Novo Resources Annual Report 2020

FY2020 Annual Report · Novo Resources

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Novo Nordisk
Annual Report
2020

Team Novo Nordisk, the world’s first all-diabetes professional cycling team, are racing with 100 on their jersey to celebrate the 100-year anniversary of the discovery of insulin
Novo Nordisk A/S - Novo Allé 1, 2880 Bagsværd, Denmark - CVR no. 24256790

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 2

Contents

Management review

Consolidated statements

Introducing Novo Nordisk

Consolidated financial statements

Letter from the Chair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47

Letter from the CEO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Cash flow statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

Novo Nordisk at a glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Balance sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Business model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Equity statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

Performance highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Notes to the consolidated financial statements . . . . . . . . . . . . . . . . . 51

Strategic Aspirations

Consolidated ESG statement (supplementary information)

Purpose and sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statement of ESG performance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Innovation and therapeutic focus . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to the consolidated ESG statement . . . . . . . . . . . . . . . . . . . . . . 82

Commercial execution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Corporate governance

Statements and Auditor's Reports

Statement by Board of Directors and Executive Management . . . . . 88

Independent Auditor's Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Risk management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Independent Assurance Report on the ESG statement . . . . . . . . . . . 91

Shares and capital structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Corporate governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

Governance practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Additional information

Mandy is part of Team Novo Nordisk, the world’s first
all-diabetes professional cycling team

Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

More information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Executive Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Product overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 3

Letter from the Chair

Rising to the
challenge

The devastating impact of COVID-19 on societies and economies
in 2020 intensified existing challenges such as inequality and
poverty. However, in times of crisis, businesses play a critical role
in mobilising resources and providing solutions. Novo Nordisk
has worked hard to respond to the challenges, helping people
with serious chronic diseases while also supporting society on a
broader scale.

Novo Nordisk’s highest priority in 2020 was to

commercial organisation embraced an increasingly

ensure the safety of our employees and the

digital new reality.

uninterrupted supply of our life-saving medicines

for patients. We achieved this, while also

The world has been through one of the most

supporting society's response to the pandemic,

difficult years in recent human history. Despite

most notably in Denmark, where our headquarter

the pandemic and the turbulent business

presence meant we were able to assist the

environment, Novo Nordisk took important steps

government in the rapid scale-up of coronavirus

towards delivering on our purpose of driving

testing . At the same time, our scientists continued

change to defeat diabetes and other serious

to make significant progress in discovering

chronic diseases – a goal we are confident will

new therapies of the future, while our global

translate into sustainable and profitable growth.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 4

This does not mean that the road ahead is going

to be easy . The pandemic has exacted an immense

economic, as well as human, cost on societies

and it is inevitable that public finances will remain

fragile for many years. Those fiscal constraints

will put pressure on businesses that work closely

with governments, including the pharmaceutical

industry, and we will have to find new ways to

ensure that our products are accessible to all

those who need them.

Beyond COVID-19, two consistent priorities were

high on the Board’s agenda in 2020, namely

scientific innovation and sustainability – both

of which are vital to ensure the future of the

company . It is therefore satisfying to see a healthy

product pipeline, including the pioneering science

that we consider to be the biggest contribution we

can make to society .

Our research is now more broadly focused as we

look to deliver treatments within therapy areas

adjacent to our core competencies. Specifically,

this means looking beyond semaglutide, the GLP-1

molecule found in our new oral diabetes treat-
ment Rybelsus® and the once-weekly injectable
Ozempic®. We are exploring novel ways to treat

a range of conditions beyond diabetes, including

cardiovascular disease – the world’s leading cause
of death1 – obesity and most recently also as a

potential treatment for Alzheimer’s disease. In

tandem with this push into new areas, we are also

establishing more external alliances and partner-

Employees from the Novo Nordisk
research department volunteered
to contribute to the fight against
COVID-19 and, together with staff from
the Danish health service, they helped
to increase the testing capacity in
Denmark .

“Above all, 2020 underscored
the need for strong corporate
values and a shared sense
of purpose. We are fortunate
that both are well-established
across our organisation,
empowering our employees
to keep delivering for both
patients and investors,
despite the unprecedented
disruptions caused by
COVID-19.”

It is increasingly clear that society expects more

Above all, 2020 underscored the need for strong cor-

from businesses as the world grapples with

porate values and a shared sense of purpose . We are

climate change and environmental degradation, as

fortunate that both are well-established across our

well as the need for greater equity in healthcare.

organisation, empowering our employees to keep

Indeed, the pandemic has turbocharged many of

delivering for both patients and investors, despite

these issues, with an effective alliance emerging

the unprecedented disruptions caused by COVID-19 .

between young people and investors that is

prompting companies to pay far more attention to

On behalf of the Board of Directors I would like to

sustainability .

offer my thanks to all Novo Nordisk’s employees

for their hard work and commitment during the

At Novo Nordisk, we have been focused on

exceptional challenges of 2020; to Lars Fruergaard

sustainability for many years – but we are

Jørgensen and his team for leading the company

determined to continue to raise our game .

through a turbulent year in such a thoughtful and

In the past year we launched a new social

positive manner; and to our shareholders for their

responsibility strategy, Defeat Diabetes, and

continued support .

initiated programmes within renewable power

and recycling as part of our Circular for Zero

Helge Lund

ships to complement our in-house expertise .

1 . WHO, The top 10 causes of death (2020)

environmental strategy .

Chair of the Board of Directors

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 5

Letter from the CEO

The power of
purpose

The COVID-19 pandemic has taken a terrible toll around the
world – but the pain has not been shared equally. People with
underlying conditions have been hit disproportionately hard
by the virus, a fact that makes Novo Nordisk’s purpose of
driving change to defeat diabetes and other serious chronic
diseases more meaningful than ever.

Today, one in 11 people in the world has diabetes

discovery of insulin, the first of these is 'Purpose

and if action is not taken to bend the curve, that
figure is projected to rise to one in nine by 20451 .

and sustainability'. Over the past year we have

stepped up our commitment to our purpose by

The risk posed by COVID-19 to people living with

launching a new Defeat Diabetes social responsi-

diabetes and obesity is a clear wake-up call: we

bility strategy . This sets out our ambition to accel-

must continue to do more to tackle these diseases

erate the prevention of type 2 diabetes, provide

or risk vast future damage to millions of lives, as

access to affordable care for vulnerable patients in

well as to broader societies and economies.

every country and innovate to improve lives .

We measure our contribution to the fight against

Beyond defeating serious chronic diseases, we

diabetes and other serious chronic diseases in our

also aspire to have zero environmental impact .

Strategic Aspirations for 2025 . Appropriately, after

In 2020, we took an important step by achieving

a year as unparalleled as 2020, and as the world

our target of using 100% renewable power across

acknowledges the hundredth anniversary of the

global production – a key milestone on the road

1 . IDF Diabetes Atlas, 9th edition, 2019

to our target of zero CO2 emissions from all
operations and transport by 2030 .

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 6

We now also ask that by the end of the decade,

our direct suppliers use only renewable power

when supplying us. It has been great to see some

of our largest suppliers step up and meet this

target already .

Despite this encouraging progress, we can

only fulfil our purpose and be respected for

adding value to society if we deliver on our core

contribution of scientific innovation. Thanks to

a strategy of targeted investment, our scientists

are currently pursuing higher levels of innovation

across more therapy areas than at any point in

the company’s history. Consequently, I believe we

are now well-positioned for success in the short,

medium and long term .

Olivia Aka is living with type 1 diabetes
and is enrolled in our Changing Diabetes®
in Children programme, Ivory Coast

Within diabetes, we are further raising the in-

led to the significant acquisitions of Corvidia

novation bar with the roll-out of the world’s first
once-daily GLP-1 tablet, Rybelsus®, while at the

Therapeutics and Emisphere Technologies,

strengthening our positions in cutting-edge areas

same time working on novel insulins, 100 years

of cardiovascular medicine and drug delivery

Our continued focus on external innovation

after the discovery of the molecule . Our Research

respectively .

& Development (R&D) colleagues are also pursu-

ing greater weight loss in obesity, and in 2020 they

Commercially, 2020 was a challenging year as

demonstrated the potential of semaglutide 2 .4 mg

lockdowns reduced the time doctors spent with

in the STEP phase 3 clinical trial programme .

their patients, leading to fewer initiations of

new treatments. Despite this, we expanded our

Crucially, we also broadened our technology

leadership position in the diabetes market in terms

platforms and expanded our research into

of value, keeping us on track to reach a share

adjacent disease areas in 2020 including

cardiovascular disease, non-alcoholic

steatohepatitis (NASH) and Alzheimer’s disease

of more than one third by 2025 . Diabetes sales
were driven by sales of GLP-1 products (Victoza®,
Ozempic® and Rybelsus®), which offset mixed

– areas of huge unmet medical need and a great

market conditions for insulins . We continued to

burden for patients, families and society alike .

help more people living with obesity, while making

“Over the past year we have
stepped up our commitment
to our purpose by launching
a new Defeat Diabetes social
responsibility strategy. This
sets out our ambition to
accelerate the prevention
of type 2 diabetes, provide
access to affordable care for
vulnerable patients in every
country and innovate to
improve lives."

progress with our ambition to secure sustained

growth within our Biopharm division thanks to

strong demand for our growth hormone and new

haemophilia products .

I believe that our ability to meet the needs of our

millions of patients during the pandemic in 2020

comes as a consequence of our crystal-clear

purpose and long-established company values . We

are far from done and have many more millions

of patients for whom treatment is not accessible

today. So now is the time to continue to invest in

our people and in our organisation, creating an

inclusive, diverse and safe working environment

in which colleagues have equal opportunities to

thrive and fulfil their potential.

Looking to the future, I am confident that our clear

corporate strategy will make us a valued partner to

society as the world continues on the long road to

recovery from the pandemic .

In closing, I would like to thank my colleagues

around the world for their agility and commitment

during this most challenging of years . Special thanks

must go to our partners and collaborators, without

whom we could not succeed. A sincere thank you

goes to our Board of Directors for their continued

support and constructive challenging of the organ-

isation. Finally, I would like to send a thank you to

our shareholders for their continuous support .

Lars Fruergaard Jørgensen

President & Chief Executive Officer

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 7

Novo Nordisk
at a glance

Novo Nordisk is a global healthcare company,

headquartered in Denmark . Our key contribu-

tion is to discover and develop innovative bio-

logical medicines and make them accessible

to patients throughout the world. We aim to

lead in all disease areas in which we are active.

126,946

DKK million in net sales

54,126

DKK million in operating profit

28,565

DKK million in free cash flow

45,323

employees worldwide

169

countries with marketed products

countries with affiliates

countries with R&D facilities

Our corporate strategy

Our corporate strategy has four distinct focus

We aim to strengthen our leadership and

areas in which we operate. It is built on our

treatment options in Diabetes and Obesity care,

purpose, the Novo Nordisk Way and our ambition

secure leading positions within Biopharm and

to be a sustainable business .

establish a strong presence in other serious

463million people live with diabetes1

chronic diseases such as NASH, cardiovascular dis-

ease and Alzheimer’s disease. Succeeding in this

will drive sustainable growth for Novo Nordisk.

Diabetes care

Strengthen leadership
by offering innovative
medicines and driving
patient outcomes

v o N ordisk W

Obesity care

Strengthen treatment options
through market development
and by offering innovative
medicines and driving
patient outcomes

Driving change to
defeat diabetes
and other serious
chronic diseases

Biopharm

stainabl e b u s i n

Secure a leading position
by leveraging full portfolio
and expanding into
adjacent areas

e ss

Other serious
chronic diseases

Establish presence by
building competitive pipeline
and scientific leadership

650million people live with obesity2

450thousand people live with

haemophilia3

1 . IDF Diabetes Atlas, 9th edition, 2019
2. WHO, Obesity and overweight, fact sheet, 2020
3 . World Federation of Hemophilia, Annual
Survey, 2018

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 8

Our business
model

Our business is built around our purpose:

Driving change to defeat diabetes and other

serious chronic diseases. Our key contribution

is to discover and develop innovative biological

medicines and make them accessible to patients

throughout the world.

We strive to be a sustainable business, creating

value to society and to our future business . We

do business in a financially, environmentally and

socially responsible manner and we do this the

Novo Nordisk Way. By succeeding in this, we will

create long-term value to patients, employees,

partners, shareholders and society .

Pioneering idea exploration
and early research with a strong
understanding of biology

Engineering and developing
leading biologics within
chronic diseases

Manufacturing biologics
at large scale, specifically
within yeast

Delivering high-volume products
such as insulin and GLP-1, via an
efficient supply chain

Executing commercially through
a market-fit approach to ensure
patient access

Resources
Resources going into our

business model at different

stages:

– Insights from healthcare

experts, patients and

partners

– Expertise from public and

private institutions

– Diverse talent

– Raw materials

– Financial resources

Value
Value created from our

business:

– 32.8 million people using

our Diabetes care products

– 43,500 patients participating

in our clinical trials

– 45,323 employees, of whom

5,446 were new hires in 2020

– 60,000 direct suppliers

– 26,376 DKK million total tax

contribution

– 36,976 DKK million to

shareholders as dividends

and share repurchases

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 9

Performance highlights

Strategic
Aspirations 2025

To reflect the broad aspects of Novo
Nordisk across therapy areas and
geographies, Novo Nordisk introduced in
2019 a comprehensive approach describing
the future growth aspirations of the
company under the headline Strategic
Aspirations 2025. 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.

Purpose and sustainability

Innovation and therapeutic focus

2025 Strategic Aspirations

2020 highlights

2025 Strategic Aspirations

2020 highlights

– Being respected for

adding value to society
– Progress towards zero
environmental impact

– Ensure distinct core

capabilities and evolve
culture

Adding value to society:
– Launch of new social responsibility strategy,

Defeat Diabetes

– Expansion of US affordability offerings
– Societal contributions during COVID-19
– Lowered ceiling price of human insulin in

76 countries
Environment:
– 100% renewable power across all production

sites

– Launch of supplier target aiming at 100%

renewable power by 2030

Ensure distinct capabilities and evolve culture
– Progress on diversity and inclusion agenda as

well as digitalisation capabilities

– 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
(CVD), NASH and chronic
kidney disease (CKD)

Diabetes:
– Semaglutide 2 .0 mg phase 3b trial

successfully completed

– Once-weekly insulin icodec phase 3 trial

programme initiated

– Rybelsus® approved in the EU, the UK

and Japan

Obesity:
– Applications for semaglutide 2 .4 mg

submitted to FDA and EMA

– AM833 + semaglutide 2 .4 mg phase 1 trial

successfully completed

Biopharm:
– Mim8 phase 1/2 trial initiated
– Concizumab phase 3 trial reinitiated
Other serious chronic disease:
– Successful completion of phase 2 trials for

ziltivekimab and semaglutide in NASH

Commercial execution

Financials

2025 Strategic Aspirations

2020 highlights

2025 Strategic Aspirations

2020 highlights

Diabetes sales increased by 8% at CER1
– Value market share leadership expanded by

0 .7 percentage points to 29 .3%

Obesity sales increased by 3% at CER to
DKK 5 .6 billion
Biopharm sales increased by 1% at CER

– Strengthen diabetes
leadership – aim at
global value market
share of more than 1/3

– Strengthen obesity

leadership and double
2019 reported sales
– Secure a sustained
growth outlook for
Biopharm

Operating profit increased by 7%
at CER to DKK 54 .1 billion
Sales increased by 7% at CER, to
DKK 126 .9 billion
– 10% sales growth at CER in IO
– 3% sales growth at CER in NAO3, with 48% of
US sales transformed to products launched
since 2015

Free cash flow of DKK 28 .6 billion and
DKK 37 billion returned to shareholders

– Deliver solid sales and

operating profit growth:
– Deliver 6–10% sales
growth in IO2
– Transform 70% of

sales in the US (from
2015 to 2022)

– 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

1. CER: Constant Exchange Rate
2. IO: International Operations
3. NAO: North America Operations

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 10

Performance highlights

Financial
highlights

Sales by geographic area
EMEA

North America

Region China

Rest of World

14%

11%

27%

DKK million

Financial performance

Net sales

Sales growth as reported

Sales growth in constant exchange rates (CER)1

Operating profit

Operating profit growth as reported

Operating profit growth in constant exchange rates (CER)1

Depreciation, amortisation and impairment losses

Net financials

Profit before income taxes

Effective tax rate2

Net profit

Purchase of intangible assets2

Purchase of property, plant and equipment2

Free cash flow1

Total assets

Equity

Financial ratios

Gross margin2

48%

Sales and distribution costs in percentage of sales

Research and development costs in percentage of sales

Operating margin2

Net profit margin2

Cash to earnings1

Sales by therapeutic area

Operating profit after tax to net operating assets1

Diabetes care

Obesity care

Biopharm

15%

Dividend payout ratio2

Share performance

Basic earnings per share/ADR in DKK2

Diluted earnings per share/ADR in DKK2

Total number of shares (million), 31 December

Dividend per share in DKK

Total dividend (DKK million)

Share repurchases (DKK million)

Closing share price (DKK)

2016

2017

2018

2019

2020

2019–2020

111,780

111,696

111,831

122,021

126,946

Change

(0 .1%)

2 .3%

0 .1%

4 .6%

9 .1%

5 .6%

4 .0%

6 .7%

48,967

47,248

52,483

54,126

1 .1%

4 .8%

3,182

(287)

48,680

21 .7%

38,130

1,022

7,626

(3 .5%)

11 .1%

2 .8%

3,925

5 .6%

5,661

367

(3,930)

47,615

48,553

18 .9%

19 .8%

38,628

38,951

2,774

9,636

2,299

8,932

3 .1%

6 .8%

5,753

(996)

53,130

20 .7%

42,138

16,256

5,825

39,991

32,588

32,536

34,451

28,565

97,539

102,355

110,769

125,612

144,922

45,269

49,815

51,839

57,593

63,325

83 .5%

26 .1%

11 .7%

43 .0%

31 .9%

88 .4%

98,0%

50 .5%

16 .41

16 .38

2,400

8 .35

83 .5%

25 .9%

12 .2%

42 .6%

33 .2%

67 .8%

82 .8%

50 .0%

18 .05

18 .01

2,350

9 .10 3

84 .2%

25 .4%

12 .5%

43 .8%

34 .1%

85 .5%

84 .2%

26 .3%

13 .2%

42 .2%

34 .5%

84 .2%

143,2%

116,7%

50 .4%

50 .6%

15 .96

15 .93

2,450

8 .15

15 .42

15 .39

2,500

7 .85

19,206

16,845

335

19,547

19,651

21,066 3

15,567

15,334

16,855

298

387

427

3 .6%

5 .5%

48,432

(2 .0%)

0,2%

3,193

(634)

47,798

20 .7%

37,925

1,199

7,068

84 .6%

25 .4%

13 .0%

43 .3%

33 .9%

105 .4%

150,2%

50 .2%

14 .99

14 .96

2,550

7 .60

19,048

15,057

255

607%

(35%)

(17%)

15%

10%

(2%)

10%

81%

1. See 'Non-IFRS financial measures' 2. See 'Financial definitions'. 3. Total dividend for the year including interim dividend of DKK 3.25 per share, corresponding to DKK 7,570 million, which was paid in
August 2020. The remaining DKK 5.85 per share, corresponding to DKK 13,496 million, will be paid subject to approval at the Annual General Meeting.

Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 11

Purpose and sustainability

Adding value to society
and to our future
business

Demands on companies are changing fast as the world is faced with
extraordinary challenges. Threats like the COVID-19 pandemic and
climate change mean that 'business as usual' is no longer an option.
The stakes are high and we are determined to be a sustainable
business by adding value to society and to our future business.

Responding to COVID-19

During 2020, COVID-19 led to a cascade of critical

needs around the world and we used our exper-

tise, resources and global reach to contribute to

the response. Our highest priority was to ensure

the safety of our employees and the uninterrupted

supply of life-saving medicines for our patients . In

addition, we focused our resources on donations

towards global relief efforts and activated our re-

search and development organisation to perform

COVID-19 testing following a request for support

from the Danish government .

Leading a sustainable business

Our purpose is to drive change to defeat

diabetes and other serious chronic diseases .

To maximise our positive impact, we must offer

solutions beyond providing medicines to help

tackle the global societal challenges of growth

in non-communicable diseases, lack of access to

affordable care and the impacts of climate change.

Socially
responsible

o N ordisk W

Driving change to
defeat diabetes
and other serious
chronic diseases

stainable b u s i n

e ss

Environmentally
responsible

Financially
responsible

The rapid outbreak of COVID-19 during 2020 put

2025 Strategic Aspirations

the potential vulnerability of people living with

We are committed to being a sustainable business .

With that, we lead towards our Strategic

Purpose and

sustainability

diseases, including diabetes and obesity, firmly in

To us, this means that we add value to society and

Aspirations within purpose and sustainability.

the spotlight . At the same time, climate change

to our future business . To achieve this ambition,

remains an urgent challenge . These challenges call

we do business in a financially, environmentally

This is what ESG – Environmental, Social and

– Being respected for

for corporations to step up and take a leading role

and socially responsible way, as reflected in our

Governance – means to us .

adding value to society

in delivering and adopting solutions .

Articles of Association and the Novo Nordisk Way .

– Progress towards zero

This approach is integrated into every aspect of

Read more about ESG in the following sections

environmental impact

In 2020 we addressed these challenges by

our decision-making, in strategies and actions,

and in the consolidated ESG statement .

– Ensure distinct core

increasing access to our medicines across the

always keeping in mind what is best in the long

capabilities and evolve

world, pursuing zero environmental impact, and

term for the patients we serve, our shareholders,

culture

taking steps towards creating a more sustainable

our employees, the communities in which we are

and inclusive workplace.

present and the global society we are part of.

Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 12

Purpose and sustainability

suppliers to encourage them to shift to sustainably

Our environmental strategy,

sourced materials, thus reducing our environmen-

Circular for Zero and 2030

tal impact. In 2020 we set an ambitious target that

ambitions

Our
environmental
responsibility

Each year, billions of Novo Nordisk tablets,
vials and injection pens are distributed to
patients and demand for them is growing.
This puts us in the front line of some
of the most challenging environmental
issues including climate change, water
and resource scarcity, pollution and plastic
waste. Our ambition is bold and simple: to
have zero environmental impact.

all our direct suppliers should source 100% renew-

able power by 2030 when supplying us. To achieve

this, we will work with our suppliers to help them

in this transition to renewable power. Successful

conversion among our 60,000 suppliers would

result in around 300,000 tonnes of CO2 being elim-
inated from our direct suppliers each year .

Circular company

We work to reduce our environmental

impact across all areas of our operations and

transportation . In 2020, total CO2 emissions across
our operations and transportation were 170,000

tonnes of CO2, representing a 44% decrease from
2019, due primarily to the implementation of

renewable energy projects and impacts on travel

To get there, we are adopting a circular mindset,

from COVID-19 .

designing products that can be re-used or

recycled, reshaping our business practice to

minimise consumption and eliminate waste, and

working with suppliers who share our ambition.

We call our environmental strategy Circular for

Zero and we measure our progress based on use

CO2 emissions from operations includes all
production facilities, global office buildings

and laboratories . In 2020, CO2 emissions from
production were 37,000 tonnes CO2, a reduction
of 57% versus 2019, primarily due to the

of resources, emissions and waste. The Circular

implementation of various renewable energy

for Zero strategy incorporates our entire value

initiatives . These projects include implementation

chain and is based on three pillars: circular supply,

of renewable heat and steam in Kalundborg,

circular company and circular products .

wind power in France, Algeria and Russia, and

Circular supply

As part of our ambition to switch to circular

solar power in the US. CO2 emissions from office
buildings and laboratories were 8,000 tonnes CO2,
a decrease of 38% versus 2019, due primarily to

sourcing and procurement, we collaborate with

energy-saving projects and COVID-19 shut-downs.

Circular supply:
Proactive collaboration with suppliers
to embed circular thinking for reduced
environmental impact across the value
chain and move towards circular
sourcing and procurement

Circular company:
Eliminate environmental footprint from
operations and drive a circular transition
across the company aiming for zero
environmental impact

Horns Rev 3 wind farm, North Sea, is one of the locations from
which we receive renewable power

Due to COVID-19, CO2 emissions from business
flights were reduced to 19,000 tonnes CO2, a
reduction of 71% compared with 2019. During

2021, we will focus on ensuring that emissions

from business travel are minimised through

the promotion of virtual collaboration with both

colleagues and stakeholders . CO2 emissions from
our company cars in 2020 were 45,000 tonnes

CO2, 27% lower than in 2019, primarily due to
fewer in-person meetings and less travel as a

result of COVID-19 . Novo Nordisk is a member

of EV100 and has committed to transitioning to

100% electric company cars by 2030 . In 2020,

CO2 emissions from product distribution were
61,000 tonnes CO2, a decrease of 24% compared
with 2019, due to optimisation projects to move

products shipped from air to sea freight .

Circular products:
Upgrade existing and design new products
based on circular principles and solve the
end-of-life product waste challenge to
close the resource loop

At the beginning of the year, we achieved our ambi-

tion of sourcing 100% renewable power in our glob-

al production when a new solar facility went online

Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 13

powering our entire US operations. In the process,

Circular products

we became the first pharmaceutical company in the

We are working to ensure existing and new

renewable power initiative, RE100, to do this.

products are fit for circularity and have developed

It is our ambition to have zero
environmental impact . In order to
achieve this ambition we set out a 2030
supplier target, with the desire that

Environmental performance

1701,000 tonnes CO2 emissions from

operations and transport
-44% from 2019

a circular design guideline within R&D to reduce

In 2020, the energy consumption for our opera-

the environmental footprint of our devices .

tions was 3,191,000 GJ, an increase of 7% com-

pared with 2019, primarily due to a new produc-

As part of Circular for Zero, we are seeking to

tion site in North Carolina . Energy-saving projects

address the end-of-life challenges associated

implemented in 2020 within production sites are

with many of our medical devices. In late 2020,

expected to result in annual savings of 94,000 GJ .

we initiated a pilot take-back scheme for medical

100%share of renewable power

for production sites
+24 percentage points from 2019

<1%of waste from production

sites sent to landfill
0% change from 2019

devices in Denmark with the aim of scaling globally

Water consumption at production sites was

in the future . Through recycling our production

3,368,000 cubic meters, an increase of 7% compared

waste, we have been able to successfully

with 2019 due to the new production site in North

recycle insulin pens, providing materials for the

Carolina . Four production sites including China and

manufacture of lamps and office furniture. We

Brazil are in areas subject to water stress or high

are pursuing greater re-use and recycling of our

seasonal variations . These sites accounted for 11%

devices and aspire to achieve this in coming years .

of the total water consumption in 2020, and water

consumption at these sites decreased by 15% in

2020, despite adding new production sites. We will

“The Danish Association of Pharmacies is

continue to focus on reducing water consumption

very excited to be part of this important

across these sites .

We are committed to reducing waste and have a

target of sending zero production waste to landfill

by 2030 . In 2020, production sites had a total

of 141,000 tonnes of waste, an increase of 14%

compared with 2019. This increase was due to

increased production in Kalundborg .

93% of waste arising from our production was

take-back project aiming to reduce the

environmental impact from used insulin

pens, which consist of valuable materials

suitable for recycling. By recycling we avoid

the negative climate impact from burning

the material as normal waste.”

– Birthe Søndergaard, Danish Association of Pharmacies

recycled, converted to biogas or incinerated in

Read more about our environmental performance

waste-to-energy plants. During 2020 less than 1%

in the consolidated ESG statement in this report

(1,000 tonnes) of our waste was sent to landfill.

and on novonordisk .com .

2030

60,000

direct suppliers use renewable
power when supplying us.

300,000

tonnes of CO2 would be eliminated
from our direct suppliers each year .

Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 14

Purpose and sustainability

We are driving change to

accessible to patients throughout the world.

– Human insulin: For about 25 USD per vial at

Our social
responsibility

At Novo Nordisk, it is our ambition to be
respected for adding value to society. We
aim to achieve this by adding value to the
communities we are part of, delivering
innovative solutions to patients, and by
offering an inclusive, diverse, safe and
ethical workplace.

Today, one in every 11 people in the world is living

with diabetes, a figure that is projected to rise to
one in nine by 2045 if action is not taken1 . Diabetes

places a great burden on health systems, and we

are committed to working with health authorities

and other partners to prevent and treat the

disease. In 2020 we launched a long-term social

responsibility strategy, Defeat Diabetes, to help

society rise to one of its biggest challenges . We

recognise that we cannot defeat diabetes alone,

Defeat Diabetes by…

In 2020, we reached an estimated total of 32.8

national pharmacies, including Walmart and CVS

million patients with our Diabetes care products,

– Immediate Supply Program: A free, one-time,

…accelerating prevention
to bend the curve…

up 9% from 2019 .

immediate supply of Novo Nordisk insulin (up to

3 vials or 2 packs of pens) to eligible patients at

Read more in the section on innovation and

risk of rationing

therapeutic focus .

– Co-pay Savings Cards: To help defray high

out-of-pocket costs for commercially insured

Access and affordability

patients .

We recognise that affordability of medicines can

be a challenge and we know that some people

During 2020, we reached more than one million

in the US living with diabetes are increasingly

people through affordability offerings in the US.

finding it hard to pay for their healthcare, including

our diabetes medicines . Ensuring access and

We also recognise that there are vulnerable

affordability is a responsibility we share with all

patients in every country and to identify these

involved in healthcare. During 2020, we continued

groups we will initiate vulnerability assessments

our efforts to help patients in the US struggling to

where we operate, excluding the US where we

afford their Novo Nordisk insulins through a range

have already expanded our affordability offerings.

…providing access to affordable
care for vulnerable patients in
every country…

of options, including:

– Follow-on brands: Unbranded biologic versions
of fast-acting (Novolog®) and premix insulin
(Novolog® Mix) at a 50% list price discount

We do this to identify how we can improve access

to affordable care and capacity building. Based on

21 country assessments made in 2020, we have

developed affordability plans in 19 countries.

versus branded versions

Vulnerable patient groups include people impact-

– My$99Insulin: 30-day supply of a combination of

ed by humanitarian crises, people living in remote

Novo Nordisk insulin products (up to three vials

areas or in poorer parts of the world with ineffi-

or two packs of pens) for 99 USD for eligible

cient healthcare systems and vulnerable popula-

patients

tion groups, such as children and the elderly .

– Patient Assistance Program: Free diabetes

…innovating
to improve lives .

but we can accelerate our actions to find solutions.

medication to people in need who meet certain

In 2020, we strengthened our Access to Insulin

Innovation

eligibility criteria, including annual household

Commitment by lowering the ceiling price (the

income at or below 400% of government-

maximum price within the commitment) from USD

Our key contribution is to discover and develop

defined poverty level. Programme expanded

4 to USD 3 per human insulin vial in 76 countries .

innovative biological medicines and make them

1 . IDF Diabetes Atlas, 9th edition, 2019

during COVID-19

This covers Least Developed Countries as defined

Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 15

by the UN, other low-income countries as defined

In total, 469 healthcare professionals have been

by the World Bank, and middle-income countries in

trained, 222 clinics established and 28,296 children

which large low-income populations lack sufficient

across 14 countries have received care as part of

health coverage, as well as selected humanitarian

the programme since 2009 .

organisations .

Prevention

An estimated 3.2 million people were treated

In addition to the impact on patient lives, diabetes

with insulin under this commitment in 2020. In

also constitutes one of the biggest societal chal-

We expanded our Changing
Diabetes in Children programme
with the ambition to reach

100,000

children by 2030 .

Research (AMR) Action Fund, the largest

collective fund ever established to support vital

research into antimicrobial resistance research
and development1

– 138 DKK million to the World Diabetes

Foundation (WDF), including a special one-off

contribution of 50 DKK million in 2020

– 20 DKK million to the Novo Nordisk Haemophilia

2020, the average price of insulin sold under this

lenges. To help society rise to this challenge, we

Foundation

commitment was 2.9 USD per vial, corresponding

focus our efforts within diabetes and obesity pre-

to 11 .6 cents per patient per day . Beyond this

vention where our expertise has the biggest impact.

Helping society respond to COVID-19

commitment, we sold human insulin at or below

Our aim is to find, pilot and scale effective interven-

Since the outbreak of COVID-19, additional efforts

the ceiling price in other countries, reaching an

tions to prevent diabetes and obesity, starting with

have been focused on helping society .

estimated another 3 .1 million people during

early interventions and health inequalities in cities .

2020 . Our Access to Insulin Commitment is only

one element and it cannot stand alone . Supply

Within early interventions, our collaboration with

chain improvements and capacity building are

UNICEF to prevent childhood overweight and

also important in our efforts to provide access to

obesity in Mexico and Colombia is progressing

affordable care to vulnerable patients.

despite COVID-19, and global advocacy on

childhood malnutrition continues .

Read more about the remuneration of our

sustainable business is integrated into our

executives in the corporate governance section

ownership structure. Our foundation ownership

of this report .

supports the overarching imperative to be both

commercially successful and responsive to the

Sustainable tax approach

the principals and are allocated an activity-based

profit according to a benchmarked profit mar-

gin . The tax outcome of this operational model

is reflected in the overview below, which shows

our corporate income taxes by region . To ensure

alignment between taxing authorities about the

allocation of profit between our entities, we have

Advance Pricing Agreements in place for geogra-

phies representing more than 65% of our revenue

worldwide.

Our sustainable tax approach has been approved

by the Board of Directors . Read more about our

sustainable tax approach on novonordisk .com .

Roshni has type 1 diabetes
and lives in India

In addition to corporate income taxes, we also pay

other taxes . Please refer to 'total tax contribution'

in the ESG statement .

wider needs of society. The fact that we have

Our overall guiding principle within tax is to have a

Corporate income taxes by region – three year average

a combination of foundation ownerships and

sustainable tax approach (tax policy), emphasising

Share of category

stock listing enables us to embark on long-

our commercial approach to managing the impact

term strategies while maintaining short-term

of taxes while remaining true to our values of

transparency on performance .

operating our business in a responsible and

transparent manner. This means that we pay

Region

International Operations

– Denmark

The objective of the Novo Nordisk Foundation is

tax where value is generated and are always

– EMEA (excluding Denmark)

to provide a stable basis for the commercial and

respecting international and domestic tax rules .

– China

research activities of Novo Nordisk and support

broader scientific, humanitarian and social

As a global business, we conduct cross-border

purposes .

trading, which is subject to transfer pricing reg-

ulations . We apply a 'Principal structure' in line

– Rest of World

North America Operations

– Of which the US

Total

Intellectual
property rights1

Production2

Sales3

Corporate
income taxes
(DKK billion)

8.4

7 .2

0 .9

0 .2

0 .1

1.5

1 .4

9.9

In addition to managing our business, our

with OECD principles, meaning all legal entities

governing bodies set direction and ensure

perform their functions on contract on behalf of

1. Intellectual property rights based on sales from where intellectual property rights are located
2 . Production based on production employees in the region
3 . Sales based on the location of the customer

Introducing Novo Nordisk / Strategic Aspirations — Purpose and sustainability / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 19

Financial and ESG assurance

Our 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 our ESG responsibility,

we voluntarily include an Assurance Report from

an independent external auditor for ESG report-

ing in the annual report . The assurance provider

reviews whether the ESG performance information

covers aspects that are deemed to be material

and verifies the internal control processes for the

information reported .

Our internal audit function provides independent and

objective assurance, primarily within internal control

of financial processes, IT security and business ethics.

To ensure that the internal financial audit function

operates independently of Executive Management,

its charter, audit plan and budget are approved by

the Audit Committee . The Audit Committee must ap-

prove the appointment, remuneration and dismissal

of the head of the internal audit function .

Read more about our corporate governance in

the corporate governance section of this report .

Materiality

We have a robust materiality process in place

where material issues are determined and

reassessed on an annual basis by management .

The three most material risk factors that can

impact our ability to create value over time are

defined by management as:

– Product quality and patient safety

Governance performance

approval

commitments and recommendations,

– Pricing and market access environment

including those outlined below:

– Progress in the R&D pipeline and regulatory

We adhere to international standards,

26facilitations of the Novo Nordisk Way

conducted
6 fewer than in 2019

80.6

company trust level
+3% from 2019

32business ethics reviews

conducted
2 fewer than in 2019

177supplier audits

59 fewer than in 2019

Read more in the risk management section of

– Access to Medicines Index

this report .

– CDP

– Sustainability Accounting Standards Board

Sustainability standards and performance

– Task Force on Climate-Related Financial

We strive to report on our ESG performance in

Disclosures

accordance with relevant disclosure standards.

– UK Bribery Act

One of these is the Taskforce on Climate-related

– UK Modern Slavery Act

Financial Disclosures (TCFD). Here we take a

– UN Global Compact Ten Principles

stepwise approach to incorporate material climate-

– UN Guiding Principles on Business

related disclosures into our annual report . A

and Human Rights

summary of how we address the risks related to

– UN Political Declaration on Universal

climate change can be found at our website and

Health Coverage

in our CDP disclosure report . As recommended

– UN Sustainable Development Goals

by TCFD, we are integrating climate change

– US Foreign Corrupt Practices Act

scenarios of 2⁰C, consistent with meeting the Paris

Agreement Goal (Representative Concentration

For more information, see

Pathway ‘RCP 2.6’) and 4⁰C as an alternative high

novonordisk .com .

emission (RCP 8 .5) RCP to identify short-, medium-

and long-term risks within our production and

supply chain to ensure a steady supply of medicine

to patients .

For the United Nations Sustainable Development

Goals (SDGs), we focus our efforts on Goal 3,

We strive to adhere to the disclosures of the Social

'health' and Goal 12, 'responsible consumption

Accountability Standards Board (SASB) which

and production', as this is where we believe we can

apply to our industry . We do this to demonstrate

maximise our positive impact on the SDGs .

our commitment to being transparent and

accountable for how we operate. We are fully or

Read more about our sustainability governance in

partially aligned to 20 of 25 metrics. In 2021 we

the consolidated ESG statement in this report and

will further assess our adherence and disclosure.

on novonordisk .com .

Introducing Novo Nordisk / Strategic Aspirations — Innovation and therapeutic focus / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 20

Innovation and therapeutic focus

Prioritising a pipeline
of hope for serious
chronic diseases

2025 Strategic Aspirations

Innovation and

therapeutic focus

– Further raise the

innovation bar for

diabetes treatment

– Develop a leading portfolio

of superior treatment

For almost a century, Novo Nordisk has
pioneered scientific breakthroughs within
serious chronic diseases. To ensure that we
continue to deliver value to society, we are
pursuing even higher levels of innovation,
across more therapy areas and technology
platforms and with more patients and
partners than at any point in our history.

innovative approaches to fighting obesity

and other serious chronic diseases, as well

as expanding our therapy area focus . These

approaches will rely not only on our cutting-edge

protein and peptide engineering, but on novel

technology platforms including oral delivery of

biologics, stem cells, RNA interference (RNAi) and

gene editing to further advance our innovative

pipeline for long-term success .

Shifting gears for future growth

Our Research & Development (R&D) strategy is

driven by targeted investment in novel products

and technology platforms, resulting in higher

levels of innovation across more therapy areas

and with more external partners than at any point

in our near 100-year history . In an increasingly

August and Marie Krogh brought insulin, a breakthrough
innovation discovered 100 years ago, to Denmark, where Nordisk
Insulinlaboratorium subsequently commercialised the production
of insulin .

competitive biopharmaceutical industry, this

In 2020 we had more than 43,500 patients partici-

gear-shift is imperative to ensure that we retain

pating in our clinical phase one to four trials – more

a leading scientific position in the disruptive

than at any point in our history . And, despite the

innovations that are set to transform medicine in
the 21st century .

disruption caused to society and healthcare sys-

tems by COVID-19, we safely maintained continuity

of key clinical trials through remote monitoring of

Over the past decade, on average we have

patients and by distributing trial products directly

solutions for obesity

Discovering ways to treat serious chronic diseases

developed one novel product each year and our

to them rather than via study sites where possible.

– Strengthen and progress

has never been more important . The COVID-19

business has grown strongly. To secure future

the Biopharm pipeline

pandemic has highlighted the vulnerability of

growth platforms, we expect to increase our R&D

Significant regulatory milestones in the past year

– Establish presence in

hundreds of millions of people with diabetes,

investments in near- and mid-term opportunities .

other serious chronic

obesity and other serious chronic diseases,

By building on our core capabilities including

included European and Japanese approvals for
Rybelsus® – the first commercially available GLP-1

diseases focusing on

underlining the urgency of addressing their unmet

our clinical trial expertise, large scale protein

based medicine in a tablet – strengthening our

cardiovascular disease,

medical needs .

manufacturing base and commercial excellence,

leadership position in diabetes . The once-daily

NASH and chronic kidney

we strive to enable more products to be launched

treatment represents a major technological

disease

We are rising to the challenge by building on a

in future years .

advance for people living with type 2 diabetes and

successful track record in diabetes to pursue

is now available in nine markets.

Introducing Novo Nordisk / Strategic Aspirations — Innovation and therapeutic focus / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 21

Raising the bar in diabetes research

Shaping the future of obesity treatment

With the number of people living with diabetes

We are also playing a leading role in discover-

projected to increase from 463 million today to
700 million in 20451, there remains an urgent

ing new treatments for obesity, which is still not

universally recognised as a serious chronic and

need to find innovative and more convenient

progressive disease . This is despite the fact that

the classical siloed approach to treating disease

symptoms one by one is breaking down and that a

molecule like semaglutide can potentially target a

number of different therapeutic areas.

treatments . This includes novel forms of insulin, a

people with obesity face a range of other health

Other serious chronic diseases

molecule discovered 100 years ago in 1921 . One

risks, from cancer, type 2 diabetes and heart

such candidate is insulin icodec, which during

disease to severe illness or complications from

2020 was seen to be effective and well-tolerated

COVID-19. Among significant progress made in the

in phase 2 trials. This once-weekly insulin might

past year was the phase 3 clinical trial programme

one day offer patients far fewer injections than

STEP (Semaglutide Treatment Effect in People with

the current option of once- or twice-daily basal

obesity), in which our GLP-1 once weekly injectable

insulins .

semaglutide 2.4 mg demonstrated average weight

loss of 17%-18% over 68 weeks in subjects with

Within GLP-1s we are building on our legacy by

obesity without diabetes, when using a trial prod-

developing mono- and combination therapies that

uct estimand (15%-17% weight loss reported when

deliver higher efficacy and improved outcomes by

using a treatment policy estimand) . By leveraging

demonstrating benefits on diabetes comorbidities.

GLP-1 semaglutide treatment we hope to maxim-

ise the ability of people with obesity to achieve and

However, our efforts within diabetes research do

maintain substantial weight loss. Our aspiration is

not stop there. In late 2020, we initiated a phase 1

to close the gap between current pharmacological

trial to establish the safety of a glucose-sensitive

treatment options and bariatric surgery by using

insulin candidate . We hope that such a treatment

combination therapies based on our peptide

might one day mimic the body’s own, naturally oc-

innovation .

curring insulin by sensing and responding to blood

sugar levels in the body . Furthermore, together

with Massachusetts Institute of Technology, we are

Semaglutide – also the active ingredient in Ry-
belsus® and Ozempic® – exemplifies an important

continuing to progress the development of sys-

trend in medicine in the form of a more holistic

tems enabling the oral delivery of macromolecules,

approach to cardiometabolic diseases . The close

including the tortoise shell-inspired, self-orienting

association between type 2 diabetes, obesity,

oral device 'SOMA', with the ultimate ambition of

cardiovascular disease, chronic kidney disease and

As a result, semaglutide is becoming a pipeline of

opportunities within a single molecule. In addition

to the results seen with semaglutide in diabetes

and obesity, a recent phase 2 trial involving

patients with NASH showed that treatment with

semaglutide resulted in a significantly higher

percentage of patients achieving NASH resolution

compared to placebo and could potentially play

a key role in preventing disease progression .

Furthermore, early-stage research supports

investigating semaglutide as treatment for early

Alzheimer's disease . A pivotal phase 3 programme

with oral semaglutide will be initiated in the first

half of 2021. But, while such a molecule is every

scientist's dream, our long-term innovation for the

benefit of patients must go beyond semaglutide.

It is with this ambition that we are branching

into areas of medicine that build upon our

core capabilities . In cardiovascular therapy, this

includes several approaches, including an anti-

IL6 monoclonal antibody and a PCSK9 peptide-

based inhibitor, the latter of which would provide

an alternative to existing forms of powerful

cholesterol-lowering therapy. This molecule has

one day delivering insulin in a tablet .

non-alcoholic steatohepatitis (NASH) means that

just completed phase 1 studies .

1 . IDF Diabetes Atlas, 9th edition, 2019

Introducing Novo Nordisk / Strategic Aspirations — Innovation and therapeutic focus / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 22

Harnessing external innovation

for rare blood and rare endocrine disorders,

The acquisition in 2020 of US-based biotech

where unmet need remains high. Our pipeline

company Corvidia Therapeutics further

includes Mim8 – a next generation treatment for

strengthens our pipeline by introducing the

haemophilia A, concizumab for the treatment of

anti-IL-6 monoclonal antibody, ziltivekimab,

haemophilia A or B and once-weekly somapacitan

which has shown encouraging results in phase

for growth-related disorders. However, we are

2 on inflammatory biomarkers in patients with

also collaborating with bluebird bio, which is

atherosclerotic cardiovascular disease and chronic

pioneering the development of next-generation

kidney disease .

in vivo genome editing treatments for genetic

Strategic investments of this nature reflect

our ambition to establish a leading presence

Looking to the future

diseases, including haemophilia .

in new adjacent therapy areas – just as we

Our investment in stem cell-based, regenerative

do within diabetes, obesity, haemophilia and

therapies lays the foundation for additional

growth disorders. During 2020, we also acquired

expansion into new areas such as Parkinson’s

Emisphere Technologies, and with it proprietary

disease, dry age-related macular degeneration

technologies that enable the oral formulation
of therapeutics – including the Eligen® SNAC
technology found in Rybelsus® .

and chronic heart failure . Not to mention stem

cell-based therapies potentially offering a path

to curing type 1 diabetes – an aspiration at the

heart of our purpose to defeat diabetes and other

By continuing to work with a growing number

serious chronic diseases .

of external partners and investing in novel

technology platforms – including stem cell

One thing common to our entire innovation

research, RNA-interfering (RNAi) therapeutics and

strategy is a drive to maximise the potential of

gene editing – we aim to deliver innovation across

data and digital technology – spaces that we

a broader range of serious chronic diseases than

invested in throughout 2020 via recruitment and

ever before . These technologies are revolutionising

external collaboration . It is increasingly clear

what is possible in medicine and they will power

that excellence in digital science, just as much

the disruptive innovations of the future .

as expertise in biology, will be vital for success
in biopharmaceutical R&D in the 21st century, as

Progressing the Biopharm pipeline

advances in analytics and real-world evidence

External innovation is also playing an important

move data-driven discovery to centre-stage in the

role in the evolution of our Biopharm business, a

hunt for new medicines.

speciality care unit that encompasses treatments

Shirley Stewart has type 2 diabetes and lives in the US

Introducing Novo Nordisk / Strategic Aspirations — Innovation and therapeutic focus / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 23

Innovation and therapeutic focus

Research and development

Diabetes

Regulatory events

– The oral glucagon-like peptide 1 (GLP-1) analogue in a
tablet, Rybelsus®, was granted market authorisation in
the EU and Japan for treatment of adults with type 2
diabetes (T2D) .

– In China, a label expansion for Victoza® was approved

to include a cardiovascular (CV) indication based
on LEADER. Furthermore, new drug applications
(NDAs) were submitted to China’s National Medicinal
Products Administration for semaglutide and the
insulin degludec/liraglutide combination .

Clinical progress

– The phase 3b trial, SUSTAIN FORTE, completed

successfully, demonstrating superior reduction in
HbA1c for 2.0 mg semaglutide compared with 1.0
mg semaglutide when administered once-weekly
subcutaneously (sc) in people with T2D in need of
treatment intensification1 .

– A phase 3b trial was initiated, investigating the effects
of sc semaglutide in people with T2D and peripheral
artery disease .

Obesity

Biopharm

Other serious chronic diseases

Regulatory events

Clinical progress

– An NDA for once-weekly sc semaglutide 2.4 mg for

– The once-weekly growth hormone derivative,

weight management in adults with obesity was filed
with the FDA utilising a priority review voucher. A
marketing authorisation application for semaglutide
2.4 mg in obesity was submitted to the European
Medicines Agency .

– The submissions are based on the results from

the STEP phase 3a clinical trial programme, which
included more than 4,500 adults with obesity or
overweight. Across the STEP programme, people with
obesity treated with once-weekly semaglutide 2.4
mg achieved a statistically significant and greater re-
duction in body weight compared to placebo. Across
the trials in people without diabetes, STEP 1, 3 and
4, a weight loss of 17%-18% was reported for people
treated with semaglutide 2.4 mg, when using a trial
product estimand (15%-17% weight loss reported
when using a treatment policy estimand).

– Saxenda® was granted a label expansion to include
the use in adolescents (aged 12 to <18 years) with
obesity or overweight in the US.

somapacitan, was approved under the brand name
Sogroya® for treatment of adult growth hormone
deficiency (AGHD) in the US and Japan. Positive
Committee for Medicinal Products for Human Use
(CHMP) opinion for Sogroya® for AGHD was granted
in Europe .

Clinical progress

– The phase 2 proof-of-concept study (Explorer 4)
with concizumab in haemophilia patients with
inhibitors completed successfully . The halted phase
3 programme (Explorer 6, 7 and 8) was reinitiated,
investigating sc concizumab prophylaxis treatment in
haemophilia A and B patients regardless of inhibitor
status .

– The combined phase 1/2 trial was initiated for Mim8,

a next-generation factor VIII mimetic bispecific
antibody for sc prophylaxis in haemophilia A patients
regardless of inhibitor status . After successful
single-dose administration (phase 1), Mim8 entered
multiple-dose administration (phase 2) .

– A phase 1 trial for EPI-01 in sickle cell disease

– The phase 2 trial investigating daily, sc semaglutide in
non-alcoholic steatohepatitis (NASH) was completed
successfully and semaglutide was granted break-
through therapy designation in the US . Phase 3a initia-
tion of semaglutide in NASH will be initiated in 2021.

– Novo Nordisk and Gilead Sciences presented results
from a phase 2 proof-of-concept trial in NASH . The
five-arm trial evaluated combinations of semaglutide
with Gilead’s FXR agonist, cilofexor, and/or ACC
inhibitor, firsocostat in people with NASH.

– Novo Nordisk acquired Corvidia Therapeutics Inc .,
with the lead compound ziltivekimab in late-stage
clinical development . Ziltivekimab is a fully human
monoclonal antibody directed against interleukin-6
(IL-6). Following the acquisition, the phase 2b
trial with ziltivekimab was successfully completed.
Ziltivekimab showed reduction in markers of
inflammation compared to placebo in a chronic
kidney disease patient population with atherosclerotic
CV disease and inflammation. A phase 3 CV outcomes
trial is expected to be initiated in 2021 .

– Positive phase 1 results were reported for the PCSK9i
mimetic peptide showing long-lasting LDL-cholesterol
lowering effect.

– A phase 3b trial was initiated with high dose oral sema-
glutide, 25 and 50 mg, in people with T2D in H1 2021.

Clinical progress

– Phase 2 trials with the once-weekly basal insulin ana-

logue, insulin icodec, were successfully completed and
the phase 3a trial programme, ONWARDS, was initiated.

– Phase 1 trials for icosema and insulin 965 were

successfully completed .

– The first human dose trials were initiated for glucose-
sensitive insulin, once-weekly combination sema-GIP
and a DNA immunotherapy for T1D .

– Novo Nordisk announced successful headline results

completed successfully .

from two clinical trials with the once-weekly sc
amylin analogue (AM833). Encouraging results were
obtained in a phase 2 AM833 monotherapy trial and
a phase 1b combination trial of AM833 and once-
weekly semaglutide 2.4 mg.

1 . As add-on to metformin and/or sulfonylureas
Note: Details on clinical trials can be found in company announcements and press releases published by Novo Nordisk during 2020, available at novonordisk .com

Introducing Novo Nordisk / Strategic Aspirations — Innovation and therapeutic focus / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 24

Innovation and therapeutic focus

Pipeline overview

Diabetes care

Project

Indication

Description

Phase

Semaglutide 2.0 mg
NN9535

Type 2
diabetes

A long-acting GLP-1 analogue for once-weekly
treatment .

Oral semaglutide HD
NN9924

Type 2
diabetes

A long-acting oral GLP-1 analogue, 25 and 50 mg,
intended for once-daily oral treatment .

Icodec
NN1436

Insulin 965
NN1965

Icosema
NN1535

FDC Sema – OW GIP
NN9389

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

A combination of GLP-1 analogue semaglutide
and insulin icodec intended for once-weekly treatment.

A combination of semaglutide and novel GIP
intended for once-weekly treatment.

Glucose-sensitive insulin
NN1845

Type 1 and
2 diabetes

A glucose-sensitive insulin analogue intended
for once-daily treatment .

Ideal Pump Insulin
NN1471

DNA Immunotherapy
NN9041

Type 1
diabetes

A novel insulin analogue ideal for use in a closed
loop pump device as delivery .

A novel plasmid encoding pre- and pro-insulin
intended for preservation of beta cell function .

Obesity care

Semaglutide 2.4 mg
NN9536

AM833
NN9838

AM833 + semaglutide
NN9838

LA-GDF15
NN9215

PYY1875
NN9775

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 amylin analogue and GLP-1 analogue
semaglutide intended for once-weekly treatment.

A long-acting GDF15 analogue intended for appetite
regulation leading to weight loss.

A novel analogue of the appetite-regulating hormone,
PYY, intended for once-weekly treatment.

Biopharm

Project

Sogroya®
NN8640

Somapacitan
NN8640

Concizumab
NN7415

Macrilen™
EX2020

Mim8
NN7769

Eclipse
NN7533

Indication

Description

Phase

Adult GHD1

GHD1

A long-acting HGH2 derivative intended for
once-weekly subcutaneous administration in adults.

A long-acting HGH2 analogue intended for
once-weekly subcutaneous administration
in children .

Haemophilia
A and B w/wo
inhibitors

A monoclonal antibody against tissue factor
pathway inhibitor intended for subcutaneous
prophylaxis treatment .

GHD1

An oral diagnostic agent used for the diagnosis
of GHD in adolescents and children .

Haemophilia A
with or without
inhibitors

A next generation FVIII mimetic bispecific antibody
for subcutaneous prophylaxis of haemophilia A
regardless of inhibitor status .

Sickle cell
disease

An oral combination treatment of sickle cell disease
and beta thalassaemia . Project is developed in
collaboration with EpiDestiny.

Other serious chronic diseases

Semaglutide
NN9931

Ziltivekimab
NN6018

PCSK9i peptide
NN6434

Anti-ApoC3
NN5058

NASH3

CVD4

A long-acting GLP-1 analogue for once-weekly
treatment of NASH3 .

A novel once-monthly monoclonal antibody
intended for inhibition of IL-6 activity .

A long-acting PCSK9 inhibitor for subcutaneous
treatment .

A novel monoclonal antibody intended for
inhibition of ApoCIII activity . Project is developed
in collaboration with STATEN.

1. GHD: Growth hormone deficiency 2. HGH: Human growth hormone 3. NASH: Non-alcoholic steatohepatitis
4. CVD: Cardiovascular disease

Phase 1

Phase 2

Phase 3

Submission and/or approval

Introducing Novo Nordisk / Strategic Aspirations — Innovation and therapeutic focus / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 25

Innovation and therapeutic focus

Diabetes:

Patent status
for marketed
products

The patent expiry dates for the products are

shown in the table on the right. The dates

provided are for expiry in the US, China, Japan

and Germany 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)

Human insulin

NovoRapid® (NovoLog®)

NovoMix® 30 (NovoLog® Mix 70/30)

NovoNorm® (Prandin®)

Levemir®

Victoza®

Tresiba®

Ryzodeg®

Xultophy®

Fiasp®

Ozempic®

Rybelsus®

Obesity:

Saxenda®

Biopharm:

Norditropin® (Norditropin® SimpleXx®)

Sogroya®

MacrilenTM

NovoSeven®

NovoEight®

NovoThirteen® (TRETTEN®)

Refixia® (REBINYN®)

Esperoct®

Vagifem® 10 mcg

Expired

2023

2029

(2030)3

20321

20321,7

China

Expired

2024

(2030)3

2026

20267

Japan

Expired

2022

2027

20242

(2030)3

20311

20311,7

Germany

Expired

2023

2028

(2030)3

2031

2023

Expired

2023

Expired

20341

20278

Expired4

N/A

2021

20281

20321

20225,6

Expired

2031

N/A

Expired4

N/A

2022

2029

N/A

Expired

20361

N/A

Expired4

N/A

Expired

20271

20341

20215

Expired

20351

N/A

Expired4

N/A

Expired

20271

20341

N/A

1 . Current estimate . 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, Japan
and Germany 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 .

Introducing Novo Nordisk / Strategic Aspirations — Commercial execution / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 26

Commercial execution

Delivering innovation
to patients in the face
of a pandemic

Around the world, the number of people
living with diabetes and other serious
chronic diseases is growing fast and the
need to supply improved treatments
is critical. But ensuring that life-saving
medicines reach all those who require them
– from Stockholm to Shanghai and New
York to Nigeria – has demanded new ways
of doing business in 2020 as the COVID-19
pandemic has disrupted societies and
economies.

2025 Strategic Aspirations

Commercial

execution

– Strengthen diabetes

leadership – aim at a

global value market share

of 1/3

– Strengthen obesity

leadership and double

2019 reported sales

– Secure a sustained growth

outlook for Biopharm

Despite the challenging backdrop provided by

The crisis underscores the importance of

the COVID-19 pandemic, our commercial teams

increasing our efforts in prevention and disease

around the world have remained committed to

management for people with diabetes and obesity,

delivering innovation to patients . By harnessing

as they are subject to an increased risk of severe

the power of digital technologies, they have

symptoms and outcomes from COVID-19 . With

shown it is possible to continue to grow market

millions of patients depending on us, failing to

share and execute on key new product launches,

meet their needs is simply not an option .

while meeting the needs of our patients and

customers . This includes the successful roll-out of
Rybelsus®, our GLP-1 based medicine in a tablet .

Embracing virtual interactions

Across the pharmaceutical industry the pandemic

As a result, we remain on track to reach our goal

has created an unprecedented commercial

of a global diabetes value market share of more

environment in which traditional ways of delivering

than one third by 2025, after expanding our value

medical innovations could no longer continue .

market share by 0 .7 percentage points to 29 .3%

Face-to-face contacts – whether between patients

in 2020. Obesity treatment sales were impacted

and doctors or companies and customers –

by the COVID-19 pandemic in 2020 but are also

became almost impossible in many countries for

on course to double from 2019 to 2025, while

significant periods of 2020. This challenged some

the Biopharm division is building a platform for

parts of our business, especially in the dynamic

sustainable growth.

A victory for agility

section of the market as fewer patients could

be initiated onto new treatments in the face of

widespread lockdowns and follow-up clinic visits

Our ability to maintain effective commercial

were delayed.

operations during these exceptional times reflects

our willingness to pursue new, simpler, agile ways

But we quickly adapted to the new ways of

of working. Even before the pandemic hit, we

communicating, by transitioning to virtual

were already adopting strategies to address the

interactions with healthcare professionals and

opportunity presented by the rise of digitisation

customers. As well as a far greater degree of

in healthcare and the challenge of ensuring

virtual interactions, this involved making the

the affordability of our medicines. The effect of

majority of our commercial materials digital and

COVID-19 has been to push the 'fast-forward'

shifting group presentations into a virtual setting

button on all these key activities, inspiring

– a particularly popular approach in China . We also

colleagues to adapt and evolve business practices

moved our line-up of expert educational events to

faster than ever in 2020 .

digital platforms, running a significant proportion

of these virtually in 2020 .

Introducing Novo Nordisk / Strategic Aspirations — Commercial execution / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 27

A leading portfolio of diabetes medicines

In diabetes, 2020 was a breakthrough year for our
latest GLP-1 products, with Ozempic®, our once

weekly injectable, now launched in 52 countries
around the world and Rybelsus®, our semaglutide-

glass vials to the newer insulins, such as Tresiba®
and Ryzodeg®, offered in FlexTouch® pre-filled

pens . We are also adapting packaging to the

needs of different markets, for example by offering

smaller pack sizes in out-of-pocket markets such

based oral medicine, now launched in nine

as in India, where some customers struggle to

countries around the world. Overall sales of GLP-1
products for type 2 diabetes (Victoza®, Ozempic®
and Rybelsus®) increased by 25 .9% in Danish

afford monthly or quarterly purchases of their

medicines .

kroner and by 28 .7% in constant exchange rates .

We also know some people are struggling to

GLP-1 therapies are now helping millions of people

to manage their disease, and the segment’s value

patients a range of options to help . We invested
in raising awareness of Novocare®, which provides

share of the total diabetes market has grown to

patient affordability and access support, to ensure

afford their insulin in the US as well, and offer

50.4% compared with 47.5% a year ago. The GLP-

1 story shows how we are continuing to deliver

meaningful advances for patients, despite having

been in diabetes for nearly a century .

Diabetes value market share (%)

GLP-1

Insulin

Diabetes

Insulin sales across global markets were mixed,

with growth across International Operations

being offset by declining sales in the US due to

lower realised prices following higher rebates,

launches of affordability programmes and changes

in the Medicare Part D Coverage Gap legislation .

Ozempic® has now been launched in

Measured by volume, we continue to be the

world’s leading provider of insulin.

Around the globe, the insulin market is becoming

increasingly competitive, and we are adapting our

commercial approach according to the needs of

different markets. Despite the challenges, one of

46.2%

43.6%

47.5%

50.4%

44.5%

44.3%

27.8%

28.6%

29.3%

our core strengths is a broad portfolio of products

2018

2019

2020

at different price points – from human insulin in

Source: IQVIA data

52countries

Rybelsus® in

countries

Leonardo is living with type 1 diabetes in Mexico,
studying in high school and doing triathlons .

This line-up of changes dovetailed with a dramatic

rise in the use of telemedicine across primary and

some secondary care in key markets including

the US and the UK, as well as the transition of

international medical congresses from physical

to virtual platforms . Fortunately, the inability to

run physical congresses allowed many more

healthcare professionals who would not normally

attend in person to participate remotely and learn

about the latest developments in their field.

Introducing Novo Nordisk / Strategic Aspirations — Commercial execution / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 28

The global burden of obesity

that during a period of financial hardship and

the COVID-19 pandemic took hold . In the US,

Building in Biopharm

650million adults have

obesity1

124million children and adolescents

are living with obesity2

increased unemployment, patients are aware

meanwhile, growth was negatively impacted by a

Sales of Biopharm products increased by 0 .7%

of the options available – including our Patient

significant drop in doctor visits and fewer patients

in constant exchange rates and declined 1 .3%

Assistance Program, which offered a free 90-day

initiating treatment .

supply of insulin for eligible patients who lost

healthcare coverage due to COVID-19 .

Nonetheless, we remain confident in the difference

in Danish kroner. The growth as measured in

constant exchange rates is following increasing
demand for our growth hormone Norditropin®,

we can make for people with obesity and we are

due in part to supply challenges for competing

Leading the way in obesity

well-placed to serve a growing demand as we

Obesity is a serious chronic disease that is closely

aspire to transition from a single-product obesity

products in some countries . Our haemophilia
medicine NovoSeven®, however, experienced

linked to type 2 diabetes and which also poses

offering to a portfolio of therapies in the future.

weaker sales, partly as a result of reduced elective

a range of other health risks – from cancer and

In the near term, this is expected to be driven by

surgeries and bleeds during COVID-19 lockdowns.

heart disease to severe outcomes from COVID-19 .

semaglutide, 2.4 mg, which has proven effective

This was offset to some extent by the successful

Our ambition is to ensure that it is widely

in clinical trials, demonstrating weight loss of

recognised as such and to offer medical treatment

17%-18% in subject with obesity without diabetes,

roll-out of the new haemophilia treatments
Esperoct® and Refixia® .

to help effective management of the disease. It

when using a trial product estimand (15%-17%

has been encouraging to see more governments –

weight loss reported when using a treatment

including Italy, Germany, the UK and Switzerland –

policy estimand), and thus showing potential as a

taking steps during 2020 to recognise and address

transformative treatment for obesity .

obesity as a chronic disease . But there is still more

to be done to raise awareness and to fight the

stigma and bias associated with obesity.

Obesity sales

Biopharm sales

Sales as reported

Growth at CER

Sales as reported

Growth at CER

Sales of Saxenda® increased by 3 .3% in constant

exchange rates, while declining by 1.3% in Danish

kroner in 2020. Sales growth was negatively

DKK
billion

impacted by COVID-19 as fewer patients initiated

treatment. In October 2020 the United Kingdom’s

National Institute for Health and Care Excellence
(NICE) recommended Saxenda® for certain people
with obesity3; however, it is often not reimbursed

and is paid for out of pocket by patients . In

countries such as Brazil, Saudi Arabia and South
Korea, fewer Saxenda® prescriptions were filled

64%

245%

42%

60%

DKK
billion

-16%

-1%

due to patients cutting personal spending as

2016

2017

2018

2019

2020

2016

2017

2018

2019

2020

Bjarne Lynderup is living with obesity in
Denmark

1. WHO, Obesity and overweight, fact sheet,
2020
2. Lancet, Worldwide trends in body-mass index,
underweight, overweight, and obesity from
1975 to 2016: a pooled analysis of 2416 pop-
ulation-based measurement studies in 128 .9
million children, adolescents, and adults (2017)
3. Population covers people with a BMI at or
above 35 and with cardiovascular risk

Introducing Novo Nordisk / Strategic Aspirations — Financials / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 29

Financials

2020 performance
and 2021 outlook

2025 Strategic Aspirations

Financial performance
Sales increased by 4% measured in Danish

Sales in North America Operations increased by

Sales of long-acting insulin decreased by 11%

1% measured in Danish kroner and by 3% at CER .

measured in Danish kroner and by 9% at CER to

In 2020, 48% of US sales came from products

DKK 18,439 million . Novo Nordisk has increased

launched after 2015, with the aspiration to reach

its global volume market share in the long-acting

70% by 2022 .

Sales development across therapeutic areas
Diabetes care sales growth of 8% (CER), Obesity

care sales growth of 3% (CER) and Biopharm sales

growth of 1% (CER).

insulin segment from 32 .4% to 32 .8% in the last 12

months. The sales decline measured at CER was
driven by declining Levemir® and Tresiba® sales,
partially offset by increased sales of Xultophy® .
Tresiba® has been launched in 91 countries, while
Xultophy® has been launched in 42 countries .

Financials

kroner and by 7% at CER to DKK 126,946 million

Diabetes and Obesity care

Sales of premix insulin increased by 3% measured

in 2020. Sales growth was negatively impacted

Diabetes care, sales development

in Danish kroner and by 6% at CER to DKK 10,925

– Deliver solid sales and

by COVID-19, driven by fewer patients initiating

Sales in Diabetes care increased by 5% measured

million . Novo Nordisk is the market leader in the

operating profit growth:

treatment. Novo Nordisk’s 2020 sales and

in Danish kroner and by 8% at CER to DKK 102,412

premix insulin segment with a global volume

– Deliver 6–10% sales

operating profit performance measured at

million driven by GLP-1 growth. Novo Nordisk has

market share of 65 .2% compared to 64 .2% 12

growth in International

constant exchange rates (CER) were within the

improved the global diabetes value market share

Operations

ranges provided in October 2020. The effective

over the last 12 months from 28 .6% to 29 .3%,

– Transform 70% of sales

tax rate, capital expenditure as well depreciation,

driven by market share gains in both International

in the US (from 2015 to

amortisiation and impairment loses were all

Operations and North America Operations .

months ago. The sales increase was driven by
increased sales of both Ryzodeg® and NovoMix® .
Ryzodeg® has now been launched in 37 countries.

2022)

broadly in line with the guidance. The free cash

– Drive operational

flow subceeded the range provided in October

In the following sections, unless otherwise noted,

Financial performance

efficiencies across the

2020 reflecting the acquisitions of Emisphere

market data are based on moving annual total

NAO net sales as reported

IO net sales as reported

value chain to enable

Technologies Inc . in the fourth quarter of 2020 .

(MAT) from November 2020 and November 2019

Growth at CER

investments in future

growth assets

– Deliver free cash flow to

Geographic sales development
Sales in International Operations increased by 7%

Insulin

provided by the independent data provider IQVIA.

DKK billion

enable attractive capital

measured in Danish kroner and by 10% at CER .

Sales of insulin decreased by 5% measured in

allocation to shareholders

Sales growth was driven by all geographical areas.

Danish kroner and by 3% at CER to DKK 56,550

Sales in EMEA increased by 6% measured in Dan-

million. The sales decrease was driven by declining

ish kroner and by 9% at CER . Sales in Region China

sales in the US, partly offset by increased sales in

increased by 10% measured in Danish kroner and

International Operations .

by 11% at CER . Sales in Rest of World increased by

6% measured in Danish kroner and by 12% at CER .

150

120

2016

2017

2018

2019

2020

Introducing Novo Nordisk / Strategic Aspirations — Financials / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 30

Sales of fast-acting insulin decreased by 5%

Sales by therapeutic areas

5,608 million . Saxenda® sales growth at CER was

sales in Region China, reflecting timing of ship-

measured in Danish kroner and by 3% at CER to

Diabetes care

Obesity care

driven by International Operations, partially offset

ments. The declining sales partly reflect reduced

DKK 18,313 million . Novo Nordisk is the market

Biopharm

Growth at CER

by North America Operations. Sales growth was

elective surgeries and bleedings due to COVID-19 .

leader in the fast-acting insulin segment and

has increased its global volume market share to

DKK billion

negatively impacted by COVID-19 as fewer patients
initiated treatment . Saxenda® has now been

Sales of NovoEight® decreased by 4% measured

51 .7% from 50 .7% in the last 12 months . The sales
decrease was driven by NovoRapid®, partly offset
by increased Fiasp® sales . Fiasp® has now been

launched in 41 countries .

Sales of human insulin decreased by 2% measured

in Danish kroner and increased by 2% at CER to

DKK 8,873 million .

GLP-1 therapy for type 2 diabetes

Sales of GLP-1 products for type 2 diabetes
(Ozempic®, Victoza® and Rybelsus®) increased by

26% measured in Danish kroner and by 29% at
CER to DKK 41,831 million . Ozempic® has now

been launched in 52 countries with sales of DKK
21,211 million, and Rybelsus® has been launched

in nine countries with sales of DKK 1,873 million.

150

120

launched in 55 countries . Novo Nordisk currently

in Danish kroner and by 1% at CER to DKK 1,462

has a value market share of 64 .7% of the global

million. The decreasing sales were driven by

obesity prescription drug market .

Biopharm

declining sales in EMEA and the US, partly offset by
increased sales in Rest of World . The NovoEight®
sales decrease was offset by Esperoct®, the long-

Biopharm, sales development

acting haemophilia A treatment, which has now

Sales of biopharm products decreased by 1%

been launched in 19 countries .

measured in Danish kroner and increased by 1%

at CER to DKK 18,926 million. The sales growth

Sales of Refixia® increased to DKK 518 million .

at CER was driven by International Operations.

Sales growth was driven by continued uptake

Sales growth was driven by Growth Disorders and

the launches of new haemophilia products, offset
by declining sales of NovoSeven®. Sales growth

in Rest of World and EMEA as well as continued
uptake in North America Operations. Refixia® has

been launched in 25 countries .

2016 2017

2018

2019

2020

Sales split in Diabetes care

was negatively impacted by lower demand due to

Insulin sales as reported

GLP-1 sales as reported

Other diabetes

Growth at CER

COVID-19 .

Haemophilia

Growth disorders (Norditropin®)
Sales of Norditropin® increased by 6% measured

in Danish kroner and by 8% at CER to DKK

The GLP-1 segment’s value share of the total

DKK billion

Sales of haemophilia products decreased by 6%

7,704 million. The sales increase was driven by

diabetes market has increased to 22 .0% compared

with 18.0% 12 months ago. Novo Nordisk

continues to be the global market leader in the

GLP-1 segment with a 50.4% value market share,

an increase of 2 .9 percentage points compared

to 12 months ago. Sales growth was negatively

impacted by COVID-19 .

Obesity care, sales development
Sales of Saxenda® decreased by 1% measured in

100

measured in Danish kroner and by 4% at CER

International Operations increasing by 16%,

to DKK 9,662 million. The decreasing sales were
driven by declining NovoSeven® sales, while the

partially offset by North America Operations

declining by 4% at CER . Novo Nordisk is the

haemophilia A and B franchises grew driven by the
continued global roll-out of Esperoct® and Refixia® .

leading company in the global human growth

disorder market with a value market share of

Sales of NovoSeven® decreased by 11% measured

new indications and the global roll-out of the next-

in Danish kroner and by 9% at CER to DKK 7,203

generation device. Sales growth was positively

million. The sales development was driven by

impacted by additional demand, following supply

declining sales in North America Operations, Rest

challenges for competing products in select

36 .0% compared to 33 .0% a year ago, driven by

Danish kroner and increased by 3% at CER to DKK

2016 2017

2018

2019

2020

of World and EMEA, partially offset by increasing

countries .

Introducing Novo Nordisk / Strategic Aspirations — Financials / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 31

Development in costs and operating profit
The cost of goods sold increased by 4% measured

cardiovascular disease and stem cell projects

As per the end of December 2020, a positive

Operating profit and margin

as well as patient recruitment to the ongoing

market value of financial contracts of

in Danish kroner and by 5% at CER to DKK 20,932

cardiovascular outcomes trials, SOUL and SELECT .

approximately DKK 1 .8 billion has been deferred

million, resulting in an unchanged gross margin

for recognition in 2021 . For more information see

Operating profit (left axis)

Operating profit margin (right axis)

Growth at CER

of 83 .5% measured in Danish kroner compared

Administration costs decreased by 1% measured in

note 4.3 in the financial statement.

DKK billion

to 2019. The unchanged gross margin reflects

Danish kroner and increased by 1% at CER to DKK

productivity improvements and a positive product

3,958 million, reflecting broadly unchanged spend

The effective tax rate is 20.7% in 2020 compared

mix driven by increased GLP-1 sales . This is

across administrative areas .

with an effective tax rate of 19.8% in 2019. In 2019,

countered by a negative impact from lower

a tax reform was passed in Switzerland which had

realised prices in the US and a negative currency

Other operating income (net) was DKK 460 million

positive impact on the effective tax rate, driven by

impact of 0 .3 percentage points .

compared with DKK 600 million in 2019 following

a non-recurring increase to deferred tax assets .

Sales and distribution costs increased by 3%

measured in Danish kroner and by 6% at CER

Operating profit increased by 3% measured in

Cash flow and capital allocation
Capital expenditure for property, plant and

to DKK 32,928 million . The increase in costs is

Danish kroner and by 7% at CER to DKK 54,126

equipment was DKK 5.8 billion compared with DKK

reduced royalty income .

2016 2017

2018

2019

2020

driven by North America Operations reflecting
launch activities for Rybelsus® and continued
promotional activities for Ozempic®, partly offset

by lower promotional spend related to insulin.

In International Operations, promotional spend
is related to launch activities for Ozempic® and
Rybelsus® as well as the continued roll-out of
Saxenda® . COVID-19 resulted in a reduction of the

million .

8.9 billion in 2019. The lower capital expenditure

Financial items (net) and tax
Financial items (net) showed a net loss of DKK 996

was mainly related to lower investments in

Cash flow and capital

the new production facility for diabetes active

allocation

pharmaceutical ingredients in Clayton, North

million compared with a net loss of DKK 3,930

Carolina, US, which is now in the final stages of

million in 2019 .

construction .

In line with Novo Nordisk’s treasury policy, the

Free cash flow of DKK 28.6 billion compared with

Dividend for prior year

Interim dividend

Share repurchases

Free cash flow

DKK billion

activity level and delay of promotional activities .

most significant foreign exchange risks for Novo

DKK 34.5 billion in 2019. The decrease is reflecting

Research and development costs increased by 9%

foreign exchange forward contracts. The foreign

primarily related to the acquisitions of Corvidia

measured in Danish kroner and by 10% at CER to

exchange result was a net loss of DKK 747 million

Therapeutics Inc . and Emisphere Technologies Inc .

Nordisk have been hedged, primarily through

purchase of intangible assets of DKK 16 .3 billion,

DKK 15,462 million . The cost increase is driven by

compared with a net loss of DKK 3,212 million

the amortisation of the priority review voucher for

in 2019. This reflects losses on non-hedged

Novo Nordisk’s financial reserves were DKK 28.8

semaglutide 2 .4 mg in obesity in the third quarter

currencies driven by significant depreciations

billion by end of December 2020 comprising

of 2020. Increased activities within Other serious

of several emerging market currencies, partially

cash at bank and undrawn credit facilities less

chronic diseases are driving the cost increase

offset by gains on hedged currencies.

overdrafts and loans repayable within 12 months.

following progression of the early pipeline within

2017 2018

2019

2020

2021E1

1 . Expectations for 2021

Introducing Novo Nordisk / Strategic Aspirations — Financials / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 32

2021 outlook
The current expectations for 2021 are summarised

2021 . Given the current exchange rates versus

Depreciation, amortisation and impairment

the Danish krone, growth reported in DKK is now

losses are expected to be around DKK 6 .0 billion .

in the table named 'Outlook 2021' on this page .

expected to be around 6 percentage points lower

The increase in depreciation, amortisation and

than at CER, mainly driven by the spot rate of the

impairment losses in 2021 reflects depreciation

For 2021, sales growth is expected to be 5% to

USD being 615 versus an average of 654 in 2020 .

of the new production facility for diabetes active

9% at CER. The guidance reflects expectations

pharmaceutical ingredients in Clayton, North

for continued sales growth in International

The current COVID-19 pandemic causes

Carolina, US. The free cash flow is expected to be

Operations in line with the Strategic Aspiration of

uncertainty to the outlook regarding the number

DKK 36-41 billion. The increase in free cash flow

6-10% growth as well as growth in North America

of patients initiating treatment and societal

compared to 2020 reflects the impact from the

Operations. The guidance reflects expectations

impacts such as the unemployment rate in the

acquisitions in 2020 .

for sales growth within Diabetes care, mainly
driven by the GLP-1 products Ozempic® and
Rybelsus®, as well as growth within Obesity care.

US, which is impacting healthcare insurance

coverage . The outlook is based on a number of

All of the above expectations are based on as-

assumptions related to the severity and duration

sumptions that the global or regional macroeco-

Intensifying competition within both Diabetes care

of impacts from COVID-19 . Consequently, volatility

nomic and political environment will not significant-

and Biopharm is also reflected in the guidance.

in quarterly results should be expected .

ly change business conditions for Novo Nordisk

Furthermore, continued pricing pressure within

during 2021, including the potential implications

Diabetes care, especially in the US, is expected to

For 2021, Novo Nordisk expects financial items

from major healthcare reforms, and that the cur-

negatively impact sales development . Given the

(net) to amount to a gain of around DKK 0 .7 billion,

rency exchange rates, especially the US dollar, will

current exchange rates versus the Danish krone,

reflecting the expected hedging gains of DKK

growth reported in DKK is expected to be around 4

1.1 billion mainly related to the US dollar with

Outlook 2021

percentage points lower than at CER.

a hedging period of 11 months and associated

The current expectations for 2021 are summarised in the table below:

Operating profit growth is expected to be 4% to

hedging costs .

Expectations are as reported, if not otherwise stated

Expectations 3 February 2021

8% at CER. The expectation for operating profit

The effective tax rate for 2021 is expected to be in

growth primarily reflects the sales growth out-

the range of 20-22% .

look and continued investments in current and

future growth drivers across the operating units,
including the continued roll-out of Ozempic® and
Rybelsus® as well as global investments in building

Capital expenditure is expected to be around

DKK 8 .0 billion in 2021, primarily relating to

investments in additional capacity for active

an anti-obesity market and the expected launch

pharmaceutical ingredient (API) production at

of semaglutide 2 .4 mg in the US . Furthermore, re-

existing manufacturing sites within Diabetes care.

sources are allocated to both early and late-stage

The expected increase in capital expenditure

Sales growth

at CER

as reported

Operating profit growth

at CER

as reported

Financial items (net)

Effective tax rate

Capital expenditure (PP&E)

pipeline activities, including expected initiations

reflects progress of R&D projects based on the

Depreciation, amortisation and impairment losses

of several phase 3a clinical trial programmes in

oral technology platform .

Free cash flow

Around 4 percentage points lower than at CER

5% to 9%

4% to 8%

Around 6 percentage points lower than at CER

Gain of around DKK 0 .7 billion

20% to 22%

Around DKK 8 .0 billion

Around DKK 6 billion

DKK 36-41 billion

Introducing Novo Nordisk / Strategic Aspirations — Financials / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 33

remain at the current level versus the Danish kro-

product development, product introductions

opment, unplanned loss of patents, interruptions

ne. Neither does the guidance include the financial

and product approvals as well as cooperation in

of supplies and production, product recalls, unex-

implications of significant business development

relation thereto,

pected contract breaches or terminations, govern-

transactions during the remainder of 2021 .

– Statements containing projections of or targets

ment-mandated or market-driven price decreases

for revenues, costs, income (or loss), earnings

for Novo Nordisk’s products, introduction of com-

Novo Nordisk has hedged expected net cash flows

per share, capital expenditures, dividends,

peting products, reliance on information technol-

in a number of invoicing currencies and, all other

capital structure, net financials and other

ogy, Novo Nordisk’s ability to successfully market

things being equal, movements in key invoicing

financial measures,

current and new products, exposure to product

currencies will impact Novo Nordisk’s operating

– Statements regarding future economic

liability and legal proceedings and investigations,

profit operating profit as outlined in note 4.2 in the

performance, future actions and outcome of

changes in governmental laws and related inter-

financial statements.

contingencies such as legal proceedings, and

pretation thereof, including on reimbursement,

Forward-looking statements
Novo Nordisk’s reports filed with or furnished to

– Statements regarding the assumptions

intellectual property protection and regulatory

underlying or relating to such statements .

controls on testing, approval, manufacturing and

marketing, perceived or actual failure to adhere

the US Securities and Exchange Commission (SEC),

In this Annual Report 2020, examples of forward-

to ethical marketing practices, investments in and

including this statutory Annual Report 2020 and

looking statements can be found under the

divestitures of domestic and foreign companies,

Form 20-F, which are both expected to be filed with

section related to our ‘Strategic Aspirations’ and

unexpected growth in costs and expenses, failure

the SEC in February 2021 in continuation of the

elsewhere.

publication of this Annual Report 2020, and written

to recruit and retain the right employees, failure to

maintain a culture of compliance and epidemics,

information released, or oral statements made,

These statements are based on current plans,

pandemics or other public health crises .

to the public in the future by or on behalf of Novo

estimates and projections . By their very nature,

Nordisk, may contain forward-looking statements.

forward-looking statements involve inherent risks

For an overview of some, but not all, of the risks

and uncertainties, both general and specific. Novo

that could adversely affect Novo Nordisk’s results

Words such as ‘believe’, ‘expect, ‘may’, ‘will’, ‘plan’,

Nordisk cautions that a number of important

or the accuracy of forward-looking statements in

‘strategy’, ‘prospect’, ‘foresee’, ‘estimate’, ‘project’,

factors, including those described in this Annual

this Annual Report 2020, reference is made to the

‘anticipate’, ‘can’, ‘intend’, ‘target’ and other words

Report 2020, could cause actual results to differ

overview of risk factors in ‘Risk management’ of

and terms of similar meaning in connection with

materially from those contemplated in any

this Annual Report 2020 .

any discussion of future operating or financial

forward-looking statements.

performance identify forward-looking statements.

Unless required by law, Novo Nordisk is under no

Examples of such forward-looking statements

Factors that may affect future results include, but

duty and undertakes no obligation to update or

include, but are not limited to:

are not limited to, global as well as local political

revise any forward-looking statement after the

– Statements of targets, plans, objectives or goals

and economic conditions, including interest rate

distribution of this Annual Report 2020, whether

for future operations, including those related

and currency exchange rate fluctuations, delay or

as a result of new information, future events, or

to Novo Nordisk’s products, product research,

failure of projects related to research and/or devel-

otherwise.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 34

Risk
management

In order for us to become a sustainable
business, we must anticipate and adapt
to our surrounding environment to create
new strategic opportunities. Managing risks
rigorously and systematically is key in order
for us to create and protect value over the
short, medium and long term.

with all involved in healthcare. We recognise

child labour, can occur in every industry and sector .

Key risks

that we cannot defeat diabetes alone, but we

We respect human rights as per the UN Guiding

An aggregated presentation of

can accelerate our actions to find solutions in

Principles on Business and Human Rights .

our key risks is outlined below

collaboration with relevant stakeholders.

Risk management process

and on the next page . Every six

months, our Board of Directors

Digital disruption

A rigorous approach to enterprise risk management

and Executive Management re-

New digital technologies in healthcare are offering

helps the company protect and enhance the value

view our key risks and a mapping

more personalised treatment and better manage-

of our assets . We are continually exposed to risks

of these in the below 'heat map'.

ment of diseases . This is an opportunity for us to

throughout our value chain – from early discovery

deliver more value to our stakeholders and help

of new, promising molecules to the production and

patients live a life free from the limitations of their

delivery of medicines to patients . Some risks are

disease. New digital health solutions, including our

inherent in the pharmaceutical industry, such as

own, bring new risks particularly around data regu-

delays or failures of potential new medicines in the

lation and data privacy, as well as potential quality

R&D pipeline . Other risks, such as supply disrup-

and reliability risks . We strive to develop digital

tions and competitive threats, are well-known to

Research and

Development Risks

Product Supply, Quality

and Safety Risks

health solutions in collaboration with relevant part-

any manufacturing company with global produc-

Commercialisation Risks

ners . We also believe in the value of open innova-

tion. We will never compromise on product quality,

tion and sharing our knowledge and experience.

patient safety and business ethics: these are front

IT Security Risks

Addressing risks in our strategic planning:

and centre of our enterprise-wide risk management

Scenario and risk-thinking exercises are part of our

Environmental risks

set-up. We apply a two-way lens and assess risks to

Financial Risks

strategic planning process . They include analyses

We are preparing for the risks and opportunities

potential financial loss and reputational damage.

of market dynamics as well as socioeconomic

which will arise from climate change. As

Legal and Compliance Risks

and political developments that present risks or

recommended by the Task Force on Climate-

Executive Management and the Board of Directors

opportunities for our business .

related Financial Disclosures (TCFD), we are

review a 'heat map' of our biggest risks every six

Heat map

integrating climate change scenarios into our

months . This map is based on insights from man-

Access and affordability

risk management processes to identify short-,

agement teams in the organisation and includes

In the short and medium term, access to

medium- and long-term risks .

risks that could cause significant disruptions to the

affordable care and innovative treatments is a

business over a three-year horizon. The following

key challenge for patients in many parts of the

Human rights and labour risks

overview provides more details of our key risks.

world. Access to affordable care is a global issue

We take a proactive approach to integrating risk

as healthcare systems struggle to provide quality

management of human and labour rights into our

For more information, see our Corporate

care at a sustainable cost, while the burden of

risk management process, while recognising that

Governance report available on

chronic diseases keeps rising . Ensuring access and

modern slavery, including human trafficking, forced

www.novonordisk.com/about/corporate

affordability is a responsibility Novo Nordisk shares

labour, bonded labour, child slavery and hazardous

-governance/recommendations-and-practices .html

H
g
h

m
p
a
c
t

Low

Likelihood

High

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 35

Risk area

Description

Impact

Mitigating actions

Research and
Development
Risks

Findings in pre-clinical and clinical activities,
regulatory processes or commercial product
planning leading to delays or failure of
products in the pipeline .

– Patients would not benefit from innovative treatments
– Could have adverse impact on sales, profits and market position

– Insight into patients’ unmet needs informs the selection of new

product candidates

– Pre-clinical and clinical activities to demonstrate safety and efficacy
– Scientific and commercial viability assessments determine progress
– Consultations with regulators to review pre-clinical and clinical

findings and obtain guidance on development path

Product Supply,
Quality and
Safety Risks

Disruption of product supply or quality
failures may compromise the health of
patients .

– Product shortages could have potential implications for patients
– Could put patients’ health and lives at risk and jeopardise Novo

– Global production with multiple facilities and safety stock reduces

supply risk

Nordisk’s reputation and licence to operate if regulatory compliance
is not ensured

– Regular quality audits of internal units and suppliers and annual

inspections by authorities document GMP compliance

– Could have an adverse impact on sales, profits and market position

– Identification and correction of root causes when issues are

identified. If necessary, products are recalled

Commercialisation
Risks

Market dynamics and geopolitical,
macroeconomic or healthcare crises
(e .g . pandemics) leading to reduced payer
ability and willingness to pay.

– Market dynamics could impact price levels and patient access
– Could have an adverse impact on sales, profits and market position

– Innovation of novel products, clinical trial data and real-world evidence

demonstrate added value of new products

– Payer negotiations to ensure improved patients’ access
– Increased and new access and affordability initiatives

IT Security Risks

Disruption to IT systems, such as cyber-
attacks or infrastructure failure resulting
in business disruption or breach of data
confidentiality.

– Could limit our ability to produce and safeguard product quality
– Could compromise patients’ or other individuals’ privacy
– Could limit our ability to maintain operations
– Could limit future business opportunities if proprietary information

– Protection mechanisms in IT systems and business processes
– Company-wide information security awareness activities
– Continuity plans for non-availability of IT systems
– Company-wide internal audits of IT security controls

is lost

Financial Risks

Exchange rate fluctuations, disputes with
tax authorities and changes to tax legislation
and interpretation . Our foreign exchange
risk is most significant in USD, CNY, and JPY.

– Could negatively impact cash flow, statement of comprehensive

income and balance sheet

– Could lead to significant tax adjustments, fines and

– Hedging for selected currencies
– Integrated treasury management
– Applicable taxes paid in jurisdictions where business activity

higher-than-expected tax level

generates profits

– Multi-year Advance Pricing Agreements with tax authorities for

more than 65% of sales

Legal and
Compliance Risks

Breach of legislation, industry codes or
company policies . Competitors asserting
patents against Novo Nordisk or challenging
patents critical for protection of commercial
products and pipeline candidates .

– Could expose Novo Nordisk to investigations, criminal and civil

sanctions and other penalties

– Could compromise our reputation and the rights and integrity of

individuals involved

– Legal review of key activities
– Business Ethics Code of Conduct and compliance hotline in place
– Internal Audit of compliance with business ethics standards.
– Internal controls minimise vulnerability to patent infringement

– Unexpected loss of exclusivity for or injunctions against existing and

and invalidity actions

pipeline products could have an adverse impact on future sales

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 36

Shares and
capital structure

The company’s A shares are not listed and are
held by Novo Holdings A/S1, a Danish public

Geographical split of
shareholders2

was 91.2% (of which approximately 10.0% are list-

ed as ADRs), excluding Novo Holdings A/S's holding

limited liability company wholly-owned by the

% of share capital

and Novo Nordisk’s holding of treasury shares.

Novo Nordisk Foundation . The Foundation has

Denmark

North America

As of 31 December 2020, Novo Holdings A/S and

a dual objective: to provide a stable basis for the

Other

Novo Nordisk B shares equalled 159,277,660

commercial and research activities conducted by

the companies within the Novo Group (of which

Novo Nordisk A/S is the largest), and to support

25%

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 subscription rights

in the event of an increase in the A share capital

and pre-emptive purchase rights in the event of

a sale of A shares, while B shares take priority for

liquidation proceedings . A shares take priority for

dividends below 0.5%, and B shares take priority

for dividends between 0.5 and 5%. However, in

26%

practice, A and B shares receive the same amount

Ownership structure3

of dividend per share .

shares and had a nominal value of DKK 31,855,532 .

For details about the share capital, see note 4 .1 to

the consolidated financial statements.

41%

Capital structure

Novo Nordisk’s Board of Directors and Executive

Management consider that the current capital and

share structure of Novo Nordisk serve the interests

of the shareholders and the company well. Novo

Nordisk’s capital structure strategy offers a balance

Through open and proactive
communication, Novo Nordisk aims to
provide the basis for fair and efficient
pricing of our shares.

Share capital and ownership

As of 31 December 2020, Novo Holdings A/S also

Novo Nordisk’s share capital of DKK 470,000,000

held a B share capital of nominally DKK 24,347,800 .

is divided into A and B share capital . The A and B

Together with the A shares, Novo Holdings A/S's

shares are calculated in units of DKK 0 .20, amount-

total ownership amounted to nominally DKK

ing to 2 .35 billion shares . The A share capital,

131,835,000. Novo Holdings A/S's ownership is

consisting of 537 million shares, has a nominal

reflected in the 'Ownership structure' chart.

value of DKK 107,487,200 and the B share capital,

consisting of 1,813 million shares, has a nominal

There is no complete record of all shareholders;

value of DKK 362,512,800 . Each A share carries

however, based on available sources of informa-

200 votes and each B share carries 20 votes . Novo

tion, as of 31 December 2020 it is estimated that

Nordisk's B shares are listed on Nasdaq Copenha-

shares were geographically distributed as shown in

gen and on the New York Stock Exchange (NYSE)

the 'Geographical split of shareholders’ chart. As of

Novo Nordisk Foundation

Institutional and private investors

Novo Holdings A/S

76 .5% of votes
28 .1% of capital

23 .5% of votes
71 .9% of capital

537 million A shares
(nominal value DKK 107 mDKK)

1,813 million B shares
(nominal value DKK 363 mDKK)

Novo Nordisk A/S

1 . Novo Holdings A/S's registered address is Tuborg Havnevej 19, DK-2900 Hellerup, Denmark .

2 . Using shareholder registered home countries .

as American Depository Receipts (ADRs) .

31 December 2020, the free float of listed B shares

3. Treasury shares are included, however, voting rights of treasury shares cannot be exercised.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 37

between long-term shareholder value creation and

Share repurchase programme for 2020/2021

Share price performance 2020

competitive shareholder return in the short term .

During the twelve-month period beginning 1

Novo Nordisk share price and indexed peers1

February 2020, Novo Nordisk repurchased shares

Novo Nordisk

Pharmaceutical industry index2

OMXC25

The capital structure has been adjusted as a con-

worth DKK 17 billion. The share repurchase pro-

sequence of Novo Nordisk’s debt-financed, USD

gramme has primarily been conducted in accord-

1 .8 billion acquisition of Emisphere Technologies

ance with the safe harbour rules in the EU Market

Inc., which was finalised on 8 December 2020.

Abuse Regulation (MAR) . For the next 12 months,

Dividend policy

Novo Nordisk has decided to implement a new

share repurchase programme . The expected total

The company’s dividend policy applies a

repurchase value of B shares amounts to a cash

pharmaceutical industry benchmark to ensure a

value of up to DKK 17 billion . The total programme

competitive payout ratio for dividend payments,

may be reduced in size if significant business de-

which are complemented by share repurchase

velopment opportunities arise during 2021 . Novo

programmes. The final dividend for 2019 paid in

Nordisk expects to conduct the majority of the new

March 2020 was equal to DKK 5.35 per A and B

share repurchase programme according to the

share of DKK 0.20 as well as for ADRs. The total

safe harbour rules in MAR . At the Annual General

dividend for 2019 was DKK 8.35 per A and B share

Meeting in March 2021, the Board of Directors

of DKK 0 .20, corresponding to a payout ratio of

will propose a further reduction in the company’s

DKK

600

500

400

300

200

33.7%

10.3%

-2.4%

Jan

Feb

Mar

Apr

May

June

July

Aug

Sep

Oct

Nov

Dec

1. OMXC25 and pharmaceutical industry development have been rebased to Novo Nordisk share price in January 2020

2. AstraZeneca, Bristol-Myers Squibb, Eli Lilly & Co, Glaxo Smith Kline, Lundbeck, Merck & Co, Novartis AG, Pfizer, Roche,

50.5%, which was in line with the 2019 pharma

B share capital, corresponding to approximate-

Sanofi-Aventis SA

peer group average of 53 .5% .

ly 1 .7% of the total share capital, by cancelling

In August 2020, an interim dividend was paid

equalling DKK 3 .25 per A and B share of DKK

Share price development

40,000,000 treasury shares .

0.20 as well as for ADRs. For 2020, the Board of

Novo Nordisk’s share price increased by 10.3%

Directors will propose a final dividend of DKK

between its 2019 close of DKK 386.65 and the 31

5 .85 to be paid in March 2021, equivalent to a

December 2020 close of DKK 426 .65 . For compar-

total dividend for 2020 of DKK 9 .10 and a payout

ison purposes, the Danish OMXC25 stock index

ratio of 50 .0% . The company expects to distribute

increased by 33 .7% and the pharma peer group

an interim dividend in August 2021 . Further

decreased by 2 .4% during 2020 . The total market

information regarding this interim dividend will be

value of Novo Nordisk’s B shares, excluding treas-

announced in connection with the financial report

ury shares and Novo Holdings A/S shares, was DKK

for the first six months of 2021. Dividends are paid

705,374,617,388 as of 31 December 2020 .

from distributable reserves . Novo Nordisk does not

pay a dividend on its holding of treasury shares .

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 38

Corporate governance

Shareholders

Key responsibilities

Board of Directors

Key responsibilities

Board committees:
- Chairmanship
- Audit Committee
- Nomination
Committee
- Remuneration
Committee

- R&D Committee

The shareholders of Novo Nordisk have ultimate authority over the company and exercise their
right to make decisions at general meetings . At the Annual General Meeting, shareholders approve
the annual report and any amendments to the company’s Articles of Association. Shareholders also
elect Board members and the independent auditor . Resolutions can generally be passed by a simple
majority .

However, resolutions to amend the Articles of Association require two thirds of the votes cast and
capital represented, unless other adoption requirements are imposed by the Danish Companies Act .

Novo Holdings A/S 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 .

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

The Board of Directors:
– Develops the company as a focused, sustainable, global pharmaceutical company
– Supervises Executive Management
– Appoints members of Executive Management and determines their remuneration
– Determines the company’s overall strategy and oversees the implementation of the strategy and the

performance of the company

– Ensures adequate management and organisation
– May distribute extraordinary dividends and issue new shares in accordance with the Articles of

Composition and independence
As of 31 December 2020, the Board of Directors consisted of 13 members. Nine were elected by
shareholders and four by Danish-based employees. Board members must retire at the first Annual
General Meeting after they reach the age of 70 .

Shareholder-elected Board members serve for a one-year term and may be re-elected, which was the
case for all nine members at the Annual General Meeting in 2020. Two shareholder-elected Board
members are not independent, as they are related to the main shareholder, Novo Holdings A/S, and
may be regarded as representing Novo Holdings A/S’s 1 interests, while the remaining seven members
are independent . For independence2, see table on page 44 .

Association

– May repurchase shares in accordance with authorisations granted by the shareholders at the

Annual General Meeting in 2020 and recorded in the meeting minutes available at novonordisk .com

Danish-based employees may elect a number of Board members equalling half of the shareholder-
elected members. Employee-elected members serve for a statutory four-year term, with the next
election in 2022, and have the same rights, duties and responsibilities as shareholder-elected members .

Executive Management

Key responsibilities

Executive Management is responsible for overall day-to-day management, the organisation of the
company, allocation of resources, determination and implementation of strategies and policies,
direction setting, and ensuring timely reporting and provision of information to the Board of Directors
and Novo Nordisk’s stakeholders.

To ensure the organisational implementation of our strategy, Executive Management has established
a Management Board consisting of the Chief Executive Officer, Executive Vice Presidents and Senior
Vice Presidents .

Composition and meetings
As of 31 December 2020, Executive Management consisted of nine members including the Chief
Executive Officer. No changes were made in the composition of Executive Management in 2020.
Executive Management meets at least once a month and due to COVID-19 a significant number of their
meetings and other activities were conducted virtually. 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.

1. Related as a member of either the Board of Directors or Executive Management of Novo Holdings A/S. 2. Independence as defined by the Danish Corporate Governance Recommendations.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 39

Board committees1

Chairmanship

Audit Committee

Nomination Committee

Remuneration Committee

Research &
Development Committee

Key responsibilities

Assists the Board of
Directors with:

– Planning of Board meetings
– Employment, incentive

remuneration and performance
evaluation of Executive
Management

– The external auditors
– The internal audit function
– Handling complaints reported

through the Compliance Hotline
– Financial, social and environmental

– Represents the Board externally

reporting (ESG reporting)

– The competence profile and
composition of the Board

– Nomination of Board members
and Board committee members
– Annual evaluation of the Board
– Corporate governance of the

– The Remuneration Policy
– The actual remuneration of Board
members, Board committees and
Executive Management

– The research and development

strategy
– The pipeline
– The R&D organisation

– Internal controls over financial and

company

ESG reporting

– Business ethics compliance
– IT security and insurance coverage

Members
(appointed by
the Board)

For independence
and competencies
see table on page 44 .

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
2020, Helge Lund was re-elected as
chair and Jeppe Christiansen was re-
elected as vice chair of the Board .

– Liz Hewitt (chair)
– Laurence Debroux
– Andreas Fibig
– Sylvie Grégoire
– Stig Strøbæk

2020 key
activities

In 2020, the Chairmanship focussed
particularly on strategy execution
within the therapy areas and in
different markets, digitalisation,
partnering and acquisitions to
access external innovation, talent
and leadership development as well
as succession preparedness, core
capabilities and development of the
company culture and impact of the
COVID-19 pandemic .

In 2020, the Audit Committee focused
on work performed by internal
and external auditors and held
focus sessions on risks and internal
controls . The Audit Committee also
discussed key accounting matters,
including provisions for sales rebates,
indirect production costs, ongoing
tax and legal cases and impairment .
The Audit Committee also reviewed
Information Security, Business Ethics
Compliance and Compliance Hotline
cases . Finally, the Audit Committee
recommended Deloitte to be elected
as external auditor in 2021 .

– Helge Lund (chair)
– Sylvie Grégoire
– Kasim Kutay
– Mette Bøjer Jensen

– Jeppe Christiansen (chair)
– Brian Daniels
– Liz Hewitt
– Anne Marie Kverneland

– Martin Mackay (chair)
– Brian Daniels
– Sylvie Grégoire
– Kasim Kutay
– Thomas Rantzau

In 2020, the Nomination Committee
focused particularly on reviewing the
composition of the Board, identifying
and interviewing candidates and
considering long-term succession
planning. It also reviewed the desired
competences to be represented on
the Board .

In 2020, the Remuneration
Committee focused particularly
on executive remuneration in light
of the COVID-19 pandemic, on
assessing the design and structure
of the short-term as well as the long-
term incentive programme for the
Executive Management in 2021 and
on enhancing the transparency in
remuneration reporting even further .

In 2020, 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
potential opportunities for addressing
unmet needs in mild cognitive
impairment and mild dementia . It also
reviewed potential external research
collaborations as well as acquisitions.

1. For a more detailed description of the Board committees, details on members and full reports on the Board committees’ activities in 2020, please refer to the Corporate Governance Report 2020 available at:
https://www.novonordisk.com/about/corporate-governance/recommendations-and-practices.html

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 40

Governance practices

Nomination

Board diversity

Evaluation

The Board conducts an annual evaluation . The

evaluation includes all Board members and

executives . The chair has overall responsibility

for the evaluation in collaboration with the

Nationality – Board members
Nordic

Non-Nordic

46%

The Nomination Committee presents proposals

In 2016, the Board of Directors adjusted its

Nomination Committee . Every third year, the

for election or re-election of shareholder-elected

diversity ambition and set new targets for

evaluation is facilitated by external consultants,

Board members to the Board of Directors . When

diversity among shareholder-elected Board

who interview all Board members and executives.

recommending candidates to be nominated by

members. By 2020, it was the aim that at least

For the subsequent two years, the evaluation is

the Board, the Nomination Committee considers

two members were of Nordic nationality and two

facilitated by the secretary of the Nomination

factors such as the balance between renewal

of non-Nordic nationality. The aim was also to

Committee based on written questionnaires.

and continuity, the desired competences and

have at least three shareholder-elected Board

The evaluation includes topics such as Board

experience, the performance of the individual

members of each gender .

Board members, the ambition for diversity as well

performance, effectiveness, composition and

succession, performance of the Chairmanship

as independence considerations .

As of 31 December 2020, our shareholder-

and the Board Committees as well as the

Gender – Board members

Men

Women

elected Board members consisted of two Nordic

collaboration in the Board and between the

38%

The Board of Directors has determined a

members and seven non-Nordic members . Of

Board and Executive Management . Each Board

competence profile for the shareholder-elected

these, three members were female and six were

member and executive also receives feedback

Board members . Board members should possess

male. Thus, the Board of Directors fulfilled its

from all other Board members and executives on

integrity, accountability, fairness, financial

2016 gender and nationality ambition. The Board

their individual performance .

literacy, commitment and desire for innovation .

of Directors finds that being diverse in gender

Additionally, the following competences and

and nationality is of continued importance, and

In 2020, the Board evaluation was facilitated

54%

62%

experience should be represented: Global

consequently in 2020 the Board of Directors

externally by a consultant working exclusively

business management, strategic operations and

prolonged its gender and nationality ambition

with Board effectiveness reviews. Overall, the

governance . Healthcare industry and market

to 2024. When including the employee-elected

evaluation revealed good performance by the

Shareholder-/employee-elected
Board members

Shareholder-elected
Employee-elected

access . Research and development, technology

Board members, six members were Nordic and

Board and good collaboration between the Board

and digitalisation . M&A and external innovation

seven were non-Nordic. Of these, five were

and Executive Management . The evaluation

sourcing . People leadership and change

female and eight were male.

resulted in continued focus on Board culture,

31%

management . Finance and accounting .

evolving the induction for new Board members,

Please refer to the overview on page 44 for com-

Danish Financial Statements Act, Novo Nordisk

competency profile and informal time between

petence profiles for shareholder-elected Board

discloses current performance on diversity in

the Board members, which had been affected by

In accordance with sections 99b and 107d of the

Board documentation and presentations, Board

members. The Competence Profile is available at

the social responsibility section. Novo Nordisk’s

COVID-19.

69%

novonordisk .com .

diversity policy is available in that section .

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 41

Remuneration

Compliance with corporate governance codes

Danish Corporate

Disclosure regarding change of control

In 2020, a new Remuneration Policy was adopted

Novo Nordisk’s B shares are listed on Nasdaq

Governance Recommendations

The EU Takeover Bids Directive, as partially imple-

by the Annual General Meeting describing Board

Copenhagen and on the New York Stock

not being fulfilled

mented by the Danish Financial Statements Act,

and Executive remuneration . The policy replaces

Exchange (NYSE) as American Dipository Receipts

Novo Nordisk’s Remuneration Principles and

(ADRs) .

was introduced to comply with changed EU leg-

islation. The new policy is applicable to Board

Today, Novo Nordisk adheres to all Danish

remuneration as of 2020, while it is applicable to

Corporate Governance Recommendations (2017)

Executive remuneration as of 2021. Consequently,

designated by Nasdaq Copenhagen except

the Remuneration Principles applied to Board

the five recommendations outlined under

remuneration relating to the period up to and

the heading 'Danish Corporate Governance

including 2019 and to Executive remuneration

Recommendations not being fulfilled'.

for the period up to and including 2020. The

Remuneration Policy and the Remuneration

In addition, Novo Nordisk complies with the

Principles are available at:

Corporate Governance Standards of the NYSE

https://www.novonordisk.com/about/

applicable to foreign private issuers . A summary

corporate-governance/remuneration .html

of the significant ways in which Novo Nordisk’s

Novo Nordisk has prepared a separate

NYSE Corporate Governance Standards can be

Remuneration Report describing the remuner-

found in Novo Nordisk’s Corporate Governance

corporate governance practices differ from the

ation awarded or due during 2020 to the Board

Report 2020.

members and Executives as registered with the

Danish Business Authority . The Remuneration

Novo Nordisk's compliance with and explanations

Report will be submitted to the Annual General

about the applicable corporate governance codes

Meeting for an advisory vote . The Remuneration

designated by Nasdaq Copenhagen and the New

Report is available at:

York Stock Exchange is available at

https://www.novonordisk.com/about/

www.novonordisk.com/about/

corporate-governance/remuneration .html

corporate-governance/recommendations-and

-practices .html in accordance with section 107b of

the Danish Financial Statements Act .

3.3.2
Disclosure of additional information
about the Board members: Information
on matters such as numbers of shares
owned and changes during the year is
disclosed in the Remuneration Report
for 2020 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-
ment and recommending candidates
for the Executive Management resides
with the Chairmanship and not with the
Nomination Committee .

3.4.7
Tasks of the Remuneration Committee:
Responsibility for the remuneration pol-
icy applicable to employees in general
resides with Executive Management and
not with the Remuneration Committee.

4.1.5
Termination payments: One executive
employment contract entered into
before 2008 allows for severance
payments of more than 24 months’
fixed base salary plus pension
contribution, and thus the total value of
the remuneration relating to the notice
period and of the severance payment
exceeds two years of remuneration.

requires listed companies to disclose information

that may be of interest to the market and poten-

tial take-over bidders, in particular in relation

to disclosure of change-of-control provisions in

material contracts .

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 discretion of the relevant counter-

party – lead to the termination of such agree-

ment. Given the ownership structure of Novo

Nordisk, the risk is considered to be remote .

In relation to Executive Management,

the current employment contracts allow

for 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' .

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 42

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) .

Positions and management duties:
Operating advisor to Clayton
Dubilier & Rice, US . Chair of the
boards of BP p .l .c . UK and Inkerman
Holding AS, Norway. Member of the
boards of P/F Tjaldur, Faroe Islands
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 mem-
ber and/or executive director of two
wholly owned subsidiaries of this
company, both in Denmark . Chair of
Haldor Topsøe A/S, Emlika Holding
ApS, and two wholly owned subsid-
iaries of the latter company, and
chair of JEKC Holding ApS . Board
member of Novo Holdings A/S and
KIRKBI A/S, Pluto Naturfonden and
Randers Regnskov, all in Denmark .
Member of the board of BellaBeat
Inc ., US . Member of the board of
Governors of Det Kgl . Vajsenhus,
Denmark . Adjunct Professor, De-
partment of Finance, Copenhagen
Business School, Denmark .

Special competences:
Executive background and
extensive experience within the
financial sector, in particular in
relation to financial and capital
market issues as well as insight into
the investor perspective .

Education:
MSc in Economics 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 .

Positions and management duties:
Partner with 5AM Venture
Management, LLC, member of the
board at Caballeta Bio Inc ., and
Artiva Biotherapeutics, all in the US .

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

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

Laurence Debroux
Member of the Board of Novo
Nordisk A/S and member of the
Audit Committee since 2019 .

Andreas Fibig
Member of the Board of Novo
Nordisk A/S and member of the
Audit Committee since 2018 .

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 Netherlands, and of HEC Paris
Business School, France .

Special competences:
Significant financial and
accounting experience, extensive
global experience within the
pharmaceutical industry and
experience from executive positions
in major international companies .

Education:
Master's Degree from HEC
Paris, Ecoles des Hautes Etudes
Commerciales, France (1992) .

Positions and management duties:
Chair and Chief Executive 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 strategy,
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:
Executive Chair of the board of EIP
Pharma, Inc ., and member of the
board of Perkin Elmer Inc ., both 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 . Ms . Grégoire 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) .

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 43

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) .

Mette Bøjer Jensen
Member of the Board of
Novo Nordisk A/S (employee
representative) and member
of the Nomination Committee
since 2018 .

Positions and
management duties:
Wash & Sterilisation Specialist
in Product Supply, Novo
Nordisk A/S .

Education:
Graduate Programme (HD)
in Business Administration
(Strategic management and
business development) from
Copenhagen Business School,
Denmark (2010), and MSc
in Biotechnology, Aalborg
University, Denmark (2001) .

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 .

Positions and
management duties:
Member (senior independent
director) of the board of
Melrose Industries plc, UK,
where she chairs the audit
committee, and member of
the board of National Grid
plc, UK .

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:
Qualified Chartered
Accountant FCA (UK Institute
of Chartered Accountants)
(1982), and BSc (Econ Hons)
from the University College in
London, UK (1977) .

Kasim Kutay
Member of the Board of Novo
Nordisk A/S and member of
the Nomination Committee
since 2017 and member of
the Research & Development
Committee since 2020 .

Positions and
management duties:
Chief Executive Officer of
Novo Holdings A/S, Denmark .
Member of the board of
Novozymes A/S, Denmark,
of Evotec SE, Germany, and
of the Life Sciences Advisory
board of Gimv NV, Belgium .

Special competences:
Extensive experience as an
investor in the life science
sector . Mr Kutay manages an
investment fund that invests
in life science companies at
all stages of development
including the venture,
growth and developed
stages . 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 (laboratory
technologist) from
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 and
CEO of the company and
in an executive leadership
role overseeing all research
and non-research functions .
Member of the board of 5:01
Acquisition Corporation,
US. 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
experience in building a
pipeline, acquiring products
and managing 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) .

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 4 4

Independence, meeting attendance and competence overview

Name (male/female)

First
elected Term Nationality

Born

Independence2

Board of
Directors

Chairmanship

Audit
Committee8

Nomination
Committee

Remuneration
Committee

R&D
Committee

Competencies

Meeting attendance in 20201

Helge Lund (m)

20173

2021 Norwegian

Oct . 1962

Independent

Jeppe Christiansen (m)

2013

2021 Danish

Nov . 1959 Not independent 4

Laurence Debroux (f)

2019

2021

French

Jul . 1969

Independent 9

Brian Daniels (m)

2016

2021 American

Feb . 1959

Independent

Andreas Fibig (m)

2018

2021 German

Feb . 1962

Independent 5, 6

Sylvie Grégoire (f)

2015

2021 Canadian/American Nov . 1961

Independent 5, 6

Liz Hewitt (f)

2012

2021 British

Nov . 1956

Independent 5, 6, 9

Mette Bøjer Jensen (f)

2018

2022 Danish

Dec . 1975 Not independent 7

Kasim Kutay (m)

2017

2021 British

May 1965 Not independent 4

Anne Marie Kverneland (f) 2000

2022 Danish

Jul . 1956 Not independent 7

Martin Mackay (m)

2018

2021 American

Apr . 1956

Independent

Thomas Rantzau (m)

2018

2022 Danish

Mar . 1972 Not independent 7

Stig Strøbæk (m)

1998

2022 Danish

Jan . 1964 Not independent 5, 7

N/A (employee-elected)

1. Number of meetings attended by each Board member out of the total number of meetings within the member's term. 2. In accordance with recommendation 3.2.1 of the Danish Corporate Governance Recommendations as designated by Nasdaq Copenhagen.
3. In addition, Helge Lund was a member of the Board for one year in 2014-2015 4. Member of the Board of Directors or Executive Management of Novo Holdings A/S. 5. Pursuant to the US Securities Exchange Act, Ms Hewitt, Ms Grégoire, Ms Debroux 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, Ms Debroux 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. 8. All members have relevant industry expertise. 9. Designated as financial experts as defined by the US Securities and Exchange Commission (SEC).

Competencies and experiences to be represented among shareholder-elected Board members (see page 40)

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 leadership and change management

Finance and accounting

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional information

Novo Nordisk Annual Repor t 2020 / 45

Executive Management

Lars Fruergaard Jørgensen
— President and Chief
Executive Officer (CEO)

Monique Carter
— Executive Vice President,
People & Organisation

Maziar Mike Doustdar1
— Executive Vice President,
International Operations

Ludovic Helfgott1
— Executive Vice President,
Biopharm

Karsten Munk Knudsen
— Executive Vice President,
Chief Financial Officer (CFO)

Born: November 1966.

Born: December 1973.

Born: August 1970.

Born: July 1974.

Born: December 1971.

Other positions and
management duties:
No other management positions .

Other positions and
management duties:
President of the Novo Nordisk
Haemophilia Foundation Council .

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

Other positions and
management duties:
Vice chair of the supervisory
board and member of the audit
committee and nomination
committee of Carlsberg A/S,
Denmark .

As of 1 January 2021, vice president
elect of the European Federation
of Pharmaceutical Industries and
Associations (EFPIA) .

Doug Langa1
— 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 positions and
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)

Henrik Wulff
— Executive Vice President,
Product Supply, Quality & IT

Born: December 1960.

Born: November 1970.

Other positions and
management duties:
Member of the board of Ambu A/S,
Denmark and member of the board
of Grundfos Holding A/S, Denmark .

Other positions and
management duties:
Member of the board of BB Biotech
AG, Switzerland. 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 .

1. Not registered as executive with the
Danish Business Authority .

Novo Nordisk Annual Repor t 2020 / 46

Consolidated financial, environmental, social and
governance statements 2020

Consolidated financial statements
Income statement
Cash flow statement
Balance sheet
Equity statement

Notes to the consolidated financial statements

Section 1
Basis of preparation
1.1 Principal accounting policies and key accounting estimates
1.2 Changes in accounting policies and disclosures

Section 2
Results for the year
2.1 Net sales and rebates
2.2 Segment information
2.3 Research and development costs
2.4 Employee costs
2.5 Other operating income, net
2.6 Income taxes and deferred income taxes

Section 3
Operating assets and liabilities
3.1 Intangible assets and property, plant and equipment
3.2 Leases
3.3 Inventories
3.4 Trade receivables
3.5 Retirement benefit obligations
3.6 Provisions and contingent liabilities
3.7 Other liabilities

p. 47
p. 48
p. 49
p. 50

p. 51
p. 51

p. 52
p. 53
p. 55
p. 55
p. 56
p. 56

p. 58
p. 60
p. 61
p. 61
p. 62
p. 63
p. 64

Section 4
Capital structure and financial items
4.1 Earnings per share, distributions to shareholders, treasury

Statement of environmental, social and governance (ESG)
performance (supplementary information)
Statement of ESG performance

p. 81

shares, share capital and other reserves

p. 65
p. 66
4.2 Financial risks
p. 68
4.3 Derivative financial instruments
4.4 Borrowings
p. 69
4.5 Cash and cash equivalents, financial reserves and free cash flow p. 69
p. 70
4.6 Change in working capital
p. 70
4.7 Other non-cash items
p. 71
4.8 Financial assets and liabilities
p. 72
4.9 Financial income and expenses

Section 5
Other disclosures
5.1 Share-based payment schemes
5.2 Commitments
5.3 Related party transactions
5.4 Fee to statutory auditors
5.5 General accounting policies
5.6 Companies in the Novo Nordisk Group

p. 73
p. 75
p. 76
p. 76
p. 76
p. 77

Notes to the ESG statement

Section 6
Basis of preparation

Section 7
Environmental performance
7.1 Energy consumption for operations and share of

renewable power

7.2 Water consumption for production sites
7.3 CO2 emissions from operations and transportation
7.4 Waste from production sites

Section 8
Social performance
8.1 Patients reached with Novo Nordisk’s Diabetes care products
8.2 Donations and other contributions
8.3 Employees
8.4 Frequency of occupational accidents
8.5 Animals purchased for research
8.6 Gender diversity

Section 9
Governance performance
9.1 Business ethics
9.2 Facilitations of the Novo Nordisk Way
9.3 Supplier audits
9.4 Product recalls
9.5 Failed inspections
9.6 Company trust
9.7 Total tax contribution
9.8 Breaches of environmental regulatory limit values

p. 82

p. 83
p. 83
p. 83
p. 84

p. 84
p. 84
p. 85
p. 85
p. 85
p. 85

p. 86
p. 86
p. 86
p. 86
p. 86
p. 86
p. 87
p. 87

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional informationManuelNovo Nordisk Annual Repor t 2020 / 47

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

Note

2020

2019

2018

DKK million

Note

2020

2019

2018

Statement of comprehensive income

2.1, 2.2

126,946

122,021

111,831

Net profit

42,138

38,951

38,628

2.2

20,932

20,088

17,617

106,014

101,933

94,214

Other comprehensive income:

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

Sales and distribution costs

2.2

32,928

31,823

29,397

Research and development costs

2.2, 2.3

15,462

14,220

14,805

Remeasurements of retirement benefit obligations

3.5

(67)

(187)

Administrative costs

Other operating income, net

Operating profit

Financial income

Financial expenses

Profit before income taxes

Income taxes

Net profit

Earnings per share

Basic earnings per share (DKK)

Diluted earnings per share (DKK)

2.2

2.2, 2.5

3,958

460

4,007

600

3,916

1,152

Items that will be reclassified subsequently to the income statement:

Exchange rate adjustments of investments in subsidiaries

(1,689)

226

491

54,126

52,483

47,248

Cash flow hedges:

4.9

1,628

2,624

3,995

2,122

1,755

Realisation of previously deferred (gains)/losses

Deferred gains/(losses) incurred during the period

4.1, 4.3

53,130

48,553

47,615

Other items

2.6

10,992

9,602

8,987

Tax on other comprehensive income, income/(expense)

2.6

42,138

38,951

38,628

Other comprehensive income, net of tax

329

1,384

(577)

(610)

1,677

(329)

(231)

1,165

(2,027)

(1,677)

(27)

755

(2,398)

Total comprehensive income

41,528

40,116

36,230

4.1

18.05

18.01

16.41

16.38

15.96

15.93

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationCash flow statement

for the year ended 31 December

Novo Nordisk Annual Repor t 2020 / 48

DKK million

Cash flow statement

Net profit

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

Note

2020

2019

2018

DKK million

Note

2020

2019

2018

42,138

38,951

38,628

Dividends paid

Purchase of treasury shares

Repayment of borrowings

8,987

Proceeds from borrowings

4.1

4.4

(16,855)

(15,334)

(15,567)

(20,121)

(19,409)

(19,048)

(950)

5,682

(822)

—

10,992

5,753

7,849

9,602

5,661

7,032

2.6

3.1

4.7

4.6

(4,353)

(3,388)

(3,370)

100

(422)

(204)

(89)

2.6

(10,106)

(10,936)

(9,614)

3,925

Net cash used in financing activities

(32,244)

(35,484)

(34,521)

6,098

Net cash generated from activities

(2,729)

(211)

(1,985)

Cash and cash equivalents at the beginning of the year

4.5

15,411

15,629

17,158

Reclassification of bank overdraft to financing activities

Exchange gains/(losses) on cash and cash equivalents

—

(456)

—

(7)

412

Cash and cash equivalents at the end of the year

4.5

12,226

15,411

15,629

Net cash generated from operating activities

51,951

46,782

44,616

Purchase of intangible assets

3.1

(16,256)

(2,299)

(2,774)

Proceeds from sale of property, plant and equipment

Purchase of property, plant and equipment

3.1

(5,825)

(8,932)

(9,636)

Proceeds from other financial assets

Purchase of other financial assets

—

Investment in associated companies

5.3

(392)

Proceeds from the divestment of Group and
associated companies

Dividend received from associated companies

5.3

—

148

(350)

(97)

(3)

178

(248)

—

368

Net cash used in investing activities

(22,436)

(11,509)

(12,080)

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationBalance 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

Novo Nordisk Annual Repor t 2020 / 49

Note

2020

2019

DKK million

Note

2020

2019

3.1

2.6

3.3

3.4

4.2, 4.3

18,536

27,734

289

4,161

2,332

4.2, 4.5

12,757

65,809

20,657

50,269

582

5,865

674

1,066

Equity and liabilities

5,835

Share capital

50,551

Treasury shares

474

Retained earnings

4,121

Other reserves

841

Total equity

1,334

Borrowings

79,113

63,156

Deferred income tax liabilities

17,641

Retirement benefit obligations

24,912

Provisions

806

Total non-current liabilities

3,434

188

15,475

62,456

Borrowings

Trade payables

Tax payables

Other liabilities

144,922

125,612

Derivative financial instruments

Provisions

Total current liabilities

Total liabilities

Total equity and liabilities

4.1

470

(8)

480

(10)

63,774

57,817

4.1

(911)

(694)

63,325

57,593

4.4

2.6

3.5

3.6

4.4

3.7

4.3

3.6

2,897

2,502

1,399

4,526

11,324

7,459

5,717

3,913

3,009

1,334

4,613

9,036

1,474

6,358

4,212

17,005

15,085

1,365

34,814

70,273

81,597

734

31,120

58,983

68,019

144,922

125,612

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationNovo Nordisk Annual Repor t 2020 / 50

Equity statement

at 31 December

DKK million

Share
capital

Treasury
shares

Retained
earnings

Other
reserves

2020

Total

Share
capital

Treasury
shares

Retained
earnings

Other
reserves

2019

Total

Share
capital

Treasury
shares

Retained
earnings

Other
reserves

2018

Total

Balance at the beginning of the year

480

(10)

57,817

(694)

57,593

490

(11)

53,406

(2,046)

51,839

500

(11)

48,887

439

49,815

Net profit

Other comprehensive income

Total comprehensive income

Transfer of cash flow hedge reserve to
intangible assets

Transactions with owners:

Dividends (note 4.1)

Share-based payments (note 5.1)

Tax related to restricted stock units

Purchase of treasury shares (note 4.1)

Reduction of the B share capital (note 4.1)

Balance at the end of the year

42,138

(67)

42,071

(543)

42,138

(610)

41,528

326

38,951

(187)

38,764

1,352

38,951

1,165

40,116

38,628

(2,485)

(2,398)

38,715

(2,485)

36,230

(20,121)

(19,409)

(19,048)

823

(16,847)

823

(16,855)

—

63,774

(911)

63,325

363

(15,325)

(9)

363

(15,334)

—

(10)

57,817

(694)

57,593

414

(5)

(10)

(15,557)

414

(5)

(15,567)

—

(11)

53,406

(2,046)

51,839

(10)

490

(10)

480

(8)

(10)

470

Slet tom linje,

dog ikke i w-desk

Refer to note 4.1 for details of movements in other reserves.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationNovo Nordisk Annual Repor t 2020 / 51

Key accounting estimates and judgements
The use of reasonable estimates and judgements is an essential part
of the preparation of the consolidated financial statements. Given the
uncertainties inherent in Novo Nordisk’s business activities, Management
must make certain estimates regarding valuation and make judgements on
the reported amounts of assets, liabilities, net sales, expenses and related
disclosures.

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.

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. The
general accounting policies are described in note 5.5.

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 Management.

Rigth indent i den

bredde kolonne

8px

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. An example
being the estimation of US sales deductions and provisions for sales
rebates. 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 in the process of applying the
entity’s accounting policies, for example the classification of a transaction
as an asset acquisition or a business combination.

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

Estimate of US sales deductions and provisions for sales rebates

Income taxes and deferred income taxes

Judgement and estimate regarding deferred income tax assets and
provision for uncertain tax positions

Intangible assets

Estimate regarding impairment of assets and judgement of whether a
transaction is an asset acquisition or a business combination

Inventories

Estimate of indirect production costs capitalised and inventory write-down

Provisions and contingent liabilities

Estimate of ongoing legal disputes, litigation and investigations

2.1

2.6

3.1

3.3

3.6

High

Medium

Low

Medium

Management provides specific disclosures required by IFRS unless the
information is not applicable or is considered immaterial to the decision-
making of the primary users of these financial statements.

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 effective on or after 1 January 2020.

The Group adopted the amendments to IFRS 3 for the first time in 2020.
The amendments narrow and clarify the definition of a business and
permit a simplified assessment of whether an acquired set of activities and
assets is a group of assets rather than a business (concentration test). The
amendments are applied prospectively to all business combinations and
asset acquisitions with an acquisition date on or after 1 January 2020.

It is assessed that application of other new amendments effective from
1 January 2020 has not had a material impact on the consolidated financial
statements in 2020. Furthermore, Management does not anticipate any
significant impact on future periods from the adoption of these new
amendments.

Adoption of new or amended IFRSs in prior periods
As of 1 January 2019, Novo Nordisk applied IFRS 16 'Leases' for the first
time. The standard was implemented using the modified retrospective
approach. 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 implementation did not have any impact on equity.

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.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationManuel

Knib som tidligere

Section 2
Results for the year

2.1 Net sales and rebates

Gross-to-net sales reconciliation

DKK million

Gross sales

2020

2019

2018

298,187

270,431

230,701

US Managed Care and Medicare

(96,716)

(84,202)

(65,207)

US wholesaler charge-backs

(37,036)

(33,772)

(29,469)

US Medicaid rebates

(17,307)

(14,365)

(11,950)

Other US discounts and sales
returns

Non-US rebates, discounts and
sales returns

Total gross-to-net sales
adjustments

(10,867)

(8,280)

(6,606)

(9,315)

(7,791)

(5,638)

(171,241)

(148,410)

(118,870)

Net sales

126,946

122,021

111,831

Provisions for sales rebates

DKK million

2020

2019

2018

At the beginning of the year

30,878

25,760

20,374

Additional provisions, including
increases to existing provisions

111,921

102,782

82,631

Amount paid during the year

(106,116)

(98,655)

(78,647)

Adjustments, including unused
amounts reversed during the year

166

Effect of exchange rate adjustment

(2,797)

381

610

386

1,016

At the end of the year

34,052

30,878

25,760

Pricing mechanisms in the US market
In the US, sales rebates are paid in connection with public healthcare
insurance programmes, namely Medicare and Medicaid, as well as rebates
to pharmacy benefit managers (PBMs) and managed healthcare plans.
Key customers in the US include private payers, PBMs and government
payers. PBMs and managed healthcare plans play a role in negotiating
price concessions with drug manufacturers 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 estimated according to the specific terms in each agreement,
historical experience, anticipated channel mix, growth rates and market
share information. Novo Nordisk adjusts the provision periodically to
reflect actual sales performance. 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 after receipt of claim.

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 changes, 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.

Sales discounts and sales rebates are predominantly issued in the US. As
such, rebates amount to 74% of gross sales in the US (71% in 2019 and 68%
in 2018). Provisions for sales rebates includes US Managed Care, Medicare,
Medicaid and other minor US rebate types, as well as rebates in a number of
European countries and Canada.

Other US and non-US discounts and sales returns
Other discounts are provided to distributors, wholesalers, hospitals,
pharmacies, etc. They are usually linked to sales volume or provided as cash
discounts. Discounts are calculated based on historical data and recorded
as a reduction in gross sales at the time the related sales are recorded. Sales
returns relate to damaged or expired products.

Novo Nordisk Annual Repor t 2020 / 52

Other net sales disclosures
In 2020, Novo Nordisk had three major wholesalers distributing products in
the US, representing 19%, 13% and 12% respectively of total net sales (19%,
14% and 12% in 2019 and 20%, 13% and 13% in 2018). 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, are expected to be DKK 431 million within 12 months (DKK
544 million in 2019) and DKK 216 million thereafter (DKK 32 million in 2019).

Novo Nordisk's sales are impacted by exchange rate changes. Refer to note
4.2 for development in key exchange rates.

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.

Unsettled rebates are recognised as provisions when the timing or amount
is uncertain (note 3.6).

Where absolute amounts are known, the rebates are recognised as other
liabilities. Wholesaler charge-backs are netted against trade receivable balances.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationThe impact of foreign currency hedging is recognised in the income
statement in financial items. Please refer to notes 4.2, 4.3 and 4.9 for more
details on hedging.

2.2 Segment information

Business segments – Key figures

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 obligations 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.

DKK million

Total net sales

Cost of goods sold

Sales and distribution costs

The estimates are based on analyses of existing contractual obligations
and historical experience. Provisions are calculated on the basis of a
percentage of sales for each product as defined by the contracts with the
various customer groups. Provisions for sales rebates are adjusted to actual
amounts as rebates, discounts and returns are processed.

Research and development costs

13,535

12,128

12,222

Administrative costs

Other operating income, net

3,387

264

3,346

309

3,266

538

Operating profit

Operating margin

43,744

42,637

37,842

10,382

40.5%

41.5%

40.3%

54.9%

Novo Nordisk Annual Repor t 2020 / 53

Diabetes and Obesity care

Biopharm

Total

2020

2019

2018

2020

2019

2018

2020

2019

2018

108,020

102,840

93,904

18,926

19,181

17,927

126,946

122,021

111,831

17,715

29,903

16,309

14,716

28,729

26,396

3,217

3,025

1,927

571

196

3,779

3,094

2,092

661

291

9,846

51.3%

2,901

3,001

2,583

650

614

20,932

32,928

15,462

3,958

460

20,088

17,617

31,823

29,397

14,220

14,805

4,007

600

3,916

1,152

9,406

54,126

52,483

47,248

52.5%

42.6%

43.0%

42.2%

Novo Nordisk considers the provisions established for sales rebates to be
reasonable and appropriate based on currently available information. However,
the actual amount of rebates and discounts may differ from the amounts
estimated by Management as more detailed information becomes available.

Depreciation, amortisation and
impairment losses expensed

4,624

3,916

3,210

1,129

1,745

715

5,753

5,661

3,925

Novo Nordisk operates in two business segments based on therapies:
Diabetes and Obesity care and Biopharm, representing the entirety of the
Group's operations.

Geographical areas
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.

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

antidiabetic 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.

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.

In 2020 Novo Nordisk operated in two main commercial units:
– International Operations

– EMEA: Europe, the Middle East and Africa.
– China: Mainland China, Hong Kong and Taiwan.
– Rest of World: All other countries except for North America.

– North America Operations (the US and Canada)

International Operations was reorganised with effect from 1 April 2020,
and the geographical reporting has been amended to reflect the new
organisation. Amounts for 2018 and 2019 have been restated. Refer to
note 5.6 for an overview of companies in the Novo Nordisk Group based on
geographical areas.

The country of domicile is Denmark, which is part of EMEA. Denmark is
immaterial to Novo Nordisk’s activities in terms of sales as 99.7% of total
sales are realised outside Denmark. Sales are attributed to geographical
areas according to the location of the customer.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationNet sales – Business segments and geographical areas

DKK million

2020

2019

2018

2020

2019

2018

2020

2019

2018

2020

2019

2018

2020

2019

2018

2020

2019

2018

2020

2019

2018

Total IO

EMEA

China

Rest of World

Total NAO

Of which the US

Total International Operations

Total North America Operations

Total Novo Nordisk
net sales

Novo Nordisk Annual Repor t 2020 / 54

Diabetes and Obesity care segment:

Long-acting insulin

– of which Tresiba®

– of which Xultophy®

– of which Levemir®

9,959

9,035

7,942

6,451

5,955

5,289

1,471

1,059

814

2,037

2,021

1,839

8,480

11,741

12,902

7,962

11,271

12,600

18,439

20,776

20,844

4,407

3,477

2,764

2,574

1,983

1,479

418

1,789

1,493

1,085

1,605

1,407

1,060

—

3,763

4,065

4,093

2,272

2,565

2,750

1,052

972

798

183

439

528

1,415

1,407

1,269

4,561

5,782

5,271

4,191

5,500

5,192

8,968

9,259

655

717

529

642

708

528

2,444

2,210

545

3,264

5,242

7,102

3,129

5,063

6,880

7,027

9,307

11,195

8,035

1,614

Premix insulin

10,246

9,707

8,862

2,959

3,160

3,034

4,852

4,306

3,783

2,435

2,241

2,045

– of which Ryzodeg®

1,291

993

714

321

237

152

—

931

752

562

– of which NovoMix®/NovoLog Mix®

8,955

8,714

8,148

2,638

2,923

2,882

4,813

4,302

3,783

1,504

1,489

1,483

679

—

679

871

1,332

—

871

1,332

652

—

652

839

1,294

10,925

10,578

10,194

—

— 1,291

993

714

839

1,294

9,634

9,585

9,480

Fast-acting insulin

– of which Fiasp®

10,808

10,304

9,332

6,584

6,422

5,931

2,075

1,753

1,450

2,149

2,129

1,951

7,505

8,999

10,021

7,101

8,592

9,634

18,313

19,303

19,353

832

617

357

764

585

357

—

553

626

233

519

597

211

1,385

1,243

590

– of which NovoRapid®/NovoLog®

9,976

9,687

8,975

5,820

5,837

5,574

2,075

1,753

1,450

2,081

2,097

1,951

6,952

8,373

9,788

6,582

7,995

9,423

16,928

18,060

18,763

Human insulin

Total insulin

Victoza®

Ozempic®

Rybelsus®

Total GLP-1

7,339

7,361

7,348

2,370

2,438

2,592

2,655

2,847

2,821

2,314

2,076

1,935

1,534

1,675

1,917

1,431

1,552

1,778

8,873

9,036

9,265

38,352

36,407

33,484

18,364

17,975

16,846

11,053

9,965

8,868

8,935

8,467

7,770

18,198

23,286

26,172

17,146

22,254

25,306

56,550

59,693

59,656

7,095

7,249

6,240

4,251

4,713

4,337

1,033

898

521

1,811

1,638

1,382

11,652

14,685

18,093

11,292

14,217

17,561

18,747

21,934

24,333

3,634

1,143

—

3,112

969

—

512

174

— 17,577

10,094

1,757

16,650

9,599

1,634

21,211

11,237

1,796

—

— 1,837

— 1,826

— 1,873

—

10,765

8,392

6,279

7,399

5,682

4,376

1,043

898

521

2,323

1,812

1,382

31,066

24,829

19,850

29,768

23,866

19,195

41,831

33,221

26,129

Other Diabetes care

2,946

3,389

3,360

725

1,052

1,064

1,546

1,647

1,672

675

690

624

1,085

858

890

943

705

733

4,031

4,247

4,250

Total Diabetes care

52,063

48,188

43,123

26,488

24,709

22,286

13,642

12,510

11,061

11,933 10,969

9,776

50,349

48,973

46,912

47,857

46,825

45,234 102,412

97,161

90,035

Obesity care (Saxenda®)

2,118

2,083

1,211

1,124

981

547

984

1,093

663

3,490

3,596

2,658

3,230

3,348

2,446

5,608

5,679

3,869

Diabetes and Obesity care total

54,181

50,271

44,334

27,612

25,690

22,833

13,652

12,519

11,062

12,917 12,062 10,439

53,839

52,569

49,570

51,087

50,173

47,680 108,020 102,840

93,904

Biopharm segment:

Haemophilia

5,708

5,946

5,572

3,579

3,646

3,604

– of which NovoSeven®

– of which NovoEight®

3,996

4,502

4,424

2,352

2,577

2,694

1,127

1,143

1,046

790

844

836

Growth disorders (Norditropin®)

4,832

4,225

4,000

2,220

1,960

1,972

1,108

1,122

1,017

886

912

817

Other Biopharm

Biopharm total

361

345

284

269

199

194

1,768

2,016

1,769

3,954

4,335

4,004

3,675

4,031

3,723

9,662

10,281

9,576

1,299

1,656

1,536

3,207

3,617

3,457

3,089

3,454

3,278

7,203

8,119

321

284

205

335

382

308

312

358

291

1,462

1,525

2,546

2,229

2,008

2,872

3,050

2,834

2,854

3,035

2,823

7,704

7,275

7,881

1,354

6,834

217

205

196

452

503

500

208

247

262

1,560

1,625

1,517

Total sales by geographical area

65,829

61,564

54,923

34,297

32,208

29,226

14,084

12,844

11,285

17,448 16,512 14,412

61,117

60,457

56,908

57,824

57,486

54,488 126,946 122,021

111,831

Total sales growth as reported

6.9% 12.1%

2.3%

6.5% 10.2%

2.5%

9.7%

13.8%

5.4%

5.7% 14.6% (0.3%)

1.1%

6.2% (1.9%)

0.6%

5.5% (2.4%)

4.0%

9.1%

0.1%

11,648

11,293

10,589

6,685

6,518

6,393

432

325

223

4,531

4,450

3,973

7,278

7,888

7,338

6,737

7,313

6,808

18,926

19,181

17,927

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information2.3 Research and development costs

DKK million

Employee costs (note 2.4)

2020

6,269

2019

5,968

2018

6,288

Amortisation and impairment
losses, intangible assets (note 3.1)

Depreciation and impairment
losses, property, plant and
equipment (note 3.1)

Other research and
development costs

1,025

522

769

724

783

468

7,444

6,947

7,280

Total research and development
costs

15,462

14,220

14,805

As percentage of net sales

12.2%

11.7%

13.2%

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

Accounting policies
Novo Nordisk expenses all research costs. In line with industry practice,
internal and subcontracted development costs are also expensed as
they are incurred, due to significant regulatory uncertainties and other
uncertainties inherent in the development 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 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.

– 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 treatment of

Certain research and development activities are recognised outside research
and development costs:

– Royalty expenses paid to partners after regulatory approval are expensed

haemophilia and other rare blood disorders.

as cost of goods sold.

– Human growth hormone and new modes of action for treatment of growth

– Royalty income received from partners is recognised as part of other

disorders and other rare endocrine disorders.

operating income, net.

– New modes of action including GLP-1 and stem cells for treatment of

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

NASH, cardiovascular disease, Alzheimer's disease, chronic kidney disease
and Parkinson's disease, among others.

are disclosed separately as commitments in note 5.2.

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. Research activities further focus on new technology
platforms including stem cells and developing RNAi therapies for liver-
related cardio-metabolic diseases.

Research and development activities are carried out by Novo Nordisk’s
research and development centres, mainly in Denmark, the US, the UK and
China. Clinical trials are carried out all over the world. Novo Nordisk also
enters into partnerships and licence agreements.

Novo Nordisk Annual Repor t 2020 / 55

2.4 Employee costs

DKK million

2020

2019

2018

Wages and salaries

26,778

25,335

25,259

Share-based payment costs
(note 5.1)

Pensions – defined contribution
plans

Pensions – defined benefit plans
(note 3.5)

Other social security contributions

Other employee costs

823

363

414

1,961

1,910

1,791

138

1,862

2,044

151

1,963

2,203

1,901

2,087

Total employee costs for the year

33,606

31,925

31,525

Employee costs capitalised as
intangible assets and property,
plant and equipment

Change in employee costs
capitalised as inventories

Total employee costs
in the income statement

Included in the income statement:

(1,279)

(1,314)

(1,500)

(60)

(139)

(105)

32,267

30,472

29,920

Cost of goods sold

8,896

8,134

8,164

Sales and distribution costs

14,146

13,463

12,214

Research and development costs

Administrative costs

Other operating income, net

Total employee costs in the
income statement

6,269

2,848

108

5,968

2,679

228

6,288

2,755

499

32,267

30,472

29,920

Number of employees

2020

2019

2018

Average number of
full-time employees

Year-end number of
full-time employees

Employees (total)

43,759

42,218

42,881

44,723

45,323

42,703

42,672

43,258

43,202

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationRemuneration to Executive Management and Board of Directors

2.6 Income taxes and deferred income taxes

DKK million

Salary and short-term incentive

Pension

Benefits

Long-term incentive1

Severance payments

Executive Management in total2

Fee to Board of Directors2

Total

2020

119

—

207

224

2019

120

—

200

219

2018

102

178

195

1. Please refer to note 5.1 for further information.
2. Total remuneration for registered members of Executive Management amounts to

DKK 141 million (DKK 135 million in 2019 and DKK 142 million in 2018). All members of
the Board of Directors are registered.

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.

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 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.

Novo Nordisk Annual Repor t 2020 / 56

2020

2019

2018

4,262

7,774

6,640

4,508

2,258

2,376

1,336

904

598

9,614

Income taxes expensed

DKK million

2020

2019

2018

Current tax on profit for the year

11,557

11,275

10,469

Deferred tax on profit for the year

1,105

(1,559)

(1,007)

Tax on profit for the year

12,662

9,716

9,462

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

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

(563)

(191)

(522)

Income taxes paid

10,106

10,936

(1,107)

In 2020, income taxes paid in Denmark and paid outside Denmark are
impacted by transfers of intellectual property rights related to acquisitions.

10,992

9,602

8,987

577

231

(755)

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, driven by a non-recurring increase
to deferred tax assets.

Computation of effective tax rate

DKK million

2020

2019

2018

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)

Other adjustments (net)

Effective tax rate

22.0%

(2.5%)

(2.1%)

(1.9%)

(0.2%)

1.4%

20.7%

0.1%

(0.2%)

19.8%

(0.2%)

(1.0%)

18.9%

The deviation in foreign subsidiaries' tax rates from the Danish tax rate is
mainly driven by Swiss business activities.

Other adjustments in 2020 comprise of tax related to acquisitions and
subsequent transfers of intellectual property rights (around 4%) countered
by clarification of tax uncertainties, settlement of tax cases and adjustment
of prior years.

Accounting policies
The tax expense for the period comprises current and deferred tax. It also
includes adjustments 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.

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
withholding tax is only recognised if a concrete distribution of dividends
is planned. The unrecognised potential withholding tax amounts to DKK
337 million (DKK 315 million in 2019).

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.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationManagement 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 differences 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.

Novo Nordisk Annual Repor t 2020 / 57

Property,
plant and
equipment

Intangible

assets Inventories

Liabilities

Other

Offset
within
countries

Total

Development in deferred income tax assets and liabilities

DKK million

2020

Net deferred tax asset/(liability) at 1 January

Income/(charge) to the income statement

Income/(charge) to other comprehensive income

Income/(charge) to equity

Acquisition of subsidiaries

Effect of exchange rate adjustment

(1,591)

(718)

(47)

(2,883)

—

(92)

—

1,811

963

(216)

—

(2)

Net deferred tax asset/(liability) at 31 December

(1,614)

(3,600)

2,556

Classified as follows:

Deferred tax asset at 31 December

755

2,568

Deferred tax liability at 31 December

(2,369)

(3,646)

(12)

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

(703)

(865)

(5)

—

(18)

(564)

—

(155)

—

973

—

820

—

3,452

1,449

—

(300)

4,617

4,895

(278)

2,402

865

133

—

(18)

1,087

520

(469)

276

(30)

—

4,041

(577)

(72)

276

(307)

3,363

1,404

—

2,903

(5,302)

5,865

(1,499)

5,302

(2,502)

667

—

689

(296)

—

2,775

—

1,482

(231)

(18)

Net deferred tax asset/(liability) at 31 December

(1,591)

(718)

1,811

3,452

1,087

—

4,041

Classified as follows:

Deferred tax asset at 31 December

769

3,428

Deferred tax liability at 31 December

(2,360)

(776)

(1,617)

3,580

(128)

1,843

(5,557)

4,121

(756)

5,557

(80)

The total tax value of unrecognised tax loss carry-forwards amounts to DKK 628 million in 2020 (DKK 144 million in 2019).

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information
Section 3
Operating assets
and liabilities

3.1 Intangible assets and property, plant and
equipment

Of total property, plant and equipment and intangible assets, DKK 44,431
million is located in Denmark (DKK 28,322 million in 2019) and DKK 18,750
million is located in the US (DKK 20,256 million in 2019) where the Group's
main production, filling, packaging, moulding, assembly facilities and
intangible assets are located.

Novo Nordisk Annual Repor t 2020 / 58

DKK million

2020

Patents
and
licences

Software
and other
intangibles

Total
intangible
assets

Land and
buildings

Plant and
machinery

Other
equipment

Assets
under
construction

Property,
plant and
equipment

Cost at the beginning of the year

7,270

2,560

9,830

30,260

27,594

6,215

20,351

84,420

Additions during the year

Disposals during the year

Transfer and reclassifications

Effect of exchange rate adjustment

15,906

(698)

—

(74)

396

16,302

—

(20)

(698)

—

(94)

741

(119)

7,440

(813)

506

(583)

4,586

(600)

Cost at the end of the year

22,404

2,936

25,340

37,509

31,503

490

(122)

4,560

(16)

515

(12,541)

6,297

(840)

—

(222)

6,876

(1,556)

(3,191)

10,798

86,686

Amortisation/depreciation and impairment losses at the
beginning of the year

Amortisation/depreciation for the year

Impairment losses for the year

Amortisation/depreciation and impairment losses
reversed on disposals during the year

Effect of exchange rate adjustment

Amortisation/depreciation and impairment losses at the
end of the year

Carrying amount at the end of the year

2,643

889

350

(698)

(49)

3,135

19,269

2019

1,352

207

—

(11)

1,548

1,388

11,528

18,888

3,453

3,995

1,096

350

(698)

(60)

1,859

1,500

(119)

(346)

(581)

(432)

4,683

12,936

19,444

20,657

24,573

12,059

—

(16)

—

33,869

4,180

127

(831)

(928)

36,417

10,798

50,269

821

(115)

(150)

4,037

2,839

Cost at the beginning of the year

5,247

2,412

7,659

25,401

25,412

4,779

16,846

72,438

Change in accounting policy, leases

Additions during the year

Disposals during the year

Transfer and reclassifications

Effect of exchange rate adjustment

—

1,958

—

221

(79)

—

2,179

(79)

—

3,291

555

(407)

1,277

143

—

350

(504)

2,248

487

498

(244)

665

—

7,580

3,778

8,983

(74)

(1,229)

(4,190)

189

—

450

Cost at the end of the year

7,270

2,560

9,830

30,260

27,594

6,215

20,351

84,420

Amortisation/depreciation and impairment losses at the
beginning of the year

1,390

1,124

2,514

Amortisation/depreciation for the year

Impairment losses for the year

Amortisation/depreciation and impairment losses
reversed on disposals during the year

Effect of exchange rate adjustment

312

914

—

Amortisation and impairment losses at the end of the year

2,643

Carrying amount at the end of the year

4,627

175

(18)

1,352

1,208

487

982

(18)

3,995

5,835

17,871

2,906

9,770

1,818

(160)

1,410

(504)

11,528

18,888

18,732

8,706

—

(74)

—

30,547

3,971

221

(967)

33,869

20,351

50,551

743

(229)

3,453

2,762

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationNovo Nordisk Annual Repor t 2020 / 59

Intangible assets

Amortisation and impairment losses

DKK million

Cost of goods sold

Sales and distribution costs

Research and development costs

Administrative costs

Other operating income, net

Total amortisation and
impairment loss

Total amortisation

Total impairment losses

2020

369

1,025

1,446

1,096

350

capitalised and subsequent milestone payments payable on achievement
of a contingent event will be capitalised on the contingent event being
probable of being achieved.

2019

2018

916

522

1,469

487

982

208

769

1,000

—

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 are recognised as
intangible assets if the recognition criteria are met, for example a significant
business system where the expenditure leads to the creation of a durable
asset. Amortisation is based on the straight-line method over the estimated
useful life of 3-15 years. The amortisation begins when the asset is in the
location and condition necessary for it to be capable of operating in the
manner intended by Management.

2020 additions
In 2020 Novo Nordisk acquired Corvidia Therapeutics Inc., in a transaction
accounted for as an asset acquisition. An addition of DKK 4,580 million was
recognised in patents and licences for the acquisition of Ziltivekimab, a fully
human monoclonal antibody directed against Interleukin-6 related to chronic
kidney disease, which is under development.

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, development costs are also expensed until
regulatory approval is obtained or is probable; please refer to note 2.3.

Novo Nordisk acquired Emisphere Technologies Inc. and obtained ownership of
the Eligen® SNAC oral delivery technology. Novo Nordisk and Emisphere have
collaborated since 2007 and Emisphere’s proprietary drug delivery technology
Eligen® SNAC is used by Novo Nordisk under an existing licence agreement in
the oral formulation of Novo Nordisk’s GLP-1 receptor agonist semaglutide,
which is marketed and sold under the brand name Rybelsus®. Under the
terms of the agreement, Novo Nordisk acquired all outstanding shares of
Emisphere for USD 1,335 million. As part of the transaction, Novo Nordisk also
acquired related Eligen® SNAC royalty stream obligations owed to MHR Fund
Management LLC (MHR), the largest shareholder of Emisphere, for USD 450
million. The transaction has been accounted for as an asset acquisition, with
DKK 11,060 million recognised in patents and licences, of which DKK 2,467
million are related to assets under development. At 31 December 2020, the
carrying amount of acquired intangible assets related to Rybelsus is DKK 7,716
million, which has a remaining amortisation period of 14 years.

Of the total addition of intangible assets in 2020 DKK 396 million is internally
developed (DKK 221 million in 2019).

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. Upfront fees and acquisition costs are

Payments to third parties under collaboration and licence 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
likelihood 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 acquisition. 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. Development costs incurred
subsequent to acquisition are treated consistently with internal project
development costs.

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.

Key accounting estimates and judgements on intangible assets
In 2020, an impairment loss of DKK 350 million (DKK 982 million in 2019) was
recognised, substantially all of which related to patents and licences. DKK 350
million (DKK 282 million in 2019) of the impairment was related to the Diabetes
and Obesity care segment and none related to Biopharm (DKK 700 million
in 2019). All the impairment loss in 2020 was recognised in research and
development costs (DKK 529 million in cost of goods sold and DKK 450 million
in research and development costs in 2019). The impairment was a result of
Management’s review of expectations related to patents and licences not yet in
use. No impairment related to marketable products was identified in 2020.

Intangible assets with an indefinite useful life and intangible assets not yet
available for use are not subject to amortisation. They are tested annually for
impairment, irrespective of whether there is any indication that they may be
impaired.

Intangible assets not yet being amortised amounts to DKK 9,607 million (DKK
3,380 million in 2019), primarily patents and licences in relation to research
and development projects. Impairment tests in 2020 and 2019 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. In addition, Management makes judgements related to intangible
assets when assessing whether a transaction is a business combination or
an asset acquisition. An asset acquisition will arise when substantially all
the transaction value is concentrated in a single asset or when there are no
substantive business processes in the acquired entity. Judgements are also
made in evaluating whether payments under collaboration arrangements are
acquisition of assets or prepayment of R&D services.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationProperty, plant and equipment

3.2 Leases

Depreciation and impairment losses

Right-of-use assets in the balance sheet

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

2020

2,729

403

724

433

2019

2,656

354

783

376

2018

2,312

468

DKK million

2020

Balance at 1 January

Additions during the year

Depreciation for the year

4,307

4,192

2,925

Effect of exchange rate adjustment

Land and
buildings

Other
equipment

3,029

660

(644)

(144)

2,901

3,291

333

(564)

(31)

3,029

503

318

(320)

(22)

479

487

307

(288)

(3)

503

Total

3,532

978

(964)

(166)

3,380

3,778

640

(852)

(34)

3,532

Balance at 31 December

2019

Balance at 1 January

Additions during the year

Depreciation for the year

Effect of exchange rate adjustment

Balance at 31 December

Amounts recognised in the income statement

DKK million

Depreciation

Interest on lease liabilities

Variable lease expenses

Short-term leases

Lease of low value assets

2020

2019

964

135

852

108

113

201

Total amounts recognised in the
income statement

1,373

1,337

In 2020 the total cash outflow for leases amounted to DKK 1,367 million
(DKK 1,295 million in 2019). Please refer to note 4.4 for a maturity analysis of
lease payments. The lease costs for 2018 were DKK 1,299 million.

Capital expenditure in the reporting period was primarily related to
investments in facility upgrades and new production facilities for active
pharmaceutical ingredients for diabetes, mainly the facility in Clayton, US.
The facility in Clayton is intended to strengthen the Novo Nordisk supply
chain. Capital expenditure also related to investments in facility upgrades
of the purification plant in Kalundborg and investments were also made to
establish additional API capacity in Kalundborg. Finally, capital expenditure
related to the establishment of an oral tablet facility near Durham, US for
launch and commercial manufacturing of tablets.

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: 5-25 years and other
equipment: 3-10 years. Land is 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 appropriate, 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 alternative 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 Repor t 2020 / 60

Accounting policies
Novo Nordisk mainly leases office buildings, warehouses, laboratories and
vehicles. The right-of-use asset is presented in property, plant and equipment
and the lease liability in borrowings.

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. The lease liability is measured using the effective
interest method. Variable lease payments not based on an index or a rate
are recognised as an expense in the income statement as incurred. Residual
value guarantees that are expected to be paid are included in the initial
measurement of the lease liability.

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.

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.

As of 31 December 2020, the lease liability excludes DKK 2,363 million
(undiscounted) of potential lease payments related to lease term extension
rights on properties which were not considered reasonably certain to be
exercised (DKK 2,760 million in 2019).

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information3.3 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

2020

3,326

2019

2,842

12,252

11,375

5,111

20,689

(2,153)

18,536

9,703

52%

1,426

1,628

(528)

(373)

2,153

4,850

19,067

(1,426)

17,641

9,216

52%

1,959

414

(68)

(879)

1,426

All write-downs in both 2020 and 2019 relate to fully impaired inventory.

In 2019 a reversal of write-down on prelaunch inventory with a net positive
income statement effect of DKK 510 million on research and development
costs was recognised.

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 capitalised but immediately provided for, until there is a high probability of
regulatory approval for the product. A write-down is made against inventory,
and the cost is recognised in the income statement as research and
development costs. Once there is a high probability of regulatory approval
being obtained, the write-down is reversed, up to no more than the original
cost.

Key accounting estimate of indirect production costs capitalised 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.

Novo Nordisk Annual Repor t 2020 / 61

3.4 Trade receivables

DKK million

2020

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

27,511

1,000

188

320

(805)

(112)

(63)

(29)

(51)

(320)

26,706

888

125

—

Trade receivables

29,114

(1,380)

27,734

EMEA

China

Rest of World

North America Operations

6,306

2,137

3,003

17,668

(781)

—

(580)

(19)

Trade receivables

29,114

(1,380)

2019

Not yet due

1-90 days

91-180 days

181-270 days

271-360 days

More than 360 days past due

24,359

1,204

261

397

(763)

(127)

(69)

(49)

(79)

(397)

5,525

2,137

2,423

17,649

27,734

23,596

1,077

192

—

Trade receivables

26,396

(1,484)

24,912

EMEA

China

Rest of World

North America Operations

7,104

1,760

3,084

14,448

(903)

—

(568)

(13)

Trade receivables

26,396

(1,484)

Movements in allowance for doubtful trade receivables

DKK million

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

2020

1,484

(108)

139

(135)

1,380

6,201

1,760

2,516

14,435

24,912

2019

1,370

(45)

158

1,484

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationNovo Nordisk Annual Repor t 2020 / 62

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.

During 2020 country risk ratings have been downgraded in a number of
countries. However, despite of the COVID-19 pandemic, Novo Nordisk has
not experienced significant increases in collectability issues on individual
customers nor have we experienced significant deterioration in the ageing
of receivables. Please refer to note 4.2 for the trade receivable programmes.

Accounting policies
Trade receivables are initially recognised at transaction price and
subsequently measured at amortised cost using the effective interest
method, less allowance for doubtful trade receivables. The allocation of
trade receivables and allowance for trade receivables is based on the
location of the customer.

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 from 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 4.2 for a general description of credit risk.

3.5 Retirement benefit obligations

Net retirement benefit obligations

DKK million

Retirement benefit obligations

Fair value of plan assets

Net retirement benefit obligations
at the end of the year

Net remeasurement is a loss of DKK 67 million (loss of DKK 187 million in
2019), primarily related to changes in financial assumptions (discount rate),
and is included in other comprehensive income.

2020

2,624

1,225

2019

2,508

1,174

Please refer to note 5.2 for a maturity analysis of the net retirement benefit
obligation. Novo Nordisk does not expect the contributions over the next
five years to differ significantly from current contributions.

1,399

1,334

Accounting policies

Key assumptions used for valuation and sensitivity analysis

DKK million

2020

Key
assumptions

1%-point
increase

1%-point
decrease

Discount rate (decrease)/increase

1.0%

(403)

523

Future remuneration growth
(decrease)/increase

2019

2.2%

116

(101)

Discount rate (decrease)/increase

1.3%

(366)

Future remuneration growth
(decrease)/increase

2.4%

105

465

(94)

The sensitivities consider the single change shown, with the other
assumptions assumed to be unchanged. The table shows the NPV impact of
net retirement liabilities.

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.

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 counterparty risk against these insurance companies.
The total cost recognised for the year amounts to DKK 138 million (DKK 151
million in 2019).

The present value of partly funded retirement benefit obligations amounts
to DKK 1,953 million (DKK 1,845 million in 2019). The present value of
unfunded retirement benefit obligations amounts to DKK 671 million (DKK
663 million in 2019).

Defined contribution plans
Novo Nordisk’s contributions to the defined contribution plans are charged
to the income statement in the year to which they relate.

Defined benefit plans
The costs for the year for defined benefit plans are determined using the
projected unit credit method. This reflects services rendered by employees
to the valuation dates and is based on actuarial assumptions primarily
regarding discount rates used in determining the present value of benefits
and projected rates of remuneration growth. Discount rates are based on
the market yields of high-rated corporate bonds in the country concerned.

Actuarial gains and losses arising from experience adjustments and changes
in actuarial assumptions are charged or credited to other comprehensive
income in the period in which they arise. Past service costs are recognised
immediately in the income statement.

Pension plan assets are only recognised to the extent that Novo Nordisk is
able to derive future economic benefits such as refunds from the plan or
reductions of future contributions.

Costs recognised for retirement benefits are included in cost of goods
sold, sales and distribution costs, research and development costs, and
administrative costs. The net obligation recognised in the balance sheet is
reported as non-current liabilities.

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 has been determined based on reasonably likely changes
in the assumptions occurring at the end of the period.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information
3.6 Provisions and contingent liabilities

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 liabilities3

Current liabilities

Provisions
for sales
rebates1

Provisions
for legal
disputes

Provisions
for product
returns

Other
provisions2

2020
total

2019
total

30,878

111,921

(106,116)

166

(2,797)

34,052

301

33,751

2,375

662

(364)

—

(222)

2,451

2,209

242

1,082

1,398

35,733

29,553

413

(694)

(6)

—

795

293

502

814

113,810

104,621

(46)

(107,220)

(99,244)

(82)

(42)

2,042

1,723

(3,061)

39,340

4,526

148

655

35,733

4,613

319

34,814

31,120

1. Provisions for sales rebates are related to US Managed Care, Medicare, Medicaid and other minor US rebate types, as well as rebates in a number of European countries and Canada.
2. Other provisions consists of various types of provision, including obligations in relation to employee benefits such as jubilee benefits, company-owned life insurance, etc.
3. For non-current liabilities, provision for sales rebates is expected to be settled after one year, provisions for product returns will be utilised in 2022 and 2023. 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
investigations arising out of the normal conduct of its business. While
provisions that Management deems to be reasonable and appropriate
have been made for probable losses, there are uncertainties connected
with these estimates. Novo Nordisk does not expect the pending litigations,
claims and investigations, individually and in the aggregate, to have a
material impact on Novo Nordisk’s financial position, operating profit or cash
flow in addition to the amounts accrued as provision for legal disputes.

Pending litigation against Novo Nordisk
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 1 February
2021, 384 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. 236 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 2021. 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 statements 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.

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 11.8 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 contains 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.

Novo Nordisk Annual Repor t 2020 / 63

Novo Nordisk is currently defending six lawsuits, including two plead as
putative class actions, relating to the pricing of diabetes medicines. Four
of these cases are pending in New Jersey federal court; the other two are
pending in Kentucky state court and Texas federal court. All pending matters
also name as defendants Eli Lilly and Company and Sanofi-Aventis U.S.
LLC; while certain matters also name Pharmacy Benefit Managers (PBMs)
and related entities. Plaintiffs generally allege that the manufacturers and
PBMs colluded to artificially inflate list prices paid by consumers for diabetes
products, while offering reduced prices to PBMs through rebates used to
secure formulary access. Novo Nordisk does not expect the lawsuits to have
a material impact on Novo Nordisk’s financial position, operating profit or
cash flow.

In 2016, Novo Nordisk US received a Civil Investigative Demand from
the U.S. Department of Justice (“DOJ CID”) relating to potential off-label
marketing of NovoSeven® (including high dose and for prophylactic use) and
interactions with physicians and patients. The DOJ investigation was likely
prompted by a lawsuit filed by a former Novo Nordisk US employee (the
“Relator”) under seal in the Western District of Oklahoma in 2015. Relator
alleges Novo Nordisk US caused the submission of false claims to Medicare,
Medicaid, Federal Employees Health Benefits Program and private insurers
in California as a result of the same conduct that was the subject of the DOJ
CID. As a result of these allegations, Relator (on behalf of the federal and
state governments) seeks injunctive and monetary relief. A consolidated
complaint was jointly filed by relator and the State of Washington on 9
March 2020. The consolidated complaint was unsealed (made public) by the
court on 28 May 2020. Novo Nordisk has filed two motions seeking dismissal
of the Complaint, both of which are currently pending and awaiting ruling
from the Court. Novo Nordisk does not expect the lawsuit 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 information. Below is a list of ongoing matters:

– Washington Attorney General’s Office CID (March 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 (April 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 (March 2019), relating to, among other

things, marketing and promotional practices for Ozempic®.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information
Novo Nordisk Annual Repor t 2020 / 64

3.7 Other liabilities

Other liabilities primarily comprises employee cost payables, payables
related to non-current assets, and sales rebates.

– New York State Attorney General’s Office Subpoena (July 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 (December2019), relating to,

among other things, pricing and trade practices for insulin products, for
the period from 1 January 2010 to present.

– State of California Office of the Insurance Commissioner Subpoena (July

2020) related to Novo Nordisk’s patent and regulatory strategies for
Prandin® and Prandimet® in the US market, and the projected impact of
generic repaglinide on Novo Nordisk’s Prandin® and Prandimet® franchises
in the US.

– Mississippi Attorney General’s Office Subpoena (December 2020), related
to, among other things, pricing and trade practices for insulin products,
including Levemir®, NovoLog®, and Novolin®, from 1 January 2005 through
the present date.

– Vermont Attorney General’s Office Subpoena (December 2020), related to,

among other things, pricing and trade practices for insulin products sold by
Novo Nordisk during the period 1 January 2011 through the present date.

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.

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.

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 contingencies, including the probability of pending and
potential future litigation outcomes. These are by nature dependent on
inherently uncertain future events. When determining likely outcomes of
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.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationCash distribution to shareholders

Treasury shares

DKK million

Interim dividend for the year

Dividend for prior year

Share repurchases for the year

Total

2020

7,570

12,551

16,855

36,976

2019

7,100

2018

7,238

12,309

11,810

15,334

15,567

34,743

34,615

The net cash distribution to shareholders in the form of dividends and share
repurchases amounts to DKK 36,976 million, compared with a free cash
flow of DKK 28,565 million. This is in line with the guiding principle of paying
out excess capital to investors after funding organic growth and potential
acquisitions.

The total dividend for 2020 amounts to DKK 21,066 million (DKK 9.10 per
share). The 2020 final dividend of DKK 13,496 million (DKK 5.85 per share) is
expected to be distributed pending approval at the Annual General Meeting.
The interim dividend of DKK 7,570 million (DKK 3.25 per share) was paid in
August 2020. The total dividend for 2019 was DKK 19,651 million (DKK 8.35
per share), of which the final dividend of DKK 12,551 million (DKK 5.35 per
share) was paid in March 2020. 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 2020, distributable reserves
total DKK 51,858 million (DKK 40,801 million in 2019), corresponding to the
parent company's retained earnings and cash flow hedge reserve.

Novo Nordisk Annual Repor t 2020 / 65

Market
value,
DKK million

Treasury
shares in %

2020

2019

Number of
B shares
of DKK 0.20
(million)

18,613

2.0%

48.1

55.8

(19,333)

(50.0)

(148)

16,855

(0.4)

39.8

—

16,016

1.6%

37.5

(2.6)

44.9

—

48.1

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

Treasury shares
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. 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.

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 2019 share repurchase programme, totalling DKK 0.9 billion and
the DKK 17 billion Novo Nordisk B share repurchase programme for 2020, of
which DKK 1 billion was outstanding at year-end. The programme ended on
1 February 2021. Transfer of treasury shares relates to the long-term share-
based incentive programme and restricted stock units to employees.

Section 4
Capital structure
and financial items

4.1 Earnings per share, distributions to shareholders,
treasury shares, share capital and other reserves

Earnings per share

DKK million

Net profit

2020

2019

2018

42,138

38,951

38,628

Average number of
shares outstanding

in million
shares

2,333.9

2,374.3

2,419.6

Dilutive effect of
average outstanding
share pool1

Average number of
shares outstanding,
including dilutive
effect of outstanding
share pool

Basic earnings
per share

Diluted earnings
per share

in million
shares

6.1

4.4

4.8

2,340.0

2,378.7

2,424.4

DKK

18.05

16.41

15.96

DKK

18.01

16.38

15.93

1. For further information on the outstanding share pool, please refer to note 5.1.

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
monthly average number of shares outstanding. Diluted earnings per share
is calculated as net profit divided by the sum of monthly 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.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationA share
capital

B share
capital

Total share
capital

Management has assessed the following key financial risks:

4.2 Financial risks

Skemaer:

Gør rows mindre

13px

Share capital

DKK million

Development in share capital:

Share capital 2017

Cancelled in 2018

Cancelled in 2019

Share capital at the beginning
of the year

Cancelled in 2020

Share capital at the end
of the year

107

—

107

—

107

393

(10)

373

(10)

363

500

(10)

480

(10)

470

Type

Foreign exchange risk

Credit risk

Interest rate risk

Liquidity risk

Financial risk

High

Low

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.

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
comprehensive income, balance sheet and cash flow statement.

The overall objective of foreign exchange risk management is to reduce the
short-term negative impact of exchange rate fluctuations on earnings and
cash flow, 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.

At the end of 2020, the share capital amounted to DKK 107 million in A share
capital (equal to 537 million A shares of DKK 0.20) and DKK 363 million in
B share capital (equal to 1,813 million B shares of DKK 0.20). Each A share
carries 200 votes and each B share carries 20 votes.

Specification of Other reserves

DKK million

Reserve at
1 January 2018

Other comprehensive
income, net for 2018

Reserve at
31 December 2018

Other comprehensive
income, net for 2019

Reserve at
31 December 2019

Other comprehensive
income, net for 2020

Transfer of cash flow
hedge reserve to
intangible assets1

Reserve at
31 December 2020

Exchange
rate ad-
justments

Cash
flow
hedges

Tax and
other
items

Total

(1,556)

2,027

(32)

439

491

(3,704)

728

(2,485)

(1,065)

(1,677)

696

(2,046)

226

1,348

(222)

1,352

(839)

(329)

474

(694)

(1,689)

1,713

(567)

(543)

418

(92)

326

(2,528)

1,802

(185)

(911)

1. For information on derivatives refer to note 4.3

Novo Nordisk Annual Repor t 2020 / 66

During 2020, the hedging horizon varied between 5 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 ineffectiveness at 31 December 2020,
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

2020

10 months

6 months

2019

9 months

7 months

12 months

9 months

11 months

10 months

1. Chinese yuan traded offshore (CNH) is used to hedge Novo Nordisk's CNY currency

exposure.

Key currencies

Exchange rate DKK per 100

2020

2019

2018

USD

Average

Year-end

Year-end change

CNY

Average

Year-end

654

606

(9.3%)

667

668

2.5%

631

652

5.1%

Year-end change

(3.1%)

1.1%

(0.3%)

JPY

Average

Year-end

Year-end change

CAD

Average

Year-end

Year-end change

GBP

Average

Year-end

Year-end change

6.13

5.88

(3.8%)

488

474

(7.2%)

839

824

(6.0%)

6.12

6.11

3.4%

503

511

6.7%

852

877

6.0%

5.72

5.91

7.3%

487

479

(3.2%)

842

827

(1.4%)

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationNovo Nordisk Annual Repor t 2020 / 67

Manuel

skema

Credit exposure

0 under

næste row

o over

Knib andetsidste afsnit

Foreign exchange sensitivity analysis
At year-end, an immediate 5% increase/decrease 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

2021

1,900

460

200

140

110

2020

1,950

450

150

130

100

At year-end, an immediate 5% 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

2020

Other comprehensive income

Income statement

Total

2019

Other comprehensive income

Income statement

Total

Immediate
5% increase

Immediate
5% decrease

(1,893)

299

(1,594)

(1,811)

199

(1,612)

1,893

(299)

1,594

1,811

(199)

1,612

A 5% depreciation of USD versus EUR and DKK at 31 December 2020 would
affect other comprehensive income by DKK 1,380 million (DKK 1,298 million in
2019) and the income statement by DKK -2 million (DKK 135 million in 2019).

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.

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 15,089 million (DKK 15,663 million in 2019). 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 29,522 million (DKK 26,622 million in 2019). 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

2020

AA range

A range

BBB range

Not rated or below BBB range

Total

2019

AA range

A range

BBB range

Not rated or below BBB range

Derivative
financial
instruments

Cash at
bank

7,296

4,443

212

806

989

1,343

—

Total

8,285

5,786

212

806

12,757

2,332

15,089

7,471

7,145

314

545

139

—

7,610

7,194

314

545

Total

15,475

188

15,663

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, see note 2.1. However, US wholesaler credit
ratings are monitored and part of the trade receivables are sold on full non-
recourse terms; see below for details. Novo Nordisk continues to monitor
the credit exposure in countries with increasing sales and low credit ratings.

Trade receivable programmes
Please refer to note 3.4 for the description of COVID-19’s impact on trade
receivables including the loss allowance for the Group and 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 2020 amounting to:

DKK million

Japan

2020

1,817

2,351

2019

3,672

2,149

2018

3,587

1,937

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 3.4 for the split of allowance for trade receivables by
geographical segment.

Interest rate risk
Novo Nordisk has no significant exposure to interest rate risk as Novo
Nordisk does not hold any significant interest-bearing marketable securities
or non-current loans. Furthermore, net interest costs have low sensitivity
towards interest rates due to the capital structure.

Liquidity risk
The liquidity risk is considered to be low. 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.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationNovo Nordisk Annual Repor t 2020 / 68

For cash flow hedges of foreign currency risk on highly probable non-
financial asset purchases, the cumulative value adjustments are transferred
directly from the cash flow hedge reserve to the initial cost of the asset
when recognised.

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.

4.3 Derivative financial instruments

Derivative financial instruments

2020

2019

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 income2

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

29,110

10,291

39,401

19,411

4,578

23,989

63,390

1,658

191

1,849

379

104

483

2,332

483

1,849

—

1,307

1,318

1,365

1,318

25,394

10,013

35,407

11,287

3,761

15,048

50,455

116

188

116

315

130

445

217

289

734

289

445

1. Average hedge rate for USD cash flow hedges is 640 at the end of 2020 and 654 at the end of 2019.
2. The fair value of cash flow hedges at year-end 2020, DKK 1,802 million, is recognised in other comprehensive income. In addition DKK 418 million in cash flow hedge losses on

intangible asset purchases has been incurred for a total 2020 other comprehensive impact of DKK 1,384 million. The DKK 418 million deferred loss was transferred directly from the
cash flow hedge reserve to the initial cost of the intangible assets.

The 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.

Initial recognition and measurement
On initiation of the contract, Novo Nordisk designates each derivative
financial contract that qualifies for hedge accounting as one of:

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.

– 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 attributable 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 statement when the hedged transaction is recognised in the income
statement.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information4.4 Borrowings

Contractual undiscounted cashflows

DKK million

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

Novo Nordisk Annual Repor t 2020 / 69

4.5 Cash and cash equivalents, financial reserves and
free cash flow

2019

Leases

Bank
overdrafts1

DKK million

2020

2019

2018

Total

Cash and cash equivalents

659

1,506

Cash at bank (note 4.2)

1,424

734

1,140

4,804

Borrowings1

Cash and cash equivalents

Financial reserves

Cash and cash equivalents

Undrawn committed credit facility2

Undrawn bridge facility3

4,483

Borrowings1, 3

12,757

(531)

12,226

11,531

5,577

(576)

15,475

15,638

(64)

(9)

15,411

15,629

15,411

11,578

—

(595)

15,629

11,574

—

(506)

Financial reserves4

28,758

26,394

26,697

3,009

1,474

—

659

—

659

Leases

855

1,247

694

1,241

Bank
overdrafts1

1,107

Loans

5,577

—

2020

Total

7,539

1,247

694

1,241

847

1,424

734

1,140

4,037

5,577

1,107

10,721

4,145

3,672

2,897

775

5,577

1,107

10,356

—

5,577

1,107

2,897

7,459

3,824

3,009

815

Reconciliation of liabilities arising from financing activities

Non-cash movements

Beginning
of the year Cash flows Additions

Disposals

Exchange
rates

Other

End of the
year

3,824

—

595

4,419

4,483

3,988

506

4,494

4,503

(950)

5,582

100

4,732

467

5,199

(822)

(741)

(686)

978

—

978

—

978

640

—

640

—

640

—

(57)

—

(57)

—

(57)

(171)

(5)

(119)

(295)

—

(295)

—

(9)

—

(9)

—

(9)

—

Free cash flow

DKK million

Net cash generated from
operating activities

Net cash used in investing
activities

Repayment on lease liabilities

Free cash flow4

2020

2019

2018

51,951

46,782

44,616

(22,436)

(11,509)

(12,080)

(950)

28,565

(822)

—

34,451

32,536

1. Bank overdrafts includes DKK 576 million classified as financing activities (DKK 595

million in 2019) and DKK 531 million classified as cash and cash equivalents (DKK 64
million in 2019).

2. The undrawn committed credit facility comprises a EUR 1,550 million facility (EUR
1,550 million in 2019 and EUR 1,550 million in 2018) committed by a portfolio of
international banks. The facility matures in 2024.

3,672

5,577

576

9,825

531

10,356

3. The undrawn bridge facility included in financial reserves comprises the EUR

750 million (DKK 5,577 million) undrawn portion of EUR 1,500 million bridge facility.
The facility is expected to mature in 2021 but the terms provide that the maturity can
be extended, at the option of Novo Nordisk, through June 2022. Financial reserves
include amounts undrawn under credit facilities and overdrafts where the repayment
is not contractually required within 12 months. In accordance with IFRS, the DKK
5,577 million (EUR 750 million) drawn loan has been classified as current borrowings as
it is Management’s expectation that it will be repaid in 2021.

4. Additional non-IFRS financial measure; please refer to ‘Non-IFRS financial measures’,

which is not part of the audited financial statements.

3,824

595

4,419

4,483

DKK million

2020

Lease liabilities

Loans

Bank overdrafts1

Liabilities arising from financing activities

Bank overdrafts1

Total borrowings

2019

Lease liabilities

Bank overdrafts1

Liabilities arising from financing activities

Bank overdrafts1

Total borrowings

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationNovo Nordisk Annual Repor t 2020 / 70

Restricted cash
Cash and cash equivalents at 31 December 2020 includes DKK 653 million
that is restricted (DKK 509 million in 2019). The restricted cash balance
relates to subsidiaries in which availability of currency for remittance of
funds is temporarily scarce.

Accounting policies
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
overdrafts. Where short-term bank overdrafts 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 statement.

Financial reserves comprise the sum of cash and cash equivalents at the end
of the year and undrawn committed credit and loan facilities, with a maturity
of more than 12 months, less loans and bank overdrafts classified as
liabilities arising from financing activities contractually obliged for repayment
within 12 months of the balance sheet date.

4.6 Change in working capital

4.7 Other non-cash items

DKK million

Inventories

2020

(895)

2019

(1,305)

2018

(963)

Trade receivables

(2,822)

(2,126)

(2,621)

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:

Other receivables and
prepayments

Trade payables

Other liabilities

Adjustment for payables related to
non-current assets

Adjustment related to divestment
of Group companies

Change in working capital
including exchange rate
adjustments

Exchange rate adjustments

Cash flow change in working
capital

(419)

(641)

1,274

879

—

(1,190)

(398)

1,202

295

(42)

(662)

1,146

(348)

—

(2,624)

(1,729)

(3,564)

(3,364)

176

(6)

(4,353)

(3,388)

(3,370)

Accounting policies
Working capital is defined as current assets less current liabilities and
measures the liquid assets Novo Nordisk has available for the business.

DKK million

2020

2019

2018

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 3.6) and retirement benefit
obligations (note 3.5)

Other

Total other non-cash items

195

(149)

823

—

3,605

3,322

7,849

155

145

(163)

137

363

(12)

414

(68)

(122)

162

—

6,071

7,032

5,503

444

6,098

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information
4.8 Financial assets and liabilities

Financial assets by category

DKK million

Other financial assets1

Derivative financial instruments (note 4.3)

Financial assets at fair value through the
income statement

Other financial assets1

Trade receivables

Other receivables and prepayments (current
and non-current)

– less prepayments and VAT receivables

Cash at bank (note 4.5)

Financial assets at amortised cost

Trade receivables in a factoring portfolio2

Financial assets at fair value through OCI

2020

766

2,332

3,098

300

2019

970

188

1,158

364

11,643

12,203

4,835

(4,113)

12,757

25,422

16,091

4,275

(3,899)

15,475

28,418

12,709

Total financial assets at the end of the year
by category1

44,611

42,285

1. Financial assets with the exception of other financial assets and the non-current part of
other receivables and prepayments (DKK 674 million in 2020, DKK 841 million in 2019)
are all due within one year. Other financial assets at amortised cost include DKK 280
million which are due in more than five years (DKK 327 million in 2019). 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. Refer to note 3.4.

Financial liabilities by category

DKK million

Derivative financial instruments (note 4.3)

Financial liabilities measured at
fair value through the income statement

Borrowings (non-current)

Borrowings (current)3

Trade payables

Other liabilities

– less VAT and duties payable

Financial liabilities measured at
amortised cost

32,480

25,448

Total financial liabilities at the end of the year
by category4

33,845

26,182

3. The fair value of loans approximates the booked amount
4. Please refer to note 4.4 for a maturity analysis for non-current and current borrowings.

All other financial liabilities are due within one year.

Fair value measurement hierarchy

DKK million

Active market data

Directly or indirectly observable market data

Not based on observable market data5

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

2020

634

2,332

16,223

19,189

—

1,365

—

1,365

2019

846

188

12,833

13,867

—

734

—

734

5. 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 into
the estimate of US wholesaler charge-backs are described in note 2.1.

Novo Nordisk Annual Repor t 2020 / 71

2020

1,365

2,897

7,459

5,717

2019

734

3,009

1,474

6,358

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 2020, 2019 or 2018. There are no significant
intangible assets or items of property, plant and equipment measured at fair
value.

For a description of the credit quality of financial assets such as trade
receivables, cash at bank, current debt and derivative financial instruments,
refer to notes 4.2 and 4.3.

17,005

15,085

(598)

(478)

Accounting policies
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
recognition 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 transferred 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.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationFinancial 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-collect' 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 are initially recognised at transaction price 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
receivables 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.

Novo Nordisk Annual Repor t 2020 / 72

4.9 Financial income and expenses

Financial impact from forward contracts and currency options, specified

Financial income

DKK million

Interest income1

Foreign exchange gain (net)

Financial gain from forward
contracts (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
contracts (net)

Capital loss on investments, etc.

Result of associated companies

Other financial expenses

2019

2018

2020

337

1,142

—

149

1,628

2020

390

—

2019

220

539

1,889

2,673

195

—

150

145

137

281

—

1,656

152

251

2,122

2018

1,510

—

Total financial expenses

2,624

3,995

1,755

1. Total interest income and expenses is measured at amortised cost for financial assets

and liabilities.

DKK million

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

Financial income/(expense) from
currency options

2020

2019

2018

(329)

(1,677)

1,841

(1,609)

(1,299)

(835)

(217)

(143)

(804)

830

1,257

(1,889)

(2,673)

1,656

—

186

(3)

(31)

152

Accounting policies
As described in note 4.2 Management has chosen to classify the result
of hedging activities as part of financial items in the income statement
except for cash flow hedges of foreign currency risk on highly probable
non-financial asset purchases, where the cumulative value adjustments are
transferred directly from the cash flow hedge reserve to the initial cost of the
asset when recognised.

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.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationNovo Nordisk Annual Repor t 2020 / 73

Section 5
Other disclosures

5.1 Share-based payment schemes

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
programme (management group
below Management Board)

Shares allocated to individual
employees

Share-based payment expensed in
the income statement

2020

189

162

436

823

2019

195

363

2018

204

145

414

1. In 2017 Novo Nordisk introduced, for the first time, a share-based compensation

programme with terms which amortises the grant date valuation over four years. The
2020 expense includes amortisation of the 2017, 2018, 2019 and 2020 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.

Long-term share-based incentive programme

Management Board
On 2 February 2021, the Board of Directors approved the allocation of a
total of 370,038 Novo Nordisk B shares to the members of the Management
Board for the 2020 financial year. The value at launch of the programme
(adjusted for expected dividends) was DKK 152 million. On average, this
corresponds to 14.9 months’ fixed base salary plus pension contribution
for the CEO, 11.2 months’ fixed base salary plus pension contribution
per executive vice president as of 1 March 2020 and 8.3 months’ fixed
base salary plus pension for senior vice presidents. The cost of the 2020
programme is amortised over the vesting period of 2020-2023 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 2020, and the share
price used for the determining the grant date fair value of the award was
the average share price (DKK 435) for Novo Nordisk B shares on Nasdaq
Copenhagen in the period 5-19 February 2020, adjusted for the expected
dividend. Based on the split of participants when the share allocation was
decided, 47% of the allocated shares will be allocated to members of Executive
Management and 53% to other members of the Management Board.

The shares allocated to the pool for 2017 were released to the individual
participants subsequent to approval of the 2020 Annual Report by the
Board of Directors and after the announcement of the 2020 full-year
financial results on 3 February 2021. The shares allocated correspond
to a value at launch of the programme of DKK 76 million, expensed over
the vesting period of 2017-2020. The number of shares to be transferred
(331,587 shares) is lower than the original number of shares allocated, as
some participants had left the company before the programme's release
conditions were met.

All restricted stock units and shares allocated to Management are hedged by
treasury shares.

Management group below Management Board
The management group below the Management Board has a share-based
incentive programme with similar performance criteria. For 2020, a total
of 1,011,692 shares were allocated to this group, corresponding to a value
at launch of the programme (adjusted for expected dividends) of DKK 416
million. The cost of the 2020 programme is amortised over the vesting
period of 2020-2023 at an annual amount of DKK 104 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 2017 were released to the individual participants
subsequent to approval of the 2020 Annual Report by the Board of Directors
and after the announcement of the 2020 full-year financial results on 3
February 2021. The shares allocated correspond to a value at launch of
the programme of DKK 162 million amortised over the period 2017-2020.
The number of shares to be transferred (635,516 shares) is lower than
the original number of shares allocated, as some participants had left the
company before the programme’s release conditions were met.

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.

Tjek Typo i W-desk

1. linje i skema

luft over note

minus en linje under note

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationNovo Nordisk Annual Repor t 2020 / 74

General terms and conditions of launched programmes

Number of shares awarded in the year

Value per share at launch (DKK)

Total market value at launch (DKK million)

Amortisation period of the programme

Allocated to recipients

Vesting period

Restricted stock units to employees

Shares for Management Board

Shares for management group below
Management Board

Shares allocated to individual
employees

2020

2019

2018

2020

2019

2018

2020

2019

2018

2020

2019

2018

—

2,148,580

307

660

2019 to
2023

Feb 2023

370,038

508,398

411,090

1,011,692

1,300,333

1,114,455

43,790

154,122

159,437

411

152

298

152

280

115

411

416

298

387

280

312

391

311

278

2020 to
2023

2019 to
2022

2018 to
2021

2020 to
2023

2019 to
2022

2018 to
2021

2020 to
2023

2019 to
2022

2018 to
2021

Feb 2024

Feb 2023

Feb 2022

Feb 2024

Feb 2023

Feb 2022

2023

2022

2021

—

3.5 years

—

3 years

Outstanding restricted stock units

Total

Restricted stock units to employees

Shares for Management Board

Shares for management group below
Management Board

Shares allocated to individual
employees

2020

2019

2018

2020

2019

2018

2020

2019

2018

2020

2019

2018

2020

2019

2018

Outstanding at the beginning of the
year

6,879,198

5,584,019

4,933,882

2,148,580

1,521,031

1,556,211

1,326,080

1,228,714

1,115,494

3,173,185

2,665,226

2,226,683

231,353

169,048

35,494

Released allocated shares

(361,844)

(2,553,658)

(825,537)

(29,250)

(1,431,192)

(35,180)

(95,082)

(378,421)

(284,173)

(171,162)

(662,172)

(480,301)

(66,350)

(81,873)

(25,883)

Cancelled allocated shares

(129,713)

(262,596)

(209,308)

Allocated in the year

1,425,520

4,111,433

1,684,982

Performance adjustment1

863,557

—

(89,839)

2,148,580

—

(12,700)

(32,611)

(13,697)

(95,038)

(130,202)

(195,611)

(21,975)

(9,944)

—

370,038

508,398

411,090

1,011,692

1,300,333

1,114,455

43,790

154,122

159,437

239,567

—

623,990

—

Outstanding at the end of the year

8,676,718

6,879,198

5,584,019

2,119,330

2,148,580

1,521,031

1,827,903

1,326,080

1,228,714

4,542,667

3,173,185

2,665,226

186,818

231,353

169,048

1. Number of shares for Management Board and management group below Management board has been adjusted as the sales growth target set by the Board is expected to be exceeded for the 2018, 2019 and 2020 programmes.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional information5.2 Commitments

Total contractual obligations and recognised non-current debt can be specified as follows (payments due by period):

DKK million

Retirement benefit obligations

Leases (note 4.4)

Total obligations recognised in the
balance sheet

Leases1

Within
1 year

855

878

152

1-3
years

1,247

1,293

198

Research and development obligations

2,733

3,460

3-5
years

More
than
5 years

2020

Total

1,286

1,399

1,241

4,037

2,527

5,436

764

280

137

Within
1 year

847

860

128

1-3
years

1,424

1,450

229

3-5
years

734

759

199

7,235

2,600

3,258

1,493

More
than
5 years

1,270

1,140

2019

Total

1,334

4,145

2,410

5,479

376

932

7,380

Research and development – potential
milestone payments2

Commercial product launch – potential
milestone payments2

Purchase obligations relating to invest-
ments in property, plant and equipment

205

918

507

2,453

4,083

300

1,023

1,009

2,403

4,735

—

339

—

212

5,893

6,105

—

339

172

—

3,468

—

172

Other purchase obligations

7,528

3,014

748

12,063

5,695

2,989

1,175

621

10,480

Total obligations not recognised in the
balance sheet

10,957

7,590

2,531

9,511

30,589

8,895

7,499

3,876

6,897

27,167

Total contractual obligations

11,835

8,883

3,269

12,038

36,025

9,755

8,949

4,635

9,307

32,646

1. Predominantly relates to estimated variable property taxes, leases committed not yet commenced and low value assets.
2. Potential milestone payments are associated with uncertainty as they are linked to successful achievements in research activities.

694

738

134

905

—

773

Novo Nordisk Annual Repor t 2020 / 75

Contractual obligations
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 75% of the commitments are related
to leases outside Denmark.

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 are 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, royalties and
other payments based on a percentage of sales generated from sale of
goods following marketing approval are excluded from the contractual
commitments analysis because of their contingent nature, related to future
sales. The due periods disclosed are based on Management’s best estimate.

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.

Other guarantees
Other guarantees amounts to DKK 1,117 million (DKK 906 million in 2019).
Other guarantees primarily relate to performance guarantees issued by
Novo Nordisk.

World Diabetes Foundation (WDF)
At the Annual General Meeting in 2020, a donation to WDF was approved,
thereby replacing the remaining five years of the former donation approved
by the Annual General Meeting in 2014, which covered the period 2018-
2024. For the years 2020-2024, the donation is calculated as 0.085% of Novo
Nordisk's total Diabetes care net sales. The annual donation cannot exceed
DKK 91 million in 2020, DKK 92 million in 2021, DKK 93 million in 2022, DKK
94 million in 2023, ending at DKK 95 million in 2024, or 15% of the taxable
income of Novo Nordisk A/S in the financial year in question, whichever is
the lowest. In addition, in 2020 Novo Nordisk A/S granted a special one-off
contribution of DKK 50 million.

For 2020, the total amount to WDF was DKK 138 million (DKK 86 million in
2019 and DKK 85 million in 2018).

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationNovo Nordisk Annual Repor t 2020 / 76

5.5 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.

5.3 Related party transactions

Material transactions with related parties

In 2020, Novo Nordisk A/S acquired 14,025,000 B shares, worth DKK
6.0 billion, from Novo Holdings A/S as part of the DKK 17.0 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 2020.

DKK million

Novo Holdings A/S

Purchase of Novo Nordisk B shares

5,963

2020

2019

2018

4,894

—

4,207

(368)

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, Sonion A/S or CS Solar Fund XIV.

—

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 commitment1

Distribution by CS Solar Fund XIV

5,767

5,580

5,496

775

(18)

(113)

—

941

(20)

(132)

103

389

(385)

1,052

(19)

(115)

121

—

1. The liability disclosed for 2019 related to capital commitment was paid in 2020
(DKK 392 million).

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 76.5% 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, Sonion 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.

For information on remuneration of the Management of Novo Nordisk,
please refer to note 2.4, ‘Employee costs’. There were no loans to the Board
of Directors or Executive Management in 2020, nor were there any in 2019
or 2018.

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.

There were no material unsettled balances with related parties at the end of
the year.

Translation of foreign currencies

5.4 Fee to statutory auditors

DKK million

Statutory audit

Audit-related services

Tax advisory services

Other services

Total fee to statutory auditors

2020

2019

2018

Functional and presentation currency
Items included in the financial statements of Novo Nordisk's entities are
measured using the currency of the primary economic environment in
which the entity operates (functional currency). The consolidated financial
statements are presented in Danish kroner (DKK), which is also the
functional and presentation currency of the parent company.

Translation of transactions and balances
Foreign currency transactions are translated into the functional currency
using the exchange rates prevailing at the transaction dates. Foreign
exchange gains and losses resulting from the settlement of such
transactions and from the translation at year-end exchange rates of
monetary assets and liabilities are recognised in the income statement.

Fees for services other than statutory audit of the financial statements
amount to DKK 16 million (DKK 19 million in 2019 and DKK 17 million in
2018). PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab
(PricewaterhouseCoopers Denmark) provided other services in the amount
of DKK 9 million (DKK 12 million in 2019 and DKK 9 million in 2018), which
relate to tax compliance and transfer pricing, educational training, review of
ESG data, due diligence and other assurance assessments and opinions.

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.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationNovo Nordisk Annual Repor t 2020 / 77

Company and country

Percentage of shares owned

Activity

Company and country

Percentage of shares owned

Activity

5.6 Companies in the Novo Nordisk Group
Activity:

• Sales and marketing
• Research and development

•
•

Production
Services/investments

Novo Nordisk Production SAS, France

Novo Nordisk Pharma GmbH, Germany

Company and country

Percentage of shares owned

Activity

Novo Nordisk Hellas Epe., Greece

Parent company

Novo Nordisk A/S, Denmark

Subsidiaries by geographical area

North America Operations

Novo Nordisk Canada Inc., Canada

Novo Nordisk Inc., United States

Novo Nordisk North America Operations A/S, Denmark

Novo Nordisk Pharmaceutical Industries LP, United States

Novo Nordisk Pharma, Inc., United States

Novo Nordisk Research Center Indianapolis, Inc., United States

Novo Nordisk Research Center Seattle, Inc., United States

Novo Nordisk US Bio Production, Inc., United States

Novo Nordisk US Commercial Holdings, Inc., United States

Novo Nordisk US Holdings Inc., United States

Corvidia Therapeutics, Inc., United States

Emisphere Technologies, Inc., United States

International Operations

Novo Nordisk Pharmaceuticals A/S, Denmark

Novo Nordisk Pharma Operations A/S, Denmark

Novo Nordisk Region AAMEO and LATAM A/S, Denmark

Novo Nordisk Region Europe A/S, Denmark

Novo Nordisk Region Japan & Korea A/S, Denmark

EMEA

Aldaph SpA, Algeria

Novo Nordisk Pharma GmbH, Austria

S.A. Novo Nordisk Pharma N.V., Belgium

Novo Nordisk Pharma d.o.o., Bosnia and Herzegovina

Novo Nordisk Pharma EAD, Bulgaria

Novo Nordisk Hrvatska d.o.o., Croatia

Novo Nordisk s.r.o., Czech Republic

Novo Nordisk Denmark A/S, Denmark

Novo Nordisk Pharmatech A/S, Denmark

Novo Nordisk Egypt LLC, Egypt

Novo Nordisk Farma OY, Finland

Novo Nordisk, France

Novo Nordisk Hungária Kft., Hungary

• • • •

Novo Nordisk Biopharm Limited, Ireland

Novo Nordisk Limited, Ireland

Novo Nordisk Ltd, Israel

Novo Nordisk S.P.A., Italy

Novo Nordisk Kazakhstan LLP, Kazakhstan

Novo Nordisk Kenya Ltd., Kenya

Novo Nordisk Pharma SARL, Lebanon

UAB Novo Nordisk Pharma, Lithuania

Novo Nordisk Farma dooel, North Macedonia

Novo Nordisk Pharma SAS, Morocco

Novo Nordisk B.V., Netherlands

Novo Nordisk Pharma Limited, Nigeria

Novo Nordisk Norway AS, Norway

Novo Nordisk Pharmaceutical Services Sp. z o.o., Poland

Novo Nordisk Pharma Sp.z.o.o., Poland

Novo Nordisk Comércio Produtos Farmacêuticos Lda., Portugal

Novo Nordisk Farma S.R.L., Romania

Novo Nordisk Limited Liability Company, Russia

Novo Nordisk Production Support LLC, Russia

Novo Nordisk Pharma d.o.o. Belgrade (Serbia), Serbia

Novo Nordisk Slovakia s.r.o., Slovakia

Novo Nordisk, d.o.o., Slovenia

Novo Nordisk (Pty) Limited, South Africa

Novo Nordisk Pharma S.A., Spain

Novo Nordisk Scandinavia AB, Sweden

Novo Nordisk Health Care AG, Switzerland

Novo Nordisk Pharma AG, Switzerland

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

Novo Nordisk Holding Limited, United Kingdom

Novo Nordisk Limited, United Kingdom

Ziylo Limited, United Kingdom

100

•
•

•

•
•

•

•
•

•
•
•
•
•

• •
•
•
•
•
•
•
•
• •
•
•
•

100

•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•

•
•
•
•
•
•
•
•
•
•
•
•

•

Region China

Novo Nordisk (China) Pharmaceuticals Co., Ltd., China

Novo Nordisk Region China A/S, Denmark

• •

100

Beijing Novo Nordisk Pharmaceuticals Science & Technology Co., Ltd., China 100

•

Novo Nordisk Hong Kong Limited, Hong Kong

Novo Nordisk Pharma (Taiwan) Ltd., Taiwan

Rest of World

Novo Nordisk Pharma Argentina S.A., Argentina

Novo Nordisk Pharmaceuticals Pty. Ltd., Australia

Novo Nordisk Pharma (Private) Limited, Bangladesh

Novo Nordisk Produção Farmacêutica do Brasil Ltda., Brazil

Novo Nordisk Farmacêutica do Brasil Ltda., Brazil

Novo Nordisk Farmacéutica Limitada, Chile

Novo Nordisk Colombia SAS, Colombia

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 Pharma Ltd., Japan

Novo Nordisk Pharma (Malaysia) Sdn Bhd, Malaysia

100

Novo Nordisk Pharma Operations (Business Area) Sdn Bhd, Malaysia 100

Novo Nordisk Mexico S.A. de C.V., Mexico

•

Novo Nordisk Pharmaceuticals Ltd., New Zealand

Novo Nordisk Pharma (Private) Limited, Pakistan

Novo Nordisk Panama S.A., Panama

Novo Nordisk Peru S.A.C., Peru

Novo Nordisk Pharmaceuticals (Philippines) Inc., Philippines

Novo Nordisk Pharma (Singapore) Pte Ltd., Singapore

Novo Investment Pte Limited, Singapore

Novo Nordisk Pharma Korea Ltd., South Korea

Novo Nordisk Lanka (PVT) Ltd, Sri Lanka

Novo Nordisk Pharma (Thailand) Ltd., Thailand

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

•

Companies without significant activities are not included in the list.
NNE A/S subsidiaries are not included in the list.

100

•
•

•
•
•

•
•
•
•

•

•
• •
• •
•

•
•
•

•
•
•
•

•

•
•
•

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Financial statement / Additional informationManuelNovo Nordisk Annual Repor t 2020 / 78

Financial definitions

(part of Management's review – not audited)

Dividend payout ratio
Total dividends for the year as a percentage of net profit.

Purchase of intangible assets
Cash flow statement amount for the purchase of intangible assets.

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'.

Purchase of property, plant and equipment
Cash flow statement amount for the purchase of property, plant and
equipment.

The definition of capital expenditure was redefined in 2019. Capital
expenditure is now defined as purchase of property, plant and equipment
from the cash flow statement. Amounts for 2016-2018 have been restated in
'Performance highlights'.

ADR
An American Depository 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.

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.

Gross margin
Gross profit as a percentage of sales.

Net profit margin
Net profit as a percentage of sales.

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.

Part of Management´s review – not auditedManuelNon-IFRS financial
measures

Sales in constant exchange rates

DKK million

Net sales

2020

2019

2018

126,946

122,021

111,831

Effect of exchange rate

3,254

(3,923)

5,043

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 have not been
restated. Please refer to note 1.2.

(part of Management's review – not audited)

Sales in constant exchange rates

130,200

118,098

116,874

Novo Nordisk Annual Repor t 2020 / 79

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 reserves
– Free cash flow
– Cash to earnings

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 of the
prior year compared with net sales/operating profit for the same period of
the prior year. Price adjustments within hyperinflation countries as defined
in IAS 29 ‘Financial reporting in hyperinflation 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 operating profit by adjusting for the impact of currency fluctuations.

Net sales previous year

122,021

111,831

111,696

% increase/(decrease) in reported
currencies

% increase/(decrease) in constant
exchange rates

4.0%

9.1%

0.1%

6.7%

5.6%

4.6%

Operating profit in constant exchange rates

The following table shows the reconciliation of operating profit after tax
to net operating assets with operating profit/equity in %, the most directly
comparable IFRS financial measure:

Operating profit/equity in %

DKK million

Operating profit

/ Equity

2020

54,126

63,325

85.5%

2019

2018

52,483

47,248

57,593

51,839

91.1%

DKK million

Operating profit

2020

2019

2018

54,126

52,483

47,248

Operating profit/equity in %

Effect of exchange rate

1,930

(2,607)

3,098

Operating profit in constant
exchange rates

Operating profit previous year

% increase/(decrease) in reported
currencies

% increase/(decrease) in constant
exchange rates

56,056

52,483

49,876

50,346

47,248

48,967

3.1%

11.1%

(3.5%)

6.8%

5.6%

2.8%

Operating profit after tax to net operating assets (OPAT/NOA)
Operating profit after tax to net operating assets is defined as ‘operating
profit after tax‘ (using the effective tax rate) as a percentage of average
inventories, receivables, property, plant and equipment, intangible assets
and deferred tax assets, less non-interest-bearing liabilities including
provisions and deferred tax liabilities (where average is the sum of the
above assets and liabilities at the beginning of the year and at year-end
divided by two).

Management believes operating profit after tax to net operating assets is
a useful measure in providing investors and Management with information
regarding the Group's performance. The calculation of this financial target
is a widely accepted measure of earnings efficiency in relation to total
capital employed.

Operating profit after tax to net operating assets

DKK million

Operating profit after tax

/ Average net operating assets

Operating profit after tax to net
operating assets in %

2020

42,922

51,824

2019

2018

42,091

38,318

42,940

32,832

82.8%

98.0%

116.7%

OPAT/NOA numerator

Reconciliation of operating profit to operating profit after tax:

DKK million

Operating profit

2020

2019

2018

54,126

52,483

47,248

Tax on operating profit (using
effective tax rate)

(11,204)

(10,392)

(8,930)

Operating profit after tax

42,922

42,091

38,318

Part of Management´s review – not auditedManuelNovo Nordisk Annual Repor t 2020 / 80

The following table shows a reconciliation of free cash flow with net cash
generated from operating activities, the most directly comparable IFRS
financial measure:

2019

5,835

2018

5,145

50,551

41,891

4,121

2,893

Financial reserves
'Financial reserves at the end of the year' is defined as the sum of cash and
cash equivalents at the end of the year and undrawn committed credit and
loan facilities, with a maturity of more than 12 months, less loans and bank
overdrafts classified as liabilities arising from financing activities with obliged
repayment within 12 months of the balance sheet date.

Free cash flow

DKK million

Management believes that financial reserves at the end of the year are an
important measure of the Group's financial strength from an investor's
perspective, capturing the robustness of the Group's financial position and
its financial preparedness for unforeseen developments.

Net cash generated from
operating activities

Net cash used in investing
activities

2020

2019

2018

51,951

46,782

44,616

(22,436)

(11,509)

(12,080)

The following table reconciles total financial reserves with cash and cash
equivalents, the most directly comparable IFRS financial measure:

Repayment on lease liabilities

(950)

(822)

—

Free cash flow

28,565

34,451

32,536

Financial reserves

DKK million

Cash and cash equivalents

Undrawn committed credit facility

2020

12,226

11,531

5,577

(576)

2019

15,411

11,578

—

(595)

2018

15,629

11,574

—

(506)

(4,610)

Undrawn bridge facility2

(15,085)

(14,098)

Borrowings2

(31,120)

(26,161)

Financial reserves2

28,758

26,394

26,697

2. Financial reserves include amounts undrawn under credit facilities and overdrafts
where the repayment of such facilities or overdrafts is not contractually required
within 12 months of the balance sheet date. Financial reserves include the DKK 5,577
million (EUR 750 million) undrawn portion of a bridge facility as the terms of the facility
provide that the maturity can be extended, at the option of Novo Nordisk, through
June 2022. In accordance with IFRS, the DKK 5,577 million (EUR 750 million) drawn
portion of the bridge facility has nevertheless been classified as current debt as it is
Management’s expectation that the facility will be repaid in 2021.

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’.

From 1 January 2019, Novo Nordisk has defined free cash flow as ’net cash
generated from operating activities’, less ‘net cash used in investing activities’,
less repayment on lease liabilities. The updated definition reflects the imple-
mentation 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.

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 reconciliation of cash to earnings to cash flow
from operating activities/net profit in %, the most directly comparable IFRS
financial measure:

Cash flow from operating activities/net profit in %

DKK million

2020

2019

2018

Net cash generated from
operating activities

/ Net profit

Cash flow from operating
activities/net profit in %

51,951

42,138

46,782

38,951

44,616

38,628

123.3%

120.1%

115.5%

Cash to earnings

DKK million

Free cash flow

/ Net profit

Cash to earnings

2020

28,565

42,138

67.8%

2019

34,451

38,951

88.4%

2018

32,536

38,628

84.2%

OPAT/NOA denominator

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)

Net operating assets

Average net operating assets1

2020

20,657

50,269

5,865

674

18,536

27,734

289

4,161

(2,502)

(1,399)

(4,526)

(5,717)

(3,913)

(17,005)

(34,814)

58,309

51,824

841

17,641

24,912

806

3,434

(80)

(1,334)

(4,613)

(6,358)

(4,212)

—

16,336

22,786

1,013

3,090

(118)

(1,256)

(3,392)

(6,756)

45,339

42,940

36,763

32,832

1. Average net operating assets for 2019 was calculated based on an adjusted net

operating assets figure for 2018, which was 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 was adjusted to DKK 40,541
million for the calculation of the average net operating assets for 2019.

Reconciliation of net operating assets to equity:

DKK million

Equity

Investment in associated
companies

Other financial assets

Derivative financial instruments

2020

63,325

(582)

(1,066)

(2,332)

2019

2018

57,593

51,839

(474)

(531)

(1,334)

(1,242)

(188)

(204)

Cash at bank

(12,757)

(15,475)

(15,638)

Borrowings – non-current

Borrowings – current

Derivative financial instruments

2,897

7,459

1,365

3,009

1,474

734

—

515

2,024

Net operating assets

58,309

45,339

36,763

Part of Management´s review – not auditedStatement of
environmental,
social and
governance (ESG)
performance

for the year ended 31 December

Environmental performance

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 tonnes)
Waste from production sites (1,000 tonnes)

Social performance

Patients

Patients reached with Novo Nordisk's Diabetes care products (estimate in millions)

– Hereof reached via the Novo Nordisk Access to Insulin Commitment (estimate in millions)

Children reached through the Changing Diabetes in Children programme (CDiC) (cumulative)

Donations and other contributions (DKK million)

Employees

Employees (total)

Employee turnover

Employee engagement1

Frequency of occupational accidents (number per million working hours)

Other

Animals purchased for research

Gender in management (ratio men:women)

Gender in BoD (ratio men:women)

Governance performance

Relevant employees trained in business ethics

Business ethics reviews

Facilitations of the Novo Nordisk Way (total)

Supplier audits

Product recalls

Failed inspections

Company trust (scale 0–100)

Total tax contribution (DKK million)

Breaches of environmental regulatory limit values

Novo Nordisk Annual Repor t 2020 / 81

Note

2020

2019

2018

7.1

7.2

7.3

7.4

8.1

8.2

8.3

8.4

8.5

8.6

9.1

9.2

9.3

9.4

9.5

9.6

9.7

9.8

3,191

100%

3,368

170

141

32.8

3.2

28,296

158

45,323

7.9%

N/A

1.3

50,036

59:41

62:38

99%

177

—

80.6

26,376

2,993

76%

3,149

306

124

3,099

77%

3,101

278

142

30.0

2.9

29.2

0.3

25,695

22,876

105

103

43,258

11.4%

91%

2.2

43,202

11.7%

91%

2.4

49,637

65,593

60:40

62:38

60:40

67:33

99%

236

—

78.2

99%

294

—

84.5

27,527

25,825

1. Due to COVID-19, the annual employee engagement survey was replaced with more frequent and dynamic surveys tailored to local needs to ensure a continuous check-in with
employees throughout 2020.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional informationManuelNovo Nordisk Annual Repor t 2020 / 82

Notes to the consolidated ESG 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, 99b and 107d specify the requirements of
the EU Directive on disclosure of non-financial and diversity information
to report on the management of risks related to the environment, climate,
human rights, labour and social conditions, anti-corruption and gender
distribution. These requirements are addressed in the Management Review.
Novo Nordisk also adheres to the International Integrated Reporting
Framework and the AA1000AP(2018), 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.

Novo Nordisk is an active member of the world's leading circular economy
network, the Ellen MacArthur Foundation.

As recommended by the Task Force on Climate-related Financial Disclosures
(TCFD), Novo Nordisk is working to integrate two climate change scenarios
into the risk management process to identify short, medium and long-term
risks within our production and supply chain:

– 2⁰C scenario, consistent with meeting the Paris Agreement Goal

(Representative Concentration Pathway RCP 2.6)

– 4⁰C scenario as an alternative high-emission scenario (RCP 8.5)

Novo Nordisk discloses in accordance with the recommendations put
forward by the Carbon Disclosure Project (CDP). For a full breakdown of
climate and water impacts, please refer to the publicly available report of
Novo Nordisk CDP disclosures.

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 ESG information. Novo Nordisk
has designed processes to ensure that the qualitative and quantitative
information that documents the ESG 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 'Purpose & sustainability'.

Materiality
Key issues are identified through ongoing stakeholder engagement
and trendspotting, informed by data-driven analysis and addressed by
programmes or action plans with clear and measurable targets. 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 consider and respond to stakeholder concerns and interests. The
report reaches out to a wide range of stakeholders, each with specific needs
and interests. The Annual 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 ESG 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 ESG
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.

Principles of consolidation
The environmental disclosures covers the production sites, laboratories and
offices with significant activities. CO2 emissions related to transportation
cover cars leased or owned by Novo Nordisk, business flights and suppliers
distributing Novo Nordisk products.

The social and governance-related disclosures cover the Novo Nordisk Group,
comprising Novo Nordisk A/S and entities controlled by Novo Nordisk A/S.

Accounting policies
The accounting policies set out below in the notes have been applied
consistently in the preparation of the consolidated ESG statement for all the
years presented.

Changes to accounting policies and disclosures
Children reached through the Changing Diabetes in Children programme
(CDiC) has been added to expand disclosure to align with the Defeat
Diabetes strategy.

Gender in the Board of Directors (BoD) (ratio men:women) has been added
to expand on the diversity reporting.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional informationManuelNovo Nordisk Annual Repor t 2020 / 83

Section 7
Environmental
performance

7.1 Energy consumption for operations and share of
renewable power

Energy consumption for operations

1,000 GJ

Production

Office buildings and laboratories

Total energy consumption

2020

2,718

473

3,191

2019

2,458

535

2,993

2018

2,502

597

3,099

Energy consumption for production increased by 11% primarily due to a
new API production facility in Clayton, North Carolina. Energy consumption
in office buildings and laboratories decreased by 12% due to both energy-
saving projects and COVID-19 shutdowns.

Energy-saving projects implemented in 2020 within production sites are
expected to result in annual savings of 94,000 GJ.

In 2020, 100% of power sourced at production sites was from renewable
energy, an increase from 76% in 2019. This is due to five production sites,
including North America, Russia and France, now also sourcing renewable
power starting in 2020.

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.

The 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.

7.2 Water consumption for production sites

In 2020, production sites consumed 3,368,000 cubic metres of water,
an increase of 7% compared with 2019 due to the start-up of a new API
production facility in Clayton, North Carolina.

CO2 emissions from global offices and laboratories decreased by 38% in
2020. As part of the Circular for Zero strategy, all offices and laboratories
will source renewable power by 2030. In 2020, CO2 emissions from office
buildings and laboratories decreased, primarily due to energy-saving
projects and impacts from COVID-19.

Four production sites, including China and Brazil, are in areas subject to
water stress or high seasonal variations. They consume 11% of the total
water for global production. Overall, water consumption at these facilities
decreased by 15% in 2020, despite adding new sites. This was due to
significant water-saving projects implemented in China and Brazil.

In 2020, emissions from product distribution decreased by 24%, primarily
driven by optimisation projects to move products shipped from air to sea
freight despite supply and market challenges.

CO2 emissions from business flights decreased by 71%, and emissions from
company cars decreased by 27%. This was due to impacts from COVID-19.

Accounting policies
Water consumption is measured based on meter readings and invoices. It
includes drinking water, industrial water and steam used at production sites.

A full breakdown of scope 1, 2 and 3 emissions from Novo Nordisk can be
found at cdp.net.

7.3 CO2 emissions from operations and transportation

CO2 emissions from operations and transportation

1,000 tonnes

Production

Office buildings and laboratories

Product distribution

Business flights

Company cars

2020

2019

2018

Total CO2 emissions

170

306

278

Novo Nordisk has a long-term target of zero CO2 emissions from operations
and transportation by 2030.

In 2020, CO2 emissions from operations and transportation decreased by
44%. The decrease was due to the implementation of renewable energy
initiatives in production, as well as impacts from COVID-19 on 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 tonnes, 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 tonnes. 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 production decreased by 57% due to the
implementation of renewable heat and steam in Kalundborg, Denmark, wind
power in France, Algeria and Russia, and solar power in the US.

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 petrol used.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional informationManuelikke hårdt linjeskift i

overskrifter

7.4 Waste from production sites

Waste from production sites

1,000 tonnes

Organic residues1

Other (paper, cardboard, metals, etc.)

Total recycling

Ethanol waste2

Other (various combustible waste)

Total waste with energy recovery3

Water waste

Other

Total waste with no energy recovery4

Total waste to landfill

Total waste

2020

108

116

2019

2018

105

141

124

142

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. 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.

3. Energy recovery is waste disposed of at waste-to-energy plants and at a biogas plant.
4. Water waste and other waste not suitable for other disposal methods, such as

hazardous waste for incineration and various other types of waste.

In 2020, waste from production sites increased by 14% compared with 2019.
The amount of waste recycled increased by 20% in 2020 primarily due to an
increase in production in Kalundborg, Denmark.

The amount of waste sent for energy recovery decreased by 17% primarily
due to a distillation method within API production to reuse ethanol
internally instead of sending it for incineration with energy recovery.

In 2020, 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. Less than 1% of total waste was sent to landfill.

14% of the waste is categorised as hazardous waste, a decrease from 18%
in 2019. This reduction was due to a reduction in ethanol waste from the
production of API for Diabetes and Obesity care.

Accounting policies
Waste is measured as the sum of all the waste disposed of at production
sites based on weight receipts.

Novo Nordisk Annual Repor t 2020 / 84

Section 8
Social performance

8.1 Patients reached with Novo Nordisk's Diabetes
care products

considerations. Despite this uncertainty, Novo Nordisk assesses this to be
the most consistent way of reporting.

The number of children reached with free diabetes care treatment through
the Changing Diabetes in Children programme is measured as the total
accumulated number of children reached at the end of the year since 2009,
when the programme was initiated.

8.2 Donations and other contributions

The estimated number of full-year patients reached with Novo Nordisk's
Diabetes care products increased from 30.0 million in 2019 to 32.8. million in
2020. This 9% increase was primarily driven by sales of long-acting, premix
and fast-acting insulins, human insulin and GLP-1 products.

Donations and other contributions

DKK million

World Diabetes Foundation (WDF)

In 2020, the estimated number of patients reached with Novo Nordisk's
Diabetes care products via the Access to Insulin Commitment was 3.2
million, compared with 2.9 million in 2019. Novo Nordisk sold insulin
according to this commitment in 34 countries of the 76 countries in scope.
Beyond this scheme, Novo Nordisk also sold human insulin below the
ceiling price in other countries, reaching an estimated additional 3.1 million
patients in 2020. Approximately 130,000 patients were reached through
human insulin vial donations to humanitarian organisations.

Through the Changing Diabetes in Children programme, 28,296 children
had been reached by the end of 2020, compared with 25,695 in 2019.

Accounting policies
The number of full-year patients reached with Novo Nordisk's Diabetes
care products, excluding devices and PrandiMet®, is estimated by dividing
Novo Nordisk's annual sales volume by the annual usage dose per patient
for each product class as defined by the World Health Organization (WHO).
PrandiMet® is not included as no WHO-defined dosage exists. 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 number of full-year patients reached with Novo Nordisk's Diabetes care
products (human insulin in vials) via the Access to Insulin Commitment (AtIC)
is estimated by dividing Novo Nordisk's annual sales volume by the annual
usage dose per patient reached via the AtIC as defined by WHO.

The WHO-defined daily dosage has not changed since 1982, except for
Victoza® which was changed in 2019, and may not accurately reflect
the recommended or prescribed daily dose. Actual doses are based on
individual characteristics (e.g. age and weight) and pharmacokinetic

Novo Nordisk Haemophilia
Foundation (NNHF)

Total donations and other
contributions

2020

138

158

2019

2018

105

103

The WDF, an independent trust, supports sustainable partnerships and acts
as a catalyst to help others do more. In 2020, the WDF provided funding to
21 partnership projects in 22 countries. The projects focus on awareness,
education and capacity-building at local, regional and global levels The
amount granted to WDF in 2020 covers i.a. the donation approved by the
Annual General Meeting in 2020 and a special one-off contribution. See note
5.2 in the consolidated financial statements and worlddiabetesfoundation.org
for additional information.

The NNHF supports programmes in low- and middle-income countries.
Initiatives focus on capacity-building, diagnosis and registry, awareness and
advocacy. Since 2005, the NNHF has provided funding for 296 programmes
in 78 countries. See nnhf.org.

Furthermore, DKK 165 million was granted to the Antimicrobial Resistance
Research (AMR) Action Fund, the largest collective fund ever established
to support vital research into antimicrobial resistance research and
development. It is categorised as an equity investment and therefore not
expensed in the income statement.

Accounting policies
Donations and other contributions by Novo Nordisk to the WDF and the
NNHF are recognised as an expense when the donation or contribution is
paid out or when an unconditional commitment to donate has been made.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional information8.3 Employees

Employees

Number

North America Operations

2020

6,213

2019

2018

6,190

6,093

International Operations:

39,110

37,068

37,109

EMEA (Europe, the Middle East and Africa)

24,600

23,540

24,517

- of which in Denmark

17,538

16,747

17,461

China (Mainland China, Hong Kong, Taiwan)

5,548

5,263

4,636

Rest of World (all other countries)

8,962

8,265

7,956

Total employees

Full-time employees

45,323

43,258

43,202

44,723

42,703

42,672

The growth in employees was mainly driven by International Operations,
with the highest growth rate in China. Novo Nordisk also continues to
increase the number of employees in Global Business Services in India,
which grew by 14% compared with last year.

8.4 Frequency of occupational accidents

The average frequency rate of occupational accidents with absence was 1.3
accidents per million working hours in 2020, compared with 2.2 in 2019,
due to a 39% decrease in the number of accidents. In 2020, as in 2019,
Novo Nordisk had one work-related fatality. The significant decrease in the
number of occupational accidents is attributed to the global COVID-19-
related lockdown. Our production sites, which have remained in operation
during the lockdown, also show a decline in the number of occupational
accidents with absence. Novo Nordisk works with a zero-injury mindset and
has a long-term commitment to continuously improving safety performance.

Accounting policies
The frequency of occupational accidents with absence is measured as the
internally reported number of accidents using full-time employees, excluding
externals, employees on unpaid leave, interns, bachelor and master
thesis employees and substitutes, per million nominal working hours. An
occupational accident with absence is any work-related accident causing at
least one day of absence in addition to the day of the accident.

8.5 Animals purchased for research

The employee turnover rate decreased significantly from 11.4% in 2019 to
7.9% in 2020, and it is assumed to be related to the COVID-19 pandemic.

Animals purchased

Number

2020

2019

2018

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 EMEA, and employees in Global Business Service in Bangalore,
India are included in Rest of World.

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 of are
not counted as having left the Group.

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.

Mice, rats and other rodents

38,850

48,081

63,547

Pigs

Rabbits

Dogs

Non-human primates

Fish (larvae)

Other vertebrates

783

239

264

9,804

880

349

157

168

—

1,023

641

100

278

—

Total animals purchased

50,036

49,637

65,593

The number of animals purchased for research in 2020 increased by 1%
compared with 2019 due to the purchase of fish. The overall development
reflects the changes in stages of the different research projects. However,
for 2020 the animals purchased for research are also impacted by the overall
COVID-19 situation. The reduction in the number of rodents purchased also
reflects Novo Nordisk's continuous focus on reducing the number of animals
per research project. 78% of the animals purchased were rodents.

Novo Nordisk Annual Repor t 2020 / 85

Accounting policies
The record of animals purchased for research comprises the number of
animals purchased for all research undertaken by Novo Nordisk either
in-house or by external contractors. The number of animals purchased is
based on internal registration of purchased animals and yearly reports from
external contractors.

8.6 Gender diversity

Gender in management

Ratio men:women

EVP, SVP

CVP, VP, GM

Director, Manager, Team Leader

Gender in management (overall)

Gender in BoD

2020

76:24

64:36

58:42

59:41

62:38

2019

82:18

66:34

59:41

60:40

62:38

2018

87:13

66:34

60:40

67:33

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. For additional information about diversity at
executive management level and at BoD level see page 42 - 45.

Gender diversity in management overall remained approximately the same
as in 2019. Among employees as a whole, the gender split was 49% women
and 51% men in 2020, the same as in 2019.

Accounting policies
Diversity at Novo Nordisk is reported as the percentage split by gender in
all managerial 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).

Diversity at Board of Directors-level is reported as the percentage split by
gender among the members.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional informationNovo Nordisk Annual Repor t 2020 / 86

Section 9
Governance
performance

9.1 Business ethics

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 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.

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.

9.2 Facilitations of the Novo Nordisk Way

In 2020, a total of 26 units were facilitated and more than 1,200 employees,
were individually interviewed. In addition, feedback on those units was
collected from approximately 340 stakeholders.

Overall, the 2020 process continues to show a good level of adherence
to the Novo Nordisk Way. Three units were found to be in breach of one
or more of the Novo Nordisk Essentials. The Essential with the strongest
performance continues to be the 'Patient-centred business approach'.
In 2020, partly driven by the focus on strengthening the culture journey,
significantly more findings were issued related to the Essential 'We set
ambitious goals and strive for excellence'.

Accounting policies
Facilitations of the Novo Nordisk Way is measured as the number of
facilitations and culture coaching sessions completed. Both are internal
processes for assessing adherence 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 and discussed with management. The facilitators and management agree
on an action plan to address those gaps and improvement opportunities.

9.3 Supplier audits

Supplier audits

Number

Responsible sourcing audits

Quality audits

Total supplier audits

2020

2019

2018

170

177

209

236

275

294

The number of audits concluded in 2020 decreased by 25% compared with
2019. The decrease was due to COVID-19-related restrictions imposed
on travel and general ability to access suppliers' facilities and subsequent
postponement of planned audits. No critical findings were issued related to
responsible sourcing audits, while one critical finding was issued related to
quality audits regarding handling of controlled waste. A follow-up audit has
since been conducted, where the finding was found to have been closed
satisfactorily.

Accounting policies
The number of supplier audits concluded by Novo Nordisk's Corporate
Quality function consists of the number of responsible sourcing audits and
quality audits conducted at suppliers.

9.4 Product recalls

9.5 Failed inspections

In 2020, as in 2019, there were no failed inspections among those resolved
at year-end. During the year, 77 inspections were conducted, compared
with 66 in 2019. At year-end, 59 inspections were passed and 18 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 2021.

Accounting policies
The number of failed inspections is measured in relation to inspections by
the US Food & Drug Administration (USFDA), the European Medicines Agency
(EMA), the Notified Body (TÜV SUD) and domestic authorities for strategic
manufacturing sites. Failed inspections are defined as inspections where
Warning Letters or EMA non-compliance letters related to GMP inspections
are received, GMP/ISO certificates for strategic sites are lost, pre-approval
inspections result in a Warning Letter, study conclusions are changed
due to GCP/GLP inspection issues, or marketing or import authorisations
are withdrawn due to inspection issues. Strategic sites are defined as the
manufacturing sites in Brazil, China, Denmark, France and the US.

9.6 Company trust

Company trust

Scale 0-100

People with diabetes

General practitioners

Diabetes specialists

Total score (average)

2020

2019

2018

80.4

76.1

85.2

80.6

78.1

75.3

81.3

78.2

78.6

85.7

89.2

84.5

Novo Nordisk had no product recalls from the market in 2020, compared
with four in 2019. To verify that the product recall process remains robust
and efficient, a mock recall was effectuated in 18 affiliates worldwide. Based
on that, the product recall process has been evaluated and concluded to be
effective.

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.

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 July 2020.

The data are collected through annual surveys carried out by external
consultancy firms.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional information9.7 Total tax contribution

9.8 Breaches of environmental regulatory limit values

Total tax contribution

2020

2019

2018

DKK million

Taxes
borne

Taxes
collected

In 2020, there were 15 breaches, a decrease from 16 breaches in 2019. The
breaches were mainly related to wastewater, and all had a minor impact on
the environment.

Novo Nordisk Annual Repor t 2020 / 87

Accounting policies
Breaches of regulatory limit values cover all breaches reported to the
environmental authorities.

Corporate income taxes paid 10,106

3,471

13,577

14,392 13,006

Employment taxes

1,549

8,039

9,588

9,638

9,427

Indirect taxes

Other taxes

Total

1,307

1,190

2,497

2,610

2,257

714

—

714

887

1,135

13,676

12,700

26,376

27,527 25,825

The total tax contribution in 2020 amounted to DKK 26,376 million split with
52% on taxes borne and 48% on taxes collected. In 2019, the split was 54%
on taxes borne (DKK 14,829 million) and 46% on taxes collected (DKK 12,698
million).

The overall decrease in total tax contribution from 2019 to 2020 is primarily
related to 'Corporate income taxes paid' . This is mainly due to less
prepayment in Denmark as a consequence of acquisitions in the end of 2020.

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 salaries and paid
on to the government.

Corporate income taxes paid
Corporate income taxes paid primarily consists of corporate income taxes
and withholding taxes on company dividends paid during the year.

Employment taxes
Employment taxes primarily consist of taxes collected from the employees
on behalf of the government and social security costs (part of payroll taxes in
some countries).

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.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG statement / Additional informationNovo Nordisk Annual Repor t 2020 / 88

Statement by the Board of Directors and
Executive Management on the 2020 Annual Report

Today, the Board of Directors and Executive Management approved the
Annual Report of Novo Nordisk A/S for the year 2020. The Board of Directors
and Executive Management are jointly responsible for ensuring the integrity
and quality of the report.

The Annual Report has been prepared in accordance with the International
Integrated Reporting Framework. The Consolidated Financial Statements
have been prepared in accordance with International Financial Reporting
Standards (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.

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 2020, the results of the Group’s and
Parent Company’s operations, and consolidated cash flows for the
financial year 2020. 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 Environmental, Social and Governance
Statements have been prepared in accordance with the reporting
principles of materiality, inclusivity, responsiveness and impact of
AA1000AP(2018) and environmental, social and governance accounting
policies. They give a true and fair account and a balanced and
reasonable presentation of the organisation’s environmental, social and
governance performance in accordance with these principles.

We recommend that the Annual Report be adopted at the Annual
General Meeting.

In our opinion, the Annual Report of Novo Nordisk A/S for the financial
year 1 January to 31 December 2020 identified as NOVO-2020-12-31.zip is
prepared, in all material respects, in compliance with the ESEF Regulation.

Bagsværd, 3 February 2021

Registered Executive Management

Board of Directors

Lars Fruergaard Jørgensen
President and CEO

Karsten Munk Knudsen
CFO

Helge Lund
Chair

Jeppe Christiansen
Vice chair

Brian Daniels

Monique Carter

Camilla Sylvest

Laurence Debroux

Andreas Fibig

Sylvie Grégoire

Mads Krogsgaard Thomsen

Henrik Wulff

Liz Hewitt

Mette Bøjer Jensen

Kasim Kutay

Anne Marie Kverneland

Martin Mackay

Thomas Rantzau

Stig Strøbæk

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Statement by BoD and Management / Additional informationManuelNovo Nordisk Annual Repor t 2020 / 89

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 39 years including the financial year 2020.

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 2020. These matters were
addressed in the context of our audit of the Financial Statements as a whole, and in
forming our opinion thereon, and we do not provide a separate opinion on these
matters.

Key audit matter

How our audit addressed the key audit matter

Revenue recognition relating to rebates and discounts in the US business

The Group sells to various customers in the US, which can fall under certain commercial
and government mandated contracts and reimbursement arrangements, of which the
most significant are Managed Care, Medicare, Medicaid and charge-backs to wholesalers.

These arrangements result in deductions to gross sales in arriving at net sales and
give rise to obligations for the Group to provide customers with rebates, discounts and
allowances, which for unsettled amounts are recognised as an accrual.

We 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 3.6.

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.

We formed an independent assessment of the most significant elements of the accrual
at 31 December 2020 using third party data and compared this expectation to the actual
accrual recognised.

Independent
Auditor’s Reports

To the shareholders of Novo Nordisk A/S

Report on the audit of the Financial Statements

Our opinion
In our opinion, the Consolidated Financial Statements give a true and fair view of
the Group’s financial position at 31 December 2020 and of the results of the Group’s
operations and cash flows for the financial year 1 January to 31 December 2020 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.

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 2020 and of the results
of the Parent Company’s operations for the financial year 1 January to 31 December 2020
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 2020, 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 2020, 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”.

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Independent Auditor’s Reports / Additional informationManuel

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 misstatement in
Management’s Review.

Management’s responsibilities for the Financial Statements
Management is responsible for the preparation of consolidated financial statements that
give a true and fair view in accordance with International Financial Reporting Standards
(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 and for the preparation of parent company financial statements that give a true and
fair view in accordance with the Danish Financial Statements Act, and for such internal
control as Management determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to fraud or error.

In preparing the Financial Statements, Management is responsible for assessing the
Group’s and 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 alternative 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 applicable
in Denmark, we exercise professional judgement and maintain professional scepticism
throughout the audit.

We also:
– Identify and assess the risks of material misstatement of the Financial Statements,
whether due to fraud or error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and appropriate to provide
a basis for our opinion. The risk of not detecting a material misstatement resulting
from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.

– Obtain an understanding of internal control relevant to the audit in order to design

audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Group’s and the Parent Company’s
internal control.

– Evaluate the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by Management.

– Conclude on the appropriateness of Management’s use of the going concern basis of
accounting and based on the audit evidence obtained, whether a material uncertainty
exists related to events or conditions that may cast significant doubt on the Group’s
and the Parent Company’s ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditor’s
report to the related disclosures in the Financial Statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are based on the audit evidence
obtained up to the date of our auditor’s report. However, future events or conditions
may cause the Group or the Parent Company to cease to continue as a going concern.

– 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 reasonably be thought to bear on our
independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine
those matters that were of most significance in the audit of the Financial Statements of
the current period and are therefore the key audit matters. We describe these matters
in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, we determine that a matter should not
be communicated in our report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.

Report on compliance with the ESEF Regulation
As part of our audit of the Financial Statements we performed procedures to express
an opinion on whether the Annual Report of Novo Nordisk A/S for the financial year 1
January to 31 December 2020 with the file name NOVO-2020-12-31.zip is prepared, in
all material respects, in compliance with the Commission Delegated Regulation (EU)
2019/815 on the European Single Electronic Format (ESEF Regulation) which includes
requirements related to the preparation of the Annual Report in XHTML format and iXBRL
tagging of the Consolidated Financial Statements.

Novo Nordisk Annual Repor t 2020 / 90

Management is responsible for preparing an Annual Report that complies with the ESEF
Regulation. This responsibility includes:
– The preparation of the Annual Report in XHTML format;
– The selection and application of appropriate iXBRL tags, including extensions to the

ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all financial
information required to be tagged using judgement where necessary;

– Ensuring consistency between iXBRL tagged data and the Consolidated Financial

Statements presented in human-readable format; and

– For such internal control as Management determines necessary to enable the
preparation of an Annual Report that is compliant with the ESEF Regulation.

Our responsibility is to obtain reasonable assurance on whether the Annual Report is
prepared, in all material respects, in compliance with the ESEF Regulation based on the
evidence we have obtained, and to issue a report that includes our opinion. The nature,
timing and extent of procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material departures from the requirements set out in the
ESEF Regulation, whether due to fraud or error. The procedures include:
– Testing whether the Annual Report is prepared in XHTML format;
– Obtaining an understanding of the company’s iXBRL tagging process and of internal

control over the tagging process;

– Evaluating the completeness of the iXBRL tagging of the Consolidated Financial

Statements;

– Evaluating the appropriateness of the company’s use of iXBRL elements selected from
the ESEF taxonomy and the creation of extension elements where no suitable element
in the ESEF taxonomy has been identified;

– Evaluating the use of anchoring of extension elements to elements in the ESEF

taxonomy; and

– Reconciling the iXBRL tagged data with the audited Consolidated Financial Statements.

In our opinion, the Annual Report of Novo Nordisk A/S for the financial year 1 January to
31 December 2020 with the file name NOVO-2020-12-31.zip is prepared, in all material
respects, in compliance with the ESEF Regulation.

Hellerup, 3 February 2021
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR no 3377 1231

Mogens Nørgaard Mogensen
State Authorised Public Accountant
mne21404

Mads Melgaard
State Authorised Public Accountant
mne34354

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – Independent Auditor’s Reports / Additional informationManuelIndependent Assurance Report on the ESG statement

Novo Nordisk Annual Repor t 2020 / 91

To the Stakeholders of Novo Nordisk A/S

Novo Nordisk A/S engaged us to provide limited assurance on the Consolidated ESG
statement stated in the Annual Report of Novo Nordisk for the year ended 31 December
2020.

Our conclusion
Based on the procedures we performed and the evidence we obtained:
A. nothing has come to our attention that causes us to believe that the Consolidated ESG
statement of Novo Nordisk’s Annual Report for the year ended 31 December 2020 has
not been prepared, in all material respects, in accordance with the Reporting Criteria;
and

B. nothing has come to our attention that causes us to believe that the description of

Novo Nordisk’s alignment with the AA1000 Accountability Principles (AA1000AP) (2018)
of Inclusivity, Materiality, Responsiveness and Impact is not fairly stated.

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 Consolidated ESG statement needs to be read and understood together with the
Reporting Criteria (pages 82 - 87), 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 Consolidated ESG statement. In doing so, we:

– conducted interviews to understand the key processes and control activities for

This conclusion is to be read in the context of what we say in the remainder of our report.

reporting data;

Novo Nordisk’s responsibilities
Management are responsible for:
– designing, implementing and maintaining internal controls over information relevant

to the preparation of the Consolidated ESG statement that is free from material
misstatement, whether due to fraud or error;

– establishing objective Reporting Criteria for preparing the Consolidated ESG statement;
– preparing the greenhouse gas protocol statement in accordance with the defined

Reporting Criteria. Greenhouse gas quantification is subject to inherent uncertainty
because of incomplete scientific knowledge used to determine emissions factors and
the values needed to combine emissions of different gases;

– measuring and reporting the Consolidated ESG statement based on the Reporting

Criteria; and

– the content of the Annual Report 2020.

Our responsibility
We are responsible for:
– planning and performing the engagement to obtain limited assurance about whether
the Consolidated ESG statement is free from material misstatement, whether due to
fraud or error;

What we are assuring
The scope of our work was limited to assurance over:
A. the Consolidated ESG statement and associated notes on pages 81 - 87 in the Annual

Report of Novo Nordisk;

B. Novo Nordisk’s description of alignment with the AA1000AP principles of Inclusivity,

Materiality, Responsiveness and Impact for the year ended 31 December 2020 which is
set out on page 82 (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, in respect of the greenhouse
gas emissions stated on pages 81 and 83 in accordance with International Standard on
Assurance Engagements 3410 ‘Assurance engagements on greenhouse gas statements’
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 engagement in
relation to both the risk assessment procedures, including an understanding of internal
control, and the procedures performed in response to the assessed risks; consequently,
the level of assurance obtained in a limited assurance engagement is substantially
lower than the assurance that would have been obtained had a reasonable assurance
engagement been performed.

Our independence and quality control
We have complied with the Code of Ethics for Professional Accountants issued by the
International Ethics Standards Board for Accountants, which includes independence and
other ethical requirements founded on fundamental principles of integrity, objectivity,
professional competence and due care, confidentiality and professional behaviour. We
also qualify as independent as defined by the AA1000AS. The firm applies International
Standard on Quality Control 1 and accordingly maintains a comprehensive system of

– obtained an understanding of the key processes and controls for managing, recording

and reporting;

– performed limited substantive testing on a selective basis to check that data had been

– forming an independent conclusion, based on the procedures we performed and the

appropriately measured, recorded, collated and reported;

evidence we obtained; and

– performed analysis of data selected on the basis of risk and materiality to the group;
– made inquiries to significant development in reported data;
– considered the presentation and disclosure of the Consolidated ESG statement; and
– assessed that the process for reporting greenhouse gas emissions data comply with
the principles of relevance, completeness, consistency, transparency and accuracy
outlined in the greenhouse gas protocol (2003).

B. In respect of Novo Nordisk’s description of alignment with the AA1000AP of Inclusivity,

Materiality, Responsiveness and Impact we performed the following activities:

– interviewed members of Novo Nordisk’s Board of Directors and Executive Management
team, representatives responsible for Corporate and Commercial Strategy at global
level and within International Operations, key employees in Global Public Affairs
and Sustainability to determine their understanding of Novo Nordisk’s 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
stakeholder engagement capabilities, particularly, in relation to understanding and
responding to material concerns, needs and desires linked to access and affordability
regarding medicin and Circular for Zero;

– reviewed evidence on a selective basis to support the assertions made in these

interviews and in the stakeholder engagement description;

– confirmed the systems and procedures to support Novo Nordisk’s governance for
responsible business conduct and stakeholder relationships. Our work focused on
how Novo Nordisk intends to deliver on the Atrategic Aspiration of Purpose and
sustainability and to what extend it is aligned with stakeholder needs and concerns and
Novo Nordisk’s aim of being a truly sustainable company; and

– assessed the disclosure and presentation of the stakeholder engagement description.

– reporting our conclusion to the Stakeholders of Novo Nordisk A/S.

Observations and recommendations
According to AA1000AS, we are required to include observations and recommendations
for improvements in relation to adherence to the AA1000AP. We have no significant
recommendations regarding Inclusivity, Materiality, Responsiveness and Impact. We
have communicated a number of minor recommendations for improvement to the
Management.

Hellerup, 3 February 2021
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR no 3377 1231

Mogens Nørgaard Mogensen
State Authorised Public Accountant
mne21404

Mads Melgaard
State Authorised Public Accountant
mne34354

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements – ESG Assurance Report / Additional informationManuelNovo Nordisk Annual Repor t 2020 / 92

Credits
Design and production: Kontrapunkt.
Photography: Gustavo Aranda Hernández, Oliver Grenaa, Martin Nordmark.

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
financial capital in their decision-making is included in the Annual Report, i.e.
of such relevance and importance that it could substantively influence their
assessments of Novo Nordisk’s ability to create value over the short, medium
and long term. 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.

The statutory Annual Report will be presented and adopted at the annual
general meeting on 25 March 2021 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 additional 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 remuneration received by each
member of the Board of Directors and the Executive Management of Novo
Nordisk A/S from 2016 to 2020.

Corporate governance report
The corporate governance report discloses Novo Nordisk’s compliance with
Danish Corporate Governance Recommendations to meet the requirements
of the Danish Financial Statements Act.

References
Throughout the management review section in this report, links are provided
to online sources for additional information. Some of the references are not
mandatory and hence not included in the audit of the management review.

For more news from Novo Nordisk, visit
novonordisk.com/investors.html
novonordisk.com/news-and-media/latest-news.html

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional informationManuelProduct overview

2021 financial calender

3 February 2021
Financial statement for 2020 and Annual Report 2020

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
NovoMix® 30, biphasic insulin aspart
NovoMix® 50, biphasic insulin aspart
NovoMix® 70, biphasic insulin aspart

Human insulin
lnsulatard®, 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

Diabetes delivery systems

Pre-filled delivery system
FlexTouch®, U100, U200
FlexPen®
InnoLet®
Ozempic® pen
Ozempic® Single dose device
(approved in Japan)

Durable delivery systems
NovoPen® 5
NovoPen® 4
NovoPen Echo®

Other delivery systems
PumpCart®, NovoRapid® and Fiasp®
cartridge to be used in pump
Cartridge Vial

Human growth hormone
Norditropin®, somatropin (rDNA origin)
Macrilen, Macimorelin; growth hormone
secretagogue receptor agonist

25 March 2021
Annual General meeting 2020

Oral antidiabetic agents
NovoNorm®, repaglinide

Glucagon
GlucaGen®, glucagon for diagnostic use
GlucaGen® Hypokit, glucagon
emergency kit for severe hypoglycaemia

Human growth hormone delivery system
Pre-filled delivery system
FlexPro®
NordiFlex®
Nordilet®
NordiPen®

26 March 2021
Ex-dividend

29 March 2021
Record date

30 March 2021
Payment, B shares

Needles
NovoFine® Plus
NovoFine®
NovoTwist®
NovoFine®
AutoCover®

Obesity care

Glucagon-like peptide-1
Saxenda®, liraglutide 3 mg

Obesity delivery systems
Saxenda® pen

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®, Turoctocog alfa
pegol, NS-GP

Durable delivery systems
Durable multi-dose delivery system to be used
with Norditropin® SimpleXx®

9 April 2021
Payment, ADRs

Other delivery system
PenMate®, automatic needle inserter
(for NordiPen® and NordiFlex®)

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®

5 May 2021
Financial statement for the first three months of 2021

5 August 2021
Financial statement for the first six months of 2021

16 August 2021
Ex-dividend

17 August 2021
Record date

18 August 2021
Payment, B shares

25 August 2021
Payment, ADRs

3 November 2021
Financial statement for the first nine months of 2021

2022 financial calendar

2 February 2022
Financial statement for 2021 and Annual Report 2021

Novo Nordisk Annual Repor t 2020 / 93

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
https://www.novonordisk.com/contact-us.html

Shareholders’ enquiries concerning dividend
payments and shareholder accounts should
be addressed to:
investor-relations@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

Outside the U.S.: Phone: +1 651 453 2128

Regular correspondence:
Shareowner Services
P.O. Box 64504
St. Paul, MN 55164-0504

Email: StockTransfer@equiniti.com

Introducing Novo Nordisk / Strategic Aspirations / Corporate governance / Consolidated statements / Additional informationNovo Nordisk Annual Repor t 2020 / 94

Financial statements of the parent company 2020

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

2020

2019

DKK million

Note

2020

2019

DKK million

Note

2020

2019

100,940

93,440

Assets

Equity and liabilities

3,428

Share capital

470

480

17,940

Intangible assets

75,500

Property, plant and equipment

23,619

Financial assets

12,858

Deferred income tax assets

1,837

Other receivables and prepayments

7,938

25,322

43,598

—

218

24,724

33,876

239

Net revaluation reserve according to
the equity method

Development costs reserve

Reserve for cash flow hedge

2,204

Total non-current assets

77,076

62,362

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

20,662

80,278

26,673

14,524

1,913

1,976

39,144

10,394

2,144

2,238

39,390

Raw materials

10,497

Work in progress

485

Finished goods

3,707

Inventories

Profit before income taxes

49,444

46,665

Trade receivables

Income taxes

Net profit

7,285

7,413

Amounts owed by affiliated companies

15,893

14,302

42,159

39,252

Tax receivables

Other receivables and prepayments

Receivables

—

2,353

295

1,340

19,769

17,624

Derivative financial instruments

2,332

2,781

10,647

2,246

2,357

9,761

2,590

15,674

14,708

1,523

1,687

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

9,749

959

1,617

50,241

63,036

596

523

1,348

2,467

6,275

1,365

2,910

15,340

811

(323)

41,124

57,432

715

—

995

1,710

165

734

2,673

40,931

40,754

3,114

6,262

60,857

63,324

5,407

49,807

51,517

Cash at bank

Total current assets

Total assets

11,509

49,284

188

14,067

46,587

Tax payables

Other liabilities

Total current liabilities

126,360

108,949

Total liabilities

Total equity and liabilities

126,360

108,949

Financial statements of the parent companyManuelEquity statement

DKK million

Net
revaluation
reserve

Reserve for
cash flow
hedges

Develop-
ment costs
reserve

Share
capital

Retained
earnings

2020

2019

Please refer to note 4.1 in the consolidated financial statements for
details on the average number of shares, treasury shares and total
number of A and B shares in Novo Nordisk A/S.

Balance at the beginning of the year

480

15,340

(323)

811

41,124

57,432

51,505

Appropriated from net profit

24,995

15,377

Novo Nordisk Annual Repor t 2020 / 95

Appropriated from net profit to net revaluation reserve

Exchange rate adjustments of investments in subsidiaries

(3,902)

(1,689)

Effect of cash flow hedges transferred to the income statement

1,940

Fair value adjustments of cash flow hedges for the year

Development costs

Other adjustments

Transactions with owners:

Total dividend for the year

Interim dividends paid during the year

Dividends paid for prior year

Reduction of the B share capital

Purchase of treasury shares

Share-based payments (note 3)

Tax related to restricted stock units

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

(3,902)

(1,689)

1,940

—

(179)

4,224

226

1,506

(323)

—

(155)

148

(148)

(179)

21,066

(7,570)

19,651

(7,100)

(12,551)

(12,309)

—

(16,855)

(15,334)

327

148

(10)

470

9,749

1,617

959

50,241

63,036

57,432

7,570

13,496

(3,902)

24,995

42,159

7,100

12,551

4,224

15,377

39,252

Financial statements of the parent company
Novo Nordisk Annual Repor t 2020 / 96

Manuel

Notes

enkelte linjer brødtekst

under skema

giv tabeltxt

1 Accounting policies
The financial statements of the parent company have been prepared in
accordance with the Danish Financial Statements Act (Class D) and other
accounting regulations for companies listed on Nasdaq Copenhagen.

The accounting policies for the financial statements of the parent company
are unchanged from the previous financial year except for a change of
presentation of equity. The accounting policies are the same as for the
consolidated financial statements with the adjustments described below.
For a description of the accounting policies of the Group, please refer to the
consolidated financial statements.

To the extent that net profit exceeds declared dividends from such
companies, the net revaluation of investments in subsidiaries and associated
companies is transferred to net revaluation reserve under equity according
to the equity method. Profits in subsidiaries and associated companies are
disclosed as profit after tax.

3 Employee costs

DKK million

Wages and salaries

Tax
For Danish tax purposes, the parent company is assessed jointly with its
Danish subsidiaries. The Danish jointly taxed companies are included in a
Danish on-account tax payment scheme for Danish corporate income tax. All
current taxes under the scheme are recorded in the individual companies.
Novo Nordisk A/S and its Danish subsidiaries are included in the joint
taxation of the parent company, Novo Holdings A/S.

2 Sales

DKK million

2020

2019

Share-based payment costs

Pensions

Other social security contributions

Other employee costs

Total employee costs in the income
statement

Average number of full-time employees

Year-end number of full-time employees

2020

2019

11,503

10,668

327

1,045

176

299

13,350

15,782

16,151

148

1,009

197

393

12,415

15,550

15,442

for bedre afstand

No separate statement of cash flows has been prepared for the parent
company; please refer to the statement of cash flows for the Group.

Sales by business segment

Diabetes and Obesity care

100,741

93,192

For information regarding remuneration to the Board of Directors and
Executive Management, please refer to note 2.4 to the consolidated financial
statements.

Change of presentation of equity
The Danish Financial Statements Act has been amended effective from 1
January 2020 to require an equity reserve corresponding to income and
expenses on cash flow hedges recognised in equity ('Reserve for cash flow
hedges'). These transactions have previously been recognised in retained
earnings. The reserve for cash flow hedges is distributable.

The amendment has been implemented retrospectively. The impact at the
beginning of 2019 is recognition of a reserve for cash flow hedges
amounting to DKK (1,506) million and a corresponding increase in retained
earnings. The implementation had no impact on total equity. The movement
in the reserve for 2019 amounted to DKK 1,183 million, resulting in a reserve
of DKK (323) million at the end of 2019.

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. The equity method is used as a measurement
basis rather than a consolidation method. The net profit of subsidiaries and
associated companies less unrealised intra-group profits is recorded in the
income statement of the parent company.

Biopharm

Total sales

Sales by geographical segment

North America Operations

International Operations:

EMEA

China

Rest of World

Total sales

199

248

100,940

93,440

4 Financial income and financial expenses

52,054

50,326

DKK million

Interest income relating to subsidiaries

25,124

12,554

11,208

22,941

10,326

9,847

100,940

93,440

Result of associated company

Foreign exchange gain (net)

Other financial income

Total financial income

Sales are attributed to a geographical segment based on location of the
customer. For definitions of segments, please refer to note 2.2 in the
consolidated financial statements. Refer to note 5.6 in the consolidated
financial statements for an overview of companies in the Novo Nordisk
Group based on geographical areas.

Interest expenses relating to subsidiaries

Foreign exchange loss (net)

Financial loss from forward contracts (net)

Other financial expenses

Total financial expenses

2020

263

1,751

109

2,144

137

—

1,777

324

2,238

2019

432

—

485

588

426

2,470

223

3,707

Financial statements of the parent companyNovo Nordisk Annual Repor t 2020 / 97

Land and
buildings

Plant and
machinery

Other
equipment

Assets
under
con-
struction

2020

2019

20,757

20,816

3,732

4,240

49,545

47,292

—

152

(69)

1,254

—

581

(526)

1,476

22,094

22,347

8,352

1,023

(69)

14,367

1,038

(520)

9,314

14,954

12,780

7,393

709

—

123

(40)

198

4,013

2,102

326

(39)

2,393

1,620

—

2,233

(16)

(2,928)

—

3,089

(651)

—

3,529

51,983

—

(16)

—

24,821

2,387

(644)

26,661

3,529

25,322

—

763

1,010

2,021

(778)

—

49,545

23,151

2,283

164

(777)

24,821

24,724

877

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

Carrying amount at the end of the year

Of which related to leased property, plant and equipment

Leased property, plant and equipment primarily relates to lease of office buildings, warehouses, laboratories and vehicles.

5 Deferred income tax assets/(liabilities)

7 Property, plant and equipment

DKK million

2020

2019

Net deferred tax asset/(liability) at the beginning
of the year

Income/(charge) to the income statement

Income/(charge) to equity

Net deferred tax asset/(liability) at the end of
the year

(18)

(600)

(523)

The Danish corporate tax rate was 22% in 2020 (22% in 2019).

DKK million

Cost at the beginning of the year

Change of accounting policy for leases

(137)

460

(228)

Additions during the year

Disposals during the year

Transfer from/(to) other items

Cost at the end of the year

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

2020

6,065

5,165

(153)

11,077

2,637

306

349

(153)

3,139

7,938

2019

4,887

1,190

(12)

6,065

2,088

271

290

(12)

2,637

3,428

Intangible assets primarily relate to patents and licences, internally
developed software and costs related to major IT projects.

Financial statements of the parent companyNovo Nordisk Annual Repor t 2020 / 98

Invest-
ments in
subsidiaries

Amounts
owed by
affiliated
companies

Invest-
ment in
associated
company

Other
securities
and invest-
ments

The carrying amount of investments in subsidiaries does not include
capitalised goodwill at the end of the year. For a list of companies in
the Novo Nordisk Group, please refer to note 5.6 to the consolidated
financial statements.

2020

2019

8,933

21,816

8,257

7,789

(1,575)

(11,999)

4,047

267

29,174

28,652

18,187

(3,748)

105

1,198

18,493

17,277

(2)

29,629

(13,576)

1,220

34,546

(224)

28,803

18,187

105

108

5,409

(4,193)

18,493

28,952

16,514

(3,748)

(2,226)

(171)

(187)

(16,767)

(18)

(16,785)

(6,320)

8 Financial assets

DKK million

Cost at the beginning of the year

Investments during the year

Divestments and repayments 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

(2,537)

(512)

2,468

(3)

(54)

(3)

(3,103)

2,468

—

450

(215)

(8,201)

28,803

Value adjustments at the end of the year

26,255

(245)

111

(452)

25,669

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

(13,420)

(4,045)

848

(13,420)

(17,760)

(4,045)

(3,791)

848

—

(70)

8,201

Unrealised internal profit at the end of the year

Carrying amount at the end of the year

(16,617)

—

38,812

3,802

—

216

—

(16,617)

(13,420)

768

43,598

33,876

Financial statements of the parent companyNovo Nordisk Annual Repor t 2020 / 99

9 Derivatives
For information on derivative financial instruments, please refer to note 4.3
to the consolidated financial statements.

10 Borrowings

DKK million

Within 1 year

1-5 years

More than 5 years

Total borrowings

2020

6,275

470

126

6,871

2019

165

523

192

880

Borrowings within one year includes a DKK 5,577 million loan. The
remainder of Borrowings are related to lease liabilities.

11 Other provisions

Provisions for pending litigations are recognised as other provisions.
For information on pending litigations, please refer to note 3.6 to the
consolidated financial statements. 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.

12 Related party transactions

For information on transactions with related parties, please refer to note 5.3
to 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 638
million (DKK 758 million in 2019).

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

2020

2019

2020

2019

137

6,794

8,490

101

175

4,464

10,011

130

1. Lease commitments predominantly relate to estimated variable property taxes and low

value assets.

2. Potential milestone payments are associated with uncertainty as they are linked
to successful achievements in research activities; please refer to note 5.2 to 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 3.6 and 5.2 to the consolidated financial statements.

Financial statements of the parent company