Novo Nordisk
Annual Report 2019
ROSHNI
Roshni has type 1 diabetes and lives in India
Contents
Management review
Consolidated statements
Introducing Novo Nordisk
Consolidated financial statements
Letter from the Chair
01
02
Letter from the CEO
04 Novo Nordisk at a glance
06 Performance highlights
Our business
Leading a sustainable business
Innovative treatments and solutions for unmet needs
08
11
14 Pipeline overview
16
International Operations: Building a sustainable
platform for accelerated growth
North America Operations: Ready for growth
in a challenging business environment
20 2019 performance and 2020 outlook
18
Governance
29 Managing risks to protect value
32 Shares and capital structure
34 Corporate governance
38 Board of Directors
40 Executive management
Income statement
42
43 Cash flow statement
44 Balance sheet
45 Equity statement
46 Notes to the consolidated financial statements
Consolidated social statement
(Supplementary information)
78 Statement of social performance
78 Notes to the consolidated social statement
Consolidated environmental statement
(Supplementary information)
84 Statement of environmental performance
84 Notes to the consolidated environmental statement
Additional information
87 Management´s statement and Auditor´s reports
91 More information
92 Product overview
Roshni lives in India, and loves her school. She is 12 years old and wants to become a doctor.
Roshni was diagnosed with type 1 diabetes at the age of four. The first few months were tough. It was hard to get the blood sugar levels
right. Then she was referred to a hospital and enrolled in Novo Nordisk’s Changing Diabetes in Children programme, which offers free insulin,
help on managing diabetes and support for her and her family.
The patient portrayed in this Annual Report have participated of her own accord and solely to express her personal opinions on topics
referred to, which do not necessarily reflect the views and opinions of Novo Nordisk. Use of her pictures as illustrations is in no way intended
to associate them with the promotion of any Novo Nordisk products.
All references can be found in 'More information'.
The Management review, as defined by the Danish Financial Statements Act, is found on pp 1-40 and pp 88-91.
This Annual Report is Novo Nordisk’s full statutory Annual Report 2019. Please read further details in 'More information'.
Novo Nordisk Annual Report 2019 Letter from the Chair
Making good
progress
Novo Nordisk made good progress during 2019. Our teams have
delivered growth and crucial new product launches. This has
established a good platform for the next decade and beyond as we
continue to build our pipeline and make progress as a sustainable
business.
pleased to say that these changes are now
bearing fruit, as evidenced by an accelera-
tion of sales in International Operations, a
return to growth in our Biopharm business,
and a reinvigorated pipeline with great
potential to offer treatment for unmet
medical needs.
We recognise that relying solely on in-house
research capabilities will not be enough to
sustain success, and we are therefore open-
ing our business to strategic partnerships.
Novo Nordisk’s market strength and deep
expertise in metabolic diseases makes the
company an attractive partner for innova-
tive biotech companies. This has allowed
us to build partnerships to bring on-board
promising new technologies.
As a large company, Novo Nordisk also
has large responsibilities. Society is
expecting more from business to help solve
challenges such as bending the curve on
diabetes, climate change and environmen-
tal degradation. I believe Novo Nordisk,
with its purpose and commitment to
pursuing a more sustainable development,
is well placed to rise to the challenge.
The pharmaceutical industry faces an
important societal challenge: how can
we continue to innovate and improve
health outcomes while at the same time
ensuring that as many people as possible
have access to our products at an afford-
able price? This issue has been discussed
at every board meeting I have chaired. I
believe our initiatives for enhancing access
to care represent real progress towards re-
Our strategy is working. Although
the challenges facing Novo Nordisk are
not going away – indeed, many problems
such as intensified competition, healthcare
affordability and the need to bolster R&D
are more urgent than ever – we have put
in place the building-blocks for responding
to these and other challenges. The Board
of Directors is confident that Novo Nordisk
is well positioned to deliver on its purpose
of defeating diabetes and other serious
chronic diseases and, by doing so, achieve
profitable growth.
Last year, we laid out our plans to repriori-
tise resources towards key growth areas,
streamline operations and redefine our
research and development strategy. I am
1
solving this dilemma. And so do the major
prevention programmes targeting obesity
and diabetes.
The decisions taken by companies like ours
will help shape the future of societies for
generations to come, whether that means
bending the curve of the global diabetes
epidemic or eliminating our environmental
footprint, another area of priority for Novo
Nordisk.
Over the past year, I have visited our offices
in many parts of the world. I have met
people on the front line of operations who
have told me how working for a company
committed to improving healthcare and
promoting sustainability motivates them.
The insights from these meetings, and the
discussions I have had with patients and
our investors, have brought external per-
spectives into the boardroom. The lesson
I take away is simple: purpose comes first,
profit is an outcome. A clear purpose and
ambition to add value to society beyond
financial results helps attract the top talent,
thereby fuelling innovation and making
Novo Nordisk a more sustainable company.
In the course of 2019, two long-tenured
colleagues, Jesper Brandgaard, executive
vice president of Biopharm & Global Legal
& Patents, and Lars Green, executive vice
president of Business Services & Compli-
ance, both left Novo Nordisk to pursue
their careers elsewhere. I want to thank
them both for the legacy they leave and
commend them for their dedication and
leadership and for the achievements they
made on behalf of Novo Nordisk.
New members were brought on board
from outside of Novo Nordisk. Ludovic
Helfgott joined in April 2019 as executive
vice president and head of Biopharm.
Monique Carter, who joined Novo Nordisk
in November 2018, was promoted in
August 2019 to executive vice president of
People & Organisation.
On behalf of the Board, I would like to
offer my thanks to all Novo Nordisk’s
employees for their hard work and commit-
ment during 2019; to Lars Fruergaard
Jørgensen and his team for their inspiring
leadership and to our shareholders for their
continued support. •
Helge Lund
Chair of the Board of Directors
Novo Nordisk Annual Report 2019Our businessConsolidated statementsIntroducing Novo NordiskGovernance Letter from the CEO
Setting new
strategic
aspirations
Our purpose is to drive change to defeat diabetes and other serious
chronic diseases. That is a long-term commitment, and we are
pursuing it relentlessly. We build on our innovation expertise and
our therapy focus combined with commercial excellence to provide
benefits to the millions of patients who rely on our products. When
we do that well, we will be a sustainable business that adds value
to society and delivers profitable growth.
As we enter a new decade, Novo
Nordisk stands strong. We delivered a very
solid financial result for 2019 reflecting
an accelerated growth in International
Operations and the contribution from the
launch of Ozempic® particularly in North
America Operations.
Three milestones stand out: in the US, we
secured a major scientific achievement
with the regulatory approval of Rybelsus®,
the world’s first and only GLP-1 medicine
in a tablet, and early feedback indicates
promising prospects. In January 2020,
Ozempic®, a once-weekly injectable GLP-1,
was approved in the US for cardiovascular
risk reduction in people with type 2
diabetes and established cardiovascular
disease. Ozempic® is now available in 26
countries and achieved blockbuster status
within 18 months.
We have introduced strategic aspirations
in four categories with medium-term
goals to provide direction towards 2025:
purpose and sustainability; innovation and
therapeutic focus; commercial execution;
and financials. I invite you to also look
at our company’s performance from this
holistic perspective, because that is how
2
we manage the business. These aspirations
replace our long-term financial targets. We
hold ourselves accountable for progress
towards each and all of them, and in the
following pages we elaborate on the new
aspirations.
Our key contribution is to discover and de-
velop innovative biological medicines and
make them accessible to patients all over
the world. Today, we have best-in-class
products in all the therapy areas in which
we are active, and at the end of 2019 our
sales and marketing teams have delivered
no fewer than 87 successful launches,
delivering innovative treatments to people
living with diabetes, obesity, haemophilia
and growth hormone disorders. We
are accelerating growth in International
Operations where we now aspire to grow
annual sales by 6-10% until 2025 from a
historical level of 5-6%. Meanwhile, we
are transforming our US business, and it
is our ambition that by 2022 around 70%
of our sales will come from new products.
It is also encouraging to note that our
Biopharm business has proven robust in
the face of disruptive competition and has
grown in both the haemophilia and growth
hormone disorder product segments.
One of the greatest opportunities for Novo
Nordisk is undoubtedly obesity care, where
there are huge unmet needs. We have
already established a leading position in
this field and expect to build on the success
of Saxenda®, which is now available in 46
countries. In 2020 we will see the results
of our pivotal clinical programme, STEP,
which evaluates the benefits of injectable
semaglutide for the treatment of obesity.
Our contribution to global health relies
on our ability to develop radically new
treatments and solutions and we are well
positioned to do this. We have raised the
innovation-bar and are bolstering our
pipeline, making significant advances in
R&D productivity by harnessing digital tech-
nologies to accelerate development of new
product candidates. We believe we have
what it takes to potentially even disrupt
how diabetes is treated. To complement
our in-house capabilities to develop novel
therapies we partner with leading biotech
companies like bluebird bio and Dicerna.
All of these accomplishments demonstrate
how we are indeed driving change to
benefit patients and delivering convincing
results. Results that are
Novo Nordisk Annual Report 2019Our businessConsolidated statementsIntroducing Novo NordiskGovernance 3
reflected in strong financial performance
and achievement of our long-term financial
targets.
But in a world where serious chronic
diseases not only have a significant impact
on individuals’ quality of life, but also ham-
per socio-economic development and put a
strain on healthcare budgets, it takes more
than medicines. We consider it our respon-
sibility to help tackle these challenges. That
is what we mean by driving change.
through education and on-the-ground
interventions. Our Cities Changing
Diabetes programme now involves 25
cities. In 2019, we entered a partnership
with UNICEF to develop interventions that
can help prevent childhood overweight and
obesity worldwide, with an initial focus
on Latin America and the Caribbean. And
through our partnership with the Interna-
tional Red Cross, we are providing essential
insulin to thousands of people who are
affected by humanitarian crises.
We are stepping up our efforts to ensure
broader access to our medicines for those
who need them, regardless of their circum-
stances. Ensuring affordability of medicines
is a high priority for us, and we have
expanded our affordable insulin offerings in
the US, where our offerings provide a solid
safety net for uninsured patients, and in
low- and middle-income countries, where
healthcare systems are inadequate.
During 2019, we launched an ambitious
new environmental strategy, Circular
for Zero, which will take us towards our
ultimate ambition, namely to ensure zero
environmental impact from our activities.
As of this year, our entire global production
sources renewable power and the next
major milestone in sight is to eliminate CO2
entirely from all operations and transport
by 2030.
be successful we must set ambitious goals,
and we must work in a simple and agile
way and nurture an inclusive workplace
that enables everyone to realise their
potential.
We aim to be a truly sustainable business
– environmentally, socially and financially.
From the very beginning, this is how we
have built our business, sticking with the
Novo Nordisk Way. I am confident that we
have a solid formula for delivering on our
purpose, contributing to global sustainable
development and sustaining commercial
success. Let me close by thanking everyone
at Novo Nordisk for all their great work and
their commitment to our shared purpose.
A special thanks to our Board of Directors
for their decisive stewardship, constructive
challenges and unwavering confidence. I
also want to thank our shareholders and all
our other stakeholders for their continued
support. •
We are working with partners across
the globe to advance disease prevention
With the Novo Nordisk Way as our guide,
we will continue to evolve our culture. To
Lars Fruergaard Jørgensen
President & chief executive officer
Strategic aspirations for 2025
Purpose and
sustainability
Innovation and
therapeutic focus
Commercial
execution
Financials
• Being respected for
• Further raise the
• Strengthen Diabetes care
• Deliver solid sales and
adding value to society
innovation-bar for
leadership – aim at a
operating profit growth
diabetes treatment
global value market
– Deliver 6–10% sales
• Progress towards zero
share of more than 1/3
growth in International
environmental impact
• Develop a leading
Operations
portfolio of superior
• Strengthen Obesity care
– Transform 70% of sales
• Ensure distinct core
treatment solutions for
leadership and double
in the USA2
capabilities and evolve
obesity
current sales¹
culture
• Drive operational
• Strengthen and progress
• Secure a sustained
efficiencies across the
the Biopharm pipeline
growth outlook for
value chain to enable
Biopharm
investments in future
• Establish presence in
Other serious chronic
diseases focusing on
cardiovascular disease,
non-alcoholic steato-
hepatitis and chronic
kidney disease
growth assets
• Deliver free cash flow to
enable attractive capital
allocation to shareholders
1. Based on 2019 sales 2. From 2015 to 2022
Novo Nordisk Annual Report 2019Our businessConsolidated statementsIntroducing Novo NordiskGovernance
Introducing Novo Nordisk
Our business
Governance
Consolidated statements
4
Novo Nordisk
at a glance
Novo Nordisk is a global health-
care company, headquartered
in Denmark. Our key contribu-
tion 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.
463
million people live with diabetes1
650
million people live with obesity2
1.1
million people live with
Haemophilia3
1.8-2.9
in every 10,000 children is born with
growth hormone defi ciency4
43,258 employees
world wide
80 countries with
affi liates or offi ces
169 countries with
marketed products
3 continents with research
and development facilities
Our corporate strategy
Diabetes care
Strengthen leadership
by offering innovative
medicines and driving
patient outcomes
9
1
0
2
t
r
o
p
e
R
l
a
u
n
n
A
k
s
i
d
r
o
N
o
v
o
N
Biopharm
Secure a leading position by
leveraging full portfolio and
expanding into adjacent areas
N
o
ay
v o N ordisk W
Driving
change to
defeat diabetes
and other
serious chronic
diseases
ustainable b u s i n
e ss
S
Obesity care
Strengthen treatment
options through market
development and by
offering innovative
medicines and
driving patient
outcomes
Other serious
chronic diseases
Establish presence by
building competitive pipeline
and scientifi c leadership
5
Financially
responsible
Socially
responsible
Environmentally
responsible
Our key contribution is to discover and develop
innovative biological medicines and make them
accessible to patients throughout the world.
We rely on external fi nancial, environmental and
social resources and leverage our core capa-
bilities to create value for patients, employees,
partners and shareholders.
Deep disease
understanding
Adding value
to society
The company’s Articles of Association spell out the obligation to do business in a financially,
environmentally and socially responsible way. This approach is applied to ensure that
business decisions are better informed, always keeping in mind the best interests of the
patients we serve and with an aim to create value for all stakeholders.
Our business model
Expertise
from academic
institutions
Manufactured
goods
Insights
from
healthcare
experts and
patients
Raw
materials,
water and
energy
Resources
Financial
resources
Diverse
talent
Effi cient large-scale
production of proteins
Global commercial reach
and leader in chronic
disease care
Core capabilities
Financially responsible
Environmentally responsible
Socially responsible
Engineering, formulating,
developing and delivering
protein-based treatments
Value created
30 million
people using
Novo Nordisk
Diabetes care
products
DKK 34,743
million to
shareholders
as dividends
and share
repurchases
DKK 27,527
million
total tax
contribution
Approx. 5,000
investigator sites
active in Novo
Nordisk-sponsored
clinical trials
More than
1 billion insulin
penfi lls
produced
43,258
employees of
which 5,507
new hires
Novo Nordisk Annual Report 2019Our businessConsolidated statementsIntroducing Novo NordiskGovernance 6
Performance highlights
DKK million
Financial performance
Net sales
Sales growth in constant exchange rates1
Net sales growth as reported
Operating profit
Net financials
Profit before income taxes
Net profit for the year
Total assets
Equity
Purchase of property, plant and equipment1
Free cash flow1
Financial ratios1
Percentage of sales:
Gross margin
Operating margin
Net profit margin
Sales and distribution costs
Research and development costs
Administrative costs
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 constant exchange rates adjusted2
Operating profit after tax to net operating assets
Cash to earnings (three-year average)
2015
2016
2017
2018
2019
2018–2019
107,927
111,780
111,696
111,831
122,021
8.4%
21.5%
49,444
(5,961)
43,483
34,860
91,799
46,969
5,224
34,222
85.0%
45.8%
32.3%
26.2%
12.6%
3.6%
51.2%
79.9%
98.2%
46.6%
43.3%
35.2%
12.7%
148.7%
96.8%
5.5%
3.6%
48,432
(634)
47,798
37,925
97,539
45,269
7,068
39,991
84.6%
43.3%
33.9%
25.4%
13.0%
3.5%
46.4%
82.2%
105.4%
50.2%
(2.0%)
3.9%
6.2%
150.2%
102.4%
2.3%
(0.1%)
48,967
(287)
48,680
38,130
4.6%
0.1%
47,248
367
47,615
38,628
5.6%
9.1%
52,483
(3,930)
48,553
38,951
102,355
110,769
125,612
49,815
7,626
32,588
51,839
9,636
32,536
57,593
8,932
34,451
84.2%
43.8%
34.1%
25.4%
12.5%
3.4%
48.7%
80.2%
85.5%
50.4%
1.1%
1.1%
4.8%
84.2%
42.2%
34.5%
26.3%
13.2%
3.5%
46.8%
76.0%
84.2%
50.6%
(3.5%)
(3.5%)
2.8%
143.2%
116.7%
96.4%
91.7%
83.5%
43.0%
31.9%
26.1%
11.7%
3.3%
45.8%
71.2%
88.4%
50.5%
11.1%
11.1%
5.6%
98.0%
86.0%
Change
9%
11%
2%
1%
13%
11%
(7%)
6%
Target
5%
80%
85%
The Group has applied IFRS 16 'Leases' for the first time on 1 January 2019. Amounts for 2015-2018 have not been restated. Please refer to note 1.2.
1. See ’Financial definitions’. 2. Years 2015 and 2016, adjusted for DKK 2,376 million from the partial divestment of associated company and DKK 449 million from the income related to the
out-licensing of assets for inflammatory disorders respectively.
Sales by therapeutic area
Diabetes care Obesity care
Haemophilia Growth disorders
Other Biopharm
Sales by geographic area
Region Europe Region AAMEO
Region China Region Japan & Korea
Region Latin America
North America Operations
Patients reached with diabetes care products
(estimate)
Ceiling price* Regular pricing
6%
1%
8%
5%
19%
2019
11%
2019
11%
80%
5%
4%
50%
Million
30
25
20
15
10
5
0
2015
2016
2017
2018
2019
* Patients reached with insulin below ceiling price
of USD 4.00/vial of human insulin.
Novo Nordisk Annual Report 2019Our businessConsolidated statementsIntroducing Novo NordiskGovernance 7
Performance highlights
2015
2016
2017
2018
2019
2018–2019
Social performance
Patients reached with Novo Nordisk's diabetes care products
(estimate in millions)
Patients reached with Novo Nordisk's diabetes care products via the
Access to Insulin Commitment (estimate in millions)
Employees (total)
Employee turnover
Gender in management (ratio men:women)
Relevant employees trained in business ethics
Product recalls
Failed inspections
Long-term social targets
Employee engagement
Company trust (scale 0–100)
Environmental performance
Water consumption for production sites (1,000 m3)
Waste from production sites (1,000 tons)
Long-term environmental targets
Share of renewable power for production sites
CO2 emissions from operations and transportation (1,000 tons)
Share performance
Basic earnings per share/ADR in DKK1
Diluted earnings per share/ADR in DKK1
Total number of shares (million), 31 December
Dividend per share in DKK
Total dividend (DKK million)
Share repurchases (DKK million)
Closing share price (DKK)
26.8
28.0
27.7
29.2
30.0
—
—
41,122
42,446
9.2%
59:41
98%
9.7%
59:41
99%
2
0
—
—
6
0
—
—
0.3
42,682
11.0%
60:40
99%
6
0
0.3
43,202
11.7%
60:40
99%
3
0
90%
82.2
91%
84.5
3,131
159
3,293
153
3,276
157
3,101
142
78%
—
78%
—
79%
—
77%
278
13.56
13.52
2,600
6.40
16,230
17,229
399.90
14.99
14.96
2,550
7.60
19,048
15,057
254.70
15.42
15.39
2,500
7.85
19,206
16,845
334.50
15.96
15.93
2,450
8.15
19,547
15,567
297.90
2.9 3
43,258
11.4%
60:40
99%
4
0
91%
78.2
3,149
124
76%
306
16.41
16.38
2,400
8.35 4
19,651 4
15,334
386.65
Change
3%
—
0%
33%
Target
≥ 90
≥ 80
Change
2%
(13%)
Target
100% by 2020
0 by 2030
Change
3%
3%
(2%)
2%
1%
(1%)
30%
1. See ’Financial definitions’. 3. Scope of Access to Insulin Commitment expanded in 2019 to also include middle-income countries and selected organisations providing humanitarian relief. 4. Total
dividend for the year including interim dividend of DKK 3.00 per share, which was paid in August 2019. The remaining DKK 5.35 per share, corresponding to DKK 12.551 million, will be paid subject
to approval at the Annual General Meeting.
Employees (total)
Region Europe Region AAMEO
Region China Region Japan & Korea
Region Latin America
North America Operations
Water consumption
Locations with high water stress or large
seasonal variations* Other locations
Thousand
14%
CO2 emissions from operations and
transportation
Company cars Business flights
Product distribution
Office buildings and laboratories Production
20%
29%
2019
2019
2015
2016
2017
2018
2019
* As defined by the World Resource Institute
21%
86%
4%
26%
50
40
30
20
10
0
Novo Nordisk Annual Report 2019Our businessConsolidated statementsIntroducing Novo NordiskGovernance
Introducing Novo Nordisk
Our business
8
Purpose and sustainability:
Leading a
sustainable
business
Our business is built on a commitment to drive change to defeat
diabetes and other serious chronic diseases. We do so by pioneer-
ing scientific breakthroughs and expanding access to our medi-
cines. But we do not stop at that. We are also working to prevent,
and ultimately cure, these diseases. We have a legacy in diabetes
of almost a century, and over the years we have expanded into
other serious chronic diseases.
There will not be resources to provide
for adequate chronic care for all who
need it. In the public debate strong voices
are questioning our business model and
current practices for intellectual property
rights, putting pressure on the price of es-
sential medicines, and expecting us to take
more responsibility for solving the problems
caused by the pandemic growth of chronic
diseases as well as other global issues. We
want to be part of the solution, and we are
stepping up to that challenge.
We envisage a future in which markets and
governments will punish companies that
are seen to cause harm to people, com-
munities or the environment through their
products or operations, and reward those
that account transparently for their impacts
and benefit society. Our aspiration is to be
respected for adding value to society.
We take leadership in the concerted efforts
to achieve good health and well being
for all. We have also committed to take
action in the face of climate change, with a
bold ambition to leave zero environmental
footprint from our business activities. Our
strategy is informed by the global goals
for sustainable development towards 2030
set by world leaders in 2015. We can help
deliver on these goals.
Preventing the rise in diabetes and
obesity
In a world strained by the impact of dia-
betes, we have a responsibility to respond
to the societal challenge. The burden of
diabetes, fuelled by increasing rates of
overweight and obesity, is rising in every
part of the world despite long-running, col-
lective efforts to fight the pandemic and its
devastating impact on people and societies.
To defeat diabetes, we need a new level of
commitment. Prevention of diabetes and
obesity is systematically underfunded and
there are few, if any effective models that
adequately address inequality in health. We
want to find, pilot and scale effective ways
to prevent people at risk from developing
diabetes and obesity.
In support of the Sustainable Development
Goals, we are working with partners across
the globe to advance disease prevention
through education and on-the-ground in-
terventions. Our Cities Changing Diabetes
programme has become a social movement
in its own right, mobilising multiple stake-
holders in the effort to tackle the growing
issues of urban diabetes and build healthier
environments. By now we have 25 partner
cities.
Strategic aspirations for 2025
Purpose and
sustainability
• Being respected for adding
value to society
• Progress towards zero
environmental impact
• Ensure distinct core capabilities
and evolve culture
In 2019, we entered a partnership with
UNICEF to develop interventions that can
help prevent childhood overweight and
obesity worldwide, with an initial focus on
Latin America and the Caribbean. Through
this partnership we will combine efforts to
enhance knowledge and awareness and
address root causes. The aim is three-fold.
We want to enhance knowledge among
decision-makers on successful policies to
prevent childhood overweight and obesity
in middle-income countries. We will build
awareness of the impact of overweight and
obesity on children and their rights and
advocate for the need to make systemic
changes to address this growing epidemic.
And finally, we will drive and strengthen
multi-sector interventions.
With the right medical treatment and care,
people with serious chronic diseases can
live a life free of complications and be fully
productive citizens. But as long as there is a
significant gap between those who achieve
good health and those who do not, the sit-
uation is unsustainable and will impact our
ability to be successful for the long-term.
We are stepping up our efforts to provide
broader access to our medicines for those
who need them. We will actively be part
of ensuring that more people are given
access to diagnosis and that Novo Nordisk
medicines are available and affordable,
and we will continue to develop new and
innovative treatments to further improve
health outcomes for patients. Meanwhile,
we will also support prevention by building
capacity in health systems and societies.
When we succeed at all this, it will ulti-
mately lead to better health and thereby
help contain the vast societal and financial
burden arising from chronic diseases.
Access to affordable care for
vulnerable populations
Novo Nordisk operates in 169 countries
with vastly different levels of income and
Novo Nordisk Annual Report 2019Consolidated statementsGovernance Introducing Novo Nordisk
Our business
9
health systems. As a global healthcare
company, we know that different ap-
proaches are needed to ensure that the
most vulnerable people receive the care
they need. For this reason, Novo Nordisk
has put in place a number of initiatives
aimed at ensuring that vulnerable groups
have access to affordable medicines and
care, including:
• Through our Access to Insulin Commit-
ment we have set a ceiling price of USD 4
for a 10 ml vial of Human Insulin offered
to governments in low- and middle-
income countries and to humanitarian
organisations.
• Through the Changing Diabetes® in
Children programme we provide insulin
free of charge to children with type
1 diabetes and build capacity in the
world’s poorest countries. In 2019, we
enrolled 2,819 additional children. In to-
tal 15,121 health care professionals have
been trained, 208 clinics established and
25,695 children across 14 countries have
received care as part of the programme
since 2009.
• We work to strengthen capacity to
diagnose and treat people affected by
humanitarian crises through Partnering
for Change with the International Com-
mittee of the Red Cross and the Danish
Red Cross.
• Through the World Diabetes Founda-
tion, we support large-scale diabetes
capacity building in low-resource
settings and through the Defeat NCD
partnership we support a new multi-
sector effort to improve global access to
care for non-communicable diseases.
In September 2019, the United Nations
adopted the Political Declaration on Uni-
versal Health Coverage in support of the
Sustainable Development Goals. In Novo
Nordisk we welcome this effort to find sus-
tainable solutions and we will continue to
expand our own efforts to provide access
to our products and strengthen capacity
to diagnose and treat diabetes throughout
the world.
Affordable insulin in the US
Ensuring affordability of medicines within
the complex US healthcare system contin-
ues to be a high priority. This year, we met
face-to-face with some of our most vocal
critics in the insulin pricing debate – includ-
ing patients and physicians – to improve
our understanding of the affordability
challenges that patients are facing. And we
are continuing to launch initiatives to help
more people with diabetes access afford-
able medicine – including those with insur-
ance and those without – as we continue
to support a longer-term, systemic reform.
New insulin affordability offers, effective as
of January 2020, include:
• A Cash Card Program, offering that for
USD 99, people with diabetes can get up
to three vials or two packs of FlexPen®/
FlexTouch®/PenFill® pens of any combi-
nation of Novo Nordisk Inc. insulins.
• NovoLog® and NovoLog® Mix follow-on
brands are made available in vials and
pens at a 50 percent list price reduc-
tion from the newly established Novo
Nordisk Pharma Inc.
• An immediate, one-time insulin supply
option available for people facing an
acute need when more time is needed
to identify a sustainable solution.
These new options build upon our existing
offers:
• The Patient Assistance Program, which
we have offered since 2003. This pro-
vides free medicines, including all Novo
Nordisk insulin medications, to eligible
patients. Families of four with an annual
income up to USD 103,000 can get
free medications through our Patient
Assistance Program (USD 49,960 for
individuals).
• We have made Novo Nordisk human
insulin available at Walmart for about
USD 25/vial for the past 15 years, and
recently expanded it to other national
pharmacy chains.
• Our Co-pay Savings Cards help spread
the costs of commercially insured pa-
tients with high out-of-pocket costs.
Pursuing zero environmental impact
Our long-standing climate action efforts
are paying off. We expect to meet our
target of using only renewable power in
our production by 2020. The final stretch
was the result of a new investment in a 2.7
square kilometre solar panel installation
in North Carolina, USA, which will make
power supplies for our entire US produc-
tion carbon-free from early 2020.
Our next ambitious target is to achieve
zero CO2 emissions from all operations and
transport by 2030. This target is part of our
‘Circular for Zero’ environmental strategy,
which ultimately aims for zero environmen-
tal impact from our business. We focus on
three key areas:
• Circular supply: we will collaborate
proactively with suppliers to embed
circular thinking for reduced environ-
mental impact across our value chain
and switch towards circular sourcing and
procurement.
• Circular company: we aim to eliminate
environmental footprint from Novo
Nordisk operations and drive a circular
transition across the company aspiring
for zero environmental impact.
• Circular products: we will upgrade
existing and design new products based
on circular principles and solve the end-
of-life product waste challenge to close
the resource loop.
Sustainable business approach
As a business with global reach, we are
defining our role in contributing to an
environment, society and economy that
enables all people, and our business, to
thrive. Our ambition is to be a sustainable
business that adds value to society. By that
we mean staying in business – because
millions of people rely on us – and con-
tributing to the achievement of global
sustainable development.
In our approach, we adhere to interna-
tional standards, including the UN Guiding
Principles on Business and Human Rights,
voluntary commitments such as the UN
Global Compact Ten Principles and the
recommendations of the Task Force on
Climate-related Financial Disclosures. We
also diligently adhere to compliance re-
quirements such as the US Foreign Corrupt
Practices Act, the UK Bribery Act and the
UK Modern Slavery Act.
And throughout, we seek to integrate
sustainability in all our operations. For
example, environmental considerations are
included in the project manual for develop-
ment of new products, ensuring that deci-
sions are informed by life cycle assessments
of environmental impacts.
So how will we know when we are doing
enough – throughout our value chain? We
are changing the way we manage, track
and report on progress to be a sustainable
business. Taking our point of departure in
what science and international standards
have defined to be necessary in a global
context, we follow a robust approach to
identify current state and required actions
through a focused, long-term effort.
Novo Nordisk Annual Report 2019Consolidated statementsGovernance Introducing Novo Nordisk
Our business
10
Our four Transformational Research Units,
which pursue novel treatment forms and
platform technologies, illustrate this type
of cultural evolution. These biotech-like
units, based in Denmark, the USA and the
UK, operate as satellites to Novo Nordisk’s
central R&D function and drive innovation
in prioritised fields such as translational
cardio-metabolic research and stem cell
research. Working in a highly agile manner,
outside of the usual governance structures,
they are largely free of most corporate
formalities and control – so they can dis-
cover, enable and accelerate concepts and
projects that will expand and diversify our
pipeline with disruptive medicines. •
Novo Nordisk’s '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 perfor-
mance 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.
assurance, in adherence with international
standards.
Evolving our culture
Novo Nordisk core capabilities provide a
competitive advantage. Building on a deep
disease understanding, we are a leader
in chronic disease care. We have deep
expertise in engineering, formulating,
developing and delivering protein-based
treatments. And we have the capacity for
efficient large-scale production.
To meet the needs of the patients we serve,
we are continuously challenging ourselves
to raise the innovation-bar while pursuing
aspirational goals. That, in turn, demands
that we change how we work – that we
evolve our culture – to think bigger, strive
for simplicity and be more agile in order
to quickly adapt to a constantly-changing
business environment.
With bold ideas, the risk of failure will
increase. We have to accept failure, and
learn fast from them. We find inspiration
from the agility and entrepreneurial mind-
set in biotech start-ups. One example is the
Novo Nordisk Research Centre in Seattle,
USA, where we work with cutting-edge
technologies in life sciences. It was initially
set up in 2009 to focus on our now discon-
tinued research in autoimmune diseases.
Since then, the site has transitioned into
type 1 diabetes, obesity, immunology,
kidney disease, device research and protein
and peptide engineering. Here, a diverse
group of 120 employees are encouraged
to work together across functions and in
close collaboration with the global R&D
organisations across Novo Nordisk and 40
strategic partners.
The landmark development of Rybelsus®,
the first ever oral GLP-1 product, is a
stellar example of simplicity and agility. The
submission for marketing approval of Ry-
belsus® embodies the FAST concept, intro-
duced in 2019 across R&D: Flexible, Agile,
Simple and Transformational. The team
ensured parallel rather than sequential pro-
cesses without compromising on quality,
following a clinical development program
involving more than 9,500 patients, 10
phase 3a studies, and more than 20 clinical
pharmacology studies. As a result, timelines
were reduced to way below industry stan-
dards, achieving approval within six months
and bringing Rybelsus® faster to the market
to the benefit of patients.
Guided by the Novo Nordisk Way
We build our business on a principled
approach to always doing business in a
financially, environmentally and socially
responsible way, which is firmly anchored
in the Articles of Association. This commit-
ment is reflected in the Novo Nordisk Way,
and guides how we lead a sustainable busi-
ness. When we make decisions, we always
keep in mind what is best in the long term
for the patients we serve, our employees,
the communities in which we are present
and the global society we are part of. This
way we seek to attend to the interests
of stakeholders as well as the long-term
interests of our shareholders. The goal is to
avoid any negative impacts, and maximise
the positive impacts we can make through
our business activities.
We use a unique and systematic approach
called facilitation to make sure everyone
lives up to the Novo Nordisk Way. It
comprehensively assesses how managers
and employees demonstrate our desired
behaviours, our ten ‘Essentials‘. These
assessments are conducted by experienced
in-house experts with a broad knowledge
of the business. Any issues are addressed
locally, and consolidated insights are shared
with Executive Management and the Board
of Directors.
The Novo Nordisk Way also underpins our
performance management and incentive
schemes. All employees are appraised
against criteria for goal achievement as
well as the extent to which their behaviours
model the Novo Nordisk Way, as spelled
out in the Essentials.
We have global codes of conduct and
standards to ensure that we conduct our
business ethically and responsibly: to pre-
vent corruption, meet our responsibility to
respect human rights, safeguard health and
fair employment terms for our employees
as well as those of our suppliers, effective-
ly manage and mitigate impacts on the
environment and respect the integrity of
our business partners. These practices are
put into action via robust governance and
Novo Nordisk Annual Report 2019Consolidated statementsGovernance
Introducing Novo Nordisk
Our business
11
Innovation and therapeutic focus:
Innovative
treatments and
solutions to unmet
needs
In the pursuit of our purpose, we pioneer scientific breakthroughs,
expand access to our medicines, and work to prevent and ultimately
cure the diseases we are experts in.
Chronic diseases affect hundreds
of millions of people and are among the
most urgent global health challenges. Left
untreated, they can lead to life-threatening
complications, and the burden they place
on individuals, families and society is grow-
ing in every part of the world. We will take
part in ensuring that more people have ac-
cess to diagnosis and affordable treatment
options where they do not currently exist,
and we continue to drive innovation in our
labs that can improve life for people living
with a serious chronic disease.
Our innovation and therapeutic focus is
leveraged by our commercial excellence.
We draw upon insights from patients
and partners to transform bold ideas into
life-saving and preventive medicines. We
make long-term investments in novel treat-
ments and technologies, including curative
stem cell-based therapies, and we contin-
ually advance the development of medical
devices and digital health solutions.
Strengthen leadership in Diabetes care
There is a need for new and improved
treatments that can provide better health
outcomes for people with diabetes.
According to the International Diabetes
Federation 463 million people worldwide
are now estimated to have diabetes5, and
eight out of ten live in low- and middle-
income countries.6 Less than half of them
are treated, and even then, only a fraction
of them live a life free of diabetes-related
complications. As a consequence, people
with diabetes have a higher risk of dying
prematurely, with an average reduction
in life expectancy of eight years.7 People
with diabetes have a 150% increase in risk
of stroke8 and as many as 70% of people
with diabetes die from atherosclerotic
cardiovascular diseases.9 Without concert-
ed action, it is estimated that 700 million
people will have diabetes by 204510 with
associated societal costs exceeding USD 1
trillion per year globally.11
We will remain the global leader for diabe-
tes care and offer patient support solutions
in addition to therapeutic treatment. Novo
Nordisk currently holds a global diabetes
market share of 29% and is growing this
share, with a medium-term goal of at least
one third of the market. We want to en-
able people with diabetes to lead healthy
lives, and we have product offerings for
all types of treatment needs (see 'Product
overview'). Over the next decade, we will
further raise the innovation-bar for diabe-
tes treatment, with the goal of normalising
life with diabetes.
More than half of our total sales in the
diabetes care segment, insulin is still
Strategic aspirations for 2025
Innovation and
therapeutic focus
• Further raise the innovation-bar
for diabetes treatment
• Develop a leading portfolio of
superior treatment solutions for
obesity
• Strengthen and progress the
Biopharm pipeline
• Establish presence in Other
serious chronic diseases focusing
on cardiovascular disease,
non-alcoholic steatohepatitis
and chronic kidney disease
Diabetes is associated with
shorter life expectancy and
lower quality of life
Diabetes
Life expectancy 8 years shorter7
Driven by 200% increased risk of
all-cause mortality12
CVD
70% of people with diabetes die
from atherosclerotic CVD9
150% increase in risk of stroke8
Organs
Higher likelihood of neuropathy,
retinopathy, limb amputation,
cancer and cognitive dysfunction
Further raise the innovation bar for
diabetes treatment
l
e
v
e
l
Insulin
GLP-1
n
o
i
t
a
v
o
n
n
I
Curative
treatment
Glucose-sensitive
Insulin
Once-weekly
Oral GLP-1
analogue
Weekly GLP-1
analogue
Long-acting
GLP-1
analogue
Insulin
analogue
Native GLP-1
time
Novo Nordisk Annual Report 2019Consolidated statementsGovernance
Introducing Novo Nordisk
Our business
12
important to Novo Nordisk, and it remains
the only treatment for type 1 diabetes. We
are relentlessly pursuing a cure for type
1 diabetes, and at the same time we are
working to develop stem cell therapy that
could be transformational.
We will strengthen our leading position
within insulin and gain market share with
our current portfolio of next-generation
insulin products. Meanwhile, in our inno-
vation pipeline we continue to focus on
delivering improved glucose control, but
we also target diabetes-related complica-
tions. We are researching glucose sensitive
insulins and cardio-protective insulins.
With our two recent GLP-1 products,
Ozempic® and Rybelsus®, we want to
redefine type 2 diabetes treatment. Our
intention is to position Rybelsus® as the
preferred tablet, and Ozempic® as the pre-
ferred injectable GLP-1 for the treatment of
type 2 diabetes.
We are at the forefront of innovation in the
GLP-1 class and orally administered delivery
devices and are pursuing several therapeu-
tic opportunities with semaglutide.
Our digital health initiatives, which include
connected devices and digital solutions,
also aim to improve health outcomes for
patients. Not only will these tools aim to
make it easier for patients to manage their
treatment and bring them in better control;
this will potentially allow for data capture
that can document adherence patterns as
well as short and long-term benefits of our
treatments.
Strengthen treatment options in
Obesity care
Around 650 million adults live with obesi-
ty13 and this number is expected to grow
to more than one billion by 2025.14 In ad-
dition, 120 million children have obesity.15
People with obesity are at an increased risk
of developing several comorbidities that are
life-threatening and costly for society. From
a socioeconomic perspective, obesity is one
of the biggest disease burdens, with its
global economic impact estimated at USD
2 trillion annually.16
Still, obesity is not widely recognised as a
disease that may require medical treat-
ment. Today, around 15 million people use
anti-obesity medication.18 Few medications
exist, leaving a significant opportunity for
Novo Nordisk as a market leader for anti-
obesity medication. We aim to develop a
leading portfolio of treatment solutions.
We are committed to expanding access
to obesity care and helping patients lead
healthy lives. The first step is to change
how the world sees people with obesity
and make obesity a healthcare priority. We
are determined to combat the stigma and
biases associated with obesity. We fight for
better recognition of obesity as a treatable
disease, taking a holistic approach. We
aim to help a wider number of people, by
partnering with professional associations
and other stakeholders. In this effort, we
need to engage with payers and educate
healthcare professionals, encourage people
with obesity to seek treatment, and de-
velop educational programmes and open
research initiatives.
We support this development with preven-
tive interventions, commercial execution
and pipeline research progress – developing
a leading portfolio of superior treatment
solutions and securing broad availability of
treatments for people with obesity. Sax-
enda®, currently available in 46 countries,
addresses a global unmet need for medical
weight management. Over the next few
years, we will make Saxenda® available to
more people in more countries.
We are working to develop new anti-obe-
sity medications based on semaglutide.
We are awaiting the results of our pivotal
phase 3a clinical development programme,
STEP, which investigates injectable
semaglutide for the treatment of obesity.
Meanwhile, we are gathering evidence
on how obesity management can lead to
sustainable and relevant health, economic
and societal outcomes.
Secure a leading position in Biopharm
Our Biopharm business is a strong speciality
care unit that encompasses rare blood and
rare endocrine disorders, both areas of
significant unmet medical need.
While Biopharm’s performance has been
resilient and robust the future is not
straightforward, due to intense competi-
tion and slower growth in the haemophilia
and growth hormone markets. Therefore,
we are expanding our focus to shape
Biopharm for leadership in rare blood
disorders and rare endocrine disorders.
In the near term the way we will be suc-
cessful is by working towards
The global
burden of obesity
650 million
adults have obesity13
120 million
children have obesity15
3.4 million
deaths were caused by
obesity in 201017
2 trillion
US dollars in annual global
cost of obesity16
Develop a leading portfolio of superior
treatment solutions for obesity
Launched
Saxenda®
Phase 3
Semaglutide
Obesity
Phase 2
AM833
Phase 1
PYY 1875
Tri-agonist
GG-co-agonist
LA-GDF15
AM833+Sema
%
5
10
15
20
25
30
Today´s
available
medication
Treatment
gap
Bariatric
surgery
Weight loss over time
Strengthen and progress the Biopharm
pipeline
a
i
l
i
h
p
o
m
e
a
h
n
i
n
o
i
t
a
v
o
n
n
I
Curative
therapy
Non-invasive
therapy
Mim8
Concizumab
Esperoct®
Refixia®
NovoEight®
NovoThirteen®
NovoSeven®
1986
today
future
Novo Nordisk Annual Report 2019Consolidated statementsGovernance
Introducing Novo Nordisk
Our business
13
Establish presence in Other serious chronic
diseases
CVD
CKD
NASH
Stem Cells
developing and delivering faster and more
front-loaded launches, in more markets.
Additionally, we will strengthen our Bio-
pharm platform by reinvigorating our R&D
efforts and utilising the full range of the
technology platforms at our disposal, as
well as pursuing external opportunties.
Within rare blood disorders, we are
well-positioned with a broad product port-
folio in haemophilia. Our legacy recombi-
nant product, NovoSeven®, remains resilient
in a competitive market, and with our
latest, long-acting products, Esperoct® and
Refixia®, we are expanding our offering for
patients with Haemophilia A, Haemophilia
B and rare bleeding disorders. In 2019, we
launched Esperoct® and are accelerating
our launches to new markets so that many
more patients can benefit from this extend-
ed half-life factor VIII therapy. We also
succeeded in including the use of automat-
ed infusion pumps in the European label for
NovoSeven®, a testimony to the strong life
cycle management of our legacy products.
We will accelerate innovation by leveraging
all Novo Nordisk R&D technology platforms
– using the full spectrum from stem cell
research to formulation and encapsula-
tion – to expand our pipeline. In 2019,
we initiated phase 3 clinical trials with
concizumab for Haemophilia A and B with
and without inhibitors. We are also about
to begin phase 1 clinical trials with our
next-generation recombinant factor VIII,
Mim8, a bispecific antibody for subcutane-
ous prophylactic treatment in people with
haemophilia A. Outside of haemophilia we
are conducting phase 1 trials with EPI01 in
sickle cell disease.
We will look for external assets as well.
By joining forces with bluebird bio in
next-generation genome editing, we aim
to offer a potentially curative treatment for
children and adults with haemophilia A.
Within rare endocrine disorders, we will
maintain our leading position in the growth
hormone segment by offering transforma-
tive treatment options. We will continue
to explore innovation through all Novo
Nordisk R&D platforms. We will build on
the market-leading quality of our devices,
support increased rates of diagnosis,
and continue to work towards bringing
somapacitan, our next-generation product
intended for once-weekly treatment, to
market to treat growth hormone disorders.
Shifting the treatment paradigm from a
daily to a weekly injection has the poten-
tial to significantly relieve the treatment
burden for people with growth hormone
deficiencies and may increase adherence
and efficacy.
Establish presence in other serious
chronic diseases
Finally, we are working to establish our
presence in other serious chronic diseases
such as cardiovascular diseases (CVD),
non-alcoholic steatohepatitis (NASH) and
chronic kidney disease (CKD).
NASH is a progressed stage of non-
alcoholic fatty liver disease that affects
an estimated 30 million people in the US,
Europe and Japan and for which there
are no approved treatments. NASH is a
common comorbidity of diabetes and
obesity; 80% of diagnosed NASH patients
live with obesity19, while 35% live with
type 2 diabetes.20 We are still exploring the
potential of semaglutide to offer people
with NASH better control over their disease
as a stand-alone therapy and as a combi-
nation product together with our partner,
Gilead, a global pharmaceutical company
specialising in liver diseases.
We are also exploring therapies for treat-
ment of cardiovascular diseases. Some of
our GLP-1 products reduce the risk of car-
diovascular disease and are also currently
recommended for the treatment of type
2 diabetes for established cardiovascular
disease. Oral semaglutide is being further
investigated in cardiovascular outcomes
trials and more early-stage projects are in
the pipeline.
Multiple other serious chronic diseases
represent vast unmet medical needs that
are waiting to be defeated. We believe we
can use our innovation capabilities to meet
these. We will build a competitive pipeline
and leverage our scientific leadership to
broaden and widen our portfolio as we
expand into adjacent disease areas. As
in other therapy areas, we will nurture
partnerships and relationships across
our field force and R&D with healthcare
professionals and other stakeholders. New
technologies, including stem cell-based
therapies, will help this expansion into
new therapeutic areas such as Parkinson’s
disease, dry age-related macular degenera-
tion, and chronic heart failure. Forming the
right strategic alliances and transforming
the way we deliver innovation will help us
achieve our aspirations in this area. •
Novo Nordisk Annual Report 2019Consolidated statementsGovernance Introducing Novo Nordisk
Our business
Governance
Consolidated statements
1414
Pipeline overview
Diabetes care
Project
Rybelsus®
NN9924
Anti-IL-21 GLP-1 T1D
NN9828
Insulin icodec (LAI287)
NN1436
Insulin 965
NN1965
Icosema (LAISema)
NN1535
Obesity care
Semaglutide Obesity
NN9536
AM833
NN9838
AM833 and semaglutide
NN9838
LA-GDF15
NN9215
GG-co-agonist 1177
NN9277
PYY1875
NN9775
Tri-agonist 1706
NN9423
Haemophilia
Concizumab
NN7415
Eclipse
NN7533
Mim8
NN7769
Growth disorder
Indication
Description
Phase
Type 2 diabetes
A long-acting oral GLP-1 analogue intended for once-daily oral treatment.
Type 1 diabetes
A beta-cell preservation treatment intended for adults who are newly
diagnosed with type 1 diabetes.
Type 1 and 2 diabetes
A long-acting basal insulin analogue intended for once-weekly treatment.
Type 1 and 2 diabetes
A novel basal insulin analogue intended for once-daily treatment.
Type 2 diabetes
Combination of the GLP-1 analogue semaglutide and the long-acting
basal insulin icodec intended for once-weekly treatment.
Obesity
Obesity
Obesity
Obesity
Obesity
Obesity
Obesity
A long-acting GLP-1 analogue intended for once-weekly treatment.
A novel long-acting amylin analogue intended for once-weekly treatment.
A combination of the novel amylin analogue and the GLP-1 analogue
semaglutide intended for once-weekly treatment.
A long-acting GDF15 analogue intended for appetite regulation leading
to weight loss.
A glucagon and GLP-1 receptor co-agonist intended for once-weekly treatment.
A novel analogue of the appetite-regulating hormone, PYY, intended
for once weekly treatment.
A novel tri-agonist of the human GIP, GLP-1 and glucagon receptors intended for
once-daily treatment.
Haemophilia A and B with
or without inhibitors
A monoclonal antibody against tissue factor pathway inhibitor intended
for subcutaneous prophylaxis treatment.
Sickle cell disease and beta
thalassaemia
An oral combination treatment of sickle cell disease. Project is developed
in collaboration with EpiDestiny.
Haemophilia A with or
without inhibitors
A next-generation FVIII mimetic bispecific antibody for subcutaneous prophylaxis
of haemophilia A regardless of inhibitor status. Combined phase 1/2.
Somapacitan AGHD
NN8640
Adult growth hormone
deficiency
A long-acting human growth hormone analogue intended for once-weekly
subcutaneous administration in adults.
Somapacitan GHD
NN8640
Growth hormone
deficiency
A long-acting human growth hormone analogue intended for once-weekly
subcutaneous administration in children.
NASH (non-alcoholic steatohepatitis)
Semaglutide
NN9931
Gilead:Sema combo
NN9931
NASH
NASH
Cardiovascular disease
A long-acting GLP-1 analogue for treatment of NASH.
A GLP-1 analogue, semaglutide, in combination with an FXR agonist,
cilofexor, an ACC inhibitor, firsocostat, or the three in combination.
The project is developed in collaboration with Gilead.
PCSK9i peptide
NN6434
CVD
A long-acting PCSK9 inhibitor for subcutaneous treatment.
9
9
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Novo Nordisk Annual Report 2019Consolidated statementsGovernance
Introducing Novo Nordisk
Our business
Governance
Consolidated statements
1515
2020 expected key milestones
Oral semaglutide
Regulatory decision in Japan
AM833
Semaglutide
Semaglutide
Ozempic®
Somapacitan
Phase 2 results from Amylin in obesity
Phase 2 results for semaglutide in NASH
Phase 3 results for semaglutide in obesity
Phase 3 results for 2 mg Ozempic®
Regulatory decision for AGHD in the US and the EU
Patent status for marketed products
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, when applicable. For
several products, in addition to the active ingredient 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 and/
or orphan exclusivity may apply.
Key marketed products in main markets (active ingredients)
USA
China
Japan
Germany
Diabetes:
Human insulin
NovoRapid® (NovoLog®)
NovoMix® 30 (NovoLog® Mix 70/30)
NovoNorm® (Prandin®)
Levemir®
Victoza®
Tresiba®
Ryzodeg®
Xultophy®
Fiasp®
Ozempic®
Rybelsus®
Obesity:
Saxenda®
Haemophilia, growth disorders and hormone replacement therapy:
Norditropin® (Norditropin® SimpleXx®)
MacrilenTM
NovoSeven®
NovoEight®
NovoThirteen® (TRETTEN®)
Refixia® (REBINYN®)
Esperoct®
Vagifem® 10 mcg
Expired
Expired
Expired
Expired
Expired
2023
2029
2029
2029
(2030)3
20311
20311,7
Expired
Expired
Expired
Expired
Expired
Expired
2024
2024
2024
(2030)3
2026
20267
Expired
Expired
Expired
Expired
Expired
2022
2027
20242
20242
(2030)3
20311
20311,7
Expired
Expired
Expired
Expired
Expired
2023
2028
2028
2028
(2030)3
2031
20317
2023
Expired
Expired
2023
Expired
20278
Expired
Expired
Expired
N/A
N/A
N/A
Expired4
Expired4
Expired4
Expired4
N/A
2021
20281
20321
20225,6
N/A
N/A
2022
2029
N/A
N/A
N/A
Expired
Expired
20271
20341
20215
20271
20341
N/A
1. Current estimates. 2. Patent term extension until 2027 may apply. 3. Formulation patent; active ingredient patent has expired. 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. Tablet formulation and once-daily
treatment regimen are protected by additional patents expiring in 2031-2034. 8. Protects method of use and kits of parts.
9
9
1
1
0
0
2
2
t
t
r
r
o
o
p
p
e
e
R
R
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Novo Nordisk Annual Report 2019Consolidated statementsGovernance
Introducing Novo Nordisk
Our business
16
Commercial execution:
International
Operations: Building
a sustainable
platform for
accelerated growth
Our International Operations (IO) unit covers 190 countries and
95% of the world’s population. Around 430 million people are liv-
ing with diabetes in these countries21 and an estimated 570 million
live with obesity.22 The unmet needs are huge, and Novo Nordisk is
gearing up for growth, with a strategic aspiration of 6-10% annual
growth in sales towards 2025.
Across IO, the number of people with
diabetes is rising fast. As economies grow,
so too does the level of access to different
types of diabetes treatment. In a business
unit as broad as IO, this creates a high
degree of complexity due to different levels
of security, economic development and
political situation in the respective regions.
The fastest increase in type 2 diabetes is
seen in emerging economies, where rapid
urbanisation leads to more sedentary
lifestyles and less healthy diets. Type 2 dia-
betes in younger people is also a significant
global trend that will increasingly affect the
way we operate commercially.
With type 2 diabetes so closely linked to
obesity, these trends are also informing our
obesity strategy. As the number of younger
people with obesity grows, so does the
number of instances of diabetes in people
in their 30s and 40s. At this age, these are
primarily working people, which means
that doctors need to give them different
guidance to what they might tell a retiree.
A market fit approach
To ensure as many as possible of these
people can access our treatments, we tailor
our strategic approach to the specific needs
of each market. We have a diverse port-
folio of products that enables us to have
suitable offers for all situations – we call
that our market fit approach. For example,
our range of basal insulin includes human
insulin, modern insulin and next-generation
insulin – providing us with a solid base
as a leader in diabetes care. At the same
time, we also offer GLP-1 products that we
expect will drive future growth in Diabetes
and Obesity care.
There are local market considerations, too.
In Latin America, for example, we are
seeing an increase in healthcare spending.
However, this is counterbalanced by high
political risks – for example, high inflation
rates in Venezuela and Argentina.
In China, meanwhile, a huge ageing
population points to growing unmet
medical needs in the future. As a result,
healthcare is high on the Chinese govern-
ment’s agenda through general reform and
programmes such as Healthy China 2030.
Across IO, Novo Nordisk holds the leading
diabetes value market share in most
countries. In markets where this is not the
case, we want to grow our share. In order
to respond to the diverse conditions and
Strategic aspirations for 2025
Commercial
execution
• Strengthen Diabetes care
leadership – aim at a global value
market share of more than 1/3
• Strengthen Obesity care leader-
ship and double current sales¹
• Secure a sustained growth
outlook for Biopharm
1. Based on 2019 sales
trends across our geographic regions and
therapeutic focus areas, we constantly eval-
uate our business decisions and fine-tune
our strategy to make sure we meet local
market needs and challenges.
By combining this market fit approach
with the business ethics enshrined in the
Novo Nordisk Way, we believe we have
the framework we need to achieve our
commercial goals sustainably.
Growing fast and sustainably
2019 demonstrated that our commercial
model is working. We accelerated our sales
growth to 11% at CER in 2019 compared
to around 5% at CER historically. This has
been enabled by:
• Changing demographics across geogra-
phies that lead to significant increase in
unmet medical needs
• Our market fit approach – where our re-
gional teams develop product strategies
fit for their areas
• Our portfolio of products
Looking ahead, our ambition is to drive
growth by establishing leadership in the
basal insulin space, accelerating the growth
of the GLP-1 market, and expanding the
obesity market.
We want to broaden access to diabetes
treatments – and make treatment more
affordable. This is where we can strengthen
our market leadership in basal insulin.
Last year, Tresiba® became available to
patients in France, Germany and China,
and we are already beginning to see more
patients benefiting from this, our flagship
next-generation basal insulin. In the next
few years, we expect to launch Tresiba®
and Xultophy® in several other countries
where new-generation insulin are not
available today.
Novo Nordisk Annual Report 2019Consolidated statementsGovernance
Introducing Novo Nordisk
Our business
Governance
17
Whilst we remain value leaders in the
GLP-1 market, we are facing increased
competitive pressures and a decline in our
market share in some IO regions. This year,
we focused on turning this trend around.
We are leveraging the label update for
Victoza® achieved on the basis of results
from the LEADER trial, which showed that
liraglutide is associated with significant
cardiovascular risk reduction in people with
type 2 diabetes. Meanwhile, we are rolling
out Ozempic® as fast as we can wherever
there is a market opportunity. This is
helping us to increase our share of market
growth, bringing us closer to realising our
medium-term ambition of more than 50%.
We are also planning launches of the first
and only GLP-1 in a tablet, Rybelsus®, in
the same timeframe. Because Rybelsus®
will follow a route driven by general prac-
titioners and patient demands it is likely to
put pressure on our field force capacities,
as our representatives will have to reach
far more healthcare professionals and have
less time with each. We are mitigating this
by exploring partnerships that can give
us extra and flexible field force resources
when we need them.
To maximise the opportunity this presents,
we have agreed to enter a co-promotion
partnership with the major pharmaceu-
tical firm MSD, whose vast experience in
marketing oral antidiabetics (OADs) to Jap-
anese diabetes specialists is key our efforts
to bring the treatment into the hands of as
many people as possible.
In Obesity care, we are investing to expand
the market by working with a variety of
stakeholders including policymakers to
ensure that it is more widely recognised
as a disease that can be tackled through
medical intervention.
Saxenda® is already delivering value here,
with around 72% of market growth
over the last year. We plan for several
more launches between 2020 and 2022,
at which point we hope to be ready to
introduce semaglutide for obesity into this
fast-growing therapy area.
with the government in China to provide
digital healthcare solutions. One example is
WeDoctor – a nationwide medical consult-
ing platform connecting an astounding 172
million patients and 300,000 doctors. This
platform allows patients and doctors to
stay in touch via a user-friendly mobile app.
But when it comes to delivering better
treatments to people living with diabetes,
obesity or other chronic diseases, commer-
cial innovation can be just as important
as product innovation. This is why we
constantly assess and - if necessary -
rethink the way we execute our strategy.
This year, for example, we created separate
teams for GLP-1, insulin and Biopharm,
respectively, to give each area more focus
and decision- making autonomy. •
In Biopharm we will focus on expanding
our footprint in haemophilia A and B. Hae-
mophilia A constitutes the largest patient
population in haemophilia and our ability
to secure a leading position in rare blood
disorders will be driven by our success
in growing sales with NovoEight® and
Esperoct®. Furthermore, we are confident
that an increasing number of patients living
with haemophilia B will choose Refixia®.
Combining research and commercial
innovation
We believe Rybelsus® – our semaglu-
tide-based oral diabetes medicine – will
transform the lives of millions of people
across IO by helping people to manage
their disease. Our aim, therefore, is to
secure broad access to this world-first
innovation, and we are already taking steps
to ensure this ahead of the product’s first
IO launch.
We are also capitalising on innovation
developments in different regions. For
example, in China, the government’s push
for innovation in healthcare is helping us
broaden and deepen our relationships
there. The Chinese government is enabling
quicker clinical review and encouraging
the use of generics to drive more cost-
efficiency – meaning we will have shorter
windows of opportunity and shorter
product lifecycles.
To help Chinese patients better manage
their diabetes, we are working closely
Novo Nordisk diabetes value market share and share of growth in International Operations
NN share of growth NN market share
%
25
20
15
10
5
0
23.1%
7.4%
Nov 2016
22.0%
20.7%
Nov 2019
Novo Nordisk Annual Report 2019Consolidated statements Introducing Novo Nordisk
Our business
18
Commercial execution:
North America
Operations: Ready
for growth in a
challenging business
environment
Around half of our global sales are generated in the US, making our
North America operations – the US and Canada – a critical compo-
nent of our business. We are successfully transforming our business
by utilising the potential of our innovative product offerings and
we have strengthened our commitment to our social responsibility
to make insulin available to all patients.
More than 30 million people in the
US live with diabetes.23 Of those, millions
remain undiagnosed and are not getting
proper treatment.
The numbers are just as alarming in obesity
– if not more so. According the Centers for
Disease Control & Prevention, more than
93.3 million people were living with obesity
in 201624, costing the US healthcare system
1.72 trillion US dollars annually.25
The unmet needs are beyond question and
have brought about new dynamics in the
marketplace. Payer consolidation puts pres-
sure on prices of medicines, government
interventions aim to address structural
barriers to effective care, healthcare is
undergoing a digital transformation, and
across all of these looms the urgency of
providing affordable care for uninsured and
underinsured people like those in high-de-
ductible healthcare plans.
Successfully adapting to the new busi-
ness environment
In this challenging business environment,
Novo Nordisk is going through a historic
transition to remain a market leader and
secure future growth, contributing to the
company’s overall goal to achieve a global
diabetes value market share of more than
one-third. Towards 2022, it is expected that
around 70% of sales will be from inno-
vative new products, while the remaining
30% will be legacy products. To help us
reach our medium-term goals, we have
a clear growth strategy centred around
bringing innovative new products to mar-
ket – and increasing our market share.
Our GLP-1 offerings provide improved
treatment for broader segments of pa-
tients. Meanwhile, we continue to deliver
insulins and grow the volume amidst pric-
ing challenges. We are building the market
for obesity care, enhancing growth oppor-
tunities for our innovative products. And
we remain committed to serving patients
with haemophilia and growth disorders.
Reaching significant milestones
We have reached three very important
milestones, all of which emphasise the
strength of our existing – and future – GLP-
1 franchise:
Strategic aspirations for 2025
Commercial
execution
• Strengthen Diabetes care
leadership – aim at a global value
market share of more than 1/3
• Strengthen Obesity care leader-
ship and double current sales¹
• Secure a sustained growth
outlook for Biopharm
1. Based on 2019 sales
• Rybelsus®, our oral semaglutide medi-
cine for type 2 diabetes, was approved
by the US Food & Drug Administration
(FDA) in September 2019, with the
first prescriptions written the following
month,
• In January 2020, Ozempic® our
once-weekly type 2 diabetes medicine,
was approved in the US for cardiovascu-
lar risk reduction in people with type 2
diabetes and established cardiovascular
disease.
• Ozempic® reached global blockbuster
status in September 2019, with the bulk
of sales generated in the US.
Innovating for diabetes leadership
Our ultimate goal for diabetes treatment
is to help patients live as full and healthy
lives as possible. We want to change how
the disease is treated and how it is viewed,
offering products that meet medical needs
and match patients’ lifestyles.
We built our position as the world’s larg-
est insulin producer through innovative
injectable drugs. Going forward, we will
transform the market with our indus-
try-first GLP-1 in a tablet, Rybelsus®. In the
US, around 70% of diabetes prescriptions
are for oral treatments, and so far none are
from the highly effective GLP-1 class which
we specialise in. We are confident that the
launch of Rybelsus® will change this.
But our focus is not only on portfolio inno-
vation; we also need to improve access and
play a key role in prevention. This means
effecting change everywhere that influenc-
es, or is influenced by the disease – includ-
ing research, education, public policy, as
well as humanitarian and outreach efforts.
Championing affordability for patients
in a complex healthcare system
Tackling the structural challenges in
Novo Nordisk Annual Report 2019Consolidated statementsGovernance
Introducing Novo Nordisk
Our business
Governance
19
In a few years, Novo Nordisk USA
aspire to have
2
new blockbusters
on the market
notably increase
the number of
patients treated
turned around approx.
70% of sales
(from 2015)
stakeholders to advocate for the Treat
and Reduce Obesity Act, a vital piece of
legislation that will improve access to care
for people with obesity. The Act addresses
policy barriers to obesity care and cover-
age, including access to pharmacotherapy.
All of these measures are helping shift
social perspectives towards recognition of
obesity as a chronic disease and empower
people living with obesity in the US to seek
and receive the respectful, complete care
they deserve.
Promising prospects in biopharm
Haemophilia remains a key focus in our
biopharm business. We want to help
patients living with this disease manage it
better so they can lead healthier and more
fulfilling lives.
The FDA approval of Esperoct® in Febru-
ary 2019 and the Breakthrough Therapy
Designation for concizumab for prophylaxis
treatment in people with haemophilia B
with inhibitors were important milestones
in the fight against this serious chronic
disease.
In our growth disorders business, we are
awaiting the response on somapacitan –
a new long-acting growth hormone for
treatment in adults with growth hormone
deficiency, which we submitted for the
US FDA regulatory approval in September
2019. •
the US healthcare system calls for long-
term reform changes to make sustainable
and meaningful affordability a reality.
We are doing our part and updating our
support offerings, engaging with multiple
stakeholders. We acknowledge the role
of list prices, but more needs to be done
to improve how insurance benefits cover
essential medicines, especially through high
deductible health plans. See our offerings
to provide affordable insulin in 'Leading a
sustainable business'.
Advocating for stronger obesity focus
and policies
We have a clear ambition to offer medical
treatment for more people with obesity
and expect to double the sales of our
obesity products globally by 2025. In the
US and Canada, we work to bring superior
treatments to market, and engage with
key stakeholders and policymakers to make
obesity a healthcare priority.
The launch of our Changing Obesity™
aspiration in January 2019 underscores
our commitment to change how the world
sees, treats and works to prevent obesity.
In this effort we work with partners from
both public and private sectors.
A case in point is our contribution – via an
educational grant – to the establishment of
the US Obesity Medicine Clinical Fellow-
ship Development Program. Thanks to this
grant, the Obesity Society and the Obesity
Medicine Association are working to in-
crease the number of physicians with spe-
cialised training in caring for and treating
patients with obesity and its complications.
In 2019, seven new Obesity Fellowships
were awarded.
We also invested considerable time and
resources in and joined forces with key
Novo Nordisk diabetes value market share and share of growth in North America Operations
NN share of growth NN market share
%
50
40
30
20
10
0
28.5%
22.9%
Nov 2016
37.4%
31.1%
Nov 2019
Novo Nordisk Annual Report 2019Consolidated statements Introducing Novo Nordisk
Our business
Governance
20
Financials:
2019 performance and
2020 outlook
Financial performance
Novo Nordisk's 2019 performance for sales
measured at constant exchange rates (CER)
exceed the outlook provided in February
2019, while operating profit measured at
CER was within the range provided in Feb-
ruary 2019. The free cash flow marginally
exceeded the outlook provided in February
2019, while the tax rate was lower follow-
ing a positive impact from non-recurring
changes to deferred tax assets. Capital
expenditure was broadly in line with the
guidance provided in February 2019.
Geographic sales development
Sales increased by 9% measured in Danish
kroner and by 6% at CER to DKK 122,021
million in 2019. Sales in International
Operations increased by 12% measured in
Danish kroner and by 11% at CER. Sales in
North America Operations increased by 6%
measured in Danish kroner and by 1% at
CER. The sales growth is in line with the lat-
est guidance of '5-6% sales growth at CER'
provided in connection with the announce-
ment in November 2019 for the financial
results of the first nine months of 2019.
Sales development across
therapeutic areas
Sales growth in 2019 was 9% measured in
Danish kroner and 6% at CER was driven
by solid growth across all therapy areas with
Diabetes care sales growth of 4% (CER),
Obesity care sales growth of 42% (CER)
and Biopharm sales growth of 4% (CER).
Diabetes care, sales development
Sales in Diabetes care increased by 8%
measured in Danish kroner and by 4% at
CER to DKK 97,161 million driven by solid
GLP-1 growth, partly offset by declining
insulin sales. Novo Nordisk has improved
its global diabetes value market share over
the last 12 months from 27.8% to 28.6%,
driven by improved global insulin market
share and growth of the GLP-1 segment,
reflecting an expansion of the diabetes
value market share in North America
Operations and a stabilisation of the value
market share in International Operations.
In the following sections, unless otherwise
noted, market data are based on moving
annual total (MAT) from November 2019
and November 2018 provided by the inde-
pendent data provider IQVIA.
Insulin
Sales of insulin remained unchanged in
Danish kroner and decreased by 3% at CER
to DKK 59,693 million. The decreased sales
measured at CER were driven by declining
sales in the USA, partly offset by increased
sales in International Operations.
Sales of long-acting insulin remained
unchanged in Danish kroner and decreased
by 4% at CER to DKK 20,776 million. Novo
Nordisk has improved its global volume
market share in the long-acting insulin seg-
ment from 31.6% to 32.4% in the last 12
months. The decreased sales measured at
CER were driven by declining Levemir® sales,
partly offset by a positive impact from Tresi-
ba® and Xultophy®. Tresiba® has now been
launched in 86 countries, while Xultophy®
has now been launched in 37 countries.
Sales of premix insulin increased by 4%
measured in Danish kroner and by 2% at
CER to DKK 10,578 million. Novo Nordisk
is market leader in the premix insulin
segment with a global volume market
share of 63.9%, which has been broadly
unchanged over the past 12 months. The
increased sales were driven by increased
sales of Ryzodeg®
NovoMix® sales. Ryzodeg® has now been
launched in 30 countries.
, partly offset by declining
Sales of fast-acting insulin remained un-
changed in Danish kroner and decreased
by 3% at CER to DKK 19,303 million.
Novo Nordisk is market leader in the
fast-acting insulin segment with a global
volume market share of 50.7%, which has
been broadly unchanged over the past 12
months. The decreasing sales measured
at CER were driven by declining sales of
NovoRapid®, partly offset by a positive
impact from Fiasp®. Fiasp® has now been
launched in 33 countries.
Strategic aspirations for 2025
Financials
• Deliver solid sales and operating
profit growth
– Deliver 6-10% sales growth in
International Operations
– Transform 70% of sales in the
USA2
• Drive operational efficiencies
across the value chain to enable
investments in future growth
assets
• Deliver free cash flow to enable
attractive capital allocation to
shareholders
2. From 2015 to 2022
Sales growth
In DKK as reported
At constant exchange rates
%
25
20
15
10
5
0
2015
2016
2017
2018
2019
Share of growth at constant exchange rates
Region Europe Region AAMEO
Region China Region Japan & Korea
Region Latin America
North America Operations
%
100
80
60
40
20
0
2015
2016
2017*
2018*
2019
* In 2017, North America contributed -5% to the total growth
* In 2018, Japan & Korea contributed -2% to the total growth
Novo Nordisk Annual Report 2019Consolidated statements
Introducing Novo Nordisk
Our business
Governance
21
Sales by segment
Biopharm
Diabetes and Obesity care
DKK billion
125
100
75
50
25
0
2015
2016
2017
2018
2019
Operating profit
Operating profit margin (left)
Operating profit (right)
DKK billion
60
50
40
30
20
10
0
2015 2016 2017 2018 2019
%
60
50
40
30
20
10
0
Sales of human insulin decreased by 2%
measured in Danish kroner and by 5% at
CER to DKK 9,036 million.
GLP-1 therapy for type 2 diabetes
Sales of GLP-1 products for type 2 diabe-
tes (Victoza®, Ozempic® and Rybelsus®)
increased by 27% measured in Danish
kroner and by 22% at CER to DKK 33,221
million. Sales growth was driven by both
North America Operations and Inter-
national Operations. Sales of Ozempic®
were DKK 11,237 million and Ozempic®
has now been launched in 26 countries in
North America Operations, Region Europe,
Region Latin America and Region AAMEO.
The GLP-1 segment’s value share of the to-
tal diabetes market has increased to 18.0%
compared with 14.4% 12 months ago.
Novo Nordisk continues to be the global
market leader in the GLP-1 segment with a
47.5% value market share.
Obesity care, sales development
Sales of Saxenda® increased by 47%
measured in Danish kroner and by 42% at
CER to DKK 5,679 million. Sales growth of
Saxenda® was driven by both International
Operations and North America Operations.
Saxenda® has now been launched in 46
countries. Novo Nordisk currently has a
value market share of 56% of the global
obesity prescription drug market.
Biopharm
Biopharm, sales development
Sales of biopharm products increased by
7% measured in Danish kroner and by 4%
at CER to DKK 19,181 million. The sales
development was driven by sales growth
in both operating units as well as across
both franchises: Haemophilia and Growth
disorders. Sales growth in International
Operations was driven by Region Latin
America, Region AAMEO, Region China
and Region Japan & Korea.
Haemophilia
Sales of haemophilia products increased
by 7% measured in Danish kroner and by
4% at CER to DKK 10,281 million. The in-
creasing sales were driven by the continued
global roll-out of Refixia® and NovoEight®.
Novo Nordisk continues to expand its
broad global haemophilia presence.
Sales of NovoSeven® increased by 3%
measured in Danish kroner, and remained
unchanged at CER, to DKK 8,119 million,
reflecting the solid position of NovoSeven®
as a haemostatic agent in critical treatment
settings and a wide range of labelled indi-
cations in an increasingly competitive envi-
ronment. The sales development is driven
by increased sales in Region Latin America,
Region AAMEO and Region China as well
as stable sales in North America Operations
offset by declining sales in Region Europe
and Region Japan & Korea.
Sales of NovoEight® increased by 13%
measured in Danish kroner and by 10% at
CER to DKK 1,525 million. Sales growth
was driven by Region Latin America,
Region AAMEO, Region Europe and North
America Operations. NovoEight® has now
been launched in 52 countries.
Sales of Refixia® increased to DKK 382
million. Sales growth was driven by the
product launches in Region Europe,
Region Japan & Korea and North America
Operations. Refixia® has now been
launched in 16 countries.
Esperoct® has now been launched in nine
countries and the initial feedback from
patients and physicians is encouraging.
Growth disorders (Norditropin®)
Sales of growth disorder products increased
by 6% measured in Danish kroner and
by 2% at CER to DKK 7,275 million. The
increasing sales were driven by Internation-
al Operations increasing by 3% at CER and
by North America Operations increasing
by 2% at CER. Novo Nordisk is the leading
company in the global human growth
disorder market with a market share mea-
sured in value of around 33% driven by
new indications and the introduction of the
next-generation device.
Development in costs and
operating profit
The cost of goods sold increased by 14%
measured in Danish kroner and by 12% at
CER to DKK 20,088 million, resulting in a
gross margin of 83.5% measured in Danish
kroner, compared with 84.2% in 2018. The
decrease in gross margin reflects a negative
impact from lower realised prices in the
USA and impairment of intangible assets,
partly countered by a positive product
mix driven by increased GLP-1 sales and a
positive currency impact of 0.3 percentage
point.
Sales and distribution costs increased by
8% measured in Danish kroner and by 6%
at CER to DKK 31,823 million. The increase
in sales and distribution costs was
Novo Nordisk Annual Report 2019Consolidated statements Introducing Novo Nordisk
Our business
Governance
22
Free cash flow
DKK billion
40
30
20
10
0
2015
2016
2017
2018
2019
line with the latest guidance of 'around
DKK 9 billion'. Capital expenditure was
primarily related to investments in a new
production facility for diabetes active phar-
maceutical ingredients in Clayton, North
Carolina, USA, expansion of production
facilities in Kalundborg, Denmark, expan-
sion of production facilities in Chartres,
France and a new diabetes filling capacity
in Hillerød, Denmark.
Free cash flow was DKK 34.5 billion com-
pared with DKK 32.5 billion in 2018, which
is in line with the latest guidance of 'DKK
31-35 billion'. The increase of 6% com-
pared with 2018 primarily reflects increased
cash from operating activities driven by the
timing of rebate payments in the USA.
driven by International Operations reflect-
ing resource allocation to growth markets
and promotional activities for Victoza® and
launch activities for Ozempic®, promotional
activities for insulin, particularly in China,
as well as promotional activities for the
continued roll-out of Saxenda®. In the
USA, promotional activities are focusing on
Ozempic® and Saxenda® as well as launch
activities for Rybelsus®, partly offset by
lower promotional spend related to insulin.
Research and development costs decreased
by 4% measured in Danish kroner and by
6% at CER to DKK 14,220 million, posi-
tively impacted by reversal of write-downs
of prelaunch inventory in first quarter of
2019 following the filing of Rybelsus® to
the US FDA, severance costs in second half
of 2018 and the expense of the priority
review voucher for Rybelsus® in fourth
quarter of 2018 partly offset by impair-
ment of intangible assets in 2019. The
underlying increase in R&D costs is driven
by increased costs for the semaglutide
in obesity clinical programmes STEP and
SELECT, the ramp-up of the SOUL cardio-
vascular outcomes trial with Rybelsus® as
well as increased costs for the semaglutide
NASH development activities, partly offset
by the completion of the Rybelsus® phase
3a development programme and the com-
pletion of the head-to-head study between
Tresiba® and insulin glargine U300.
Administration costs increased by 2% mea-
sured in Danish kroner and by 1% at CER
to DKK 4,007 million, reflecting increased
legal costs while spend across administra-
tive areas was broadly unchanged.
Other operating income (net) was DKK
600 million compared with DKK 1,152
million in 2018. The decline in Other
operating income (net) in 2019 compared
with 2018 reflects non-recurring income in
2018 and decrease in income from licence
agreements.
Operating profit increased by 11% in
Danish kroner and by 6% at CER to DKK
52,483 million, which is in line with the
latest guidance for operating profit growth
measured at CER of '4-6%' in 2019.
Financial items (net) and tax
Financial items (net) showed a net loss of
DKK 3,930 million compared with a net
gain of DKK 367 million in 2018. The re-
ported net financial items in 2019 is in line
with the latest guidance of 'loss of around
DKK 3.9 billion'.
In line with Novo Nordisk’s treasury policy,
the most significant foreign exchange risks
for the Group have been hedged, primarily
through foreign exchange forward con-
tracts. The foreign exchange result was a
loss of DKK 3,212 million compared with
a gain of DKK 298 million in 2018. This
development reflects a loss on foreign
exchange hedging, especially related to the
US dollar versus the Danish krone.
As per the end of December 2019, a
negative market value of financial contracts
of approximately DKK 0.3 billion has been
deferred for recognition in 2020.
The effective tax rate was 19.8% in 2019
compared with an effective tax rate of
18.9% in 2018. The reported effective
tax rate of 19.8% is in line with the latest
guidance of a tax rate of '19-21%' for
2019. The effective tax rate for 2019 was
positively impacted by minor non-recurring
changes to deferred tax assets following
the approval of the Swiss tax reform, while
non-recurring changes in tax provisions
related to settlement of international tax
cases positively impacted the 2018 tax rate.
Capital expenditure and free cash
flow
Capital expenditure for property, plant and
equipment was DKK 8.9 billion compared
with DKK 9.6 billion in 2018, which is in
Key invoicing
currencies
Impact on Novo Nordisk's operating profit in the next 12
months of a 5% movement in currency
Hedging period
(months)
USD
CNY1
JPY
CAD
GBP
DKK 1,950 million
DKK 450 million
DKK 150 million
DKK 130 million
DKK 100 million
9
7
12
9
10
1 Chinese yuan traded offshore (CNH) used as proxy when hedging Novo Nordisk’s CNY currency exposure
Novo Nordisk Annual Report 2019Consolidated statements Introducing Novo Nordisk
Our business
23
Outlook 2020
The current expectations for 2020 are summarised in the table below:
Expectations are as reported, if not otherwise stated
Expectations 5 February 2020
(API) production within Diabetes care and
an expansion of thefilling capacity within
Diabetes care. Depreciation, amortisation
and impairment losses are expected to be
around DKK 5 billion. The decline in depre-
ciation, amortisation and impairment losses
in 2020, compared with the level in 2019,
reflects higher levels of impairment losses
in 2019. Free cash flow is expected to be
DKK 36-41 billion.
All of the above expectations are based
on assumptions that the global or regional
economic and political environment will
not significantly change business conditions
for Novo Nordisk during 2020, including
the potential implications from major
healthcare reforms, and that the currency
exchange rates, especially the US dollar,
will remain at the current level versus the
Danish krone. Neither does the guidance
include the financial implications in case
of a significant bolt-on acquisition during
2020. Furthermore, the guidance does not
include any significant impact from the
outbreak of coronavirus.
Novo Nordisk has hedged expected net
cash flows in a number of invoicing cur-
rencies and, all other things being equal,
movements in key invoicing currencies will
impact Novo Nordisk’s operating profit as
outlined in the table Key invoicing currencies.
Long-term financial targets
Novo Nordisk introduced four long-term
financial targets in 1996 to balance short-
and long-term considerations . The targets
were subsequently revised and updated
on several occasions, most recently in con-
nection with the Annual Report for 2018
released in February 2019.
With the performance in 2019, Novo Nor-
disk has met its long-term financial targets
comprising average operating profit growth
of 5%, cash-to-earnings of 85% (3-year
average) and operating profit after tax over
net operating assets (OPAT/NOA) of 80%.
3% to 6%
Around 1 percentage point higher than at CER
1% to 5%
Around 1 percentage point higher than at CER
Loss of around DKK 1.5 billion
20% to 22%
Around DKK 6.5 billion
Around DKK 5 billion
DKK 36-41 billion
activities related to the commercial priorities
across the operating units including the
introduction of Rybelsus® in the USA, the
continued global expansion of the injectable
GLP-1 diabetes franchise, the global invest-
ment in building an anti-obesity market
and the promotional activities for roll-out of
the Biopharm portfolio. Given the current
exchange rates versus the Danish krone,
growth reported in DKK is expected to be 1
percentage point higher than at CER.
For 2020, Novo Nordisk expects financial
items (net) to amount to a loss of around
DKK 1.5 billion, offsetting the positive
currency impact on operating profit. The
current expectation for 2020 primarily
reflects losses associated with foreign
exchange hedging contracts, mainly related
to the US dollar and Chinese yuan versus
the Danish krone.
The effective tax rate for 2020 is expected
to be in the range of 20-22%.
Capital expenditure is expected to be
around DKK 6.5 billion in 2020, primarily
relating to investments in additional ca-
pacity for active pharmaceutical ingredient
Sales growth
at CER
as reported
Operating profit growth
at CER
as reported
Financial items (net)
Effective tax rate
Capital expenditure (PP&E)
Depreciation, amortisation and impairment losses
Free cash flow
For 2020, sales growth is expected to
be 3% to 6%, measured at CER. This
guidance reflects expectations for robust
performance for the GLP-1-based diabetes
care products Ozempic®, Victoza® and Ry-
belsus®, the obesity care product Saxenda®,
the portfolio of new-generation insulin and
the contribution from the biopharm prod-
ucts Esperoct®, Refixia® and NovoEight®.
The guidance also reflects intensifying com-
petition both within Diabetes care and Bio-
pharm, especially within the haemophilia
inhibitor segment. Furthermore, continued
pricing pressure within Diabetes care as
well as expansion of already announced af-
fordability initiatives, especially in the USA,
are expected to impact sales development.
Given the current exchange rates versus
the Danish krone, growth reported in DKK
is expected to be around 1 percentage
point higher than at CER.
For 2020, operating profit growth is expect-
ed to be 1% to 5%, measured at CER. The
expectation for operating profit growth pri-
marily reflects the sales growth outlook and
continued focus on resource allocation. Op-
erating profit growth is negatively impacted
by increased investments in commercial
Long-term financial targets
Operating profit growth at CER1
Operating profit after tax to net operating assets
98.0%
116.7%
143.2%
150.2%
Cash to earnings
Cash to earnings (three-year average)
88.4%
86.0%
84.2%
85.5%
105.4%
91.7%
96.4%
102.4%
1 Operating profit growth at CER for 2016 is adjusted for DKK 2,376 million from the partial divestment of associated company and DKK 449 million from the income related to the out-licensing of
assets for inflammatory disorders in 2015.
2019
5.6%
2018
2.8%
2017
4.8%
2016
6.2%
Average
2016 -
2019
4.9%
Target
5%
80%
85%
Novo Nordisk Annual Report 2019Consolidated statementsGovernance Introducing Novo Nordisk
Our business
24
Novo Nordisk’s results or the accuracy of
forward-looking statements in this Annual
Report 2019, reference is made to the
overview of risk factors in ‘Managing risks
to protect value’ of this Annual Report
2019.
Unless required by law, Novo Nordisk is
under no duty and undertakes no obliga-
tion to update or revise any forward-look-
ing statement after the distribution of
this Annual Report 2019, whether as a
result of new information, future events or
otherwise. •
Strategic aspirations for 2025
To reflect the broad growth aspects of
Novo Nordisk across therapy areas and
geographies, the historic approach to long-
term financial targets focusing on specific
financial aspects is no longer sufficiently
describing Novo Nordisk’s future growth
outlook. Consequently, Novo Nordisk
announced in connection with its Capital
Markets Day in November 2019 that it is
replacing the current long-term financial
targets structure with a more comprehen-
sive approach describing the future growth
aspirations of the company under the
headline: Strategic aspirations for 2025.
The strategic aspirations, reflecting the
sustained growth opportunities until 2025,
are intended to cover future growth drivers
of Novo Nordisk and thereby providing
investors with an understanding of Novo
Nordisk’s growth and investment opportu-
nities across therapy areas and geographies.
The strategic aspirations are objectives that
Novo Nordisk intends to work towards
and are not a projection of Novo Nordisk's
financial outlook or expected growth. Novo
Nordisk intends to describe how its activi-
ties develop in relation to each of the four
dimensions on an ongoing basis.
Forward-looking statements
Novo Nordisk’s reports filed with or fur-
nished to the US Securities and Exchange
Commission (SEC), including this statutory
Annual Report 2019 and Form 20-F, which
are both expected to be filed with the SEC
in February 2020 in continuation of the
publication of this Annual Report 2019,
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’, ‘in-
tend’, ‘target’ and other words and terms
of similar meaning in connection with any
discussion of future operating or financial
performance identify forward-looking state-
ments. Examples of such forward-looking
statements include, but are not limited to:
• statements of targets, plans, objectives
or goals for future operations, includ-
ing 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 expen-
ditures, dividends, capital structure, net
financials and other financial measures,
• statements regarding future economic
performance, future actions and out-
come of contingencies such as legal
proceedings, and
• statements regarding the assump-
tions underlying or relating to such
statements.
In this Annual Report 2019, examples of
forward-looking statements can be found
under the headings '2019 Performance
and 2020 outlook' and elsewhere.
These statements are based on current
plans, estimates and projections. By their
very nature, forward-looking statements in-
volve inherent risks and uncertainties, both
general and specific. Novo Nordisk cautions
that a number of important factors, includ-
ing those described in this Annual Report
2019, 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, gov-
ernment-mandated or market-driven price
decreases for Novo Nordisk’s products, in-
troduction 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 reim-
bursement, intellectual property protec-
tion 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 main-
tain a culture of compliance.
For an overview of some, but not all,
of the risks that could adversely affect
Novo Nordisk Annual Report 2019Consolidated statementsGovernance Introducing Novo Nordisk
Our business
Governance
25
Research and
development
In 2019, we made significant prog-
ress in research and development pipeline,
reaching several important regulatory
milestones. Key development projects are
highlighted below, along with a pipeline
overview of compounds in clinical develop-
ment. Further details on clinical trials can
be found in company announcements and
press releases published by Novo Nordisk
during 2019, available at novonordisk.com
Diabetes care
Regulatory events
We submitted a New Drug Applications
(NDA) to the US Food and Drug Admin-
istration (FDA) for oral semaglutide, a
once-daily glucacon-like peptide-1 (GLP-1)
receptor agonist, as a treatment to improve
glycaemic control in adults with type 2 dia-
betes. This resulted in FDA approval in Sep-
tember 2019, of the first GLP-1 in a tablet,
Rybelsus®. The approval was based on the
phase 3a PIONEER development pro-
gramme, which included 9,543 adults with
type 2 diabetes. We launched Rybelsus® in
the US in the fourth quarter of 2019.
A second NDA was submitted for oral
semaglutide and a supplementary NDA
(sNDA) for Ozempic® (once-weekly inject-
able semaglutide), seeking approval for a
separate indication for cardiovascular risk
reduction in adults with type 2 diabetes.
These applications are based on results
from two cardiovascular outcomes trials
(CVOTs) evaluating the effects of adding
semaglutide or placebo to standard of
care on the risk of cardiovascular events,
namely, PIONEER 6 with oral semaglutide
and SUSTAIN 6 with Ozempic®. On the
basis of the submitted data, Ozempic®
was approved in the USA for cardiovas-
cular risk reduction in people with type
2 diabetes. The Rybelsus® US label was
updated with additional results from the
PIONEER 6 trial.
On 31 January the committee for medicinal
products for human use (CHMP) under
the EMA adopted a positive opinion,
recommending marketing authorisation for
Rybelsus® (oral semaglutide) for the treat-
ment of adults with type 2 diabetes. We
expect to receive final marketing authorisa-
tion from the European Commission in the
beginning of second quarter of 2020.
Biopharm
Based on the ELLIPSE trial, we obtained a
label expansion for Victoza® which now in-
cludes an indication for the use in children
and adolescent, aged 10-17 with type 2
diabetes in the US and Europe.
Clinical progress
The SOUL trial was initiated, a dedicated
diabetes cardiovascular outcome trial,
aiming to confirm the cardiovascular
benefits of oral semaglutide and expand
the scientific evidence base of semaglutide.
The SOUL trial is expected to enrol
approximately 9,600 people.
Three phase 3b trials were initiated with
subcutaneous (sc) once-weekly semaglu-
tide: SUSTAIN FORTE, with the objective
to compare and assess the efficacy and
safety of sc semaglutide 2 mg compared to
sc semaglutide 1 mg in people with type
2 diabetes. FOCUS, a diabetic retinopathy
outcomes trial, with the objective to assess
the long-term effects of sc semaglutide in
people with type 2 diabetes. Lastly, FLOW,
a diabetic nephropathy outcomes trial, with
the objective of assessing the effect of sc
semaglutide on the progression of renal
impairment in people with type 2 diabetes
and chronic kidney disease.
Furthermore, Novo Nordisk completed
a phase 2 trial with the combination of
anti-IL-21 and liraglutide in people with
newly diagnosed type 1 diabetes. The trial
demonstrated statistically significantly im-
proved beta cell function with anti-IL-21 in
combination with liraglutide compared to
placebo. Together with regulatory authori-
ties, Novo Nordisk is evaluating next steps.
Lastly, Novo Nordisk completed the 26-week
phase 2 trial with insulin icodec (previously
named LAI287). Insulin icodec is anticipated
to be the first once-weekly insulin and have
similar glucose-lowering effect and safety
profile to once-daily insulin glargine U100.
Based on the phase 2 results, Novo Nordisk
plans to initiate a phase 3 clinical trial pro-
gramme in second half of 2020.
Obesity care
Clinical progress
We initiated a phase 2 trial for the long-act-
ing amylin analogue AM833, intended
for chronic weight management with a
once-weekly subcutaneous administration.
Regulatory events
We obtained approval of Esperoct® (the
brand name for N8-GP) in the US, the EU
and Japan for prophylaxis and on-demand
treatment of all age groups, in the EU above
12 years of age, of haemophilia A patients.
In addition, the regulatory file was submit-
ted for the once-weekly growth hormone
derivative, somapacitan, for the treatment
of adult growth hormone deficiency, to the
US FDA and EMA.
Clinical progress
We initiated the phase 3 programme (REAL
4) for somapacitan in children with growth
hormone deficiency.
Furthermore, we initiated the explorer7
and explorer8 phase 3 clinical trials with
subcutaneous prophylactic treatment of
concizumab in people with haemophilia A
or B with inhibitors and a parallel trial in
haemophilia A or B patients without inhib-
itors. The objective of these trials is to es-
tablish the safety and efficacy of once-daily
subcutaneous concizumab as a pen device
based on prophylactic treatment to reduce
the number of bleeds.
We initiated the phase 1/2 trial for Mim8.
Mim8 is a next-generation factor VIII mi-
metic bi-specific antibody for subcutaneous
prophylaxis of haemophilia A regardless of
inhibitor status.
Other serious chronic diseases
Clinical progress
Gilead Sciences, Inc. and Novo Nordisk
established a collaboration on clinical trial
activities, by combining compounds from
their respective pipelines in non-alcoholic
steatohepatitis (NASH). The clinical trial
is a proof-of-concept study combining
Novo Nordisk's semaglutide and Gilead's
small molecules; the FXR agonist cilofexor
and the ACC inhibitor firsocostat for the
treatment of people with NASH. Results are
expected in the first half of 2020.
Finally, we initiated the first human dose trial
(phase 1) for a subcutaneous PCSK9i. The
trial is designed as a dose escalation trial
with the aim to establish the safety, tolera-
bility and pharmacokinetics of PCSK9i. The
trial will form the basis for a review of the
options for further drug development of a
PCSK9i within the cardiometabolic space. •
Novo Nordisk Annual Report 2019Consolidated statements Introducing Novo Nordisk
Our business
Governance
26
Social performance
Novo Nordisk accounts for social
performance on three dimensions: patients,
employees and responsible business in
pursuit of the ambition to be a sustainable
business. Policies, actions and governance
oversight are in place to prevent any un-
wanted impacts and promote social progress
through global access to healthcare, a safe,
healthy and inclusive working environment
with equal opportunities for all, business
conduct with respect of others´ integrity and
human rights, and financial contributions to
communities where Novo Nordisk operates.
Patients
Novo Nordisk is committed to driving
change to defeat diabetes and other serious
chronic diseases. To fulfil this purpose, Novo
Nordisk pioneers scientific breakthroughs,
expand access to our medicines, and work
to prevent and ultimately cure disease.
In 2019, Novo Nordisk provided medical
treatment to an estimated 30.0 million peo-
ple with diabetes worldwide, compared with
29.2 in 2018. This 3% increase was primar-
ily driven by sales of long-acting, premix and
fast-acting insulins and GLP-1 products.
Through Novo Nordisk’s Access to Insulin
Commitment, the company guarantees to
provide low-priced human insulin to gov-
ernments in the poorest parts of the world
and selected humanitarian organisations
at a ceiling price of USD 4 per vial. As of
2019, the guarantee is expanded to include
an additional 29 middle-income countries.
This means that a total of 78 countries, as
well as selected humanitarian organisa-
tions, can benefit from this guarantee. An
estimated 2.9 million people were treated
with insulin under this commitment in
2019, of which approximately 200,000
people were reached through sales to
humanitarian organisations. In 2019, the
average price the insulin was sold at equals
USD 0.12 per patient per day. Beyond this
commitment, Novo Nordisk sold human
insulin at or below the ceiling price in other
countries, reaching an estimated additional
2.2 million people in 2019.
Novo Nordisk has several initiatives,
programmes and partnerships focused on
increasing access to care all over the world.
See novonordisk.com.
Novo Nordisk takes a patient-centred ap-
proach in its care delivery model and learns
with patients. For additional information,
see the 'Our Business section' and
novonordisk.com.
Employees
Novo Nordisk aims to be an attractive
employer that offers a safe and healthy,
inclusive and engaging working environ-
ment in which all employees have equal
opportunities to realise their potential.
At the end of 2019, the total number of
employees was 43,258, corresponding to
42,703 full-time positions, which is a less
than 1% increase compared with 2018.
The underlying growth in employees was
mainly driven by Region China. Employee
turnover decreased from 11.7% in 2018 to
11.4%.
Novo Nordisk’s responsibility to respect la-
bour rights applies to our global operations
as a global minimum standard of business
conduct. In 2019, the Global Labour Code
of Conduct was revitalised and reinforced
to ensure alignment with Novo Nordisk’s
Business Ethics Compliance Framework,
which includes respect of human rights.
The Code of Conduct describes expected
global minimum labour rights requirements
for Novo Nordisk employees including the
principles concerning fundamental rights in
the eight ILO Core Conventions and labour
rights as stipulated in the International Bill
of Human Rights. Minimum paid maternity
leave is increased from 12 to 14 weeks
globally and a right to paid paternity leave
is introduced. Moreover, guidance to avoid
forced and bonded labour/child labour
and young workers is better described, the
right to social security is affirmed, and life
insurance for all employees is introduced.
For more information see
novonordisk.com.
In addition, Novo Nordisk entered a 5-year
living wage programme with an external
global non-profit business network and
consultancy. The objective is to ensure that
all employees are paid a living wage, i.e.
adequate to purchase basic goods and ser-
vices necessary to achieve a basic standard
of living, based on calculations of living
wages in the countries we operate in. An
analysis indicated that this is the case.
By the end of 2019, the gender distribution
among managers was 60% men and 40%
women, unchanged from 2018.
Through 2019 diversity and inclusion have
been strategic and tactical priorities for
Novo Nordisk. The launch of the Diversity
Aspiration of achieving gender balance at
all managerial levels and the Diversity Ac-
tion Plan with new guidelines and flexible
working conditions have created direction
towards becoming a more inclusive compa-
ny. Novo Nordisk acknowledges the impor-
tance of leadership role modelling inclusive
behaviour to lead a sustainable work place
where everyone is able to perform at their
best. The strong stance on diversity and
inclusion will continue in 2020 with focus
on realising continuous impact from the
initiatives.
Novo Nordisk is committed to ensuring
fair and equal treatment, opportunities –
and pay – for all employees regardless of
gender. In 2019, we conducted a study on
gender and equal pay covering more than
50 countries and over 25,000 employees in
order to reveal any differences in pay level
or annual bonus due to gender. In a few
locations, we identified some differences
that need to be further investigated, and
if due to gender, corrected. The equal pay
study will be repeated in 2020 to ensure a
continued focus.
The average frequency rate of occupational
accidents with absence was 2.2 per million
working hours in 2019 compared with
2.4 in 2018. In 2019, Novo Nordisk had
one work-related fatality compared with
none in 2018. Novo Nordisk works with a
zero-injury mindset and remains com-
mitted to continuously improving safety
performance. Employees are encouraged
to always make the safe choice, and it is
emphasised that safety behaviour is part of
the company values.
Novo Nordisk Annual Report 2019Consolidated statements Introducing Novo Nordisk
Our business
27
Responsible business
Measures are taken to ensure that Novo
Nordisk conducts its business in a respon-
sible way, in accordance with the Novo
Nordisk Way.
Business ethics, data privacy and
human rights
In Novo Nordisk Business Ethics, Data Priva-
cy and Human Rights is about acting with
integrity and in compliance with the Novo
Nordisk Way, the Business Ethics Code of
Conduct as well as international and local
standards for responsible business conduct.
Training in Business Ethics is mandatory
and a high priority. Annual Business Ethics
training is required for all employees, includ-
ing new hires. Business Ethics training is
therefore a key element of the onboarding
programmes. In 2019, 99% of all relevant
employees completed and documented
their training. This high level is attributed to
the constant focus on and communication
by senior management of the importance
of business ethics compliance. In 2019, 34
business ethics reviews were completed
with 87 findings, compared with 33 re-
views with 113 findings in 2018. Based on
the completed business ethics reviews, it is
Group Internal Audit's assessment that the
business ethics compliance level is sound.
Management action plans and closure of
findings progressed as planned, and there
were no overdue Management actions or
findings at the end of the year.
During 2019 Novo Nordisk developed and
approved its internal corporate require-
ments on Data Privacy and Human Rights
which is operationalised in the Novo
Nordisk’s Business Ethics Code of Conduct.
The requirements set out guidance and
expectations to all employees. Furthermore,
Data Privacy and Human Rights risks (‘risks
to people’) were integrated into the Busi-
ness Ethics risk methodology, as the basis
for risk management in the Novo Nordisk
global organisation as of 2020.
Progress was made in regard to manage-
ment of salient human rights issues beyond
those already addressed by existing global
standards and programmes. In 2019, for
patient safety and the right to health,
we further increased the share of Novo
Nordisk subsidiaries providing access
to safety reporting with local language
directions on local websites, from 90% in
2018 to 96% in 2019. For availability and
affordability aspects of the right to health,
see progress above. To mitigate risks of
exploitation and ensure respect for donors’
right to free and informed consent among
others, we evaluated and delisted human
biosample providers and reduced the ratio
of the unevaluated providers we use, from
12% in 2018 to 6% in 2019. We have
also developed a risk-based global due
diligence system. The Responsible Sourcing
standards were updated in December 2019
to strengthen its human rights coverage.
For our due diligence on modern slavery
risks, see Novo Nordisk’s Modern Slavery
Statement at novonordisk.com.
In 2019, a total of 236 supplier audits, un-
dertaken by Novo Nordisk's own organisa-
tion, were conducted to assess compliance
levels with the company's standards for
suppliers. Of these, 27 were responsible
sourcing audits and one critical finding was
issued regarding working hours. An action
plan with deadlines has been agreed upon
and a re-audit is planned for 2020.
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 rel-
evant 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 has APAs in place covering
intercompany transactions with the US,
Canada, Japan, India and China corre-
sponding to more than 60% of total sales.
Novo Nordisk's tax strategy is endorsed by
the Board of Directors.
Long-term social targets
Novo Nordisk has two long-term social
targets related to employee engagement
and trust.
Product quality
Novo Nordisk had four product recalls from
the market in 2019, compared with three
in 2018. As in 2018, none of the recalls
were critical. Local health authorities were
informed in all instances to ensure that dis-
tributors, pharmacies, doctors and patients
received appropriate information.
The level of employee engagement and
commitment to the company’s values re-
mains high. In the annual employee survey,
conducted in the second quarter of 2019,
91% of employees responded positively to
a set of questions to measure the level of
engagement, same as in 2018. The target
is at least 90%.
In 2019, as in 2018, there were no failed
inspections by regulatory authorities
among those resolved at year-end. In
2019, 66 inspections were conducted at
Novo Nordisk’s sites, at clinics conducting
investigations for Novo Nordisk or for
voluntary ISO 9001 certification, compared
with 75 inspections in 2018. At year-end,
44 inspections had been passed and 22
were unresolved. Follow up on unresolved
inspection continues in 2020.
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. See 'Note 2.6 income
taxes and deferred income taxes' and 'Note
9.8 total tax contribution'.
The level of trust in Novo Nordisk among
key stakeholders - people with diabetes,
general practitioners and diabetes special-
ists - is an indicator of the extent to which
the company lives up to stakeholders' ex-
pectations and the likelihood that they will
trust, support and engage with the com-
pany. The company trust score, measured
on a scale of 0-100, decreased to 78.2
from 84.5 in 2018. The decline in trust can
best be explained by the increased scrutiny
on pharma industry throughout 2019, in
particular in regards to pricing, access and
affordability of medicines, which continues
to be reflected in media sentiment and
social media conversations. The decline in
trust is not unique to Novo Nordisk, but is a
trend across the pharma sector. Data were
collected between June and September
2019; a score between 70 and 80 is con-
sidered strong. The target is at least 80.
Read more details in the 'Consolidated
social statement' and novonordisk.com. •
Novo Nordisk Annual Report 2019Consolidated statementsGovernance Introducing Novo Nordisk
Our business
28
Environmental performance
Waste
Compared to 2018, waste decreased by
13% in 2019. This was due to a decreased
amount of both ethanol waste and organic
residues from the production of API in
Kalundborg.
Novo Nordisk has a bold and simple
ambition: to have zero environmental
impact. To get there we are adopting a
circular mindset – designing products that
can be recycled or re-used, reshaping our
business practice to minimise consumption
and eliminate waste, and working with
suppliers who share our ambition. Our bold
ambition is communicated through the
new Circular for Zero environmental strate-
gy. We measure our progress based on use
of resources, emissions and waste.
Resources
In 2019, the energy consumption for op-
erations decreased slightly compared with
2018. There is a continued focus on ener-
gy-saving projects within production, and
projects implemented in 2019 are expected
to result in annual savings of 72,000 GJ.
Water consumption in production sites in
2019 increased slightly by 2% compared
with 2018. Three facilities in Algeria, Brazil
and China are in areas with water stress
or high seasonal variability. These sites
accounted for 14% of the total water con-
sumption in 2019, and there is a continued
focus on reducing water consumption
across these sites.
As part of the new Circular for Zero
strategy, procurement is collaborating with
suppliers to reduce environmental impact
across the value chain via a gradual shift to
sustainably sourced materials.
Novo Nordisk is also working to ensure ex-
isting and new products are fit for circulari-
ty, and, in 2019, a Circular Design Guideline
was developed within R&D to reduce the
environmental footprint of our devices.
Emissions
In 2019, total emissions across operations
and transportation were 306,000 tons CO2,
which is a 10% increase compared to 2018,
primarily due to a significant increase in
emissions from product distribution. This was
due to an increase in distributed volume, and
the fact that there was more air freight than
sea freight due to supply and market-driven
challenges. In 2020, Novo Nordisk has focus
on ensuring a shift to sea freight and to en-
sure efficient production planning to reduce
emissions from product distribution.
Emissions from production remained stable
compared to 2018. At the end of 2019, the
conversion of Asnæs power plant in Kalund-
borg, Denmark was completed in collab-
oration with the energy company, Ørsted.
This means that future heat and steam for
our largest production site will come from
sustainable biomass instead of fossil fuels.
Overall, 93% of waste generated from
production is recycled, used for biogas
production or incinerated in waste-to-ener-
gy plants. In 2019, 1% of total waste was
sent to landfill.
One strategic focus of the Circular for Zero
strategy is to investigate the end-of-life
challenge of devices following patient use,
for the materials can be recovered and
recycled into new products.
With the use of bionatural gas and steam
based on biomass in Denmark, as well
as power from renewable sources across
global production sites, it is expected that
more than 75% of the total energy use for
production sites will be based on renew-
able sources in 2020.
Emissions from global offices and labs
decreased by 15,000 tons CO2 in 2019. As a
part of the new Circular for Zero strategy, all
offices and labs will source renewable power
by 2030. In 2019, there was a significant re-
duction in CO2 emissions from the R&D site
in Beijing, due to sourcing of wind power.
Emissions from company cars remained
stable at 62,000 tons CO2 in 2019. In order
to decrease emissions from company cars
and encourage the global shift to electric
vehicles, Novo Nordisk joined EV100 this
year. This partnership means that Novo
Nordisk commits to transitioning the entire
fleet of approximately 8,000 vehicles to
hybrid and electric vehicles by 2030.
Emissions from business flights are estimat-
ed to be 65,000 tons CO2 in 2019, a small
increase compared to 2018. In 2019, Novo
Nordisk invested in 55 new, larger video
conferencing systems and five immersive
video systems to enhance the conferencing
experience. In 2019, over 90 major events
were hosted from Livestream, including
updates from Executive Management.
An ambitious circular supplier program,
'Suppliers for Zero', was initiated as part of
the Circular for Zero strategy. Twelve key
suppliers have enrolled in 2019 of which
four have committed to achieving zero CO2
emissions.
Long-term environmental targets
In 2019, 76% of power for production sites
was sourced from renewable energy. In
2019, Novo Nordisk finalised an agreement
in the United States to have solar energy
cover power consumption across all US op-
erations. This agreement is effective as of
2020. With this solution, Novo Nordisk will
achieve its target to source 100% renew-
able power at all production sites in 2020.
In 2019, total emissions across operations
and transportation was 306,000 tons CO2.
Emissions are expected to decrease signifi-
cantly in 2020 due to various renewable
energy projects, including solar power
across all US operations, wind power in
Europe and green steam in Denmark. Emis-
sions from transportation are also expected
to decrease due to a company car policy
that encourages transition to hybrid and
electric vehicles and through collaboration
with EV100, (The Climate Group's global
initiative for electrical vehicles). The target
is to have zero emissions from operations
and transportation by 2030 and it covers
production sites, over 80 offices and labo-
ratories, company cars, business flights and
product distribution and was approved by
the Science Based Target Initiative.
Read more details in the 'Consolidated
environmental statement' and novonordisk.
com. For a full breakdown of climate and
water impacts please refer to the publicly
available Novo Nordisk CDP disclosures.
Details about Circular for Zero, including
R&D developments and procurement can
be found on novonordisk.com. •
Novo Nordisk Annual Report 2019Consolidated statementsGovernance Introducing Novo Nordisk
Our business
Governance
29
Managing risks to
protect value
For Novo Nordisk to continue to be a sustainable business, we must
anticipate and adapt to changes in our markets to create new stra-
tegic opportunities. Managing the associated risks rigorously and
systematically is key in order for us to create and protect value over
the short, medium and long term.
Scenario and risk-thinking exercises
are part of our strategic planning process.
They include analyses of market dynamics
as well as socioeconomic and political de-
velopments that present risks or opportuni-
ties for our business.
Balancing affordable care and
commercial value
In the short and medium term, we zoom in
on trends in the healthcare ecosystem we
rely on. For example, in the diabetes care
market, payers continue to put pressure on
costs of insulin and are unwilling to pay a
premium for incremental innovation.
For our business, the risks are reduced
profit from lower prices, and the damage
to brand trust could be significant if we were
seen to be profiteering from the situation.
The US healthcare system’s structural chal-
lenges continue to be a risk to our business
as well. Affordable access to essential medi-
cines is a big issue for the approximately five
percent of Americans who are uninsured.
This will be front and centre in the 2020
elections. Meanwhile, US market dynamics
are forging new healthcare alliances that
affect negotiations between payers and
providers of medicines. Access to afford-
able care is not just an US issue. Globally,
healthcare systems are struggling to provide
quality care at a sustainable cost, while the
burden of chronic disease keeps rising.
Digital disruption
New digital technologies in healthcare are
offering more personalised treatment and
better management of chronic diseases.
This is an opportunity to deliver more value
to our stakeholders and help patients live
a life free from the limitations of their
disease.
But the rise of digital healthcare brings
risks of its own. New entrants and disrup-
tive competitors, including large tech play-
ers as well as new start-ups, will be able
to leverage big data analytics to address
some of the inefficiencies in the current
healthcare systems. This will affect some
of our markets, and we will have to act to
avoid losing market share.
Artificial Intelligence (AI) and automation in
the sector should make us more productive
and speed up our time-to-market. Today,
we are running several AI and automation
pilots to accelerate innovation and harvest
efficiency gains. Highly agile technolo-
gy sector companies could enter with
disruptive approaches to health care. AI is
associated with issues such as unpredict-
ability of future uses.
Moreover, new collaborations with per-
sonal healthcare players bring new risks
– particularly around increased complexity,
shared commercial arrangements and data
regulation. The personal healthcare apps
need to be tested for quality and reliabil-
ity. If they do not work properly and give
the correct guidance, they could present
a health risk to the patients using our
products.
Facing up to environmental risks
Across all of these trends runs a growing
and widely acknowledged concern for the
global environment, particularly in relation
to climate change.
We are preparing for the risks and oppor-
tunities which will arise from changing
weather patterns, sea level rises and other
climate impacts. As recommended by the
Task Force on Climate-related Financial
Disclosures, we are integrating climate
change scenarios to identify short, medium
and long-term risks within our production
and supply chain to ensure a steady supply
of medicine to patients.
Rigorous and robust risk management
A rigorous approach to enterprise risk man-
agement helps our management protect
and enhance the value of our tangible and
intangible assets.
We are continually exposed to risks
throughout our value chain – from early
discovery of new, promising molecules to
the production and delivery of medicines
to patients. Some risks are inherent in the
pharmaceutical industry, such as delays or
failures of potential new medicines in the
R&D pipeline. Other risks such as supply
disruptions and competitive threats are
well-known to any manufacturing com-
pany with global production.
We will never compromise on product
quality, patient safety and business ethics:
these are front and centre of our enter-
prise-wide risk management set-up. We
apply a two-way lens and assess risks to
people as well as potential financial loss
and reputational damage.
Executive Management and the Board
of Directors review a ‘heat map’ of our
biggest risks biannually. This map is based
on insights from management teams in all
organisational areas and includes risks that
could cause significant disruptions to the
business over a three-year horizon. There is
a more detailed overview of our key risks in
the following overview.
Novo Nordisk Annual Report 2019Consolidated statements Introducing Novo Nordisk
Our business
Governance
Consolidated statements
30
Novo Nordisk's key risks
What is the risk?
What is the impact?
What actions are taken?
Delays or failure of products in pipeline
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 production facilities.
Patients would not benefit from innovative
treatments and Novo Nordisk’s future posi-
tion as a leader could be jeopardised if we
were 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.
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 regula-
tors to review clinical findings and obtain
guidance on clinical programmes.
Supply disruptions
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 com-
pany sites or at key suppliers’ production
facilities.
If Novo Nordisk were prevented from
supplying products to markets, pharmacies
and hospitals could face product shortages,
with potential implications for patients’
daily treatment needs.
Competition and market developments
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 or obtain label change for
marketed products, leading to increased
competition.
Patients would not have access to the
clinical benefits of new products if Novo
Nordisk were prevented from launching
new products due to reimbursement
restrictions and newer products could be
niched for use in narrow sub-populations.
Across all markets, product categories
could face intensified competition and
in these categories lower realised prices
would be expected.
Compromises to product quality and patient safety
Product quality and patient safety may be
compromised if, for example, a production
facility is found to be in noncompliance, a
product is not within specifications, or if
side effects that were not detected in clini-
cal 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.
Internal quality audits and annual inspec-
tions 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 pre-
vent 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 bene-
fits of new products.
A robust quality management system,
improvement plans and systematic senior
management reviews are in place. Author-
ity inspections and internal quality audits
are conducted at production sites. When
issues are found within the production pro-
cess of clinical or marketed products, root
causes are identified and corrected and, if
necessary, products are recalled.
Novo Nordisk Annual Report 2019 Introducing Novo Nordisk
Our business
Governance
Consolidated statements
31
What is the risk?
What is the impact?
What actions are taken?
IT security breaches
Disruption to IT systems, such as virus
attacks, and breaches of data security,
may happen across the global value chain,
where reliable IT systems and infrastruc-
ture are critical for the company’s ability to
operate effectively.
Patients’ or other individuals’ privacy could
be compromised if confidential information
were disclosed, and breaches of IT security
could have a severe impact on Novo Nor-
disk’s ability to maintain operations and
hence on its financial situation. In produc-
tion environments, for example, breaches
of IT security could impact Novo Nordisk’s
ability to produce and safeguard product
quality.
IT security technologies and controls are
in place to help prevent intruders from
causing damage to systems and gaining
access to critical data and systems. Con-
tinuity plans are in place in the event of
non-availability of IT systems. Awareness
campaigns, access controls and intrusion
detection and prevention systems have
been implemented. Company-wide internal
audits of IT security controls are conducted
to detect and mitigate any breaches.
Currency impact and tax disputes
Exchange rate fluctuations, disputes
with tax authorities and changes to tax
legislation are external factors. 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 towards
EUR.
Novo Nordisk’s cash flow, statement of
comprehensive income and balance sheet
can be impacted significantly by currency
fluctuations. Changes to tax legislation or
loss of major tax cases could result in signif-
icant tax adjustments and fines, and could
lead to a higher-than-expected tax level for
the company.
Breach of legislation or ethical standards
In a tightly regulated industry, breach of
legislation, industry codes or company
policies may occur in connection with
business interactions, such as with health-
care professionals, business partners or
other stakeholders. Operations in complex
socioeconomic and cultural contexts could
present risks of non-compliance with
Business Ethics standards including human
rights and personal data protection.
Breaches of legislation or ethical standards
could compromise the integrity, dignity and
rights of the individuals involved and could
cause damage to Novo Nordisk’s reputation
and financial situation and could expose
Novo Nordisk to investigations, criminal
and civil sanctions and other penalties.
Loss of intellectual property rights
The validity of patents that are critical for
protecting Novo Nordisk’s commercial
products and candidates in the R&D pipe-
line may be challenged by competitors.
Loss of exclusivity for existing and pipeline
products could impact Novo Nordisk’s
market position, sales and profits.
Expected future cash flows for selected
currencies are hedged to mitigate short-
term impact on earnings and cash flow. An
integrated treasury management system
is in place. Applicable taxes are paid in
jurisdictions where business activity gen-
erates profits. Multi-year advance pricing
agreements with tax authorities have been
negotiated for more than 60% of our sales
in the US, China and Japan. Hedging activ-
ities and calculation of transfer pricing are
subject to internal controls and audit.
Compliance programmes address ad-
herence, such as the Business Ethics
Compliance Framework, supported by
due diligence, standard procedures and
training to ensure compliance with laws,
international standards and regulations
and prevent breaches of standards, with
legal defence where relevant. Compliance
with business ethics standards is subject to
internal audit. Action is taken immediately
on substantiated non-compliance.
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 proac-
tively identified to defend Novo Nordisk’s
intellectual property rights.
Novo Nordisk Annual Report 2019 Introducing Novo Nordisk
Our business
Governance
32
Shares and capital
structure
Through open and proactive communication, the company aims to
provide the basis for fair and efficient pricing of its shares.
However, in practice, A shares and B shares
receive the same amount of dividend per
share. As of 31 December 2019, Novo
Holdings A/S also held a B share capital of
nominally DKK 27,152,800. Novo Holding
A/S's total ownership is reflected in the
following chart of ownership structure.
There is no complete record of all share-
holders; however, based on available
sources of information about the company’s
shareholders, as of 31 December 2019 it is
estimated that shares were geographically
distributed as shown in the chart 'Geo-
graphical split'. As of 31 December 2019,
Ownership structure
Novo Nordisk Foundation
Novo Holdings A/S
76.1% of votes
28.1% of capital
A shares
537 million shares
Share capital and ownership
Novo Nordisk’s total share capital of DKK
480,000,000 is divided into an A share
capital of nominally DKK 107,487,200
and a B share capital of nominally DKK
372,512,800. 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 million
A shares and 1,863 million B shares. Each
A share carries 200 votes and each B share
carries 20 votes.
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 A/S 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. Special rights attached
to A shares include pre-emptive subscrip-
tion 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%.
the free float of listed B shares was 90.1%
(of which approximately 11.9% are listed
as ADRs), excluding the Novo Holdings
A/S holding and Novo Nordisk’s holding of
treasury shares which, as of 31 December
2019, was DKK 36,780,840 nominally. For
details about the share capital, see note 4.1.
Capital structure and dividend policy
Novo Nordisk’s Board of Directors and
Executive Management consider that the
current capital and share structure of Novo
Nordisk serves the interests of the share-
holders and the company well, providing
the strategic flexibility to pursue Novo
Nordisk’s vision. Novo Nordisk’s capital
structure strategy offers a good balance
between long-term shareholder value cre-
ation and competitive shareholder return
in the short term. Novo Nordisk’s guiding
principle is that, after the funding of
organic growth opportunities, investments
and acquisitions, any excess capital should
be returned to investors. The company’s
dividend policy applies a pharmaceutical in-
dustry benchmark to ensure a competitive
payout ratio for dividend payments, which
are complemented by share repurchase
programmes. The final dividend for 2018
paid in March 2019 was equal to DKK 5.15
per A and B share of DKK 0.20 as well
as for ADRs. The total dividend for 2018
was thus DKK 8.15 per A and B share of
DKK 0.20, corresponding to a payout ratio
of 50.6%, which is in line with the 2018
pharma peer group average of 49.4%. In
August 2019, an interim dividend was paid
equalling DKK 3.00 per A and B share of
DKK 0.20 as well as for ADRs. For 2019,
the Board of Directors will propose a
Institutional and
private investors
23.9% of votes
71.9% of capital
B shares
1,863 million shares
Novo Nordisk A/S
Note: Treasury shares are included, however, voting rights of treasury shares cannot be exercised
Novo Nordisk Annual Report 2019Consolidated statements Introducing Novo Nordisk
Governance
33
final dividend of DKK 5.35 to be paid in
March 2020, equivalent to a total dividend
for 2019 of DKK 8.35 and a payout ratio of
50.5%. The company expects to distribute
an interim dividend in August 2020, and
further information regarding such interim
dividend will be announced in connection
with the financial report for the first six
months of 2020. Dividends are paid from
distributable reserves. Share premium is a
distributable reserve and any former share
premium reserve has been fully distributed.
Novo Nordisk does not pay a dividend on
its holding of treasury shares.
Share repurchase programme for
2019/2020
During the twelve-month period beginning
1 February 2019, Novo Nordisk repur-
chased shares worth DKK 15 billion. The
share repurchase programme has primarily
been conducted in accordance with the
safe harbour rules in the EU Market Abuse
Regulation (MAR). 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 17 billion. The total programme may
be reduced in size if significant product
in- licensing or bolt-on acquisition oppor-
tunities arise during 2020. 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 2020,
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 cancel-
ling 50,000,000 treasury shares. After
the implementation of the share capital
reduction, Novo Nordisk’s share capital will
amount to DKK 470,000,000 divided into
A share capital of DKK 107,487,200 and B
share capital of DKK 362,512,800.
Share price development
Novo Nordisk’s share price increased by
29.8% between its 2018 close of DKK
297.9 and the 31 December 2019 close
of DKK 386.65. For comparison purposes,
the Danish OMXC25 stock index increased
by 26% and the pharma peer group
increased by 13% during 2019. The total
market value of Novo Nordisk’s A and B
shares, excluding treasury shares, was
DKK 909,178,012,657 as of 31 December
2019. •
Geographial split*
% of share capital 2019 2018
%
50
40
30
20
10
0
Denmark
North America
UK and Ireland
Other
*Using shareholder registered home countries
Cash distribution to shareholders
Dividend for prior year Interim dividend
Share repurchases in the calendar year Free cash flow
DKK billion
40
30
20
10
0
2016
2017
2018
2019
2020E
Share price performance 2019
Novo Nordisk share price and indexed peers1
Novo Nordisk Pharmaceutical industry index*
OMXC25
DKK
400
360
320
280
240
200
Jan
Feb
Mar
Apr
May
June
July
Aug
Sep
Oct
Nov
Dec
*Pharmaceuticals index comprises: AstraZeneca, Bristol-Myers Squibb, Eli Lilly, GlaxoSmithKline, Johnson & Johnson, Merck,
Novartis, Pfizer, Roche, Sanofi and Novo Nordisk
1. OMX C25 and pharmaceutical industry development have been rebased to Novo Nordisk share price in January 2019
Novo Nordisk Annual Report 2019Our businessConsolidated statements Introducing Novo Nordisk
Governance
34
Corporate
governance
The Board of Directors of Novo Nordisk focuses on good gover-
nance practices. In 2019, one new board member was appointed at
the Annual General Meeting. Two members of Executive Manage-
ment left Novo Nordisk after more than 20 years with the company
and two new members of Executive Management were appointed.
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 Gen-
eral 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 holds the majority
of votes at general meetings. However,
all strategic and operational matters are
decided solely by the Board of Directors
and Executive Management. Read more
about the ownership structure of Novo
Nordisk in 'Shares and capital structure'.
Board of Directors
Novo Nordisk has a two-tier management
structure consisting of the Board of Direc-
tors and Executive Management. The two
bodies are separate, and no one serves as a
member of both.
The Board of Directors supervises Executive
Management, determines the company’s
overall strategy and follows up on its
Corporate governance codes and practices
implementation, the performance, ensures
adequate management and organisation
and, as such, actively contributes to devel-
oping the company as a focused, sustain-
able, global pharmaceutical company.
The Board of Directors may also distribute
extraordinary dividends, issue new shares
or repurchase shares in accordance with
authorisations granted by the sharehold-
ers at the Annual General Meeting and
recorded in the meeting minutes available
at novonordisk.com/about_us.
Shareholder-elected board members serve
for a one-year term and may be re-elected.
Board members must retire at the first An-
nual General Meeting after reaching the age
of 70. One board member is a member 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 seven of the
nine shareholder-elected board members
are independent as defined by the Danish
Corporate Governance Recommendations.
Under Danish law, employees in Denmark
may elect a number of board members
equalling half of the shareholder-elected
board members. 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 again
in 2022. Read more about the members of
the Board of Directors and at novonordisk.
com/about_us.
Compliance
Governance structure
Assurance
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.
Audit of financial data
and review of social and
environmental data
(internal and external)
Facilitation (internal)
Quality audit
and inspections
(internal and external)
Novo Nordisk Annual Report 2019Our businessConsolidated statements Introducing Novo Nordisk
Governance
35
As of 31 December 2019, the Board of
Directors consisted of 13 members, nine of
whom were elected by shareholders and
four of whom were elected by employees
based in Denmark. The Board of Directors
met eight times during 2019. At the
Annual General Meeting in March 2019,
Laurence Debroux was elected as new
member of the Board of Directors.
utive succession, board composition and
succession, potential over-boarding and
training as well as the performance of the
Chairmanship and the board committees.
In addition, each member of the Board
of Directors and Executive Management
is provided with feedback from all other
board members and executives on their
individual performance.
Nomination, self-evaluation and
diversity
A proposal for election or re-election of
shareholder-elected board members is
presented by the Nomination Committee
to the Board of Directors. When recom-
mending candidates to be nominated by
the Board, the Nomination Committee
considers factors such as the balance
between renewal and continuity, the
desired competences and experience, the
performance of the individual Board mem-
bers, the ambition for diversity as well as
independence considerations.
To support continued fulfilment of the
Novo Nordisk Way, in the Board com-
petence profile the Board of Directors
has determined that the Board members
should possess integrity, accountability,
fairness, financial literacy, commitment
and desire for innovation. Additionally, the
following competences and experience
should be represented on the Board: global
business management, strategic operations
and governance, healthcare industry and
market access, research and development,
technology and digitalisation, M&A and
external innovation sourcing, people lead-
ership and change management as well as
finance and accounting, cf. the biographies
of Board members in the overview 'Board
of Directors'. The competence profile,
which includes the nomination criteria, is
available at novonordisk.com/about_us.
The Board of Directors conducts a self-eval-
uation every year. The self-evaluation
includes all members of the Board and Ex-
ecutive Management. The chair has overall
responsibility for conducting the self-eval-
uation. The self-evaluation is facilitated
every third year by external consultants,
who interview all members of the Board of
Directors and Executive Management. For
the subsequent two years, the self-evalu-
ation is facilitated by the secretary of the
Nomination Committee based on written
questionnaires. The process evaluates topics
such as board dynamics, board agenda
and discussions, strategy, culture, exec-
In 2019, the Board evaluation was facili-
tated internally and, in general, revealed
good performance by the Board and
good collaboration between the Board
and Executive Management. The process
also resulted in continued focus on the
implementation of the R&D strategy, on
commercial execution and on being a
sustainable company.
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 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 2019, three
shareholder- elected board members were
female and six were male, while seven
of the nine shareholder-elected board
members were non-Nordic and two were
Nordic. The company thus fulfilled its
nationality ambition and its gender ambi-
tion. The Board of Directors will revisit its
diversity ambition in 2020 and, if needed,
adjust the numbers and parameters which
are currently fulfilled.
In accordance with section 99b of the
Danish Financial Statements Act, Novo
Nordisk discloses current performance
on diversity in the 'Social performance'
section. Novo Nordisk’s diversity policy is
available at novonordisk.com.
Board committees
Chairmanship
The Chairmanship consists of the chair and
the vice chair, both of whom are elected
directly by the shareholders at the general
meetings. At the Annual General Meeting
in 2019, Helge Lund was re-elected as chair
and Jeppe Christiansen was re-elected as
vice chair. The Chairmanship assists the
Board of Directors in the planning of Board
meetings, employment of Executive Man-
agement and other assignments as decided
by the Board.
In 2019, the Chairmanship particularly
discussed commercial execution within
the therapy areas and in different mar-
kets, partnering and acquisition to access
external innovation as well as talent and
leadership development, supervising the
changes in Executive Management and
development of the company culture.
Audit Committee
The Audit Committee assists the Board
of Directors with oversight of the exter-
nal auditors, the internal audit function,
handling hotline complaints, financial,
social and environmental reporting,
business ethics compliance, information
security, insurance coverage, special theme
reviews and other tasks on an ad hoc basis,
as specifically decided by the Board. All
members have relevant industry expertise.
For independence see table on meeting
participation in 2019.
The Audit Committee is appointed by the
Board and consists of:
• Liz Hewitt (chair; financial expert)
• Laurence Debroux (financial expert)
• Andreas Fibig
• Sylvie Grégoire
• Stig Strøbæk
In 2019, the Audit Committee focused
particularly on reviewing and discussing
work performed by internal and external
auditors and held focused sessions on risks
and internal controls in key areas such as
North America Operations, Product Supply
and International Operations. The Audit
Committee also discussed key accounting
policies and estimates, including provi-
sions for sales rebates, indirect production
costs and ongoing tax and legal cases.
The Audit Committee also reviewed and
discussed the status of Information Security
and Business Ethics Compliance within
Novo Nordisk. Finally, the Audit Committee
recommended a preferred external auditor
which is to be selected by the Annual Gen-
eral Meeting in 2021.
Novo Nordisk Annual Report 2019Our businessConsolidated statements Introducing Novo Nordisk
Governance
36
Nomination Committee
The Nomination Committee assists the
Board with oversight of the competence
profile and composition of the Board, nom-
ination of members and committees, the
corporate governance of the company and
other tasks on an ad hoc basis, as specifi-
cally decided by the Board.
The Nomination Committee is appointed
by the Board and consists of:
• Helge Lund (chair)
• Sylvie Grégoire
• Kasim Kutay
• Mette Bøjer Jensen
In 2019, the Nomination Committee
focused particularly on reviewing the com-
position of the Board and considered long-
term succession planning. It also reviewed
the desired competences to be represented
on the Board.
Remuneration Committee
The Remuneration Committee assists the
Board with oversight of the remuneration
policy as well as the actual remuneration
of board members, Board committees and
Executive Management.
The Remuneration Committee is appointed
by the Board and consists of:
• Jeppe Christiansen (chair)
• Brian Daniels
• Liz Hewitt
• Anne Marie Kverneland
In 2019, the Remuneration Committee fo-
cused particularly on conducting a general
review of executive remuneration, includ-
ing proposing changes to the base salary,
the pension, the short-term cash-based
incentive programme, the long-term share-
based incentive programme, the sharehold-
ing requirement, etc., and on developing of
a new Remuneration Policy to be approved
by the Annual General Meeting and a new
separate Remuneration Report to be pre-
sented to the Annual General Meeting.
Research & Development Committee
The Research & Development Committee
assists the Board with oversight of the
research and development strategy, the
pipeline, the R&D organisation and other
tasks on an ad hoc basis, as specifically
decided by the Board.
The Research & Development Committee is
appointed by the Board and consists of:
• Martin Mackay (chair)
• Brian Daniels
• Sylvie Grégoire
• Thomas Rantzau
In 2019, the Research & Development
Committee focused particularly on
reviewing the results of clinical trials and
discussed potential additional research and
development activities to further explore
opportunities within subcutaneous and oral
GLP-1 as well as competitor initiatives. In
addition, the committee discussed the po-
tential opportunities for addressing unmet
needs in NASH. It also reviewed potential
external research collaborations as well as
acquisitions.
See the Corporate Governance Report or
novonordisk.com/about_us for a more de-
tailed description of the Board committees,
their charters, details on members and full
reports on the Board committees’ activities
in 2019.
Executive Management
Executive Management is responsible
for overall day-to-day management, the
organisation of the company, allocation of
resources, determination and implemen-
tation 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. The Board of Directors appoints
members of Executive Management and
determines their remuneration. The Chair-
manship reviews the performance of the
executives.
To ensure the organisational implementa-
tion of the strategy, Executive Management
has established a Management Board
consisting of the chief executive officer,
executive vice presidents and senior vice
presidents.
As of 31 December 2019, Executive
Management consisted of nine members
including the chief executive officer. As of
April 2019, Jesper Brandgaard retired from
Novo Nordisk and Ludovic Helfgott was
appointed executive vice president, head of
Biopharm. As of August 2019, Lars Green
resigned from Novo Nordisk and Monique
Carter was appointed executive vice presi-
dent, head of People & Organisation.
The three executives who are based outside
Denmark and who have responsibility for
Biopharm, International Operations and
North America Operations, respectively,
are not registered as executives with the
Danish Business Authority.
Remuneration
Novo Nordisk’s Remuneration Principles
provide the framework for the remuner-
ation of the Board and Executive Man-
agement. The Remuneration Principles
were most recently changed in March
2019, where the Annual General Meeting
approved amendments in order to reflect
the fact that the Research & Development
Committee had become a permanent
Board committee and in order to ensure
that Novo Nordisk is able to reclaim
incorrect pay-outs of incentives based on a
misstatement of data regardless of whether
this originates due to wilful misconduct or
gross negligence. Moreover, the Annual
General Meeting approved the denomi-
nation of travel allowance in DKK instead
of EUR. These principles are available at
novonordisk.com/about-novo-nordisk/cor-
porate-governance/remuneration.html.
Novo Nordisk has prepared a separate
Remuneration Report that describes the
remuneration awarded or due during 2019
to the members of the Board and the Exec-
utive Management of Novo Nordisk A/S as
registered with the Danish Business Author-
ity. This report also includes a description of
key developments in remuneration in 2019,
the actual remuneration of board members
and executives, an overview of remuner-
ation awarded during the previous five
financial years, remuneration benchmarks
and shareholdings by board members and
executives. The Remuneration Report is
available at: novonordisk.com/about-no-
vo-nordisk/corporate-governance/remuner-
ation.html.
Read more in the
Remuneration report
Assurance
The company’s financial reporting and
the internal controls of financial reporting
processes are audited by an independent
audit firm elected at the Annual General
Meeting. As part of Novo Nordisk’s com-
mitment to its social and environmental
Novo Nordisk Annual Report 2019Our businessConsolidated statements Introducing Novo Nordisk
Governance
37
Disclosure regarding change
of control
The EU Takeover Bids Directive, as partially
implemented by the Danish Financial State-
ments Act, requires listed companies to
disclose information that may be of interest
to the market and potential take-over bid-
ders, in particular in relation to disclosure
of change-of-control provisions.
Novo Nordisk discloses that the Group has
one significant agreement with a US payer
which takes effect, alters or terminates
upon a change of control of the Group. If
effected, a takeover could – at the discre-
tion of the relevant counterparty – lead to
the termination of such agreement. Given
the ownership structure of Novo Nordisk,
the risk is considered to be remote.
In relation to Executive Management,
the current employment contracts allow
severance payments of up to 36 months'
fixed base salary plus pension contributions
in the event of a merger, acquisition or
takeover of Novo Nordisk.
For information about the ownership
structure of Novo Nordisk, see 'Shares and
capital structure'.
ment and recommending candidates
for the Executive Management re-
sides with the Chairmanship and not
with the Nomination Committee.
3.4.7 Tasks of the Remuneration Commit-
tee: responsibility for the remunera-
tion policy applicable to employees
in general resides with Executive
Management and not with the Re-
muneration Committee.
4.1.5 Termination payments: one executive
employment contract entered into
before 2008 allow for severance pay-
ments of more than 24 months’ fixed
base salary plus pension contribu-
tion, and thus the total value of the
remuneration relating to the notice
period and of the severance payment
exceeds two years of remuneration.
Novo Nordisk complies with the corporate
governance standards of NYSE applicable
to foreign listed private issuers. A summa-
ry 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 Statu-
tory Corporate Governance Report.
The Statutory Corporate Governance
Report, in accordance with section 107b
of the Danish Financial Statements Act,
the applicable corporate governance codes
for each stock exchange and an overview
of Novo Nordisk’s compliance with and
explanations for all applicable Nasdaq and
NYSE Corporate Governance recommenda-
tions, are all available at novonordisk.com/
about-novo-nordisk/corporate-governance/
Recommendations-and-practices.html
Read more in the
Corporate Governance report
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 per-
formance information covers aspects that
are deemed to be material and verifies the
internal control processes for the informa-
tion reported.
Novo Nordisk’s internal audit function
provides independent and objective assur-
ance, 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.
Other types of assurance activity – quality
audits and values audits, known as facili-
tations – help to ensure that the company
adheres to high quality standards and op-
erates in accordance with the Novo Nordisk
Way. Read more about the Novo Nordisk
Way in 'Leading a sustainable business'.
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 Depos-
itory Receipts (ADRs).
Today, Novo Nordisk adheres to all Danish
Corporate Governance Recommendations
designated by Nasdaq Copenhagen except
the following five recommendations:
3.3.2 Disclosure of additional information
about the Board members: informa-
tion on matters such as numbers of
shares owned and changes during
the year is disclosed in the Remuner-
ation Report for 2019 and not in the
management commentary.
3.4.2 Independence of Board committees:
the majority of the members of the
Nomination Committee and the
Remuneration Committee are not
independent.
3.4.6 Tasks of the Nomination Committee:
responsibility for succession manage-
Novo Nordisk Annual Report 2019Our businessConsolidated statements Introducing Novo Nordisk
Governance
38
Board of Directors
Helge Lund — Chair
Chair of the Board of Novo Nordisk A/S since 2018
(member for one year in 2014-2015 and again in 2017) and
chair of the Nomination Committee since 2018 (member
since 2017).
Position and management duties: Operating advisor to
Clayton Dubilier & Rice, US. Chair of the Board of BP p.l.c.,
UK. Member of the boards of P/F Tjaldur, Faroe Islands,
Inkerman Holding AS, Norway, and Belron SA, Luxembourg.
Member of the Board of Trustees of the International Crisis
Group.
Special competences: Extensive executive and board
experience in large multinational companies and significant
financial knowledge.
Education: MBA from INSEAD, France (1991) and MA in
Economics from the Norwegian School of Economics &
Business Administration (NHH), Norway (1987).
Jeppe Christiansen — Vice chair
Vice chair and member of the Board of Novo Nordisk A/S
since 2013. Chair of the Remuneration Committee since
2017 (member since 2015).
Positions and management duties: Chief executive
officer of Maj Invest Holding A/S as well as board member
and/or executive director in three wholly owned subsidiaries
of this company, all in Denmark. Chair of Haldor Topsøe A/S
and Emlika ApS and board member of a wholly owned sub-
sidiary of this company and of the boards of Novo Holdings
A/S and KIRKBI A/S, all in Denmark. Member of the Board
of Governors of Det Kgl. Vajsenhus, Denmark. Adjunct
Professor, Department of Finance, Copenhagen Business
School, Denmark.
Special competences: Executive background and extensive
experience within the financial sector, in particular in rela-
tion to financial and capital market issues as well as insight
into the investor perspective.
Education: MSc in Economics from University of
Copenhagen, Denmark (1985).
Brian Daniels
Member of the Board of Novo Nordisk A/S since 2016,
member of the Remuneration Committee since 2018 and
member of the Research & Development Committee since
2017.
Position and management duties: Partner with 5AM
Venture Management, LLC, and member of the board at
Caballeta Bio Inc., both in the US.
Special competences: Extensive experience in clinical
development, medical affairs and corporate strategy
across a broad range of therapeutics areas within the
pharmaceutical industry, especially in the US.
Education: MD from Washington University, St. Louis, US
(1987), and MA in Metabolism and Nutritional Biochemistry
(1981) and BSc in Life Sciences (1981), both from Massa-
chusetts Institute of Technology, Cambridge, US.
Laurence Debroux
Member of the Board of Novo Nordisk A/S and member of
the Audit Committee since 2019.
Positions and management duties: Group chief financial
officer, executive board member, of Heineken N.V., the
Netherlands. Member of the board of Exor N.V., the Nether-
lands, and of HEC Paris Business School, France.
Special competences: Significant financial and accounting
experience, extensive global experience within the pharma-
ceutical industry and experience from executive positions in
major international companies.
Education: Master Degree from HEC Paris, Ecoles des
Hautes Etudes Commerciales, France (1992).
Andreas Fibig
Member of the Board of Novo Nordisk A/S and member of
the Audit Committee since 2018.
Position and management duties: Chair and chief exec-
utive officer of International Flavors & Fragrances Inc., US,
Chair of the Board of the German American Chamber of
Commerce, and Executive Committee member of the World
Business Council for Sustainable Development (WBCSD).
Special competences: Extensive global experience within
biopharmaceutical companies, in-depth knowledge of strat-
egy, sales and marketing and knowledge about how large
international companies operate.
Education: Degree in Marketing from Berlin School of
Economics, Germany (1982).
Sylvie Grégoire
Member of the Board of Novo Nordisk A/S and of the
Audit Committee since 2015, member of the Research &
Development Committee since 2017, and member of the
Nomination Committee since 2018.
Positions and management duties: Chair of the board of
Corvidia Therapeutics Inc., executive chair of the board of
EIP Pharma, Inc., and member of the board of Perkin Elmer
Inc., all in the US.
Special competences: Deep knowledge of the regulatory
environment in both the US and the EU, with experience
of all phases of the product life cycle, including discovery,
registration, pre-launch and managing the life cycle while
on the market. She also has financial insight, including into
P&L responsibility.
Education: Pharmacy Doctorate degree from the State
University of NY at Buffalo, US (1986), BA in Pharmacy from
Laval University, Canada (1984), and Science College degree
from Séminaire de Sherbrooke, Canada (1980).
Competences and experience to be represented on the Board (shareholder-elected Board members only)
Global business
management, strategic
operations and gov-
ernance
Healthcare industry
and market access
Research and
development, technol-
ogy and digitalisation
M&A and external
innovation sourcing
People leadership and
change management
Finance and
accounting
Read more on competences and experience to be represented on the Board under “Nomination” in the Corporate Governance article.
Novo Nordisk Annual Report 2019Our businessConsolidated statements Introducing Novo Nordisk
Governance
39
Liz Hewitt
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 Remuneration Committee since 2018.
Position and management duties: Member of the board
of Melrose Industries plc, UK, where she chairs the audit
committee, and member of the board of National Grid plc,
UK. External member of the House of Lords Commission,
UK, where she chairs the audit committee.
Special competences: Extensive experience within the
field of medical devices, significant financial knowledge,
including mergers and acquisitions, and knowledge about
how large international companies operate.
Education: FCA (UK Institute of Chartered Accountants)
(1982), and BSc (Econ Hons) from the University College in
London, UK (1977).
Mette Bøjer Jensen
Member of the Board of Novo Nordisk A/S (employee
representative) and member of the Nomination Committee
since 2018.
Position and management duties: Wash & Sterilisation
Specialist in Product Supply, Novo Nordisk A/S.
Education: Graduate Programme (HD) in Business Admin-
istration (Strategic management and business development)
from Copenhagen Business School, Denmark (2010), and
MSc in Biotechnology, Aalborg University, Denmark (2001).
Kasim Kutay
Member of the Board of Novo Nordisk A/S and member of
the Nomination Committee since 2017.
Positions and management duties: Chief executive
officer of Novo Holdings A/S, Denmark. Member of the
board of Novozymes A/S, Denmark, and of the Life Sciences
Advisory Board of Gimv NV, Belgium.
Special competences: Extensive experience as financial
advisor to the pharmaceutical, biotechnology and medical
device industries. Mr Kutay has also advised healthcare
companies on an international basis including companies
based in Europe, the US, Japan and India.
Education: MSc in Economics (1987), and BSc in Economics
(1986), both from the London School of Economics, UK.
Anne Marie Kverneland
Member of the Board of Novo Nordisk A/S since 2000
(employee representative) and member of the Remuneration
Committee since 2017.
Positions and management duties: Laboratory technician
and full-time union representative in Novo Nordisk A/S.
Member of the Board of Directors of the Novo Nordisk
Foundation since 2014.
Education: Degree in medical laboratory technology from
the Copenhagen University Hospital, Denmark (1980).
Martin Mackay
Member of the Board of Novo Nordisk A/S and chair of the
Research & Development Committee since 2018.
Positions and management duties: Co-founded Rallybio
LLC, US, in January 2018 and serves as chair of the Board of
the company and in an executive leadership role overseeing
all research and non-research functions. Senior advisor to
New Leaf Venture Partners, LLC, US. Member of the board
and chairs the Science and Technology Committee of
Charles River Laboratories International, Inc., US.
Special competences: R&D executive with extensive expe-
rience in building a pipeline, acquiring products and man-
aging the portfolio of early-stage and late-stage projects in
large international pharmaceutical companies.
Education: Doctorate/PhD from University of Edinburgh,
UK (1984), and BSc (First Class Honours) in Microbiology
from Heriot-Watt University, Edinburgh, UK (1979).
Thomas Rantzau
Member of the Board of Novo Nordisk A/S (employee
representative) and member of the Research & Development
Committee since 2018.
Positions and management duties: Area specialist in
Product Supply, Novo Nordisk A/S.
Education: Degree in food engineering from DTU,
Denmark (2003) and diploma as dairy technician (1992).
Stig Strøbæk
Member of the Board of Novo Nordisk A/S since 1998
(employee representative) and member of the Audit
Committee since 2013.
Positions and management duties: Electrician and a
full-time union representative in Novo Nordisk A/S.
Education: Diploma in further training for board members
from the Danish Employees’ Capital Pension Fund (LD)
(2003), and diploma in electrical engineering (1984).
Name (male/female)
First elected Term Nationality
Born
Independence2
20173
Helge Lund (m)
2013
Jeppe Christiansen (m)
2019
Laurence Debroux (f)
2016
Brian Daniels (m)
2018
Andreas Fibig (m)
2015
Sylvie Grégoire (f)
2012
Liz Hewitt (f)
2018
Mette Bøjer Jensen (f)
Kasim Kutay (m)
2017
Anne Marie Kverneland (f) 2000
2018
Martin Mackay (m)
2018
Thomas Rantzau (m)
Stig Strøbæk (m)
1998
2020
2020
2020
2020
2020
2020
2020
2022
2020
2022
2020
2022
2022
Oct. 1962
Norwegian
Nov. 1959
Danish
Jul. 1969
French
Feb. 1959
American
German
Feb. 1962
Canadian/American Nov. 1961
Nov. 1956
British
Dec. 1975
Danish
May 1965
British
Jul. 1956
Danish
Apr. 1956
American
Mar. 1972
Danish
Jan. 1964
Danish
Independent
Not independent 4
Independent
Independent
Independent 5, 6
Independent 5, 6
Independent 5, 6
Not independent 7
Not independent 4
Not independent 7
Independent
Not independent 7
Not independent 5, 7
Board of
Directors
Chairman-
ship
Audit
Committee
Remuneration
Committee
Nomination
Committee
R&D
Committee
Meeting participation in 20191
8/8
6/8
8/8
8/8
6/6
8/8
8/8
7/8
8/8
8/8
8/8
8/8
8/8
8/8
8/8
3/3
2/4
4/4
4/4
4/4
3/3
3/3
3/3
3/3
5/5
5/5
5/5
5/5
6/6
6/6
6/6
6/6
1. Number of meetings attended by each board member out of the total number of meetings within the member's term. 2. As designated by Nasdaq Copenhagen in accordance with section 3.2.1 of
Recommendations on Corporate Governance. 3. In addition, Helge Lund was a member of the Board for one year in 2014-2015 4. Member of the board or the management of Novo Holdings A/S. 5.
Pursuant to the US Securities Exchange Act, Ms Hewitt, Ms Grégoire and Mr Fibig qualify as independent Audit Committee members, while Mr Strøbæk relies on an exemption from the independence
requirements. 6. Ms Hewitt, Ms Grégoire and Mr Fibig qualify as independent Audit Committee members as defined under part 8 of the Danish Act on Approved Auditors and Audit Firms. 7. Elected
by employees of Novo Nordisk.
Novo Nordisk Annual Report 2019Our businessConsolidated statements Introducing Novo Nordisk
Governance
40
Executive Management
Lars Fruergaard Jørgensen — President and chief
executive officer (CEO)
Born: November 1966.
Other positions and management duties:
Vice-chair of the supervisory board and member of the
nomination committee of Carlsberg A/S, Denmark.
Monique Carter — Executive vice president,
People & Organisation
Born: December 1973.
Other management positions:
No other management positions.
Maziar Mike Doustdar* — Executive vice president,
International Operations
Born: August 1970.
Other positions and management duties:
No other management positions.
Ludovic Helfgott* — Executive vice president,
Biopharm
Born: July 1974.
Other management positions:
No other management positions.
Karsten Munk Knudsen — Executive vice president,
chief financial officer (CFO)
Born: December 1971.
Other positions and management duties:
Chair of the board of NNE A/S, Denmark.
Doug Langa* — Executive vice president,
North America Operations
Born: October 1966.
Other positions and management duties:
No other management positions.
Camilla Sylvest — Executive vice president,
Commercial Strategy & Corporate Affairs
Born: November 1972.
Other management duties:
Member of the board of Danish Crown A/S, Denmark and
Vice Chair of the board of the World Diabetes Foundation,
Denmark.
Mads Krogsgaard Thomsen — Executive vice
president, chief science officer (CSO)
Born: December 1960.
Other management duties:
Member of the board of Symphogen A/S, Denmark.
Member of the editorial boards of international, peer-
reviewed journals. Adjunct professor at the Faculty
of Health and Medical Sciences of the University of
Copenhagen, Denmark.
Henrik Wulff — Executive vice president, Product
Supply, Quality & IT
Born: November 1970.
Other management duties:
Chair of the board of Novo Nordisk Pharmatech A/S and
member of the board of Ambu A/S, both in Denmark.
* Not registered as executive with the Danish Business Authority.
Novo Nordisk Annual Report 2019Our businessConsolidated statements 41
Consolidated financial,
social and environmental
statements 2019
Consolidated financial statements
Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 42
Cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 43
Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 44
Equity statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 45
Consolidated social statement
(supplementary information)
Statement of social performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 78
Notes to the Consolidated social statement
Notes to the Consolidated financial statements
Section 6
Section 1
Basis of preparation
Principal accounting policies and key accounting estimates . . . . . . . . . . p 46
1.1
1.2 Changes in accounting policies and disclosures . . . . . . . . . . . . . . . . . . . . p 47
1.3 General accounting policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 47
Section 2
Results for the year
2.1 Net sales and rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 48
Segment information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 49
2.2
Research and development costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 51
2.3
2.4
Employee costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 52
2.5 Other operating income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 53
Income taxes and deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . p 53
2.6
Section 3
Operating assets and liabilities
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 55
3.1
Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 56
3.2
Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 57
3.3
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 58
3.4
Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 59
3.5
Retirement benefit obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 60
3.6
3.7
Provisions and contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 61
3.8 Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 62
Section 4
Capital structure and financial items
Share capital, distributions to shareholders and earnings per share . . . . p 63
4.1
Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 64
4.2
4.3
Financial risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 65
4.4 Derivative financial instrument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 67
4.5 Cash and cash equivalents, financial resources and free cash flow . . . . . p 68
4.6 Change in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 68
4.7 Other non-cash items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 68
Financial assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 69
4.8
Financial income and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 70
4.9
Section 5
Other disclosures
5.1
Share-based payment schemes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 71
5.2 Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 73
Related party transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 74
5.3
5.4
Fee to statutory auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 74
5.5 Companies in the Novo Nordisk Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 75
Basis of preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 78
Section 7
Patients
7.1
Patients reached with Novo Nordisk’s Diabetes care products (estimate) .. p 80
7.2 Donations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 80
7.3 Animals purchased for research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 80
Section 8
Employees
8.1
8.2
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 81
Frequency of occupational accidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 81
Section 9
Responsible business
Relevant employees trained in business ethics . . . . . . . . . . . . . . . . . . . . . . p 82
9.1
Business ethics reviews . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 82
9.2
Facilitations of the Novo Nordisk Way . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 82
9.3
Supplier audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 82
9.4
Product recalls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 83
9.5
9.6
Failed inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 83
9.7 Company trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 83
Total tax contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 83
9.8
Consolidated environmental statement
(supplementary information)
Statement of environmental performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 84
Notes to the Consolidated environmental statement
Section 10
Basis of preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 84
Section 11
Resources
11.1 Energy consumption for operations and share of renewable power . . . p 85
11.2 Water consumption for production sites . . . . . . . . . . . . . . . . . . . . . . . . . . . p 85
Section 12
Emissions and waste
12.1 CO2 emissions from operations and transportation . . . . . . . . . . . . . . . . . . p 85
12.2 Waste from production sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 86
Section 13
Responsible business
13.1 Breaches of regulatory limit values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . p 86
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019 Income statement
and statement of comprehensive income 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
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)
DKK million
Statement of comprehensive income
Net profit for the year
Other comprehensive income:
Items that will not be reclassified subsequently to the income statement:
Remeasurements of retirement benefit obligations
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
42
Note
2019
2018
2017
2.1, 2.2
2.2
2.2
2.2, 2.3
2.2
2.2, 2.5
4.9
4.9
2.6
4.1
4.1
122,021
20,088
101,933
31,823
14,220
4,007
600
52,483
65
3,995
48,553
9,602
38,951
111,831
17,617
111,696
17,632
94,214
29,397
14,805
3,916
1,152
47,248
2,122
1,755
47,615
8,987
94,064
28,340
14,014
3,784
1,041
48,967
1,246
1,533
48,680
10,550
38,628
38,130
16.41
16.38
15.96
15.93
15.42
15.39
Note
2019
2018
2017
38,951
38,628
38,130
3.6
(187)
87
103
4.4
4.4
2.6
226
1,677
(329)
9
(231)
1,165
491
(2,027)
(1,677)
(27)
755
(2,398)
(632)
1,955
1,987
(577)
(1,041)
1,795
40,116
36,230
39,925
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements Cash flow statement
for the year ended 31 December
DKK million
Cash flow statement
Net profit for the year
Adjustment of non-cash items:
Income taxes in the income statement
Depreciation, amortisation and impairment losses
Other non-cash items
Change in working capital
Interest received
Interest paid
Income taxes paid
Net cash generated from operating activities
Purchase of intangible assets
Proceeds from sale of property, plant and equipment
Purchase of property, plant and equipment
Proceeds from other financial assets
Purchase of other financial assets
Sale of marketable securities
Investment in associated companies
Proceeds from the divestment of Group and associated companies
Dividend received from associated companies
Net cash used in investing activities
Purchase of treasury shares
Dividends paid
Repayment of borrowings, net
Net cash used in financing activities
Net cash generated from activities
Cash and cash equivalents at the beginning of the year
Reclassification of bank overdraft to financing activities
Exchange gains/(losses) on cash and cash equivalents
Cash and cash equivalents at the end of the year
43
Note
2019
2018
2017
2.6
3.1, 3.2
4.7
4.6
2.6
3.1
3.2
5.3
5.3
4.1
4.1
4.2
4.5
4.5
38,951
38,628
38,130
9,602
5,661
7,032
(3,388)
64
(204)
(10,936)
8,987
3,925
6,098
(3,370)
51
(89)
(9,614)
10,550
3,182
2,027
(3,634)
101
(87)
(9,101)
46,782
44,616
41,168
(2,299)
4
(8,932)
148
(350)
—
(97)
(3)
20
(2,774)
13
(9,636)
178
(248)
—
—
368
19
(1,022)
9
(7,626)
73
(40)
2,009
—
—
26
(11,509)
(12,080)
(6,571)
(15,334)
(19,409)
(741)
(15,567)
(19,048)
94
(16,845)
(18,844)
—
(35,484)
(34,521)
(35,689)
(211)
15,629
—
(7)
(1,985)
17,158
412
44
(1,092)
18,461
—
(211)
4.5
15,411
15,629
17,158
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements Balance sheet
at 31 December
DKK million
Assets
Intangible assets
Property, plant and equipment
Investments in associated companies
Deferred income tax assets
Other receivables and prepayments
Other financial assets
Total non-current assets
Inventories
Trade receivables
Tax receivables
Other receivables and prepayments
Derivative financial instruments
Cash at bank
Total current assets
Total assets
Equity and liabilities
Share capital
Treasury shares
Retained earnings
Other reserves
Total equity
Borrowings
Deferred income tax liabilities
Retirement benefit obligations
Provisions
Total non-current liabilities
Borrowings
Trade payables
Tax payables
Other liabilities
Derivative financial instruments
Provisions
Total current liabilities
Total liabilities
Total equity and liabilities
44
Note
2019
2018
3.1
3.2
2.6
4.8
4.8
3.4
3.5, 4.8
4.8
4.3, 4.4, 4.8
4.3, 4.5, 4.8
5,835
50,551
474
4,121
841
1,334
63,156
17,641
24,912
806
3,434
188
15,475
5,145
41,891
531
2,893
—
1,242
51,702
16,336
22,786
1,013
3,090
204
15,638
62,456
59,067
125,612
110,769
4.1
4.1
4.2, 4.8
2.6
3.6
3.7
4.2, 4.8
4.8
3.8, 4.8
4.4, 4.8
3.7
480
(10)
57,817
(694)
57,593
3,009
80
1,334
4,613
9,036
1,474
6,358
4,212
15,085
734
31,120
58,983
68,019
490
(11)
53,406
(2,046)
51,839
—
118
1,256
3,392
4,766
515
6,756
4,610
14,098
2,024
26,161
54,164
58,930
125,612
110,769
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements Equity statement
at 31 December
DKK million
Share
capital
Treasury
shares
Retained
earnings
45
Total
45,269
38,130
1,795
39,925
(18,844)
292
18
(16,845)
—
Other reserves
Exchange
rate
adjust-
ments
Cash
flow
hedges
Tax and
other
items
Total
other
reserves
(924)
(1,915)
1,496
(1,343)
(632)
(632)
3,942
(1,618)
3,942
(1,618)
1,692
1,692
48,977
(1,556)
2,027
(122)
349
49,815
(90)
38,628
87
38,625
(19,048)
414
(5)
(15,557)
491
491
(3,704)
(3,704)
90
728
818
90
(2,485)
—
38,628
(2,398)
(2,395)
36,230
(19,048)
414
(5)
(15,567)
—
53,406
(1,065)
(1,677)
696
(2,046)
51,839
46,111
38,130
103
38,233
(18,844)
292
18
(16,833)
510
(9)
(10)
500
(12)
10
(11)
(10)
490
(10)
10
(11)
38,951
(187)
38,764
(19,409)
363
18
(15,325)
(9)
10
226
226
1,348
1,348
(222)
(222)
1,352
1,352
38,951
1,165
40,116
(19,409)
363
18
(15,334)
—
(10)
57,817
(839)
(329)
474
(694)
57,593
(10)
480
2017
Balance at the beginning of the year
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
2018
Change in accounting policy, IFRS 9 (net of tax)
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
2019
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
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 46
Section 1
Basis of preparation
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 in accordance
with IFRS as endorsed by the EU and further requirements in the Danish Financial
Statements Act. All entities in the Novo Nordisk Group follow the same Group
accounting policies.
Measurement basis
The consolidated financial statements have been prepared on the historical cost
basis except for derivative financial instruments, equity investments and trade
receivables in a factoring portfolio, which are measured at fair value.
Except for the changes described in note 1.2, 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. Accounting policies listed in the table below
are regarded as the principal accounting policies applied by the Management.
Key accounting estimates and judgements
The use of reasonable estimates and judgements is an essential part of the prepa-
ration of the consolidated financial statements. Given the uncertainties inherent
in Novo Nordisk’s business activities, Management must make certain estimates
regarding valuation and judgements on the reported amounts of assets, liabilities,
net sales, expenses and related disclosures.
The key accounting estimates identified are those that have a significant risk of
resulting in a material adjustment to the measurement of assets and liabilities
in the following reporting period. 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. 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. The actual
amounts may differ from the amounts estimated as more detailed information
becomes available.
In addition, Management makes judgements and estimates in the process of
applying the entity’s accounting policies, for example regarding recognition and
measurement 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
Note Estimation risk
US net sales and rebates
Income taxes and deferred income taxes
Intangible assets
Inventories
Provisions and contingent liabilities
Estimate of US sales deductions and provisions for sales rebates
Judgement and estimate regarding deferred income tax assets and provision for
uncertain tax positions
Estimate regarding impairment of assets
Estimate of indirect production costs capitalised and inventory write-down
Estimate of ongoing legal disputes, litigation and investigations
2.1 High
2.6 Medium
3.1 Low
3.4 Low
3.7 High
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. 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 not appli-
cable or is considered immaterial to the economic decision-making of the users of
these financial statements.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 47
1.2 Changes in accounting policies and disclosures
Adoption of new or amended IFRSs
Management has assessed the impact of new or amended and revised accounting
standards and interpretations (IFRSs) issued by the IASB and IFRSs endorsed by the
European Union.
The following recognition exemptions and practical expedients were applied on
transition:
• Applied a single discount rate to a portfolio of leases with similar characteristics
• Excluded initial direct costs from measuring the right-of-use asset at the date of
initial application
• Used hindsight when determining the lease term if the contract contains option
to extend or terminate
• Exempted short-term lease contracts with a remaining duration of 12 months
IFRS 16 'Leases'
As of 1 January 2019 Novo Nordisk applied IFRS 16 'Leases' for the first time.
or less as at 1 January 2019
Reconciliation of lease liabilities pursuant to IFRS 16 on transition:
The Group has implemented IFRS 16 'Leases' using the modified retrospective
approach.
DKK million
Under this method, the cumulative effect of initially applying the standard is
recognised at 1 January 2019. Right-of-use assets and lease liabilities have been
recognised for those leases previously classified as operating leases, except for
short-term leases and leases of low value assets. The right-of-use assets have been
recognised based on the amount equal to the lease liabilities, adjusted for any
related prepaid and accrued lease payments previously recognised. Lease liabilities
are recognised based on the present value of the remaining lease payments,
discounted using the incremental borrowing rate as of 1 January 2019. The
comparative information has not been restated.
Impact from IFRS 16 as of 1 January 2019:
DKK million
Property, plant and equipment
Prepayments
Borrowings (non-current)
Borrowings (current)
Other liabilities
Net assets
1 January
2019
3,778
(5)
3,330
658
(215)
—
On transition to IFRS 16, the Group recognised an additional DKK 3,778 million of
right-of-use assets and DKK 3,988 million of lease liabilities.
The change in policy has had an insignificant impact on the income statement.
In the cash flow statement the principal repayment of lease liabilities is presented
in 'net cash used in financing activities', whereas the full lease payment under
previous policies was presented in 'net cash generated from operating activities'.
The change in policy has had no impact on free cash flow due to a change in
definition, as described in non-IFRS financial measures. Refer to note 3.3 for the
new accounting policies.
Operating lease commitment as disclosed in the Group's
2018 consolidated financial statements
Short-term leases
Leases of low value assets
Service commitments excluded
Other
Lease liability on transition (undiscounted)
Discounted using the Group's incremental borrowing rate
at 1 January 2019
Lease liability recognised on transition
1 January
2019
4,896
(142)
(43)
(220)
(31)
4,460
2.95%
3,988
On transition to IFRS 16, Novo Nordisk recognised lease liabilities in relation to
leases which had previously been classified as operating leases in accordance
with IAS 17. The lease liabilities were measured at the present value of the future
discounted lease payments using Novo Nordisk's incremental borrowing rate at
1 January 2019. The weighted average incremental borrowing rate applied on
transition to IFRS 16 was 2.95%.
Other new interpretations effective 1 January 2019
It is assessed that application of other new interpretations effective on 1 January
2019 has not had a material impact on the Consolidated financial statements in
2019. Furthermore, Management does not anticipate any significant impact on
future periods from the adoption of these new interpretations.
Adoption of new or amended IFRSs in prior periods
As of 1 January 2018 Novo Nordisk applied IFRS 9 'Financial Instruments' and IFRS
15 'Revenue from contracts with customers' for the first time. The impact of the
implementation of IFRS 9 and IFRS 15 was immaterial in relation to recognition
and measurement.
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 oper-
ates (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.
Foreign currency differences arising from the translation of effective qualifying
cash flow hedges are recognised in other comprehensive income.
Translation of Group companies
Financial statements of foreign subsidiaries are translated into DKK 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 other comprehensive
income, i.e.:
• 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 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements Section 2
Results for the year
2.1 Net sales and rebates
Accounting policies
Revenue from sale of goods is recognised when Novo Nordisk has transferred
control of products sold to the buyer and it is probable that Novo Nordisk will
collect the consideration to which it is entitled for transferring the products.
Control of the products is transferred at a point in time, typically on delivery.
The amount of sales to be recognised is based on the consideration Novo Nordisk
expects to receive in exchange for its goods. 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, by assessing the expected value of the sales deductions (variable
consideration). Where contracts contain customer acceptance criteria, Novo
Nordisk recognises sales when the acceptance criteria are satisfied.
In some markets, Novo Nordisk sells products on a sale-or-return basis.
Where there is historical experience or a reasonably accurate estimate of future
returns, estimated product returns are recorded as a reduction in sales.
Where shipments of new products are made on a sale-or-return basis, without
sufficient historical experience for estimating sales returns, revenue is recorded
based on estimated demand and acceptance rates for well-established products
with similar market characteristics. If similar market characteristics do not exist,
revenue is recorded when there is evidence of consumption or when the right of
return has expired.
Key accounting estimates 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 rebate, discount and product return obliga-
tions require use of significant 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 histor-
ical 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 reason-
able 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.
Gross-to-net sales reconciliation
DKK million
2019
2018
2017
Gross sales
270,431
230,701
216,174
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
(84,202)
(33,772)
(14,365)
(65,207)
(29,469)
(11,950)
(53,077)
(28,324)
(12,491)
(8,280)
(6,606)
(5,771)
(7,791)
(5,638)
(4,815)
Total gross-to-net sales adjustments
(148,410)
(118,870)
(104,478)
Net sales
122,021
111,831
111,696
Sales discounts and sales rebates are predominantly issued in the US. As such,
rebates amount to 71% of gross sales in the US (68% in 2018 and 64% in 2017).
Novo Nordisk sales are impacted by exchange rate changes. For developments in
key currencies refer to note 4.3.
48
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 health-
care plans play a role in negotiating price concessions with drug manufacturers for
both the commercial and government channels, and determine which drugs are
covered on their formularies (or 'preferred drug lists').
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 thresholds. Rebates are esti-
mated 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.
Managed Care and Medicare rebates are generally settled around 100 days from
the transaction date.
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
estimated using a combination of historical experience, product and population
growth, price increases, and the impact of contracting strategies. The calculation
also involves interpretation of relevant regulations that are subject to changes in
interpretative guidance from government authorities. Novo Nordisk adjusts the
provision periodically to reflect actual sales performance. Medicaid rebates are
generally settled around 150 days from the transaction date.
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
2019
2018
2017
At the beginning of the year
25,760
20,374
20,063
Additional provisions, including
increases to existing provisions
Amount paid during the year
Adjustments, including unused
amounts reversed during the year
Effect of exchange rate adjustment
102,782
(98,655)
82,631
(78,647)
63,880
(61,059)
381
610
386
1,016
(117)
(2,393)
At the end of the year
30,878
25,760
20,374
Unsettled rebates are recognised as Provisions when the timing or amount
is uncertain (note 3.7). Where absolute amounts are known, the rebates are
recognised as other liabilities. Wholesaler charge-backs are netted against trade
receivable balances. Provisions for sales rebates thus includes US Managed Care,
Medicare, Medicaid and other minor US rebate types, as well as rebates in a
number of European countries and Canada.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 49
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 this forum.
Business segments
Novo Nordisk operates in two business segments based on therapies: Diabetes and
Obesity care and Biopharm, representing the entirety of the Group's operations.
The segments include research, development, manufacturing and marketing of
products within the following areas:
- Diabetes and Obesity care: insulin, GLP-1 and related delivery systems, oral anti-
diabetic products (OAD), obesity and other serious chronic diseases.
- Biopharm: haemophilia, growth disorders and hormone replacement therapy.
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.
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 small 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.
Business segments
DKK million
Segment sales
Long-acting insulin
- of which Tresiba®
- of which Xultophy®
- of which Levemir®
Premix insulin
- of which Ryzodeg®
- of which NovoMix®/NovoLog Mix®
Fast-acting insulin
- of which Fiasp®
- of which NovoRapid®/NovoLog®
Human insulin
Total insulin
Victoza®
Ozempic®
Rybelsus®
Total GLP-1
Other Diabetes care
Total Diabetes care
Obesity care (Saxenda®)
2019
2018
2017
2019
2018
2017
2019
2018
2017
Diabetes and Obesity care
Biopharm
Total
20,776
9,259
2,210
9,307
10,578
993
9,585
19,303
1,243
18,060
9,036
59,693
21,934
11,237
50
33,221
4,247
97,161
5,679
20,844
8,035
1,614
11,195
10,194
714
9,480
19,353
590
18,763
9,265
59,656
24,333
1,796
—
26,129
4,250
90,035
3,869
22,174
7,327
729
14,118
10,749
492
10,257
20,124
99
20,025
9,793
62,840
23,173
—
—
23,173
4,302
90,315
2,562
Diabetes and Obesity care total sales
102,840
93,904
92,877
Haemophilia
- of which NovoSeven®
- of which NovoEight®
Growth disorders (Norditropin®)
Other Biopharm
Biopharm total sales
Segment key figures
Total net sales
Cost of goods sold
Sales and distribution costs
Research and development costs
Administrative costs
Other operating income, net
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
10,281
8,119
1,525
7,275
1,625
19,181
19,181
3,779
3,094
2,092
661
291
9,846
51.3%
9,576
7,881
1,354
6,834
1,517
10,469
9,206
1,103
6,655
1,695
17,927
18,819
17,927
2,901
3,001
2,583
650
614
9,406
52.5%
18,819
2,618
2,865
2,656
641
575
10,614
56.4%
122,021
20,088
31,823
14,220
4,007
600
52,483
43.0%
111,831
17,617
29,397
14,805
3,916
1,152
47,248
42.2%
111,696
17,632
28,340
14,014
3,784
1,041
48,967
43.8%
102,840
16,309
28,729
12,128
3,346
309
42,637
41.5%
93,904
14,716
26,396
12,222
3,266
538
37,842
40.3%
92,877
15,014
25,475
11,358
3,143
466
38,353
41.3%
3,916
3,210
2,536
1,745
715
646
5,661
3,925
3,182
9,644
86,700
9,219
71,706
7,565
61,542
1,518
16,514
3,107
17,542
2,226
14,994
11,162
103,214
22,398
125,612
12,326
89,248
21,521
110,769
9,791
76,536
25,819
102,355
1. The part of total assets that remains unallocated to either of the two business segments includes investments in associated companies, deferred income tax assets, other financial assets, tax
receivables, derivative financial instruments and cash at bank.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements
50
Net sales disclosures
Sales to external customers attributed to the US are collectively the most material
to the Group. The US and Mainland China are the only territories where sales
contribute 10% or more of total net sales.
In 2019, Novo Nordisk had three major wholesalers distributing products, repre-
senting 19%, 14% and 12% respectively of total net sales (20%, 13% and 13%
in 2018 and 21%, 13% and 12% in 2017). Sales to these three wholesalers are
within both Diabetes and Obesity care and Biopharm.
Net sales to be recognised from fulfilling existing customer contracts containing
fixed or minimum sales volumes, with an original term greater than 12 months, is
expected to be DKK 544 million within 12 months (2018: DKK 767 million) and
DKK 32 million thereafter (2018: DKK 742 million).
Net sales will be impacted by exchange rate fluctuations. Novo Nordisk has an
accounting policy to recognise the income statement impact of foreign currency
hedging within financial items. Please refer to notes 4.3, 4.4 and 4.9 for more
details on hedging.
2.2 Segment information (continued)
Geographical areas
Novo Nordisk operates in two main commercial units:
• International Operations
◦ Region Europe: the EU, EFTA, Albania, Bosnia-Herzegovina, Macedonia,
Serbia, Montenegro and Kosovo
◦ Region AAMEO: countries in Africa, Asia, Middle East & Oceania
◦ Region China: Mainland China, Taiwan and Hong Kong
◦ Region Japan & Korea: Japan and South Korea
◦ Region Latin America: countries in South America, Central America
and Mexico
• North America Operations (the US and Canada)
Sales are attributed to geographical regions according to the location of the
customer. Allocation of property, plant and equipment, trade receivables, allow-
ance 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. 99.7% of total sales are realised outside Denmark.
Of total property, plant and equipment, DKK 25,175 million is located in Denmark,
where the Group's main production, filling, packaging, moulding and assembly
facilities are located.
Geographical areas
2019
2018
2017
2019
2018
2017
2019
2018
2017
2019
2018
2017
International Operations
DKK million
Total International Operations
Region Europe
Region AAMEO
Region China
Sales by business segment:
Long-acting insulin
- of which Tresiba®
- of which Xultophy®
- of which Levemir®
Premix insulin
- of which Ryzodeg®
- of which NovoMix®/NovoLog Mix®
Fast-acting insulin
- of which Fiasp®
- of which NovoRapid®/NovoLog®
Human insulin
Total insulin
Victoza®
Ozempic®
Rybelsus®
Total GLP-1
Other Diabetes care
Total Diabetes care
Obesity care (Saxenda®)
9,035
3,477
1,493
4,065
9,707
993
8,714
10,304
617
9,687
7,361
36,407
7,249
1,143
—
8,392
3,389
7,942
2,764
1,085
4,093
8,862
714
8,148
9,332
357
8,975
7,348
7,416
2,345
567
4,504
8,959
492
8,467
9,156
91
9,065
7,856
33,484
6,240
39
—
33,387
5,708
—
—
6,279
3,360
5,708
3,359
4,720
1,685
1,266
1,769
1,595
68
1,527
4,732
585
4,147
1,380
12,427
3,967
965
—
4,932
562
4,282
1,246
1,007
2,029
1,701
56
1,645
4,558
357
4,201
1,580
3,895
966
560
2,369
1,878
26
1,852
4,366
91
4,275
1,770
12,121
3,720
39
—
11,909
3,451
—
—
3,759
579
3,451
605
1,526
406
146
974
2,961
429
2,532
2,622
27
2,595
2,230
9,339
1,005
4
—
1,009
691
1,281
337
58
886
2,606
275
2,331
2,194
—
2,194
2,065
8,146
841
—
—
841
675
1,229
261
7
961
2,686
183
2,503
2,261
—
2,261
1,922
8,098
858
—
—
858
754
1,059
87
—
972
4,306
4
4,302
1,753
—
1,753
2,847
9,965
898
—
—
898
1,647
814
16
—
798
3,783
—
3,783
1,450
—
1,450
2,821
8,868
521
—
—
521
1,672
694
2
—
692
3,555
—
3,555
1,253
—
1,253
3,096
8,598
309
—
—
309
1,566
48,188
2,083
43,123
1,211
42,454
569
17,921
334
16,459
207
15,965
102
11,039
802
9,662
418
9,710
190
12,510
9
11,061
1
10,473
—
Diabetes and Obesity care total
50,271
44,334
43,023
18,255
16,666
16,067
11,841
10,080
9,900
12,519
11,062
10,473
Haemophilia
- of which NovoSeven®
- of which NovoEight®
Growth disorders
Other Biopharm
5,946
4,502
1,143
4,225
1,122
5,572
4,424
1,046
4,000
1,017
5,446
4,597
788
4,105
1,113
2,762
1,767
790
1,466
779
2,781
1,944
776
1,511
721
2,828
2,245
551
1,572
722
1,305
1,130
146
691
252
1,177
1,049
109
680
216
1,163
1,097
52
676
279
Biopharm total
11,293
10,589
10,664
5,007
5,013
5,122
2,248
2,073
2,118
284
269
15
36
5
325
199
194
5
20
4
223
216
215
1
15
5
236
Total sales by business and
geographical segment
61,564
54,923
53,687
23,262
21,679
21,189
14,089
12,153
12,018
12,844
11,285
10,709
Total sales growth as reported
12.1%
2.3% 2.2%
7.3%
2.3% 2.5% 15.9%
1.1% 3.8%
13.8%
5.4% 2.4%
Property, plant and equipment
Trade receivables, net
Allowance for doubtful trade
receivables
Total assets
30,972
10,508
28,851
9,884
27,929
9,423
26,730
3,611
25,500
3,388
24,665
3,273
(1,471)
85,541
(1,358)
80,420
(1,262)
81,743
(196)
67,007
(241)
64,327
(223)
65,600
1,003
3,595
(967)
6,729
723
3,237
566
3,468
(866)
5,635
(823)
5,876
2,101
1,760
—
6,820
1,812
1,841
1,884
1,541
—
6,003
—
5,927
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements
Geographical areas (continued)
2019
2018
2017
2019
2018
2017
2019
2018
2017
2019
2018
2017
International Operations (continued)
North America Operations
DKK million
Region Japan & Korea
Region Latin America
Total
Of which the US
51
Sales by business segment:
Long-acting insulin
- of which Tresiba®
- of which Xultophy®
- of which Levemir®
Premix insulin
- of which Ryzodeg®
- of which NovoMix®/NovoLog Mix®
Fast-acting insulin
- of which Fiasp®
- of which NovoRapid®/NovoLog®
Human insulin
Total insulin
Victoza®
Ozempic®
Rybelsus®
Total GLP-1
Other Diabetes care
Total Diabetes care
Obesity care (Saxenda®)
930
821
11
98
722
457
265
790
5
785
170
2,612
748
—
—
748
421
3,781
282
857
751
—
106
650
351
299
779
—
779
187
2,473
614
—
—
614
368
872
739
—
133
697
253
444
941
—
941
232
2,742
590
—
—
590
376
3,455
175
3,708
—
800
478
70
252
123
35
88
407
—
407
734
2,064
631
174
—
805
68
2,937
656
708
414
20
274
122
32
90
351
—
351
695
1,876
544
—
—
544
66
726
377
—
349
143
30
113
335
—
335
836
11,741
5,782
717
5,242
871
—
871
8,999
626
8,373
1,675
2,040
500
23,286
14,685
— 10,094
50
—
12,902
5,271
529
7,102
1,332
—
1,332
10,021
233
9,788
1,917
26,172
18,093
1,757
—
14,758
4,982
162
9,614
1,790
—
1,790
10,968
8
10,960
1,937
29,453
17,465
—
—
500
58
24,829
858
48,973
3,596
19,850
890
17,465
943
46,912
2,658
47,861
1,993
2,486
410
2,598
277
11,271
5,500
708
5,063
839
—
839
8,592
597
7,995
1,552
22,254
14,217
9,599
50
23,866
705
46,825
3,348
12,600
5,192
528
6,880
1,294
—
1,294
9,634
211
9,423
1,778
25,306
17,561
1,634
—
14,466
4,970
162
9,334
1,743
—
1,743
10,574
—
10,574
1,766
28,549
16,929
—
—
19,195
733
16,929
782
45,234
2,446
46,260
1,828
Diabetes and Obesity care total
4,063
3,630
3,708
3,593
2,896
2,875
52,569
49,570
49,854
50,173
47,680
48,088
Haemophilia
- of which NovoSeven®
- of which NovoEight®
Growth disorders
Other Biopharm
560
377
116
1,746
84
557
400
135
1,538
72
681
497
169
1,579
104
1,035
959
76
286
2
858
837
21
251
4
Biopharm total
2,390
2,167
2,364
1,323
1,113
558
543
15
263
3
824
4,335
3,617
382
3,050
503
4,004
3,457
308
2,834
500
5,023
4,609
315
2,550
582
4,031
3,454
358
3,035
247
3,723
3,278
291
2,823
262
4,852
4,451
315
2,543
348
7,888
7,338
8,155
7,313
6,808
7,743
Total sales by business and
geographical segment
6,453
5,797
6,072
4,916
4,009
3,699
60,457
56,908
58,009
57,486
54,488
55,831
Total sales growth as reported
11.3% (4.5%)
(2.5%)
22.6%
8.4% 3.0%
6.2% (1.9%)
(2.1%)
5.5% (2.4%)
(2.4%)
Property, plant and equipment
Trade receivables, net
Allowance for doubtful trade receivables
Total assets
436
495
(7)
1,543
201
504
(5)
1,503
146
279
(5)
1,304
702
1,047
(301)
3,442
615
914
(246)
2,952
668
862
(211)
3,036
19,579
14,404
(13)
40,071
13,040
12,902
(12)
30,349
7,318
10,742
(32)
20,612
19,531
13,999
(13)
39,460
13,023
12,643
(12)
29,732
7,298
10,517
(32)
20,180
2.3 Research and development costs
Accounting policies
Novo Nordisk’s research and development is mainly focused on:
• Insulins, GLP-1s and other therapeutic new antidiabetic drugs for diabetes
treatment.
• GLP-1s, combinations and new modes of action for Obesity care.
• 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 and stem cells for treatment of NASH,
cardiovascular disease, chronic kidney disease and Parkinson's disease, among
others.
to significant regulatory uncertainties and other uncertainties inherent in the devel-
opment of new products. This means that they do not qualify for capitalisation
as intangible assets until marketing approval by a regulatory authority is obtained
or considered highly probable. Costs for post-approval activities that are required
by authorities as a condition for obtaining regulatory approval are recognised as
research and development costs.
Research and development activities are carried out by Novo Nordisk’s research and
development centres, mainly in Denmark, the US, the UK and China. Research and
development trials are carried out all over the world. Novo Nordisk also enters into
partnerships and licence agreements.
The research activities mainly 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.
Novo Nordisk expenses all research costs. In line with industry practice, internal
and subcontracted development costs are also expensed as they are incurred, due
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. The costs also comprise amortisation,
depreciation and impairment losses related to software and property, plant and
equipment used in the research and development activities. Impairment losses
recognised on intangible assets not yet available for use related to research and
development projects are presented in research and development costs.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 52
2.3 Research and development costs (continued)
2.4 Employee costs
Certain research and development activities are recognised outside research and
development costs:
• Royalty expenses paid to partners after regulatory approval are expensed as cost
of goods sold.
• Royalty income received from partners is recognised as part of other operating
income, net.
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.
• Contractual research and development obligations to be paid in the future are
disclosed separately as commitments in note 5.2.
Employee costs
DKK million
Research and development costs by business segment (note 2.2)
DKK million
2019
2018
Diabetes and Obesity care
Biopharm
Total
Research and development costs
DKK million
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)
Other research and development
costs
Total research and development
costs
As percentage of net sales
12,128
2,092
14,220
2019
5,968
522
783
2017
11,358
2,656
12,222
2,583
14,805
14,014
2018
6,288
769
468
2017
5,848
211
525
6,947
7,280
7,430
14,220
11.7%
14,805
14,014
13.2%
12.5%
Wages and salaries
Share-based payment costs (note 5.1)
Pensions – defined contribution plans
Pensions – defined benefit plans
(note 3.6)
Other social security contributions
Other employee costs
2019
25,335
363
1,910
151
1,963
2,203
2018
2017
25,259
414
1,791
73
1,901
2,087
23,869
292
1,800
165
1,910
2,102
Total employee costs for the year
31,925
31,525
30,138
Employee costs capitalised as
intangible assets and property, plant
and equipment
Change in employee costs capital-
ised as inventories
Total employee costs
in the income statement
Included in the income statement:
Cost of goods sold
Sales and distribution costs
Research and development costs
Administrative costs
Other operating income, net
Total employee costs
in the income statement
(1,314)
(1,500)
(1,435)
(139)
(105)
(91)
30,472
29,920
28,612
8,134
13,463
5,968
2,679
228
8,164
12,214
6,288
2,755
499
7,854
11,994
5,848
2,505
411
30,472
29,920
28,612
Average number of full-time
employees
Year-end number of full-time
employees
Employees (total)
42,218
42,881
41,665
42,703
43,258
42,672
43,202
42,076
42,682
Remuneration to Executive Management and Board of Directors
DKK million
2019
2018
Salary and short-term incentive
Pension
Benefits
Long-term incentive3
Severance payments
Executive Management in total1,2
Fee to Board of Directors2
Total
120
26
14
40
—
200
19
219
102
22
4
22
28
178
17
195
2017
74
18
6
7
—
105
16
121
1. Jesper Brandgaard retired from Novo Nordisk in April 2019. Until April 2020 Jesper
Brandgaard will continue to provide certain services for Novo Nordisk. Remuneration of
Jesper Brandgaard from January to April 2019 is included in the above table. A severance
payment of DKK 27.7 million is included in the 2018 amounts.
2. Total remuneration for registered members of Executive Management amounts to
DKK 135 million (DKK 142 million in 2018 and DKK 74 million in 2017). All members of
the Board of Directors are registered.
3. Please refer to note 5.1 for further information.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 53
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
from royalties on future net sales is recognised as the underlying customers' sale
occurs and from sales milestones once the contingent sale milestone is achieved
in accordance with the terms of the relevant agreement. Income from the transfer
of the right to use intellectual property may contain development or regulatory
milestones (variable consideration) on which the income is recognised when
the significant uncertainties in achieving the milestones are resolved, due to
the significant uncertainties inherent in the development of pharmaceutical
products.
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.
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. It also includes adjust-
ments to previous years and changes in provisions 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.
Provisions for ongoing tax disputes are included as part of deferred tax assets, tax
receivables and tax payables.
Management judgement regarding recognition of deferred income tax
assets and provisions 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 provisions 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 differ-
ences and unused tax losses can be utilised.
Management has considered future taxable income and applied its 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 litigation and settlements with the relevant
tax authorities.
Swiss tax reform
In 2019, a tax reform was passed in Switzerland. The tax reform has a minor positive
impact on the effective tax rate in 2019, driven by a non-recurring increase to
deferred tax assets.
Income taxes expensed
DKK million
Current tax on profit for the year
Deferred tax on profit for the year
Tax on profit for the year
Current tax adjustments recognised
for prior years
Deferred tax adjustments recognised
for prior years
Income taxes in the
income statement
Tax on other comprehensive
income for the year, (income)/
expense
2019
11,275
(1,559)
9,716
2018
2017
10,469
(1,007)
10,562
182
9,462
10,744
(191)
(522)
(425)
77
47
231
9,602
8,987
10,550
231
(755)
1,041
DKK million
2019
2018
2017
Computation of effective tax rate:
Statutory corporate income tax rate
in Denmark
Deviation in foreign subsidiaries’
tax rates compared to the Danish
tax rate (net)
Non-taxable income less
non-tax-deductible expenses (net)
Others, including adjustment of
prior years
Effective tax rate
22.0%
22.0%
22.0%
(2.1%)
(1.9%)
0.0%
0.1%
(0.2%)
0.1%
(0.2%)
19.8%
(1.0%)
(0.4%)
18.9%
21.7%
The impact of the deviation in foreign subsidiaries’ tax rates compared to the
Danish tax rate is mainly driven by Swiss business activities.
Income taxes paid
DKK million
Income taxes paid in Denmark for
current year
Income taxes paid outside Denmark
for current year
Income taxes paid/repayments
relating to prior years
2019
2018
2017
7,774
2,258
904
6,640
6,798
2,376
2,639
598
(336)
Total income taxes paid
10,936
9,614
9,101
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 54
2.6 Income taxes and deferred income taxes (continued)
Deferred income taxes
Accounting policies
Deferred income taxes arise from temporary differences between the accounting
and tax 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 in which the assets are expected to be
utilised.
In general, the Danish tax rules related to dividends from group companies
provide exemption from tax for most repatriated profits. A provision for with-
holding tax is only recognised if a concrete distribution of dividends is planned.
The unrecognised potential withholding tax amounts to DKK 315 million for 2019
(DKK 367 million in 2018).
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
2019
Net deferred tax asset/(liability) at 1 January
Change in accounting policy, leases
Income/(charge) to the income statement
Income/(charge) to other comprehensive income
Income/(charge) to equity
Disposal of subsidiaries
Effect of exchange rate adjustment
Net deferred tax asset/(liability) at 31 December
Classified as follows:
Deferred tax asset at 31 December
Deferred tax liability at 31 December
2018
Net deferred tax asset/(liability) at 1 January
Income/(charge) to the income statement
Income/(charge) to other comprehensive income
Income/(charge) to equity
Effect of exchange rate adjustment
Net deferred tax asset/(liability) at 31 December
Classified as follows:
Deferred tax asset at 31 December
Deferred tax liability at 31 December
Property,
plant and
equipment
Intangible
assets
Inventories
Liabilities
Other
(703)
(865)
(5)
—
—
—
(18)
(1,591)
769
(2,360)
(868)
199
—
—
(34)
(703)
694
(1,397)
(564)
—
(155)
—
—
—
1
(718)
58
(776)
(500)
(67)
—
—
3
(564)
52
(616)
973
—
820
18
—
—
—
1,811
3,428
(1,617)
833
177
(37)
—
—
973
2,490
(1,517)
2,402
865
133
47
—
(18)
23
3,452
3,580
(128)
1,658
763
(22)
—
3
2,402
2,403
(1)
Offset
within
countries
—
667
—
689
(296)
18
—
9
1,087
—
1,843
(756)
(5,557)
5,557
(28)
(112)
814
(15)
8
667
—
—
833
(166)
(3,579)
3,579
Total
2,775
—
1,482
(231)
18
(18)
15
4,041
4,121
(80)
1,095
960
755
(15)
(20)
2,775
2,893
(118)
The total tax value of unrecognised tax loss carry-forwards amounts to DKK 144 million in 2019 (DKK 90 million in 2018).
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements Section 3
Operating assets and liabilities
55
Additions
Additions to intangible assets amount to DKK 2,179 million. The additions related
to patents and licences amount to DKK 1,599 million (DKK 1,403 million in 2018)
within Diabetes and Obesity care and DKK 359 million (DKK 1,165 million in
2018) within Biopharm. Please refer to note 5.2 Commitment for an overview of
total contractual commitments.
In 2018 and 2019 Novo Nordisk both acquired intellectual property and entered
into major patent and licence agreements, as summarised below. Upfront fees
and acquisition costs have been capitalised and subsequent milestone payments
payable on achievement of a contingent event will be capitalised on the contin-
gent event being probable of being achieved.
2019 additions
Dicerna
Novo Nordisk has entered into a collaboration and license agreement providing
development and commercialisation rights to novel therapies for the treatment
of liver-related cardio-metabolic diseases using Dicerna’s proprietary GalXC™
RNAi platform technology. The addition relates to the Diabetes and Obesity care
segment.
Priority review voucher
During 2019 Novo Nordisk acquired a priority review voucher intended for use in
the Diabetes and Obesity care segment.
Esperoct™ milestones
Novo Nordisk has capitalised two milestone payments to the business partner
following EU and FDA approval of Esperoct™. The additions relate to the
Biopharm segment.
2018 additions
Macrilen™
Novo Nordisk has acquired the US and Canadian rights to Macrilen™ (macimo-
relin), the first and only FDA-approved oral growth hormone receptor indicated for
the diagnosis of Adult Growth Hormone Deficiency, a rare endocrine disorder. The
acquisition relates to the Biopharm segment.
Priority review voucher
During 2018 Novo Nordisk acquired a priority review voucher which has been
fully amortised on notification and commitment to the FDA in December 2018 of
the intent to use the Priority Review Voucher for the oral semaglutide New Drug
Application (NDA) filing. The acquisition relates to the Diabetes and Obesity care
segment.
Ziylo Ltd
Novo Nordisk has acquired full rights to Ziylo's glucose binding molecule platform
to develop glucose responsive insulins. The acquisition relates to the Diabetes and
Obesity care segment.
3.1 Intangible assets
Accounting policies
Patents and licences, including patents and licences acquired for 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 means the legal duration or the economic useful life
depending on which is shorter, and 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 amortisa-
tion 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 and subcontracted 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 is probable; please refer to note 2.3.
Payments to third parties under collaboration and license agreements are assessed for
the substance of their nature. Payments which represent subcontracted research and
development are expensed as the services are received. Payments which represent rights
to the transfer of intellectual property, developed at risk by the third party, are capitalised.
For acquired research and development projects, patents and licences the likeli-
hood of obtaining future commercial sales is reflected in the cost of the asset, and
thus the probability recognition criteria is always considered to be satisfied. As
the cost of acquired research and development projects can often be measured
reliably, these projects fulfil the capitalisation criteria as intangible assets on acqui-
sition. Subsequent milestone payments payable on achievement of a contingent
event (e.g. commencement of phase 3 trials) are accrued and capitalised into
the cost of the intangible asset when the achievement of the event is probable.
However, further internal development costs subsequent to acquisition are treated
in the same way as other internal development costs.
Key accounting estimates of impairment of assets
Intangible assets with an indefinite useful life and intangible assets not yet avail-
able for use are not subject to amortisation. They are tested annually for impair-
ment, irrespective of whether there is any indication that they may be impaired.
Assets that are 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.
Intangible assets
DKK million
Patents and licences
Software
Total intangible assets
2019
4,627
1,208
5,835
2018
3,858
1,287
5,145
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 56
Amortisation and impairment losses
DKK million
2019
2018
Cost of goods sold
Sales and distribution costs
Research and development costs
Administrative costs
Other operating income, net
Total amortisation and impairment losses
Total amortisation
Total impairment losses
916
24
522
3
4
1,469
487
982
208
15
769
2
6
1,000
1,000
—
Capital expenditure in the reported period was primarily related to investments in
facility upgrades and new production facilities for active pharmaceutical ingredi-
ents for diabetes, mainly the facility in Clayton, US. The facility in Clayton will also
be used for tableting and packing of oral products.
Capital expenditure also related to new diabetes filling capacity in Hillerød. The
facility will serve as a backup production facility for the US market and act as a
launch site for new injectable diabetes products.
Finally, capital expenditure related to expansion of the facility in Chartres, France.
The investment will establish FlexTouch® assembly and packaging capacity at the
Chartres site.
Depreciation and impairment losses
DKK million
Cost of goods sold
Sales and distribution costs
Research and development costs
Administrative costs
Other operating income, net
Total depreciation and impairment losses
2019
2,656
354
783
376
23
4,192
2018
2,312
69
468
70
6
2,925
3.1 Intangible assets (continued)
Amortisation and impairment losses
In 2019, an impairment loss of DKK 982 million was recognised (no impairment
losses were recognised in 2018), substantially all of which related to patents
and licences. DKK 282 million of the impairment was related to the Diabetes
and Obesity care segment and DKK 700 million of the impairment was related
to Biopharm. Of the total impairment loss, DKK 529 million was recognised in
cost of goods sold and DKK 450 million in research and development costs. The
impairment was a result of Management’s review of projected future cash flows
from marketable products and expectations related to patents and licences not yet
in use.
The impairment losses related to marketable products were based on fair value
less cost of disposal calculations. The projected future cash flows were prepared
based on Management’s expectations for market access, market share and devel-
opment in net sales prices. Management has used a post-tax discount rate of 7%.
The inherent risk and uncertainty related to cash flows were adjusted for in the
expected future cash flows.
Intangible assets not yet in use amount to DKK 3,380 million (DKK 2,612 million
in 2018), primarily patents and licences in relation to research and development
projects. Impairment tests in 2019 and 2018 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.
3.2 Property, plant and equipment
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 e.g. administration and distribution.
Management believes this is a significant factor in maintaining the quality of the
company´s products.
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. Depreciation is based on the straight-line method over the estimated
useful lives of the assets:
• Buildings: 12-50 years
• Plant and machinery: 5-20 years
• Other equipment: 3-10 years
• Land: not depreciated.
The depreciation commences when the asset is available for use, i.e. 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 appro-
priate, at the end of each reporting period. If an asset’s carrying amount is higher
than its estimated recoverable amount, it is written down to the recoverable
amount.
Plant and equipment with no alternative use developed as part of a research and
development project are expensed. However, plant and equipment with an alter-
native use or used for general research and development purposes are capitalised
and depreciated over the estimated useful life as research and development costs.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements
3.2 Property, plant and equipment (continued)
Property, plant and equipment
DKK million
2019
Cost at the beginning of the year
Change in accounting policy, leases
Additions during the year
Disposals during the year
Transfer from assets under construction
Effect of exchange rate adjustment
Cost at the end of the year
Depreciation and impairment losses at the beginning of the year
Depreciation for the year
Impairment losses for the year
Depreciation and impairment losses reversed on disposals during the year
Effect of exchange rate adjustment
Depreciation and impairment losses at the end of the year
Carrying amount at the end of the year
2018
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
Cost at the end of the year
Depreciation and impairment losses at the beginning of the year
Depreciation for the year
Impairment losses for the year
Depreciation and impairment losses reversed on disposals during the year
Effect of exchange rate adjustment
Depreciation and impairment losses at the end of the year
Carrying amount at the end of the year
57
Total
72,438
3,778
8,983
(1,229)
—
450
16,846
—
7,580
(74)
(4,190)
189
20,351
84,420
—
—
74
(74)
—
—
30,547
3,971
221
(967)
97
33,869
20,351
50,551
14,361
8,775
—
(6,410)
120
64,661
9,537
(1,867)
—
107
16,846
72,438
—
—
—
—
—
—
29,414
2,809
116
(1,744)
(48)
30,547
16,846
41,891
Land and
buildings
Plant and
machinery
Other
equipment
Assets under
construction
25,401
3,291
555
(407)
1,277
143
25,412
—
350
(504)
2,248
88
30,260
27,594
9,770
1,818
57
(160)
43
17,871
1,410
70
(504)
41
11,528
18,888
18,732
8,706
22,032
222
(267)
3,448
(34)
23,799
365
(1,422)
2,667
3
25,401
25,412
8,934
1,047
49
(235)
(25)
17,808
1,377
63
(1,346)
(31)
9,770
17,871
15,631
7,541
4,779
487
498
(244)
665
30
6,215
2,906
743
20
(229)
13
3,453
2,762
4,469
175
(178)
295
18
4,779
2,672
385
4
(163)
8
2,906
1,873
3.3 Leases
Accounting policies
Novo Nordisk mainly leases office buildings, warehouses, laboratories and vehicles.
For contracts which are, or contain, a lease, the Group recognises a right-of-use
asset and a lease liability. The right-of-use asset is initially measured at cost, being
the initial amount of the lease liability. The right-of-use asset is subsequently
depreciated using the straight-line method over the lease term. The right-of-use
asset is periodically adjusted for certain remeasurements of the lease liability and
reduced by any impairment losses.
The lease term determined by the Group is the non-cancellable period of a lease,
together with extension/termination option if these are reasonably certain to be
exercised.
When determining the term, Management considers multiple factors that create
economic incentives to exercise an option to extend the lease or not to terminate
the lease, including termination penalties, potential relocation costs and whether
significant leasehold improvements have been capitalised on the lease, with a
remaining useful life which exceeds the fixed minimum duration of the lease.
For contracts with a rolling term (evergreen leases), the Group estimates the
leasing period to be equal to the termination period if no probable scenario exists
for estimating the leasing period.
The lease liability is initially measured at the present value of the lease payments
outstanding at the commencement date, discounted using the incremental
borrowing rate. Lease payments consist of the following payments:
• fixed payments from commencement date
• certain variable payments
• residual value guarantees or the exercise price of a purchase option
• termination penalties
The lease liability is measured using the effective interest method.
The lease liability is remeasured when there is a change in future lease payments,
typically due to a change in index or rate (e.g. inflation) on property leases, or
if there is a reassessment of whether an extension or termination option will be
exercised. A corresponding adjustment is made to the right-of-use asset, or in the
income statement when the right-of-use asset has been fully depreciated.
The right-of-use asset is presented in property, plant and equipment and the lease
liability in borrowings.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 3.3 Leases (continued)
New lease contracts with a lease term of 12 months or less and lease of low value
assets are not recognised on the balance sheet. These are expensed on a straight-
line basis over the lease term or another systematic basis. Lease of low value assets
include personal computers, telephones and small items of office equipment.
Variable lease payments may depend on an index, a rate or other elements.
Variable lease payments that depend on an index or a rate are included in
the initial measurement of the lease liability using the index/rate at the lease
commencement date. Variable lease payments not based on an index or a rate are
recognised as an expense in the income statement as incurred.
Amounts recognised in the income statement
DKK million
Depreciation
Interest on lease liabilities
Variable lease expenses
Short-term leases
Lease of low value assets
Total amounts recognised in the income statement
Residual value guarantees that are expected to be paid are included in the initial
measurement of the lease liability. Please refer to note 4.2.
The lease costs for 2018 were DKK 1,299 million.
As of 31 December 2019, the lease liability excludes DKK 2,760 million (undis-
counted) of potential lease payments related to lease term extension rights on
properties, which were not considered reasonably certain to be exercised.
Amounts recognised in the cash flow statement
DKK million
58
2019
852
108
113
201
63
1,337
Property, plant and equipment presented in the balance sheet includes the
following right-of-use assets.
Right-of-use assets in the balance sheet
Total cash outflow for leases
1,295
Please refer to note 4.2 for a maturity analysis of lease payments.
Land and
buildings
Other
equipment
3,291
333
(564)
(31)
3,029
487
307
(288)
(3)
503
Total
3,778
640
(852)
(34)
3,532
DKK million
2019
Balance at 1 January
Additions during the year
Depreciation for the year
Other movements
Balance at 31 December
3.4 Inventories
Accounting policies
Inventories are stated at cost or net realisable value, whichever is lower. 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 (prelaunch inventory) is capi-
talised 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.
In March 2019, Novo Nordisk filed oral semaglutide for US regulatory approval
of glycaemic control. Subsequent to filing, write-downs on prelaunch inventory
was reversed with a net positive income statement effect of DKK 510 million on
research and development costs. Regulatory approval was obtained in September
2019.
Key accounting estimate of indirect production costs capitalised and
inventory write-downs
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 and Obesity care and Biopharm
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
Total inventories (net)
Indirect production costs included in work in
progress and finished goods
Share of total inventories (net)
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
Write-downs at the end of the year
2019
2,842
11,375
4,850
19,067
(1,426)
17,641
9,216
52%
1,959
414
(68)
(879)
1,426
2018
2,464
11,753
4,078
18,295
(1,959)
16,336
8,533
52%
2,219
509
(409)
(360)
1,959
All write-downs in both 2018 and 2019 relate to fully impaired inventory.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 59
Gross
carrying
amount
Loss
allowance
Net
carrying
amount
24,359
1,204
261
96
79
397
(763)
(127)
(69)
(49)
(79)
(397)
23,596
1,077
192
47
—
—
3.5 Trade receivables
Accounting policies
Trade receivables are initially recognised at fair value and subsequently measured
at amortised cost using the effective interest method, less allowance for doubtful
trade receivables.
Trade receivables
DKK million
2019
Before being sold, trade receivables in factoring portfolios are measured at fair
value with changes recognised in other comprehensive income.
The allowance for doubtful receivables 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.
Novo Nordisk’s customer base comprises government agencies, wholesalers, retail
pharmacies and other customers. Management makes allowance for doubtful
trade receivables based on the simplified approach to provide for expected credit
losses, which permits the use of the lifetime expected loss provision for all trade
receivables. The allowance is an estimate based on shared credit risk characteristics
and the days past due. Generally, invoices are due for payment within 90 days of
shipment of goods.
Loss allowance is calculated using an ageing factor, geographical risk and specific
customer knowledge. The allowance is based on a provision matrix on days past
due and a forward looking element relating mainly to incorporation of the Dun &
Bradstreet country risk rating and an individual assessment. Please refer to note
4.3 for a general description of credit risk.
Not yet due
1-90 days
91-180 days
181-270 days
271-360 days
More than 360 days past due
Trade receivables
26,396
(1,484)
24,912
DKK million
2018
Not yet due
1-90 days
91-180 days
181-270 days
271-360 days
More than 360 days past due
Gross
carrying
amount
Loss
allowance
Net
carrying
amount
22,359
1,055
235
60
76
371
(692)
(111)
(79)
(41)
(76)
(371)
21,667
944
156
19
—
—
Trade receivables
24,156
(1,370)
22,786
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.
Movements in allowance for
doubtful trade receivables
Novo Nordisk closely monitors the current economic conditions of countries
impacted by currency fluctuations, high inflation and an unstable political climate.
These indicators as well as payment history 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 notes 4.3 and 4.8
for the trade receivable programmes.
Carrying amount at the beginning of the year
Reversal of allowance on realised losses
Net movement recognised in income statement
Effect of exchange rate adjustment
Allowance at the end of the year
2019
1,370
(45)
158
1
1,484
2018
1,294
(25)
164
(63)
1,370
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements
60
3.6 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.
Net retirement benefit obligations
DKK million
Retirement benefit obligations
Fair value of plan assets
2019
2018
2,508
1,174
2,488
1,232
Defined benefit plans
In a few countries, Novo Nordisk operates defined benefit plans, primarily located
in the US, Germany, Switzerland and Japan. 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 coun-
terparty risk against these insurance companies.
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 valua-
tion 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.
Costs recognised for retirement benefits are included in cost of goods sold, sales
and distribution costs, research and development costs, and administrative costs.
The total cost recognised for the year amounts to DKK 151 million (DKK 73 million
in 2018).
The net obligation recognised in the balance sheet is reported as non-current
liabilities.
Net retirement benefit obligations at the end
of the year
1,334
1,256
The present value of partly funded retirement benefit obligations amounts to DKK
1,845 million (DKK 1,841 million in 2018). The present value of unfunded retire-
ment benefit obligations amounts to DKK 663 million (DKK 647 million in 2018).
Net remeasurement is a loss of DKK 187 million (gain of DKK 87 million in 2018),
primarily related to changes in financial assumptions (discount rate), and is
included in other comprehensive income.
Please refer to note 5.2 for a maturity analysis of the net retirement benefit obliga-
tion. 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.
The sensitivities below consider the single change shown with the other
assumptions assumed to be unchanged. The table shows the NPV impact of net
retirement liabilities.
Key assumptions used for valuation and sensitivity analysis
DKK million
2019
Discount rate (decrease)/increase
Future remuneration growth (decrease)/increase
2018
Discount rate (decrease)/increase
Future remuneration growth (decrease)/increase
Key
assumptions
1 %-point
increase
1 %-point
decrease
1.3%
2.4%
2.1%
2.5%
(366)
105
(369)
99
465
(94)
458
(89)
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 61
3.7 Provisions and contingent liabilities
Accounting policies
Provisions for sales rebates and discounts granted to government agencies,
wholesalers, retail pharmacies, Managed Care and other customers are recorded
at the time the related revenues are recorded or when the incentives are offered.
Provisions are calculated based on historical experience and the 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 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.
Provisions
DKK million
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 liabilities2
Current liabilities
Novo Nordisk issues credit notes for expired goods as a part of normal business.
Where there is historical experience or a reasonably accurate estimate of expected
future returns can otherwise be made, a provision for estimated product returns is
recorded. The provision is measured at gross sales value.
Key accounting estimate regarding ongoing legal disputes, litigation and
investigations
Provisions for legal disputes consist of various types of provision linked to ongoing
legal disputes. Management makes estimates regarding provisions and contingen-
cies, 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 litigation, 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.
Provisions
for sales
rebates
Provisions
for legal
disputes
Provisions
for product
returns
Other
provisions1
25,760
102,782
(98,655)
381
610
30,878
551
30,327
1,860
650
(4)
(156)
25
2,375
2,375
—
869
679
(424)
(48)
6
1,082
300
782
1,064
510
(161)
(29)
14
1,398
1,387
11
2019
total
29,553
104,621
(99,244)
148
655
35,733
4,613
31,120
2018
total
24,057
83,337
(79,243)
314
1,088
29,553
3,392
26,161
1. Other provisions consists of various types of provision, including obligations in relation to employee benefits such as jubilee benefits, company-owned life insurance, etc.
2. For non-current liabilities, provision for sales rebates is expected to be settled after one year, provisions for product returns will be utilised in 2021 and 2022. In the case of provisions for legal
disputes, the timing of settlement cannot be determined.
Contingent liabilities
Novo Nordisk is currently involved in pending litigations, claims and investiga-
tions arising out of the normal conduct of its business. While provisions that
Management deems to be reasonable and appropriate have been made for prob-
able 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
Novo Nordisk, along with the majority of incretin-based product manufacturers
in the United States, is a defendant in product liability lawsuits related to use of
incretin-based medications. As of 3 February 2020, 332 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. 209 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. Novo Nordisk does not currently have any
individual trials scheduled in 2020. 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, former 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 Depositary Receipts between February 2015 and February 2017. All
lawsuits have been consolidated into one case. The lawsuit alleges that Novo
Nordisk artificially inflated its financial results, failed to disclose pricing pressure
and rising rebate payments to PBMs, and made other materially misleading state-
ments to potential investors. Novo Nordisk does not expect the litigation to have a
material impact on Novo Nordisk’s financial position, operating profit or cash flow.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 62
• Washington Attorney General’s Office CID (2017), relating to, among other
things, pricing and trade practices for insulin products, including Levemir®,
NovoLog®, and Novolin®, from 1 January 2005 through the present date.
• New Mexico Attorney General’s Office CID (2017), relating to, among other
things, trade practice and pricing of insulin products, namely NovoLog® and
Novolin® from 1 January 2012 through the present date.
• Texas Attorney General’s Office CID (2019), relating to, among other things,
marketing and promotional practices for Ozempic®.
• New York State Attorney General’s Office Subpoena (2019), relating to, among
other things, pricing and trade practices for insulin products, from 1 July 2013
through the present.
• Colorado Attorney General’s Office CID (2019), relating to, among other things,
pricing and trade practices for insulin products, for the period from 1 January
2010 to present.
In all matters Novo Nordisk is cooperating with the authority in question. Novo
Nordisk does not expect the above investigations to have a material impact on
Novo Nordisk’s financial position, operating profit or cash flow.
Novo Nordisk is one of several pharmaceutical companies that received requests
for information involving pricing practices for its diabetes products from several
committees of the Unites States House of Representatives and/or United States
Senate. Novo Nordisk is working with the staff of the various committees to
respond to their questions. Novo Nordisk does not expect the inquiries to have a
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 Provisions and contingent liabilities (continued)
In August 2019, a securities lawsuit was filed against Novo Nordisk in Denmark
by a number of institutional shareholders. The claim is for a total amount of
DKK 11.6 billion based on trading and holding of shares in Novo Nordisk during
the period between February 2015 and February 2017. The lawsuit alleges
that Novo Nordisk made misleading statements and did not make appropriate
disclosures regarding its sales of insulin products in the US. It appears to contain
broadly similar allegations to those of the previously disclosed securities class
action lawsuit filed in the US in 2017 on behalf of all purchasers of Novo Nordisk
American Depository Receipts. Novo Nordisk does not expect the lawsuit to have a
material impact on Novo Nordisk’s financial position, operating profit or cash flow.
Since January 2017, thirteen lawsuits, including several putative class actions, have
been filed in various federal and state courts against Novo Nordisk Inc., Sanofi, Eli
Lilly, and others relating to the pricing of diabetes medicines. Six of these lawsuits
were consolidated into one matter pending in the United States District Court
for the District of New Jersey, yet one of these six lawsuits was later decon-
solidated and voluntarily dismissed without prejudice. Additionally, two of the
thirteen lawsuits were also voluntarily dismissed in 2019 and 2020. Accordingly,
six lawsuits remain pending against Novo Nordisk in various jurisdictions. Three
lawsuits are pending in the same New Jersey federal court as the consolidated
matter referenced above, while two other lawsuits are pending in other jurisdic-
tions (Kentucky state court and Texas federal court). All pending matters allege
that the manufacturers and Pharmacy Benefit Managers (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
Several authorities in the US have served Novo Nordisk with Civil Investigative
Demands (CIDs) or subpoenas calling for the production of documents and infor-
mation. Below is a list of ongoing matters:
• United States Department of Justice CID (2016) and Washington State Attorney
General’s Office CID (2014 and 2016) both relating to, among other things,
the promotion and marketing of NovoSeven®, interactions with physicians and
patients, and the use of haemophilia-related patient support programmes.
3.8 Other liabilities
Other liabilities primarily comprises employee cost payables, payables related to
non-current assets and sales rebates.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements Section 4
Capital structure and financial items
4.1 Share capital, distributions to shareholders and earnings per share
Share capital
DKK million
Development in share capital:
Share capital 2016
Cancelled in 2017
Cancelled in 2018
Share capital at the beginning of the year
Cancelled in 2019
Share capital at the end of the year
63
A share
capital
B share
capital
Total share
capital
107
—
—
107
—
107
403
(10)
(10)
383
(10)
373
510
(10)
(10)
490
(10)
480
At the end of 2019, the share capital amounted to DKK 107 million in A share capital (equal to 537 million A shares of DKK 0.20) and DKK 373 million in B share capital
(equal to 1,863 million B shares of DKK 0.20). Each A share carries 200 votes and each B share carries 20 votes.
Cash distribution to shareholders
Novo Nordisk paid out an interim dividend of DKK 3.00 per share in August 2019. The net cash distribution to shareholders in the form of dividends and share repurchases
amounts to DKK 34.7 billion, compared with a free cash flow of DKK 34.5 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
2019
7,100
12,309
15,334
34,743
2018
2017
7,238
11,810
15,567
7,396
11,448
16,845
34,615
35,689
The total dividend for 2019 amounts to DKK 19,651 million (DKK 8.35 per share). The 2019 final dividend of DKK 12,551 million (DKK 5.35 per share) is expected to be
distributed pending approval at the Annual General Meeting. The interim dividend of DKK 7,100 million (DKK 3.00 per share) was paid in August 2019. The total dividend
for 2018 was DKK 19,547 million (DKK 8.15 per share), of which the final dividend of DKK 12,309 million (DKK 5.15 per share) was paid in March 2019. No dividend is
declared on treasury shares.
According to Danish corporate law, reserves available for distribution as dividends are based on the financial statements of the parent company, Novo Nordisk A/S.
Dividends are paid from distributable reserves. Share premium is a distributable reserve and any former share premium reserve has been fully distributed.
As at 31 December 2019, distributable reserves total DKK 40,801 million (2018: DKK 38,816 million), corresponding to the parent company's retained earnings.
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
2019
2018
Market value,
DKK million
As % of share
capital before
cancellation
As % of
share
capital after
cancellation
Number of
B shares
of DKK 0.20
(million)
Number of
B shares
of DKK 0.20
(million)
2.3%
(2.0%)
16,610
(14,895)
(762)
15,334
2,326
18,613
2.0%
56
(50)
(3)
45
—
48
56
(50)
(1)
51
—
56
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 Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 64
4.1 Share capital, distributions to shareholders and earnings per share (continued)
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’s dividend payouts are complemented by share repurchase programmes.
The purchase of treasury shares during the year relates to the remaining part of the 2018 share repurchase programme, totalling DKK 1.2 billion and the DKK 15 billion
Novo Nordisk B share repurchase programme for 2019, of which DKK 0.9 billion was outstanding at year-end. The programme ended on 3 February 2020. 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’ for a description of calculation of the dilutive effect.
DKK million
Net profit for the year
2019
2018
2017
38,951
38,628
38,130
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
in 1,000 shares
2,374,299
4,359
2,378,658
2,419,603
4,814
2,424,417
2,473,218
4,875
2,478,093
Basic earnings per share
Diluted earnings per share
1. For further information on the outstanding share pool, please refer to note 5.1.
DKK
DKK
16.41
16.38
15.96
15.93
15.42
15.39
4.2 Borrowings
Contractual undiscounted cashflows
DKK million
2019
Within 1 year
1-3 years
3-5 years
More than 5 years
Total contractual undiscounted cash flows at the end of the year
Contractual discounted cash flows included in the balance sheet at the end of the year
Non-current liabilities
Current liabilities
Leases
Bank
overdrafts1
847
1,424
734
1,140
4,145
3,824
3,009
815
659
—
—
—
659
659
—
659
Total
1,506
1,424
734
1,140
4,804
4,483
3,009
1,474
1. Bank overdrafts includes DKK 595 million classified as financing activities (2018: DKK 506 million) and DKK 64 million classified as cash and cash equivalents (2018: DKK 9 million).
Reconciliation of liabilities arising from financing activities
DKK million
2019
Lease liabilities
Bank overdrafts
Liabilities arising from financing activities
Bank overdrafts
Total borrowings
Non-cash movements
Beginning
of the year Cash flows
Additions
Disposals
Exchange
rates
End of the
year
Other
3,988
506
4,494
9
(822)
81
(741)
55
4,503
(686)
640
—
640
—
640
(57)
—
(57)
—
(57)
63
8
71
—
71
12
—
12
—
12
3,824
595
4,419
64
4,483
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 4.3 Financial risks
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,
and all positions are marked-to-market. Management has assessed the following
key financial 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 the most important financial risk for Novo Nordisk and
can have a significant impact on the income statement, statement of comprehen-
sive 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,
thereby contributing to the predictability of the financial results.
The majority of Novo Nordisk’s sales are in USD, EUR, CNY, JPY, CAD and GBP.
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 exchange 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 2019, the hedging horizon varied between 6 and 13 months for USD,
CNY, JPY, CAD and GBP. The currency hedging strategy balances risk reduction
and cost of hedging by use of 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. There is no expected ineffec-
tiveness at 31 December 2019, primarily because hedging instruments match
currencies of hedged cash flows.
The financial contracts existing at year-end cover the expected future cash flow for
the following number of months:
USD
CNY1
JPY
CAD
GBP
2019
2018
9 months
7 months
12 months
9 months
10 months
11 months
6 months
12 months
9 months
11 months
1. Chinese yuan traded offshore (CNH) is used to hedge Novo Nordisk’s CNY currency
exposure.
65
Key currencies
Exchange rate DKK per 100
2019
2018
2017
USD
Average
Year-end
Year-end change
CNY
Average
Year-end
Year-end change
JPY
Average
Year-end
Year-end change
CAD
Average
Year-end
Year-end change
GBP
Average
Year-end
Year-end change
667
668
2.5%
97
96
1.1%
6.12
6.11
3.4%
503
511
6.7%
852
877
6.0%
631
652
5.1%
95
95
(0.3%)
5.72
5.91
7.3%
487
479
(3.2%)
842
827
(1.4%)
660
621
(12.0%)
98
95
(6.9%)
5.88
5.51
(8.6%)
508
495
(5.5%)
849
839
(3.5%)
Foreign exchange sensitivity analysis
A 5% increase/decrease in the year-end rate in the following currencies versus EUR
and DKK would impact Novo Nordisk’s operating profit estimated by Management
as outlined in the table below:
DKK million
USD
CNY
JPY
CAD
GBP
Estimated for
2020
1,950
450
150
130
100
2019
2,000
350
160
90
85
At year-end, a 5% immediate increase/decrease in all other currencies versus EUR
and DKK would affect other comprehensive income and the income statement as
outlined in the table below:
DKK million
2019
Other comprehensive income
Income statement
Total
2018
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
(1,811)
199
(1,612)
(1,988)
115
(1,873)
1,811
(199)
1,612
1,988
(115)
1,873
A 5% depreciation of USD against all other currencies at 31 December 2019
would affect equity by DKK 1,298 million (2018: DKK 1,604 million) and the
income statement by DKK 135 million (2018: DKK 157 million).
The foreign exchange sensitivity analysis comprises effects from the Group’s cash,
trade receivables and trade payables, current loans, current and non-current
financial investments, lease liabilities, foreign exchange forwards and foreign
exchange options at year-end. Anticipated currency transactions, investments and
non-current assets are not included.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 66
Outside the US, Novo Nordisk has no significant concentration of credit risk
related to trade receivables or other receivables and prepayments, as the exposure
in general is spread over a large number of counterparties and customers. In the
US, the three major wholesalers account for a large proportion of total net sales,
cf. note 2.2. However, US wholesaler credit ratings are monitored and a large
proportion of the trade receivables are sold on full non-recourse terms; see below
for details. 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
Please refer to note 3.5 for the description of the loss allowance for the Group
and the ageing analysis.
Novo Nordisk’s subsidiaries in the US and Japan employ trade receivable
programmes in which 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 2019 amounting to:
DKK million
US
Japan
2019
3,672
2,149
2018
3,587
1,937
2017
3,328
2,024
In addition, full non-recourse off-balance sheet factoring arrangement
programmes are occasionally applied by Novo Nordisk subsidiaries around the
world, with limited impact on the Group’s trade receivables.
Please refer to note 2.2 for the split of allowance for trade receivables by
geographical segment.
4.3 Financial risks (continued)
Interest rate risk
Novo Nordisk has no significant exposure to interest rate risk as it does not hold
any significant interest-bearing marketable securities or non-current loans.
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 both
uncommitted and committed credit 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 exposure to financial counterparties to be DKK
15,663 million (2018: DKK 15,842 million). In addition, Novo Nordisk considers its
maximum credit exposure to trade receivables, other receivables (less prepayments
and VAT receivables) and other financial assets to be DKK 26,622 million (2018:
DKK 25,065 million). Please refer to note 4.8 for details of the Group’s total
financial assets.
To manage credit risk regarding 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 at least 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 table below shows Novo Nordisk’s credit exposure
on cash and financial derivatives.
Credit exposure for cash at bank and derivative financial instruments
(market value)
DKK million
2019
AA-range
A-range
BBB-range
Not rated or below BBB-range
Total
2018
AA-range
A-range
BBB-range
Not rated or below BBB-range
Total
Derivative
financial
instruments
Cash at
bank
7,471
7,145
314
545
15,475
7,989
7,212
246
191
15,638
139
49
—
—
188
90
114
—
—
204
Total
7,610
7,194
314
545
15,663
8,079
7,326
246
191
15,842
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 67
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.
4.4 Derivative financial instruments
Accounting policies
Novo Nordisk uses financial instruments to reduce the impact of foreign exchange
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, to a lesser extent, currency
options to hedge forecast transactions, assets and liabilities. The overall policy is to
hedge the majority of total currency exposure.
Net investments in foreign subsidiaries are currently 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.
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 attribut-
able to the hedged risk.
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 state-
ment when the hedged transaction is recognised in the income statement.
Derivative financial instruments
2019
2018
DKK million
Forward contracts USD1
Forward contracts CNH, JPY, GBP and CAD
Forward contracts, cash flow hedges
Forward contracts USD
Forward contracts CNH, CAD, EUR, GBP and JPY
Forward contracts, fair value hedges
Total derivative financial instruments
Recognised in the income statement
Recognised in other comprehensive income
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
25,394
10,013
35,407
11,287
3,761
15,048
50,455
81
35
116
61
11
72
188
72
116
315
130
445
217
72
289
734
289
445
29,951
7,462
37,413
9,145
3,268
12,413
49,826
21
23
44
123
37
160
204
160
44
1,555
166
1,721
256
47
303
2,024
303
1,721
1. Average hedge rate for USD cash flow hedges is 654 at the end of 2019 and 610 at the end of 2018.
The above financial contracts are expected to impact the income statement within the next 12 months, with deferred gains and losses on cash flow hedges then being
transferred to financial income or financial expenses.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 68
4.5 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. The change in working capital
is also 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 consists of cash offset by short-term bank loans. Where
short-term bank loans are consistently overdrawn, they are excluded from cash
and cash equivalents. The movement in such facilities is presented under financing
activities in the cash flow statement1. 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.
Restricted cash
Cash and cash equivalents at 31 December 2019 includes DKK 509 million that is
restricted (2018: DKK 120 million). The restricted cash balance relates to subsidi-
aries in which availability of currency for remittance of funds is temporarily scarce.
DKK million
2019
2018
2017
Cash and cash equivalents
Cash at bank (note 4.3)
Borrowings (bank overdrafts)1
Cash and cash equivalents
Financial resources
Cash and cash equivalents
Undrawn committed credit facility2
Borrowings (bank overdrafts)1
Financial resources3
15,475
(64)
15,411
15,411
11,578
(595)
26,394
15,638
(9)
18,852
(1,694)
15,629
17,158
15,629
11,574
(506)
17,158
8,190
—
26,697
25,348
1. Cash and cash equivalents at the beginning of 2018 has been adjusted for a DKK 412
million bank loan reclassified to financing activities. At 31 December 2019 bank overdrafts
classified as financing activities totalled DKK 595 million (2018: DKK 506 million).
2. The undrawn committed credit facility in 2019 is a EUR 1,550 million facility (EUR 1,550
million in 2018 and EUR 1,100 million in 2017) committed by a portfolio of international
banks. The facility matures in 2024.
3. Additional non-IFRS financial measure; please refer to 'Financial definitions', which is not
part of the audited financial statements.
Free cash flow
DKK million
Net cash generated from
operating activities
Net cash used in investing activities
Net purchase of marketable
securities
Repayment on lease liabilities
2019
2018
2017
46,782
(11,509)
44,616
(12,080)
—
(822)
—
—
41,168
(6,571)
(2,009)
—
Free cash flow4
34,451
32,536
32,588
4. Additional non-IFRS financial measure; please refer to 'Financial definitions', which is not
part of the audited financial statements.
4.6 Change in working capital
4.7 Other non-cash items
Accounting policies
Working capital is defined as current assets less current liabilities and measures the
liquid assets Novo Nordisk has available for the business.
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:
2018
2017
Other non-cash items
DKK million
2019
2018
2017
Change in working capital
DKK million
Inventories
Trade receivables
Other receivables and prepayments1
Trade payables
Other liabilities1
Adjustment for payables related to
non-current assets
Adjustment related to divestment of
group companies
Change in working capital
including exchange rate
adjustments
2019
(1,305)
(2,126)
(1,190)
(398)
1,202
295
(42)
(963)
(2,621)
(662)
1,146
(348)
84
—
(1,032)
69
(17)
(401)
265
(1,143)
—
(3,564)
(3,364)
(2,259)
Exchange rate adjustments
176
(6)
(1,375)
Cash flow change in working
capital
(3,388)
(3,370)
(3,634)
1. Change in working capital includes adjustments in respect of implementation of IFRS 16,
please refer to note 1.2.
Reversals of non-cash income
statement items
Interest income and interest
expenses, net (note 4.9)
Capital gain/(loss) on investments,
net etc (note 4.9)
Result of associated company (note
4.9)
Share-based payment costs (note
5.1)
Income from the divestment of
group companies
Adjustment in non-cash items
related to divestment of group
companies
Increase/(decrease) in provisions
(note 3.7) and retirement benefit
obligations
Other
Total other non-cash items
155
145
137
363
(68)
162
6,071
67
7,032
34
(163)
(12)
414
(122)
—
5,503
444
6,098
21
25
(14)
292
—
—
214
1,489
2,027
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements
69
4.8 Financial assets and liabilities
Accounting policies
The implementation of IFRS 9 from 1 January 2018 resulted in changes to the
classification of financial assets. Key changes from the application of IFRS 9 were:
From 1 January 2018, Novo Nordisk's investments in minor shareholdings are
measured and classified as fair value through the income statement (previously
measurement was at fair value through other comprehensive income).
From 1 January 2018, all financial assets previously categorised as loans and
receivables are classified as financial assets at amortised cost with the exception
of certain portfolios of trade receivables which are either sold under master
factoring agreements or collected from the customer. These specific portfolios of
trade receivables are separately classified and measured at fair value through other
comprehensive income.
Depending on purpose, Novo Nordisk classifies investments into the following categories:
• Financial assets at fair value through the income statement
• Financial assets at amortised cost
• Financial assets at fair value through OCI
Management determines the classification of its financial assets on initial recogni-
tion and re-evaluates this at the end of every reporting period to the extent that
such a classification is permitted or required.
Recognition and measurement
Purchases and sales of financial assets are recognised on the settlement date.
These are initially recognised at fair value.
Fair value disclosures are made separately for each class of financial instruments at
the end of the reporting period.
Financial assets are removed from the balance sheet when the rights to receive
cash flows have expired or have been transferred, and Novo Nordisk has trans-
ferred substantially all the risks and rewards of ownership.
Financial assets 'at fair value through the income statement'
Financial assets at fair value through the income statement consist of equity
investments and forward exchange contracts. 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.
Net gains and losses arising from changes in the fair value of financial assets are
recognised in the income statement as financial income or expenses.
The fair values of quoted investments 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.
Financial assets 'at amortised cost'
Financial assets at amortised cost are cash at bank and non-derivative financial assets
solely with payments of principal and interest. Novo Nordisk normally 'holds-to-col-
lect' the financial assets to attain the contractual cash flows. 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 allowance for doubtful receivables.
Financial assets 'at fair value through other comprehensive income'
Financial assets at fair value through other comprehensive income are trade receiv-
ables that are held to collect or to sell in factoring agreements.
Financial liabilities 'at fair value through the income statement'
Financial liabilities at fair value through the income statement consist of forward
exchange contracts.
Financial liabilities 'at amortised cost'
Financial liabilities at amortised cost consist of bank overdrafts, trade payables and
other liabilities.
Financial assets by category
DKK million
Financial assets at fair value through the income statement
Other financial assets1
Derivative financial instruments (note 4.4)
Financial assets at amortised cost
Other financial assets1
Trade receivables (note 3.5)2
Other receivables and prepayments (current and non-current)
- less prepayments and VAT receivables
Cash at bank (note 4.5)
Financial assets at fair value through OCI
Trade receivables in a factoring portfolio (note 3.5)2
Total financial assets at the end of the year by category1
2019
1,158
970
188
28,418
364
12,203
4,275
(3,899)
15,475
12,709
12,709
42,285
2018
969
765
204
28,340
477
11,188
3,090
(2,053)
15,638
11,598
11,598
40,907
1. Financial assets with the exception of other financial assets and non-current part of other receivables and prepayments (DKK 841 million) are all due within one year. Other financial assets at amor-
tised cost include DKK 327 million which are due in more than 5 years (2018: DKK 377 million). Other financial assets measured at fair value through the income statement are minor shareholdings.
2. Trade receivables which are measured at fair value through OCI, which have no associated loss allowance.
Financial liabilities by category
DKK million
Financial liabilities measured at fair value through the income statement
Derivative financial instruments (note 4.4)
Financial liabilities measured at amortised cost
Borrowings (non-current)
Borrowings (current)
Trade payables
Other liabilities
- less VAT and duties payable
Total financial liabilities at the end of the year by category3
3. Please refer to note 4.2 for a maturity analysis for non-current and current borrowings. All other financial liabilities are due within one year.
2019
734
734
25,448
3,009
1,474
6,358
15,085
(478)
26,182
2018
2,024
2,024
20,936
—
515
6,756
14,098
(433)
22,960
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 4.8 Financial assets and liabilities (continued)
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 4.3 and 4.4.
70
Fair value measurement hierarchy
DKK million
Active market data
Directly or indirectly observable market data
Not based on observable market data1
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
2019
846
188
12,833
13,867
—
734
—
734
2018
649
204
11,714
12,567
—
2,024
—
2,024
1. The fair value of trade receivables in a factoring portfolio is calculated based on the net invoice amount (invoice amount less charge-backs) less the fee payable to the factoring entity. The
factoring fee is insignificant due to the short period between the time of sale to the factoring entity and the invoice due date and the rate applicable. Inputs to the estimate of US wholesaler
charge-backs are described in note 2.1.
Financial assets and liabilities measured at fair value can be categorised using the fair value measurement hierarchy above. There were no transfers between the ’Active
market data’ and ’Directly or indirectly observable market data’ categories during 2019, 2018 or 2017. There are no significant intangible assets or items of property,
plant and equipment measured at fair value.
Financial impact from forward contracts and currency options, specified
DKK million
2018
2019
2017
Forward contracts
Income/(loss) transferred from other
comprehensive income
Value adjustment of transferred
contracts
Unrealised fair value adjustments of
forward contracts
Realised foreign exchange gain/
(loss) on forward contracts
Financial income/(expense) from
forward contracts
Currency options
Realised income/(loss) transferred
from other comprehensive income
Value adjustment of transferred
options
Foreign exchange gain/(loss) on
currency options
(1,677)
1,841
(2,016)
(1,609)
(1,299)
2,477
(217)
(143)
116
830
1,257
(1,923)
(2,673)
1,656
(1,346)
—
—
—
—
186
(3)
(31)
152
61
(9)
(56)
(4)
4.9 Financial income and expenses
Accounting policies
As described in note 4.3, Management has chosen to classify the result of
hedging activities as part of financial items in the income statement. Financial
items primarily relate 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. In addition, 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 foreign currency assets and liabilities in
non-hedged currencies will impact financial income and financial expenses.
2019
2018
2017
69
1,163
—
—
—
14
51
—
1,656
152
251
12
Financial income
DKK million
Interest income1
Foreign exchange gain (net)
Financial gain from forward con-
tracts (net)
Financial gain from currency options
(net)
Capital gain on investments, etc.
Result of associated companies
Total financial income
Financial expenses
DKK million
Interest expenses1
Foreign exchange loss (net)
Financial loss from forward con-
tracts (net)
Financial loss from currency options
(net)
Capital loss on investments, etc.
Result of associated companies
Other financial expenses
65
—
—
—
—
—
65
2019
220
539
2,673
—
145
137
281
Total financial expenses
3,995
1,755
1,533
1. Total interest income and expenses is measured at amortised cost for financial assets and liabilities.
2,122
1,246
Financial income/(expense) from
currency options
2018
85
1,510
—
—
88
—
72
2017
90
—
1,346
4
25
—
68
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements
Section 5
Other disclosures
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
Restricted stock units to employees
Long-term share-based incentive
programme (Management Board)1
Long-term share-based incentive pro-
gramme (management group below
Management Board)
Shares allocated to individual
employees
Share-based payment expensed
in the income statement
2019
48
86
195
34
363
2018
204
2017
169
48
19
145
17
414
102
2
292
1. In 2017 Novo Nordisk introduced, for the first time, a share-based compensation pro-
gramme with terms which amortises the grant date valuation over four years. The 2019
expense includes amortisation of the 2017, 2018 and 2019 programmes.
Restricted stock units to employees
In appreciation of the efforts of employees during recent years, as of 1 August
2019, all employees in the company were offered 75 restricted stock units. A
restricted stock unit gives the holder the right to receive one Novo Nordisk B share
free of charge in February 2023 subject to continued employment. The cost of the
DKK 660 million programme is amortised over the vesting period.
71
Long-term share-based incentive programme
Management Board
On 4 February 2020, the Board of Directors approved the allocation of a total of
508,398 Novo Nordisk B shares to the members of the Management Board for the
2019 financial year. The value at launch of the programme (adjusted for expected
dividends) was DKK 152 million. On average, this corresponds to 14.7 months’
fixed base salary plus pension contribution for the CEO, 11.0 months’ fixed base
salary plus pension contribution per executive vice president as of 1 March 2019
and 8.2 months’ fixed base salary plus pension for senior vice presidents. The
cost of the 2019 programme is amortised over the vesting period of 2019-2022
at an annual amount of DKK 38 million. The amount of shares allocated may be
reduced or increased by up to 30%, depending on whether the average sales
growth per year in the three-year vesting period deviates from a target set by the
Board of Directors.
The grant date of the programme was February 2019, and the share price used
for the determining the grant date fair value of the award was the average share
price (DKK 322) for Novo Nordisk B shares on Nasdaq Copenhagen in the period
1-15 February 2019, adjusted for expected dividend. Based on the split of partici-
pants when the share allocation was decided, 43% of the allocated shares will be
allocated to members of Executive Management and 57% to other members of
the Management Board.
The shares allocated to the joint pool for 2016 were released to the individual
participants subsequent to approval of the 2019 Annual Report by the Board of
Directors and after the announcement of the 2019 full-year financial results on
5 February 2020. The shares allocated correspond to a value at launch of the
programme of DKK 29 million, expensed in 2016.
Management group below Management Board
The management group below the Management Board has a share-based incen-
tive programme with similar performance criteria. For 2019, a total of 1,300,333
shares were allocated to this group, corresponding to a value at launch of the
programme (adjusted for expected dividends) of DKK 387 million. The cost of the
2019 programme is amortised over the vesting period of 2019-2022 at an annual
amount of DKK 97 million. The amount of shares allocated may be reduced or
increased by up to 30%, depending on whether the average sales growth per
year in the three-year vesting period deviates from a target set by the Board of
Directors.
The shares allocated for 2016 were released to the individual participants subse-
quent to approval of the 2019 Annual Report by the Board of Directors and after
the announcement of the 2019 full-year financial results on 5 February 2020.
The shares allocated correspond to a value at launch of the programme of DKK
68 million amortised over the period 2016-2019. The number of shares to be
transferred (174,481 shares) is lower than the original number of shares allocated,
as some participants had left the company before the programme’s release condi-
tions were met.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated 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
2019
2018
2017
2019
2018
2017
2019
2018
2017
72
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)
Amortisation period of
the programme
2,148,580
307
3.5 years
Feb 2023
660
2019 to
2023
Outstanding restricted stock units
Outstanding at the beginning of the year
Released restricted stock units to employees
Released shares allocated to Management in 2015
Released shares allocated to individual employees
Cancelled allocated shares
Allocated restricted stock units to employees
Shares allocated to Management in the year
Shares allocated to individual employees in the year
Outstanding at the end of the year
Outstanding restricted stock units
Restricted stock units to employees
2016 Restricted stock units
2019 Restricted stock units
—
—
—
—
—
—
—
—
—
—
508,398
298
3 years
Feb 2023
152
2019 to
2022
411,090
280
3 years
Feb 2022
356,195
213
3 years
Feb 2021
1,300,333
298
3 years
Feb 2023
115
2018 to
2021
76
2017 to
2020
387
2019 to
2022
1,114,455
280
3 years
Feb 2022
312
2018 to
2021
2019
5,584,019
(1,431,192)
(1,040,593)
(81,873)
(262,596)
2,148,580
1,808,731
154,122
6,879,198
761,826
213
3 years
Feb 2021
162
2017 to
2020
2018
4,833,882
(35,180)
(764,474)
(25,883)
(209,308)
100,000
1,525,545
159,437
5,584,019
Released
(accu mulated)
Issued1
Cancelled
(accumulated) Outstanding
Value at
launch date
DKK million
Vesting
date
1,565,411
2,148,580
(1,475,572)
—
(89,839)
—
— 2,148,580
508
660
Q1 2019
Q1 2023
Outstanding restricted stock units to employees
3,713,991
(1,475,572)
(89,839)
2,148,580
Shares allocated to Management Board
2015 Shares allocated to joint pool
2016 Shares allocated to joint pool
2017 Shares allocated to joint pool
2018 Shares allocated
2019 Shares allocated
378,943
96,705
356,195
411,090
508,398
(522)
(378,421)
—
(1,623)
— (24,608)
— (20,077)
—
—
—
95,082
331,587
391,013
508,398
Outstanding shares for Management Board
1,751,331
(378,421)
(46,830)
1,326,080
Shares allocated to pools for management group below Management Board
2015 Shares allocated
2016 Shares allocated
2017 Shares allocated
2018 Shares allocated
2019 Shares allocated
879,988
224,055
761,826
1,114,455
1,300,333
(662,172)
(217,816)
— (49,574)
— (100,098)
— (77,812)
—
—
174,481
661,728
1,036,643
— 1,300,333
108
29
76
115
152
251
68
162
312
387
Q1 2019
Q1 2020
Q1 2021
Q1 2022
Q1 2023
Q1 2019
Q1 2020
Q1 2021
Q1 2022
Q1 2023
Outstanding shares for Management group below Management Board
Shares allocated to individual employees
4,280,657
323,170
(662,172)
(81,873)
(445,300)
(9,944)
3,173,185
231,353
75
2020-2023
Outstanding at the end of 2019
10,069,149
(2,598,038)
(591,913)
6,879,198
All restricted stock units and shares allocated to Management are hedged by treasury shares.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 5.2 Commitments
Commitments
Total contractual obligations and recognised non-current debt can be specified as
follows (payments due by period):
The lease commitments are related to IFRS 16 leases primarily for premises and
company cars and include the present value of future lease payments during the
lease term. Approximately 74% of the commitments are related to leases outside
Denmark.
73
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 include contingent payments related to
achieving development milestones. Such amounts entail uncertainties in relation
to the period in which payments are due because a proportion of the obligations
is dependent on milestone achievements. Exercise fees and subsequent milestone
payments under in-licensing option agreements are excluded, as Novo Nordisk
is not contractually obligated to make such payments. Commercial product
launch milestones include contingent payments solely related to achievement of a
commercial product launch following regulatory approval. Commercial milestones,
royalty and other payments based on a percentage of sales generated from sale of
goods following marketing approval are excluded from the contractual commit-
ments analysis because of their contingent nature, related to future sales. The due
periods disclosed are based on Management’s best estimate.
DKK million
Other guarantees
2019
2018
World Diabetes Foundation (WDF)
At the Annual General Meeting in 2014, a donation to WDF was approved. 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 DKK 90 million or 15% of the
taxable income of Novo Nordisk A/S in the financial year in question, whichever
is lower.
Total
For 2019, the total donation amounts to DKK 86 million (DKK 85 million in 2018
and DKK 85 million in 2017).
172
5,695
—
2,989
—
1,175
—
621
172
10,480
Other guarantees primarily relate to performance
guarantees issued by Novo Nordisk
906
973
2019
DKK million
Within
1 year
Retirement benefit obligations
Leases (note 4.2)
13
847
1-3
years
26
1,424
More
than
5 years
1,270
1,140
3-5
years
25
734
Total
1,334
4,145
Total obligations recognised
in the balance sheet
860
1,450
759
2,410
5,479
Leases1
128
229
199
376
932
2,600
3,258
1,493
29
7,380
300
1,023
1,009
2,403
4,735
—
—
— 3,468
3,468
Research and
development obligations
Research and development -
potential milestone payments3
Commercial product launch -
potential milestone payments3
Purchase obligations relating
to investments in property,
plant and equipment
Other purchase obligations
Total obligations not recog-
nised in the balance sheet
Total contractual obligations
9,755
8,949
4,635
9,307
32,646
8,895
7,499
3,876
6,897
27,167
2018
DKK million
Within
1 year
1-3
years
3-5
years
More
than
5 years
Retirement benefit obligations
13
Total obligations recognised
in the balance sheet
13
25
25
25
1,193
1,256
25
1,193
1,256
Operating leases2
1,007
1,463
915
1,511
4,896
Research and
development obligations
Research and development -
potential milestone payments3
Commercial product launch -
potential milestone payments3
Purchase obligations relating
to investments in property,
plant and equipment
Other purchase obligations
Total obligations not recog-
nised in the balance sheet
2,014
1,715
968
75
4,772
550
833
818
2,091
4,292
—
—
— 2,591
2,591
1,875
4,392
—
2,536
—
1,095
—
406
1,875
8,429
9,838
6,547
3,796
6,674
26,855
Total contractual obligations
9,851
6,572
3,821
7,867
28,111
1. Predominantly relates to estimated variable property taxes, leases committed not yet
commenced and low value assets.
2. There were no material finance lease obligations in 2018.
3. Potential milestone payments are associated with uncertainty as they are linked to success-
ful achievements in research activities.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 5.3 Related party transactions
5.4 Fee to statutory auditors
74
DKK million
2019
2018
2017
Statutory audit
Audit-related services
Tax advisory services
Other services
Total fee to statutory auditors
26
4
11
4
45
25
3
11
3
42
24
4
10
5
43
Fees for services other than statutory audit of the financial statements
amount to DKK 19 million (DKK 17 million in 2018 and DKK 19 million in
2017). PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab
(PricewaterhouseCoopers Denmark) provided other services in the amount of DKK
12 million (DKK 9 million in 2018 and DKK 8 million in 2017). Services other 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, 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. 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.
As associated companies of Novo Nordisk A/S, NNIT Group and Churchill Stateside
Solar Fund XIV, LLC (‘CS Solar Fund XIV’) are considered related parties. As an
associated company of Novo Holdings A/S, Unchained Labs, Inc. is considered a
related party to Novo Nordisk A/S. As they share a controlling shareholder, the
Novozymes Group and Xellia Pharmaceuticals are also considered to be related
parties as well as the Board of Directors or Executive Management of Novo
Nordisk A/S.
In 2019, Novo Nordisk A/S acquired 14,025,000 B shares, worth DKK 4.9
billion, from Novo Holding A/S as part of the DKK 15.0 billion share repurchase
programme. The transaction price for each transaction was calculated as the
average market price in the open windows following the announcements of the
financial results for the four quarters in 2019.
The Group has had the following material transactions with related parties:
DKK million
2019
2018
2017
Novo Holdings A/S
Purchase of Novo Nordisk B shares
Sale of NNIT B shares
Dividend payment to
Novo Holdings A/S
NNIT Group
Services provided by NNIT
Dividend payment from NNIT
Novozymes Group
Services provided by Novo Nordisk
Services provided by Novozymes
CS Solar Fund XIV
Purchase of shares by Novo Nordisk
Liability for capital commitment
Distribution by CS Solar Fund XIV
4,894
—
4,207
(368)
—
—
5,580
5,496
5,330
941
(20)
(132)
103
97
389
(385)
1,052
(19)
(115)
121
—
—
—
1,231
(26)
(145)
163
—
—
—
In Novo Nordisk A/S, there were no transactions with the Board of Directors or
Executive Management besides remuneration. There were no 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, Unchained Labs or CS Solar Fund XIV.
For information on remuneration of the Management of Novo Nordisk, please
refer to note 2.4, ‘Employee costs’. There are no loans to the Board of Directors
or Executive Management in 2019, nor were there any in 2018 or 2017.
There are no material unsettled balances with related parties at the end of
the year.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 5.5 Companies in the Novo Nordisk Group
Activity:
• Sales and marketing
• Production
• Research and development
• Services/investments
75
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
100 •
Novo Nordisk Canada Inc., Canada
100 •
Novo Nordisk Inc., United States
100
Novo Nordisk US Bio Production, Inc., United States
100
Novo Nordisk US Holdings Inc., United States
Novo Nordisk Pharmaceutical Industries LP, United States
100
Novo Nordisk Research Center Indianapolis, Inc., United States 100
100
Novo Nordisk Research Center Seattle, Inc., United States
100 •
Novo Nordisk Pharma, Inc., United States
•
•
•
•
International Operations
Novo Nordisk Pharma Operations A/S, Denmark
Novo Nordisk Region AAMEO and LATAM A/S, Denmark
Region Japan & Korea
Novo Nordisk Region Japan & Korea A/S, Denmark
Novo Nordisk Pharma Ltd., Japan
Novo Nordisk Pharma Korea Ltd., South Korea
100 •
100
100
100 • •
100 •
•
Region Europe
100 •
Novo Nordisk Pharma GmbH, Austria
100 •
S.A. Novo Nordisk Pharma N.V., Belgium
100 •
Novo Nordisk Pharma d.o.o., Bosnia and Herzegovina
100 •
Novo Nordisk Pharma EAD, Bulgaria
100 •
Novo Nordisk Hrvatska d.o.o., Croatia
100 •
Novo Nordisk s.r.o., Czech Republic
100 • •
Novo Nordisk Pharmatech A/S, Denmark
100
Novo Nordisk Region Europe A/S, Denmark
100 •
Novo Nordisk Denmark A/S, Denmark
100 •
Novo Nordisk Farma OY, Finland
100 •
Novo Nordisk, France
100
Novo Nordisk Production SAS, France
100 •
Novo Nordisk Pharma GmbH, Germany
100 •
Novo Nordisk Hellas Epe., Greece
100 •
Novo Nordisk Hungária Kft., Hungary
100 •
Novo Nordisk Biopharm Limited, Ireland
100 •
Novo Nordisk Limited, Ireland
100 •
Novo Nordisk S.P.A., Italy
100 •
UAB Novo Nordisk Pharma, Lithuania
100 •
Novo Nordisk Farma dooel, Macedonia
100 •
Novo Nordisk B.V., Netherlands
100 •
Novo Nordisk Scandinavia AS, Norway
100 •
Novo Nordisk Pharmaceutical Services Sp. z o.o., Poland
Novo Nordisk Comércio Produtos Farmacêuticos Lda., Portugal 100 •
100 •
Novo Nordisk Farma S.R.L., Romania
100 •
Novo Nordisk Pharma d.o.o. Belgrade (Serbia), Serbia
100 •
Novo Nordisk Slovakia s.r.o., Slovakia
100 •
Novo Nordisk, d.o.o., Slovenia
100 •
Novo Nordisk Pharma S.A., Spain
100 •
Novo Nordisk Scandinavia AB, Sweden
100 •
Novo Nordisk Health Care AG, Switzerland
100 •
Novo Nordisk Pharma AG, Switzerland
100
Novo Nordisk Holding Limited, United Kingdom
100 •
Novo Nordisk Limited, United Kingdom
100
Ziylo Limited, United Kingdom
•
•
•
•
•
•
•
•
•
100 • •
100 •
100 •
100 •
100 •
100
100 •
100 •
100 •
100 •
100 •
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 (Business Area) Sdn Bhd, Malaysia 100
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
100 •
100 •
100 •
100 •
100 •
100 •
100
100
100 •
100 •
100 •
93 •
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
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 companies
NNE A/S, Denmark
NNIT A/S, Denmark
Churchill Stateside Solar Fund XIV, LLC, United States
100 • •
100
•
•
100 •
100 •
100 •
100
100 •
100 •
100 •
100 •
100
100 •
100 •
100
18
99
Companies without significant activities are not included in the list. NNE A/S
subsidiaries are not included in the list.
•
•
•
•
•
•
•
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Financial Statements 7676
Financial definitions (part of Management's review – not audited)
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-IFRS 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.
Basic earnings per share (EPS)
Net profit divided by the average number of shares outstanding.
Gross margin
Gross profit as a percentage of sales.
Net profit margin
Net profit as a percentage of sales.
Purchase of property, plant and equipment
Cash flow statement amount for the purchase of property, plant and equipment.
The definition of capital expenditure has been redefined in 2019. Capital expend-
iture is now defined as purchase of property, plant and equipment from the cash
flow statement. Amounts for 2015-2018 have been restated in the 'Performance
highlights'.
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.
Number of shares outstanding
The total number of shares, excluding the holding of treasury shares.
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
(part of Management's review - not audited)
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.
The non-IFRS financial measures presented in the Annual Report are:
• Sales and operating profit in constant exchange rates
• Operating profit after tax to net operating assets (OPAT/NOA)
• Financial resources
• Free cash flow
• Cash to earnings
IFRS refers to an IFRS financial measure.
Sales and operating profit growth in constant exchange rates
'Growth in constant exchange rates’ means that the effect of changes in exchange
rates is excluded. It is defined as sales/operating profit for the period measured
at the average exchange rates for the same period prior year compared with net
sales/operating profit for the same period prior year. Price adjustments within
hyperinflation countries as defined in IAS 29 ‘Financial reporting in hyperinfla-
tion economies’ are excluded from the calculation to avoid growth in constant
exchange rates being artificially inflated.
Growth in constant exchange rates is considered to be relevant information for
investors in order to understand the underlying development in sales and oper-
ating profit by adjusting for the impact of currency fluctuations.
Sales in constant exchange rates
DKK million
2019
2018
2017
Net sales IFRS
Effect of exchange rate
122,021
(3,923)
111,831
5,043
111,696
2,609
Sales in constant exchange
rates
118,098
116,874
114,305
Net sales previous year
111,831
111,696
111,780
% increase/(decrease) in constant
exchange rates
% increase/(decrease) in reported
currencies
5.6%
9.1%
4.6%
2.3%
0.1%
(0.1)%
Operating profit in constant exchange rates
2019
DKK million
Operating profit IFRS
Effect of exchange rate
Operating profit in constant
exchange rates
Operating profit previous year
% increase/(decrease) in constant
exchange rates
% increase/(decrease) in reported
currencies
52,483
(2,607)
49,876
47,248
2018
2017
47,248
3,098
48,967
1,770
50,346
50,737
48,967
48,432
5.6%
2.8%
4.8%
11.1%
(3.5%)
1.1%
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Part of management´s review − not auditedNovo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019 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 begin-
ning 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 this financial target is a widely accepted
measure of earnings efficiency in relation to total capital employed.
Solely for the purpose of calculating average net operating assets for 2019,
year-end net operating assets for 2018 have been adjusted upwards by DKK 3,778
million to DKK 40,541 million, reflecting the recognition by Novo Nordisk of right-
of-use assets of DKK 3,778 million as of 1 January 2019 in accordance with IFRS
16. Comparative figures for 2018 and 2017 have not been restated. Please refer
to note 1.2.
7777
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, undrawn committed credit facilities less
bank overdrafts classified as liabilities arising from financing activities (part of
borrowings).
Management believes that financial resources at the end of the year are an
important measure of the Group's financial strength from an investor's perspec-
tive, 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 equiva-
lents, the most directly comparable IFRS financial measure:
Financial resources
DKK million
Cash and cash equivalents IFRS
Undrawn committed credit facilities
Borrowings (bank overdrafts)
2019
15,411
11,578
(595)
26,394
2018
2017
15,629
11,574
(506)
17,158
8,190
—
26,697
25,348
The following table shows the calculation of operating profit after tax to net
operating assets:
Financial resources
Operating profit after tax to net operating assets
DKK million
2019
2018
2017
Operating profit after tax
/ Average net operating assets
42,091
42,940
38,318
32,832
38,341
26,776
Operating profit after tax to net
operating assets in %
98.0%
116.7%
143.2%
OPAT/NOA numerator
Reconciliation of operating profit to operating profit after tax:
DKK million
2019
2018
2017
Operating profit IFRS
52,483
47,248
48,967
Tax on operating profit (using
effective tax rate)
(10,392)
(8,930)
(10,626)
Operating profit after tax
42,091
38,318
38,341
Free cash flow
Novo Nordisk used to define free cash flow as ‘net cash generated from operating
activities’ less ‘net cash used in investing activities’ excluding net change in
marketable securities.
From 1 January 2019, Novo Nordisk defines free cash flow as ’net cash generated
from operating activities’, less ‘net cash used in investing activities’, less repayment
on lease liabilities and excluding net change of marketable securities. The updated
definition reflects the implementation of IFRS 16, which accordingly has a neutral
effect on free cash flow.
Free cash flow is a measure of the amount of cash generated in the period which
is available for the Board to allocate between Novo Nordisk's capital providers,
through measures such as dividends, share repurchases and repayment of debt
(excluding lease liability repayments) or for retaining in the business to fund future
growth.
The following table shows a reconciliation of free cash flow with net cash
generated from operating activities, the most directly comparable IFRS financial
measure:
OPAT/NOA denominator
Reconciliation of average net operating assets: IFRS
2019
DKK million
2018
2017
Free cash flow
DKK million
Intangible assets
Property, plant and equipment
Deferred income tax assets
Other receivables and prepayments
(non-current)
Inventories
Trade receivables
Tax receivables
Other receivables and prepayments
(current)
Deferred tax liabilities
Retirement benefit obligations
Provisions (non-current)
Trade payables
Tax payables
Other liabilities
Provisions (current)
5,835
50,551
4,121
841
17,641
24,912
806
3,434
(80)
(1,334)
(4,613)
(6,358)
(4,212)
(15,085)
(31,120)
5,145
41,891
2,893
—
16,336
22,786
1,013
3,090
(118)
(1,256)
(3,392)
(6,756)
(4,610)
(14,098)
(26,161)
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)
Net operating assets
45,339
36,763
28,900
Average net operating assets
42,9401
32,832
26,776
1. Average net operating assets for 2019 is calculated based on an adjusted net operating
assets figure for 2018, which has been adjusted by the right-of-use assets of DKK 3,778
million as of 1 January 2019, following the implementation of IFRS 16. As a consequence,
the net operating assets figure for 2018 has been adjusted to DKK 40,541 million for the
calculation of the average net operating assets for 2019.
Net cash generated from operating
activities IFRS
Net cash used in investing activities
IFRS
Net purchase of marketable secu-
rities IFRS
Repayment on lease liabilities IFRS
2019
2018
2017
46,782
44,616
41,168
(11,509)
(12,080)
(6,571)
—
(822)
—
—
(2,009)
—
Free cash flow
34,451
32,536
32,588
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. 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
2019
2018
2017
Free cash flow
/ Net profit IFRS
Cash to earnings
34,451
38,951
88.4%
32,536
38,628
32,588
38,130
84.2%
85.5%
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Part of management´s review − not auditedNovo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019 Consolidated Social Statement (supplementary information)
78
Statement of social performance
for the year ended 31 December
Patients
Patients reached with Novo Nordisk's diabetes care products (estimate in millions)
Patients reached with Novo Nordisk's diabetes care products via the Access to Insulin Commitment (estimate in millions)
Donations (DKK million)
Animals purchased for research
Employees
Employees (total)
Employee turnover
Employee engagement
Gender in management (ratio men:women)
Frequency of occupational accidents (number per million working hours)
Responsible business
Relevant employees trained in business ethics
Business ethics reviews
Facilitations of the Novo Nordisk Way
Supplier audits
Product recalls
Failed inspections
Company trust (scale 0–100)
Total tax contribution (DKK million)
Note
2019
2018
2017
7.1
7.1
7.2
7.3
8.1
8.1
8.1
8.2
9.1
9.2
9.3
9.4
9.5
9.6
9.7
9.8
30.0
2.91
105
49,637
43,258
11.4%
91%
60:40
2.2
99%
34
32
236
4
0
78.2
27,527
29.2
0.3
103
65,593
43,202
11.7%
91%
60:40
2.4
99%
33
63
294
3
0
84.5
25,825
27.7
0.3
103
67,623
42,682
11.0%
90%
60:40
2.7
99%
34
65
246
6
0
82.2
—
1. Scope of Access to Insulin Commitment expanded in 2019 to also include middle-income countries and selected organisations providing humanitarian relief.
Notes to the consolidated
social statement
Section 6
Basis of preparation
General reporting standards and principles
Novo Nordisk's annual reporting complies with the Danish Financial Statements
Act. Sections 99a and b specify the requirements of the EU Directive on disclosure
of non-financial and diversity information to report on management of risks
related to the environment, climate, human rights, labour and social conditions,
anti-corruption and gender distribution. This requirement is addressed in the
Management Review. Novo Nordisk also adheres to the following internationally
recognised voluntary reporting standards and principles:
• The UN Guiding Principles Reporting Framework, the only comprehensive
guidance for companies to report on how they respect human rights. Novo
Nordisk’s implementation of the Guiding Principles on Business and Human
Rights is reported at novonordisk.com.
• The UK Modern Slavery Act, adopted in 2015, requires commercial organisa-
tions operating in the UK to publish an annual slavery and human trafficking
statement. Novo Nordisk’s annual statement is available at novonordisk.com.
• 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 AA1000AP(2018) and AA1000AS(2008) framework, which states that
reporting must provide a complete, accurate, relevant and balanced picture of
the organisation’s approach to and impact on stakeholders and society.
• The Biotechnology & Pharmaceuticals Sustainability Accounting Standard developed
by the Sustainability Accounting Standards Board (SASB). The standard consists of a
set of topics and accounting metrics companies can use to guide their reporting.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019
79
• 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-cor-
ruption and broader UN Goals. Novo Nordisk’s obligation as a participant in
the UN Global Compact to provide a Communication on Progress is met by
inclusion of material information in the Annual Report and additional informa-
tion at novonordisk.com and submitted to the UN Global Compact database at
unglobalcompact.org.
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 consist-
ently 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:
• 'Patients reached with diabetes care products via the Access to Insulin
Commitment' is expanded in scope to reflect new initiatives, effective as of
2019. In addition to the least developed countries, the number now also covers
patients reached in selected middle-income countries and through sales to
selected organisations providing relief in humanitarian situations. The compara-
tive information has not been restated.
• 'Fulfilment of action points from the Novo Nordisk Way' is replaced with
‘Facilitations of the Novo Nordisk Way’, to align with the new approach to
assessing adherence to the Novo Nordisk Way.
• 'Company reputation' is replaced by 'Company trust' as a meaningful proxy for
supportive stakeholder behaviours. The methodology has been adjusted and
simplified.
Other accounting policies
Employee engagement
Employee engagement is measured on a scale of 1–5 and based on questions
relating to employee engagement in the annual employee survey, OurVoice. The
score is calculated as the proportion of employees who responded favourably (4
or 5) to relevant questions. For 2019, the response rate was 90% compared with
91% in 2018.
Novo Nordisk applies AA1000AP(2018) 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 AA1000AP(2018) 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 the perspective of social responsibility, the key stakeholder groups are
patients who rely on Novo Nordisk products, employees at Novo Nordisk and
throughout the Group’s value chain, business partners 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. See how Novo Nordisk defines what is
meant by sustainable business in 'Leading a sustainable business'.
Materiality
Key issues are identified through ongoing stakeholder engagement and trend-
spotting, 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 Annual Report reflects how the company is managing operations in ways that
respond to and consider stakeholder concerns and interests. The report reaches
out to a wide range of stakeholders, each with specific needs and interests. The
management report is prepared with investors in mind. To these stakeholders,
however, as well as to the many other groups who may seek information in the
Annual Report, this is just one element of interaction and communication with the
company.
Impact
Understanding, measuring and communicating the positive and negative impacts
on society and the environment of Novo Nordisk's activities are important. Novo
Nordisk is currently working on developing methodologies to be better able to do
just that covering the entire value chain.
Applying materiality
The consolidated social statement is a result of assessing legal requirements and
disclosure commitments applicable to Novo Nordisk. Whether information is
tied directly or indirectly to Novo Nordisk’s ability to create value over the short,
medium and long term is also assessed.
When assessing whether a disclosure is material to include in the consolidated
social statement, Management considers whether the matter is of such relevance
and importance that it could substantively influence the assessment by providers
of financial capital of Novo Nordisk's ability to create value over the short, medium
and long term. See more at novonordisk.com.
The conclusion from the external assurance provider is available in the
'Independent limited assurance report'.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Social Statement (supplementary information) 80
Section 7
Patients
7.1 Patients reached with Novo Nordisk's
diabetes care products (estimate)
7.3 Animals purchased for research
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 regis-
tration of purchased animals and yearly reports from external contractors.
Animals purchased
Number
Mice, rats and other rodents
Pigs
Rabbits
Dogs
Non-human primates
Other vertebrates
Total animals purchased
2019
48,081
880
349
157
168
2
49,637
2018
2017
63,547
1,023
641
100
278
4
65,869
835
493
63
241
122
65,593
67,623
The number of animals purchased for research in 2019 decreased by 24%
compared with 2018 and reflects the changes in stages of the different research
projects. Furthermore the reduction in the number of rodents purchased, reflects
Novo Nordisk's continuous focus on reducing the number of animals per research
project. 97% of the animals purchased were rodents.
Accounting policies
The number of full-year patients reached with Novo Nordisk's diabetes care prod-
ucts, 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's diabetes care prod-
ucts 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 29 middle-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. WHO has
not yet assigned a daily dose for Rybelsus®. For this calculation, it is assumed that
one tablet equals one patient treatment day.
The WHO-defined daily dosage has not changed since 1982, except for Victoza®
which was changed in 2019, and may not reflect the recommended or prescribed
daily dose accurately. Actual doses are based on individual characteristics (e.g. age
and weight) and pharmacokinetic considerations. Despite this uncertainty, Novo
Nordisk assesses this to be the most consistent way of reporting.
Development
The estimated number of full-year patients reached with Novo Nordisk’s diabetes
care products increased from 29.2 million in 2018 to 30.0 million in 2019. This
3% increase was primarily driven by sales of long-acting, premix and fast-acting
insulins and GLP-1 products.
In 2019, the estimated number of patients reached via the Access to Insulin
Commitment was 2.9 million, compared with 0.3 million in 2018. The significant
increase is due to an expansion of the Access to Insulin Commitment to also
include selected middle-income countries as well as selected organisations
providing relief in humanitarian situations. Novo Nordisk sold insulin according
to this commitment in 31 countries. Beyond this scheme, Novo Nordisk also sold
human insulin below the ceiling price in other countries reaching an estimated
additional 2.2 million patients in 2019.
7.2 Donations
Accounting policies
Donations by Novo Nordisk to the World Diabetes Foundation (WDF) and the Novo
Nordisk Haemophilia Foundation (NNHF) are recognised as an expense when the dona-
tion is paid out or when an unconditional commitment to donate has been made.
Donations
DKK million
2019
2018
2017
World Diabetes Foundation (WDF)
Novo Nordisk Haemophilia Founda-
tion (NNHF)
Total donations
86
19
105
85
18
103
85
18
103
WDF, an independent trust, supports sustainable partnerships and acts as a catalyst
to help others do more. In 2019, WDF provided funding to 12 partnership projects
in 11 countries. The projects focus on awareness, education and capacity building
at local, regional and global levels. See 'Note 5.2' in the consolidated financial
statements and worlddiabetesfoundation.org.
Novo Nordisk also provides financial support for improving global access to
haemophilia care. 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 284 programmes
in 75 countries. See nnhf.org.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Social Statement (supplementary information) 81
Section 8
Employees
8.1 Employees
8.2 Frequency of occupational accidents
Accounting policies
The frequency of occupational accidents with absence is measured as the inter-
nally 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 addi-
tion to the day of the accident.
Development
The average frequency rate of occupational accidents with absence was 2.2
per million working hours in 2019, compared with 2.4 in 2018 due to an 8%
decrease in the number of accidents. In 2019, Novo Nordisk had one work-related
fatality compared with none in 2018. Novo Nordisk works with a zero-injury
mindset and has a long-term commitment to continuously improving safety
performance.
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, production
and support functions. Employees in corporate functions are included in Region
Europe and employees in the global service centre in Bangalore, India are included
in Region AAMEO (Africa, Asia, Middle-East and Oceania).
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. Employees
working for Group companies that have been disposed are not counted as having
left the Group.
Diversity at Novo Nordisk is reported as the percentage split by gender in all mana-
gerial positions. Managerial positions are defined as all managers at Novo Nordisk
(global job level including Executive Vice Presidents (EVP), Senior Vice Presidents
(SVP), Corporate Vice Presidents (CVP), Vice Presidents (VP), General Managers
(GM), Directors, Managers and Team Leaders).
Employees
Number
North America
Region Europe
- of which in Denmark
Region AAMEO
Region China
Region Japan & Korea
Region Latin America
Total employees
Full-time employees
Employee turnover
Change in employees
2019
6,190
20,980
16,747
7,622
5,263
1,165
2,038
43,258
42,703
11.4%
0%
2018
2017
6,093
22,114
17,461
7,127
4,636
1,268
1,964
6,391
21,920
17,510
6,767
4,482
1,252
1,870
43,202
42,682
42,672
42,076
11.7%
11.0%
1%
1%
The underlying growth in employees was mainly driven by Region China.
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 2019, same as in 2018.
The table below shows the gender split among managers.
Gender in management
Ratio men:women
EVP, SVP
CVP, VP, GM
Director, Manager, Team Leader
Gender in management (overall)
2019
82:18
66:34
59:41
60:40
2018
87:13
66:34
60:40
60:40
2017
86:14
67:33
59:41
60:40
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Social Statement (supplementary information) 82
Section 9
Responsible business
9.1 Relevant employees trained in business ethics
9.3 Facilitations of the Novo Nordisk Way
Accounting policies
The mandatory business ethics training is based on the Business Ethics Code of
Conduct in the form of globally applicable e-learning, 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 training in both the Code of Conduct and related tests, based on
internal registrations.
Development
In 2019, as in 2018, 99% of relevant employees were trained in business ethics.
9.2 Business ethics reviews
Accounting policies
The number of business ethics reviews is recorded as the number of business
ethics reviews performed by Group Internal Audit in subsidiaries, production sites
and headquarter areas. During a business ethics review, Group Internal Audit will
examine procedures and processes in place to ensure ethical behaviour. Any gaps
identified in procedures, processes or behaviour are presented to Management
and the Board of Directors as findings. An action plan to mitigate findings is
agreed between Management and Group Internal Audit, and Group Internal
Audit follows up on the implementation of the agreed actions before closing the
findings.
Accounting policies
Facilitations of the Novo Nordisk Way is measured as the number of facilitations
and culture coachings completed. Both are internal audit processes for assessing
compliance with the Novo Nordisk Way. The assessments are based on review of
documentation and feedback from stakeholders followed by an on-site visit during
which randomly selected employees and management are interviewed. Identified
gaps and improvement opportunities related to the Novo Nordisk Way are
presented to management. The facilitators and management agree on an action
plan to address those gaps and improvement opportunities.
In Q4 2018, culture coaching was introduced as a variation of the facilitation
service to support the company-wide culture journey focused on ‘think bigger’,
‘cut complexity’ and ‘be more agile’. Culture coaching builds on the same meth-
odology as standard facilitations and is also anchored in the Novo Nordisk Way. In
the information below, no distinction is made between a standard facilitation and
culture coaching - both are referred to under the term 'facilitations'.
Development
In 2019, a total of 32 units were facilitated covering approximately 11,000
employees, of whom around 1,500 were individually interviewed. In addition,
feedback on those units was collected from approximately 400 stakeholders. The
reduction in the number of assignments compared to previous years is mainly a
result of merging assignments to cover entire functional areas instead of facili-
tating many departments individually.
Overall, the 2019 process has shown a high level of adherence to the Novo
Nordisk Way. The highest rated Essential continues to be the 'Patient-centred busi-
ness approach', while the lowest rated Essential 'Focus on personal performance
and development' continues to be an area of improvement despite efforts to raise
the level of adherence.
Business ethics reviews
Number
Business ethics reviews
Findings
2019
2018
2017
34
87
33
113
34
130
9.4 Supplier audits
Based on the completed business ethics reviews, it is Group Internal Audit’s
assessment that the business ethics compliance level, in 2019 as in 2018, is sound.
Management action plans and closure of findings have progressed as planned,
and there were no overdue management actions or findings at the end of the
year.
Accounting policies
The number of supplier audits concluded by Novo Nordisk’s Corporate Quality
function includes the number of responsible sourcing audits and quality audits
conducted among suppliers.
Supplier audits
Number
Responsible sourcing audits
Quality audits
Total supplier audits
2019
2018
2017
27
209
236
19
275
294
28
218
246
The number of audits concluded in 2019 decreased by 20% compared with 2018.
The decrease in quality audits was due to the additional qualification audits in
2018 supporting, among others, the diabetes API project in the US. There were no
critical findings related to the quality audits, but one critical finding was issued in
connection with a responsible sourcing audit regarding working hours. An action
plan with concrete deadlines has been agreed upon and a responsible sourcing
re-audit is planned for 2020 to follow up on improvements.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Social Statement (supplementary information) 83
9.5 Product recalls
9.8 Total tax contribution
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.
Development
Novo Nordisk had four product recalls from the market in 2019, compared with
three in 2018. As in 2018, none of the recalls were critical. Local health authorities
were informed in all instances to ensure that distributors, pharmacies, doctors and
patients received appropriate information.
9.6 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), Notified Body
(TÜV SUD) and domestic authorities for strategic manufacturing sites. Failed
inspections are defined as inspections where Warning Letters or EMA non-com-
pliance 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 2019, as in 2018, there were no failed inspections among those resolved at
year-end. During the year, 66 inspections were conducted compared with 75 in
2018. At year-end, 44 inspections were passed and 22 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 continues in 2020.
9.7 Company trust
Accounting policies
Novo Nordisk’s total tax contribution is measured as the taxes borne or collected
by Novo Nordisk, which have been paid in the respective year. Taxes borne are
defined as taxes where Novo Nordisk carries the cost. Taxes collected are defined
as taxes collected by Novo Nordisk on behalf of others, e.g. employee income
taxes deducted from the employee salary and paid on to the government.
Tax on company income
Tax on company income primarily consists of corporate income taxes and with-
holding taxes on company dividends.
Employment taxes
Employment taxes primarily consist of taxes collected from the employees on
behalf of the government and social security costs.
Indirect taxes
Indirect taxes consist of non-refundable VAT, net VAT collections, customs duties,
environmental taxes and property taxes.
Other taxes
Other taxes consist of country-specific taxes not linked to one of the categories
above, e.g. the US branded prescription drug (BPD) fee.
The total tax contribution in 2019 amounted to DKK 27,527 million split into 54%
on taxes borne and 46% on taxes collected compared with 2018, where the total
tax contribution was DKK 25,825 million split into 53% on taxes borne and 47%
on taxes collected.
Total tax contribution 2019
DKK million
Tax on company income
Employment taxes
Indirect taxes
Other taxes
Taxes borne
Taxes col-
lected
10,936
1,642
1,364
887
3,456
7,996
1,246
—
Total
14,392
9,638
2,610
887
Total
14,829
12,698
27,527
Accounting policies
Company trust is measured annually. The total score is measured as the mean
company trust score among people with diabetes, general practitioners and
diabetes specialists across key markets. Trust 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 2019.
The data are collected through annual surveys carried out by external consultancy
firms.
Total tax contribution 2018
DKK million
Tax on company income
Employment taxes
Indirect taxes
Other taxes
Taxes borne
Taxes col-
lected
9,614
1,571
1,300
1,135
3,392
7,856
957
—
Total
13,006
9,427
2,257
1,135
Total
13,620
12,205
25,825
Company trust
Scale 0-100
People with diabetes
General practitioners
Diabetes specialists
Total score (average)
2019
78.1
75.3
81.3
78.2
2018
2017
78.6
85.7
89.2
84.5
82.1
78.5
86.0
82.2
The decline in trust can best be explained by the increased scrutiny on pharma
throughout 2019, in particular in regards to pricing, access and affordability of
medicines, which continues to be reflected in media sentiment and social media
conversations. The decline in trust is not unique to Novo Nordisk, but is a trend
across the pharma sector.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Environmental Statement (supplementary information) 84
Statement of environmental performance
for the year ended 31 December
Resources
Energy consumption for operations (1,000 GJ)
Share of renewable power for production sites
Water consumption for production sites (1,000 m3)
Emissions and waste
CO2 emissions from operations and transportation (1,000 tons)
Waste from production sites (1,000 tons)
Responsible business
Breaches of regulatory limit values
Note
2019
2018
2017
11.1
11.1
11.2
12.1
12.2
2,993
76%
3,149
306
124
3,099
77%
3,101
278
142
—
79%
3,276
—
157
13.1
16
27
23
Notes to the consolidated
environmental statement
Section 10
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 6
Basis of preparation’ of the consolidated social statement for general overview. In
addition, the following standards have been applied:
• Recommendations of the Financial Stability Board's Task Force on Climate-
related Financial Disclosures (TCFD). TCFD aims to develop voluntary, consistent
climate-related financial risk disclosures for use by companies in providing
information to investors, lenders, insurers, and other stakeholders. Novo
Nordisk’s actions taken in line with the TCFD recommendations are reported at
novonordisk.com.
• CDP (formerly Climate Disclosure Project). CDP runs a global environmental
disclosure system, which supports companies with measuring and managing
risks and opportunities related to climate change, water security and deforesta-
tion. Novo Nordisk's CDP disclosures are publicly available at cdp.net
Principles of consolidation
The consolidated environmental statement covers the production sites, laborato-
ries and offices with significant activities. CO2 emissions related to transportation
cover cars leased or owned by Novo Nordisk, business flights and suppliers distrib-
uting Novo Nordisk products.
Environmental accounting policies
The accounting policies set out below have been applied consistently in the prepa-
ration of the consolidated environmental statement for all the years presented.
Changes to accounting policies and disclosures
The following disclosure changes have been made:
• 'Energy consumption for operations’ is expanded in scope from covering all
facilities at production sites to also include office buildings and laboratories
outside of production sites. Comparative information has been updated
accordingly.
• 'CO2 emissions from production sites and product distribution' has been
taken out. This information is included in 'CO2 emissions from operations and
transportation'.
• The accounting policy for 'CO2 emissions from business flights', included in
the note for 'CO2 emissions' has been updated to include passenger class.
Comparative information has been updated accordingly.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Environmental Statement (supplementary information) 85
Section 11
Resources
11.1 Energy consumption for operations and share
of renewable power
Accounting policies
Energy consumption for operations is measured as consumption of power, steam,
heat and fuel. The fuel is mainly from natural gas, biogas and wood. Energy
consumption is based on meter readings and invoices and covers all energy types
at production sites and laboratories and consumption of power at office buildings
outside of production sites.
Share of renewable power used at production sites 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
or self-produced.
Energy consumption for operations
1,000 GJ
Production
Office buildings and laboratories
Total energy consumption
2019
2,458
535
2,993
2018
2,502
597
3,099
2017
—
—
—
reduced energy use to produce diabetes finished products. Energy consumption
decreased by 10% from offices and laboratories due to various smaller changes
across multiple sites.
In 2019, 76% of power used at production sites was sourced from renewable
energy, a decrease from 77% in 2018. This is due to lower power consumption at
the largest production site in Kalundborg, Denmark which uses wind power. With
an agreement to have solar power in the United States, effective as of 2020, Novo
Nordisk is on track to achieve 100% renewable power at all production sites in 2020.
11.2 Water consumption for production sites
Accounting policies
Water consumption is measured based on meter readings and invoices. It includes
drinking water, industrial water and steam used at production sites.
Development
In 2019, water consumption at production sites increased slightly by 2%
compared with 2018. This was due to an increase in water consumption for
production of API for Diabetes and Obesity care.
Energy consumption for operations has expanded in scope from covering all facil-
ities at production sites to also include office buildings and laboratories outside of
production sites. In 2019, energy consumption for operations decreased by 3%
compared to 2018. Energy consumption for production decreased 2% due to
Three facilities, in Algeria, Brazil and China, are in regions subject to high water
stress or large seasonal variations, consuming 14% of the total water for global
production. There have been no water shortage incidents in 2019 and overall,
water consumption at these facilities increased by 2% in 2019.
Section 12
Emissions and waste
12.1 CO2 emissions from operations and transportation
Accounting policies
CO2 emissions from operations (production, office buildings and
laboratories)
CO2 emissions from operations cover consumption of power, fuel, heat and
steam at office buildings in Denmark, global production sites and laboratories,
and consumption of power in office buildings outside Denmark. Emissions are
measured in metric tons, 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 subsidiaries, direct customers and
importing distributors. CO2 emissions from product distribution from subsidiaries
to pharmacies, hospitals and wholesalers are not included.
CO2 emissions from business flights
CO2 emissions from business flights are estimated based on mileage and emission
factors for short, medium and long-haul flights along with passenger class
obtained from travel agencies.
CO2 emissions from company cars
CO2 emissions from company cars cover cars leased or owned by Novo Nordisk.
Emissions are calculated by multiplying emission factors by the volumes of diesel
and gasoline used.
CO2 emissions from operations and transportation
1,000 tons
2019
2018
2017
Production
Office buildings and laboratories
Product distribution
Business flights
Company cars
86
13
80
65
62
86
28
39
63
62
Total CO2 emissions
306
278
—
—
—
—
—
—
Novo Nordisk has a long-term target of zero CO2 emissions from operations and
transportation by 2030.
In 2019, CO2 emissions from operations and transportation increased by 10%.
The increase was primarily from product distribution, due to an increase in
distributed volume, along with using more air freight than sea freight as a result of
supply and market driven-challenges.
CO2 emissions from global offices and laboratories decreased by 54% in 2019. As
part of the new Circular for Zero strategy, all offices and laboratories will source
renewable power by 2030. In 2019, there was a significant reduction in CO2
emissions from the R&D site in Beijing, sourcing wind power.
CO2 emissions are expected to decrease significantly in 2020 due to various
renewable energy projects, including solar power across all US operations, wind
power in Europe and green steam in Denmark. Emissions from transportation are
also expected to decrease due to a company car policy that encourages transition
to hybrid and electric vehicles and through collaboration with EV100.
A full breakdown of Scope 1, 2 and 3 emissions from Novo Nordisk can be found
at cdp.net.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Environmental Statement (supplementary information)
86
In 2019, waste from production sites decreased by 13% compared with 2018.
The amount of waste recycled decreased 8% in 2019 primarily due to a decrease
in organic residues from the fermentation of insulin.
The amount of waste sent for energy recovery decreased by 36% primarily due
to the implementation of a distillation method within API production to reuse
ethanol instead of sending it for incineration with energy recovery.
In 2019, 93% of the total waste from production sites was recycled, used for
biogas production or incinerated at plants where the energy is used for heat and
power production.
18% of the waste is categorised as hazardous waste, a decrease from 21% in
2018. This decrease was due to a reduction in ethanol waste from the production
of API for Diabetes and Obesity care.
12.2 Waste from production sites
Accounting policies
Waste is measured as the sum of all the waste disposed of at production sites
based on weight receipts.
Waste from production sites
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
2019
2018
2017
97
89
8
18
13
5
8
5
3
1
105
93
12
28
22
6
8
4
4
1
122
116
6
28
21
7
6
5
1
1
124
142
157
1. Organic residues for recycling are 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 waste-to-energy plants and at a biogas plant.
3. Ethanol is used in purification of Diabetes care and Biopharm products. The ethanol is
recovered in internal 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.
Section 13
Responsible business
13.1 Breaches of regulatory limit values
Accounting policies
Breaches of regulatory limit values cover all breaches reported to the environ-
mental authorities.
Development
In 2019 there were 16 breaches, a decrease from 27 breaches in 2018. The
breaches were mainly related to wastewater, and all had minor impact on the
environment.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Consolidated Environmental Statement (supplementary information) Consolidated Financial Statements – Management statement
87
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 2019. The Board of Directors and Execu-
tive Management are jointly responsible for ensuring the integrity and quality of
the report.
The Annual Report has been prepared in accordance with the International Inte-
grated Reporting Framework.
The Consolidated financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS) as issued by the International
Accounting Standards Board and in accordance with IFRS as endorsed 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, 5 February 2020
Registered Executive Management
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 2019, the results of the Group’s and parent company’s operations, and
consolidated cash flows for the financial year 2019. 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(2018), and social and environmental accounting
policies. They give a true and fair account and a balanced and reasonable pres-
entation 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.
Lars Fruergaard Jørgensen
President and CEO
Karsten Munk Knudsen
CFO
Monique Carter
Camilla Sylvest
Mads Krogsgaard Thomsen
Henrik Wulff
Board of Directors
Helge Lund
Chair
Jeppe Christiansen
Vice chair
Brian Daniels
Laurence Debroux
Andreas Fibig
Sylvie Grégoire
Liz Hewitt
Mette Bøjer Jensen
Kasim Kutay
Anne Marie Kverneland
Martin MacKay
Thomas Rantzau
Stig Strøbæk
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019 88
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 2019 and of the results of the
Group’s operations and cash flows for the financial year 1 January to 31 December
2019 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 2019 and
of the results of the Parent Company’s operations for the financial year 1 January
to 31 December 2019 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 2019, section ‘Consolidated financial statements’,
comprise income statement and statement of comprehensive income, cash flow
statement, balance sheet, equity statement and 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 2019, section ‘Financial Statements of the Parent
Company’, comprise income statement, balance sheet, equity statement and
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 38 years including the financial year 2019.
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 2019. 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 arrange-
ments, 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 focused on this area because rebates, discounts and allowances are complex
and because establishing an appropriate accrual requires significant judgement
and estimation by Management. This judgement is particularly complex in a
US healthcare environment in which competitive pricing pressure and product
discounting are growing trends.
Refer to note 2.1 and note 3.7.
Litigations
The pharmaceuticals industry is heavily regulated which increases inherent litiga-
tion 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 focused on this area as the amounts involved are potentially material and
the valuation of the provision is based on application of material judgement and
estimation and therefore is associated with uncertainty. Accordingly, unexpected
adverse outcomes could significantly impact the Group’s reported profit and
financial position.
Refer to note 3.7.
We obtained Management’s calculations for accruals under applicable schemes
and assessed the significance of assumptions applied by comparing them to the
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 compared the assumptions to contracted prices, historical rebates, discounts,
allowances and to current payment trends. We also considered the historical
accuracy of the Group’s estimates in previous years.
We formed an independent assessment of the most significant elements of the
accrual at 31 December 2019 using third party data and compared this expecta-
tion to the actual accrual recognised.
We discussed the status of significant known actual and potential litigations 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 recog-
nise provisions, including correspondence with external legal counsel and other
counter-parties and considered Management’s assessment of the probability of
defending any litigation and the reliability of estimating any provisions.
We assessed 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 evaluated significant
adjustments to legal provisions recorded during the year to determine if they were
indicative of management bias.
We 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.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Independent auditor’s report Statement on Management’s Review
Management is responsible for Management’s Review, section ‘Managements
review’.
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 Statements Act. We did not identify any material misstate-
ment in Management’s Review.
Management’s responsibilities for the Financial Statements
Management is responsible for the preparation of consolidated financial state-
ments 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 neces-
sary 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 the 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 the Parent Company or to cease operations, or has no realistic alterna-
tive but to do so.
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 appli-
cable in Denmark, we exercise professional judgement and maintain professional
scepticism throughout the audit. We also:
89
• 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 reasonable-
ness 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.
• 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 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 reason-
ably be thought to bear on our independence, and where applicable, related
safeguards.
From the matters communicated with those charged with governance, we deter-
mine 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.
• Identify and assess the risks of material misstatement of the Financial
Hellerup, 5 February 2020
Statements, whether due to fraud or error, design and perform audit proce-
dures 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, misrep-
resentations, or the override of internal control.
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR no 3377 1231
Mogens Nørgaard Mogensen
State Authorised Public Accountant
mne21404
Mads Melgaard
State Authorised Public Accountant
mne34354
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Independent auditor’s report Independent assurance report
90
Independent limited assurance report on the consolidated
social and environmental statements for 2019
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 2019.
• 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
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 statements of Novo Nordisk’s Annual
Report for the year ended 31 December 2019 has not been prepared, in all mate-
rial respects, in accordance with the Reporting Criteria.
B) Nothing has come to our attention that causes us to believe that the descrip-
tion of Novo Nordisk’s alignment with the AA1000 Accountability Principles
(AA1000AP) (2018) of Inclusivity, Materiality, Responsiveness and Impact 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 'Consolidated social statement' and 'The consolidated environmental
statement' and associated 'Notes‘, in the Annual Report of Novo Nordisk (the
“Selected Information”).
B) Novo Nordisk’s description of alignment with the AA1000AP principles of
Inclusivity, Materiality, Responsiveness and Impact for the year ended 31 December
2019 which is set out in ‘Basis of preparation‘ in section ‘Consolidated social
statement‘ (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 AA1000
Assurance Standard (AA1000AS, 2008) with 2018 Addendum (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 engage-
ment in relation to both the risk assessment procedures, including an under-
standing 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 (AA1000AS, 2008) with 2018 Addendum. 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, sections ‘Consolidated social statement‘ and ‘Consolidated
environmental statement‘, 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
control activities for reporting site performance data.
• Obtained an understanding of the key processes and controls for managing,
recording and reporting the Selected Information.
materiality to the group; and
• Considered the presentation and disclosure of the Selected Information.
B) In respect of Novo Nordisk’s description of alignment with the AA1000
Accountability Principles (AA1000AP) (2018) of Inclusivity, Materiality,
Responsiveness and Impact we performed the following activities:
• Interviewed members of Novo Nordisk’s Executive Management team, repre-
sentatives responsible for GLP-1 portfolio and market access at global level
and in the US, key employees within Corporate Global Patient Access and
Corporate Sustainability 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 understanding and responding to material patient concerns, needs
and desires.
• 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
governance for responsible business conduct and stakeholder relationships.
Our work focused on priorities and responsible decision-making relating to the
development, launch and rollout of oral semaglutide and how this aligns with
Novo Nordisk’s ambition of creating a sustainable business; 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 mate-
rial 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 2019.
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 with 2018 addendum, 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, Responsiveness and Impact. We have communicated a
number of minor recommendations for improvement to the management of Novo
Nordisk.
Hellerup, 5 February 2020
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab (CVR no. 3377 1231)
Mogens Nørgaard Mogensen
State Authorised Public Accountant
mne21404
Mads Melgaard
State Authorised Public Accountant
mne34354
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019 Additional information
91
More information
Additional reporting
Novo Nordisk provides additional disclosure to
satisfy legal requirements and stakeholder interests.
Supplementary reports can be downloaded from
novonordisk.com/annualreport, while additional
information can be found at novonordisk.com
Materiality
Novo Nordisk leans on the International Integrated
Reporting Council’s definition of materiality.
Information deemed material for providers of finan-
cial capital in their decision-making is included in the
Annual Report, ie of such relevance and importance
that it could substantively influence their assess-
ments of Novo Nordisk’s ability to create value over
the short, medium and long term. See how Novo
Nordisk determines materiality and material issues at
novonordisk.com
Annual report
This Annual Report is Novo Nordisk’s full statutory
Annual Report pursuant to Section 149(1) of the
Danish Financial Statements Act.
Pursuant to section 149(2), a shortened version,
consisting of the Management Review and excerpts
from the consolidated statements, is available in
Danish. In the event of any discrepancies, the full
statutory Annual Report shall prevail.
The statutory Annual Report will be presented and
adopted at the annual general meeting on 26 March
2020 and will subsequently be submitted to and be
available at the Danish Business Authority.
The 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.
The Annual Report also meets the requirements
for Communication on Progress to the UN Global
Compact, a voluntary reporting on performance
towards its 10 principles on human rights, labour
rights, environment and anti-corruption and addi-
tional progress reporting on corporate sustainability
leadership and UN goals. The Annual Report also
adheres to the UN Guiding Principles Reporting
Framework on respect of human rights.
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.
Remuneration report
The remuneration report includes the total remu-
neration received by each member of the Board of
Directors and the Executive Management of Novo
Nordisk A/S from 2016 to 2018.
Corporate governance report
The corporate governance report discloses Novo
Nordisk’s compliance with Danish Corporate
Governance Recommendations to meet the require-
ments of the Danish Financial Statements Act.
For more news from Novo Nordisk, visit
novonordisk.com/investors
novonordisk.com/media
References
1,5,6,10,11,12,21. International Diabetes Federation. IDF Diabetes Atlas, 9th edition, 2019. 2,13,15,16,17,18,22. World Health Organization. Obesity and Overweight, Fact sheet, 2018. 3. Iorio A.
et al. Establishing the Prevalence and Prevalence at Birth of Hemophilia in Males, A Meta-analytic Approach Using National Registries. Annals of internal medicine, pp. 1-7, 2019. DOI: 10.7326/
M19-1208. 4. Vimpani G. et al. Prevalence of severe growth hormone deficiency. British Medical journal, pp. 427-430, 1977; Lindsay R. et al. Utah Growth Study: Growth standards and the
prevalence of growth hormone deficiency. Pediatric, pp. 29-35, 1994; Thomas M. et al. Prevalence and demographic features of childhood growth hormone deficiency in Belgium during the
period 1986–2001. European Journal of Endocrinology pp. 67–72, 2004. 7. Wright et al. Life Expectancy and Cause-Specific Mortality in Type 2 Diabetes: A Population-Based Cohort Study
Quantifying Relationships in Ethnic Subgroups. Diabetes care, vol. 40, pp. 338-345, 2017, DOI: 10.2337/dc16-1616. 8. https://www.diabetes.org/diabetes/complications/stroke. 9. https://www.
who.int/cardiovascular_diseases/en/. 14. https://www.worldobesity.org/about/about-obesity/prevalence-of-obesity. 19. Diehl A.M.and Day C., Cause, Pathogenesis, and Treatment of Nonalco-
holic Steatohepatitis. N Engl J Med 2017. 20. Estes C. et al. Modeling the epidemic of nonalcoholic fatty liver disease demonstrates an exponential increase in burden of disease. Hepatology, pp.
123-133,2018,doi: 10.1002/hep.29466. 23. National Center for Chronic Disease Prevention and Health Promotion, National Diabetes Statistics Report, 2017, Estimates of Diabetes and Its Burden
in the United States, pp. 1-20, 2017. 24. Centers for Disease Control & Prevention, Prevalence of Obesity Among Adults and Youth: United States, 2015–2016, pp. 1-8, 2017. 25. Waters H, Graf
M. America's Obesity Crisis: The Health and Economic Costs of Excess Weight. pp. 1-30, 2018.
Market data on pp 20-21 are from IQVIA, November, 2018 and 2019.
Design and production: Kontrapunkt. Digital version: Inviso. Photography: Martin Nordmark, Ulrik Jantzen, Jesper Edvardsen, Jesper Westley, Per Fledelius.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019 Additional information
92
Product overview
Diabetes care
New-generation insulin and combinations
Tresiba®, insulin degludec
Ryzodeg® 70/30, 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
Ozempic®, semaglutide
Rybelsus®, oral semaglutide (only approved in the US)
Other pre-filled insulin delivery systems
FlexTouch®, U100, U200
FlexPen®
InnoLet®
Other insulin delivery systems
PumpCart®, NovoRapid® cartridge to be used in
pump
Cartridge
Vial
Insulin pens
NovoPen® 5
NovoPen® 4
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
Obesity care
Glucagon-like peptide-1
Saxenda®, liraglutide 3 mg
Biopharm
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
Refixia®****, Nonacog beta pegol; N9/GP
Esperoct®1, Turoctocog alfa pegol, N8-GP
Human growth hormone
Norditropin®, somatropin (rDNA origin)
Norditropin® FlexPro®, pre-filled multidose
delivery system
Norditropin® NordiFlex®, pre-filled multi-dose
delivery system
Norditropin® NordiLet®, pre-filled multi-dose
delivery system
Norditropin® SimpleXx®, durable multi-dose
delivery system
NordiPen®, prefilled multi-dose delivery system
PenMate®, automatic needle inserter
(for NordiPen® and NordiFlex®)
Macrilen™, Macimorelin; growth hormone
secretagogue receptor agonist
Hormone replacement therapy
Vagifem®, estradiol hemihydrate
Activelle®, estradiol/norethisterone acetate
Kliogest®, estradiol/norethisterone acetate
Novofem®, estradiol/norethisterone acetate
Trisequens®, estradiol/norethisterone acetate
Estrofem®, estradiol
* in the US approved under the brand name Xultophy®
100/3.6
** in the US called NovoLog®
*** in the US spelt Novoeight®
**** in the US approved under the name of REBINYN®
1approved in the US and received positive opinion in EU
The product overview on this page makes reference to our
2019 product offering. The names used are European prod-
uct trade names with accompanying generic names. Trade
and generic names may differ in other markets.
Financial
calendar 2020
5 February 2020
Financial statement
for 2019 and Annual
Report 2019
26 March 2020
Annual General
meeting 2019
14 August 2020
Ex-dividend
17 August 2020
Record date
18 August 2020
Payment, B shares
27 March 2020
Ex-dividend
25 August 2020
Payment, ADRs
30 October 2020
Financial statement for
the first nine months
of 2020
Financial
calendar 2021
3 February 2021
Financial statement
for 2020 and Annual
Report 2020
30 March 2020
Record date
31 March 2020
Payment, B shares
7 April 2020
Payment, ADRs
6 May 2020
Financial statement
for the first three
months of 2020
6 August 2020
Financial statement
for the first six
months of 2020
Headquarters
Novo Nordisk A/S
Novo Allé
2880 Bagsværd
Denmark
Tel +45 4444 8888
CVR number 24 25 67 90
novonordisk.com
Investor Service
We welcome enquiries and feedback to the
Annual Report via novonordisk.com/contact-us.html
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:
JPMorgan Chase Bank, N.A
Toll free number: Phone: 1 800 990 1135
Hearing impaired: Phone: 1 866 700 1652
Outside the U.S.: Phone: +1 651 453 2128
Regular correspondence:
Shareowner Services
P.O. Box 64504
St. Paul, MN 55164-0504
(From outside the United States)
StockTransfer@equiniti.com
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019 93
Financial Statements of
the Parent Company 2019
The following pages comprise the financial statements of the parent company, 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
Balance sheet
For the year ended 31 December
At 31 December
Note
2019
2018
DKK million
Note
2019
2018
DKK million
Net 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
Profit before income taxes
Income taxes
Net profit for the year
2
3
3
3
3
8
4
4
93,440
17,940
75,500
23,619
12,858
1,837
2,204
39,390
10,497
485
3,707
46,665
7,413
39,252
84,752
16,457
68,295
22,215
13,308
1,746
2,214
33,240
11,485
1,970
1,585
45,110
6,580
38,530
Assets
Intangible assets
Property, plant and equipment
Financial assets
Deferred income tax assets
Other receivables and prepayments
Total non-current assets
Raw materials
Work in progress
Finished goods
Inventories
Trade receivables
Amounts owed by affiliated companies
Tax receivables
Other receivables and prepayments
Receivables
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
Borrowings
Deferred income tax liabilities
Other provisions
Total non-current liabilities
Borrowings
Derivative financial instruments
Trade payables
Amounts owed to affiliated companies
Tax payables
Other liabilities
Total current liabilities
Total liabilities
6
7
8
5
9
10
5
11
10
9
11
3,428
24,724
33,876
95
239
62,362
2,357
9,761
2,590
14,708
1,687
14,302
295
1,340
17,624
188
14,067
46,587
108,949
2,799
24,141
28,469
—
—
55,409
1,951
9,191
1,922
13,064
1,847
11,544
884
1,001
15,276
204
14,472
43,016
98,425
480
490
15,340
811
40,801
57,432
715
—
995
1,710
165
734
2,673
40,754
74
5,407
49,807
51,517
11,116
1,083
38,816
51,505
—
137
739
876
2
2,024
2,368
36,108
33
5,509
46,044
46,920
98,425
Total equity and liabilities
108,949
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Financial Statements of 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 prior 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
Balance at the end of the year
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
94
Share
capital
Net
revaluation
reserve
Develop-
ment costs
reserve
490
11,116
1,083
4,224
(10)
(272)
Retained
earnings
38,816
15,377
19,651
1,506
(323)
(7,100)
(12,309)
148
16
(15,334)
10
226
272
(155)
2019
2018
51,505
15,377
19,651
4,224
1,506
(323)
(7,100)
(12,309)
148
16
(15,334)
—
226
—
(155)
49,284
22,452
19,547
(3,469)
(1,820)
(1,506)
(7,238)
(11,810)
199
(2)
(15,567)
—
491
—
944
480
15,340
811
40,801
57,432
51,505
7,100
12,551
4,224
15,377
39,252
7,238
12,309
(3,469)
22,452
38,530
Please refer to note 4.1 in the consolidated financial statements regarding average number of shares, treasury shares and total number of A and B shares in Novo Nordisk A/S.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Financial Statements of the Parent Company Notes
1 Accounting policies
The financial statements of the parent company have been prepared in accord-
ance 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 previous financial year except for a change of accounting
policy for leases and changed presentation of the balance sheet. The accounting
policies are the same as for the consolidated financial statements with the adjust-
ments described below. For a description of the accounting policies of the group,
please refer to the consolidated financial statements.
No separate statement of cash flows has been prepared for the parent company;
please refer to the statement of cash flows for the group.
Change of presentation of balance sheet
The parent company has changed the presentation of the balance sheet to align
to the balance sheet for the Group. Deferred tax asset is now being presented as
a non-current asset and provisions are now being presented as non-current and
current liabilities. The change had no impact on recognised amounts.
Change of accounting policy for leasing
As of 1 January 2019, the parent company has changed accounting policy for
leases from using IAS 17 for interpretation of the Danish Financial Statements Act
to using IFRS 16. The parent company implemented IFRS 15 as interpretation for
revenue in the financial statements for 2018.
The change has been applied by using the modified retrospective approach.
Under this method, the cumulative effect of initially applying the standard is
recognised at 1 January 2019. Rights-of-use assets and lease liabilities have been
recognised for those leases previously classified as operating leases, except for
short-term leases and leases of low value assets. The rights-of-use assets have
been recognised based on the amount equal to the lease liabilities, adjusted for
any related prepaid and accrued lease payments previously recognised. Lease
liabilities are recognised based on the present value of the remaining lease
payments, discounted using the incremental borrowing rate as of 1 January
2019. The comparative information has not been restated. The weighted average
incremental borrowing rate applied on transition to IFRS 16 for parent company
was 1.20%.
For a description of the transition method used and for a description of the
new accounting policies please refer to note 1.2 in the consolidated financial
statements.
The impact of the change in accounting policy is recognition of additional
DKK 1,010 million of property, plant and equipment and DKK 1,010 million of
borrowings. The change in policy has had an insignificant impact on the income
statement for 2019.
Reconciliation of lease liabilities pursuant to change of accounting policy
95
Supplementary accounting policies for the parent company
Financial assets
In the financial statements of the parent company, investments in subsidiaries and
associated companies are recorded under the equity method, using the respective
share of the net asset values in subsidiaries and associated companies. Net profit
of subsidiaries and associated company less unrealised intra-group profits is
recorded in the income statement of the parent companies.
To the extent that net profit exceeds declared dividends from such companies,
net revaluation of investments in subsidiaries and associated companies are trans-
ferred to Net revaluation reserve under equity according to the equity method.
Profits in subsidiaries and associated companies are disclosed as profit after tax.
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-ac-
count 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 differ-
ences can be utilised.
2 Sales
DKK million
Sales by business segment
Diabetes and Obesity care
Biopharm
Total sales
Sales by geographical segment
North America Operations
Region Europe
Region China
Region AAMEO
Region Latin America
Region Japan & Korea
Total sales
2019
2018
93,192
248
93,440
50,326
16,615
10,326
9,808
3,030
3,335
93,440
84,573
179
84,752
47,942
14,445
8,962
8,490
2,339
2,574
84,752
DKK million
Operating leases commitments as disclosed in the parent
company’s 2018 financial statement
Recognition exemptions:
Short-term leases
Leases of low value assets
Variable lease payments
Other
Lease liability on transition (undiscounted)
Discounted using the parent company’s incremental bor-
rowing rate at 1 January 2019
Lease liability recognised on transition
1,296
(23)
(24)
(187)
(7)
1,055
1.20%
1,010
Sales are attributed to geographical segment based on location of the customer.
For definitions of segments, please refer to note 2.2 in the consolidated financial
statements.
3 Employee costs
DKK million
Wages and salaries
Share-based payment costs
Pensions
Other social security contributions
Other employee costs
2019
10,668
148
1,009
197
393
Total employee costs in the income statement
12,415
Average number of full-time employees
Year-end number of full-time employees
15,550
15,442
2018
11,423
199
1,028
212
346
13,208
16,244
16,094
For information regarding remuneration to the Board of Directors and Executive
Management, please refer to note 2.4 in the consolidated financial statements.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Financial Statements of the Parent Company 96
4 Financial income and financial expenses
DKK million
Interest income relating to subsidiaries
Income from associated company
Financial gain from forward contracts (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
2019
432
36
—
17
485
588
426
2,470
223
3,707
2018
297
40
1,300
333
1,970
483
1,018
—
84
1,585
5 Deferred income tax assets/(liabilities)
DKK million
Net deferred tax asset/(liability) at the beginning
of the year
Income/(charge) to the income statement
Income/(charge) to Equity
2019
2018
(137)
460
(228)
(856)
30
689
Net deferred tax asset/(liability) at the end of
the year
95
(137)
The Danish corporate tax rate was 22% in 2019 (22.0% in 2018).
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
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
Change of accounting policy for leases
Additions during the year
Disposals during the year
Transfer from/(to) other items
Cost at the end of the year
Depreciation and impairment losses at the beginning of the year
Depreciation for the year
Impairment losses for the year
Depreciation reversed on disposals during the year
Depreciation and impairment losses at the end of the year
Land and
buildings
Plant and
machinery
Other
equipment
Assets in
course of
construction
19,140
965
176
(146)
622
19,063
—
361
(436)
1,828
3,230
45
140
(175)
492
5,859
—
1,344
(21)
(2,942)
20,757
20,816
3,732
4,240
49,545
7,365
1,077
55
(145)
8,352
13,834
899
70
(436)
14,367
1,952
307
18
(175)
2,102
—
—
21
(21)
—
23,151
2,283
164
(777)
24,821
Carrying amount at the end of the year
12,405
6,449
1,630
4,240
24,724
Of which related to leased property, plant and equipment
826
—
51
—
877
Leased property, plant and equipment primary relates to lease of office buildings, warehouses, laboratories and vehicles.
2019
6,032
1,190
(12)
7,210
3,233
271
290
(12)
3,782
3,428
2019
47,292
1,010
2,021
(778)
—
2018
4,765
1,267
—
6,032
2,319
914
—
—
3,233
2,799
2018
46,099
—
2,791
(1,598)
—
47,292
22,685
1,881
112
(1,527)
23,151
24,141
—
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Financial 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
Cost at the end of the year
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
Transfer between unrealised internal profit and value adjustment
Value adjustments at the end of the year
Unrealised internal profit at the beginning of the year
Unrealised internal profit movements in the year
Effect of exchange rate adjustment
Transfer between unrealised internal profit and value adjustment
Unrealised internal profit at the end of the year
Investments in
subsidiaries
Amounts
owed by
affiliated
companies
Investment
in
associated
company
Other
securities
and
investments
97
2018
14,405
3,545
(673)
17,277
30,591
15,329
40
(2,323)
129
(15,694)
44
698
138
—
105
807
391
2019
17,277
5,409
(4,193)
105
1,198
18,493
92
36
(20)
(39)
(187)
2
28,952
16,514
36
(2,226)
(187)
(6,320)
—
450
(215)
(8,201)
267
108
(224)
28,803
28,952
(17,760)
(3,791)
(70)
8,201
(16,382)
(1,521)
143
—
—
213
—
974
(13,420)
(17,760)
33,876
28,469
8,933
3,744
(3,744)
8,933
28,784
16,514
(2,226)
(6,300)
296
(215)
(8,201)
28,652
(17,760)
(3,791)
(70)
8,201
(13,420)
7,432
1,274
(449)
8,257
115
152
—
Carrying amount at the end of the year
24,165
8,524
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 Derivatives
For information on derivative financial instruments, please refer to note 4.4 in the
consolidated financial statements.
10 Borrowings
DKK million
Within 1 year
1-5 years
More than 5 years
Total borrowings
2019
2018
165
523
192
880
2
—
—
2
Borrowings at end of 2019 are related to lease liabilities.
11 Other provisions
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 3.7 in the consolidated
financial statements.
12 Related party transactions
For information on transactions with related parties, please refer to note 5.3 in the
consolidated financial statements.
Transactions with CS Solar Fund XIV disclosed in note 5.3 in the consolidated
financial statements are not related to the parent company. The parent company’s
share of services provided by NNIT Group amounts to DKK 758 million.
Novo Nordisk A/S is included in the consolidated financial statements of Novo
Nordisk Foundation.
13 Fee to statutory auditors
DKK million
Statutory audit
Audit-related services
Tax advisory services
Other services
Total fee to statutory auditors
14 Commitments and contingencies
DKK million
Commitments
Leases1
Potential milestone payments2
Guarantees given for subsidiaries
Other guarantees
2019
2018
8
3
6
3
20
8
3
4
2
17
2019
2018
175
4,464
10,011
130
1,296
3,004
9,898
171
1. Leases for 2019 predominantly relate to estimated variable property taxes and low value
assets. Leases for 2018 reflect operating lease commitment.
2. Potential milestone payments are associated with uncertainty as they are linked to
successful achievements in research activities; please refer to note 5.2 in the consolidated
financial statements.
Novo Nordisk A/S and its Danish subsidiaries are jointly taxed with the Danish
companies in 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 severally 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 3.7 and 5.2 in the consolidated financial statements.
Novo Nordisk Annual Report 2019Novo Nordisk Annual Report 2019Financial Statements of the Parent Company