is expected to be partly countered by
intensifying global competition both within
diabetes care and biopharmaceuticals,
especially within the haemophilia inhibitor

KEY INVOICING
CURRENCIES

IMPACT ON NOVO NORDISK'S OPERATING
PROFIT IN THE NEXT 12 MONTHS OF A
5% IMMEDIATE MOVEMENT IN CURRENCY

HEDGING PERIOD
(MONTHS)

USD
CNY
JPY
GBP
CAD

DKK 1,900 million
DKK 325 million
DKK 170 million
DKK 90 million
DKK 80 million

12
13
11

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

NOVO NORDISK ANNUAL REPORT 2017PEFORMANCE AGAINST
LONG-TERM FINANCIAL TARGETS

Operating profit growth
Operating profit growth adjusted
Operating profit growth adjusted in local currencies
Operating profit after tax to net operating assets
Cash to earnings
Cash to earnings (three-year average)

segment, as well as continued pricing
pressure within diabetes care especially
in the USA. Overall, the expectations are
based on an assumption of a broadly
unchanged global macroeconomic
environment. Given the current exchange
rates versus the Danish krone, growth
reported in DKK is expected to be around
7 percentage points lower than the local
currency level.

For 2018, operating profit growth is
expected to be in the range of 1% to 5%
growth, measured in local currencies. The
expectation for operating profit growth
primarily reflects the outlook for sales
growth and an impact from continued cost
control. The outlook also reflects a planned
increase in the sales and distribution costs
to support the commercialisation efforts for
the launch of Ozempic®. Given the current
exchange rates versus the Danish krone,
growth reported in DKK is expected to be
around 10 percentage points lower than
the local currency level.

For 2018, Novo Nordisk expects financial
items (net) to amount to a gain of around
DKK 2.5 billion, partly offsetting the
negative currency impact on operating
profit. The current expectation for 2018
reflects gains associated with foreign
exchange hedging contracts, mainly related
to the US dollar and Japanese yen versus
the Danish krone, partly offset by losses on
non-hedged currencies. The expectation
for financial items (net) reflects that net
gains of DKK 2.7 billion in relation to
foreign exchange hedging contracts as per
26 January 2018 is expected to be income
recognised later in 2018.

The effective tax rate for 2018 is expected
to be in the range of 20-22%. The range
for effective tax rate is positively impacted
by the reduced federal corporate tax rate in
2018 in the USA.

Capital expenditure is expected to be
around DKK 9.5 billion in 2018, primarily
related to investments in additional capacity
for active pharmaceutical ingredient
production within diabetes care and an
expansion of the diabetes care filling
capacity. Depreciation, amortisation and
impairment losses are expected to be
around DKK 3 billion. Free cash flow is
expected to be DKK 27-32 billion.

2017

1.1%
1.1%
4.8%
143.2%
85.5%
96.4%

TARGET

125%

90%

political environment will not significantly
change business conditions for Novo
Nordisk during 2018, and that currency
exchange rates, especially the US dollar,
will remain at the current level versus the
Danish krone.

Novo Nordisk has hedged expected net
cash flows in a number of invoicing
currencies and, all other things being equal,
movements in key invoicing currencies will
impact Novo Nordisk’s operating profit as
outlined in the table on the opposite side.

FORWARD-LOOKING
STATEMENTS

Novo Nordisk’s reports filed with or
furnished to the US Securities and Exchange
Commission (SEC), including this statutory
Annual Report 2017 and Form 20-F, both
expected to be filed with the SEC in February
2018, in continuation of the publication
of this Annual Report 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
statements include, but are not limited to:

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

• statements containing projections of
or targets for revenues, costs, income
(or loss), earnings per share, capital
expenditures, dividends, capital structure,
net financials and other financial
measures

• statements regarding future economic

performance, future actions and
outcome of contingencies such as legal
proceedings, and

• statements regarding the assumptions

underlying or relating to such statements.

All of the above expectations are based on
assumptions that the global economic and

In this Annual Report 2017, examples of
forward-looking statements can be found

ACCOMPLISHMENTS AND RESULTS 2017

under the headings '2017 performance and
2018 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
Annual Report 2017, 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.

For an overview of some, but not all, of
the risks that could adversely affect Novo
Nordisk’s results or the accuracy of forward-
looking statements in this Annual Report
2017, reference is made to the overview of
risk factors in ‘The risks of doing business’
on pp 40–43 of this Annual Report 2017.

Unless required by law, Novo Nordisk
is under no duty and undertakes no
obligation to update or revise any forward-
looking statement after the distribution
of this Annual Report 2017, whether as a
result of new information, future events or
otherwise.

NOVO NORDISK ANNUAL REPORT 201710 ACCOMPLISHMENTS AND RESULTS 2017

RESEARCH AND DEVELOPMENT

2017 was a year during which Novo Nordisk
made significant progress in its research and
development pipeline and reached several
regulatory milestones.

Below are the highlights from the key
development projects. On pp 22–23, the
pipeline overview shows all the compounds
in clinical development, and further
details on clinical trials can be found in
the company announcements and press
releases published by Novo Nordisk during
2017, which are available on
novonordisk.com.

R&D STRATEGY
Novo Nordisk's R&D strategy was updated
in 2016 and focuses on raising the
innovation level within the core therapy
areas: diabetes, obesity, haemophilia and
growth disorders. In addition, Novo Nordisk
is expanding its R&D efforts into other
serious chronic diseases with high unmet
medical needs and market attractiveness.
The other serious chronic diseases are
cardiovascular disease (CV), non-alcoholic
steatohepatitis (NASH) and chronic kidney
disease (CKD). Novo Nordisk plans to
expand into these areas with semaglutide.

DIABETES
During 2017, the EU label for Tresiba®
(insulin degludec) was updated to include
results from the DEVOTE and SWITCH
trials reflecting the reduced risk of hypo-
glycaemia with Tresiba® compared with
insulin glargine U100. In the US, the FDA
is currently reviewing the DEVOTE and
SWITCH trials for an update of the Tresiba®
label, with feedback expected in the first
quarter of 2018.

Fiasp® (fast-acting insulin aspart), a new
fast-acting mealtime insulin, obtained
approval in the US and the EU for the
treatment of adults with diabetes. Fiasp®
is an innovative formulation of insulin
aspart (NovoLog®) developed with the
aim of obtaining pharmacokinetic and
pharmacodynamic properties that more
closely match the natural physiological
insulin mealtime response of a person
without diabetes.

The label for Victoza® (liraglutide) was
updated in the US and the EU to reflect the
reduced risk of major adverse cardiovascular
(CV) events in adults with type 2 diabetes
and established CV disease. The decision
was based on the results of the landmark

LEADER trial, which demonstrated that
Victoza® statistically significantly reduced
the risk of cardiovascular death, non-fatal
heart attack or non-fatal stroke by 13% vs
placebo, when added to standard of care.

In August 2017, the results of the SUSTAIN
7 trial were announced, demonstrating
that people with type 2 diabetes treated
with Ozempic® (once-weekly semaglutide)
experienced superior reduction in HbA1c
and body weight compared with treatment
with dulaglutide. SUSTAIN 7 was a 40-week
trial investigating the efficacy and safety of
0.5 mg semaglutide compared with 0.75
mg dulaglutide, and of 1.0 mg semaglutide
compared with 1.5 mg dulaglutide, when
added to metformin.

In December 2017, Novo Nordisk obtained
approval of Ozempic® in the US and
subsequent endorsement in the EU from
the Committee for Medical Products for
Human Use (CHMP). Ozempic® is a once-
weekly glucagon-like peptide-1 (GLP-1
analogue), and the approvals were based
on the results of the SUSTAIN clinical trial
programme. In people with type 2 diabetes,
Ozempic® produced clinically meaningful
and statistically significant reductions in
HbA1c compared with placebo, sitagliptin,
exenatide extended-release and insulin
glargine U100. Furthermore, in the trials,
treatment with Ozempic® resulted in
statistically significant reductions in body
weight. Ozempic® demonstrated a safe and
well-tolerated profile across the SUSTAIN
programme, with the most common
adverse event being mild-to-moderate
nausea, which diminished over time.

OBESITY
The EU label for Saxenda® was updated
to reflect the primary outcome from the
LEADER trial, which investigated the long-
term effects of Victoza® in people with type
2 diabetes and established cardiovascular
disease. Although the Saxenda® dosing
of liraglutide 3.0 mg was not investigated
in the LEADER trial, the results were
considered supportive for the assessment of
Saxenda® for any potential cardiovascular
risk.

Novo Nordisk completed a phase 2 trial
with once-daily subcutaneous semaglutide
in people with obesity. The headline results
from the 52-week double-blind phase 2
clinical trial with once-daily subcutaneous
semaglutide showed that people from
a mean baseline weight of around 111

kg and a body mass index (BMI) of
approximately 39, experienced a weight
loss of up to 17.8 kg after 52 weeks of
treatment with semaglutide. The results
corresponded to an estimated 13.8%
weight loss compared with the weight loss
of 2.3% achieved by diet, exercise and
placebo alone, with all treatment arms
adjusted for people discontinuing treatment
in the study. Novo Nordisk plans to initiate
a large phase 3a trial with once-weekly
subcutaneous semaglutide in people with
obesity during 2018.

HAEMOPHILIA
Novo Nordisk obtained approval of its
extended half-life factor IX molecule
Refixia®/Rebinyn® for replacement therapy
in people with haemophilia B (congenital
factor IX deficiency) in both the EU and
the US. In the US, Rebinyn® is indicated
for on-demand treatment and control of
bleeding episodes and the perioperative
management of bleeding in adults and
children with haemophilia B. In the EU,
Refixia® is indicated for prophylaxis, on-
demand treatment of bleeding and surgical
procedures in adolescents (> 12 years of
age) and adults with haemophilia B.

In August 2017, Novo Nordisk initiated
two phase 2 trials for concizumab, a
monoclonal antibody against Tissue Factor
Pathway Inhibitor (TFPI) intended for
bleeding prevention after subcutaneous
administration in people with haemophilia.
The two trials, named explorer 4 and
explorer 5, are expected to enrol more
than 50 people in total, with the objective
of demonstrating that concizumab
is efficacious in preventing bleeding
episodes in people with haemophilia A or
B with inhibitors as well as in people with
haemophilia A.

GROWTH DISORDERS
Novo Nordisk completed the main phase of
REAL 1, the pivotal phase 3 trial with the
long-acting recombinant growth hormone
somapacitan. REAL 1 was a 34-week trial
that enrolled 301 treatment-naïve adults
with growth hormone deficiency. At the
end of the trial, there was a statistically
significant difference between somapacitan
and placebo, with the somapacitan-treated
patients showing a greater reduction in
truncal fat percentage. The safety profile
observed in this study was consistent with
that known for Norditropin®.

NOVO NORDISK ANNUAL REPORT 2017SOCIAL PERFORMANCE

Novo Nordisk accounts for social
performance on three dimensions: patients,
people and assurance.

The number of people reached with Novo
Nordisk diabetes care products decreased
slightly, while employee turnover was
higher than in previous years, following
a workforce reduction implemented in
late 2016 and 2017. Company reputation
remains high.

PATIENTS
Novo Nordisk’s business is built on the
promise to help patients with serious
chronic diseases live better, healthier lives
and the determination to enhance access
to medical treatment and quality of care for
patients. In 2017, Novo Nordisk provided
medical treatment to an estimated 27.7
million people with diabetes worldwide, a
decrease of 1% compared to 28.0 million
in 2016. The decline was caused by lower
sales of human insulin mainly due to an
impact from lower tender volumes of
human insulin in some large tender markets
in 2017, partly offset by growth in sales
of modern and new-generation insulin
as well as Victoza® (see note 2.2 to the
Consolidated financial statements).

Through Novo Nordisk’s Access to Insulin
Commitment, the company guarantees to
provide low-priced human insulin to the
poorest parts of the world. The guarantee
applies to Least Developed Countries
(LDCs) as defined by the UN and other low-
income countries as defined by the World
Bank as well as selected organisations
providing relief in humanitarian situations.
Moreover, Novo Nordisk sells human insulin
at similar prices in other low- and middle-
income countries. In 2017, the ceiling price
was USD 4 per vial with an average selling
price of USD 3 per vial. As a result, an
estimated 0.3 million patients were treated
with insulin for 12 cents per day or less.

Through the company’s Changing
Diabetes® programmes particular focus
is given to vulnerable populations.
The Changing Diabetes® in Children
programme operates in 13 countries
and reaches more than 16,000 children
with type 1 diabetes, who receive insulin
treatment free of charge (see p 37).
The Changing Diabetes® in Pregnancy
programme has screened more than 68,000
women for gestational diabetes, and more
than 6,700 women have been diagnosed
and subsequently treated. The Base of the
Pyramid programme has been expanded
in Nigeria and Ghana and started up in
Senegal.

Cities Changing Diabetes is a partnership
programme with University College London
and Steno Diabetes Center Copenhagen as
well as a range of local partners, including
diabetes and health communities, city
governments, academic institutions, city
experts and civil society organisations. It
is a response to the dramatic rise in type
2 diabetes in cities, also referred to as
‘urban diabetes’, and the aim is to map
the problem, share solutions and drive
concrete action to address the diabetes
challenge in cities around the world.
The coalition of cities, which comprises
Beijing, Copenhagen, Hangzhou, Houston,
Johannesburg, Mexico City, Rome,
Shanghai, Tianjin, Vancouver and Xiamen,
representing more than 100 million citizens,
has called for an ambitious global goal to
prevent more than 100 million new cases
of diabetes by 2045. Achieving the goal
requires cutting rates of obesity by 25%,
which would prevent more than 100 million
people globally developing diabetes and
could lead to savings of USD 200 billion
annually by 2045.

Donations to the World Diabetes Founda-
tion (WDF) amounted to 85 million Danish
kroner in 2017. Created by Novo Nordisk
in 2002, WDF is an independent trust
dedicated to the prevention and treatment
of diabetes in the developing world.
WDF supports sustainable partnerships
and acts as a catalyst to help others do
more. In 2017, WDF provided funding to
47 partnership projects in 32 countries;
116 countries have been supported to
date since 2002. The projects focus on
awareness, education and capacity building
at local, regional and global levels. For
every dollar donated by WDF, local partners
are able to raise approximately USD 2 in
cash or as in-kind donations from other
sources for the projects. Read more on
worlddiabetesfoundation.org.

Novo Nordisk also provides financial
support to improve global access to
haemophilia care. In 2017, the company
donated 18 million kroner to the Novo
Nordisk Haemophilia Foundation (NNHF),
established in 2005. NNHF supports
programmes in developing and emerging
countries. Initiatives focus on capacity
building, diagnosis and registry, education
and empowerment. Since 2005, NNHF has
provided funding for 230 programmes in
69 countries. Read more on nnhf.org.

EMPLOYEES
Novo Nordisk aims to be an attractive
employer and offers a safe and healthy,
inclusive and engaging working

ACCOMPLISHMENTS AND RESULTS 2017

environment. At the end of 2017, the
total number of employees was 42,682,
corresponding to 42,076 full-time positions,
which is a 1% increase compared with
2016. The growth in employees was
mainly driven by the global service centre
in Bangalore, India. Employee turnover
increased from 9.7% in 2016 to 11.0%
in 2017. The increased employee turnover
in 2017 was mainly due to the workforce
reduction at the end of 2016; as a part of
this workforce was still employed at the
end of 2016 it affects the 2017 employee
turnover.

The level of engagement and commitment
to the company’s values remains high. In
the annual employee survey, conducted
in the second quarter of 2017, 90%
of employees responded positively to a
set of questions to measure the level of
sustainable engagement.

By the end of 2017, the gender distribution
among managers was 60% men and 40%
women. Of the newly promoted managers,
43% were women, which is the same level
as in 2016. All management teams, from
entry level and upwards, are encouraged to
focus on enhanced diversity, with the aim
of ensuring a robust pipeline of talent for
management positions.

The average frequency rate of occupational
accidents with absence was 2.7 per
million working hours in 2017 compared
with 3.0 in 2016. There were no work-
related fatalities in 2017, compared with
one fatality in 2016. Novo Nordisk works
with a zero-injury mindset and remains
committed to continuously improving safety
performance. The link between company
values and safety behaviour is emphasised
to ensure that employees always make the
safe choice.

ASSURANCE
Measures are taken to provide assurance
that Novo Nordisk conducts its business in a
responsible way.

Training in business ethics is mandatory
and a high priority. Annual business ethics
training is required for all employees,
including new hires. Business ethics
training is therefore a key element of the
onboarding programmes. In 2017, as
in 2016, 99% of all relevant employees
completed and documented their training
and passed the related tests. This high level
is attributed to the constant focus on and
communication by senior management
of the importance of business ethics
compliance.

CONTINUED

NOVO NORDISK ANNUAL REPORT 201712 ACCOMPLISHMENTS AND RESULTS 2017

A total of 34 business ethics reviews were
completed in 2017 with 130 findings,
compared with 52 reviews in 2016 with
234 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 2017.

The global facilitator team conducted 65
audits of units’ adherence to the Novo
Nordisk Way. These facilitations covered
approximately 21,000 employees, of whom
almost 3,000 were interviewed, while
feedback was collected from almost 700
stakeholders. The facilitations in 2017, as
in 2016, 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 pp 16–17 and novonordisk.
com/about-novo-nordisk/novo-nordisk-way.
html for additional information).

A total of 246 supplier audits, compared
with 223 in 2016, were conducted in 2017
to assess suppliers’ level of compliance
with the company’s standards for suppliers.
These relate to quality as well as to Novo
Nordisk’s responsible sourcing policy to
ensure respect for human and labour rights,
environmental management and business
ethics. These audits are undertaken by Novo
Nordisk’s Corporate Quality organisation.
Of the audits carried out in 2017, 28
concerned responsible sourcing criteria,
on par with 2016. Only high-risk suppliers,
identified through a robust risk assessment,
are selected for responsible sourcing audits.
There were no critical findings in 2017.

Novo Nordisk had six product recalls from
the market in 2017, which is the same
level as in 2016. None of these recalls
were critical. Local health authorities were
informed in all instances to ensure that
distributors, pharmacies, doctors and
patients received appropriate information.

In 2017, as in 2016, there were no failed
inspections by regulatory authorities among
those resolved at year-end. A total of 83
inspections were conducted in 2017 at
Novo Nordisk’s sites, at clinics conducting
investigations for Novo Nordisk or for
voluntary ISO 9001 certification, compared
with 74 inspections in 2016. At year-end,
54 inspections had been passed and 29
were unresolved.

HUMAN RIGHTS
Novo Nordisk acts on its responsibility to
respect human rights as set out in the
UN Guiding Principles on Business and
Human Rights, and conducts ongoing 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 2017, the focus was on
human biosamples for research use, patient
safety and local production projects. Novo
Nordisk has also strengthened consultations
with patients. Reporting on respect of
human rights, using the UN Guiding
Principles Reporting Framework, is available
in the Communication on Progress at
novonordisk.com/annualreport.

REPUTATION
Novo Nordisk's reputation among key
stakeholders – people with diabetes,
general practitioners and diabetes specialists
– is an indicator of the extent to which
the company lives up to stakeholders'
expectations and the likelihood that they
will trust, support and engage with the
company. The company reputation score,
measured on a scale of 0–100, increased
to 79.3, from 77.8 in 2016. Data were
collected between June and September
2017; a score between 70 and 80 is
considered strong.

RESPONSIBLE TAX APPROACH
Novo Nordisk’s tax approach is to pursue
a competitive tax level in a responsible
way. As a general rule, Novo Nordisk
subsidiaries pay corporate taxes in the
countries in which they operate and where
business activity generates profits, earned
in accordance with international transfer
pricing rules. A competitive tax level implies
achieving a tax level around the peer-group
average. The company has a balanced tax
risk profile and does not engage in tax
avoidance activities. For further information
about Novo Nordisk taxes, see note 2.6
Income taxes and deferred income taxes
on p 72.

To create certainty regarding tax payments,
Novo Nordisk has applied for advance
pricing agreements (APAs) in key countries.
The ambition is to have APAs covering
more than two-thirds of total sales. 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 level of taxable income for
the countries in question. An APA typically
covers a future period of five tax years.
Novo Nordisk currently has APAs in place
covering intercompany transactions with
the US, Canada and Japan, corresponding
to more than half of total sales.

The finance policy and the tax strategy are
endorsed by the Board of Directors of Novo
Nordisk.

LONG-TERM SOCIAL
TARGETS

Long-term social targets support long-
term financial performance, balancing
responsibility with profitability, with the

aim of creating sustainable value for
shareholders and other stakeholders. These
targets reflect Novo Nordisk's ambition
to be a sustainable business: fostering
well-being by helping people live better
lives, working the Novo Nordisk Way
and safeguarding the reputation of the
company.

Novo Nordisk has three long-term social
targets related to patient reach, employee
engagement and reputation, two of which
are in the process of being changed. The
target set in 2013 to reach 40 million
people with the company’s diabetes care
products by 2020 has been abandoned.
As communicated in the Annual Report
2016, current projections show that it will
not be possible to reach the target due to a
more challenging market environment than
anticipated when the target was set. Work
is ongoing to deliver on the commitment to
improve access to quality care.

Until 2016, the company measured
employee engagement through a custom-
made annual survey (eVoice). While
providing relevant data on year-on-year
trends within the company, the study
did not allow for external benchmarking
with other companies. In 2017, a new
methodology for measuring employee
engagement was introduced that allows
for external benchmarking. Once a robust
baseline has been established, long-term
targets will be set.

Reputation is measured among key external
stakeholders, and the target is unchanged.
The scope of the calculation has been
updated. For more information see Changes
to accounting policies and disclosures on
p 100.

For further information about social
performance, see the social statement on
pp 98–103 and the Communication on
Progress at novonordisk.com/annualreport.

COMPANY REPUTATION
Mean score among key external stakeholders

• Realised
Target

Scale

100

2013* 2014 2015 2016 2017

* Data for people with diabetes not included due to lack

of availability.

NOVO NORDISK ANNUAL REPORT 2017ENVIRONMENTAL PERFORMANCE

Novo Nordisk accounts for environmental
performance on three dimensions: use of
resources, emissions and waste. All of Novo
Nordisk’s production facilities are certified
according to ISO 14001. The production
of active pharmaceutical ingredients (API)
in Kalundborg, Denmark, is also certified
according to ISO 50001.

In 2017, use of resources decreased
slightly. CO2 emissions from production
sites decreased as a result of the decreased
energy use while CO2 emissions from
product distribution and waste increased
slightly.

RESOURCES
Novo Nordisk’s environmental strategy
prioritises minimising the use of non-
depletable or scarce natural resources.
In 2017, energy and water consumption
decreased slightly. 79% of the power
(electricity) used at production sites came
from renewable sources such as biomass,
wind and hydropower. Two facilities are
located in regions subject to high water
stress, ie high seasonal variations in water
availability, and account for 7% of the
total water used at Novo Nordisk, up from
6% in 2016 due to increased production
to meet market demands. There were no
incidents of water shortage. Novo Nordisk
continued to focus on energy efficiency and
water savings. Energy and water projects
implemented in 2017 are expected to lead
to estimated annual savings of 18,000 GJ
energy and more than 100,000 m3 water
from 2018.

EMISSIONS 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, purchased
goods and services and transportation
such as company cars, business flights and
product distribution.

The overall CO2 emissions from energy
consumption at production sites decreased
by 2% to 90,000 tons, due to decreased
energy use in areas that use fossil-based
energy. Novo Nordisk continues to engage
with energy suppliers to explore possible
renewable power solutions for facilities in
the USA and Europe, in order to meet the
long-term target for all power used by the
company's production sites to be based on
renewable sources by 2020.

Novo Nordisk’s largest production site
– located in Kalundborg, Denmark – is
supplied with steam and heat from the

local Asnæs power plant. As a result of a
partnership between Novo Nordisk, other
local businesses and energy provider Ørsted,
construction started in October 2017 to
convert Asnæs from being coal-fired to
burning wood chips. With this change, it is
expected that all Novo Nordisk production
in Denmark by 2020 will be based on
renewable energy delivered as power,
heating and steam.

With the use of bio-natural gas and steam
based on wood chips in Denmark, as well
as power from renewable sources at Novo
Nordisk production sites globally, it is
expected that more than 75% of the total
energy use will be based on renewable
sources by 2020.

As part of Novo Nordisk’s supply chain
programme, focused on reducing emissions
from suppliers of raw materials, more than
20 key suppliers were engaged in 2017
to work on energy efficiency and use of
renewable energy.

CO2 emissions from business flights are
estimated to be 44,000 tons in 2017, the
same as in 2016. Novo Nordisk encourages
employees to use virtual meetings instead
of travelling, and in 2017 virtual meetings
increased by 25%. CO2 emissions from
company cars, mainly used by the sales
force, showed a decrease of 7% from
68,000 tons to 63,000 tons in 2017,
due to a reduction in the number of cars
and a shift to more fuel efficient cars. In
November 2017, Novo Nordisk adopted
new global guidelines for company cars,
which is guiding the shift towards electric
and hybrid cars. Based on these guidelines,
local car policies will be implemented in
2018.

Emissions from product distribution
increased by 3% compared with 2016.
Emissions from air and ground transport
remained stable. More products were
distributed by sea. Distributing as many
products as possible by sea remains a
priority for Novo Nordisk, as sea transport
reduces both CO2 emissions and costs
relative to product volume.

Waste increased by 3% compared with
2016, primarily due to increased amounts
of organic residues from fermentation
processes. The energy from these residues is
recovered in biogas plants, and the digested
slurry is used as fertiliser on local farmland.
Overall, 96% of all the waste is recycled,
used for biogas production or incinerated
in plants where the energy is used for
producing heat or power.

ACCOMPLISHMENTS AND RESULTS 2017

LONG-TERM
ENVIRONMENTAL TARGETS

Novo Nordisk has three long-term
environmental targets related to share of
power from renewable sources, energy use
and water use.

In 2015, Novo Nordisk set a target for all
production sites to run solely on power
from renewable sources by 2020. The
company has signed up to the RE100
initiative, led by The Climate Group in
partnership with CDP, a not-for-profit
organisation responsible for managing the
global disclosure system for environmental
impacts. Novo Nordisk is well on track to
meet the target.

With the decrease in energy and water use
in 2017, the long-term targets for reducing
consumption of energy and water were
met and will be discontinued. Experience
has shown that a target correlated with
sales does not drive performance towards
becoming a sustainable business.

New long-term targets will be developed as
a result of a strategy process in 2018.

Long-term environmental targets support
long-term financial performance, balancing
responsibility with profitability, with the
aim of creating sustainable value for
shareholders and other stakeholders.
These targets reflect strategic priorities
to be a sustainable business: aiming to
manage the use of natural resources with
respect to ecosystems and not encroach on
ecosystems or communities.

For further information about
environmental performance, see the
Consolidated environmental statement on
pp 104–106 and the Communication on
Progress at novonordisk.com/annual report.

SHARE OF RENEWABLE POWER
FOR PRODUCTION

• Realised
Target

100

2013 2014 2015 2016 2017

NOVO NORDISK ANNUAL REPORT 201714 ACCOMPLISHMENTS AND RESULTS 2017

PERFORMANCE HIGHLIGHTS

DKK million

2013

2014

2015

2016

2017

2016–2017

FINANCIAL PERFORMANCE
Net sales

Sales growth in local currencies1
Foreign currency impact

83,572

88,806

107,927

111,780

111,696

11.9%
(4.8%)

8.3%
(2.0%)

8.4%
13.1%

5.5%
(1.9%)

2.3%
(2.4%)

Net sales growth as reported

7.1%

6.3%

21.5%

3.6%

(0.1%)

Depreciation, amortisation and impairment losses
Operating profit
Net financials
Profit before income taxes
Net profit for the year

Total assets
Equity

Capital expenditure, net
Free cash flow1

FINANCIAL RATIOS1
Percentage of sales:
Sales outside Denmark
Sales and distribution costs
Research and development costs
Administrative costs

Gross margin
Operating margin
Net profit margin
Effective tax rate
Equity ratio
Return on equity
Cash to earnings
Payout ratio

LONG-TERM FINANCIAL TARGETS1
Operating profit growth
Operating profit growth adjusted2
Operating profit growth in local currencies adjusted2
Operating profit after tax to net operating assets
Cash to earnings (three-year average)

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%
37.7%
30.1%
22.6%
60.5%
60.5%
88.8%
47.1%

6.9%
6.9%
14.6%
97.2%
93.9%

3,435
34,492
(396)
34,096
26,481

77,062
40,294

3,986
27,396

99.5%
26.2%
15.5%
4.0%

83.6%
38.8%
29.8%
22.3%
52.3%
63.9%
103.5%
48.7%

9.5%
9.5%
12.7%
101.0%
93.1%

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%
45.8%
32.3%
19.8%
51.2%
79.9%
98.2%
46.6%

43.3%
35.2%
12.7%
148.7%
96.8%

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%
43.3%
33.9%
20.7%
46.4%
82.2%
105.4%
50.2%

(2.0%)
3.9%
6.2%
150.2%
102.4%

3,182
48,967
(287)
48,680
38,130

102,355
49,815

8,679
32,588

99.6%
25.4%
12.5%
3.4%

84.2%
43.8%
34.1%
21.7%
48.7%
80.2%
85.5%
50.4%

1.1%
1.1%
4.8%
143.2%
96.4%

Change

(0%)

(0%)
1%
N/A
2%
1%

5%
10%

23%
(19%)

Target

125%
90%

1. For definitions, please refer to pp 96–97. 2. Years 2015 and 2016, adjusted for DKK 2,376 million from the partial divestment of NNIT A/S and DKK 449 million from the income related to the out-
licensing of assets for inflammatory disorders respectively.

SALES BY GEOGRAPHIC REGION
 Region Latin America
 Region Japan & Korea
 Region China
 Region AAMEO
 Region Europe
 North America Operations

DKK billion

125

100

DIABETES CARE AND OBESITY SALES
 Other diabetes care and obesity
 Victoza®
 New-generation insulin
 Modern insulin
 Human insulin

BIOPHARMACEUTICALS SALES
 Other biopharmaceuticals
 Growth disorders
 Haemophilia

DKK billion

100

DKK billion

2013 2014 2015 2016 2017

NOVO NORDISK ANNUAL REPORT 2017ACCOMPLISHMENTS AND RESULTS 2017

2013

2014

2015

2016

2017

2016–2017

SOCIAL PERFORMANCE

Patients reached with Novo Nordisk diabetes care
products (estimate in millions)
Patients reached with Novo Nordisk diabetes care
products via the Access to Insulin Commitment (estimate
in millions)
Donations (DKK million)3
New patent families (first filings)
Employees (total)
Employee turnover
Sustainable engagement score
Gender in Management (ratio men:women)
Relevant employees trained in business ethics
Product recalls
Failed inspections

LONG-TERM SOCIAL TARGET

Company reputation (scale 0–100)5

ENVIRONMENTAL PERFORMANCE
Energy consumption (1,000 GJ)
Water consumption (1,000 m3)
CO2 emissions from energy consumption (1,000 tons)
Waste (1,000 tons)

LONG-TERM ENVIRONMENTAL TARGETS

Energy consumption (vs prior year)6
Share of renewable power for production
Water consumption (vs prior year)6

SHARE PERFORMANCE
Basic earnings per share/ADR in DKK1,8
Diluted earnings per share/ADR in DKK1,8
Total number of shares (million), 31 December
Treasury shares (million), 31 December
Share capital (DKK million)
Dividend per share in DKK8
Total dividend (DKK million)
Share repurchases (DKK million)
Closing share price (DKK)

24.3

24.4

26.8

28.0

—

83
77
38,436 4
8.1%
—
61:39
97%
6
0

84
93
41,450 4
9.0%
—
60:40
98%
2
0

105
77
41,122
9.2%
—
59:41
98%
2
0

106
74
42,446
9.7%
—
59:41
99%
6
0

27.7

0.3

103
65
42,682
11.0%
90%
60:40
99%
6
0

82.5

79.5

81.1

77.8

79.3

2,572
2,685
125
131

6%
74%
8%

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

2,556
2,959
120
141

(1%)
73%
10%

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

2,778
3,131
107
159

9%
78%
6%

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

2,935
3,293
92
153

6%
78%
5%

14.99
14.96
2,550
46
510
7.60
19,048
15,057
254.70

2,922
3,276
90
157

0%
79%
1%

15.42
15.39
2,500
56
500
7.85 9
19,206 9
16,845
334.50

Change

(1%)

(3%)
(12%)
1%

Target

≥ 80

Change

(0%)
(1%)
(2%)
3%

Target

Not to exceed 3%7
100% by 2020
Not to exceed 3%7

Change

3%
3%
(2%)
22%
(2%)
3%
1%
12%
31%

3. Donations to the World Diabetes Foundation and the Novo Nordisk Haemophilia Foundation. 4. Includes employees of NNIT A/S. 5. Calculation has been adjusted due to change of methodology.
Historical data have been restated accordingly. See p 100 and p 103, note 4.6 for additional information. 6. Target to be discontinued in 2018. See p 13 for additional information. 7. The 3% equals
50% of the business growth measured as the increase in sales in local currencies as a three-year average. Please refer to p 13 for additional information. 8. Share performance-related key figures have
been calculated reflecting a trading unit of DKK 0.20. 9. Total dividend for the year including interim dividend of DKK 3.00 per share, which was paid in August 2017. The remaining DKK 4.85 per
share, corresponding to DKK 11,810 million, will be paid subject to approval at the Annual General Meeting.

EMPLOYEES (TOTAL)
 Region Latin America
 Region Japan & Korea
 Region China
 Region AAMEO
 Region Europe
 North America

Thousand

WATER CONSUMPTION IN
AREAS SUBJECT TO WATER
STRESS*
 Consumption in areas subject to

water stress

 Consumption in areas not subject

to water stress

100

CASH DISTRIBUTION TO
SHAREHOLDERS
 Share repurchases in the year
 Interim dividend for the year
 Dividend for prior year
Free cash flow

DKK billion

2013 2014 2015 2016 2017

* As defined by the World Resources Institute

NOVO NORDISK ANNUAL REPORT 2017
OUR BUSINESS

LEADING THE
NOVO NORDISK WAY

The Novo Nordisk Way is the foundation for ‘how we do business’. It sets the direction for
all employees at Novo Nordisk and underpins the company’s vision, strategy and actions.

“The Novo Nordisk Way is the foundation
for everything we do,” says President and
Chief Executive Officer Lars Fruergaard
Jørgensen. “It describes why we’re here,
our ambitions and how we do things. And
it spells out what’s expected of every single
employee, regardless of where they work,”
he elaborates.

The 10 Essentials that are part of the Novo
Nordisk Way describe the behaviours
that characterise working the Novo
Nordisk Way. In every aspect, the patient
perspective comes first. Patients rely on
Novo Nordisk products every day and
should have confidence in the company

behind these medicines. But earning the
trust of other stakeholders matters too,
and the company therefore stays attuned
to the interests of all key stakeholders
and seeks to build and maintain good
relationships.

“The actions we take will inevitably impact
people, communities and the environment.
That’s why we use the Triple Bottom Line
principle to guide decisions and always
strive to achieve a good balance between
financial, social and environmental
dimensions of performance. We want to
maximise our positive impacts and minimise
any adverse impacts of our business. This is

what doing business responsibly means to
us,” explains Lars Fruergaard Jørgensen.

Novo Nordisk’s purpose is ‘driving change
to defeat diabetes and other serious chronic
diseases’. This is a promise to patients, and
the company holds itself accountable for
delivering on it.

“Since the very beginning, Novo Nordisk
has been focused on finding new and
better ways of treating diabetes. But the
way we do this matters, and the values of
the company’s founders are values we’re
guided by today, even if the wording may
have been updated.”

NOVO NORDISK ANNUAL REPORT 2017OUR BUSINESS

“We acknowledge that it can be difficult to
understand and interpret all applicable rules
correctly and that there can be challenging
situations – cultural norms, industry
practices or even, sometimes, conflicting
demands. We also acknowledge that
breaches may, and occasionally do, happen.
We do our utmost to identify any violations,
either through internal audits or through
reports to the Compliance Hotline, and
we take appropriate action, depending on
the severity of the violation,” explains Lars
Fruergaard Jørgensen.

“There’s zero tolerance for unethical
business behaviour. If we don’t get this
right, we risk losing our licence to operate
and the respect of those who trust us each
and every day – jeopardising the whole
company. Therefore, we make great efforts
to ensure that employees know what is
and what is not acceptable behaviour.
Requirements are spelled out in our
Business Ethics Code of Conduct, and all
employees must undergo training and tests
yearly. The dos and don’ts are conveyed
consistently and in plain language by senior
management, and through dedicated
communication and education – where we
share with employees what can go wrong
and the associated consequences. Everyone
has access to simple and practical guidance
they can consult when encountering
potential ethical issues. As with all of the
Essentials in the Novo Nordisk Way, it’s a
mindset we share – and we hold ourselves
accountable for living by it.”

WALKING THE TALK
Facilitation is a systematic and unique
approach to follow up on how the Novo
Nordisk Way is lived across the organisation.
The facilitations are conducted by a team
of in-house experts with deep and broad
knowledge of the business. They assess
how the Novo Nordisk Way is practised at
unit level, specifically by measuring how
the Essentials are expressed in the actions
of leaders and their employees. Simply
put, facilitations ensure that people in the
company are walking the talk.

A unit’s overall compliance rating describes
to what extent the unit lives up to the Novo
Nordisk Way. A 1–5 rating scale is applied,
ranging from ‘Not meeting standards’ to
‘Outstanding’, and best practice examples
are shared internally, while action is taken
by local management to remedy below-
standard performance findings.

A consolidated report is presented to
Executive Management and the Board of
Directors. See facilitation findings in 2017
on p 103.

REAFFIRMING

‘HOW WE DO BUSINESS’
When he took office as CEO, Lars
Fruergaard Jørgensen took the
opportunity to reaffirm the Novo
Nordisk Way. He and his leadership
team wanted to convey a strong
message that not only will Novo Nordisk
continue to do business the Novo Nordisk
Way – but also that the Novo Nordisk Way
will be defining for the company’s future
success.

“At Novo Nordisk, we aim to be a leader
in all the areas in which we’re active, and
this ambition is now explicitly stated in the
Novo Nordisk Way. We must have self-
confidence, but we must also be mindful
of the obligation that follows. To deliver on
our promises, we must take responsibility
for developing even better products and
making sure that more patients get access
to our products. This is the mindset we
need to have for Novo Nordisk to be
successful in the future.

“THE NOVO NORDISK
WAY AND THE
TRIPLE BOTTOM LINE
PRINCIPLE PROVIDE THE
FOUNDATION FOR OUR
SUCCESS IN THE LONG
TERM.”

Lars Fruergaard Jørgensen,
president and chief executive officer

“I’m amazed by how strongly the Novo
Nordisk Way is present around the world.
It really resonates. Our facilitations – an
internal audit process conducted by senior
employees interviewing employees to
measure how well we operate in line with
our values – tell us that we have a solid
level of compliance with the Novo Nordisk
Way,” says Lars Fruergaard Jørgensen.
“But we can’t take this for granted. Across
the organisation, we must focus on the
ability to anticipate and adapt to changing
conditions in a timely and agile way,
tackling challenges, prioritising resources
and seizing opportunities to shape our
business environment. In a world and
industry of increasing complexity, we
must encourage employees at all levels to
practise simplicity – focusing on making
things simple, and to question what they
don’t understand, eliminating processes
and steps that don’t add value. That, in
turn, will allow us to operate with greater
agility.”

NO BUSINESS WITHOUT ETHICS
One other statement stands out. Even
though competition may be tough,
quality and business ethics must never be
compromised.

In 1923, our Danish founders began a
journey to change diabetes. Today, we are
thousands of employees across the world
with the passion, skills and commitment to
drive change to defeat diabetes and other
serious chronic diseases.

• We aim to lead in all disease areas in

which we are active.

• 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.

• 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.

• We never compromise on quality and

business ethics.

Every day, we must make difficult choices,
always keeping in mind what is best
for patients, our employees and our
shareholders in the long run.

It’s the Novo Nordisk Way.

THE ESSENTIALS

1. 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.

7. We focus on personal performance and

development.

8. We have a healthy and engaging

working environment.

9. We strive for agility and simplicity in

everything we do.

10. We never compromise on quality and

business ethics.

novonordisk.com/NNWay

18 OUR BUSINESS

A STRATEGY
TO IMPROVE
PATIENTS’ LIVES

Novo Nordisk is dedicated to driving change to defeat diabetes and other serious chronic
diseases. The ambition is to lead in all disease areas where the company is active. Currently,
Novo Nordisk offers and develops innovative treatments for diabetes, obesity, haemophilia
and growth disorders. A new strategic priority is to expand into other serious chronic
diseases, such as liver, heart and kidney diseases related to diabetes and obesity.

“Our strategic foundation is strong.
We have five clear priorities, our core
capabilities which enable us to execute
these priorities well, and the Novo Nordisk
Way which guides how we do business
to be a successful, sustainable business,”
explains Camilla Sylvest, executive
vice president, Commercial Strategy &
Corporate Affairs, Novo Nordisk.

The company operates in a dynamic
business environment that presents several
challenges. On the one hand, there are
large and growing unmet medical needs in
all the areas in which Novo Nordisk is active,
and the company has very competitive
products to improve patients' lives. On the
other hand, competition is more intense
than ever, not least in what is by far Novo
Nordisk's largest business area: diabetes.
The launch of biosimilar products in the
insulin segment, combined with stronger
buyers’ power and lower willingness to pay
for innovation, makes for a challenging
business environment.

“We must ramp up our efforts to drive
commercial innovation and gain market
access, if we are to grow our business
sustainably. We can’t rely on product
innovation alone. We know it takes
more than medicine to defeat diabetes
and other chronic diseases. That's why
we work to strengthen digital and
commercial innovation in healthcare by
offering supporting tools, services and
programmes,” says Camilla Sylvest.

"Digital health is another innovation that
can lead to better treatment outcomes,
thanks to the generation of actionable
insights from real-world usage of our
products. Our connected pens can be
applied with multiple partnership solutions
for use by patients and healthcare pro-
viders. They can provide patient benefits
such as better dosing, easier adherence and
coaching on the use of our products. This
may also allow for innovative contracting,
where payers and patients can link financial
investments to the proven, real-world
clinical value of our products.”

STRENGTHEN LEADERSHIP IN
DIABETES CARE

There are significant unmet needs within
diabetes care. Today, the International
Diabetes Federation (IDF) estimates that
more than 425 million people are living
with diabetes, and this number is likely to
grow to 629 million by 2045.1 Only 6%
are currently treated with Novo Nordisk
products.1

The intention is to strengthen the
differentiation of the company’s newest
insulins – Tresiba®, Xultophy®, Ryzodeg®
and Fiasp® – by focusing on their potential
for improved treatment outcomes.

In markets where there is not yet
competitive access to these products, the
focus will be on one or more of the modern
insulin products – Levemir®, NovoRapid®
and NovoMix® – depending on the local
market situation. In countries where a buyer

STRATEGIC PRIORITIES

CORE CAPABILITIES

PURPOSE

Strengthen leadership in DIABETES CARE

Strengthen leadership in OBESITY

Pursue leadership in HAEMOPHILIA

Strengthen leadership in GROWTH DISORDERS

Expand into OTHER SERIOUS CHRONIC DISEASES

Engineering,
formulating,
developing
and
delivering
protein-based
treatments

Deep
disease
under-
standing

Efficient
large-scale
production of
proteins

Global
commercial
reach and
leader in
chronic
disease care

DRIVING
CHANGE
TO DEFEAT
DIABETES
AND OTHER
SERIOUS
CHRONIC
DISEASES

NOVO NORDISK WAY

NOVO NORDISK ANNUAL REPORT 2017OUR BUSINESS

wants insulin at the lowest possible price,
Novo Nordisk offers a range of human
insulin products. See Product overview on
p 112.

Across the world, the majority of people
with diabetes are not achieving the optimal
blood glucose level. This is linked to the fear
of hypoglycaemia (low blood sugar). After
experiencing episodes of hypoglycaemia,
some patients tend to reduce their insulin
dose, which in turn leads to poor blood
glucose control and long-term diabetes
complications.1 Severe hypoglycaemic
episodes are associated with increased risk
of death and high healthcare costs of up to
14,500 dollars per episode.2

"Tresiba® sets a new standard for basal
insulin initiation by lowering the risk
of hypoglycaemia, offering healthcare
professionals and patients the ability to
control diabetes with fewer concerns,”
Camilla Sylvest explains. Read more on
pp 24–25.

“IT ALL STARTS WITH
THE PATIENT. WE WILL
IMPROVE PATIENTS’
ACCESS TO OUR
PRODUCTS AND THEIR
ABILITY TO REACH
TREATMENT TARGETS,
BECAUSE THIS IS WHAT
LEADS TO BETTER
HEALTH OUTCOMES.”

Camilla Sylvest, executive vice president, Commercial
Strategy & Corporate Affairs

Novo Nordisk’s GLP-1 products – Victoza®
and the new once-weekly Ozempic®
(semaglutide) – may transform the
treatment of people with type 2 diabetes.
They are the only GLP-1 products to
have recently demonstrated in large
phase 3 trials that patients can cut
the risk of cardiovascular disease and
death significantly, while also achieving
unsurpassed blood glucose lowering and
weight loss. This is important because
adults with diabetes still have a 2–4-fold
higher risk of cardiovascular disease,
despite the advances in the treatment

of cardiovascular disease that have been
made. Read more on pp 24–25.

semaglutide in the first half of 2018. Read
more on pp 28–29.

In 2017, Victoza® was relaunched with the
new cardiovascular data in the label in EU
countries, and a cardiovascular indication in
the US. The launch of Ozempic® as a once-
weekly injection is expected to begin in the
first countries in 2018.

A once-daily tablet version of semaglutide is
under development and may provide Novo
Nordisk with a very promising product in
the oral diabetes segment. Read more on
pp 24–25.

STRENGTHEN LEADERSHIP IN
OBESITY

“Obesity is a chronic disease that, for some
people, requires medical treatment. It’s
possibly the largest risk to global health and
may have severe comorbidities, such as type 2
diabetes and cardiovascular diseases. It’s also
a significant cost burden for society, expected
to increase if firm action is not taken. Today,
more than 650 million adults worldwide are
living with obesity, of whom only 2% receive
medical treatment.3 This number is forecast
to grow to 1 billion by 2025.3 In the same
period, the costs of treating diseases linked to
obesity are expected to increase by 50% to
around 1.2 trillion dollars globally, assuming
no action is taken to bend the rise in obesity.4
With Saxenda® (liraglutide 3 mg), we have
a strong position in the small, but growing,
market for medical treatment of obesity. We
have the potential and the ambition to build
the global obesity market,” says Camilla
Sylvest.

Novo Nordisk's ambition is to improve
patients’ access to medication, support
the education of healthcare professionals
in medical obesity treatment, support new
clinics, and build awareness and recognition
that obesity is a chronic disease.

Meanwhile, Novo Nordisk’s research and
development teams are working relentlessly
to develop new biologic medicines that
either alone or in combination can achieve a
weight loss of more than 15% by reducing
appetite and increasing energy expenditure.
In a recent phase 2 study, a 0.4 mg dose of
semaglutide as a once-daily injection led to
weight loss of up to 16.2% after one year's
treatment. The company plans to initiate
a phase 3 clinical trial programme with

PURSUE LEADERSHIP IN
HAEMOPHILIA

Within the haemophilia business,
approximately half of historic NovoSeven®
sales could be exposed due to the launch
of a new competing product, but the
product still has opportunities in some
markets. NovoEight® sales measured
in volume continue to grow, despite
increasing competition from long-acting
factor VIII products. To solidify its position
in the market for haemophilia products,
Novo Nordisk is pursuing opportunities for
in-licensing or acquisitions. Read more on
pp 32–33.

STRENGTHEN LEADERSHIP IN
GROWTH DISORDERS

Lack of growth hormone treatment may
significantly impact a person physically and
psychologically. “Novo Nordisk is the global
market leader in growth disorder treatment,
and we'll strengthen this position through
effective life cycle management of existing
products and innovation," explains Camilla
Sylvest. "A new-generation, long-acting
human growth hormone, somapacitan,
could be the first once-weekly treatment for
growth disorders, and this could improve
treatment options for patients.”

EXPAND INTO OTHER SERIOUS
CHRONIC DISEASES

As part of an update of its R&D strategy,
Novo Nordisk has decided to expand into
other serious chronic diseases associated
with diabetes and obesity. The areas
currently being explored are the liver disease
NASH (non-alcoholic steatohepatitis),
cardiovascular diseases and chronic
kidney disease – which all have patient
populations with high unmet medical
needs. The expansion will be spearheaded
by semaglutide, which may have positive
effects on these diseases. Novo Nordisk will
also explore the utility of other compounds
in its pipeline within these areas and
intensify its search for external innovation.
Read more on pp 20–21.

NOVO NORDISK ANNUAL REPORT 201720 OUR BUSINESS

RAISING THE
INNOVATION
HEIGHT

The healthcare agenda is changing, and business
competition is increasing. To meet these challenges,
Novo Nordisk’s future drug development ambitions
call for a higher innovation threshold, expansion into
other therapy areas and more external partnerships.

For many serious chronic diseases such as
obesity, treatment options are limited, and
the need for innovative research is great.
In 2017, Novo Nordisk implemented a
set of new strategic priorities in research
and development that raise its drug
development innovation ambitions, as the
company aims to develop breakthrough
treatments within its existing areas and
expand into other serious chronic disease
areas.

“It’s all about providing better treatments
for people with diabetes, obesity, haemo-
philia and growth disorders, but also
focusing on other serious chronic diseases
with high unmet needs. These are areas
where we don’t yet have a presence, but
which are the natural next step for us as
there are overlapping patient populations
and we have the relevant capabilities and
molecules that we believe can be developed
into treatments for these diseases,” explains
Mads Krogsgaard Thomsen, executive vice
president and chief science officer, Novo
Nordisk.

TRANSFORMING EXPECTATIONS
With the launch of liraglutide
(Victoza®) in 2009, Novo

Nordisk moved into a new category of
diabetes medications: GLP-1 analogues.
This would later prove to be the company’s
entry into a new disease area, obesity, and
potentially other areas in the future, such as
cardiovascular disease.

Beyond lowering blood glucose – which
all diabetes medications do – liraglutide
also helps people with type 2 diabetes
to lose weight and reduce their risk of
major cardiovascular events. According to
Mads Krogsgaard Thomsen, semaglutide
(Ozempic®), Novo Nordisk’s new once-
weekly GLP-1 analogue, which is expected
to be launched in 2018, will take diabetes
treatment to the next level.

“Semaglutide, or Ozempic®, was conceived
as the longer-acting version of human GLP-
1, but this molecule has proven far more
efficacious than expected in terms of blood

glucose lowering, weight loss and
reduction of cardiovascular

events. We continue to
explore the impact
of semaglutide

when it comes

to weight loss

and cardiovascular events, and we're also
beginning to look at how semaglutide may
reduce the risk of kidney and, potentially,
fatty liver disease in people with diabetes.

“We’re transforming expectations of what
a diabetes medication should do, from only
being able to lower blood glucose, to being
able to treat comorbidities,” he continues.

Read more about diabetes treatment
moving beyond blood glucose control on
pp 24–25.

TREATING OBESITY
Novo Nordisk is already leveraging the
insights from its GLP-1 research in other
serious chronic disease areas. Liraglutide 3
mg (Saxenda®) was launched in 2015 as
a treatment for obesity, and semaglutide
is approaching phase 3 development for
obesity.

Obesity is a complex disease (see pp 28–
29). GLP-1 analogues such as liraglutide are
effective in reducing calorie consumption
by reducing appetite and increasing the
feeling of satiety. Striving to develop
obesity treatments which can deliver more
than 15% weight loss, Novo Nordisk

PARVANEH works in Research and
Development at Novo Nordisk in Denmark

OUR BUSINESS

sufficient quantities still needs to be
discovered. Novo Nordisk is working with
external scientific partners to discover such
a drug delivery technology. “We’re very
conscious that oral insulin, like oral GLP-1
products, remains a ‘Holy Grail’ for many
people living with diabetes, and it’s the
needs of patients that guide our company,”
Mads Krogsgaard Thomsen points out.

STEM CELL THERAPY FOR TYPE 1 DIABETES
The ultimate treatment innovation within
diabetes is finding a cure. Type 1 diabetes
is caused by a malfunction in the immune
system whereby the body attacks its own
insulin-producing beta cells. If it were
possible to transplant new beta cells into
the body and keep them alive, type 1
diabetes could be cured. Professor Jacob
Sten Petersen, corporate vice president of
Global Research, Novo Nordisk, says that
the company has recently moved several
steps closer to developing beta cells that
can be transplanted into the bodies of
people with type 1 diabetes.

“Recent progress in our research means
that today we have a protocol for
developing stem cells into beta cells that is
reproducible, scalable and robust. We’ve
achieved this by leveraging decades of
experience of working with mammalian
cells in research, development and pro-
duction. We now have the infrastructure
and quality to make large-scale production
of beta cells,” he explains.

At the same time, Novo Nordisk has made
significant progress in developing an
encapsulation device that will protect the
newly transplanted beta cells from attack by
the body. “I hope that we’ll be in a position
to start clinical trials in the next few years,”
adds Jacob Sten Petersen.

JOINING FORCES AND TAKING RISKS
Novo Nordisk’s new strategic priorities to
raise the innovation threshold and move
into other serious chronic disease areas are
ambitious, and the company realises that it
cannot achieve its goals without access to
external innovation and competences. “We
have a long history of collaboration with
world-leading institutions and academia.
We plan to intensify research collaborations
and utilise external expertise to fuel our
internal innovation,” explains Mads
Krogsgaard Thomsen.

Expanding and entering other chronic
disease areas comes at the price of higher
risk, he acknowledges. “Our future
drug development ambitions and higher
innovation threshold require a change
in mindset. We need to embrace taking
risks and not be discouraged by potential
failures, as high-risk research innovation is
necessary if we are to bring breakthrough
products within our existing therapy areas
to the market and successfully enter other
chronic disease areas.”

is investigating a number of innovative
approaches to address the causes of
obesity in its early research pipeline. “We’re
working on molecules with new modes
of action, which have the potential to
provide innovative and effective treatment
options for obesity,” says Mads Krogsgaard
Thomsen. “Furthermore, some of these
molecules may have potential for treating
other serious chronic diseases new to Novo
Nordisk.”

MOVING INTO OTHER THERAPY AREAS
Besides diabetes and obesity, semaglutide is
being investigated as a potential treatment
for NASH, a progressed stage of non-
alcoholic fatty liver disease for

which there is currently no

approved treatment. NASH
may progress to liver
failure and is projected
to be the leading cause
of liver transplantation.5
Semaglutide as a once-
daily treatment for NASH is
currently under development
in phase 2.

semaglutide on cardiovascular and kidney
disease. “Within cardiovascular disease,
we have opportunities to reduce the
risk of heart attacks and stroke,” says
Mads Krogsgaard Thomsen. “I believe
that cardiovascular disease and chronic
kidney disease are areas that constitute
a significant unmet medical need where
semaglutide could make a real difference.”

BIOLOGICAL MEDICINE IN A TABLET
Insulin and GLP-1 analogues are biological
medicines – proteins – that if taken orally
as a tablet will be destroyed by digestive
enzymes in the gastrointestinal tract before
having any effect in the body – hence
the need to inject such medicines. This
may change within the next few years,
as Novo Nordisk scientists have found a
way to formulate semaglutide in a tablet
that offers the GLP-1 product protection
against digestive enzymes as well as
increasing absorption into the bloodstream.
Oral semaglutide is currently in phase 3
development for the treatment of type 2
diabetes.

Novo Nordisk is also
investigating the effect of

In order for oral insulin to be viable, the
technology to ensure that the insulin
molecule is absorbed by the body in

NOVO NORDISK ANNUAL REPORT 201722 OUR BUSINESS

PIPELINE OVERVIEW

DIABETES CARE AND OBESITY

Compound

Indication

Description

Phase 1

Phase 2

Phase 3

Filed/
regulatory
approval

DIABETES CARE

Ozempic®
(semaglutide)
NN9535

oral
semaglutide
NN9924

Type 2
diabetes

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

Type 2
diabetes

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

anti-IL-21 T1D
NN9828

Type 1
diabetes

A beta-cell preservation treatment intended for adults who
are newly diagnosed with type 1 diabetes.

LAI287
NN1436

PI406
NN1406

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.

PYY 1562
NN9748

Type 2
diabetes

An appetite-regulating hormone, peptide tyrosine tyrosine,
for the treatment of type 2 diabetes.

OBESITY

semaglutide
NN9536

AM833
NN9838

FGF21
NN9499

G530L
NN9030

GG-co-agonist
1177
NN9277

PYY 1562
NN9747

tri-agonist
1706
NN9423

Obesity

A long-acting GLP-1 analogue intended as a once-weekly
treatment for obesity.

A novel amylin analogue intended as a once-weekly
treatment for obesity.

A modified and protracted FGF21 analogue intended for the
treatment of obesity.

A novel glucagon analogue which, in combination with
liraglutide, is intended for the treatment of obesity.

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

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

An acylated tri-agonist on human GIP, GLP-1 and glucagon
receptors that acts as an agonist at three metabolically related
peptide hormone receptors, intended for once-daily weight
management treatment.

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

Overview as of 31 December 2017

Phase 1

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 patient
populations. 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 2017OUR BUSINESS

BIOPHARMACEUTICALS

Compound

Indication

Description

Phase 1

Phase 2

Phase 3

Filed/
regulatory
approval

HAEMOPHILIA

N8-GP
NN7088

Haemophilia A A glycopegylated long-acting recombinant coagulation

factor VIII intended to offer prophylaxis and treatment of
breakthrough bleeds.

concizumab
NN7415

Haemophilia
A and B

A monoclonal antibody against Tissue Factor Pathway Inhibitor
(TFPI) intended to offer subcutaneous prophylaxis.

SC N8-GP
NN7170

Haemophilia A Product to enable subcutaneous (SC) administration of N8-GP.

GROWTH DISORDERS

somapacitan
NN8640

Growth
disorders

A long-acting human growth hormone intended for once-
weekly subcutaneous (SC) administration. Projects in phase 3
for adults (AGHD) and in phase 2 for children (GHD).

OTHER SERIOUS CHRONIC DISEASES

semaglutide
NASH
NN9931

NASH

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

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

Overview as of 31 December 2017

2018 KEY EXPECTED MILESTONES
Tresiba®

Label extension with DEVOTE and SWITCH data in the US

Ozempic® (semaglutide)

Feedback from regulatory authorities in the EU and Japan

oral semaglutide

Results from phase 3a trial programme (PIONEER)

semaglutide obesity

Initiation of phase 3

N8-GP

concizumab

somapacitan

Submission in the US, the EU and Japan

Results from phase 2 trial programme (explorer 4 and 5)

Results from phase 3a trial programme (REAL 1) for adults

Results from phase 2 trial programme (REAL 3) for children

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 two of the triad
markets: the US, the EU and Japan.

NOVO NORDISK ANNUAL REPORT 201724 OUR BUSINESS

OUR BUSINESS

GOOD DIABETES CARE
REQUIRES MORE THAN
BLOOD GLUCOSE CONTROL

The conversation between a person with diabetes and their
doctor usually focuses on blood glucose control. But living
with diabetes comes with a number of life-threatening risks,
including cardiovascular events and severe hypoglycaemic
episodes – risks that novel diabetes treatments can now
reduce. And so the conversation is changing.

Fact: cardiovascular (CV) disease is the
leading cause of death in people with type
2 diabetes.1

People with type 2 diabetes have a higher
risk of experiencing or dying from CV
events compared with people without
diabetes, despite many being treated with
blood pressure- and cholesterol-lowering
agents in addition to receiving diabetes
treatment. “The CV risk associated with
type 2 diabetes has long been recognised,”
points out Stephen Gough, senior vice
president and global chief medical officer,
Novo Nordisk. “But treating a person

with both type 2 diabetes and CV disease
has historically been like treating two
unconnected diseases, due to the lack
of type 2 diabetes medications that also
reduce the risk of major adverse CV
events.”

REDUCING CV RISK
In 2017, Novo Nordisk’s Victoza®, which helps
people with type 2 diabetes to lower their
blood glucose levels and lose weight, became
the first GLP-1 analogue approved in the EU
and the US for also reducing the relative risk
of major adverse CV events in adults with
type 2 diabetes and established CV risk.

These label updates were based on data
from the LEADER trial, which demonstrated
that Victoza® significantly reduced the
overall risk of CV events by 13% when
added to standard of care.6 Moreover,
Victoza® was shown to significantly reduce
death from CV events.6

“Addressing both blood glucose and CV
risks should now be integral parts of type
2 diabetes treatment, so that the number
of people dying from CV events associated
with diabetes is reduced,” says Stephen
Gough.

A ONCE-WEEKLY TREATMENT OPTION
Since the launch of Victoza®, Novo
Nordisk has been working hard on the
development of a once-weekly GLP-1
analogue, semaglutide, which in clinical
trials has been shown to consistently lower
both blood glucose and body weight
significantly against all tested comparators,
including a DPP-IV inhibitor, a basal insulin
and other GLP-1 analogues. The results

Type 2 diabetes and
cardiovascular disease

The symptoms of cardiovascular disease
may go undetected for years, and
serious cardiovascular disease may
develop in people with diabetes before
they reach the age of 30. More than
half the people with type 2 diabetes
will exhibit signs of cardiovascular
disease complications at the time of
their diabetes diagnosis.

Type 2 diabetes causes high levels of
glucose in the blood (hyperglycaemia)
that, if left untreated or not managed
effectively, can damage the walls of the
arteries and make them more likely to
develop fatty deposits, called atheroma.

A build-up of atheroma in the arteries
that supply oxygen-rich blood to the
heart and brain leads to cardiovascular
disease, including stroke and coronary
heart disease, which can cause angina
and heart attack.

CARDIOVASCULAR DISEASE AWARENESS SURVEY
In September 2017, the International Diabetes Federation (IDF) partnered with Novo Nordisk to launch the first-ever multi-country online
survey investigating the level of cardiovascular disease awareness and knowledge among people with type 2 diabetes.

NOVO NORDISK ANNUAL REPORT 2017GOOD DIABETES CARE

REQUIRES MORE THAN

BLOOD GLUCOSE CONTROL

OUR BUSINESS

from the SUSTAIN 7 clinical trial, announced
in August 2017, showed that people with
type 2 diabetes treated with once-weekly
semaglutide experienced superior reduction
in HbA1c and body weight compared with
treatment with dulaglutide – the best-
selling once-weekly GLP-1 analogue in the
US.

"In addition to the superior blood glucose
reduction, we were positively surprised
by the great weight-reducing effect of
semaglutide in the SUSTAIN clinical trial
programme. Semaglutide has demonstrated
unprecedented effects in that regard,”
says Stephen Gough. Semaglutide is
currently awaiting phase 3 initiation for the
treatment of obesity.

“In a clinical trial, we saw a 26% decrease
in the occurrence of major adverse CV
events when semaglutide was added to
standard of care.6 Based on the SUSTAIN
clinical results, semaglutide has the
potential to produce better results than
Victoza® for blood glucose control, weight
management and CV risk reduction,
with the convenience of a once-weekly
injection,” Stephen Gough explains.

In 2018, Novo Nordisk plans to initiate
a large clinical trial focusing on the CV
benefits of semaglutide.

In December 2017, Ozempic® (semaglutide)
was approved by the FDA, based on
the results of the SUSTAIN clinical trial
programme. Semaglutide is currently under
review by several regulatory agencies,
including the European Medicines Agency
and the Japanese Pharmaceuticals and
Medical Devices Agency. Novo Nordisk
plans to launch Ozempic® in the US at the
beginning of 2018.

REDUCING THE RISKS ASSOCIATED WITH
HYPOGLYCAEMIA
Hypoglycaemia (low blood glucose),
particularly at night, is a major fear for
people with type 1 or type 2 diabetes on
insulin treatment. Novo Nordisk’s ambition
is to help people with diabetes to achieve
their treatment goals and at the same time
reduce their risk of severe hypoglycaemia.

Tresiba® (insulin degludec), Novo Nordisk’s
once-daily long-acting basal insulin,

has demonstrated lower rates of severe
hypoglycaemia and severe nocturnal
hypoglycaemia compared with insulin
glargine U100 in adults with diabetes.

In the EU, the Tresiba® label was updated
to reflect results from the double-
blinded SWITCH 1 and 2 and DEVOTE
clinical trials. The trials demonstrated a
significant reduction in the risk of severe
hypoglycaemia with Tresiba® compared
with insulin glargine U100.

The DEVOTE trial confirmed the
cardiovascular safety of Tresiba® and
demonstrated a 53% relative reduction in
the rate of severe nocturnal hypoglycaemia
in people with type 2 diabetes compared
with insulin glargine U100.7

Reducing the risk of hypoglycaemia is not
only good for patient confidence – it may
also have a significant impact on long-
term health. Further analyses of pooled
data from the DEVOTE trial showed that
daily fluctuations in blood glucose levels in
people with type 2 diabetes are associated
with a higher risk of severe hypoglycaemic
episodes and death, and that a severe
hypoglycaemic episode is associated with
an increased risk of death.

“The risk of severe hypoglycaemia is a
major reason why people with type 2
diabetes aren’t reaching their treatment
targets,” explains Stephen Gough. “The
association between hypoglycaemia, CV
risk and all-cause mortality is a real cause
for concern. Maintaining low variability in
blood glucose levels when treating people
with type 2 diabetes is therefore crucial.”

A POSITIVE IMPACT ON TREATMENT
OUTCOMES
“Talking about CV risks and weight
management – in addition to blood glucose
control and the risks associated with
hypoglycaemia – should become part of
the standard dialogue between doctors
and patients at primary care level,” stresses
Stephen Gough. “We intend to change the
conversation so that everyone with diabetes
is offered a treatment that addresses the
associated risk of death for this serious
chronic disease. This could create a positive
impact on treatment outcomes and
potentially change the course of diabetes.”

SIMONE LENSBØL HAS
TYPE 2 DIABETES AND
CARDIOVASCULAR DISEASE.
SIMONE LIVES IN DENMARK

Simone Lensbøl is a registered
nurse with long experience from
working on different hospital
wards and is currently working
as a clinical safety associate in
the Global Safety department of
Novo Nordisk.

"I'm passionate about sharing
my knowledge about type 2
diabetes. It's a complicated
disease, and there's a lot of
prejudice attached to it. My
wish is to eliminate this and
give hope, knowledge and
understanding to colleagues and
other patients. I'm hopeful the
mindset towards the disease will
change over time."

WHAT IS DIABETES?

Diabetes is a chronic disease
characterised by raised blood
glucose due to defective insulin
secretion, resistance to insulin
action or a combination of both.
Type 1 diabetes is characterised
by the autoimmune destruction
of the insulin-producing beta
cells in the pancreas, leading to
absolute insulin deficiency. People
with type 1 diabetes are therefore
dependent on daily insulin
injections to control their blood
glucose level. Type 2 diabetes is a
progressive disease characterised
by increasing insulin resistance
and failing beta cell function
in the pancreas. Depending on
the stage of the disease, people
with type 2 diabetes require
different treatments. Initially, oral
medication is often sufficient,
while progressed stages may
require GLP-1 products and
eventually insulin. The treatment
goals for people with diabetes are
to achieve normal or near-normal
glucose levels, in order to delay
or reduce diabetic complications
and negative outcomes.

26 OUR BUSINESS

IT TAKES MORE THAN
MEDICINE TO DEFEAT
DIABETES

The International Diabetes Federation (IDF) estimates that more than 425 million1 people
worldwide have diabetes today. Yet half of them are not diagnosed and even fewer
receive care and live a life free of diabetes-related complications.8 Other estimates
published recently show that, without concerted action, up to 750 million people could
have diabetes by 2045, with associated costs exceeding 1 trillion dollars a year.9

Diabetes is a disease that can be treated
successfully, even in the poorest countries.
With a growing portfolio of medicines and
future digital health solutions that increase
the benefit of those medicines, Novo
Nordisk offers a broad range of medical
treatment options for people with diabetes.

However, defeating diabetes will not be
achieved by medicine alone. It requires
containing the rise in diabetes before it
becomes unmanageable for healthcare
systems and economies and, at the
same time, giving more people access to
diagnosis and treatment where it does not
currently exist.

A crucial first step to contain the rise in
diabetes is to understand the scale of the
challenge and what it will take to bend the
curve. That is why Novo Nordisk developed
a model in 2017 to plot the trajectory of
diabetes prevalence over time and the
associated costs to healthcare systems.
The model on p 27 illustrates how, if no
additional action is taken, one in nine adults
will have diabetes by 2045.9 The model also
shows that the burden of type 2 diabetes
can be reduced by addressing obesity, the
single biggest modifiable risk factor for
diabetes.

Based on the model research, Novo Nordisk
joined city leaders, academics and public
health experts in calling for a global goal
to limit diabetes growth. The goal is that
by 2045 no more than one in 10 adults
globally will have diabetes. Achieving
this will require ambitious action to
reduce obesity by 25%9 by 2045, thereby
preventing more than 100 million people
globally from developing diabetes.

These cities are taking impactful action to
deal with their diabetes challenges, and –
together with University College London,
Steno Diabetes Center Copenhagen and
Novo Nordisk have co-created the methods
and tools that work in the cities in an
Urban Diabetes Toolbox. This toolbox is
now publicly available so that any city can
set goals and establish an action plan for
diabetes.

LEADING THE FIGHT IN URBAN
ENVIRONMENTS
Cities are the front line when it comes to
containing the rise in type 2 diabetes. A
rapidly urbanising world is changing not
just where we live but also how we live.
The way cities are designed, built and run
creates health benefits for citizens – but
also health risks. Towns and cities, where
half of the world’s population now lives,
are home to two-thirds of the people with
diabetes.

Novo Nordisk put the spotlight on urban
diabetes in 2014 with the launch of Cities
Changing Diabetes. This initiative has
grown into an international coalition of
11 cities, with a combined population
exceeding 100 million people,10 and more
than 100 expert partners united in the fight
against diabetes.

IMPROVING ACCESS TO DIABETES CARE
The burden of diabetes touches every
country in the world. The dynamics of the
challenge vary from country to country,
and from region to region, but the disease
disproportionately affects people in low-
and middle-income countries, where four
out of five people with diabetes live.1

Novo Nordisk has long-standing pro-
grammes supporting access to diabetes care
in these countries. In 2001, the company
made a commitment to provide human
insulin at a very low price in the world’s
least developed countries. See p 38. A
renewed Access to Insulin Commitment,
which guarantees the provision of low-
priced human insulin to low-income
countries and humanitarian organisations,
was launched in 2016 and benefited 0.3
million people with diabetes in 2017.

11 CITIES WITH A
COMBINED POPULATION
EXCEEDING 100 MILLION
PEOPLE, AND MORE
THAN 100 EXPERT
PARTNERS, ARE FIGHTING
DIABETES AS PART
OF CITIES CHANGING
DIABETES.

NOVO NORDISK ANNUAL REPORT 2017

5 MILLION PEOPLE WITH
DIABETES GLOBALLY
HAD ACCESS TO HUMAN
INSULIN AT A MAXIMUM
PRICE OF 4 DOLLARS PER
VIAL IN 2017.

16,000 CHILDREN WITH TYPE 1
DIABETES RECEIVE LIFE-SAVING
CARE THROUGH THE CHANGING
DIABETES® IN CHILDREN
PROGRAMME (see p 37).

85 MILLION DANISH KRONER
WAS DONATED BY NOVO
NORDISK TO THE WORLD DIABETES
FOUNDATION IN 2017.

PROJECTED DIABETES
PREVALENCE 2017–20459

(ADULTS AGED 20–79)

13%

12%

11%

10%

11.7%

11.0%

9.9%

10.0%

10.1%

9.6%

2015

2017

2025

2035

2045

IF NO ACTION IS TAKEN

11.7% EQUALS
736 MILLION PEOPLE WITH
DIABETES*, AND ASSOCIATED
COSTS OF
1,076 BILLION DOLLARS

BENDING THE GLOBAL
DIABETES CURVE

10.0% EQUALS
625 MILLION PEOPLE WITH
DIABETES, AND ASSOCIATED
COSTS OF
872 BILLION DOLLARS

OF THE
ESTIMATED
425 MILLION1
PEOPLE WITH
DIABETES…

RULE OF HALVES

THE RULE OF HALVES8 ILLUSTRATES THE GLOBAL
DIABETES SITUATION.** ONLY AROUND 6% OF
PEOPLE WITH DIABETES LIVE A LIFE FREE FROM
DIABETES-RELATED COMPLICATIONS.

ABOUT
50% ARE
DIAGNOSED…

OF WHOM
ABOUT 50%
RECEIVE
CARE…

OF WHOM
ABOUT 50%
ACHIEVE
TREATMENT
TARGETS…

OF WHOM
ABOUT 50%
ACHIEVE DESIRED
OUTCOMES.

* The Global Diabetes Projection Model and the IDF Diabetes Atlas 2017 provide slightly differing outlooks for

diabetes. The Global Diabetes Projection Model takes into account population, age and obesity, while the IDF
projection takes into account population and age, but not explicitly obesity or other diabetes risk factors.

** Actual rates of diagnosis, treatment, targets and outcomes vary in different countries.

NOVO NORDISK ANNUAL REPORT 2017

In 2002, Novo Nordisk established the
World Diabetes Foundation (WDF) as
an independent trust dedicated to the
prevention and treatment of diabetes
in the developing world. WDF supports
sustainable partnerships and acts as a
catalyst to help others do more.

Despite these efforts, and those of other
organisations in the public and private
sectors, further progress is needed to make
it possible for more people to get access to
diabetes care. Novo Nordisk has initiated
partnerships designed to tackle affordability
and accessibility in sub-Saharan Africa with
the non-governmental organisation PATH
and through national Base of the Pyramid
programmes with local health authorities
and healthcare organisations. An evaluation
of the programme in Kenya by University
College London found that the project
had ensured stable availability of human
insulin at a significantly reduced price. This
is a great achievement in a region where
weak procurement and distribution systems
are a major barrier for getting medicine
to patients at a reasonable cost. However,
it is clear that to remove barriers in more
countries and to do so in a sustainable
way, new approaches are needed, in which
more companies, governments, NGOs and
funding agencies join forces to improve the
procurement and distribution of medicines,
and build healthcare capacity. To this
end, Novo Nordisk has decided to explore
broader partnerships to remove the barriers
to access to diabetes care in the developing
world. The ambition is to launch one or
more such partnerships in 2018.

PARTNERSHIPS FOR IMPACT
Novo Nordisk’s work on Cities Changing
Diabetes and access to care demonstrates
the impact that can be created by building
new forms of public–private partnerships
which go beyond medicine and align
behind a common cause: to defeat
diabetes.

As a company whose focus has been on
diabetes for almost 100 years, Novo Nordisk
is uniquely positioned to take a leading role
in the fight against this disease. And by so
doing, we will help achieve several of the
Sustainable Development Goals agreed by
world leaders in 2015, including the goals
on health and sustainable cities – and the
commitment to deliver change through
innovative partnerships.

Learn more at
novonordisk.com/changingdiabetes
novonordisk.com/accesstocare
citieschangingdiabetes.com

28 OUR BUSINESS

“WHEN I WAS AT MY BIGGEST,
I FELT THAT THE LITTLE PERSON WAS
TRAPPED INSIDE OF ME. I’D LOVE
OTHER PEOPLE TO SEE ME AS JUST ME:
MY HAIR, EYES, BRAIN – JUST ME.”

Susie Birney has obesity and lives in Ireland

WHY SOME
PEOPLE
WITH OBESITY
NEED MEDICAL
TREATMENT

The underlying cause of obesity is an energy imbalance
between calories consumed and calories expended. But
this is only part of the story. The science behind obesity is
complex – and maintaining weight loss is not easy.

Guilt and shame. That is what many
people with obesity feel, as they either
struggle to lose weight or struggle even
more to maintain their weight loss. They
are stigmatised for being weak with no
self-control and having a ‘self-inflicted’
condition which is a healthcare burden.
A recent paper based on the nationwide
Awareness, Care and Treatment in Obesity
Management (ACTION) study, which
investigated key barriers to effective obesity
management in the US, found that 82%
of people with obesity believe weight loss
to be completely their own responsibility.11
Lack of support from families, society and
even doctors is not unusual, and a series
of failed diets can reinforce feelings of
personal failure.

But the perception that weight loss is easy
to achieve, if only you have the willpower,
is incorrect. Energy balance is influenced by
a number of factors, including physiology,
genetics, psychology and the person's
environment. Adding to the complexity is

the body’s own response to weight loss
– increased feelings of hunger, increased
desire to eat and lowered metabolic
rate.12 Put simply, the body works
hard to regain lost weight. Maintaining
weight loss for more than one year is
therefore extremely challenging – which
is why, in some cases, diet and exercise
alone are not enough.

AN UNDERSERVED NEED FOR MEDICAL
TREATMENT
The World Health Organization (WHO)
estimates that, of the world's adult
population in 2016, 39% were overweight
and 13% had obesity.3 This is a serious
health concern with severe implications
for the population's health and economic
development, as obesity has been linked
to a staggering 236 different diseases,
including cardiovascular disease, high blood
pressure, elevated blood lipids, type 2
diabetes and some types of cancer. In fact,
obesity is linked to some of the leading
causes of death.

NOVO NORDISK ANNUAL REPORT 2017
Even though an increasing number of
health organisations and professional
associations, including the WHO, World
Obesity Federation, The Obesity Society
and the American Medical Association,
recognise obesity as a chronic disease
requiring long-term management, few
treatment options are available, and many
doctors are not prepared to enter into a
dialogue with patients about their weight.
“I’ve met many people with obesity and
heard their emotional stories, and it's clear
that many people with obesity require
support from their doctors. However,
stigma and lack of awareness can act as
significant barriers to constructive dialogue
between people with obesity and

their doctors,” explains Morten
Lammert, vice president of

Saxenda® & Obesity, Novo

Nordisk.

The ACTION study
found that few people
with obesity seek or
receive long-term
obesity management.11
In the study, of the 71%
of people with obesity who
say they have spoken with
a healthcare professional
about their weight in the
past five years, only 55%
report having been given a
diagnosis of obesity, and only
24% were offered follow-up
care for this disease.11

SIGNIFICANT AND
SUSTAINED WEIGHT LOSS
However, when lifestyle

changes are not

sufficient to maintain
weight loss, medical
intervention may
be necessary.
But with limited
pharmacological
treatments
available, and
not wanting to
undergo bariatric
surgery, people with
obesity did not have
many options in the
past. Novo Nordisk’s
GLP-1 analogue for
weight management,
Saxenda® (liraglutide 3
mg), therefore addresses
a significant unmet medical
need.

OUR BUSINESS

who may still struggle to lose weight or
are experiencing weight regain following
lifestyle changes including increased
physical activity and reduced-calorie diet.
Furthermore, fewer people on Saxenda®
developed type 2 diabetes over three years
compared to placebo.

In 2017, the EU label for Saxenda®
(liraglutide 3 mg) was updated to reflect
the results from the LEADER cardiovascular
outcomes trial which investigated the
long-term cardiovascular safety of
Victoza® (liraglutide 1.8 mg) in more than
9,000 people with type 2 diabetes and
at high cardiovascular risk, when added
to standard of care. Although Saxenda®
was not investigated in this trial, the
cardiovascular risk reduction observed in
LEADER with Victoza® (liraglutide 1.8 mg)
in people with type 2 diabetes was used
by the regulatory authorities to assess and
evaluate the cardiovascular safety profile
of Saxenda®.

Novo Nordisk is committed to helping
people with obesity get the treatment they
need. “Obesity is a progressive, serious,
chronic disease. We need to change the
way people view, treat and care for people
with obesity,” explains Morten Lammert.
He agrees that this will take time, but
points out that the company is in this for
the long haul.

A PROMISING PIPELINE
Novo Nordisk’s research and development
pipeline is clear testament to the fact that
the company is committed to alleviating
obesity. Klaus Langhoff-Roos, corporate vice
president, Ozempic® & Oral Semaglutide,
Novo Nordisk, believes that semaglutide
for weight management, which will soon
move into phase 3 development, holds
great promise for future treatment options.
“In the phase 2 trial for semaglutide for
obesity, people treated with semaglutide
achieved a weight loss of up to 13.8%
after 52 weeks. As this is approaching the
efficacy of some surgical procedures for
obesity management, I hope it will trigger
a greater willingness among doctors to
consider pharmacological treatments as
part of their overall weight management
approach,” he says.

Novo Nordisk also has six products for
the treatment of obesity in phase 1
development, investigating new targets as
well as combination therapies to achieve
greater weight loss. See Pipeline overview
on pp 22–23.

Treatment with Saxenda®, as an
adjunct to a reduced-calorie diet
and increased physical activity, for
weight management in adults with
certain BMI levels, has been shown
to result in significantly greater and
sustained weight loss over three years
compared to placebo. This is important
for the many people with obesity

“We want to give people with obesity the
opportunity to combine diet and exercise
plans with medicine to achieve and
maintain successful weight loss and improve
their health and well-being. This way, we
will improve obesity management and help
reduce the burden that obesity and related
diseases place on the healthcare system and
society,” concludes Klaus Langhoff-Roos.

SUSIE BIRNEY HAS OBESITY
AND LIVES IN IRELAND

Susie Birney is a patient
advocate from Ireland. She has
been living with obesity and its
associated psychological and
physical challenges since she
was 20 years old. Susie suffers
from selective eating disorder as
well as type 2 diabetes, diabetic
retinopathy and other obesity-
related complications. As part of
her own journey with obesity,
Susie has joined several patient
support groups in Ireland, and
she is determined to get obesity
recognised as a chronic disease
in Europe by representing Ireland
in the European Association for
the Study of Obesity (EASO)
patient council.

WHAT IS OBESITY?

Both overweight and obesity are
defined as abnormal or excessive
fat accumulation that may impair
health. Adults with a body mass
index (BMI) equal to or greater
than 25 are defined by the WHO
as being overweight, and adults
with a BMI equal to or greater
than 30 are classified as having
obesity.3 BMI provides the most
convenient population-level
measure of overweight and
obesity currently available.

However, BMI itself 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).

OUR BUSINESS

BUILDING THE
BIOPHARM BUSINESS

Biopharm (short for biopharmaceuticals) is the part of Novo Nordisk's product portfolio
not related to diabetes and obesity. There are many unmet medical needs for
biopharm to address in the coming years – and some growth challenges ahead.

For decades, haemophilia and growth
disorders have been the main focus of
the biopharm business. Novo Nordisk was
the first company to develop a treatment
– NovoSeven® – for the small community
of people with haemophilia who have
inhibitors to existing treatment, and the
first to develop a liquid growth hormone
in a pen device for children with growth
disorders.

A key task for Biopharm Operations is to
set the overall strategic direction for the
biopharm area – which Christian Kanstrup
says relies on three key elements: ensuring
that more patients have access to Novo
Nordisk’s current and new products,
pursuing complementary acquisitions to
expand into other serious chronic disease
areas and ensuring the right operational
structure.

Today, Novo Nordisk has a broad product
portfolio and clinical development pro-
gramme within haemophilia and is the
leading company in the global market for
growth hormone. Yet it is a business that is
under pressure due to new competition and
changing market dynamics. In 2017, the
company’s biopharm business experienced
lower sales, due to patent expiry and
generic competition relating to the
company’s hormone replacement therapy
Vagifem®.

Returning to growth in biopharm is singled
out as a key priority in Novo Nordisk’s
corporate strategy. To set a new course,
the company established its new Biopharm
Operations unit in October 2017, headed
by Senior Vice President Christian Kanstrup.

“We see potential for leveraging our core
strengths: a strong portfolio of marketed
products, an exciting development
pipeline and good relationships with key
stakeholders,” he says.

ORGANIC BUSINESS GROWTH
While the haemophilia business – and
NovoSeven® specifically – is set to be
challenged by a new competitor in 2018,
with 50% of historic NovoSeven® sales
potentially exposed, new products coming
through the company’s development
pipeline will address some of the unmet
medical needs within haemophilia and help
the business to grow.

“Our first priority will be to increase our
efforts to improve access to the products
we already have on the market for the
patients who need them,” he explains.
“In China, for example, I believe we have
untapped potential for our haemophilia
products. And we haven’t yet seen the true
global market potential of NovoEight® for
the treatment of people with haemophilia
A.”

In 2017, Novo Nordisk’s long-acting factor
IX (called Refixia® in the EU and Rebinyn®
in the US) was approved. “The launch of
Refixia® in 2017 and Rebinyn® in 2018 will
be an important expansion of the treatment
options for people with haemophilia B,”
says Christian Kanstrup.

Novo Nordisk’s long-acting factor VIII (N8-
GP) for the treatment of haemophilia A is
expected to be submitted for regulatory
approval in 2018. Moreover, concizumab,
a monoclonal antibody being developed
for bleeding prevention, entered phase 2
development for haemophilia A and B in
August 2017.

Within growth disorders, the company will
continue to roll out its growth hormone
Norditropin® in the FlexPro® injection
device, aiming to make treatment as easy
and pain-free as possible. Somapacitan,
Novo Nordisk’s long-acting growth
hormone in phase 3 development for
adult growth hormone deficiency and in

phase 2 development for children, has
the potential to improve treatment
compliance. Christian Kanstrup points
out that early diagnosis and optimal
treatment is very important for children
with growth disorders, for their future
health and well-being. “We intend
to invest more to improve early
diagnosis rates,” he says.

EXTERNAL INNOVATION
AND OPPORTUNITIES
A critical element of Novo
Nordisk’s strategy to drive
change within biopharm is
its pursuit of complementary
acquisitions. “Identifying
external licensing and acquisition
opportunities where we can
leverage our core biopharm
capabilities will allow us to help
patients live better lives as well as
strengthen our business,” continues
Christian Kanstrup.

INCREASED FOCUS
"To support the new growth ambition,
the operational structure must
enhance the level of collaboration
and effectiveness around biopharm
across the global organisation –
which is what Biopharm Operations
has already started to do," Christian
Kanstrup explains. "We’ve optimised
our structure to ensure stronger
alignment in our work and improve
development of key organisational
capabilities. This will allow us to
increase our focus even more on the
patient.

“We’re in biopharm for the long
term, and are confident that we'll be
able to strengthen our position to
grow our business and make an even
greater positive difference to the lives
of patients going forward.”

NOVO NORDISK ANNUAL REPORT 2017

EVIE (SIX YEARS OLD)
HAS GROWTH HORMONE
DEFICIENCY, AND HOLLY
(NINE YEARS OLD) HAS
CORTISOL AND GROWTH
HORMONE DEFICIENCY.
THE SISTERS LIVE IN
BANBURY IN THE UNITED
KINGDOM

“Evie has taught me how
resilient she can be. She grabs
life by two hands and takes it
all in her stride. Nothing stops
her when she sets her mind to
something. It’s not nice having
to go to a lot of hospital
appointments and put her
through blood tests, but she
does it all with a smile on her
face. I’m in awe of Evie’s ability
to keep smiling and tackle life
head on.”

Lorraine Lloyd-Garwood,
Evie & Holly's mother

WHAT ARE
GROWTH
DISORDERS?

Growth disorders are
caused by growth hormone
deficiency which occurs
when the pituitary gland
does not produce enough
growth hormone for the
normal development and
maintenance of the body.
While some growth-related
disorders may be diagnosed
at birth, others may not
become obvious until later in
childhood. Growth hormone
deficiency in children impacts
the body’s composition,
which causes insufficient
longitudinal growth and may
negatively affect the heart,
lungs, bones, brain, quality of
life and life expectancy. The
standard of care for growth
hormone deficiency in children
is once-daily growth hormone
injections. In some countries,
growth hormone is also
approved for the treatment
of other causes of growth
disorders.

32 OUR BUSINESS

PERFORMING WHILE TRANSFORMING:

BUILDING A BOLDER AND
MORE COMPETITIVE US
BUSINESS

The US market continues to be the largest for Novo Nordisk. It represents approximately
half of the company's global sales and is in the midst of a significant transformation.

2017 was another dynamic year for
Novo Nordisk in the US. A new leadership
team came together and built a new
business strategy anchored in prioritising
and evolving the company’s commercial
business model – all designed to modernise
the organisation, enable it to deliver on
its innovation commitment and position it
for growth in the challenging US market.
The internal mantra is ‘perform while we
transform’, and the organisation is doing
just that.

The voices of people such as Donna Kasznel
(see sidebar), who are living with a chronic
disease, are where Novo Nordisk’s US
organisation draws its inspiration from. The
unmet patient needs give the organisation
purpose, not only in obesity, but also
in diabetes, haemophilia and growth
disorders.

NEW US LEADERSHIP
In March 2017, Doug Langa took over
as head of Novo Nordisk North America
Operations, which comprises the US and
Canada. He was no stranger to the US
organisation, having led the company’s
Market Access function for the previous
six years and also having served on the US
Executive Team.

“If there’s one thing we can count on in
the US, it’s that things will continue to
be dynamic when the competition and
the pressure are on. To be successful, we
need to have a deep understanding of the
market dynamics and the implications for
our business, and a willingness to make
some bold changes,” he says.

New products from competitors mean
fiercer competition and, in some instances,
a crowded market. Customers, especially
a handful of very large pharmaceutical
benefit managers, have more negotiating

power and want greater rebates, fees or
other concessions from drug manufacturers
to keep their products on formularies, or
lists of preferred medications. This has
potential implications for sales growth and
profitability.

At the same time, there is tremendous
pressure on the healthcare system to lower
costs, including the cost of prescription
medications. Novo Nordisk has taken
actions to better support patients who
cannot afford medication and has
proactively engaged in dialogue with
advocacy groups, the government and
customers to discuss solutions. “We’re
participating in programmes with customers
that are making medications available
at a lower cost for patients, which will
be a continued area of focus. We’re also
implementing value-based contracts
with customers, which are a way to align
payment with realised outcomes. There are
a lot of challenges associated with value-
based contracts, such as data collection,
but we’re learning a lot and continuing to
optimise,” explains Doug Langa.

UNCERTAIN POLITICAL ENVIRONMENT
Uncertainty in the political environment
provides both opportunities and challenges.
Congress has expressed interest in
addressing drug pricing and reforming
Medicare and Medicaid. Meanwhile, several
states have proposed laws relating to price
controls and greater transparency regarding
the costs of prescription medications.
Some states have already passed legislation
which means, among other things, new
reporting requirements for pharmaceutical
manufacturers such as Novo Nordisk. For
example, in October 2017, the Governor
of California signed a bill into law that will
require medical companies to notify the
state 60 days prior to price increases as
well as to comply with a number of other

reporting requirements. Activity focused on
healthcare costs and access – specifically
as it relates to medicines – is expected to
continue at both federal and state level in
2018.

A HETEROGENEOUS AND COST-
CONSCIOUS MARKET
Healthcare delivery in the US is not one-
size-fits-all. It is a heterogeneous market,
and different geographies have distinct local
health systems requiring different approaches.
In more traditional markets where there is
greater access to healthcare professionals
(HCPs), there are greater opportunities for
face-to-face interactions between HCPs
and Novo Nordisk sales representatives. At
the other end of the spectrum, there are
more controlled markets with integrated
delivery networks (IDNs) – a more complex
system of care involving hospitals, providers
and employers and requiring an account
management approach.

Increasingly, stakeholders in the healthcare
system are trying to balance cost and
quality. For example, some payers are
creating exclusive formularies where they
may offer only one therapy in each class.
While driving price competition among
manufacturers by encouraging increased
rebates and discounts in order to gain
preferred brand status, this potentially
limits patient access to other therapeutic
options. In the past six years, the rebates
and discounts Novo Nordisk has paid have
increased substantially.

Across all medicines in 2017, rebates and
discounts consumed 64.1% of gross sales
(59% in 2016 and 56% in 2015). In other
words, for every dollar in gross revenue,
Novo Nordisk paid 64 cents in rebates and
discounts, leaving us with 36 cents to pay
for expenses including R&D, manufacturing
and sales and marketing.

NOVO NORDISK ANNUAL REPORT 2017PERFORMING WHILE TRANSFORMING:

BUILDING A BOLDER AND

MORE COMPETITIVE US

BUSINESS

OUR BUSINESS

“WE RECOGNISE THE
NEED FOR SOLUTIONS
BEYOND MEDICINES,
AND DIGITAL HEALTH
PLAYS AN IMPORTANT
ROLE.”

Doug Langa,
executive vice president,

North America Operations

NEW BUSINESS STRATEGY AND
OPERATING MODEL
With the new leadership, there was an
opportunity to take a fresh look at things
in the light of these US market dynamics.
“We’d already been working on a longer-
term business strategy, but as we looked at
the market, where we were and where we
wanted to be, we knew that we needed to
do more than define the business strategy.
If we wanted to position the organisation
for optimal success, we needed to change
our operating model and how we approach
the US market. Without that, we weren’t
in the best position to deliver on the
strategy,” explains Doug Langa.

Evolving the commercial operating model
would involve a restructuring and a change
of approach. It also brought with it the
potential for significant disruption, as the
company was simultaneously launching
Victoza® as the only GLP-1 product on the
market indicated to reduce the risk of major
cardiovascular events, and preparing to
launch Ozempic® in early 2018. “Of course,
we took a pause and debated whether the

CONTINUED

DONNA KASZNEL HAS
OBESITY AND LIVES
IN BOWLING GREEN,
KENTUCKY

“I’ve been overweight for
most of my adult life and have
always been ashamed of it.
Unlike some other diseases,
obesity isn’t something that
you can keep a secret. It’s the
first thing people see when
they meet you, and you’re
immediately judged based on
your appearance. Obesity is
relentless – it affects everything
you do all day, every day, and
permeates all aspects of your
life – from what you wear to
where you park, to the seat
you choose, or whether you
can even participate in certain
things. My shame and my
perceived failure at being able
to control my weight prevented
me from moving on in other
areas of my life for decades.
Today, I’m proud to use my
voice to advocate for improved
obesity management, as my
wish is for others like me to
get the medical treatment and
support they deserve.”

Donna Kasznel is a Novo
Nordisk Obesity Patient
Ambassador and she advocates
to improve health policies that
make obesity management
more accessible to people in
her state.

OBESITY AFFECTED
ABOUT 4 OUT OF 10
ADULTS IN THE US
IN 201614

MORE THAN
425 BILLION DOLLARS
PER YEAR IN DIRECT
MEDICAL COSTS16

OBESITY
IS LINKED
TO OVER

T2D

DISORDERS15

timing was right and if we were putting our
launches at risk, but the question quickly
became, ‘how can we not do this now?’”
says Doug Langa. “We knew change was
necessary to position us for success in
the short and long term, so we couldn’t
wait. We focused on performing while
we were transforming. I couldn’t be more
proud of my leadership team and all of our
employees who did just that.”

The new business strategy and plans
to evolve the operating model were
communicated to all US employees in
August 2017. As part of the restructuring,
some jobs were eliminated and new
positions were created. The goal of the
restructuring was not to become smaller,
but rather to optimise the structure to
ensure the right capabilities were in place to
support the strategy.

The new operating model and organ-
isational design are built on three simple
principles:

Integrate: create a new business unit
structure for each key business: diabetes,
obesity and biopharm. This would enable
a simple, unified commercial approach
by bringing together sales and marketing
under one senior business leader and
driving stronger collaboration across
commercial and non-commercial functions.

Localise: understand the market at a
local level and tailor the approach to
local needs in the heterogeneous US
market. For example, in diabetes, there
are five new Area Commercial Lead roles,
with experienced leaders who have the
autonomy to lead the diabetes business
locally and decide how to allocate resources
based on local insights and actual customer
needs.

Focus: strong prioritisation of, and resource
allocation to, the top three strategic
priorities that will drive growth in the US:
growing volume share in the basal insulin
market with Tresiba®, growing value share
in the GLP-1 market with Victoza® and
Ozempic®, and creating and leading the US
obesity market with Saxenda®.

“We see an unprecedented opportunity in
the US. That’s why it was so important to
evolve our operating model and modernise
the organisation now, so we have the right
infrastructure, mindset and leadership to
deliver on the strategy,” says Doug Langa.

FROM STRATEGY TO ACTION
The company’s approach to obesity
management is a good example of
how it is approaching the market and
customers differently, based on needs
and opportunity. In the US, more than
90 million adults are living with obesity,14
which is linked to many other disorders and
results in direct medical costs of more than
425 billion dollars per year.16 Despite these
staggering statistics, obesity remains largely
under-recognised and undertreated in the
US. If these trends continue, more that
44% of the US population will be affected
by obesity by 2030.15

“We want to change how the world sees
and treats obesity, and we believe we’re the
company to do it. We understand it, have a
long-standing history in metabolic disease,
20 years of obesity medication research, the
largest development pipeline in the industry
and diverse partnerships that uniquely
position us to lead in this area of tremendous
unmet needs,” comments Doug Langa. “We
don’t underestimate the barriers as they are
multi-faceted and significant, but we have
a legacy of commitment to the patients
and communities we serve, and obesity is
among them so we’re in this for the long
haul.” Novo Nordisk is actively engaged
in an ambitious three-part plan to reshape
the treatment landscape for people with
obesity, focused on changing the mindset,
improving access to care and coverage for
medications, and building a critical mass of
people (patients and physicians) motivated
to engage in discussion and manage this
disease.

NEW DATA, NEW PRODUCTS, NEW
OPPORTUNITIES
Based on data from the new LEADER study,
Novo Nordisk received approval from the
US Food & Drug Administration (FDA) in
September 2017 for a supplemental New
Drug Application (sNDA) for Victoza®,
making Victoza® the first GLP-1 analogue
indicated to reduce the risk of major
cardiovascular events in people with type
2 diabetes. “Although Victoza® has been
on the market since 2010, we treated this
as a new product launch, with field force
training, customer outreach and new
promotional materials,” notes Doug Langa.

In December 2017, Novo Nordisk also
received FDA approval for Ozempic®,
a once-weekly GLP-1 analogue for the
treatment of type 2 diabetes, based on the
SUSTAIN clinical development programme,
involving eight phase 3a trials with more
than 8,000 adults with type 2 diabetes.
“It’s a welcome dilemma. With Victoza®
and Ozempic® we have two exceptional
GLP-1 compounds, yet the challenge is
how do we effectively launch Ozempic®
and what’s the right promotional strategy?
In the old world, it would’ve been a one-
size-fits-all approach, but that won’t work
today. Recognising that access won’t be
immediate and that once-weekly is the
preferred GLP-1 dosing regimen, we’ll
watch the market and make a real-time
shift of promotional resources as access
is achieved. That way, we continue to
promote Victoza® where and when it
makes sense, yet we'll be ready to capitalise
on the Ozempic® opportunity when the
market is ready. That’s something we simply
couldn’t have accommodated in the old
operating model,” Doug Langa continues.

As part of its commitment to improving
patient care through digital solutions,
Novo Nordisk has partnered with Glooko,
a leading diabetes data management
platform, to help people manage their
diabetes more effectively through an app.
The app combines Novo Nordisk's extensive

NOVO NORDISK ANNUAL REPORT 2017OUR BUSINESS

INVESTING FOR
GROWTH

SEATTLE, WA
Established in 2009
R&D

WEST LEBANON, NH
Established in 2015
Manufacturing

INDIANAPOLIS, IN
Established in 2015
R&D

PLAINSBORO, NJ
Established in 1996
Headquarters

CLAYTON, NC
Operational in 1996
Manufacturing

Novo Nordisk has a strong presence and a long history of
investment in the US. Nearly 6,000 people are employed
across the company's US operations, approximately 200
of whom in research and development positions. The US
headquarters is in Plainsboro, New Jersey. The company
has R&D sites in Seattle, Washington, and Indianapolis,
Indiana, and recently completed a 10-million-dollar
laboratory expansion in Seattle. Manufacturing facilities
are located in Clayton, North Carolina, and West
Lebanon, New Hampshire.

The Clayton facility manufactures diabetes products and
represents a large investment area for the company. It
was purchased in 1991 and became operational in 1996.
The approximately 42,000 m2 manufacturing facility
currently employs approximately 1,000 employees and
also includes office and laboratory space.

In 2015, Novo Nordisk announced that it was expanding
its presence in Clayton and investing 2 billion dollars
to build a new production facility. The plant will
produce active pharmaceutical ingredients (API) for the
company’s diabetes care products, including semaglutide
for formulation in a tablet (see p 21). "It's the largest
investment ever undertaken by Novo Nordisk, and the
expansion will help the company to meet rising US
demand for its diabetes and obesity medicines. Clayton
will become an even more important site in Novo
Nordisk's global manufacturing set-up," says Henrik
Wulff, executive vice president, Product Supply.

Once complete, the new facility will measure
approximately 77,000 m2. It will be the first location
outside of Denmark where Novo Nordisk will produce
API for diabetes care and obesity products. Once the
facility is fully operational, it is expected to create close
to 700 new full-time jobs. Novo Nordisk also expects
to create a significant employment effect during the
construction period, with up to 2,500 people working
on the project at peak construction. The new facility is
expected to be operational in 2020 and underscores
Novo Nordisk’s commitment to the US market and
patients.

“WE’RE PARTICIPATING
IN PROGRAMMES WITH
CUSTOMERS THAT ARE
MAKING MEDICATIONS
AVAILABLE AT A LOWER
COST FOR PATIENTS.”

Doug Langa,
executive vice president, North America Operations

knowledge of diabetes and personalised
patient support with Glooko's digital
platform and data analytics expertise.

“We recognise the need for solutions
beyond medicines, and digital health
plays an important role in helping patients
achieve their goals through technology. It’s
about building new capabilities, expertise
and smart collaborations with a focus
on helping people with diabetes better
manage their health,” notes Doug Langa.

LOOKING AHEAD
“When I reflect on 2017, I’m immensely
proud of how much we accomplished,
delivering solid business performance
while taking bold steps to modernise and
position the organisation for growth. US
sales were at a similar level to 2016, despite
the impact of the introduction of a generic
version of the hormone replacement
therapy product Vagifem® and a significant
favourable rebate adjustment for human
growth hormone at the beginning of 2016.
That's thanks to strong growth in our
diabetes care and obesity portfolio. We’re
competing like never before and, although
change is never easy, our employees are
energised by the empowerment, clear
priorities, business strategy and potential
to help patients through our differentiated
portfolio.

In 2018, the US business will continue
to build on Novo Nordisk’s legacy in
diabetes and drive meaningful change
with innovative products and ground-
breaking science, while also partnering
with the obesity community and investing
significantly to fundamentally change how
obesity management will be delivered in the
US. We’re energised by the opportunity we
have to make the lives of people living with
diabetes, obesity, haemophilia and growth
disorders better,” Doug Langa concludes.

36
36

OUR BUSINESS

OPPORTUNITIES AND CHALLENGES:

NOVO NORDISK’S
INTERNATIONAL
OPERATIONS

Covering 95% of the world’s population in more than 190 countries,10 International
Operations is a diverse unit with a myriad of opportunities and challenges underpinned by
one principle: to reach ever more people with diabetes and other serious chronic diseases
with innovative treatment options. This requires a market-fit business model.

“I had no money left to buy insulin,”
says Affoué Alice Kouffi from Ivory Coast,
talking about her son, Trésor, who was
diagnosed with type 1 diabetes in 2015.
“I took him to the local medicine man, who
gave him some natural plants and herbs.
But of course it didn’t help him – and he
went into a coma and almost died.” Two
years on, Trésor is under good control and
enrolled in the Changing Diabetes® in
Children programme, through which he has
access to free insulin and ongoing medical
education.

Trésor is one of the 23 million people
treated with Novo Nordisk products in
International Operations. They live across
more than 190 countries and 20 time
zones, from highly developed parts of the
world, such as Japan and Europe, to least
developed countries, such as Kenya and
Afghanistan, and developing countries
across Latin America, Asia and Africa. Most
of the 23 million people have diabetes, but
the figure also includes people with obesity,
haemophilia and growth disorders.

International Operations reflects the
diversity of cultures it serves. Covering 95%
of the world’s population,10 it is made up of
five regions: Europe, AAMEO (Africa, Asia,
Middle East & Oceania), Japan & Korea,
China and Latin America.

“In such a diverse unit, our business
model is to take a market-fit approach,”
says Maziar Mike Doustdar, executive
vice president and head of International
Operations. “We tailor our portfolio,
market access strategy and sales strategy to

NOVO NORDISK ANNUAL REPORT 2017

the needs of each individual market. This is
good business sense – and means that we
can ensure patients get the best possible
treatment, wherever they are in the world.”

One constant across the markets of
International Operations is the competitive
landscape. “Regardless of whether we’re
operating in a mature or emerging market,
prescribers now have more treatment
options available than ever before,”
he explains. “In that environment, our
commercial execution needs to be flawless,
with a sharp focus on the clinical benefits
our products offer patients.”

CHALLENGES AND
OPPORTUNITIES ABOUND
The market-fit approach contributed to
the strong performance in 2017. All five
regions contributed to growth, despite a
range of challenges. Pressures on healthcare
expenditures remain in mature markets
such as Europe and Japan, with their ageing
populations and a rapidly rising number
of people with chronic diseases. The
same situation is now emerging in many
developing countries. At the same time, an
increasing number of biosimilar products
have given payers and prescribers lower-
priced treatment options across the globe.

In this challenging environment, Maziar
Mike Doustdar sees opportunities for
International Operations to get closer to
patients, prescribers and payers through
increased education and awareness,
scientific dialogue and enhanced
commercial execution. “I’m incredibly
proud that we serve 23 million patients

every day,” he says, “but that’s still a
small proportion of the nearly 400 million
people with diabetes across International
Operations.1 I believe that in the future
more patients will be using Novo Nordisk
products because of the strong data we’ve
seen from recent clinical studies with
Victoza® and Tresiba®. It’s our responsibility
to patients to leverage these data and
deepen the conversation with payers
and doctors about how we can improve
patients’ lives.”

In particular, Maziar Mike Doustdar sees
the need to make more payers, health
policymakers and doctors understand that
treating diabetes is about more than ‘just’
controlling blood glucose levels. “A person
with diabetes thinks about and experiences
their condition in complex ways,” he points
out. “They fear situations when their blood
glucose becomes dangerously low, called
hypoglycaemia, they’re concerned about
weight gain and may worry about the
risk of severe complications, in particular
cardiovascular events which could be life-
changing or even life-threatening.”

Maziar Mike Doustdar is confident that
International Operations has the right
approach to providing solutions to meet
patients’ needs. “Our market-fit approach
means that we can offer a product mix
suitable for any type of country,” he says.
“In less developed countries, we can
provide high-quality human insulin at very
low prices. In developing countries, we can
offer patients modern insulin – or insulin
analogues – with enhanced properties, such
as shorter or longer duration of action.

OUR BUSINESS

And in mature markets, we can change
patients’ lives with the newest, innovative
products that can reduce hypoglycaemic
events or the risk of cardiovascular events
and death.”

Novo Nordisk is currently the market leader
in diabetes in International Operations,
supplying half of all insulin and holding
a 23% share of the total diabetes value
market. But Maziar Mike Doustdar
believes that the unit can increase market
share: “Our portfolio will become even
stronger with Ozempic® – our once-
weekly semaglutide – which we expect to
launch in the first countries in International
Operations in 2018. Combined with our
existing market-fit portfolio, I believe that
we’ll reach and benefit more people with
diabetes across the world than ever before
in the years to come.”

Moreover, with obesity posing a growing
challenge to individuals and societies
around the world, Maziar Mike Doustdar
believes there are significant opportunities
for International Operations to have a
positive impact. “We have a robust pipeline
in obesity but already we have a strong
footprint with Saxenda® – our once-daily
3 mg formulation of liraglutide,” he says.
“Over the next couple of years, we'll see
obesity become an increasingly important
part of our business.”

CONTINUED

TRÉSOR KOUADIO AND HIS
MOTHER AFFOUÉ ALICE
KOUFFI. TRÉSOR HAS TYPE
1 DIABETES AND LIVES IN
IVORY COAST

FOCUS ON ACCESS
TO CARE: CHANGING
DIABETES® IN
CHILDREN

Producing life-saving medicines
is a significant responsibility, but
it takes more than medicine to
defeat diabetes. Read more on
pp 26–27. Novo Nordisk’s
Changing Diabetes® commitment
is part of the company’s response
to create a future where fewer
people develop diabetes, everyone
with diabetes is diagnosed earlier,
everyone diagnosed receives
adequate care and everyone
receiving care is able to live a life
with as few limitations as possible.

One key project is the Changing
Diabetes® in Children (CDiC)
programme. The programme
allows children with type 1 diabetes
to live instead of dying due to
undiagnosed or untreated diabetes.
In the new CDiC programme in
Ivory Coast, 44 children were
enrolled six months after the
programme was launched. Most of
these were initially thought to have
a common infectious disease. By
the time they reached a healthcare
provider, they were in severe
ketoacidosis.

The CDiC programme is designed
to address the barriers to access
to care for children with type 1
diabetes in developing countries
in a sustainable way. The
programme is currently running
in 14 countries. Providing life-
saving insulin is one part of the
programme, but this goes hand
in hand with building capacity in
the local healthcare system and
educating children and caregivers.
More than 16,000 children have
been enrolled in the programme
since 2009, and the aim is to
reach 20,000 children by 2020.

Read more at
novonordisk.com/cdic.

38 OUR BUSINESS
OUR BUSINESS

MAZIAR MIKE DOUSTDAR,
EXECUTIVE VICE PRESIDENT,
INTERNATIONAL OPERATIONS

HOW ARE NOVO
NORDISK'S PRODUCTS
PRICED?

The way the price and reimbursement
of medicines are determined varies
greatly between countries. In some
countries, price and reimbursement
are the result of negotiations between
the pharmaceutical manufacturer
and the government, and in others,
governments make bulk purchases of
medicine through tender orders – an
auction-like process whereby several
companies are invited to submit their
best bid.

“When we determine how to
price our medicines, we consider a
number of factors – primarily what
medical need the product meets for
clinicians and patients, and how the
clinical profile of the drug compares
with other treatments for the same
condition," Maziar Mike Doustdar
explains. "Other factors include
the level of development of the
local economy, and the pricing and
reimbursement systems in the country.

"In the world’s poorest countries,
we've made a special commitment to
improving access to quality treatments
for patients. We guarantee that we'll
provide low-priced human insulin to
least developed countries, as defined
by the United Nations, and to other
low-income countries, as defined by
the World Bank, as well as to selected
organisations providing relief in
humanitarian situations. This means
that we'll provide the human insulin
needed at a guaranteed ceiling price
which won't exceed 20% of the
human insulin list price in the Western
world.*"

* The ceiling price for 2017 was set at 4 dollars per vial

(16 cents per day).

REGION
AAMEO

REGION
EUROPE

• Total population:
• Adults with diabetes:
• Adult diabetes prevalence:
• Employees*:

4,326m10
187m1
~7.5%1
~4,600

• Total population:
• Adults with diabetes:
• Adult diabetes prevalence:
• Employees*:

593m10
39m1
~8.8%1
~2,900

Region AAMEO is Novo Nordisk’s most
geographically and culturally diverse
region, spanning four continents and 110
countries. In 2017, sales in Region AAMEO
grew by 8% in local currencies, driven
by strong diabetes market performance
and a growing obesity business through
private-market launches of Saxenda®. The
region continues to face macroeconomic
and geopolitical challenges, with oil-
exporting countries acclimatising to the
‘new normal’ of sub-100-dollar/barrel oil
prices and a number of markets beset by
conflict and political unrest, particularly
in the Middle East and Africa. In spite
of these pressures, Region AAMEO is
expected to continue to grow the market
through higher volume sales, upgrades
from human insulin to modern insulin in
less developed countries and launches of
new-generation insulin in more mature
markets such as Turkey, Saudi Arabia
and the Philippines. There will be further
opportunities to develop the obesity
business following the strong post-launch
performance of Saxenda®, particularly
in Middle Eastern markets. Investments
will also continue to underpin ongoing
partnerships in key markets, particularly
through local manufacturing facilities
in Iran, Algeria and Russia that ensure
product supply and strengthen stakeholder
relationships in strategic markets across
Region AAMEO.

Region Europe is International
Operations’ largest region in terms
of sales, but in previous years it has
seen very low growth due to pressure
on healthcare budgets and difficult
market access conditions. In 2017,
Region Europe delivered 3% sales
growth in local currencies. In particular,
new-generation insulin products such
as Xultophy®, Fiasp® and Tresiba®
have taken significant market shares
at launch across several markets. In
September 2017, Victoza® received an
updated label that now incorporates
the cardiovascular benefits shown by
the LEADER study data (see pp 24–25).
In the coming year, Region Europe
will focus efforts on leveraging the
strong clinical profile of Victoza® and
cementing leadership in the GLP-1
segment, in advance of the expected
launch of Ozempic® in late 2018
in selected markets. There are also
opportunities to broaden the biopharm
business by building on previous
launches of the recombinant factor VIII,
NovoEight®.

* Employee numbers only cover regional sales organisations.

REGION
CHINA

REGION
JAPAN &
KOREA

REGION
LATIN
AMERICA

• Total population:
• Adults with diabetes:
• Adult diabetes prevalence:
• Employees*:

1,410m10
117m1
~10.9%1
~3,100

• Total population:
• Adults with diabetes:
• Adult diabetes prevalence:
• Employees*:

178m10
11m1
~8.0%1
~1,200

• Total population:
• Adults with diabetes:
• Adult diabetes prevalence:
• Employees*:

648m10
40m1
~9.3%1
~900

Region China has shown economic
resilience in 2017 and continues to
invest in its healthcare infrastructure
and capacity, delivering opportunities
for continued growth for Novo Nordisk.
In 2017, sales in Region China grew by
6% in local currencies, driven by the
continued strong uptake of modern
insulin in a market where the majority
of people with diabetes still use human
insulin. Following market share declines
in 2016, the key focus for Region
China in 2017 was to increase share
of growth by focusing on major cities
and provincial markets alike. The region
was able to turn around its market
share performance by mid-2017, and
continues to be the market leader
and growth driver in modern insulin.
2017 also brought three milestones:
1) in July, Victoza® became the only
reimbursed GLP-1 analogue on China’s
national reimbursement drug list, 2)
also in July, NovoSeven® was admitted
to the national reimbursement drug list
and 3) in September, Tresiba® received
regulatory approval from the China Food
and Drug Administration (CFDA). With
an enhanced portfolio, particularly in the
GLP-1 segment, Region China is now
in a position to deliver more treatment
options for prescribers and patients alike.

* Employee numbers only cover regional sales organisations.

Region Japan & Korea has been
resilient in the face of increased
competitive pressures and a low-growth
environment, particularly in Japan. In
2017, sales in the region grew by 2%
in local currencies, driven by strong
uptake and market share gains of
new-generation insulins Tresiba® and
Ryzodeg®. Tresiba® has established
and cemented Novo Nordisk's basal
leadership in both markets. Ryzodeg®
has delivered strong growth in the mix
segment in Japan. It was also launched
in South Korea in November 2017 and
is expected to provide further growth
in the coming year. The GLP-1 segment
has, however, become increasingly
competitive. Given the propensity of
prescribers to choose once-weekly
formulations, Ozempic® is expected to
be in a strong position to gain market
share in the growing GLP-1 segment
in the coming years. There will also be
opportunities to continue to advance
leadership in the company's biopharm
business, with continued focus on
growth disorders and expanding use
of NovoEight® amongst people with
haemophilia A.

Region Latin America was elevated to
a separate region in 2016 because of
strong sales growth in the previous five
years. The region was able to continue
its upward trajectory in 2017, growing
sales by 7% in local currencies and
driven by strong performance in Brazil
and Argentina as well as the robust
uptake of Saxenda® across the region.
This strong sales growth was achieved
despite macroeconomic challenges
in multiple markets, particularly in
Venezuela and Argentina, and it is
likely that these challenges will remain
in 2018. Despite this, Region Latin
America will continue to provide growth
opportunities through increased volumes
and a market access environment that
remains conducive to further penetration
with Novo Nordisk’s novel portfolio. In
particular, Tresiba® and Ryzodeg® will
offer alternative treatment options for
prescribers in multiple countries, and
Saxenda® penetration will build on a
strong market entry in countries such as
Brazil, Mexico and Chile.

NOVO NORDISK ANNUAL REPORT 2017
NOVO NORDISK ANNUAL REPORT 2017

40 OUR BUSINESS

HOW NOVO NORDISK
MANAGES MATERIAL RISKS

THE RISKS OF
DOING BUSINESS

Risk management is a discipline that requires constant vigilance. The risk profile for Novo
Nordisk is dynamic, and therefore monitored and reassessed systematically throughout the
company. The most significant risks are reviewed quarterly by Executive Management and
the Board of Directors.

“We have a very structured process for
identifying risks throughout the value
chain, and also look for cross-functional
correlations. On our ‘heat map’ are the risks
that could cause significant disruptions to
our business on a three-year horizon. For
each risk, we assess likelihood and impact
and determine what mitigating actions
to take,” explains Jesper Brandgaard,
chief financial officer and chair of the Risk
Management Board of Novo Nordisk.

“We also monitor emerging risks, although
they are of course more difficult to assess
in terms of both likelihood and potential
impact. As part of our enterprise risk
management system, we conduct risk-
thinking exercises with management
teams to identify emerging risks and
trends and to think the unthinkable.
Risks and opportunities arising from
trends in our business environment and
macro developments are factored into
Novo Nordisk’s strategy process. Here
we assess the major risk factors to the
financial outlook and undertake sensitivity
analyses related to the pipeline, competitor
advances and market dynamics in a 10-year
perspective,” Jesper Brandgaard continues.

RESEARCH & DEVELOPMENT RISKS
Specific to the pharmaceutical industry are
risks associated with the testing of new
medicines for safety and efficacy during
a rigorous process that often takes more
than 10 years. Throughout in the process,
there is the risk of studies showing that
new product candidates are not sufficiently
efficacious or that they have unacceptable
side effects. Furthermore, there is always
the risk, during the regulatory approval
process, that the authorities will request

more data before they decide whether or
not to approve the product.

In 2017, several Novo Nordisk products
passed important regulatory milestones, in
the form of first-time approval or updated
labels, which strengthened the products’
clinical profiles. This significantly reduced
Novo Nordisk’s near-term R&D risk profile
during the year. Most important were the
first regulatory approvals of Ozempic®
(semaglutide for once-weekly injection)
as a treatment for type 2 diabetes.
Ozempic® was approved in the US and was
recommended for approval by the European
regulatory authorities, both in 2017, paving
the way for its launch in the US and in
Europe.

MARKET RISKS
“While the short-term R&D risk profile was
overall lower at the end of 2017 than the
year before, I can’t say the same about
market risks,” says Jesper Brandgaard.
“In the US, price pressure in the very
competitive market for basal insulin
continues, and in International Operations
we see the same trend. The market for GLP-
1 products isn’t currently under the same
pressure, but this may change when new
products enter the market.”

Within haemophilia, a well-known market
risk for Novo Nordisk is the launch of a
competitor product for the treatment
of haemophilia impacting sales of
NovoSeven®.

Market risks may also come from new
legislation. “Healthcare reforms in the US
are a potential risk, but so far attempts
to replace and repeal the Affordable Care

Act have not been successful, and federal
lawmakers currently seem to be focusing on
other priorities and the way forward seems
highly uncertain,” says Jesper Brandgaard.
“This isn’t to say there won’t be reforms
at federal level, but it will take longer than
we thought a year ago. Meanwhile, several
states have developed or are considering
their own measures aimed at lowering costs
for medicine.”

SUPPLY, QUALITY AND PRODUCT SAFETY
RISKS
In terms of Novo Nordisk’s ability to ensure
a steady supply of high-quality products
to its customers, no significant risks
materialised in 2017. During 2017, 34
audits and 47 inspections by authorities
were conducted at the company’s
production sites, none of which failed.
Further, to mitigate risks Novo Nordisk
collaborates with suppliers, for example to
avoid production of critical components
relying on a single supplier or a single
production site.

Product safety and quality must never be
compromised. Hence, potential safety
issues are acted upon immediately. Novo
Nordisk did not have any critical product
recalls in 2017, but a safety issue was
detected with a cartridge holder in some
batches of NovoPen Echo® and NovoPen®
5 injection devices, which could have led
to some patients getting a smaller insulin
dose than intended. Novo Nordisk recalled
affected pens in stock at wholesalers and
pharmacies in 40 markets and put in place
measures whereby patients could have their
cartridge holder exchanged.

NOVO NORDISK ANNUAL REPORT 2017OUR BUSINESS

IT SECURITY RISKS
Like any other business, Novo Nordisk is
subject to computer virus and malware
attacks, and in fact fends off millions of
attacks on a daily basis. In light of the
severe incidents that other companies have
experienced in recent years, attacks on
Novo Nordisk’s IT systems are now assessed
to present a greater risk than previously
envisaged. If a virus or malware penetrates
the different layers of security, it could
have a significant adverse impact on key IT
systems throughout the value chain.

“In recent years, we’ve upgraded our
IT security capabilities and processes,”
says Jesper Brandgaard. “But we’re not
done, and probably never will be. We
must continuously strengthen our ability
to protect against, detect and respond to
cyberattacks, which includes investing in
business continuity measures.”

LEGAL AND COMPLIANCE RISKS
At any point in time, a pharmaceutical
company of Novo Nordisk’s size could
face legal and compliance risks, such as
lawsuits filed by competitors or customers,
or investigations by authorities into certain
business practices. Investors do, and should,
pay attention to such cases, as they can
have significant financial or market impacts.
A summary of Novo Nordisk’s significant
ongoing cases can be found on p 80.

Novo Nordisk has a comprehensive Business
Ethics Code of Conduct and Framework, and
all relevant employees are trained regularly.
Unethical behaviour is not tolerated – a
message that is consistently reinforced by
senior management and underpinned by
timely and appropriate action in cases where
breaches have occurred (see p 17).

CONTINUED

LONG-TERM RISKS

Novo Nordisk aspires to be a sustainable business, which requires
a long-term perspective on value creation. In the context of
risk management, it means taking an active role in addressing
risks related to global economic development, geopolitics and
long-term prosperity. These trends and macro developments
are assessed in Novo Nordisk’s rolling 10-year strategic planning
process.

Detailed descriptions of how Novo Nordisk manages
environmental and social risks through climate action initiatives,
water stewardship, respect for human rights, access to health,
diversity and inclusion, business ethics and responsible tax can be
reviewed in the Communication on Progress at
novonordisk.com/annualreport.

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.

RISK PROFILE AND MITIGATING ACTIONS

As a global business, Novo Nordisk is exposed to risks throughout
its value chain – from early discovery of new medicines in the
research laboratories to the homes of patients who take its
life-saving medicines on a daily basis. The more specific the risk,
the more concrete the mitigating action. For example, back-
up facilities and inventories can be put in place to anticipate
supply disruptions. Delays or failure in the pipeline, which may
lead to abandoning a promising product candidate, can also be
quantified, and actions can be taken throughout the process
from discovery to commercialisation. Other risks may materialise
suddenly or from unseen angles, such as a virus attack on data
systems, and may cause business disruptions, if mitigating actions
are not sufficient.

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. Management
teams in all organisational areas are responsible for continuous
identification, assessment, mitigation and reporting of current
and emerging risks. Risks are assessed in terms of potential
financial loss and potential reputational damage. Through this
process, risks can be anticipated and addressed proactively
in order to protect and enhance the value of assets, people,
performance and reputation. The most significant risks are those
that would have a material negative impact on the business
and a significant adverse impact on people. These key 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.

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
PATIENT SAFETY

WHAT IS
THE RISK?

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,
commercial product planning
and regulatory approval,
including approval of the
production facilities.

Failures or delays may
occur at production sites or
throughout the extensive
global supply chain,
relating to procurement of
ingredients and components
as well as distribution of
products. This could be due
to breakdowns or quality
failures at company sites or
at key suppliers’ 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.

Product quality and patient
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.

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 reimbursement
restrictions. Lower average
prices are expected in the
US. In other markets, prices
are also under pressure,
and newer products could
be niched for use in narrow
sub-populations.

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 compliance,
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.

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

See more on pp 32–39.

See more on pp 20–23.

See more on p 12.

A robust quality
management system,
improvement plans
and systematic senior
management reviews are in
place. Authority inspections
and internal quality audits
are conducted at production
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 p 12.

NOVO NORDISK ANNUAL REPORT 2017OUR BUSINESS

INFORMATION
TECHNOLOGY SECURITY
BREACHES

CURRENCY IMPACT
AND TAX DISPUTES

BREACH OF LEGISLATION
OR ETHICAL STANDARDS

LOSS OF INTELLECTUAL
PROPERTY RIGHTS

Disruption to IT systems,
such as virus attacks,
breaches of data security
or failure to integrate 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.

Exchange rate fluctuations
and transfer pricing disputes
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 professionals,
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
individuals’ privacy could be
compromised 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
adjustments 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. Continuity
plans are being prepared in
the event of non-availability
of IT 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
exposures. An integrated
treasury management system
is in place. Applicable taxes
are paid in jurisdictions
where business activity
generates profits. Multi-year
advance pricing agreements
(APAs) with tax authorities
have been negotiated with
the US, Canada and Japan.
Hedging activities and
calculation of transfer pricing
are subject to internal audit.

See more on pp 13, 72–73
and 83–84.

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, sales and
profits.

Due diligence, standard
procedures and training
are in place to ensure
compliance 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 16–17 and
102–103.

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

See more on pp 74–75 and
101.

NOVO NORDISK ANNUAL REPORT 201744 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
500,000,000 is divided into an A share
capital of nominally DKK 107,487,200
and a B share capital of nominally DKK
392,512,800.* The company’s A shares are
not listed and are held by Novo Holdings
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 2017, Novo Holdings A/S also
held a B share capital of nominally DKK
32,762,800. Novo Nordisk’s B shares are
listed on Nasdaq Copenhagen and on
the New York Stock Exchange (NYSE) as
American Depository Receipts (ADRs). Novo
Nordisk’s A and B shares are calculated in
units of DKK 0.20, resulting in 537,436,000
A shares and 1,962,564,000 B shares.
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 shareholders, as of 31
December 2017 it is estimated that shares
were geographically distributed as shown
in the chart on the opposite page. As of 31
December 2017, the free float of listed B
shares was 88.8% (of which approximately
11.8% are listed as ADRs), excluding the
Novo Holdings A/S holding and Novo
Nordisk’s holding of treasury shares
which, as of 31 December 2017, was DKK
43,871,211 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 shareholders 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 illustrated on the opposite
page, Novo Nordisk has continuously
increased both the payout ratio and the
dividend paid over the last five years. The
final dividend for 2016 paid in March 2017
was equal to DKK 4.60 per A and B share
of DKK 0.20 as well as for ADRs. The total
dividend for 2016 was DKK 7.60 per A
and B share of DKK 0.20, corresponding to
a payout ratio of 50.2%, which is on par
with the 2016 pharma peer group average
of 48.7%. In August 2017, an interim
dividend was paid equalling DKK 3.00 per
A and B share of DKK 0.20 as well as for
ADRs. For 2017, the Board of Directors
will propose a final dividend of DKK 4.85
to be paid in March 2018, equivalent to a
total dividend for 2017 of DKK 7.85 and
a payout ratio of 50.4%. The company
expects to distribute an interim dividend
in August 2018, and further information
regarding such interim dividend will be
announced in connection with the financial
report for the first six months of 2018.
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 2
February 2017, Novo Nordisk repurchased
shares worth DKK 17 billion. The share
repurchase programme has primarily been
conducted in accordance with the safe
harbour rules in the EU Market Abuse
Regulation (MAR).

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 14 billion.
The total programme may be reduced in
size if significant product in-licensing or
bolt-on acquisition opportunities arise
during 2018. Novo Nordisk expects to
conduct the majority of the new share

repurchase programme according to the
safe harbour rules in MAR. At the Annual
General Meeting in March 2018, 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
490,000,000, divided into A share capital
of DKK 107,487,200 and B share capital of
DKK 382,512,800.

SHARE PRICE DEVELOPMENT
Novo Nordisk’s share price increased by
31.3% between its 2016 close of DKK
254.7 and the 29 December 2017 close
of DKK 334.5. For comparison, the Danish
OMXC20 CAP stock index increased
by 12.1% and the pharma peer group
increased by 1.3% during 2017. The total
market value of Novo Nordisk’s B shares,
excluding treasury shares, was DKK 638
billion as of 31 December 2017.

COMMUNICATION WITH SHAREHOLDERS
To keep investors updated about
performance 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 Executive
Management and Investor Relations.

ANALYST COVERAGE
Novo Nordisk is currently covered by 33
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
under ‘Investors’ on novonordisk.com. 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 presen-
tations and background information.

* 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 2017GOVERNANCE, LEADERSHIP AND SHARES

SHARE AND OWNERSHIP STRUCTURE

OWNERSHIP STRUCTURE

Novo Nordisk
Foundation

Novo Holdings A/S

Institutional and
private investors

76% of votes
28% of capital

24% of votes
72% of capital

A shares
537m shares

B shares
1,963m shares

Novo Nordisk A/S

GEOGRAPHICAL SPLIT*
% of share capital

 2016  2017

Note: Treasury shares are included in share capital but have no voting rights.

* Using shareholder' 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

480

420

360

300

240

180

DKK billion

DKK

420

360

300

240

180

120

Mar

Jun
2016

Sep

Dec Mar

Sep

Dec

Jun
2017

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

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

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2017

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

(-2%)

2014

2015

2016

2017

2018E

2014

2015

2016

2017

2018E

Note: Dividends are allocated to the year of dividend pay. Interim dividend for

2018 to be determined. For illustration only.

NOVO NORDISK ANNUAL REPORT 2017
46

CORPORATE
GOVERNANCE

The Board of Directors of Novo Nordisk focuses on good
governance practices. In 2017, a temporary Research &
Development Committee was established to provide
oversight of the revised research and development strategy.
The Board conducted a self-assessment facilitated by
external consultants. Two board members joined the Board,
and two members left.

GOVERNANCE STRUCTURE

SHAREHOLDERS
The shareholders of Novo Nordisk have
ultimate authority over the company and
exercise their right to make decisions at
general meetings. At the annual general
meeting, shareholders approve the
annual report and any amendments to
the company’s Articles of Association.
Shareholders also elect board members and
the independent auditor.

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 Holdings A/S has the voting majority
at the annual general meeting. However,
all strategic and operational matters are
decided solely by the Board of Directors and
Executive Management of Novo Nordisk
A/S. Read more about shares and capital
structure on pp 44–45.

BOARD OF DIRECTORS
Novo Nordisk has a two-tier management
structure consisting of the Board of
Directors and Executive Management. The
two bodies are separate, and no one serves
as a member of both.

The Board of Directors determines the
company’s overall strategy and follows
up on its implementation, supervises
the performance, ensures adequate
management and organisation and, as
such, actively contributes to developing the

NOVO NORDISK ANNUAL REPORT 2017
NOVO NORDISK ANNUAL REPORT 2016

company as a focused, sustainable, global
pharmaceutical company. The Board of
Directors supervises Executive Management.
The Board of Directors may also distribute
extraordinary dividends, issue new shares
or repurchase 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.

As of 31 December 2017, the Board of
Directors had 11 members, seven of whom
were elected by shareholders and four
by employees in Denmark. The Board of
Directors met seven times during 2017. At
the Annual General Meeting in March 2017,
Bruno Angelici did not seek re-election,
and Kasim Kutay and Helge Lund were
elected to the Board of Directors. In May
2017, Mary Szela stepped down from the
Board of Directors due to a potential future
conflict of interest.

Shareholder-elected board members serve
for a one-year term and may be re-elected.
Board 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
Holdings A/S, and one board member is
chief executive officer of Novo Holdings
A/S and may be regarded as representing
the interests of the controlling shareholder,
while four of the seven shareholder-elected
board members are independent as defined
by the Danish Corporate Governance
Recommendations.

Under Danish law, 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
amongst themselves – two male and
two female. Board members elected by
employees serve for a statutory four-year
term and have the same rights, duties and
responsibilities as shareholder-elected board
members. The employee-elected board
members are up for election in 2018. Read
more about the members of the Board of
Directors on pp 54–55.

NOMINATION, SELF-ASSESSMENT
AND DIVERSITY
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 competence profile and
reflecting the results of a self-assessment
process.

In order to support continued fulfilment of
the Novo Nordisk Way, the criteria for board
members described in the competence
profile include integrity, accountability,
fairness, financial literacy, commitment
and desire for innovation. Board 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.

The Board of Directors conducts a self-
assessment every year. The self-assessment
includes all members of the Board of
Directors and Executive Management.
The chairman has overall responsibility
for conducting the self-assessment. The
self-assessment is facilitated every third
year by external consultants, who interview
all members of the Board of Directors
and Executive Management as well as the
secretaries to the Board and the board
committees. For the subsequent two years,
the self-assessment is facilitated by the
secretary of the Nomination Committee
and is based on written questionnaires
to all members of the Board of Directors
and Executive Management. The process,
whether it is facilitated internally or by

NOVO NORDISK ANNUAL REPORT 201747

external consultants, evaluates topics such
as board dynamics, board agenda and
discussions, strategy, culture, executive
succession, board composition, succession
and training. In addition, each individual
member of the Board of Directors and
Executive Management is provided with
feedback from all other board members and
executives on their individual performance.
The self-assessment is conducted on an
anonymous basis. Ratings and comments
to individuals are only shared with
that individual and the chairman in an
anonymised version, while the remaining
ratings and comments are consolidated
and shared with the board members and
executives in an anonymised version.

In 2017, the self-assessment was facilitated
by external consultants and, in general,
revealed a good performance by the Board
of Directors as well as good collaboration
between the Board of Directors and
Executive Management. The process also
resulted in increased focus on the process
for strategy development, development of
the company culture, executive succession
and future board competences.

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. In 2016, the
Board of Directors adjusted its diversity
ambition and set out new targets with
the aim of consisting, by 2020, 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.

As of 31 December 2017, two shareholder-
elected board members were female and
five were male, while four of the seven
shareholder-elected board members were
non-Nordic and three were Nordic. Thus,
the company did not fulfil the ambition of
having at least three shareholder-elected
board members of each gender on the
Board by the end of 2017, given that Mary
Szela stepped down from the Board of

Directors in May 2017 due to a potential
future conflict of interest. The company will
strive to fulfil this ambition by 2020.

In accordance with section 99b of the
Danish Financial Statements Act, Novo
Nordisk discloses its diversity policy, targets
and current performance in the UN Global
Compact Communication on Progress,
which is available at
novonordisk.com/annualreport.

BOARD COMMITTEES

CHAIRMANSHIP
The annual general meeting elects
the chairman and the vice chairman
of the Board of Directors directly. 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 2017, the Chairmanship particularly
discussed the sales performance in
the US and projections for 2018, the
pipeline progress, the implementation
of the revised research and development
strategy, the establishment of the Research
& Development Committee and the
composition of and succession plan for
Executive Management.

AUDIT COMMITTEE
The Audit Committee consists of four
members. One member is an employee
representative. Three members qualify as
independent, including the chairman, and
one member, the employee representative,
qualifies as non-independent. In addition,
two members have competences in
accounting and auditing, and the members
of the Audit Committee collectively have
competences relevant to the healthcare
industry, as required by the Danish
Act on Approved Auditors and Audit
Firms. Pursuant to the US Securities
Exchange Act, the three shareholder-
elected members qualify as independent,
including the chairman, while the
employee representative member relies

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). The Audit Committee
assists the Board of Directors with oversight
of the external auditors, the internal audit
function, handling hotline 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 2017, the Audit Committee particularly
discussed accounting policies and estimates,
including the treatment and impact of the
revised IFRS standards as well as the risk
and provisions for ongoing tax and legal
cases. Furthermore, the Audit Committee
discussed key internal financial controls
as well as business ethics compliance and
information security.

NOMINATION COMMITTEE
The Nomination Committee consists of
five members. Two members qualify as
independent and three members qualify as
non-independent, including the chairman.
One member is an employee representative.
The Nomination Committee assists the
Board with oversight of the competence
profile and composition of the Board,
nomination of members and committees,
and other tasks on an ad hoc basis, as
specifically decided by the Board.

In 2017, the Nomination Committee
particularly focused on supervising the
process for chairman succession and on
identifying and interviewing candidates
with experience and competences within
research and development, the US pharma
market and general management.

REMUNERATION COMMITTEE
The Remuneration Committee consists of
three members. All three members qualify
as non-independent. 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

CONTINUED

NOVO NORDISK ANNUAL REPORT 2017members, board committees and Executive
Management.

and full reports on the board committees’
activities in 2017.

In 2017, the Remuneration Committee
particularly focused on supplementing
the executive remuneration benchmarks
with additional benchmark data presented
by an external remuneration consultant
and, based on that, recommending an
adjustment to the short-term cash-based
incentive programme for 2018 for executive
vice presidents and a modernisation of the
maximum of the long-term share-based
incentive programme to ensure that it is
competitive. In addition, the Remuneration
Committee focused on remuneration levels
for executives being promoted.

RESEARCH & DEVELOPMENT COMMITTEE
The Research & Development Committee
was established in March 2017 in light of
the updated research and development
strategy and priorities. The new Research
& Development Committee is temporary
and is expected to exist for 18–24 months
while the company is implementing
the new research and development
strategy. The Research & Development
Committee consists of four members. Two
members qualify as independent and two
members qualify as non-independent,
including the chairman. One member is
an employee representative. The Research
& Development Committee assists the
Board with oversight of the research
and development strategy, the pipeline
and other tasks on an ad hoc basis, as
specifically decided by the Board.

In 2017, the Research & Development
Committee particularly focused on the
revised research and development strategy,
and discussed how to raise the research
innovation level within core Novo Nordisk
therapy areas, how to expand into new
therapy areas by exploring current assets,
and progress of the intensified external
innovation activities.

See novonordisk.com/about_us for a
more detailed description of the board
committees, their charters, their members

EXECUTIVE MANAGEMENT
Executive Management is responsible
for the overall day-to-day management,
the organisation of the company,
allocation of resources, determination and
implementation of strategies and policies,
direction setting, and ensuring timely
reporting and provision of information to
the Board of Directors and Novo Nordisk’s
stakeholders. Executive Management meets
at least once a month, and often more
frequently. The Board of Directors appoints
members of Executive Management
and determines their remuneration. The
Chairmanship reviews the performance of
the executives. To ensure the organisational
implementation of the strategy,
Executive Management has established a
Management Board consisting of the chief
executive officer, executive vice presidents
and senior vice presidents.

On 1 January 2017, Lars Fruergaard
Jørgensen became chief executive officer
(CEO), succeeding Lars Rebien Sørensen,
who retired from the company at the
end of 2016. Jakob Riis left the company
in March 2017 and was succeeded by
Doug Langa as a member of Executive
Management. Lars Green was appointed
executive vice president in July 2017, and
Camilla Sylvest was appointed executive
vice president in October 2017.

The two executives who are based outside
of Denmark and who have responsibility for
International Operations and North America
Operations respectively are not registered
as executives with the Danish Business
Authority.

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
commitment to its social and environmental

responsibility, the company voluntarily
includes an assurance report for social
and environmental reporting in the annual
report. The assurance provider reviews
whether the social and environmental
performance information covers aspects
deemed to be material, and verifies
the internal control processes for the
information reported.

Novo Nordisk’s internal audit function
provides independent and objective
assurance, primarily within internal
control of financial processes, IT security
and business ethics. To ensure that the
internal financial audit function operates
independently of Executive Management,
its charter, audit plan and budget are
approved by the Audit Committee. The
Audit Committee must approve the
appointment, remuneration and dismissal
of the head of the internal audit function.

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.
Read more about the Novo Nordisk Way on
pp 16–17.

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 Statutory Corporate
Governance Report at novonordisk.com/
about-novo-nordisk/corporate-governance/
Recommendations-and-practices.html.

NOVO NORDISK ANNUAL REPORT 2017

NOVO NORDISK ANNUAL REPORT 201749

company, Novo Nordisk is not obliged to
comply with all the standards established
by NYSE. Furthermore, Novo Nordisk, as a
foreign private issuer, is permitted to follow
home country practice, which is the case
in relation to independence requirements,
audit committee, equity compensation
plans, code of business conduct and ethics,
and CEO certification. A summary of the
significant ways in which Novo Nordisk’s
corporate governance practices differ
from the NYSE corporate governance
listing standards can be found in the
Statutory Corporate Governance Report
at novonordisk.com/about-novo-nordisk/
corporate-governance/Recommendations-
and-practices.html.

Novo Nordisk also adheres to the charter
for companies in the Novo Group, as it is
partially owned by Novo Holdings A/S. The
charter is available on novoholdings.dk.

Today, Novo Nordisk adheres to all but the
following three recommendations:

• 3.4.2 – Independence of board
committees: the majority of the
members of the Nomination Committee,
the Remuneration Committee and the
Research & Development Committee
respectively are not independent.
• 3.4.7 – Tasks of the Remuneration
Committee: responsibility for the
remuneration policy applicable to
employees in general resides with
Executive Management and not with the
Remuneration Committee.

• 4.1.5 – Termination payments: two

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

For more information, please refer to the
Statutory Corporate Governance Report
2017.

Novo Nordisk complies with the corporate
governance standards of NYSE applicable to
foreign listed private issuers. As a controlled

DISCLOSURE REGARDING
CHANGE OF CONTROL

The EU Takeover Bids Directive, as partially
implemented by the Danish Financial
Statements Act, requires listed companies
to disclose information that may be of
interest to the market and potential
takeover bidders, in particular in relation to
disclosure of change-of-control provisions.

Novo Nordisk discloses that the Group
does not have any significant 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.

In relation to Executive Management,
the current employment contracts allow
severance payments of up to 36 months’
fixed base salary plus pension contribution
in the event of a merger, acquisition or
takeover of Novo Nordisk.

For information about the ownership
structure of Novo Nordisk, please refer to
Shares and capital structure on pp 44–45.

CORPORATE GOVERNANCE CODES AND PRACTICES

COMPLIANCE

GOVERNANCE STRUCTURE

Danish and
foreign laws
and regulations

Corporate
governance
standards

Shareholders

Board of Directors

Chairmanship*

Audit
Committee

Nomination
Committee

Remuneration
Committee

R&D
Committee

Executive Management

Novo Nordisk Way

Organisation

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

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)

NOVO NORDISK ANNUAL REPORT 2017

NOVO NORDISK ANNUAL REPORT 201750 GOVERNANCE, LEADERSHIP AND SHARES

REMUNERATION: BOARD OF DIRECTORS
At the Annual General Meeting in March 2017, it was decided to leave all components of
the remuneration of Novo Nordisk’s Board of Directors unchanged.

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. In March 2017, the
Annual General Meeting approved that
the level for the fixed base fee for 2017
should be DKK 600,000. 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 per board meeting and per board

committee meeting of 5,000 euros per
meeting in the member’s home country
involving travel of 5 hours or more, 5,000
euros per meeting outside the member’s
home country but on home country
continent and 10,000 euros per meeting
in a country outside the member's home
continent.

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.

INCENTIVE PROGRAMMES
Board members are not offered stock
options, warrants or participation in other
incentive schemes.

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

BOARD AND COMMITTEE FEE LEVELS 2017

BOARD

AUDIT COMMITTEE

NOMINATION
COMMITTEE

REMUNERATION
COMMITTEE

R&D COMMITTEE1

Chair
Vice chair
Member

Multiplier
3.00
2.00
1.00

DKK
1,800,000
1,200,000
600,000

Multiplier
1.00
-
0.50

DKK
600,000
-
300,000

Multiplier
0.50
-
0.25

DKK
300,000
-
150,000

Multiplier
0.50
-
0.25

DKK
300,000
-
150,000

Multiplier
0.50
-
0.25

DKK
300,000
-
150,000

1. The Research & Development Committee is temporary and is expected to exist for 18–24 months.

ACTUAL BOARD REMUNERATION 2017

2017

2016

DKK million

Göran Ando3 (BC, NC and RDC)
Jeppe Christiansen (BV, RC)
Brian Daniels1 (RDM)
Sylvie Grégoire (AM and RDM)
Liz Hewitt (AC and NM)
Liselotte Hyveled (RDM)
Kasim Kutay1 (NM and RM)
Anne Marie Kverneland (RM)
Helge Lund1 (AM and NM)
Søren Thuesen Pedersen (NM)
Stig Strøbæk (AM)
Bruno Angelici2
Mary Szela2
Former members2

Total

Fixed
base fee

Fee for
ad hoc tasks and
committee work

Travel

allowance Total

Fixed
base fee

Fee for
ad hoc tasks and
committee work

Travel
allowance

Total

1.8
1.2
0.6
0.6
0.6
0.6
0.5
0.6
0.5
0.6
0.6
0.2
0.3
-

8.7

0.6
0.3
0.1
0.4
0.7
0.2
0.2
0.2
0.3
0.1
0.3
-
0.1
-

3.5

0.6
0.2
0.5
0.5
0.4
0.1
0.2
0.1
0.6
0.3
0.2
0.1
0.1
-

3.0
1.7
1.2
1.5
1.7
0.9
0.9
0.9
1.4
1.0
1.1
0.3
0.5
-

3.9

16.1 4

1.8
1.2
0.5
0.6
0.6
0.6
-
0.6
-
0.6
0.6
0.6
0.6
0.2

8.5

0.5
0.4
-
0.3
0.7
0.2
-
-
-
0.1
0.3
0.2
0.2
-

2.9

0.5
0.2
0.3
0.4
0.4
0.1
-
0.1
-
0.1
0.1
0.3
0.4
0.1

2.8
1.8
0.8
1.3
1.7
0.9
-
0.7
-
0.8
1.0
1.1
1.2
0.3

3.0

14.4 4

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, RDC = R&D Committee chairman, RDM = R&D Committee member.

1. Brian Daniels was first elected in March 2016. Kasim Kutay and Helge Lund were first elected in March 2017. 2. Bruno Angelici resigned as of March 2017, and Mary Szela resigned as of May 2017.
Former members also includes fees to Thomas Paul Koestler and Eivind Kolding, who resigned as of March 2016. 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 2016).

NOVO NORDISK ANNUAL REPORT 2017GOVERNANCE, LEADERSHIP AND SHARES

REMUNERATION: EXECUTIVE MANAGEMENT
In 2017, the cash bonus for the members of Executive Management under the short-term
cash-based incentive programme was 100% of the maximum cash bonus, while it was
adjusted for executives being promoted to Executive Management in second half of 2017.
The members of Executive Management received 69% of their respective maximum share
allocation under the long-term share-based incentive programme.

2017 PERFORMANCE

In March 2017, the Annual General
Meeting approved a change in the structure
of the long-term share-based incentive
programme by increasing the importance of
sales growth. The specific targets for 2017
were established by the Board of Directors
in February 2017. The targets and structure
of the programme have not been changed
subsequently.

In 2017, Novo Nordisk exceeded the
planned incentive target for economic
value creation, with 4.8%, primarily due
to higher operating profit, lower than
planned net operating assets and a lower
than planned effective tax rate and partly
offset by an unfavourable net impact from
currencies. Sales were 0.8% above the
target level in local currencies. Two of the
non-financial targets were not met: Novo
Nordisk did not receive a label update in
2017 in the US for Tresiba® based on the
SWITCH data and obtained a lower than
targeted reputation score amongst key
stakeholders. This will, however, not result
in any deduction of the share allocation
since at least 85% of non-financial targets
have been met. On this basis, 69% 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 8.2 months’ fixed base salary plus
pension contribution, whereas executive
vice presidents will receive shares equalling
6.2 months’ fixed base salary plus pension
contribution. The two executives being
promoted to executive vice president after
1 July 2017 will receive shares equalling
5.5 months’ fixed base salary plus pension
contribution based on their previous status
as senior vice president.

In 2017, the achievement of the predefined
functional and individual business targets
for the short-term cash-based incentive
programme by each executive has been
assessed. Consequently, the cash bonus
for the chief executive officer for 2017 was
100% of the maximum cash bonus equalling
12 months’ fixed base salary plus pension
contribution. The cash bonus for the executive
vice presidents was 100% of their maximum
cash bonus equalling 8.5 and 8 months’
fixed base salary plus pension contribution
respectively, while it was adjusted for
executives being promoted to Executive
Management in second half of 2017.

LONG-TERM INCENTIVE – PERFORMANCE 2017

Performance

Incentive
impact

104.8%

48%

100.8%

26%

85%

Long-term incentive target basis (index 100)
Economic value creation1
(50% of total target allocation)

A. Incentive performance based
on economic value creation

Long-term incentive target basis (index 100)
Sales growth adjustment2
(50% of total target allocation)

B. Incentive performance based
on sales performance

A. + B. Total incentive based
on financial targets
C. Non-financial targets achievement3
Total incentive performance
(A+B adjusted for C)

Maximum performance
Performance as percentage of maximum
Performance as percentage of target

Months of base
salary equivalent

CEO

EVPs

3.0

1.5

4.5

3.0

0.8

3.8

8.2

2.3

1.1

3.3

2.3

0.6

2.8

6.2

12
69%
137%

9
69%
137%

1. ±10% incentive impact for each percentage point performance above/below 100% until max 110% and min 90%.
2. ±33% incentive impact for each percentage point performance above/below 100% until max 103% and min 97%.
3. Shortfall, if performance is below 85%, deducted from incentive performance.

TOTAL REMUNERATION COMPOSITION AND
PERFORMANCE OVERVIEW FOR CEO AND EVPs – 2017

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

87% of
maximum

91% of
maximum

DKK million

Maximum

Actual

Maximum

Actual

Chief executive ofﬁcer

Other registered members of
Executive Management1 (average)

1. Includes executives who have been registered with the Danish Business Authority in 2017 full year.

CONTINUED

NOVO NORDISK ANNUAL REPORT 201752 GOVERNANCE, LEADERSHIP AND SHARES

REMUNERATION
COMPOSITION
Novo Nordisk’s Remuneration
Principles provide the framework for
the remuneration of the Executive
Management. Remuneration has 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
of the remuneration packages for Executive
Management in 2017. Remuneration
packages for executives comprise a fixed
base salary, a cash-based incentive, a
long-term share-based incentive, a pension
contribution and other benefits. 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 business decisions
to meet the company’s objectives. All
incentives are subject to claw-back if it is
subsequently determined that payment was
based on information that was manifestly
misstated. 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. Based on a
review of benchmark data from European
pharmaceutical companies which are similar
in size and complexity to Novo Nordisk, the
Board decided to increase the fixed base
salary for Danish based members of Executive
Management effective as of November 2017.
Furthermore, the Board decided that the fixed
base salary for Danish based members of
Executive Management promoted in 2017 is
to be phased in over a period of time and that
the phase-in period for the chief executive
officer is two years.

CASH-BASED INCENTIVE
The short-term cash-based incentive
is designed to incentivise individual
performance. 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 2017, the Board of Directors
determined that the 2017 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 executive vice presidents
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 allocation of shares is based on the
degree of achievement of the planned
economic value creation and on the degree
of achievement of the planned level of sales
growth. The allocation of shares may be
reduced (but not increased) if certain non-
financial targets are not met. Non-financial
targets are determined on the basis of an
assessment of the objectives regarded as
particularly important for the 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,
quality/compliance, people and sustainability.
Targets within research and development
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 and compliance related
to number of actual recalls, to quality
compliance and to customer complaint
rate. Targets within people related to certain
activities to build capabilities for future growth
and targets within sustainability related to the
emissions of CO2 from energy consumption
for production and company reputation.

In February 2017, the Board determined that
the 2017 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 executive
vice presidents. 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 of shares
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 executive vice
presidents.

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

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.

SHAREHOLDING REQUIREMENT
To further align the interests of the
shareholders and Executive Management,
the chief executive officer should hold Novo
Nordisk B shares corresponding to two times
the annual gross salary, and the executives
should hold shares corresponding to one time
the annual gross salary. For executives being
promoted or employed from outside Novo
Nordisk, the shareholding requirement is built
up over a period of 5 years after promotion
and employment respectively. All executives
met the shareholding requirement as of
31 December 2017.

Further information on the remuneration
of Executive Management is available at
novonordisk.com/about_us.

REMUNERATION PACKAGE COMPONENTS

Remuneration

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

Board of
Directors

Executive
Management

Comments relating to Executive
Management

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

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

Up to 12 months‘ fixed base salary + pension contri-
bution per year typically based on base salary at the
end of the year.

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

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 2017REMUNERATION OF EXECUTIVE MANAGEMENT AND OTHER MEMBERS OF THE
MANAGEMENT BOARD

GOVERNANCE, LEADERSHIP AND SHARES

2017

2016

Fixed
base
salary7

Cash
bonus

Pension

Benefits

Share-
based
incentive8

Total

Fixed
base
salary7

Cash
bonus

Pension

Benefits

Share-
based
incentive8

DKK million

Executive Management
Lars Fruergaard Jørgensen
Jesper Brandgaard
Lars Green1
Camilla Sylvest1
Mads Krogsgaard Thomsen
Henrik Wulff3
Non-registered members of
Executive Management1,2
Former members of
Executive Management:
Lars Rebien Sørensen3
Jakob Riis4
Former non-registered members of
Executive Management5
Share-based incentive

8.5
6.3
2.2
1.1
6.3
5.1

9.5

-
-

2.8
-

9.2
4.6
1.3
0.6
4.6
3.8

6.2

-
-

1.2
-

4.4
2.8
0.9
0.4
2.8
2.2

3.5

-
-

1.5
-

0.3
0.3
0.2
0.1
0.3
0.3

0.5

-
-

-
-
-
-
-
-

-
-

22.4
14.0
4.6
2.2
14.0
11.4

19.7

-
-

0.2
-

-
28.5

5.7
28.5

1.8
2.0
-
-
2.0
1.7

1.8
2.0
-
-
2.0
1.6

0.3
0.3
-
-
0.3
0.3

2.8

2.9

0.4

6.0
1.8

4.1
-

4.5
1.4

3.4
-

0.3
0.2

0.4
-

-
-
-
-
-
-

-
-

-
11.4

Total

9.4
10.4
-
-
10.5
8.5

12.3

22.7
7.0

16.2
11.4

5.5
6.1
-
-
6.2
4.9

6.2

11.9
3.6

8.3
-

52.7 7

77.7 7

Executive Management in total

Other members of the Management
Board in total5,6

41.8 7

79.5 7

31.5

18.5

2.2

28.5

122.5

31.7

26.8

21.7

34.1

193.8

22.2

19.6

2.5

11.4

108.4

22.5

25.2

20.1

15.0

160.5

1. In 2017, Novo Nordisk’s Executive Management was expanded to include three new members, Doug Langa (effective 1 March 2017), Lars Green (effective 1 July 2017) and Camilla Sylvest (effective 1
October 2017), of whom Lars Green and Camilla Sylvest are registered with the Danish Business Authority as members of Executive Management of Novo Nordisk A/S. Respective amounts in the table
include remuneration from the effective dates in 2017. Remuneration for Doug Langa is included within Non-registered members of Executive Management. 2. Includes remuneration for Maziar Mike
Doustdar and for the period March to December 2017 for Doug Langa. Amounts include taxes paid by Novo Nordisk to Maziar Mike Doustdar due to his international employment terms. In addition,
Maziar Mike Doustdar received benefits 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-filing support, all offered net of tax to the assignees. Including tax paid by Novo Nordisk, the benefits received in 2017 not included in the above
table amount to DKK 2.6 million (DKK 2.6 million in 2016). 3. 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, including participation in the share-based incentive programme for 2017, is not included. 4. Effective 1
September 2016, Jakob Riis was appointed executive vice president and head of North America Operations. Amounts in the table for 2016 include remuneration from January to August 2016, whereas
remuneration for September to December 2016 is included within Former non-registered members of Executive Management. 5. Effective 1 March 2017, Jakob Riis decided to leave Novo Nordisk.
Remuneration for Jakob Riis is included in the table above. In 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 as part of Other members of the Management Board. In addition, Jakob Riis, Jerzy
Gruhn and Jesper Høiland received benefits 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-filing support, all offered net of tax to the assignees. Including tax paid by Novo Nordisk, the benefits received in 2017 not included in the above
table amount to DKK 1.2 million (DKK 5.0 million in 2016). 6. The total remuneration for 2017 includes remuneration of 33 senior vice presidents (33 in 2016), 2 of whom have retired or left the
company (four in 2016). The 2017 remuneration for the retired senior vice presidents is included in the table above, whereas severance payments of DKK 13.0 million (DKK 69.0 million in 2016) are not
included. 7. Excluding social security taxes paid amounting to DKK 0.3 million (DKK 1.9 million in 2016) for Executive Management and DKK 2.6 million (DKK 2.2 million in 2016) for other members
of the Management Board. 8. The shares are locked up for three years before they are 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 amount of shares may potentially be reduced in the event of lower-than-
planned value creation in subsequent years.

MANAGEMENT’S LONG-TERM INCENTIVE PROGRAMME

The shares allocated to the members of Executive Management were released to the individual participants subsequent to approval of the
Annual Report 2017 by the Board of Directors and the announcement of the full-year financial result for 2017 on 1 February 2018. Based on
the share price at the end of 2017, the value of the released shares is as follows:

Value as of 31 December 2017 of shares released on 1 February 2018

Number
of shares1

Market value2
(DKK million)

Executive Management
Lars Fruergaard Jørgensen
Jesper Brandgaard
Lars Green
Camilla Sylvest
Mads Krogsgaard Thomsen
Henrik Wulff
Non-registered members of Executive Management4

Executive Management in total3

Other members of the Management Board in total3

11,866
16,054
6,429
1,938
16,054
8,659
8,429

69,429

100,196

4.0
5.4
2.2
0.6
5.4
2.9
2.8

23.3

33.5

1. Includes 293,542 shares released from the joint pool for 2014 to the individual participants for the Management Board and 3,938 shares released to members of Executive Management who was
not included in the joint pool for 2014 for the Management Board. 2. The market value of the shares released in 2018 is based on the Novo Nordisk B share price of DKK 334.50 at the end of 2017.
3. In addition, 127,855 shares (market value: DKK 42.8 million) were released to retired Executive Management and Management Board members. 4. Not registered with the Danish Business Authority
as members of the Executive Management of Novo Nordisk A/S.

External board remuneration: Jesper Brandgaard serves as chairman of the board of SimCorp A/S, from which he received remuneration of DKK 1,092,305 in 2017 (DKK 1,035,257 in 2016); as
chairman of the board of NNIT A/S until March 2017, from which he received remuneration of DKK 137,671 in 2017 (DKK 750,000 in 2016) and as board member of Chr. Hansen A/S (no remuneration
received in 2017). The NNIT remuneration is included in the remuneration of Executive Management presented above. Lars Green serves as board member of Novozymes A/S, from which he received
remuneration of DKK 1,000,000 in 2017. Camilla Sylvest serves as board member of Danish Crown A/S (no remuneration received in 2017). Mads Krogsgaard Thomsen serves as chairman of the board
of the University of Copenhagen, from which he received remuneration of DKK 209,902 in 2017 (DKK 82,215 in 2016). Henrik Wulff serves as board member of AMBU A/S, from which he received
remuneration of DKK 300,000 in 2017 (DKK 300,000 in 2016).

NOVO NORDISK ANNUAL REPORT 201754 GOVERNANCE, LEADERSHIP AND SHARES

BOARD OF DIRECTORS

GÖRAN
ANDO

Chairman

JEPPE
CHRISTIANSEN

Vice chairman

BRIAN
DANIELS

Former 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 Research & Development
Committee since 2017.

Management duties: Symphogen A/S, Denmark
(chair), member of the boards of Novo Holdings
A/S, Denmark, Molecular Partners AG, Switzerland,
EUSA Pharma Ltd., UK, and ICMEC, US. Senior
advisor to EW Healthcare Partners, 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. Chair of the Remuneration
Committee since 2017 (member since 2015).

Management duties: Haldor Topsøe A/S (chair),
Maj Bank A/S (vice chair), and member of the
boards of Novo Holdings A/S, KIRKBI A/S and
Symphogen A/S, all in Denmark. Member of the
board of governors of Det Kgl. Vajsenhus, Denmark.
Adjunct professor, Department of Finance at
Copenhagen Business School, 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.

Senior advisor with the Boston Consulting
Group and venture partner with 5AM Venture
Management LLC, both in the US. Member of the
Board of Novo Nordisk A/S since 2016 and member
of the Research & Development Committee since
2017.

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

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

SYLVIE
GRÉGOIRE

LIZ
HEWITT

LISELOTTE
HYVELED

Former president of Human Genetic Therapies
Shire plc, US and Switzerland (retired). Member of
the Board of Novo Nordisk A/S and of the Audit
Committee since 2015. Member of the Research &
Development Committee since 2017.

Former Group Director in 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: Corvidia Therapeutics Inc.,
US (chair), and member of the boards of Vifor
Pharma Ltd., 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, including 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.

Management duties: Member of the boards of
Savills plc and Melrose Industries plc, where she is
chairman of both audit committees, 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).

Senior facilitator in Business Assurance. Member
of the Board of Novo Nordisk A/S since 2014
and member of the Research & Development
Committee since 2017.

Management duties: Member of the board of
RSP Systems A/S, Denmark.

Education: MSc in pharmaceutical science (1992)
from Copenhagen University, Master of Medical
Business Strategies (2011) from Copenhagen
Business School and certified board programme
diploma from Copenhagen Business School (2018),
all in Denmark.

Meeting participation in 20172

Name (male/female)

First elected Term Nationality

Born

Independence1

Board of
Directors Chairmanship

Audit
Committee

Remuneration
Committee

Nomination
Committee

R&D
Committee

Göran Ando (m)
Jeppe Christiansen (m)
Brian Daniels (m)
Sylvie Grégoire (f)
Liz Hewitt (f)
Liselotte Hyveled (f)

2005
2013
2016
2015
2012
2014

2018 Swedish
2018 Danish
2018 American
2018 Canadian/American Nov. 1961 Independent4, 5
Nov. 1956 Independent4, 5
2018 British
Jan. 1966 Not independent6
2018 Danish

Mar. 1949 Not independent3
Nov. 1959 Not independent3
Feb. 1959 Independent

7/7
7/7
7/7
7/7
7/7
7/7

1/1
5/5

7/7
6/7

1/1

4/4
4/4

8/8

7/8
1/1

3/3

3/3
3/3

3/3

1. As designated by Nasdaq Copenhagen in accordance with section 3.2.1 of Recommendations on Corporate Governance. 2. Number of meetings attended by each board member out of the total
number of meetings within the member's term. 3. Member of the board or the management of Novo Holdings A/S. 4. Pursuant to the US Securities Exchange Act, Ms Hewitt, Ms Grégoire and Mr
Lund qualify as independent Audit Committee members, while Mr Strøbæk relies on an exemption from the independence requirements.

NOVO NORDISK ANNUAL REPORT 2017GOVERNANCE, LEADERSHIP AND SHARES

KASIM
KUTAY

ANNE MARIE
KVERNELAND

HELGE
LUND

Chief executive officer of Novo Holdings
A/S, Denmark. Member of the Board of Novo
Nordisk A/S, the Nomination Committee and the
Remuneration Committee since 2017.

Laboratory technician and full-time union
representative. Member of the Board of Novo
Nordisk A/S since 2000 and member of the
Remuneration Committee since 2017.

Management duties: Member of the boards of
Novozymes A/S, Denmark, and ConvaTec plc, UK.

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

Special competences: Extensive experience
as financial advisor to the pharmaceutical,
biotechnology and medical device industries. He has
also advised healthcare companies internationally,
including companies based in Europe, the US, Japan
and India.

Education: BSc in Economics and MSc in
Economics, both from the London School of
Economics, UK.

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

Operating advisor to Clayton Dubilier & Rice, US.
Member of the Board of Novo Nordisk A/S in
2014–2015 and again since 2017. Member of the
Audit Committee and the Nomination Committee
since 2017.

Management duties: Member of the boards of
Schlumberger Ltd., Curaçao, and P/F Tjaldur, Faroe
Islands. Member of the board of trustees of the
International Crisis Group.

Special competences: Extensive executive and
board experience of large multinational companies
headquartered in Scandinavia within regulated
markets, and significant financial knowledge.

Education: MA in Economics (1987) from the
Norwegian School of Economics & Business
Administration (NHH), Norway, and MBA (1991)
from INSEAD, France.

SØREN
THUESEN
PEDERSEN

STIG
STRØBÆK

External Affairs director in Quality Intelligence and
Inspections. Member of the Board of Novo Nordisk
A/S since 2006 and member of the Nomination
Committee since 2017.

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.

Management duties: Member of the boards of
HOFOR A/S, HOFOR Forsyning Holding P/S, 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.

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

Name (male/female)

First elected Term Nationality

Born

Independence1

Board of
Directors Chairmanship

Audit
Committee

Remuneration
Committee

Nomination
Committee

R&D
Committee

Meeting participation in 20172

Kasim Kutay (m)
2017
Anne Marie Kverneland (f)
2000
20178
Helge Lund (m)7
Søren Thuesen Pedersen (m) 2006
1998
Stig Strøbæk (m)

2018 British
2018 Danish
2018 Norwegian
2018 Danish
2018 Danish

May 1965 Not independent3
Jul. 1956 Not independent6
Oct. 1962 Independent4, 5
Dec. 1964 Not independent6
Jan. 1964 Not independent4,6

5/5
7/7
5/5
7/7
7/7

4/4
4/4

1/1

6/7

7/7
7/7

3/3

4/4

5. Ms Hewitt, Ms Grégoire and Mr Lund qualify as independent Audit Committee members as defined under part 8 of the Danish Act on Approved Auditors and Audit Firms. 6. Elected by employees
of Novo Nordisk. 7. As part of the Board succession preparedness activities, Helge Lund has been invited to the chairmanship meetings as an observer since April 2017. 8. In addition, Helge Lund was a
member of the Board for one year in 2014–2015.

NOVO NORDISK ANNUAL REPORT 201756 GOVERNANCE, LEADERSHIP AND SHARES

EXECUTIVE MANAGEMENT

LARS
FRUERGAARD
JØRGENSEN

President and chief
executive officer (CEO)

JESPER
BRANDGAARD

Executive vice president,
chief financial
officer (CFO)
and head of
Biopharm

MAZIAR
MIKE
DOUSTDAR*

Executive vice
president, International
Operations

Lars Fruergaard Jørgensen joined Novo Nordisk in
1991 as an economist and has since completed
postings in the Netherlands and overseas in the
US and Japan. He was appointed executive vice
president of IT, Quality & Corporate Development 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).

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. In 2017, he
took over responsibility for the Biopharm activities.

Other management duties: Chairman of the
board of SimCorp A/S and member of the board of
Chr. Hansen A/S, both in Denmark.

Born: October 1963.

Maziar Mike Doustdar joined Novo Nordisk in
1992 as an office clerk in Vienna, Austria. He was
appointed senior vice president of International
Operations in 2013 and executive vice president in
2015. In September 2016, he took on additional
geographical responsibility and was promoted
to executive vice president of an expanded
International Operations, leading all commercial
units globally, except for the US and Canada.

Born: August 1970.

LARS GREEN

Executive vice president,
Business Services &
Compliance

DOUG
LANGA*

Executive vice
president,
North America
Operations

CAMILLA
SYLVEST

Executive vice
president,
Commercial Strategy
& Corporate Affairs

Lars Green joined Novo Nordisk in 1992 as a
graduate on the Finance Graduate Programme.
In 2004, he was appointed senior vice president
of Corporate Finance, and in 2014 he took up
the position as senior vice president of Finance &
Operations of Novo Nordisk Inc. in the US. In July
2017, he was promoted to executive vice president
of Business Services & Compliance.

Other management duties: Member of the
board of Novozymes A/S, Denmark, where he also
chairs the audit committee.

Born: May 1967.

Doug Langa joined Novo Nordisk in 2011 as senior
director of Management Markets. In 2015, he
was appointed corporate vice president of Market
Access in the US, and in 2016 he was promoted
to senior vice president of Market Access in the
US. In March 2017, he was appointed senior vice
president, head of North America Operations and
president of Novo Nordisk Inc. In August 2017,
he was promoted to executive vice president,
continuing his responsibilities.

Born: October 1966.

Camilla Sylvest joined Novo Nordisk as a trainee in
1996. From 2008 to 2015, she headed up affiliates
and business areas of growing size and complexity
in Europe and Asia. In 2015, she was appointed
senior vice president and general manager of Novo
Nordisk’s Region China, and in October 2017,
she was promoted to executive vice president of
Commercial Strategy & Corporate Affairs.

Other management duties: Member of the
board of Danish Crown A/S, Denmark.

Born: November 1972.

MADS
KROGSGAARD
THOMSEN

Executive vice president
and chief science
officer (CSO)

HENRIK
WULFF

Executive vice
president, Product
Supply

Mads Krogsgaard Thomsen joined Novo Nordisk
in 1991 as head of Growth Hormone Research. He
was appointed senior vice president of Diabetes
R&D in 1994, and executive vice president and chief
science officer in November 2000.

Henrik Wulff joined Novo Nordisk in 1998 in the
logistics 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: Chairman of the
board of the University of Copenhagen, Denmark,
and member of the editorial boards of international,
peer-reviewed journals.

Other management duties: Chairman 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: December 1960.

Born: November 1970.

* Not registered as executives with the Danish Business Authority.

NOVO NORDISK ANNUAL REPORT 2017CONSOLIDATED
FINANCIAL, SOCIAL
AND ENVIRONMENTAL
STATEMENTS 2017

CONSOLIDATED
FINANCIAL
STATEMENTS

Income statement

Cash flow statement

Balance sheet

Equity statement

Notes to the Consolidated
financial statements

CONSOLIDATED
SOCIAL STATEMENT
(SUPPLEMENTARY INFORMATION)

Statement of social performance

Notes to the Consolidated social
statement

CONSOLIDATED
ENVIRONMENTAL
STATEMENT
(SUPPLEMENTARY INFORMATION)

104

Statement of environmental
performance

104

Notes to the Consolidated
environmental statement

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 disclosures.

NOVO NORDISK ANNUAL REPORT 2017
NOVO NORDISK ANNUAL REPORT 2017

Novo Nordisk Headquarters,
Bagsværd, north of Copenhagen,
Denmark

58 CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

INCOME STATEMENT
AND STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER

CASH FLOW STATEMENT

FOR THE YEAR ENDED 31 DECEMBER

DKK million

INCOME STATEMENT

Net sales

Cost of goods sold

Gross profit

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 profit

Financial income

Financial expenses

Profit before income taxes

Income taxes

Net profit for the year

EARNINGS PER SHARE

Basic earnings per share (DKK)

Diluted earnings per share (DKK)

Note

2017

2016

2015

DKK million

Note

2017

2016

2015

2.1, 2.2

2.2

111,696

17,632

111,780

17,183

107,927

16,188

2.2

2.2, 2.3

2.2

2.2, 2.5

2.5

4.8

2.6

4.1

94,064

28,340

14,014

3,784

1,041

—

94,597

28,377

14,563

3,962

737

—

91,739

28,312

13,608

3,857

3,482

2,376

48,967

48,432

49,444

1,246

1,533

48,680

10,550

726

47,798

9,873

6,046

43,483

8,623

38,130

37,925

34,860

15.42

15.39

14.99

14.96

13.56

13.52

DKK million

Note

2017

2016

2015

STATEMENT OF COMPREHENSIVE INCOME

Net profit for the year

Other comprehensive income:

38,130

37,925

34,860

Net cash used in financing activities

(35,689)

(38,887)

(30,101)

Items that will not be reclassified subsequently to the Income statement:

Remeasurements of retirement benefit obligations

3.5

103

(205)

(37)

Items that will be reclassified subsequently to the Income statement:

Exchange rate adjustments of investments in subsidiaries

Cash flow hedges, realisation of previously deferred (gains)/losses

Cash flow hedges, deferred gains/(losses) incurred during the period

Other items

Tax on other comprehensive income, income/(expense)

Other comprehensive income for the year, net of tax

Total comprehensive income for the year

4.3

2.6

(632)

1,955

1,987

(577)

(1,041)

1,795

39,925

(7)

682

(1,911)

(74)

324

(1,191)

36,734

(669)

2,216

(681)

366

(87)

1,108

35,968

NOVO NORDISK ANNUAL REPORT 2017

INCOME STATEMENT

CASH FLOW STATEMENT

NOVO NORDISK ANNUAL REPORT 2017

Net cash generated from operating activities

41,168

48,314

38,287

2.6

(9,101)

(2,899)

(9,374)

Income taxes in the Income statement

Depreciation, amortisation and impairment losses

Non-recurring income from the partial divestment of NNIT A/S

included in Other operating income

2.6

3.1, 3.2

CASH FLOW STATEMENT

Net profit for the year

Reversal of non-cash items:

Other non-cash items

Change in working capital

Interest received

Interest paid

Income taxes paid

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 financial assets

Purchase of other financial assets

Sale of marketable securities

Purchase of marketable securities

Dividend received from associated company

38,130

37,925

34,860

10,550

3,182

—

2,027

(3,634)

101

(87)

—

(7,626)

(40)

2,009

—

9,873

3,193

—

3,882

(3,708)

114

(66)

—

(112)

2,064

(531)

8,623

2,959

(2,526)

5,908

(2,157)

(61)

2,303

(1,182)

(9)

1,500

(3,533)

—

(1,022)

(1,199)

(7,068)

(5,224)

2.5

4.6

4.5

2.5

3.1

3.2

5.3

4.1

Net cash used in investing activities

(6,571)

(6,790)

(6,098)

Purchase of treasury shares, net

Dividends paid

(16,845)

(18,844)

(15,057)

(23,830)

(17,196)

(12,905)

Net cash generated from activities

Cash and cash equivalents at the beginning of the year

Exchange gains/(losses) on cash and cash equivalents

(1,092)

18,461

(211)

2,637

2,088

15,850

(26)

13,676

Cash and cash equivalents at the end of the year

4.4

17,158

18,461

15,850

CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER

CONSOLIDATED FINANCIAL STATEMENTS

DKK million

Note

2017

2016

2015

CASH FLOW STATEMENT

Net profit for the year

Reversal of non-cash items:

Income taxes in the 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

2.6

3.1, 3.2

2.5

4.6

4.5

38,130

37,925

34,860

10,550

3,182

—

2,027

(3,634)

101

(87)

9,873

3,193

—

3,882

(3,708)

114

(66)

8,623

2,959

(2,526)

5,908

(2,157)

(61)

2.6

(9,101)

(2,899)

(9,374)

Net cash generated from operating activities

41,168

48,314

38,287

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 financial assets

Purchase of other financial 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

2.5

3.1

3.2

5.3

4.1

—

(1,022)

(7,626)

(40)

2,009

—

(1,199)

(7,068)

(112)

2,064

(531)

2,303

(1,182)

(5,224)

(9)

1,500

(3,533)

—

(6,571)

(6,790)

(6,098)

(16,845)

(18,844)

(15,057)

(23,830)

(17,196)

(12,905)

Net cash used in financing activities

(35,689)

(38,887)

(30,101)

Net cash generated from activities

Cash and cash equivalents at the beginning of the year

Exchange gains/(losses) on cash and cash equivalents

(1,092)

18,461

(211)

2,637

2,088

15,850

(26)

13,676

Cash and cash equivalents at the end of the year

4.4

17,158

18,461

15,850

CASH FLOW STATEMENT

NOVO NORDISK ANNUAL REPORT 2017

60 CONSOLIDATED FINANCIAL STATEMENTS

BALANCE SHEET
AT 31 DECEMBER

DKK million

ASSETS

Intangible assets

Property, plant and equipment

Investment in associated company

Deferred income tax assets

Other financial assets

Total non-current assets

Inventories

Trade receivables

Tax receivables

Other receivables and prepayments

Marketable securities

Derivative financial 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 benefit obligations

Provisions

Total non-current liabilities

Current debt

Trade payables

Tax payables

Other liabilities

Derivative financial instruments

Provisions

Total current liabilities

Total liabilities

Total equity and liabilities

Note

2017

2016

3.1

3.2

4.8

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

2.6

3.5

3.6

4.4, 4.7

4.7

3.7, 4.7

4.3, 4.7

3.6

3,325

35,247

784

1,941

978

2,714

30,179

809

2,683

1,388

42,275

37,773

15,373

20,165

958

2,428

—

2,304

18,852

60,080

102,355

500

(11)

48,977

349

14,341

20,234

1,552

2,411

2,009

529

18,690

59,766

97,539

510

(9)

46,111

(1,343)

49,815

45,269

846

1,336

3,302

5,484

1,694

5,610

4,242

14,446

309

20,755

47,056

52,540

102,355

1,451

3,370

4,834

229

6,011

3,976

14,181

2,578

20,461

47,436

52,270

97,539

NOVO NORDISK ANNUAL REPORT 2017

BALANCE SHEET

CONSOLIDATED FINANCIAL STATEMENTS

EQUITY STATEMENT
AT 31 DECEMBER

DKK million

2015

Share
capital

Treasury
shares

Retained
earnings

Other reserves

Exchange
rate
adjust-
ments

Cash
flow
hedges

Tax and
other
items

Total
other
reserves

Total

Balance at the beginning of the year

530

(11)

41,277

(248)

(2,221)

967

(1,502)

40,294

Net profit for the year

34,860

Other comprehensive income for the year

(37)

(669)

1,535

279

1,145

34,860

1,108

Total comprehensive income for the year

34,823

(669)

1,535

279

1,145

35,968

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

2016

Net profit 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

2017

Net profit for the year

(12,905)

442

366

(10)

(17,219)

(12,905)

442

366

(17,229)

—

(10)

46,816

(917)

(686)

1,246

(357)

46,969

(10)

520

37,925

(205)

37,720

(23,830)

368

(15,048)

(1,229)

250

(986)

37,925

(1,191)

(1,229)

250

(986)

36,734

(7)

(23,830)

368

(15,057)

—

46,111

(924)

(1,915)

1,496

(1,343)

45,269

(10)

510

(9)

Other comprehensive income for the year

103

(632)

3,942

(1,618)

1,692

38,130

1,795

Total comprehensive income for the year

38,233

(632)

3,942

(1,618)

1,692

39,925

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)

500

(18,844)

292

(16,833)

(12)

(18,844)

292

(16,845)

—

(11)

48,977

(1,556)

2,027

(122)

349

49,815

EQUITY STATEMENT

NOVO NORDISK ANNUAL REPORT 2017

62 CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

Basis of preparation

Results for the year

Operating assets
and liabilities

Capital structure and
financing items

Other disclosures

SECTION 1 BASIS OF PREPARATION

Principal accounting policies and key accounting estimates

1.1
1.2 Changes in accounting policies and disclosures
1.3 General accounting policies

SECTION 2 RESULTS FOR THE YEAR

2.1 Net sales and rebates
Segment information
2.2
Research and development costs
2.3
2.4
Employee costs
2.5 Other operating income, net
2.6

Income taxes and deferred income taxes

SECTION 3 OPERATING ASSETS AND
LIABILITIES

Intangible assets
Property, plant and equipment
Inventories
Trade receivables
Retirement benefit obligations
Provisions and contingent liabilities

3.1
3.2
3.3
3.4
3.5
3.6
3.7 Other liabilities

p 63
p 64
p 64

p 65
p 67
p 70
p 71
p 71
p 72

p 74
p 75
p 77
p 77
p 78
p 79
p 80

SECTION 4 CAPITAL STRUCTURE AND
FINANCIAL ITEMS

Share capital, distribution to shareholders and earnings per share p 81
4.1
p 83
Financial risks
4.2
4.3 Derivative financial instruments
p 85
4.4 Cash and cash equivalents, financial resources and free cash flow p 86
p 86
4.5 Change in working capital
p 87
4.6 Other non-cash items
p 87
4.7
p 89
4.8

Financial assets and liabilities
Financial income and expenses

SECTION 5 OTHER DISCLOSURES

Share-based payment schemes

5.1
5.2 Commitments
5.3
5.4
5.5 Companies in the Novo Nordisk Group

Related party transactions
Fee to statutory auditors

p 90
p 92
p 93
p 93
p 94

NOVO NORDISK ANNUAL REPORT 2017

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
financing items

Other disclosures

All entities in the Novo Nordisk Group follow the same Group accounting
policies. This section gives a summary of the significant 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 specific reported amounts is
presented in each note to the relevant financial item.

1.1 PRINCIPAL ACCOUNTING POLICIES AND
KEY ACCOUNTING ESTIMATES

The Consolidated financial statements included in this Annual Report
have been prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards
Board (IASB) and endorsed by the EU as well as further Danish disclosure
requirements for annual reports of listed companies.

Measurement basis
The Consolidated financial statements have been prepared on the historical
cost basis except for derivative financial 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 financial 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 financial statements. Management regards the
ones listed in the table below as the most significant accounting policies for
the recognition and measurement of reported amounts.

Key accounting estimates and judgements
The use of reasonable estimates and judgements is an essential part of the
preparation of the Consolidated financial statements. Given the uncertainties
inherent in Novo Nordisk’s business activities, Management must make
certain estimates regarding valuation and judgements. Those affect the
application of accounting policies and reported amounts of assets, liabilities,
sales, costs, cash flows and related disclosures.

The key accounting estimates identified are those that have a significant
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 key accounting estimates 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 classification of transactions.

Management regards those listed below as the key accounting estimates
and judgements used in the preparation of the Consolidated financial
statements.

Please refer to the specific notes for further information on the key
accounting estimates and judgements as well as assumptions applied.

Principal accounting policies

Key accounting estimates and judgements

Net sales and rebates
Research and development
Derivative financial instruments
Income taxes and deferred income taxes

Estimate of sales deductions and provisions for sales rebates
–
–
Judgement regarding deferred income tax assets and provision for
uncertain tax positions

Note

2.1
2.3, 3.1 and 3.2
4.3
2.6

Property, plant and equipment including impairment
Inventories
Trade receivables
Provisions and contingent liabilities

–
Estimate of indirect production costs capitalised
Estimate of allowance for doubtful trade receivables
Estimate of ongoing legal disputes, litigations and investigations

3.2
3.3
3.4
3.6

Applying materiality
The Consolidated financial 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 financial statements.
If a line item is not individually material, it is aggregated with other items of
a similar nature in the Consolidated financial statements or in the notes.

There are substantial disclosure requirements throughout IFRS. Management
provides specific disclosures required by IFRS unless the information is
considered immaterial to the economic decision-making of the users of these
financial statements or not applicable.

BASIS OF PREPARATION

NOVO NORDISK ANNUAL REPORT 2017

64 CONSOLIDATED FINANCIAL STATEMENTS

1.2 CHANGES IN ACCOUNTING POLICIES AND DISCLOSURES

Adoption of new or amended IFRSs
Management assesses the impact of new or amended and revised
accounting standards and interpretations (IFRSs) issued by the (IASB), and
IFRSs endorsed by the European Union. It is assessed that application of
new IFRSs effective on 1 January 2017 has not had a material impact on
the Consolidated financial statements in 2017. Further, Management does
not anticipate any significant 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
significant impact on current accounting regulation:

Standard

Description

Implementation

Impact

IFRS 9 Financial
Instruments
(endorsed by the EU)

IFRS 9 is part of IASB’s project to replace IAS
39, and the new standard will substantially
change the classification and measurement
of financial instruments.

Further, the standard introduces a new
hedge-accounting model that enables
companies to better reflect their risk
management activities in the financial
statements.

Novo Nordisk will adopt the standard on
the effective date, being 1 January 2018.

The standard will be implemented following
the specific transitional requirements listed
in the standard related to classification and
measurement, impairments and hedge
accounting. This results in prospective
application.

Novo Nordisk has assessed the impact of
the standard and determined that it will
not have any significant impact on the
Consolidated financial statements.

IFRS 15 Revenue
from contracts with
customers
(endorsed by the EU)

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 will adopt the standard on
the effective date, being 1 January 2018.

The standard will be implemented using the
modified retrospective approach.

IFRS 16 Leases
(endorsed by the EU)

The standard provides details on
recognising revenue to reflect the transfer
of control of goods to customers at a value
that the entity expects to be entitled to.

IFRS 16 replaces IAS 17, and will change
the accounting treatment of leases that
are currently treated as operating leases.
The standard requires all leases, regardless
of type and with few exceptions, to be
recognised in the balance sheet as an
asset with a related liability. The Income
statement will also be affected, as the
annual lease costs will consist of both
depreciation and interest expenses going
forward. Currently, the annual costs
relating to operating leases are recognised
as a single expense amount in the Income
statement.

Novo Nordisk will adopt the standard on
the effective date, being 1 January 2019.

The standard will be implemented using
the modified retrospective approach,
meaning that comparative information
is not restated. The cumulative effect of
initially applying IFRS 16 is presented as an
adjustment to opening retained earnings
under equity.

Novo Nordisk has performed an analysis of
the impact, including areas such as variable
considerations, right of return, licensing
arrangements and agent relationships.
Based on the analysis, it is assessed that
the standard will not have any significant
impact on revenue recognition or
measurement compared to current practice.
Implementation might result in extended
disclosures regarding disaggregation of
revenue and accounting policies.

The changes require 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
financial ratios related to the balance sheet.

The lease payments will be split between a
depreciation charge included in operating
costs and an interest expense on lease
liabilities included in financial expenses.
The impact on operating profit will be
insignificant.

1.3 GENERAL ACCOUNTING POLICIES

Principles of consolidation
The Consolidated financial statements incorporate the financial 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 bring the financial statements
of subsidiaries in line with the Novo Nordisk Group's accounting 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.

Translation of foreign currencies
Functional and presentation currency
Items included in the financial statements of Novo Nordisk's entities are
measured using the currency of the primary economic environment in
which the entity operates (functional currency). The Consolidated financial
statements are presented in Danish kroner (DKK), which is 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 are recognised in the Income statement.
Translation differences on non-monetary items 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, except for the following, which are recognised in Other
comprehensive income:

• 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 at average to year-end exchange rates.

NOVO NORDISK ANNUAL REPORT 2017

BASIS OF PREPARATION

SECTION 2 RESULTS FOR THE YEAR

CONSOLIDATED FINANCIAL STATEMENTS

Basis of preparation

Results for the year

Operating assets
and liabilities

Capital structure and
financing items

Other disclosures

This section comprises notes related to the results for the year and hence
provides information related to Novo Nordisk’s long-term financial target for
growth in operating profit in local currencies. Operating profit increased by
1.1% in 2017 (decrease of 2.0% in 2016).

The article ‘2017 performance and 2018 outlook’ on p 6 includes
Management’s review of the results for the year and the articles 'Performing
while transforming: building a bolder and more competitive US business' and
'Opportunities and challenges: Novo Nordisk's international Operations' on
pp 32-39 includes Management's perspective on the various markets, which
is not part of the audited financial statements (unaudited).

Pricing mechanisms in the US market
In the US, sales rebates are paid in connection with public healthcare
insurance programmes, namely Medicare and Medicaid, as well as rebates to
pharmacy benefit managers (PBMs) and managed healthcare plans.
Key customers in the US include private payers, PBMs and government
payers. PBMs and managed healthcare plans play a role in negotiating price
concessions with drug manufacturers on behalf of private payers for both
the commercial and government channels, and determine which drugs
are covered on their formularies (or 'preferred drug lists'). Specifically,
Management views the rising healthcare cost trend and highly competitive
environment as the primary drivers of payer pressure to reduce overall drug
costs.

This has resulted in greater focus on negotiating higher rebates from drug
manufacturers. As new products enter the market, private payers are
increasingly likely to adopt narrow formularies that exclude certain drugs,
while securing higher rebates from the preferred brand(s).

From Management's perspective, in 2017 payers have continued to leverage
their size and influence to negotiate higher rebates. Moreover, intense
competition in the diabetes space limits the impact of price increases, as
much of it is given back to payers in the form of higher rebates and price
protection, leading to continued downward pressure on prices.

2.1 NET SALES AND REBATES

Accounting policies
Revenue is recognised when Novo Nordisk has transferred the significant
risks and rewards from products sold 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 satisfied.

Revenue recognition for new product launches is based on specific 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 sufficient historical experience for estimating sales
returns, revenue is only recorded when there is evidence of consumption or
when the right of return has expired.

Key accounting 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 defined 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 2017

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

2017

2016

2015

216,174

198,924

182,779

(53,077)
(28,324)
(12,491)
(5,771)

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

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

(4,815)

(4,845)

(5,064)

Total gross-to-net sales adjustments

(104,478)

(87,144)

(74,852)

Net sales

111,696

111,780

107,927

Sales discounts and sales rebates are predominantly issued in the US. As
such, rebates amount to 64% of gross sales in the US (59% in 2016 and
56% in 2015). Novo Nordisk sales are impacted by exchange rate changes.
For development in key currencies refer to note 4.2 on p 83.

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 specific terms in each
agreement, historical experience, anticipated channel mix, growth rates and
market share information. Novo Nordisk adjusts the provision periodically to
reflect 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 rebates
Medicaid is a government insurance programme. 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 specific 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. They
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 predefined targets.

PROVISIONS FOR SALES REBATES

DKK million

2017

2016

2015

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

19,971

16,508

11,002

63,772

56,954

45,190

(61,017)

(53,217)

(40,958)

(117)

(2,393)

(822)

548

—

1,274

At the end of the year

20,216

19,971

16,508

Unsettled rebates are recognised as Provisions when the timing or amount
is uncertain (note 3.6). 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 US rebate types, as well
as rebates in Canada.

PROVISIONS FOR SALES REBATES

■ US Managed Care ■ US Medicare ■ US Medicaid
■ Other sales rebates in the US and Canada

DKK million

10,000

8,000

6,000

4,000

2,000

2015

2016

2017

NOVO NORDISK ANNUAL REPORT 2017

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 significant decisions regarding business development and
direction are taken in that forum.

Business segments
Novo Nordisk operates in two business segments based on therapies:
Diabetes care and obesity and Biopharmaceuticals.

The Diabetes care and obesity 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),
obesity and other chronic diseases.

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

CONSOLIDATED FINANCIAL STATEMENTS

Segment performance is evaluated on the basis of operating profit consistent
with the Consolidated financial 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 specific
allocation. In addition, a minor number of corporate overhead costs are
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,
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
- of which Tresiba®

Total modern insulin

NovoRapid® / NovoLog®
NovoMix® / NovoLog® Mix
Levemir®
Human insulin
Total insulin
Victoza®
Other diabetes care
Total diabetes care
Obesity (Saxenda®)

2017

2016

2015

2017

2016

2015

2017

2016

2015

Diabetes care and obesity

Biopharmaceuticals

Total

8,647
7,327
44,400
20,025
10,257
14,118
10,072
63,119
23,173
4,023
90,315
2,562

4,459
4,056
47,510
19,945
10,482
17,083
11,090
63,059
20,046
4,267
87,372
1,577

1,438
1,278
50,164
20,720
11,144
18,300
11,231
62,833
18,027
4,270
85,130
460

Diabetes care and obesity total sales

92,877

88,949

85,590

Haemophilia

- of which NovoSeven®
- of which NovoEight®

Growth disorders
Other biopharmaceuticals

10,469
9,206
1,103
6,655
1,695

10,472
9,492
851
8,770
3,589

10,647
10,064
477
7,820
3,870

Biopharmaceuticals total sales

18,819

22,831

22,337

Segment key figures

Total net sales
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 profit
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

92,877
15,014

25,475
11,358
3,143
466

88,949
14,337

24,387
11,481
3,128
486

85,590
13,725

24,926
10,475
3,051
488

—

18,819
2,618

22,831
2,846

22,337
2,463

111,696
17,632

111,780
17,183

107,927
16,188

2,865
2,656
641
575

—

3,990
3,082
834
251

—

3,386
3,133
806
618

—

28,340
14,014
3,784
1,041

28,377
14,563
3,962
737

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

—

2,376

38,353
41.3%

36,102
40.6%

33,901
39.6%

10,614
56.4%

12,330
54.0%

13,167
58.9%

48,967
43.8%

48,432
43.3%

49,444
45.8%

2,536

2,674

2,514

646

519

445

3,182

3,193

2,959

7,565

6,144

4,991

2,226

2,123

1,415

9,791

8,267

6,406

61,542

55,081

46,444

14,994

14,798

11,759

76,536
25,819

102,355

69,879
27,660

97,539

58,203
33,596

91,799

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 financial assets, Tax receivables,

Marketable securities, Derivative financial instruments and Cash at bank.

RESULTS FOR THE YEAR

NOVO NORDISK ANNUAL REPORT 2017

68 CONSOLIDATED FINANCIAL STATEMENTS

2.2 SEGMENT INFORMATION (CONTINUED)

GEOGRAPHICAL AREAS
Novo Nordisk operates in two main commercial units:

• North America Operations (US and Canada)
• International Operations

• Region Europe: the EU, EFTA, Albania, Bosnia-Hercegovina,

Macedonia, Serbia, Montenegro and Kosovo

• Region AAMEO (Africa, Asia, Middle East & Oceania)
• Region China: China, Hong Kong and Taiwan
• Region Japan & Korea: Japan and South Korea
• Region Latin America: countries in South America, Central America

and Mexico

As of 1 January 2017, the geographical regions were changed to align with
management structure as listed above. Comparative figures have been
updated to reflect the new regional structure. Please refer to note 5.5 for an
overview of subsidiaries.

Sales are attributed to geographical regions according to the location of the
customer. Allocation of property, plant and equipment, trade receivables,
allowance for trade receivables and total assets is based on the location of
the assets.

The country of domicile is Denmark, which is part of Region Europe.
Denmark is immaterial to Novo Nordisk’s activities in terms of geographical
size and the operational business segments. 99.6% of total sales are realised
outside Denmark.

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

In 2017, Novo Nordisk had three major wholesalers distributing products,
representing 21%, 13% and 12% respectively of total net sales (21%,
13% and 12% in 2016 and 21%, 12% and 11% in 2015). Sales to
these three wholesalers are within both Diabetes care and obesity and
Biopharmaceuticals.

Net sales will be impacted by exchange rate fluctuations. Conversely,
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.

For patent expiry in key markets by product, please refer to note 2.4 of the
Consolidated social statement.

SALES BY BUSINESS SEGMENT 2017

SALES BY GEOGRAPHICAL AREA 2017

Diabetes care and obesity

■ Diabetes care

■ Obesity

Biopharmaceuticals

■ Haemophilia

■ Growth disorders

■ Other biopharmaceuticals

■ North America Operations ■ Region Europe ■ Region AAMEO

■ Region China ■ Region Japan & Korea ■ Region Latin America

CONSOLIDATED FINANCIAL STATEMENTS

6% 2%

10%

11%

52%

81%

19%

GEOGRAPHICAL AREAS

GEOGRAPHICAL AREAS (CONTINUED)

2017

2016

2015

2017

2016

2015

2017

2016

2015

2017

2016

2015

2017

2016

2015

2017

2016

2015

2017

2016

2015

2017

2016

2015

DKK million

n North America Operations

International Operations

International Operations (continued)

Total

Of which US

Total

n Region Europe

n Region AAMEO

n Region China

n Region Japan & Korea

n Region Latin America

451

261

5,725

2,261

2,503

961

2,201

8,377

858

475

279

181

5,284

1,995

2,291

998

2,494

8,057

715

505

162

122

5,099

1,825

2,297

977

2,431

7,692

584

613

5,500

1,253

3,555

692

3,096

8,598

309

—

4,969

1,059

3,363

547

3,361

8,330

255

1,566

1,697

1,518

1,787

1,713

992

739

941

444

133

232

590

376

769

711

998

619

170

302

623

434

495

491

888

632

193

324

470

354

—

4,312

866

3,036

410

3,537

7,849

213

1,594

9,656

—

9,710

9,277

8,889

10,473 10,282

3,708

3,915

3,356

2,598

2,287

2,449

190

—

2,742

2,858

2,532

2,040

1,797

2,017

407

377

797

335

113

349

836

500

277

558

543

263

279

253

699

266

104

329

819

438

1,022

—

221

203

183

983

326

161

496

831

352

877

—

348

Sales by business segment:
New-generation insulin
- of which Tresiba®

Total modern insulin

NovoRapid® / NovoLog®
NovoMix® / NovoLog® Mix
Levemir®
Human insulin
Total insulin
Victoza®
Other diabetes care
Total diabetes care
Obesity (Saxenda®)

5,152
4,982

2,246
33
33
2,246
22,364 26,043 28,708
10,960 11,427 12,576
1,790
2,837
2,080
9,614 12,536 13,295
2,094
2,011
1,937
29,453 30,300 30,835
17,465 14,624 13,014
950
47,861 45,854 44,799
459
1,446

1,993

930

943

5,132
4,970

2,246
33
33
2,246
21,651 25,337 27,945
10,574 11,058 12,184
1,743
2,779
2,032
9,334 12,247 12,982
1,884
1,827
1,766
28,549 29,410 29,862
16,929 14,146 12,570
785
46,260 44,332 43,217
452
1,366

1,828

776

782

3,495
2,345

9,065
8,467
4,504
8,135

2,213
1,405
1,237
1,810
22,036 21,467 21,456
8,144
8,518
8,307
8,402
4,547
5,005
9,137
9,079
33,666 32,759 31,998
5,013
5,422
3,320
3,337
42,454 41,518 40,331
1

5,708
3,080

569

131

1,643
966
8,496
4,275
1,852
2,369
1,770

886
545
665
441
8,728
9,349
4,200
4,239
2,025
2,181
2,503
2,929
2,014
2,103
11,909 11,717 11,908
3,394
3,391
679
649
15,965 15,757 15,981
1

3,451
605

102

Diabetes care and obesity total

49,854 47,300 45,258

48,088 45,698 43,669

43,023 41,649 40,332

16,067 15,785 15,982

9,900

9,323

8,889

10,473 10,282

9,656

3,708

3,915

3,356

2,875

2,344

2,449

Haemophilia

- of which NovoSeven®
- of which NovoEight®

Growth disorders
Other biopharmaceuticals

5,023
4,609
315
2,550
582

4,934
4,589
254
4,498
2,510

5,208
5,021
110
3,625
2,765

4,852
4,451
315
2,543
348

4,710
4,378
254
4,495
2,291

5,086
4,914
110
3,625
2,559

5,446
4,597
788
4,105
1,113

5,538
4,903
597
4,272
1,079

5,439
5,043
367
4,195
1,105

2,828
2,245
551
1,572
722

2,520
2,082
416
1,661
716

2,405
2,137
249
1,675
736

1,163

1,097

1,101

1,082

1,319

1,310

676

279

906

250

—

818

246

216

215

158

—

195

—

681

497

169

737

559

170

643

524

118

1,579

1,469

1,339

104

Biopharmaceuticals total

8,155 11,942 11,598

7,743 11,496 11,270

10,664 10,889 10,739

5,122

4,897

4,816

2,118

2,257

2,383

236

176

215

2,364

2,310

2,079

824

1,249

1,246

Total sales by business and
geographical segment

58,009 59,242 56,856

55,831 57,194 54,939

53,687 52,538 51,071

21,189 20,682 20,798

12,018 11,580 11,272

10,709 10,458

9,871

6,072

6,225

5,435

3,699

3,593

3,695

Total sales growth as reported

(2.1%)

4.2% 31.8%

(2.4%)

4.1% 32.9%

2.2% 2.9% 11.8%

2.5% (0.6%)

3.2%

3.8% 2.7% 15.1%

2.4% 5.9% 22.0%

(2.5%) 14.5% 10.8%

3.0% (2.8%) 33.7%

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

7,318

4,599
10,742 10,604

3,049
6,619

7,298

4,599
10,517 10,426

3,047
6,456

27,929 25,580 22,496
8,866
9,630

9,423

24,665 22,040 19,097
3,203
3,304

3,273

566

525

353

3,468

3,164

2,620

1,884

1,541

2,095

1,773

2,291

1,541

(32)

(41)

(25)

(32)

(41)

(25)

(1,262)

(1,182)

(1,166)

(223)

(166)

(139)

(823)

(817)

(786)

—

146

279

(5)

161

305

(5)

153

466

(5)

668

862

759

602

1,084

1,036

(211)

(194)

(211)

20,612 18,684 12,830

20,180 18,349 12,594

81,743 78,855 78,969

65,600 63,407 64,590

5,876

4,937

4,160

5,927

5,697

5,603

1,304

1,248

1,338

3,036

3,566

3,278

NOVO NORDISK ANNUAL REPORT 2017

RESULTS FOR THE YEAR

NOVO NORDISK ANNUAL REPORT 2017

SALES BY BUSINESS SEGMENT 2017

Diabetes care and obesity
■ Diabetes care
■ Obesity

Biopharmaceuticals
■ Haemophilia
■ Growth disorders
■ Other biopharmaceuticals

6% 2%

CONSOLIDATED FINANCIAL STATEMENTS

SALES BY GEOGRAPHICAL AREA 2017
■ North America Operations ■ Region Europe ■ Region AAMEO
■ Region China ■ Region Japan & Korea ■ Region Latin America

10%

11%

52%

GEOGRAPHICAL AREAS (CONTINUED)
2016
2015

2016

2017

81%

19%

2015

2017

2016

2015

2017

2016

2015

n Region AAMEO

n Region China

n Region Japan & Korea

n Region Latin America

International Operations (continued)

451
261
5,725
2,261
2,503
961
2,201
8,377
858
475
9,710
190

279
181
5,284
1,995
2,291
998
2,494
8,057
715
505
9,277
46

162
122
5,099
1,825
2,297
977
2,431
7,692
584
613
8,889
—

2
2
5,500
1,253
3,555
692
3,096
8,598
309
1,566

—
—
4,969
1,059
3,363
547
3,361
8,330
255
1,697
10,473 10,282
—

—

—
—
4,312
866
3,036
410
3,537
7,849
213
1,594
9,656
—

992
739
1,518
941
444
133
232
2,742
590
376
3,708
—

769
711
1,787
998
619
170
302
2,858
623
434
3,915
—

495
491
1,713
888
632
193
324
2,532
470
354
3,356
—

407
377
797
335
113
349
836
2,040
500
58
2,598
277

279
253
699
266
104
329
819
1,797
438
52
2,287
57

203
183
983
326
161
496
831
2,017
352
80
2,449
—

9,900

9,323

8,889

10,473 10,282

9,656

3,708

3,915

3,356

2,875

2,344

2,449

1,163
1,097
52
676
279

1,101
1,082
11
906
250

1,319
1,310
—
818
246

216
215
1
15
5

158
158
—
15
3

195
195
—
15
5

681
497
169
1,579
104

737
559
170
1,469
104

643
524
118
1,339
97

558
543
15
263
3

1,022
1,022
—
221
6

877
877
—
348
21

2,118

2,257

2,383

236

176

215

2,364

2,310

2,079

824

1,249

1,246

12,018 11,580 11,272

10,709 10,458

9,871

6,072

6,225

5,435

3,699

3,593

3,695

3.8% 2.7% 15.1%

2.4% 5.9% 22.0%

(2.5%) 14.5% 10.8%

3.0% (2.8%) 33.7%

566
3,468

525
3,164

353
2,620

1,884
1,541

2,095
1,773

2,291
1,541

(823)

(817)

(786)

—

146
279

(5)

161
305

(5)

153
466

(5)

668
862

759
1,084

602
1,036

(211)

(194)

(211)

5,876

4,937

4,160

5,927

5,697

5,603

1,304

1,248

1,338

3,036

3,566

3,278

RESULTS FOR THE YEAR

NOVO NORDISK ANNUAL REPORT 2017

70 CONSOLIDATED FINANCIAL STATEMENTS

2.3 RESEARCH AND DEVELOPMENT COSTS

RESEARCH AND DEVELOPMENT COSTS BY BUSINESS
SEGMENT (NOTE 2.2)

Accounting policies
Novo Nordisk’s research and development is mainly focused on:

• Insulins, GLP-1s and other therapeutic new anti-diabetic drugs for

diabetes treatment

• GLP-1s, combinations and new modes of action for weight management
• Blood-clotting factors and new modes of action for haemophilia

treatment

• Human growth hormone for treatment of growth disorders
• New modes of action including GLP-1 for treatment of NASH,

cardiovascular- and chronic kidney disease

The research activities utilise biotechnological methods based on 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 and human growth
hormone.

In line with industry practice, Novo Nordisk expenses all internal research
costs. Internal development costs are also expensed as incurred, due to
regulatory and other uncertainties inherent in the development of new
products. Hence, these do not qualify for capitalisation as intangible assets
until marketing approval by a regulatory authority is obtained or highly
probable.

Research and development activities are carried out by Novo Nordisk’s
research and development centres, mainly in Denmark, the US and China.
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,
and internal and external costs related to execution of studies, including
manufacturing costs and facility costs of the research centres. Further, the
costs comprise 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 milestone payments paid to partnerships prior
to or upon regulatory approval are capitalised as intangible assets and
amortised as Cost of goods sold over the useful life.

• Royalty expenses paid to partnerships after regulatory approval are

expensed as Cost of goods sold.

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

operating income, net.

• Contractual research and development obligations to be paid in the future

are disclosed separately as Commitments in note 5.2.

DKK million

2017

2016

2015

Diabetes care and obesity
Biopharmaceuticals

11,358
2,656

11,481
3,082

10,475
3,133

Total

14,014

14,563

13,608

RESEARCH AND DEVELOPMENT COSTS

DKK million

2017

2016

2015

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)

7,430

5,848

211

7,494

6,149

427

7,352

5,584

247

525

493

425

Total Research and development
costs

14,014

14,563

13,608

As percentage of sales

12.5%

13.0%

12.6%

For a review of the development in Research and development costs, refer
to p 7 and p 10, ‘2017 performance and 2018 outlook’, which is not part of
the audited financial statements.

Research costs comprise 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 profile that will support a decision to initiate development activities.
Before selection of the final drug candidate, it is tested in animals to gather
efficacy, toxicity and pharmacokinetic information.

Development costs are incurred from the start of phase 1, when the drug is
administered to humans for the first time; these are the projects captured
in the pipeline overview on pp 22-23 (unaudited). The final product is
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 2017

RESULTS FOR THE YEAR

DKK million

2017

2016

2015

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 benefits are recognised in the year in which
the associated services are rendered by employees of Novo Nordisk. Where
Novo Nordisk provides long-term employee benefits, the costs are accrued to
match the rendering of the services by the employees concerned.

EMPLOYEE COSTS

Wages and salaries
Share-based payment costs (note 5.1)
Pensions – defined contribution plans
Pensions – defined benefit plans
Other social security contributions
Other employee costs

23,869
292
1,800
165
1,910
2,102

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

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

Total employee costs for the year

30,138

30,956

29,500

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

(1,435)

(1,258)

(957)

(91)

(127)

(191)

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

28,612

29,571

28,352

7,854
11,994
5,848
2,505
411

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

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

28,612

29,571

28,352

Average number of full-time employees
Year-end number of full-time employees

41,665
42,076

41,993
41,971

40,342
40,638

CONSOLIDATED FINANCIAL STATEMENTS

REMUNERATION TO EXECUTIVE MANAGEMENT AND
BOARD OF DIRECTORS

DKK million

2017

2016

2015

Salary and cash bonus
Pension
Benefits4
Share-based incentive5
Severance payments1,4

Fee to Board of Directors

Total

74
18
6
7
0

105

121

77
20
10
11
66

184

198

89
22
7
44
73

235

247

1. Please refer to note 5.1 and ’Remuneration’, pp 50-53 (unaudited), for further information.
2. President and CEO Lars Rebien Sørensen retired from Novo Nordisk on 31 December 2016.
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 Novo Nordisk´s Executive Management in 2016. The 2016 remuneration for Jerzy
Gruhn and Jesper Høiland is included in the above table. EVP Kåre Schultz left Novo Nordisk
on 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.

3. Total remuneration for registered members of Executive Management and the Board of

Directors amounts to DKK 90 million (DKK 152 million in 2016 and DKK 120 million in 2015).

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

Wages and salaries in the table above.

5. Until 2017 the cost of the programme was expensed when shares was granted as the pool

was fixed. From 2017 onwards, the programme will be expensed equally over the grant year
and the subsequent 3 years of vesting as the number of shares will be reduced if a participant
terminates employment with Novo Nordisk.

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 profit 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 costs 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 flow statement.

RESULTS FOR THE YEAR

NOVO NORDISK ANNUAL REPORT 2017

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 as well as
interest on tax cases ongoing or settled during the year. Further, it includes
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. Significant
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
sufficient taxable income will be available in the future against which the
temporary differences and unused tax losses can be utilised.

Management has considered future taxable income 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. Management judgement is applied
to assess the possible outcome of such disputes. The 'most probable
outcome' method is applied when making provisions for uncertain tax
positions, and Novo Nordisk considers the provisions made to be adequate.
However, the actual obligation may deviate and depends on the result of
litigations and settlements with the relevant tax authorities.

US tax reform
The net deferred US tax asset has been reevaluated as a consequence of new
US tax legislation, increasing the tax expense for 2017 by DKK 171 million.

INCOME TAXES EXPENSED

DKK million

2017

2016

2015

Current tax on profit for the year
Deferred tax on profit for the year

10,562
182

8,981
3,014

9,648
(1,130)

Tax on profit 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

10,744

11,995

8,518

(425)

(3,191)

231

1,069

102

10,550

9,873

8,623

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

(2)

(28)

1,043

(296)

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

1,041

(324)

—

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 the associated tax liability recognised in prior
years.

DKK million

2017

2016

2015

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 the 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%

0.0%

0.2%

(2.9%)

—

(1.3%)

0.1%

(0.4%)

(1.6%)

0.4%

Effective tax rate

21.7%

20.7%

19.8%

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.

NOVO NORDISK ANNUAL REPORT 2017

RESULTS FOR THE YEAR

CONSOLIDATED FINANCIAL STATEMENTS

2.6 INCOME TAXES AND DEFERRED
INCOME TAXES (CONTINUED)

INCOME TAXES PAID

DKK million

2017

2016

2015

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

6,798

5,506

5,926

2,639

2,645

3,040

(336)

(5,252)

408

Total income taxes paid

9,101

2,899

9,374

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

DEFERRED INCOME TAXES

Accounting policies
Deferred income taxes arise from temporary differences between the
accounting and taxable values of the individual consolidated companies
and from realisable tax loss carry-forwards. The tax value of tax loss carry-
forwards is included in deferred tax assets to the extent that these 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 assumed
in the year the assets are expected to be utilised. In general, the Danish tax
rules related to company dividends provide exemption from tax for most
repatriated profits. A provision for withholding tax is only recognised if a
concrete distribution of earnings is planned.

The potential withholding tax amounts to DKK 343 million for 2017 (DKK
330 million in 2016).

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 estimated excess tax deduction compared to the costs realised in the
Income statement is charged to Equity.

DEVELOPMENT IN DEFERRED INCOME TAX ASSETS AND LIABILITIES

DKK million

2017

Property,
plant and
equipment

Intangible
assets

Inventories

Provisions
and other
liabilities

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

(966)
61
—
—
37

(359)
(132)
—
—
(9)

1,176
(192)
(151)
—
—

2,005
(182)
(26)
—
(139)

Offset
within
countries

—

Other2

814
32
(866)
17
(25)

Total

2,670
(413)
(1,043)
17
(136)

Net deferred tax asset/(liability) at
31 December

Classified as follows:
Deferred tax asset at 31 December
Deferred tax liability at 31 December

(868)

(500)

833

1,658

(28)

—

1,095

237
(1,105)

57
(557)

2,194
(1,361)

1,748
(90)

318
(346)

(2,613)
2,613

1,941
(846)

1. Deferred tax related to value adjustment of restricted stock units. In addition, DKK 1 million related to current tax has also been charged to Equity. The net charge to Equity is DKK 18 million.
2. Other includes hedging and tax loss carry forwards, etc.

2016

Net deferred tax asset/(liability) at 1 January
Income/(charge) to the Income statement
Income/(charge) to Other comprehensive income
Income/(charge) to Equity3
Effect of exchange rate adjustment

(765)
(188)
—
—
(13)

(337)
(23)
—
—
1

3,593
(2,390)
(27)
—
—

2,559
(632)
54
—
24

1,750
(850)
269
(355)
—

—

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

Net deferred tax asset/(liability) at 31 December

(966)

(359)

1,176

2,005

814

—

2,670

Classified as follows:
Deferred tax asset at 31 December
Deferred tax liability at 31 December

183
(1,149)

96
(455)

2,400
(1,224)

2,081
(76)

930
(116)

(3,007)
3,007

2,683
(13)

3. 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.

SPECIFICATION OF TAX LOSS CARRY-FORWARDS AT 31 DECEMBER

DKK million

Recognised deferred tax on tax loss carry forwards

Unrecognised tax base of tax loss carry-forwards

Classified as follows:
Expiry within one year
Expiry within two to five years
Expiry after more than five years

2017

2016

364

—
16
348

235

19
—
216

The total tax value of unrecognised tax loss carry forward amounts to DKK 93 million in 2017 (DKK 73 million in 2016).

RESULTS FOR THE YEAR

NOVO NORDISK ANNUAL REPORT 2017

74 CONSOLIDATED FINANCIAL STATEMENTS

CONSOLIDATED FINANCIAL STATEMENTS

SECTION 3 OPERATING ASSETS AND LIABILITIES

3.1 INTANGIBLE ASSETS (CONTINUED)

DEVELOPMENT IN CAPITAL EXPENDITURE

■ Capital expenditure, net • Capital expenditure / sales

Basis of preparation

Results for the year

Operating assets
and liabilities

Capital structure and
financing items

Other disclosures

This section presents details of 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 profit after tax to
net operating assets’ (OPAT/NOA); for a definition please refer to pp 96-97
(unaudited).

DEVELOPMENT IN OPERATING PROFIT
AFTER TAX TO NET OPERATING ASSETS

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

Novo Nordisk, in line with industry practice, does not capitalise internal
development costs, which impacts OPAT/NOA. Novo Nordisk´s approach to
managing operating assets is to retain assets for research, development and
production activities under the company’s own control, and to lease non-
core assets related to administration and distribution. Management believes
this is a significant factor in maintaining the quality of the company´s
products. Further, being able to deliver products to customers with limited
notice is a priority. Consequently, the total production capacity reflects this
priority, and the inventory level includes a level of safety stock.

Impact of rebates in the US
Management believes that a significant factor in the development of
net operating assets relates to the provision for sales rebates in the US,
presented as Provisions under current liabilities in the Balance sheet.

The increase in 2017 reflects the combined increase in the Managed Care
and Medicare Part D rebates, and is related to contract enhancements and
price protection. This is partially countered by the effect of faster collection
from pharmacy benefit managers and authorities.

DKK million

45,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

180

160

140

120

100

2015

2016

2017

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. This 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 software for internal use is recognised as intangible
assets if the recognition criteria are met, for example a significant 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 reflected in the cost of the asset, and the probability recognition
criteria are therefore always considered satisfied. As the cost of acquired
ongoing research and development projects can often be measured
reliably, these projects fulfil the capitalisation criteria as intangible assets
on acquisition. However, further internal development costs subsequent to
acquisition are treated in the same way as other internal development costs.

Impairment of assets
Intangible assets with an indefinite useful life and intangible assets not yet
available for use are not subject to amortisation. They are tested annually for
impairment, irrespective of whether there is any indication that they may be
impaired.

Assets that are not subject to amortisation 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 flows. Impairments are reviewed at each reporting date for possible
reversal.

2017

2016

2,095

1,230

1,591

1,123

3,325

2,714

DKK million

10,000

8,000

6,000

4,000

2,000

INTANGIBLE ASSETS

DKK million

Patents and licences

Ongoing and developed software

Total

Additions to intangible assets amount to DKK 1,103 million of which DKK

81 million have not yet been paid. The additions in 2017 are related to

research and development projects within Diabetes care and obesity (DKK

389 million) and Biopharmaceuticals (DKK 714 million). In 2016 research and

development projects were related to Biopharmaceuticals

(DKK 1,199 million).

In 2017, an impairment loss of DKK 195 million (DKK 416 million in 2016)

related to patents and licences was recognised. All impairments was related

to the Diabetes care and obesity segment.

Intangible assets not yet in use amount to DKK 1,715 million (DKK 1,247

million in 2016), primarily patents and licences in relation to research and

development projects. Impairment tests in 2017 and 2016 of patents

and licences not yet in use are based on Management’s projections and

anticipated net present value of estimated future cash flows from marketable

products. Terminal values used are based on the expected life of products,

forecasted life cycle and cash flow over that period, and the useful life of the

underlying assets.

AMORTISATION AND IMPAIRMENT LOSSES

DKK million

2017

2016

Cost of goods sold

Sales and distribution costs

Research and development costs

Administrative expenses

Other operating income, net

Total amortisation and impairment losses

193

211

427

186

427

635

2015

2016

2017

Plant and equipment with no alternative use developed as part of a research

and development project are expensed. However, plant and equipment with

an alternative use or used for general research and development purposes

are capitalised and depreciated over the estimated useful life as Research and

development costs.

Capital expenditure in 2017 was primarily related to investments in new

production facilities for active pharmaceutical ingredients for diabetes

care, mainly the facility in Clayton, US. Further, it related to new diabetes

care filling capacity, expansion of the manufacturing capacity for

biopharmaceutical products and the construction of new research facilities.

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.

In August 2015, Novo Nordisk announced its intention to construct new

facilities in Clayton, US, 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.

In November 2015, Novo Nordisk initiated the construction of a 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.

DKK million

Cost of goods sold

Sales and distribution costs

Research and development costs

Administrative costs

2017

2016

2,091

1,952

525

493

Total depreciation and impairment losses

2,755

2,558

3.2 PROPERTY, PLANT AND EQUIPMENT

DEPRECIATION AND IMPAIRMENT LOSSES

that future economic benefits associated with the item will flow to Novo

Other operating income, net

Accounting policies

Property, plant and equipment is measured at historical cost less

accumulated depreciation and any impairment loss. The cost of self-

constructed assets includes costs directly and indirectly attributable to the

construction of the assets. Any subsequent cost is included in the asset’s

carrying amount or recognised as a separate asset only when it is probable

Nordisk and the cost of the item can be measured reliably. In general,

construction of major investments is self-financed 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.

NOVO NORDISK ANNUAL REPORT 2017

OPERATING ASSETS AND LIABILITIES

NOVO NORDISK ANNUAL REPORT 2017

3.1 INTANGIBLE ASSETS (CONTINUED)

DEVELOPMENT IN CAPITAL EXPENDITURE

CONSOLIDATED FINANCIAL STATEMENTS

INTANGIBLE ASSETS

DKK million

Patents and licences
Ongoing and developed software

Total

2017

2016

2,095
1,230

1,591
1,123

3,325

2,714

Additions to intangible assets amount to DKK 1,103 million of which DKK
81 million have not yet been paid. The additions in 2017 are related to
research and development projects within Diabetes care and obesity (DKK
389 million) and Biopharmaceuticals (DKK 714 million). In 2016 research and
development projects were related to Biopharmaceuticals
(DKK 1,199 million).

In 2017, an impairment loss of DKK 195 million (DKK 416 million in 2016)
related to patents and licences was recognised. All impairments was related
to the Diabetes care and obesity segment.

Intangible assets not yet in use amount to DKK 1,715 million (DKK 1,247
million in 2016), primarily patents and licences in relation to research and
development projects. Impairment tests in 2017 and 2016 of patents
and licences not yet in use are based on Management’s projections and
anticipated net present value of estimated future cash flows from marketable
products. Terminal values used are based on the expected life of products,
forecasted life cycle and cash flow over that period, and the useful life of the
underlying assets.

AMORTISATION AND IMPAIRMENT LOSSES

DKK million

2017

2016

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

Total amortisation and impairment losses

193
15
211
3
5

427

186
11
427
3
8

635

■ Capital expenditure, net • Capital expenditure / sales

DKK million

10,000

8,000

6,000

4,000

2,000

2015

2016

2017

Plant and equipment with no alternative use developed as part of a research
and development project are expensed. However, plant and equipment with
an alternative use or used for general research and development purposes
are capitalised and depreciated over the estimated useful life as Research and
development costs.

Capital expenditure in 2017 was primarily related to investments in new
production facilities for active pharmaceutical ingredients for diabetes
care, mainly the facility in Clayton, US. Further, it related to new diabetes
care filling capacity, expansion of the manufacturing capacity for
biopharmaceutical products and the construction of new research facilities.

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.

In August 2015, Novo Nordisk announced its intention to construct new
facilities in Clayton, US, 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.

In November 2015, Novo Nordisk initiated the construction of a 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.

3.2 PROPERTY, PLANT AND EQUIPMENT

DEPRECIATION AND IMPAIRMENT LOSSES

DKK million

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

2017

2016

2,091
76
525
57
6

1,952
51
493
57
5

Total depreciation and impairment losses

2,755

2,558

Accounting policies
Property, plant and equipment is measured at historical cost less
accumulated depreciation and any impairment loss. The cost of self-
constructed assets includes costs directly and indirectly attributable to the
construction of the assets. Any subsequent cost is included in the asset’s
carrying amount or recognised as a separate asset only when it is probable
that future economic benefits associated with the item will flow to Novo
Nordisk and the cost of the item can be measured reliably. In general,
construction of major investments is self-financed 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.

OPERATING ASSETS AND LIABILITIES

NOVO NORDISK ANNUAL REPORT 2017

76 CONSOLIDATED FINANCIAL STATEMENTS

3.2 PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

PROPERTY, PLANT AND EQUIPMENT

DKK million

2017

Cost at the beginning of the year
Additions during the year1
Disposals during the year
Transfer from assets under construction
Effect of exchange rate adjustment

Land and
buildings

Plant and
machinery

Other
equipment

Assets under
construction

20,190
895
(133)
1,516
(436)

23,165
502
(367)
964
(465)

4,130
263
(186)
401
(139)

10,539
7,028
—
(2,881)
(325)

Total

58,024
8,688
(686)
—
(1,365)

Cost at the end of the year

22,032

23,799

4,469

14,361

64,661

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

8,182
964
54
(100)
(166)

17,079
1,340
47
(343)
(315)

2,584
334
16
(178)
(84)

Depreciation and impairment losses at the end of the year

8,934

17,808

2,672

—
—
—
—
—

—

27,845
2,638
117
(621)
(565)

29,414

Carrying amount at the end of the year

13,098

5,991

1,797

14,361

35,247

2016

Cost at the beginning of the year
Additions during the year
Disposals during the year
Transfer from assets under construction
Effect of exchange rate adjustment

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

51,170
7,068
(736)
—
522

Cost at the end of the year

20,190

23,165

4,130

10,539

58,024

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

1. The cash flow statement excludes additions of DKK 1,062 million for property, plant and equipment that has not yet been paid.

GLOBAL PRODUCTION SETUP

DENMARK
(~9,750 FTE´s)

• Diabetes and

biopharmacetutical active
ingredient production
• Filling and packaging
• Moulding and assembly
• Tablet production

NEW HAMPSHIRE,
USA (~180 FTE´s)

• Biopharmaceutical

active ingredient production

CLAYTON, NC,
USA (~1,030 FTE´s)

• Diabetes active ingredient

production

• Filling and packaging
• Assembly

MONTE CLAROS,
BRAZIL (~960 FTE´s)

• Filling and packaging
• Assembly

KALUGA,
RUSSIA (~260 FTE´s)

• Filling and packaging
• Assembly

KORIYAMA,
JAPAN (~70 FTE´s)

• Packaging

TIANJIN,
CHINA (~990 FTE´s)

• Filling and packaging
• Assembly

CHARTRES,
FRANCE (~1,130 FTE´s)

• Filling and packaging
• Assembly

TIZI OUZOU,
ALGERIA (~170 FTE´s)

• Tablet production

NOVO NORDISK ANNUAL REPORT 2017

OPERATING ASSETS AND LIABILITIES

3.3 INVENTORIES

3.4 TRADE RECEIVABLES

CONSOLIDATED FINANCIAL STATEMENTS

Accounting policies
Inventories are stated at the lower of cost and net realisable value. Cost
is determined using the first-in, first-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
finished 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. A write-down is made against inventory,
and the cost is recognised in the Income statement as Research and
development costs. Once there is a high probability of regulatory approval
being obtained, the write-down is reversed, up to no more than the original
cost.

Key accounting estimate of indirect production costs capitalised
Indirect production costs account for approximately 50% of the net
inventory value, reflecting a lengthy production process compared with low
direct raw material costs. The production of both diabetes care and obesity
and biopharmaceutical products is highly complex from fermentation to
purification and formulation, including quality control of all production
processes. Furthermore, the process is very sensitive to manufacturing
conditions. These factors all influence 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. This
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 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.

INVENTORIES

DKK million

Raw materials
Work in progress
Finished goods

Total inventories (gross)

Write-downs at year-end

2017

2016

2,420
10,992
4,180

2,285
9,379
4,035

17,592

15,699

2,219

1,358

Total inventories (net)

15,373

14,341

Indirect production costs included in work in
progress and finished goods
Share of total inventories (net)

7,768

7,103

51%

50%

MOVEMENTS IN INVENTORY
WRITE-DOWNS

Write-downs at the beginning of the year
Write-downs during the year
Utilisation of write-downs
Reversal of write-downs

1,358
1,556
(438)
(257)

1,419
861
(672)
(250)

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 financial 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.

Many of the countries within Region AAMEO have significant sales and
low credit ratings. As such, this region has a relatively high impact on the
allowance for doubtful trade receivables. Instability and sharp currency
depreciation are impacting the political climate in Russia and Iran.
Novo Nordisk is monitoring these developments closely. Payment history as
well as current economic conditions and indicators are taken into account in
the valuation of trade receivables.

Please refer to note 2.2 for a geographical split of trade receivables and
allowance for doubtful trade receivables, and note 4.2 for the trade
receivable programmes.

TRADE RECEIVABLES

DKK million

2017

2016

Trade receivables (gross)
Allowance for doubtful trade receivables

21,459
1,294

21,457
1,223

Trade receivables (net)

20,165

20,234

Trade receivables (net) equals a credit period of 66
days (66 days in 2016).

Age analysis of trade receivables
- Not yet due
- Overdue by between 1 and 179 days
- Overdue by between 180 and 360 days

19,034
1,095
36

18,980
1,079
175

Trade receivables with credit risk exposure

20,165

20,234

MOVEMENTS IN ALLOWANCE FOR
DOUBTFUL TRADE RECEIVABLES

Carrying amount at the beginning of the year
Reversal of allowance on realised losses
Allowance for possible losses during the year
Effect of exchange rate adjustment

1,223
(27)
196
(98)

1,166
(9)
104
(38)

Write-downs at the end of the year

2,219

1,358

All write-downs in both 2016 and 2017 relate to fully impaired inventory.

Total realised losses in 2017 amount to DKK 27 million (DKK 13 million in
2016).

Allowance at the end of the year

1,294

1,223

OPERATING ASSETS AND LIABILITIES

NOVO NORDISK ANNUAL REPORT 2017

78 CONSOLIDATED FINANCIAL STATEMENTS

3.5 RETIREMENT BENEFIT OBLIGATIONS

Accounting policies
Defined contribution plans
Novo Nordisk operates a number of defined 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 defined
contribution plans are charged to the Income statement in the year to which
they relate.

Defined benefit plans
In a few countries, Novo Nordisk operates defined benefit plans. The plan
in the US 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 defined contribution
plan was established covering all employees in the US.

The defined benefit plans for Germany cover all employees employed before
November 2003. Obligations relating to employees employed after 2003 are
covered by a defined contribution plan.

In Switzerland, the employee pension scheme is set up as a combined
defined benefit and defined contribution plan, and is mandatory. In
Germany and Switzerland, the defined benefit plans are partly reimbursed
by international insurance companies. The risk related to the plan assets
in these countries is therefore limited to counterparty risk against these
insurance companies.

The plan in Japan covers all employees and is set up as a combined defined
benefit and defined contribution plan.

RETIREMENT BENEFIT OBLIGATIONS

Recognition of defined benefit plans
The costs for the year for defined benefit plans are determined using the
projected unit credit method. This reflects services rendered by employees
to the valuation dates and is based on actuarial assumptions primarily
regarding discount rates used in determining the present value of benefits
and projected rates of remuneration growth. Discount rates are based on the
market yields of high-rated corporate bonds in the country concerned.

Actuarial gains and losses arising from experience adjustments and changes
in actuarial assumptions are charged or credited to Other comprehensive
income in the period in which they arise. Past service costs are recognised
immediately in the Income statement.

Pension plan assets are only recognised to the extent that Novo Nordisk is
able to derive future economic benefits 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 Group’s defined benefit 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 benefit obligation is recognised in the Balance sheet. Costs
recognised for retirement benefits 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.

DKK million

Germany

Switzerland

Japan

Other

At the beginning of the year
Current service costs
Past service costs and settlements
Interest costs
Remeasurement (gains)/losses1
Plan participant contributions etc
Benefits 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
Benefits paid to employees
Effect of exchange rate adjustment

At the end of the year

Net retirement benefit obligations
at the end of the year

478
17
—
16
8
—
(14)
(57)

448

—
—
—
—
14
—
(14)
—

—

448

945
32
—
15
(62)
—
(6)
2

926

497
8
—
4
21
—
(6)
1

525

401

350
24
(43)
1
(14)
8
(14)
(29)

283

246
—
(43)
1
19
8
(14)
(20)

197

420
28
—
2
(1)
—
(20)
(36)

393

319
1
—
19
24
—
(20)
(27)

316

418
40
(2)
6
(10)
4
(12)
(16)

428

98
3
—
—
18
6
(12)
(9)

104

2017
total

2,611
141
(45)
40
(79)
12
(66)
(136)

2,478 2

1,160
12
(43)
24
96
14
(66)
(55)

1,142

2016
total

2,268
157
(49)
51
200
16
(67)
35

2,611

1,082
20
(6)
(5)
102
16
(67)
18

1,160

324

1,336

1,451

1. Net remeasurement is a gain of DKK 103 million (loss of DKK 205 million in 2016), primarily related to changes in financial assumptions, is included in Other comprehensive income.
2. The present value of partly funded retirement benefit obligations amounts to DKK 1,778 million (DKK 1,887 million in 2016). The present value of unfunded retirement benefit obligations amounts

to DKK 700 million (DKK 724 million in 2016).

NOVO NORDISK ANNUAL REPORT 2017

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 outflow 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.

Provisions are measured at the present value of the anticipated expenditure
for settlement. This is calculated using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific
to the obligation. The increase in the provision for interest is recognised as a
financial expense.

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.

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 estimates regarding provisions
and contingencies, including the probability of pending and potential
future litigation outcomes. These are by nature 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
proceedings 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 5.2 for a maturity analysis of the net retirement benefit
obligation. Novo Nordisk does not expect the contributions over the next five
years to differ significantly from current contributions.

Actuarial valuations are performed annually for all major defined benefit
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 inflation are also considered
in the calculation.

Significant actuarial assumptions for the determination of the retirement
benefit 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

Discount rate (decrease)/increase
Future remuneration growth (decrease)/
increase

1 %-point
increase

1 %-point
decrease

(375)

105

463

(95)

The sensitivities above consider the single change shown with the other
assumptions assumed to be unchanged. The table shows the NPV impact of
net retirement liabilities.

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 specific 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

At the end of the year

Non-current liabilities
Current liabilities

19,971
63,772
(61,017)
(117)
(2,393)

1,915
743
(455)
(287)
(135)

20,216

1,781

—
20,216

1,781
—

767
314
(274)
54
(14)

847

508
339

2017
total

23,831
65,213
(61,976)
(406)
(2,605)

2016
total

19,824
58,688
(53,991)
(1,291)
601

1,178
384
(230)
(56)
(63)

1,213

24,057

23,831

1,013
200

3,302
20,755

3,370
20,461

1. Other provisions consist of various types of provision, including obligations in relation to employee benefits such as jubilee benefits, company-owned life insurance etc. Assets offsetting obligations

related to company-owned life insurance are presented as part of Other financial assets.

For non-current liabilities, provisions for product returns will be utilised in 2019 and 2020. In the case of provisions for legal disputes, the timing of settlement
cannot be determined.

OPERATING ASSETS AND LIABILITIES

NOVO NORDISK ANNUAL REPORT 2017

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 financial position, operating profit or cash flow in addition
to the amounts accrued as provision for legal disputes.

Pending litigation against Novo Nordisk
As of 31 December 2017, Novo Nordisk, along with the majority of incretin-
based product manufacturers in the US, is a defendant in product liability
lawsuits related to use of incretin-based medications. To date, 250 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 (incretin-based) products. 162
of the Novo Nordisk plaintiffs have also named other defendants in their
lawsuits. Most Novo Nordisk plaintiffs have filed suit in California federal and
state courts. In November 2015, all cases pending in the California federal
and state courts were dismissed on Federal pre-emption grounds. Plaintiffs
subsequently appealed these rulings to the Federal and California state
appeals courts. In November 2017, the U.S. Court of Appeals for the Ninth
Circuit reversed and vacated the Federal District Court Judge´s ruling, thereby
reinstating the dismissed federal lawsuits and remanding them back to the
Federal District Court in California for further proceedings. The ruling by the
US Court of Appeals does not bind the California State Appeals Court, which
is currently reviewing the state court judge’s pre-emption ruling. Currently,
Novo Nordisk does not have any individual trials scheduled in 2018. Novo
Nordisk does not expect the pending claims to have a material impact on its
financial position, operating profit or cash flow.

Since January 2017, several class action lawsuits have been filed against
Novo Nordisk, former CEO Lars Rebien Sørensen, current CFO Jesper
Brandgaard, and former President of Novo Nordisk Inc. Jakob Riis in the
United States District Court for the District of New Jersey on behalf of all
purchasers of Novo Nordisk American Depository Receipts between February
2015 and February 2017. All lawsuits have now been consolidated into
one case. The lawsuit alleges that Novo Nordisk colluded with other insulin
manufacturers to increase drug prices, artificially inflated its financial results,
and made materially misleading statements to potential investors. Novo
Nordisk has filed a Motion to Dismiss the case, and is currently awaiting
the court’s decision on this, expectedly within the first half of 2018. Novo
Nordisk does not expect the litigation to have a material impact on Novo
Nordisk’s financial position, operating profit or cash flow.

Since January 2017, nine pricing-related class action lawsuits have been
brought against Novo Nordisk, Sanofi, Eli Lilly and in some cases certain
Pharmacy Benefit Managers (“PBMs”) on behalf of classes of U.S. purchasers
of diabetes products. Six of these lawsuits have been consolidated into one
matter pending in the United States District Court for the District of New
Jersey. Two of the three remaining lawsuits are also pending in the same
Federal Court in New Jersey, while the other lawsuit is currently pending in
the United States District Court for the Western District of Texas. All pending
matters allege that the manufacturers and PBMs colluded to artificially inflate
list prices paid by consumers for diabetes products, while offering reduced
prices to PBMs through rebates used to secure formulary access. Novo
Nordisk does not expect the lawsuits to have a material impact on Novo
Nordisk’s financial position, operating profit or cash flow.

Pending claims against Novo Nordisk and investigations involving
Novo Nordisk
In March 2016, the United States Department of Justice (“DOJ”) served
Novo Nordisk with a Civil Investigative Demand (“CID”) 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 Office
for the Western District of Oklahoma. Furthermore, two CIDs from the
Washington State Attorney General’s (“WAG”) office have been served
on Novo Nordisk in 2014 and 2016, each 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. The WAG has recently
decided to cease further investigation under its CIDs and defer to the related

investigation being conduct by the DOJ under its March 2016 CID. Novo
Nordisk continues to cooperate with DOJ and the U.S. Attorneys’ Office in
this investigation. Novo Nordisk does not expect the investigation to have a
material impact on Novo Nordisk’s financial position, operating profit or cash
flow.

In March 2016, the US Attorney’s Office for the Southern District of New
York served Novo Nordisk with a Civil Investigative Demand calling for the
production of documents and informationregarding Novo Nordisk’s contracts
and business relationships with Pharmacy Benefit Managers concerning
NovoLog®, Novolin® and Levemir®. Novo Nordisk continues to cooperate
with the U.S. Attorney’s Office in this investigation. Novo Nordisk does
not expect the investigation to have a material impact on Novo Nordisk’s
financial position, operating profit or cash flow.

On 18 January 2017, the Minnesota State Attorney General’s Office 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 through the present date. 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
financial position, operating profit or cash flow.

On 7 March 2017, the Washington State Attorney General’s Office 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 insulin products from 1 January 2005 through the present date.
Novo Nordisk is cooperating with the Washington State Attorney General in
this investigation. Novo Nordisk does not expect the investigation to have a
material impact on Novo Nordisk’s financial position, operating profit or cash
flow.

On 26 April 2017, the New Mexico State Attorney General’s Office served
Novo Nordisk with a Civil Investigative Demand calling for the production of
documents and information regarding the trade practice and pricing of Novo
Nordisk’s insulin products, namely NovoLog® and Novolin®, for the period
of 1 January 2012 through the present date. Novo Nordisk is cooperating
with the New Mexico Attorney General in this investigation. Novo Nordisk
does not expect the investigation to have material impact on Novo Nordisk’s
financial position, operating profit or cash flow.

Other contingent liabilities
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 financial position, operating profit
or cash flow.

3.7 OTHER LIABILITIES

OTHER LIABILITIES

DKK million

Employee costs payable
Sales rebates payable
Healthcare fees payable
VAT and duties payable
Payables regarding clinical trials
Payables regarding promotion activities
Rent and leases payable
Legal and consultancy costs payable
Amount owed to associated company
Payables related to non-current assets
Other payables

2017

2016

5,617
1,528
990
1,182
402
325
300
164
223
1,143
2,572

6,069
2,071
1,193
1,088
359
203
200
127
245
—
2,626

Total other liabilities

14,446

14,181

SECTION 4 CAPITAL STRUCTURE AND FINANCIAL ITEMS

Basis of preparation

Results for the year

Operating assets

and liabilities

Capital structure and

financial items

Other disclosures

CONSOLIDATED FINANCIAL STATEMENTS

This section provides an insight into Novo Nordisk’s capital structure,

Novo Nordisk has a low debt-to-equity ratio due to limited debt financing.

earnings per share, free cash flow and financing items. The free cash flow

Further information on the company’s capital structure can be found in

impacts Novo Nordisk’s long-term target for ‘Cash to earnings (three-year

`Shares and capital structure’ on pp 44-45 (unaudited).

average)’. Cash to earnings is defined as ´free cash flow as a percentage of

net profit’. Free cash flow is the cash amount generated that is available for

Management considers foreign exchange exposure to be one of the main

future investments in Novo Nordisk and distribution to shareholders without

financial risks. Novo Nordisk aims to reduce the short-term impact from

consuming prior years’ cash creation retained in the company.

movements in key currencies by hedging future cash flows. Notes 4.2 and

4.3 include more information in this respect.

4.1 SHARE CAPITAL, DISTRIBUTION TO SHAREHOLDERS AND EARNINGS PER SHARE

SHARE CAPITAL

DKK million

Development in share capital:

Share capital 2013

Cancelled in 2014

Cancelled in 2015

Cancelled in 2016

Share capital at the beginning of the year

Cancelled in 2017

Share capital at the end of the year

DKK 0.20).

DKK million

Interim dividend for the year

Dividend for prior year

Share repurchases for the year

Total

A share

capital

B share

capital

Total share

capital

107

—

107

—

107

443

(20)

(10)

403

(10)

393

550

(20)

(10)

510

(10)

500

2017

2016

2015

7,396

11,448

16,845

7,600

16,230

15,057

—

12,905

17,196

35,689

38,887

30,101

At the end of 2017, the share capital amounted to DKK 107 million in A share capital and DKK 393 million in B share capital (equal to 1,963 million B shares of

CASH DISTRIBUTION TO SHAREHOLDERS

After introducing interim dividend payments in 2016, Novo Nordisk paid out an interim dividend of DKK 3.00 per share in August 2017. The net cash

distribution to shareholders in the form of dividends and share repurchases amounts to DKK 35.7 billion, compared with a free cash flow of DKK 32.6 billion.

This is in line with the guiding principle of paying out excess capital to investors after funding organic growth and potential acquisitions.

The total dividend for 2017 amounts to DKK 19,206 million (DKK 7.85 per share). At the end of 2017, a final dividend of DKK 11,810 million (DKK 4.85 per

share) is expected to be distributed pending approval at the Annual General Meeting. The interim dividend of DKK 7,396 million (DKK 3.00 per share) was paid

in August 2017. The total dividend for 2016 was DKK 19,048 (DKK 7.60 per share), of which the final dividend of DKK 11,448 million (DKK 4.60 per share) was

paid in March 2017. No dividend is declared on treasury shares.

NOVO NORDISK ANNUAL REPORT 2017

OPERATING ASSETS AND LIABILITIES

CAPITAL STRUCTURE AND FINANCIAL ITEMS

NOVO NORDISK ANNUAL REPORT 2017

SECTION 4 CAPITAL STRUCTURE AND FINANCIAL ITEMS

Basis of preparation

Results for the year

Operating assets
and liabilities

Capital structure and
financial items

Other disclosures

CONSOLIDATED FINANCIAL STATEMENTS

This section provides an insight into Novo Nordisk’s capital structure,
earnings per share, free cash flow and financing items. The free cash flow
impacts Novo Nordisk’s long-term target for ‘Cash to earnings (three-year
average)’. Cash to earnings is defined as ´free cash flow as a percentage of
net profit’. Free cash flow 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.

Novo Nordisk has a low debt-to-equity ratio due to limited debt financing.
Further information on the company’s capital structure can be found in
`Shares and capital structure’ on pp 44-45 (unaudited).

Management considers foreign exchange exposure to be one of the main
financial risks. Novo Nordisk aims to reduce the short-term impact from
movements in key currencies by hedging future cash flows. Notes 4.2 and
4.3 include more information in this respect.

4.1 SHARE CAPITAL, DISTRIBUTION TO SHAREHOLDERS AND EARNINGS PER SHARE

SHARE CAPITAL

DKK million

Development in share capital:
Share capital 2013
Cancelled in 2014
Cancelled in 2015
Cancelled in 2016

Share capital at the beginning of the year

Cancelled in 2017

Share capital at the end of the year

A share
capital

B share
capital

Total share
capital

107
—
—
—

107

—

107

443
(20)
(10)
(10)

403

(10)

393

550
(20)
(10)
(10)

510

(10)

500

At the end of 2017, the share capital amounted to DKK 107 million in A share capital and DKK 393 million in B share capital (equal to 1,963 million B shares of
DKK 0.20).

CASH DISTRIBUTION TO SHAREHOLDERS

After introducing interim dividend payments in 2016, Novo Nordisk paid out an interim dividend of DKK 3.00 per share in August 2017. The net cash
distribution to shareholders in the form of dividends and share repurchases amounts to DKK 35.7 billion, compared with a free cash flow of DKK 32.6 billion.
This is in line with the guiding principle of paying out excess capital to investors after funding organic growth and potential acquisitions.

DKK million

Interim dividend for the year
Dividend for prior year
Share repurchases for the year

Total

2017

2016

2015

7,396
11,448
16,845

7,600
16,230
15,057

—
12,905
17,196

35,689

38,887

30,101

The total dividend for 2017 amounts to DKK 19,206 million (DKK 7.85 per share). At the end of 2017, a final dividend of DKK 11,810 million (DKK 4.85 per
share) is expected to be distributed pending approval at the Annual General Meeting. The interim dividend of DKK 7,396 million (DKK 3.00 per share) was paid
in August 2017. The total dividend for 2016 was DKK 19,048 (DKK 7.60 per share), of which the final dividend of DKK 11,448 million (DKK 4.60 per share) was
paid in March 2017. No dividend is declared on treasury shares.

CAPITAL STRUCTURE AND FINANCIAL ITEMS

NOVO NORDISK ANNUAL REPORT 2017

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
Transfer regarding restricted stock units
Purchase 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

1.8%
(2.0%)

11,631
(12,735)
(152)
16,845
2,990

18,579

2.2%

2017

2016

Number of
B shares
of DKK 0.20
(million)

46
(50)
—
60
—

52
(50)
(4)
48
—

Treasury shares are primarily acquired to reduce the company’s share capital. In addition, a limited part is used to finance 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 2016 share repurchase programme totalling DKK 1.5 billion and the DKK
17 billion Novo Nordisk B share repurchase programme for 2017, of which DKK 1.7 billion was outstanding at year-end. The programme ended on 30 January
2018. Transfer of treasury shares relates to the long-term share-based incentive programme and restricted stock units to employees.

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 profit divided by the average number
of shares outstanding. Diluted earnings per share is calculated as net profit divided by the sum of average number of shares outstanding, including the dilutive
effect of the outstanding share pool. Please refer to ‘Financial definitions’ on pp 96-97 for a description of calculation of the dilutive effect.

DKK million

Net profit for the year

2017

2016

2015

38,130

37,925

34,860

Average number of shares outstanding
Dilutive effect of average outstanding share pool1
Average number of shares outstanding, including dilutive effect of outstanding share
pool

in 1,000 shares
in 1,000 shares

2,473,218
4,875

2,529,945
4,784

2,571,219
6,479

in 1,000 shares

2,478,093

2,534,729

2,577,698

Basic earnings per share

Diluted earnings per share

1. For further information on the outstanding share pool, please refer to note 5.1.

DKK

15.42

15.39

14.99

14.96

13.56

13.52

NOVO NORDISK ANNUAL REPORT 2017

CAPITAL STRUCTURE AND FINANCIAL ITEMS

4.2 FINANCIAL RISKS

KEY CURRENCIES

CONSOLIDATED FINANCIAL STATEMENTS

Exchange rate DKK per 100

2017

2016

2015

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

660
621
(12.0%)

98
95
(6.9%)

5.88
5.51
(8.6%)

849
839
(3.5%)

508
495
(5.5%)

673
706
3.4%

101
102
(2.9%)

6.21
6.03
6.3%

911
869
(14.0%)

508
524
6.5%

673
683
11.6%

107
105
6.1%

5.56
5.67
10.7%

1,028
1,011
6.2%

527
492
(6.6%)

Foreign exchange sensitivity analysis:
A 5% immediate increase/decrease in the following currencies would impact
Novo Nordisk’s operating profit as outlined in the table below:

DKK million

USD
CNY
JPY
GBP
CAD

Estimated for
2018

1,900
325
170
90
80

2017

2,100
320
200
90
80

Novo Nordisk has centralised management of the Group’s financial risks. The
overall objectives and policies for the company’s financial 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
financial instruments and risk limits.

Novo Nordisk only hedges commercial exposures and consequently does not
enter into derivative transactions for trading or speculative purposes. Novo
Nordisk uses a fully integrated Treasury Management System to manage all
financial positions. All positions are marked-to-market based on real-time
quotes. Management has assessed the following key risks:

Type

Financial risk

Foreign exchange risk
Interest rate risk
Liquidity risk
Credit risk

High
Low
Low
Low

Foreign exchange risk
Foreign exchange risk is an important financial risk for Novo Nordisk and
can have a significant impact on the Income statement, Statement of
comprehensive income, Balance sheet and Cash flow statement.

The overall objective of foreign exchange risk management is to reduce the
short-term negative impact of exchange rate fluctuations on earnings and
cash flow. Consequently, this is likely to increase the predictability of the
financial results.

The majority of Novo Nordisk’s sales are in USD, EUR, CNY, JPY, GBP and
CAD. The foreign exchange risk is most significant in USD, CNY and JPY,
while the EUR exchange rate risk is regarded as low because of Denmark’s
fixed-rate policy towards EUR.

Novo Nordisk hedges existing assets and liabilities in key currencies as well as
future expected cash flows 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 financial
items.

During 2017, the hedging horizon varied between 5 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 flows are continually assessed using historical inflows, budgets
and monthly sales forecasts. Hedge effectiveness is assessed on a regular
basis.

The financial contracts existing at year-end cover the expected future cash
flow for the following number of months:

USD
CNY1
JPY
GBP
CAD

2017

2016

12 months
6 months
12 months
13 months
11 months

12 months
9 months
14 months
12 months
11 months

1. Chinese yuan traded offshore (CNH) is used when hedging Novo Nordisk’s CNY currency

exposure.

CAPITAL STRUCTURE AND FINANCIAL ITEMS

NOVO NORDISK ANNUAL REPORT 2017

84 CONSOLIDATED FINANCIAL STATEMENTS

4.2 FINANCIAL RISKS (CONTINUED)

Credit exposure on Cash at bank, Marketable securities and Derivative
financial instruments (market value)

DKK million

2017
AA-range
A-range
BBB-range
Not rated or below
BBB-range

Cash at
bank

Marketable
securities1

Derivative
financial
instruments

12,369
5,967
438

935
1,369

Total

13,304
7,336
438

Total

18,852

—

2,304

21,156

2016
AAA-range
AA-range
A-range
BBB-range
Not rated or below
BBB-range

12,442
5,971
83

194

2,007

309
220

2,007
12,751
6,191
83

196

Total

18,690

2,009

529

21,228

1. Net yield on the bond portfolio in 2016 was -0.05%.

Novo Nordisk has no significant 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 AAMEO due to the
increasing sales and low credit ratings of many countries in this region.

Trade receivable programmes
Novo Nordisk’s subsidiaries in the US and Japan employ trade receivable
programmes where trade receivables are sold on full non-recourse terms to
optimise working capital.

At year-end, the Group had derecognised receivables without recourse
having due dates after 31 December amounting to:

DKK million

2017

2016

2015

US
Japan

3,328
2,024

2,754
2,259

945
1,899

In addition, full non-recourse off-balance sheet factoring arrangement
programmes are occasionally applied by Novo Nordisk affiliates 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.

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

2017
Other comprehensive income
Income statement

Total

2016
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

(1,994)
210

(1,784)

(2,477)
94

(2,383)

2,098
(255)

1,843

2,478
(89)

2,389

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 financial investments, foreign exchange forwards
and foreign exchange options at year-end. Anticipated currency transactions,
investments and non-current assets are not included.

Interest rate risk
Changes in interest rates affect Novo Nordisk’s financial instruments. At the
end of 2017, a 1 percentage point increase in the interest rate level would,
all else being equal, result in a change in the fair value of Novo Nordisk’s
financial instruments of DKK 0 million (a decrease of DKK 3 million in 2016).

The financial 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.

Liquidity risk
The liquidity risk is considered to be low, and Novo Nordisk has limited debt
financing. 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.

Credit risk
Credit risk arises from the possibility that transactional counterparties may
default on their obligations, causing financial losses for the Group. Novo
Nordisk considers its maximum credit risk on financial counterparties to be
DKK 21,158 million (2016: DKK 21,228 million). In addition, Novo Nordisk
considers its maximum credit risk on Trade receivables, Other receivables less
prepayments and Other financial assets to be DKK 22,602 million (2016:
DKK 22,974 million). Please refer to note 4.7 for details of the Group’s total
financial assets.

To manage credit risk on financial counterparties, Novo Nordisk only enters
into derivative financial contracts and money market deposits with financial
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 defined 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, fixed-income
marketable securities and financial derivatives.

NOVO NORDISK ANNUAL REPORT 2017

CAPITAL STRUCTURE AND FINANCIAL ITEMS

4.3 DERIVATIVE FINANCIAL INSTRUMENTS

Accounting policies
Novo Nordisk uses financial instruments to reduce the impact of foreign
exchange and interest rate fluctuations on financial results.

Use of derivative financial instruments
The derivative financial instruments are used to manage the exposure to
market risk. None of the derivatives are held for trading.

Novo Nordisk uses forward exchange contracts and currency options to
hedge forecast transactions, assets and liabilities. The overall policy is to
hedge the majority 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
financial contract that qualifies 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 financial transaction (cash flow

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.

CONSOLIDATED FINANCIAL STATEMENTS

Cash flow hedges
Value adjustments of the effective part of cash flow 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 reflected in the value of the option.

Discontinuance of cash flow 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 financial instruments is measured on the basis of
quoted market prices of financial 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 financial 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 financial instruments assumed to be
motivated by normal business considerations.

If an active market does not exist, the fair value of standard and simple
financial 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

2017

2016

Contract
amount
at year-end

Positive
fair value
at year-end

Negative
fair value
at year-end

Contract
amount
at year-end

Positive
fair value
at year-end

Negative
fair value
at year-end

Forward contracts USD
Forward contracts CNH, JPY, GBP and other currencies

33,273
7,677

1,664
222

Forward contracts, cash flow hedges

40,950

1,886

Currency options USD
Currency options JPY

Currency options, cash flow hedges1

Forward contracts USD
Forward contracts CNH, JPY, GBP and other currencies

Forward contracts, fair value hedges

Time value of currency options (hedge accounting not applied)

Currency options GBP (hedge accounting not applied)

2,152
112

2,264

11,519
2,680

14,199

—

125

180
6

186

260
120

380

Total hedging activities

57,538

2,487

Recognised in the Income statement
Recognised in Other comprehensive income2

Presented in the Balance sheet as:
Derivative financial instruments (current assets/liabilities)
Cash at bank

415
2,072

2,304
183

36,579
10,070

46,649

588
190

778

9,953
3,087

13,040

—

60,467

8
37

—
—

—

239
25

264

—

309

264
45

309

16
199

215

50
11

223
79

302

580

304
276

529
51

2,081
110

2,191

—
—

—

300
87

387

—

2,578

387
2,191

2,578

1. Includes expired currency options of DKK 183 million deferred for realisation in 2018.
2. Realisation in 2017 of previously deferred loss amounts to DKK 1,955 million (DKK 1,915 million adjusted for DKK 40 million to be realised in 2018). Furthermore, an additional gain of DKK 1,987

million (DKK 2,027 million adjusted for DKK 40 million from prior years) as of 31 December 2017 has been deferred for realisation in 2018.

CAPITAL STRUCTURE AND FINANCIAL ITEMS

NOVO NORDISK ANNUAL REPORT 2017

86 CONSOLIDATED FINANCIAL STATEMENTS

4.3 DERIVATIVE FINANCIAL INSTRUMENTS (CONTINUED)

The above financial contracts regarding cash flow hedging are expected to impact the Income statement within the periods shown below. The split is based on
an estimate of when the cash flow hedges are expected to be reclassified to fair value hedges with the fair value then being transferred to Financial income or
Financial expenses. The cash flow impact is an immediate consequence of the reclassification.

2017

2016

Positive
fair value
at year-end

Negative
fair value
at year-end

Positive
fair value
at year-end

Negative
fair value
at year-end

2,072
—

2,072

45
—

FREE CASH FLOW

236
40

276

2,191
—

2,191

DKK million

2017

2016

2015

Net cash generated from
operating activities
Net cash used in investing activities
Net purchase of marketable securities

41,168

48,314

38,287

(6,571)
(2,009)

(6,790)
(1,533)

(6,098)
2,033

Free cash flow3

32,588

39,991

34,222

3. Additional non-IFRS measure; please refer to pp 96-97 for definition.

4.5 CHANGE IN WORKING CAPITAL

Accounting policies
Working capital is defined as current assets less current liabilities and
measures the liquid assets Novo Nordisk has available for the business.

CHANGE IN WORKING CAPITAL

DKK million

2017

2016

2015

Inventories
Trade receivables
Other receivables and prepayments
Trade payables
Other liabilities
Adjustment for payables related to non-
current assets
Adjustment for the partial divestment of
NNIT A/S

(1,032)
69
(17)
(401)
265

(1,143)

—

(1,583)
(4,749)
(154)
1,084
1,526

—

(1,401)
(2,444)
493
(23)
1,604

—

(207)

Change in working capital before
exchange rate adjustments

(2,259)

(3,876)

(1,978)

Exchange rate adjustments

(1,375)

168

(179)

Cash flow change in working capital

(3,634)

(3,708)

(2,157)

DKK million

Expected timing of Income statement impact

0–12 months
More than 12 months

Total cash flow hedges for which hedge accounting is applied

4.4 CASH AND CASH EQUIVALENTS,
FINANCIAL RESOURCES AND FREE CASH
FLOW

Accounting policies
The Cash flow statement 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.

The Cash flow statement is presented in accordance with the indirect
method commencing with Net profit for the year. Cash flows in foreign
currencies are translated to DKK at the average exchange rate for the
respective year.

Cash from operating activities converts income statement items from
the accrual basis of accounting to cash basis. As such, starting with net
profit, 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 fixed assets such as construction of new
production sites, intangible assets such as patents and licences, and financial
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.

DKK million

2017

2016

2015

CASH AND CASH EQUIVALENTS

Cash at bank (note 4.2)
Current debt (bank overdrafts)

18,852
(1,694)

18,690
(229)

16,923
(1,073)

Cash and cash equivalents

17,158

18,461

15,850

FINANCIAL RESOURCES

Cash and cash equivalents
Marketable securities (note 4.2)
Undrawn committed credit facility1

17,158
—
8,190

18,461
2,009
8,178

15,850
3,542
8,209

Financial resources2

25,348

28,648

27,601

1. The undrawn committed credit facility in 2017 is a EUR 1,100 million facility (EUR 1,100
million in 2016 and EUR 1,100 million in 2015) committed by a portfolio of international
banks. The facility matures in 2019.

2. Additional non-IFRS measure; please refer to pp 96-97 for definition.

NOVO NORDISK ANNUAL REPORT 2017

CAPITAL STRUCTURE AND FINANCIAL ITEMS

4.6 OTHER NON-CASH ITEMS

For the purpose of presenting the Cash flow statement, non-cash items with effect on the Income statement must be reversed to identify the actual cash flow
effect from the Income statement. The adjustments are specified 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/(loss) 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 benefit obligations (note 3.5)
Remeasurements of retirement benefit obligations (note 3.5)

Other adjustments
Exchange rate adjustments on working capital (note 4.5)
Other, primarily exchange rate adjustments

2017

2016

2015

21
25
(14)
292

226
(115)
103

1,375
114

13
(16)
(24)
368

4,007
265
(205)

(168)
(358)

11
(15)
(14)
442

6,193
155
(37)

179
(1,006)

Total other non-cash items

2,027

3,882

5,908

Unrealised gains and losses arising from changes in the fair value of financial
assets classified as available for sale are recognised in Other comprehensive
income. When financial assets classified 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 financial assets with fixed or
determinable 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 classified as Current assets. If not, they are presented as
Non-current assets.

Trade receivables and Other receivables are recognised initially at fair value.
Subsequently they are measured at amortised cost using the effective
interest method, less provision for allowance.

4.7 FINANCIAL ASSETS AND LIABILITIES

Accounting policies
Depending on the purpose, Novo Nordisk classifies investments into the
following categories:

• Available-for-sale financial assets
• Loans and receivables
• Financial assets at fair value through the Income statement (derivatives).

Management determines the classification of its investments on initial
recognition and re-evaluates this at the end of every reporting period to the
extent that such a classification is permitted and required.

Recognition and measurement
Purchases and sales of investments are recognised on the settlement date.
Investments are initially recognised at fair value.

Available-for-sale financial assets and financial assets at fair value are
subsequently carried at fair value.

Fair value disclosures are made separately for each class of financial
instruments at the end of the reporting period.

Disposal of investments
Investments are removed from the Balance sheet when the rights to receive
cash flows 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 financial assets
Available-for-sale financial assets consist of equity investments and
marketable securities. Equity investments are included in Other financial
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.

CAPITAL STRUCTURE AND FINANCIAL ITEMS

NOVO NORDISK ANNUAL REPORT 2017

CONSOLIDATED FINANCIAL STATEMENTS

4.8 FINANCIAL INCOME AND EXPENSES

FINANCIAL IMPACT FROM FORWARD CONTRACTS AND

CURRENCY OPTIONS, SPECIFIED

Accounting policies

As described in note 4.2, Management has chosen to classify the result

of hedging activities as part of financial 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 flow 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

of forward contracts

Financial income and Financial expenses.

DKK million

2017

2016

2015

Forward contracts

Income/(loss) transferred from

Other comprehensive income

Value adjustment of transferred

contracts

Unrealised fair value adjustments

Foreign exchange gain/(loss) on

forward contracts

(2,016)

(705)

(2,237)

2,477

(3,212)

116

(1,923)

(85)

570

(412)

629

DKK million

2017

2016

2015

Financial income/(expense)

from forward contracts

(1,346)

(158)

(5,232)

Currency options

Realised income/(loss) transferred

from Other comprehensive income

Value adjustment of transferred

options

Foreign exchange gain/(loss) on

currency options

(9)

—

(12)

(56)

(106)

(171)

DKK million

2017

2016

2015

Financial income/(expense)

from currency options

(4)

(83)

(162)

FINANCIAL INCOME

Interest income

Foreign exchange gain (net)1

Capital gain on investments etc

Result of associated company2

Total financial income

FINANCIAL EXPENSES

Interest expenses

Foreign exchange loss (net)1

Financial loss from forward

contracts (net)

Financial loss from currency

options (net)

Capital loss on investments etc

Other financial expenses

1,163

—

1,246

1,346

—

335

158

—

504

5,232

162

—

Total financial expenses

1,533

726

6,046

1. Primarily related to Trade receivables, Other receivables and Trade payables.

2. Based on the share price as of 31 December 2017, the market value of the investment in

NNIT A/S (corresponding to 26% of the share capital) amounts to DKK 1,109 million (DKK

1,364 million at 31 December 2016 and DKK 1,186 million at 31 December 2015).

88 CONSOLIDATED FINANCIAL STATEMENTS

4.7 FINANCIAL ASSETS AND LIABILITIES (CONTINUED)

FINANCIAL ASSETS BY CATEGORY

DKK million

2017

Other financial assets
Trade receivables (note 3.4)
Other receivables
- less prepayments and VAT receivables
Derivative financial instruments (note 4.3)
Cash at bank (note 4.4)

Total financial assets at the end of the year by category1

Total financial assets at the end of the year by category, 2016

1. Financial assets are all due within one year except for DKK 30 million due in 2019.

FINANCIAL LIABILITIES BY CATEGORY

DKK million

2017

Current debt (note 4.4)
Trade payables
Other liabilities (note 3.7)
- less VAT and duties payable (note 3.7)
Derivative financial instruments (note 4.3)

Total financial liabilities at the end of the year by category2

Financial
assets
measured at
fair value
through the
Income
statement

Loans
and
receivables

Cash
and cash
equivalents

567
20,165
2,428
(1,613)

2,304

18,852

Total

978
20,165
2,428
(1,613)
2,304
18,852

2,304

21,547

18,852

43,114

529

21,750

18,690

43,677

Available-
for-sale
financial
assets at
fair value

411

2,708

Financial
liabilities
measured at
fair value
through the
Income
statement

309

Financial
liabilities
measured at
amortised
cost

1,694
5,610
14,446
(1,182)

Total

1,694
5,610
14,446
(1,182)
309

20,568

20,877

Total financial assets at the end of the year by category, 2016

2,578

19,349

21,927

2. All financial liabilities are due within one year except for DKK 1 million due in 2019.

For a description of the credit quality of financial assets such as Trade receivables, Cash at bank, Marketable securities, Current debt and Derivative financial
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 financial assets at fair value

Active market data
Directly or indirectly observable market data
Not based on observable market data

Total financial liabilities at fair value

2017

2016

338
2,304
73

2,675
529
33

2,715

3,237

—
309
—

309

—
2,578
—

2,578

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 2017 or 2016. There are no intangible assets or items of
property, plant and equipment measured at fair value.

NOVO NORDISK ANNUAL REPORT 2017

CAPITAL STRUCTURE AND FINANCIAL ITEMS

NOVO NORDISK ANNUAL REPORT 2017

CONSOLIDATED FINANCIAL STATEMENTS

4.8 FINANCIAL INCOME AND EXPENSES

FINANCIAL IMPACT FROM FORWARD CONTRACTS AND
CURRENCY OPTIONS, SPECIFIED

Accounting policies
As described in note 4.2, Management has chosen to classify the result
of hedging activities as part of financial 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 flow 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

2017

2016

2015

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

(2,016)

(705)

(2,237)

2,477

(3,212)

116

(1,923)

(85)

570

(412)

629

DKK million

2017

2016

2015

Financial income/(expense)
from forward contracts

(1,346)

(158)

(5,232)

Interest income
Foreign exchange gain (net)1
Capital gain on investments etc
Result of associated company2

Total financial income

69
1,163
—
14

1,246

52
—
16
24

56
—
15
14

Currency options

Realised income/(loss) transferred
from Other comprehensive income

Value adjustment of transferred
options
Foreign exchange gain/(loss) on
currency options

(9)

—

(12)

(56)

(106)

(171)

FINANCIAL EXPENSES

DKK million

2017

2016

2015

Financial income/(expense)
from currency options

(4)

(83)

(162)

Interest expenses
Foreign exchange loss (net)1
Financial loss from forward
contracts (net)
Financial loss from currency
options (net)
Capital loss on investments etc
Other financial expenses

90
—

1,346

25
68

65
335

158

—
85

67
504

5,232

162

—
81

Total financial expenses

1,533

726

6,046

1. Primarily related to Trade receivables, Other receivables and Trade payables.
2. Based on the share price as of 31 December 2017, the market value of the investment in

NNIT A/S (corresponding to 26% of the share capital) amounts to DKK 1,109 million (DKK
1,364 million at 31 December 2016 and DKK 1,186 million at 31 December 2015).

CAPITAL STRUCTURE AND FINANCIAL ITEMS

NOVO NORDISK ANNUAL REPORT 2017

90 CONSOLIDATED FINANCIAL STATEMENTS

SECTION 5 OTHER DISCLOSURES

Basis of preparation

Results for the year

Operating assets
and liabilities

Capital structure and
financing items

Other disclosures

This section provides details on notes that are statutory or by their nature of
secondary importance for understanding the financial performance

of Novo Nordisk. A list of subsidiaries in the Novo Nordisk Group is also
included here.

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 fixed 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

2017

2016

2015

Restricted stock units to employees

169

Long-term share-based incentive
programme (Management Board)2

Long-term share-based incentive
programme (management group
below Management Board)3
Shares allocated to individual
employees

19 1

102

245

—

135

108

199

—

Share-based payment expensed
in the Income statement

292

368

442

1. The expense for 2017 reflects the value at launch (adjusted for expected dividend) of the

programme, amortised over four years. The expense for 2015 and 2016 reflects the full value
of the programme (adjusted for expected dividend) for the year, as vesting conditions were
met.

2. The programme includes payments to former members of the Management Board at a total

value of DKK 3 million (DKK 3 million in 2016 and DKK 16 million in 2015).

3. The expense for the year reflects 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
first 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.

Long-term share-based incentive programme
For a description of the programme, please refer to ‘Remuneration’ in
‘Governance, leadership and shares’, pp 50-53 (unaudited).

Management Board
On 1 February 2018, the Board of Directors approved the transfer of a total
of 356,195 Novo Nordisk B shares to the pool for members of Management
Board for the financial year 2017. The value at launch of the programme
(adjusted for expected dividends) was DKK 76 million. On average, this
corresponds to 8.2 months’ fixed base salary plus pension contribution
for the CEO, 6.2 months’ fixed base salary plus pension contribution per
member of Executive Management as of 1 March 2017 and 5.5 months’
fixed base salary for Senior Vice Presidents. For 2017, the shares will no
longer remain in the pool if a member of the Management Board leaves
Novo Nordisk, why the cost of the 2017 programme is amortised over the
vesting period 2017-2020 at an annual amount of DKK 19 million.

The grant date of the programme was February 2017, and the share price
used for the conversion was the average share price (DKK 237) for Novo
Nordisk B shares on Nasdaq Copenhagen in the period 2-16 February 2017,
adjusted for expected dividend. Based on the split of participants when
the pool was established, approximately 38% of the pool will be allocated
to members of Executive Management and 62% to other members of the
Management Board.

The shares allocated to the joint pool for 2014 were released to the
individual participants subsequent to approval of the Annual Report 2017
by the Board of Directors and after the announcement of the 2017 full-year
financial results on 1 February 2018. The shares allocated correspond to a
value at launch of the programme of DKK 66 million, expensed in 2014.

Management group below Management Board
The management group below the Management Board has a share-based
incentive programme with similar performance criteria. For 2017, a total of
761,826 shares were allocated to the pool for this group, corresponding to a
value at launch of the programme (adjusted for expected dividends) of DKK
162 million. The cost of the 2017 programme is amortised over the vesting
period 2017-2020 at an annual amount of DKK 40 million.

The shares allocated to the pool for 2014 were released to the individual
participants subsequent to approval of the Annual Report 2017 by the Board
of Directors and after the announcement of the 2017 full-year financial
results on 1 February 2018. The shares allocated correspond to a value at
launch of the programme of DKK 155 million amortised over the period
2014-2017. The number of shares to be transferred (518,079 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.

NOVO NORDISK ANNUAL REPORT 2017

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 Management Board

Shares for Management group below
Management Board

2017

2016

2015

2017

2016

2015

2017

2016

2015

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

—

—
—

—

356,195

96,705

378,943

761,826

224,055

879,988

213
3 years
Feb. 2021

304
3 years
Feb. 2020

285
3 years
Feb. 2019

213
3 years
Feb. 2021

304
3 years
Feb. 2020

285
3 years
Feb. 2019

108

162

251

2017 to
2020

Expensed
in 2016

Expensed
in 2015

2017 to
2020

2016 to
2019

2015 to
2018

OUTSTANDING RESTRICTED STOCK UNITS

Outstanding at the beginning of the year

Released restricted stock units to employees
Released shares from 2012 and 2013 Management pool
Cancelled shares from Management pool
Adjustments
Allocated restricted stock units to employees (2013 programme)
Allocated restricted stock units to employees (2016 programme)
Shares allocated to Management pools
Shares allocated to individual employees

Outstanding at the end of the year

OUTSTANDING RESTRICTED
STOCK UNITS

Restricted stock units to employees
2016 Restricted stock units

2017

2016

4,591,526

7,158,636

(9,200)
(749,658)
(157,724)
5,423
—
—
1,118,021
35,494

(2,590,000)
(1,808,729)
(174,552)
—
220,000
1,465,411
320,760
—

4,833,882

4,591,526

Value at
launch date
DKK million

Vesting date

Issued1

Released

Cancelled

Outstanding

1,465,411

(9,200)

1,456,211

508

Q1 2019

Outstanding restricted stock units to employees

1,465,411

(9,200)

Shares allocated to pools
for Management Board
2013 Shares allocated to joint pool
2014 Shares allocated to joint pool
2015 Shares allocated to joint pool
2016 Shares allocated to joint pool
2017 Shares allocated to pool3

254,513
298,467
378,943
96,705
356,195

(249,678)
(9,369) 2
—
—
—

—

(4,835) 4
(4,925) 4
(522)
—
—

1,456,211

—
284,173
378,421
96,705
356,195

Outstanding shares in joint pool for Management Board

1,384,823

(259,047)

(10,282)

1,115,494

Shares allocated to pools for management group
below 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 pool
2017 Shares allocated to pool3

1,559,235
622,190
683,728
879,988
224,055
761,826

(1,376,973)
(521,214)
(34,061) 2
—
—
—

(182,262)
(100,976)
(131,588)
(139,235)
(18,030)
—

—
—
518,079
740,753
206,025
761,826

Outstanding shares in pool for Management group
below Management Board

4,731,022

(1,932,248)

(572,091)

2,226,683

51
66
108
29
76

234
126
155
251
68
162

Q1 2017
Q1 2018
Q1 2019
Q1 2020
Q1 2021

Q1 2016
Q1 2017
Q1 2018
Q1 2019
Q1 2020
Q1 2021

Shares allocated to individual employees

35,494

—

35,494

2018-2020

Outstanding at the end of 2017

7,616,750

(2,200,495)

(582,373)

4,833,882

1. All restricted stock units and shares allocated to Management pools are hedged by treasury shares.
2. Released shares from 2014 Management pools relate to NNIT employees following the IPO of NNIT A/S.
3. 2017 programme granted subsequent to approval of the Annual Report 2017 on 1 February 2018. For 2017, the shares allocated to pools for Management Board will no longer remain in the pool if

a member of the Management Board leaves Novo Nordisk, why the cost of the 2017 programme is amortised over the vesting period 2017-2020.

4. Cancellation is related to individuals who were compensated in cash instead of shares upon resignation.

OTHER DISCLOSURES

NOVO NORDISK ANNUAL REPORT 2017

92 CONSOLIDATED FINANCIAL STATEMENTS

5.2 COMMITMENTS

Commitments
Total contractual obligations and recognised non-current debt can be
specified as follows (payments due by period):

Within
1 year

1-3
years

3-5
years

More
than
5 years

Total

1,204

1,336

The operating lease commitments are related to non-cancellable operating
leases primarily for premises, company cars and office equipment.
Approximately 74% of the commitments are related to leases outside
Denmark. The lease costs for 2017 and 2016 were DKK 1,392 million and
DKK 1,513 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 flow from operations.

Research and development obligations entail uncertainties in relation to the
period in which payments are due because a proportion of the obligations is
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.

2017

DKK million

Retirement benefit
obligations

Total obligations recognised
in the Balance sheet

Operating leases1
Research and
development obligations

Research and development
- potential milestone
payments2

Purchase obligations relating
to investments in property,
plant and equipment
Other purchase obligations

Total obligations
not recognised in the
Balance sheet

Total contractual
obligations

2016

DKK million

Retirement benefit
obligations

Total obligations recognised
in the Balance sheet

Operating leases1
Research and
development obligations

Research and development
- potential milestone
payments2

Purchase obligations relating
to investments in property,
plant and equipment
Other purchase obligations

Total obligations
not recognised in the
Balance sheet

1,204

1,336

DKK million

2017

2016

Other guarantees
Other guarantees primarily related to guarantees
issued by Novo Nordisk in relation to rented
property

Security for debt
Land, buildings and equipment etc at carrying
amount

752

808

World Diabetes Foundation (WDF)
At the Annual General Meeting in 2014, a donation to WDF was agreed.
For the years 2018-2024, the donation is 0.1% of the Group´s net insulin
sales. 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 financial
year in question.

For 2017, the total donation amounts to DKK 85 million (DKK 85 million in
2016 and DKK 86 million in 2015), which is recognised in Administrative
costs in the Income statement.

1,220

1,730

1,411

2,094

6,455

1,912

767

— 2,774

193

725

166

1,628

2,712

1,663

—

— 1,663

5,192

2,552

1,474

9,232

10,180

5,774

3,146

3,736 22,836

10,207

5,828

3,197

4,940 24,172

Within
1 year

1-3
years

3-5
years

More
than
5 years

Total

1,247

1,451

1,247

1,451

1,214

2,061

1,697

2,329

7,301

2,199

1,069

138

— 3,406

176

267

282

431

1,156

521

—

521

4,335

2,166

926

— 7,427

8,445

5,563

3,043

2,760 19,811

Total contractual obligations

8,488

5,646

3,121

4,007 21,262

1. No material finance lease obligations existed in 2017 or 2016.
2. Potential milestone payments are associated with uncertainty as they are linked to successful

achievements in research activities.

NOVO NORDISK ANNUAL REPORT 2017

OTHER DISCLOSURES

5.3 RELATED PARTY TRANSACTIONS

5.4 FEE TO STATUTORY AUDITORS

CONSOLIDATED FINANCIAL STATEMENTS

DKK million

2017

2016

2015

Statutory audit
Audit-related services
Tax advisory services
Other services

Total fee to statutory auditors

24
4
10
5

24
4
9
4

24
4
8
7

Fees for other services than statutory audit of the financial statements
amounts to DKK 19 million (DKK 17 million in 2016 and DKK 19 million in
2015). PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab
(PricewaterhouseCoopers Denmark) provided other services in the amount
of DKK 8 million (DKK 7 million in 2016 and DKK 7 million in 2015).
Other services than statutory audit of the financial statements provided
by PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab
(PricewaterhouseCoopers Denmark) comprise services relating to tax
compliance and transfer pricing, educational training, review of Social and
Environmental information, due diligence, other assurance opinions and
agreed-upon procedures, as well as accounting advice.

Novo Nordisk A/S is controlled by Novo Holdings A/S (incorporated in
Denmark), which owns 28.1% of the share capital in Novo Nordisk A/S,
representing 76.1% 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

2017

2016

2015

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 Holdings A/S
Services provided by Novo Nordisk
Sale of NNIT B shares

—

(4)

—

(3)
—

(69)

(3)

(2)
—

(3)

—

(3)
(797)

Dividend payment to Novo Holdings A/S

4,085

5,052

2,687

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

(25)
1,231
(26)

(30)
1,239
(26)

(32)
1,316
—

(145)
163

(163)
150

(185)
165

(13)

(108)

(11)

Novo Nordisk has transferred the activities of Steno Diabetes Center A/S to
the Capital Region of Denmark as of 1 January 2017.

In Novo Nordisk A/S, there have been no transactions with the Board of
Directors or Executive Management besides remuneration. There have
not been any other transactions with the Board of Directors or Executive
Management of NNIT A/S, Novozymes A/S, Novo Holdings A/S, the Novo
Nordisk Foundation, Xellia Pharmaceuticals ApS or associated companies.

For information on remuneration to the Management of Novo Nordisk,
please refer to `Remuneration´ on pp 50-53 (unaudited) and note 2.4,
‘Employee costs’. There are no loans to the Board of Directors or Executive
Management in 2017, nor were there in 2016 or 2015.

There are no material unsettled transactions with related parties at the end
of the year.

OTHER DISCLOSURES

NOVO NORDISK ANNUAL REPORT 2017

94 CONSOLIDATED FINANCIAL STATEMENTS

5.5 COMPANIES IN THE NOVO NORDISK GROUP
Activity: • Sales and marketing • Production

• Research and development • Services/investments

Percentage of
shares owned Activity

Company and country

Percentage of
shares owned Activity

Company and country

Parent company
Novo Nordisk A/S, Denmark

Subsidiaries by region

• • • •

North America Operations
Novo Nordisk Canada Inc., Canada
Novo Nordisk Inc., United States
Novo Nordisk US Bio Production, Inc., United States
Novo Nordisk US Holdings Inc., United States
Novo Nordisk Pharmaceutical Industries Inc., United States
Novo Nordisk Research Center Indianapolis, Inc., United States
Novo Nordisk Research Center Seattle, Inc., United States

100 •
100 •
100 •
100
100 •
100
100

International Operations
Novo Nordisk Pharma Operations A/S, Denmark
Novo Nordisk Region International Operations A/S, Denmark

100 •
100

Region Japan & Korea
Novo Nordisk Region Japan & Korea A/S, Denmark
Novo Nordisk Pharma Ltd., Japan
Novo Nordisk Pharma Korea Ltd., South Korea

Region Europe
Novo Nordisk Pharma GmbH, Austria
S.A. Novo Nordisk Pharma N.V., Belgium
Novo Nordisk Pharma d.o.o., Bosnia-Hercegovina
Novo Nordisk Pharma EAD, Bulgaria
Novo Nordisk Hrvatska d.o.o., Croatia
Novo Nordisk s.r.o., Czech Republic
Novo Nordisk Pharmatech A/S, Denmark
Novo Nordisk Region Europe A/S, Denmark
Novo Nordisk Region Europe Pharmaceuticals A/S, Denmark
Novo Nordisk Farma OY, Finland
Novo Nordisk, France
Novo Nordisk Production SAS, France
Novo Nordisk Pharma GmbH, Germany
Novo Nordisk Hellas Epe., Greece
Novo Nordisk Hungária Kft., Hungary
Novo Nordisk Limited, Ireland
Novo Nordisk S.P.A., Italy
UAB Novo Nordisk Pharma, Lithuania
Novo Nordisk Farma dooel, Macedonia
Novo Nordisk B.V., Netherlands
Novo Nordisk Scandinavia AS, Norway
Novo Nordisk Pharmaceutical Services Sp. z o.o., Poland

Novo Nordisk Comércio de Produtos Farmacêuticos Lda.,
Portugal

Novo Nordisk Farma S.R.L., Romania
Novo Nordisk Pharma d.o.o. Belgrade (Serbia), Serbia
Novo Nordisk Slovakia s.r.o., Slovakia
Novo Nordisk, d.o.o., Slovenia
Novo Nordisk Pharma S.A., Spain
Novo Nordisk Scandinavia AB, Sweden
Novo Nordisk Health Care AG, Switzerland
Novo Nordisk Pharma AG, Switzerland
Novo Nordisk Holding Limited, United Kingdom
Novo Nordisk Limited, United Kingdom

100
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100
100
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100 •
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100
100 •

•

•
•

•

•
•

•

Region AAMEO
Aldaph SpA, Algeria
Novo Nordisk Pharmaceuticals Pty. Ltd., Australia
Novo Nordisk Pharma (Private) Limited, Bangladesh
Novo Nordisk Egypt LLC, Egypt
Novo Nordisk India Private Limited, India
Novo Nordisk Service Centre (India) Pvt. Ltd., India
PT. Novo Nordisk Indonesia, Indonesia
Novo Nordisk Pars, Iran
Novo Nordisk Ltd, Israel
Novo Nordisk Kazakhstan LLP, Kazakhstan
Novo Nordisk Kenya Ltd., Kenya
Novo Nordisk Pharma SARL, Lebanon
Novo Nordisk Pharma (Malaysia) Sdn Bhd, Malaysia
Novo Nordisk Pharma Operations (BAOS) Sdn Bhd, Malaysia
Novo Nordisk Pharma SAS, Morocco
Novo Nordisk Pharmaceuticals Ltd., New Zealand
Novo Nordisk Pharma Limited, Nigeria
Novo Nordisk Pharma (Private) Limited, Pakistan
Novo Nordisk Pharmaceuticals (Philippines) Inc., Philippines
Novo Nordisk Limited Liability Company, Russia
Novo Nordisk Production Support LLC, Russia
Novo Investment Pte Limited, Singapore
Novo Nordisk Pharma (Singapore) Pte Ltd., Singapore
Novo Nordisk (Pty) Limited, South Africa
Novo Nordisk Lanka (PVT) Ltd, Sri Lanka
Novo Nordisk Pharma (Thailand) Ltd., Thailand
Novo Nordisk Tunisie SARL, Tunisia
Novo Nordisk Saglik Ürünleri Tic. Ltd. Sti., Turkey
Novo Nordisk Ukraine, LLC, Ukraine
Novo Nordisk Pharma Gulf FZ-LLC, United Arab Emirates

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100 •
100 •
100 •
100
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100 •
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49 •
100 •
100 •
100 •
100 •

Region China
Novo Nordisk (China) Pharmaceuticals Co., Ltd., China

Beijing Novo Nordisk Pharmaceuticals Science & Technology
Co., Ltd., China

Novo Nordisk Hong Kong Limited, Hong Kong
Novo Nordisk Pharma (Taiwan) Ltd., Taiwan

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100

•

100 •
100 •

Region Latin America
Novo Nordisk Pharma Argentina S.A., Argentina
Novo Nordisk Produção Farmacêutica do Brasil Ltda., Brazil
Novo Nordisk Farmacêutica do Brasil Ltda., Brazil
Novo Nordisk Farmacéutica Limitada, Chile
Novo Nordisk Colombia SAS, Colombia
Novo Nordisk Mexico S.A. de C.V., Mexico
Novo Nordisk Panama S.A., Panama
Novo Nordisk Peru S.A.C., Peru

Novo Nordisk Venezuela Casa de Representación C.A.,
Venezuela

Other subsidiaries and associated company
NNE A/S, Denmark
NNIT A/S, Denmark

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100
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100
26

•

•
•

Companies without significant activities are not included in the list. NNE A/S
subsidiaries are not included in the list.

NOVO NORDISK ANNUAL REPORT 2017

OTHER DISCLOSURES

PART OF MANAGEMENT’S REVIEW

NOT AUDITED

MANAGEMENT’S HOLDING OF SHARES

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
Jeppe Christiansen
Brian Daniels
Sylvie Grégoire
Liz Hewitt
Liselotte Hyveled
Kasim Kutay
Anne Marie Kverneland
Helge Lund
Søren Thuesen Pedersen
Stig Strøbæk

15,000
8,279
1,200
875
2,725
5,955
—
10,289
3,000
1,815
2,050

15,500
900
1,000
625
473

150

15,000
23,779
2,100
1,875
3,350
4,388
—
9,920
3,000
1,965
2,050

(2,040)

(369)

Board of Directors in total

51,188

18,648

(2,409)

67,427

Lars Fruergaard Jørgensen
Jesper Brandgaard
Lars Green
Camilla Sylvest
Mads Krogsgaard Thomsen
Henrik Wulff
Non-registered members of Executive Management

110,125
186,305
132,333
195
297,720
87,575
31,080

10,637
14,392

14,392
5,708
1,785

(14,392)

(14,392)
(5,708)
(16,865)

120,762
186,305
132,333
195
297,720
87,575
16,000

Executive Management in total

845,333

46,914

(51,357)

840,890

Other members of the Senior Management Board

489,057

89,944

(144,012)

434,989

Pool for Executive Management and other members of the
Senior Management Board3

560,223

293,689

(126,044)

727,868 4

Total

1,945,801

449,195

(323,822)

2,071,174

5.0
8.0
0.7
0.6
1.1
1.5
—
3.3
1.0
0.7
0.7

22.6

40.4
62.3
44.3
0.1
99.6
29.3
5.3

281.3

145.5

243.4

692.8

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 2016. For new members shareholdings are included from the day they became member of Executive Management.

2. Calculation of market value is based on the quoted share price of DKK 334.50 at the end of the year.
3. The annual allocation to the 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

pool was established, approximately 38% of the pool will be allocated to the members of Executive Management and approximately 62% to other members of the Senior Management Board. In the
lock-up period, the pool may potentially be reduced in the event of lower-than-planned value creation in subsequent years.

4. The pool includes the 2014 programme released on 1 February 2018, but excludes 367,648 shares assigned to retired Executive Management and Senior Management Board members.

NOVO NORDISK ANNUAL REPORT 2017

96 FINANCIAL DEFINITIONS

NOT AUDITED

PART OF MANAGEMENT’S REVIEW

FINANCIAL DEFINITIONS

Financial ratios have been calculated in accordance with the guidelines from the Danish Society of Financial Analysts, and supplemented by certain key ratios for
Novo Nordisk. Financial ratios are described below and in the section 'Non-IRFS financial measures'.

ADR
An American Depositary Receipt (or ADR) represents ownership of the shares
of a non-US company and trades in US financial markets.

Number of shares outstanding
The total number of shares, excluding the holding of treasury shares.

Basic earnings per share (EPS)
Net profit divided by the average number of shares outstanding.

Diluted earnings per share
Net profit 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 profit before income taxes.

Equity ratio
Total equity at year-end as a percentage of total assets at year-end.

Gross margin
Gross profit as a percentage of sales.

Net profit margin
Net profit as a percentage of sales.

Operating margin
Operating profit 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 company.
Examples of items that are required to be presented in OCI are:

• Exchange rate adjustments of investments in subsidiaries
• Remeasurements of defined benefit plans
• Changes in fair value of financial instruments in a cash flow hedge.

Payout ratio
Total dividends for the year as a percentage of net profit.

Return on equity (ROE)
Net profit for the year as a percentage of shareholders’ equity (average).

NON-IFRS FINANCIAL MEASURES

OPERATING PROFIT IN LOCAL CURRENCIES

In the Annual Report, Novo Nordisk discloses certain financial measures of
the Group’s financial performance, financial position and cash flows that
reflect adjustments to the most directly comparable measures calculated and
presented in accordance with IFRS. These non-IFRS financial measures may
not be defined and calculated by other companies in the same manner, and
may thus not be comparable.

DKK million

2017

2016

2015

Operating profit

48,967

48,432

49,444

Effect of exchange rate

1,770

1,099

(7,838)

The non-IFRS financial measures presented in the Annual Report are:

Operating profit in local
currencies

50,737

49,531

41,606

• Sales and operating profit in local currencies
• Operating profit after tax to net operating assets
• Financial resources
• Free cash flow
• Cash to earnings

refers to an IFRS financial measure.

Sales and operating profit growth in local currencies
'Growth in local currencies' means that the effect of changes in exchange
rates is included. The measure is defined as sales/operating profit for the
year measured at prior-year average exchange rates compared with sales/
operating profit for the prior year. Growth in local currencies is considered to
be relevant information for investors in order to understand the underlying
development in sales and operating profit by adjusting for the impact of
currency fluctuations.

SALES IN LOCAL CURRENCIES

DKK million

2017

2016

2015

Net sales
Effect of exchange rate

111,696
2,609

111,780
2,110

107,927
(11,672)

Sales in local currencies

114,305

113,890

96,255

Operating profit after tax to net operating assets (OPAT/NOA)
Operating profit after tax to net operating assets is defined as ‘operating
profit 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)’.

Management believes Operating profit after tax to net operating assets is
a useful measure in providing investors and Management with information
regarding the Group’s performance. The calculation of the financial target
'Operating profit after tax to net operating assets' is a widely accepted
measure of earnings efficiency in relation to total capital employed.

The following table shows the calculation of Operating profit after tax to net
operating assets:

OPERATING PROFIT AFTER TAX TO NET OPERATING
ASSETS

DKK million

2017

2016

2015

Operating profit after tax
/ Average net operating assets

38,341
26,776

38,407
25,578

39,654
26,668

Operating profit after tax
to net operating assets
in %

143.2%

150.2%

148.7%

NOVO NORDISK ANNUAL REPORT 2017

PART OF MANAGEMENT’S REVIEW

NOT AUDITED

NON-IFRS FINANCIAL MEASURES

Free cash flow
Novo Nordisk defines free cash flow as ‘net cash generated from operating
activities’ less ‘net cash used in investing activities’ excluding net change in
marketable securities. A positive free cash flow shows that the Group is able
to finance its activities and that external financing is thus not necessary for
the Group’s operating activities. This non-IFRS liquidity measure is therefore
believed to provide useful information to investors in addition to the most
directly comparable IFRS financial measure, ‘Net cash generated from
operating activities’.

The following table shows a reconciliation of Free cash flow with Net cash
generated from operating activities, the most directly comparable IFRS
financial measure:

FREE CASH FLOW

DKK million

2017

2016

2015

Net cash generated from
operating activities
Net cash used in investing
activities
Net purchase of marketable
securities

41,168

48,314

38,287

(6,571)

(6,790)

(6,098)

(2,009)

(1,533)

2,033

Free cash flow

32,588

39,991

34,222

Cash to earnings
Cash to earnings is defined as 'free cash flow as a percentage of net profit'.

Management believes that Cash to earnings is an important performance
metric because it measures the Group’s ability to turn earnings into cash.
Hence it is considered a meaningful measure for investors to understand
the development of the Group’s net cash generated from operating and
investing activities. Since Management wants this measure to capture the
ability of the Group’s operations to generate cash, free cash flow is used as
the numerator instead of net cash flow.

The following table shows the calculation of Cash to earnings:

CASH TO EARNINGS

DKK million

Free cash flow
/ Net profit

2017

2016

2015

32,588
38,130

39,991
37,925

34,222
34,860

Cash to earnings

85.5%

105.4%

98.2%

OPAT/NOA NUMERATOR
Reconciliation of Operating profit to operating profit after tax:

DKK million

2017

2016

2015

Operating profit

48,967

48,432

49,444

Tax on operating profit (using
effective tax rate)

(10,626)

(10,025)

(9,790)

Operating profit after tax

38,341

38,407

39,654

OPAT/NOA DENOMINATOR
Reconciliation of Average net operating assets :

DKK million

2017

2016

2015

Intangible assets
Property, plant and equipment
Deferred income tax assets
Inventories
Trade receivables
Tax receivables
Other receivables and
prepayments
Deferred tax liabilities
Retirement benefit obligations
Provisions (non-current)
Trade payables
Tax payables
Other liabilities
Provisions (current)

3,325
35,247
1,941
15,373
20,165
958

2,428

(846)
(1,336)
(3,302)
(5,610)
(4,242)
(14,446)
(20,755)

2,714
30,179
2,683
14,341
20,234
1,552

2,411

(13)
(1,451)
(3,370)
(6,011)
(3,976)
(14,181)
(20,461)

2,158
25,545
6,806
12,758
15,485
3,871

2,257

(6)
(1,186)
(2,765)
(4,927)
(3,777)
(12,655)
(17,059)

Net operating assets

28,900

24,651

26,505

Average net operating
assets

26,776

25,578

26,668

Financial resources
Financial resources at the end of the year is defined 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.
Management believes that Financial resources at the end of the year is
an important measure of the Group’s financial strength from an investor’s
perspective, capturing the robustness of the Group’s financial position and its
financial preparedness for unforeseen developments.

The following table reconciles total financial resources with Cash and cash
equivalents, the most directly comparable IFRS financial measure:

FINANCIAL RESOURCES

DKK million

2017

2016

2015

Cash and cash equivalents
Marketable securities
Undrawn committed credit
facilities

17,158
—

8,190

18,461
2,009

8,178

15,850
3,542

8,209

Financial resources

25,348

28,648

27,601

NOVO NORDISK ANNUAL REPORT 2017

98 CONSOLIDATED SOCIAL STATEMENT

SUPPLEMENTARY INFORMATION

STATEMENT OF SOCIAL PERFORMANCE
FOR THE YEAR ENDED 31 DECEMBER

PATIENTS

EMPLOYEES

Employees (total)
Employee turnover
Sustainable engagement score1
Gender in Management (ratio men:women)
Frequency of occupational accidents (number per million working hours)

ASSURANCE

Relevant employees trained in business ethics
Business ethics reviews
Fulfilment of action points from facilitations of the Novo Nordisk Way
Supplier audits
Product recalls
Failed inspections
Company reputation (scale 0–100)1

Note

2017

2016

2015

2.1

2.2
2.3
2.4

3.1
3.1

3.1
3.2

4.1
4.2
4.3
4.4
4.5
4.6

27.7

0.3

103
67,623
65

42,682
11.0%
90%
60:40
2.7

99%
34
97%
246
6
0
79.3

28.0

—

106
77,920
74

42,446
9.7%
—
59:41
3.0

99%
52
95%
223
6
0
77.8

26.8

—

105
67,240
77

41,122
9.2%
—
59:41
3.0

98%
49
94%
240
2
0
81.1

1. Updated disclosure. See p 100 'Changes to accounting policies and disclosures' for additional information.

NOVO NORDISK ANNUAL REPORT 2017

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 one long-term target, namely company reputation (see pp 12,15
and note 4.6, p 103).

The Consolidated social statement contains additional performance
information of strategic importance, such as patients reached with diabetes
care products, employee turnover, employee engagement, gender diversity,
training of employees in business ethics, supplier audits and product quality.

A long-term commitment to provide access to affordable insulin
The Novo Nordisk Way states that ‘our key contribution is to discover
and develop innovative biological medicines and make them accessible to
patients throughout the world'.

Novo Nordisk’s Access to Insulin Commitment guarantees provision of
low-priced human insulin to ensure access to quality treatments for patients
in the poorest parts of the world for many years to come. The guarantee
applies to Least Developed Countries as defined by the UN and other
low-income countries as defined by the World Bank as well as selected
organisations providing relief in humanitarian situations.

In 2017, Novo Nordisk sold human insulin according to the Access to Insulin
Commitment in 30 of the world’s 50 poorest countries. In total, 0.3 million
patients were treated with insulin sold at or below the ceiling price.

Outside this scheme, Novo Nordisk also sold human insulin below the ceiling
price in other countries, reaching an estimated 5 million patients in 2017
compared to an estimated 6.5 million patients in 2016. The decline was
caused by lower sales of human insulin, mainly due to an impact from lower
tender volumes of human insulin in some large tender markets in 2017,
partly offset by growth in sales of modern and new-generation insulin as
well as Victoza®.

The ceiling price for 2017 was set at 4 US dollars per vial, which is a level not
exceeding 20% of the human insulin list prices in the western world.
At this price, the cost for insulin treatment per patient per day was 16 cents.
The average realised price for insulin sold under the programme was 3
dollars per vial, corresponding to 12 cents per patient per day.

Novo Nordisk is unable to guarantee that the price at which the company
sells the insulin will be reflected in the price to the consumer. Printing the
price on the actual products is one initiative to avoid mark-ups on price.

SECTION 1 BASIS OF PREPARATION

General reporting standards and principles
Novo Nordisk adheres to the following internationally recognised voluntary
reporting standards and principles (for overview, see 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 financial capital.

• The UN Global Compact, a strategic policy initiative for businesses that are
committed to aligning their operations and strategies with 10 universally
accepted principles in the areas of human rights, labour, environment,
anti-corruption and broader UN Goals. As a participant, Novo Nordisk
reports on progress during 2017 in its Communication on Progress, which
can be found at novonordisk.com/annualreport.

• The framework AA1000APS(2008) and AA1000AS(2008), which states

that reporting must provide a complete, accurate, relevant and balanced
picture of the organisation’s approach to and impact on society.

Novo Nordisk applies AA1000APS(2008) as 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 capacity to
be a sustainable business at corporate, regional and affiliate levels.

Materiality
Key issues are identified through ongoing stakeholder engagement
and trendspotting, informed by data-driven analysis and 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 significant 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 specific
needs and interests. The management report is prepared with the retail
investors in mind. To most stakeholders, however, the Annual Report is just
one element of interaction and communication with the company. The
Annual Report reflects how the company is managing operations in ways
that respond to and consider stakeholder concerns and interests.

Applying materiality
The Consolidated social statement is a result of assessing legal requirements
and disclosure commitments applicable to Novo Nordisk. It is further
assessed whether information is tied directly or indirectly to Novo Nordisk’s
ability to create value over the short, medium and long term.

When assessing whether a disclosure is material to include in the
Consolidated social statement, Executive Management considers whether
the matter could substantively affect the company’s strategy, business
model, ability to access required resources or key stakeholders. The
disclosures included in the Consolidated social statement are approved by
the Audit Committee.

The conclusion from the external assurance provider is available in the
Independent assurance report on p 111.

STATEMENT OF SOCIAL PERFORMANCE

NOVO NORDISK ANNUAL REPORT 2017

100 CONSOLIDATED SOCIAL STATEMENT

SUPPLEMENTARY INFORMATION

OTHER ACCOUNTING POLICIES
Sustainable engagement score
Sustainable engagement score is measured on a scale of 1–5 and based on
questions in the annual employee survey, OurVoice, related to sustainable
engagement. The score is calculated as the share of employees who
responded favourably (4 or 5) to relevant questions. For 2017, the response
rate was 94%.

Relevant employees trained in business ethics
The mandatory business ethics training is based on globally applicable
e-learning, the Business Ethics Code of Conduct and related tests released
annually by the Novo Nordisk Business Ethics Compliance Office. The target
groups for the individual tests vary in size and are defined by Novo Nordisk.
The target groups are all employees of 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 Code of Conduct and the
related tests, based on internal registrations.

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
The following disclosure changes have been made to align with
Management priorities:

• ‘Patients reached with diabetes care products via the Access to Insulin
Commitment’ is added as a separate line item to disclose progress
on expanding access to care via the new commitment replacing the
disclosure of 'Least developed countries (LDCs) where Novo Nordisk sells
insulin according to the differential pricing policy'. The number of LDCs
with sales has been added to the note as additional information.

• ‘Sustainable engagement score’ replaces ‘Working the Novo Nordisk Way’

to align with a new methodology.

• The calculation of 'Company reputation' has been adjusted due to
implementation of a new methodology for tracking 'Sustainable
engagement score'. This methodology does not allow for comparison
with the RepTrak® methodology used for measuring company reputation
among external stakeholder groups. Historical data have been restated
accordingly.

SECTION 2 PATIENTS

2.1 PATIENTS REACHED WITH NOVO
NORDISK DIABETES CARE PRODUCTS
(ESTIMATE)

In 2017, the estimated number of patients reached via the Access to Insulin
Commitment was 0.3 million, and Novo Nordisk sold insulin according to this
commitment in 30 countries. Beyond this scheme, Novo Nordisk also sold
human insulin below the ceiling price in other countries, as well, reaching an
estimated 5 million patients in 2017.

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 defined by the World Health Organization (WHO).
PrandiMet® is not included as no WHO-defined dosage exists.

The number of full-year patients reached with Novo Nordisk diabetes care
products via the Access to Insulin Commitment is estimated by dividing Novo
Nordisk's annual sales volume in the least developed countries as defined
by the United Nations and other low-income countries as defined by the
World Bank as well as selected organisations providing relief in humanitarian
situations by the annual usage dose per patient for human insulin in vials as
defined by WHO.

The WHO-defined daily dosage has not changed since 1982 and may
not reflect 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 decreased from 28.0 million in 2016 to 27.7 million
in 2017. The decline was caused by lower sales of human insulin, mainly
due to an impact from lower tender volumes of human insulin in some large
tender markets in 2017, partly offset by growth in sales of modern and new-
generation insulin as well as Victoza®. An additional 0.9 million people were
reached with modern and new-generation insulin.

2.2 DONATIONS

Accounting policies
Donations by Novo Nordisk to the World Diabetes Foundation (WDF) 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. The WDF donation is recognised in Administrative costs in
the Income statement. For additional information regarding WDF, see note
5.2 in the Consolidated financial statements.

DONATIONS

DKK million

2017

2016

2015

World Diabetes Foundation
Novo Nordisk Haemophilia Foundation

85
18

85
21

86
19

Total

103

106

105

NOVO NORDISK ANNUAL REPORT 2017

STATEMENT OF SOCIAL PERFORMANCE

SUPPLEMENTARY INFORMATION

CONSOLIDATED SOCIAL STATEMENT

101

2.3 ANIMALS PURCHASED FOR RESEARCH

2.4 NEW PATENT FAMILIES (FIRST FILINGS)

Accounting policies
The number of new patent families (first filings) is based on new patent
applications that were filed during the year.

Development
A total of 65 new patent families were established in 2017, a decrease of
12% compared with filing activity in 2016, when 74 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 US, Germany, China and
Japan of patents on the active ingredient, unless otherwise indicated, and
include extensions of patent term (including for paediatric extension, where
applicable). For several products, in addition to the compound patent, Novo
Nordisk holds other patents on manufacturing processes, formulations or
uses that may be relevant for exclusivity beyond the expiration of the active
ingredient patent. Furthermore, regulatory data protection may apply.

Accounting policies
The record of animals purchased for research comprises 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

Number

2017

2016

2015

Mice, rats and other rodents
Pigs
Rabbits
Dogs
Non-human primates
Other vertebrates

65,869
835
493
63
241
122

76,049
891
347
227
406
0

65,335
939
443
214
302
7

Total animals purchased

67,623

77,920

67,240

The number of animals purchased for research in 2017 decreased by 13%
compared with 2016 and reflect the changes in stages of the different
research projects. In all, 97% of the animals purchased were rodents. The
variation in the purchase of large animals from year to year reflects the
different development phases the research projects have reached.

2.4 MARKETED PRODUCTS IN KEY MARKETS (ACTIVE INGREDIENTS)

Germany

China

Japan

Diabetes care:
NovoRapid® (NovoLog®)
NovoMix® 30 (NovoLog® Mix 70/30)
NovoNorm® (Prandin®)
Levemir®
Victoza®
Tresiba®
Ryzodeg®
Xultophy®
Fiasp®
Ozempic®

Obesity:
Saxenda®

Biopharmaceuticals:
Norditropin® (Norditropin® SimpleXx®)
NovoSeven®
NovoEight®
NovoThirteen® (TRETTEN®)
Vagifem® 10 mcg
Refixia® (REBINYN®)

Expired
Expired
Expired
2019
2022
2029
2029
2029
(2030)2
20313

Expired
Expired
Expired
2019
2022
2028
2028
2028
(2030)2
20313

Expired
Expired
Expired
Expired
Expired
2024
2024
2024
(2030)2
2026

Expired
Expired
Expired
2019
2022
2027
20241
20241
(2030)2
20313

2022

Expired

Expired7

Expired
Expired4
N/A
2021
20225,6
20283

Expired
Expired4
N/A
Expired
20215
20273

Expired
Expired4
N/A
N/A
N/A
2022

Expired
Expired4
N/A
Expired
20215
20273

1. Patent term extension until 2027 may apply.
2. Protected by formulation patent, which expires in 2030; compound patent has expired.
3. Current estimates.
4. Room temperature-stable formulation patent until 2023 in China, Germany and Japan and

until 2025 in the US.

5. Patent covers low-dose treatment regimen.
6. Licensed to several generic manufacturers from October 2016.
7. Protected by formulation patent, which expires in 2024.

STATEMENT OF SOCIAL PERFORMANCE

NOVO NORDISK ANNUAL REPORT 2017

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.

Employees are attributed to geographical regions according to their
primary workplace across the commercial units, research and development,
manufacturing and support functions. Employees in corporate functions are
included in Region Europe and employees in the global service centre are
included in Region AAMEO.

The rate of turnover is measured as the number of employees, excluding
temporary employees, who left the Group during the financial year divided
by the average number of employees, excluding temporary employees.

Diversity at Novo Nordisk is reported as the percentage split by gender in
all managerial positions and for newly appointed managers. Managerial
positions are defined as all managers at Novo Nordisk (global job level incl
CEO, EVP, SVP, CVP, VP, Director, Manager and Team Leader). New managers
are defined as all employees who have moved to a managerial position
within the last 12 months – both promoted and externally hired.

EMPLOYEES

Numbers

North America
Region Europe

- of which in Denmark
Region AAMEO
Region China
Region Japan & Korea
Region Latin America

2017

2016

2015

6,391
21,920
17,510
6,767
4,482
1,252
1,870

6,394
22,529
18,221
6,200
4,356
1,190
1,777

6,439
21,871
17,398
5,606
4,389
1,119
1,698

Total employees

42,682

42,446

41,122

Full-time employees

42,076

41,971

40,638

Employee turnover

11.0%

9.7%

9.2%

Increase in employees

(1%)

Gender split among all managers

60:40

59:41

Share of women among newly
appointed managers

43%

44%

The growth in employees was mainly driven by the global service centre in
Bangalore, India. Employee turnover increased from 9.7% in 2016 to 11.0%
in 2017. The increased employee turnover in 2017 was mainly due to the
workforce reduction at the end of 2016; as a part of this workforce was still
employed at the end of 2016 it affects the 2017 employee turnover.

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
affiliates, production sites and headquarter areas. Any gaps between
procedures and behaviour are identified and presented to Management and
the Board of Directors as findings. An action plan for the closure of findings
is agreed upon, and Group Internal Audit follows up on the implementation
of the agreed actions before closing the findings.

All management teams, from entry level upwards, are encouraged to focus
on enhanced diversity, with the aim of ensuring a robust pipeline of talent
for management positions.

Among employees as a whole, the gender split was 49% women and 51%
men in 2017.

The graph below shows the gender split among managers for the last three
years.

GENDER IN MANAGEMENT

■ EVP/SVP ■ CVP/VP/GM ■ Managers

% Men

100

% Women

100

2015

2016

2017

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 was
2.7 per million working hours in 2017, compared with 3.0 in 2016,
corresponding to a 10% decrease. There were no work-related fatalities in
2017, compared with one fatality in 2016. The performance improvement is
mainly attributed to the mandatory training in product supply. Novo Nordisk
works with a zero-injury mindset and has a long-term commitment to
continuously improving safety performance.

Development
A total of 34 business ethics reviews were completed in 2017 with 130
findings, compared with 52 reviews with 234 findings in 2016. It is Group
Internal Audit’s assessment that the overall business ethics compliance level
is sound. Closure of findings progressed as planned, and there were no
overdue findings as of 31 December 2017.

NOVO NORDISK ANNUAL REPORT 2017

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 identified gaps related
to the Novo Nordisk Way are presented to Management as findings. The
facilitator and Management agree on an action plan to close the findings.
The percentage of fulfilment 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

2017

2016

2015

Fulfilment of action points

97%

95%

94%

Facilitations
Findings

65
264

84
283

65
257

A total of 65 units were facilitated covering approximately 21,000
employees, of whom almost 3,000 were interviewed. In addition, feedback
on those units was collected from almost 700 stakeholders. Overall, the
facilitations in 2017, as in 2016, 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 identified, covering approximately 60% of all findings,
concerned Essential 2 ‘We set ambitious goals and strive for excellence’,
Essential 5 'We build and maintain good relations with our key stakeholders'
and Essential 7 ‘We focus on personal performance'. The 10 Essentials are
part of the Novo Nordisk Way. See p 17 for additional information.

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
Novo Nordisk had six product recalls from the market in 2017, which is
the same level as in 2016. None of these recalls were critical. 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), the 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 defined as inspections where
Warning Letters or EMA non-compliance letters related to GMP inspections
are received, GMP/ISO certificates 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 defined as the
manufacturing sites in Brazil, China, Denmark, France and the US.

Development
In 2017, as in 2016, there were no failed inspections among those resolved
at year-end. In 2017, 83 inspections were conducted compared with 74 in
2016. At year-end, 54 inspections had been passed and 29 were unresolved,
as final inspection reports had not been received or the final authority
acceptance was pending, which is normal. Follow-up on unresolved
inspections will continue in 2018.

4.3 SUPPLIER AUDITS

4.6 COMPANY REPUTATION

Accounting policies
The number of supplier audits concluded by Novo Nordisk’s Supplier Audit
department includes the number of responsible sourcing audits and quality
audits conducted in the areas of direct- and indirect-spend materials.

SUPPLIER AUDITS

Numbers

2017

2016

2015

Responsible sourcing audits
Quality audits

Total supplier audits

28
218

246

27
196

223

28
212

240

The number of audits concluded in 2017 increased by 10% compared with
2016. The increase in quality audits was mainly due to an expanded focus on
outsourced services. There were no critical findings in 2017.

Accounting policies
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
and diabetes specialists across 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
were collected between June and September 2017.

The data are collected through annual surveys carried out by external
consultancy firms.

COMPANY REPUTATION

By stakeholder group

2017

2016

2015

People with diabetes
General practitioners
Diabetes specialists

Total score

77.2
79.1
81.7

79.3

73.7
78.9
80.9

77.8

73.9
83.9
85.3

81.1

STATEMENT OF SOCIAL PERFORMANCE

NOVO NORDISK ANNUAL REPORT 2017

104 CONSOLIDATED ENVIRONMENTAL STATEMENT

SUPPLEMENTARY INFORMATION

STATEMENT OF ENVIRONMENTAL PERFORMANCE
FOR THE YEAR ENDED 31 DECEMBER

RESOURCES

Energy consumption (1,000 GJ)
Share of renewable power for production
Water consumption (1,000 m3)

EMISSIONS AND WASTE

CO2 emissions from energy consumption (1,000 tons)
CO2 emissions from product distribution (1,000 tons)
Waste (1,000 tons)

COMPLIANCE

Breaches of regulatory limit values

Note

2017

2016

2015

2.1
2.1
2.2

3.1
3.1
3.2

4.1

2,922
79%
3,276

90
39
157

2,935
78%
3,293

92
38
153

2,778
78%
3,131

107
43
159

NOTES TO THE CONSOLIDATED ENVIRONMENTAL STATEMENT

Basis of preparation

Resources

Emissions and waste

Compliance

In the Consolidated environmental statement, Novo Nordisk reports on
performance in terms of resources, and emissions and waste. Progress is
reported against long-term targets to continuously reduce environmental
impacts. See pp 13 and 15.

The Statement of environmental performance contains additional
performance information of strategic importance, such as energy and water
consumption, CO2 emissions, waste and breaches of regulatory limit values.

Steady progress on reducing CO2 emissions from production sites
In 2017, 79% of the power used at production sites came from renewable
sources, such as wind, hydropower and biomass. With planned initiatives,
the company is well on track to meet the target that all production sites are
to be 100% powered by renewable energy by 2020. The target is in line
with the Paris Agreement. The graph shows how CO2 emissions and sales
have been decoupled.

SALES AND CO2 EMISSIONS
(2015 = INDEX 100)

■ Index sales in DKK
■ Index CO2 emissions

Index

120

110

100

2015

2016

2017

NOVO NORDISK ANNUAL REPORT 2017

STATEMENT OF ENVIRONMENTAL PERFORMANCE

SUPPLEMENTARY INFORMATION

CONSOLIDATED ENVIRONMENTAL STATEMENT

105

SECTION 1 BASIS OF PREPARATION

General reporting standards and principles
The Consolidated environmental statement has been prepared in accordance
with the same standards as those for the Consolidated social statement. See
section 1 ‘Basis of preparation’ of the Consolidated social statement on p 99.

ENVIRONMENTAL ACCOUNTING POLICIES
The accounting policies set out below have been consistently applied in the
preparation of the Consolidated environmental statement for all the years
presented.

Principles of consolidation
The Consolidated environmental statement covers the production sites
including office buildings and R&D facilities at the sites, except for CO2
emissions from product distribution, which covers external suppliers used to
distribute Novo Nordisk products.

SECTION 2 RESOURCES

2.1 ENERGY CONSUMPTION AND SHARE
OF RENEWABLE POWER

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 power, steam and district heat. The
consumption of fuel (internally produced energy) and externally produced
energy is based on meter readings and invoices.

Share of renewable power is reported according to the Greenhouse Gas
(GHG) Protocol Scope 2 Guideline. It is calculated as the sum of power in
each country that comes from 100% renewable sources, either sourced from
the market or self-produced.

ENERGY CONSUMPTION

1,000 GJ

2017

2016

2015

Diabetes care and obesity
Biopharmaceuticals
Not allocated1

2,015
482
425

2,050
460
425

2,006
322
450

Total energy consumption

2,922

2,935

2,778

Changes to accounting policies and disclosures
The following disclosure changes have been made to align with
Management priorities:

• 'Organic residues’ and ’Waste’ were previously reported as two separate
line items. As of 2017, organic residues will be reported as part of the
disclosure of waste, and the note has been updated accordingly.

• 'Non-hazardous waste' is no longer reported as a separate line item but

included as part of the information in note 3.2 Waste.

2.2 WATER CONSUMPTION

Accounting policies
Water consumption is measured based on meter readings and invoices. It
includes drinking water, industrial water and steam.

WATER CONSUMPTION

1,000 m3

2017

2016

2015

Diabetes care and obesity
Biopharmaceuticals
Not allocated1

2,808
290
178

2.866
260
167

2.753
213
165

Total water consumption

3,276

3,293

3,131

1. Not allocated consists of consumption that cannot be directly linked to the production of
either Diabetes care and obesity or Biopharmaceuticals, ie office buildings and research
activities.

In 2017, water consumption decreased slightly. Water-saving projects
remain in focus, and projects implemented in 2017 are expected to give
annual water savings of more than 100,000m3, which corresponds to 3%
of the total water use. More than half of the water-saving projects were
implemented at a production site located in an area subject to high seasonal
variations in water availability.

Share of renewable power
for production

79%

78%

7% of Novo Nordisk's water consumption is in areas subject to high water
stress.

1. Not allocated consists of consumption that cannot be directly linked to the production of
either Diabetes care and obesity or Biopharmaceuticals, ie office buildings and research
activities.

In 2017, energy consumption decreased slightly. Novo Nordisk continues to
focus on energy efficiency, and projects implemented in 2017 are expected
to give annual savings of more than 18,000 GJ.

The share of renewable power increased slightly to 79% in 2017 from 78%
in 2016. Novo Nordisk has a target to reach 100% power from renewable
sources by 2020 and at year-end, 11 out of 16 production sites use power
from renewable sources.

SECTION 3 EMISSIONS AND WASTE

3.1 CO2 EMISSIONS

Accounting policies
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 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 based on the worldwide
distribution of semi-finished and finished products, raw materials and
components by air, sea and road between production sites and from
production sites to affiliates, direct customers and importing distributors. CO2
emissions from product distribution from affiliates to pharmacies, hospitals
and wholesalers are not included.

STATEMENT OF ENVIRONMENTAL PERFORMANCE

NOVO NORDISK ANNUAL REPORT 2017

106 CONSOLIDATED ENVIRONMENTAL STATEMENT

SUPPLEMENTARY INFORMATION

3.1 CO2 EMISSIONS (CONTINUED)

3.2 WASTE

CO2 EMISSIONS

1,000 TONS

CO2 emissions from energy
consumption
- Diabetes care and obesity
- Biopharmaceuticals
- Not allocated1
CO2 emissions from product
distribution

2017

2016

2015

76
12
2

78
11
3

107

88
6
13

Total CO2 emissions

129

130

150

1. Not allocated consists of consumption that cannot be directly linked to the production of
either Diabetes care and obesity or Biopharmaceuticals, ie office buildings and research
activities.

CO2 emissions from energy consumption at production sites decreased
slightly by 2% due to reduced energy use at production sites using fossil
fuel-based energy.

Emissions from product distribution increased by 3% compared with 2016.
Emissions from air and ground transport remained stable. More products
were distributed by sea. Distributing as many products as possible by sea
remains a priority for Novo Nordisk, as sea transport reduces both CO2
emissions and costs relative to product volume.

Accounting policies
Waste is measured as the sum of all the waste disposed of based on weight
receipts.

WASTE

1,000 TONS

Recycling
- Organic residues1
- Other (paper, cardboard, metals etc)

Energy recovery2
- Ethanol waste3
- Other (various combustible waste)

No energy recovery4
- Water waste
- Other

Landfill

Total waste

2017

2016

2015

122
116
6

28
21
7

6
5
1

116
109
7

30
24
6

6
5
1

123
114
9

28
21
7

7
6
1

157

153

159

1. Organic residues for recycling is waste from the production of the active pharmaceutical

ingredients, where the energy is recovered in biogas plants and the digested slurry is used on
local farmland as fertiliser.

2. Energy recovery is waste disposed of at incineration plants with energy recovery and at

biogas plants.

3. Ethanol is used in purification of diabetes and biopharmaceutical products. The ethanol is

recovered in own regeneration plants and re-used many times. The ethanol waste reported
here is from production with no regeneration or residues from the regeneration process.
4. Water waste and other waste not suitable for other disposal methods, such as hazardous

waste for incineration and various other types of waste.

The total waste volume increased by 3% compared with 2016, which was
mainly due to an increase in the organic residues from the fermentation of
insulin. Ethanol waste decreased due to process optimisations and increased
regeneration of ethanol.

18% of all the waste was categorised as hazardous waste, a decrease from
20% in 2016. This is mainly a result of the decrease in ethanol waste.

At Novo Nordisk, it is a priority to recycle as much waste as possible or
ensure energy recovery when recycling is not possible. 96% of total waste is
either recycled, used for biogas production or incinerated at plants where the
energy is used for heat and power production.

WASTE DISPOSAL
■ 2015 ■ 2016 ■ 2017

1,000 tons

150

120

SECTION 4 COMPLIANCE

4.1 BREACHES OF REGULATORY LIMIT
VALUES

Accounting policies
Breaches of regulatory limit values cover all breaches reported to the
environmental authorities.

Recycling

Energy
recovery

No energy
recovery

Landfill

Development
Incidents with breaches of regulatory limit values decreased from 42 in 2016
to 23 in 2017, primarily due to improved control of the pH and Biological
Oxygen Demand (BOD) and Chemical Oxygen Demand (COD) at one
facility. The majority of the breaches were related to wastewater, with minor
impacts on the environment.

NOVO NORDISK ANNUAL REPORT 2017

STATEMENT OF ENVIRONMENTAL PERFORMANCE

MANAGEMENT STATEMENT

CONSOLIDATED FINANCIAL STATEMENT

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 2017. 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 financial 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.

Bagsværd, 1 February 2018

In our opinion, the Consolidated financial statements and the Financial
statements of the parent company give a true and fair view of the financial
position at 31 December 2017, the results of the Group’s and parent
company’s operations, and consolidated cash flows for the financial year
2017. Furthermore, in our opinion, Management's review includes a
true and fair account of the development in the operations and financial
circumstances, of the results for the year and of the financial position of
the Group and the parent company as well as a description of the most
significant risks and elements of uncertainty facing the Group and the parent
company.

Novo Nordisk’s 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.

Registered Executive
Management

Lars Fruergaard Jørgensen
President and CEO

Jesper Brandgaard
CFO

Lars Green

Camilla Sylvest

Mads Krogsgaard Thomsen

Henrik Wulff

Board of Directors

Göran Ando
Chairman

Jeppe Christiansen
Vice chairman

Brian Daniels

Sylvie Grégoire

Liz Hewitt

Liselotte Hyveled

Kasim Kutay

Anne Marie Kverneland

Helge Lund

Søren Thuesen Pedersen

Stig Strøbæk

MANAGEMENT STATEMENT

NOVO NORDISK ANNUAL REPORT 2017

108 INDEPENDENT AUDITOR’S REPORT

INDEPENDENT AUDITOR´S REPORT

To the shareholders of Novo Nordisk A/S

Our opinion
In our opinion, the Consolidated Financial Statements give a true and fair
view of the Group’s financial position at 31 December 2017 and of the
results of the Group’s operations and cash flows for the financial year 1
January to 31 December 2017 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 Parent Company Financial Statements give a
true and fair view of the Parent Company’s financial position at 31 December
2017 and of the results of the Parent Company’s operations for the financial
year 1 January to 31 December 2017 in accordance with the Danish Financial
Statements Act.

Our opinion is consistent with our Auditor’s Long-form Report to the Audit
Committee and the Board of Directors.

What we have audited
The Consolidated Financial Statements of Novo Nordisk A/S for the financial
year 1 January to 31 December 2017, pp. 58-94, comprise the income
statement and statement of comprehensive income, cash flow statement,
balance sheet, equity statement and the notes, including summary of
significant accounting policies.

The Parent Company Financial Statements of Novo Nordisk A/S for the
financial year 1 January to 31 December 2017, pp. 114-118, comprise the
income statement, balance sheet, equity statement and the notes, including
summary of significant accounting policies.

Collectively referred to as the “Financial 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 Financial Statements
section of our report.

We believe that the audit evidence we have obtained is sufficient 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 additional requirements applicable
in Denmark. We have also fulfilled our other ethical responsibilities in
accordance with the IESBA Code.

To the best of our knowledge and belief, prohibited non-audit services
referred to in Article 5(1) of Regulation (EU) No 537/2014 were not provided.

Appointment
We were first appointed auditors of Novo Nordisk A/S in April 1982 for the
financial year 1982. We have been reappointed annually by shareholder
resolution for a total period of uninterrupted engagement of 36 years
including the financial year 2017.

Key audit matters
Key audit matters are those matters that, in our professional judgement,
were of most significance in our audit of the Financial Statements for 2017.
These matters were addressed in the context of our audit of the Financial
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 US, which can fall under certain
commercial and government mandated contracts and reimbursement
arrangements, of which the most significant 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 because rebates, discounts and allowances are
complex and because establishing an appropriate accrual requires significant
judgment and estimation by Management. This judgment is particularly
complex in a US healthcare environment in which competitive pricing
pressure and product discounting are growing trends.

Refer to Note 2.1 and Note 3.6.

We have obtained Management’s calculations for accruals under applicable
schemes and assessed the significance 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 significant
elements of the accrual at 31 December 2017 using third party data and
compared this expectation to the actual accrual recognised by the Group.

NOVO NORDISK ANNUAL REPORT 2017

INDEPENDENT AUDITOR’S REPORT

Litigations

The pharmaceuticals industry is heavily regulated which increases inherent
litigation risk and litigation and contingent liabilities may arise from product-
specific 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 judgment and estimation and therefore is associated with
uncertainty. Accordingly, unexpected adverse outcomes could significantly
impact the Group’s reported profit and statement of financial position.

Refer to Note 3.6.

Statement on Management’s Review
Management is responsible for Management’s Review, pp 1-56 and pp
95-97.

Our opinion on the Financial 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 Financial Statements, our responsibility
is to read Management’s Review and, in doing so, consider whether
Management’s Review is materially inconsistent with the Financial
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 Financial Statements and the Parent
Company Financial Statements and has been prepared in accordance with
the requirements of the Danish Financial Statement Act. We did not identify
any material misstatement in Management’s Review.

Management’s responsibilities for the Financial Statements
Management is responsible for the preparation of consolidated financial
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 parent company financial statements 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
financial statements that are free from material misstatement, whether due
to fraud or error.

In preparing the Financial 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 discussed the status of significant 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
external legal counsel and other counter-parties to litigations 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 litigation history and other available evidence to assess the
valuation and completeness of the provisions recognised by the Group. We
have obtained confirmations from external legal counsel to confirm our
understanding of settled and outstanding litigation and asserted claims. We
have evaluated significant 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 confirmation by testing legal expenses on a sample
basis and comparing to internal documents.

Auditor’s responsibilities for the audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the
Financial 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 influence the economic decisions of users taken
on the basis of these Financial Statements.

As part of an audit in accordance with ISAs and the additional requirements
under Danish audit regulation, we exercise professional judgement and
maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the Financial
Statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is
sufficient 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 significant 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 Financial 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 2017

110 INDEPENDENT AUDITOR’S REPORT

• Evaluate the overall presentation, structure and content of the Financial

Statements, including the disclosures, and whether the Financial
Statements represent the underlying transactions and events in a manner
that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial
information of the entities or business activities within the Group to
express an opinion on the Consolidated Financial 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 significant audit findings, including any significant deficiencies
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 significance in the audit of
the Financial 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 benefits of
such communication.

Bagsværd, 1 February 2018

PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab (CVR no 3377 1231)

Mogens Nørgaard Mogensen
State Authorised Public Accountant State Authorised Public Accountant
mne21404

Torben Jensen

mne18651

NOVO NORDISK ANNUAL REPORT 2017

INDEPENDENT AUDITOR’S REPORT

INDEPENDENT LIMITED ASSURANCE REPORT ON THE
CONSOLIDATED SOCIAL AND ENVIRONMENTAL REPORTING

INDEPENDENT ASSURANCE REPORT

111

To the Stakeholders of Novo Nordisk A/S
Novo Nordisk A/S engaged us to provide limited assurance on the
information described below and set out in the Annual Report of Novo
Nordisk for the year ended 31 December 2017.

Our conclusion
Based on the procedures we have performed and the evidence we have
obtained:

• A) Nothing has come to our attention that causes us to believe that the
Consolidated social and environmental statement of Novo Nordisk’s
Annual Report for the year ended 31 December 2017 has not been
prepared, in all material respects, in accordance with the Reporting
Criteria.

• B) Nothing has come to our attention that causes us to believe that

the description of Novo Nordisk’s alignment with AA1000APS (2008)
(AA1000ApS) principles of Inclusivity, Materiality and Responsiveness is
not fairly stated.

This conclusion is to be read in the context of what we say in the remainder
of our report.

What we are assuring
The scope of our work was limited to assurance over:

A) the Statement of social and environmental performance and associated
Notes on pages 98 to 106 in the Annual Report of Novo Nordisk (the
“Selected Information”).
B) Novo Nordisk’s description of alignment with the AA1000APS principles of
Inclusivity, Materiality and Responsiveness for the year ended 31 December
2017, which is set out on pages 99 to 100 (the “Stakeholder Engagement
description”) of the Annual Report.

Professional standards applied and level of assurance
We performed a limited assurance engagement in accordance with
International Standard on Assurance Engagements 3000 (Revised)
‘Assurance Engagements other than Audits and Reviews of Historical
Financial Information’ and AA1000AS (Type 2, moderate, which is the
equivalent to ISAE 3000 limited assurance). 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; consequently, the level of assurance obtained in a limited
assurance engagement is substantially lower than the assurance that
would have been obtained had a reasonable assurance engagement been
performed.

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, confidentiality and professional behaviour. We also qualify
as independent as defined by the AA1000 Assurance Standard (2008)
(AA1000AS). The firm applies International Standard on Quality Control
1 and accordingly maintains a comprehensive system of quality control
including 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.

Understanding reporting and measurement methodologies
The Selected Information needs to be read and understood together with
the Reporting Criteria (page 99 to 106), which Novo Nordisk A/S is solely
responsible for selecting and applying. The absence of a significant body of
established practice on which to draw to evaluate and measure non-financial
information allows for different, but acceptable, measurement techniques
and can affect comparability between entities and over time.

Work performed
A) We are required to plan and perform our work in order to consider the
risk of material misstatement of the Selected Information. In doing so, we:
• conducted interviews with data owners to understand the key processes

and controls for reporting site performance data;

• obtained an understanding of the key processes and controls for
managing, recording and reporting the Selected Information.

• performed limited substantive testing on a selective basis of the Selected

Information at corporate head office to check that data had been
appropriately measured, recorded, collated and reported;

• performed analysis of data from reporting sites, selected on the basis of

risk and materiality to the group; and

• considered the disclosure and presentation of the Selected Information.

B) In respect of Novo Nordisk’s description of alignment with AA1000APS
principles of Inclusivity, Materiality and Responsiveness we performed the
following activities:
• interviewed members of Novo Nordisk’s Executive Management,

Communication, Relations & Corporate Affairs and Global Market Access
to determine their understanding of their stakeholders, the mechanisms
used to engage them and key issues that are of interest to each
stakeholder group;

• interviewed external stakeholders to determine their perception of Novo
Nordisk’s capabilities in relation to stakeholder engagement, in particular,
in relation to being inclusive and responsive to stakeholders on material
topics;

• reviewed evidence on a selective basis to support the assertions made in

these interviews and in the Stakeholder Engagement description;
• confirmed the existence of systems and procedures to support Novo

Nordisk’s Triple Bottom Line governance and stakeholder relationships.
Our work focused on access and affordability, including a review of Novo
Nordisk’s Access to insulin commitment, pricing policy and strategy in the
US and in International Operations; and

• assessed the disclosure and presentation of the Stakeholder Engagement

description.

Novo Nordisk’s responsibilities
Novo Nordisk’s management are responsible for:
• designing, implementing and maintaining internal controls over

information relevant to the preparation of the Selected Information that is
free from material misstatement, whether due to fraud or error;
• establishing objective Reporting Criteria for preparing the Selected

Information;

• measuring and reporting the Selected Information based on the Reporting

Criteria; and

• reporting the Stakeholder Engagement description; and
• the content of the Annual Report 2017.

Our responsibility
We are responsible for:
• planning and performing the engagement to obtain limited assurance

about whether the Selected Information and the Stakeholder Engagement
description is free from material misstatement, whether due to fraud or
error;

• forming an independent conclusion, based on the procedures we have

performed and the evidence we have obtained; and

• reporting our conclusion to the Stakeholders of Novo Nordisk A/S.

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 significant recommendations regarding
Inclusivity, Materiality and Responsiveness. We have communicated a
number of minor recommendations for improvement to the management of
Novo Nordisk.

Bagsværd, 1 February 2018

PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab (CVR no. 3377 1231)

Mogens Nørgaard Mogensen
State Authorised Public Accountant
mne21404

Torben Jensen
State Authorised Public Accountant
mne18651

INDEPENDENT ASSURANCE REPORT

NOVO NORDISK ANNUAL REPORT 2017

112 ADDITIONAL INFORMATION

PRODUCT
OVERVIEW

DIABETES CARE

NEW-GENERATION INSULIN AND COMBINATIONS
• Tresiba®, insulin degludec
• Ryzodeg®, insulin degludec/insulin aspart
• Fiasp®, fast-acting insulin aspart
• Xultophy®, insulin degludec/liraglutide

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

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®)

A selection of Novo Nordisk‘s injection devices

OTHER INSULIN DELIVERY SYSTEMS
• PumpCart®, NovoRapid® cartridge to be used in pump
• Cartridge
• Vial

INSULIN PENS
• NovoPen® 5 PLUS
• 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 2017 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 2017MORE 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
Novo Nordisk leans on the International Integrated
Reporting Council’s definition of 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
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
International Integrated Reporting Framework.

A shortened, printed version, consisting of the
Management review and excerpts from the consolidated
statements, is available in Danish.

NEWS AND UPDATES

FOR MORE NEWS FROM NOVO NORDISK, VISIT
novonordisk.com/investors
novonordisk.com/media
novonordisk.com/sustainable-business

REFERENCES

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 the requirements of the
Danish Financial Statements Act.

COMMUNICATION ON PROGRESS
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.

1. International Diabetes Federation. IDF Diabetes Atlas, 7th edn. Brussels, Belgium. International Diabetes Federation 2015. 2. Jönsson, Linus,
et al. Cost of Hypoglycemia in Patients with Type 2 Diabetes in Sweden. Value in Health, vol. 9, No 3, 2006, pp 193–198., doi:10.1111/j.1524-
4733.2006.00100.x. 3. World Health Organization. Obesity and Overweight. Fact sheet No 311. Updated October 2017. 4. World Obesity Day
data released. World Obesity, World Obesity Federation, 2015, www.worldobesity.org/news/world-obesity-day-data-released/. Accessed 23 Janu-
ary 2017. 5. McCullough AJ. Epidemiology of the metabolic syndrome in the USA. Journal of Digestive Diseases 2011; 12:333–340. 6. Marso
SP, et al. Liraglutide and Cardiovascular Outcomes in Type 2 Diabetes. New England Journal of Medicine 2016; 375(18):1797–1799. 7. Marso,
Steven P., et al. Efficacy and Safety of Degludec versus Glargine in Type 2 Diabetes. New England Journal of Medicine, vol. 377, No 8, 24 Aug.
2017, pp 723–732., doi:10.1056/nejmoa1615692. 8. 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. 9. Cities Changing Diabetes. Diabetes Projection Model,
Global. Data on file. Novo Nordisk. Incentive, ed. Holte, Denmark 2017. 10. United Nations, Department of Economic and Social Affairs, Popula-
tion Division (2015). World Urbanization Prospects: The 2014 Revision, (ST/ESA/SER.A/366). 11. Kaplan L, Golden A, Jinnett K, et al. Perceptions
of Barriers to Effective Obesity Care: Results from the National ACTION Study. Obesity 2017; DOI:10.1002/oby.22054. 12. “Obesity.” Rethink
Obesity, Novo Nordisk, 2017, global.rethinkobesity.com/. Accessed 1 August 2017. 13. Michele M Yuen, et al. T-P-3166: A systematic review
and evaluation of current evidence reveals 236 obesity-associated disorders (ObAD). 14. Obesity and Overweight. Centers for Disease Control
and Prevention website. https://www.cdc.gov/nchs/fastats/obesityoverweight.htm. Updated June 13, 2016. Accessed 1 August 2017. 15. Trust
for America’s Health. F as in Fat: How obesity threatens America’s future. http://healthyamericans.org/assets/-files/2012_f_as_in_fat_FINAL%20
ES%209-22-12.pdf. Published September 2012. Accessed May 2017. 16. Waters, Hugh, and Ross DeVoL. “Weighing Down America: The Health
and Economic Impact of Obesity.” Milken Institute, 30 Nov. 2016, www.milkeninstitute.org/publications/view/833.

Market data on pp 6–8, 19, 30, 34, and 37–39 are from IMS MIDAS Health 2017.

Design and production: ADtomic Communications. Printing: Bording PRO as, February 2018. Photography: Martin Juul, Willi Hansen, Jesper Edvardsen, Jesper
Westley Jørgensen, Andreas Houmann, Anders Bøggild, Ulrik Jantzen, Teresa Flanigan and Jens Lindhe.

FINANCIAL
CALENDAR
2018

22 MARCH
2018
Annual General
Meeting 2018

23 MARCH
2018
Ex-dividend

26 MARCH
2018
Record date

27 MARCH
2018
Payment, B shares

3 APRIL
2018
Payment, ADRs

2 MAY
2018
Financial Statements
for the first three
months of 2018

8 AUGUST
2018
Financial Statements
for the first six months
of 2018

17 AUGUST
2018
Ex-dividend

20 AUGUST
2018
Record date

21 AUGUST
2018
Payment, B shares

28 AUGUST
2018
Payment, ADRs

1 NOVEMBER
2018
Financial Statements
for the first nine
months of 2018

FINANCIAL
CALENDAR
2019

1 February
2019
Financial statements for
the full year 2018

114

FINANCIAL STATEMENTS OF THE PARENT COMPANY

FINANCIAL STATEMENTS OF
THE PARENT COMPANY 2017

The following pages comprise the financial statements of the parent company, being the legal entity Novo Nordisk A/S. Apart from ownership of the subsidiaries
in the Novo Nordisk Group, 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

Note

2017

2016

DKK million

Note

2017

2016

DKK million

Sales
Cost of goods sold

Gross profit

Sales and distribution costs
Research and development costs
Administrative costs
Other operating income, net

Operating profit

Profit in subsidiaries, net of tax
Financial income
Financial expenses

2
3

3
3
3

8
4
4

76,887
13,357

68,671
11,496

63,530

57,175

18,969
12,785
1,532
2,432

19,768
11,974
1,736
1,861

32,676

25,558

12,561
1,678
1,962

17,817
192
847

Profit before income taxes

44,953

42,720

Income taxes

7,080

4,929

Net profit for the year

37,873

37,791

ASSETS

Intangible assets
Property, plant and equipment
Financial assets

Total fixed assets

Raw materials
Work in progress
Finished goods

Inventories

Trade receivables
Amounts owed by affiliated
companies
Tax receivables
Other receivables

Receivables

Deferred income tax assets
Marketable securities
Derivative financial instruments
Cash at bank

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 financial instruments
Trade payables
Amounts owed to affiliated
companies
Tax payables
Other liabilities

Current liabilities

Total liabilities

Total equity and liabilities

6
7
8

5
9

2,446
23,414
28,614

1,775
20,825
22,166

54,474

44,766

1,846
8,222
2,096

1,809
7,284
2,090

12,164

11,183

1,677

1,648

10,653

13,112

783
627

1,209
807

13,740

16,776

—
—
2,304
17,511

45,719

100,193

500

14,585

1,072
33,127

268
2,007
529
17,560

48,323

93,089

510

8,948

962
34,278

49,284

44,698

856
863

1,719

1,262
309
2,476

—
800

800

19
2,578
2,266

39,533

37,134

114
5,496

49,190

100,193

163
5,431

47,591

93,089

NOVO NORDISK ANNUAL REPORT 2017

THE PARENT COMPANY

EQUITY STATEMENT

DKK million

Balance at the beginning of the year
Appropriated from Net profit for the year
Total dividend for the year
Appropriated from Net profit for the year to Net revaluation reserve
Effect of cash flow hedges transferred to the Income statement
Fair value adjustments of cash flow 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
Reduction of the B share capital
Exchange rate adjustments of investments in subsidiaries
Development costs
Other adjustments

FINANCIAL STATEMENTS OF THE PARENT COMPANY

115

Share
capital

Net
revaluation
reserve

Development
costs reserve

Retained
earnings

2017

2016

510

8,948

962

5,637

(10)

110

34,278
13,030
19,206

1,742
1,820
(7,396)
(11,448)
115
14
(16,845)
10
(632)
(110)
(657)

44,698
13,030
19,206
5,637
1,742
1,820
(7,396)
(11,448)
115
14
(16,845)
—
(632)
—
(657)

46,358
14,772
19,048
3,971
614
(1,742)
(7,600)
(16,230)
163
102
(15,057)
—
(7)
—
306

Balance at the end of the year

500

14,585

1,072

33,127

49,284

44,698

Proposed appropriation of net profit:
Interim dividend for the year
Final dividend for the year
Appropriated to Net revaluation reserve
Transferred to Retained earnings

Distribution of net profit

7,396
11,810
5,637
13,030

7,600
11,448
3,971
14,772

37,873

37,791

Please refer to note 4.1 to the Consolidated financial 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 2017

116 FINANCIAL STATEMENTS OF THE PARENT COMPANY

FINANCIAL STATEMENTS OF THE PARENT COMPANY

117

NOTES

1 ACCOUNTING POLICIES

3 EMPLOYEE COSTS

6 INTANGIBLE ASSETS

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 at the end of the year

Carrying amount at the end of the year

Amortisation and impairment losses reversed on disposals during the year

2017

3,777

1,016

(28)

2,002

150

195

(28)

2016

3,363

414

—

1,445

141

416

—

4,765

3,777

2,319

2,002

2,446

1,775

Intangible assets primarily relate to patents and licences, internally developed software and costs related to major IT projects.

7 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

equipment

construction

2017

2016

Assets in

course of

7,677

3,643

—

(2,395)

Land and

buildings

Plant and

machinery

14,495

17,282

531

(88)

1,318

684

(62)

145

(287)

770

867

(266)

Other

2,716

112

(127)

307

1,790

172

—

(124)

42,170

4,431

(502)

—

21,345

1,723

(452)

37,955

4,784

(569)

—

20,158

1,603

107

(523)

Cost at the end of the year

16,256

17,910

3,008

8,925

46,099

42,170

Depreciation and impairment losses at the beginning of the year

6,136

13,419

Depreciation for the year

Impairment losses for the year

Depreciation reversed on disposals during the year

Depreciation and impairment losses at the end of the year

6,785

14,062

1,838

—

22,685

21,345

Carrying amount at the end of the year

9,471

3,848

1,170

8,925

23,414

20,825

The financial 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 financial statements of the parent company
are unchanged from the last financial year. The accounting policies are the
same as for the Consolidated financial statements with the adjustments
described below. For a description of the accounting policies of the Group,
please refer to the Consolidated financial statements, pp 63-64.

No separate statement of cash flows has been prepared for the parent
company; please refer to the Statement of cash flows for the Group on p 59.

SUPPLEMENTARY ACCOUNTING POLICIES FOR THE PARENT
COMPANY

Financial assets
In the financial 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 profit of subsidiaries less
unrealised intra-Group profits is recorded in the Income statement of the
parent company.

To the extent that net profit 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. Profits
in subsidiaries are disclosed as profit after tax.

Fair value adjustments of financial 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 Holdings A/S.

Uncertain tax positions are presented individually as part of Tax receivables/
Tax payables.

Novo Nordisk recognises deferred income tax assets if it is probable that
sufficient taxable income will be available in the future against which the
temporary differences can be utilised.

2 SALES

DKK million

Sales by business segment

Diabetes care and obesity
Biopharmaceuticals

Total sales

2017

2016

76,661
226

68,472
199

76,887

68,671

DKK million

2017

2016

DKK million

Wages and salaries
Share-based payment costs
Pensions
Other social security contributions
Other employee costs

10,550
115
993
230
376

11,032
163
996
230
326

Total employee costs for the year

12,264

12,747

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

(306)

(90)

(236)

(145)

Total employee costs in the Income
statement

11,868

12,366

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 financial statements.

Average number of full-time employees
in Novo Nordisk A/S

16,267

16,683

4 FINANCIAL INCOME AND FINANCIAL
EXPENSES

DKK million

Interest income relating to subsidiaries
Income from associated company
Foreign exchange gain (net)
Other financial income

Total financial income

Interest expenses relating to subsidiaries
Foreign exchange loss (net)
Financial loss from forward contracts (net)
Other financial expenses

Total financial expenses

2017

212
54
1,380
32

1,678

230
—
1,031
701

1,962

2016

111
64
—
17

192

50
324
262
211

847

5 DEFERRED INCOME TAX ASSETS/
(LIABILITIES)

Sales by geographical segment

DKK million

North America Operations
Region Europe
Region AAMEO
Region China
Region Latin America
Region Japan & Korea

42,332
13,911
8,542
7,308
2,437
2,357

34,768
13,197
7,936
7,234
2,339
3,197

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

2017

268
(229)
(895)

2016

1,653
(1,375)
(10)

(856)

268

Total sales

76,887

68,671

Sales are attributed to geographical segment based on location of the
customer. For definitions of segments, please refer to note 2.2 to the
Consolidated financial statements.

The Danish corporate tax rate was 22.0% in 2017 (22.0% in 2016).

NOVO NORDISK ANNUAL REPORT 2017

THE PARENT COMPANY

NOVO NORDISK ANNUAL REPORT 2017

6 INTANGIBLE ASSETS

DKK million

Cost at the beginning of the year
Additions during the year
Disposals during the year

Cost at the end of the year

Amortisation at the beginning of the year
Amortisation during the year
Impairment losses for the year
Amortisation and impairment losses reversed on disposals during the year

Amortisation at the end of the year

Carrying amount at the end of the year

FINANCIAL STATEMENTS OF THE PARENT COMPANY

117

2017

3,777
1,016
(28)

2016

3,363
414
—

4,765

3,777

2,002
150
195
(28)

1,445
141
416
—

2,319

2,002

2,446

1,775

Intangible assets primarily relate to patents and licences, internally developed software and costs related to major IT projects.

7 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

2017

2016

14,495
531
(88)
1,318

17,282
145
(287)
770

2,716
112
(127)
307

7,677
3,643
—
(2,395)

42,170
4,431
(502)
—

37,955
4,784
(569)
—

Cost at the end of the year

16,256

17,910

3,008

8,925

46,099

42,170

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

6,136
684
27
(62)

13,419
867
42
(266)

1,790
172
—
(124)

21,345
1,723
69
(452)

20,158
1,603
107
(523)

Depreciation and impairment losses at the end of the year

6,785

14,062

1,838

—

22,685

21,345

Carrying amount at the end of the year

9,471

3,848

1,170

8,925

23,414

20,825

THE PARENT COMPANY

NOVO NORDISK ANNUAL REPORT 2017

118 FINANCIAL STATEMENTS OF THE PARENT COMPANY

8 FINANCIAL ASSETS

DKK million

Cost at the beginning of the year
Investments during the year
Divestments during the year

Investments in
subsidiaries

Amounts
owed by
affiliates

Investment in
associated
company

Other
securities and
investments

8,854
79
—

3,440
3,105
(1,878)

153

Cost at the end of the year

8,933

4,667

153

Value adjustments at the beginning of the year
Profit/(loss) before tax
Share of result after tax in associated company
Income taxes on profit for the year
Market value adjustment
Dividends received
Divestments during the year
Effect of exchange rate adjustment
Other adjustments

25,879
16,129

(3,554)

(6,514)
—
(1,195)
222

(16)

(222)

(39)

369
318
(35)

652

333

(590)

22
(3)

2017

2016

12,816
3,502
(1,913)

10,766
2,717
(667)

14,405

12,816

26,281
16,129
54
(3,554)
(590)
(6,553)
22
(1,420)
222

28,023
17,050
64
(4,936)
(77)
(13,613)
38
(16)
(252)

Value adjustments at the end of the year

30,967

(238)

100

(238)

30,591

26,281

Unrealised internal profit at the beginning of the year
Change for the year – charged to Income statement
Effect of exchange rate adjustment

(16,931)
(14)
563

Unrealised internal profit at the end of the year

(16,382)

—

Carrying amount at the end of the year

23,518

4,429

(16,931)
(14)
563

(22,732)
5,703
98

—

253

—

(16,382)

(16,931)

414

28,614

22,166

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 5.5 to the Consolidated financial statements.

9 OTHER PROVISIONS

12 COMMITMENTS AND CONTINGENCIES

2017

2016

DKK million

2017

2016

DKK million

Non-current
Current

863
272

800
241

Total other provisions

1,135

1,041

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 financial statements.

10 RELATED PARTY TRANSACTIONS

For information on transactions with related parties, please refer to note 5.3
to the Consolidated financial statements.

Commitments
Operating leases
Research and development obligations
Research and development - potential
milestone payments1
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 five years
After five years

1,455
2,774

2,712

345

6,281
9,269
168

226
708
521

1,303
3,406

1,156

818

4,485
10,661
192

228
709
366

11 FEE TO STATUTORY AUDITORS

Total operating leases

1,455

1,303

DKK million

Statutory audit
Audit-related services
Tax advisory services
Other services

Total fee to statutory auditors

2017

2016

8
2
3
3

8
3
3
1

NOVO NORDISK ANNUAL REPORT 2017

The operating lease costs for 2017 and 2016
were DKK 279 million and DKK 327 million
respectively.

Security for debt
Land, buildings and equipment etc at carrying
amount

—

1. Potential milestone payments are associated with uncertainty as they are linked to

successful achievements in research activities.

Novo Nordisk A/S and its Danish subsidiaries are jointly taxed with the
Danish companies in the Novo Holdings A/S. 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 5.2 to the Consolidated financial statements.

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
St. Paul
Minnesota, MN, 55164-0504, US
Attention: Depositary Receipts Group
Tel +1 800 990 1135
Tel +1 651 453 2128
(From outside the United States)
jpmorgan.adr@wellsfargo.com

Shirley Adelia Stewart lives in
New Orleans, Louisiana, US,
and has type 2 diabetes