Prepared by Imprima de Bussy


Washington, D.C. 20549


Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934

22 FEBRUARY 2005

        NOVO NORDISK A/S       
(Exact name of Registrant as specified in its charter)

Novo Allé
DK- 2880, Bagsvaerd

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F

Form 20-F [X]     
     Form 40-F [  ]

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes [  ]     
      No [X]

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g-32(b):82-_____________________




Back to Contents

Back to Contents

Defeating diabetes
Defeating diabetes demands social leadership and scientific
breakthroughs. It all comes down to prevention.
Diabetes is as complex and variable as people’s individual
personalities and lifestyles, which is why there is no one-
size-fits-all insulin therapy.
NovoSeven® may save lives and prevent severe disabil-
ities in many life-threatening situations.
  Competitive business results
Novo Nordisk answers questions on its short- and long-term
business strategy.
The management report, Triple Bottom Line performance in-
dicators, financial, environmental and social highlights, review
of corporate governance and risk management, financial ac-
counts and notes, and non-financial accounting policies.
  Challenging workplace
With a worldwide sales organisation and customers in every
corner of the globe, Novo Nordisk is working towards be-
coming more international.
A strategy for developing talent and diversity is key for Novo
Nordisk’s future growth.
  Values in action
The pharmaceutical industry is being challenged on every-
thing from access to medicine, drug pricing and marketing
to the conduct of clinical trials.
For the developing world, diabetes is a future time bomb,
with two-thirds of future diabetes cases expected to occur in
this part of the world.
Climate change is one of the serious environmental chal-
lenges facing humankind. If unaddressed, it can be a grow-
ing and costly business risk.

Front cover:
Andrea Monjarás Taméz from Mexico knows that by taking care of
herself, she can live her life with all it has to offer – including skateboarding!
Andrea has type 1 diabetes. See page 14 for more information.

Back to Contents

Global challenges – global opportunities

Defeating diabetes is our passion and our business. We have built our company on that aspiration, and this is what defines our commitment as a responsible business. The diabetes epidemic travels fast across the globe, and so we must be there at its heels when it strikes – or even better: before it does. We will continue to develop better treatment options and to drive research into what matters most: to find the cure. We will also be rallying for the prevention of diabetes, with a special focus on children and youth –our future.
     Novo Nordisk is an increasingly active player in the global competition for resources, people, market shares and voice. In 2004 we significantly expanded our sales organisation in key growth markets. We have grown our business, especially in the US and in developing countries. In Brazil, China and the US we have made large investments in new production facilities, building a global sourcing network at competitive costs. And today, more than 40% of Novo Nordisk’s people are employed outside Denmark.
     In diabetes, Novo Nordisk has the broadest product portfolio in the industry, and with the approval and launch of Levemir® in Europe, we are the first company with a full range of insulin analogues. In haemostasis management, we achieved proof of concept in stopping serious bleeds in trauma and intracerebral haemorrhage with NovoSeven®. And we believe that our pipeline will prove that we can play a key role in the discovery and development of new biopharmaceuticals for the treatment of other serious illnesses such as cancer and inflammatory diseases.
     As a result of the growing demand
for better diabetes therapy, our competitive portfolio of patent-protected new analogues, and further penetration of the usage of NovoSeven® both within haemo-philia and for investigational use, we are realising strong growth in our sales.
     But no road is smooth. Competition is tougher than ever, and healthcare reforms across the globe and in particular in Europe are impacting profit margins. In 2004 we also saw yet another year with adverse currency developments for European-based companies which called for continued cost cautiousness. In spite of this we are pleased to see very satisfactory financial results for 2004. For this, we thank the people of Novo Nordisk for their commitment and efforts, as well as our

partners and collaborators throughout the world. Also in 2004 we saw an appreciation of Novo Nordisk’s share price and we are pleased to see that our shareholders were rewarded for their support.
     Novo Nordisk is well positioned to meet the challenges of the future. We have built leadership positions in areas of huge unmet medical needs. We are expanding our research network internationally while building a global sourcing organisation. There will be challenges related to the transformation of jobs in developed countries to jobs with increased knowledge content, while new jobs are created in developing economies. We are rolling out a portfolio of new and patent-protected products and are not like the rest of the pharmaceutical industry, which is exposed to patent expirations over the next few years. We have a strong track record in the area of biopharma-ceuticals, an area which we believe will represent significant growth opportunities in the future. Therefore we see globalisation as an opportunity.
     In a highly competitive business environment there is a particular challenge in taking a long-term, holistic perspective. Novo Nordisk takes a multi-pronged approach to providing better access to health through capacity building, a preferential pricing policy for the poorest nations and funding through the World Diabetes Foundation, which is now reaching out to many millions of people with diabetes.
     In terms of sustainability, Novo Nordisk demonstrates its determination to play a leading role by setting a target for an absolute reduction of CO2 emissions over the next decade. When people can overcome the challenges of diabetes, we must as a company tackle the global challenges of social and sustainable stewardship.
     The Novo Nordisk Annual Report 2004 provides a balanced presentation of the company’s financial, social and environmental performance – this year for the first time in one inclusive report.
We hope you will enjoy reading it. *

Novo Nordisk Annual Report 2004 1  

Back to Contents

Back to Contents

The bicycle paths in Shanghai are being paved over for new highways. From New York to Munich to São Paulo, people eat food high in fat, sugar and salt. Conveniences like modern appliances, cars, computers and television encourage people to move less. There are too few parks and playgrounds as much of the world gets around by car.
     The traditional Western lifestyle, to which many in the developing world aspire, puts human health at risk. The chronic diseases associated with an unhealthy lifestyle, like heart disease and diabetes, are striking not just the elderly but also the working-age population in societies around the world. With growing rates of obesity, children are developing type 2 diabetes – a disease formerly seen only in adults.
     Chronic diseases are now the largest cause of death in the world. But the developing world is fighting on two fronts: fighting infectious diseases while also dealing with explosive rates of chronic disease.
     Something has to change. And it means every sector of society has to get involved. In 2003, Novo Nordisk, together with Oxford University, founded Oxford Vision 2020. Its goal is to call attention to the fact that three risk factors (tobacco, diet and lack of physical exercise) cause four chronic diseases (cardiovascular disease, diabetes, chronic lung disease, and some types of cancer) which lead to 50% of deaths globally. It is dedicated to the cause of preventing the pandemic growth of chronic diseases, especially in low- and middle-income countries and the poorer segments of society in the developed world. The intention is not simply to prevent or delay illness or death but to create momentum for a healthier lifestyle and a better quality of life. For more information, visit annual-report-2004
     In 2004, the more than 50 founding members met for the second time in Oxford and agreed on a plan of action to start combating these risk factors. The members include government and public health agencies, universities, corporations such as Novo Nordisk, Johnson & Johnson, Nestlé and Unilever, and organisations like the World Bank, the World Health Organization and the World Heart Federation.
     The members have pledged to develop further evidence for the movement’s rallying call and will launch community-based demonstration projects to show that prevention works. With advocacy and communication they aim to move chronic disease higher up the political agenda.

Drugs alone not the answer
It is a challenging task, given that obesity is a worldwide epidemic and that we live in an environment not always designed to encourage fitness and exercise. But turning away from the challenge is simply not an option, says John Bell, regius professor of Medicine at Oxford University and one of the leaders of Oxford Vision 2020.
     “Social leadership will be just as important as science in defeating a disease like diabetes,” says Professor Bell. “Diabetes cannot be


Back to Contents


“When I ask people with diabetes ‘What is it you really expect from us?’, they don’t say ‘I want your latest insulin analogue in a device that can speak to my telephone.’ They want to get rid of their disease and they want to prevent their relatives and friends from getting the disease. So prevention for us is part of good diabetes care.”

Lars Rebien Sørensen, president and chief executive officer, Novo Nordisk

tackled by drugs alone. The scale of the problem is too big and most people with the disease live in countries where they can’t afford the enormous medical burden of treating this disease with drugs.” That is a view echoed by Novo Nordisk, a world leader in diabetes care with the vision of defeating diabetes. That might seem an unlikely goal for a company whose success is based on treating diabetes. But according to Lars Rebien Sørensen, president and CEO of Novo Nordisk, the vision is consistent with the company’s promise to be there for its customers – people with diabetes.
     “When I ask people with diabetes ‘What is it you really expect from us?’, they don’t say ‘I want your latest insulin analogue in a device that can speak to my telephone.’ They want to get rid of their disease and they want to prevent their relatives and friends from getting the disease. So prevention for us is part of good diabetes care,” says Mr Rebien Sørensen.
     “We take our leadership in diabetes care seriously, and care means more than selling products. I would be dishonest with my customers if I only focused on the part of our interaction that made money, rather than trying to meet their ultimate need – which is trying to defeat diabetes,” he adds.

Working in partnership
“While Novo Nordisk has not yet been able to identify a business model based around prevention, given that its products and services enter the picture only after people have developed diabetes, there are other more indirect benefits from its involvement in efforts like Oxford Vision 2020,” says Mr Rebien Sørensen.

     “As a knowledge-based company, we know that type 2 diabetes is caused largely by factors which can be prevented. If society is moving in the direction of prevention, it makes sense for us to be involved, not only because we have knowledge about how to potentially postpone or prevent the disease, but also because we need to be alert to changes in society that could affect our long-term activities,” he says. “It is about turning what could be considered a risk into an opportunity.”
    The company has also been working with scenarios to examine key drivers of future change within the global economy, nutrition and culture as well as healthcare delivery, diabetes care, corporate social responsibility and the market. Such exercises inform the company’s thinking and future strategy, so that it is not taken by surprise by developments in society. Oxford Vision 2020 is another way for the company to keep its ear close to the ground.

     “I believe through our involvement we earn respect as a partner and collaborator that can work openly with other sectors of society. I also believe it makes us more attractive as an employer. Young people want to work for companies that dare to take a stand and fight for it,” he adds.
     With its 80-year history in treating diabetes, Novo Nordisk has long collaborated with other stakeholders to improve diagnosis and treatment as well as conduct some of the most advanced research into a cure (see page 6). Spearheading a movement like Oxford Vision 2020 became a natural outcome of a stakeholder approach built on dialogue and alliances.
    That is an argument that makes sense to Professor Bell. “As a

4 Novo Nordisk Annual Report 2004

Back to Contents

healthcare company, you have a commitment to improve health-care, regardless of where the incentive comes from. And if a solution involves changing the environment rather than producing a drug, a healthcare company should endorse that because it makes people healthier and that’s why they’re in this business.”

Providing the right incentives
Both industry and government have incentives to take up prevention as a business model, says Professor Bell. With rising healthcare costs attributed to treating chronic diseases like diabetes and its complications, governments have an economic incentive to focus on prevention, as well as an obligation to improve people’s quality of life, he says.
     “Of course, in the end it is up to individuals to make choices but, the question is, how can government, industry and other partners in society help to make the healthy choices the easy choices?” asks Professor Bell.
     “Government can offer economic incentives for business and individuals to make healthier choices. In many countries, the un-healthiest food choices are also the cheapest and most widely available, whereas fresh fruits and vegetables are often more expensive. Cities and towns can be planned in a way that allows for more green spaces and more bike paths,” says Professor Bell.

Getting kids to listen
That is a message that needs to be driven home to the generation which will most benefit from a successful prevention movement today: children and youth.
     “If you really want to make an impact on society’s health, you need to focus your attention on the future generation. You have to make the investment in good health as a child and teenager. If your health is already deteriorating at age 50, it is very hard to turn it around. People will give up their wealth and their fortune once they’ve had a heart attack if only they were able to restore a little bit of their health,” says Mr Rebien Sørensen.
It is a warning that came across loud and clear to the group of young people who attended the Oxford Vision 2020 Summit in Oxford in September 2004. Members of Kikass, a youth charity group based in the UK, told the summit participants that kids need a movement like Oxford Vision 2020 – but it has to speak in their language.

     “Don’t tell us that 400 million people will die from diabetes in 2020. Tell us that one in 10 of our friends will die an early death from this terrible disease,” says Sarah Jarman, a student at the Surrey Institute of Art and Design. “We’re a generation that’s willing to take a responsible approach to our lifestyle choices but there has to be a reputable and trustworthy source of information,” adds Mark Harris, a student at Oxford University.
     So, can diabetes really be defeated? “It is entirely possible,” says Mr Rebien Sørensen, “but it won’t be through science alone. I don’t think we can solve our societal problems with a pill. It’s going to take more than that. Getting the word out about these risk factors for type 2 diabetes has to start with young people. That is how we will really make progress towards defeating diabetes over the next 20 years.”

An employee receives encouragement from a fitness instructor at Novo Nordisk’s leisure centre in Bagsværd, Denmark.

Putting prevention into practice

Awareness is the key to prevention. Novo Nordisk has long had a business approach that focuses not only on selling its products and devices, but also on educating people about diabetes. Education efforts, in both the developed and developing world, are aimed at healthcare professionals, people with diabetes and the general public. Examples include:

In India, diabetes awareness exhibitions sponsored by Novo Nordisk attracted 318,000 people in 2004.
In China, Novo Nordisk and the Chinese Ministry of Health have launched a project to bring extensive diabetes education throughout China.
Novo Nordisk also has programmes in sub-Saharan Africa to educate doctors and nurses as well as people with diabetes (see page 28).
The landmark study about the psychosocial aspects of diabetes, called DAWN, sponsored by Novo Nordisk (see page 14), has prompted a series of educational activities around the world in partnership with other organisations.

Knowing what it does about the risk factors for diabetes, Novo Nordisk has also turned its attention to its own employees with a prevention programme aimed at improving employees’ health, called NovoSund. It was launched in Denmark in 2004, where 59% of the company’s employees are based, but will go global. The programme offers company-sponsored stop-smoking courses and campaigns to promote more exercise and better nutrition, such as healthier canteen food, company-sponsored sports activities or ways to reduce stress. In a pilot programme at one of the company’s facilities in Denmark, employees can test their risk factors for diabetes and other chronic diseases, and consult with a healthcare provider on how to make healthy changes in their lives.
     Novo Nordisk is also conducting a baseline study of the health status of its employees in Denmark. The status will be monitored over a period of years and the results made available to those who may be interested in efforts to improve health in the workplace.
     By creating a culture and working environment supportive of healthy lifestyles, the idea is to put prevention into practice.

Novo Nordisk Annual Report 2004 5  

Back to Contents


Scientists around the world are working hard to defeat diabetes, but a cure has proven elusive. Still, there are encouraging signs of progress. Meanwhile, advanced treatment makes it easier for people to cope with diabetes today.

The search
for a cure

David Matthews is a relentless optimist. He concedes that after more than 30 years of research, a cure for diabetes is still not a reality. But he also points out that the scientific community is closer than ever to its goal – or at least some approximation of a cure for diabetes by 2015. David Matthews should know. As professor at Oxford University and the head of the Oxford Centre for Diabetes, Endocrinology and Metabolism (OCDEM), he is at the centre of the strides being made in the field of diabetes in the last decade.
     “I believe we can look at diabetes the same way we look at cancer. In other words, as a disease that breaks out but can be sent into remission, a stage without symptoms. If you consider type 2 diabetes like that, how would you define a cure? I would say a treat-

ment that prevents the insulin-producing beta cells from dying and keeps blood sugar under control. The patient might have to be treated several times in order to be symptom-free. But I believe it is possible to develop that kind of treatment within the next 15 years. The situation is different for type 1 diabetes. Here the body destroys the beta cells through an immune reaction, and a cure thus involves producing new, well-functioning beta cells – from stem cells, for example – as well as developing drugs to stop attacks on the immune system. Early results from various laboratories indicate that both are possible in time,” says Professor Matthews.

     OCDEM is a unique place in which to realise those possibilities. It represents a partnership between the UK’s National Health Service, Oxford University and Novo Nordisk. It opened in 2003 and is the

Different sources of stem cells

Stem cell research has raised hopes for a future treatment for people with type1 diabetes, using cell transplantation. Novo Nordisk’s research activities in this area have to date concentrated on mouse embryonic stem cells.

The company actively participated in the scientific, public and political processes leading up to the revised Danish laws Komitéloven and Patientretsstillings-loven and the EU Cells and Tissue Directive. Novo Nordisk’s Bioethics Policy can be found at

Novo Nordisk Annual Report 2004

Back to Contents

first diabetes centre in Europe to combine basic and clinical research with patient care and medical training, all under one roof. Novo Nordisk’s investment amounts to 4 million British pounds. OCDEM is heading up a project within the European Union to look for biomarkers for diabetes: molecules in the body that can reveal how far developed the disease is for the individual patient and provide guidelines for optimal treatment.

Promise of stem cells
type 1 diabetes, the search for a cure revolves around being able to transplant islet cells from the pancreas into a person with diabetes. Islet cells contain the beta cells that regulate the blood sugar level. Currently, this type of transplantation can only be done on a limited scale and with limited success, through donor pancreases. People who undergo transplantation also need to take immunosuppressant drugs, which can have serious side effects. This is because type 1 diabetes is a chronic autoimmune disease, in which the immune system attacks and destroys the beta cells.
advancements in stem cell research hold the promise of creating a safe, stable and widely available source of insulin-secreting cells for transplantation. Stem cells are ‘blank’ cells with the ability to grow into any other type of cell, such as islets.
     Novo Nordisk is at the forefront of stem cell research. The Hagedorn Research Institute, an independent basic research component of Novo Nordisk, is the only industrial partner in both the National Institutes of Health-supported Beta Cell Biology Consortium and the Juvenile Diabetes Research Foundation Centre for Beta Cell Therapy in Europe. The company is currently investing 17 million Danish kroner in stem cell research at Hagedorn.
     Meanwhile, scientists are pursuing many other clues, such as the use of genetics to point the way to new biological molecules that serve
as targets for drugs; biomarkers, to identify the biological signs of impending diabetes or its complications; or an artificial pancreas, a medical device that would register blood glucose levels and in response deliver the right amount of insulin.

Facing today’s challenges
“When and if a cure becomes reality, Novo Nordisk will have a strong presence. But meanwhile the estimated 194 million people with diabetes need the best possible treatment today to control their disease and avoid serious complications, such as blindness, nerve damage, kidney failure, heart disease and stroke, and treatment-related hypo-glycaemia (low blood sugar),” says Mads Krogsgaard Thomsen, chief science officer of Novo Nordisk.
     “While it is our vision to defeat diabetes, in reality we don’t know if we will ever get there. But it is important to do everything we can

for the millions of people living with diabetes,” says Dr Krogsgaard Thomsen.
     That is why Novo Nordisk has developed the broadest and most comprehensive diabetes portfolio on the market. “There is no one-size-fits-all diabetes management,” says Dr Krogsgaard Thomsen.
     Today’s insulin therapy strives to mimic the body’s exquisitely precise regulation of blood glucose by insulin-producing pancreatic beta cells. When these cells are missing, as they are in type 1 diabetes, or depleted, as in type 2 diabetes, insulin analogues can provide the next-best alternative to Mother Nature.
     These are designer insulins, which via chemical or protein engineering take on a different action profile and hence mimic insulin physiologically in the body.

Better control, healthier lives
There has been a great evolution in the development of insulin analogues in the past decade. The research into new and better insulin therapy was accelerated by the findings of two landmark studies, the Diabetes Control and Complications Trial (DCCT), which studied type 1 diabetes, and the UK Prospective Diabetes Study (UKPDS), which examined type 2 diabetes.
     Both studies found that while intensive control of diabetes helped reduce complications by as much as 50%, it heightened the risk of hypo-glycaemia, which is serious and even life-threatening, and caused weight gain, which for people with type 2 diabetes is already a contributing factor to their disease.
     In 2004, Novo Nordisk added Levemir® to its portfolio, the only insulin product in the world, says Dr Krogsgaard Thomsen, that doesn’t make you put on weight, and offers predictability in regulating blood sugar. Also the GLP-1 analogue under development, liraglutide, has proved in clinical trials so far to produce less or no hypo-glycaemia, since it is glucose-dependent, and to help people manage their weight.
     While numerous studies have shown that people with type 2 diabetes often benefit in terms of better control and reduced complications by starting insulin therapy earlier, resistance to insulin therapy can be strong, due to worries and fears over injection, as uncovered by the Novo Nordisk study Diabetes Attitudes, Wishes and Needs (DAWN) (see page 14). For such people, AERx® insulin Diabetes Management System, now undergoing clinical trials by Novo Nordisk, could be a motivating factor to start insulin therapy, as insulin could be administered by inhalation.
     “We believe that leadership is responding to patients’ needs, whether it is for a more innovative range of insulins or more convenient devices,” says Dr Krogsgaard Thomsen. “At the same time, if we are serious about fulfilling our vision of defeating diabetes, then we must be present in the future when a cure moves closer to reality. This is why we take a holistic approach to diabetes care. The answers aren’t simple but they are within reach.”

“In a decade we could have a situation in which diabetes is a disease, like cancer, that goes into remission, perhaps for years.”
Professor David Matthews, Oxford University

Novo Nordisk Annual Report 2004 7  

Back to Contents

The Novo Nordisk way

Novo Nordisk is a biotech-based healthcare company that strives to conduct its activities in a financially, environmentally and socially responsible way.

This commitment to sustainable development is anchored in the Novo Nordisk Way of Management. The company is a world leader in diabetes care and has the broadest diabetes product portfolio in the industry, including the most advanced products within the area of insulin delivery systems. In addition, Novo Nordisk has leading positions within areas such as haemostasis management, growth hormone therapy and hormone replacement therapy. Novo Nordisk manufactures and markets pharmaceutical products and services that make a difference to patients, the medical profession and society.
     With headquarters in Denmark, Novo Nordisk has 20,725 employees, operates in 78 countries and markets its products in 179 countries.


Company history

Novo Nordisk’s strong background in diabetes care builds on more than 80 years’ experience in this area. It began in 1922 when August Krogh, Danish Nobel laureate in physiology, and his wife Marie, who had type 2 diabetes, visited the Canadian researchers Frederick Banting and Charles Best. Banting and Best

had begun extracting insulin from the pancreas of cows the previous year. The Kroghs returned home and the following year August Krogh set up a company in Denmark called Nordisk Insulinlaboratorium (Nordic Insulin Laboratory) with Dr H C Hagedorn and began producing insulin for the treat-
Novo Nordisk Annual Report 2004

Back to Contents


Novo Nordisk’s Vision sets the company’s direction for the future. It expresses what Novo Nordisk strives for, how the company will work, and how it is guided by its values as it endeavours to find the right balance between compassion and competitiveness. The Vision is part of the Novo Nordisk Way of Management. This management approach ensures that the company, in pursuit of its strategic objectives, links financial, environmental, social and bioethical considerations for the long-term benefit of its stakeholders. For more information, visit

Novo Nordisk’s Vision:

We will be the world’s leading diabetes care company. Our aspiration is to defeat diabetes by finding better methods of diabetes prevention, detection and treatment. We will work actively to promote collaboration between all parties in the healthcare system in order to achieve our common goals.
We will offer products and services in other areas where we can make a difference. Our research will lead to the discovery of new, innovative products, also outside diabetes. We will develop and market such products ourselves whenever we can do it as well as, or better than, others.
We will achieve competitive business results. Our focus is our strength. We will stay independent, and form alliances whenever they serve our business purpose and the cause we stand for.
A job here is never just a job. We are committed to being there for our customers whenever they need us. We will be innovative and effective in everything we do. We will attract and retain the best people by making our company a challenging place to work.
Our values are expressed in all our actions. Decency is what counts. Every day we strive to find the right balance between compassion and competitiveness, the short and the long term, self and commitment to colleagues and society, work and family life.

Ownership structure
Novo Nordisk’s ownership is split between holders of A and B shares. A shares are held by Novo A/S, the holding company, fully owned by the Novo Nordisk Foundation and established in 1999 to manage the Foundation’s assets and to actively invest in life science businesses. The Novo Nordisk Foundation is a privately owned self-governing institution. Its objectives are to provide a stable basis for the commercial and research activities undertaken by the companies in the Novo Group and to support scientific, humanitarian and social purposes. The majority of its grants go to medical and scientific projects.

ment of diabetes. In 1925 two former employees, the brothers Harald and Thorvald Pedersen, formed a competing insulin company, Novo Terapeutisk Laboratorium (Novo Therapeutic Laboratory). In 1989, the two Danish companies joined forces to become Novo Nordisk A/S.

The Novo Nordisk Way of Management

The Novo Nordisk Way of Management is the framework for how the company does business. Internally, as well as to external stakeholders, this governance framework defines the commitments and puts them into context.
     The Novo Nordisk Way of Management explicitly refers to the Triple Bottom Line (TBL) – social, environmental and financial responsibility – as the company’s underlying business principle. In order to serve the long-term interest of the shareholders, in March 2004 Novo Nordisk amended its Articles of Association to specify that the company will ‘strive to conduct its activities in a financially, environmentally and socially responsible way’. For more information, see page 49.
     To ensure performance to the highest standards, whether they are legal or ethical, global or company-specific, the Novo Nordisk Way of Management has built-in follow-up methods that seek to ensure systematic and validated documentation of performance to the company’s values-based management system:

The Balanced Scorecard is employed as the management tool for embedding and cascading corporate goals throughout the organisation. The Balanced Scorecard outlines the key priorities for Novo Nordisk in a short-term perspective.
The annual reporting accounts for performance against targets, strategies, activities, risk profile and new targets.
Facilitations, undertaken by Novo A/S, measure Novo Nordisk’s governance performance at unit level, facilitate organisational learning and help align projects with business targets. The facilitators are a global team of people with long-standing managerial experience and expertise in the business. They evaluate how well the practices and understanding of the Novo Nordisk Way of Management, including the company’s commitment to the Triple Bottom Line, are embedded in the organisation. This involves review of documentation, interviews with management and employees, sometimes also external stakeholders, and analyses of relevant business processes.

For further information about the Novo Nordisk Way of Management, including the full list of Fundamentals, please visit

Novo Nordisk Annual Report 2004 9  

Back to Contents

Back to Contents

will provide new treatment options for the growing number of people with type 2 diabetes who fail to achieve satisfactory blood glucose regulation by traditional blood glucose-lowering tablets. And there are the opportunities for long-term growth inherent in new indications for NovoSeven®, including its use for people undergoing cardiac surgery and those with traumatic brain injury.

What are your key markets now and in the future, and why?
Currently Europe is our biggest market and, with our full insulin analogue portfolio, we expect to see healthy growth in this market. As the world’s biggest pharmaceutical market, the US is a key market for us. We started to penetrate the US insulin and growth hormone markets a few years ago and are now significantly increasing our market share. The US has a large and growing population of people with diabetes, many of whom would benefit greatly from improved blood glucose control to avoid the complications associated with diabetes. The US is also the biggest market for the current and future uses of NovoSeven
®. Then again, we are seeing encouraging growth in key markets in our International Operations due to the increasing number of people being treated for diabetes. Right now half of the company’s total diabetes care production is for countries in these markets, namely China, India, Korea, Turkey, Taiwan, Brazil, Mexico, Egypt, Thailand and Argentina. In Europe and Japan, more moderate growth is expected, hampered by healthcare reforms that are becoming increasingly common as governments face pressure to contain healthcare costs. This limits our ability to negotiate prices that cover the cost of innovation. The sales growth in the US, however, offsets more modest growth in Europe.

What is the future strategy for diabetes care and will Novo Nordisk become a major player in oral products?
We will remain strongly focused on insulin and other protein therapeutics which are our core competences. Within diabetes, our strategy is not simply to deliver superior products and devices but also to provide the services and education that make us the preferred partner in diabetes care. As for oral products, we want to fulfil unmet needs rather than make incremental improvements in what is already available. Therefore, within oral antidiabetic research, we will only focus on projects where we have a clear edge. This contributed to our decision in 2004 to terminate the balaglitazone oral antidiabetic project, since the preclinical results did not suggest a sufficient competitive advantage for balaglitazone, compared to similar, marketed products within this therapeutic category.

You have four therapy areas, but you only mention two of them as business drivers. What about growth hormone therapy and HRT? What is your strategy for these areas?
We’ve seen nice growth in growth hormone this year, thanks in part to our strategy of providing superior delivery systems for the company’s liquid growth hormone Norditropin
® SimpleXx®. This product has particularly taken off in the US market, where the first disposable human growth hormone pen, NordiFlex®, received US Food & Drug Administration (FDA) approval in 2004 for long-term treatment of children. The market for hormone replacement therapy (HRT) has been contracting due to negative media. But we still believe that HRT fills an important medical need for women with ser-

Kåre Schultz, chief operating officer of Novo Nordisk.

ious menopausal symptoms, and our product line is well suited to treatment recommendations for lowest possible dose.

You have been investing in several new production facilities this year, most of which are outside Denmark. Can you outline the strategy behind these investments?
Increased activities outside Denmark give us a more competitive cost base and a more balanced exposure to risks such as currency fluctuations. We also gain a strong presence in key markets, such as the US, Brazil and China – globalisation of production will be a continuing focus of our future growth strategy. Internationalisation of our manufacturing capacity enables us to stay cost-competitive and offers us a favourable position in key segments and markets. But Denmark will most likely continue to be an important ‘engine room’ of growth, where we can undertake productivity improvement measures, using facilities in Denmark as ‘labs’ for upscaling and fine-tuning production. The learnings can then be applied around the world.

In October, when your American affiliate reached 1 billion dollar sales, the president of the affiliate stated that the success you have enjoyed in the US is due to your Triple Bottom Line (TBL) approach. How is that?
First you need the right products and the right strategy and organisation. When you have these things, the TBL approach is important. We have been in the business of diabetes care for more than 80 years. For Novo Nordisk, diabetes is both a business and a passion. We want to do more to improve diabetes care in the US than simply provide products. By offering services and education for people with diabetes and the healthcare professionals who treat them, we try to live up to our commitment to the Triple Bottom Line, where social and environmental responsibility is as important as the financial results. With an estimated 17 million people with diabetes in the US, almost 6 million of them undiagnosed, there is clearly a need for this type of approach.

    For more information, visit

Novo Nordisk Annual Report 2004 11  

Back to Contents

Back to Contents



Back to Contents


could never arrange to go on a trip too much in advance.” That changed when Ms Munroe began using insulin.
     “I didn’t want to take insulin because I thought that would be the beginning of the end. It was just too much – too serious. So I avoided taking it as long as I could. Looking back, I wish I hadn’t been so stubborn because now I’m on insulin and I’ve never felt so good. I’m raring to go. I enjoy riding my bike, swimming in my pool, gardening, going out with friends, making porcelain dolls… I’m never bored, that’s for sure,” she says.
     Staying active means regularly monitoring her blood sugar levels and controlling her diet. “Even though I feel so good,” she says, “I wish there was a cure for diabetes, so that children didn’t have to suffer.”

When choice is limited
Novo Nordisk does not offer its full range of insulin analogues in all parts of the world, as there is not a sufficiently profitable market in all countries for these products. But the company does make human insulin available in most countries of the world, and in 49 of the 50 Least Developed Countries, as defined by the United Nations, Novo Nordisk offers preferential pricing for its human insulin at 20% of its price in the Western world (see page 29).
     As markets and economies develop, and knowledge about the best diabetes care becomes more widespread, it is hoped that the latest advances in insulin therapy can be made available to all who can benefit from them. That would make getting on with life just a little bit easier.

When fear blocks treatment
When Ray ka Msenga’s doctor told him that he was to change from tablets to insulin therapy to treat his type 2 diabetes, he felt shocked.

As far as he knew, an early death was the only possible outcome for people who need insulin injections to live. He felt guilt and anger, and retreated from his closest relationships. Finally, a doctor friend calmly explained why the doctor had recommended insulin, and Mr ka Msenga saw that his fears were exaggerated.

     Had his doctor responded to his fears in the same way, Mr ka Msenga, a former president of the South African Red Cross Society and a member of the International Red Cross, feels he would not have suffered as he had.

     He is not alone. According to the DAWN (Diabetes Attitudes, Wishes and Needs) stakeholder innovation programme initiated by Novo Nordisk in 2001, people with diabetes experience emotional distress and poor psychological well-being, a major contributing factor to impaired diabetes health outcomes. Healthcare professionals acknowledge a lack of resources to identify and care for the many psychosocial problems as well as a major gap with regard to team-based patient-centred communication.

     As the largest study of its kind in diabetes ever conducted, DAWN involved more than 5,400 people with diabetes and more than 3,800 healthcare professionals from 12 countries in collaboration with the International Diabetes Federation (IDF) and an international expert advisory board.

     The main conclusion drawn from the multitude of learnings was that to improve health outcomes in diabetes, the total healthcare system must focus more on the psychological and social issues attached to managing the condition; in other words, address the people behind the disease.

     The ongoing DAWN programme, led by Novo Nordisk in collaboration with the IDF and an expert advisory board, provides a business case for stakeholder innovation and concerted action at national,


Advances in insulin

Novo Nordisk has the broadest portfolio of insulin products and devices on the market, including a full range of insulin analogues. These are designed to mimic more closely the body’s own physiological insulin regulation of blood glucose levels than human insulin and offer better meal-time glucose control, less hypoglycaemia and increased convenience for all types of people with diabetes.
     Levemir®, launched in many countries in Europe in 2004, is the latest of the insulin analogues developed by Novo Nordisk. Levemir® is a long-acting insulin analogue that provides more consistent day-to-day control of blood glucose levels compared to conventional insulin preparations. Among the benefits for people with diabetes, it

“I know I have something called diabetes, but I have always had it! I don’t think about it much; I just do what I have to do to take care of myself,” explains Andrea, who has had type 1 diabetes since she was four years old. Andrea’s story features in Young Voices, a book about the lives of 13 young people living with diabetes. For more information on the book, visit

Novo Nordisk Annual Report 2004

Back to Contents

“I want to inspire kids. I don’t expect them to walk to the South Pole, but I do want to motivate them to go out and play, kick a ball and get on a soccer team. I have lived all my life in defiance of the common misperception that people with diabetes must restrict their physical activities.” Will Cross

regional and international level to improve diabetes care by increasing the availability of psychosocial support for people with the condition. A worldwide call to action emerged from the 2nd International DAWN Summit in 2003 with participation from 31 countries.
     The DAWN message was published in 2004 in more than 140 countries by the IDF and featured in international and national scientific and lay journals to reach millions of people with diabetes, diabetes caregivers and decision-makers. Also in 2004, the DAWN call to action and resulting tools and strategies were used in more than 20 countries to increase awareness of the importance of the psychosocial aspects to optimise treatment. This included updating national diabetes care guidelines to reflect DAWN, holding scientific

symposia on the topic and holding training programmes for health-care professionals.
     In total 33 countries sent in submissions for the 2004 DAWN award to recognise innovative projects aimed at implementing the DAWN call to action.
     In 2005 and 2006, DAWN will include a new focus on the attitudes, wishes and needs of young people and ethnic minorities with diabetes, through new research and dialogue aimed at improving the health and quality of life of these groups and reducing health disparities.
     For more information on DAWN, visit*


has been demonstrated that Levemir® reduces fasting blood glucose and the risk of hypoglycaemia, especially at night-time. In addition, studies have shown that people using Levemir® do not experience the undesirable weight gain often associated with conventional insulin preparations.
     Another insulin analogue developed by Novo Nordisk is NovoRapid® (called NovoLog® in the US), which gives tighter blood glucose control at meal-times without risk of increased hypo-glycaemia. The shorter duration of action leads to less hypoglycaemia at other times, including at night. The more rapid onset of action also means that it can be injected just before a meal, increasing convenience and quality of life.
     Increased convenience is also an advantage of NovoMix® 30 (called NovoLog® Mix 70/30 in the US and NovoRapid® Mix in Japan), a dual-release insulin analogue, which means that rather than having two injections of one rapid- and one intermediate-acting insulin, people get both types of insulin in one injection.


     Devices that offer convenience and discretion are also part of improved control of diabetes and better quality of life. Novo Nordisk produces a range of devices for insulin therapy, including FlexPen®, an easy-to-use, prefilled injection pen.
     Advances in insulin therapy in the Novo Nordisk pipeline include NovoMix® 50 and 70. These are premixed formulations of the rapid-acting insulin analogue, insulin aspart. These products are expected to offer better glycaemic control with only three daily injections for both type 1 and type 2 diabetes.
    Another substance under development is GLP-1 or li-raglutide. GLP-1 is a hormone produced in the intestine. It stimulates the pancreas to secrete insulin, and also tells the brain to reduce appetite. Novo Nordisk’s researchers have turned the natural hormone into a drug by stabilising it so that, instead of breaking down within a couple of minutes, its effect is sustained for 24 hours, so that it can be taken once daily for the treatment of type 2 diabetes. For more information, visit




Novo Nordisk Annual Report 2004 15  

Back to Contents


Back to Contents


Governance rules!

Stakeholders state it simply: to earn our trust, be trustworthy. To earn our confidence, show strategic direction and management oversight. And to help us make decisions, disclose business risks and opportunities. Taking up this invitation, Novo Nordisk steps up its governance practices.

Good governance is the system by which companies are directed and controlled,” said Sir Adrian Cad-bury in the report on financial aspects of corporate governance, commissioned by the UK government in 1992. Since then, the intense debate has brought new dimensions to the table: the Danish Nørby Committee calls for accountability towards stakeholders. The US Sarbanes–Oxley Act imposes stricter requirements to financial reporting, internal control and auditing. And the OECD guidelines, updated in 2004, recognising the links between the mainstream financial agenda and broader corporate responsibility, demand insights into the role of stakeholders and shareholder rights.
     These initiatives evolve around essential principles: transparency, accountability, openness, integrity and responsibility put into practice by a combination of statutory requirements and self-regulation.

Beyond compliance
Novo Nordisk is generally in compliance with the codes of good corporate governance designated by the stock exchanges in Copenha-gen (Nørby Committee recommendations on Corporate Governance), New York (NYSE Corporate Governance Standards) and London (Combined Code), where Novo Nordisk is listed. A full overview can be found at Based on a review of business practices against current and upcoming requirements, the company has taken steps to further improve its corporate governance. These improvements address four key issues: putting principles into action, shareholder rights, board and management accountability, and risk management.

Audit and Disclosure Committees
In March 2004, Novo Nordisk’s Board of Directors set up an Audit Committee, chaired by Kurt Anker Nielsen. Its two other members are Niels Jacobsen and Ulf J Johansson. All qualify as independent under the US Securities and Exchange Commission Rules. This move follows international trends and meets the requirements of the US Sarbanes–Oxley Act. The Audit Committee assists the Board of Directors in overseeing for example external and internal auditors, accounting and internal controls.
     Employees and other stakeholders can, via the ‘whistleblower’ system, anonymously bring to the attention of the Audit Committee any issues or concerns they might come across pertaining to accounting malpractices or irregularities.
    Another step to formalise internal procedures is the Disclosure

Committee, established in November 2004. It is chaired by the chief financial officer, with the mandate to consider the materiality of information, determine disclosure obligations and oversee the publication of stock exchange announcements.

A key role for stakeholders
The company values open and transparent communication. Without sufficient insight, stakeholders have little chance of assessing the company’s performance. That is why the company pro-actively engages in dialogues with rating agencies, analysts, investors and others with an interest in Novo Nordisk’s business. The aim is twofold. First, to better address stakeholders’ concerns, align with different views and focus on the issues that matter to the company’s ability to pursue its vision. And second, to candidly convey the company’s positions and rationale for its decisions. *



Strengthening the stand
on corporate governance

In 2004, Novo Nordisk’s Board and Executive Management took steps to ensure that the company maintains its position as a trustworthy business:

  Putting principles into action  
    Formalised ‘whistleblower’ function established under the remit of the Audit Committee. Also, employees can bring to the Novo Nordisk Ombudsman any personal and organisational issues which conflict with the company’s values and fundamental management systems.  
  Shareholder rights  
    Equal access to information: simultaneous translation into English at the Annual General Meeting in March 2005.  
  Board and management accountability  
    Audit Committee (board), Disclosure Committee (management), improved disclosure and current updates at  
  Risk management  
    Systematic and integrated risk management approach (see page 56).  

Novo Nordisk Annual Report 2004 17  

Back to Contents


The pharmaceutical industry is being challenged on everything from access to medicine, drug pricing and marketing, to the conduct of clinical trials. With calls for transparency, earning society’s trust becomes a business imperative.

An industry under fire:
credibility at risk

Pharmaceutical companies are in the business of developing and manufacturing healthcare products for the good of humankind. This entails a particular social responsibility. But there is a growing perception that the industry is failing to help solve real health challenges and instead is too focused on its own profitability. Other issues on the agenda are the degree to which it funds public research and engages in the post-graduate education of healthcare providers, the full and timely disclosure of clinical trial results, perceived overzealous marketing and unhealthy political influence. The public, government authorities and others are demanding more transparency.
     “Public authorities and NGOs have sharpened their tone, and we must take them seriously,” says President and CEO of Novo Nordisk, Lars Rebien Sørensen. “It is important to be open and honest about our stand and our actions. Trust has to be earned.”

The Novo Nordisk way
As one response to the increased focus on ethical business conduct, the Board of Directors has endorsed that a Novo Nordisk policy on business ethics be added to the existing set of policies and that operational procedures are conveyed to employees. Furthermore, in 2005 the current policies in the Novo Nordisk Way of Management will be reviewed to ensure that business ethics are sufficiently addressed in each policy.
     Novo Nordisk also participated in The UN Global Compact Leaders Summit, where the 10th principle on fighting bribery and corruption was endorsed. The company has committed to this principle.

Working in partnership
Novo Nordisk works with many partners to address key areas of corporate responsibility. Reaching out to stakeholders helps reconcile

dilemmas and find common ground for more sustainable solutions. It also helps the company’s monitoring of trends that can affect its future business.

     “If all the different groups involved in the healthcare sector are to trust each other, a partnership concept is essential. We all have our own values. If we put them all on the table, we could perhaps find some that we share,” says Lise Kingo, executive vice president of Novo Nordisk for people, reputation and relations.
     For more information on Novo Nordisk’s stakeholder engagement, see annual-report-2004

Investors look for leadership
How well a company responds to non-financial risks is sparking interest among some large investors who are beginning to evaluate companies based on their strategies to address social, environmental and governance risks.
     “At a time of intense scrutiny of the industry, investors are looking for companies that stand out because they perform well in social, environmental and ethical areas,” says Stewart Adkins, senior analyst for the pharmaceutical industry at Lehman Brothers. “Investors feel greater trust in such companies, finding that they are less likely to be subject to litigation or have difficult relationships with key stakeholders. And that makes a better long-term investment.”

Facing the critics
In 2004, Novo Nordisk was put to the test with legal challenges of its own. Lars Rebien Sørensen, president and CEO of Novo Nordisk, responds below to general industry criticism as well as specific issues.

Critics say that the industry is not doing enough to increase access to medicine in developing countries.
There’s no doubt that the industry was late in getting its act together

“At a time of intense scrutiny of the industry, investors are looking for companies that stand out because they perform well in social, environmental and ethical areas.”
Stewart Adkins
Senior analyst at Lehman Brothers

Novo Nordisk Annual Report 2004

Back to Contents

when it comes to increasing access to medicine, but I think today many companies are doing a lot. Our own approach is based on the priorities of the World Health Organization for improving access to medicine [see page 28].

The industry is charged with suppressing negative clinical trial results and not making all results publicly available.
I will not engage in a discussion about the cases which have triggered the debate, because I don’t know the cases well enough. But speaking about the issue in general, I’m strongly in favour of increasing transparency when it comes to clinical trials – we cannot live with the perception that the industry is hiding important information from the public.
     Starting in 2005 we will publish the results of all our clinical trials of marketed compounds in a public database in accordance with the principles laid out by the pharmaceutical manufacturers’ associations. Likewise we will publicly report the initiation of all new phase 2, 3 and 4 clinical trials at a public trial registry in accordance with the specifications and requirements from the International Committee of Medical Journal Editors. In addition, we adhere to international as well as internal ethical standards on the conduct of clinical trials, and are committed to making the results publicly available regardless of the outcome of the trial.

The industry is accused of having doctors under its thumb by funding most post-graduate medical education and sponsoring most clinical trials.
I hate to see doctors portrayed as the pharmaceutical industry’s marionettes. It’s not the picture I get. Most doctors I know – and I meet many in my job – are people who hold themselves to high moral standards, who are not under anyone’s thumb and whose first priority is to meet the needs of their patients. Having said that, I would like to see increased public funding of research and postgraduate medical education, so doctors have more sources of funding to choose from. That’s in everybody’s interest.

Novo Nordisk is one of several pharmaceutical companies under investigation for illegal activities related to public tenders in Brazil in which it is alleged that businesses conspired with Health Ministry officials and others to inflate the prices of ministry purchases, including insulin.
Novo Nordisk does participate in tenders in Brazil, but an independent investigation that we conducted through an international law firm concluded, based on available information, that no individuals at the Novo Nordisk affiliate had done anything wrong. We will support our employees in their defence in these cases.

Novo Nordisk is one of 44 pharmaceutical companies named in a lawsuit filed by New York City that claims
the city was overcharged on drugs used for its
Medicaid programme, the government health
insurance programme for needy people.

The claim against Novo Nordisk is that we artificially inflated

reimbursement prices for three products, which led to allegedly inflated Medicaid payments to the pharmacies that dispensed these products. To the best of our knowledge Novo Nordisk correctly calculated the reimbursement prices for the products in question.

Over the past few years, several thousand women have filed lawsuits against pharmaceutical manufacturers and sellers for alleged injuries arising from their use of hormone replacement therapy (HRT) products.
Novo Nordisk Inc., together with the majority of hormone therapy product manufacturers, is a defendant in 16 product liability lawsuits. Since the initiation of the lawsuits in July 2004, three cases against Novo Nordisk Inc. have been dismissed by the courts. Novo Nordisk’s hormone therapy products (Activella® and Vagifem®) have been sold and marketed in the US since 2000. Until July 2003, the products were sold and marketed exclusively in the US by Pharmacia & Upjohn Corporation (now Pfizer). The proceedings are in their preliminary stages and at this point we can’t provide further information. *

Novo Nordisk Annual Report 2004

Back to Contents



Back to Contents


The 60 minutes following a car crash is what emergency crews aptly call ‘the golden hour’, when doctors have the best chance of saving a life. But many people suffering trauma injuries from a car crash literally bleed to death before a surgeon can intervene. Stopping that bleeding could make the critical difference to the millions of people who experience serious trauma every year. About five million people are killed by traumatic injuries each year worldwide, such as motor vehicle accidents, gunshots, knife wounds or falls. That number is expected to reach 8.4 million by 2010, according to the World Health Organization. That’s close to 10% of all deaths worldwide.
     “Most trauma deaths are due to blood loss or the complications of fighting that blood loss,” says Dr Carl J Hauser, professor of surgery at the New Jersey Medical School, who specialises in critical care.
     He was among the doctors who were excited by the news at the 6th World Congress on Trauma, Shock, Inflammation and Sepsis in Munich, Germany, in March 2004 that recombinant factor VIIa, marketed by Novo Nordisk to people with haemophilia with inhibitors under the name NovoSeven®, could have a future in the treatment of critically bleeding trauma patients.
     Also promising were early clinical trial results during 2004 for the use of NovoSeven® in intracerebral haemorrhage (ICH) – the most dangerous and least treatable form of stroke.
     NovoSeven® is currently approved for treatment of the estimated 3,400 people with haemophilia with inhibitors in the developed world, as well as in Europe for people with acquired haemophilia, and the rare bleeding disorders Glanzmann’s thrombasthenia and factor VII deficiency.

Hope for stroke victims
Dr Stephan Mayer, a neurologist who heads an intensive care unit at Columbia University Medical Center in New York City, often sees the devastating impact of ICH – for which there is no proven treatment.
     An intracerebral haemorrhage occurs when a blood vessel inside the brain ruptures, leaking blood directly into the brain tissue. Studies indicate that around 250,000 people in North America, Europe and Japan experience ICH each year.
     “I’ve sat many times with ICH patients in the intensive care unit, unable to do anything but watch them gradually sink into a coma. It is as if they are drowning on the inside. It is terrible to watch,” says Dr Mayer, who was lead trial investigator in the phase 2 trial of NovoSeven® as a treatment for ICH.
     People who survive intracerebral haemorrhages are left with more severe disabilities than survivors of other forms of stroke, including loss of movement, speech and mental capability. About 50% of people who experience an intra-cerebral haemorrhage die within 30 days.
     Dr Mayer has worked with ICH patients for 10 years; the results of the phase 2 trial, announced in June 2004, were more than he hoped for.
     The ICH trial showed that use of NovoSeven® could reduce the volume of blood leaking into the brain during intracerebral haemorrhage when administered within four hours of onset.

Next steps
“I was thinking that maybe if we reduced bleeding a bit we could improve the lives of patients; what we found was that we reduced bleeding and had incredible reductions in poor outcomes,” Dr Mayer says.
     According to Dr Mayer, with the use of NovoSeven®, mortality appeared to be reduced by a third and the number of patients in the trial who survived with none or limited disability tripled.
    Some 400 patients in 20 countries worldwide participated in the trial, making


Back to Contents

The 60 minutes following a car crash is what emergency crews aptly call ‘the golden hour’, when doctors have the best chance of saving a life.
But many people suffering trauma injuries from a car crash literally bleed to death before a surgeon can intervene. Based on the results of
clinical trials for the blunt trauma indication, NovoSeven
® was submitted for the treatment of blunt trauma in Europe in January 2005.

it the largest ever ICH-focused clinical trial with a biopharmaceutical agent. Following regulatory consultations in Europe, Novo Nordisk expects to file an application for marketing approval in Europe for the use of NovoSeven® in connection with ICH by mid-2005.
     Mads Krogsgaard Thomsen, chief science officer of Novo Nordisk, underlines the implications for the future. “I think we’ll see much less disability and mortality in the long term when NovoSeven® comes to ICH patients. We now have what we think is a major breakthrough in the management of a hitherto intractable disease.”

Saving lives from trauma
“When it comes to trauma,” says Dr Hauser, “we’re talking about the possibility of saving thousands of lives, perhaps tens of thousands.
    ” Based on the results of clinical trials for the blunt trauma indication, NovoSeven® was submitted for the treatment of blunt trauma in Europe in January 2005. “We hope approval of NovoSeven® for the blunt trauma indication in Europe could come in 2005,” says Dr Krogsgaard Thomsen.

    The trial for the trauma indication was conducted on a group of

283 patients who were treated at trauma centres around the world. All were in danger of bleeding to death; on a random basis, each received either NovoSeven® or placebo plus standard therapy. In those receiving NovoSeven®, the study found that:

NovoSeven® reduced the need for red blood cell transfusion
NovoSeven® has the potential to reduce complications such as multiple organ failure and acute respiratory distress syndrome
adverse events such as thromboembolic events showed no higher rate of incidence than for placebo.

It is particularly important to note that a massive transfusion can itself put a trauma patient at risk of infection, multiple organ failure and hypothermia, which inhibits normal coagulation. Thus, reducing the need for transfusion reduces other risks.
     A study on the use of NovoSeven® in trauma patients in the US will start in 2005.

Weighing the ethical issues
Novo Nordisk has undertaken an internal ethical review of

Novo Nordisk Annual Report 2004

Back to Contents

NovoSeven® to explore any potential issues so that they can be addressed proactively.
     Ethical dilemmas exist around any pharmaceutical product, most often relating to access and price, and NovoSeven® is no exception, says Lars Rebien Sørensen, president and CEO of Novo Nordisk.
     The key dilemma concerning NovoSeven® is how to price it in its new indications to reach the most people who need it, while maintaining a profitable and healthy business.
     “While we don’t yet have all the answers, pricing is an issue we take seriously and intend to address as regards these new indications,” says Mr Rebien Sørensen. The potential cost of using NovoSeven® in Europe for the treatment of ICH is approximately 3,000–3,800 euros per patient and for trauma in the range of 7,500–19,000 euros per patient (average body weight of 70 kg) depending on how fast the bleeding can be stopped (depending on its severity). “I think Novo Nordisk has priced NovoSeven® appropriately for catastrophic or rescue use for the developed world. But that pricing structure is not sustainable in the developing world. If there is a price differentiation between the wealthier and poorer parts of the world, it must be with the understanding that the developed world will foot the research bill.” According to Dr Mayer, the cost of NovoSeven® should be viewed in terms of overall medical costs. Stopping or slowing life-threatening bleeding during trauma, surgery or ICH can, for example, reduce the need and cost of blood transfusions and medical intervention in the hospital or trauma centre.
     In addition, use of NovoSeven® has the potential to prevent future disabilities or deaths, which are extremely costly to society, he adds.
     “The use of NovoSeven® gives us the chance to avert disaster –the subsequent deterioration that leads people to bleed and die, or end up so physically and mentally impaired that they must spend the rest of their lives in a nursing home,” says Dr Mayer.
     According to the National Institute of Neurological and Stroke Statistics of the National Institutes of Health in the US, the national cost of lost productivity due to stroke (that is, lost family income) runs into billions of dollars a year. Many persons who suffer stroke end up in chronic care facilities such as nursing homes, which, in the US, cost thousands of dollars a year. “So from a socio-economic point of view, we believe the potential cost of using NovoSeven® is appropriate,” explains Mr Rebien Sørensen.

Bleeding in surgery
In addition to trauma and ICH, there are other potential indications for NovoSeven® currently being tested in clinical trials. Some of those relate to bleeding that occurs during surgery, which can cause complications during or after surgery, such as cardiac surgery, spinal surgery and liver transplantation, as well as for upper gastrointestinal bleeding in people with cirrhosis.
     Those are just a few of the ways NovoSeven® could begin to serve as the world’s first general haemostatic agent for critical bleeding.
     For more information, visit *


Top: Scanning electron micrograph of human red blood cells. Red blood cells have no nucleus and contain haemoglobin pigment. Their primary function is to transport oxygen from the lungs to the rest of the body, and carbon dioxide from the body back to the lungs for expulsion. Bottom: Scanning electron micrograph of a blood clot. Red blood cells enmeshed in fibrin, a protein. A clot is triggered by contact of blood with a foreign surface or damaged tissue, thereby preventing bleeding.

Recombinant factor XIII: stabilising blood clots
Another interesting new opportunity within haemostasis management has emerged with new insight into protein recombinant factor XIII (rFXIII), which has been in-licensed from ZymoGenetics, Inc. rFXIII has a known mechanism for stabilising blood clots alone or in combination with other therapy.
     With its leadership within proteins, Novo Nordisk expects initially to bring rFXIII to market for the benefit of people with FXIII deficiency. However, various settings of critical bleeding in other patient groups as well as combination therapy with rFXIII and NovoSeven® add to the potential of rFXIII.



Novo Nordisk Annual Report 2004 23  

Back to Contents

Novo Nordisk cancer research moves forward

Novo Nordisk has begun clinical testing in humans of a potential cancer drug, interleukin-21 (IL-21). The phase 1/2 study, which is being conducted in Australia, is part of what could become a new therapy area for the company.
     Peter Kurtzhals, senior vice president of Discovery, explains: “We cannot say that we have a new therapy area until we have an approved product. But we have previously stated that our research strategy is aimed at maximising the value of our competences in therapeutic proteins – and if this goes well, it will invariably result in a new therapy area.” The drug is being tested on people with malignant melanoma – in the Western world around 90,000 new cases of this aggressive, life-threatening form of skin cancer are diagnosed per year and around 15,000 die every year from this disease. The clinical testing, which began in September 2004, will be conducted on a maximum of 40 persons.

Kidney cancer
Another possible indication for IL-21 which Novo Nordisk plans to investigate is renal cell carcinoma, a cancer affecting the kidney. The company has applied for and received orphan drug status for IL-21 in the European Union. Orphan drug status can speed up the development process for a drug and allows its developers certain financial and marketing advantages.However, the designation is only given by the authorities to drugs being developed for the treatment of serious, rare diseases for which little financial return is expected and where few other treatment options are available.

     Renal cell carcinoma qualifies for this designation because, in addition to its life-threatening nature, it affects relatively few patients (3.21 cases per 10,000 persons in the EU); moreover, there is at present little possibility of effective treatment.
     Orphan drug status for IL-21 was approved by the EU Commission on 2 September, based on a recommendation by the European Medicines Agency’s Committee for Orphan Medicinal Products.
     Peter Kurtzhals notes that, as research proceeds, other indications such as colorectal cancer and ovarian cancer may be developed for the drug.

Suppressing the tumour
     IL-21 is a novel protein which appears to stimulate the immune system to kill cancer cells.
     The protein was discovered by scientists at the American biopharmaceutical company Zymo-Genetics; Novo Nordisk has been investigating IL-21 in collaboration with this firm. In March 2004, this collaboration became a clinical data-sharing agreement in which the two companies make results available to each other, says Global Regulatory Affairs Project Manager Anita Osborne of the IL-21 team.
     According to the terms of the agreement, ZymoGenetics has commercialisation rights for IL-21 in North America, while commercialisation rights in the rest of the world are licensed to Novo Nordisk.


  Making growth disorder treatment easier  
  For people with growth disorders, administering growth hormone by injection is part of daily life. Norditropin NordiFlex®, the world’s first liquid growth hormone in a disposable pen, makes that way of life easier and simpler.
     The product was first introduced by Novo Nordisk in Denmark in 2003 and launched in Japan and several European countries in 2004. In 2004, it received US Food and Drug Administration approval for the long-term treatment of children who have growth failure due to inadequate secretion of endogenous growth hormone and for the long-term treatment of growth hormone deficient adults.
     Since Norditropin NordiFlex® is prefilled, there is no loading of cartridges. Other key features include:
  Norditropin NordiFlex® is based on FlexPen®, the successful prefilled delivery device for insulin for the treatment of diabetes.
     Novo Nordisk first produced biosynthetic growth hormone in 1985. In 1999, Novo Nordisk introduced a premixed liquid growth hormone and a new pen system to Europe and Japan. The pre-mixed Norditropin® cartridge and NordiPen® delivery system were introduced in the US in 2000, and the NordiPenMate® auto-insertion device became available in 2001.
      For more information, visit
  ease of use: no loading, no mixing (reconstitution)        
  ease of training – for the healthcare professional to teach, and the caregiver and patient to use        
  easy dial-back reset        
  disposable – made of environmentally friendly materials that when burned release only water and carbon dioxide.        
24 Novo Nordisk Annual Report 2004

Back to Contents

Afghan construction workers toss mud onto the roof being built at the Rabia
Balkhi Women’s Hospital in Kabul, Afghanistan.

When war takes a toll
on health

In war-ravaged countries, getting medicines and treatment to people in desperate need of healthcare is a considerable challenge. Novo Nordisk is doing what it can to help people with diabetes in two such countries: Afghanistan and Iraq.
     An estimated 917,000 people in Afghanistan have diabetes, most of them undiagnosed and untreated. To begin to address this critical gap in care, in October 2004 the World Diabetes Foundation, an independently governed foundation established by Novo Nordisk in 2001, and the Afghan Ministry of Health initiated a new project: the Diabetes Control and Treatment Programme for Afghanistan. The agreement provides 400,000 US dollars to renovate and equip four diabetes centres in Kabul over the next two years.
     In addition, the company arranged a training seminar in June 2004 for 20 Afghan doctors, including three directors from the Ministry of Health. A follow-up session was held in November. Novo Nordisk also established the Afghan Medical Relief Foundation. The goal of this new non-profit organisation is to bring life-saving medicines to Afghanistan. The foundation will raise money through fundraising, buy life-saving medicines including insulin, antibiotics, vaccines and other medicines, and donate these to hospitals and diabetes centres throughout Kabul and eventually, when security and infrastructure allows, throughout the country.
     In Iraq, the current prevalence of diabetes is unknown but it is believed to be a large-scale problem. The International Diabetes Federation estimated in 2003 that 7.7% of the population has diabetes.
     Novo Nordisk has been supplying insulin to Iraq since 1972 and, since 1991, the company has been virtually the sole supplier of insulin to the Iraqi people.
     Beyond meeting the immediate needs of Iraqi patients, Novo Nordisk also arranges for the training of Iraqi doctors and nurses in diabetes care, in cooperation with the Iraqi Diabetes Association. It is working with the Ministry of Health to create a national diabetes programme that will include the development of diabetes centres and public clinics, continuous education for doctors and nurses, and patient awareness programmes.

“Living with diabetes for a week at the diabetes camp has totally changed my perception.”
Marta Wielondek, Novo Nordisk

Children teach life lessons
in TakeAction! project

Marta Wielondek, senior product manager in the Region Europe office of Novo Nordisk, thought she knew all about diabetes after three years with the company. But spending a week at a summer camp for children with diabetes in Poland as part of the company’s TakeAction! programme made her realise how much she still has to learn.
     “Living with diabetes for a week at the diabetes camp has totally changed my perception,” says Ms Wielondek.
     Marta Wielondek is one of 21 Novo Nordisk employees from Region Europe who volunteered to spend part of their summer working hours at a summer camp for children with diabetes. The idea was to give employees an insight into the lives of children with diabetes, develop relationships with local diabetes associations to promote future collaboration, and to offer extra help in the camps free of charge to the camp organisers.
     The TakeAction! programme, launched in 2003, encourages employees to carry out individual or team activities in the name of sustainable development. This includes working at diabetes clinics in developing countries, participating in walkathons to raise money for diabetes, and taking steps to improve the environment. For more information on the TakeAction! programme, visit

Novo Nordisk Annual Report 2004 25  

Back to Contents

Back to Contents


Activelle® low dose
Indication Oestrogen deficiency symptoms in women more than one year after menopause. Prevention of osteoporosis in postmenopausal women at high risk of future fractures who are intolerant of, or contraindicated for, other medicinal products approved for the prevention of osteoporosis Description Low-dose continuous combined HRT within the ultra low-dose class Phase Phase 3

NovoSeven®: intracerebral haemorrhage
Indication Bleeding in emergencies, intracerebral haemorrhages Description Phase 2b studies of NovoSeven® as a general haemo-static agent for treatment of intracerebral haemorrhages have been completed. Filing in the EU is anticipated in mid-2005. A second study will be initiated in the US
Phase Not applicable

NovoSeven®: trauma
Indication Bleeding in emergencies, trauma
Description Phase 2 studies of NovoSeven® as a general haemo-static agent for bleedings related to traumatic injuries have been completed. Filing for blunt trauma in the EU took place in January 2005. A study in the US will be initiated in 2005 Phase Not applicable

NovoSeven®: variceal bleedings
Indication Bleeding in emergencies, upper gastrointestinal bleeds in cirrhotic patients Description NovoSeven® is being tested as a general haemostatic agent for treatment of bleedings from oesophageal varices in connection with liver cirrhosis Phase Phase 2

NovoSeven®: cardiac surgery
Indication Cardiac surgery
Description NovoSeven® is being tested as a general haemostatic agent for treatment of bleedings in connection with cardiac surgery Phase Phase 2

NovoSeven®: traumatic brain injury
Indication Bleeding in emergencies, traumatic brain injury
Description Traumatic brain injury (TBI) occurs as a result of a sudden injury to the head. TBI is most commonly caused by road traffic accidents and is primarily affecting younger men Phase Exploratory phase 2

NovoSeven®: spinal surgery
Indication Critical bleeding in surgery, spinal surgery
Description NovoSeven® is being tested as a general haemostatic agent for treatment of bleedings in connection with spinal surgery Phase Exploratory phase 2

Indication Haemostasis management
Description FXIII stabilises blood clots, indicating that FXIII alone or in combination with other therapy might become an interesting new opportunity within haemostasis management Phase Phase 2 is in planning

Indication Cancer (malignant melanoma)
Description A study testing interleukin 21 (IL-21) for the treatment of the cancer malignant melanoma Phase Phase 1/2

  From idea to treatment          

In the healthcare industry, the road from idea to treatment for a new product is highly complex and time-consuming.
     Industry estimates that out of 10,000 ideas that begin in the lab, just 10 will ever reach the stage where they are tested on people. Out of those, one may reach the market. The entire process represents some of the largest investments Novo Nordisk makes, both in terms of capital and manpower.


     The process typically takes 10 to 13 years from initial work in the lab until a product is launched on the market. The further a product is developed, the greater the loss if suspended due to adverse events.
     The purpose of a clinical trial is to find out whether a medication or treatment regimen is safe and effective for the treatment of a specific condition or disease.

Phase 1 studies test a potential
new drug with a small number of volunteers, usually between 10 and 100, for best dosage and potential side effects.
Phase 2 studies test a drug with
known dose and side effects with a larger number of volunteers, usually between 50 and 300, to learn more about side effects, how the body uses the drug, and how the drug helps the condition.
Phase 3 studies compare the newdrug with a commonly used drug for both safety and efficacy.The trials typically involve between1,500 and 4,000 people who havethe disease. If phase 3 results aresuccessful, a New Drug Application is submitted and reviewed by thevarious government regulatory agencies.
Phase 4 studies, which are con-
ducted after a drug is approved and launched, continue to evaluate a drug’s long-term effects.We involve 500–3,000 patients or more, depending on scope.

Novo Nordisk Annual Report 2004


Back to Contents

During her visit to Tanzania, Clare Rosenfeld visited the Morogoro hospital and met a 17-year-old boy who had been newly diagnosed with diabetes.

Time to act

For the developing world, diabetes is not just a present-day misery. It’s a future time bomb as well. With two-thirds of future diabetes cases expected to occur in this part of the world, Novo Nordisk believes it has a responsibility to act.

Clare Rosenfeld considers herself lucky. While she has had type 1 diabetes since the age of seven, the 18-year-old from Eugene, Oregon in the US, has always had access to the medicine and the doctors she needs to cope with her condition. But as Ms Rosenfeld, who is the founder of the International Diabetes Youth Advocacy Group, found out on a Novo Nordisk-sponsored tour of its projects in Tanzania, El Salvador and Bangladesh in 2004, that kind of access is rare for children and adults with diabetes in the developing world.
     “There is no reason why people who by all rights should be living normal, healthy, productive lives should die when treatment is available. Something must be done,” Ms Rosenfeld writes, after meeting many children, young people and adults who struggled – and some-

times failed – to cope with their diabetes because of lack of access to treatment.

A complex challenge
Seeing the world in a new context can be an eye-opening experience. For Novo Nordisk, the challenging state of diabetes care in the developing world has long been apparent.
     Meeting this challenge is complicated. Low- and middle-income countries often lack the healthcare infrastructure to meet the needs of a growing number of people with diabetes. Lack of awareness and education about diabetes is a serious problem. Many experts believe that the only way to fight diabetes, in the developing world as elsewhere, is by taking an approach that combines increased awareness, education and prevention with improved access to treatment.

Novo Nordisk Annual Report 2004

Back to Contents

“There is no reason why people who by all rights should be living normal, healthy, productive lives should die when treatment is available. Something must be done.”
Clare Rosenfeld

     “By working together with governments, patient organisations and other partners to improve diabetes care in poorer countries, we can use our expertise and competence in diabetes to address some of these issues,” says Lise Kingo, executive vice president for people, reputation and relations at Novo Nordisk. “At the same time, we build a long-term sustainable business advantage as a leader in diabetes care.”
      Investors are increasingly paying attention to how companies act to address the public health crisis in the developing world because they fear that not acting will damage companies’ societal licence to operate – and thus, profitable returns in both the short and long term.
      “I think investors do care about a company’s social, ethical and environmental performance because it is an indicator of two things: the quality of management and the risk profile. If a company responds to these issues, it will probably have less risk associated with it,” says Analyst Benjamin Yeoh of ABN-AMRO, a major investment bank.

Bridges to better care
Since 2001, Novo Nordisk has had a four-pronged strategy to addressing access to health in the developing world that builds on the WHO’s four major focus areas for improving access to healthcare.
     Building national healthcare capacity and developing national disease strategies is at the heart of the National Diabetes Programme (NDP), a collaborative approach to improving diabetes care globally. Today there are 213 separate activities carried out by Novo Nordisk affiliates in 46 countries, in both the developed and the developing world. Activities include educating nurses, doctors and patients, supporting diabetes patient organisations, equipping diabetes clinics and working with governments to design national diabetes strategies.
     The NDP is setting up diabetes activities in eight developing or emerging economies: India, Bangladesh, China, Costa Rica, El Salvador, Malaysia, Tanzania and Zambia. As a result, there has been an increase in the number of people reporting to diabetes clinics, a greater proportion being treated, and more newly diagnosed persons with diabetes reporting early; that is, before they have started developing severe complications. It is estimated that 50–80% of people with diabetes in the developing world are undiagnosed.

More affordable pricing
Improving the affordability of essential drugs like insulin is also part of the solution to better access to care. In recognition of this, since

2001 Novo Nordisk has offered insulin to the public health systems in the 50 Least Developed Countries (LDCs), as defined by the United Nations, at prices not to exceed 20% of the average price in the industri-alised countries of North America, Europe and Japan. In 2004, Novo Nordisk offered this pricing scheme to 49 countries and sold insulin to a total of 33 LDCs at or below this price, compared to 16 in 2003. In several cases, the government has not responded to the offer; either because there are no private wholesalers or other partners with whom to work; or wars or political unrest sometimes make it impossible to do business. Unfortunately, there is no way to guarantee that the price at which Novo Nordisk sells the insulin will be reflected in the final price on the pharmacist’s shelf. Novo Nordisk therefore works with governments to encourage tenders, so that there is a greater chance that the preferential price will benefit the patient for whom it is intended.

     The affordability of medicine is just one of the many problems that Clare Rosenfeld encountered on her trip. Just as serious was the widespread ignorance about diabetes among the general population, lack of knowledge among doctors, and the lack of clinics and equipment to treat diabetes.

“The answer seems clear to me: collaboration,” Ms Rosenfeld writes. “Collaboration between patient associations, healthcare professionals, the government and the pharmaceutical companies can tackle all the problems in these countries. I saw a lot of tough things, but I also saw the potential and the passion to make a difference.” For more information, visit *

Novo Nordisk Annual Report 2004 29  

Back to Contents

Sustainable supply chain management
benefits bottom line

Working with suppliers on social and environmental issues can benefit a company’s financial bottom line, according to a model commissioned by Novo Nordisk. The model indicates that the return on investment for sustainable supply chain management is created through financial and reputational benefits for both parties.
     The model concludes that there are both direct and indirect implications which can be identified if not yet quantified. According to the model, effective sustainable supply chain management can affect the bottom line in two ways: through costs and through turnover. Total costs, in turn, are affected by production costs and cost of capital.
     Benefits include higher product quality and reduced risk as well as a positive impact on the company brand. In a broader perspective there are benefits to society, such as reduced pollution and fewer work-related injuries and accidents. Suppliers can measure the effects of improving labour standards and environmental management in terms of fewer costs related to compensa-

Like ripples in the water: Novo Nordisk is encouraging
its suppliers to look at their own supply chains.

tion, reduced pollution charges, etc. As important, perhaps, is closer collaboration and sharing of better practices between Novo Nordisk and its suppliers, and better self-regulation and documentation towards regulatory authorities.

     Novo Nordisk has had a comprehensive supply chain management programme since 2001, when it began requiring its suppliers to complete a self-evaluation questionnaire regarding their environmental and social performance. The latter deals with treating employees fairly in terms of wage and benefits, working hours, child labour, collective bargaining and other issues described in The United Nations Universal Declaration of Human Rights and the International Labour Organisation’s Core Conventions.
     The programme, which now includes audits, is expected to cover all major areas of purchase by 2005.
     Now reaching out to second-tier suppliers, Novo Nordisk has developed a new toolbox for its suppliers and other companies who intend to engage in a programme with their suppliers which is available at
     Read more, and see the research behind the model of the financial impacts, at

  A catalyst for business’ role in human rights  
  The observance of human rights is interwoven in the daily fabric of a company’s operations – in everything from ensuring safe factories to fostering equal opportunities and guaranteeing basic labour rights for employees. But when a company is multinational, its obligation to protect human rights extends around the globe.
     Defining the boundaries of a company’s sphere of influence in protecting human rights is the task that Novo Nordisk and nine other companies have undertaken in the Business Leaders Initiative in Human Rights (BLIHR). The aim of the three-year initiative, launched in 2003, is to serve as a catalyst to further integrate human rights in business policies and practices.
     The first item of business on BLIHR’s agenda is for business to identify opportunities for action based on the United Nations Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights.
     The Norms suggest the introduction of global binding standards and external monitoring to ensure that companies observe basic human rights in all their operations worldwide.
      Novo Nordisk regards the Norms as a positive challenge to the
  company’s approach to addressing human rights. With the other members of BLIHR, it has agreed to ‘road test’ the Norms.
     “As a result of our involvement with BLIHR, we expect to have an operational standard that will enable us to strengthen our work with human rights. We also wish to contribute to a broader understanding of the role of business in human rights by sharing our experiences with other companies,” says Lise Kingo, executive vice president, people, reputation and relations, Novo Nordisk.
     Novo Nordisk has worked closely with human rights since 1998 as part of its commitment to support the United Nations Universal Declaration of Human Rights. It is also a signatory to the UN Global Compact.
     The company’s approach to human rights has been to focus on key stakeholders and run projects on strategic issues.
     Current focus areas are the right to health, equal opportunities and diversity, and privacy.
     The Novo Nordisk position on human rights, and more information on its approach to human rights, can be found at


30 Novo Nordisk Annual Report 2004

Back to Contents


Novo Nordisk supports the principle of the three R’s: to reduce, refine and replace animal
experiments. Lise Holst, Bioethics Management at Novo Nordisk

Improving standards for
experimental animals

Novo Nordisk actively practises a principle known collectively as the three R’s – which means that the company attempts to reduce, refine and replace animal experiments with alternative procedures whenever possible. Novo Nordisk considers experiments on living animals to be a necessary component of the research and development process for new medicines for both scientific and mandatory reasons, and to satisfy expectations of drug regulatory authorities. In the past decade, Novo Nordisk has set new standards for housing, training and socialisation of laboratory animals and significantly reduced the number of animals used. Due to a higher research activity in early phases, this positive trend could not be maintained in 2004, as 10% more animals were purchased.

     In 2004, both an approval by the US Food and Drug Administration (FDA) and the development and approval of a new test method will enable Novo Nordisk to reduce the number of animals used by the company even further:

In the fourth quarter of 2004, the FDA approved a reduction in the numbers of animals required to test insulin-based products, resulting in a considerable reduction of rabbits used for this purpose.
Novo Nordisk has developed a novel test for glucagon that utilises isolated cells in vitro rather than living animals, which was approved for use by the FDA in October 2003. Implementation of this new test was completed in the third quarter of 2004 and rabbits are no longer used for this purpose.

     Novo Nordisk has committed itself to investigate further approaches to practising the three R’s and, therefore, to reduce the use of living animals in the future, as and when this becomes possible due to establishment of newly emerging regulations and technologies. For more information, visit À

A balanced view of
HRT therapy

Menopause can have a severe adverse impact on the quality of life for some women. Despite this, use of hormone replacement therapy (HRT) medicine has declined since the release of the Women’s Health Initiative (WHI) study in 2002 and the Million Women Study in 2003. Both studies reported potential health risks following long-term HRT use, and HRT sales worldwide declined. The controversy also resulted in some HRT users filing lawsuits against producers of HRT drugs, including Novo Nordisk (see page 19).
     Novo Nordisk produces the low-dose HRT drugs Activelle® and Vagifem®. The results of the studies, as is true of all studies involving HRT medicines produced by other companies, were of interest to Novo Nordisk. Specifically, these two studies found that HRT should not be initiated 10 years after menopause for prevention of cardiovascular diseases. Unfortunately, the study did not explore the cardiovascular effect of HRT in women in early menopause, when HRT is most commonly initiated. For example, the majority of women in the WHI study were well beyond menopause and experienced no climacteric symptoms.
     “These and other questions need further study,” says Camille Lee, vice president of Global HRT at Novo Nordisk. “But I feel that WHI and other studies support our position on HRT: that women needing HRT should start when they first experience severe menopausal symptoms and use the therapy for the shortest possible time in the lowest possible doses.” Research reported in 2004 has shown that HRT may save lives when taken by women under age 60 – but that the risks may outweigh the benefits for older women (according to the results from 30 clinical trials involving more than 26,000 women in a study led by Dr Shelley Salpeter at Santa Clara Valley Medical Center in San Jose, California). Also in 2004, a research team from the University of California led by Dr Judith L Turgeon found that the results of the WHI study, which only studied one product, should not be generalised to all forms of HRT therapy. Dr Turgeon’s team found that knowledge of hormones and their effects has more than doubled in the last 10 years. This increase in knowledge over time and with additional experience is true for virtually all medicines.
     Since the publication of the results of the WHI and Million Women Study, most health authorities recommend that the lowest effective dose is used to relieve symptoms of the menopause. Ms Lee adds: “Novo Nordisk offers a full low-dose HRT range and we also have even lower-dose compounds in our research and development pipeline.” (See page 27.)


Back to Contents

Global expansion

More than 99% of our sales are in countries outside Denmark,” observes Chief Financial Officer Jesper Brandgaard. “Yet only 41% of our employees are working outside the country. We must internationalise to fulfil our vision and stay competitive in the pharmaceutical industry.”

Supporting the markets
Making the most of the US market is vital: sales in North America are expected to overtake Europe within the next 5–10 years, making it Novo Nordisk’s largest region. To support US growth, Novo Nordisk will invest 100 million US dollars in expanding its insulin manufacturing plant in North Carolina (see box opposite) and has transferred some major development responsibilities from Danish headquarters to the US affiliate. Actions also include recruiting more US participants into its global trainee programmes.
     Other efforts have targeted the International Operations region, where the growth potential is generally regarded to be greater than in Europe. Actions include major investments in new manufacturing facilities in Brazil and China which also comprises intensified talent recruitment.

Costs, risks and innovation
But internationalisation is not just about sales growth.
    “Increased activities outside Denmark provide Novo Nordisk with a more competitive cost base and a more balanced exposure to risks

such as currency fluctuations,” notes Jesper Brandgaard. Novo Nordisk has already taken steps to outsource production of needles and plastic components for the pen systems. By choosing global partners when outsourcing, Novo Nordisk will ensure competitiveness and ‘insource’ knowledge from these key performers in the market.

     Chief Science Officer Mads Krogsgaard Thomsen adds that internationalisation also potentially benefits the Novo Nordisk pipeline: “We need to increase our access to research and development conducted outside Denmark. To find all the skills needed for future development, it is essential that we recruit even more new, international talent,” he says.
     Mads Krogsgaard Thomsen is also convinced that international partnerships with companies outside Novo Nordisk will become increasingly important to the R&D pipeline – particularly in view of the company’s growing focus on proteins outside the established therapy areas. Through agreements with partners including ZymoGenetics, Biostratum, Transition Therapeutics, Innate Pharma and Neose, Novo Nordisk currently has an exciting early-stage pipeline of eight projects targeting cancer or inflammatory diseases. As of September 2004, Novo Nordisk had established 26 discovery and early development partnerships and the company is seeking even more.

New employment patterns
One area which has been at the forefront of internationalisation is Product Supply, which comprises all manufacturing in Novo Nordisk.

Novo Nordisk Annual Report 2004

Back to Contents

     Expansion of production facilities is already taking place in Montes Claros, Brazil; Chartres, France; Tianjin, China; and Clayton, US. “We expect that the expansions will create approximately 1,000 new jobs outside Denmark in the coming five-year period,” explains Senior Vice President Per Valstorp from Product Supply.
     However, he continues: “While new jobs will be established abroad, employee numbers will most likely decrease in Denmark in the same period. To embrace the changes in employment patterns in Denmark, Product Supply has established a Job Transfer Centre which is operating in Denmark only. The system allows employees at downsized Danish production sites to register their skills and preferences at the centre, which can then refer them to jobs and relevant training within Novo Nordisk.”
     “The alternative to this would have been layoffs. So I think this is a good example of social responsibility on the part of the company,” remarks union representative Jan Carstensen, who represents unskilled and semi-skilled workers at a number of Danish production sites.

A strategy for people
In the company’s philosophy, Novo Nordisk is its people. Its People Strategy supports the objectives of being an attractive and challenging workplace focused on high performance and equal opportunities for each to develop and grow.

     To better prepare the company for its international growth, the People Strategy now focuses on mobility: the ability to recruit and develop international talent.
     “We want to put the best person into any job, regardless of where they come from; we also want to reduce the geographical barriers to talent movement,” says Ginger Gregory, senior vice president of People and Organisation at Novo Nordisk.
     To facilitate this, the new unit is developing a global system of job descriptions, remuneration and talent evaluation. This will ensure that mobility across Novo Nordisk’s operating units globally becomes much smoother and that diversity increases across the organisation.
     For more information, visit

Fulfilling a vision
When all else has been said, one final observation remains: Novo Nordisk must continue to increase its presence around the world to fulfil its vision of being the world’s leading diabetes company.
     Jesper Brandgaard sums it up: “The fulfilment of this aspiration will require Novo Nordisk to be present. Present with our customers where they live and work, present with regulators and other authorities, present with business partners, universities, investors and other stakeholders.”

“We must internationalise to fulfil our vision and stay competitive in the pharmaceutical industry.”
Jesper Brandgaard, chief financial officer, Novo Nordisk

Investing in the future

China Novo Nordisk is expanding its production facilities in Tianjin, China. The new plant will be built on Novo Nordisk’s existing 40,000 square metres site in Tianjin, which has been designated Novo Nordisk’s primary production base in the Asia Pacific region. Creating more than 100 new jobs in China, the plant will be operational in 2006 and will supply both the domestic and export markets.

US Novo Nordisk’s insulin manufacturing plant in Clayton, North Carolina, will be expanded to more than double its insulin-filling capacity, as well as include assembly and packaging facilities for FlexPen®, administration and storage space. This expansion will provide around 200 new jobs at the plant in Clayton for a total of 600 when fully operational.

Brazil One of Novo Nordisk’s major international investments is a new production facility in Montes Claros, Brazil. The new facility will focus on formulation, filling and packaging of various insulin products, and is expected to create around 600 new jobs.

Novo Nordisk Annual Report 2004

Back to Contents


Leading with

A company’s commitment to sustainability starts with its people. For Novo Nordisk, that means developing talent and encouraging diversity in such a way that employees actually live the Triple Bottom Line.

Of course I know what the Triple Bottom Line means. But today, I really experienced it. And I know why Novo Nordisk has embraced it,” remarks Finn Benned Hansen following his participation in the Lighthouse Programme’s visit to Brazil in December 2004.
     The Lighthouse Programme is an innovative way in which Novo Nordisk is developing the next generation of the company’s leadership. ‘Destination Brazil’ brought 32 of the company’s top talents together for seven days to experience economic, social and environmental conditions in Brazil – an important emerging market for the company. The main goal was to build a sense of community among a group of executives to enhance their understanding of one another, their ability to work together and their sense of the world around them. The journey was led by Lars Rebien Sørensen, president and

Visit to GRAACC, a children’s cancer centre in São Paulo.

Community work at a paediatric clinic in São Paulo.

CEO of Novo Nordisk, and addressed global business and health challenges, doing business in emerging markets, sustainability as a business factor and leading with passion.
     In this first Lighthouse journey, the ‘classroom’ stretched from crowded urban streets to the rainforest, and teachers included local business leaders, government ministers and representatives of indigenous peoples. The journey took employees from the relative comfort of their corporate jobs to the heart of the company’s strategic agenda: globalising the business, improving access to health and dealing with thorny dilemmas posed by fulfilling its commitment to the Triple Bottom Line.
     Developing talent is a top priority for Novo Nordisk if it is to continue to succeed in a highly competitive market. In March 2004, the company established a new centre of excellence called Global Talent Development to facilitate identification and development of talent throughout the organisation. This global oversight is a business

Novo Nordisk Annual Report 2004

Back to Contents

‘Life Line session’ with Lars Rebien Sørensen, president and CEO of Novo Nordisk.

imperative at a time when the company is expanding internationally.
     Talent is managed across Novo Nordisk in a number of talent pools that have been established during 2003 and 2004 to give people opportunities to develop their skills towards the next level in the organisation. This might take the form of opportunities to discuss strategic business issues with other company leaders, including top management, or taking on a challenging assignment with a real impact on the business. The Lighthouse Programme is just one of many initiatives to develop talent.
     Lise Kingo, executive vice president for people, reputation and relations at Novo Nordisk, says: “It is too early to say how the Lighthouse journey will shape the next generation of Novo Nordisk leaders. But we expect that the participants will be driven to carry out their jobs with even greater passion and be able to cascade their new sense of vision throughout the organisation.”

A strategy for diversity
For companies to tap talent, the greatest opportunities are in diversity. Novo Nordisk operates in 78 countries and comprises a wide range of different nationalities. To achieve the full potential in talent management, it is important to ensure a level playing field. With its strategy for equal opportunities (EO) and diversity, Novo Nordisk is creating sound diversity in the organisation that can support internationalisation of business and spark continued innovation.
     Novo Nordisk has made diversity an integral part of management training and incorporated targets on diversity into the corporate management tool, the Balanced Scorecard, and evaluates the performance on EO and diversity in the organisation each year.
     Based on this evaluation, in 2004, Novo Nordisk began to see the first results of this strategy being embedded in the organisation. For example, in South Africa Novo Nordisk increased the diversity of its medical representative staff to better reflect the community it serves. In the US there were targeted efforts to reach out to minorities disproportionately affected by diabetes. Brazil is collaborating with organisations that work with disadvantaged sections of society.

     In Denmark the affiliates NNE and NNIT are working to improve their ability to attract and develop talent from an increasingly diverse society. Both have broadened the recruitment base by focusing on values which appeal to different types of applicant. NNIT has found new channels of communication to reach new groups of potential candidates, and recruitment tests are now available in 80 languages. In 2004 NNE recruited an increased number of women compared to previous years.

Women in management
Another focus area during 2004 was increasing the number of women in management, based on an analysis conducted in 2003. One initiative was the formation of a Sounding Board of women and men to discuss issues and coordinate activities relating to women in management.
    Other activities launched in 2004 include:

the formation of women’s networks, in which women identified as leaders are invited to participate in network groups on women in management

a mentoring programme in which women identified as potential leaders in the organisation are invited to be mentored by a member of senior management

a review of the performance and succession management systems to achieve greater transparency, including looking at leadership competences from a gender perspective.

“Women often face informal rather than formal barriers in the work-place,” says Kirstine Brown Frandsen, vice president of International Medical Affairs at Novo Nordisk and a member of the Sounding Board. “Women may have different ways of working, communicating and leading than men, and it is important that we talk about it openly so that these differences are understood and appreciated.”
    For more on equal opportunities and diversity, visit annual-report-2004

Visit to indigenous tribe in Iguassu.

Novo Nordisk Annual Report 2004

Back to Contents

Preparing for a low

Immediate and concerted action is required to combat climate change. Recognising that there are opportunities as well as challenges in that call for action, Novo Nordisk is preparing for a carbon-constrained future.

Climate change is one of the serious environmental challenges facing humankind. The rising level of greenhouse gases in the atmosphere is changing global climatic patterns, resulting in increased incidences of floods, storms and droughts, affecting habitats, biodiversity, food systems, economies and human life. Tackling an issue as complex as climate change requires a concerted effort from government, business and civil society.
     The environmental strategy of Novo Nordisk, which determines the priorities and long-term strategic focus areas, has highlighted climate change, use of natural resources and management of pollution as the key long-term environmental challenges for its business. As a business committed to addressing climate change, Novo Nordisk is developing a strategy to reduce its emissions of CO2. In 2004 Novo Nordisk entered into a partnership with the WWF whereby it has committed to reduce its CO2 emissions. During 2005, WWF will work with Novo Nordisk in setting a below stabilisation target for achieving an absolute reduction of CO2 by 2014. Such a commitment will enable Novo Nordisk to become part of the WWF’s Climate Savers initiative.
     “We are initiating an assessment to identify our reduction opportunities and the measures we can undertake to reduce the carbon intensity of our products and the way we manufacture them. The Climate Savers partnership is an opportunity for us to go beyond regulation and be well prepared for a low-carbon future. This will

benefit both our company and the environment,” says Per Valstorp, senior vice president of Product Supply, Novo Nordisk.

     Installations for energy production at two Novo Nordisk sites in Denmark, Bagsværd and Hillerød are covered by the EU Emission Trading Scheme (ETS), which allocates allowances to emit CO2. As of 1 January 2005, installations whose CO2 emissions exceed their allowances will have to purchase additional allowances from the market. Novo Nordisk’s financial exposure to the ETS in the first period (2005–2007) is rather limited. In fact, the company will have a net surplus of allowances during the first ETS period.

Energy efficiency and beyond
Novo Nordisk has a history of successfully optimising energy efficiency. Yet these initiatives have not resulted in an absolute reduction of its CO2 emissions. A new approach to energy efficiency is re-quired where the focus shifts: from optimising individual components of operations to taking the entire production operations as a whole system. Identifying new energy conservation measures using this approach can reveal opportunities for achieving significant CO2 reductions, capturing synergies between different measures and obtaining multiple benefits from a single investment. Implementing these potential projects will also require that investments take into account both the financial and environmental benefit, thereby enabling the company to overcome the traditional investment barriers such as pay-back and ROIC.

Novo Nordisk Annual Report 2004

Back to Contents

-carbon future

     Reducing emissions over a 10-year period will also require innovation in the way the company procures energy. In 2004, 82% of Novo Nordisk CO2 emissions were associated with the external purchase of energy. During 2005, Novo Nordisk will investigate the possibilities of purchasing credible certified electricity from renewable sources and also enter into a dialogue with its utility providers on their fuel choices and emission factors.
     Achieving absolute reductions of CO2 presents both challenges and opportunities for a rapidly growing company. Given the expected rise in the number of people with diabetes, Novo Nordisk has to expand production to meet this increasing demand. The challenge lies in decoupling the direct link between volume growth and energy use and making energy less carbon intensive. Novo Nordisk’s focus on implementing optimisation measures such as cLEAN™ – lean manufacturing principle – will definitely assist in the process but a more sustained decoupling will require the company to look beyond efficiency. This would include a shift to cleaner fuels, purchase of renewable energy and an even greater emphasis on environmentally sound design and development of future processes and products.

Gene technology saves resources
Novo Nordisk uses gene technology and genetically modified organisms in biomedical research and pharmaceutical production. Safe use of gene technology can benefit both the environment and the financial bottom line. A new insulin production process, NN2000, based on genetic engineering, produces five times higher yield per cell compared to the existing production process.

     This translates into use of fewer raw materials such as sugar, water and energy and less waste per produced unit. In addition, to enhance safe use of gene technology, the NN2000 process has also eliminated the use of antibiotic resistance genes from the yeast cells, thereby reducing the risk of transfer of resistance genes to other organisms. Achieving reductions of CO2 will require that the company develops and replicates similar processes.
     This increased efficiency directly impacts the financial bottom line. That is the philosophy behind the Environmental Management Accounting used to assess the economic value of natural resources, and the business and financial value of good environmental performance.

Sound product design
Rethinking product design is yet another way to prepare for a low-carbon future. Novo Nordisk recognises that its influence on the environmental impact of its products decreases throughout the product life cycle. Therefore it has initiated a project to systematically embed environmental considerations in discovery, development and major support projects. In 2004 it established an environmental team in the device development area to develop a tool for systematic environmental evaluation of raw materials, components and processes of future devices. This team will work closely with the Environmental Devices and Packaging Group responsible for integrating environmental considerations in Novo Nordisk’s devices and packaging strategies.
     Only by taking such a holistic approach from development to disposal, and systematically undertaking a mix of options, can Novo Nordisk prepare itself for a carbon-constrained future.
    For more information, visit

“The only solution to the global climate problem is a conversion of our energy sources so that in the long run we do not emit CO2 at all.”
Kim Carstensen, WWF Denmark

Novo Nordisk Annual Report 2004

Back to Contents


Financial performance
In 2004, Novo Nordisk’s sales were 29,031 million Danish kroner (DKK), up 11% from DKK 26,158 million in 2003. Measured in local currencies this is an increase of 15%. Operating profit in 2004 increased by 9% from 2003 to DKK 6,980 million. A lower level of non-recurring income reduced operating margin in 2004 to 24.0% from 24.6% in 2003. Return on invested capital increased by 21% in 2004 from 20% in 2003. The cash to earnings ratio for 2004 ended at 85% up from 80% in 2003. Earnings per share (diluted) increased by 5% in 2004 to DKK 14.83 from DKK 14.15. For more information, see the full discussion on page 41.

Environmental performance
Novo Nordisk continued to produce ‘more with less’ in 2004. The eco-productivity indices, which express the ability to utilise resources effectively, showed an improvement of 7% for water and 8% for energy, and thereby reaching the targets for 2004. The implementation of certified environmental management in Japan is progressing according to plan. Detailed accounts for performance can be found at

Social performance
In 2004 Novo Nordisk created 1,484 new full-time positions, mainly outside Denmark. The year-end number of employees in 2004 was 20,725. The employee turnover rate for 2004 was 7.3%. The frequency of occupational injuries was 5.6 per million working hours, compared to 5.4 in 2003. Detailed accounts for performance can be found at


Business review 2004

  Product news
  Novo Nordisk’s long-acting insulin analogue Levemir® was launched in Switzerland, the UK, Ireland, Denmark, Sweden, Norway, Finland, the Netherlands, Austria and Germany in 2004.
  Norditropin NordiFlex®, the world's first liquid growth hormone in a disposable pen, was rolled out across Europe and received FDA approval in the US.
  A In February, NovoSeven® was approved to treat factor VII deficiency and Glanzmann’s thrombasthenia.

Research and development

  The results of a phase 2 study of NovoSeven® in the treatment of critically bleeding multi-trauma patients were announced in March.
  Novo Nordisk announced the results from the phase 2b study of NovoSeven® in the treatment of intracerebral haemorrhage in June.
  NovoMix® 50 and 70 files were sent to the European Medicines Agency (EMEA) in July.
  In October, Novo Nordisk announced its decision to initiate an additional clinical study for its human GLP-1 analogue, liraglutide.

Novo Nordisk Annual Report 2004

Back to Contents

    The study will delay the start of phase 3 trials by approximately one year.

  Stakeholder innovation  
  At the Oxford Vision 2020 Summit in September, Novo Nordisk pledged 3 million British pounds to the ongoing global fight against chronic diseases, including diabetes.

  Novo Nordisk entered a licensing agreement with Transition Therapeutics Inc in August to develop Islet Neogenesis Therapy for the treatment of diabetes.  
  Novo Nordisk signed an agreement in September that gave the company expanded licensing rights to the AERx® iDMS inhaled insulin programme from Aradigm, and obtained full development and manufacturing rights.  

Novo Nordisk and Sumitomo Pharmaceuticals, Co, Ltd concluded a licence agreement in September for repaglinide, which enables Sumitomo to develop and market the type 2 diabetes tablet in Japan.

  Novo Nordisk and Medtronic, the world’s leading manufacturer of insulin pumps, announced an agreement in November to develop prefilled insulin cartridges containing the rapid-acting insulin analogue NovoLog® (NovoRapid® outside the US).

  It was announced in October that Novo Nordisk’s insulin manufacturing plant in Clayton, North Carolina, will be expanded (see page 32).  
  Novo Nordisk announced in November that it is expanding its production facilities in Tianjin, China (see page 32).


In 2004, Novo Nordisk had two accidental releases of materials containing GMOs at the production site in Bagsværd, Denmark.
The incidents caused no harm to humans or the environment.

  Novo Nordisk and the WWF have entered into an agreement that will help Novo Nordisk to reduce its CO2 emissions over a period of 10 years (see page 36).  
Novo Nordisk Annual Report 2004 39  

Back to Contents


Three years ago Novo Nordisk’s Board and its courageous shareholders decided to embark on a journey to prevent and treat diabetes in the developing world. This visionary initiative created the World Diabetes Foundation.

In our first three years we have funded over 40 projects promoting treatment, awareness, prevention and education within diabetes care in some of the poorest countries in the world.

Hilda from Dar-es-Salaam in Tanzania is just one of many millions of people in the developing world, whose lives are potentially affected by our work.

We can all be proud of our results so far. We promise to keep up the good work.

Thank you for your support.

Novo Nordisk Annual Report 2004

Back to Contents


Management report and discussion 2004

Novo Nordisk is pleased to report satisfactory financial results for 2004, in spite of experiencing yet another year with adverse currency exposure. Looking to the future, the increasing demand for the company’s products – especially insulin analogues and NovoSeven® – underpins our expectations for solid growth in 2005 also.

Business performance and discussion

Sales in 2004 increased by 15% measured in local currencies.
Sales of insulin analogues increased by 84%
Sales of NovoSeven® increased by 19%
Sales in North America increased by 32%
Measured in Danish kroner sales increased by 11%.
Underlying operating profit increased by more than 20%, and measured in Danish kroner operating profit increased by 9% to DKK 6,980 million.
Net profit increased by 4% to DKK 5,013 million and earnings per share (diluted) increased by 5% to DKK 14.83.
In 2005, the underlying operating profit is expected to grow by 15% in local currencies. Measured in Danish kroner the growth in operating profit is expected to be around 5%, reflecting a significant, negative currency impact and no major non-recurring income in 2005.

Operating profit increased by 9% to DKK 6,980 million from DKK 6,422 million in 2003, thereby exceeding the expectations for operating profit as expressed earlier in the financial year – despite a more challenging currency environment than anticipated. The main reason for exceeding expectations is better operational performance in terms of stronger sales growth, and improved product mix and lower cost consumption.
     Measured in local currencies and excluding the impact from non-recurring items operating profit increased more than 20% – thereby exceeding the long term financial target of 15%, which formed the basis for the operating profit growth expectations to 2004.
     Reported sales of DKK 29,031 million correspond to a sales growth of 11% over 2003 of DKK 26,158 million. Measured in local currencies sales increased 15%, thereby leaving the negative impact from depreciating foreign exchange rates at 4 percentage points.
     Operating margin for 2004 was realised at 24.0% down from 24.6% in 2003. The lower operating margin reflects both a lower level of non-recurring income as well as a negative impact from depreciating foreign currencies. The foreign exchange rate development has impacted operating margin negatively by approximately 1 percentage point.
     Novo Nordisk continuously hedges the cash flows for the main invoicing currencies to limit the short term negative impact on both earnings and cash flow arising from fluctuations in foreign exchange rates. As a consequence the negative impact from the decreasing value of the foreign exchange rates on operating profit is to a large extent countered by net financial hedging gains. With the

exchange rates prevailing in the beginning of February 2004 it was expected that a net financial income of DKK 250 million would be realised, including Novo Nordisk’s share of the profit & loss from associated companies. As a result of the decreasing value of the US dollar and related currencies, net finance was realised at DKK 477 million in 2004.
     The effective tax rate decreased to 33% from 34% in 2003, net profit increased to DKK 5,013 million up 4% compared to 2003 of DKK 4,833 million. Earnings per share (diluted) thereby increased from DKK 14.15 to DKK 14.83 in 2004, corresponding to a growth of 5%.
     Return on invested capital (ROIC) ended at 21% up from 20% in 2003. A large proportion of Novo Nordisk’s assets are denominated in Danish kroner or Euro and ROIC is very sensitive to fluctuations in foreign exchange rates. An increase in ROIC has been realised despite a continued depreciation in the key foreign exchange rates, especially the US dollar, impacting ROIC negatively by approximately 2 percentage points.
     The cash to earnings ratio for 2004 ended at 85% up from 80% in 2003. The three-year average for cash to earings ratio for 2004 increased from 32.3% in 2003 to 59.0% (see page 98). The free cash flow for 2004 was expected around DKK 3 billion, but was realised at a significantly higher level of DKK 4.3 billion, reflecting the higher realised result for 2004 and a continued reduction in the average number of credit days for trade debtors.

Long-term financial targets
The long-term financial targets of Novo Nordisk were defined and communicated to the stock market in 2001. Below we have illustrated the reported average performance for the five year period 2000–2004 compared to the long-term financial targets:

Financial target
5 years’ average
financial targets

Operating profit growth per annum 15 % 15 %
Operating margin 24 % 25 %
Return on invested capital per annum 21 % 25 %
Cash to earnings ratio as a three-year average 54 % 60 %


     The targets were selected to ensure management focus on long-term growth of the business, transformation of results into cash and a significant improvement in return on invested capital. The pursuit of these long-term targets will support the creation of a competitive shareholder return. As demonstrated by the moderate growth in operating profit in 2002, 2003 and 2004, the development in the exchange rates can have significant impact on the reported growth in operating profit in an individual year. In fact, if Novo Nordisk’s main invoicing currencies remain at their current level throughout 2005, it is probable that in 2005 Novo Nordisk will also be unable to meet its 15% operating profit growth target. The company’s view is, however, that the 15% growth target is a realistic target which Novo

Novo Nordisk Annual Report 2004

Back to Contents


Nordisk will be able to meet in most years, based on the performance of the recurring business and assuming that currencies are relatively stable. In other words, the company’s ability to deliver on the target in a particular year will be impacted by significant changes in currency exchange rates or events of a non-recurring nature.

Sales development by segments

Sales increased by 15% measured in local currencies. Growth was realised both within diabetes care and biopharmaceuticals – primarily driven by strategically important products such as the insulin analogues NovoRapid® and NovoMix® 30 as well as NovoSeven®. Sales growth was realised in all regions, with the primary growth driver being North America, constituting 26% of total sales, but also International Operations, constituting 17% of total sales, showed solid growth rates.

Diabetes care
Sales of diabetes care products grew by 15% measured in local currencies compared to 2003 and by 11% measured in Danish kroner to DKK 20,533 million. Novo Nordisk remains the global market leader in diabetes care (insulin and oral antidiabetic products) with an overall market share of 20%.

Insulin analogues, human insulin and insulin-related products
Sales of insulin analogues, human insulin and insulin-related products increased by 14% measured in local currencies and by11% measured in Danish kroner to DKK 18,890 million. All regions contributed to growth both measured in local currencies and in Danish kroner.

     Novo Nordisk is the global leader in the insulin market with a worldwide insulin volume market share of 50%, and within the ana-

logue segment Novo Nordisk continues to gain market share, now holding close to 30% of the world market.

     Sales of insulin analogues increased by 84% measured in local currencies and by 77% in Danish kroner to DKK 4,507 million in 2004. Solid growth rates were realised in all regions, and North America continues to be the primary growth driver. Sales of insulin analogues contribute with 55% of the overall growth in local currencies and now constitute 24% of Novo Nordisk’s total sales of all insulin products.

     Levemir®, Novo Nordisk’s long-acting insulin analogue, continues to gain market share in Europe and now holds 9% of the market for long-acting insulin analogues, less than a year after introduction in the first market. A continued roll-out of Levemir® in additional countries in 2005 is expected to underpin the solid development seen in the early launch phase.

Sales in Europe increased by 6% measured in both local currencies and in Danish kroner, with growth being driven by the portfolio of insulin analogues, including Levemir®. Growth in insulin sales continues to be negatively impacted by price-focused healthcare reforms in some countries, while insulin sales in Germany in the fourth quarter were positively affected by an acceleration of purchasing by patients, primarily motivated by reimbursement considerations.

North America
Sales in North America increased by 34% in local currencies in 2004 and by 22% measured in Danish kroner. The solid sales growth reflects underlying market growth and market share gains. The increased market share is driven by a solid penetration of the insulin analogues NovoLog® and NovoLog® Mix. Novo Nordisk now holds more than one-third of the US insulin market and 20% of the analogue market.

     In December, Novo Nordisk’s US affiliate Novo Nordisk Inc, was again awarded a national contract to provide the US Veterans Administration and Department of Defense (VA/DoD) with human insulin, now also including analogue insulin in both vials and delivery devices. The new contract is initially for one year with an option of prolongation for four additional option years, at the discretion of the VA/DoD. The VA/DoD announced the potential five-year value of the contract at just under USD 250 million.

International Operations
Sales within International Operations increased by 20% in local currencies and by 14% measured in Danish kroner. The key growth driver continues to be sales of human insulin, driven especially by China. However, insulin analogues also continue to add to growth, driven especially by Turkey, and Novo Nordisk remains the overall market leader in the analogue segment in the International Operations region.

Japan & Oceania
Sales in Japan & Oceania increased by 11% in local currencies and by 9% measured in Danish kroner. Growth is primarily due to increased sales of NovoRapid® and NovoRapid® Mix 30, supported by a continued conversion from durable to prefilled devices, with Novo Nordisk now holding more than 80% of the prefilled device market.

Novo Nordisk Annual Report 2004

Back to Contents

Oral antidiabetic products
Sales of oral antidiabetic products increased in all regions and in total by 21% measured in local currencies and 15% measured in Danish kroner to DKK 1,643 million, with growth primarily driven by North America but also by International Operations.

Sales of biopharmaceutical products increased by 15% in local currencies compared to 2003 and by 11% measured in Danish kroner to DKK 8,498 million.

Sales of NovoSeven® increased by 19% in local currencies compared to 2003. Measured in Danish kroner sales increased by 13% to DKK 4,359 million, with all regions contributing to growth, but with North America, Europe and International Operations as the major growth drivers. In the fourth quarter, sales were positively affected by a timing-related increase in sales to a number of countries in International Operations.

     The sales growth of NovoSeven® was driven by several factors in 2004. Due to the high penetration within spontaneous bleeds in congenital inhibitor patients, the predominant part of the growth within the inhibitor segment has been generated by treatment of acquired haemophilia patients and usage of NovoSeven® in connection with elective surgery. Furthermore, the marketing approval in Europe in the first quarter of 2004 of NovoSeven® for the control of bleeding in patients with factor VII deficiency and Glanzmann’s thrombasthenia added to growth. Treatment of spontaneous bleeds for congenital inhibitor patients remains the largest area of use. In addition, sales are perceived to have been positively affected by increased investigational use of NovoSeven® influenced by data from clinical trials from the NovoSeven® expansion programme.

Growth hormone therapy (Norditropin® and Norditropin® SimpleXx®)
In local currencies sales of Norditropin® and Norditropin® SimpleXx® products increased by 11% compared to 2003. Measured in Danish kroner sales increased by 9% to DKK 2,317 million and were driven

by Europe and North America. The prefilled delivery device NordiFlex® was launched in Japan and selected European countries during 2004 as well as in the US market in January 2005.
     In Japan, the launch of NordiFlex® in July 2004 contributed to the positive development in Novo Nordisk’s market share during the second half of 2004; however, the government-mandated reduction in reimbursement prices in April 2004 impacted sales negatively.

Other products
Sales of other products within the biopharmaceuticals segment, which predominantly consists of hormone replacement therapy (HRT) related products, grew by 11% in local currencies and by 7% in Danish kroner to DKK 1,822 million.

     The sales growth in 2004 was positively impacted by the change in July 2003 of the US distribution set-up for Novo Nordisk’s HRT products and by the continued market penetration of the low-dose continuous-combined product Activella® and the topical oestrogen product Vagifem®. However, global sales in 2004 were negatively impacted by the overall contraction of the HRT market.

Costs, licence fees and other operating income

The cost of goods sold increased by 9% to DKK 8,050 million, representing a gross margin of 72.3%, an increase from 71.7% in 2003. Gains from an improved product mix as well as productivity increases, totalling slightly above 1 percentage point, were only partially offset by a negative currency impact.
     Total non-production-related costs increased by 9% to DKK 14,576 million. The increase reflects especially costs related to sales and distribution, which increased in line with the growth in sales. The main drivers of sales and distribution costs in 2004 were, respectively, launch activities for Levemir® in Europe; an increased US sales force, primarily focusing on promotion of insulin products but also related to the changed set-up for HRT products; and costs related to an impairment charge on intangible assets in Brazil.
     As a consequence of the implementation of IFRS 2 ‘Share-based payment’, Novo Nordisk in 2004 expensed costs related to share-based programmes amounting to DKK 104 million. The comparable expense included in the IFRS-based statements for 2003 was DKK 76 million.
     Total costs related to depreciation, amortisation and impairment losses in 2004 were DKK 1,892 million compared to DKK 1,581 million in 2003. The costs for 2004 include DKK 326 million in non-recurring impairment charges, compared to DKK 178 million in 2003.
     Total income related to licence fees and other operating income was DKK 575 million in 2004 compared to DKK 1,036 million in 2003, primarily reflecting a lower level of non-recurring income in 2004.

Net financials and tax

Net financials showed a net income of DKK 477 million in 2004 compared to DKK 954 million in 2003, reflecting a lower level of hedging income in 2004. The foreign exchange hedging gains, primarily related to the hedging of the US dollar, were DKK 663 million compared to DKK 1,195 million in 2003. Foreign exchange hedging gains in the fourth quarter of 2004 were positively impacted by un-

Novo Nordisk Annual Report 2004

Back to Contents


realised gains from the mark-to-market valuation of foreign exchange options, primarily related to the US dollar.
     Novo Nordisk has as per 27 January 2005 hedged expected net cash flows in relation to US dollars, Japanese yen and British pounds for 14, 11 and 8 months, respectively.
     The effective tax rate for 2004 was 33%, down from 34% in 2003, corresponding to a total tax expense of DKK 2,444 million in 2004.

Capital expenditure

Net capital expenditure for property, plant and equipment for 2004 was realised at DKK 3.0 billion, compared to DKK 2.3 billion for 2003. The main investment projects in 2004 were the expansion of purification capacity for Levemir®, as well as expansion of filling capacity for insulin products, including FlexPen®.

Free cash flow and financial reserves

Free cash flow for 2004 was realised at DKK 4,278 million compared to DKK 3,846 million for 2003. This is higher than previously anticipated and is primarily related to a reduction in the average number of credit days for trade receivables.
     Novo Nordisk’s financial resources at the end of 2004 were DKK 10.2 billion compared to DKK 11.4 billion in 2003. Included in the financial resources are undrawn committed credit facilities of close to DKK 6.7 billion.

Non-financial performance:
Progress towards sustainability

In managing its business with a Triple Bottom Line approach, Novo Nordisk is linking a set of key targets to sustainability goals. Twenty top-level indicators help track performance over time in regard to environmental, social and socio-economic goals. They relate to six areas of strategic importance: living our values, access to health, our employees, our use of animals, eco-efficiency and compliance, and economic contribution. The indicators have been defined through consultation with stakeholders, while methods of measuring and targets are set by Novo Nordisk’s management. For details and comparative data, see page 50–51 and

Living our values
The employee survey, eVoice, is conducted annually and systematically measures the working climate. This includes a measure of the organisational support for and understanding of responsible business practices. In 2004, the average of respondents’ answers – on a scale from 1–5, with 5 being the highest score – was 4.2. Regular independent facilitations assess compliance with the Novo Nordisk Way of Management. In 2004, 96% of identified corrective actions were accomplished. Performance on these indicators is stable over time and better than targets.
     Novo Nordisk’s commitment to social and environmental good practices extends throughout the supply chain. Suppliers are evaluated with respect to basic labour rights and environmental management. Due to the company’s expanding global production, new sup-

pliers have been introduced to the company and its standards. To focus on key impacts, the triviality limit has been raised. During 2004 suppliers accounting for 20% of the total value of Novo Nordisk’s purchases were evaluated. Of these, 72% reported a satisfactory performance. All suppliers with an unsatisfactory rating receive a feedback letter from Novo Nordisk, and when needed an action plan is agreed upon. In 2004, nine key suppliers were audited, following similar processes as Novo Nordisk’s regular quality audits.

Access to health
Novo Nordisk has built its strategy for improved access to diabetes care on the World Health Organization’s (WHO) key priorities: national healthcare strategies, national healthcare capacity, best possible pricing and additional funding. Novo Nordisk serves around 20% of the global diabetes care market, supplying insulin to 11–13 million people. The global health programmes, providing awareness, education or treatment of diabetes, are reaching out to at least 21 million people.
     The best possible pricing scheme, offered by Novo Nordisk to 49 of the least developed countries (LDCs) in the world, was monitored closely in 2004 to ensure that sales offers were followed up and re-alised purchase prices were at or below the level at 20% of average prices in the industrialised countries. As a result, 33 LDCs chose to buy insulin under this pricing scheme, as compared with 16 LDCs in 2003.

Our employees
Since 2003 efforts to improve health and safety have focused on prevention. As a result, the frequency of occupational injuries per million working hours has gone down; from 8.9 in 2002 to 5.6 in 2004. Regrettably, Novo Nordisk had one fatal accident in 2004 in connection with a social team event. Steps have been taken to ensure that employees’ safety is properly considered before embarking on such activities.
     Employee turnover at Novo Nordisk was 7.3% in 2004, which is satisfactory compared to the industry.

Our use of animals
Novo Nordisk sets goals to reduce, refine and replace animal experiments and to improve animal welfare. Hence, despite a significantly higher research activity in early phases, when animal experimentation is required, the number of animals purchased in 2004 only rose by 10% to 47,311 animals, of which 96% are mice, transgenic mice and rats.
     The goal to totally remove animal test types for biological product control by 2004 had to be postponed until 2005. An FDA approval, obtained in 2004, enables Novo Nordisk to considerably reduce (by approximately 80%) the number of animals used for biological product control in one of the two remaining tests. A 60% reduction in the use of rabbits has already been achieved by the end of 2004. A novel test for glucagon was fully implemented in the third quarter of 2004. The test uses isolated cells in vitro rather than living animals, and rabbits are therefore no longer used for this purpose.

Eco-efficiency and compliance
The 2003–2008 environmental strategy identified eight focus areas, of which climate change has key priority. Novo Nordisk has agreed


Novo Nordisk Annual Report 2004

Back to Contents

to set the goal for absolute reductions of its net CO2 emission by 2014. The year 2004 will serve as the basis for evaluation of the target achievement.    
     In 2004, CO2 emissions were 253,000 tons. This is a significant in-
crease from previous years. There are two reasons: First, the emission factors from electricity purchased in Denmark have increased by approximately 15%. Secondly, Novo Nordisk no longer purchases green electricity certificates for its site in Kalundborg. The company is currently investigating in detail the renewable energy market, product offerings and the possibilities to purchase credible certified electricity from renewable sources.
     Eco-productivity is a means of measuring the ability to ‘produce more with less’. The medium-term targets for 2001–2005 are a 5% annual improvement in water efficiency and a 4% annual improvement in energy efficiency. In 2004 the achieved improvements were 7% and 8% respectively.
     Compliance with regulatory requirements is a key indicator for the standards of environmental management at local production sites. In 2004, there were 76 breaches of regulatory limits, which is a marked improvement compared with 2003, with a record number of 105.
     In 2004 there were 30 incidents of accidental releases, as compared with 20 in 2003. Immediate measures are taken to mitigate future events, including retraining of personnel. In August 2004, Novo Nordisk had two accidental releases of materials containing genetically modified organisms (GMOs) at the production site in Bagsværd. The affected areas were disinfected immediately, and no harm was done to humans or the environment.
     However, since the goal remains to be zero breaches and zero accidental releases, this performance is not satisfactory. Steps are taken to improve compliance.

Economic contribution
The ‘footprint’ model provides an understanding of Novo Nordisk’s local and global contributions to society. In the reports from the largest production sites, the company’s contribution to socio-economic growth is assessed and quantified. This includes job creation, local taxes paid and local procurement.

Knowledge assets
Being a research driven and knowledge intensive company, knowledge is considered a key asset for further exploration. Novo Nordisk takes a strategic and systematic approach, viewing knowledge from a holistic approach that seeks to balance three perspectives: behaviour/culture, technology/communication and performance economics.
     To ensure progress and report on the knowledge base, knowledge assets are defined as stakeholder resources (employees, customers, relationships and partnerships) and structural resources (technology and processes).
     Novo Nordisk’s exposure to patent expiry is significantly lower than that of industry peers. No major patents expire within a 5-year period. In 2004 Novo Nordisk had a total of 778 active patent families, as compared with 701 in 2003.
     Two key elements of the patent strategy are to raise patent awareness internally, through training and the appointment of

‘patent champions’ in the R&D organisation, and to improve the intellectual asset management.

Research and development update

Diabetes care
In December, Novo Nordisk filed the amended New Drug Application related to Levemir® with the US regulatory authorities (FDA), and Novo Nordisk expects a US marketing approval around mid-2005, following an expected six months’ review period by the FDA.
     The liraglutide phase 2b study was, as expected, initiated in January 2005 and Novo Nordisk still expects to initiate the phase 3 clinical trial around the turn of the year 2005/6.
     Novo Nordisk and the diabetes business unit of Medtronic Inc entered into an agreement in November, covering the US and Puerto Rico, to develop the world’s first prefilled cartridge for use with Paradigm®, Medtronic’s external insulin pumps. Prefilled cartridges containing NovoLog® are expected to offer a convenient treatment option for people using Paradigm® pump therapy. Novo Nordisk has completed the restructuring transaction with Aradigm Corporation related to the AERx® insulin Diabetes Management System (iDMS), giving Novo Nordisk full development and manufacturing rights to the programme as of 26 January 2005. Following the fulfilment of closing conditions, including approval by the US competition authorities as well as approval by Aradigm’s shareholders, Novo Nordisk’s wholly-owned affiliate Novo Nordisk Delivery Technologies, Inc now employs approximately 130 former Aradigm employees who have been dedicated to the AERx® iDMS programme.
     In November, The University of Oxford Diabetes Trials Unit, in collaboration with Novo Nordisk, initiated the 4-T study (Treating To Target in Type 2 Diabetes). The study compares safety and efficacy of three different insulin treatment regimens in patients with type 2 diabetes, who are inadequately controlled with oral antidiabetic agents. The objective of this three-year study is to provide evidence and guidance on ‘how best to treat people with type 2 diabetes with insulin’, with the aim of preventing long-term complications and preserve quality of life. Initial results from the study, which includes approximately 700 patients, are expected during 2006, with final results expected during 2008.

Novo Nordisk submitted the regulatory dossier for marketing approval of the use of NovoSeven® for treatment of blunt trauma to the European Medicines Agency in early January 2005. The application is a supplemental new drug application with an expected six months’ review time. Novo Nordisk still expects to initiate a US trauma trial in the second quarter of 2005. The study is expected to comprise some 600 blunt and penetrating trauma patients.
     Following recent consultations with the FDA, Novo Nordisk expects to initiate a confirmatory clinical trial in the US and Europe as well as in other countries for the use of NovoSeven® in intracerebral haemorrhage (ICH) mid-2005, involving some 450 patients. Novo Nordisk expects this trial to generate further clinical documentation for filing with the FDA for regulatory approval in the US of NovoSeven® in connection with ICH. Novo Nordisk still expects to


Novo Nordisk Annual Report 2004

Back to Contents


file an application by mid-2005 for marketing approval in Europe for the use of NovoSeven® in connection with ICH.
     In November, the Japanese Ministry of Health, Labour and Welfare granted approval of NovoSeven® for treatment of bleeding episodes in patients with acquired haemophilia, in addition to the existing approval for treatment of congenital haemophilia patients with inhibitors.
     Also in November, Novo Nordisk was granted marketing authori-sation in the US for Norditropin® for treatment of severe growth hormone deficiency in adults.
     Following analysis of the phase 2 data on the use of human growth hormone in complicated fractures, further clinical development has been discontinued. The phase 2 data showed a significant acceleration of fracture healing; however, pharma-economic analysis did not justify further clinical development. Novo Nordisk will continue to develop human growth hormone for other new therapeutic indications.


Total equity was DKK 26,504 million at the end of 2004, equal to 70.8% of total assets, compared to 71.7% at the end of 2003.

Proposed dividend

At the Annual General Meeting on 9 March 2005, the Board of Directors will propose a 9% increase in dividend to DKK 4.80 per share of DKK 2, corresponding to a pay-out ratio of 31.8%, compared to 30.8% for the financial year 2003. No dividend will be paid on the company’s holding of own shares.

Treasury shares and share repurchase programme

As per 28 January 2005, Novo Nordisk A/S and its wholly-owned affiliates owned 22,585,129 of its own B shares, corresponding to 6.37% of the total share capital. During 2004, Novo Nordisk purchased 6,480,000 B shares at a cash value of DKK 2 billion, which is in line with the share repurchase programme as announced in April 2004. Novo Nordisk still expects to purchase additional B shares during 2005 equivalent to a cash value of DKK 2 billion, with the remaining shares under the total DKK 5 billion share repurchase programme to be acquired during 2006.

Long-term share-based incentive programme

As from 2004, Novo Nordisk’s Executive Management and Senior Management Board (26 in total) participate in a performance-based incentive programme where Novo Nordisk B shares are annually allocated to a bonus pool when certain predefined business-related targets have been achieved. The annual maximum allocation of shares to the bonus pool is capped at the equivalent of eight months of salary per participant. The shares in the bonus pool are locked up for a three-year period before they are transferred to the executives at the expiry of the three-year lock-up period. Based on an assessment of the economic value generated in 2004 as well as the performance of the R&D portfolio and key sustainability projects, the Board of Directors on 27 January 2005 approved the estab-

lishment of a bonus pool for 2004 by allocating a total of 126,344 Novo Nordisk B shares, corresponding to a cash value of DKK 33.7 million. This allocation amounts to seven months of salary on average per participant.

Audit Committee

The Audit Committee, which was established by the Board of Directors in March 2004, continues to be responsible, on behalf of the Board, for a number of predefined tasks. These include overseeing the internal and external auditors, accounting policies and internal controls, as well as procedures for handling complaints regarding financial reporting matters.

Legal issues

As of 27 January 2005, Novo Nordisk Inc, together with the majority of hormone therapy product manufacturers, is a defendant in 16 product liability lawsuits. Since the initiation of the lawsuits in July 2004, three cases against Novo Nordisk Inc have been dismissed by the courts. Novo Nordisk’s hormone therapy products (Activella® and Vagifem®) have been sold and marketed in the US since 2000. Until July 2003, the products were sold and marketed exclusively in the US by Pharmacia & Upjohn Corporation (now Pfizer). The proceedings are in their preliminary stages; however, Novo Nordisk is not expecting the claims to impact Novo Nordisk’s financial outlook.
     In January 2005, Novo Nordisk, Teva and Savient (formerly known as Bio-Technology General) have agreed to a partial settlement of their disputes over human growth hormone (hGH) intellectual property. Under the terms of the agreement, the three parties have granted each other cross-licences to any patents covering the hGH-active ingredient. An appeal of a District Court judgment regarding one portion of the dispute will continue, as will an interference proceeding in the US Patent and Trademark Office. The financial terms of the agreement are not disclosed, but the financial impact has been included in this annual report.

Outlook 2005

Novo Nordisk expects a 10–15 percentage-point growth in sales for 2005 measured in local currencies based on expectations of a strong market for insulin products in general and the continued market penetration of Novo Nordisk’s insulin analogue portfolio, combined with expectations of increasing NovoSeven® and Norditropin® SimpleXx® sales. However, as a consequence of the continued challenging currency environment, primarily related to the US dollar and related currencies, the sales growth measured in Danish kroner is expected to be around 10%.
     For 2005, operating profit growth measured in local currencies and excluding the impact from non-recurring items is expected to be in line with Novo Nordisk’s long-term target of growing operating profit by 15%. Measured in Danish kroner the growth in operating profit is expected to be around 5%, reflecting a significant, negative currency impact and no major non-recurring income in 2005.
     Novo Nordisk expects a net financial expense of DKK 100 million, reflecting:


Novo Nordisk Annual Report 2004

Back to Contents

a financial income, net of around DKK 100 million (excluding Novo Nordisk’s share of loss & profit in associated companies), primarily related to expected gains from foreign exchange hedging contracts; and

a negative impact from losses in associated companies of around DKK 200 million, primarily reflecting Novo Nordisk’s share of the expected loss in ZymoGenetics, Inc.

Given the prevailing Danish corporation tax regime, Novo Nordisk expects the tax rate to be 32%, 1 percentage point lower than the tax rate realised for 2004.
     Novo Nordisk plans capital expenditures of close to DKK 4 billion in 2005, primarily related to the construction of production plants for Levemir® as well as additional filling capacity for insulin products. Capital expenditure will include purchase of fixed assets from Aradigm Corporation of approximately DKK 300 million related to the transfer of the AERx® iDMS project to Novo Nordisk. Depreciation, amortisation and impairment losses are expected to be around DKK 1.9 billion and the free cash flow to be more than DKK 2 billion.
     All of the above expectations are provided that currency exchange rates remain at the current level for 2005. All other things being equal, movements in key invoicing currencies will impact Novo Nordisk’s operating profit in 2005 as illustrated below. *

Invoicing currency
Annual impact on Novo Nordisk’s operating profit in 2005 of a 5% movement in currency

DKK 280 million
DKK 130 million
DKK 80 million
DKK 70 million

Note: USD-related currencies include CNY, CAD, ARS, BRL, MXN, CLP, SGD, TWD and INR.

Forward looking statement

This management report contains forward-looking statements as the term is defined in the US Private Securities Litigation Reform Act of 1995. Forward-looking statements provide current expectations or forecasts of events such as new product introductions, product approvals and financial performance.
     Such forward-looking statements are subject to risks, uncertainties and inaccurate assumptions. This may cause actual results to differ materially from expectations. Factors that may affect future results include interest rate and currency exchange rate fluctuations, delay or failure of development projects, production problems, unexpected contract breaches or terminations, government-mandated or market-driven price decreases for Novo Nordisk’s products, introduction of competing products, Novo Nordisk’s ability to successfully market both new and existing products, exposure to product liability and other lawsuits, changes in reimbursement rules and governmental laws and related interpretation thereof, and unexpected growth in costs and expenses.
     Risks and uncertainties are further described in reports filed by Novo Nordisk with the US Securities and Exchange Commission (SEC) including the company’s Form 20-F, which was filed on 27 February 2004. Please also refer to the article ‘Risk Management’ on page 56. Novo Nordisk is under no duty to update any of the forward-looking statements or to conform such statements to actual results, unless required by law.



Novo Nordisk Annual Report 2004

Back to Contents



DKK million
DKK million
DKK million
DKK million
DKK million
EUR million
EUR million

Diabetes care:
Insulin analogues 142 459 1,187 2,553 4,507 77 % 344 606
Human insulin and insulin-related products 13,161 14,533 14,651 14,492 14,383 (1 %) 1,950 1,933
Oral antidiabetic products (OAD) 1,080 1,392 1,620 1,430 1,643 15 % 192 221

Diabetes care total 14,383 16,384 17,458 18,475 20,533 11 % 2,486 2,760

Haemostasis management (NovoSeven®) 2,252 3,071 3,593 3,843 4,359 13 % 517 586
Growth hormone therapy 2,008 2,055 2,061 2,133 2,317 9 % 287 311
Hormone replacement therapy 1,298 1,426 1,333 1,322 1,488 13 % 178 200
Other products 544 449 421 385 334 (13 %) 52 45

Biopharmaceuticals total 6,102 7,001 7,408 7,683 8,498 11 % 1,034 1,142

Total sales by segments 20,485 23,385 24,866 26,158 29,031 11 % 3,520 3,902

Europe 9,093 10,562 10,889 11,697 12,411 6 % 1,574 1,668
North America 4,028 5,167 5,786 6,219 7,478 20 % 837 1,005
International Operations 2,869 3,395 4,099 4,227 4,844 15 % 569 651
Japan & Oceania 4,495 4,261 4,092 4,015 4,298 7 % 540 578

Total sales by geographical areas 20,485 23,385 24,866 26,158 29,031 11 % 3,520 3,902

Price and volume/mix 16 % 17 % 11 % 15 % 15 %
Currency 11 % (3 %) (5 %) (10 %) (4 %)

Total growth 27 % 14 % 6 % 5 % 11 %


DKK million
DKK million DKK million DKK million DKK million Change EUR million EUR million

Operating profit 4,703 5,410 5,927 6,422 6,980 9 % 864 938
Net financials 181 285 401 954 477 (50 %) 129 64
Profit before income taxes 4,884 5,695 6,328 7,376 7,457 1 % 993 1,002
Net profit 3,154 3,620 4,116 4,833 5,013 4 % 650 674
Equity 16,620 19,700 22,477 24,776 26,504 7 % 3,328 3,563
Total assets 24,597 28,662 31,612 34,564 37,433 8 % 4,643 5,033
Capital expenditure (net) 2,123 3,829 3,893 2,273 2,999 32 % 305 403
Free cash flow 2,712 186 497 3,846 4,278 11 % 517 575



Earnings per share 9.03 10.47 11.87 14.17 14.89 5 % 1.90 2.00
Earnings per share diluted 9.03 10.45 11.85 14.15 14.83 5 % 1.90 1.99
Proposed dividend 2.65 3.35 3.60 4.40 4.80 9 % 0.59 0.65
Quoted price at year-end for B shares 285 342 205 241 299 24 % 32 40


% % % % % Long-term financial target in %

Growth in operating profit 32.6 15.0 9.6 8.4 8.7 15
Growth in operating profit, three-year average 24.1 22.7 19.1 11.0 8.9
Operating profit margin 23.0 23.1 23.8 24.6 24.0 25
Return on invested capital (ROIC) 22.3 22.7 20.5 19.5 20.6 25
Cash to earnings 86.0 5.1 12.1 79.6 85.3
Cash to earnings, three-year average 66.3 56.2 34.4 32.3 59.0 60
Net profit margin 15.4 15.5 16.6 18.5 17.3
Return on equity 19.6 19.9 19.5 20.5 19.6
Equity ratio 67.6 68.7 71.1 71.7 70.8
Change in market capitalisation 56.2 20.4 (40.4 ) 15.4 21.9

Key figures and per share data are translated into EUR as supplementary information – the translation is based on the currency rate at 31 December 2004 (EUR1=DKK 7.4381).


Novo Nordisk Annual Report 2004

Back to Contents



Resources Water consumption 1,000m3 1,429 1,790 2,044 2,621 2,756
Energy consumption 1,000GJ 1,732 1,838 2,083 2,299 2,408
Raw and packaging materials 1,000 tons 76 88 93 110 111

Wastewater Volume 1,000m3 1,121 1,424 1,714 2,169 2,226
COD Tons 723 830 971 1,187 1,448
Nitrogen Tons 63 86 111 122 121
Phosphorus Tons 11 15 17 21 21

By-products (biomass) Volume 1,000m3 141 147 155 181 155
Nitrogen Tons 1,167 1,415 1,649 1,846 1,876
Phosphorus Tons 353 423 504 555 530

Waste Waste (total) Tons 10,551 14,866 12,935 21,356 21,855
Non-hazardous waste Tons 7,300 7,032 9,370 9,203
Hazardous waste Tons 7,566 5,903 11,986 12,652
Recycling percentage of total waste % 45 50 41 41 40

Emissions to air Organic solvents Tons 78 75 149 1371 ) 115
Ozone-depleting substances Kg 1,561 915 1,351 1,047 1,176
CO2 1,000 tons 139 143 149 153 253
SO2 Tons 270 245 162 158 288
NOx Tons 272 251 283 291 452

Environmental Impact Potentials Global warming 1,000 tons CO2-eqv 142 145 152 155 255
Ozone layer depletion Kg CFC11-eqv 153 41 83 43 60
Acidification Tons SO2-eqv 460 421 360 361 604
Eutrophication Tons NO3-eqv 1,040 1,291 1,417 1,598 1,803

Eco-productivity indices (EPIs) EPI for water 110 102 116 110 107
EPI for energy 111 114 115 124 108

Compliance Breaches of regulatory limit values 9 68 30 105 762 )
Accidental releases 2 5 12 20 30
Complaints 2 32 7 11 13


Basic employee statistics Employees (total)3) 13,752 16,693 18,372 19,241 20,725
Female % 50.8 50.7 49.7 49.4 49.1
Male % 49.2 49.3 50.3 50.6 50.9
Rate of absence4) % 4.0 3.8 2.7 3.1 3.2
Rate of employee turnover4) % 10.6 7.7 6.4 7.1 7.3

Health & safety Frequency of occupational injuries per million working hours 8.4 8.2 8.9 5.4 5.6
Frequency of occupational illnesses per million working hours 1.7 2.2 1.1 1.1 1.3
Fatalities 0 1

Training costs Annual training per employee5) DKK 8,393 8,201 8,189 7,518 8,992


Purchased animals Number of animals purchased 61,512 55,876 48,128 42,869 47,311

Patent families Active patent families to date 526 590 654 701 778
New patent families (first filing) 85 107 114 140 145

Environmental costs and Environmental costs DKK million 93.2 129.7 139.1 151.46 ) 155.3
investments Environmental investments DKK million 30.1 44.3 14.4 23.0 54.0
as share of total investments in tangible assets7) % 1.4 1.2 0.4 1.0 1.8

Economics7) R&D as share of sales % 16.6 16.6 15.9 15.5 15.0
Total corporate tax as share of sales % 8.4 8.9 8.9 9.7 8.4
Employee income taxes DKK million 1,597 1,853 2,010 2,065
Novo Nordisk exports as share of Danish exports % 3.4 4.1 4.4 4.4 3.9

1) Was reported as 140. Reporting error now corrected.
2) Includes breaches that are also registered as accidental releases. Two of them are accidental releases of GMOs.
3) Headcount at the end of 2004. The full-time equivalent is 20,285.
4) 2002–2004 figures cover all employees, whereas figures for 2000–2001 comprise only employees in Denmark and employees at production sites outside Denmark.
5) Average spent on training costs per employee based on headcount.
6) Was reported as 149.8. Reporting error now corrected.
7) Financial figures 2001–2004 have been changed due to adoption of IFRS. See Note 1 on page 64.


Novo Nordisk Annual Report 2004

Back to Contents



Living our values    

Two indicators show how we live up to the company’s values, as per-ceived by employees. This is measured as part of the climate survey, eVoice, conducted annually. Responses are given on a scale from 1 to 5, with 5 being the highest score. One indicator shows follow-up on the facilitation process.   Average of respondents’ answers as to whether social and environmental issues are important for the future of the company.

    Average of respondents’ answers as to whether management demonstrates in words and action that they live up to our Values.

    Percent of fulfilment of action points planned arising from facilitations of the Novo Nordisk Way of Management and Values.

Access to health    

Two indicators measure progress on one of the programmes for global access to health, the best possible pricing scheme in Least Developed Countries (LDCs). In 2004 there were 50 LDCs.   Number of LDCs where Novo Nordisk operates.

    Number of LDCs which have chosen to buy insulin under the best possible pricing scheme.

Our employees    

Four indicators measure standards of health and safety in the work-place, employee development and equal opportunities. Responses in the eVoice climate survey are given on a scale from 1 to 5, with 5 being the highest score.   Frequency of occupational injuries.

    Employee turnover rate.

    Average of respondents’ answers as to whether their work gives them an opportun-ity to use and develop their competences/skills.

    Average of respondents’ answers as to whether people from diverse backgrounds have equal opportunities (for example in terms of hiring, promotion and training) at Novo Nordisk, regardless of gender, race, ways of thinking etc.

Our use of animals    

Two indicators track efforts to reduce the number of experimental ani-mals and improve their welfare.   Percent of animal test types removed from external and internal specification.

    Housing conditions for experimental animals, considering the needs of the animals.

Eco-efficiency and compliance    

Two environmental indicators, eco-productivity indices (EPIs), are based   Annual improvement in water efficiency.
on eco-efficiency thinking and reflect internationally adopted views.  
Full compliance with local laws and regulations is a company policy.   Annual improvement in energy efficiency.
Certification of production facilities is instrumental to that end.  
    ISO 14001 implementation.

Economic contribution    

Five financial measures for reporting to shareholders and the financial markets serve as indicators for economic contribution.   Operating profit margin.
    Growth in operating profit.
    Total corporate tax as share of sales
(corporation tax in profit and loss/sales).
    Return on invested capital (ROIC).
    Cash to earnings (three-year average).


Novo Nordisk Annual Report 2004

Back to Contents

TARGETS 2004–2007


Organisational support for and understanding of responsible business practices.  
> 3.5

Integration of corporate values in all decisions.  
> 3.5

Corrective actions on values following facilitations.  


Access to essential medicines.  
Best possible pricing scheme in all LDCs.

Affordability of essential medicines.  
Best possible pricing scheme in all LDCs.


Increased quality of life for employees, improved work flow and productivity, and less absence due to illness.  
Continuous decrease.

Influx and outflux of knowledge.  
Reduction of turnover.

Increased competence level for employees and increased competence capital in the company.  
> 3.5

Increased diversity in the workplace.  
> 3.5


Reduction and replacement of experimental animals.  
Total removal of animal test types for biological product control by 2005.5)

Improved welfare of experimental animals.  
Housing prototypes
New housing standards
New facilities in use
New facilities in use
Full implementation of new Novo Nordisk standards for optimal housing.


Water use efficiency.  
5% improvement per annum 2001–2005

Energy use efficiency.  
4% improvement per annum 2001–2005

Compliance with regulatory requirements.  
Zero breaches.
Accidental releases.  
Zero accidental releases.

Pollution prevention through decreased use of raw materials, water and energy, and decreased environmental impact per produced unit.  
System described
ISO 14001 certification of all production facilities worldwide by 2007. The next is planned for 2005.


Contribution to company efficiency, growth and investors’ economic capacity.  

Contribution to company growth and investors’ economic capacity.  
15% per annum6)

Contribution to national economic capacity.  

Efficiency of invested capital, contribution to asset base and investors’ economic capacity.  
25% per annum6)

Contribution to the company’s degree of freedom in terms of available cash funds (resources).  
60% as a three-year average6)

1) Comparable data for 2000 do not exist, as this set of indicators was defined in 2001.
2) The survey population was 21% of all employees. The population was small as the questions were not mandatory.
3) In 2004 a margin of +10% to the realised sales price (ie 20–22%) is permitted where exchange rates fluctuate. This occurred for three countries.
4) The survey population was 76% of all employees.
5) Target revised in 2004.
6) Long-term growth target. Financial figures have been changed due to adoption of IFRS. See Note 1 on page 64.


Back to Contents


Measuring contributions to society

Novo Nordisk’s business strategy aims to contribute to society in those areas where the company has outstanding knowledge and expertise. Access to health, ethical business practice, supply chain management and environmental management at all production sites are important for the institutional framework within which the markets work. The footprint model and the cash value distribution on the opposite page illustrate the relationship between Novo Nordisk and its economic stakeholders and their roles as drivers of economic activity in society.
     The principles of economics have been justified by the success of the market economy, growth and societal wealth creation. Economic growth and trade combined with foreign investments that create employment are important factors in capacity building globally. Social indicators, though, show that the created wealth is unevenly distributed. In poor communities, investments and tax contributions are but one aspect of responsible business. Market failure, inadequate information and lack of societal institutions impede the workings of economic stakeholder mechanisms, in particular in the developing world. Performance-based principles, such as those developed by the Global Reporting Initiative, in conjunction with government regulation may be a way to ensure that the market economy is working for everyone.

Direct and indirect local and global impact
To show the indirect impact of Novo Nordisk in Denmark (2004), we have estimated the indirect employment created by our production and by employees’ consumption in Denmark and globally. The indirect effects are estimated by using production multipliers for the pharmaceutical industry and consumption multipliers from Statistics Denmark. A total of 11,839 direct jobs in Denmark translated into 42,673 global jobs in the supply chain due to production needs and the private consumption of employees in Denmark. The value of the jobs in Denmark is DKK 9.9 billion and DKK 3.9 billion in income taxes.
     Key indicators of the company’s direct economic and geographical impact are reported on page 53. Measured by sales, Novo Nordisk is the 11th largest Danish company. Most production facilities, 58% of the employees measured in full-time equivalents (FTE) and 88% of tangible assets are in Denmark. From 2003 to 2004, sales grew by 11%. 99% of sales are outside Denmark: 43% in

IMPACTS (2004)
Jobs Income Tax

DKK billion DKK billion

Direct impact in Denmark 11,839 5.0 2.1
Indirect impact: suppliers 17,501 4.1 1.5
Indirect impact: employees 3,476 0.8 0.3

Impact in Denmark 32,816 9.9 3.9

Impact globally 42,673

Europe, 26% in North America, 15% in Japan & Oceania and 16% in International Operations. 36% of the cash from customers goes to suppliers, who are primarily located in Denmark: The employee base (FTE) grew by 8%, primarily in North America (23%) followed by International Operations (19%) and Japan & Oceania (8%). 34% of the cash-added value was remuneration, mainly in the developed world, and particularly in Denmark. In 2004, total corporate taxes constituted 8% of sales. In Denmark 13% is paid as local taxes and 87% as state taxes. Most investors are Danish (59%), North American (25%) or British (13%). An estimated 60% of employees own a total of 1% of the shares.

Value of knowledge and investments
Novo Nordisk’s greatest value is societies’ expectations of future products and solutions. This value originates from the skills, expertise and competences of the people at Novo Nordisk and is, although difficult to measure, of benefit to individuals as well as society. A rough measure of current values is wage share (54%) of the value added per employee (DKK 908,772 or USD 151,666). Expenditure on R&D is an important capacity builder for society and source of innovation creating future wealth for Novo Nordisk. The wage share (39%) of R&D is an indication of the company’s impact as a capacity builder in the community. The level of investment is a measure of the company’s future economic capacity. In 2004 Novo Nordisk invested DKK 3 billion in new production facilities, primarily in Brazil, Denmark, France and the US, as compared with DKK 2.3 billion in 2003.

Contribution to society locally and impact globally
Measured as a share of Danish GDP, turnover in 2004 accounted for 2%, a rise from 1.9% in 2003. In 2004 economic contribution to overall economic wealth for society through the value added was 1.5% of Gross Value Added (GVA), 3.9% of Danish exports and 0.5% of Danish employment. In 2004 Novo Nordisk accounted for 4.3% of Danish corporate taxes and Novo Nordisk’s employees accounted for 0.6% of total Danish income tax.
     The company’s impact on society through the value of products may be illustrated through the number of people reached globally. Novo Nordisk serves 20% of the diabetes care market and with an insulin market share of 51%, supplies insulin to 11–13 million people globally. These are primarily people with diabetes in the developed world, but Novo Nordisk is also supplying 3–5 million people in the developing world, in many countries as the only provider of insulin. The burden of diabetes is forecast to worsen in the future. It is not enough for companies to contribute to access to health in the developing world; products must be affordable and income must be generated in the local economies to generate funds for a sustainable healthcare system. During 2004 Novo Nordisk created new jobs and income opportunities both in China (118) and Brazil (253).
     See the indicators of current and future global health at and read more about the effect of creating jobs and income in the developing world. *


Novo Nordisk Annual Report 2004

Back to Contents

Novo Nordisk’s economic stakeholder model

This model illustrates Novo Nordisk and its economic stakeholders and the interactions that drive economic growth in well-developed societies. When, for instance, investors provide risk capital so that Novo Nordisk can develop new products, it will benefit customers, employees and suppliers. For customers, in turn, the products from Novo Nordisk improve their ability to contribute to society. When employees, suppliers and investors spend their income to buy goods and services and make investments, they too contribute to wealth generation in society. And in their capacity as citizens in the local and global community, all economic actors pay taxes to the public sector in return for services. Our sustainable business practices are mechanisms that improve the outcome of the market economy model. The interactions and multiplier effects are illustrated by the green circle linking the stakeholders.

DKK million
Cash received
Cash-added value

Cash received for products and services (from sales) 28,754 100%
Cash payments for materials, facilities and services1) 10,320 36%
Company cash
Cash-added value (a minus b) 18,434 100%
Remuneration 9,872 34% 54%
Dividend and interest payments 3,560 13% 19%
Public sector
Taxes 2,866 10% 16%
Future growth 2,136 7% 11%

1) Cash payments outside Novo Nordisk. The figure includes cash received from licence fees, realised exchange rate gains and interest income.


Novo Nordisk Annual Report 2004

Back to Contents


Corporate governance on the agenda

In 2004 a number of new national and international guidelines emerged. In Denmark, the Nørby Committee II set up by the Copenhagen Stock Exchange published a draft revision of its recommendations for good corporate governance. The European Commission continued to launch initiatives under the Corporate Governance action plan.

     As a company organised under Danish law and with a primary listing on the Copenhagen Stock Exchange, Novo Nordisk is guided by the Nørby recommendations and the EU initiatives. As an international company listed in New York and London, Novo Nordisk is in compliance with the US Sarbanes–Oxley Act as a foreign private issuer and will seek inspiration from internationally recognised standards.

Organisational structure
Novo Nordisk is a public limited liability company. Within that framework, shareholders have the ultimate authority over the company, and they exercise their right to make decisions regarding Novo Nordisk at general meetings. The company has a two-tier board structure consisting of the Board of Directors and Executive Management. The Board of Directors supervises the performance of the company, its management and organisation on behalf of the shareholders. It also participates in determining the company strategy. Executive Management, in turn, has responsibility for the company’s daily operations. The two bodies are separate, and no person serves as a member of both.

Shares and voting rights
The share capital in Novo Nordisk is divided into A shares and B shares. The A shares, which are solely owned by the Novo Nordisk Foundation via Novo A/S, have 10 votes per DKK 1 of the A share capital, whereas the B shares have one vote per DKK 1 of the B share capital. According to the Articles of Association of the Foundation, the A shares cannot be divested by Novo A/S or the Foundation. The A shares represent 15.2% of the capital and 64.1% of the entire voting power in the company. The A shares are not listed, whereas the B shares are listed on the Copenhagen and London Stock Exchanges, and on the New York Stock Exchange in the form of ADRs. There are no transferability restrictions on the B shares. Novo Nordisk is of the opinion that the current ownership structure is appropriate and preferable for the long-term development of the company. A revocation of the current voting rights differentiation cannot be implemented as this would violate the Articles of Association of the Foundation as approved by the Danish authorities. For further information on shares, see page 104.

The Novo Nordisk Foundation
The objective of the Foundation is to provide a stable basis for the commercial and research activities of Novo Nordisk and support scientific, humanitarian and social purposes. The Foundation may, in connection with a capital increase in Novo Nordisk or a merger of Novo Nordisk with other companies, waive its controlling interest in

Novo Nordisk if it is necessary to uphold and develop the commercial and research activities of Novo Nordisk as an internationally competitive business. However, the Foundation shall strive to maintain material influence in Novo Nordisk through Novo A/S.

     The Foundation supports Novo Nordisk in achieving its vision, ensuring competitive financial results and adhering to the Charter for Companies in the Novo Group. All strategic and operational matters are solely decided by the Board and the management of Novo Nordisk. Overlapping board memberships ensure that the Foundation and Novo Nordisk share a common vision and strategy.

Shareholders’ general meeting
General meetings are called with approximately three weeks’ notice, and the agenda is accompanied by proxy forms enabling the shareholder to vote specifically on each item. The annual general meeting approves the annual report.

     The general meeting elects 4–10 directors, and the auditor(s). All shareholders may ask questions at the general meetings. Proposals for resolutions at the Annual General Meeting must be submitted in writing to the Board no later than 1 February of any given year.

The Board of Directors
The Board currently consists of 10 directors. Seven are elected by shareholders at general meetings, and three are Novo Nordisk employees from Denmark, elected by Danish employees.

     Shareholder-elected directors serve for a one-year term and can be re-elected at the general meeting. Directors must retire at the first general meeting after having reached the age of 70. The chairmanship recommends to the Board whether directors should be nominated for re-election – among other things on the basis of an evaluation of their performance. The aim is to compose a board consisting of persons who have such knowledge and experience that the Board can, in the best possible way, attend to the interests of the shareholders, the employees and other stakeholders. Descriptions of the candidates’ qualifications accompany the agenda of the general meeting.

     According to Danish law, Novo Nordisk employees in Denmark are entitled to be represented by half of the total number of directors elected at the general meeting. Thus, employees have among themselves elected three directors, each of whom serves for a four-year term as per the current legislation. Directors elected by the employees have the same rights and obligations as the directors elected by the shareholders. For information on each director, see page 106.

     All directors receive induction on joining the Board, and regularly update and refresh their competences and knowledge. The Board ordinarily meet seven times a year including a 2–3 day strategic session. All directors attended all board meetings in 2004. The Board ensures via a fixed annual calendar that it addresses the main tasks in a timely manner. With the exception of agenda items reserved for the Board’s internal discussion, executives attend and may speak at the board meetings ensuring that the Board is sufficiently informed of the operations of the company. Executives’ regular feedback

Novo Nordisk Annual Report 2004

Back to Contents

from meetings with investors enables directors to have insight into major shareholders’ views of Novo Nordisk.

The chairman and the deputy chairman form the chairmanship of the Board. They carry out administrative tasks, such as the planning of board meetings to ensure a balance between determination of strategy and the financial and managerial supervision of the company. Other tasks include recommending the remuneration of directors and executives, and suggesting candidates for election by the general meeting.

The Audit Committee
The Board established an Audit Committee in March 2004, with three members. All members qualify as independent as defined by the US Securities and Exchange Commission (SEC). One member is designated as chairman and two members have been designated as Audit Committee Financial Experts.

     The Audit Committee assists the Board with the oversight of a) the external auditors, b) the internal auditors, c) the procedure for handling complaints regarding accounting, internal controls, auditing or financial reporting matters (‘whistleblower’ system), d) the accounting policies, and e) the systems of internal controls.

Executive Management
Executive Management is responsible for the day-to-day management of the company. It consists of the president and CEO, and five other executives. The Board appoints Executive Management and determines their remuneration. The chairmanship reviews the performance of the executives. As part of the Organisational Audit process, the chairmanship identifies successors to executives and presents the names of such candidates to the Board for approval. Executives must retire having reached the age of 62. For information on each executive, see page 107.

Remuneration Policy
Policy. The Remuneration Policy is designed to attract, retain and motivate the directors and executives.

Directors. Each director receives a fixed fee per year at a competitive level. The chairmanship recommends to the Board the amount, which is reported in the annual report. The total remuneration of the directors is approved by the annual general meeting in connection with the approval of the annual report. Directors are not offered stock options, warrants or participation in other incentive schemes.

Executives. Executive remuneration is evaluated against a Danish benchmark of large companies with international activities. The remuneration package consisting of a base salary, cash bonus, pensions, non-monetary benefits and a long-term incentive is determined by the Board, and should align the interests of the executive with those of the shareholders.

For further information on remuneration, see Note 35 on page 87.

Assessment of the Board of Directors and Executive Management
The Board of Directors annually conducts a self-assessment procedure to improve the performance of the Board and the cooperation

with Executive Management. This process is directed by the chairmanship and may be facilitated by an external consultant. Written questionnaires form the basis for the process that evaluates whether each director and executive participates actively in the Board discussions and contributes with independent judgement within, for example, organisation and management as well as financial and operational strategy. Further, assessment is made as to whether the director is inspirational and whether the environment supports open discussion at board meetings. The Board continuously assesses, formally once a year, the performance of each executive. The chairman also conducts an annual interview with each executive.

Risk management
Executive Management is responsible for the risk management process, including risk identification, assessment of probability and potential impact, and initiation of risk-mitigating actions. Major risks are systematically identified and regularly reported to Executive Management and the Board of Directors. For details on risk management, see page 56.

Internal control
The Board of Directors has overall responsibility for Novo Nordisk’s system of internal controls and the Audit Committee reviews the adequacy of the internal controls over financial reporting. Among other things the review is based on reports from the organisation, internal audit function as well as the external auditors.

The Annual General Meeting in 2004 elected two independent auditing firms, who act in the interest of the shareholders, as well as the public in general. The Board proposes at the Annual General Meeting 2005 to elect only one auditor, in line with the amended requirements for listed Danish companies. The auditors report any significant findings regarding accounting matters, internal control deficiencies etc via the Audit Committee to the Board and in the auditor’s long-form report. A more detailed management report on internal controls and accounting issues is provided to Executive Management. The Audit Committee supervises the annual audit process, which includes meetings with the auditors. In order to safeguard independence and objectivity, the Audit Committee pre-approves services to be provided by the principal auditor. The principal auditor is restricted from providing certain non-audit services and, as from 2004, the lead partner is required to rotate every five years.

Corporate governance codes and practices
Novo Nordisk is in general in compliance with the codes of good corporate governance designated by stock exchanges in Copen-hagen, New York and London. For a detailed review of Novo Nordisk’s compliance with the applicable codes and a more extensive review of Novo Nordisk’s corporate governance practices, see*

Novo Nordisk Annual Report 2004

Back to Contents


Managing risks

Exploiting business opportunities relies on effective management and mitigation of risks. With a formalised governance structure on risk management and disclosure in place, Novo Nordisk is better positioned to respond promptly to events that may have a significant negative impact on the company’s ability to meet its objectives, both short term and long term.

     There’s a fine balance between taking calculated, entrepreneurial risks and being overly precautious. This is particularly true for companies in the pharmaceutical industry, where the pipeline from hypothesis to successful market penetration typically runs over more than a 10-year period. To Novo Nordisk, risk management is about identifying and reducing risk to an acceptable level. Novo Nordisk defines risk as ‘any event that could have a significant negative impact upon our ability to meet our objectives’. Not just in terms of pursuing the Vision and meeting long-term financial targets, but also to protect employees and reputation. Hence, risk management considers both financial and non-financial risks, and reports on key risks through one integrated and systematic approach.

Risk alert
In the wake of Enron, companies were alerted to improving not only their disclosure of business risks, but also internal control procedures. Novo Nordisk generally complies with current national and international codes of good corporate governance and also works to improve internal processes to identify risks, monitor trends and respond to emerging issues. However, in 2002 the Board of Directors and Executive Management took the opportunity to proactively address the emerging requirements on managing and reporting on risks. Against that background, the company established a process to standardise and optimise the company’s risk management system.

Risk reporting
Today, a common, systematic risk reporting approach is in place which

identifies and assesses material risks associated with Novo Nordisk’s business. In quarterly reports to Executive Management and the Board of Directors, long-term and short-term risks are assessed and quantified in terms of reputational damage and financial impact. For each risk factor the potential impact is detailed, as are mitigating actions. This is being aligned with long-existing management processes such as the annual strategic planning, balanced scorecards and budgeting.

     A Financial Corporate Governance and Risk Office has been established to handle implementation of the Sarbanes–Oxley requirements in Novo Nordisk and improve risk management. Reporting to the CFO and with links to the legal Corporate Governance function and Group Internal Audit, this office drives and consolidates risk reporting from each of the five business areas: discovery and development; manufacturing, sales and marketing; quality, regulatory and business development; finance, legal and IT; and people, reputation and relations. This is done in a process of consultation with internal risk stakeholders to ensure monitoring, measuring and reporting of risks, as well as implementation of mitigating actions. Moreover, a thorough risk assessment is included in all major projects.

Risk Management Group
Executive Management has established a dedicated Risk Management Group of senior executives, representing all key business areas, and reporting to Executive Management and the Board of Directors. It sets the strategic direction and challenges, and analyses the risk and control information generated by the individual business areas. This challenger function helps eliminate blind spots and that potential cross-functional impacts are considered.

Current risk profile
Key risks are mapped throughout the value chain of primary activities: from discovery and development, through manufacturing and logistics, and to marketing and sales. In addition, risks related to

Risk management process

Examples of risk areas:
  Development of new drugs: strategic candidates 1 in pipeline
 Manufacturing and quality: insufficient capacity
 Competition: new and stronger competitors
 Financial risks: foreign exchange rates
 Business ethics: reputational damage

Novo Nordisk’s risk reporting matrix is updated on a quarterly basis. Two factors are considered: what is the likelihood of a negative event occurring, and what is the calculated impact on the business. Impacts are quantified and assessed in terms of potential financial loss and reputational damage.

Novo Nordisk Annual Report 2004

Back to Contents

support activities such as quality, regulatory and business development, finance, legal, IT and human resources are included. Below are examples of current key risks.

Development of new drugs
Delays in the development of new drugs or failure to obtain approval from regulatory authorities could have a significant negative impact on Novo Nordisk’s ability to maintain its position as a market leader in diabetes care and to reach its long-term financial targets. On the other hand, drug development requires taking calculated risks; statistically the industry must carry a 45% risk that drugs tested as far as into phase 3 studies will never reach the market.

     An example of a current risk in this area is Novo Nordisk’s investments in the development of the new pulmonary delivery system AERx®. To mitigate this risk, Novo Nordisk has expanded its licensing rights to AERx® iDMS inhaled insulin programme from Aradigm, and obtained full development and manufacturing rights. Under the agreement, Novo Nordisk has assumed all further responsibilities for AERx® iDMS development and funding.

Manufacturing and quality
The major part of Novo Nordisk’s manufacturing capacity is concentrated at a few sites in Denmark. While this entails a relatively low risk in terms of access to a skilled people base, natural disasters and political instability, the geographical concentration in itself poses a potential risk. Contingency planning includes preventive measures against major exposures, for example alternative stock facilities. In 2004 Novo Nordisk announced new investment projects in production facilities outside Denmark – in the US and China. This will not only reduce exposure in terms of production capacity, but will also facilitate better access to strategic markets and reduced currency risk exposure.

     Based on the samples taken during internal quality audits and inspections by health authorities in 2004, Novo Nordisk’s production is found to be in general compliance with international standards for good manufacturing practice (cGMP). In 2004 Novo Nordisk received four inspections by the FDA; only one of these resulted in written observations. Regulatory approval of production sites as well as of products for the market is a precondition for the company’s long-term ability to supply medicines to the market. A global strategy to obtain and maintain market authorisation will mitigate risks in this area, for example in relation to approvals for Levemir® and future indications of NovoSeven®.

The diabetes market is highly competitive and increasingly so. On the one hand, Novo Nordisk is facing increased competition with strong entrants to the market, while on the other hand the company is gaining market shares in the attractive US market. In addition, there is government-mandated pressure on prices, particularly in Europe. Here, current healthcare reforms are putting pressure on the industry’s ability to produce pharmacoeconomic assessments.

Security, litigation and financial risks
Non-compliance with international and local legislation is also a risk factor. One example is the ongoing dispute with Polish customs authorities, who have claimed that pharmaceutical companies that have

imported products to Poland in the period 1999–2001 have misstated customs values. This dispute concerns a number of pharmaceutical importers, including Novo Nordisk. Another example would be the tax risk related to fixing and approval of transfer pricing.

     Novo Nordisk is involved in some legal proceedings, and risks related to these are closely monitored. One such example is claims on alleged product liability on HRT. Novo Nordisk Inc., together with the majority of hormone therapy product manufacturers, is a defendant in 16 product liability lawsuits. Since the initiation of the lawsuits in July 2004, three cases against Novo Nordisk Inc. have been dismissed by the courts (see page 92).

     Foreign exchange risk is the principal financial risk factor for Novo Nordisk, as a major part of costs are being paid in euro and significant income in non-euro currencies, primarily US dollars and Japanese yen. To mitigate this exposure, financial hedging instruments are used (see Note 36 on page 90 and management report on page 41). In addition, the company’s global expansion strategy entails carrying a higher share of production costs in foreign currencies.

Business ethics and people
In a highly competitive business environment, protecting employees and reputation is vital. Novo Nordisk relies on its ability to attract and retain talented individuals, and this is known to be a function of the company’s external reputation and stakeholder trust.

     In 2004, Novo Nordisk’s ethics were challenged on a number of occasions (see page 18). However, none of these constitute major financial or reputational issues. The introduction of a business ethics policy and guidelines for employees will serve as mitigation of such risks. There have been no incidents of problematic relationships with key non-financial stakeholder groups that posed any significant risk to the company. *


Quantitative and
qualitative measures


The assessment of risks to financial stakeholders involves in-depth financial analysis of earnings, cash flows, balance sheets and off balance sheet risk exposures. Much of this analysis is quantitative in nature. At the same time a more qualitative analysis is often conducted, which focuses on other aspects of company performance, including country influences, industry factors, competitive dynamics, and company management and policy – all with regard to their impact on the quality and sustainability of a company’s operating and financial performance.

   Novo Nordisk’s qualitative risk analysis aims to maximise shareholder value and enhance the quality of the company’s transparency and disclosure. However, the company acknowledges that despite systematic risk identification, reporting, monitoring and mitigation, unforeseen adverse events can still occur. See page 47.


Novo Nordisk Annual Report 2004

Back to Contents


Reporting against global standards

Novo Nordisk holds itself accountable to stakeholders for the company’s performance and seeks to report in a transparent way about the challenges and opportunities for its business today and in the longer term. In terms of reporting on social, environmental, ethical and economic issues Novo Nordisk has contributed to developing and driving emerging international standards and codes and continues its support to promote corporate responsibility and global sustainable development. In 2004 Novo Nordisk became engaged in the process of developing an international standard for social responsibility under the auspices of the ISO.

AA1000 Framework
Novo Nordisk’s non-financial reporting follows the AA1000 Framework, an accountability standard designed to improve accountability and performance by learning through stakeholder engagement. It states that reporting must provide a complete, accurate, relevant and balanced picture of the organisation’s approach to and impact on society. To the best of our knowledge, this
Annual Report 2004 complies with these requirements.

Global Reporting Initiative Guidelines
Novo Nordisk reports – and has done so since 2002 – in accordance with The Global Reporting Initiative’s (GRI’s) 2002 Sustainability Reporting Guidelines. The Guidelines require reporting in accord-

ance with 11 principles and against a list of 97 sustainability performance indicators, of which 50 are core indicators that must be reported on. On the website is a GRI index with an overview of the full ‘in accordance’ reporting. See more at

Global Compact
Novo Nordisk is a signatory to the United Nations Global Compact, a platform for encouraging and promoting good corporate principles and learning experiences in the areas of human rights, labour, environment and bribery & corruption. Novo Nordisk is working actively to implement the Global Compact principles in our business and within our sphere of influence. Reporting on actions taken during 2004 to implement the 10 principles of the Global Compact in a Communication on Progress, including performance metrics aligned with the GRI Guidelines, can be found at

Assurance after AA1000AS
The information provided in Novo Nordisk’s annual reporting for 2004 and the underlying data sets have been assured according to the AA1000 Assurance Standard. This includes an assessment of Novo Nordisk’s reporting ‘in accordance’ with the GRI Guidelines and Global Compact. See the Assurance statement on page 105. *


Level of reporting

Vision and strategy
1.1, 1.2
Company activities, report scope, report profile


Governance structure and management systems
Structures and processes at board and executive level, stakeholder engagement policies and management systems

GRI Content Index

Performance indicators

Economic performance
Direct impacts on: customers, suppliers, employees, providers of capital,
+/8 */3 -/2
public sector; Indirect economic impacts

Environmental performance
Materials, energy, water, biodiversity, emissions, effluents and waste suppliers, products and services, transport
+/16 */5 -/14

Social performance
Employment, labour/management relations, health and safety, training and education, diversity and opportunity
+/8 */5 -/4

Human rights
+/12 */2

+/2 */1 -/4

Product responsibility
+/5 */6 -/6

+ Fully reported /Number of indicators * Partially reported /Number of indicators - Not reported /Number of indicators

Novo Nordisk Annual Report 2004

Back to Contents


This Annual Report does not include the Financial Statements of the Parent Company, Novo Nordisk A/S. These have been prepared in a separate document, which can be obtained upon request from Novo Nordisk A/S and is available at The Financial Statements of the Parent Company, Novo Nordisk A/S, form an integral part of the complete Annual Report. The complete Annual Report including the Financial Statements of the Parent Company, Novo Nordisk A/S, will be filed with the Danish Commerce and Companies Agency where a copy also can be obtained. In note 15, page 76, the Appropriation of net profit incl proposed dividends of the Parent Company Novo Nordisk A/S is included.

     The accounting policies of Novo Nordisk have been changed as of 1 January 2004 to comply with International Financial Reporting Standards (IFRS).

     In note 1 – ‘Changes in accounting policies – Adoption of IFRS’ the effect of adopting IFRS is shown.


Consolidated income statement 60  
Consolidated balance sheet 61  
Consolidated cash flow statement and financial resources 62  
Consolidated statement of changes in equity 63  

Notes – Accounting policies

Changes in accounting policies – Adoption of IFRS 64  
Summary of significant accounting policies 67  
Changes in the scope of consolidation 71  
Critical accounting estimates and judgements 71  

Notes – Consolidated income statement

Segment information 72  
Sales 74  
Employee costs 74  
Depreciation, amortisation and impairment losses 74  
Fees to statutory auditors 74  
Licence fees and other operating income (net) 74  
Financial income 75  
Financial expenses 75  
Income taxes 75  
Earnings per share 75  
Appropriation of net profit incl proposed dividends 76  

Notes – Consolidated balance sheet

Intangible assets 76  
Property, plant and equipment 77  
Financial assets 78  
Inventories 79  
Trade receivables 79  
Other receivables 79  
Marketable securities 79  
Share capital 80  
Long-term debt 80  
Deferred tax liabilities 81  
Provisions for pensions 82  
Other provisions 83  
Short-term debt 83  
Other liabilities 83  

Notes – Consolidated cash flow and financial resources

Other reversals with no effect on cash flow 84  
Cash flows from divestment of subsidiaries 84  
Cash flows from acquisition of subsidiaries 84  
Cash and cash equivalents 84  

Notes – Additional information

Share-based payment schemes 85  
Management‘s remuneration, share options and shareholdings 87  
Derivative financial instruments 90  
Commitments and contingencies 92  
Related party transactions 93  
Reconciliation to US GAAP 93  

Companies in the Novo Nordisk Group 96  
Summary of financial data 2000 –2004 98  
Accounting policies for non-financial data 100  
Quarterly figures 2003 and 2004 (unaudited) 102  
Management Statement 103  
Auditors‘ reports 104  

Definitions 70  


Novo Nordisk Annual Report 2004
Consolidated Financial Statements 2004  59

Back to Contents


DKK million

Cost of goods sold
7, 8

Gross profit
Sales and distribution costs
7, 8
Research and development costs
7, 8
Administrative expenses
7, 8, 9
Licence fees and other operating income (net)

Operating profit
Share of profit/(loss) in associated companies
8, 18
Financial income
Financial expenses

Profit before income taxes
Income taxes

Net profit

Basic earnings per share (DKK)
Diluted earnings per share (DKK)


60  Consolidated Financial Statements
Novo Nordisk Annual Report 2004

Back to Contents


DKK million
31 Dec 2004
31 Dec 2003


Intangible assets
Property, plant and equipment
Investments in associated companies
Deferred income tax assets
Other financial assets

Total long-term assets

Trade receivables
Tax receivable
Other receivables
Marketable securities
Cash at bank and in hand

Total current assets

Total assets


Share capital
Treasury shares
Share premium account
Retained earnings
Other comprehensive income

Total equity

Long-term debt
Deferred tax liabilities
Provision for pensions
Other provisions

Total long-term liabilities

Short-term debt
Trade payables
Tax payables
Other liabilities
Other provisions

Total current liabilities

Total liabilities

Total equity and liabilities

Novo Nordisk Annual Report 2004
Consolidated Financial Statements  61

Back to Contents


DKK million

Net profit
Reversals with no effect on cash flow:
   Income taxes
   Depreciation, amortisation and impairment losses
   Interest income and interest expenses
   Other reversals with no effect on cash flow
Income taxes paid
Interest received and interest paid (net)

Cash flow before change in working capital
Change in working capital:
(Increase)/decrease in trade receivables and other receivables
(Increase)/decrease in inventories
Increase/(decrease) in trade payables and other liabilities

Cash flow from operating activities
Divestment of subsidiaries
Acquisition of subsidiaries
Purchase of intangible assets and long-term financial assets
Sale of property, plant and equipment
Purchase of property, plant and equipment
Net change in marketable securities (over three months)

Cash flow from investing activities
New long-term debt
Repayment of long-term debt
Purchase of treasury shares
Sale of treasury shares
Dividends paid

Cash flow from financing activities

Net cash flow

Unrealised gain/(loss) on exchange rates and marketable securities
included in cash and cash equivalents

Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the year

Cash and cash equivalents at the end of the year
Bonds with original term to maturity exceeding three months
Undrawn committed credit facilities

Financial resources at the end of the year

Free cash flow



62 Consolidated Financial Statements
Novo Nordisk Annual Report 2004

Back to Contents


Retained earnings
Other comprehensive income

DKK million
Deferred gain/loss on cash flow hedges

Balance at the beginning of the year 709 (33 ) 2,565 20,925 (79 ) 513 176 24,776
Exchange rate adjustment of investments in subsidiaries 39 39
Deferred (gain)/loss on cash flow hedges at the beginning of
the year recognised in the Income statement for the year (513 ) (513 )
Deferred gain/(loss) on cash flow hedges at the end of the year 461 461
Other adjustments 7 7

Net income recognised directly in equity 39 (52 ) 7 (6 )
Net profit for the year 5,013 5,013

Total income for the year 5,013 39 (52 ) 7 5,007
Cost of share-based payment 104 104
Purchase of treasury shares (13 ) (1,969 ) (1,982 )
Sale of treasury shares 1 86 87
Dividends (1,488 ) (1,488 )

Balance at the end of the year 709 (45 ) 2,565 22,671 (40 ) 461 183 26,504

At the end of the year proposed dividends of DKK 1,594 million are included in retained earnings. No dividend is declared on treasury shares.

Balance at the beginning of the year 709 (19 ) 2,565 18,849 (85 ) 391 67 22,477
Exchange rate adjustment of investments in subsidiaries 6 6
Deferred (gain)/loss on cash flow hedges at the beginning of
the year recognised in the Income statement for the year (391 ) (391 )
Deferred gain/(loss) on cash flow hedges at the end of the year 513 513
Other adjustments 109 109

Net income recognised directly in equity 6 122 109 237
Net profit for the year 4,833 4,833

Total income for the year 4,833 6 122 109 5,070
Cost of share-based payment 76 76
Purchase of treasury shares (14 ) (1,605 ) (1,619 )
Sale of treasury shares 15 15
Dividends (1,243 ) (1,243 )

Balance at the end of the year 709 (33 ) 2,565 20,925 (79 ) 513 176 24,776

At the end of the year proposed dividends of DKK 1,488 million are included in retained earnings. No dividend is declared on treasury shares.

Balance at the beginning of the year 709 (16 ) 2,565 16,200 116 126 19,700
Exchange rate adjustment of investments in subsidiaries (85 ) (85 )
Deferred (gain)/loss on cash flow hedges at the beginning of
the year recognised in the Income statement for the year (116 ) (116 )
Deferred gain/(loss) on cash flow hedges at the end of the year 391 391
Other adjustments (59 ) (59 )

Net income recognised directly in equity (85 ) 275 (59 ) 131
Net profit for the year 4,116 4,116

Total income for the year 4,116 (85 ) 275 (59 ) 4,247
Cost of share-based payment 38 38
Purchase of treasury shares (4 ) (382 ) (386 )
Sale of treasury shares 1 38 39
Dividends (1,161 ) (1,161 )

Balance at the end of the year 709 (19 ) 2,565 18,849 (85 ) 391 67 22,477

At the end of the year proposed dividends of DKK 1,243 million are included in retained earnings. No dividend is declared on treasury shares.


Novo Nordisk Annual Report 2004
Consolidated Financial Statements 63

Back to Contents




As of 1 January 2004, the accounting policies have been changed to comply with International Financial Reporting Standards (IFRS). The date of transition is 1 January 2002 and all comparative figures for 2000 –2003 have been restated. Following IFRS 1 all standards and interpretations effective at 31 December 2004 have been applied.

The following standards with effective date after 31 December 2004 have also been applied:

IFRS 2 ‘Share-based Payment’ (issued February 2004). IFRS 2 has been applied retrospectively to all grants of employee shares and share options from 1997 to 2004.
The revised standards IAS 32 ‘Financial Instruments: Disclosure and Presentation’ and IAS 39 ‘Financial Instruments: Recognition and Measurement’
All the revised standards in the IASB‘s improvement project, ie: IAS 1, IAS 2, IAS 8, IAS 10, IAS 16, IAS 17, IAS 21, IAS 24, IAS 27, IAS 28, IAS 31, IAS 33 and IAS 40.

The standard IFRS 5 ‘Non-current Assets Held for Sale and Discontinued Operations’ with effective date 1 January 2005 has not been applied. IFRS 5 will be applied in accordance with the effective date 1 January 2005. The standard will be applied prospectively and only affects future transactions. The impact of application is not expected to be significant.

The adoption of IFRS results in changes to the accounting policies in the following areas:

a) Accounting for associated R&D companies – Novo Nordisk’s share of profit or loss in associated research and development companies, including impairment losses, is included in share of profit and loss in associated companies and is therefore no longer included in research and development costs. Novo Nordisk’s capital gains on dilution or sale of investments in associated research and development companies is included in share of profit or loss in associated companies and therefore no longer in Licence fees and other operating income (net). The method of calculating Novo Nordisk’s share of profit or loss in an associated company is slightly changed.

b) Market value of currency options – currency options hedging future cash flow are measured at market value at the balance sheet date. As a consequence of the detailed IFRS requirements for allowing hedge ac-counting for currency options, the current use does not qualify for cash flow hedge accounting. Value adjustments are therefore recognised in the Income statement under financial income or financial expenses.

c) Share-based payment – in accordance with IFRS 2 ‘Share-based pay-ment’ the fair value of employee services received in exchange for the grant of share-based compensation plans is recognised as an expense, and allocated over the vesting period.


d) Provision for pensions – provisions for pension commitments and similar obligations are calculated in accordance with IAS 19. All actuarial gains and losses are recognised in the balance sheet at 1 January 2002 in accordance with IFRS 1.

e) Borrowing costs – all interest expenses are recognised as an expense in the period in which they are incurred. Interest expenses on loans financing construction of major investments are no longer included in the cost of the assets.

f) Cash discounts – in line with the development in international practice, cash discounts are now classified as a deduction from sales. Previously, cash discounts were reported as Sales and distribution costs.

g) Long-term bonds – cash and cash equivalents consist of cash and marketable securities which at the date of acquisition had a maturity not exceeding three months. The cash flow from marketable securities, which at the date of acquisition had a maturity exceeding three months, is included in cash flow from investing activities.

h) Deferred tax assets are presented as long-term assets and are no longer offset in provisions for deferred tax.

i) Software – development costs of software in relation to major IT projects for internal use are reclassified from property, plant and equip-ment to intangible assets.

j) In the income statement gains and losses on derivative financial instruments are no longer offset in the gains and losses of the hedged items. This has the effect that a foreign exchange loss of DKK 229 million in 2003 (DKK 510 million in 2002) is reclassified from financial income to financial expenses.

k) Long-term employee benefits – provisions are recognised for certain long-term employee benefits.

l) Diluted earnings per share – are calculated in accordance with IAS 33, which causes a change in the calculation of the dilutive effect.

m) Other minor effects from adopting IFRS.

The changes regarding share-based payment, cash discounts and long-term employee benefits were not included in the unaudited reconciliations to IFRS included in the Annual Financial Report 2003 and the Stock Exchange Announcement for the first three quarters of 2004.

To illustrate the effect of adopting IFRS in the Novo Nordisk Group, the following reconciliations of the reported figures for 2002 and 2003 under previous Danish GAAP to the IFRS figures have been prepared.

The letters a) to m) in the tables below refer to descriptions of the changes in accounting policies due to IFRS adoption mentioned above.



Previous GAAP
Previous GAAP

Growth in operating profit 6.8%   8.4%   6.5%   9.6%  
Operating profit margin 24.1%   24.6%   23.7%   23.8%  
Return on invested capital (ROIC) 19.1%   19.5%   20.1%   20.5%  
Cash/earnings, three-year average 32.0%   32.3%   34.9%   34.4%  
Basic earnings per share (DKK) 14.24 14.17 11.81 11.87  
Diluted earnings per share (DKK) 14.14 14.15 11.72 11.85  



64 Consolidated Financial Statements
Novo Nordisk Annual Report 2004

Back to Contents




Consolidated income statement

  2003   2002  
DKK million

Cost of goods sold

Gross profit
Sales and distribution costs
Research and development costs
Administrative expenses
Licence fees and other operating income (net)

Operating profit
Share of profit/(loss) in associated companies
Financial income
Financial expenses

Profit before income taxes
Income taxes

Net profit
  (25 ) 4,833   4,095   21



DKK million

Operating profit – previous GAAP 6,384   5,979  
a) Accounting for associated R&D companies        
  – reclassification of share of profit or loss 150   194  
  – reclassification of capital gain (85 ) (236 )
c) Share-based payment (76 ) (38 )
d) Provisions for pensions 10   (11 )
e) Borrowing costs – depreciation 38   38  
m) Other 1   1  

Operating profit – IFRS 6,422   5,927  



DKK million 2003   2002  

Net profit – previous GAAP 4,858   4,095  
a) Accounting for associated R&D companies        
  – increased share of profit or loss (9 ) (9 )
b) Market value of currency options 30   50  
c) Share-based payment (69 ) (28 )
d) Provision for pensions 6   (7 )
e) Borrowing costs – depreciation 38   38  
e) Borrowing costs – interest expenses as incurred (10 ) (14 )
m) Other (11 ) (9 )

Net profit – IFRS 4,833   4,116  



Consolidated balance sheet                        

  2003   2002  
DKK million

Intangible assets
Property, plant and equipment
Investments in associated companies
Deferred income tax assets
Other financial assets
Trade and other receivables
Marketable securities
Cash at bank and in hand

Total assets 34,394   170   34,564   31,496   116   31,612  

Equity 25,224   (448 ) 24,776   22,928   (451 ) 22,477  
Total liabilities 9,170   618   9,788   8,568   567   9,135  

Total equity and liabilities 34,394   170   34,564   31,496   116   31,612  



Novo Nordisk Annual Report 2004
Consolidated Financial Statements 65

Back to Contents



Consolidated balance sheet (continued

DKK million

Total assets – previous GAAP 34,394   31,496  
a) Accounting for associated R&D companies 31   47  
d) Provisions for pensions   (43 )
e) Borrowing costs (382 ) (410 )
h) Deferred tax assets 548   559  
m) Other (27 ) (37 )

Total assets – IFRS 34,564   31,612  


Total liabilities – previous GAAP
9,170   8,568  
h) Deferred tax assets 548   559  
  Changes to deferred tax as a result of the other changes to accounting policies (201 ) (234 )
d) Provisions for pensions 52   14  
k) Long-term employee benefits 211   211  
m) Other 8   17  

Total liabilities – IFRS 9,788   9,135  

1 Jan
DKK million

Equity – previous GAAP 25,224 22,928 20,137
a) Accounting for associated
R&D companies 31 47 57
b) Market value of currency options
– deferred tax effect (35 ) (22 ) (22 )
c) Share-based payment
– deferred tax effect 100 92 82
d) Provisions for pensions (36 ) (42 ) (15 )

e) Borrowing costs (268 ) (287 ) (297 )
k) Long-term employee benefits (211 ) (211 ) (211 )
m) Other (29 ) (28 ) (31 )

Equity – IFRS 24,776 22,477 19,700

Consolidated cash flow statement                        

  2003   2002  
DKK million

Cash flow from operating activities
Cash flow from investing activities *)
Cash flow from financing activities

Net cash flow 1,452   (1,516 ) (64 ) (1,029 ) 1,085   56  

Net change in cash and cash equivalents 1,435   (1,513 ) (78 ) (1,053 ) 1,087   34  
Cash and cash equivalents at the beginning of the year 1,234   (315 ) 919   2,287   (1,402 ) 885  

Cash and cash equivalents at the end of the year 2,669   (1,828 ) 841   1,234   (315 ) 919  

Free cash flow **) 3,846     3,846   497     497  



DKK million 2003   2002  

Cash flow from operating activities – previous GAAP 6,159   4,881  
e) Borrowing costs        
  – cash flow effect of interest expenses (10 ) (14 )

Cash flow from operating activities – IFRS 6,149   4,867  

Cash flow from investing activities – previous GAAP (2,313 ) (4,384 )
e) Borrowing costs        
  – cash flow effect of interest expenses 10   14  
g) Long-term bonds (1,513 ) 1,087  
g) Long-term bonds – unrealised gains/losses (3 ) (2 )

Cash flow from investing activities – IFRS (3,819 ) (3,285 )



DKK million 2003   2002  

Cash and cash equivalents at the end of the year        
– previous GAAP 2,669   1,234  
g) Long-term bonds – at the end of the year (1,828 ) (315 )

Cash and cash equivalents        
at the end of the year – IFRS 841   919  


*) According to IFRS the cash flow from investments in long-term bonds (more than three months) is included in cash flow from investing activities. Excess liquidity is primarily invested in non-callable, high-rated, liquid bonds with solid credit rating.
**) Free cash flow is not included as a subtotal in the cash flow statement according to IFRS. Free cash flow is calculated as the sum of Cash flow from operating activities and investing activities excluding Net change in marketable securities (more than three months). This leaves Free cash flow unaffected by the IFRS adoption.


66 Consolidated Financial Statements
Novo Nordisk Annual Report 2004

Back to Contents




The Consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The Consolidated financial statements are prepared in accordance with the historical cost convention, as modified by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities (including derivative financial instruments) at fair value through profit or loss.
     To facilitate the reading of the Annual Report, part of the information required by IFRS has been included in the Management Report.

Novo Nordisk’s management considers the following to be the most important accounting policies for the Group.

Principles of consolidation
The Consolidated financial statements include the financial statements of Novo Nordisk A/S (the Parent Company) and all the companies in which Novo Nordisk A/S directly or indirectly owns more than 50% of the voting rights or in some other way has a controlling influence (subsidiaries). Novo Nordisk A/S and these companies are referred to as the Group.
     Companies that are not subsidiaries, but in which the Group holds 20% to 50% of the voting rights or in some other way has a significant influence on the operational and financial management, are treated as associated companies.
     The Consolidated financial statements are based on the financial statements of the parent company and of the subsidiaries and are prepared by combining items of a uniform nature and eliminating intercompany transactions, share-holdings, balances and unrealised intercompany profits and losses. The Consolidated financial statements are based on financial statements prepared by applying the Novo Nordisk Group’s accounting policies.
     The purchase method of accounting is used to account for the acquisition of businesses by the Group. The cost of an acquisition is measured as the fair value of the assets given and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill.
     Newly acquired and divested companies are included in the Income statement during the period of Novo Nordisk’s ownership. Comparative figures are not adjusted for disposed or newly acquired companies.

Sales and revenue recognition
Sales represent the fair value of the sale of goods excluding value added tax and after deduction of provisions for returned products, trade discounts and allowances.
     Provisions and accruals for rebates to customers are provided for in the period the related sales are recorded. Historical data are readily available and reliable, and are used for estimating the amount of the reduction in sales.
     Revenue is recognised when it is realised or realisable and earned. Revenues are considered to have been earned when Novo Nordisk has substantially accomplished what it must do to be entitled to the revenues.
     Revenue from the sale of goods is recognised when all the following specific conditions have been satisfied:

Novo Nordisk has transferred to the buyer the significant risk and rewards of ownership of the goods
Novo Nordisk retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold
The amount of revenue can be measured reliably
It is probable that the economic benefits associated with the transaction will flow to Novo Nordisk; and
The costs incurred or to be incurred in respect of the transaction can be measured reliably.

These conditions are usually met by the time the products are delivered to the customers.
     A reliable measurement of the amount of revenue requires that reliable estimates of discounts, rebates and product returns can be made.
     Licence fees are recognised on an accrual basis in accordance with the terms and substance of the relevant agreement.
     As a principal rule sale of intellectual property is recorded as income at the time of the sale. Where the Group assumes an obligation in connection with a sale of intellectual property, the income is recognised in accordance with the term of the obligation. On the sale of intellectual property where the final sale is conditional on future events, the amount is recorded as income at the occurrence of such future events.
     Revenue is measured at the fair value of the consideration received or receivable.

Research and development
All internal research and development costs are expensed in the Income statement as incurred. Due to the long development period and significant uncertainties relating to the development of new products, including risks regarding clinical trials and regulatory approval, it is concluded that the Group’s internal development costs in general do not meet the capitalisation criteria in IAS 38 ‘Intangible Assets’. Thus the technical feasibility criteria of IAS 38 are not considered fulfilled before regulatory approval is obtained.
     For acquired in-process research and development projects the effect of probability is reflected in the cost of the asset and the probability recognition criteria are therefore always considered satisfied. As the cost of acquired in-process research and development projects can often be measured reliably, these projects fulfil the criteria for capitalisation. Please refer to the section ‘Intangible assets’ regarding the accounting treatment of intangible assets.
     Property, plant and equipment used for research and development purposes are capitalised and depreciated in accordance with the Group’s depreciation policy.

Derivative financial instruments
The Group uses forward exchange contracts, currency options and interest swaps to hedge forecasted transactions in foreign currencies.
     Novo Nordisk applies hedge accounting under the specific rules of IAS 39 to forward exchange contracts and interest rate swaps. Upon initiation of the contract, the Group designates each derivative financial contract that qualifies for hedge accounting as a hedge of a specific hedged transaction: either i) a recognised asset or liability (fair value hedge), ii) a forecasted financial transaction or firm commitment (cash flow hedge), or iii) a hedge of a net investment in a foreign entity.
     All contracts are initially recognised at cost and subsequently remeasured at their fair value at the balance sheet date. The value adjustments on forward exchange contracts, and interest rate swaps designated as hedges of forecasted transactions are recognised directly under equity, given hedge effectiveness. The cumulative value adjustment of these contracts is removed from equity and included in the Income statement under financial income and expenses when the hedged transaction is recognised in the Income statement.
     Currency options are initially recognised at cost and subsequently remeasured at their fair value at the balance sheet date. While providing effective economic hedges under the Group’s risk management policy, the current use of currency options does not meet the detailed requirements of IAS 39 for allowing hedge accounting. Currency options are therefore recognised directly in the Income statement under Financial income (or expenses).
     Forward exchange contracts and currency swaps hedging recognised assets or liabilities in foreign currencies are measured at fair value at the balance sheet date. Value adjustments are recognised in the Income statement under Financial income or Financial expenses, along with any value adjustments of the hedged asset or liability that is attributable to the hedged risk.

Novo Nordisk Annual Report 2004
Consolidated Financial Statements 67

Back to Contents




     Currency swaps used to hedge net investments in subsidiaries are measured at fair value based on the difference between the swap exchange rate and the exchange rate at the balance sheet date. The value adjustment is recognised in equity.
     All fair values are based on marked-to-market prices or standard pricing models.
     The accumulated net fair value of derivative financial instruments is presented as Other receivables if positive or Other liabilities if negative.


Translation of foreign currencies
Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates. The Consolidated financial statements are presented in Danish kroner (DKK), which is the functional and presentation currency of the parent company.

Translation of transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.
     Translation differences on non-monetary items, such as equities held at fair value through profit or loss, are reported as part of the fair value gain or loss. Translation differences on non-monetary items, such as equities classified as available-for-sale financial assets, are included in the fair value reserve in equity.

Translation of group companies
Financial statements of foreign subsidiaries are translated into Danish kroner at exchange rates ruling at the balance sheet date for assets and liabilities and at average exchange rates for Income statement items.

     All exchange rate adjustments are recognised in the Income statement with the exception of exchange gains and losses arising from:

The translation of foreign subsidiaries‘ net assets at the beginning of the year translated at the exchange rates at the balance sheet date.
The translation of foreign subsidiaries‘ income statements using average exchange rates whereas balance sheets are translated using the exchange rates ruling at the balance sheet date.
The translation of long-term intercompany receivables which are considered to be an addition to net assets in subsidiaries.
The translation of investments in associated companies.

The above exchange gains and losses are recognised in Other comprehensive income under equity.

Segment information
Novo Nordisk operates on a worldwide basis in two business segments, diabetes care and biopharmaceuticals, constituting the primary reporting format. Business segment information is disclosed in note 5. Within the business segments Novo Nordisk has more areas for which sales are disclosed in note 6.
     Novo Nordisk operates in four main geographical areas: Europe, North America, International Operations and Japan & Oceania, constituting the secondary reporting format. Geographical segment information is disclosed in note 5.
     The segment information is prepared applying the accounting policies of the Group.

Licence fees and other operating income (net)
Licence fees and other operating income (net) comprise licence fees and income (net) of a secondary nature in relation to the main activities of the Group. The item also includes one-off income items (net) in respect of sale of intellectual property.

Intangible assets
Goodwill represents any cost in excess of identifiable net assets, measured at fair value, on the acquired company. Goodwill recorded under Intangible assets is related to subsidiaries. Goodwill on acquisitions of associates is included in Investments in associated companies.
     Goodwill is measured at historical cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
     Goodwill is allocated to cash-generating units for the purpose of impairment testing.

Patents, licences, and other intangibles
Patents and licences, and other intangibles are carried at historical cost less accumulated amortisation and any impairment loss.
     Amortisation is provided under the straight-line method over the estimated useful life of the asset (up to 10 years).
     Internal development costs and the related software in connection with major IT projects for internal use are capitalised under Other intangibles.

Property, plant and equipment
Property, plant and equipment are measured at historical cost less accumulated depreciation and any impairment losses. The cost of self-constructed assets includes costs directly attributable to the construction of the assets. Interest on loans financing construction of major investments is recognised as an expense in the period in which it is incurred Land is not depreciated. Depreciation is provided under the straight-line method over the estimated useful lives of the assets as follows

Buildings: 12– 50 years.
Plant and machinery: 5 –16 years.
Other equipment: 3 –16 years.
Minor fixed assets below DKK 100,000 and fixed assets with limited expected useful lives are charged to the Income statement in the year of acquisition.

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.

     An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is higher than its estimated recoverable amount.

Leases of assets whereby the Group assumes substantially all the risks and rewards of ownership are capitalised as finance leases under Property, plant and equipment and depreciated over the estimated useful lives of the assets, according to the periods listed above. The corresponding finance lease liabilities are included in liabilities.
     Operating lease costs are charged to the Income statement on a straight-line basis over the period of the lease.

Investments in associated companies
Investments in associated companies are accounted for under the equity method of accounting, ie at the respective share of the associated companies‘ net asset value applying Group accounting policies.
     Goodwill relating to associated companies is recorded under Investments in associated companies.

Impairment of assets
Property, plant and equipment, long-term financial assets and intangible assets, including goodwill, are reviewed for impairment losses when there is an indication that the carrying amount may not be recoverable. Goodwill is furthermore reviewed for impairment annually. An impairment loss is recognised for the amount by which the carrying amount of the asset exceeds its recoverable amount, which is the higher of an asset’s net selling price and value in use.
     For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units).


68 Consolidated Financial Statements
Novo Nordisk Annual Report 2004

Back to Contents




Financial assets
The Group classifies its investments in the following categories: ‘Marketable securities’ (financial assets at fair value through the Income statement), Loans and receivables, and ‘Long-term financial assets’ (available-for-sale financial assets). The classification depends on the purpose for which the investments were acquired. Management determines the classification of its investments on initial recognition and re-evaluates this designation at every reporting date.

Marketable securities
Marketable securities consists of financial assets designated at fair value through profit or loss on initial recognition. Assets in this category are classified as current assets if they are expected to be realised within 12 months of the balance sheet date.

Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables are included in Trade receivables and Other receivables in the balance sheet.
     Trade receivables and Other receivables are stated at amortised cost less allowances for doubtful trade receivables. The allowances are based on an individual assessment of each receivable, which also include an assessment of payment risk associated with individual countries.

Available-for-sale financial assets
Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in Long-term financial assets unless Management intends to dispose of the investment within 12 months of the balance sheet date.

Recognition and measurement
Purchases and sales of investments are recognised on settlement date. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss.
     Investments are derecognised when the rights to receive cash flows from the investments have expired or have been transferred, and the Group has transferred substantially all risks and rewards of ownership.
     Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are carried at amortised cost using the effective interest method.
     Realised and unrealised gains and losses arising from changes in the fair value of the ‘Marketable securities’ category are included in the Income statement in the period in which they arise. Unrealised gains and losses arising from changes in the fair value of securities classified as available-for-sale are recognised in equity. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments are included in the Income statement as gains and losses from investment securities.
     The fair values of quoted investments are based on current bid prices. If the market for a financial asset (and for unlisted securities) is not active, the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analyses, and option pricing models refined to reflect the issuer’s specific circumstances.
     The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial assets has been impaired. In the case of equity securities classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the securities are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss –measured as the difference between cost and the current fair value, less any impairment loss on that financial asset previously recognised in Income statement – is removed from equity and recognised in the Income statement. Impairment losses recognised in the Income statement on equity instruments are not reversed through the Income statement.

Raw materials and consumables are measured at cost assigned by using the first-in, first-out method.

     Work in progress and finished goods are stated at cost assigned by using the first-in, first-out method. Cost comprises direct production costs such as raw materials, consumables, energy and labour, and production overheads such as employee costs, depreciation, maintenance etc. The production overheads are measured based on a standard cost method which is reviewed regularly in order to ensure relevant measures of utilisation, production lead time etc.
     If the expected sales price less completion costs and 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.

Income taxes in the Income statement include tax payable for the year with addition of the change in deferred tax for the year.
     Deferred income taxes arise from temporary differences between the accounting and tax balance sheets of the individual consolidated companies and from realisable tax-loss carry-forwards, using the liability method. Deferred income tax is furthermore provided for re-taxation of tax-deductible losses realised in non-Danish affiliated companies, if the re-taxation is expected to be realised by the withdrawal of affiliated companies from the Danish joint taxation scheme. The tax value of tax-loss carry-forwards will be included in deferred tax assets to the extent that the tax losses and other tax assets are expected to be utilised in the future taxable income. The deferred taxes are measured according to current tax rules and at the tax rates expected to be in force on the elimination of the temporary differences. Measurement of deferred taxes in Denmark is based on a tax rate of 30%.
     Tax payable/receivable includes tax payable computed on the basis of the expected taxable income for the year and adjustments for tax payable for previous years.

Employee benefits
Wages, salaries, social security contributions, paid annual leave and sick leave, bonuses, and non-monetary benefits are accrued in the year in which the associated services are rendered by employees of the Group. Where the Group provides long-term employee benefits, the costs are accrued to match the rendering of the services by the employees concerned.

The Group operates a number of defined benefit and defined contribution plans throughout the world.
     The costs for the year for defined benefit plans are determined using the projected unit credit method. This reflects services rendered by employees to the dates of valuation and is based on actuarial assumptions primarily regarding discount rates used in determining the present value of benefits, projected rates of remuneration growth, and long-term expected rates of return for plan assets. Discount rates are based on the market yields of high-rated corporate bonds in the country concerned.
     Differences between assumptions and actual events, and effects of changes in actuarial assumptions are allocated over the estimated average remaining working lives of employees, where these differences exceed a defined corridor.
     Past service costs are allocated over the average period until the benefits become vested.
     Pension assets and liabilities in different defined benefit schemes are not offset unless the Group has a legally enforceable right to use the surplus in one plan to settle obligations in the other plan. Pension assets are only recognised to the extent that the Group is able to derive future economic benefits in the way of refunds from the plan or reductions of future contributions.
     The Group’s contributions to the defined contribution plans are charged to the Income statement in the year to which they relate.

Share-based compensation
The Group operates equity-settled, share-based compensation plans. The fair value of the employee services received in exchange for the grant of the options or shares is recognised as an expense, and allocated over the vesting period.


Novo Nordisk Annual Report 2004
Consolidated Financial Statements 69


Back to Contents




     The total amount to be expensed over the vesting period is determined by reference to the fair value of the options or shares granted, excluding the impact of any non-market vesting conditions. The fair value is fixed at grant date. Non-market vesting conditions are included in assumptions about the number of options that are expected to become exercisable. At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable. Novo Nordisk recognises the impact of the revision of the original estimates, if any, in the Income statement, and a corresponding adjustment to equity over the remaining vesting period. Adjustments relating to prior years are included in the Income statement in the year of adjustment ‘truing up’.

Provisions are recognised where a legal or constructive obligation has been incurred, as a result of past events, and it is probable that it will lead to an outflow of resources that can be reliably estimated. Provisions are recognised for the estimated ultimate liability that is expected to arise, taking into account foreign currency effects and the time value of money.
     Provisions for product returns cover expected lost contribution because of expected future returns and are measured at selling price value. The provisions have been calculated based on statistical measures of historical returns.

Generally, liabilities are stated at amortised cost unless specifically mentioned otherwise.

Treasury shares
Treasury shares are deducted from share capital at their nominal value of DKK 2 per share. Differences between this amount and the amount paid for acquiring, or received for disposing of, treasury shares are deducted from retained earnings.

Dividends are recognised as a liability in the period in which they are declared at the Annual General Meeting.

Consolidated statement of cash flows and financial resources
The Consolidated statement of cash flows and financial resources is presented in accordance with the indirect method commencing with net profit. The statement shows cash flows for the year, the net change in cash and cash equivalents for the year and cash and cash equivalents at the beginning and the end of the year.
     Cash and cash equivalents consist of cash and marketable securities, with original maturity of less than three months, less short-term bank loans. Besides cash and cash equivalents, undrawn committed credit facilities expiring after more than one year are included in financial resources.

United States Generally Accepted Accounting Principles (US GAAP)
The Group prepares a reconciliation of the effect on sales, net profit, equity and balance sheet of the application of US Generally Accepted Accounting Principles (US GAAP) in lieu of International Financial Reporting Standards. Note 39 discloses the US GAAP reconciliation.


ADRs: American Depositary Receipts.

Basic earnings per share (EPS): Net profit divided by the average number of shares outstanding.

Cash/earnings: Free cash flow as a percentage of net profit.

Diluted earnings per share: Net profit divided by the sum of average number of shares outstanding including the dilutive effect of share options ‘in the money’ in accordance with IAS 33. The dilutive effect of share options in the money is calculated as the difference between the following: 1) the number of shares that could have been acquired at fair value with proceeds from the exercise of the share options and 2) the number of shares that would have been issued assuming the exercise of the share options.

The difference (the dilutive effect) is added to the denominator as an issue of shares for no consideration.

Effective tax rate: Income taxes as a percentage of profit before income taxes.

Equity ratio: Equity at year-end as a percentage of the sum of total liabilities and equity at year-end.

Free cash flow: The sum of Cash flow from operating activities and Cash flow from investing activities excluding Net change in marketable securities.

Gross margin: Gross profit as a percentage of sales.

Market capitalisation: Total number of shares outstanding at year-end multiplied by the quoted (closing) price at year-end for Novo Nordisk’s B shares on the Copenhagen Stock Exchange.

Net profit margin: Net profit as a percentage of sales.

Number of shares outstanding: The number of shares outstanding is the total number of shares excluding the holding of treasury shares.

Operating profit: Earnings before tax, financial items and share of profit/ loss in associated companies.

Operating profit margin: Operating profit as a percentage of sales.

Payout ratio: Total dividends for the year as a percentage of net profit.

Price/earnings: The quoted (closing) price at year-end for Novo Nordisk’s B shares on the Copenhagen Stock Exchange divided by earnings per share.

Quoted price at year-end for ADRs: The quoted (closing) price at year-end for Novo Nordisk’s ADRs on the New York Stock Exchange.

Quoted price at year-end for B shares: The quoted (closing) price at year-end for Novo Nordisk’s B shares on the Copenhagen Stock Exchange.

Return on equity: Net profit as a percentage of average equity (the sum of equity at the beginning of the year and at year-end divided by two).

ROIC (return on invested capital): Operating profit after tax (using the effective tax rate) as a percentage of average inventories, receivables, property, plant and equipment and as well as intangible assets less non-interest bearing liabilities including provisions (the sum of above assets and liabilities at the beginning of the year and at year-end divided by two).

Weighted Average Cost of Capital (WACC): WACC states the company’s average cost of capital considering the capital structure.

70 Consolidated Financial Statements
Novo Nordisk Annual Report 2004

Back to Contents




In 2004, no changes in the scope of consolidation occurred.
     In 2003, Novo Nordisk acquired 55% of the Algerian company Aldaph SpA for DKK 0. There is no goodwill related to the acquisition. Until the acquisition of these shares, Aldaph SpA was an associated company of Novo Nordisk and Novo Nordisk owned 45% of the share capital.
     In 2002, Novo Nordisk acquired the Brazilian diabetes care company Biobrás (Novo Nordisk Produsao Farmacêutica Do Brasil). Novo Nordisk

Produsao Farmacêutica Do Brasil was included in the consolidation as from February 2002. Novo Nordisk Produsao Farmacêutica Do Brasil was acquired for DKK 423 million in cash (including transaction costs).
     In April 2002, Novo Nordisk sold the Dutch wholesaler of medical devices Hermedico BV for DKK 63 million.



The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s). Management bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the reported carrying amounts of assets and liabilities and the reported amounts of revenues and expenses that may not be readily apparent from other sources. Actual results could differ from those estimates. Novo Nordisk believes the following are the significant accounting estimates and related judgments used in the preparation of its consolidated financial statements.

Accruals and provision for sales rebates
Accruals and provisions for sales rebates are established in the same period as the related sales. The accruals and provisions for sales rebates are recorded as a reduction in sales and are included in Other provisions and Other liabilities.
     The accruals and provisions are based upon historical rebate payments. They are calculated based upon a percent of sales for each product as defined by the contracts with the various customer groups.
     Factors that complicate the rebate calculations are identification of which products have been sold subject to a rebate, which customer or government price terms apply, and the estimated lag time between sale and payment of a rebate.
     Novo Nordisk believe that the accruals established for sales rebates are reasonable and appropriate based on current facts and circumstances. However, actual amount of rebates and discounts may differ from the amounts estimated by Management.

Indirect Production Costs (IPC)
Work in progress and finished goods are stated at cost assigned by using the first-in, first-out method. Cost comprises direct production costs such as raw materials, consumables, energy and labour, and IPC such as employee costs, depreciation, maintenance etc.
     The IPC with a carrying amount of DKK 3,240 million at 31 December 2004 are measured based on a standard cost method which is reviewed regularly in order to ensure relevant measures of utilisation, production lead time and other relevant factors. Changes in the method for calculation of IPC, including utilisation levels, production lead time etc in the calculation of IPC, could have an impact on the gross margin and the overall valuation of inventories.

Allowances for doubtful trade receivables
Trade receivables are stated at amortised cost less allowances for potential losses on doubtful debts.
     Novo Nordisk maintains allowances for doubtful trade receivables for estimated losses resulting from the subsequent inability of the customers to make required payments. If the financial conditions of the customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required in future periods. Management specifically analyses trade receivables and analyses historical bad debt, customer concentrations, customer credit-worthiness, current economic trends and changes in the customer payment terms when evaluating the adequacy of the allowance for doubtful trade receivables.
     Based on actual losses in the last three years, the uncertainty connected with the allowance for doubtful trade receivables is considered limited. The carrying amount of allowances for doubtful trade receivables is DKK 369 million at 31 December 2004.

Deferred taxes
Management judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and the extent to which deferred tax assets can be recognised. Novo Nordisk recognises deferred tax assets if it is probable that sufficient taxable income will be available in the future against which the temporary differences and unused tax losses can be utilised. Management has considered future taxable income in assessing whether deferred tax assets should be recognised.
     The carrying amount of deferred tax assets (net) and deferred tax liabilities is DKK 769 million and 1,853 respectively at 31 December 2004.

Provisions and contingencies
As part of normal business Novo Nordisk issues credit notes for expired goods. Consequently a provision for future returns is made, based on historical statistical product returns. The pattern in returns in the future may be different from previous patterns.
     The carrying amount of provision for returned products is DKK 403 million at 31 December 2004.
     Management of the Company makes judgments about provisions and contingencies, including the probability of pending and potential future litigation outcomes that in nature are dependent on future events that are inherently uncertain. In making its determinations of likely outcomes of litigation and tax matters etc, management considers the evaluation of outside counsel knowledgeable about each matter, as well as known outcomes in case law. See note 37 for a description of the significant litigation.

Novo Nordisk Annual Report 2004
Consolidated Financial Statements  

Back to Contents




Primary reporting format – BUSINESS SEGMENTS

At 31 December 2004, the Novo Nordisk Group operates on a worldwide basis in two business segments (the primary reporting format):

Diabetes care:
The business segment includes discovery, development, manufacturing and marketing of products within the areas of insulin and delivery systems and oral antidiabetic products (OAD).

The business segment includes discovery, development, manufacturing and marketing of products within the therapy areas haemostasis management (NovoSeven®), growth hormone therapy, hormone replacement therapy and other products.

The segments and regions are the same as those used for internal reporting, allowing a reliable assessment of risk and returns. There are no sales or other transactions between the business segments. Costs have been split between business segments based on a specific allocation with the addition of a minor number of corporate overheads allocated systematically to the segments. Segment assets comprise the assets which are applied directly to the activities of the segment, including intangible assets, property, plant and equipment, long-term financial assets, inventories, trade receivables and other receivables. Segment liabilities comprise liabilities derived from the activities of the segment, including provisions, trade payables and other liabilities.

Comparative figures for 2002 are presented even though in 2002 and previous years, Novo Nordisk comprised only one segment. The comparative figures for 2002 have been prepared based on allocations consistent with methods applied for 2003 and 2004.


DKK million
Diabetes care

Segment results

Sales 20,533 18,475 17,458
   Change in DKK (%) 11.1% 5.8%   6.6%  
   Change in local currencies (%) 14.7% 16.0%  
Operating profit 3,404 3,142 2,346

Share of profit in associated companies (81 ) (59 ) (1 )
Finance income net
Profit before income taxes
Income taxes

Net profit

Other segment items

Research and development costs 2,932 2,805 3,064
Depreciation and amortisation 1,312 1,125 959
Impairment losses in the income statement 320 143 97
Additions to property, plant and equipment and intangible assets (net) 2,652 1,930 3,497
Investments in associated companies (net) 35
Long-term assets 15,270 14,405 13,793
Total assets 24,997 23,911 22,747
Total liabilities 4,788 4,241 4,323




DKK million
North America

Sales 12,411 11,697 10,889 7,478 6,219 5,786
   Change in DKK (%) 6.1% 7.4%   3.1%   20.2% 7.5%   12.0%  
Additions to property, plant and equipment and intangible assets (net) 2,831 2,137 3,883 133 63 74
Property, plant and equipment 16,519 15,510 14,777 425 366 425
Total assets 31,198 29,166 26,266 2,725 2,270 2,423



72 Consolidated Financial Statements
Novo Nordisk Annual Report 2004

Back to Contents




Secondary reporting format – GEOGRAPHIC SEGMENTS


The Novo Nordisk Group operates in four main geographical areas (the secondary reporting format):  

Europe: EU, EFTA
North America: USA and Canada
Japan & Oceania: Japan, Australia and New Zealand
International Operations: All other countries


Sales are attributed to geographical segments based on the location of the customer. There are no sales between segments. Total assets and additions to property, plant and equipment and intangible assets are based on the location of the assets.  



Biopharmaceuticals       Corporate/unallocated           Total      


8,498   7,683   7,408         29,031   26,158   24,866  
10.6% 3.7%   5.8%         11.0% 5.2%   6.3%  
15.4% 14.0%           14.9% 15.0%    
3,576   3,280   3,581         6,980   6,422   5,927  

(25 ) (12 ) 46   (11 ) 12   27   (117 ) (59 ) 72  
      594   1,013   329   594   1,013   329  
            7,457   7,376   6,328  
      2,444   2,543   2,212   2,444   2,543   2,212  

            5,013   4,833   4,116  


1,420   1,250   888         4,352   4,055   3,952  
254   278   230         1,566   1,403   1,189  
6   35   7         326   178   104  
583   388   787         3,235   2,318   4,284  
      18     18   18     53  
3,185   3,020   3,226   1,229   947   912   19,684   18,372   17,931  
5,644   5,495   5,519   6,792   5,158   3,346   37,433   34,564   31,612  
1,581   1,416   1,362   4,560   4,131   3,450   10,929   9,788   9,135  



International Operations  
Japan & Oceania

4,844   4,227   4,099   4,298   4,015   4,092   29,031   26,158   24,866  
14.6% 3.1%   20.7%   7.0% (1.9% ) (4.0% ) 11.0% 5.2%   6.3%  
252   83   315   19   35   12   3,235   2,318   4,284  
376   184   150   239   282   329   17,559   16,342   15,681  
2,387   2,260   2,086   1,123   868   837   37,433   34,564   31,612  


Novo Nordisk Annual Report 2004
Consolidated Financial Statements

Back to Contents



6     SALES            

DKK million

Insulin analogues