Novo Resources
Annual Report 2021

Plain-text annual report

Novo Nordisk Annual Report 2021 Morten Kruse-Jacobsen (to the right), Senior Director at Novo Nordisk and married to Anders. Being a sustainable employer is a key priority for Novo Nordisk. This includes fostering a diverse and inclusive workplace. From January 2022, Novo Nordisk will offer a minimum of eight weeks paid parental leave to all non-birthing parents globally, regardless of gender. Novo Nordisk A/S - Novo Allé 1, 2880 Bagsværd, Denmark - CVR no. 24256790 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 2 Contents Management review Introducing Novo Nordisk Letter from the Chair Letter from the CEO Novo Nordisk at a glance Our business model: how we create value for society Performance highlights Strategic Aspirations Purpose and sustainability (ESG) Innovation and therapeutic focus Commercial execution Financials Key risks Risk management Management Board of Directors Executive Management 4 5 6 7 8 11 24 30 33 41 44 47 Consolidated statements and additional information Consolidated financial statements Income statement Cash flow statement Balance sheet Equity statement Notes to the consolidated financial statements Consolidated ESG statement Consolidated statement of ESG performance Notes to the consolidated ESG statement Statements and Auditor's Reports Statement by the Board of Directors and the Executive Management Independent Auditor's Reports on the Financial Statement Independent Assurance Report on the ESG statement Additional information More information Financial calendar Product overview 50 51 52 53 54 85 86 92 93 95 96 97 97 Novo Nordisk Annual Report 2021Introducing Novo Nordisk 4 5 6 7 8 Letter from the Chair Letter from the CEO Novo Nordisk at a glance Our business model: how we create value for society Performance highlights Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 4 Letter from the Chair Our long-standing aspiration of creating value for society and serving people living with diabetes and obesity but also making Building for the future for our future business is more relevant than ever, given the a positive impact in new therapeutic areas. mounting threats to people’s lives and livelihoods posed by the health and environmental challenges dominating today’s global Our stable ownership structure with the Novo Nordisk agenda. The past two years have underscored the essential role Foundation as the main shareholder will help in this transition by of science in tackling these challenges, whether managing a supporting us through investment in research and development rogue virus or reducing emissions. for the long-term while maintaining a focus on high quality operations and financial performance. We have made good progress as a company in the past year – despite the pandemic which continues to impact the world and the initial challenges in meeting the unprecedented demand for our new obesity treatment. We continued to broaden our technology platforms and product pipeline to strengthen the basis for long- term growth whilst investing significantly in expanding our future production capacity. Continued investment in innovation is vital for patients, the future of our company and for the wider benefits we can offer to society. We must also ensure that Novo Nordisk has a diverse and truly It is therefore gratifying to see the strides that have been made in 2021 with the launch of new products – most notably Wegovy® inclusive culture if we are to become a better and more innovative company. With this in mind, we have set new 2025 aspirational for obesity. Production challenges meant that we struggled to targets for achieving a balanced gender representation across meet the high patient demand for the treatment – a situation managerial levels. We believe that this will also stimulate and that served to underline the vital importance of investments inspire the work we are doing to enhance other diversity made in our global production capacity during 2021. dimensions. The opportunity for the coming years is to execute on the At Board level, we are also committed to ensuring strong diversity commercial potential of our innovative, new treatments while and having the right competences to meet future challenges. In ensuring that as many people as possible have access to quality 2021, the Board was delighted to welcome the election of Henrik medicines. At the same time, we must succeed in developing the Poulsen, whose deep experience in corporate transformations medicines of the future. This means looking beyond our existing and strong ESG credentials will be invaluable. I would also like to focus areas and our successful GLP-1 molecule semaglutide, thank Brian Daniels and Liz Hewitt, who stepped down from the towards other therapy areas and new technology platforms to Board in 2021, for their significant contributions to Novo Nordisk. address unmet medical needs related to serious chronic diseases. On behalf of the Board of Directors, I would like to offer my To serve more patients with high quality medicines and to sincere thanks to all Novo Nordisk employees for their dedication continue to grow sustainably, we will evolve and challenge and contribution to the good operational and strategic progress ourselves in how we work and innovate. This also entails in 2021; to CEO Lars Fruergaard Jørgensen and his team for their combining our company’s deep in-house expertise with the leadership and to our shareholders and other stakeholders for best science from outside, through partnerships with other continued support. businesses, with universities around the world and with research institutions. If we succeed, Novo Nordisk will look very Helge Lund different a decade from now, by which time we will not only be Chair of the Board of Directors Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 5 Letter from the CEO Our company’s strong commercial performance against a We are also doing more than ever to mitigate our impact on the Strong progress and new learnings During 2021 we exceeded expectations – growing our business, serving more patients than ever and expanding our pipeline for long-term success. But we also disappointed patients and prescribers alike due to supply challenges that we must learn from as we look to the future. backdrop of continued disruption caused by the pandemic would not have been possible without the resilience and environment, with a 43% reduction in CO2 emissions compared to pre-pandemic, and an action plan to drive emissions down collaborative spirit shown by colleagues across the organisation further in transportation, which is our largest residual source of and our many partners. CO2. This includes converting our fleet of cars to electric vehicles, as well as working with a shipping partner to increasingly This momentum was driven by our portfolio of GLP-1 based transport our products using biofuel. therapies where buoyant demand for our semaglutide-based medicines Ozempic® and Rybelsus® contributed to a total GLP- We have bold ambitions to diversify our product pipeline 1 growth of 28% in 2021, thereby strengthening our global into adjacent therapy areas such as NASH (non-alcoholic leadership in diabetes in the process. steatohepatitis) and cardiovascular disease, where we believe Such was the demand in the US for another semaglutide product Wegovy® , that five weeks after launch, as many prescriptions were written for the anti-obesity medication as in the four years that followed the launch of its predecessor Saxenda®. This we can be among the best in the world. Our collaboration with Heartseed for stem cell-based heart failure therapy reflects these efforts and we expect to take a significant step forward by initiating the first human trials this year. underscored the high unmet need among people living with Our acquisition of Dicerna, which develops RNAi-based therapies obesity but also presented initial challenges for us in supply to selectively silence genes that cause or contribute to disease, capacity – exacerbated when a key partner experienced issue demonstrates our ambition to innovate within both established with Good Manufacturing Practices (GMP) in December. and new therapy areas for Novo Nordisk. Our commitment to achieving further breakthroughs within diabetes remains Whilst we continue to focus on providing treatment to already- as strong as ever. Driving this innovation requires creativity – initiated patients, we are taking steps within our global something I am convinced is fostered through inclusion. To enable production to enable us to fully meet US demand in the second this, we are making Novo Nordisk a more diverse and inclusive half of this year and to enable much-anticipated launches in workplace in which both new and long-serving employees have broader markets. the opportunity to achieve their full potential. Importantly, we continue to reach more patients in need around the world. Our Changing Diabetes® in Children partnership, for I would like to thank all my colleagues around the globe for their hard work and commitment during another demanding year, example, has provided free, holistic diabetes care to nearly 32,000 as well as the Board of Directors and our shareholders for their children and adolescents living with type 1 diabetes in low- and continued support. middle-income countries. Our diabetes products now reach 34.6 million people worldwide, with more than 5 million receiving them Lars Fruergaard Jørgensen through our access and affordability programmes. President & Chief Executive Officer Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 6 Novo Nordisk at a glance Our corporate strategy Novo Nordisk is a global healthcare company, headquartered Our corporate strategy has four distinct focus areas in leading positions within Biopharm and establish a in Denmark. Our key contribution is to discover and develop which we operate. It is built on our purpose, the Novo strong presence in other serious chronic diseases such innovative biological medicines and make them accessible to Nordisk Way and our ambition to be a sustainable as NASH, cardiovascular disease and Alzheimer’s disease. patients throughout the world. We aim to lead in all disease business. We aim to strengthen our leadership and Succeeding in this will drive sustainable growth for areas in which we are active. treatment options in Diabetes and Obesity care, secure Novo Nordisk. 140,800 DKK million in net sales 168 countries with marketed products 58,644 DKK million in operating profit 80 countries with affiliates 29,319 DKK million in free cash flow 5 countries with R&D facilities 48,478 employees worldwide Diabetes care Strengthen leadership by offering innovative medicines and driving patient outcomes o N v o N ordisk W a y 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 S u 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 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information Novo Nordisk Annual Repor t 2021 7 Resources Our business model How we create value for society Value * Number of unique HCPs educated by independent medical education activities supported through educational grants Sustainable taxpayerDKK 32,593 million total tax contribution> 5 million patients reachedvia access and affordability initiativesNovo Nordisk Foundation and other shareholdersDKK 40,964 million paid out via dividends and share buy-backs34.6 million patients reached with our diabetes productsHealthcare professionals trained>950,000*Direct suppliers>60,000Climate43% reduction of CO2 emissions compared to 201948,478 employees, of whom 7,580 were new hires in 2021R&D investmentsDKK 41.9 billionInsights from healthcare experts, patients and partnersExpertise from public and private institutionsFinancial resourcesDiverse talentRaw materialsManufacturingDistributionCommercialR&DContents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 8 2021 Highlights Purpose and sustainability (ESG) Strategic Aspirations 2025 Adding value to society: – Medical treatment provided to 34.6 million people living with diabetes in 2021 – 46 new vulnerability assessments conducted enabling access to insulin to Progress towards zero environmental impact: – 43% reduction in CO2 emissions compared to 2019 around 82,000 people living with diabetes – Reaching 18 countries and around 32,000 children in Changing Diabetes® Evolve culture and ensure distinct core capabilities: – Launch of an aspirational gender diversity target – Being respected for adding value to society – Progress towards zero environmental impact – Ensure distinct core capabilities and evolve culture in Children Innovation and therapeutic focus Further raise innovation bar for diabetes treatment: – Approval of Xulthophy® and Ozempic® in China for the treatment of type 2 diabetes Strengthen and progress Biopharm pipeline: – Sogroya® phase 3 programme in children with growth hormone deficiency successfully completed – Resubmission of semaglutide 2.0 mg in the US and approval – First Mim8 phase 1/2 trial cohorts successfully completed in the EU in January 2022 – Phase 1 trial completed with a glucose-sensitive insulin Develop superior treatment solutions for obesity: – Approval of Wegovy®, semaglutide 2.4 mg, in the US and approval in the EU in January 2022 – Phase 3a development initiated with 50 mg oral semaglutide in obesity Establish presence in other serious chronic diseases: – Phase 3a development initiated with ziltivekimab in cardiovascular disease and semaglutide in NASH and Alzheimer's disease Acquisition of Dicerna Pharmaceuticals and its RNAi platform to be applied across therapy areas – 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) Commercial execution Strengthen diabetes leadership to more than one-third: – Diabetes value market share increased by 0.8 percentage point to 30.1% (MAT) Financials Deliver solid sales and operating profit growth: – Sales growth at 14% (CER) – International Operations sales growth of 14% (CER) – US sales growth of 13% (CER) with 60% of sales coming from products launched since 2015 – Operating profit growth of 13% (CER) Strengthen obesity leadership and double sales: – Obesity care sales increased by 55% (CER) to DKK 8.4 billion Secure a sustained growth outlook for Biopharm: – Biopharm sales increased by 4% (CER) to DKK 19.2 billion – 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 Drive operational efficiencies: – Continued productivity gains in Product Supply Enable attractive capital allocation to shareholders: – Free cash flow of DKK 29.3 billion – Share buyback of DKK 20 billion – Total dividend of DKK 10.40 per share and payout ratio of 49.6% – Deliver solid sales and operating profit growth: – Deliver 6–10% sales growth in IO – 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 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information Performance highlights Financial highlights Sales by geographic area North America EMEA Region China Rest of World 14% 11% 27% Sales by therapeutic area 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 Cash used for acquisition of businesses 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 Diabetes care Obesity care Biopharm Operating profit after tax to net operating assets1 14% 6% 80% 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) 2017 2018 2019 2020 2021 111,696 111,831 122,021 126,946 140,800 (0.1%) 2.3% 48,967 1.1% 4.8% 3,182 (287) 48,680 21.7% 38,130 1,022 7,626 — 32,588 102,355 49,815 84.2% 25.4% 12.5% 43.8% 34.1% 85.5% 143,2% 50.4% 15.42 15.39 2,500 7.85 19,206 16,845 335 0.1% 4.6% 47,248 (3.5%) 2.8% 3,925 367 47,615 18.9% 38,628 2,774 9,636 — 32,536 110,769 51,839 84.2% 26.3% 13.2% 42.2% 34.5% 84.2% 116,7% 50.6% 15.96 15.93 2,450 8.15 19,547 15,567 298 9.1% 5.6% 52,483 11.1% 5.6% 5,661 (3,930) 48,553 19.8% 38,951 2,299 8,932 — 34,451 125,612 57,593 83.5% 26.1% 11.7% 43.0% 31.9% 88.4% 98.0% 50.5% 16.41 16.38 2,400 8.35 19,651 15,334 387 4.0% 6.7% 54,126 3.1% 6.8% 5,753 (996) 53,130 20.7% 42,138 16,256 5,825 — 28,565 144,922 63,325 83.5% 25.9% 12.2% 42.6% 33.2% 67.8% 82.8% 50.0% 18.05 18.01 2,350 9.10 21,066 16,855 427 10.9% 13.8% 58,644 8.3% 12.7% 6,025 436 59,080 19.2% 47,757 1,050 6,335 18,283 29,319 194,508 70,746 83.2% 26.3% 12.6% 41.7% 33.9% 61.4% 69.0% 49.6% 20.79 20.74 2,310 10.40 3 23,711 3 19,447 735 1. See 'Non-IFRS financial measures' 2. See 'Financial definitions'. 3. Total dividend for the year including interim dividend of DKK 3.50 per share, corresponding to DKK 8,021 million, which was paid in August 2021. The remaining DKK 6.90 per share, corresponding to DKK 15,690 million, will be paid subject to approval at the Annual General Meeting. 9 2020-21 Change 11% 8% 11% 13% (94%) 9% 3% 34% 12% 15% 15% (2%) 14% 13% 15% 72% Novo Nordisk Annual Report 2021Strategic Aspirations Innovation and therapeutic focus 11 Purpose and sustainability (ESG) 24 30 Commercial execution 33 Financials Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 11 43% decrease in our overall CO2 emissions compared to pre-COVID levels in 2019 31,846 children reached through our Changing Diabetes® in Children programme in 2021. This corresponds to an increase of 13% compared to 2020 The “Key ESG priorities” overview is meant to inform our ESG reporting in the future and will be refreshed regularly. Overall, we aim to progress towards zero environmental impact, be respected for adding value to society and ensure distinct core capabilities, evolve culture as well as maintain and build trust across the E, S and G dimensions. Purpose and sustainability (ESG) Driving a Sustainable Business Expectations of what it means to be a sustainable business are evolving rapidly. The COVID-19 pandemic, access to care and the climate crisis have accelerated demands for the private sector to demonstrate how it adds value to society and mitigates long-term risks. Given Novo Nordisk’s central position in the healthcare ecosystem, our company is at the forefront of these challenges – and we are stepping up our commitments to patients and society as we further integrate sustainability into everything we do. Our key ESG topics In 2021, we completed a thorough process aimed at addressing materiality and prioritising our key Environmental, Social and Governance (ESG) topics. We identified key ESG topics across two dimensions: (1) how our activities impact society and planet and (2) how society and planet impact our activities. Those ESG topics that are of highest impact and materiality are covered in this integrated annual report. All applicable remaining ESG topics are covered via our reporting on relevant ESG standards and frameworks (please refer to the Sustainability Standards section on pages 22 and 23). Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 12 Novo Nordisk Society & planet Topics Key ESG priorities Environmental – CO2 emissions – Energy consumption Social – Access & affordability – Diversity & inclusion – Environmental management – Employees – Plastic – Waste & circularity – Water – Human rights – Innovation – Prevention of serious chronic diseases – Sustainable tax Governance – Bioethics – Business ethics – Corporate governance – Culture & values – Product safety – Remuneration – Risk management – Suppliers Our environmental responsibility: progressing towards zero environmental impact The sixth assessment report from the Intergovernmental Panel on Climate Change from August 2021 delivered the starkest warning yet about the impact of climate change on lives and livelihoods. The message is clear: climate change is resulting in poorer health outcomes and increasing mortality and constitutes a driver for health inequities globally. It adversely affects people who are already living with chronic diseases in particular. Health systems worldwide are increasingly acting on the urgent need to reduce their emissions and are working to become more resilient to climate change. All with a view to better adapt to future climate scenarios and protect populations from their impacts. In the fall of 2021, the COP26 Health Programme was launched to spearhead this transformation at a global level – and we look forward to contributing our part. It is clear that fast-growing and successful companies like Novo Nordisk have an obligation and a vital role to play in addressing the climate crisis and in helping to reverse the accumulation of greenhouse gas emissions responsible for today’s warming world and an even warmer future. In 2021, we made a clear and ambitious pledge to reach net-zero emissions across our entire value chain by 2045. Our environmental performance in 2021 showed good progress compared to our 2019 baseline year by minimising the impact despite increasing production globally. We have made particular progress in the reduction of CO2 emissions and the use of water in water scarce areas. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 13 Ambitious emission targets Operations We are assessing, preparing for and mitigating the risks from We are building on our landmark 2020 achievement of using climate change and have set ambitious emission reduction 100% renewable power across our global production network. targets with an emissions trajectory in line with the 1.5 degree The next step is to transform our business processes to eliminate pathway in the Paris Agreement. Action is required now, the negative environmental footprint from all our operations. We which is why we have defined several ambitious climate and environmental targets in the near to medium-term future, plan to have zero net emissions of CO2 from our own production facilities, global office buildings and laboratories by 2030, and are leading to 2030. striving to reduce our emissions year-on-year. In 2021, Novo Nordisk’s CO2 emissions from in-house operations and transport decreased by 43% compared to the 2019 level, Transportation Transportation is an important element in the environmental bringing total emissions down to 174,000 tonnes of CO2. This reduction was driven by our renewable energy projects and the equation. We have made good progress towards achieving our target of transitioning to 100% electric company cars by 2030, impact of COVID-19 on travelling. 2019 is used as the baseline with 50% of vehicles in our home market of Denmark now using for CO2 emissions as 2020 was impacted by the pandemic. electrical or plug-in technology. Entering into an agreement with Maersk to transport our products with CO2 neutral ships was another important milestone. We are also minimising Total CO2 emissions from operations and transportation emissions from business air travel by using digital platforms for 1,000 tonnes 350 300 250 200 150 100 50 0 2018 2019 2020 2021 virtual collaboration wherever possible. Supply Chain We are now stepping up our work with supply chain partners to ensure they also use renewable power when producing for Novo Nordisk. Currently, direct suppliers representing 41% of supply chain CO2 emissions have committed to using renewable power. 18% of these emissions have already been reduced due to an 50% of vehicles in our home market of Denmark now using electrical or plug-in technology early shift to renewable power, cutting our supply chain emissions we made a significant commitment in 2021 to reach net-zero by approximately 50,000 tonnes. We expect all our direct suppliers emissions across our entire value chain by 2045. Achieving this to source 100% renewable power by 2030. Successful conversion reduction calls for an ambitious plan to tackle Scope 3 to renewable power among all our suppliers would result in a further 300,000 tonnes of CO2 being eliminated every year. CO2 emissions, e.g., purchased goods and services, capital goods and employee commuting, among others. With more than 60,000 suppliers in our value chain, engaging with As part of our drive to encourage greater environmental them all to progress towards net-zero emissions is a major responsibility among all the partners we do business with, undertaking. Our role in sharing lessons learnt with peers on Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 14 the use of renewable power was recognised during Climate Week New York City in September 2021, when Novo Nordisk was awarded the RE100 Key Collaborator Award for its work in What are Scope 1, 2 & 3 emissions? accelerating the global transition to 100% renewable energy. A company’s greenhouse gas emissions can be classified into three scopes. These scopes are Stepping up to the plastic challenge the hardest to monitor and address. Novo Nordisk’s reporting of Scope 3 emissions is currently defined with reference to how directly a company influences the emissions – with Scope 3 being limited to product distribution and business flights. This means that the data shown below do not include a significant proportion of the Scope 3 emissions from our value chain. Scope 1 Scope 2 Scope 3 Direct emissions from company- owned and controlled resources (including emissions from production processes and transport) Indirect emissions from the generation of energy purchased from a utility provider (including electricity, steam, heat and cooling) All indirect emissions – not included in Scope 2 – that occur in the value chain of the reporting company (including both upstream and downstream emissions) 77,000 tonnes of CO2 16,000 tonnes of CO2 Novo Nordisk’s reporting of Scope 3 emissions is currently limited to product distribution and business flights 81,000 tonnes of CO2 174,000 tonnes 22 and 23 for more information on our reporting in the Total CO2 emissions from operations and transportation environmental dimension. Cutting CO2 emissions is only a part of our ambitious goal of creating a business with zero environmental impact. We also recognise the need to minimise the use of fossil-based plastic, which is one of our major challenges, as we produce more than 600 million pre-filled pens every year, which are an essential daily companion for people living with diabetes. We must find good solutions to minimise the use of fossil-based plastic by innovating new products, shifting to more sustainable material and establishing recycling opportunities for our pre-filled pens globally. We use more than 12,000 tonnes of plastic every year in the production of our devices. As medical waste, they are difficult to recycle. However, a pioneering take-back initiative piloted over the past year in Denmark shows that it is possible to reclaim and reuse the plastic that makes up three-quarters of these devices. Material from scrapped insulin pens has already been successfully used for the manufacture of lamps and office furniture. Over the next three years, we also aim to roll out pen recycling pilots in other markets, starting with the UK, France and Brazil. Further out, we are investigating the potential to develop non fossil fuel-derived plastics by harnessing waste carbon and hydrogen from energy supply processes, including through the use of carbon capture. Please refer to the Sustainability Standards section on pages Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 15 Our social responsibility: being respected for adding value to society With approximately 537 million adults in the world living with diabetes – a figure that is projected to rise to 783 million by 2045 if no action is taken – our Defeat Diabetes strategy is a We are driven by our purpose to defeat diabetes and other cornerstone of our social responsibility work. We are striving to serious chronic diseases including obesity, haemophilia and bend the curve of diabetes through product innovations that will growth hormone disorders. While innovation is our core improve lives, while at the same time working with partners to contribution to this fight, we know that complex inequalities in prevent the rise of new cases of both type 2 diabetes and obesity, healthcare remain the biggest barrier. By playing an active role as well as ensuring that vulnerable patients in every country can in improving access to innovative and affordable solutions for access and afford the care they need. With a growing health people with chronic conditions across the globe, our aim is to challenge of this magnitude, we know that we are nowhere close deliver real change in the communities we serve. to defeating diabetes, but we are committed to doing nothing short of that and fortunately, we are not alone in this fight. 5+ million patients reached via our access and affordability efforts, corresponding to approximately 14% of all our diabetes patients include local health authorities, partners and civil society in all Improving access to life-changing care in low- implementation activities. Shared ownership and involvement are and middle-income countries critical to value creation for the end users and the health system, Given our dedication to improve the lives of people with as well as for the sustainability of the solution. diabetes and other serious chronic diseases, including obesity, haemophilia and growth hormone disorders, we strive not The Changing Diabetes® in Children partnership is one example of only to identify new innovative treatments but also to support this work. The programme has to date provided free care to nearly a strong healthcare system that ensures patient access and 32,000 children and youth living with type 1 diabetes in low- and affordability for the medications they need. middle-income countries, putting it almost one-third along the way towards achieving our aspiration of reaching 100,000 children in We recognise that access to affordable medicines is a challenge low-resource settings by 2030. The partnership is present in 18 for many people, and not only in low-income countries. This is countries, following the addition of Ghana, Indonesia, Pakistan and why we are expanding our initiatives and partnerships to reach Peru in 2021. Five more countries (Mozambique, Rwanda, Malawi, more underserved people with affordable care worldwide. Each Jordan and Lebanon) are launching in early 2022 as part of an initiative is tailored to the local context, unmet needs and health expanded partnership project with the World Diabetes Foundation. system challenges. Our access and affordability efforts now reach more than 5 million patients out of the 34.6 million who For the many other vulnerable people who are living with both use our diabetes care products around the world. type 1 and type 2 diabetes and who are struggling to access the care they need, we are leveraging our global organisation and Rebecca Commanda has type 2 diabetes and lives in Canada Ensuring not only that access to care for patients is achieved but using our presence on the ground to develop and implement that it is done in a sustainable manner is the most important country-based solutions. An example of this is the iCARE to Defeat consideration in our initiatives. This is why we always aim to Diabetes strategy launched in our Sub-Saharan business unit. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 16 The strategy adopts an ambitious and holistic approach complex, and there is no single solution. In 2021, we provided Copay Savings Cards: Defray high out-of-pocket costs for to addressing barriers to access to care, and it engrains 30 billion USD in sales discounts and rebates, amounting to commercially insured patients. In 2021, Novo Nordisk provided the objective of reaching more people with diabetes into 75% of US gross sales (74% in 2020), which primarily helped to ~$100 million in copay assistance for insulin to patients. the organisational incentives of the business unit. Globally, secure broad formulary access for most patients with reasonable vulnerability assessments were made in a total of 67 countries copays. In addition, we have continued to provide a full suite of Reaching people where they are is vital, so we invested in in 2021, up from 21 assessments in 2020. Based on these affordability offerings through which we helped more than one broad communications to ensure awareness. We also made assessments, affordability plans are being implemented and million patients with diabetes in the US afford Novo Nordisk enhancements to create a positive user experience and make around 82,000 people with diabetes have obtained access insulin in 2021. These affordability options include: to diabetes care across Ethiopia, Ghana, Ivory Coast, Kenya, NovoCare.com, our one-stop patient access and affordability support resource, easy to use. NovoCare® helps support one Nigeria, Syria, Peru and Panama. My$99Insulin: 30-day supply of a combination of Novo Nordisk patient every ten seconds. insulin products (up to three vials or two packs of pens) for 99 As the world's leading supplier of insulin, we reaffirm our USD for eligible patients. Access to Insulin Commitment ensuring affordable insulin for vulnerable patients. Under this commitment, we offer human insulin vials at a ceiling price of USD 3 to 76 countries, as well NNPI Unbranded Biologics: Unbranded versions of fast-acting (NovoLog®) and premix insulin (NovoLog® Mix), available from The second tenet is working with all stakeholders to simplify and transform the healthcare system, while we work towards longer-term reform. We support policies that make insurance work better for patients. These include first-dollar coverage for as to selected humanitarian organisations and UN agencies Novo Nordisk Pharma, Inc. (NNPI), at a 50% list price discount chronic medications and changes to Part D, such as capping providing humanitarian relief. Long-term agreements are versus branded versions. annual out-of-pocket costs, smoothing cost-sharing over the currently in place with 10 organisations. An estimated 1.7 benefit year and passing manufacturer discounts on to patients. million patients accessed care under this commitment in 2021, Human insulin: Available for about 25 USD per vial at national and an additional estimated 2.2 million patients were reached at pharmacies, including Walmart and CVS. Nearly 500,000 The third tenet is limiting any potential future list price increases or below the ceiling price in countries outside the commitment. Americans are obtaining Novo Nordisk human insulin through to no more than single-digit percentages annually. these retailers. Improving access and affordability in the United States US Product Portfolio1 %, Change vs. Prior Year Affording healthcare is not only a challenge in low- and middle- Patient Assistance Program: Offers free diabetes medication 2017 2018 2019 2020 2021 income countries. In the United States, some people are also to people in need who meet certain eligibility criteria, including List Price Change - Avg.2 6.9% 5.0% 5.5% 2.3% 2.0% finding it increasingly hard to pay for treatments, including annual household income at or below 400% of government- Net Price Change - Avg.2 -9.0% -8.6% -13.2% -16.9% -12.3% insulin. Ensuring access and affordability is a responsibility we defined poverty level. Over 50,000 Americans received free share with all stakeholders in the United States’ healthcare insulin annually from this program in 2021. This was expanded Total US Insulin Portfolio %, Change vs. Prior Year system. We are committed to doing our part, focusing on three during the pandemic to offer 90-day free insulin to those main tenets. impacted by COVID-19 job loss. The first tenet is finding ways to lower the out-of-pocket cost Immediate Supply Program: A free, one-time, immediate to patients with high-deductible health plans or those with no supply of Novo Nordisk insulin (up to 3 vials or 2 packs of pens) insurance. The issues driving patient affordability challenges are to eligible patients who may be at risk of rationing. 2017 2018 2019 2020 2021 List Price Change - Avg.2 6.3% 4.5% 4.4% 0.2% 0.0% Net Price Change - Avg.2 -13.5% -14.8% -17.4% -27.7% -10.2% 1. NN US Product Portfolio is inclusive of Diabetes, Obesity and BioPharm products 2. % change represents a sales weighted average list and net price for the respective calendar year compared to the sales weighted average list and net price for the prior year and is not reflective of the magnitude of individual list price actions Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 17 Alejandro Treviño is living with obesity in Mexico Improving access in resource-poor settings urban settings. In 2021, Cities Changing Diabetes reached more Further to the description of our US specific initiatives above, places than ever before, with 41 cities now participating in the improved access can also be driven by better science. We initiative, up from 36 in 2020. These cities are home to more than are leveraging our expertise in research to bring life-saving 220 million people. In Cities Changing Diabetes, some of the products to more people in resource-poor settings. This activities that cities engage in include health promotion, COVID-19 includes ongoing work to deliver insulins with extended storage response, working with community organisations to reach isolated time outside of refrigeration in order to improve access and and vulnerable populations, improving bicycling and walking benefit patients and healthcare professionals living and working infrastructure and addressing challenges in access to healthy food. in humanitarian settings or countries with challenging weather conditions and limited access to refrigeration. As a first step, A diverse and inclusive workplace in 2021 we filed for EMA assessment of label updates on two As a global employer, we are of the view that offering an of our human insulins to potentially enable them to be kept inclusive and diverse working environment is an integrated outside of refrigeration for up to four weeks before use. part of being a sustainable business. We fundamentally believe Strengthening our prevention efforts for Novo Nordisk by increasing innovation, enabling a diverse Prevention is the other vital pillar in our strategy to defeat line of thought and providing all employees with equitable diabetes. Diabetes and obesity prevalence continue to grow opportunities to realise their potential. that diversity of people and inclusive leadership drive value on all continents and the burden on individuals, families, workplaces and society is large and growing. Ensuring access Launching aspirational targets to our medicines will help reduce the burden for people At Novo Nordisk, we believe that diversity is any dimension that with chronic disease but we must also work to prevent these differentiates people and enables a diverse line of thought - for diseases from developing in the first place. Our aim is to example background, education, experience, ethnicity, race or find, pilot and scale effective interventions to prevent both age, nationality, disability status or sexual orientation. Whilst diabetes and obesity. These efforts, which explore innovations legal constraints mean we currently do not have consistent in place-based interventions, digital solutions and new ways global measures on all the aspects of diversity, gender of collaborating with financial services sector participants diversity is a space in which we have identified a need to set in support of common objectives, are evidence-based and an aspirational target to ensure accountability among leaders partnership-driven for the greatest possible impact. and accelerate progress. As of 2021, women fill 43% of all leadership positions and 36% of senior leadership positions1 at Our work in collaboration with UNICEF to prevent childhood Novo Nordisk. While several initiatives have been launched to overweight and obesity is one example of this. However, we also progress gender diversity in senior leadership positions, we are continue to expand our successful public-private partnership, not yet satisfied with the current state. Cities Changing Diabetes, which is designed to address diabetes 1. Defined as vice presidents, corporate vice presidents, senior vice presidents and obesity prevention amongst vulnerable populations in and executive management Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 18 Our aspirational target was announced alongside two non-binary gender, recognising that some employees may not Driving progress in diversity and inclusion others in 2021: wish to be categorised. – Create an inclusive culture where all employees have a sense of belonging and equitable opportunities to realise their Women in leadership potential – Achieve a balanced gender representation across all managerial levels – Achieve a minimum of 45% women and a minimum of 45% EVP/SVP CVP VP men in senior leadership positions by the end of 2025 Senior leadership We define balance as the range between 45%-55% to leave up to 10% flexibility for women and men while also allowing for Director Manager All leaders 2017 2018 2019 2020 2021 14% 28% 33% 31% 42% 40% 40% 13% 31% 35% 32% 41% 40% 40% 18% 33% 35% 33% 43% 40% 40% 24% 37% 36% 35% 41% 42% 41% 28% 39% 36% 36% 44% 43% 43% To create an inclusive workplace, we continuously review our processes and policies. In 2021, we announced a new global parental leave policy. From January 2022, we will offer a minimum of eight weeks paid leave within the first year of becoming a parent to all non-birthing parents globally, regardless of gender. Our ambition is that recognition of the non-birthing parents' right to leave will result in greater inclusion and equality for parents - both at work and at home. In addition, we conduct yearly equal pay reviews and take mitigating actions in case of any identified pay gaps. Out of the 34,000 positions2 covered in the pay review in 2021, we identified 1% with an equal pay gap3 and have taken corrective action. Of the positions where an equal pay gap was identified, 152 are occupied by female employees and 131 are occupied by male employees, indicating that there is no structural gender bias in the way we pay. Finally, in 2021 we introduced our global “Inclusion Index” as part of our annual employee engagement survey. The index is a numerical indicator of how our employees rate the state of inclusion at Novo Nordisk. In 2021, 78% of employees rated the statements about inclusion favourably. The score is below average when benchmarked against other highly engaged organisations. As a result, we have encouraged all leaders to engage their employees in dialogue around how to improve local inclusion and to identify concrete actions. Mandy Marquardt is a professional track cyclist and is living with type 1 diabetes. She is representing Team Novo Nordisk, the world's first all-diabetes professional cycling team 2. Excluding some populations and locations due to local regulations such as in the US where a local process is in place 3. “Equal Pay gap” is defined as the employee’s pay being significantly above or below the expected pay given the employee’s job level, tenure, job family and other parameters Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 19 Diversity and inclusion challenges and opportunities vary Corporate income taxes by region – three year average Human rights' risk management depending on the local context and the societies that we serve. Share of category To ensure we consider the local context, drive impact at all levels and hold our leaders accountable for driving progress, all our Intellectual property senior leaders across the company have been asked to define Region rights1 Production2 Sales3 local diversity and inclusion aspirations and associated action International Operations plans. We expect all our leaders to embrace their role as inclusive leaders by being committed to building diverse teams of complementary strengths, valuing diverse perspectives and creating a psychologically safe space in which all employees feel free to speak up. Progress of diversity and inclusion has been anchored in both short-term and long-term incentive programmes and we follow up and track progress on a regular basis. – Denmark – EMEA (excluding Denmark) – China – Rest of World North America Operations – Of which the US Total 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 We are committed to respecting human rights as per the UN Guiding Principles on Business and Human Rights (please refer to the Governance section on page 20 and novonordisk.com). We continue to integrate human rights risks into our risk management process, across our operations and business relationships. 2021 Corporate income taxes (DKK billion) 9.3 8.0 0.6 0.4 0.3 1.3 1.2 10.6 Please refer to note 8.5 on Gender diversity on page 89 for entities perform their functions under contract on behalf further information. Please refer to the Corporate Governance of the principals and are allocated an activity-based profit Report available at novonordisk.com for further information on according to a benchmarked profit margin. The tax outcome D&I targets regarding the Board of Directors. of this operational model is reflected in the overview above, structure' in line with OECD principles, meaning all legal Sustainable tax approach which shows our corporate income taxes by region. To ensure alignment between taxing authorities about the allocation Our overall guiding principle within taxation is to have a of profit between our entities, we have Advance Pricing 'sustainable tax approach', emphasising our business anchored Agreements in place for geographies representing around 65% approach to managing the impact of taxes while remaining of our revenue worldwide. true to the Novo Nordisk values of operating our business in a responsible and transparent manner. This means that we pay Our tax policy has been approved by the Board of Directors. tax where value is generated and always respect international Read more about this topic at novonordisk.com. and domestic tax rules. As a global business, we conduct cross-border trading, which Please refer to note 8.6 on Total tax contribution on page 90 for Sierra Clark lives with Glanzmann Thrombasthenia in Canada is subject to transfer pricing regulations. We apply a 'Principal further information. In addition to corporate income taxes, we also pay other taxes. Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 20 Our governance responsibility: maintaining and building trust At Novo Nordisk, we categorise governance into three dimensions. The first dimension is Corporate Governance and covers our governance and ownership structure. Governing Processes, the second dimension, refers to how we run our business. Sustainability Standards, which is about how we oversee and prioritise our sustainability and ESG agenda, is the third dimension. Foundation ownership Novo Nordisk has prepared a separate Remuneration Report Novo Holdings A/S, a Danish company wholly owned by the describing the remuneration awarded or due during 2021 to Novo Nordisk Foundation, holds the majority of votes at the Board and Executives registered with the Danish Business general meetings. Authority. The Remuneration Report is submitted to the Annual General Meeting for an advisory vote. The combination of foundation ownership and stock listing enables Novo Nordisk to embark on long-term sustainable The Remuneration Policy and Remuneration Report are available strategies while maintaining short-term transparency on at: www.novonordisk.com/about/corporate-governance.html performance. Our foundation ownership supports the overarching imperative to be both commercially successful and Reporting on diversity is included in the social responsibility responsive to the wider needs of society. section on pages 17 to 19, in the social performance section on page 89, and for the Board of Directors also in the Corporate Corporate Governance The objective of the Novo Nordisk Foundation is to provide a Governance Report. Novo Nordisk’s diversity policy is available stable basis for the commercial and research activities of Novo at novonordisk.com. Governance Structure Nordisk as well as Novozymes and support broader scientific, The shareholders of Novo Nordisk exercise their rights at the humanitarian and social purposes. Please refer to page 7 for Disclosure regarding change of control provisions general meeting, which is the supreme governing body of the an illustration of how we create value for society in conjunction The EU Takeover Bids Directive, as partially implemented by the company. The general meeting inter alia adopts the company’s with the Novo Nordisk Foundation. For more information about Danish Financial Statements Act, requires listed companies to Articles of Association, approves the annual report and elects the ownership structure of Novo Nordisk, see page 37. disclose information that may be of interest to the market and the Board of Directors. potential take-over bidders, in particular in relation to disclosure Corporate Governance Reporting of change-of-control provisions in material contracts. Any shareholder has the right to raise questions at general Novo Nordisk reports in accordance with the Danish Corporate meetings. Resolutions can generally be passed by a simple Governance Recommendations designated by Nasdaq Novo Nordisk discloses that the Group has one significant majority. However, resolutions to amend the Articles of Copenhagen as well as the Corporate Governance Standards agreement with a US payer which takes effect, alters or Association require two-thirds of the votes cast and capital of the New York Stock Exchange applicable to foreign private terminates upon a change of control of the Group. If effected, a represented, unless other adoption requirements are imposed issuers. In 2021 Novo Nordisk complied with the Danish takeover could – at the discretion of the relevant counterparty – by the Danish Companies Act. Corporate Governance Recommendations as we either complied lead to the termination of such agreement. Given the ownership with or explained our approach to the recommendations. You structure of Novo Nordisk, the risk is considered to be remote. Novo Nordisk has a two-tier management structure consisting can find further information about our corporate governance of the Board of Directors and Executive Management. practices in our 2021 Corporate Governance Report. In relation to the registered management of Novo Nordisk The governance structure and rules of Novo Nordisk are A/S, the current employment contracts allow for severance further described in our Articles of Association and our Corporate Governance Report in accordance with section 107b payments of up to 24 months' fixed base salary plus pension Corporate Governance Report, both of which are available at of the Danish Financial Statements Act: contributions in the event of a merger, acquisition or takeover novonordisk.com. www.novonordisk.com/about/corporate-governance.html of Novo Nordisk. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 21 Governing Processes The Novo Nordisk Way – Essentials Group Internal Audit assesses that the level of business ethics compliance is sound. Management action plans and closure Novo Nordisk Way 1. We create value by having a patient centred of findings progressed as planned and there were no overdue The Novo Nordisk Way is a set of guiding principles which business approach. management actions or findings at the end of the year. underpins every decision we make. We use a unique, systematic 2. We set ambitious goals and strive for excellence. approach known as facilitation to ensure that everyone lives 3. We are accountable for our financial, environmental In 2021, data ethics principles were enhanced and will be up to the Novo Nordisk Way. In 2021, 34 facilitations and eight and social performance. implemented through policies and trainings across the special assignments were completed. Any issues are addressed 4. We provide innovation to the benefit of organisation in 2022. Our data ethics principles support ethical locally and a consolidated report is shared with the Board of our stakeholders. decision-making when using data across the value chain. We Directors and Executive Management. 5. We build and maintain good relations with further strengthened the global integration of data protection our key stakeholders. and human rights risks in the business ethics risk management In 2021, five units were found not to be operating in full 6. We treat everyone with respect. process. Please find more information at novonordisk.com. accordance with the Novo Nordisk Way, a similar percentage 7. We focus on personal performance and development. to 2020 but still a concern. In most cases the root causes were 8. We have a healthy and engaging working environment. Product quality and supplier audits grounded in leadership style and behaviours not living up to 9. We strive for agility and simplicity in everything we do. In 2021, as in 2020, Novo Nordisk had no failed inspections the Novo Nordisk Way. There were no findings around quality or 10. We never compromise on quality and business ethics. among those resolved by the relevant health authority at business ethics mindset. Company reputation Code of Conduct and international and local standards for year-end. However, a contract manufacturer filling syringes for Wegovy® failed an inspection causing disruption in the supply of Wegovy®. During the year, 97 inspections were conducted, The Novo Nordisk reputation score among key stakeholders (i.e., responsible business conduct. Business ethics covers anti-fraud, compared with 77 in 2020. At year-end, 86 inspections were the informed general public, people with diabetes, people with anti-bribery, anti off-label promotion, transparency in dealing passed and 11 were unresolved, as final inspection reports obesity, healthcare professionals and diabetes specialists) is an with healthcare professionals and healthcare organisations, the had not been received or the final authority acceptance was indicator of the extent to which we live up to society’s expectations. protection of personal data, as well as respect for human rights pending. Follow-up on unresolved inspections continues in with the aim of minimising any potential risks to our patients, 2022. Please see note 9.4 on page 91 for further information. We achieved a reputation score of 82.6 points in 2021 business, people and stakeholders. measured on a scale of 0-100. As the only company among our In 2021, a total of 253 supplier audits were conducted to assess selected peers, Novo Nordisk enjoys a score above 80 points Annual training in business ethics is mandatory for all compliance levels with our supplier standards. for Products & Services, which is the most important driver employees, including all new hires. In 2021, 98% of employees of reputation across all stakeholder groups, and thus the key completed and documented their training, with the remaining In 2021, we had 1 product recall from the market. Please see driver of the positive overall result. 2% missing mainly due to employees being on leave. In note 9.3 on page 91 for further information. 2021, 37 business ethics reviews were completed with 129 Business ethics findings, compared with 32 reviews with 107 findings in Financial and ESG assurance Our approach to business ethics is acting with integrity and 2020. Consolidated findings are reported to our Executive We are committed to ensuring the accuracy of our financial and in compliance with the Novo Nordisk Way, our Business Ethics Management and the Audit Committee. ESG reporting. Our financial reporting and the internal controls Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 22 of financial reporting processes are audited by an independent aligned with 23 of 25 metrics. Our VRF/ SASB adherence future. We therefore welcome that SBTi launched a new net-zero audit firm elected at the Annual General Meeting. As part of our document is available on our ESG Portal at novonordisk.com. standard in October 2021 and we have committed to have our ESG responsibility, we voluntarily include an Assurance Report net-zero CO2 emissions in 2045 target validated by them in 2022. from an independent external auditor for ESG reporting in the Using the TCFD framework, we continue to take a stepwise Annual Report. The assurance provider reviews whether the ESG approach to incorporating material climate-related risk- For the United Nations Sustainable Development Goals (SDGs), performance information covers aspects that are deemed to assessments into our governance, strategy and execution on we focus our efforts on Goal 3, 'health' and Goal 12, 'responsible be material and verifies the internal control processes for the climate and environmentally related initiatives. This includes the consumption and production', as this is where we believe we information reported. consideration of operational risks related to the environment, can maximise our positive impact. such as current and emerging environmental and climate- Our internal audit function provides independent and objective related litigation, access to resources, such as water and raw We will publish further information on our adherence to selected assurance, primarily within internal control of financial processes, materials, and exposure to acute physical risks that could standards on our ESG Portal on an ongoing basis. This applies to IT security and business ethics. To ensure that the internal disrupt production. As recommended by the TCFD, we work to the VRF/ SASB, TCFD and WEF's Stakeholder Capitalism Metrics in financial audit function operates independently of Executive identify, assess and mitigate short-, medium- and long-term particular. Please also refer to the consolidated ESG statement in Management, its charter, audit plan and budget are approved climate-related risks within our operations and supply chain. this Annual Report and to novonordisk.com for more information by the Audit Committee. The Audit Committee must approve on our sustainability governance. the appointment, remuneration and dismissal of the head of the In addition to the TCFD, we have been working with the Science internal audit function. As part of our ESG responsibility, the Audit Committee also oversees our ESG reporting. We thereby ensure that our ESG reporting is subject to the same robust governance Based Targets initiative (SBTi) for a number of years, where our CO2 emissions reduction targets for 2030 are validated. We believe external validation and transparency are paramount ESG "rankers and raters" We perform on par with peers according to selected raters but with room to improve, particularly with respect to S&P Global that applies to our financial reporting. measures to ensure rapid progress towards a decarbonised and Access to Medicine Index. Sustainability Standards Sustainability standards and performance We report on our ESG performance in accordance with relevant disclosure standards, including those of the Value Reporting Foundation (VRF)/ Sustainability Accounting Standards Board (SASB), the Taskforce on Climate-related Financial Disclosures (TCFD) and the Carbon Disclosure Project (CDP). We strive to adhere to the disclosure requirements of the VRF/ SASB, as they apply to the pharmaceuticals industry. We do this to demonstrate our commitment to being transparent and accountable for how we operate. Having further assessed our adherence and disclosure in 2021, we are now fully or partially High Medium MSCI’s ESG Rating is designed to measure a company’s resilience to long-term, industry-material ESG risks. Novo Nordisk continued to hold an AAA leadership ESG rating in line with the past five years. Sustainalytics' ESG Risk Ratings score the ESG performance of more than 12,000 companies, from “negligible” to “severe”. Novo Nordisk received an ESG risk rating of 24.1 (“medium”). Novo Nordisk ranked among the top 10% in the Industry Group ‘Pharmaceuticals’, with a ranking of 94 out of 1028 based on those companies reviewed. CDP scores companies from “D-“ to “A”. In 2021, Novo Nordisk continued to hold an “A” leadership ranking in CDP Climate, and a “B” ranking in CDP Water. The ATMI evaluates 20 of the world’s largest pharmaceutical companies in areas where they have the biggest potential and responsibility to make change, such as R&D. Novo Nordisk ranked 10th, with a score of 2.96 and strong performance in Governance of Access and Product Delivery. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 23 We follow and adhere to legal requirements, international standards, recommendations and commitments including: Standards Legal requirements – Value Reporting Foundation/ – The Danish Financial Statements Act Sustainability Accounting Standards – UK Bribery Act Board – UK and Australian Modern – Taskforce on Climate-related Slavery Acts Financial Disclosures – US Foreign Corrupt Practices Act – Science Based Targets initiative – World Economic Forum's Recommendations and Stakeholder Capitalism Metrics commitments – UN Global Compact Ten Principles – UN Guiding Principles on Business and Human Rights – UN Political Declaration on Universal Health Coverage – UN Sustainable Development Goals – OECD Guidelines for Multinational Enterprises on Responsible Business Conduct For more information, see novonordisk.com. Regulatory compliance We are committed to comply with all applicable rules and regulations. As a listed company with more than 500 employees, we are in scope of the EU Taxonomy Regulation. We do not currently consider our core economic activities to be in scope of the EU Taxonomy Regulation’s technical annexes on climate change mitigation and climate change adaptation. Based on our current understanding, available data and assessment of requirements, we have zero eligible activities to report on within revenue, Opex and Capex. We note that the EU Taxonomy Regulation will keep evolving and that we will continue to consider its impact as well as future reporting obligations. Remuneration As described in the Remuneration Report, executive remuneration is linked to performance on financials as well as non-financials (e.g., innovation, sustainability). Strategic Aspirations 2025 Purpose and sustainability – Being respected for adding value to society – Progress towards zero environmental impact – Ensure distinct core capabilities and evolve culture Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 24 Innovation and therapeutic focus In pursuit of life-changing innovation We are active in late stage assets across all our therapy areas Since 1923, Novo Nordisk has pursued scientific breakthroughs within serious chronic diseases. To enable us to drive change for society throughout another century, we are exploring higher levels of innovation by deploying novel technology platforms across more therapy areas than at any point in our history. In doing so, we are building on our heritage within diabetes care with the ambition to become the world’s foremost cardiometabolic disease company. more technologies than ever before, not least within the rapidly evolving cardiometabolic disease space. This journey can deliver for those who for decades have relied on our innovation within diabetes and haemophilia, but also in the future may have the potential to deliver for others at risk of diseases such as NASH and dyslipidaemia (high cholesterol). To achieve our ambitions, we will not only leverage our existing capabilities in protein and peptide engineering and delivery, but also invest in new platforms such as cell therapy, RNA The COVID-19 pandemic has exacerbated the mounting social, interference and gene editing. Much of this work will be done economic and human burden of serious chronic diseases through partnerships. that affect hundreds of millions of people. By exposing the vulnerability of these populations, it has highlighted the complex interactions between communicable and non-communicable diseases, underscoring the need for ground-breaking innovation. We are meeting the challenge by creating an increasingly broad pipeline of life-changing products in areas including diabetes, obesity, cardiovascular disease, non-alcoholic steatohepatitis (NASH), and Alzheimer’s disease. The innovations we are pursuing today take our company into more therapy areas and Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 25 Towards holistic, integrated healthcare In the meantime, our R&D is continuing to deliver significant Our Research and Development (R&D) strategy has led us to a point in time where we now have more clinical programmes advances. Major milestones in the past year include the US approval of Wegovy® – a pivotal new treatment of obesity with more participants than at any time in our 99-year history. and the initiation of phase 3 clinical trials investigating oral To make this possible, we have re-organised R&D operations, semaglutide for both obesity and Alzheimer’s disease. creating a Research & Early Development unit to fuel and validate our early pipeline, and a patient solutions-focused Entering a new century of diabetes innovation Development organisation to take our most promising In the 101 years since the discovery of insulin, there have been candidates forward. many advances in the treatment of diabetes, yet the number of people living with the condition continues to climb. As a result, Throughout this work, we are focused on the power of there remains an urgent need for better, more patient-focused digitalisation and connected healthcare. We are evolving therapies to continue to reduce the burden of diabetes. from a molecule-focused pharmaceutical company to a patient solutions-oriented enterprise where drug, device, Our potential future treatment and device innovations may offer digital, diagnostics and data are fully integrated to deliver this step change in care. They include the once-weekly basal leading treatment solutions to patients. This ‘5D’ approach will insulin icodec, which entered final-stage phase 3 development bring improvements right along the value chain, from more in November 2020, which has the potential to offer patients convenient and better products and devices for patients – who greater convenience than the current option of once-daily basal can check and track their health status in real time via apps and insulins. We have also progressed our work on glucose-sensitive other systems – to faster, more efficient product development. insulin, which is designed to activate when glucose levels rise, Moustapha Djamil Cissé is living with type 1 diabetes and is enrolled in our Changing Diabetes® in Children programme, Senegal thereby potentially providing better disease control and a lower Our electronic Patient Interaction Device, for example, allows risk of hypoglycaemia. the collection of real-time clinical trial data. This technology is already being used by more than 4,000 patients in 36 countries Beyond insulin, we have continued the rollout of Rybelsus®, our for patients living with obesity), and the other looking at and forms a central plank of our ‘moonshot’ aspiration of being once-daily oral GLP-1 therapy, while once-weekly semaglutide combination of semaglutide and GIP (gastric inhibitory able to submit new products for market authorisation in four 2.0 mg for type 2 diabetes received a positive opinion polypeptide). key markets within four days of the last patient visiting a pivotal recommending marketing authorisation in the EU in November trial site. 2021, and has been re-submitted for US regulatory approval Leading the treatment of obesity This is a journey that will take time to complete, but it is already & Drug Administration in March 2021. We have also launched creating an innovative pipeline of differentiated projects that two phase 2 trials investigating fixed-dose combination successful launch of our pioneering injectable GLP-1 product Wegovy® in the US and the advancement in our pipeline of has the potential to secure long-term sustainable growth of our therapies for type 2 diabetes – one focusing on semaglutide next-generation therapies that we hope will deliver even greater offering to patients beyond 2030. in combination with cagrilintide (which is also being explored weight loss efficacy. following the receipt of a Refusal to File letter from the US Food We are making major strides in tackling obesity, both with the Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 26 study looking at a combination of cagrilintide and semaglutide. Broadening our horizons across serious chronic diseases Cagrilintide, a long-acting amylin analogue, works by reducing the We are actively widening our therapeutic focus as we explore signaling of hunger to the brain, and early phase 1b data suggests a more holistic approach to cardiometabolic diseases – a that its combination with semaglutide provides additive weight loss trend exemplified by the potential of semaglutide to improve efficacy without compromising gastrointestinal tolerability. outcomes in a wide range of disorders. Alongside this, we have initiated a phase 3 trial of high-dose Significantly, the push into new areas includes the treatment of semaglutide 50 mg as an oral treatment for obesity. This would Alzheimer’s disease, where we are testing oral semaglutide 14 offer patients a new option and could potentially address issues mg in two phase 3a trials that will run for three years. We have associated with injections. also started a phase 3 programme with semaglutide in patients with NASH, while two major phase 3 trials are exploring the Innovating in rare diseases potential of semaglutide in treating heart disease. The rare blood and endocrine disorders that our Biopharm business seeks to treat are areas of continuing high unmet Beyond semaglutide, our antibody drug ziltivekimab has need, and we are advancing several key new products in entered phase 3 development for atherosclerotic cardiovascular our pipeline. This includes the planned initiation of phase disease and we are exploring a novel oral PCSK9i agent for 3 development of Mim8, a next-generation subcutaneous high cholesterol in phase 2. Meanwhile, new partnerships with prophylactic treatment for haemophilia A, in 2022. We are also Prothena and Heartseed have strengthened our pipeline in awaiting the results from phase 3 trials with concizumab in cardiovascular disease, with the latter building our expertise in Nadia Sadi is living with non-alcoholic steatohepatitis (NASH) in Denmark Wegovy®, once-weekly subcutaneous semaglutide 2.4 mg, takes patients with haemophilia A or B, with or without inhibitors, the exciting new field of cell therapy. the medical treatment of obesity to a new level, as an adjunct to while a phase 3 trial investigating the efficacy and safety of diet and exercise, with an average sustained weight loss from baseline of 17-18%4 sustained over 68 weeks in clinical trials. concizumab for pediatric use is expected to be initiated in 2022. The implications of such weight loss can be profound since Furthermore, we are seeking to harness disruptive technologies people with obesity face a range of health risks, from cancer, such as gene editing and RNA interference to develop next- type 2 diabetes and heart disease, to severe symptoms and generation treatments for rare diseases. In December, we complications of COVID-19. announced the completion of the acquisition of Dicerna Strategic Aspirations 2025 Innovation and therapeutic focus Pharmaceuticals – a Boston-based biotech firm specialising – Further raise the innovation-bar for diabetes treatment Our ultimate aspiration is to close the gap between current in RNAi therapeutics for rare and common diseases. The – Develop a leading portfolio of superior treatment pharmacological treatment options and bariatric surgery through acquisition builds on a successful collaboration initiated with solutions for obesity combination therapies. This work will take a significant step Dicerna in 2019 to discover and develop selective gene-silencing – Strengthen and progress the Biopharm pipeline forward next year with the planned initiation of a large phase 3 therapies for liver-related cardio-metabolic diseases using – Establish presence in other serious chronic diseases 4. Based on the trial product estimand (secondary statistical approach): treatment effect if all people adhered to treatment and did not initiate other anti-obesity therapies. When using a treatment policy estimand, 15-17% weight loss was reported Dicerna’s proprietary RNAi technology platform, and we will now focusing on Cardiovascular disease (CVD); Non-alcoholic seek to expand the application of this innovative technology steatohepatitis (NASH) across all our therapy areas. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 27 Pipeline overview Diabetes care Project Indication Description Phase Semaglutide 2.0 mg NN9535 Oral semaglutide HD1 NN9924 Type 2 diabetes Type 2 diabetes A long-acting GLP-1 analogue for once-weekly treatment. A long-acting oral GLP-1 analogue, 25 and 50 mg, intended for once-daily oral treatment. Icodec NN1436 Icosema NN1535 FDC Sema – OW GIP NN9389 CagriSema in T2D NN9388 Type 1 and 2 diabetes A long-acting basal insulin analogue intended for once-weekly treatment. Type 2 diabetes Type 2 diabetes 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. A combination of amylin analogue and GLP-1 analogue semaglutide intended for once-weekly treatment. Insulin 965 NN1965 Type 1 and 2 diabetes A novel basal insulin analogue intended for once-daily 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 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 Oral Sema Obesity NN9932 PYY1875 NN9775 Cagrilintide NN9838 CagriSema NN9838 LA-GDF15 NN9215 Obesity Obesity Obesity Obesity Obesity A long acting GLP-1 analogue intended for once-daily treatment. A novel analogue of the appetite-regulating hormone, PYY, intended for once-weekly treatment. A novel long-acting amylin analogue intended for once-weekly treatment. A combination of amylin analogue cagrilintide and GLP-1 analogue semaglutide intended for once-weekly treatment. A long-acting GDF15 analogue intended for appetite regulation leading to weight loss. 2020 2021 Phase 1 Phase 2 Phase 3 Submission and/or approval 1. High dose 2. GHD: Growth hormone deficiency 3. HGH: Human growth hormone 4. NASH: Non-alcoholic steatohepatitis 5. CVD: Cardiovascular disease 6. Alpha-1-AntiTrypsin Deficiency related liver disease 7. Asset without NN project ID 8. This project also includes a phase 2b study in F4 in a collaboration with Gilead Biopharm Project Sogroya® NN8640 Somapacitan NN8640 Concizumab NN7415 Macimorelin EX2020 Mim8 NN7769 Nedosiran7 Eclipse NN7533 Indication Description Phase Adult GHD2 GHD2 A long-acting HGH3 derivative intended for once-weekly subcutaneous administration in adults. A long-acting HGH3 derivative intended for once- weekly subcutaneous administration in children. Haemophilia A and B w/wo inhibitors A monoclonal antibody against tissue factor pathway inhibitor (TFPI) intended for subcutaneous prophylaxis treatment. GHD2 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. Primary Hyperoxaluria An siRNA targeting lactate dehydrogenase A (or LDHA) for once monthly subcutaneous treatment. 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 Semaglutide8 NN9931 NASH4 A long-acting GLP-1 analogue for once-weekly treatment of NASH4. Semaglutide Alzheimer NN6535 Alzheimer’s A long-acting GLP-1 analogue for once-daily treatment of Alzheimer’s disease. Ziltivekimab NN6018 Belcesiran7 Oral PCSK9i NN6435 FGF-21 NASH NN9500 PRX004 NN6019 DCR-AUD7 CVD5 AATD6 CVD5 NASH4 CVD5 A novel once-monthly monoclonal antibody intended for inhibition of IL-6 activity. An siRNA targeting Alpha-1-AntiTrypsin (AAT) for once monthly subcutaneous treatment. A long-acting PCSK9 inhibitor for oral treatment. A long-acting FGF21 analogue for once-weekly treatment of NASH. An anti-amyloid immunotherapy treatment for ATTR5. Alcohol Use Disorder An siRNA targeting ALDH2 for once monthly subcutaneous treatment. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 28 Research and development progress Diabetes Obesity Biopharm Other serious chronic diseases Regulatory events – A market authorisation application was resubmitted to the FDA for approval of semaglutide 2.0 mg May 2021. – Approval by the EU of Ozempic 2.0 mg. – Xultophy® was approved in China for diabetes management. – Ozempic® was approved in China for diabetes management. – A label extension for Insulatard® and Actrapid® was submitted to EMA to increase the non-refrigerated storage time prior to opening by 4 weeks. Clinical progress – A phase 3b trial was initiated with high dose Rybelsus®, 25 and 50 mg, in people with type 2 diabetes (T2D). – The phase 3a programme, COMBINE, was initiated investigating the once-daily combination of Icodec and semaglutide in people with T2D. – Phase 3a, ONWARDS trials were initiated investigating once-weekly Icodec in people with type 1 (T1D) and (T2D). – A Phase 2 trial was initiated to investigate the effects of the combination of semaglutide and novel GIP in people with T2D. – A Phase 2 trial was initiated to investigate the effects of the combination of semaglutide and cagrilintide in people with (T2D). – A Phase 1 trial for glucose sensitive insulin was completed. – A Phase 1 trial was initiated to investigate tolerogenic DNA plasmid in for preventive treatment of diabetes in people with T1D. Regulatory events – Once-weekly sc semaglutide 2.4 mg was approved Regulatory events – The once-weekly growth hormone derivative, Clinical progress – A phase 3a programme, ESSENCE, was initiated under the brand name Wegovy® for weight management in adults with obesity or overweight and at least one weight-related comorbidity in the US. A marketing authorisation application for semaglutide 2.4 mg obesity was submitted to the Japanese Health Authorities and approved in the EU. – Saxenda® was granted a label expansion to include the use in adolescents (aged 12 to <18 years) with obesity or overweight in the US and Europe. Clinical progress – A phase 3a trial was initiated to investigate the effects of once-weekly sc semaglutide 2.4 mg on physical function, symptoms and body weight in people with obesity-related heart failure with preserved ejection fraction (HFpEF). – A phase 3a trial OASIS-1 was initiated to investigate oral semaglutide 50 mg in people with obesity. somapacitan, was approved in Japan and Europe for adults with growth hormone deficiency. investigating once-weekly semaglutide in people with Non-alcoholic steatohepatitis (NASH). – Regulatory file to support a prophylaxis indication for – A phase 3a programme, EVOKE, was initiated Rebinyn® was submitted. – Regulatory file to support a new indication for NovoSeven® in women with Postpartum haemorrhage was submitted. Clinical progress – Initial results from the phase 3a programme, REAL 4; investigating the once-weekly growth hormone derivative, somapacitan, in children with Growth Hormone Deficiency (GHD) were compiled. – Results from a phase 2 trial, REAL 5, in children, with short stature and born short for gestational age were compiled. – First cohorts of phase 1/2 trial with Mim8 successfully completed. investigating once-weekly semaglutide in people with Alzheimer’s Disease. – A phase 3a cardiovascular outcome trial, ZEUS, was initiated investigating once-monthly monoclonal antibody Ziltivekimab in people with Atherosclerotic Cardiovascular Disease (ASCVD), Chronic Kidney Disease (CKD) and residual inflammatory risk. – In collaboration with Gilead, a phase 2b trial was initiated investigating semaglutide in combination with Gileads investigational FXR agonist cilofexor and investigational ACC inhibitor firsocostat in people with compensated cirrhosis (F4) due to NASH. – A phase 2 trial was initiated investigating orally administrated PCSK9i for LDL-cholesterol lowering in people with ASCVD or general CV risk. – A phase 3a trial for macimorelin was initiated investigating an oral diagnostic agent used for the diagnosis of GHD in adolescents and children. – Novo Nordisk acquired phase 2 ready antibody PRX004 for the rare heart disease ATTR cardiomyopathy from Prothena Corporation PLC. – A phase 2 trial was initiated investigating once-weekly FGF21 in people with NASH. As part of phase 2 trial an additional treatment arm with Cagrilintide in combination with semaglutide is included in the trial. – Collaboration with Staten Biotechnology terminated. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 29 Patent status for marketed products The patent expiry dates for the products are shown in the Key marketed products in main markets (active ingredients) table on the right. The dates provided are for expiry in the US, China, Japan and Europe of patents on the active Diabetes: ingredient, unless otherwise indicated, and include actual Human insulin and Modern insulins1 and estimated extensions of patent term, when applicable. NovoNorm® (Prandin®) 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. Victoza®9 Tresiba® Ryzodeg® Xultophy® Fiasp® Ozempic® Rybelsus® Obesity: Saxenda® Wegovy® Biopharm: Norditropin® (SimpleXx®) Sogroya® NovoSeven® NovoEight® NovoThirteen® (TRETTEN®) Refixia® (REBINYN®) Esperoct® Vagifem® 10 mcg US China Japan Europe8 Expired Expired Expired Expired Expired Expired Expired Expired 2023 2029 2029 2029 20303 2032 20324 Expired 2024 2024 2024 20303 2026 20264 2022 2027 20242 20242 20303 2031 20314 2023 2032 Expired Expired 2026 2031 2023 2028 2028 2028 20303 2031 20314 2023 2031 Expired Expired Expired Expired 2034 2031 2036 2036 Expired5 Expired5 Expired5 Expired5 No patent No patent No patent No patent Expired No patent No patent No patent 2028 2032 2022 2029 2027 2034 2027 2034 20226,7 No patent Expired Expired 1. Modern insulins are NovoRapid® (NovoLog®), NovoMix® 30 (NovoLog® Mix 70/30) and Levemir® 2. Patent term extension until 2027 may apply 3. Formulation patent; active ingredient patent has expired 4. Tablet formulation and once-daily treatment regimen are protected by additional patents expiring in 2031-2034 5. Room temperature-stable formulation patent until 2023 in China, Japan and Germany and until 2025 in the US 6. Patent covers low-dose treatment regimen 7. Licensed to several generic manufacturers from October 2016 8. Patent status varies from country to country. The figures in the table are based on Germany 9. We have granted and pending patents covering the Victoza® formulation. These patents generally expire in November 2024, except for the US where the formulation patent expires in February 2026 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 30 Commercial execution Maintaining commercial excellence 30.1% Value market share for diabetes 8,400 DKK million sales in obesity treatment The COVID-19 pandemic provided the backdrop to Novo Nordisk’s commercial operations in 2021. The increased risk of serious illness from coronavirus among people living with diabetes and obesity and other serious chronic diseases – and the growing incidence of these conditions around the world – has made delivering our products to patients more imperative than ever. Despite the economic and social disruptions caused by the pandemic, we successfully launched important new products and grew market share in 2021, allowing us to make progress across our strategic aspirations. This robust performance was underpinned by strong demand for our diabetes treatments and our new obesity medication, Wegovy®. We are working towards achieving a global diabetes market value share of one third by 2025. We are also committed to We are increasingly providing a holistic solution to the consolidating and expanding our leading position in obesity challenges of inter-linked cardiometabolic diseases – such treatment, while our Biopharm division is building a diversified as diabetes, obesity and other serious chronic diseases – by platform for sustainable growth. offering products to patients, healthcare professionals and payers. In this way we are driving change and adding value for society, while at the same time building a sustainable business for the future. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 31 Delivering on our ambitions even during these exceptional understanding of the need to address obesity is winning times has required our commercial teams to rapidly adopt healthcare system reimbursement in select sub-populations new ways of doing business and increase their use of digital across a growing number of markets, creating a solid platform Kara Richadrson Whitely lives with obesity in the US. She has hiked Mount Kilimanjaro three times tools. This shift was necessitated by the pandemic, but it for the increasing uptake of anti-obesity medications. has now become standard practice across the organisation. Today, we are embracing virtual customer interactions in We are the global leader in obesity treatment, with a value multiple settings and developing new digital competences as market share of 77.8% of branded prescription sales, and there we apply a market-fit approach to our operations. is substantial scope for further growth in the years ahead. There A watershed year in obesity therapy Obesity was an important stand-out in 2021, both for patients and for our business. The US launch of Wegovy® in June 2021 marked the start of a new era in obesity care and underscored the value that our innovations can bring to society. The exceptional demand for the therapy – exceeding are currently around 650 million people living with obesity, and in 10 years the total is likely to be closer to 1 billion. all expectations – was testament to the high unmet need Diabetes value market share among people living with the disease, while the fact that our GLP-1 Insulin Diabetes medicine helps patients achieve unprecedented weight loss, fuelled extensive media attention. Acceptance by payers was also highly encouraging, with US commercial formulary access now around 73%. As a result of this exceptional interest, initial demand for Wegovy® exceeded supply, requiring careful management to ensure continuity of care for individual patients who had already started treatment. Despite increasing production efforts, additional supply chain challenges encountered towards the end of 2021 mean we do not expect to be able to meet demand in the US until the second half of 2022 - with relatively few new patients expected to be able to initiate treatment as a result. 47.5% 44.5% 28.6% % 55 50 45 40 35 30 25 20 50.4% 52.7% 44.3% 43.8% 29.3% 30.1% Outside the US, our first-generation obesity product Saxenda® has now been launched in 62 countries. Better Source: IQVIA data 2019 2020 2021 Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 32 Growing value market share in diabetes In the highly competitive diabetes market, we improved our Obesity sales Sales as reported Growth at CER value market share by 0.8 percentage points to 30.1%, reflecting strong demand for GLP-1 products across both North American and International Operations. There is a clear shift to greater use of GLP-1 therapies around the world and this segment’s value share of the total diabetes market has increased to 26.5% compared with 21.9% 12 months ago. We continue to be the global market leader with our type 2 diabetes products Rybelsus®, Ozempic® and Victoza®, with a 52.7% share by value. Ozempic®, our once-weekly injectable semaglutide, is now available in 69 countries – including China – and Rybelsus®, our oral formulation of semaglutide, has been launched in 30 countries. DKK billion 10 8 6 4 2 0 55% 42% 3% 60% 64% The smart pen initiative also paves the way for the digitalisation of the patient journey in other therapy areas in the future. The aim is simple: to use smart technology to help patients lead as normal a life as possible. Further growth in Biopharm In Biopharm, sales growth across International and North America Operations was driven by our treatments for rare blood disorders, including the newly launched products Esperoct® and Refixia®, as well as NovoEight® and NovoSeven®. Sales of haemophilia A and haemophilia B products increased by 23% and 23% respectively. Overall demand for rare endocrine disorder products was flat, with an increase in international sales offset by a decline Increasingly, healthcare providers are demanding diabetes 2017 2018 2019 2020 2021 in North America. We remain the market leader in the global treatments that not only control blood glucose levels but also have cardiovascular benefits. The fact that Ozempic® has been shown to significantly reduce the risk of major adverse Biopharm sales human growth disorder market with a value share of 36.3%, against 35.6% a year ago, reflecting the new indications that have been approved for our products and the global roll-out of cardiovascular events compared with placebo in people living Sales as reported Growth at CER our next-generation injection device. with type 2 diabetes and ASCVD (atherosclerotic cardiovascular disease) is particularly important in this regard. DKK billion 25 Insulin sales in 2021 were mixed, with the growth driven by International Operations partially offset by lower sales in the US However, 2021 was a landmark year for digital health in our 20 -16% -1% 4% 1% 4% diabetes business, with the first launch of our smart insulin pens 15 in Sweden and Germany followed by the UK launch in January 2022. By automatically recording insulin dosing information and viewing this alongside blood sugar information, the pens allow patients to better manage their disease with greater accuracy. This is a key part of our drive to provide more personalised treatment guidance to ensure patients using insulin maximise their time in the correct glycaemic range. 10 5 0 2017 2018 2019 2020 2021 Strategic Aspirations 2025 Commercial execution – Strengthen Diabetes leadership – aim at global value market share of more than 1/3 – Strengthen Obesity leadership and double current sales (based on reported sales in 2019) – Secure a sustained growth outlook for Biopharm Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 33 Financials 2021 performance and 2022 outlook Financial performance Sales development across therapeutic areas Sales increased by 11% measured in Danish kroner and by 14% Sales in Diabetes care increased by 11% measured in Danish Financials performance at CER to DKK 140,800 million in 2021. Sales in International Operations increased by 12% measured in Danish kroner kroner and by 13% at CER. Sales of Obesity care products, Saxenda® and Wegovy®, increased by 50% measured in and by 14% at CER. The strategic aspiration for International Danish kroner and by 55% at CER. Sales of Biopharm products Operations is sales growth between 6-10%. Sales in North increased by 1% measured in Danish kroner and by 4% at CER. America Operations increased by 10% measured in Danish kroner and by 14% at CER. The strategic aspiration of In the following sections, unless otherwise noted, market transforming 70% of sales in the US has progressed, and 60.3% data are based on moving annual total (MAT) from November of sales are now derived from products launched since 2015. 2021 and November 2020 provided by the independent data Geographic sales development provider IQVIA. Diabetes care Sales in International Operations increased by 12% measured Sales in Diabetes care increased by 11% measured in Danish in Danish kroner and by 14% at CER. Sales in EMEA increased kroner and by 13% at CER to DKK 113,197 million driven by by 10% measured in Danish kroner and by 12% at CER. Sales GLP-1 growth. Novo Nordisk has improved the global diabetes in Region China increased by 14% measured in Danish kroner value market share over the last 12 months from 29.3% to NAO net sales IO net sales Growth at CER 14% 6% 7% 2% 5% DKK billion 150 120 90 60 30 0 and by 11% at CER. Sales in Rest of World increased by 14% 30.1%. The market share increase was driven by market share 2017 2018 2019 2020 2021 measured in Danish kroner and by 19% at CER. gains in both International Operations and North America Sales in North America Operations increased by 10% measured in Danish kroner and by 14% at CER. Operations. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 34 GLP-1 therapy for type 2 diabetes Sales of GLP-1 products for type 2 diabetes (Rybelsus®, Ozempic® and Victoza®) increased by 28% measured by North America Operations and International Operations. Saxenda® has been launched in 65 countries, and Wegovy® was launched in the US in June 2021. Novo Nordisk currently has in Danish kroner and by 32% at CER to DKK 53,597 million. The a value market share of 77.8% of the global branded obesity GLP-1 segment’s value share of the total diabetes market has prescription drug market. The strategic aspiration for Obesity increased to 26.5% compared with 21.9% 12 months ago. care is to more than double reported sales from the base in 2019 of DKK 5,679 million by 2025. Rybelsus® sales increased by 158% measured in Danish kroner and by 168% at CER to DKK 4,838 million. Sales growth was Biopharm driven by North America Operations as well as EMEA and Rest of World. Rybelsus® has now been launched in 29 countries. Sales of Biopharm products increased by 1% measured in Danish kroner and by 4% at CER to DKK 19,203 million in line with the strategic aspiration of sustained growth in Biopharm. Ozempic® sales increased by 59% measured in Danish kroner The sales growth at CER was driven by both North America and by 64% at CER to DKK 33,705 million. Sales growth was Operations and International Operations. Sales growth was driven by both North America Operations and International Operations. Ozempic® has now been launched in 72 countries. driven by Rare blood disorders. Sales by therapeutic area Diabetes care Obesity care Biopharm Growth at CER 14% 6% 7% 2% 5% DKK billion 150 120 90 60 30 0 Victoza® sales decreased by 20% measured in Danish kroner Sales of Rare blood disorder products increased by 6% and by 18% at CER to DKK 15,054 million as the GLP-1 market is measured in Danish kroner and by 9% at CER to DKK 10,217 Sales split in Diabetes care Rare blood disorders 2017 2018 2019 2020 2021 moving towards once-weekly and tablet-based treatments. The sales decline was driven by North America Operations, EMEA and Rest of World, partially offset by higher sales in Region China. Insulin sales million. The increasing sales were driven by the launch products Esperoct® and Refixia® as well as NovoSeven® and NovoEight®. Insulin sales GLP-1 sales Other diabetes care Growth at CER Rare endocrine disorders Sales of Rare endocrine disorder products decreased by 5% measured in Danish kroner and by 2% at CER to DKK 7,303 DKK billion 120 100 6% 4% 13% 4% 8% Sales of insulin decreased by 1% measured in Danish kroner million. The sales development was driven by North America and increased by 1% at CER to DKK 56,006 million. Sales Operations' sales decreasing by 12% at CER, partially offset by growth at CER was driven by increased sales in International International Operations sales increasing by 5% at CER. Novo Operations, partially offset by declining sales in the US. Nordisk is the leading company in the global human growth Obesity care Sales of Obesity care products, Saxenda® and Wegovy®, increased by 50% measured in Danish kroner and by 55% at CER to DKK 8,400 million. Sales growth was driven disorder market with a value market share of 36.3% compared to 35.6% a year ago. 80 60 40 20 0 2017 2018 2019 2020 2021 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 35 Development in costs and operating profit The cost of goods sold increased by 13% measured in Danish kroner and by 15% at CER to DKK 23,658 million, resulting in a gross margin of 83.2% measured in Danish kroner compared with 83.5% in 2020. The decline in gross margin reflects lower realised prices in the US, a negative currency impact of 0.2 and North America Operations. In International Operations, promotional spend is related to launch activities for Rybelsus® and Ozempic® as well as Obesity care market development primarily through foreign exchange forward contracts. The foreign exchange result was a net gain of DKK 344 million compared with a net loss of DKK 747 million in 2020. This activities. In North America Operations, the cost increase is driven by promotional activities for Rybelsus® and Ozempic® reflects gains on hedged currencies, primarily the US dollar. as well as market development activities for Obesity care and launch costs for Wegovy®, partially offset by lower promotional As per the end of December 2021, a negative market value of financial contracts of approximately DKK 1.7 billion has been percentage points and amortisation of intangible assets related spend related to insulin. deferred for recognition in 2022. to the acquisition of Emisphere Technologies Inc. in 2020. This is countered by a positive product mix driven by increased GLP- Research and development costs increased by 15% measured The effective tax rate is 19.2% in 2021 compared with an 1 sales and productivity improvements in line with the strategic in Danish kroner and by 16% at CER to DKK 17,772 million. effective tax rate of 20.7% in 2020, mainly reflecting non- aspiration of driving operational efficiencies. Increased activities within Other serious chronic diseases are recurring impact from acquisitions in 2020 and 2021. Sales and distribution costs increased by 12% measured pipeline within cardiovascular disease and NASH. The growth Net profit increased by 13% to DKK 47,757 million and diluted in Danish kroner and by 15% at CER to DKK 37,008 million. The increase in costs is driven by International Operations is impacted by amortisation of the priority review voucher for Wegovy® in the US in 2020. earnings per share increased by 15% to DKK 20.74 DKK. driving the cost increase reflecting the progression of the Administration costs increased by 2% measured in Danish Cash flow and capital allocation Operating profit and margin kroner and by 4% at CER to DKK 4,050 million, reflecting low Free cash flow was DKK 29.3 billion compared with DKK 28.6 Operating profit (left axis) Operating profit margin (right axis) spend in 2020 due to COVID-19 impact on activities. billion in 2020 supporting the strategic aspiration to deliver Growth at CER DKK billion 5% 3% 60 50 40 30 20 10 0 6% 7% 13% Other operating income and expenses (net) was DKK 332 driven by higher net profit and higher provisions for rebates million compared with DKK 460 million in 2020. in the US partially driven by changed distribution policy for the 340B programme. This increase is partially countered by an Operating profit increased by 8% measured in Danish kroner unfavourable impact from change in working capital. attractive capital allocation to shareholders. The increase is and by 13% at CER to DKK 58,644 million. Financial items (net) and tax Capital expenditure for property, plant and equipment was DKK 6.3 billion compared with DKK 5.8 billion in 2020. Financial items (net) showed a net gain of DKK 436 million Novo Nordisk’s financial reserves were DKK 16.1 billion by compared with a net loss of DKK 996 million in 2020. end of December 2021 comprising cash at bank, marketable In line with Novo Nordisk’s treasury policy, the most significant and undrawn credit facilities less overdrafts and loans repayable foreign exchange risks for Novo Nordisk have been hedged, within 12 months. securities (measured at fair value based on active market data) % 60 50 40 30 20 10 0 2017 2018 2019 2020 2021 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 36 Cash flow and capital allocation impact sales development. Given the current exchange rates The free cash flow is expected to be DKK 50-55 billion. The Dividend for prior year Interim dividend Share repurchases versus the Danish krone, growth reported in DKK is now increase in free cash flow compared to 2021 reflects the impact DKK billion 50 40 30 20 10 0 expected to be around 5 percentage points higher than at CER. from the acquisition of Dicerna Pharmaceuticals in 2021. All of the above expectations are based on assumptions that the Operating profit growth is expected to be 4% to 8% at CER. The global or regional macroeconomic and political environment will expectation for operating profit growth primarily reflects the sales not significantly change business conditions for Novo Nordisk growth outlook and continued investments in current and future during 2022, including the potential implications from major growth drivers within research and development and commercial. healthcare reforms and legislative changes as well as outcome Across the operating units, commercial investments are related to the continued roll-out of Ozempic® and Rybelsus® as well as global investments in building the anti-obesity market and the launch of Wegovy®. Furthermore, resources are allocated to both of legal cases including litigations related to the 340B Drug Pricing Programme in the US, and that the currency exchange rates, especially the US dollar, will remain at the current level versus the Danish krone. Neither does the guidance include the early and late-stage pipeline activities. The acquisition of Dicerna financial implications of any significant business development Pharmaceuticals Inc. is negatively impacting operating profit transactions during the remainder of 2022. growth by around 3 percentage points due to higher operating 2018 2019 2020 2021 2022E* exchange rates versus the Danish krone, growth reported in DKK is invoicing currencies and, all other things being equal, movements costs and amortisations of intangible assets . Given the current Novo Nordisk has hedged expected net cash flows in a number of *Expectations for 2022 2022 outlook For 2022, sales growth is expected to be 6% to10% at CER. The guidance reflects expectations for sales growth in both The effective tax rate for 2022 is expected to be in the range of International Operations and in North America Operations, 20-22%. mainly driven by Diabetes and Obesity care. Within Obesity care, the guidance reflects an expectation of meeting the demand for Wegovy® in the US in the second half of 2022. expected to be around 7 percentage points higher than at CER. in key invoicing currencies will impact Novo Nordisk’s operating profit as outlined in note 4.3 in the financial statements. For 2022, Novo Nordisk expects financial items (net) to amount to a loss of around DKK 2.8 billion, mainly reflecting losses associated with foreign exchange hedging contracts. Expectations are as reported, if not otherwise stated Expectations 2 February 2022 6% to 10% Around 5 percentage points higher than at CER Sales growth at CER as reported Operating profit growth Capital expenditure is expected to be around DKK 12 billion in at CER 4% to 8% 2022 primarily relating to investments in additional capacity as reported Around 7 percentage points higher than at CER for active pharmaceutical ingredient (API) production at Financial items (net) Loss of around DKK 2.8 billion Intensifying competition within both Diabetes care and existing manufacturing sites. The expected increase in capital Effective tax rate Biopharm as well as an estimated negative impact on global expenditure reflects progress of R&D projects based on the oral Capital expenditure (PP&E) sales growth of around 3 percentage points from Volume technology platform. Based Procurement of insulin in China are also reflected in the guidance. Furthermore, continued pricing pressure within Depreciation, amortisation and impairment losses are expected to Diabetes care, especially in the US, is expected to negatively be around DKK 6.5 billion. Depreciation, amortisation and impairment losses Free cash flow (excluding impact from business development) DKK 50-55 billion 20% to 22% Around DKK 12.0 billion Around DKK 6.5 billion Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 37 Forward-looking statements These statements are based on current plans, estimates and For an overview of some, but not all, of the risks that could projections. By their very nature, forward-looking statements adversely affect Novo Nordisk’s results or the accuracy of Novo Nordisk’s reports filed with or furnished to the US involve inherent risks and uncertainties, both general and forward-looking statements in this Annual Report 2021, Securities and Exchange Commission (SEC), including this specific. Novo Nordisk cautions that a number of important reference is made to the overview of risk factors in ‘Risk statutory Annual Report 2021 and Form 20-F, which are factors, including those described in this Annual Report 2021, management’ of this Annual Report 2021. both expected to be filed with the SEC in February 2022 in could cause actual results to differ materially from those continuation of the publication of this Annual Report 2021, contemplated in any forward-looking statements. Unless required by law, Novo Nordisk is under no duty and and written information released, or oral statements made, undertakes no obligation to update or revise any forward- to the public in the future by or on behalf of Novo Nordisk, Factors that may affect future results include, but are not looking statement after the distribution of this Annual Report may contain forward-looking statements. Words such as limited to, global as well as local political and economic 2021, whether as a result of new information, future events, ‘believe’, ‘expect, ‘may’, ‘will’, ‘plan’, ‘strategy’, ‘prospect’, ‘foresee’, conditions, including interest rate and currency exchange rate or otherwise. ‘estimate’, ‘project’, ‘anticipate’, ‘can’, ‘intend’, ‘target’ and other fluctuations, delay or failure of projects related to research and/ words and terms of similar meaning in connection with any or development, unplanned loss of patents, interruptions of Shares and capital structure discussion of future operating or financial performance identify supplies and production, including as a result of interruptions forward-looking statements. Examples of such forward-looking or delays affecting supply chains on which Novo Nordisk relies, Through open and proactive communication, Novo Nordisk aims statements include, but are not limited to: product recalls, unexpected contract breaches or terminations, to provide the basis for fair and efficient pricing of our shares. – Statements of targets, plans, objectives or goals for future government- mandated or market-driven price decreases for operations, including those related to Novo Nordisk’s Novo Nordisk’s products, introduction of competing products, products, product research, product development, product reliance on information technology including the risk of Geographical split of shareholders1 introductions and product approvals as well as cooperation in cybersecurity breaches, Novo Nordisk’s ability to successfully % of share capital relation thereto, market current and new products, exposure to product Denmark North America UK Other – Statements containing projections of or targets for liability and legal proceedings and investigations, changes revenues, costs, income (or loss), earnings per share, capital in governmental laws and related interpretation thereof, expenditures, dividends, capital structure, net financials and including on reimbursement, intellectual property protection other financial measures, and regulatory controls on testing, approval, manufacturing – Statements regarding future economic performance, and marketing, perceived or actual failure to adhere to ethical future actions and outcome of contingencies such as legal marketing practices, investments in and divestitures of domestic proceedings, and and foreign companies, unexpected growth in costs and – Statements regarding the assumptions underlying or relating expenses, failure to recruit and retain the right employees, 25% 4% 40% to such statements. failure to maintain a culture of compliance, epidemics, pandemics or other public health crises, and factors related 31% In this Annual Report 2021, examples of forward looking to the foregoing matters and other factors not specifically statements can be found under the section related to our identified herein. 1. Split of shareholders is denoted according to the location of legal deposit-owner ‘Strategic Aspirations’ and elsewhere. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 38 Ownership structure* Novo Nordisk Foundation Institutional and private investors Novo Holdings A/S 76.7% of votes 28.1% of capital 23.3% of votes 71.9% of capital 537 million A shares (nominal value DKK 107 million) 1,773 million B shares (nominal value DKK 355 million) Novo Nordisk A/S * Treasury shares are included, however, voting rights of treasury shares cannot be exercised As of 31 December 2021, Novo Holdings A/S also held a B share capital of nominally DKK 22,103,800. Together with the A shares, Novo Holdings A/S's total ownership amounted to nominally DKK 129,591,000. Novo Holdings A/S's ownership is reflected in the 'Ownership structure' chart. There is no complete record of all shareholders; however, based on available sources of information, as of 31 December 2021 it is estimated that shares were geographically distributed as shown in the 'Geographical split of shareholders’ chart. As of 31 December 2021, the free float of listed B shares was 92.01% (of which approximately 10.1% are listed as ADRs), excluding Novo Holdings A/S's holding and Novo Nordisk’s holding of treasury shares. As of 31 December 2021, Novo Holdings A/S and Novo Nordisk’s holding of B shares equaled 141,618,276 shares and had a nominal value of DKK 28,323,655. For details about the share capital, see note 4.2 to the consolidated financial statements. Share capital and ownership Novo Nordisk’s share capital of DKK 462,000,000.00 is divided The company’s A shares are not listed and are held by Novo Holdings A/S5, a Danish public limited liability company wholly- Capital structure Novo Nordisk’s Board of Directors and Executive Management into A and B share capital. The A and B shares are calculated in owned by the Novo Nordisk Foundation. According to the consider that the current capital and share structure of Novo units of DKK 0.20, amounting to 2.31 billion shares. The A share Articles of Association of the Foundation, the A shares cannot Nordisk serve the interests of the shareholders and the capital, consisting of 537 million shares, has a nominal value of DKK be divested. 107,487,200 and the B share capital, consisting of 1,773 million company well. Novo Nordisk’s capital structure strategy offers a balance between long-term shareholder value creation and shares, has a nominal value of DKK 354,512,800. Each A share Special rights attached to A shares include pre-emptive competitive shareholder return in the short term. carries 200 votes and each B share carries 20 votes. Novo Nordisk's subscription rights in the event of an increase in the A share B shares are listed on Nasdaq Copenhagen and on the New York capital and pre-emptive purchase rights in the event of a The capital structure has been adjusted following Novo Stock Exchange (NYSE) as American Depository Receipts (ADRs). sale of A shares, while B shares take priority for liquidation Nordisk’s Eurobond issuance with an aggregate principal The general meeting has authorised the Board of Directors and B shares take priority for dividends between 0.5 and 5%. the acquisition of Dicerna on 18 November 2021, worth DKK 18 to distribute extraordinary dividends, issue new shares in However, in practice, A and B shares receive the same amount billion net of cash which is mainly debt-financed. proceedings. A shares take priority for dividends below 0.5%, amount of EUR 1.3 billion. In addition, Novo Nordisk announced accordance with the Articles of Association and repurchase of dividend per share. shares in accordance with authorizations granted. 5. Novo Holdings A/S's registered address is Tuborg Havnevej 19, DK-2900 Hellerup, Denmark Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 39 Dividend policy The company’s dividend policy applies a pharmaceutical be paid in March 2022, equivalent to a total dividend for 2021 Regulation (MAR). For the next 12 months, Novo Nordisk has of DKK 10.40 and a payout ratio of 49.6%. The company expects decided to implement a new share repurchase programme. industry benchmark to ensure a competitive payout ratio to distribute an interim dividend in August 2022. Further The expected total repurchase value of B shares amounts for dividend payments, which are complemented by share information regarding this interim dividend will be announced to a cash value of up to DKK 22 billion. The total programme repurchase programmes. The final dividend for 2020 paid in in connection with the financial report for the first six months may be reduced in size if significant business development March 2021 was equal to DKK 5.85 per A and B share of DKK of 2022. Dividends are paid from distributable reserves. Novo opportunities arise during 2022. Novo Nordisk expects to 0.20 including ADRs. The total dividend for 2020 was DKK 9.10 Nordisk does not pay a dividend on its holding of treasury conduct the majority of the new share repurchase programme per A and B share of DKK 0.20, corresponding to a payout ratio shares. of 50.0%, which was in line with the 2020 pharma peer group average of 50.6%. Share repurchase programme for 2021/2022 During the twelve-month period beginning 1 February 2021, according to the safe harbour rules defined in MAR. At the Annual General Meeting in March 2022, the Board of Directors will propose a further reduction in the company’s B share capital, corresponding to approximately 1.3% of the total share In August 2021, an interim dividend was paid equaling DKK 3.50 Novo Nordisk repurchased shares worth DKK 20 billion. The capital, by cancelling 30,000,000 treasury shares. per A and B share of DKK 0.20 including ADRs. For 2021, the share repurchase programme has primarily been conducted in Board of Directors will propose a final dividend of DKK 6.90 to accordance with the safe harbour rules in the EU Market Abuse Share price performance 2021 Novo Nordisk share price and indexed peers1 Share price development Novo Nordisk’s share price increased by 72.3% during 2021 until its close on 31 December close of DKK 735.00. The total market value of Novo Nordisk’s B shares, excluding treasury shares and Novo Holdings A/S shares, was DKK 1,198,745,107,140, as of 31 Novo Nordisk Pharmaceutical industry index2 OMXC25 December 2021. DKK 1000 800 600 400 200 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 72.3% 25.5% 17.2% Strategic Aspirations 2025 Financial – Deliver solid sales and operating profit growth: – Deliver 6–10% sales growth in International Operations – 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. OMXC25 and pharmaceutical industry development have been rebased to Novo Nordisk share price in January 2021 2. AstraZeneca, Bristol-Myers Squibb, Eli Lilly & Co., Glaxo Smith Kline, Lundbeck, Merck & Co, Novartis AG, Pfizer, Roche, Sanofi-Aventis AG Novo Nordisk Annual Report 2021Key risks 41 Risk Management Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 41 Risk management Innovation and competition wide risk management set-up. We assess risks to potential We are a scientific based company whose future is based on financial loss and reputational damage. To be a sustainable business, we must anticipate and adapt to our environment to create new strategic opportunities. Managing risks rigorously and systematically is key in order for us to create and protect value. raising the innovation bar. To remain competitive in the future and thereby mitigate the innovation risk, we invest significantly Executive Management, the Board of Directors and Audit in internal and external pipeline opportunities to ensure Committee review a 'heat map' of our biggest operational patients receive improved treatments. risks every six months. This map is based on insights from Digital disruption management teams across the organisation and includes risks that could cause significant disruptions to the business over New digital technologies could bring new competitors into the a three-year horizon. The following overview provides more We apply a dual lensed approach to risk management. This pharmaceutical industry. It also provides an opportunity for us details of our key risks. means we identify and mitigate both operational risks that pose to deliver more value to our stakeholders and help patients live a threat to our short to medium-term plans, as well as strategic a life free from the limitations of their disease. Digital health For more information, see our Corporate Governance risks that could reduce our ability to achieve our corporate solutions bring new risks particularly around data regulation report available at www.novonordisk.com/about/corporate- strategy over the long-term. and privacy, as well as potential quality risks. We strive to governance.html monitor and mitigate these risks in close collaboration with Addressing risks in our strategic planning: Scenario and risk-thinking exercises are part of our strategic relevant partners. Key operational risks An aggregated illustration of our key operational risks is planning. They include analyses of market dynamics as well Production capacity and supply chain risks outlined below with associated descriptions on the next page. as socioeconomic and political developments that present Demand fluctuations, resource shortages, trade disputes, risks or opportunities for our business. Annually, Executive quality assurance and local manufacturing requirements are Management and the Board of Directors review a strategic risk all factors that can pressure global supply chains. Furthermore, profile. expanding production capacity is complex and associated with a long lead time. Therefore, planning and management of our 1 2 3 Clinical Pipeline Risks Product Supply, Quality and Safety Risk Commercialisation Risks 4 5 6 IT Security Risks Financial Risks Legal, Patents and Compliance Risks Access and affordability supply chain and production is key to mitigate this risk. Access to affordable care is a global issue as healthcare systems struggle to provide quality care at a sustainable cost, while the burden of chronic diseases keeps rising. Ensuring access and Operational risk management process: In the short to medium-term we are also exposed to risks High affordability is a risk and responsibility Novo Nordisk shares throughout our value chain. Some risks are inherent in the with all involved in healthcare. We recognize that we cannot pharmaceutical industry, such as delays or failures of potential defeat chronic diseases alone, but to mitigate the risk we can late-stage medicines in the R&D pipeline. Other risks, such as Impact accelerate our actions to find solutions in collaboration with supply disruptions and competitive threats, are well-known relevant stakeholders. to any manufacturing company with global production. We will never compromise on product quality, patient safety and business ethics: these are front and centre of our enterprise- ILLUSTRATIVE 3 2 4 6 1 5 Low Likelihood High Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 42 Risk area Description Impact Mitigating actions 1 Clinical Pipeline Risks Findings in clinical activities, regulatory processes or misunderstanding of commercial potential leading to delays or failure of products in the pipeline – Patients would not benefit from innovative treatments – Could have an adverse impact on sales, profits and market position – Pre-clinical and clinical activities to demonstrate safety and efficacy – Consultations with regulators to review pre-clinical and clinical findings and obtain guidance on development path 2 Product Supply, Quality and Safety Disruption of product supply or quality failures may compromise the availability of products, ultimately impacting the health of patients and a lost commercial opportunity Risks – Product shortages could have potential implications for patients – Could put patients' health and lives at risk and jeopardise reputation and license to operate if regulatory compliance is not ensured – Establishing global production with multiple facilities and safety stock to reduce supply risk – 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 3 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 4 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 or limit future business opportunities if proprietary information is lost – Company-wide information security awareness activities – Continuity plans for non-availability of IT systems – Company-wide internal audit of IT security controls – Detection and protection mechanisms in IT systems and business – Could have an adverse impact on sales, profits and market position processes 5 Financial Risks Exchange rate fluctuations (mainly in USD, CNY and JPY), disputes with tax authorities and changes to tax legislation and interpretation – Could lead to significant tax adjustments, fines and higher-than- expected tax level – Could have an adverse impact on sales, profits and market position – Hedging for selected currencies – Integrated treasury management – Applicable taxes paid in jurisdictions where business activity generates profits and multi-year Advance Pricing Agreements with tax authorities 6 Legal, Patents 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 product and pipeline candidates – Potential exposure 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 integrated in our business, Compliance hotline in place and Internal Audit of compliance with business ethics standards – Unexpected loss of exclusivity for or injunctions against existing – Internal controls to minimise vulnerability to patent infringement and pipeline products could have an adverse impact on future sales – Could have an adverse impact on sales, profits and market position and invalidity actions Novo Nordisk Annual Report 2021Management 44 Board of Directors 47 Executive Management Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 4 4 Board of Directors Helge Lund Chair Jeppe Christiansen Vice chair Laurence Debroux Andreas Fibig Sylvie Grégoire Henrik Poulsen Norwegian. Born October 1962. Male. First elected 20171. Term 2022. Danish. Born November 1959. Male. First elected 2013. Term 2022. French. Born July 1969. Female. First elected 2019. Term 2022. German. Born February 1962. Male. First elected 2018. Term 2022. Canadian and American. Born November 1961. Female. First elected 2015. Term 2022. Danish. Born September 1967. Male. First elected 2021. Term 2022. Chair of the Nomination Committee and Chair of the Chair Committee. Chair of the Remuneration Committee and member of the Chair Committee. Chair of the Audit Committee and member of the Remuneration Committee. Member of the Audit Committee. Positions and management duties: Chair of the board of directors and chair of the people & governance committee of BP p.l.c. Chair of the board of directors of Inkerman Holding AS. Member of the board of directors and member of the remuneration committee of Belron SA and of the board of directors of P/F Tjaldur. Operating advisor to Clayton Dubilier & Rice. Member of the board of trustees of the International Crisis Group. Competences: Global corporate leadership; healthcare and pharma industry; finance & accounting; business development, M&A and external innovation sourcing; human capital management; environmental, social & governance (ESG). 1. In addition, Helge Lund was a member of the Board for one year in 2014-2015 Positions and management duties: Chief executive officer of Maj Invest Holding A/S and executive director of two wholly owned subsidiaries. Chair of the board of directors of Haldor Topsøe A/S, Emlika Holding ApS, and two wholly owned subsidiaries of the latter company, and chair of the board of directors of JEKC Holding ApS. Member of the board of directors of Novo Holdings A/S, KIRKBI A/S, BellaBeat Inc., Pluto Naturfonden and Randers Regnskov. Member of the board of governors of Det Kgl. Vajsenhus. Adjunct Professor, department of finance, Copenhagen Business School. Competences: Healthcare and pharma industry; finance & accounting; business development, M&A and external innovation sourcing; human capital management; environmental, social & governance (ESG). Positions and management duties: Member of the board of directors, chair of the audit committee and member of the ESG committee of Exor N.V. Member of the board of directors, control & risk committee and of the ESG committee of Juventus Football Club S.p.A. Member of the board of HEC Paris Business School and of Kite Insights (The Climate School). Positions and management duties: Chair, chief executive officer and member of the innovation and sustainability committee of International Flavors & Fragrances Inc. Chair of the board of directors of the German American Chamber of Commerce and executive committee member of the World Business Council for Sustainable Development (WBCSD). Competences: Global corporate leadership; healthcare and pharma industry; finance & accounting; business development, M&A and external innovation sourcing; human capital management; environmental, social & governance (ESG). Competences: Global corporate leadership; healthcare and pharma industry; technology; finance & accounting; business development, M&A and external innovation sourcing; human capital management; environmental, social & governance (ESG). Member of the Audit Committee, the Research & Development Committee and the Nomination Committee. Positions and management duties: Executive chair of the board of directors of EIP Pharma, Inc. Member of the board of directors and member of the nominating and corporate governance committee of Perkin Elmer Inc. Member of the board of directors of F2G Ltd. Competences: Global corporate leadership; healthcare and pharma industry; medicine & science; finance & accounting; business development, M&A and external innovation sourcing; human capital management. Member of the Audit Committee. Positions and management duties: Deputy chair of the board of directors and member of the transaction committee of ISS A/S. Deputy chair of the supervisory board and member of the audit, remuneration and nomination committees of Carlsberg A/S. Member of the board of directors of Novo Holdings A/S and Ørsted A/S. Senior advisor to A.P. Møller Holding A/S and chair of the board of directors of Færch A/S. Member of the supervisory board of Bertelsmann SE & Co. KGaA. Competences: Global corporate leadership; finance & accounting; business development, M&A and external innovation sourcing; human capital management; environmental, social & governance (ESG). Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 45 Mette Bøjer Jensen Kasim Kutay Anne Marie Kverneland Martin Mackay Thomas Rantzau Stig Strøbæk Danish. Born December 1975. Female. First elected 2018. Term 2022. British. Born May 1965. Male. First elected 2017. Term 2022. Danish. Born July 1956. Female. First elected 2000. Term 2022. American and British. Born April 1956. Male. First elected 2018. Term 2022. Danish. Born March 1972. Male. First elected 2018. Term 2022. Danish. Born January 1964. Male. First elected 1998. Term 2022. Employee representative. Member of the Nomination Committee. Member of the Nomination Committee and the Research & Development Committee. Employee representative. Member of the Remuneration Committee. Chair of the Research & Development Committee. Member of the Remuneration Committee. Employee representative. Member of the Research & Development Committee. Employee representative. Member of the Audit Committee. Positions and management duties: Wash & Sterilisation specialist in Product Supply, Novo Nordisk A/S. Competences: Not mapped for employee representatives. Positions and management duties: Chief executive officer of Novo Holdings A/S. Member of the board of directors and member of the nomination and remuneration committee of Novozymes A/S. Member of the board of directors and member of the nomination and remuneration committee of Evotec SE. Member of the board of directors of the Life Sciences Advisory board of Gimv NV. Competences: Global corporate leadership; healthcare and pharma industry; finance & accounting; business development, M&A and external innovation sourcing; human capital management. 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. Competences: Not mapped for employee representatives. Positions and management duties: Co-founder, chair and CEO of Rallybio LLC. Member of the board of directors of 5:01 Acquisition Corporation. Senior advisor to New Leaf Venture Partners, LLC. Member of the board of directors and chair of the science & technology committee of Charles River Laboratories International, Inc. Competences: Global corporate leadership; healthcare and pharma industry; medicine & science; technology; business development, M&A and external innovation sourcing; human capital management. Positions and management duties: Area specialist in Product Supply, Novo Nordisk A/S. Positions and management duties: Electrician and a full-time union representative in Novo Nordisk A/S. Competences: Not mapped for employee representatives. Competences: Not mapped for employee representatives. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 46 Independence and meeting attendance overview Meeting attendance in 20211 Board of Directors Chair Committee Audit Committee7 Nomination Committee Remuneration Committee R&D Committee Name Helge Lund Jeppe Christiansen Laurence Debroux Andreas Fibig Sylvie Grégoire Mette Bøjer Jensen Kasim Kutay Independence2 Independent Not independent 3 Independent 4,5,8 Independent 4 Independent 4 Not independent 6 Not independent 3 Anne Marie Kverneland Not independent 6 Martin Mackay Henrik Poulsen Thomas Rantzau Stig Strøbæk Independent Not independent 3,4,5,8 Not independent 6 Not independent 4,6 Board members who stepped down at the annual general meeting in March 2021 Brian Daniels Liz Hewitt Independent Independent 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. Member of the board of directors or executive management of Novo Holdings A/S 4. Pursuant to the US Securities Exchange Act, Ms Debroux, Mr Fibig and Ms Grégoire qualify as independent Audit Committee members, while Mr Poulsen and Mr Strøbæk rely on an exemption from the independence requirements 5. Ms Debroux and Mr Poulsen possess the qualifications within accounting and auditing required under part 8 of the Danish Act on Approved Auditors and Audit Firms 6. Elected by employees of Novo Nordisk 7. Collectively the members have relevant industry expertise 8. Designated as financial experts as defined by the US Securities and Exchange Commission (SEC) Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 47 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) Doug Langa1 Executive vice president, North America Operations Born November 1966. Male. Born December 1973. Female. Born August 1970. Male. Born July 1974. Male. Born December 1971. Male. Born October 1966. Male. Other positions and management duties: Member of the supervisory board and member of the nomination committee of Carlsberg A/S. First vice president of the European Federation of Pharmaceutical Industries and Associations (EFPIA). Other positions and management duties: No other management positions. 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 directors of NNE A/S. Member of the board of directors and chair of the audit committee of Hempel A/S. Other positions and management duties: No other management positions. Martin Holst Lange Executive vice president Development Marcus Schindler Executive vice president Research & Early Development and chief scientific officer (CSO) Camilla Sylvest Executive vice president Commercial Strategy & Corporate Affairs Henrik Wulff Executive vice president Product Supply, Quality & IT Born October 1970. Male. Born September 1966. Male. Born November 1972. Female. Born November 1970. Male. Other positions and management duties: No other management positions. Other positions and management duties: Adjunct Professor of Pharmacology at the University of Gothenburg. Other positions and management duties: Vice chair of the board of directors of the World Diabetes Foundation. Member of the board of directors of Danish Crown A/S. Other positions and management duties: Member of the board of directors and the remuneration committee of Ambu A/S. Member of the board of directors of Grundfos Holding A/S. 1. Not registered as executive with the Danish Business Authority Novo Nordisk Annual Report 2021Consolidated statements and additional information 49 Consolidated financial statements 85 Consolidated ESG statement 92 Management statement and Auditor's Reports 96 Additional information Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 49 Consolidated financial, environmental, social and governance statements 2021 Consolidated 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 and expenses 2.6 Income taxes and deferred income taxes 2.7 Earnings per share Section 3 Operating assets and liabilities 3.1 Intangible assets and property, plant and equipment 3.2 Inventories 3.3 Trade receivables 3.4 Provisions and contingent liabilities 3.5 Other liabilities p. 50 p. 51 p. 52 p. 53 p. 54 p. 54 p. 55 p. 56 p. 58 p. 58 p. 59 p. 59 p. 60 p. 61 p. 64 p. 65 p. 66 p. 67 Section 4 Consolidated ESG statement p. 85 Distribution to shareholders Share capital, Treasury shares and Other reserves Financial risks Derivative financial instruments Borrowings Cash and cash equivalents Capital structure and financial items 4.1 4.2 4.3 4.4 4.5 4.6 4.7 Other non-cash items 4.8 4.9 4.10 Financial income and expenses Change in working capital Financial assets and liabilities Section 5 Other disclosures 5.1 5.2 5.3 5.4 5.5 5.6 5.7 Share-based payment schemes Commitments Acquisition of businesses Related party transactions Fee to statutory auditors General accounting policies Companies in the Novo Nordisk Group Financial definitions (part of Management's review – not audited) Non-IFRS financial measures (part of Management's review – not audited) p. 68 p. 68 p. 69 p. 71 p. 72 p. 73 p. 73 p. 73 p. 74 p. 75 p. 76 p. 78 p. 78 p. 79 p. 80 p. 80 p. 81 p. 82 p. 83 Notes to the consolidated 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 Breaches of environmental regulatory limit values 7.4 CO2 emissions from operations and transportation 7.5 Waste from production sites Section 8 Social performance 8.1 Patients reached with Novo Nordisk's Diabetes care products 8.2 Employees 8.3 Sustainable employer score 8.4 Frequency of occupational accidents 8.5 Gender diversity 8.6 Total tax contribution 8.7 Supplier audits Section 9 Governance performance 9.1 Business ethics reviews and training 9.2 Supplier audits 9.3 Product recalls 9.4 Failed inspections 9.5 Facilitations of the Novo Nordisk Way 9.6 Company reputation 9.7 Animals purchased for research p. 86 p. 87 p. 87 p. 87 p. 87 p. 88 p. 88 p. 89 p. 89 p. 89 p. 89 p. 90 p. 90 p. 90 p. 90 p. 91 p. 91 p. 91 p. 91 p. 91 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 50 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 2021 2020 2019 DKK million Note 2021 2020 2019 2.1, 2.2 140,800 126,946 122,021 Net profit 47,757 42,138 38,951 Statement of comprehensive income 2.2 (23,658) (20,932) (20,088) Other comprehensive income: 117,142 106,014 101,933 Items that will not be reclassified subsequently to the income statement: Sales and distribution costs 2.2 (37,008) (32,928) (31,823) Research and development costs 2.2, 2.3 (17,772) (15,462) (14,220) Administrative costs 2.2 (4,050) (3,958) (4,007) Other operating income and expenses 2.2, 2.5 332 460 600 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) 4.10 4.10 58,644 54,126 52,483 2,887 1,628 65 (2,451) (2,624) (3,995) 59,080 53,130 48,553 2.6 (11,323) (10,992) (9,602) 47,757 42,138 38,951 2.7 2.7 20.79 20.74 18.05 18.01 16.41 16.38 Remeasurements of retirement benefit obligations 146 (67) (187) Items that will be reclassified subsequently to the income statement: Exchange rate adjustments of investments in subsidiaries 1,624 (1,689) 226 Cash flow hedges: Realisation of previously deferred (gains)/losses 4.2, 4.4 (1,802) 329 1,677 Deferred gains/(losses) incurred during the period 4.2, 4.4 (1,755) 1,384 (329) Other items Tax on other comprehensive income, income/(expense) 2.6 Other comprehensive income, net of tax Total comprehensive income 112 1,005 (670) 10 (577) (610) 9 (231) 1,165 47,087 41,528 40,116 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 51 Cash flow statement for the year ended 31 December 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 2021 2020 2019 DKK million Note 2021 2020 2019 2.6 3.1 4.7 4.8 Purchase of treasury shares 47,757 42,138 38,951 Dividends paid 11,323 10,992 9,602 Repayment of borrowings Proceeds from borrowings 4.2 4.1 4.5 4.5 (19,447) (16,855) (15,334) (21,517) (20,121) (19,409) 22,160 (6,689) 5,682 (950) 81 (822) 6,025 13,009 5,753 7,849 5,661 7,032 (8,656) (4,353) (3,388) 241 (261) 100 (422) 64 (204) Net cash used in financing activities (25,493) (32,244) (35,484) Net cash generated from activities (2,098) (2,729) (211) Cash and cash equivalents at the beginning of the year 12,226 15,411 15,629 Exchange gains/(losses) on cash and cash equivalents 591 (456) (7) Cash and cash equivalents at the end of the year 4.6 10,719 12,226 15,411 2.6 (14,438) (10,106) (10,936) Net cash generated from operating activities 55,000 51,951 46,782 Purchase of intangible assets 3.1 (1,050) (16,256) (2,299) Proceeds from sale of property, plant and equipment — 7 4 Purchase of property, plant and equipment Cash used for acquisition of businesses Proceeds from other financial assets Purchase of other financial assets Purchase of marketable securities Sale of marketable securities Investment in associated companies Proceeds from the divestment of Group and associated companies Dividend received from associated companies 3.1 5.3 5.4 5.4 (6,335) (5,825) (8,932) (18,283) — (4) (7,109) 1,172 — — 4 — 12 — — — — 148 (350) — — (392) (97) — 18 (3) 20 Net cash used in investing activities (31,605) (22,436) (11,509) Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 52 Balance sheet at 31 December DKK million Assets Intangible assets Property, plant and equipment Investments in associated companies Deferred income tax assets Other receivables and prepayments Other financial assets Total non-current assets Inventories Trade receivables Tax receivables Other receivables and prepayments Marketable securities Derivative financial instruments Cash at bank Total current assets Total assets Note 2021 2020 DKK million Note 2021 2020 3.1 3.1 2.6 3.2 3.3 4.3 4.4 4.6 43,171 55,362 525 8,672 267 916 Equity and liabilities 20,657 Share capital 50,269 Treasury shares 582 Retained earnings 5,865 Other reserves 674 Total equity 1,066 Borrowings 108,913 79,113 Deferred income tax liabilities 18,536 Retirement benefit obligations 27,734 Other liabilities 289 Provisions 19,621 40,643 1,119 5,037 6,765 1,690 10,720 85,595 4,161 — 2,332 12,757 65,809 Borrowings Trade payables Tax payables Other liabilities 194,508 144,922 Derivative financial instruments Provisions Total current liabilities Total liabilities Total equity and liabilities 4.2 4.2 4.2 4.5 2.6 3.5 3.4 462 (6) 72,004 (1,714) 70,746 12,961 5,271 1,280 360 4,374 470 (8) 63,774 (911) 63,325 2,897 2,502 1,399 — 4,526 4.5 13,684 8,870 3,658 19,600 2,184 51,520 99,516 3.5 4.4 3.4 7,459 5,717 3,913 17,005 1,365 34,814 70,273 123,762 81,597 194,508 144,922 Total non-current liabilities 24,246 11,324 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 53 Equity statement at 31 December DKK million Share capital Treasury shares Retained earnings Other reserves Balance at the beginning of the year 470 (8) 63,774 (911) 2021 Total 63,325 47,757 (670) 47,087 Share capital Treasury shares Retained earnings Other reserves 2020 Total Share capital Treasury shares Retained earnings Other reserves 2019 Total 480 (10) 57,817 (694) 57,593 490 (11) 53,406 (2,046) 51,839 42,138 (67) 42,071 42,138 (610) 41,528 (543) (543) 38,951 (187) 38,764 1,352 1,352 38,951 1,165 40,116 47,757 146 47,903 (816) (816) 13 13 326 326 (21,517) 1,040 245 (19,441) (21,517) 1,040 245 (19,447) — 72,004 (1,714) 70,746 (20,121) (20,121) (19,409) (19,409) 823 31 (16,847) 823 31 (16,855) — 63,774 (911) 63,325 363 18 (15,325) (9) 10 363 18 (15,334) — (10) 57,817 (694) 57,593 (10) 480 (10) 470 (8) 10 (8) (6) 8 (6) (8) 462 Net profit Other comprehensive income Total comprehensive income Transfer of cash flow hedge reserve to intangible assets (note 4.2) Transactions with owners: Dividends (note 4.1) Share-based payments (note 5.1) Tax related to restricted stock units Purchase of treasury shares (note 4.2) Reduction of the B share capital (note 4.2) Balance at the end of the year Refer to note 4.2 for details of movements in Other reserves. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 54 Section 1 Basis of preparation 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. 1.1 Principal accounting policies and key accounting estimates 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 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. 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. Measurement basis The consolidated financial statements have been prepared on the historical cost basis except for derivative financial instruments, equity investments, marketable securities 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 5.6. 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. 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. 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 2021. It is assessed that application of amendments effective from 1 January 2021 has not had a material impact on the consolidated financial statements for 2021. Furthermore, Management does not anticipate any significant impact on future periods from the adoption of these amendments. Principal accounting policies Key accounting estimates and judgements Estimation risk Note US net sales and rebates Estimate of US sales deductions and provisions for sales rebates Intangible assets from acquisition of businesses Estimate in determining the fair value of intangible assets when acquiring assets in a business combination Income taxes and deferred income taxes Estimate regarding deferred income tax assets and provision for uncertain tax positions Provisions and contingent liabilities Estimate of ongoing legal disputes, litigation and investigations Intangible assets Inventories Estimate regarding impairment of assets and judgement of whether a transaction is an asset acquisition or a business combination Estimate of indirect production costs capitalised and inventory write-down High High Medium Medium Low Low 2.1 5.3 2.6 3.4 3.1 3.2 Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 55 Section 2 Results for the year 2.1 Net sales and rebates Gross-to-net sales reconciliation DKK million Gross sales 2021 2020 2019 340,180 298,187 270,431 US Managed Care and Medicare (112,929) (96,716) (84,202) US wholesaler charge-backs (40,354) (37,036) (33,772) US Medicaid rebates (19,810) (17,307) (14,365) Other US discounts and sales returns Non-US rebates, discounts and sales returns Total gross-to-net sales adjustments (14,119) (10,867) (8,280) (12,168) (9,315) (7,791) (199,380) (171,241) (148,410) Net sales 140,800 126,946 122,021 Provisions for sales rebates DKK million 2021 2020 2019 At the beginning of the year 34,052 30,878 25,760 Additional provisions, including increases to existing provisions 155,602 111,921 102,782 Amount paid during the year (141,370) (106,116) (98,655) Adjustments, including unused amounts reversed during the year Effect of exchange rate adjustment (284) 2,822 166 (2,797) 381 610 At the end of the year 50,822 34,052 30,878 Sales discounts and sales rebates are predominantly issued in the US. As such, rebates amount to 75% of gross sales in the US (74% in 2020 and 71% in 2019). Provisions for sales rebates include US Managed Care, Medicare, Medicaid, and other US rebate types, as well as rebates in a number of European countries and Canada. 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. Pricing mechanisms in the US market In the US, sales rebates are paid in connection with public healthcare insurance programmes, including 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 share 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. Since January 2021, Novo Nordisk has changed its policy in the US related to the 340B Drug Pricing Program, whereby Novo Nordisk no longer provides 340B statutory discounts to certain pharmacies that contract with covered entities participating in the 340B Drug Pricing Program. Chargebacks are estimated 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. Please refer to note 3.4 Provisions and contingent liabilities for a more elaborate description of the ongoing litigation on the 340B Drug Pricing Program. 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 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. Other net sales disclosures In 2021, Novo Nordisk had three major wholesalers distributing products in the US, representing 18%, 13% and 13% respectively of total net sales (19%, 13% and 12% in 2020 and 19%, 14% and 12% in 2019). 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 1,012 million within 12 months (DKK 431 million in 2020) and DKK 962 million thereafter (DKK 216 million in 2020). Novo Nordisk's sales are impacted by exchange rate changes. Refer to note 4.3 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 single 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 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 56 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 3.4). Where absolute amounts are known, the rebates are recognised as other liabilities. Wholesaler charge-backs that are absolute are netted against trade receivable balances. The impact of foreign currency hedging is recognised in the income statement in financial items. Please refer to notes 4.3, 4.4 and 4.10 for more details on hedging. 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. 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. Revenue can only be recognised to the extent that it is highly probable that a significant reversal of the recognised revenue will not occur. In determining the amount of revenue to recognise, Management has considered, among other factors, whether the consideration is highly susceptible to factors outside Novo Nordisk's influence, as well as the extent of predictability and historical experience with similar transactions. 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. 2.2 Segment information Business segments – Key figures DKK million Total net sales Diabetes and Obesity care Biopharm Total 2021 2020 2019 2021 2020 2019 2021 2020 2019 121,597 108,020 102,840 19,203 18,926 19,181 140,800 126,946 122,021 Cost of goods sold (19,363) (17,715) (16,309) (4,295) (3,217) (3,779) (23,658) (20,932) (20,088) Sales and distribution costs (33,791) (29,903) (28,729) (3,217) (3,025) (3,094) (37,008) (32,928) (31,823) Research and development costs (15,600) (13,535) (12,128) (2,172) (1,927) (2,092) (17,772) (15,462) (14,220) Administrative costs (3,504) (3,387) (3,346) (546) (571) (661) (4,050) (3,958) (4,007) Other operating income and expenses Operating profit Operating margin Depreciation, amortisation and impairment losses expensed 199 49,538 40.7% 264 309 43,744 42,637 40.5% 41.5% 133 9,106 47.4% 196 291 332 460 600 10,382 9,846 58,644 54,126 52,483 54.9% 51.3% 41.7% 42.6% 43.0% (4,895) (4,624) (3,916) (1,130) (1,129) (1,745) (6,025) (5,753) (5,661) Novo Nordisk operates in two business segments based on therapies: Diabetes and Obesity care and Biopharm, representing the entirety of the Group's operations. 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. 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 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. – Biopharm: Rare blood disorders, rare endocrine disorders and In 2021, Novo Nordisk operated in two main commercial units: 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 and expenses have 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. – 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). Refer to note 5.7 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 99.8% of total sales are realised outside Denmark. Sales are attributed to geographical areas according to the location of the customer. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 57 Net sales – Business segments and geographical areas DKK million 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 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 Diabetes and Obesity care segment: Rybelsus® Ozempic® Victoza® Total GLP-1 Long-acting insulin – of which Tresiba® – of which Xultophy® – of which Levemir® Premix insulin – of which Ryzodeg® – of which NovoMix® Fast-acting insulin – of which Fiasp® 524 36 — 289 36 8,856 3,634 1,143 6,393 3,112 — 969 — 303 6,726 7,095 7,249 3,527 4,251 4,713 1,544 16,106 10,765 8,392 10,209 7,399 5,682 1,847 11,074 9,959 9,035 6,729 6,451 5,955 2,080 5,486 4,407 3,477 2,979 2,574 1,983 1,095 2,135 1,789 1,493 1,693 1,605 1,407 3,453 3,763 4,065 2,057 2,272 2,565 3 982 10,512 10,246 9,707 2,879 2,959 3,160 5,224 1,711 1,291 993 392 321 237 283 8,801 8,955 8,714 2,487 2,638 2,923 4,941 10,903 10,808 10,304 6,454 6,584 6,422 2,288 1,106 832 617 965 764 585 — – of which NovoRapid® 9,797 9,976 9,687 5,489 5,820 5,837 2,288 7,453 7,339 7,361 2,152 2,370 2,438 2,692 — 10 1,033 1,043 1,471 418 1 1,052 4,852 39 4,813 2,075 — 2,075 2,655 — 235 — 2,160 — 512 — 4,314 1,837 50 4,243 1,826 50 4,838 1,873 50 174 24,849 17,577 10,094 23,168 16,650 9,599 33,705 21,211 11,237 898 898 1,655 1,811 1,638 8,328 11,652 14,685 8,031 11,292 14,217 15,054 18,747 21,934 4,050 2,323 1,812 37,491 31,066 24,829 35,442 29,768 23,866 53,597 41,831 33,221 1,059 2,265 2,037 2,021 6,990 8,480 11,741 6,412 7,962 11,271 18,064 18,439 20,776 87 — 972 1,412 1,415 1,407 4,243 4,561 5,782 3,793 4,191 5,500 439 414 183 439 86 522 655 717 512 642 708 528 2,225 3,264 5,242 2,107 3,129 5,063 9,729 2,657 5,678 8,968 2,444 7,027 9,259 2,210 9,307 4,306 2,409 2,435 2,241 4 1,036 931 752 4,302 1,373 1,504 1,489 691 — 691 679 — 679 871 — 871 665 — 665 652 — 652 839 11,203 10,925 10,578 — 1,711 839 9,492 1,291 9,634 993 9,585 1,753 2,161 2,149 2,129 6,784 7,505 8,999 6,357 7,101 8,592 17,687 18,313 19,303 — 141 68 32 642 553 626 605 519 597 1,748 1,385 1,243 1,753 2,020 2,081 2,097 6,142 6,952 8,373 5,752 6,582 7,995 15,939 16,928 18,060 2,847 2,609 2,314 2,076 1,599 1,534 1,675 1,515 1,431 1,552 9,052 8,873 9,036 Human insulin Total insulin Other Diabetes care Total Diabetes care 39,942 38,352 36,407 18,214 18,364 17,975 12,284 11,053 9,965 9,444 8,935 8,467 16,064 18,198 23,286 14,949 17,146 22,254 56,006 56,550 59,693 2,644 2,946 3,389 713 725 1,052 1,432 1,546 1,647 499 675 690 950 1,085 858 806 943 705 3,594 4,031 4,247 58,692 52,063 48,188 29,136 26,488 24,709 15,563 13,642 12,510 13,993 11,933 10,969 54,505 50,349 48,973 51,197 47,857 46,825 113,197 102,412 97,161 Obesity care (Saxenda® and Wegovy®) 3,117 2,118 2,083 1,809 1,124 981 61 10 9 1,247 984 1,093 5,283 3,490 3,596 4,912 3,230 3,348 8,400 5,608 5,679 Diabetes and Obesity care total 61,809 54,181 50,271 30,945 27,612 25,690 15,624 13,652 12,519 15,240 12,917 12,062 59,788 53,839 52,569 56,109 51,087 50,173 121,597 108,020 102,840 Biopharm segment: Rare blood disorders 5,784 5,708 5,946 3,712 3,579 3,646 222 361 284 1,850 1,768 2,016 4,433 3,954 4,335 4,170 3,675 4,031 10,217 9,662 10,281 – of which Haemophilia A 1,625 1,332 1,176 1,162 – of which Haemophilia B 400 306 197 268 983 199 877 149 – of which NovoSeven® 3,673 3,996 4,502 2,225 2,352 2,577 Rare endocrine disorders 4,880 4,832 4,225 2,212 2,220 1,960 Other Biopharm Biopharm total 1,064 1,108 1,122 837 886 912 11,728 11,648 11,293 6,761 6,685 6,518 24 4 194 167 6 395 16 — 15 — 439 128 333 107 284 48 487 237 381 212 382 185 460 102 358 86 358 77 345 269 1,254 1,299 1,656 3,548 3,207 3,617 3,461 3,089 3,454 66 5 36 5 2,501 2,546 2,229 2,423 2,875 3,052 2,400 2,857 3,037 221 217 205 619 449 501 330 205 245 2,112 1,713 1,558 637 7,221 7,303 1,683 518 7,203 7,707 1,557 382 8,119 7,277 1,623 432 325 4,572 4,531 4,450 7,475 7,278 7,888 6,900 6,737 7,313 19,203 18,926 19,181 Total sales by geographical area 73,537 65,829 61,564 37,706 34,297 32,208 16,019 14,084 12,844 19,812 17,448 16,512 67,263 61,117 60,457 63,009 57,824 57,486 140,800 126,946 122,021 Total sales growth as reported 11.7% 6.9% 12.1% 9.9% 6.5% 10.2% 13.7% 9.7% 13.8% 13.5% 5.7% 14.6% 10.1% 1.1% 6.2% 9.0% 0.6% 5.5% 10.9% 4.0% 9.1% Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 58 Novo Nordisk's research and development is mainly focused on: Certain research and development activities are recognised outside research and development costs: Change in employee costs capitalised as inventories 2.3 Research and development costs DKK million Employee costs (note 2.4) Amortisation and impairment losses, intangible assets (note 3.1) Depreciation and impairment losses, property, plant and equipment (note 3.1) Other research and development costs Total research and development costs As percentage of net sales 2021 7,328 2020 6,269 2019 5,968 744 1,025 522 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. 736 724 783 8,964 7,444 6,947 17,772 12.6% 15,462 14,220 12.2% 11.7% 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 related to research and development projects are presented in research and development costs. – insulins, GLP-1s and other therapeutic compounds 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 – Royalty expenses paid to partners after regulatory approval are expensed as cost of goods sold. haemophilia and other rare blood disorders – Royalty income received from partners is recognised as part of other – human growth hormone and new modes of action for treatment of growth operating income and expenses. disorders and other rare endocrine disorders – Contractual research and development obligations to be paid in the future – new indications with existing assets within NASH, Alzheimer’s, and chronic are disclosed separately as commitments in note 5.2. kidney disease – new research platforms including cell therapy and RNAi for treatment of NASH, cardiovascular disease, chronic kidney disease and Parkinson's disease, among others 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, gene therapy and developing RNAi therapies. 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. 2.4 Employee costs DKK million 2021 2020 2019 Wages and salaries 28,939 26,778 25,335 Share-based payment costs (note 5.1) Pensions – defined contribution plans Pensions – defined benefit plans (note N/A) Other social security contributions Other employee costs 1,040 823 363 2,022 1,961 1,910 139 2,203 2,189 138 1,862 2,044 151 1,963 2,203 Total employee costs for the year 36,532 33,606 31,925 Employee costs capitalised as intangible assets and property, plant and equipment Total employee costs in the income statement Included in the income statement: Cost of goods sold Sales and distribution costs Research and development costs Administrative costs Other operating income and expenses Total employee costs in the income statement (1,240) (1,279) (1,314) (56) (60) (139) 35,236 32,267 30,472 9,611 15,003 7,328 3,098 8,896 8,134 14,146 13,463 6,269 2,848 5,968 2,679 196 108 228 35,236 32,267 30,472 Number of employees 2021 2020 2019 Average number of full-time employees Year-end number of full-time employees Employees (total) 46,171 43,759 42,218 47,792 48,478 44,723 45,323 42,703 43,258 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 59 Remuneration 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 2021 126 12 10 100 29 277 17 294 2020 119 26 10 52 — 207 17 224 2019 120 26 14 40 — 200 19 219 1. Please refer to note 5.1 for further information. 2. Total remuneration for registered members of Executive Management amounts to DKK 0 million (DKK 141 million in 2020 and DKK 135 million in 2019). All members of the Board of Directors are registered. 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 and expenses Accounting policies Other operating income and expenses, 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. Operating profit from the wholly owned subsidiary NNE A/S, not related to Novo Nordisk's main activities, is recognised as other operating income and expenses. Other operating income and expenses, also includes income from the sale of intellectual property rights as well as transaction costs incurred in connection with acquisition of businesses. Income taxes expensed DKK million 2021 2020 2019 Current tax on profit for the year Deferred tax on profit for the year 13,871 (1,528) 11,557 1,105 11,275 (1,559) Tax on profit for the year 12,343 12,662 9,716 Current tax adjustments recognised for prior years (603) (563) (191) Deferred tax adjustments recognised for prior years Income taxes in the income statement Tax on other comprehensive income for the year, (income)/expense (417) (1,107) 77 11,323 10,992 9,602 (1,005) 577 231 Computation of effective tax rate DKK million 2021 2020 2019 22.0% 22.0% 22.0% (1.5%) (2.5%) (2.1%) (0.3%) (1.0%) 19.2% (0.2%) 1.4% 20.7% 0.1% (0.2%) 19.8% 2021 2020 2019 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 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 The deviation in foreign subsidiaries' tax rates from the Danish tax rate is mainly driven by Swiss business activities as well as adjustments to deferred tax assets due to changes in local corporate tax rates. Other adjustments consist of tax related to acquisitions and subsequent transfers of intellectual property rights and adjustments to prior years. In 2020, income taxes paid in Denmark and paid outside Denmark were impacted by transfers of intellectual property rights related to acquisitions. In 2021, the impact from acquisitions and transfer of intellectual property rights was less significant. 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. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss and does not give rise to equal taxable and deductible temporary differences. 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 444 million (DKK 337 million in 2020). 9,703 4,262 7,774 3,439 4,508 2,258 The value of future tax deductions in relation to share programmes is recognised as a deferred tax asset 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. 1,296 1,336 904 Income taxes paid 14,438 10,106 10,936 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 60 Key accounting estimate regarding deferred income tax assets and provisions for uncertain tax positions Management has considered future taxable income and has estimated the amount of deferred income tax assets that should be recognised. The estimate is based on an assessment of whether sufficient taxable income will be available in the future, against which the temporary differences and unused tax losses can be utilised. The total tax value of unrecognised tax loss carry-forwards amounts to DKK 166 million in 2021 (DKK 628 million in 2020). Development in deferred income tax assets and liabilities In the course of conducting business globally, tax and transfer pricing disputes with tax authorities may occur. Management has estimated the expected outcome of the disputes by using the ‘most probable outcome’-method to determine the provisions for uncertain tax positions. Management 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. DKK million 2021 Property, plant and equipment Intangible assets Inventories Liabilities Other Net deferred tax asset/(liability) at 1 January (1,614) (3,600) 2,556 Income/(charge) to the income statement Income/(charge) to other comprehensive income Income/(charge) to equity Additions from acquisitions (330) — — — 632 2 (2) (4,456) Effect of exchange rate adjustment (36) 49 387 251 — — 1 Net deferred tax asset/(liability) at 31 December (1,980) (7,375) 3,195 Classified as follows: Deferred tax asset at 31 December Deferred tax liability at 31 December 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 Additions from acquisitions Effect of exchange rate adjustment 719 109 (2,699) (7,484) (1,591) (718) (47) (2,883) — — — 24 92 (92) — 1 3,210 (15) 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 Deferred tax liability at 31 December 755 46 (2,369) (3,646) 2,568 (12) 4,617 2,037 (41) — — 319 6,932 7,223 (291) 3,452 1,449 16 — — (300) 4,617 4,895 (278) Offset within countries — Total 3,363 1,945 1,005 192 (3,480) 376 2,629 — 3,401 3,541 (6,130) 8,672 (912) 6,130 (5,271) — 4,041 1,404 (781) 793 194 976 43 1,087 520 (469) 20 276 (30) 2 (577) (72) 276 (307) 3,363 1,404 — 2,903 (5,302) 5,865 (1,499) 5,302 (2,502) 2.7 Earnings per share 2021 2020 2019 Net profit 47,757 42,138 38,951 Average number of shares outstanding in million shares 2,296.6 2,333.9 2,374.3 Dilutive effect of average outstanding share pool1,2 Average number of shares outstanding, including dilutive effect of outstanding share pool Basic earnings per share Diluted earnings per share in million shares in million shares 6.5 6.1 4.4 2,303.1 2,340.0 2,378.7 DKK 20.79 18.05 16.41 DKK 20.74 18.01 16.38 1. For further information on the development in treasury shares, please refer to note 4.2 2. 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. Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 61 Section 3 Operating assets and liabilities 3.1 Intangible assets and property, plant and equipment Out of total property, plant and equipment and intangible assets, DKK 46,705 million is located in Denmark (DKK 44,431 million in 2020) and DKK 41,035 million is located in the US (DKK 18,750 million in 2020) where the Group's main production, filling, packaging, moulding, assembly facilities and intangible assets are located. DKK million 2021 Intellec-tual property rights Software and other intangibles Total intangible assets Goodwill Land and buildings Plant and machinery Other equipment Assets under construction Property, plant and equipment Cost at the beginning of the year — 22,404 2,936 25,340 37,509 31,503 6,876 10,798 86,686 Additions from acquisition of businesses (note 5.3) 4,346 18,687 24 23,057 Additions during the year Disposals during the year Transfer and reclassifications Effect of exchange rate adjustment — — — — 583 — — 128 492 (45) — 27 522 827 — 890 57 516 3 582 4,858 7,091 1,075 (45) (359) (148) (305) (41) (853) — 1,529 3,078 155 1,048 621 468 164 (5,075) — 548 2,381 Cost at the end of the year 4,346 41,802 3,434 49,582 41,076 35,944 7,776 11,091 95,887 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 — — — — — — 3,135 1,548 4,683 12,936 19,444 4,037 1,066 1,892 1,529 573 14 32 824 54 866 573 — 78 200 — (1) 12 (1) 90 (365) (140) (305) (41) 192 273 108 — — 41 — — 36,417 4,245 141 (851) 573 40,525 Carrying amount at the end of the year 4,346 37,150 1,675 43,171 26,407 14,806 2020 4,652 1,759 6,411 14,669 21,138 4,718 3,058 11,091 55,362 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 — 15,906 396 16,302 741 506 490 4,560 6,297 — — — (698) — (74) — — (698) (119) (583) (122) (16) (840) — 7,440 4,586 515 (12,541) — (20) (94) (813) (600) (222) (1,556) (3,191) Cost at the end of the year — 22,404 2,936 25,340 37,509 31,503 6,876 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 — — — — — — 2,643 1,352 3,995 11,528 18,888 3,453 889 350 (698) (49) 207 1,096 1,859 1,500 — — (11) 350 14 69 (698) (60) (119) (346) (581) (432) 3,135 1,548 4,683 12,936 19,444 — — 16 (16) — — 33,869 4,180 127 (831) (928) 36,417 10,798 50,269 821 28 (115) (150) 4,037 2,839 Carrying amount at the end of the year — 19,269 1,388 20,657 24,573 12,059 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 62 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 and expenses Total amortisation and impairment loss Total amortisation Total impairment losses 2021 2020 2019 844 39 744 11 1 1,639 1,066 573 369 40 1,025 10 2 1,446 1,096 350 916 24 522 3 4 1,469 487 982 Of the total addition of intangible assets in 2021 DKK 492 million is internally developed (DKK 396 million in 2020). Intangible assets with an indefinite useful life and intangible assets not yet available for use amount to DKK 22,690 million (DKK 9,607 million in 2020), primarily intellectual property rights in relation to research and development projects and goodwill. 2021 additions Additions from acquisition of businesses relates to Novo Nordisk’s acquisition of Dicerna Pharmaceuticals, Inc., which primarily includes the RNAi research technology platform and pipeline assets, which are recognised within intellectual property rights and goodwill; please refer to note 5.3. In 2021, Novo Nordisk acquired Prothena’s wholly-owned subsidiary Neotope Neuroscience Ltd. and thereby gained full worldwide rights to the intellectual property rights of Prothena’s ATTR amyloidosis business and pipeline cover. The acquisition included the clinical stage antibody PRX004. PRX004 is an antibody that uses a depleter mechanism that has the potential to improve heart failure symptoms and reverse the disease progression within the ATTR-CM diseases. The transaction has been accounted for as an asset acquisition recognised in intellectual property rights, all related to PRX004. 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 intellectual property rights for the acquisition of Ziltivekimab, a fully human monoclonal antibody directed against Interleukin-6 related to chronic kidney disease, which is under development. Novo Nordisk acquired Emisphere Technologies Inc. and obtained ownership of the Eligen® SNAC oral delivery technology. 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 intellectual property rights, of which DKK 2,467 million was related to assets under development. At 31 December 2021, the carrying amount of acquired intangible assets related to Rybelsus is DKK 7,150 million (DKK 7,716 million in 2020), which has a remaining amortisation period of 13 years. Impairment of intangible assets In 2021, an impairment loss of DKK 573 million (DKK 350 million in 2020) was recognised, all related to intellectual property rights. DKK 436 million (DKK 350 million in 2020) of the impairment was related to the Diabetes and Obesity care segment and DKK 137 million (none in 2020) related to Biopharm. The entire impairment loss in 2021 was recognised in research and development costs (DKK 350 million in research and development costs in 2020). The impairment was a result of Management’s review of expectations related to intellectual property rights not yet in use. No impairment related to marketable products was identified in 2021 or in 2020. It is assessed that the carrying amount of goodwill which arose from the acquisition of Dicerna Pharmaceuticals, Inc. on 28 December 2021 still reflected the fair value as of 31 December 2021. An impairment test has not been performed on goodwill due to the timing of the acquisition three days before year-end, and no impairment indicators have been identified in the period from the acquisition to 31 December 2021. The allocation of goodwill of DKK 4,346 million to cash-generating units is considered provisional due to the fact that the transaction was closed on 28 December 2021, leaving limited time for determining the cash-generating units. The allocation will be finalised within 12 months from the acquisition date. Accounting policies Goodwill on acquisition of businesses is initially measured at cost, and is subsequently measured at cost less any accumulated impairment losses. Intellectual property rights acquired for research and development projects, are carried at historical cost less accumulated amortisation and any impairment loss. Upfront fees and acquisition costs are capitalised and subsequent milestone payments payable on achievement of a contingent event will be capitalised on the contingent event being probable of being achieved. Intangible assets acquired in a business combination are recognised at fair value at the acquisition date. Amortisation is based on the straight-line method over the estimated useful life. This corresponds to the legal duration or the economic useful life depending on which is shorter, and not exceeding 25 years in either case. The amortisation of intellectual property rights begins after regulatory approval has been obtained or when assets are put in use. Goodwill and 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. The carrying amount of goodwill will within 12 months from acquisition date be allocated to cash-generating units for impairment testing purposes. The allocation is made to those cash- generating units that are expected to benefit from the business combination in which the goodwill arose. The units are identified at the lowest level at which goodwill is monitored for internal management purposes. Internal development of software for internal use is recognised as intangible assets if the recognition criteria are met, for example a significant business system where the expenditure leads to the creation of a durable asset. Amortisation is based on the straight-line method over the estimated useful life of 3-15 years. The amortisation begins when the asset is in the location and condition necessary for it to be capable of operating in the manner intended by Management. Research and development projects Internal 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. Payments to third parties under collaboration and licence agreements are assessed for the substance of their nature. Payments which represent Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 63 subcontracted research and development work 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. Key accounting estimates and judgements on intangible assets Impairment tests of intellectual property rights not yet available for use are based on Management’s projections and anticipated net present value of estimated future cash flows from marketable products. Management makes judgements related to intangible assets when assessing whether a transaction is a business combination or an asset acquisition. The assessment of whether a transaction is a business combination or an asset acquisition involves the optional concentration test, which is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If met the transaction is accounted for as an asset acquisition. If not met, an assessment of any acquired processes is made to determine if they are substantive. Management makes judgements when assessing whether a process is substantive. A process is considered substantive if it is critical to the ability to producing outputs from the transaction. Judgements are also made in evaluating whether payments under collaboration arrangements are acquisition of assets or prepayment of R&D services. For acquired research and development projects, intellectual property rights, 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 an impairment, any impairment is measured based on discounted projected cash flows. Impairments on intangible assets, other than goodwill, are reviewed at each reporting date for possible reversal. Property, plant and equipment Depreciation and impairment losses DKK million Cost of goods sold Sales and distribution costs Research and development costs Administrative costs Other operating income and expenses Total depreciation and impairment losses Of which related to leased assets 2021 2,836 409 736 386 19 4,386 899 2020 2,729 403 724 433 18 4,307 964 2019 2,656 354 783 376 23 4,192 852 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 and establishing additional API capacity, both in Kalundborg. Leased property, plant and equipment DKK million Land and buildings Other equipment Total 2021 3,340 499 3,839 2020 2,901 479 3,380 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. In 2021, the total amount recognised in the income statement related to leases was DKK 1,303 million (DKK 1,373 million in 2020). The total cash outflow for leases amounted to DKK 1,275 million (DKK 1,367 million in 2020). As of 31 December 2021, the lease liability excludes potential lease payments of DKK 2,209 million (undiscounted) related to lease term extension rights on properties that were not considered reasonably certain to be exercised (DKK 2,363 million in 2020). Please refer to note 4.5 for a maturity analysis of lease payments. Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 64 Key accounting estimate of indirect production costs capitalised 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 initially 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 estimate cost of production, standard cost variances and idle capacity in determining 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. Indirect production costs account for 46% of the net inventory value, reflecting a complex production process and low direct raw material costs. 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. 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. 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. If the lease liability is remeasured due to a change in future lease payments 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. For a description of accounting policies for lease liabilities, please refer to note 4.9. 3.2 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 2021 4,310 12,285 5,282 21,877 (2,256) 19,621 8,929 46% 2,153 883 (661) (119) 2,256 2020 3,326 12,252 5,111 20,689 (2,153) 18,536 9,703 52% 1,426 1,628 (528) (373) 2,153 All write-downs in both 2021 and 2020 relate to fully impaired inventory. 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. 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 written down, until there is a high probability of regulatory approval for the product. 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. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 65 3.3 Trade receivables Movements in allowance for doubtful trade receivables 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 2021 1,380 (62) 102 10 1,430 2020 1,484 (108) 139 (135) 1,380 Novo Nordisk’s customer base is comprised of government agencies, wholesalers, retail pharmacies and other customers. 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. The country risk ratings in 2021 have overall remained unchanged from 2020. However, despite the continued COVID-19 pandemic Novo Nordisk has not experienced significant increases in collectability issues on individual customers nor has it experienced significant deterioration in the ageing of receivables. Please refer to note 4.3 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 split 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. 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 4.3 for a general description of credit risk. DKK million 2021 Not yet due 1-90 days 91-180 days 181-270 days 271-360 days Gross carrying amount Loss allowance Net carrying amount DKK million 40,274 (844) 39,430 1,132 212 87 63 (93) (74) (51) (63) 1,039 138 36 — — More than 360 days past due 305 (305) Trade receivables 42,073 (1,430) 40,643 EMEA China Rest of World North America Operations 7,827 2,564 4,227 27,455 (852) — (558) (20) 6,975 2,564 3,669 27,435 Trade receivables 42,073 (1,430) 40,643 2020 Not yet due 1-90 days 91-180 days 181-270 days 271-360 days 27,511 1,000 188 44 51 (805) (112) (63) (29) (51) More than 360 days past due 320 (320) 26,706 888 125 15 — — 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) 5,525 2,137 2,423 17,649 Trade receivables 29,114 (1,380) 27,734 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 66 3.4 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 provi- sions2 2021 Total 2020 Total 34,052 2,451 155,602 (141,370) (284) 2,822 50,822 255 50,567 608 (657) (419) 174 2,157 1,895 262 795 493 2,042 39,340 35,733 461 157,164 113,810 (450) (214) (142,691) (107,220) 13 7 858 316 542 (280) 48 2,057 1,908 (970) 3,051 55,894 4,374 149 51,520 78 (3,061) 39,340 4,526 34,814 1. Provisions for sales rebates are related to US Managed Care, Medicare, Medicaid and other 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 2023 and 2024. 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. Pending litigation against Novo Nordisk Numerous claims alleging pancreatic cancer, pancreatitis, and thyroid cancer have been filed in US courts against various incretin class manufacturers, including Victoza® and Novo Nordisk. As of 31 January 2022, 369 plaintiffs have filed product liability cases against Novo Nordisk, the vast majority alleging pancreatic cancer. In March and April 2021, the Federal MDL and State JCCP courts granted defendants’ motions for summary judgment on federal pre-emption and general causation grounds thereby dismissing all the pending cases against Novo Nordisk relating to Victoza®. Plaintiffs have filed a notice of appeal of the Federal Court ruling, and they have the right to file a similar notice of appeal of the State Court ruling. Final decisions on both appeals are not expected before the end of 2022. Novo Nordisk does not expect the lawsuit to have a material impact on Novo Nordisk’s financial position, operating profit or cash flow. In September 2021, Novo Nordisk announced that it has reached an agreement in principle to settle the previously disclosed securities class action litigation pending in the Federal District Court of New Jersey, US. The settlement was reached after a voluntary mediation process and resolves claims brought by plaintiffs for alleged violations of US securities laws. The settlement contains no admission of liability, wrongdoing, or responsibility by any of the defendants and will include a full release of all defendants in connection with the allegations made in the lawsuit. Under the terms of the settlement agreement, Novo Nordisk has agreed to pay USD 100 million (inclusive of all plaintiffs’ attorneys fees and expenses and settlement costs). The payment is covered by insurance.. The settlement is subject to a court approval process, which could take several months. In January 2022, Novo Nordisk announced that it has settled the previously disclosed securities lawsuit filed against Novo Nordisk in Denmark by a number of institutional shareholders, which included a claim for a total amount of DKK 11,800 million. The lawsuit alleged that Novo Nordisk made misleading statements and did not make appropriate disclosures regarding its sales of insulin products in the US. The settlement contains no admission of liability, wrongdoing or responsibility by Novo Nordisk and no payment will be made by Novo Nordisk to the plaintiffs. Novo Nordisk is currently defending eight 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; three are pending in federal courts in Texas, Florida, and Mississippi and the remaining one is pending in state court in Kentucky. All pending matters also name as defendants Eli Lilly and Company and Sanofi, 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. 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 certain 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. Since January 2021, Novo Nordisk has changed its policy in the US related to the 340B Drug Pricing Program, whereby Novo Nordisk no longer provides 340B statutory discounts to certain pharmacies that contract with covered entities participating in the 340B Drug Pricing Program. Novo Nordisk’s contract pharmacy policy has been challenged by the US Department of Health and Human Services. On 17 May 2021, the US government issued a letter to Novo Nordisk asserting that Novo Nordisk’s policy violates the 340B statute. Novo Nordisk believes its policy does not violate the 340B Drug Pricing Program requirements and has commenced litigation against the government seeking a declaration that its 340B policy is consistent with relevant US laws. On 5 November 2021, the US District Court for the District of New Jersey issued a decision on Novo Nordisk’s motion for summary judgment holding that the use of contract pharmacies is consistent with the 340B statute and that manufacturers have no statutory right to impose Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 67 Key accounting estimates regarding ongoing legal disputes, litigation and investigations Provisions for legal disputes consist of various types of provisions linked to Provisions for legal disputes consist of various types of provisions 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. 3.5 Other liabilities Other liabilities primarily comprises employee cost payables, payables related to non-current assets, sales rebates as well as deferred revenue. restrictions on the sale or distribution of 340B drugs. Novo Nordisk has appealed the decision to the US Court of Appeals for the Third Circuit. A decision on this appeal is not expected before the end of 2022. Depending on the outcome of these matters, there may be a significant impact on Novo Nordisk’s financial position, net sales and cash flow. Mosaic Health Inc. and Central Virginia Health Services, Inc. (both 340B covered entities) filed a putative class action lawsuit in NY Federal Court against Novo Nordisk US, Eli Lilly, Sanofi and AstraZeneca alleging a conspiracy among the manufacturers to artificially fix prices of diabetes medications through changes to their policies relating to the distribution of 340B drugs through contract pharmacy arrangements. A motion to dismiss the lawsuit has been filed and is currently pending before the Court. Novo Nordisk does not expect the lawsuits to have a material impact on Novo Nordisk’s financial position, operating profit, or cash flow. Pending claims against Novo Nordisk and Investigations involving Novo Nordisk Several authorities in the US have served Novo Nordisk with Civil Investigative Demands (CIDs) or subpoenas calling for the production of documents and 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. – 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. – 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. – US Department of Justice (December 2021), relating to the financial relationships with healthcare professional and prescriptions for Ozempic® and Rybelsus® during the period of 1 January 2016 to present. In all matters Novo Nordisk is cooperating with the authorities 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 has responded to the various committees in response to their requests. 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. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 68 Section 4 Capital structure and financial items 4.1 Distribution to shareholders 4.2 Share capital, Treasury shares and Other reserves Development in number of shares Million shares A shares B shares Shares beginning of 2020 Shares cancelled in 2020 Outstanding shares end of 2020 Shares cancelled in 2021 Outstanding shares end of 2021 537 — 537 — 537 Total 2,400 (50) 1,863 (50) 1,813 2,350 (40) (40) 1,773 2,310 DKK million Interim dividend for the year Dividend for prior year Share repurchases for the year Total 2021 8,021 13,496 19,447 40,964 2020 7,570 2019 7,100 12,551 12,309 16,855 15,334 36,976 34,743 Each A share of DKK 0.2 per share carries 200 votes and each B share of DKK 0.2 per share carries 20 votes. At the end of 2021, the share capital amounted to DKK 107 million in A share capital (DKK 107 million in 2020 and 2019) and DKK 355 million in B share capital (DKK 363 million in 2020 and DKK 373 million in 2019). received for disposing of treasury shares are deducted directly in equity. The purchase of treasury shares during the year relates to the remaining part of the 2020 share repurchase programme, totalling DKK 1 billion and the DKK 20 billion Novo Nordisk B share repurchase programme for 2021, of which DKK 1.6 billion was outstanding at year-end. The programme ended on 1 February 2022. Transfer of treasury shares relates to the long-term share-based incentive programme and restricted stock units to employees. Specification of Other reserves DKK million 2019 Reserve at the beginning of the year Other comprehensive income, net Reserve at the end of the year Exchange rate ad- justments Cash flow hedges Tax and other items Total (1,065) (1,677) 696 (2,046) 226 1,348 (222) 1,352 (839) (329) 474 (694) 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. The net cash distribution to shareholders in the form of dividends and share repurchases amounts to DKK 40,964 million, compared with a free cash flow of DKK 29,319 million. The total dividend for 2021 amounts to DKK 23,711 million (DKK 10.40 per share). The 2021 final dividend of DKK 15,690 million (DKK 6.90 per share) is expected to be distributed pending approval at the Annual General Meeting. The interim dividend of DKK 8,021 million (DKK 3.50 per share) was paid in August 2021. The total dividend for 2020 was DKK 21,066 million (DKK 9.10 per share), of which the final dividend of DKK 13,496 million (DKK 5.85 per share) was paid in March 2021. No dividend is declared on treasury shares. Novo Nordisk's dividend pay-outs are complemented by share repurchase programmes. Holding at the be- ginning 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 (17,066) (486) 19,447 4,947 Treasury shares 2021 2020 2020 Market value, DKK million Treasury shares in % Number of B shares (million) Number of B shares (million) 16,016 1.6% 37.5 48.1 Other comprehensive income, net Transferred to intangible assets1 Reserve at the end of the year (1,689) 1,713 (567) (543) — 418 (92) 326 (2,528) 1,802 (185) (911) (40.0) (50.0) 2021 (1.1) 34.7 — (0.4) 39.8 — 37.5 Other comprehensive income, net Transferred to intangible assets1 Reserve at the end of the year 1,624 (3,557) 1,117 (816) — 15 (2) 13 (904) (1,740) 930 (1,714) For information on transfer of cash flow hedge reserve to intangible assets refer to note 4.4. 22,858 1.3% 31.1 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 0.2 per share. Differences between this amount and the amount paid to acquire or 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. As of 31 December 2021 distributable reserves total DKK 51,114 million (DKK 51,858 million in 2020), corresponding to the parent company's retained earnings and reserve for cash flow hedges and exchange rate adjustments. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 69 4.3 Financial risks Management has assessed the following key financial risks: Type Financial risk Foreign exchange risk Credit risk Liquidity risk Interest rate risk High Low Low 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 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. 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. 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. 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. Management has chosen to classify the result of hedging activities as part of financial items. Key currencies figures USD CNY JPY CAD GBP Average exchange rate applied (DKK per 100) 2021 2020 2019 629 654 667 97 95 97 5.73 6.13 6.12 Year-end exchange rate applied (DKK per 100) 2021 2020 2019 657 606 668 103 93 96 5.70 5.88 6.11 502 488 503 517 474 511 865 839 852 885 824 877 Foreign exchange rate sensitivity analysis At year-end, an immediate 5% increase/decrease in the disclosed currencies versus DKK and EUR is estimated by Management to have the following impact on Novo Nordisk's operating profit for the next 12 months. Sensitivity on operating profit of an immediate 5% increase in key currencies1 DKK million 2022 2021 USD 2,350 1,900 CNY 360 460 JPY 230 200 CAD 200 140 GBP 120 110 1. An immediate 5% decrease would have the opposite impact of the above. Sensitivity of an immediate 5% increase in all other currencies rates on 31 December versus DKK and EUR1 DKK million 2021 2020 Sensitivity of all currencies Income statement Other comprehensive income Total Sensitivity of USD Income statement Other comprehensive income Total 113 (2,677) (2,564) (87) (2,218) (2,305) 299 (1,893) (1,594) 2 (1,380) (1,378) 1. An immediate 5% decrease would have the opposite impact of the above. 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 and foreign exchange forwards. Anticipated currency transactions, investments in foreign subsidiaries and non-current assets are not included. Financial contracts coverage at year end Months USD CNY1 2021 2020 12 10 0 6 JPY 12 12 CAD GBP 9 9 11 11 1. Chinese yuan traded offshore (CNH) is used to hedge Novo Nordisk's CNY currency exposure. The table above shows financial contracts existing at year-end to cover the expected future cash flow for the disclosed number of months. During 2021, the hedging horizon varied between 9 months and 12 months for USD, JPY, CAD and GBP. Average hedge rate for USD cash flow hedges is 628 at the end of 2021 (640 at the end of 2020). Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 70 Credit risk Credit risk arises from the possibility that transactional counterparties may default on their obligations, causing financial losses for the Group. Credit risk exposure to financial counterparties Credit exposure for cash at bank, marketable securities and derivative financial instruments (fair value) DKK million 2021 AAA range AA range A range BBB range Not rated or below BBB range Total 2020 AAA range AA range A range BBB range Not rated or below BBB range Total Cash at bank Marketable securities Derivative financial instruments 477 3,726 5,637 23 857 6,765 — — — — — 585 1,105 — — Total 7,242 4,311 6,742 23 857 10,720 6,765 1,690 19,175 — 7,296 4,443 212 806 12,757 — — — — — — — 989 1,343 — — — 8,285 5,786 212 806 2,332 15,089 Novo Nordisk considers its maximum credit exposure to financial counterparties to be DKK 19,175 million (DKK 15,089 million in 2020). 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 43,425 million (DKK 29,522 million in 2020). Please refer to note 4.9 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 credit risk on marketable securities is low, as investments are made in highly liquid bonds with AAA credit ratings. Credit risk exposure to non-financial counterparties 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 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. The country risk ratings in 2021 have overall remained unchanged from 2020 to 2021. However, despite the continued COVID-19 pandemic Novo Nordisk has not experienced significant increases in collectability issues on individual customers nor has it experienced significant deterioration in the ageing of receivables. Trade receivable programmes At year-end, the Group had derecognised receivables without recourse having due dates after 31 December 2021 amounting to: DKK million US Japan 2021 1,313 2,453 2020 1,817 2,351 2019 3,672 2,149 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. 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 3.3 for the split of allowance for trade receivables by geographical segment. Interest rate risk Novo Nordisk’s exposure to interest rate risk is considered to be low due to the capital structure. Non-current debt consists of fixed rate instruments and the sensitivity towards interest rates on current debt of DKK 12,861 million (DKK 6,153 million in 2020) is countered by the interest sensitivity on cash and cash equivalents of DKK 10,719 million (DKK 12,226 million in 2020). Interest rate risk on marketable securities of DKK 6,765 million is considered low due to a low portfolio duration. 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. Financial reserves comprise the sum of cash and cash equivalents at the end of the year, marketable securities with original term to maturity exceeding three months 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. Financial reserves DKK million Cash and cash equivalents (note 4.6) Marketable securities Undrawn committed credit facility1 Undrawn bridge facility2 Borrowings (Note 4.5) Financial reserves3 2021 2020 2019 10,719 6,765 11,526 — (12,861) 12,226 15,411 — — 11,531 11,578 5,577 (576) — (595) 16,149 28,758 26,394 1. The undrawn committed credit facility comprises a EUR 1,550 million facility (EUR 1,550 million in 2020 and EUR 1,550 million in 2019) committed by a portfolio of international banks. The facility matures in 2025. 2. For 2020, the undrawn bridge facility comprises the EUR 750 million (DKK 5,577 million) undrawn portion of EUR 1,500 million bridge facility. The facility was expected to mature in 2021 but the terms provided that the maturity could be extended, at the option of Novo Nordisk to June 2022. Financial reserves for 2020 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 was classified as current borrowings in 2020 as it was Management's expectation that it would be repaid in 2021. The loan was repaid in 2021. 3. Additional non-IFRS financial measure; please refer to 'Non-IFRS financial measures', which is not part of the audited financial statements. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 71 4.4 Derivative financial instruments Derivative financial instruments DKK million Forward contracts USD1 Forward contracts CNH, JPY, GBP and CAD Forward contracts, cash flow hedges Forward contracts USD2 Forward contracts CNH, CAD, EUR, GBP and JPY Forward contracts, fair value hedges Total derivative financial instruments Recognised in the income statement 2021 2020 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 42,351 9,032 51,383 30,909 7,361 38,270 89,653 17 32 49 1,607 34 1,641 1,690 1,641 1,667 122 1,789 284 111 395 2,184 395 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 — 47 47 1,307 11 1,318 1,365 1,318 47 Recognised in other comprehensive income 49 1,789 1. Average hedge rate for USD cash flow hedges is 628 at the end of 2021 and 640 at the end of 2020. 2. Average hedge rate for USD fair value hedges is 628 at the end of 2021 and 634 at the end of 2020. The fair value of cash flow hedges at year-end 2021, loss of DKK 1,740 million, has been recognised in other comprehensive income. In addition, DKK 15 million in cash flow hedge losses on intangible asset purchases has been incurred for a total 2021 other comprehensive impact of DKK 1,755 million. The DKK 15 million deferred loss was transferred directly from the cash flow hedge reserve to the initial cost of the intangible assets. Use of derivative financial instruments The derivative financial instruments are used to manage the exposure to foreign exchange risk. None of the derivatives are held for trading. Novo Nordisk uses forward exchange contracts to hedge forecast transactions, assets and liabilities. Net investments in foreign subsidiaries are currently not hedged. 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. There is no expected ineffectiveness at 31 December 2021, primarily because hedging instruments match currencies of hedged cash flows. Accounting policies On initiation of the contract, Novo Nordisk designates each derivative financial contract that qualifies for hedge accounting as one of: – hedges of the fair value of a recognised asset or liability (fair value hedge) – hedges of the fair value of a forecast financial transaction (cash flow hedge). All contracts are initially recognised at fair value and subsequently remeasured at fair value at the end of the reporting period. Fair value hedges Value adjustments of fair value hedges are recognised in the income statement along with any value adjustments of the hedged asset or liability that are attributable to the hedged risk. Cash flow hedges Value adjustments of the effective part of cash flow hedges are recognised 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. 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. For additional disclosures on accounting policies for financial instruments please refer to note 4.9. Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 72 4.5 Borrowings Contractual undiscounted cash flows 2021 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 Leases 946 1,475 942 1,266 Issued bonds Bank overdrafts1 Loans Total Leases — 12,503 359 13,808 4,854 — 4,800 — — — — — — 6,329 942 6,066 855 1,247 694 1,241 Bank overdrafts1 1,107 Loans 5,577 — — — — — — 4,629 9,654 12,503 359 27,145 4,037 5,577 1,107 10,721 4,129 3,307 822 9,654 9,654 12,503 — — 12,503 359 — 359 26,645 12,961 13,684 3,672 2,897 775 5,577 1,107 10,356 — — 5,577 1,107 2,897 7,459 Reconciliation of liabilities arising from financing activities Non-cash movements Beginning of the year Re- payments Proceeds Additions2 Disposals Exchange rates Other End of the year DKK million 2021 Lease liabilities Issued bonds Loans Bank overdrafts1 Bank overdrafts1 Total borrowings 2020 Lease liabilities Loans Bank overdrafts1 Liabilities arising from financing activities 9,825 (6,689) 22,160 1,183 3,672 (874) — 1,183 — — 9,657 5,577 (5,577) 12,503 576 (238) — — — — 531 (527) — — 10,356 (7,216) 22,160 1,183 3,824 (950) — 978 — 595 — — 5,582 100 — — 978 — 978 — — — — — — — — — — — — — 146 — — 17 163 — 163 (171) (5) (119) (295) — (295) 2 (3) — 3 2 (3) (1) (9) — — (9) — (9) 4,129 9,654 12,503 358 26,644 1 26,645 3,672 5,577 576 9,825 531 10,356 Liabilities arising from financing activities 4,419 (950) 5,682 Bank overdrafts1 Total borrowings 64 — 467 4,483 (950) 6,149 1. Bank overdrafts includes DKK 358 million classified as financing activities (DKK 576 million in 2020) and DKK 1 million classified as cash and cash equivalents (DKK 531 million in 2020). 2. Includes additions from acquisitions of businesses. Issued bonds Issue date Maturity date Interest type Coupon interest rate Carrying amount Fair value 2020 Total 7,539 1,247 694 1,241 EUR 650 million (2024) EUR 650 million (2028) 4 June 2021 4 June 2021 4 June 2024 4 June 2028 Fixed Fixed 0.000% 0.125% 4,854 4,850 4,800 4,794 In 2021 Novo Nordisk launched its first Euro Medium Term Note (EMTN) programme in two tranches with an aggregate principal amount of EUR 1.3 billion corresponding to DKK 9.7 billion. Net proceeds of the issuances have been used by Novo Nordisk for general corporate purposes, including refinancing of the bridge loan facility established in connection with Novo Nordisk’s acquisition of Emisphere Technologies Inc. in 2020. The bonds are listed on Euronext Dublin. Accounting policies The lease liabilities 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. Lease liabilities are 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. The lease liability is subsequently remeasured to reflect changes in future lease payments, e.g. changes in lease terms. Issued bonds, loans and bank overdrafts are initially recognised at the fair value of the proceeds received less transaction costs. In subsequent periods these are measured at amortised cost using the effective interest method. The difference between the proceeds received and the nominal value is recognised in financial income or financial expenses over the term of the loan. As part of bridge funding the acquisition of Dicerna Pharmaceuticals, Inc., Novo Nordisk entered into a sale and repurchase agreement of marketable securities (REPO). On 31 December 2021, the carrying amount of the assets transferred is DKK 5,937 million, and the associated liabilities amounts to DKK 5,937 million. The repurchase is fixed, and Novo Nordisk has therefore retained full exposure from fair value changes of the marketable securities. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 73 Therefore, the transaction is treated as a collateralised lending arrangement. Where substantially all the risks and rewards of ownership are retained in financial assets that have been transferred, the assets are not derecognised and the proceeds obtained are recognised as a financial liability. For fair value determination please refer to note 4.9. 4.6 Cash and cash equivalents Cash and cash equivalents DKK million 2021 2020 2019 Cash at bank (note 4.3) 10,720 12,757 15,475 Borrowings1 (note 4.5) (1) (531) (64) Cash and cash equivalents 10,719 12,226 15,411 1. Bank overdrafts includes DKK 358 million classified as financing activities (DKK 576 million in 2020) and DKK 1 million classified as cash and cash equivalents (DKK 531 million in 2020). Cash and cash equivalents at 31 December 2021 includes DKK 1,123 million that is restricted (DKK 653 million in 2020). The restricted cash balance relates to subsidiaries in which availability of currency for remittance of funds is temporarily scarce. Accounting policies 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. 4.7 Other non-cash items 4.8 Change in working capital DKK million 2021 2020 2019 DKK million Reversals of non-cash income statement items Interest income and interest expenses, net (note 4.10) Capital gain/(loss) on investments, net. etc (note 4.10) Result of associated companies (note 4.10) Share-based payment costs (note 5.1) Increase/(decrease) in provisions (note 3.4) and retirement benefit obligations Other Total other non-cash items 58 (340) 53 195 24 (149) 1,040 823 16,581 (4,354) 13,009 3,605 3,322 7,849 Inventories 2021 (1,085) 2020 (895) 2019 (1,305) Trade receivables (12,909) (2,822) (2,126) 155 145 137 363 6,071 161 7,032 Other receivables and prepayments Trade payables Other liabilities Adjustment for payables related to non-current assets Adjustment related to acquisition of businesses Adjustment related to divestment of Group companies Change in working capital including exchange rate adjustments (469) 3,153 2,595 (419) (641) 1,274 (1,190) (398) 1,202 (15) 879 295 (1,409) — — — — (42) (10,139) (2,624) (3,564) Exchange rate adjustments 1,483 (1,729) 176 Cash flow change in working capital (8,656) (4,353) (3,388) Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 74 4.9 Financial assets and liabilities Financial assets by category DKK million Other financial assets Marketable securities Derivative financial instruments (note 4.4) Financial assets at fair value through the income statement Other financial assets Trade receivables Other receivables and prepayments (current and non-current) – less prepayments and VAT receivables Cash at bank (note 4.6) Financial assets at amortised cost Trade receivables in a factoring portfolio1 Financial assets at fair value through other comprehensive income Total financial assets at the end of the year by category Financial liabilities by category 2021 553 6,765 1,690 9,008 363 2020 766 — 2,332 3,098 300 5,304 (3,438) 10,720 27,985 25,607 4,835 (4,113) 12,757 25,422 16,091 25,607 16,091 62,600 44,611 Derivative financial instruments (note 4.4) 2,184 1,365 Financial liabilities measured at fair value through the income statement Borrowings (non-current)2 (note 4.5) Borrowings (current)2 (note 4.5) Trade payables Other liabilities (non-current) Other liabilities (current) – less VAT and duties payable 2,184 12,961 13,684 8,870 360 19,600 (590) 1,365 2,897 7,459 5,717 — 17,005 (598) Financial liabilities measured at amortised cost Total financial liabilities at the end of the year by category3 54,885 32,480 57,069 33,845 1. Trade receivables which are measured at fair value through other comprehensive income, which have no associated loss allowance. Refer to note 3.3. 2. The fair value of loans approximates the booked amount. 3. Please refer to note 4.5 for a maturity analysis for non-current and current borrowings. Financial assets with the exception of other financial assets and the non- current part of other receivables and prepayments (DKK 267 million in 2021, DKK 674 million in 2020) are all due within one year. Other financial assets at amortised cost include DKK 335 million which are due in more than five years (DKK 280 million in 2020). Other financial assets measured at fair value through the income statement are minor shareholdings. Fair value measurement hierarchy DKK million Active market data Directly or indirectly observable market data 15,036 11,643 Not based on observable market data Total financial assets at fair value Active market data 2021 7,169 1,690 25,756 34,615 — 2020 634 2,332 16,223 19,189 — Directly or indirectly observable market data 2,184 1,365 Not based on observable market data — — Total financial liabilities at fair value 2,184 1,365 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 2021 or 2020. 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, please refer to notes 4.3 and 4.4. Accounting policies Depending on purpose, Novo Nordisk classifies financial instruments into the following categories: – Financial assets at fair value through the income statement – Financial assets at amortised cost – Financial assets at fair value through other comprehensive income – Financial liabilities at fair value through the income statement – Financial liabilities at amortised cost Management determines the classification of its financial instruments 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 Financial assets at fair value through the income statement consist of equity investments, marketable securities and derivative financial instruments. These are initially recognised at fair value. Equity investments are included in other financial assets. Net gains and losses arising from changes in the fair value of equity instruments and marketable securities are recognised in the income statement as financial income or expenses. For a description of accounting policies on derivative financial instruments designated to hedge accounting, please refer to note 4.4. Financial assets at fair value through other comprehensive income are trade receivables that are held to collect or to sell in factoring agreements. 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. These are initially measured at fair value less transaction costs, except for trade receivables that are initially measured at the transaction price. Subsequently, they are measured at amortised cost using the effective interest method less impairment. For a description of accounting policies on trade receivables, please refer to note 3.3. Purchases and sales of financial assets are recognised on the settlement date. 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 substantially transferred all the risks and rewards of ownership. Financial liabilities at fair value through the income statement consist of financial derivative instruments. Financial liabilities at amortised cost consist of borrowings (loans, issued bonds, bank overdrafts and lease liabilities), trade payables and other liabilities. These are initially recognised at the fair value of the proceeds received less transaction costs. The difference between the proceeds received and the nominal value is recognised in financial expenses over the term of the loan using the effective interest method. For initial recognition of lease liabilities refer to note 4.5. Financial liabilities are derecognised when the obligation is repaid, cancelled or expires. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 75 Fair value measurement 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. 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. 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. The marketable securities are initially measured at fair value plus transaction costs and subsequently changes to the carrying amount are recognised in the income statement. 4.10 Financial income and expenses Financial impact from forward contracts, specified Financial income DKK million Financial income Interest income1 Foreign exchange gain (net) Financial gain from forward contracts (net) Capital gain on investments, etc. Result of associated companies Total financial income Financial expenses Interest expenses1 Foreign exchange loss (net) Financial loss from forward contracts (net) Capital loss on investments, etc. Capital loss on marketable securities Result of associated companies Other financial expenses Total financial expenses 2021 2020 2019 231 — 2,316 340 — 2,887 289 1,972 — — 44 24 122 2,451 337 1,142 — — 149 1,628 390 — 1,889 195 — — 150 2,624 65 — — — — 65 220 539 2,673 145 — 137 281 3,995 1. Total interest income and expenses is measured at amortised cost for financial assets and liabilities. DKK million 2021 2020 2019 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 1,802 (329) (1,677) (1,411) 79 (1,609) 1,246 (835) (217) 679 (804) 830 2,316 (1,889) (2,673) Accounting policies As described in note 4.3, Management has chosen to classify the result of hedging activities as part of financial items in the income statement except for foreign currency-risk cash flow hedges 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. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 76 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 2021 189 2020 189 234 162 598 436 19 36 Share-based payment expensed in the income statement 1,040 823 2019 48 86 195 34 363 1. In 2021, Novo Nordisk introduced a new share-based compensation programme with terms, which amortises the grant date valuation over three years (2018, 2019 and 2020 were amortised over four years). The 2021 expense includes amortisation of the 2018, 2019, 2020 and 2021 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 1 February 2022, the Board of Directors approved an interim allocation of 0.5 million Novo Nordisk B shares to the members of the Management Board for the 2021 financial year. The number of shares is periodically estimated based on long-term incentive performance. The final number of shares allocated for the 2021 programme is decided at the end of the performance period in 2023. The value at launch of the programme (adjusted for expected dividends) was DKK 223 million. The cost of the 2021 programme is amortised over the vesting period of 2021-2023 at an annual amount of DKK 74 million. The maximum share allocation cannot exceed 26 months' base salary for the CEO, 19.5 months' base salary for executive vice presidents and up to 15.6 months' base salary for senior vice presidents. Financial targets are set by the Board for a three-year period, while every year the Board sets the non-financial targets, the first time in February 2021 for the year 2021. The grant date of the programme was February 2021, and the share price used for the determining the grant date fair value of the award was the average share price (DKK 450) for Novo Nordisk B shares on Nasdaq Copenhagen in the period 3-17 February 2021, adjusted for the expected dividend. Based on the split of participants when the share allocation was decided, 45% of the allocated shares will be allocated to members of Executive Management and 55% to other members of the Management Board. The shares allocated for 2018 were released to the individual participants subsequent to approval of the 2021 Annual Report by the Board of Directors and after the announcement of the 2021 full-year financial results on 2 February 2022. The shares allocated correspond to a value at launch of the programme of DKK 115 million, expensed over the vesting period of 2018-2021. The number of shares to be transferred (0.5 million shares) is higher than the original number of shares allocated, as the average sales growth in the three- year vesting period was above the maximum performance target set by the Board and consequently, the number of shares increased by 30%. All restricted stock units and shares allocated to Management are hedged by treasury shares. Management group below the Management Board The management group below the Management Board has a share-based incentive programme with similar performance criteria. For 2021, a total of 1.6 million shares have currently been allocated to this group, corresponding to a value at launch of the programme (adjusted for expected dividends) of DKK 649 million. The number of shares is periodically estimated based on long-term incentive performance. The final number of shares allocated for the 2021 programme is decided at the end of the performance period in 2023. The cost of the 2021 programme is amortised over the vesting period of 2021-2023 at an annual amount of DKK 216 million. Financial target are set by the Board for a three-year period, while every year the Board sets the non-financial targets, the first time in February 2021 for the year 2021. The shares allocated for 2018 were released to the individual participants subsequent to approval of the 2021 Annual Report by the Board of Directors and after the announcement of the 2021 full-year financial results on 2 February 2022. The shares allocated correspond to a value at launch of the programme of DKK 312 million amortised over the period 2018-2021. The number of shares to be transferred (1.2 million shares) is higher than the original number of shares allocated, as the average sales growth in the three-year vesting period was above the maximum performance target set by the Board and consequently the number of shares increased by 30%. 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 performance and 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. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 77 General terms and conditions of launched programmes Number of shares awarded in the year (million) Value per share at launch (DKK) Total market value at launch (DKK million) Performance and vesting period Allocated to recipients Amortisation period Restricted stock units to employees Shares for Management Board Shares for management group below Management Board Shares allocated to individual employees 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 — — — — — — 2.1 307 660 0.5 423 223 0.4 411 152 0.5 298 152 1.6 423 649 1.0 411 416 1.3 298 387 0.1 538 71 0.0 391 17 0.2 311 48 2019 to 2023 2021 to 2023 2020 to 2023 2019 to 2022 2021 to 2023 2020 to 2023 2019 to 2022 2021 to 2024 2020 to 2023 2019 to 2022 Feb 2023 Feb 2024 Feb 2024 Feb 2023 Feb 2024 Feb 2024 Feb 2023 2024 2023 2022 — — 3.5 years 3 years 4 years 4 years 3 years 4 years 4 years 3 years 3 years 3 years Outstanding restricted stock units (million) Restricted stock units to employees Shares for Management Board Shares for management group below Management Board Shares allocated to individual employees Total 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 2021 2020 2019 Outstanding at the beginning of the year Released allocated shares Cancelled allocated shares Allocated in the year Performance adjustment1 Outstanding at the end of the year 2.1 (0.1) — — — 2.0 2.1 (0.0) — — — 2.1 1.5 (1.4) (0.1) 2.1 — 2.1 1.8 (0.3) — 0.5 0.2 2.2 1.3 (0.1) (0.0) 0.4 0.2 1.8 1.2 (0.4) (0.0) 0.5 — 1.3 4.5 (0.6) (0.3) 1.6 0.3 5.5 3.2 (0.2) (0.1) 1.0 0.6 4.5 2.7 (0.7) (0.1) 1.3 — 3.2 0.2 (0.1) (0.0) 0.1 0.0 0.2 0.3 (0.1) (0.0) 0.0 — 0.2 0.2 (0.1) (0.0) 0.2 — 0.3 8.6 (1.1) (0.3) 2.2 0.5 9.9 6.9 (0.4) (0.1) 1.4 0.8 8.6 5.6 (2.6) (0.2) 4.1 — 6.9 1. The number of shares for Management Board and management group below Management board has been adjusted as the financial and non-financial targets set by the Board are expected to be exceeded for the 2021 programme. The number of shares for Management Board and management group below Management board has been adjusted as the sales growth target set by the Board for the 2018 programme is exceeded and is expected to be exceeded for the 2019 and 2020 programmes. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 78 Contractual obligations 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 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. At the Annual General Meeting in 2020, a donation to the World Diabetes Foundation (WDF) was approved. 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 93 million in 2022, DKK 94 million in 2023 and 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. Other guarantees Other guarantees amount to DKK 1,251 million (DKK 1,117 million in 2020). Other guarantees primarily relate to performance guarantees issued by Novo Nordisk. 5.2 Commitments Contractual obligations not recognised in the balance sheet DKK million 2021 Leases1 Research and development obligations Research and development – potential milestone payments2 Commercial product launch – potential milestone payments2 Purchase obligations relating to investments in property, plant and equipment Current Non- current Total 145 636 781 4,196 6,357 10,553 771 4,220 4,991 — 5,966 5,966 545 — 545 Other purchase obligations 13,407 5,998 19,405 Total obligations not recognised in the balance sheet 19,064 23,177 42,241 2020 Leases1 Research and development obligations Research and development – potential milestone payments2 Commercial product launch – potential milestone payments2 Purchase obligations relating to investments in property, plant and equipment 152 612 764 2,733 4,502 7,235 205 3,878 — 6,105 339 — 4,083 6,105 339 Other purchase obligations 7,528 4,535 12,063 Total obligations not recognised in the balance sheet 10,957 19,632 30,589 1. Predominantly relates to estimated variable property taxes, leases committed but 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. 5.3 Acquisition of businesses Business combinations in 2021 On 28 December 2021, Novo Nordisk acquired all outstanding shares of the publicly held US company Dicerna Pharmaceuticals, Inc. via a cash tender offer. Before the acquisition, Novo Nordisk held 2.9% of the shares in Dicerna Pharmaceuticals, Inc. at a fair value of DKK 573 million. About Dicerna Pharmaceuticals, Inc. Dicerna Pharmaceuticals, Inc. is a biopharmaceutical company focused on discovering, developing and commercialising medicines that are designed to leverage RNAi to silence selectively genes that cause or contribute to diseases. Dicerna Pharmaceuticals, Inc. has established collaborative relationships with some of the leading pharmaceutical companies and has together with the collaborative partners more than 20 active discovery, preclinical or clinical programmes. Dicerna Pharmaceuticals, Inc. employs around 320 people. Strategic rationale The acquisition of Dicerna Pharmaceuticals, Inc.’s RNAi platform is a strategic addition to Novo Nordisk’s existing research technology platforms and support the strategy of using a broad range of technology platforms applicable across all Novo Nordisk’s therapeutic focus areas. In 2019, Novo Nordisk entered into a research collaboration and license agreement with Dicerna Pharmaceuticals, Inc. to discover and develop RNAi therapies using Dicerna Pharmaceuticals, Inc.’s proprietary RNAi platform technology. Details of the acquisition The total purchase price amounts to DKK 22,034 million, which has been settled by the fair value of existing shareholdings of DKK 573 million, settlement of a pre-existing relationship of DKK 145 million and a cash consideration of DKK 21,316 million. The settlement of a pre-existing relationship relates to the existing research collaboration and license agreement, according to which Novo Nordisk has paid upfront for research services that on the date of acquisition had a value of DKK 145 million. Furthermore, under the existing research collaboration and license agreement, Novo Nordisk has prior to the acquisition acquired rights to license from Dicerna Pharmaceutical Inc. with a carrying value of DKK 863 million. As part of the acquisition of Dicerna Pharmaceutical Inc., Novo Nordisk has acquired the underlying intellectual property rights that replace the previously acquired rights to license. The additional value of the underlying property rights of DKK 2,454 million over the carrying value of previously acquired rights to license, is included in intellectual property rights acquired in the business combination and is calculated as the present value of future payment avoided by acquisition of Dicerna Pharmaceutical Inc. No material gain or loss has been recognised as part of settling the pre-existing arrangement. Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 79 The purchase price allocation for the acquisition is considered provisional due to the fact that the transaction was closed on 28 December 2021, leaving limited time to identify and determine fair value of assets acquired and liabilities assumed. Adjustments may be applied to the purchase price allocation for a period of up to 12 months from the acquisition date. The provisional fair value of recognised assets and liabilities is as follows: DKK million Intellectual property rights Other intangible assets Financial assets Cash Deferred tax assets/liabilities, net Other net assets Net identifiable assets acquired Goodwill Purchase price Settlement of pre-existing relationship Fair value of existing shareholdings Consideration transferred Cash acquired Cash used for acquisition of businesses 2021 18,687 24 31 3,033 (3,480) (607) 17,688 4,346 22,034 (145) (573) 21,316 (3,033) 18,283 The goodwill is primarily attributable to the highly-skilled workforce and expected synergies generated from Novo Nordisk's know-how and commercialisation abilities within protein and peptide based medicines and Dicerna Pharmaceuticals, Inc.’s know-how within RNAi technology. The goodwill is not expected to be deductible for tax purposes. Transaction costs of DKK 124 million are included in other operating income and expenses in the income statement. Business combinations in 2020 No business combinations were completed in 2020. Accounting policies The acquisition method of accounting is used to account for all business combinations. The purchase price for a business comprises the fair values of the assets transferred, liabilities incurred to the former owners including warrant holders of the acquired business and the fair value of any asset or liability resulting from a contingent consideration arrangement. Any amount of the purchase price which effectively comprises a settlement of a pre-existing relationship is not part of the exchange for the acquiree and is therefore not included in the consideration for the purpose of applying the acquisition method. Settlements of pre-existing relationships are accounted for as separate transactions in accordance with the relevant IFRS. Identifiable assets and liabilities and contingent liabilities assumed are measured at fair value at the date of acquisition by applying relevant valuation methods. Acquisition-related costs are expensed as incurred. Key accounting estimate in determining the fair value of intangible assets acquired in a business combination The application of the acquisition method involves the use of significant estimates as the identifiable net assets of the acquiree are recognised at their fair value for which observable market prices are typically not available. This is particularly relevant for intangible assets which require use of valuation techniques typically based on estimates of present value of future uncertain cash flows. The valuation of intellectual property rights identified in the acquisition of Dicerna Pharmaceuticals, Inc. is mainly based on Relief From Royalty models, where Management has estimated the net present value of royalties and milestone payments, if the existing research collaboration and license agreement had been extended in time and scope to cover all of the proprietary RNAi technology. Further, Pipeline assets and research collaboration and license agreements with other parties than Novo Nordisk are valued based on estimated net present value of future cash flows. 5.4 Related party transactions Material transactions with related parties DKK million Novo Holdings A/S 2021 2020 2019 Purchase of Novo Nordisk B shares 6,695 5,963 4,894 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 Liability for capital commitment1 Distribution by CS Solar Fund XIV 6,144 5,767 5,580 593 (4) (116) 78 — — — 775 (18) (113) 72 — — — 941 (20) (132) 103 97 389 (385) 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 76.7% 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. and Altascience Company Inc. are considered related parties 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. Goodwill is recognised at the excess of purchase price over the fair value of net identifiable assets acquired and liabilities assumed. Purchase of shares by Novo Nordisk Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 80 In 2021, Novo Nordisk A/S acquired 11,220,000 B shares, worth DKK 6.7 billion, from Novo Holdings A/S as part of the DKK 20.0 billion share repurchase programme. The transaction price for each transaction was calculated as the average market price in the open window period following the announcements of the financial results for the four quarters in 2021. 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. 5.5 Fee to statutory auditors 5.6 General accounting policies DKK million 2021 2020 2019 Statutory audit Audit-related services Tax advisory services Other services Total fee to statutory auditors 26 3 4 4 37 26 3 9 4 42 26 4 11 4 45 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. 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. 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 2021, nor were there any in 2020 or 2019. Fees for services other than statutory audit of the financial statements amount to DKK 11 million (DKK 16 million in 2020 and DKK 19 million in 2019). There were no material unsettled balances with related parties at the end of the year. In 2021, Deloitte Statsautoriseret Revisionspartnerselskab provided other services in the amount of DKK 6 million which relate to tax compliance and transfer pricing, educational training, review of ESG data, due diligence and other assurance assessments and opinions. PricewaterhouseCoopers Statsautoriseret Revisionspartnerselskab (PricewaterhouseCoopers Denmark) provided other services in the amount of DKK 9 million in 2020 and DKK 12 million in 2019 which relate to tax compliance and transfer pricing, educational training, review of ESG data, due diligence and other assurance assessments and opinions. 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 prevailing exchange rates at the transaction dates. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities are recognised in the income statement. Foreign currency differences arising from the translation of effective qualifying cash flow hedges are recognised in other comprehensive income. Translation of Group companies Financial statements of foreign subsidiaries are translated into DKK at the exchange rates prevailing at the end of the reporting period for balance sheet items, and at average exchange rates for income statement items. All effects of exchange rate adjustments are recognised in other comprehensive income. Cash flow statement The Cash flow statement is presented in accordance with the indirect method commencing with net profit for the year. Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 81 5.7 Companies in the Novo Nordisk Group Activity: • Sales and marketing • Research and development • • Production Services/investments Company and country Percentage of shares owned Activity Company and country Percentage of shares owned Activity Company and country Percentage of shares owned Activity • • • • Novo Nordisk Limited, Ireland Novo Nordisk Ltd, Israel Novo Nordisk S.P.A., Italy 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 Pharmatech US, Inc., 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 Dicerna Pharmaceuticals, 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 Production SAS, France Novo Nordisk Pharma GmbH, Germany Novo Nordisk Hellas Epe., Greece Novo Nordisk Hungária Kft., Hungary Neotope Neuroscience Limited, Ireland • • • • • • • • • • 100 • 100 • 100 100 100 • 100 • 100 100 100 100 100 100 100 100 100 100 • 100 100 100 100 • • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • • • • • • 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 Finance (Netherlands) 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 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • Novo Nordisk Production Support LLC, Russia 100 • • Novo Nordisk Saudi for Trading, Saudi Arabia 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 FZE, United Arab Emirates Novo Nordisk Holding Limited, United Kingdom Novo Nordisk Limited, United Kingdom Ziylo Limited, United Kingdom Region China 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 Novo Nordisk (China) Pharmaceuticals Co., Ltd., China Novo Nordisk (Shanghai) Pharma Trading Co., Ltd., China Beijing Novo Nordisk Pharmaceuticals Science & Technology Co., Ltd., China Novo Nordisk Region China A/S, Denmark Novo Nordisk Hong Kong Limited, Hong Kong Novo Nordisk Pharma (Taiwan) Ltd., Taiwan 100 • • 100 • 100 100 100 • 100 • • • • • • Rest of World Novo Nordisk Pharma Argentina S.A., Argentina Novo Nordisk Pharmaceuticals Pty. Ltd., Australia Novo Nordisk Pharma (Private) Limited, Bangladesh 100 • 100 • 100 • Novo Nordisk Produção Farmacêutica do Brasil Ltda., Brazil 100 • 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 Novo Nordisk Pharma Operations (Business Area) Sdn Bhd, Malaysia 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 Nordisk India Holding Pte Ltd., 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 100 • Other subsidiaries and associated companies NNE A/S, Denmark NNIT A/S, Denmark CS Solar Fund XIV, LLC, United States 100 18 99 Companies without significant activities are not included in the list. NNE A/S subsidiaries are not included in the list. • • 100 • 100 • 100 • 100 • 100 100 • 100 • 100 • 100 • 100 100 • 100 • 100 • 100 • 100 • 100 • 100 • 100 100 • 100 • 100 • • • • • • • Novo Nordisk Annual Report 202182 Financial definitions (part of Management's review – not audited) Financial ratios have been calculated in accordance with the guidelines from the Danish Society of Financial Analysts, and supplemented by certain key ratios for Novo Nordisk. Financial ratios are described below and in the section 'Non-IFRS financial measures'. 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 2017-2018 have been restated in 'Financial highlights'. Working capital Working capital is defined as current assets less current liabilities and measures the liquid assets Novo Nordisk has available for the business. 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. Dividend pay-out ratio Total dividends for the year as a percentage of net profit. 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. Purchase of intangible assets Cash flow statement amount for the purchase of intangible assets. Novo Nordisk Annual Report 2021Part of Management´s review – not auditedNon-IFRS financial measures Sales in constant exchange rates DKK million Net sales IFRS 2021 2020 2019 140,800 126,946 122,021 Effect of exchange rate 3,643 3,254 (3,923) Sales in constant exchange rates 144,443 130,200 118,098 (part of Management's review – not audited) Net sales previous year 126,946 122,021 111,831 83 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. 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 IFRS / Equity IFRS Operating profit/equity in % 2021 58,644 70,746 82.9% 2020 2019 54,126 52,483 63,325 57,593 85.5% 91.1% Operating profit after tax to net operating assets DKK million 2021 2020 2019 Operating profit after tax 47,384 42,922 42,091 % increase/(decrease) in reported currencies % increase/(decrease) in constant exchange rates 10.9% 4.0% 9.1% 13.8% 6.7% 5.6% Operating profit in constant exchange rates DKK million Operating profit IFRS Effect of exchange rate Operating profit in constant exchange rates Operating profit previous year % increase/(decrease) in reported currencies % increase/(decrease) in constant exchange rates 2021 58,644 2,332 60,976 54,126 2020 2019 54,126 52,483 1,930 (2,607) 56,056 49,876 52,483 47,248 8.3% 3.1% 11.1% / Average net operating assets 68,634 51,824 42,940 12.7% 6.8% 5.6% Operating profit after tax to net operating assets in % 69.0% 82.8% 98.0% 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 the 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. OPAT/NOA numerator Reconciliation of operating profit to operating profit after tax: DKK million 2021 2020 2019 Operating profit IFRS 58,644 54,126 52,483 Tax on operating profit (using effective tax rate) (11,260) (11,204) (10,392) Operating profit after tax 47,384 42,922 42,091 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 therefore 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 IFRS refers to an IFRS financial measure. Sales and operating profit growth in constant exchange rates 'Growth in constant exchange rates' means that the effect of changes in exchange rates is excluded. It is defined as sales/operating profit for the period measured at the average exchange rates for the same period 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. Novo Nordisk Annual Report 2021Part of Management´s review – not audited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 Other liabilities (non-current) Provisions (non-current) Trade payables Tax payables Other liabilities (current) Provisions (current) Net operating assets Average net operating assets1 84 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, marketable securities with original term to maturity exceeding three months 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. 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. The following table reconciles total financial reserves with cash and cash equivalents, the most directly comparable IFRS financial measure: Free cash flow DKK million Net cash generated from operating activities IFRS Net cash used in investing activities IFRS Net purchase of marketable securities IFRS Addition on marketable securities through acquisition of business IFRS Repayment on lease liabilities IFRS Free cash flow 2021 2020 2019 55,000 51,951 46,782 (31,605) (22,436) (11,509) 5,937 861 — — — — (874) (950) (822) 29,319 28,565 34,451 2021 43,171 55,362 8,672 2020 20,657 50,269 5,865 2019 5,835 50,551 4,121 267 674 841 19,621 40,643 1,119 18,536 27,734 289 17,641 24,912 806 5,037 4,161 3,434 (5,271) (1,280) (360) (4,374) (8,870) (3,658) (19,600) (51,520) 78,959 68,634 (2,502) (1,399) — (4,526) (5,717) (3,913) (80) (1,334) — (4,613) (6,358) (4,212) Financial reserves DKK million Cash and cash equivalents IFRS (17,005) (15,085) Marketable securities IFRS (34,814) (31,120) Undrawn committed credit facility 58,309 51,824 45,339 Undrawn bridge facility1 42,940 Borrowings1 2021 10,719 6,765 11,526 — (12,861) 16,149 2020 2019 12,226 15,411 — — 11,531 11,578 5,577 (576) — (595) 28,758 26,394 1. Average net operating assets for 2019 was calculated based on an adjusted net Financial reserves1 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: IFRS DKK million Equity Investment in associated companies Other financial assets Marketable securities Derivative financial instruments 2021 70,746 (525) (916) (6,765) (1,690) 2020 2019 63,325 57,593 (582) (474) (1,066) (1,334) — (2,332) — (188) Cash at bank (10,720) (12,757) (15,475) Borrowings – non-current Borrowings – current Derivative financial instruments Net operating assets 12,961 13,684 2,184 78,959 2,897 7,459 1,365 3,009 1,474 734 58,309 45,339 1. Financial reserves for 2020 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 for 2020 include the DKK 5,577 million (EUR 750 million) undrawn portion of a bridge facility as the terms of the facility provided that the maturity could 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 was Management’s expectation that the facility would be repaid in 2021. The loan was repaid in 2021. Free cash flow Free cash flow is a measure of the amount of cash generated in the period which is available for the Board to allocate between Novo Nordisk's capital providers, through measures such as dividends, share repurchases and repayment of debt (excluding lease liability repayments) or for retaining in the business to fund future growth. The following table shows a reconciliation of free cash flow with net cash generated from operating activities, the most directly comparable IFRS financial measure: 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 2021 2020 2019 Net cash generated from operating activities IFRS / Net profit IFRS Cash flow from operating activities/net profit in % 55,000 47,757 51,951 42,138 46,782 38,951 115.2% 123.3% 120.1% Cash to earnings DKK million Free cash flow / Net profit IFRS Cash to earnings 2021 29,319 47,757 61.4% 2020 28,565 42,138 67.8% 2019 34,451 38,951 88.4% Novo Nordisk Annual Report 2021Part of Management´s review – not auditedContents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 85 Statement 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) Breaches of environmental regulatory limit values 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)1 – Hereof children reached through the Changing Diabetes® in Children programme (cumulative) People & employees Employees (total) Employee turnover Sustainable employer score2 Frequency of occupational accidents (number per million working hours) Gender in leadership positions (ratio men:women) Gender in senior leadership positions (ratio men:women) Gender in the Board of Directors (ratio men:women) Societies Total tax contribution (DKK million) Donations and other contributions (DKK million) Governance performance Governing processes Business ethics reviews Relevant employees trained in business ethics Supplier audits Product recalls Failed inspections Values & trust Facilitations of the Novo Nordisk Way (total) Company reputation (scale 0-100)3 Animals purchased for research Note 2021 2020 2019 7.1 7.1 7.2 7.3 7.4 7.5 8.1 8.1 8.1 8.2 8.2 8.3 8.4 8.5 8.5 8.5 8.6 8.7 9.1 9.1 9.2 9.3 9.4 9.5 9.6 9.7 3,387 100% 3,488 12 174 181 3,191 100% 3,368 15 170 141 2,993 76% 3,149 16 306 124 34.6 1.7 32.8 3.2 30.0 2.9 31,846 28,296 25,695 48,478 11.0% 84% 1.3 57:43 64:36 67:33 32,593 92 37 98% 253 1 — 45,323 7.9% N/A 1.3 59:41 65:35 62:38 43,258 11.4% N/A 2.2 60:40 67:33 62:38 26,376 27,527 158 105 32 99% 177 — — 34 99% 236 4 — 34 82.6 47,879 26 N/A 50,036 32 N/A 49,637 1. During 2020, the ceiling price was lowered from USD 4 to USD 3 which affects the comparability of 2021 and prior years. 2. In 2021, the engagement survey was entirely redesigned to support Novo Nordisk’s strategic goals. As a result, comparison to previous surveys is not appropriate. 3. Company reputation replaces Company trust in order to capture more dimensions of how Novo Nordisk is perceived by external stakeholders. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 86 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, 99d and 107d specify the requirements to report on the management of risks related to the environment, climate, human rights, labour and social conditions, anti-corruption, gender distribution and data ethics. These requirements are addressed in the Management Review. Novo Nordisk is also inspired by the International Integrated Reporting Framework and adheres to 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. 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 the production and supply chain: – 2ºC scenario, consistent with meeting the Paris Agreement Goal (Representative Concentration Pathway RCP 2.6) – 4ºC 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 on 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. Materiality 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. This assessment builds on ongoing stakeholder engagement and trendspotting supplemented by data-driven analysis. The identified key issues are addressed by programmes or action plans with clear and measurable targets. The issues presented in the Annual Report are thus deemed to have a significant impact on the Group's Environmental, Social and Governance performance and hereby the future business performance and may support stakeholders in their decision-making. Principles of consolidation The disclosures of energy consumption and CO2 emissions cover production sites, laboratories and offices. The disclosures of water consumption, environmental breaches and waste cover production sites. The social and governance-related disclosures cover the Novo Nordisk Group, comprising Novo Nordisk A/S and entities controlled by Novo Nordisk A/S as applicable. Accounting policies and changes hereto The accounting policies set out in the notes have been applied consistently in the preparation of the consolidated ESG statement for all the years presented unless stated otherwise below. The existing categorisation of CO2 emissions from operations and transportation has been supplemented with the categorisation into scope 1, 2, and 3 emissions to align with the Greenhouse Gas Protocol. Gender in senior leadership positions (ratio men:women) has been added to the statement to reflect the aspirational target of 45:45 representation in senior leadership positions launched during 2021. The target of 45:45 representation leaves 10% flexibility while also allowing for non-binary gender definitions and those that may not wish to be categorised. 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 but is primarily prepared with investors in mind. To all Novo Nordisk stakeholders, the Annual Report is just one element of interaction and communication with the company. Sustainable employer score is replacing the previous disclosure of employee engagement in accordance with Novo Nordisk's aspirations of becoming a sustainable employer. The sustainable employer score is based on the new employee survey and captures a multitude of dimensions related to employee well-being. Impact Understanding, measuring and communicating the positive and negative impacts on society and the environment of Novo Nordisk’s activities is important and remains a priority for Novo Nordisk. Company reputation is replacing the previous disclosure of company trust. A new and more comprehensive approach to reputational intelligence has been launched in 2021 to cover more markets and stakeholders. These insights are summarised in the company reputation score. Finally, the categorisation of disclosures into Environment, Social and Governance as well as the sub-categorisation within each dimension has been changed for some metrics. Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 87 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 2021 2,859 528 3,387 2020 2,718 473 3,191 2019 2,458 535 2,993 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 site or office that is derived from 100% renewable sources, either sourced or self-produced. 7.2 Water consumption for production sites In 2021, production sites consumed 3,488,000 cubic metres of water, an increase of 4% compared to 2020 due to a new production facility and a general increase in produced volumes. Production sites in Brazil, China, Iran and Algeria, are located in areas subject to water stress or high seasonal variations. They consume 10% of the total water for global production. Overall, water consumption at these facilities decreased by 10% compared to 2020 due to significant water- saving projects implemented despite increased production. CO2 emissions by Scope 1, 2 and 3 1,000 tonnes Scope 1 – Production – Office buildings and laboratories – Company cars Scope 2 – Production – Office buildings and laboratories Scope 31 – Business flights – Product distribution Total CO2 emissions 2021 2020 2019 77 29 2 46 16 10 6 81 10 71 75 28 2 45 15 9 6 80 19 61 174 170 86 21 3 62 75 65 10 145 65 80 306 Accounting policies Water consumption is measured based on meter readings and invoices. It includes drinking water, industrial water and steam used at production sites. 1. Scope 3 emissions are restricted to CO2 emissions from business flights and product distribution. For a full overview of CO2 emissions, please visit cdp.net Energy consumption for production increased by 5% primarily due to a new production facility and a general increase in produced volumes. Energy consumption in office buildings and laboratories increased by 12% as facilities were utilised more throughout the year compared to 2020. 7.3 Breaches of environmental regulatory limit values In 2021, there were 12 breaches, a decrease from 15 breaches in 2020. The breaches were mainly related to wastewater and process waste, and all had a limited impact on the environment. All breaches were reported to the authorities. Energy-saving projects implemented in 2021 within production sites resulted in annual savings of 67,000 GJ. Accounting policies Breaches of regulatory limit values cover all breaches reported to the environmental authorities. In 2021, 100% of power sourced for production sites was from renewable energy. Accounting policies Energy consumption for operations is measured as consumption of power, steam, heat and fuel. The fuel is mainly from natural gas, wood, diesel oil, gas oil and light fuel oil. Energy consumption is based on meter readings and invoices. Energy consumption in production and laboratories covers consumption of power, steam, heat and fuel. Energy consumption in office buildings outside Denmark is limited to the consumption of power. 7.4 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 2021 2020 2019 39 8 71 10 46 37 8 61 19 45 86 13 80 65 62 Total CO2 emissions 174 170 306 Novo Nordisk has long-term targets of zero CO2 emissions from operations and transportation by 2030 and net-zero emissions by 2045. In 2021, total CO2 emissions from operations and transportation increased by 2%. The increase was primarily due to a rise in emissions from product distribution. Scope 1 emissions increased by 3% due to a new production facility, increased natural gas consumption caused by a general increase in produced volumes and an increase in car fuel consumption. Scope 2 emissions increased by 7% due to increased electricity and steam consumption caused by a general increase in produced volumes. Scope 3 emissions increased by 1% following a 16% increase in product distribution, partially countered by a 47% decrease in emissions from business flights due to COVID-19. The increase in emissions from product distribution is primarily caused by increased use of air freight instead of sea and road freight. CO2 reductions of 4,000 tonnes were incurred from green fuel agreements with selected transportation service providers. Accounting policies Emissions are limited to CO2 emissions from energy and do not include other greenhouse gases. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 88 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 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. Due to the lack of reliable emissions data from specific freight forwarders, an estimated 3% of trucking emissions are not included in the scope. 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. Currently, 85% of emissions from flights are calculated based on data provided by travel agencies. The remaining 15% emissions are extrapolated based on the average CO2 emissions per employee. 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. CO2 emissions by scope 1, 2 and 3 Scope 1 emissions comprise direct CO2 emissions from sources that are owned or controlled by Novo Nordisk A/S. Scope 2 emissions comprise CO2 emissions from purchased or acquired electricity, cooling, heat and steam. Scope 3 emissions only include CO2 emissions from business flights and product distribution. Other Scope 3 categories, e.g. purchased goods and services, capital goods, waste generated in operations and employee commuting, are not included. 7.5 Waste from production sites Waste from production sites 1,000 tonnes Organic residues Other (paper, cardboard, metals, etc.) Total recycling Ethanol waste Other (various combustible waste) Total waste with energy recovery Water waste Other Total waste with no energy recovery Total waste to landfill Total waste 2021 2020 2019 143 8 151 13 9 22 5 2 7 1 108 8 116 9 6 15 5 4 9 1 89 8 97 13 5 18 5 3 8 1 181 141 124 In 2021, waste from production sites increased by 28% due to increased production. 96% of the total waste was either recycled, used for biogas production or incinerated at plants where energy is used for heat and power production. The amount of waste recycled increased by 30% from 116,000 to 151,000 tonnes primarily driven by the production in Kalundborg, Denmark. The amount of waste sent for energy recovery increased by 47% from 15,000 to 22,000 tonnes, primarily due to increased production volumes and challenges in ethanol regeneration. Less than 1% of total waste was sent to landfill. In 2021, as in 2020, 14% of the waste was categorised as hazardous waste. Accounting policies Waste is measured as the sum of all the waste disposed of at production sites based on weight receipts. 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. Ethanol is recovered in internal regeneration plants and re-used. Energy recovery is waste disposed of at waste-to-energy plants and at a biogas plant. Waste with no energy recovery covers water waste and other waste not suitable for other disposal methods, such as hazardous waste for incineration and various other types of waste. Section 8 Social performance 8.1 Patients reached with Novo Nordisk's Diabetes care products The estimated number of full-year patients reached with Novo Nordisk's Diabetes care products increased from 32.8 million in 2020 to 34.6 million in 2021. This 5% increase was primarily driven by growth in the GLP-1 franchise which increased by 1.3 million patients followed by the new-generation insulin franchise which grew by 0.7 million patients. In 2021, the estimated number of patients reached with Novo Nordisk's Diabetes care products through the Access to Insulin Commitment was 1.7 million. Novo Nordisk also sold human insulin below the ceiling price of USD 3 in countries outside the commitment, reaching an estimated additional 2.2 million patients in 2021. During 2020, the ceiling price was lowered from USD 4 to USD 3 which affects the comparability of 2021 and prior years. Comparing 2021 and 2020 using the current ceiling price of USD 3, the result is an estimated increase of 40,000 patients reached in 2021. Using the previous ceiling price of USD 4, an estimated 3.4 million patients were reached in 2021 compared to 3.2 million in 2020. In addition to offering insulin at a low price, supply chain improvements and capacity building are also important levers in ensuring access to affordable care for vulnerable patients. Through the Changing Diabetes® in Children programme, 31,846 children had been reached by the end of 2021, compared with 28,296 in 2020. More than half of the 3,550 newly enrolled children were reached through expansion of the programme in Ethiopia, Sudan, Kenya and Uganda. Accounting policies The number of full-year patients reached with Novo Nordisk's Diabetes care products, excluding devices, 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). The number of full-year patients reached with Novo Nordisk's Diabetes care products (human insulin in vials) via the Access to Insulin Commitment is estimated by dividing Novo Nordisk's annual sales volume by the annual usage dose per patient reached via the Access to Insulin Commitment as defined by WHO. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 89 The WHO-defined daily dosage for these products may not accurately reflect the recommended or prescribed daily dose. Actual doses are based on individual characteristics (e.g. age and weight) and pharmacokinetic considerations. Despite this uncertainty, Novo Nordisk assesses this to be the most consistent way of reporting. 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. master thesis students are not included. 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. The number of children reached with diabetes care treatment through the Changing Diabetes® in Children programme is measured as the total accumulated number of children enrolled since the initiation of the partnership in 2009. 8.2 Employees Employees Number North America Operations 2021 2020 2019 6,106 6,213 6,190 International Operations 42,372 39,110 37,068 – EMEA (Europe, the Middle East and Africa) 26,680 24,600 23,540 – of which in Denmark 19,150 17,538 16,747 – China (Mainland China, Hong Kong, Taiwan) 5,833 5,548 5,263 – Rest of World (all other countries) 9,859 8,962 8,265 Total employees Full-time employees 48,478 45,323 43,258 47,792 44,723 42,703 8.3 Sustainable employer score In 2021 the global employee survey was entirely redesigned to support Novo Nordisk’s ambition to be a Sustainable Employer, which underpins the broader Sustainable Business agenda. The new 21-item survey, Evolve, is sharply focused on the most vital elements of the Sustainable Employer ambition, provides greater differentiation of results, and is more actionable for leaders and their teams. The inaugural Evolve survey revealed that overall engagement is high at 84% favourable, and that Novo Nordisk scores in the top decile against external organisations when it comes to providing a Purpose-driven workplace. Opportunities for improvement include greater equality of career opportunities, better work-life balance and clearer performance evaluations. Accounting policies The Sustainable employer score measures the average percentage of favourable answers to the 18 engagement items in the survey. Favourable answers are defined as "Agree" and "Strongly agree" to positively framed questions. The survey is distributed through an external vendor. The number of employees increased in most areas, with the highest growth in Product Supply Quality & IT, partially countered by North America Operations. 8.4 Frequency of occupational accidents The employee turnover rate increased from 7.9% in 2020 to 11.0% in 2021 which is comparable to turnover rates in years prior to COVID-19. 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 Services in Bangalore, India are included in Rest of World. The average frequency rate of occupational accidents with absence was 1.3 accidents per million working hours in 2021, which is unchanged compared to 2020. The increase of 6.5% in the number of occupational accidents with absence (99 in 2021 compared to 93 in 2020) was counter-balanced by an increase in the number of employees. In 2021, Novo Nordisk had zero (0) work-related fatalities compared to one (1) in both 2019 and 2020. 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 per million nominal working hours. Contractors, visitors, employees on unpaid leave, interns, and bachelor and 8.5 Gender diversity Gender in leadership positions Ratio men:women CEO, EVP, SVP CVP, VP Director, Manager, Team Leader 2021 72:28 63:37 57:43 2020 2019 76:24 82:18 64:36 66:34 58:42 59:41 Gender in leadership positions (overall) 57:43 59:41 60:40 Gender in senior leadership positions 64:36 65:35 67:33 Gender in the Board of Directors 67:33 62:38 62:38 The gender diversity in leadership positions overall at Novo Nordisk meets the Danish gender diversity requirements. Gender diversity in leadership positions overall increased from 41% in 2020 to 43% in 2021. Within senior leadership positions, there was an increase from 35% in 2020 to 36% in 2021. Among employees as a whole, the gender split was 49% women and 51% men in 2021, the same as in 2020. 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 leadership positions. In 2021, a global aspirational target of achieving a balanced gender representation across all managerial levels with a minimum of 45% for both women and men in senior leadership positions by the end of 2025 was introduced. Further information about the new target is disclosed in 'Launching aspirational targets' on page 17. As of 31 December 2021, two shareholder-elected Board members were female and six were male. The 2024 target of having at least three shareholder-elected Board members of each gender was thus not yet met as a female Board member stepped down at the 2021 annual general meeting, leaving the number of female Board members at two. Diversity in the broadest sense remains a key focus area for the Board of Directors, including in Board member searches. Further information about the Board members is disclosed in the Corporate Governance Report. Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 90 Accounting policies Diversity at Novo Nordisk is reported as the percentage split by gender in leadership positions. Senior leadership positions are defined as employees in the global job levels Chief Executive Officer (CEO), Executive Vice President (EVP), Senior Vice President (SVP), Corporate Vice President (CVP) and Vice President (VP). Overall leadership positions are defined as Directors, Managers, Team Leaders and senior leadership positions. Diversity at the Board of Directors is reported as the percentage split by gender among all members, including employee-elected members. 8.6 Total tax contribution Total tax contribution DKK million Corporate income taxes paid Employment taxes Indirect taxes Other taxes Total Taxes borne Taxes collected 2021 2020 2019 14,438 3,952 18,390 13,577 14,392 1,893 1,506 751 8,947 10,840 9,588 1,106 2,612 2,497 — 751 714 9,638 2,610 887 18,588 14,005 32,593 26,376 27,527 The total tax contribution in 2021 amounted to DKK 32,593 million split with 57% on taxes borne and 43% on taxes collected. In 2020, the split was 52% on taxes borne (DKK 13,676 million) and 48% on taxes collected (DKK 12,700 million). The overall increase in total tax contribution from 2020 to 2021 is primarily related to Corporate income taxes paid. In 2020 the calculated corporate tax payable exceeded the prepayment of corporate income taxes in Denmark. These additional corporate income taxes have been paid in 2021. Furthermore, the profit before tax has increased for 2021, also resulting in an increase in Corporate income taxes paid. 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 consist 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. 8.7 Donations and other contributions Donations and other contributions DKK million World Diabetes Foundation (WDF) Novo Nordisk Haemophilia Foundation (NNHF) Total donations and other contributions 2021 92 — 92 2020 138 20 158 2019 86 19 105 The WDF, an independent trust, supports sustainable partnerships and acts as a catalyst to help others do more. The amount granted to WDF has decreased from DKK 138 million in 2020 to DKK 92 million in 2021 as the donation in 2020 included a special one-off contribution of DKK 50 million. In 2021, the WDF Board of Directors approved funding to 13 partnership projects in 16 countries. See note 5.2 in the consolidated financial statements and worlddiabetesfoundation.org for additional information. Section 9 Governance performance 9.1 Business ethics reviews and training Accounting policies The number of business ethics reviews is recorded as the number of business ethics reviews performed by Group Internal Audit in subsidiaries, production sites, vendors and headquarter areas. 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. 9.2 Supplier audits Supplier audits Number Responsible sourcing audits Quality audits Total supplier audits 2021 2020 2019 16 237 253 7 170 177 27 209 236 The NNHF supports programmes in low- and middle-income countries. Initiatives focus on capacity-building, diagnosis and registry, awareness and advocacy. Novo Nordisk agreed to a donation of DKK 20 million to NNHF in 2021 but due to financial considerations from NNHF the donation was not paid out. Since 2005, the NNHF has provided funding for 289 programmes in 83 countries. See nnhf.org for additional information. The number of audits concluded in 2021 increased by 43% compared to 2020. The increase represents an improved ability to conduct audits of suppliers although the effects of COVID-19 continue to limit travel and access to suppliers' facilities. One critical finding regarding credibility of certificate of analysis has been issued during a qualification audit in 2021. Consequently, Novo Nordisk has decided not to use the supplier in question. 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. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 91 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. 9.3 Product recalls Novo Nordisk had one product recall in the US in 2021 due to disbursement of product samples without proper temperature monitoring. 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. 9.4 Failed inspections In 2021, as in 2020, Novo Nordisk had no failed inspections among those resolved at year-end. However, a contract manufacturer filling syringes for Wegovy® failed an inspection causing disruption in the supply of Wegovy®. During 2021, 97 inspections of Novo Nordisk were conducted, compared with 77 in 2020. At year-end, 86 inspections were passed and 11 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 2022. 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. 9.5 Facilitations of the Novo Nordisk Way In 2021, a total of 34 units were facilitated and more than 1,600 employees were individually interviewed. In addition, feedback on those units was collected from approximately 500 stakeholders. Overall, the 2021 process continues to show a good level of adherence to the Novo Nordisk Way. 5 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 Essential 1 (We create value by having a patient-centred business approach) and Essential 10 (We never compromise on quality and business ethics. In 2021, partly driven by the focus on strengthening the culture journey, significantly more findings were issued related to Essential 2 (We set ambitious goals and strive for excellence) and Essential 7 (We focus on personal performance and development). Accounting policies Facilitations of the Novo Nordisk Way is measured as the number of facilitations completed. It is an internal process for assessing adherence to 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. Company reputation is replacing the previous disclosure of company trust. A new and more comprehensive approach to reputational intelligence was launched in 2021 to cover more markets and stakeholders. Accounting policies The reputation score is based on four factors measuring esteem, admiration, trust, and feeling of the stakeholders towards Novo Nordisk across ten key markets: USA, Canada, Brazil, China, Japan, Germany, Italy, UK, France, and Denmark. The data are collected through online surveys carried out by an external consultancy firm. Responses are aggregated to produce an overall score on a Likert scale of 1-7 which is rebased on a 0-100 scale. 9.7 Animals purchased for research Animals purchased Number Mice, rats and other rodents Pigs Rabbits Dogs Non-human primates Fish Other vertebrates 2021 35,675 2020 2019 38,850 48,081 759 184 114 495 783 239 91 264 10,638 9,804 14 5 880 349 157 168 — 2 9.6 Company reputation Total animals purchased 47,879 50,036 49,637 Company reputation Scale 0-100 People with diabetes People with obesity General practitioners Diabetes specialists Informed general public Total score (average) 2021 2020 2019 77.1 79.4 81.5 84.8 90.3 82.6 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A The number of animals purchased for research in 2021 decreased by 4.3% compared with 2020 due to reduced usage of mice, rats and other rodents. The overall development reflects the changes in stages of the different research projects. The reduction in the number of rodents purchased reflects Novo Nordisk's continuous focus on reducing the number of animals per research project. 75% of the animals purchased were rodents and 22% were fish. 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. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 92 Statement by the Board of Directors and Executive Management on the 2021 Annual Report The Board of Directors and the Executive Management have today considered and approved the annual report for Novo Nordisk A/S for the financial year 1 January 2021 - 31 December 2021. operations and cash flows for the financial year 1 January 2021 - 31 December 2021. The consolidated financial statements are presented in accordance with International Financial Reporting Standards as endorsed by the EU. The parent financial statements are presented in accordance with the Danish Financial Statements Act. Further, the annual report is prepared in accordance with Danish disclosure requirements for listed companies. In our opinion, the management review contains a fair review of the development of the Group's and the Parent’s business and financial matters, the results for the year and of the Parent’s financial position and the financial position as a whole of the entities included in the consolidated financial statements, together with a description of the principal risks and uncertainties that the Group and the Parent face. 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 the annual report for adoption at the Annual General Meeting. In our opinion, the consolidated financial statements and the parent financial statements give a true and fair view of the Group’s and the Parent’s financial position at 31 December 2021 as well as of the results of their In our opinion, the Annual Report of Novo Nordisk A/S for the financial year 1 January to 31 December 2021 identified as NOVO-2021-12-31.zip is prepared, in all material respects, in compliance with the ESEF Regulation. Bagsværd, 2 February 2022 Registered Executive Management Board of Directors Lars Fruergaard Jørgensen President and CEO Karsten Munk Knudsen CFO Helge Lund Chair Jeppe Christiansen Vice chair Laurence Debroux Monique Carter Martin Holst Lange Andreas Fibig Sylvie Grégoire Mette Bøjer Jensen Marcus Schindler Camilla Sylvest Kasim Kutay Anne Marie Kverneland Martin Mackay Henrik Wulff Henrik Poulsen Thomas Rantzau Stig Strøbæk Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 93 Independent Auditor’s Reports To the shareholders of Novo Nordisk A/S Report on the Financial Statements Opinion We have audited the consolidated financial statements and the parent financial statements of Novo Nordisk A/S for the financial year 1 January 2021 – 31 December 2021, which comprise the income statement, balance sheet, equity statement and notes, including a summary of significant accounting policies, for the Group as well as the Parent, and the statement of comprehensive income and the cash flow statement of the Group (collectively referred to as the "Financial Statements"). The consolidated financial statements are prepared in accordance with International Financial Reporting Standards as endorsed by the EU and additional requirements of the Danish Financial Statements Act, and the parent financial statements are prepared in accordance with the Danish Financial Statements Act. In our opinion, the consolidated financial statements give a true and fair view of the Group’s financial position at 31 December 2021, and of the results of its operations and cash flows for the financial year 1 January 2021 – 31 December 2021 in accordance with International Financial Reporting Standards as endorsed by the EU and additional requirements under the Danish Financial Statements Act. Further, in our opinion, the parent financial statements give a true and fair view of the Parent’s financial position at 31 December 2021, and of the results of its operations for the financial year 1 January 2021 – 31 December 2021 in accordance with the Danish Financial Statements Act. Our opinion is consistent with our Long-form Auditor’s report issued to the Audit Committee and the Board of Directors. 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 consolidated financial statements and the parent financial statements section of this auditor’s report. We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. To the best of our knowledge and belief, we have not provided any prohibited non-audit services as referred to in Article 5(1) of Regulation (EU) No 537/2014. We were appointed auditors of Novo Nordisk A/S for the first time on 25 March 2021 for the financial year 2021. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements and the parent financial statements for the financial year 1 January 2021 - 31 December 2021. These matters were addressed in the context of our audit of the consolidated financial statements and the parent 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 US sales rebates Refer to notes 2.1 and 3.4 in the consolidated financial statements. In the United States (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. Since January 2021, the Group no longer provides 340B statutory discounts to certain pharmacies that contract with covered entities participating in the 340B Drug Pricing Program. Revenue can only be recognized only to the extent that it is highly probable that a significant reversal in the amount of revenue recognized will not occur, and give rise to obligations which are provisioned and recorded as sales deduction at the time the related sales are recorded. The provision for sales rebates and discounts amounted to DKK 50,822 million as of 31 December 2021, a significant portion of which related to the US business. The US sales rebates, including provisions related to the 340B Drug Pricing Program, involved significant measurement uncertainty as the provisions are based on legal interpretations of applicable laws and regulations, historical claims experience, payer channel mix, current contract prices, unbilled claims, claims submission time lags, and inventory levels in the distribution channel. Consequently, we considered this to be a key audit matter. Acquisition of Dicerna Pharmaceuticals, Inc. Refer to notes 3.1 and 5.3 in the consolidated financial statements. The Group completed the acquisition of Dicerna Pharmaceuticals, Inc. for DKK 22,034 million on 28 December 2021. The preliminary fair value determination of the intangible assets required Management to make significant estimates and assumptions related to future cash flows and the selection of discount rates. Consequently, we considered this to be a key audit matter. How our audit addressed the key audit matter We evaluated the appropriateness of the methodology and assumptions used to develop sales rebates provisions, including provisions related to the 340B Drug Pricing Program, by involving audit professionals with industry and quantitative analytics experience to assist us in performing our auditing procedures. We tested the effectiveness of controls relating to sales rebates, including controls over the assumptions used to estimate these rebates. We tested rebate claims processed, including evaluating those claims for consistency with the conditions and terms of rebate arrangements. We tested the overall reasonableness of the accruals recorded at period end by developing an expectation for comparison to actual recorded balances. We evaluated Management’s ability to estimate sales rebates accurately by considering the historical accuracy of the estimates in prior year. We tested the effectiveness of controls over the valuation of intangible assets, including Management’s controls over forecasts of future cash flows and the selection of discount rates. We considered the impact of reasonably possible changes in key assumptions affecting future forecasted cash flows and discount rates and performed sensitivity calculations to quantify the impact of changes to Management’s forecasted future cash flows and the selection of discount rates. We evaluated the reasonableness of Management’s key estimates and assumptions related to the forecasted future cash flows by comparing these assumptions to historical results, relevant peer companies, and third-party industry reports. With the assistance of our fair value specialists, we evaluated the reasonableness of the (1) valuation methodology and (2) valuation assumptions by testing the source information underlying the determination of the valuation assumptions and testing the mathematical accuracy of the calculation. Novo Nordisk Annual Report 2021 Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 94 Statement on management review Management is responsible for the management review. Our opinion on the consolidated financial statements and the parent financial statements does not cover the management review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements and the parent financial statements, our responsibility is to read the management review and, in doing so, consider whether the management review is materially inconsistent with the consolidated financial statements and the parent financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether the management review provides the information required under the Danish Financial Statements Act. Based on the work we have performed, we conclude that the management review is in accordance with the consolidated financial statements and the parent financial statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement of the management review. Management's responsibilities for the Financial Statements Management is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as endorsed by the EU and additional requirements of the Danish Financial Statements Act as well as the preparation of parent 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 consolidated financial statements and parent financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements and the parent financial statements, Management is responsible for assessing the Group’s and the Parent’s ability to continue as a going concern, for disclosing, as applicable, matters related to going concern, and for using the going concern basis of accounting in preparing the consolidated financial statements and the parent financial statements unless Management either intends to liquidate the Group or the Entity 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 consolidated financial statements and the parent 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 consolidated financial statements and these parent financial statements. As part of an audit conducted 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 consolidated financial statements and the parent 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’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 in preparing the consolidated financial statements and the parent financial statements, 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’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 consolidated financial statements and the parent 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 and the Entity to cease to continue as a going concern. – Evaluate the overall presentation, structure and content of Financial Statements, including the disclosures in the notes, and whether the Financial Statements represent the underlying transactions and events in a manner that gives a true and fair view. – 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, safeguards put in place and measures taken to eliminate threats. 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 of Novo Nordisk A/S, we performed procedures to express an opinion on whether the annual report of Novo Nordisk A/S for the financial year 1 January 2021 to 31 December 2021 with the file name NOVO- 2021-12-31.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. Management is responsible for preparing an annual report that complies with the ESEF Regulation. This responsibility includes: – The preparing 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 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 2021 with the file name NOVO-2021-12-31.zip is prepared in all material respects, in compliance with the ESEF Regulation. Copenhagen, 2 February 2022 Deloitte Statsautoriseret Revisionspartnerselskab Business Registration No 33 96 35 56 Anders Vad Dons State-Authorised Public Accountant mne25299 Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 95 Independent Auditor's Assurance Report on the ESG statement To Management and broader stakeholders of Novo Nordisk A/S Novo Nordisk A/S engaged us to provide limited assurance on the ESG statement presented in the Annual Report of Novo Nordisk for the year ended 31 December 2021. ethical requirements of the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code), which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour, and ethical requirements applicable in Denmark. A limited assurance engagement is substantially less in scope than a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had we performed a reasonable assurance engagement. Considering the risk of material error, we planned and performed our work to obtain all information and explanations necessary to support our conclusion. Work performed A. We are required to plan and perform our work in order to consider the risk of material misstatement in the ESG statement. To do so, we have: – conducted interviews with internal stakeholders to understand the key processes and control activities for reporting data; Our conclusion Based on our work and the evidence obtained, nothing has come to our attention that causes us not to believe that in all material respects: – The performance data regarding Environment, Social and Governance, on pages from 85 to 91 in the report, have been stated in accordance with the reporting criteria; – The description in the report adheres to the principles of inclusivity, materiality, responsiveness and impact set out in AccountAbility’s AA1000AP (2018); – The report has been prepared in accordance with the requirements of sections 99a, 99b, 99d and 107d of the Danish Financial Statements Act (FSA). Observations and recommendations According to AA1000AS, we are required to include observations and recommendations for improvements regarding adherence to AA1000AP. We have no significant recommendations regarding the principles of Materiality, Inclusivity, Responsiveness and Impact. We have communicated to Management a number of minor recommendations for improvement. Our scope of work was limited to assurance that: – The performance data regarding Environment, Social and Governance, on pages from 85 to 91 in the report, have been stated in accordance with the reporting criteria; – Novo Nordisk’s description in the report adheres to the principles of inclusivity, materiality, responsiveness, and impact set out in AccountAbility’s AA1000AP (2018); – The report has been prepared in accordance with the requirements of sections 99a, 99b, 99d, and 107d of the Danish Financial Statements Act (FSA). Management's responsibility Management of Novo Nordisk is responsible for collecting, analysing, aggregating, and presenting the information in the ESG statement, ensuring that data are free from material misstatement, whether due to fraud or error. The Novo Nordisk accounting policies and internal control documents contain Management’s defined reporting scope for each data type. The criteria for accounting principles are contained within the ESG statement. Auditor's responsibility Our responsibility is to express a limited assurance conclusion based on our engagement with Management and in accordance with the agreed scope of work. We have conducted our work in accordance with ISAE 3000 (Revised) Assurance Engagements Other than Audits or Reviews of Historical Financial Information, ISAE 3410 Assurance Engagements on greenhouse gas statements, and AA1000 Assurance Standard, AA1000AS (v3) Type 2 Moderate (which is the equivalent to ISAE 3000 limited assurance), and additional requirements under Danish audit regulation. 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; – forming an independent conclusion, based on the procedures we performed and the evidence we obtained; and – reporting our conclusion to the Management and broader stakeholders of Novo Nordisk A/S. Deloitte Statsautoriseret Revisionspartnerselskab is subject to International Standard on Quality Control (ISQC) 1 and, accordingly, applies a comprehensive quality control system, including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. We have complied with the requirements for independence and other – obtained an understanding of the key processes and controls for managing, recording Copenhagen, 2 February 2022 Deloitte Statsautoriseret Revisionspartnerselskab Business Registration No 33 96 35 56 Anders Vad Dons State Authorised Public Accountant mne25299 Helena Barton Lead Reviewer and reporting; – performed limited substantive testing on a selective basis to check that data had been appropriately measured, recorded, collated and reported; – performed analysis of data that have been selected on the basis of risk and materiality; – made inquiries regarding significant developments in the reported data; – considered the presentation and disclosure of the ESG statement; and – assessed that the process for reporting greenhouse gas emissions data follows the principles of relevance, completeness, consistency, transparency and accuracy outlined in The Greenhouse Gas Protocol Corporate Standard Revised edition (2004) and The Corporate Value Chain (Scope 3) Accounting and Reporting Standard (2011). B. Regarding alignment with the AA1000 accounting principles 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 of senior management at global and regional levels, as well as 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 of interest to each stakeholder group; – interviewed external stakeholder to determine their perception of Novo Nordisk’s stakeholder engagement capabilities, and responsiveness to material concerns of stakeholders; – 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; and – assessed the disclosure and presentation of the stakeholder engagement description. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 96 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 relies 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 24 March 2022 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. Credits Design and production: Kontrapunkt. Illustrations: &Robin. Photography: Ashley Marie, David Brecetty, Gustavo Aranda Hernández, Jesper Edvardsen, Jesper Westley, Kelly Mailloux, Martin Juul, Matt Pugh, Sala Lewis. Remuneration Report The Remuneration Report describes in accordance with section 139b of the Danish Companies Act the remuneration awarded or due during 2021 to members of the Board and Executive Management registered with the Danish Business Authority. The Remuneration Report is submitted to the Annual General Meeting for an advisory vote. Corporate Governance Report The Corporate Governance Report discloses Novo Nordisk’s compliance with Corporate Governance 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 Disclaimer The patients, employees and relatives portrayed in this Annual Report and ancillary reports have participated of their own accord and solely to express their own personal opinions on topics referred to, which do not necessarily reflect the views and opinions of Novo Nordisk. Use of the pictures as illustrations is in no way intended to associate the patients, employees or relatives with the promotion of any Novo Nordisk products. Novo Nordisk Annual Report 2021Contents Introducing Novo Nordisk Strategic Aspirations Key risks Management Consolidated statements Additional information 97 2022 financial calender 24 March 2022 Annual General meeting 28 March 2022 Record date 5 April 2022 Payment, ADRs 4 August 2022 Financial statement for the first six months of 2022 15 August 2022 Record date 23 August 2022 Payment, ADRs 1 February 2023 Financial statement for 2022 and Annual Report 2022 25 March 2022 Ex-dividend 29 March 2022 Payment, B shares 4 May 2022 Financial statement for the first three months of 2022 12 August 2022 Ex-dividend 16 August 2022 Payment, B shares 2 November 2022 Financial statement for the first nine months of 2022 Product overview Diabetes care New-generation insulin and combinations Tresiba®, insulin degludec Ryzodeg® 70/30, insulin degludec/insulin aspart Fiasp®, fast-acting insulin aspart Xultophy®*, insulin degludec/liraglutide Modern insulin Levemir®, insulin detemir NovoRapid®**, insulin aspart 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 Pre-filled delivery system FlexTouch®, U100, U200 FlexPen® InnoLet® Ozempic® pen Ozempic® Single dose device Durable delivery systems NovoPen® 6 NovoPen® 5 NovoPen® 4 NovoPen Echo® Plus NovoPen Echo® Other delivery systems PumpCart®, NovoRapid® & Fiasp® cartridge to be used in pump Cartridge Vial Oral antidiabetic agents NovoNorm®, repaglinide Glucagon GlucaGen®, glucagon for diagnostic use GlucaGen® Hypokit, glucagon emergency kit for severe hypoglycaemia Needles NovoFine® Plus NovoFine® NovoTwist® NovoFine® AutoCover® Obesity care Biopharm Glucagon-like peptide-1 Saxenda®, liraglutide 3.0 mg Wegovy®, semaglutide 2.4 mg, FlexTouch® Obesity delivery systems Saxenda® pen Wegovy®, Single dose device, FlexTouch® 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 Rare Blood Disorders 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 Rare Endocrine Disorders Norditropin®, somatropin (rDNA origin) Sogroya®, somapacitan Macrilen™, macimorelin; growth hormone secretagogue receptor agonist Human growth hormone delivery system Pre-filled delivery system FlexPro® NordiFlex® Nordilet® NordiPen® Durable delivery systems Durable multi-dose delivery system to be used with Norditropin® SimpleXx® * 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® Novo Nordisk Annual Report 2021 98 Financial statements of the parent company 2021 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 For the year ended 31 December Balance sheet At 31 December DKK million Net sales Cost of goods sold Gross profit Sales and distribution costs Research and development costs Administrative costs Other operating income and expenses Operating profit Profit in subsidiaries, net of tax Financial income Financial expenses Profit before income taxes Income taxes Net profit Note 2021 2020 DKK million Note 2021 2020 DKK million Note 2021 2020 2 3 3 3 3 8 4 4 112,553 100,940 Assets (26,642) (20,662) Intangible assets 85,911 80,278 Property, plant and equipment (30,021) (26,673) Financial assets (15,244) (14,524) Deferred income tax assets (1,976) (1,913) Other receivables and prepayments 6 7 8 5 1,032 39,702 16,879 2,415 (2,225) 56,771 (9,248) 47,523 1,976 39,144 10,394 2,144 (2,238) 49,444 (7,285) 42,159 Total non-current assets Raw materials Work in progress Finished goods Inventories Trade receivables Amounts owed by affiliated companies Tax receivables Other receivables and prepayments Receivables Marketable securities Derivative financial instruments 9 Cash at bank Total current assets Total assets 9,110 27,007 71,564 228 — 107,909 3,754 10,899 2,131 16,784 2,128 13,200 695 2,967 18,990 5,904 1,690 8,870 52,238 Equity and liabilities 7,938 Share capital 462 470 25,322 43,598 — 218 77,076 2,781 10,647 2,246 15,674 1,523 15,893 — 2,353 19,769 Net revaluation reserve according to the equity method Development costs reserve Reserve for cash flow hedge Retained earnings Total equity Borrowings Deferred income tax liabilities Other provisions Total non-current liabilities Borrowings Derivative financial instruments Trade payables Amounts owed to affiliated companies — Tax payables 2,332 11,509 49,284 Other liabilities Total current liabilities Total liabilities 17,675 1,218 (1,600) 52,714 70,469 10,111 — 1,377 11,488 12,648 2,184 3,048 10 5 11 10 9 9,749 959 1,617 50,241 63,036 596 523 1,348 2,467 6,275 1,365 2,910 53,826 40,931 171 6,313 78,190 89,678 3,114 6,262 60,857 63,324 160,147 126,360 Total equity and liabilities 160,147 126,360 Novo Nordisk Annual Report 2021Financial statements of the parent companyEquity statement DKK million Share capital Net revaluation reserve Reserve for cash flow hedges and exchange rate adjustments Develop- ment costs reserve Retained earnings Please refer to note 4.2 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. 2021 2020 Development in share capital Balance at the beginning of the year 470 9,749 1,617 959 50,241 63,036 57,432 99 Appropriated from net profit Appropriated from net profit to net revaluation reserve Exchange rate adjustments of investments in subsidiaries 6,312 1,614 Effect of cash flow hedges transferred to the income statement Fair value adjustments of cash flow hedges for the year 10 (3,227) 17,500 17,500 6,312 1,624 24,995 (3,902) (1,689) (3,227) 1,940 — — — — DKK million Beginning of 2017 Cancelled in 2017 Cancelled in 2018 Cancelled in 2019 Cancelled in 2020 Cancelled in 2021 259 (259) 1,904 1,904 (179) Share capital at the end of the year 107 A share capital B share capital Total share capital 107 — — — — — 403 (10) (10) (10) (10) (8) 355 510 500 490 480 470 462 462 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 (8) 23,711 (8,021) 23,711 (8,021) 21,066 (7,570) (13,496) (13,496) (12,551) 8 — — (19,447) (19,447) (16,855) 383 190 383 190 327 22 462 17,675 (1,600) 1,218 52,714 70,469 63,036 8,021 15,690 6,312 17,500 47,523 7,570 13,496 (3,902) 24,995 42,159 Novo Nordisk Annual Report 2021Financial statements of the parent company100 2021 2020 12,485 11,503 383 1,116 207 363 14,554 16,851 17,534 327 1,045 176 299 13,350 15,782 16,151 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 Sales by business segment 2021 2020 3 Employee costs DKK million Wages and salaries Share-based payment costs Pensions Other social security contributions Other employee costs Total employee costs in the income statement Diabetes and Obesity care 112,347 100,741 Average number of full-time employees 206 199 Year-end number of full-time employees Biopharm Total sales Sales by geographical segment North America Operations International Operations: EMEA China Rest of World Total sales 112,553 100,940 57,654 52,054 27,124 15,608 12,167 25,124 12,554 11,208 112,553 100,940 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 5.7 in the consolidated financial statements for an overview of companies in the Novo Nordisk Group based on geographical areas. For information regarding remuneration to the Board of Directors and Executive Management, please refer to note 2.4 to the consolidated financial statements. 4 Financial income and financial expenses DKK million Interest income relating to subsidiaries Result of associated company Foreign exchange gain (net) Financial gain from forward contracts (net) Other financial income Total financial income Interest expenses relating to subsidiaries Result of associated company Foreign exchange loss (net) Financial loss from forward contracts (net) Other financial expenses Total financial expenses 2021 238 — — 2,021 156 2,415 13 13 1,978 — 221 2,225 2020 263 21 1,751 — 109 2,144 137 — — 1,777 324 2,238 Notes 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 implementation of accounting policy related to goodwill. 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. No separate statement of cash flows has been prepared for the parent company; please refer to the statement of cash flows for the Group. 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 and amortisation of goodwill is recorded in the income statement of the parent company. Goodwill is amortised over no more than 25 years which reflects the useful life of the underlying assets and activities generating the goodwill. 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. Amounts owed by affiliates, where settlement is neither planned nor likely within the foreseeable future, are treated as part of net-investments in subsidiaries, with exchange rate adjustments recognised directly in equity through reserve for cash flow hedges and exchange rate adjustments. Novo Nordisk Annual Report 2021Financial statements of the parent company5 Deferred income tax assets/(liabilities) 7 Property, plant and equipment DKK million 2021 2020 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 (523) (330) 1,081 95 (18) (600) DKK million Cost at the beginning of the year Additions during the year Disposals during the year 228 (523) Transfer from/(to) other items Cost at the end of the year The Danish corporate tax rate was 22% in 2021 (22% in 2020). Depreciation and impairment losses at the beginning of the year 101 2021 2020 51,983 49,545 Land and buildings Plant and machinery Other equipment 22,094 22,347 4,013 328 (108) 630 995 (145) 1,544 22,944 24,741 9,314 1,084 9 (95) 14,954 1,089 18 (145) 10,312 15,916 12,632 8,825 545 — 162 (34) 244 4,385 2,393 347 54 (34) 2,760 1,625 52 Assets under con- struction 3,529 2,823 (9) (2,418) 4,308 (296) — 3,925 55,995 — — 9 (9) — 26,661 2,520 90 (283) 28,988 3,925 27,007 — 597 3,089 (651) — 51,983 24,821 2,387 97 (644) 26,661 25,322 763 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. 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 2021 11,077 1,560 (65) 12,572 3,139 289 34 — 3,462 9,110 2020 6,065 5,165 (153) 11,077 2,637 306 349 (153) 3,139 7,938 Intangible assets primarily relate to intellectual property rights, internally developed software and costs related to major IT projects. Novo Nordisk Annual Report 2021Financial statements of the parent company102 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 5.7 to the consolidated financial statements. Invest- ments in subsi- diaries Amounts owed by affiliated companies Invest- ment in associated company Other securities and invest- ments 2021 2020 4,047 1,255 (989) 4,313 (245) 29,174 19,698 48,872 26,255 19,635 (2,006) 105 1,220 34,546 18,493 105 111 (13) 67 21,020 29,629 (590) (1,579) (13,576) 697 53,987 34,546 (452) 25,669 28,803 19,635 18,187 (13) 21 (2,006) (3,748) 75 75 (171) (11,050) (4) (11,054) (16,785) 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 charged to the income statement Effect of exchange rate adjustment charged to equity Other adjustments 281 10 2,603 500 216 17 216 298 (3) — 2,613 (3,103) 500 2,468 Value adjustments at the end of the year 35,937 46 94 (144) 35,933 25,669 Unrealised internal profit at the beginning of the year Unrealised internal profit movements in the year Effect of exchange rate adjustment charged to equity Unrealised internal profit at the end of the year Carrying amount at the end of the year (16,617) (750) (989) (16,617) (13,420) (750) (989) (4,045) 848 (18,356) — 66,453 4,359 — 199 — (18,356) (16,617) 553 71,564 43,598 Novo Nordisk Annual Report 2021Financial statements of the parent company103 9 Derivatives 13 Fee to statutory auditors For information on derivative financial instruments, please refer to note 4.4 to the consolidated financial statements. 10 Borrowings DKK million Within 1 year 1-5 years More than 5 years Total borrowings 11 Other provisions 2021 12,648 5,282 4,829 2020 6,275 470 126 22,759 6,871 Provisions for pending litigations are recognised as other provisions. For information on pending litigations, please refer to note 3.4 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 5.4 to the consolidated financial statements. The parent company’s share of services provided by NNIT Group amounts to DKK 490 million (DKK 638 million in 2020). Novo Nordisk A/S is included in the consolidated financial statements of the Novo Nordisk Foundation. 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 2021 2020 8 2 2 2 14 8 3 5 1 17 2021 2020 117 11,978 19,141 112 137 6,794 8,490 101 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 3.4 and 5.2 to the consolidated financial statements. Novo Nordisk Annual Report 2021Financial statements of the parent company

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