UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT
OF FOREIGN PRIVATE ISSUER
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange
Act of 1934
FEBRUARY 5, 2014
NOVO
NORDISK A/S
(Exact name of Registrant as specified in its charter)
Novo Allé
DK- 2880, Bagsvaerd
Denmark
(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-_____________________
novo nordisk annual report 2013 The one rule we have to break – the Rule of Halves Is obesity a disease? – without doubt it is a growing threat to global health One size doesn’t fit all – when it comes to diabetes treatment If Novo Nordisk’s business strategy were to be described in one word, it would have to be ‘focus’
4 NOVO NORDISK AT A GLANCE 6 2013 performance and 2014 outlook 22 The one rule we have to break 6 Business strategy: ‘Our focus is our strength’ Risks to be aware of 42 24 One size dosen't fit all 1 Novo Nordisk's five regions
|
Accomplishments
and results 2013 |
||
|
|
||
| Our business | ||
|
|
||
| Governance, leadership and shares | ||
|
|
||
| Financial,
social and environmental statements |
||
|
|
||
| Additional information | ||
|
|
||
The Management review, as defined by the Danish
Financial
Statements Act (FSA), is found on pp 1–54 and 94.
This Annual Report is published in both a Danish
and an English
version. In the event of any discrepancies, the Danish version
shall prevail.
1
|
Letter
from
the Chairman |
||
|
|
|
Last year, at Novo Nordisk’s Annual General Meeting in March, I was named Chairman of the Board of Directors of which I have been a member since 2005. I feel honoured by and proud of this appointment, and will do my best to live up to the responsibilities that come with it. As a board member I’ve followed Novo Nordisk’s development during a very difficult period for the pharmaceutical industry. It has been an exciting journey: in terms of both financial value creation for our shareholders and positive impact on people with diabetes, Novo Nordisk has delivered outstanding results. I and the other members of Novo Nordisk’s Board are confident that Novo Nordisk will continue to do very well despite having been through a year that, frankly, will be remembered for a number of negative events: a Warning Letter from the US Food and Drug Administration (FDA), a delay for Tresiba® (insulin degludec) in the US, a safety scare around the class of products to which Victoza® belongs, and a major product recall. Our Chief Executive Officer, Lars Rebien Sørensen, will give you more details and share his reflections on these events on the following pages. What’s important for me to say is that the Board has followed up meticulously on each and every one of these events to ensure that management has responded appropriately to them to minimise the negative effects and the risk of reoccurrence. And we firmly believe that it has.
Chairman
of the Board of |
The Board has also reviewed the company’s long-term strategy and outlook as we do every year. Is it realistic? Is it ambitious? Does the company have the skills and resources to execute it? And if so, does it provide Novo Nordisk with the competitive advantages needed to be successful in a very competitive industry? We believe it does. We’ve also evaluated the strength of the company’s executive leadership and senior management and reviewed the succession preparedness for key positions. Together with the executive team we’ve assessed the company’s organisational strengths and weaknesses. Whenever we’ve identified issues that could become a significant obstacle to meeting the company’s long-term goals, we’ve agreed on a plan of action. We’re confident that in Lars Rebien Sørensen and his Executive Management team we have the leadership needed to execute Novo Nordisk’s strategy and execute it well. It has been a pleasure to see how two new members of Executive Management have been smoothly integrated into the team, and how the company’s bench of senior vice presidents has been expanded with new members, several of them from our large and very successful affiliate in the US. The Board is also pleased to announce the promotion of Chief Operating Officer Kåre Schultz to president. This is a reflection of the importance and complexity of his organisation and his successful management hereof. In this role, Kåre will work closely with Lars on planning Executive Management meetings and board meetings, and assume a more outward-facing role. Despite the challenges Novo Nordisk faced in 2013, it met the sales and profit targets we communicated at the beginning of the year. Sales grew by 12% and operating profit by 15%, both measured in local currencies. Furthermore, we made significant progress on the key development projects, which bodes well for future growth and for the company’s ability to achieve its long-term targets. Against this background, at the Annual General Meeting on 20 March 2014 the Board of Directors will propose a 25% increase in dividend to 4.50 Danish kroner per share of 0.20 krone. The Board of Directors has furthermore decided to initiate a new share repurchase programme of up to 15 billion kroner. I’d also like to highlight two important decisions that the Board has made regarding corporate governance. We established a Nomination Committee to enhance the process for nominating members to the Board, and set new targets for the diversity of the Board as regards gender and nationality. For more information on this, please see p 47. On behalf of the Board of Directors, I’d like to express my appreciation for the leadership shown by Lars Rebien Sørensen and his management team, and the hard work and dedication of the entire Novo Nordisk organisation.
Göran Ando
|
|
Letter
from
the CEO |
||
|
|
|
2013 was both a good year and a tough year for Novo Nordisk. Let me start with the tough part. As I mentioned in my letter in last year’s Annual Report, we began the year with the unsettling fact of having received a Warning Letter from the US Food and Drug Administration (FDA), following an inspection of one of our insulin-filling plants in Denmark. Unrelated to this, in February we received a Complete Response Letter from the FDA in which the agency requested additional cardiovascular safety data before it could complete its review of the New Drug Application for Tresiba® (insulin degludec). Tresiba® is our new-generation basal insulin with an ultra-long duration of action of more than 42 hours.
President and Chief Executive Officer Lars Rebien Sørensen at the Novo Nordisk Capital Markets Day in December 2013.
|
To make matters worse, a debate emerged in March in which some scientists questioned whether the incretin class of diabetes medications – the class to which our very successful product Victoza® belongs – had an increased risk of side effects in the pancreas. Although the authorities later concluded that the data currently available don’t confirm the concerns, the debate did create anxiety among some patients using these products. In October, we had to recall a number of batches of NovoMix® insulin in some European countries as our analysis had shown that a small percentage of the products in these batches didn’t meet the specifications for insulin strength. Not the kind of events we’d hoped for in our 90th anniversary year – or in any other year for that matter. For Novo Nordisk’s employees, who take immense pride in the safety and efficacy of our products, such events are downright painful. They are, however, also a good opportunity for learning and reflection, and we have learned from these events and are still learning. To mention just two examples: we’re improving our measures to ensure compliance with the latest and ever-evolving standards for good manufacturing practice, and we’re collecting more data than ever regarding cardiovascular safety to rule out that our products are associated with unacceptable risks. I wish I could say that events such as the ones I’ve described will never happen again, but I’m not naive. Bad things happen, even to good companies; however, I firmly believe we’re coming out of these events wiser and stronger. Allow me to turn to the brighter part of my account of 2013. I’m glad to report that our strategic products are doing well in the market. Tresiba® was launched in Japan as the first country in February 2013 and by the end of the year had claimed 8.6% |
3
of the segment for long-acting insulin (basal insulin) measured in value. Several other countries launched Tresiba® during the year and in all countries where the product is competing on an equal footing with other insulin products, it’s gaining significant market shares.
Our established key products did well, too: sales of our modern insulins grew 14%, Victoza® 27%, NovoSeven® 8% and Norditropin® 16%, all measured in local currencies. I think it’s fair to say that this is a solid performance in a global pharmaceutical market characterised by all forms of cost-containment measures. To me it shows that there’s a large and growing need for our products.
From a regional perspective, North America was again the main contributor to our growth, followed by International Operations and Region China. It’s also in these regions we expect to see most of the growth in the coming years. Our sales growth, combined with continuous focus on the efficiency of our operations, resulted in operating profit growth of 7% reported and 15% in local currencies. Growth in net profit was 18% and measured on an earnings per share basis, the increase was 20% – all in all a very robust financial performance in 2013.
Several products in our development pipeline passed important milestones in 2013:
| • | The cardiovascular outcomes trial for Tresiba ® designed to provide the data requested by the FDA was initiated in October. |
| • | IDegLira, a fixed combination of liraglutide and insulin degludec for the treatment of type 2 diabetes, was filed for regulatory review in the EU. |
| • | We started the phase 3a programme for the faster-acting formulation of insulin aspart. |
| • | A 3 mg dose of liraglutide, the active substance in Victoza ®, was filed for regulatory review in both the US and the EU as a potential new obesity treatment. |
| • | Semaglutide, a once-weekly GLP-1 analogue, started phase 3 trials. |
| • | FDA approved our insulin injection pens FlexTouch ® and NovoPen Echo® for use with certain insulin products. |
| • | Within haemophilia, turoctocog alfa, our new factor VIII product for people with haemophilia A, was approved in the US, the EU and Japan. Turoctocog alfa will be marketed under the brand name NovoEight® in most countries. |
You’ll find more information about these and other significant product development milestones in the research and development section on p 10 and in articles in this Annual Report.
In 2014, we’ll maintain a high level of investment in research and development and in our growth markets and strategic products. We’ll have special focus on:
| • | The continued roll-out of Tresiba ® |
| • | The first launches of Ryzodeg ® – a combination of Tresiba® and our fast-acting insulin NovoRapid® – and NovoEight® |
| • | The regulatory reviews of IDegLira and liraglutide 3 mg |
| • | Further strengthening our systems and processes for ensuring compliance with all relevant regulatory standards |
| • | Implementing our strategy for global access to diabetes care targeted at people who currently don’t have access to the necessary medical treatment and care. |
As you’ll see from the article on the diabetes pandemic later in this Annual Report, the number of people with diabetes is growing at an alarming rate. The latest estimates are that by 2035 close to 600 million people will have diabetes and at some point most of them will require medical treatment. You can read more about this on pp 22–23.
At Novo Nordisk we have a critical role to play and are committed to playing our part in the fight against diabetes. We’ve set ourselves the target that 40 million people will be using our products by 2020. We are, however, keenly aware that our products alone will not address all the challenges. That’s why we’re working with partners all over the world to identify and implement local solutions for improving diabetes care. You’ll find some examples of this in the article on p 26.
In the coming years we’ll have special focus on how to address the diabetes challenge in the world’s big cities. All over the world, people are migrating to big cities and, unfortunately, urbanisation and type 2 diabetes go hand in hand. Not much is known about how to change the situation, but we’re determined to work with partners to find out.
In the face of the challenges that 2013 brought for Novo Nordisk, I’ve taken great pleasure from the collaboration I’ve had with my Executive Management team, our Senior Management Board and the Board of Directors, and from dealing with the challenges we have encountered. I look forward to an even closer collaboration with Kåre Schultz in his new role as president. I have worked with Kåre for almost 20 years and have enjoyed following his development as leader of increasingly larger and more complex organisations. His promotion is well-deserved recognition of his accomplishments and leadership potential.
I’d like to thank everyone in the Novo Nordisk organisation for their contributions to our results in 2013, the people who use our products for their confidence in us, our stakeholders and partners for their collaboration, and our shareholders for their continued support.
Lars Rebien Sørensen
President and chief executive officer
PS: Please tell us what you think about our Annual Report. Does it meet your information needs? Is it comprehensible? You can help improve our reporting by answering six questions at novonordisk.com/annualreport/feedback.
PRODUCTS ESTABLISHED IN MARKETED IN DENMARK 180 IN 1923 EMPLOYEES IN 75 COUNTRIES COUNTRIES Novo Nordisk Way
Novo Nordisk Way
In 1923, our Danish founders began a journey to change diabetes.
Today, we are thousands of employees across the world with the passion, the skills and the commitment to continue this journey to prevent, treat and ultimately cure diabetes.
| • | Our ambition is to strengthen our leadership in diabetes. |
| • | We aspire to change possibilities in haemophilia and other serious chronic conditions where we can make a difference. |
| • | Our key contribution is to discover and develop innovative biological medicines and make them accessible to patients throughout the world. |
| • | Growing our business and delivering competitive financial results is what allows us to help patients live better lives, offer an attractive return to our shareholders and contribute to our communities. |
| • | We never compromise on quality and business ethics. |
| • | Our business philosophy is one of balancing financial, social and environmental considerations – we call it the Triple Bottom Line. |
| • | We are open and honest, ambitious and accountable, and treat everyone with respect. |
| • |
We offer opportunities for our people to realise their potential. |
Every day we must make difficult choices, always keeping in mind what is best for patients, our employees and our shareholders in the long run.
It’s the Novo Nordisk Way.
The Triple Bottom Line
83.6 DKK BILLION IN SALES (+7%) 25.2 DKK BILLION IN NET PROFIT (+18%) Financially responsible Patients Socially responsible Environmentally responsible 24.3 MILLION PATIENTS USE OUR DIABETES CARE PRODUCTS (+7%) 125 THOUSAND TONS CO2 EMISSIONS (+2%) 38,436 EMPLOYEES WORLDWIDE (+11%) 2,685 THOUSAND M3 WATER CONSUMPTION (+8%)
5
2013 progress on strategic focus areas
Expand leadership in diabetes care 30% GLOBAL VALUE MARKET SHARE (+2%) Establish
presence in inflammation
• Five compounds in clinical trials with three in phase 2. Expand leadership
in growth disorders
• Liraglutide 3 mg for obesity completed phase 3a and was submitted in
the EU and the US. Pursue leadership in haemophilia
• NovoEight® was approved in the US, the EU and Japan.
• N9-GP successfully completed first phase 3a trial.
• NovoThirteen® was approved in the US.
Establish presence in obesity NovoSeven® sales DKK BILLION Norditropin®
sales DKK BILLION 2012 2013 2012 2013 8.9 9.3 5.7 6.1 (+4%) (+7%) 65.5
DKK BILLION IN SALES (+8%) 2.6 (+2%) 2.2 (–19%) 38.2 10.9 (+10%) (–4%)
11.6 (+23%) 27% GLOBAL VALUE MARKET SHARE (+1%)
• Tresiba® was launched in eight countries.
• DEVOTE, a cardiovascular outcomes trial designed to provide the data
for Tresiba® requested by the FDA, was initiated.
• IDegLira was filed for regulatory review in the EU.
• Semaglutide, a once-weekly GLP-1 analogue, started phase 3a trials. Protein-related
products Oral antidiabetic products Modern insulins Human insulins Victoza®
5
| 6 | ACCOMPLISHMENTS AND RESULTS 2013 |
2013 performance
and 2014 outlook
2013 was a year of mixed fortunes for Novo Nordisk marked by steady progression towards long-term financial, social and environmental targets, whereas the Complete Response Letter for Tresiba® in the US was a disappointment.
| Financial
performance The results for 2013 are higher than expected in the outlook for the year in the Annual Report 2012 and in line with the latest guidance provided in connection with the quarterly announcement in October 2013.* |
|
|
Sales development
|
|
|
|
|
| * | Please refer to the company announcement of 30 January 2014 for explanation of results compared with the latest expectations. |
Diabetes care
sales development
Sales of diabetes care products increased
by 12% measured in local currencies and by 8% in Danish kroner to DKK 65,456
million. Novo Nordisk is the world leader in diabetes care and now holds a
global value market share of 27% compared with 26% at the same time the previous
year.
Insulins and protein-
related products
Sales of insulins and protein-related products
increased by 11% in local currencies and by 6% in Danish kroner to DKK 51,577
million. Measured in local currencies, sales growth was driven by North America,
International Operations and Region China. Novo Nordisk is the global leader
with 48% of the total insulin market and 46% of the market for modern insulins
and new-generation insulins, both measured in volume.
The roll-out
of Tresiba®
(insulin degludec), the once-daily new-generation insulin with an ultra-long
duration of action, continues to progress. Launch activities are proceeding
as planned and feedback from patients and prescribers is encouraging. Tresiba® has been launched in eight countries with 20 more countries
expected to launch during 2014. In the countries where Tresiba®
is reimbursed on a similar level to insulin glargine, it has steadily grown
its share of the basal insulin market. In these countries, Tresiba®
now represents around 10% of the basal insulin
market measured in monthly
value market share. In the markets where Tresiba®
has been launched with restricted market access compared with insulin glargine,
market penetration remains modest.
Sales
of modern insulins increased by 14% in local currencies and by 10% in Danish
kroner to DKK 38,153 million. North America accounted for two-thirds of the
growth, followed by International Operations and Region China. Sales of modern
insulins now constitute 78% of Novo Nordisk’s sales of insulin.
Victoza®
(GLP-1 therapy for type 2 diabetes)
Victoza®
sales increased by 27% in local currencies and by 23% in Danish kroner to
DKK 11,633 million, reflecting robust sales performance driven by North America,
Europe and International Operations. Victoza®
holds the global market share leadership
in the GLP-1 segment with a 71% value market share compared with 68% in 2012.
The GLP-1 segment’s value share of the total diabetes care market has
increased to 6.9% compared with 5.9% in 2012.
NovoNorm®/Prandin®/PrandiMet®
(oral antidiabetic products)
Sales of oral antidiabetic products decreased
by 16% in local currencies and by 19% in Danish kroner to DKK 2,246 million.
The negative sales development reflects an impact from generic competition
in the US and Europe as well as a changed inventory set-up in China.
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2013
|
ACCOMPLISHMENTS AND
RESULTS 2013
|
7
|
Biopharmaceuticals
sales development
Sales of biopharmaceutical products increased
by 12% measured in local currencies and by 6% in Danish kroner to DKK 18,116
million. Sales growth was primarily driven by North America and International
Operations.
NovoSeven®
(bleeding disorders therapy)
Sales of NovoSeven®
increased by 8% in local currencies and by 4% in Danish kroner to DKK 9,256
million. The market for NovoSeven®
remains volatile, and sales growth is primarily driven by North America and
International Operations.
Norditropin®
(growth hormone therapy)
Sales of Norditropin®
increased by 16% in local currencies and by 7% in Danish kroner to DKK 6,114
million. The sales growth is primarily driven by contractual wins, the support
programmes that Novo Nordisk offers healthcare professionals and patients as
well as the penetration of the prefilled FlexPro® device in North America and furthermore by growth in International
Operations. Novo Nordisk is the leading company in the global growth hormone
market with a 28% market share measured in volume.
Other biopharmaceuticals
Sales of other products within biopharmaceuticals,
which predominantly consist of hormone replacement therapy-related (HRT) products,
increased by 15% in local currencies and by 9% in Danish kroner to DKK 2,746
million. Sales growth is driven by North America and reflects a positive impact
of pricing and non-recurring adjustments to the provisions for rebates.
Development in costs
and operating profit
The cost of goods sold grew 5% to DKK 14,140
million, resulting in a gross margin of 83.1% compared with 82.7% in 2012.
This development primarily reflects an underlying improvement driven by favourable
price development in North America and a positive net impact from product
mix due to increased sales of modern insulins and Victoza®.
The gross margin was negatively impacted by around 0.3 percentage point due
to the depreciation of key invoicing currencies versus the Danish krone compared
with prevailing exchange rates in 2012.
Total
non-production-related costs increased by 11% in local currencies and by 8%
in Danish kroner to DKK 38,621 million.
Sales
and distribution costs increased by 13% in local currencies and by 9% in Danish
kroner to DKK 23,380 million. The growth in costs is driven by the expansions
of the sales forces and sales and marketing investments in the US, China and
selected countries in International Operations as well as costs related to
the launch of Tresiba®.
The growth percentage for costs has also been impacted by changes to legal
provisions in 2012 and 2013.
Research
and development costs increased by 9% in local currencies and by 8% in Danish
kroner to DKK 11,733 million. Within diabetes care, costs are primarily driven
by development costs related to the initiation of the Tresiba®
cardiovascular outcomes trial, and the ongoing phase 3a trials for both faster-acting
insulin aspart and semaglutide, the once-weekly GLP-1 analogue. Within biopharmaceuticals,
costs are primarily related to the continued progress of the portfolio of
development projects within haemophilia and the phase 2 trial for anti-IL-20,
a recombinant human monoclonal antibody, in rheumatoid arthritis.
Administrative
costs increased by 9% in local currencies and by 6% in Danish kroner to DKK
3,508 million. The increase in costs is primarily driven by back-office infrastructure
costs to support the expansions of the sales organisations in North America,
China and selected countries in International Operations, non-recurring costs
related to new offices in Denmark and the US as well as an impact from a cost
refund in 2012 of a previously expensed fine related to an import licence
for a major market in International Operations.
Licence
income and other operating income constituted DKK 682 million compared with
DKK 666 million in 2012.
Operating
profit increased by 7% in Danish kroner to DKK 31,493 million. In local currencies,
the growth was 15%.
Net financials and tax
Net financials showed a net income of DKK
1,046 million compared with a net expense of DKK 1,663 million in 2012. As
of 31 December 2013, foreign exchange hedging gains of around DKK 1,200 million
have been deferred for recognition in the income statement in 2014.
In line
with Novo Nordisk’s treasury policy, the most significant foreign exchange
risks for the Group have been hedged, primarily through foreign exchange forward
contracts. The foreign exchange result was a net income of DKK 1,146 million
compared with a net expense of DKK 1,529 million in 2012. This net income
reflects gains on foreign exchange hedging involving especially the Japanese
yen and the US dollar due to their depreciation versus the Danish krone compared
with the prevailing exchange rates in 2012, which has been partly offset by
losses on commercial balances, primarily related to non-hedged currencies.
The effective tax rate for 2013 was 22.6%.
CONTINUED ►
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2013
| 8 | ACCOMPLISHMENTS AND RESULTS 2013 |
Capital expenditure
and free cash flow
Net capital expenditure for property, plant
and equipment was DKK 3.2 billion compared with DKK 3.3 billion in 2012. Net
capital expenditure was primarily related to new offices in Denmark, filling
capacity in Denmark and Russia, additional GLP-1 manufacturing capacity, new
diabetes research facilities in Denmark as well as device production facilities
in the US and Denmark.
Free cash
flow was DKK 22.4 billion compared with DKK 18.6 billion in 2012. The increase
of 20% compared with 2012 reflects the growth in net profit of 18% and a lower
impact from tax payments in 2013 compared with 2012 related to ongoing transfer
pricing disputes, which was partly offset by earlier payment of rebate liabilities
in the US.
Outlook 2014
The current expectations for 2014 are summarised in the table below:
| Expectations are
as reported, if not otherwise stated |
Expectations
30
January 2014
|
|
|
|
| Sales growth | |
| • in local currencies |
8–11%
|
| • as reported | Around 3.5 percentage points lower |
| Operating profit growth | |
| • in local currencies | Around 10% |
| • as reported | Around 5.5 percentage points lower |
| Net financials | Income of around DKK 750 million |
| Effective tax rate | Around 22% |
| Capital expenditure | Around DKK 4.0 billion |
| Depreciation, amortisation and impairment losses | Around DKK 2.9 billion |
| Free cash flow | Around DKK 26 billion |
|
|
|
Sales growth
for 2014 is expected to be 8–11% measured in local currencies. This reflects
expectations of continued robust performance for the portfolio of modern insulins
and Victoza®
as well as a modest sales contribution from Tresiba®. These sales drivers are expected to be partly countered by
an impact from a more challenging contract environment in the US, generic
competition for Prandin® in the US during the first half of 2014, intensifying competition
within both diabetes and biopharmaceuticals as well as the macroeconomic conditions
in a number of markets in International Operations. Given the current level
of exchange rates versus the Danish krone, the reported sales growth is now
expected to be around 3.5 percentage points lower than growth measured in
local currencies.
For 2014,
operating profit growth
is expected to be around 10% measured in local currencies. This reflects a
significant increase in costs related to the continued progress of key development
projects within diabetes and biopharmaceuticals. In addition, significant
costs are expected in relation to sales force expansions and sales and marketing
investments in the portfolio of modern insulins and Victoza®
in the US, China and selected markets in International Operations as well
as the launch of Tresiba®
outside the US. Given the current level of exchange rates versus the Danish
krone, the reported operating profit growth is now expected to be around 5.5
percentage points lower than growth measured in local currencies.
For 2014,
Novo Nordisk expects a net financial income
of around DKK 750 million. The current expectation primarily reflects gains
associated with foreign exchange hedging contracts following the depreciation
of the Japanese yen and the US dollar versus the Danish krone compared with
the average prevailing exchange rates in 2013.
The effective
tax rate for 2014 is expected to be around
22%.
Capital
expenditure is expected to be around DKK
4.0 billion in 2014, primarily related to investments in additional GLP-1
manufacturing capacity, expansion of filling capacity, prefilled device production
facilities, construction of new laboratory facilities as well as expansion
of protein capacity within the CMC (Chemistry, Manufacturing and Control)
organisation. Depreciation, amortisation
and impairment losses are expected to be
around DKK 2.9 billion. Free cash flow is expected to be around DKK 26 billion.
All of
the above expectations are based on the assumption that the global economic
environment will not significantly change business conditions for Novo Nordisk
during 2014, and that currency exchange rates, especially the US dollar, will
remain at the current level versus the Danish krone.
Novo
Nordisk has hedged expected net cash flows in a number of invoicing currencies
and, all other things being equal, movements in key invoicing currencies will
impact Novo Nordisk’s operating profit as outlined in the table below:
| Key
invoicing currencies |
Annual
impact on Novo Nordisk’s operating
profit
of a 5% movement in currency
|
Hedging
period
(months)
|
|
|
|
|
|
|
| USD |
DKK 1,300 million
|
12 | |
| CNY |
DKK 220 million
|
12 | * |
| JPY |
DKK 145 million
|
14 | |
| GBP |
DKK 85 million
|
12 | |
| CAD |
DKK 60 million
|
10 | |
|
|
|
|
|
| * USD used as proxy when hedging Novo Nordisk’s CNY currency exposure. | |||
The financial impact from foreign exchange hedging is included in ‘Net financials’.
NOVO NORDISK ANNUAL REPORT 2013
|
ACCOMPLISHMENTS AND
RESULTS 2013
|
9
|
Long-term financial targets
Novo Nordisk introduced four long-term financial
targets in 1996 to balance short- and long-term considerations, thereby ensuring
a focus on shareholder value creation. The targets have subsequently been revised
and updated on several occasions, most recently in connection with the release
of the financial statement for 2012. The targets have been selected to ensure
focus on growth, profitability, efficient use of capital and cash flow generation.
The targets
are based on an assumption of a continuation of the current business environment.
Significant changes to the business environment, including the structure of
the US healthcare system, regulatory requirements, pricing and contracting environment,
competitive environment, healthcare reforms and exchange rates, may significantly
impact the time horizon for achieving the long-term targets or require them
to be revised.
| Long-term financial target |
Result
2013
|
Target
|
||
|
|
|
|
|
|
| Operating profit growth | 7% | 15% | ||
| Operating margin | 38% | 40% | ||
| Operating profit after tax to net operating assets | 97% | 125% | ||
| Cash to earnings | 89% | |||
| Cash to earnings (three-year average) | 94% | 90% | ||
|
|
|
|
|
Forward-looking statements
Novo Nordisk’s reports filed with or
furnished to the US Securities and Exchange Commission (SEC), including this
document as well as the company’s Form 20-F, both expected to be filed
with the SEC in February 2014, and written information released, or oral statements
made, to the public in the future by or on behalf of Novo Nordisk, may contain
forward-looking statements. Words such as ‘believe’, ‘expect’,
‘may’, ‘will’, ‘plan’, ‘strategy’,
‘prospect’, ‘foresee’, ‘estimate’, ‘project’,
‘anticipate’, ‘can’, ‘intend’, ‘target’
and other words and terms of similar meaning in connection with any discussion
of future operating or financial performance identify forward-looking statements.
Examples of such forward-looking statements include, but are not limited to:
| • | statements of targets, plans, objectives or goals for future operations, including those related to Novo Nordisk’s products, product research, product development, product introductions and product approvals as well as cooperation in relation thereto |
| • | statements containing projections of or targets for revenues, costs, income (or loss), earnings per share, capital expenditures, dividends, capital structure, net financials and other financial measures |
| • | statements regarding future economic performance, future actions and outcome of contingencies such as legal proceedings |
| • | statements regarding the assumptions underlying or relating to such statements. |
In this document, examples of
forward-looking statements can be found under the heading ‘2013 performance
and 2014 outlook’ and elsewhere.
These statements
are based on current plans, estimates and projections. By their very nature,
forward-looking statements involve inherent risks and uncertainties, both general
and specific. Novo Nordisk cautions that a number of important factors, including
those described in this document, could cause actual results to differ materially
from those contemplated in any forward-looking statements.
Factors
that may affect future results include, but are not limited to, global as well
as local political and economic conditions, including interest rate and currency
exchange rate fluctuations, delay or failure of projects related to research
and/or development, unplanned loss of patents, interruptions of supplies and
production, product recall, unexpected contract breaches or terminations, governmentmandated
or market-driven price decreases for Novo Nordisk’s products, introduction
of competing products, reliance on information technology, Novo Nordisk’s
ability to successfully market current and new products, exposure to product
liability and legal proceedings and investigations, changes in governmental
laws and related interpretation thereof, including on reimbursement, intellectual
property protection and regulatory controls on testing, approval, manufacturing
and marketing, perceived or actual failure to adhere to ethical marketing practices,
investments in and divestitures of domestic and foreign companies, unexpected
growth in costs and expenses, failure to recruit and retain the right employees,
and failure to maintain a culture of compliance.
Please
also refer to the overview of risk factors in ‘Risks to be aware of’
on pp 42–43.
Unless required by law, Novo Nordisk is under
no duty and undertakes no obligation to update or revise any forward-looking
statement after the distribution of this document, whether as a result of new
information, future events or otherwise.
| 10 | ACCOMPLISHMENTS AND RESULTS 2013 |
Research and
development
Diabetes
In 2013, Novo Nordisk made important advances
in the pipeline of diabetes care products.
Insulin
In response to the Complete Response Letter
on Tresiba®
from the US Food and Drug Administration (FDA), Novo Nordisk initiated a cardiovascular
outcomes trial (DEVOTE) in October. It is double-blind, uses insulin glargine
as comparator and will include 7,500 type 2 diabetes patients who have existing
or high risk of cardiovascular diseases. Novo Nordisk expects to have sufficient
data to support an interim analysis within two to three years and to complete
the study within four to six years from initiation. The data will also be used
to support the resubmission of Ryzodeg®, the combination
of Tresiba®
and insulin aspart.
Mid-2013,
Novo Nordisk filed IDegLira for regulatory review in the EU. IDegLira is a fixed
combination of insulin degludec and liraglutide and Novo Nordisk is the first
company to submit a product in this new class. The filing of IDegLira in the
US is pending the outcome of the interim analysis planned for the DEVOTE trial.
In the
prandial insulin segment Novo Nordisk began the phase 3a programme named onset®
for the faster-acting formulation of insulin aspart. The improved formulation
is intended to enable a faster onset of appearance of insulin in the bloodstream,
thereby mimicking the insulin secretion of a healthy individual more closely
than NovoRapid®.
Devices
In the US, the FDA approved FlexTouch®
for delivery of NovoLog® (NovoRapid®)
and Levemir®.
FlexTouch®
is a prefilled pen featuring a spring-loaded dosing action that allows users
to administer insulin at the touch of a button – regardless of dosage size.
The pen has been launched in the EU and Japan.
Also for
administering NovoLog®,
the FDA approved NovoPen Echo®, a reusable pen,
especially designed to meet the needs of children with diabetes. The pen has
been launched in the EU.
GLP-1 (Glucagon-Like Peptide-1)
In the GLP-1 category, Novo Nordisk initiated
phase 3a trials investigating the efficacy and safety of liraglutide as an adjunct
therapy to insulin in people with
type 1 diabetes. This programme,
named ADJUNCT™,
is expected to include 3,000 people with type 1 diabetes.
Novo Nordisk’s
once-weekly analogue semaglutide has now started three of six global phase 3a
trials, one of which will collect cardiovascular outcomes and other long-term
diabetes-related endpoints. In total, the SUSTAIN™
programme is expected to include more than 8,000 people with type 2 diabetes.
Novo Nordisk
also brought a tablet formulation of semaglutide, OG217SC, into phase 2 development.
Pioneering the effort within oral diabetes proteins, Novo Nordisk now has seven
oral formulations of insulin and GLP-1 analogues in the early pipeline (phase
1 and 2).
Obesity
Novo Nordisk successfully completed the SCALE™
phase 3a programme, which confirmed the efficacy and safety of liraglutide 3
mg for the treatment of obesity. Liraglutide 3 mg was filed for regulatory review
in the US and the EU in December.
Haemophilia
Novo Nordisk continued its strong progress
in the development of treatments for people with haemophilia and other rare
bleeding disorders.
Turoctocog
alfa, a recombinant coagulation factor VIII, was approved in the US, the EU
and Japan. The product, which is now being marketed under the trade name NovoEight®,
is indicated for use in adults and children with haemophilia A for control and
prevention of bleeding, perioperative treatment as well as routine prevention
of bleeding episodes. In January 2014, Germany was the first country to launch
the product.
Also for
people with haemophilia A, a long-acting coagulation factor, glycoPEGylated
rFVIII, N8-GP, is being studied in phase 3a. In March a trial was started in
children, which is a regulatory requirement.
Strong
results were reported in phase 3a for N9-GP, a long-acting recombinant factor
IX molecule for people with haemophilia B, with a safe and well-tolerated profile,
no inhibitor development and improved quality of life. Also, during major surgical
procedures a single preoperative dose of N9-GP prevented bleeding in all participants
with a 100% success rate. The compound continues development in clinical trials
in
children and during surgical
procedures.
In December,
the FDA approved recombinant coagulation factor XIII as Tretten®
for use in routine prophylaxis of bleeding in patients with congenital FXIII
A-subunit deficiency (approved as NovoThirteen®
in the EU).
Inflammation
Novo Nordisk aspires to improve the lives of
people with autoimmune and chronic inflammatory diseases by developing anti-inflammatory
compounds with new modes of action for rheumatoid arthritis, systemic lupus
erythematosus (SLE), inflammatory bowel disease and psoriatic arthritis. In
March, Novo Nordisk initiated a phase 2a trial with anti-IL-21 for severely
active Crohn’s disease.
Finally,
anti-NKG2D was approved for further phase 2 development for Crohn’s disease.
Growth hormone
Novo Nordisk completed its phase 1 trials for
the once-weekly growth hormone NN8640 in healthy volunteers and adults with
growth hormone deficiency. In the trial, NN8640 appeared to have a safe and
well-tolerated profile and no safety concerns were identified. The trial confirmed
the data from a similar trial in healthy adults and supports the suitability
of NN8640 for once-weekly dosing in adults with growth hormone deficiency.
NOVO NORDISK ANNUAL REPORT 2013
|
ACCOMPLISHMENTS AND
RESULTS 2013
|
11
|
Social
performance
Social performance has three dimensions: improving access to medical treatment and quality of care for patients, offering a healthy and engaging working environment for employees, and providing assurance that responsible business practices are in place, with the aim of contributing to the communities in which the company operates.
Patients
Novo Nordisk estimates that the company provides
medical treatments for approximately 24.3 million people with diabetes worldwide,
showing a 7% increase compared with 2012. The number is calculated based on
the WHO’s recommended daily doses for diabetes medicines. This growth is
driven by sales of insulin and Victoza®.
Of the
382 million people living with diabetes it is estimated that just over half
of them are diagnosed and many of those diagnosed do not receive medical treatment.
Novo Nordisk’s global access to diabetes care strategy aims to provide
better care for those who need it and currently do not have access to proper
diabetes care. The long-term goal is to reach 40 million people in 2020 with
diabetes care products and thereby enable more people with diabetes to live
better lives.
In 2013,
Novo Nordisk sold human insulin according to the company’s differential
pricing policy in 35 of the 49 Least Developed Countries (LDC), as defined by
the UN. According to this policy, the price should not exceed 20% of the average
prices in the western world. While the number of countries buying insulin in
accordance with this policy has been stable for some years, the volume sold
increased by 7%. In 2013 the LDC ceiling price for insulin treatment per patient
per day was USD 0.22, while the average price of insulins that Novo Nordisk
sold under this programme was USD 0.17. In other low- and middle-income countries,
Novo Nordisk sells large volumes of insulin at equally low tender prices through
government health programmes. In 2013, an estimated 5.2 million patients worldwide
have been treated with insulin at or for less than the LDC ceiling price.
Donations
through the World Diabetes Foundation amounted to DKK 64 million in 2013. The
World Diabetes Foundation
is an independent non-profit organisation
established in 2002 by Novo Nordisk to help expand access to diabetes care.
The foundation invests in sustainable initiatives to build healthcare capacity
with the aim of improving prevention and treatment of diabetes in developing
countries. Read more on worlddiabetesfoundation.org.
Novo Nordisk
also provides financial support to improve global access to haemophilia care.
In 2013, the company donated DKK 19 million to the Novo Nordisk Haemophilia
Foundation, established in 2005. The foundation supports projects and fellowships
in developing and emerging economies. Initiatives focus on capacity-building,
awareness, diagnosis and registries. Read more on nnhf.org.
Employees
At the end of 2013, the total number of employees
was 38,436, corresponding to 37,978 full-time positions, which is an 11% increase
compared with 2012. This growth is driven by expansion of the sales and marketing
organisation in the regions North America and International Operations as well
as significant expansion in Denmark in the research and development organisation
and in production.
Employee
turnover decreased from 9.1% in 2012 to 8.1%, reflecting a continued positive
trend. The average number covers some geographical variation.
The consolidated
score in the annual employee engagement survey, eVoice, was 4.4, measured on
a scale of 1 to 5, with 5 being the best score. The survey measures the extent
to which the organisation is working in accordance with the Novo Nordisk Way.
The 2013 result is an improvement on the score of 4.3 in 2012, and indicates
that despite continued growth, there is a strong culture and commitment to the
company’s values. Read more about the long-term target
on p 12.
In terms
of diversity, by the end of 2013 a total of 70% of the 33 senior management
teams were composed of a diverse group, with members of both genders and different
nationalities. This represents a continued and steady positive trend towards
the ambition that by the end of 2014 all senior management teams must meet these
diversity criteria or explain why this has not yet been achievable.
In 2013, the average frequency rate of occupational injuries was 3.5 per million working hours, compared with 3.6 in 2012. Uniform occupational health and safety management procedures are being rolled out in the global organisation.
Assurance
Mandatory training in business ethics is a
high priority. In 2013, 97% of all relevant employees completed and documented
their training and passed the related tests. This is a slight decrease from
99% in 2012, which can be explained by a higher number of employees in scope
of training and the introduction of tests with an explicit requirement that
documentation of training must be provided in addition to passing the tests.
Annual business ethics training is required for all employees, including new
hires. Business ethics training is a key element in all onboarding programmes.
Adherence
to the company’s global standards for ethical behaviour must be observed
and is monitored. Internal business ethics audits are conducted by means of
on-site interviews and documentation reviews to assess compliance with legal
requirements and internal procedures. During 2013, 45 business ethics reviews
were conducted, compared with 48 in 2012.
During
the year, the global facilitator team conducted 75 audits of units’ adherence
to the Novo Nordisk Way, so-called facilitations, covering approximately 11,500
employees, ie around one-third of the entire workforce. A facilitation consists
of document review and interviews with local management, employees and stakeholders
to determine the level of adherence to corporate values and behaviours spelled
out in the Novo Nordisk Way. A conclusive report, presented to the Board of
Directors, identifies best practices that are shared internally, while findings
of non-compliance are reported to local management, which must subsequently
implement corrective actions. Timely closure, measured as an average over a
three-year period during which the entire organisation is covered, is consistently
high. By the end of 2013, 96% of actions were closed on time, and the conclusion
is that there is a high level of compliance with the Novo Nordisk Way across
the organisation.
CONTINUED ►
NOVO NORDISK ANNUAL REPORT 2013
| 12 | ACCOMPLISHMENTS AND RESULTS 2013 |
A
total of 221 supplier audits were conducted to assess the level of compliance
with Novo Nordisk’s standards for suppliers. These relate to quality as
well as environment, labour, human rights and business ethics, in line with
Novo Nordisk’s responsible sourcing standards.
These
audits are undertaken by Novo Nordisk’s corporate quality organisation.
The level of audit activity was on par with 2012. Of these, 25 audits in 2013
were focused on responsible sourcing criteria, compared with 45 in 2012. Only
high-risk
suppliers, identified through
a robust risk assessment, are selected for responsible sourcing audits. In 2013,
one critical finding was identified regarding excessive overtime. This finding
is being addressed.
Following
the receipt in December 2012 of a Warning Letter from the US Food and Drug Administration
(FDA), a re-inspection was carried out in August 2013. In January 2014 Novo
Nordisk received confirmation from the agency that the violations had been addressed
satisfactorily.
In 2013, Novo Nordisk had six
instances
of product recalls from the market, which is the same level as the previous year. Among one of these, an internal quality control found that a small percentage (0.14%) of certain batches of the company’s prefilled insulin product NovoMix® 30 did not meet the specifications for insulin strength. As a result 3 million products were recalled from wholesalers, pharmacies and patients in several European markets. The root cause was found to be a production error and has been resolved.
Long-term social targets
2013 performance against
long-term social targets
| Novo Nordisk has chosen three long-term social targets to support long-term financial performance, balancing responsibility with profitability, with the aim of creating sustainable value for shareholders and other stakeholders. The social targets reflect aspirations expressed in the Novo Nordisk Way: helping people live better lives, working the Novo Nordisk Way and nurturing a diverse working environment. In 2013, progress was made against all three targets. | |
NOVO NORDISK ANNUAL REPORT 2013
|
ACCOMPLISHMENTS AND
RESULTS 2013
|
13
|
Environmental
performance
Novo Nordisk’s environmental performance is measured on three strategic dimensions: consumption of water, consumption of energy and CO2 emissions from energy consumption.
Water and energy
In 2013, 2,572,000 GJ energy and 2,685,000
m3
water were consumed at production sites around the world. This equals an increase
of 6% and 8% respectively, which is linked to the increased production volume
output and new production capacity.
Around
half of the water and 30% of the energy consumed at the company’s 13 production
sites is consumed at the production site in Kalundborg, Denmark. Optimisations
achieved at this site therefore have a significant impact on the company’s
total resource consumption.
CO2
emissions
In 2013, CO2 emissions from production
amounted to a total of 125,000 tons.
This equals a 2% increase compared with 2012, which is directly linked to
the increased consumption of energy.
The increase in CO2 emissions
is less than the increase in energy consumption, because part of the increase
in energy consumption happened at sites where
the energy consumed is less CO2-intensive.
At the same time, consumption decreased at sites with coal-based energy supply.
The company’s
target of a 10% absolute reduction in 10 years is expected to be met in 2014.
Since 2005, 685 energy-saving projects
have led to a total reduction in CO2
emissions of 44,000 tons annually.
Production sites that rely on coal-based energy supply will be in focus for
further reductions. These sites are Kalundborg in Denmark and Tianjin in China.
Waste
In 2013, Novo Nordisk generated 91,712 tons
of waste, which is an increase of 11% compared with 2012. Of this, 81% is non-hazardous
organic production waste in diabetes care.
The objective
is to reduce environmental impact from waste. As a consequence, instead of setting
traditional reduction targets measured by quantity, those areas where environmental
impacts from waste can be reduced the most have been singled out for focused
attention.
Since October
2011, the company’s organic production waste has been used for energy recovery
in biogas plants, whereas previously it was used for animal feed. As a consequence,
organic production waste is now reported as waste, included in the total waste
volume. Organic waste production is the type of waste that increases the most
in line with growing production. The total waste volume excluding organic production
waste is stable.
Long-term environmental targets
2013 performance against
long-term environmental targets
Novo Nordisk has chosen three long-term environmental
targets to support long-term financial performance, balancing responsibility
with profitability, with the aim of creating sustainable value for shareholders
and other stakeholders. The environmental targets for consumption
of energy and water and CO2
emissions contribute to optimising
production efficiency and reducing environmental impacts.
The consumption
of energy and water for production is increasing due to continued growth in
sales and, as a consequence, emissions of CO2
are increasing too.
Performance
against the targets is as projected and the targets are expected to be met.
Long-term environmental targets update
The long-term environmental targets for consumption
of energy and water were revised and updated in 2013 to ensure that they were
aligned with new business priorities in response to the need for expansions
of production capacity and an increased product portfolio.
The new
targets remain ambitious and reflect the aspiration of continuous decoupling
of environmental impacts from business growth, measured as increase in sales
in local currencies. The targets have been set as a maximum 50% increase in
energy and water consumption compared with business growth, measured as a
three-year average. This will be particularly challenging in years of production
expansion and running-in of new plants or production lines.
NOVO NORDISK ANNUAL REPORT 2013
| 14 | ACCOMPLISHMENTS AND RESULTS 2013 |
| DKK million |
2009
|
2010
|
2011
|
2012
|
2013
|
2012–2013
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Financial performance | Change | |||||||||||
| Net sales | 51,078 | 60,776 | 66,346 | 78,026 | 83,572 | 7% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Underlying sales growth in local currencies | 11% | 13% | 11% | 12% | 12% | |||||||
| Currency effect (local currency impact) | 1% | 6% | (2% | ) | 6% | (5% | ) | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net sales growth as reported | 12% | 19% | 9% | 18% | 7% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Depreciation, amortisation and impairment losses | 2,551 | 2,467 | 2,737 | 2,693 | 2,799 | 4% | ||||||
| Operating profit | 14,933 | 18,891 | 22,374 | 29,474 | 31,493 | 7% | ||||||
| Net financials | (945 | ) | (605 | ) | (449 | ) | (1,663 | ) | 1,046 | N/A | ||
| Profit before income taxes | 13,988 | 18,286 | 21,925 | 27,811 | 32,539 | 17% | ||||||
| Net profit for the year | 10,768 | 14,403 | 17,097 | 21,432 | 25,184 | 18% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total assets | 54,742 | 61,402 | 64,698 | 65,669 | 70,337 | 7% | ||||||
| Equity | 35,734 | 36,965 | 37,448 | 40,632 | 42,569 | 5% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Capital expenditure, net | 2,631 | 3,308 | 3,003 | 3,319 | 3,207 | (3% | ) | |||||
| Free cash flow1 | 12,332 | 17,013 | 18,112 | 18,645 | 22,358 | 20% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Financial ratios | ||||||||||||
| Percentage of sales | ||||||||||||
| Sales outside Denmark | 99.2% | 99.4% | 99.3% | 99.4% | 99.4% | |||||||
| Sales and distribution costs | 30.2% | 29.9% | 28.6% | 27.6% | 28.0% | |||||||
| Research and development costs | 15.4% | 15.8% | 14.5% | 14.0% | 14.0% | |||||||
| Administrative costs | 5.4% | 5.0% | 4.9% | 4.2% | 4.2% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Gross margin1 | 79.6% | 80.8% | 81.0% | 82.7% | 83.1% | |||||||
| Net profit margin1 | 21.1% | 23.7% | 25.8% | 27.5% | 30.1% | |||||||
| Effective tax rate1 | 23.0% | 21.2% | 22.0% | 22.9% | 22.6% | |||||||
| Equity ratio1 | 65.3% | 60.2% | 57.9% | 61.9% | 60.5% | |||||||
| Return on equity (ROE)1 | 31.3% | 39.6% | 46.0% | 54.9% | 60.5% | |||||||
| Cash to earnings1 | 114.5% | 118.1% | 105.9% | 87.0% | 88.8% | |||||||
| Payout ratio1 | 40.9% | 39.6% | 45.3% | 45.3% | 47.1% | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Long-term financial targets | Targets | |||||||||||
| Operating margin1 | 29.2% | 31.1% | 33.7% | 37.8% | 37.7% | 40% | ||||||
| Operating profit growth | 20.7% | 26.5% | 18.4% | 31.7% | 6.9% | 15% | ||||||
| Operating profit after tax to net operating assets1 | 47.3% | 63.6% | 77.9% | 99.0% | 97.2% | 125% | ||||||
| Cash to earnings, (three-year average) | 111.5% | 115.6% | 112.8% | 103.7% | 93.9% | 90% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2013
Diabetes care sales
.. Oral antidiabetic products (OAD)
.. Protein-related products
.. Victoza®
.. Human insulins
.. Modern insulins (insulin analogues)
Biopharmaceuticals sales
... Other products
... Norditropin(R)
... NovoSeven(R)
Sales by geographic region
... Japan & Korea
... Region China
... International Operations
... Europe
... North America
|
ACCOMPLISHMENTS AND
RESULTS 2013
|
15
|
|
2009
|
2010
|
2011
|
2012
|
2013
|
2012–2013
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Social performance | Change | |||||||||||
| Least developed countries where Novo Nordisk sells insulin according to the differential pricing policy | 36 | 33 | 36 | 35 | 35 | – | ||||||
| Donations (DKK million)2 | 83 | 84 | 81 | 84 | 83 | (1% | ) | |||||
| New patent families (first filings) | 55 | 62 | 80 | 65 | 77 | 18% | ||||||
| Employees (total) | 29,329 | 30,483 | 32,632 | 34,731 | 38,436 | 11% | ||||||
| Employee turnover | 8.3% | 9.1% | 9.8% | 9.1% | 8.1% | |||||||
| Relevant employees trained in business ethics |
N/A
|
98% | 99% | 99% | 97% | |||||||
| Product recalls |
2
|
5 | 5 | 6 | 6 | – | ||||||
| Warning Letters and re-inspections |
0
|
0 | 0 | 1 | 1 | – | ||||||
| Company reputation with external key stakeholders (scale 1–7) |
N/A
|
N/A
|
5.6 | 5.7 | 5.8 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Long-term social targets | Targets | |||||||||||
| Patients reached with Novo Nordisk diabetes care products in millions (estimate) |
N/A
|
N/A
|
20.9 | 22.8 | 24.3 | 40 by 2020 | ||||||
| Working the Novo Nordisk Way (scale 1– 5) |
N/A
|
N/A
|
4.3 | 4.3 | 4.4 | 4.0 | ||||||
| Diverse senior management teams |
50%
|
54% | 62% | 66% | 70% | 100% by 2014 | 3 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Environmental performance | Change | |||||||||||
| Energy consumption (1,000 GJ) |
2,246
|
2,234 | 2,187 | 2,433 | 2,572 | 6% | ||||||
| Water consumption (1,000 m3) |
2,149
|
2,047 | 2,136 | 2,475 | 2,685 | 8% | ||||||
| CO2 emissions from energy consumption (1,000 tons) |
166
|
95 | 94 | 122 | 125 | 2% | ||||||
| Wastewater (1,000 m3) |
2,062
|
1,935 | 2,036 | 2,272 | 2,457 | 8% | ||||||
| Waste (tons) |
26,362
|
25,627 | 41,376 | 82,802 | 91,712 | 11% | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Long-term environmental targets | Targets | |||||||||||
| Energy consumption (vs prior year) |
(11%
|
) | (1% | ) | (2% | ) | 11% | 6% | 6% | 4 | ||
| Water consumption (vs prior year) |
(20%
|
) | (5% | ) | 4% | 16% | 8% | 6% | 4 | |||
| CO2 emissions from energy consumption (vs 2004 baseline) |
(24%
|
) | (56% | ) | (57% | ) | (44% | ) | (42% | ) | by 2014 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share performance | Change | |||||||||||
| Basic earnings per share/ADR in DKK1,5 |
3.59
|
4.96 | 6.05 | 7.82 | 9.40 | 20% | ||||||
| Diluted earnings per share/ADR in DKK1, 5 |
3.56
|
4.92 | 6.00 | 7.77 | 9.35 | 20% | ||||||
| Total number of shares (millions) 31 December5 |
3,100
|
3,000 | 2,900 | 2,800 | 2,750 | (2% | ) | |||||
| Net asset value per share, (Group) in DKK5 |
11.53
|
12.32 | 12.91 | 14.51 | 15.48 | 7% | ||||||
| Dividend per share in DKK5 |
1.50
|
2.00 | 2.80 | 3.60 | 4.50 | 25% | ||||||
| Total dividend (DKK million) |
4,400
|
5,700 | 7,742 | 9,715 | 11,866 | 6 | 22% | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
1. For definitions, please refer to p 93. 2. Donations to the World Diabetes Foundation and the Novo Nordisk Haemophilia Foundation, which are working to increase healthcare capacity in developing countries. 3. By the end of 2014 all senior management teams must comply with the target to be diverse in terms of both gender and nationality or explain why this has not yet been achievable. 4. The 6% equals 50% of the business growth measured as the increase in sales in local currencies. For detailed target definition, please refer to p 13. 5. As at 2 January 2014 a stock split of the company’s trading unit was conducted. Comparative figures have been restated to reflect the change in trading unit from DKK 1 to DKK 0.20. 6. Proposed dividend for the year (not yet declared).
NOVO NORDISK ANNUAL REPORT 2013
Employees (total)
... Japan & Korea
... Region China
... International Operations
... Europe*
... North America
Includes headquarter functions and Research and Development
in Denmark.
... Waste*
... Waste excl organic production
waste for biogas
* Before 2011, most of the non-hazardous organic production
waste was used for animal feed and classified as a by-product.
Since October 2011, all this waste has been sent for energy
recovery in biogas plants and is therefore reported as waste.
Net cash distribution
to shareholders
... Dividends
... Share repurchases
Business
strategy:
‘Our focus is our strength’
If Novo Nordisk’s business
strategy were to be
described in one word, it would have to be ‘focus’.
Each
year, a team of people from different parts of
Novo Nordisk’s global organisation is tasked by senior management to
explore the business environment, analyse trends and come back and challenge
Novo Nordisk’s strategy based on the findings.
Novo
Nordisk’s corporate strategy is the result of this process, which ends
when the Board of Directors approves the updated strategy in June. In the following
months, it is anchored in the annual business and organisation plans, balanced
scorecards and performance targets.
The direction
and the core elements of the strategy do not change fundamentally from year
to year, but are adjusted whenever signals of change occur in Novo Nordisk’s
business environment. The adjustments ensure that Novo Nordisk is capable of
meeting current and emerging challenges and opportunities.
The current
business environment has plenty of both. It is characterised by slow economic
growth and austerity measures in some parts of the world, and rapid economic
growth and urbanisation with alarming implications for public health in others.
In high-income countries with ageing populations, governments and private payers
are reluctant to pay a premium for new, innovative therapies. Low- and middle-income
countries fight a double burden of poverty and poor health, and access to care
is inadequate and unevenly distributed. Many countries with largely publicly
funded healthcare systems are putting in place market restrictions for new medications
and in the US, pharmaceutical companies, including Novo Nordisk, are facing
increasingly tough pricing negotiations with managed care organisations and
pharmacy benefit managers.
Many
pharmaceutical companies are seeing major products going off patent and are
unable to bring out innovative products that can make up for the lost revenue.
Some have chosen to cut research and development budgets and lay off thousands
of employees. Some have added generic and over-the-counter medicines to their
offering, while others have created a broader service offering around their
core products. And all have realised that new products will only have a chance
in the market if they address unmet medical needs and are accompanied by convincing
data about their health-economic benefits.
Novo
Nordisk has decided to continue making large investments in research and development,
strategic products and growth markets. The decision is based on a firm belief
that huge unmet medical needs remain to be addressed, not least within diabetes,
a disease that is growing at an alarming rate all over the world. Read more
on pp 22–23.
To meet
the increasing demands for data about its products’ health-economic benefits,
capabilities are being further strengthened within the company’s market
access functions. Moreover, Novo Nordisk is expanding its field force in countries
where there are significant opportunities for market expansion. It is also exploring
new ways of reaching people with unmet health needs. For example, pilot programmes
in low-income countries such as Kenya and Bangladesh have helped improve access
to products in rural areas.
A focused strategy
The three core elements of Novo Nordisk’s strategy have remained unchanged for years:
First, Novo Nordisk has a sharp focus on a few diseases and conditions where it can make a significant difference. As a result of this focus, the company has built strong positions within diabetes care, haemophilia and growth disorders, while creating a platform for entering into treatments for obesity and autoimmune inflammatory diseases.
| Second, activities are leveraging the company’s five core capabilities: | |
| • | Engineering, formulating, developing and delivering protein-based treatments |
| • | Deep disease understanding |
| • | Efficient large-scale production of proteins |
| • | Planning and executing global launches of new products |
| • | Building and maintaining a leading position in emerging markets. |
17
Third,
Novo Nordisk has a values-based management system formalised in the Novo Nordisk
Way. Read more on p 4. A key element of the Novo
Nordisk Way is the Triple Bottom Line business principle, which was written
into the company’s Articles of Association at the Annual General Meeting
in 2004. It states that Novo Nordisk “strives to conduct its activities
in a financially, environmentally and socially responsible way”.
This
is the company that 24.3 million patients rely on for their daily medication,
where more than 38,000 employees work and in which more than 130,000 investors
have bought shares.
The five strategic focus areas
 |
1. Expand leadership in diabetes |
382 million people worldwide are living
with diabetes and it is predicted that by 2035 close to 600 million people
worldwide will have diabetes. Read more about the diabetes
pandemic on pp 22–23.
The global
market for diabetes care products amounts to approximately 238 billion Danish
kroner, of which Novo Nordisk products account for about 27%. The market has
been growing by around 11% annually in the last decade and is expected to experience
continued solid growth driven by an increased prevalence of diabetes and the
need for better treatments. Of this global market, insulin accounts for 52%,
oral diabetes products for 41% and GLP-1 products for 7%.
In 1923
the first patients were treated with insulin from the company that is now Novo
Nordisk, and diabetes care remains its largest and fastest-growing business
area.
Diabetes care accounts for close
to 78% of Novo Nordisk’s total sales, most of which comes from insulin
and GLP-1 products. In both areas Novo Nordisk is the global market leader in
terms of volume.
Novo Nordisk
is well positioned to address the unmet medical needs in diabetes.
| The insulin portfolio | |
| The insulin portfolio includes: | |
| • | Tresiba ® (insulin degludec), a once-daily new-generation basal insulin analogue with an ultra-long duration of action and a flat and stable action profile that reduces the rate of low blood sugar (hypoglycaemia). Read more about Tresiba® on pp 24–25. |
| • | Ryzodeg ® (insulin degludec/insulin aspart), a soluble insulin combination of Tresiba® and NovoRapid® (insulin aspart) providing both basal and mealtime glucose control. |
| • | NovoRapid ® (marketed as NovoLog® in the US), the world’s most widely used rapid-acting insulin for use at mealtimes. |
| • | NovoMix ® 70/50/30 (NovoLog® Mix 70/30 in the US), dual-release modern insulins that cover both mealtime and basal requirements. These insulins can be used either to initiate or intensify insulin therapy. |
| • | Levemir ® (insulin detemir), a soluble, long-acting modern insulin for once-daily use. It provides glucose control with a favourable weight profile. |
The primary goal of Novo Nordisk’s diabetes research is to discover new therapies that lower blood glucose while reducing the risk of low blood sugar. A recent result of this research is IDegLira, a fixed combination of insulin degludec and liraglutide (the active ingredient in Victoza®). IDegLira is under regulatory review in the EU. Read more about IDegLira on pp 24–25.
Novo
Nordisk is also developing a new faster-acting formulation of insulin aspart
to be taken at mealtimes and recently initiated an extensive phase 3a programme.
In addition
to new and improved injectable insulins, Novo Nordisk is also developing formulations
of insulin that can be taken as tablets.
GLP-1 (Glucagon-Like Peptide-1)
With the launch of Victoza®
in 2009, Novo Nordisk entered the GLP-1 therapy segment. Victoza® is a human GLP-1
analogue with 97% similarity to the natural gut hormone. Victoza®
is taken once daily and, like natural GLP-1, works by stimulating the beta cells
in the pancreas to release insulin only when blood sugar levels are high.
GLP-1 therapy
is a significant advance in the treatment of type 2 diabetes because it lowers
glucose with only a very low risk of triggering low blood sugar.
Victoza®
is approved for adults with type 2 diabetes who are unable to achieve blood
glucose goals with lifestyle changes and tablet-based treatment (metformin,
the most widely used tablet for type 2 diabetes). In less than two years, Victoza®
became the leading GLP-1 treatment globally and has steadily expanded the market
for GLP-1 treatment. The market is currently valued at around 16.4 billion kroner,
of which Victoza® accounts for approximately 70%. Available in more than 80 markets,
Victoza®
is now used by approximately 800,000 people worldwide according to company estimates.
Based on
the expertise Novo Nordisk has gained through the development of Victoza®,
the company is now building a GLP-1 portfolio with the intention of providing
an even broader range
CONTINUED ►
| Novo
Nordisk’s strategy Strategic focus areas |
Core capabilities | |||||||||||||||
| Expand leadership in DIABETES | Engineering, formulating, developing and delivering proteinbased treatments |
Deep disease under- standing |
Efficient large-scale production of proteins |
Planning and executing global launches of new products |
Building and maintaining a leading position in emerging markets |
|||||||||||
| Establish presence in OBESITY | ||||||||||||||||
| Pursue leadership in HAEMOPHILIA | ||||||||||||||||
| Expand leadership in GROWTH DISORDERS | ||||||||||||||||
| Establish presence in INFLAMMATION | ||||||||||||||||
|
Novo
Nordisk Way and the Triple Bottom Line business principle
|
||||||||||||||||
of treatment options. Key projects include a once-weekly GLP-1 analogue, semaglutide, which in 2013 entered phase 3a development. Novo Nordisk is also developing formulations of GLP-1 that can be taken as tablets.
Injection devices
Novo Nordisk invented the market for insulin
injection devices with the launch of the world’s first insulin pen in 1985.
Today, Novo Nordisk offers the world’s most widely used durable and disposable
devices for insulin and GLP-1, NovoPen®
4 and FlexPen®,
and is currently introducing its latest innovations, NovoPen®
5 and FlexTouch®,
in many markets. The development of injection devices is based on extensive
studies of how patients experience their daily injections and what they want
from their device. It is an area where Novo Nordisk can make a difference by
developing devices that are simple, safe and user-friendly. Read
more about devices on p 10.
 |
2. Establish a presence in obesity |
According to the World Health Organization
(WHO), obesity has reached pandemic proportions, with up to 1.4 billion adults
(over 20 years old) being overweight. Of these, more than 200 million men
and nearly 300 million women are clinically obese (ie BMI ≥ 30). Obesity
is known to be a major risk factor in developing serious diseases such as
type 2 diabetes and cardiovascular diseases.
Despite
the growing prevalence of obesity globally, there are only a few pharmaceutical
treatment options currently available and reimbursement for these medications
is limited. The market for obesity products currently amounts to 2–3 billion
kroner.
Novo
Nordisk has been investigating the use of liraglutide in a 3 mg dose as a
new once-daily treatment for some people with obesity, namely those with obesity-related
medical conditions such as prediabetes, sleep apnoea, high blood pressure
and lipid disorders. Liraglutide 3 mg is under regulatory review in the EU
and the US. Read more about obesity on pp 28–29.
 |
3. Pursue leadership in haemophilia |
Haemophilia is an inherited or acquired bleeding
disorder that prevents blood from clotting. An estimated 420,000 people worldwide
are living with severe or moderate haemophilia. The global haemophilia drug
market is estimated at 53 billion kroner and has grown by more than 4% annually
in recent years.
Novo Nordisk
entered the haemophilia market in 1996 when it introduced NovoSeven®
for the treatment of haemophilia patients who form antibodies against traditional
treatments. The
company’s ambition is to move from this niche into the main segments of the haemophilia A and B market and achieve a leadership position by developing improved treatment options for all patients. Read more about haemophilia on p 30.
 |
4. Expand leadership in growth disorders |
Novo Nordisk has been active
in the treatment of growth hormone deficiency for almost four decades. Growth
hormone therapy is most frequently used in developed countries. Globally it
is estimated that more than 2 million people are eligible for growth hormone
therapy.
The market
for growth disorder treatments is estimated at 16.4 billion kroner and has grown
by more than 4% annually since 2009. Novo Nordisk is the leading provider of
human growth hormone with a global market share of 30% measured by value.
Novo Nordisk’s
strategy in growth hormone therapy is to expand leadership by providing innovative
and convenient products and devices. Norditropin® (somatropin) is the
only liquid growth hormone product with room temperature stability after first
use that is available in a prefilled pen device. Novo Nordisk’s newest
injection device for growth hormone is Norditropin®
FlexPro®,
which has an easy-touch dosing mechanism.
Novo Nordisk
is also developing a long-acting growth hormone formulation, currently in phase
1 trials.
 |
5. Establish presence in inflammation |
Autoimmune inflammatory diseases,
such as rheumatoid arthritis and Crohn’s disease, result from the immune
system attacking the body’s own tissues and creating a chronic state of
inflammation. Many people with autoimmune inflammatory diseases do not respond
adequately to current treatments.
Novo Nordisk
is using its expertise in designing therapeutic proteins and within chronic
disease management care to develop new treatments, particularly for patients
who are unresponsive to current treatments. Novo Nordisk has built a portfolio
of first-in-class compounds with three projects being investigated in phase
2 clinical studies.
The core capabilities
Engineering, formulating, developing
and delivering protein-based treatments
Novo Nordisk has dedicated research and development
facilities in Denmark, China, the US and India. More than 7,000 employees
are involved in research and development activities throughout the company,
working in partnerships with external biotech and academic researchers.
Novo Nordisk’s researchers have many years’ experience with formulation technology, protein engineering, expression and delivery, enabling the company to continuously improve the properties of therapeutic proteins such as insulin and GLP-1. Furthermore, since 1985, when Novo Nordisk launched the world’s first insulin injection device – NovoPen® – the company has developed world-class expertise in designing and producing simple and convenient devices for injecting protein therapeutics.
Deep disease understanding
Novo Nordisk has a deep understanding of the
unmet medical needs associated with chronic conditions. This, together with
strong relationships and numerous collaborations with external researchers and
clinicians, provides a solid foundation for the company’s research, development
and marketing activities. One example is DAWN2™
(Diabetes Attitudes, Wishes and Needs), a study conducted in 17 countries and
including more than 15,000 people with diabetes, their family members and healthcare
professionals. DAWN2™
highlights opportunities for improving diabetes care, education and community
support.
| Efficient large-scale production of proteins |
|
| A high-quality, cost-effective global manufacturing infrastructure is a prerequisite for competing successfully in an increasingly competitive pharmaceutical market. It also enables Novo Nordisk to make treatments available at very low prices in developing countries. Novo Nordisk has a global production set-up with facilities strategically located in five countries across four continents: | |
| • | The production of active pharmaceutical ingredients is a highly specialised process and mainly takes place in Denmark, where Novo Nordisk has nine plants, including the largest insulin factory in the world. |
| • | The production of diabetes finished products takes place in five countries: Denmark, France, the US, Brazil and China, which all have the approval and ability to export to other markets. |
| • | In addition, Novo Nordisk has a number of smaller manufacturing plants that support local demand in selected countries. |
| • | All production facilities operate under one global quality management system with centrally deployed standard operating procedures (SOPs) for all involved employees. This ensures a uniform and high quality standard for all products. |
All manufacturing sites are held accountable for meeting ambitious targets for minimising their impact on the environment. Performance measures include energy and water consumption, CO2 emissions and the amount of waste
19
generated during production processes. Read more about production on pp 36–37.
Planning and executing global launches
of new products
Due to the high and increasing costs associated
with developing, obtaining approval for and marketing a new medicine, most pharmaceuticals
must be launched globally to optimise the return on investment. And, importantly,
such launches must happen over a relatively short time so there is a reasonable
period left before the product’s patents expire. Through the launches of
Victoza®
in multiple markets over the past years, Novo Nordisk has refined this capability,
which is now being utilised in connection with the launch of, for example, Tresiba®.
Building and maintaining a leading position
in emerging markets
Many years of experience have helped Novo Nordisk
understand the needs of new markets and forge partnerships with local stakeholders.
The company’s strategy has always been to establish a local organisation
early – as soon as there are signs of a market developing – and to
grow organically as the market develops. This has enabled Novo Nordisk to build
long-term relations and a sustainable market presence, and is a key reason behind
Novo Nordisk’s success in rapidly developing markets such as China. Read
more about Novo Nordisk’s five regions on pp 31–35.
The Triple Bottom Line business principle
Novo Nordisk’s strategy is underpinned
by the Triple Bottom Line business principle, which ensures that financial,
social and environmental impacts are considered when decisions are made. This
requires systematic and respectful engagements with key stakeholders to stay
attuned to their interests and expectations.
The aim
is to ensure long-term profitability by mitigating risks and minimising negative
impacts from business activities, and to enhance the positive contributions
to society from the company’s global operations.
Financially responsible:
profitable for the long term
Doing business in a profitable and responsible
way is the basis for the long-term viability of the company. Novo Nordisk
uses four long-term financial targets to steer the business towards long-term
sustainable growth. These targets help Executive Management balance growth
in the short term with investments in longer-term growth such as new production
facilities and research and development activities.
Socially responsible: promote
healthy living – and a healthy and engaging workplace
It is Novo Nordisk’s mission to help people
with diabetes, haemophilia and other chronic diseases live better lives. This
is encapsulated in the company’s corporate commitments of Changing Diabetes®
and Changing Possibilities in Haemophilia®.
As a research-based healthcare company, Novo Nordisk’s main contribution
is to discover and develop innovative biological medicines and make them accessible
to patients throughout the world.
With its
deep disease understanding and patient focus, Novo Nordisk plays an active part
in the fight against diabetes. The company is engaged in the prevention of diabetes
through the promotion of healthy living, and is working to improve awareness,
diagnosis and treatment of diabetes. Through these efforts, Novo Nordisk aims
to reduce the human and financial burden of diabetes. Read
more about Changing Diabetes®
on pp 26–27.
Social
responsibility is also about ensuring a healthy and engaging workplace for Novo
Nordisk’s employees. A healthy, inclusive and engaging working environment
helps attract, motivate and retain the right people, and this is critical to
sustain global growth and make positive contributions to society. Diversity
of backgrounds and experience enriches the working environment. A diversity
aspiration has been set for senior management teams. It drives strategic efforts
to encourage recruitment and promotion of women and people from different nationalities
throughout the organisation. The people strategy offers global standards for equal opportunities, respect for the individual and a safe working environment. As a particular focus, the company promotes healthy lifestyles at work through its NovoHealth programme.
Environmentally responsible:
preserve nature’s resources
Producing more with less is not just sound
household management; it is a way to help preserve scarce natural resources
and proactively address sustainability challenges throughout the value chain.
As its business grows, Novo Nordisk seeks to reduce the consumption of natural
resources and manufactured inputs across the value chain. In addition, there
is also a focus on minimising outputs in the form of emissions such
as CO2 and waste. Read more about
production on pp 36–37.
| Maximising
the value of the Triple Bottom Line |
|
| The Triple Bottom Line business principle creates value for Novo Nordisk in three ways as it: | |
| 1. | makes the company more adaptive to changes in its business environment. This, in turn, mitigates risks and builds trust. Novo Nordisk proactively engages with stakeholders to address global and systemic challenges that could affect the company’s success in the long term. One example is an active engagement in the development of a new set of global sustainable development goals under the auspices of the United Nations. |
| 2. | strengthens competitiveness. Changing Diabetes® is an example of how demonstrating social responsibility and systematic stakeholder engagements can effectively complement market strategies to drive revenue growth. Novo Nordisk has developed a method to demonstrate the business case, called the Blueprint for Change programme. Through a series of case studies, the programme documents how the company’s approach to doing business in ways that are responsible and profitable creates shared value, ie benefits for both stakeholders and the business. |
| 3. | is an engine for innovation in collaboration with partners. One example is from the recent Blueprint for Change case study in Indonesia, one of the company’s selected growth markets. The study showed how Novo Nordisk, by working with partners, can develop its business by reaching out more effectively to people with diabetes who currently do not have access to insulin treatment. The study has informed the strategy in Indonesia. Read more at novonordisk.com/sustainability. |
| 20 | OUR BUSINESS |
Diabetes care
| Compound |
Indication
|
Description
|
Phase 1 | Phase 2 | Phase 3 | Filed/ regulatory approval |
||||||
| Diabetes | ||||||||||||
|
|
||||||||||||
| Tresiba® (insulin degludec) NN1250 |
Type 1 and 2 diabetes | A new-generation basal insulin with an ultra-long duration of action of more than 42 hours. Approved to offer patients reduced risk of hypoglycaemia and the possibility of adjusting the time of injection, when needed. Approved and launched in the EU, Japan and other markets. Additional data required by the US FDA are being generated for the planned resubmission. |  |
|||||||||
|
|
||||||||||||
| Ryzodeg® (insulin degludec and insulin aspart) NN5401 |
Type 1 and 2 diabetes | A soluble co-formulation of Tresiba®, the new-generation basal insulin analogue with an ultra-long duration of action, and NovoRapid® (insulin aspart, marketed as NovoLog® in the US), a rapid-acting mealtime insulin. Approved to offer patients reduced risk of hypoglycaemia. Approved in the EU, Japan and other markets. Additional data required by the US FDA are being generated for the planned resubmission. | |
|||||||||
|
|
||||||||||||
| IDegLira (a fixed combination of insulin degludec and liraglutide) NN9068 |
Type 2 diabetes |
A combination of insulin degludec and liraglutide intended to offer the benefits of the two components in a single preparation. Under regulatory review in the EU. Regulatory filing in the US is awaiting the additional data required by the FDA for Tresiba®. | |
|||||||||
|
|
||||||||||||
| Faster-acting insulin aspart NN1218 |
Type 1 and 2 diabetes including pump users | A new formulation of insulin aspart to accelerate onset of action. |  |
|||||||||
|
|
||||||||||||
| Semaglutide NN9535 |
Type 2 diabetes | A once-weekly GLP-1 analogue intended to offer the clinical benefits of a GLP-1 analogue with less frequent injections. | |
|||||||||
|
|
||||||||||||
| LATIN T1D NN9211 |
Type 1 diabetes | Liraglutide, a once-daily human GLP-1 analogue, intended to offer clinical benefits as adjunct therapy to insulin. | |
|||||||||
|
|
||||||||||||
| OG217SC NN9924 |
Type 2 diabetes | A long-acting GLP-1 analogue intended to offer the clinical benefits of a GLP-1 analogue in a tablet. |  |
|||||||||
|
|
||||||||||||
| OG987GT NN9926 |
Type 2 diabetes | A long-acting GLP-1 analogue intended to offer the clinical benefits of a GLP-1 analogue in a tablet. |  |
|||||||||
|
|
||||||||||||
| OG987SC NN9927 |
Type 2 diabetes | A long-acting GLP-1 analogue intended to offer the clinical benefits of a GLP-1 analogue in a tablet. | |
|||||||||
|
|
||||||||||||
| OG217GT NN9928 |
Type 2 diabetes | A long-acting GLP-1 analogue intended to offer the clinical benefits of a GLP-1 analogue in a tablet. | |
|||||||||
|
|
||||||||||||
| LAI287 NN1436 |
Type 1 and 2 diabetes | A long-acting basal insulin analogue with potential for once-weekly dosing. | |
|||||||||
|
|
||||||||||||
| OI338GT NN1953 |
Type 1 and 2 diabetes | A long-acting basal insulin analogue intended to offer the clinical benefits of a basal insulin analogue in a tablet. | |
|||||||||
|
|
||||||||||||
| OI362GT NN1954 |
Type 1 and 2 diabetes | A long-acting basal insulin analogue intended to offer the clinical benefits of a basal insulin analogue in a tablet. | |
|||||||||
|
|
||||||||||||
| OI287GT NN1956 |
Type 1 and 2 diabetes | A long-acting basal insulin analogue intended to offer the clinical benefits of a basal insulin analogue in a tablet. | |
|||||||||
|
|
||||||||||||
| Obesity | ||||||||||||
|
|
||||||||||||
| Liraglutide 3 mg NN8022 |
Obesity | A once-daily human GLP-1 analogue for use as adjuvant to lifestyle changes intended to offer weight loss for people with severe obesity, including those at particular risk of developing diabetes. Under regulatory review in the US and the EU. | |
|||||||||
|
|
||||||||||||
NOVO NORDISK ANNUAL REPORT 2013
|
OUR BUSINESS
|
21
|
Biopharmaceuticals
| Compound |
Indication
|
Description
|
Phase 1 | Phase 2 | Phase 3 | Filed/ regulatory approval |
||||||
| Haemophilia | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||
| N8-GP NN7088 |
Haemophilia A | A long-acting recombinant coagulation factor VIII derivative intended to offer prophylaxis and treatment of bleeds. | |
|||||||||
|
|
||||||||||||
| N9-GP NN7999 |
Haemophilia B | A long-acting recombinant coagulation factor IX derivative intended to offer prophylaxis and treatment of bleeds. | |
|||||||||
|
|
||||||||||||
| Concizumab NN7415 |
Haemophilia A, B and with inhibitors | A monoclonal antibody against Tissue Factor Pathway Inhibitor (TFPI) intended for bleeding prevention after subcutaneous administration. | |
|||||||||
|
|
||||||||||||
| Growth disorders | ||||||||||||
|
|
||||||||||||
| NN8640 | Growth disorders | A long-acting human growth hormone intended to offer less than once-daily injections. | |
|||||||||
|
|
||||||||||||
| Inflammation | ||||||||||||
|
|
||||||||||||
| Anti-IL-20 NN8226 |
Rheumatoid arthritis |
A recombinant human monoclonal antibody with a novel mechanism of action. The drug is intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. | |
|||||||||
|
|
||||||||||||
| Anti-IL-21 NN8828 |
Crohn’s disease |
A recombinant human monoclonal antibody with a novel mechanism of action. The drug is intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. | |
|||||||||
|
|
||||||||||||
| Anti-NKG2D NN8555 |
Crohn’s disease |
A recombinant human monoclonal antibody with a novel mechanism of action. The drug is intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. | |
|||||||||
|
|
||||||||||||
| Anti-C5aR NN8210 |
Rheumatoid arthritis |
A recombinant human monoclonal antibody with a novel mechanism of action. The drug is intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. | |
|||||||||
|
|
||||||||||||
| Anti-NKG2A NN8765 |
Rheumatoid arthritis |
A recombinant human monoclonal antibody with a novel mechanism of action. The drug is intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. | |
|||||||||
|
|
||||||||||||
| Anti-IL-21 NN8828 |
Systemic lupus erythematosus | A recombinant human monoclonal antibody with a novel mechanism of action. The drug is intended to improve treatment outcomes in patients who do not respond adequately to existing treatments. | |
|||||||||
|
|
||||||||||||
|
Phase 1
Studies in a small group (usually 10–100) of healthy volunteers, and sometimes patients, to investigate how the body handles, distributes and eliminates new medication and establish maximum tolerated dose. |
Phase
2 Studies of various dose levels in a larger group of patients (usually 100–1,000) to learn about the new medication’s effect on the condition and its side effects. In phase 2, clinical trials are carried out to evaluate efficacy (and safety) in specified populations of patients. The outcome of phase 2 trials is clinical proof of concept and the selection of dose for evaluation in phase 3 trials. |
Phase
3 Studies in large groups of patients (more than 8,000) comparing a new medication with a commonly used drug or placebo for both safety and efficacy. Phase 3a covers trials conducted after efficacy is demonstrated and prior to regulatory submission. Phase 3b covers clinical trials completed during and after regulatory submission. In small therapeutic areas such as haemophilia, regulatory guidelines may allow the design of single-arm therapeutic confirmatory trials or trials that compare against eg historical control instead of existing treatment or placebo. |
Read more at novonordisk.com/investors and clinicaltrials.gov.
22
 |
|
|
382 million people in the world
have diabetes today. |
|
|
Diabetes
is an insidious disease of pandemic proportions. Ban Ki-moon, the Secretary-General
of the United Nations, has described diabetes as a tsunami in slow motion.
According to the latest figures from the International Diabetes Federation
(IDF), 382 million people in the world have diabetes today – a number
predicted to grow to close to 600 million by 2035.1* 80% of the total number
affected live in low- and middle-income countries, where the pandemic
is gathering pace at alarming rates due to the lifestyle changes associated
with economic growth and urbanisation. * All footnotes can be found on p 112. |
be almost non-existent,
while in other countries a key issue is that even those people who are
diagnosed and treated do not reach their treatment targets and therefore
have a high risk of developing complications. Cannot be ignored
|
 |
382 MILLION PEOPLE LIVE WITH DIABETES WORLDWIDE BY 2035 592 MILLION PEOPLE WILL LIVE WITH DIABETES
NOVO NORDISK ANNUAL REPORT 2013
|
The International Diabetes Federation (IDF) estimates that there are currently 35 million people with diabetes living in the Middle East and North Africa. With a population of 9 million, Cairo is the largest city in this region and as in all other big cities, the number of people with diabetes is increasing. |
|
|
 |
The Rule of Halves
According to the Rule of Halves*, only around 6% of people with diabetes live
a life free from diabetes-related complications.
Of the
estimated
382 million
people with
diabetes
About
50% are
diagnosed**
Of whom
about 50%
receive
care**
Achieve
treatment
targets
Of whom
about 50%
achieve
treatment
targets**
Achieve
desired
outcomes
Of whom
about 50%
achieve
desired
outcomes**
* Hart J.T., Rule of Halves: implications of increasing diagnosis and reducing dropout for future workload and prescribing costs in primary care,
Br J Gen Pract 1992, March; 42(356):116-119, and W.C.S. Smith, A.J. Lee, I.K. Coombie, H. Tunstall-Pedoe, Control of blood pressure in
Scotland: The rule of halves, BMJ, 300 (1990): 981-983.
** Actual rates of diagnosis, treatment, targets and outcomes vary in different countries.
|
Potential complications
|
What is diabetes? Diabetes affects the way
the body uses food for growth and energy. There are two main forms of
diabetes: type 1 and type 2. Type 1 diabetes is a lifelong autoimmune
disease that develops when the body produces an immune response against
its own cells, destroying beta cells in the pancreas. As a result, the
pancreas stops producing insulin, often – but not always – at
a young age. |
How is diabetes treated? People with type 1 diabetes
need to start taking insulin as soon as they are diagnosed and must continue
to do so for the rest of their lives. |
Stroke
Strokes are up to
four times as likely
Blindness
Diabetes is a
leading cause
of blindness
Heart attack
Heart attack is three
times as likely and
heart disease is up
to four times as
likely
Total kidney
failure
Total kidney failure is
three times as likely
Amputation
Diabetes is a leading
cause of non-traumatic
lower-limb amputations.
NOVO NORDISK ANNUAL REPORT 2013
|
OTHER BUSINESS
|
25
|
|
has been designed with
this need in mind. Greater than the sum
of its parts
|
Image
of the insulin degludec molecule based
|
|||
|
The fear of low blood sugar (hypoglycaemia) means that many people with type 2 diabetes are not treating their condition intensively enough to reduce blood sugar to the recommended level. Adding to this problem is the inflexibility of when injections must be taken, which can lead many people to not take insulin as prescribed. These factors can result in people with diabetes being at risk of developing severe long-term complications. When long is not long enough |
after meals too. For
these people, Novo Nordisk has developed IDegLira, a combination of
Tresiba®
and Victoza®
(liraglutide), delivered in a single daily dose. Victoza®,
a human GLP-1 analogue, stimulates insulin secretion and inhibits glucagon
secretion in a blood glucose-dependent manner and has also been shown
to reduce body weight.
|
|
Making Tresiba® available for patients Tresiba®
was approved in the EU in January 2013 and by the end of the year it
had been launched in eight countries. In countries with broad market
access, Tresiba®
has quickly gained a significant share of the market for long-acting
insulins. |
Tresiba® study results Translating the results from clinical trial programmes into real advances in clinical practice can be challenging, especially since new medicines are often utilised in patients who are not responding well to available therapies. However, recent findings from Marc Evans, a clinician investigator in the UK, provide some important insights into how much value Tresiba® can bring to patients who are experiencing challenges with other insulins. Dr Evans studied 25 consecutive patients who were experiencing poor glucose control and frequent low blood sugar with either insulin glargine or Levemir® (insulin detemir). He found that when switched to Tresiba®, these patients improved their glucose control (in both type 1 and type 2 diabetes) and substantially reduced the frequency of low blood sugar episodes.2 |
NOVO NORDISK ANNUAL REPORT 2013
| 26 | OUR BUSINESS |
Changing
diabetes
where it matters most
It has been
almost a decade since Novo Nordisk launched
Changing Diabetes®,
its promise to people with
diabetes to help them live a better life. Much has been
achieved in this time, but a lot still needs to be done.
|
Novo
Nordisk’s core responsibility to people with diabetes and to society
is to deliver innovative, high-quality products. We
have a very diverse insulin portfolio, from human insulins to modern insulin
analogues,” says Jakob Riis, executive vice president of Marketing
& Medical Affairs. “Our core focus is to drive innovation and
develop even better products to help people achieve the best possible
outcome of their treatment.” The challenge is global, the solutions
local |
Ambitious long-term target |
NOVO NORDISK ANNUAL REPORT 2013
|
Team Novo Nordisk
has raced more than
9,500 km in 55 races since its launch in December 2012. |
||||
|
Inspire people with diabetes |
Eliodoro Gonzales lives in Bolivia.
|
The World Diabetes Foundation The World Diabetes Foundation was established by Novo Nordisk in 2002 as an independent trust with the vision of being a catalyst for change in developing countries. Since 2002, Novo Nordisk has donated around 1.1 billion Danish kroner to the Foundation. The largest share (37%) is spent on strengthening healthcare systems and building healthcare capacity. As of October 2013, 7,138 clinics had been established or strengthened, 4.6 million patients had been treated and 221,935 healthcare professionals trained. |
||
| Training
apprentices in China. |
In
most of Africa there is a lack of knowledge about diabetes. |
|||
 |
Building healthcare capacity Healthcare professionals who are capable of detecting and treating diabetes are needed to catch up with the accelerating growth in the prevalence of diabetes. In China, Novo Nordisk, the government and local partners collaborate to increase quality diabetes care. As of October 2013, 2,076 apprentices have been trained and people across 830 counties have benefited from improved diagnosis and treatment. Another example is the new REACH programme in which Novo Nordisk-owned Steno Diabetes Center is scaling up its efforts by establishing an education centre in various countries in Asia. Once fully rolled out, the programme, which is funded by the Novo Nordisk Foundation, is expected to train more than 9,200 healthcare professionals globally each year. |
|
||
|
Patsy Left Hand
Bull is a tribal elder of the Lakota Sioux tribe in the Rosebud Reservation. |
Ranjith
is enrolled in the
Changing Diabetes® in Children programme in India. |
|||
|
Supporting vulnerable populations |
Changing
Diabetes®
in Children In some developing countries, the life expectancy for children with type 1 diabetes is less than one year. In 2010, Novo Nordisk committed 75 million Danish kroner over five years to provide free insulin and care to children as part of its Changing Diabetes® in Children programme. The programme is a collaboration with local partners including ministries of health and the World Diabetes Foundation. Since 2010, 93 clinics have been established and over 4,150 local healthcare professionals have received the proper training and education to treat children. More than 11,700 children in nine countries across Africa and Southeast Asia have been enrolled in the programme. |
 |
||
| 28 | OUR BUSINESS |
The increasing prevalence of obesity is no longer just an issue for high-income countries; the number of people who are overweight or obese is rising to record-breaking levels in low- and middle-income countries too. Without doubt, obesity is a growing threat to global health as it has many potentially life-threatening complications, not least type 2 diabetes. With liraglutide 3 mg, Novo Nordisk hopes to be able to offer a new treatment option for some people with obesity.
|
According
to the World Health Organization,
being overweight or obese is the fifth leading risk for deaths worldwide,
and is linked to more deaths globally than being underweight. In the US,
where more than 35% of adults, or some 100 million people, are obese,1
the American Medical Association recently recognised obesity as a disease.
In 2011, a US congress committee urged the US Food and Drug Administration
(FDA) to take steps to support the development of new treatments for obesity.
The US isn’t the only country sounding the alarm over the obesity
epidemic. Worldwide there appears to be a new willingness to address obesity. Moderate weight loss has significant
health benefits |
significant health benefits.9–15
However, with most people
not managing to achieve and maintain this level of weight loss with diet
and exercise alone, other treatment options are necessary. “In the
past, when medicines with an acceptable efficacy and safety profile were
lacking and after diet and exercise had failed, doctors may have been
reluctant to engage in dialogue with patients about obesity,” says
Heather Millage, corporate vice president and responsible for bringing
liraglutide 3 mg to the market. “We hope obesity care will improve
when more tools – in particular liraglutide 3 mg – are available
for the treatment of this disease.” Liraglutide 3 mg, Novo Nordisk’s
once-daily GLP-1 therapy, has recently completed the fourth phase 3a trial
as part of SCALE™, the clinical development
programme for obesity treatment. A natural hormone
|
liraglutide 3 mg during
one year lost 10% of their body weight. And the majority of patients who
had prediabetes at the beginning of the trial and who took liraglutide
3 mg reverted to a normal glucose level.” In fact, the majority of
people with obesity treated with liraglutide 3 mg in the largest trial
in the development programme achieved a clinically relevant weight loss
of 5%. In one of the trials that extended for 104 weeks, weight loss achieved
after one year was maintained for two years. Stigmatisation of people
with obesity |
NOVO NORDISK ANNUAL REPORT 2013
|
Maria Lopez is one of the |
|||||
|
29
|
|||||
|
|||||
| Definition
of obesity Obesity is defined as abnormal or excessive fat accumulation that may impair health for people with a BMI over 30. BMI provides the most convenient population-level measure of overweight and obesity currently available.16 BMI itself, however, does not define health risk. The role of hormones
in obesity |
|||||
The number of adults with obesity has doubled
since 1980
500 million
1980 2008
Worldwide rates of obesity have doubled since
1980, with more than 500 million adults classified as obese in 2008 – more
than 10% of the world’s adult population (World Health Organization’s
global estimates from 2008).
| 30 | OUR BUSINESS |
| Haemophilia Haemophilia is an inherited or acquired bleeding disorder that prevents blood from clotting. People with haemophilia lack, either partially or completely, an essential clotting factor needed to form stable blood clots. Internal bleeding into the joints, muscles and other tissues can cause severe pain, joint damage and disability. The treatment for haemophilia involves intravenous administration of replacement clotting factors. Treatment may be administered when bleeding occurs or, increasingly, on a preventive basis (prophylactic treatment). People with haemophilia A may have either a decreased ability or total inability to produce clotting factor VIII. Approximately 350,000 people have haemophilia A globally. However, the disease is severely under-diagnosed in developing countries. People with haemophilia B have deficiencies in producing clotting factor IX. Haemophilia B is inherited in the same way as haemophilia A, but is five times less common (70,000 people worldwide). Around 3,500–4,500 people with haemophilia worldwide have high-titre inhibitors. |
Living with haemophilia HERO (Haemophilia Experiences, Results and Opportunities) is an international study that aims to build an understanding of life with haemophilia, seen from the perspective of people with haemophilia, their families and their healthcare providers. Read more about the study, which is supported by Novo Nordisk’s programme Changing Possibilities in Haemophilia®, at novonordisk.com/ hero. |
|||||||
NOVO NORDISK ANNUAL REPORT 2013
North America .. Europe .. International Operations .. Region China .. Japan & Korea
Novo Nordisk markets its products in more than 180 countries. Despite the differences in terms of economic development, political systems and healthcare infrastructure between these countries, Novo Nordisk’s business model is fundamentally the same all over the world.
|
Novo
Nordisk has employees in 75 countries. They share the common ambition
to be the country’s leading pharmaceutical company within the selected
disease areas, both in commercial terms and when it comes to making a
positive change for patients. Key to achieving this ambition are biological
pharmaceuticals with new, distinct properties that Novo Nordisk’s
researchers have invented and developed. These products, for example NovoRapid®/
NovoLog®,
Levemir®
and Victoza®,
are what make up the bulk of Novo Nordisk’s revenues in all of its
five business regions. Creating value for customers
Organisation |
other pharmaceutical companies may build a presence through the acquisition of local companies, joint ventures or rented sales forces, Novo Nordisk prefers to hire its own people and train them to become the best. This is also seen as the best way to convey and preserve a strong company culture. Competitors Regional differences CONTINUED ► |
NOVO NORDISK ANNUAL REPORT 2013
| 32 |
|
The North American region
consists of the US and Canada and is Novo Nordisk’s largest in terms
of sales, which isn’t surprising given that the US is the world’s
largest pharmaceutical market. In 2012, total pharmaceutical sales in
the US amounted to 327 billion US dollars, of which 6% was spent on products
for treating diabetes. |
Levemir®,
modest growth of human insulin and a 31% growth in sales of Victoza®, measured in local
currencies. A complex healthcare
system |
providers such as physician,
hospital and pharmacy networks to provide the required service. They provide
different levels of coverage based on the payers’ willingness to
pay for selected services for their employees. A PBM is an intermediary
that contracts with payers and health plans to manage the pharmacy benefit
for a specific population. Typical services include claims processing,
managing enrolee eligibility, contracting pharmacy networks and managing
rebate contracts with pharmaceutical companies. Growing pressures
|
||
 |
||||
North
America|
In Philadelphia,
65% of the adult inhabitants
are estimated to be overweight, making it one of the most obese cities in the US. More than 10% of the inhabitants have diabetes. |
||||
|
Nordisk maintains a competitive presence on the US market. The company’s key diabetes care products have broad market access and are capturing market shares. In fact, in 2013 Novo Nordisk’s three modern insulins were the only products with a growing volume market share in the US in the modern insulin category. Growing market for
diabetes products |
To further strengthen the presence in the US, Novo Nordisk’s US affiliate has expanded its field force several times in recent years. The latest expansion was announced in 2013 with the addition of more than 350 new representatives, who after an intensive period of training will be in the field by April 2014. Preparing for a new
market Developments to look
out for |
initiated a cardiovascular
outcomes trial involving 7,500 patients. Read more
on pp 24–25. CONTINUED ► |
||
 |
||||
Sales in North America
|
Europe is Novo Nordisk’s
second largest region in terms of sales. Sales growth has been modest
in recent years – in the low single-digit range. To a large extent,
this is a result of the depressed economy in many European countries in
the wake of the financial crisis. This has led governments to implement
cost-cutting measures, both through price cuts on medicines and by limiting
access to new medicines. Tresiba® has been affected
by such measures in countries such as the UK and Denmark. Tresiba®
is important for future growth |
With sales of 12 billion
Danish kroner in 2013 and average annual sales growth of around 15% since
2009, International Operations is Novo Nordisk’s main contributor
to growth after North America. Thinking of International Operations as
one business region requires a stretch of the imagination, though. It
encompasses 149 countries all over the world with more than 4.4 billion
people – Latin America, Africa, the Middle East, the Gulf, most of
Asia, and Australia. A region of extraordinary diversity, it covers some
of the world’s poorest countries and some of the richest. |
Future growth With sales of 7.2 billion
Danish kroner in 2013 and average annual sales growth of around 19% since
2009, China has been a major contributor to Novo Nordisk’s growth
in recent years. This is predicted to be the case in the coming years
too, partly due to the rapidly increasing number of people with diabetes
in China. According to the latest estimates from the International Diabetes
Federation, more than 99 million people in China have diabetes today.
|
||
 |
 |
 |
Europe
International
Operations
Region
ChinaSales in Europe
Sales in International Operations
Sales in Region China
35
|
13% in local currencies. The sales growth was driven by all three modern insulins, while sales of human insulins only grew modestly. Currently, 97% of Novo Nordisk’s insulin volume in China is used in devices, primarily the durable device NovoPen®. GLP-1 products are currently not reimbursed in China and this class of products is therefore relatively small. However, its share of the total diabetes care market in value expanded to 0.6% compared with 0.5% in 2012. Victoza® holds a GLP-1 value market share of 74%. Reforms to widen healthcare coverage
With a 52% market share measured in volume, Novo Nordisk is the clear insulin market leader in Japan. The use of devices remains high in Japan, with 98% of Novo Nordisk’s insulin volume being used in devices, primarily FlexPen®. |
In
2013, Novo Nordisk’s sales of diabetes care products in Japan &
Korea decreased by 4% in local currencies. This sales development reflects
a stagnant Japanese insulin volume market and the negative impact from
a challenging competitive environment. A shift in recent years from the
use of premixed insulin products, where Novo Nordisk is the clear leader
with NovoMix®, to basal insulin
products, where Novo Nordisk is in fierce competition with Sanofi, has
led to a loss of market share. |
|
Japan
& Korea
Sales in Japan & Korea
Diabetes care
Value market share by geographic region
... North America
... Europe
... International Operations
... Region China
... Japan & Korea
Modern insulins
Global value market share by brand in its
respective insulin segment*
... NovoMix(r)
... NovoRapid(r)
... Levemir(r)
* Levemir(r) in the long-acting segment, NovoRapid(r) in the
rapid-acting segment and NovoMix(r) in the dual-release segment.
| Key regional facts | North America |
Europe | International Operations |
Region China4 | Japan & Korea |
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Population (million)1 |
349
|
538
|
4.408
|
1.351
|
178
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| GDP per capita (USD)1 |
51,796
|
33,242
|
4,499
|
6,091
|
39,925
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Healthcare spend per capita (USD)1 |
8,310
|
3,575
|
292
|
278
|
3,566
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Physicians per 1,000 people1 |
2.4
|
3.3
|
1.1
|
1.8
|
2.1
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Number of people with diabetes (million)2 |
27
|
34
|
203
|
99
|
11
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Diagnosis rate2 |
78%
|
64%
|
55%
|
46%
|
51%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Diabetes national prevalence2 |
11%
|
9%
|
8%
|
10%
|
8%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Novo Nordisk total sales (DKK billion) |
39.0
|
20.1
|
12.0
|
7.2
|
5.3
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Insulin value market share3 |
38%
|
47%
|
49%
|
57%
|
52%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
| Insulin volume market share3 |
41%
|
49%
|
56%
|
59%
|
49%
|
|||||
|
|
|
|
|
|
|
|
|
|
|
1. The World Bank. 2. The 2013 data are based on the IDF Diabetes Atlas, 6th edition, 2013. Prevalence rates have been estimated lower in a number of countries compared with the 5th edition used in the Novo Nordisk Annual Report 2012. This reduction is due to changes in methodology and sources used by IDF for a given country and not to an improvement in diabetes prevalence. All studies from the same country show an increase in diabetes prevalence over a longer time period. 3. IMS Health, IMS MIDAS Customized Insights, November 2013. 4. Data from IMS Health, IDF and The World Bank include China only.
The complexity of insulin production
| More than 24 million people globally rely on Novo Nordisk’s products to treat their diabetes. Around 10,000 employees are responsible for manufacturing high-quality products – with low environmental impact. |
|
Insulin production at Novo Nordisk starts in Kalundborg, a town of about 16,000 inhabitants 100 kilometres west of Copenhagen, Denmark. It is here that the company makes insulin crystals, the active ingredient in its insulin products, through the processes of fermentation, recovery and purification. Site Kalundborg is Novo Nordisk’s largest production site at 1,350,000 m2 – equivalent to 270 football pitches. In fact, it’s the largest production site for insulin in the world, making around half of the world’s insulin crystals. A complex production
process |
our manufacturing strategy,
and our unique capabilities enable us to produce large volumes of insulin
at a competitive cost.” Final production close
to patients |
to create the different
types of Novo Nordisk insulin, for example Levemir® (insulin
detemir) or Tresiba® (insulin degludec). In the filling
process, glass Penfill® cartridges and vials are filled
on high-speed lines. Once filled and inspected, some cartridges are mounted
into injection devices, such as FlexPen® and FlexTouch®.
Finally, the products are packed to fulfil customer orders and shipped
to their destination after final quality control. Continuous improvement
|
NOVO NORDISK ANNUAL REPORT 2013
|
|
Novo Nordisk uses one
global approach to ensure the quality of its products no matter where
in the world they are produced. The company’s quality management
system has been designed to ensure that all manufacturing processes follow
its standard operating procedures (SOPs) and are in compliance with international
standards such as Good Manufacturing Practice and ISO 9001. In total,
Product Supply, the company’s production division, has more than
15,000 SOPs. |
Ephrem Rudahunga works at site Kalundborg, the largest insulin production site in the world.
|
production through technology upgrades, skill-building and process optimisation. “The introduction and in-house development of cLEAN®, our version of the lean manufacturing principles, has had a very positive impact on the quality and performance of our processes and hence the production cost,” Henrik Wulff says. In fact, the company’s ambition to improve production performance has produced remarkable results, with cost of goods sold as a percentage of sales falling from 28% to 17% from 2003 to 2013. Energy savings
|
long-term aspiration is
to continuously decouple environmental impacts from business growth. Since
2004, Novo Nordisk has reduced the emissions of CO2
by 42%. In response to the need for expansions
of production capacity and an increased product portfolio, the long-term
environmental targets for consumption of energy and water were revised
and updated in 2013. |
become more difficult to
optimise our absolute footprint as we’ve become so efficient. However,
we remain committed to ensuring that our environmental impact grows more
slowly than the company grows its sales,” explains Henrik Wulff. |
|
A Warning Letter
with important learnings |
An error that shouldn’t
have happened |
|||||
NOVO NORDISK ANNUAL REPORT 2013
| 38 | OUR BUSINESS |
| As a business with shareholders to satisfy, the pharmaceutical industry must have a strong focus on financial performance. But the industry’s greater purpose is to improve human health. At first glance these ambitions may appear conflicting – is it therefore any wonder that the issue of trust is so often raised? | and redacted to protect
patient and site confidentiality – as they are the complete descriptions
of the trials presented in a standardised format and the actual material
used for submission to regulatory authorities. “In this way, we hope
to further reassure healthcare professionals and patients that what we communicate
is an accurate reflection of what we have observed and thereby strengthen
public confidence in the approved medical treatments,” adds Peter Kristensen. He stresses that Novo Nordisk will publish the CSRs after regulatory approval in the EU and in the US, so that the |
|||
|
The
pharmaceutical industry is no stranger to critical media attention. Headlines
often call into question the ethics and transparency of business practices
that must balance financial and social responsibilities. It is easy to
find people who don’t trust pharmaceutical companies to put the interests
of patients above profits. Data transparency |
clinical trial results of approved products
public,” explains Peter Kristensen, senior vice president of Global
Development. |
|
||
NOVO NORDISK ANNUAL REPORT 2013
|
OUR BUSINESS
|
39
|
|
decision-making process of the regulatory authorities is not made even more complex by a parallel public debate. In addition, prior to approval, Novo Nordisk regards the design of its trials, as well as the results obtained, as confidential information. “We have to protect competitive information. Otherwise investments in future treatments will be lost, which would be bad for patients and the industry alike,” points out Peter Kristensen. Access to patient-level
data
A selection of books |
research data from clinical
trials has recently been proposed by the European Medicines Agency (EMA).
Novo Nordisk agrees that there is value in making these data available:
“We have a responsibility to patients to ensure that the data they
contribute to clinical trials are leveraged as much as possible to advance
scientific understanding. We believe that by sharing detailed clinical
trial data with the research community, new knowledge may be created that
could contribute to the development of new and improved treatments,”
Peter Kristensen highlights. “However, we have to be careful that
patient confidentiality is not compromised and that competitive business
information is not divulged.” Integrity and transparency
are the foundation for building trust |
“Our business ethics strategy is there to safeguard the integrity of our relationships with all our stakeholders and we want to make sure our actions are transparent,” comments Lise Kingo, executive vice president and chief of staffs. She is also the chair of the Business Ethics Board, which is responsible for implementing the company’s business ethics strategy. “We have focused on business ethics for a long time and we’re always looking for ways we can make improvements in this area.” By way of example, Lise Kingo mentions that all relevant employees are trained in – and then tested on – the company’s standard operating procedures for interactions with and payments to healthcare professionals. Global reporting, global
transparency CONTINUED ► |
NOVO NORDISK ANNUAL REPORT 2013
 |
|
Europe, but throughout the world. We are therefore ready to roll out this system in each country once specific national requirements have been announced and taken into account,” explains Lise Kingo. “We hope that these new regulations and revised codes of conduct will enhance transparency and reassure external stakeholders of our commitment to ethical behaviour.” Reaffirming results
to build confidence |
saving treatments for people
who are, by nature of their medical condition, vulnerable. The company therefore
continuously and actively monitors the safety profile of its products. Stringent
protocols and systems are in place to ensure product safety, both during
the development phases and after a product has been launched. Read
more in the box on p 41. However, new pharmaceuticals often come under the spotlight, particularly if they represent a new class of drug. A recent example is GLP-1-based diabetes therapies, a drug class to which Novo Nordisk’s Victoza® belongs. The safety of this drug class was challenged early in 2013, when a study (which did not include |
Victoza®)
suggested an increased risk of side effects on the pancreas. The FDA and
EMA reacted by reviewing data on GLP-1-based therapies to see if a link
between them and an increase in pancreatic side effects could be determined. In July, the EMA concluded that currently available data did not confirm the concerns over an increased risk of pancreatic adverse events with these medicines. The FDA has not officially announced the conclusion of its review. However, in response to questions from the media, a spokesperson said that the FDA was in agreement with the EMA’s conclusions. Mads Krogsgaard Thomsen, executive vice president and chief science officer, |
41
 |
Continuous safety
|
||
| welcomed the EMA’s conclusion:
“Novo Nordisk is committed to patient safety and continuously monitors
for adverse events related to all of its medicines. Victoza®
has more than 1.9 million patient years of use and a strong body of evidence
to support its safety and efficacy based on both clinical trial and real-world
practice data.” Karsten Lollike, corporate vice president and head of Global Product Safety, adds that Novo Nordisk continues to conduct studies to assess the effects of long-term use of Victoza® on the pancreas. This includes a review of databases and the cardiovascular outcomes trial LEADER®, to be completed in 2016, and other post-marketing studies. |
“Ensuring the safety of our products remains our top priority. I believe our history – and how we have handled safety issues and concerns in the past – proves our commitment is more than just words,” explains Karsten Lollike. “I’m really pleased that in a recent survey1 Novo Nordisk was ranked number one in the industry by patients for having a good record in ensuring patient safety. I believe this shows that patients trust us.” An ongoing issue requires
a long-term perspective |
years to come, Lise Kingo hopes that Novo Nordisk’s approach to business ethics will demonstrate the company’s commitment to building trust with all its stakeholders: “We have clear priorities and the needs of patients come first – this has been the case ever since the company was founded. We have a Triple Bottom Line approach that ensures all business decisions live up to our financial, social and environmental responsibilities. This long-term perspective is absolutely fundamental to the way we work and how we run our business, and I believe this is our firm foundation for being a credible and trustworthy company,” she concludes. |
|
Several developments in 2013 were reminders that there are, and always will be, risks associated with Novo Nordisk’s business – risks that all investors should be aware of. |
|||||
|
8 February 2013: The US Food and Drug Administration (FDA) informs Novo Nordisk that it cannot approve the New Drug Applications for Tresiba® (insulin degludec) and Ryzodeg® (insulin degludec/ insulin aspart) in their current form. This unexpected development meant that these two insulin products could not be launched in the US in 2013 as originally planned. Read more on pp 24–25. 22 March 2013: A study is published suggesting that GLP-1-based drugs for treating type 2 diabetes have an increased risk of pancreatic side effects. Although the authorities later concluded that currently available data did not confirm the concerns, the growth of this market segment was affected in some countries. Read more on pp 38–41. 23 October 2013: Novo Nordisk announces a recall of 3 million NovoMix® insulin products in several European countries due to a production error. Situations leading to product recalls may pose a risk to patient safety, lead to disruption of supplies in the affected countries and tarnish Novo Nordisk’s reputation. Read more on pp 36–37. Three examples of three different types of risk that come with being a pharmaceutical company and investor in one. And there are more. This article covers the main types of risk that Novo Nordisk faces. For some specific risks, reference is made to articles elsewhere in the Annual Report and notes to the consolidated statements. |
Market risks The principal market risks Novo Nordisk experiences are: |
In addition to these global risks, in some countries in the International Operations region political instability or war may pose a risk to Novo Nordisk’s business for varying lengths of time. Delays or failure of
pipeline products |
|||
| • | price pressure and reimbursement restrictions by payers | ||||
| • | the launch of new products by established competitors | ||||
| • | increased competition from producers of biosimilar medicines in key markets. | ||||
Europe, China and the US are all main markets for Novo Nordisk where payers – both governments and private payers – take measures to limit spending on medicines, typically by driving down prices, demanding higher rebates and/or restricting access to and reimbursement of products. This is unlikely to change in the foreseeable future. For Novo Nordisk, reimbursement restrictions pose a significant risk when launching a new product such as Tresiba®, the new-generation basal insulin with ultra-long duration of action. Despite the patient benefits and data supporting the health-economic benefits of the product, it is not always possible to obtain market access on what Novo Nordisk considers reasonable conditions. In some countries, the company may therefore not launch Tresiba® under the current conditions. The launch of new products by established competitors is an inherent market risk. As mentioned on p 33 in the article about Novo Nordisk’s five regions, new products are under way in both the insulin and GLP-1 segments, including a biosimilar version of the best-selling modern insulin product. How and to what extent such events will change the market dynamics is not possible to predict at present. |
|||||
 |
|||||
|
43
|
|||||||
|
regulatory approval process, as illustrated by the aforementioned decision by the FDA regarding Tresiba® and Ryzodeg®. Supply disruptions Quality and product
safety issues Financial risks |
hedges expected future
cash flows for selected key currencies. Read more
about how Novo Nordisk manages this risk in notes 4.2 and 4.3 on pp 79–83. Information technology
risks Business ethics and
legal risks |
AIC with a few observations,
which have no material impact on Novo Nordisk’s business in China. This example underlines the potential business ethics risks associated with being a pharmaceutical company. To minimise the risk of violating national and international regulations, over the past decade Novo Nordisk has strengthened its global and regional business ethics compliance programmes. Global governance, a business ethics policy and global business ethics procedures, together with elaborate training programmes and tests for employees, close monitoring of performance, reporting requirements and audits, all aim to mitigate business ethics risks. In June 2011, Novo Nordisk settled two civil cases with the US Department of Justice regarding alleged improper marketing of NovoSeven®. As part of the settlement, Novo Nordisk’s US affiliate entered into a five-year Corporate Integrity Agreement with the Office of the Inspector General of the US Department of Health and Human Services. Under that agreement, the US affiliate has added additional reporting and other procedures to its already robust compliance programme. Also in the US, Novo Nordisk is a defendant in product liability lawsuits related to hormone therapy products and Victoza®. Read more about these and other pending litigations against Novo Nordisk and investigations involving the company, in note 3.6 on pp 74–76. Protection of intellectual property through patents is very important for promoting innovation and stimulating long-term economic growth and job creation. Novo Nordisk’s business model is based on developing new, innovative products, and when the company makes significant new inventions it will typically seek to patent them. Intellectual property risks occur if, for example, a government does not recognise the validity of patents or is unable to uphold patent rights, or if a competitor infringes a Novo Nordisk patent or challenges its validity. |
|||||
| Novo
Nordisk’s risk management policy “In Novo Nordisk we will proactively manage risk to ensure continued growth of our business and to protect our people, assets and reputation. This means that we will: |
|||||||
| • | utilise an effective and integrated risk management system while maintaining business flexibility | ||||||
| • | identify and assess material risks associated with our business | ||||||
| • | monitor, manage and mitigate risks.” | ||||||
| For more information on Novo Nordisk’s risk management process, please visit novonordisk.com/about_us. | |||||||
 |
|||||||
| 44 | GOVERNANCE, LEADERSHIP AND SHARES |
Novo Nordisk has two classes of shares: A shares and B shares. All A shares are owned by Novo A/S – a wholly owned subsidiary of the Novo Nordisk Foundation. Novo Nordisk’s B shares are listed on NASDAQ OMX Copenhagen, and on the New York Stock Exchange as American Depository Receipts (ADRs). Through open and proactive communication, the company seeks to provide the basis for fair and efficient pricing of its B shares.
|
Share capital and ownership |
2013, Novo A/S also held
nominal value DKK 32,762,800 of B share capital. Each A share carries
200 votes and each B share carries 20 votes. With 25.5% of the total share
capital, Novo A/S controls 74% of the total number of votes, excluding
Novo Nordisk’s holding of treasury shares. The capital structure |
return in the short term. Novo Nordisk’s guiding principle is that any excess capital, after the funding of organic growth opportunities and potential acquisitions, is returned to investors. The company applies a pharmaceutical industry payout ratio to dividend payments complemented by share repurchase programmes. As decided at the 2013 Annual General Meeting, a reduction of the company’s B share capital, corresponding to approximately 1.8% of the total share capital, was implemented in April 2013 by cancellation of treasury shares. This enabled Novo Nordisk to continue to buy back shares without exceeding the limit for a holding of treasury shares equivalent to 10% of the total share capital. During the 12-month period since the release of the financial results for 2012, Novo Nordisk repurchased shares worth DKK 14 billion. Since 2008, the share repurchase programme has primarily been conducted in accordance with the provisions of European Commission Regulation No 2273/2003 of 22 December 2003 (also known as the Safe Harbour Regulation). In this programme Novo Nordisk appoints financial institutions as lead managers to execute a part of its share repurchase programme independently and without influence from Novo Nordisk. Share repurchase programme
for 1 February 2014 to 31 January 2015 |
Breakdown of shareholders % of capital (% of votes)Novo A/S, Bagsværd, Denmark Novo Nordisk A/S Other 25.5 (74.0) 3.7 (0.0) 70.8 (26.0)
Geographic distribution of shareholders* % of share capital (2012 % of share capital) Denmark North America UK and Ireland Other * Calculated using shareholders’ registered home country. 41.1 (40.4) 31.9 (34.0) 12.8 (12.9) 14.2 (12.7)
NOVO NORDISK ANNUAL REPORT 2013
|
GOVERNANCE, LEADERSHIP
AND SHARES
|
45
|
|
Share price performance |
Payment of dividends Communication with
shareholders |
hosts conference calls with Executive Management following key events and the release of financial results. Executive Management and Investor Relations also travel extensively to ensure that all investors with a major holding of Novo Nordisk shares can meet with the company on a regular basis and that a number of smaller investors and potential investors also have access to the company’s Management and Investor Relations. Analyst coverage |
Novo Nordisk’s share performance compared with benchmark indexes
| Total price development in the period up to 31 December 2013 | 1 year | 3 years | 5 years | |||
| Novo Nordisk’s B shares on NASDAQ OMX, DKK |
8%
|
58%
|
267%
|
|||
| Novo Nordisk’s ADRs on the New York Stock Exchange, USD |
13%
|
64%
|
260%
|
|||
| NASDAQ OMX Copenhagen 20 Index |
24%
|
35%
|
148%
|
|||
| MSCI Europe Health Care Index |
20%
|
39%
|
48%
|
|||
| MSCI US Health Care Index |
36%
|
92%
|
108%
|
 |
 |
 |
Dividend payments and payout ratio Dividend per share for the year1 (left) Payout ratio2 (right) 1. Adjusted for the five for one stock split implemented
as of 2 January 2014. 2. Dividend for the year as a percentage of net profit. 3. Proposed dividend for the financial year 2013. DKK
Price development and monthly turnover of Novo Nordisk’s B shares on NASDAQ OMX Copenhagen 2013 Turnover of B shares (left) Novo Nordisk’s B share closing prices (right) DKK billion DKK
Total shareholder return Per cent
NOVO NORDISK ANNUAL REPORT 2013
 |
|
In 2013,
the Board of Directors established a Nomination Committee to enhance
|
 |
|
GOVERNANCE, LEADERSHIP
AND SHARES
|
47
|
Governance structure
Shareholders
Shareholders have ultimate authority over the
company and exercise their rights to make decisions at general meetings in person,
by proxy or by correspondence. Resolutions can generally be passed by a simple
majority. However, resolutions to amend the Articles of Association require
two-thirds of votes cast and capital represented, unless other adoption requirements
are imposed by the Danish Companies Act. Novo Nordisk is not aware of the existence
of any agreements with or between shareholders on the exercise of votes or control
of the company.
At the
annual general meeting, shareholders approve the annual report and any amendments
to the company’s Articles of Association. Shareholders also elect board
members and the independent auditor.
Novo
Nordisk’s share capital is divided into A shares and B shares. Special
rights attached to A shares include pre-emptive subscription rights in the
event of an increase of the A share capital, pre-emptive purchase rights in
the event of a sale of A shares and priority dividend if the dividend is below
0.5%. B shares take priority for dividends between 0.5% and 5% and for liquidation
proceedings. Read more about shares and capital structure
on pp 44–45.
Board of Directors
Novo Nordisk has a two-tier management structure
consisting of the Board of Directors and Executive Management. The two bodies
are separate and no one serves as a member of both. The Board of Directors
determines the company’s overall strategy and follows up on its implementation,
supervises the performance, ensures adequate management and organisation,
and as such actively contributes to developing the company as a focused, sustainable,
global pharmaceutical company. The Board of Directors supervises Executive
Management in its decisions and operations. The Board of Directors may also
issue new shares or buy back shares in accordance with authorisations granted
by the annual general meeting and recorded in the meeting minutes. For minutes
from annual general meetings, see novonordisk.com/about_us.
The Board
of Directors has 11 members, seven of whom are elected by shareholders and
four by employees in Denmark. Shareholder-elected board members serve a one-year
term and may be re-elected. Members must retire at the first annual general
meeting after reaching the age of 70. Four of the seven shareholder-elected
board members are independent as defined by the Danish Corporate Governance
Recommendations. Read more on pp 52–53.
A proposal
for nomination of board members is presented by the newly established Nomination
Committee to the Board of Directors, taking into account required competences
as defined by the Board of Directors’ competence
profile and reflecting the result
of a self-assessment process facilitated by internal or external consultants.
The assessment process is based on written questionnaires and evaluates the
Board of Directors’ composition and the skills of its members, including
whether each board member and executive participates actively in board discussions
and contributes with independent judgement.
To ensure
that discussions include multiple perspectives representing the complex, global
pharmaceutical environment, the Board of Directors aspires to be diverse in
gender and nationality. Currently, one shareholder-elected board member is
female and five of the seven shareholder-elected board members are non-Danes.
In 2013, the Board of Directors increased its ambition and set out new targets
with the aim that by 2017 it will consist of at least two shareholder-elected
board members with Danish nationality and at least two shareholder-elected
board members with a nationality other than Danish – and at least two
shareholder-elected board members of each gender. In accordance with section
99b of the Danish Financial Statements Act, Novo Nordisk discloses its mandatory
diversity report at novonordisk.com/annualreport.
The self-assessment
conducted in 2013 resulted in a continued focus on discussion of the current
critical issues and on management development and succession planning. In
order to support continued fulfilment of the Novo Nordisk Way, criteria for
board members include integrity, accountability, fairness, financial literacy,
commitment and desire for innovation. Members are also expected to have experience
of managing major companies that develop, manufacture and market products
and services globally. The competence profile, which includes the nomination
criteria, is available online at novonordisk.com/about_us.
Under Danish
law, Novo Nordisk’s employees in Denmark are entitled to be represented
by half of the total number of board members elected at the annual general meeting.
In 2010, employees elected four board members from among themselves – three
male and one female, all Danes. Board members elected by employees serve a four-year
term and have the same rights, duties and responsibilities as shareholder-elected
board members.
Novo Nordisk’s
Board of Directors met seven times during 2013.
Chairmanship
The annual general meeting directly elects
the chairman and vice chairman of the Board of Directors. The Chairmanship carries
out administrative tasks such as planning board meetings to ensure a balance
between overall strategy-setting and financial and managerial supervision of
the company. Other tasks include reviewing the fixed asset investment portfolio
and recommending the remuneration of board members and Executive Management.
In practice, the Chairmanship
has the role and responsibility of a remuneration committee, as the Board of
Directors considers that each board member must have the opportunity to contribute
actively to discussions and have access to all relevant information on remuneration.
In March 2013,
the Annual General Meeting elected a new chairman, Göran Ando, and a
new vice chairman, Jeppe Christiansen. See novonordisk.com/about_us
for a report on the Chairmanship’s activities.
Audit Committee
The three members of the Audit Committee are
elected by the Board of Directors among its members. Two members qualify as
independent and have been designated as financial experts as defined by the
US Securities and Exchange Commission (SEC). Under Danish law, two members qualify
as financial experts and as independent. In 2013, an employee representative
was elected as a member.
The Audit
Committee assists the Board of Directors with oversight of the external auditors,
the internal audit function, the procedure for handling complaints regarding
accounting, internal accounting controls, auditing or financial reporting
matters and business ethics matters (whistleblowing), financial, social and
environmental reporting, business ethics compliance, post-completion reviews
and post-investment reviews of investments, long-term incentive programmes,
and in 2013 it was agreed that the Audit Committee also assists with oversight
of IT security. In 2013, the Board of Directors re-elected Hannu Ryöppönen
as chairman and Liz Hewitt as a member of the Audit Committee and, further,
elected Stig Strøbæk as a new member. See novonordisk.com/about_us
for a report on the Audit Committee’s activities.
Nomination Committee
In 2013, the Board established a Nomination
Committee consisting of four members to enhance the process for nominating members
to the Board of Directors. Two members qualify as independent, while one member
is an employee representative.
The Nomination
Committee assists the Board with oversight of the competence profile and composition
of the Board, nomination of members and committees, and other tasks on an
ad hoc basis as specifically decided by the Board. In 2013, the Board of Directors
elected Göran Ando as chairman and Bruno Angelici, Liz Hewitt and Anne
Marie Kverneland as members of the Nomination Committee. See novonordisk.com\about_us
for a report on the Nomination Committee’s activities.
Executive Management
The Board of Directors has delegated responsibility
for day-to-day management of Novo Nordisk to its Executive
CONTINUED ►
NOVO NORDISK ANNUAL REPORT 2013
| 48 | GOVERNANCE, LEADERSHIP AND SHARES |
Management. In 2013, two new executives were appointed and Executive Management now consists of the president and chief executive officer plus six executives. They are responsible for overall conduct of the business and all operational matters, for organisation of the company as well as allocation of resources, determination and implementation of strategies and policies, direction-setting, and ensuring timely reporting and provision of information to the Board of Directors and Novo Nordisk’s stakeholders. Executive Management meets at least once a month and often more frequently. The Board of Directors appoints members of Executive Management and determines remuneration. The Chairmanship reviews the performance of the executives.
Assurance
External audit
The company’s financial reporting and
the internal controls over financial reporting processes are audited by an independent
audit firm elected at the annual general meeting. The auditor acts in the interest
of shareholders and expresses an audit opinion on the annual report as well
as reporting any significant audit findings to the Audit Committee and the Board
of Directors. As part of Novo Nordisk’s commitment to its social and environmental
responsibility, the company voluntarily includes an assurance report for social
and environmental reporting in the annual report. The assurance provider reviews
whether the social and environmental performance information covers aspects
deemed to be material and verifies the internal control processes for the information
reported.
Internal audit
Novo Nordisk’s internal audit function
provides independent and objective
assurance, primarily within
internal control of financial processes and business ethics.
To
ensure that the internal financial audit function works independently of Executive
Management, its charter, audit plan and budget are approved by the Audit Committee.
The Audit Committee reviews the result of the audits and must approve the appointment,
remuneration and dismissal of the head of the internal audit function.
Three other
types of assurance activity – quality audits, organisational audits and
values audits, called facilitations – help ensure that the company adheres
to high-quality standards and operates in accordance with the Novo Nordisk Way.
Compliance
Novo Nordisk’s B shares are listed on
NASDAQ OMX Copenhagen and on the New York Stock Exchange (NYSE) as American
Depository Receipts (ADRs). The applicable corporate governance codes for
each stock exchange and a review of Novo Nordisk’s compliance are available
at novonordisk.com/about_us.
In accordance
with section 107b of the Danish Financial Statements Act, Novo Nordisk discloses
its mandatory corporate governance report at novonordisk.
com/about_us/corporate_governance/ compliance.asp.
In
2013, new Danish corporate governance recommendations were introduced, and
Novo Nordisk adheres to all but the following:
| • | The Board of Directors has not established a remuneration committee (but in practice the Chairmanship has such role). |
| • | Current employment contracts for Executive Management allow in some instances for severance payments of more than 24 months’ fixed base salary plus pension contribution. |
| • | The majority of the Nomination Committee’s members are not independent. It consists of two members who are not independent, including the Chairman, and two members who are independent. |
The reasons
for deviating from the first two recommendations are given on pp 47
and 50. The reason for deviating from the third
recommendation is that the Board of Directors finds that this composition
of the Nomination Committee allows for both a representative of the majority
shareholder as well as an employee representative to be on the Nomination
Committee, while keeping it small.
Novo Nordisk
complies with the corporate governance standards of NYSE applicable to foreign
listed private issuers.
As a controlled
company, Novo Nordisk is not obliged to comply with all standards established
by NYSE. Furthermore, Novo Nordisk as a foreign private issuer is permitted
to follow home country practice, which is the case in relation to independence
requirements, audit committee, equity compensation plans, code of business conduct
and ethics, and CEO certification.
The Novo
Nordisk Way outlines the company’s ambitions and the values that characterise
the way Novo Nordisk does business and interacts with its stakeholders. Furthermore,
it sets the direction for and applies to all employees in Novo Nordisk. Read
more about the Novo Nordisk Way on p 4.
Novo
Nordisk is part of the Novo Group and adheres to the Charter for Companies
in the Novo Group, which is available online at novo.dk.
However, all strategic and operational matters are solely decided by the Board
of Directors and Executive Management of Novo Nordisk. Read
more about the Novo Group on p 44.
Corporate governance codes and practices
* The Chairmanship is directly elected by the annual general meeting.
Compliance
Governance structure Assurance
Danish and foreign laws and regulations Corporate governance standards Novo
Nordisk Way Audit of financial data and review of social and environmental data
(internal and external)Facilitation and organisational audit (internal)
Quality audit and inspections (internal and external) Board of Directors Shareholders
Executive Management Organisation Chairmanship* Nomination Committee Audit Committee
NOVO NORDISK ANNUAL REPORT 2013
|
GOVERNANCE, LEADERSHIP
AND SHARES
|
49
|
At the Annual General Meeting in 2013, Novo Nordisk’s shareholders approved that the maximum allocation for both the short- and long term incentive programmes for Executive Management was increased to 12 months’ base salary plus pension contribution. This was done to ensure flexibility for the Board of Directors in executive remuneration, as the benchmark had shown that elements of the executive remuneration were below market levels.
Remuneration of the Board of Directors and Executive Management is assessed on an annual basis against a benchmark of Nordic companies as well as European pharmaceutical companies that are similar to Novo Nordisk in size, complexity and market capitalisation. The results are presented to the Board of Directors by the chairman at its October meeting. The company strives for simplicity when composing the remuneration package, and its remuneration principles provide guidance for remuneration of the Board of Directors and Executive Management. These principles are available at novonordisk.com/about_us/corporate_ governance/remuneration.asp.
Board of Directors’
remuneration
The remuneration of Novo Nordisk’s Board of Directors comprises a fixed
base fee, a multiplier of the fixed base fee for the Chairmanship and members
of the company’s Audit Committee and
Nomination Committee, fees for
ad hoc tasks and a travel allowance.
At
the December meeting, the Board of Directors agrees on recommendations for remuneration
levels for the next financial year. In connection with the approval of the annual
report, the Board of Directors endorses the actual remuneration for the past
financial year and the recommendation on remuneration levels for the current
financial year. These are then presented to the annual general meeting for approval.
Travel and other expenses
All board members who reside outside
Denmark are paid a fixed travel allowance: 3,000 euros for Europe-based board
members and 6,000 euros for board members based outside Europe. Otherwise,
no travel allowance is paid to board members when attending board meetings
outside Denmark. Expenses such as travel and accommodation in relation to
board meetings as well as relevant continuing education are reimbursed. Novo
Nordisk also pays social security taxes imposed by foreign authorities and
bank transfer fees.
Variable remuneration
Board members are not offered stock
options, warrants, restricted stock or participation in other incentive schemes.
Executive Management’s
remuneration
The remuneration of Novo Nordisk’s
Executive Management is proposed by the Chairmanship and approved by the Board
of Directors. Remuneration packages for executives comprise a fixed base salary, a cash-based incentive, a share-based incentive, a pension contribution and other benefits. The split between fixed and variable remuneration is intended to result in a reasonable part of the salary being linked to performance, while promoting sound, long-term business decisions to achieve the company’s objectives. All incentives are subject to claw-back if it is subsequently determined that payment was based on information that was manifestly misstated.
Fixed base salary
The fixed base salary is intended
to attract and retain executives with the professional and personal competences
required to drive the company’s performance.
Cash-based incentive
The cash-based incentive is designed
to incentivise individual performance and achievement of a number of predefined
short-term functional and individual business targets linked to goals in the
company’s Balanced Scorecard. Short-term targets for the chief executive
officer are fixed by the chairman of the Board of Directors, while the targets
for the other members of Executive Management are fixed by the chief executive
officer. The Chairmanship evaluates the degree of achievement for each member
of Executive Management based on input from the chief executive officer.
CONTINUED ►
Board of Directors
In 2013, the base fee for members of the Board of Directors was DKK 500,000 (DKK 500,000 in 2012)
|
2013
|
2012
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
| DKK million |
Fixed
base fee
|
Fee for
ad hoc tasks and
committee work
|
Travel
allowance
|
Total
|
Fixed
base fee
|
Fee for
ad hoc tasks and
committee work
|
Travel
allowance
|
Total
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Göran Ando3, 4 (chairman of the Board and of the Nomination Committee) | 1.4 | – | 0.1 | 1.5 | 1.0 | – | 0.1 | 1.1 | ||||||||
| Jeppe Christiansen1 (vice chairman of the Board) | 0.8 | – | – | 0.8 | – | – | – | – | ||||||||
| Hannu Ryöppönen (chairman of the Audit Committee) | 0.5 | 0.5 | 0.1 | 1.1 | 0.5 | 0.4 | 0.1 | 1.0 | ||||||||
| Liz Hewitt1 (member of the Audit Committee and the Nomination Committee) | 0.5 | 0.3 | 0.1 | 0.9 | 0.4 | 0.2 | 0.1 | 0.7 | ||||||||
| Stig Strøbæk (member of the Audit Committee) | 0.5 | 0.2 | – | 0.7 | 0.5 | – | – | 0.5 | ||||||||
| Bruno Angelici (member of the Nomination Committee) | 0.5 | 0.1 | 0.1 | 0.7 | 0.5 | – | 0.1 | 0.6 | ||||||||
| Henrik Gürtler | 0.5 | – | – | 0.5 | 0.5 | – | – | 0.5 | ||||||||
| Ulrik Hjulmand-Lassen | 0.5 | – | – | 0.5 | 0.5 | – | – | 0.5 | ||||||||
| Thomas Paul Koestler | 0.5 | – | 0.3 | 0.8 | 0.5 | – | 0.3 | 0.8 | ||||||||
| Anne Marie Kverneland (member of the Nomination Committee) | 0.5 | 0.1 | – | 0.6 | 0.5 | – | – | 0.5 | ||||||||
| Søren Thuesen Pedersen | 0.5 | – | – | 0.5 | 0.5 | – | – | 0.5 | ||||||||
| Steen Scheibye2 | 0.4 | – | – | 0.4 | 1.5 | – | – | 1.5 | ||||||||
| Kurt Anker Nielsen2 | 0.1 | 0.1 | – | 0.2 | 0.5 | 0.3 | – | 0.8 | ||||||||
| Jørgen Wedel2 | – | – | – | – | 0.1 | 0.1 | 0.1 | 0.3 | ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total | 7.2 | 1.3 | 0.7 | 9.2 | 5 | 7.5 | 1.0 | 0.8 | 9.3 | 5 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1. | Liz Hewitt was first elected at the Annual General Meeting in March 2012, and Jeppe Christiansen was first elected at the Annual General Meeting in March 2013. |
| 2. | Jørgen Wedel resigned as of March 2012. Steen Scheibye and Kurt Anker Nielsen resigned as of March 2013. |
| 3. | Novo Nordisk provides secretarial assistance to the chairman in Denmark and the UK. |
| 4. | As Göran Ando also holds the position of chairman of the Board, he has not received a fee as chairman of the Nomination Committee. |
| 5. | In addition, social security taxes have been paid by Novo Nordisk amounting to less than DKK 1 million (less than DKK 1 million in 2012). |
| 50 | GOVERNANCE, LEADERSHIP AND SHARES |
In 2013, the Annual General Meeting approved that the maximum allocation per year cannot exceed 12 months’ base salary plus pension contribution, and in March the Board of Directors determined that the 2013 maximum would be up to 10 months.
Share-based incentives
The long-term share-based incentive programme
is designed to promote the collective performance of Executive Management and
align the interests of executives and shareholders. Share-based incentives are
linked to both financial and non-financial targets.
The long-term
incentive programme is based on a calculation of shareholder value creation
compared with planned performance. In line with Novo Nordisk’s long-term
financial targets, the calculation of shareholder value creation is based on
reported operating profit after tax reduced by a weighted average cost of capital-based
return requirement on average invested capital. A proportion of the calculated
shareholder value creation is allocated to a joint pool for the participants,
who include Executive Management and other members of the Senior Management
Board.
Pension
Pension contributions are paid to enable executives
to build up an income for retirement.
Other benefits
Other benefits are added to ensure that overall
remuneration is competitive and aligned with local practice. Such benefits are
approved by the Board of Directors via delegation of powers to the Chairmanship.
In addition, executives may participate in employee benefit programmes such
as employee share purchase programmes.
Severance payment
Novo Nordisk may terminate employment by giving
executives 12 months’ notice. Executives may terminate their employment
by giving Novo Nordisk six months’ notice. In addition to the notice period,
executives are entitled to a severance payment.
Current
employment contracts allow severance payments of up to 36 months’
fixed base salary plus pension
contribution in the event of a merger, acquisition or takeover of Novo Nordisk.
If an executive’s employment is terminated by Novo Nordisk for other reasons,
the severance payment is three months’ fixed base salary plus pension contribution
per year of employment as an executive, taking into account previous employment
history. In no event will the severance payment be less than 12 months’
or more than 36 months’ fixed base salary plus pension contribution.
The existing
employment contracts will not be changed.
For the two executives who joined Executive Management in 2013 and for all future
employment contracts for executives, the severance payment will be no more than
24 months’ fixed base salary plus pension contribution, which will bring
Novo Nordisk into alignment with the Danish Corporate Governance Recommendations
in the long term.
Non-financial
targets are determined on the basis of an assessment of the objectives regarded
as particularly important to the fulfilment of the company’s long-term
performance. These are typically related to reaching specific milestones within
research and development, such as execution of trials, product approvals and
product launches, or milestones within sustainability related to patients, environment,
company reputation and development of employees. The total number of non-financial
targets varies, but is typically made up of 10–15 targets within five to
six categories.
In 2013,
the Annual General Meeting approved that the maximum allocation per year cannot
exceed 12 months’ base salary plus pension contribution and in March the
Board of Directors determined that the 2013 maximum for Executive Management
would be nine months. If the financial target is met for economic profit, and
at least 85% performance is reached on non-financial targets, the allocation
to the joint pool would correspond to 4½ months’ base salary plus
pension contribution for Executive Management.
This pool
is then converted into Novo Nordisk B shares, which in any given year are locked
up for three years before they are transferred to the participants. The shares
in the joint pool are allocated to the participants prorated according to their
base salary as per 1 April in any given year. If a participant resigns during
the lock-up period, his or her shares will remain in the joint pool for the
benefit of the other participants.
Further
information on Novo Nordisk’s share-based incentives is available online
at novonordisk.com/about_us.
Remuneration package components
|
|
|
|
|
| Remuneration | Board of Directors |
Executive Management |
Comments relating
to Executive Management |
|
|
|
|
|
| Fixed fee/base salary |
 |
|
Accounts for 30–55% of the total value of the remuneration package* |
|
|
|
|
|
| Fee for committee work |
|
 |
|
|
|
|
|
|
| Fee for ad hoc tasks |
|
|
|
|
|
|
|
|
| Cash bonus |
|
|
Up to 6–10 months’ fixed base salary + pension contribution per year |
|
|
|
|
|
| Share-based incentive |
|
|
Up to 9 months’ fixed base salary + pension contribution per year |
|
|
|
|
|
| Pensions |
|
|
25–30% of fixed base salary and cash-based incentive |
|
|
|
|
|
| Travel and other expenses |
|
|
|
|
|
|
|
|
| Benefits |
|
|
Non-monetary benefits such as company car and phone |
|
|
|
|
|
| Severance payment |
|
|
Up to 24 months’ fixed base salary + pension. The employment contracts entered into before 2008 exceed the 24-month limit, though will not exceed 36months’ fixed base salary plus pension contribution |
|
|
|
|
|
| * The interval 30–55% states the span between ‘maximum performance’ and ‘on-target performance’. | |||
NOVO NORDISK ANNUAL REPORT 2013
|
GOVERNANCE, LEADERSHIP
AND SHARES
|
51
|
|
Delayed approval
of Tresiba®
in the US reduces share allocation in the 2013 incentive programme
|
||
| While Novo Nordisk exceeded the planned financial performance in 2013, the company did not meet its target of having Tresiba® approved in the US due to the Complete Response Letter from the US Food and Drug Administration (FDA) in February. This event also entailed that the target for the submission of IDegLira for regulatory approval to the FDA could not be met. As a | consequence of these shortcomings, the allocation of shares under the long-term incentive programme was reduced. For 2013, Executive Management was allocated an amount equal to 4.75 months’ fixed base salary plus pension contribution per member compared with a potential maximum allocation of nine months. | |
Remuneration of the Executive Management
and other members
of the Senior Management Board
| 2013 | 2012 | |||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
| DKK million |
Fixed
base
salary
|
Cash
bonus
|
Pension
|
Benefits
|
Share-
based
incentive
|
Total
|
Fixed
base
salary
|
Cash
bonus
|
Pension
|
Benefits
|
Share-
based
incentive
|
Total
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Executive Management | ||||||||||||||||||||||||
| Lars Rebien Sørensen | 10.1 | 5.1 |
3.8
|
0.3 | – | 19.3 | 8.4 | 2.9 |
2.8
|
0.3 | – | 14.4 | ||||||||||||
| Jesper Brandgaard | 5.7 | 2.4 |
2.0
|
0.3 | – | 10.4 | 4.8 | 1.6 |
1.6
|
0.3 | – | 8.3 | ||||||||||||
| Lars Fruergaard Jørgensen1 | 4.1 | 1.4 |
1.4
|
0.3 | – | 7.2 | – | – |
–
|
– | – | – | ||||||||||||
| Lise Kingo | 5.1 | 1.9 |
1.8
|
0.3 | – | 9.1 | 4.3 | 1.1 |
1.4
|
0.3 | – | 7.1 | ||||||||||||
| Jakob Riis1 | 4.1 | 1.4 |
1.4
|
0.3 | – | 7.2 | – | – |
–
|
– | – | – | ||||||||||||
| Kåre Schultz | 6.3 | 2.7 |
2.4
|
0.3 | – | 11.7 | 5.2 | 1.4 |
1.7
|
0.3 | – | 8.6 | ||||||||||||
| Mads Krogsgaard Thomsen | 5.7 | 2.4 |
2.0
|
0.3 | – | 10.4 | 4.8 | 1.6 |
1.6
|
0.3 | – | 8.3 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Executive Management in total | 41.1 | 17.3 |
14.8
|
2.1 | – | 75.3 | 27.5 | 8.6 |
9.1
|
1.5 | – | 46.7 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Other members of the Senior Management Board in total2 | 82.7 | 4 | 32.3 |
25.5
|
14.4 | – | 154.9 | 72.1 | 4 | 25.0 |
22.3
|
8.4 | – | 127.8 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Share allocation3 | 51.5 | 51.5 | 73.1 | 73.1 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1. | Effective 31 January 2013, Novo Nordisk’s Executive Management was expanded to include two new members, Jakob Riis and Lars Fruergaard Jørgensen. |
| 2. | The total remuneration for 2013 includes remuneration to 33 senior vice presidents (26 in 2012), five of whom have retired or left the company (none in 2012). The 2013 remuneration for the retired senior vice presidents is included in the table above, whereas severance payments of DKK 57.2 million are not included. |
| 3. | The joint pool of shares is locked up for three years before it is transferred to the participants employed at the end of the three-year period. The value is the cash amount of the share bonus granted in the year using the grant-date market value of Novo Nordisk B shares. Based on the split of participants at the establishment of the joint pool, approximately 40% of the pool will be allocated to the members of Executive Management and 60% to other members of the Senior Management Board (2012: 30% and 70%, respectively). In the lock-up period, the joint pool may potentially be reduced in the event of lower-than-planned value creation in subsequent years. |
| 4. | Including social security taxes paid amounting to DKK 2.0 million (DKK 1.5 million in 2012). |
Management’s long-term incentive programme
The shares allocated to the joint pool for 2010 (842,880 shares) were released to the individual participants subsequent to the approval of the Annual Report 2013 by the Board of Directors and the announcement on 30 January 2014 of the full-year financial results for 2013. Based on the share price at the end of 2013, the value of the released shares is as follows:
|
Number
|
Market value1
|
|||
| Value as at 31 December 2013 of shares released on 30 January 2014 |
of shares
|
(DKK million)
|
||
|
|
|
|
|
|
| Executive Management | ||||
| Lars Rebien Sørensen | 74,985 | 14.9 | ||
| Jesper Brandgaard | 49,990 | 9.9 | ||
| Lars Fruergaard Jørgensen | 24,995 | 5.0 | ||
| Lise Kingo | 49,990 | 9.9 | ||
| Jakob Riis | 24,995 | 5.0 | ||
| Kåre Schultz | 49,990 | 9.9 | ||
| Mads Krogsgaard Thomsen | 49,990 | 9.9 | ||
|
|
|
|
|
|
| Executive Management in total | 324,935 | 64.5 | ||
|
|
|
|
|
|
| Other members of the Senior Management Board in total2 | 392,970 | 78.1 | ||
|
|
|
|
|
| 1. | The market value of the shares released in 2014 is based on the Novo Nordisk B share price of DKK 198.80 at the end of 2013. |
| 2. | In addition, 124,975 shares (market value: DKK 24.8 million) were released to retired members of the Senior Management Board. |
| Lars Rebien Sørensen serves as a board member of Danmarks Nationalbank, from which he received remuneration of DKK 22,232 in 2013 (DKK 22,012 in 2012), as a member of the Supervisory Board of Bertelsmann AG, from which he received remuneration of EUR 122,000 in 2013 (EUR 129,000 in 2012) and as a board member of Thermo Fisher Scientific Inc, from which he received remuneration of USD 314,786 in 2013 (USD 219,840 in 2012). Jesper Brandgaard serves as chairman of the Board of Directors of SimCorp A/S, from which he received remuneration of DKK 871,068 in 2013 (DKK 801,846 in 2012). Kåre Schultz serves as a board member of LEGO A/S, from which he received remuneration of DKK 350,000 in 2013 (DKK 300,000 in 2012). Kåre Schultz also serves as chairman of the Board of Directors of Royal Unibrew A/S, from which he received remuneration of DKK 625,000 in 2013 (DKK 625,000 in 2012). Mads Krogsgaard Thomsen serves as a board member of the University of Copenhagen, from which he received remuneration of DKK 40,500 in 2013 (DKK 79,800 in 2012). Lise Kingo serves as a board member of Grieg Star Group AS from April 2013, from which she received remuneration of NOK 225,000. Jakob Riis serves as a board member of ALK-Abelló A/S, from which he received remuneration of DKK 375,000 in 2013. | |
NOVO NORDISK ANNUAL REPORT 2013
 |
 |
 |
||
| Göran Ando (chair) | Jeppe Christiansen (vice chair) | Bruno Angelici | ||
|
|
|
|
||
| Formerly CEO of Celltech Group plc, UK
(retired). Member of the Board of Novo Nordisk A/S in 2005, vice chair since
2006, chair since 2013 and chair of the Nomination Committee since 2013. Management duties: Symphogen A/S, Denmark (chair), member of the boards of Novo A/S, Denmark, Molecular Partners AG, Switzerland, Archimedes Pharma Ltd., UK, and RAND Health, US. Senior advisor to Essex Woodlands Health Ventures Ltd., UK. Special competences: Medical qualifications and extensive executive background within the international pharmaceutical industry. Education: Specialism in general medicine (1978) and degree in medicine (1973), both from Linköping Medical University, Sweden. |
Chief executive officer of Fondsmæglerselskabet
Maj Invest A/S, Denmark. Vice chair of the Board of Novo Nordisk A/S since
2013. Management duties: Member of the boards of Novo A/S, Haldor Topsøe A/S, KIRKBI A/S and Symphogen A/S, all in Denmark. Special competences: Extensive background and experience within the financial sector, in particular in relation to financial and capital market issues, as well as insight into the investor perspective. Education: MSc in Economics (1985) from the University of Copenhagen, Denmark. |
Formerly executive vice president of
AstraZeneca (retired). Member of the Board of Novo Nordisk A/S since 2011
and member of the Nomination Committee since 2013. Management duties: Member of the boards of Smiths Group plc and Vectura Group plc, both in the UK, and Wolters Kluwer, the Netherlands. Member of the Global Advisory Board at Takeda Pharmaceutical Company Limited, Japan. Special competences: Extensive global experience with two companies in the fields of pharmaceuticals and medical devices, and in-depth knowledge of strategy, sales, marketing and governance of major companies. Education: AMP (1993) from Harvard Business School and MBA (1978) from Kellogg School of Management at Northwestern University, both in the US. Law degree (1973) from Reims University and BA in Business Administration (1971) from École Supérieure de Commerce de Reims, both in France. |
 |
 |
 |
||
| Henrik Gürtler | Liz Hewitt | Ulrik Hjulmand-Lassen | ||
|
|
|
|
||
|
President and CEO of Novo
A/S, Denmark, since 2000. Formerly a member of Corporate Management of
Novo Nordisk A/S with special responsibility for Corporate Staffs. Member
of the Board of Novo Nordisk A/S since 2005. |
Formerly Group Director Corporate Affairs
of Smith & Nephew plc, UK (retired). Member of the Board of Novo Nordisk
A/S since 2012, and member of the Audit Committee since 2012 and the Nomination
Committee since 2013. Management duties: Member of the board, audit committee (chair), remuneration committee and nomination committee of Synergy Health plc and member of the board of Melrose Industries plc, both in the UK. External member of the audit committee of the House of Lords, UK. Special competences: Extensive experience within the field of medical devices, significant financial knowledge and knowledge of how large international companies operate. Education: BSc (Econ) (Hons) (1977) from University College London, UK, and FCA (UK Institute of Chartered Accountants) (1982). |
Advanced IT quality advisor in the IT
QA Office. Member of the Board of Novo Nordisk A/S since 2010. Education: CISM (2011). Trained as an MCSA/IT Security (2009) and as an ISO 9001 lead auditor (2006). BSc (1985) from the Technical University of Denmark/DIA-E. |
| Name (male/female) |
First elected
|
Term
|
Nationality
|
Born
|
Independence1
|
|
|
|
|
|
|
|
| Göran Ando (m) |
2005
|
2014
|
Swedish
|
March 1949
|
Not independent2
|
| Jeppe Christiansen (m) |
2013
|
2014
|
Danish
|
November 1959
|
Not independent2
|
| Bruno Angelici (m) |
2011
|
2014
|
French
|
April 1947
|
Independent
|
| Henrik Gürtler (m) |
2005
|
2014
|
Danish
|
August 1953
|
Not independent2
|
| Liz Hewitt (f) |
2012
|
2014
|
British
|
November 1956
|
Independent4,5
|
| Ulrik Hjulmand-Lassen3 (m) |
2010
|
2014
|
Danish
|
April 1962
|
Not independent
|
|
|
|
|
|
|
|
1. As designated by NASDAQ OMX Copenhagen in accordance with section 3.2.1 of Recommendations on Corporate Governance (2013). 2. Member of Management or the Board of Novo A/S. 3. Elected by employees of Novo Nordisk.
NOVO NORDISK ANNUAL REPORT 2013
|
GOVERNANCE, LEADERSHIP
AND SHARES
|
53
|
 |
 |
 |
||
| Thomas Paul Koestler | Anne Marie Kverneland | Søren Thuesen Pedersen | ||
|
|
|
|
||
| Executive with Vatera Holdings LLC,
US. Member of the Board of Novo Nordisk A/S since 2011. Management duties: Melinta Therapeutics Inc. (chair), US. Member of the boards of Momenta Pharmaceuticals Inc., ImmusanT Inc. and Arisaph Pharmaceuticals Inc., all in the US. Special competences: Extensive R&D knowledge, both generally and within the field of regulatory affairs. Significant know-how about the pharmaceutical industry in general and how large international corporations operate. Additional knowledge of the US market. Education: PhD in Medicine & Pathology (1982) from the Roswell Park Memorial Institute and BSc in Biology (1975) from Daemen College, both in the US. |
Laboratory technician and full-time
shop steward. Member of the Board of Novo Nordisk A/S since 2000 and member
of the Nomination Committee since 2013. Education: Degree in Medical Laboratory Technology (1980) from Copenhagen University Hospital, Denmark. |
External affairs director in Quality
Intelligence. Member of the Board of Novo Nordisk A/S since 2006. Management duties: Member of the board of the Novo Nordisk Foundation since 2002. Education: BSc in Chemical Engineering (1988) from the Engineering Academy of Denmark. |
 |
 |
|||
| Hannu Ryöppönen | Stig Strøbæk | |||
|
|
|
|||
| Formerly CFO and deputy
CEO of Stora Enso Oyj, Finland (retired). Member of the Board of Novo Nordisk
A/S since 2009 and chair of the Audit Committee since 2012 (member since
2009). Management duties: Private equity funds Altor 2003 GP Limited (chair), Altor Fund II GP Limited (chair) and Altor III GP Limited (chair), all in Jersey, Channel Islands. BillerudKorsnäs AB (chair), Sweden. Member of the boards of Amer Sports Oyj, Finland, and the private equity fund Value Creation Investments Limited, Jersey, Channel Islands. Chair of the audit committee of Amer Sports Oyj, Finland. Special competences: International executive background and thorough understanding of managing finance operations in global organisations, in particular in relation to accounting, financial and capital market issues, but also experience in private equity and mergers & acquisitions (M&A). Education: BA in Business Administration (1976) from Hanken School of Economics, Helsinki, Finland. |
Electrician and full-time
shop steward. Member of the Board of Novo Nordisk A/S since 1998 and member
of the Audit Committee since 2013. Management duties: Member of the board of the Novo Nordisk Foundation since 1998. Education: Diploma as an electrician. Diploma in further training for board members (2003) from the Danish Employees’ Capital Pension Fund (LD). |
| Name (male/female) |
First elected
|
Term
|
Nationality
|
Born
|
Independence1
|
|
|
|
|
|
|
|
| Thomas Paul Koestler (m) |
2011
|
2014
|
American
|
June 1951
|
Independent
|
| Anne Marie Kverneland3 (f) |
2000
|
2014
|
Danish
|
July 1956
|
Not independent
|
| Søren Thuesen Pedersen3 (m) |
2006
|
2014
|
Danish
|
December 1964
|
Not independent
|
| Hannu Ryöppönen (m) |
2009
|
2014
|
Finnish
|
March 1952
|
Independent4,5
|
| Stig Strøbæk3 (m) |
1998
|
2014
|
Danish
|
January 1964
|
Not independent
|
|
|
|
|
|
|
|
4. Mr Ryöppönen and Ms Hewitt qualify as independent Audit Committee members as defined by the US Securities and Exchange Commission (SEC). 5. Mr Ryöppönen and Ms Hewitt qualify as independent Audit Committee members as defined under part 8 of the Danish Act on Approved Auditors and Audit Firms.
NOVO NORDISK ANNUAL REPORT 2013
| 54 | GOVERNANCE, LEADERSHIP AND SHARES |
|
Lars Rebien Sørensen | |||
| President and chief executive officer* | ||||
|
|
|
|
||
| Lars Rebien Sørensen joined Novo Nordisk’s Enzymes Marketing in 1982. Over the years, he has completed several overseas postings, including in the Middle East and the US. He was appointed a member of Corporate Management in May 1994, and in December 1994 was given special responsibility within Corporate Management for | Health Care. He was appointed
president and chief executive officer in November 2000. Other management duties: Member of the boards of Danmarks Nationalbank, Denmark, and Thermo Fisher Scientific Inc., US. Member of the Bertelsmann AG Supervisory Board, Germany. Born: October 1954. |
 |
 |
 |
||
| Kåre Schultz | Jesper Brandgaard | Lars Fruergaard Jørgensen | ||
| Chief operating officer* | Chief financial officer | Chief information officer | ||
|
|
|
|
||
| Kåre Schultz joined Novo Nordisk
in 1989 as an economist in Health Care, Economy & Planning. In November
2000, he was appointed executive vice president and chief of staffs. In
March 2002, he took over the position of executive vice president and chief
operating officer. Other management duties: Chair of the board of Royal Unibrew A/S and member of the board of LEGO A/S, both in Denmark. Born: May 1961. |
Jesper Brandgaard joined Novo Nordisk
in 1999 as senior vice president of Corporate Finance. He was appointed
executive vice president and chief financial officer in November 2000. Other management duties: Chair of the boards of SimCorp A/S and NNIT A/S, both in Denmark. Born: October 1963. |
Lars Fruergaard Jørgensen joined
Novo Nordisk in 1991 as an economist in Health Care, Economy & Planning
and has over the years completed overseas postings in the US and Japan.
In 2004, he was appointed senior vice president for IT & Corporate Development.
In January 2013, he was appointed executive vice president and chief information
officer, assuming responsibility for IT, Quality & Corporate Development. Other management duties: Vice chair of the board of NNE Pharmaplan A/S and member of the board of NNIT A/S, both in Denmark. Born: November 1966. |
 |
 |
 |
||
| Lise Kingo | Jakob Riis | Mads Krogsgaard Thomsen | ||
| Chief of staffs | Executive vice president of Marketing & Medical Affairs | Chief science officer | ||
|
|
|
|
||
| Lise Kingo joined Novo Industry A/S in
1988 and worked over the years to build up the company’s Triple Bottom
Line business principle. In 1999, she was appointed senior vice president,
Stakeholder Relations. In 2002, she was appointed executive vice president
and chief of staffs, assuming global responsibility for Corporate Relations.
She is adjunct professor at the Medical Faculty, Vrije Universiteit, Amsterdam,
the Netherlands. Other management duties: Chair of the board of Steno Diabetes Center A/S, Denmark, and member of the board of Grieg Star Group AS, Norway. Chair of the Danish Council for Corporate Responsibility. Born: August 1961. |
Jakob Riis joined Novo Nordisk in 1996
as a health economist. From 2001 to 2005, he worked first in the US sales
force and then as head of marketing in Japan. In 2005, he was appointed
senior vice president for International Marketing. In January 2013, he was
appointed executive vice president, assuming responsibility for Marketing
& Medical Affairs. Other management duties: Chair of the board of Copenhagen Institute of Interaction Design and member of the board and audit committee of ALK-Abelló A/S, both in Denmark. Born: April 1966. |
Mads Krogsgaard Thomsen joined Novo Nordisk
in 1991 as head of Growth Hormone Research. He was appointed executive vice
president and chief science officer in November 2000. He is a member of
the editorial boards of international journals. He has served as president
of the National Academy of Technical Sciences (ATV), Denmark. He is adjunct
professor of pharmacology at the Royal Veterinary and Agricultural University
(now the Faculty of Health and Medical Sciences of the University of Copenhagen),
Denmark. Other management duties: Member of the board of the University of Copenhagen, Denmark. Born: December 1960. |
* Effective 30 January 2014, Kåre Schultz is appointed president and chief operating officer. Lars Rebien Sørensen continues as chief executive officer.
NOVO NORDISK ANNUAL REPORT 2013
Consolidated
financial,
social and environmental
statements 2013
|
Consolidated financial
statements
|
||
|
|
|
|
|
|
||
|
|
||
|
Consolidated social
statement
(supplementary information)
|
||
|
|
|
|
|
|
||
|
|
||
|
Consolidated environmental
statement
(supplementary information)
|
||
|
|
|
|
|
. |
||
| As Novo Nordisk’s
business continues to develop, the company remains committed to documenting
its performance via its integrated reporting. The Consolidated financial,
social and environmental statements are structured to increase focus on
what drives the company’s performance in accordance with the Triple
Bottom Line business principle.
Within each of the financial, social and environmental statements, the notes are grouped into sections based on how Novo Nordisk views its business. Each of the statements includes an overview of the sections and notes, and each of the sections has an introduction explaining the link between how the company does business and how this is reflected in Novo Nordisk’s financial, social and environmental statements. The disclosures in the notes are structured to provide full transparency on the disclosed amounts, describing the relevant accounting policy, key accounting estimates and numerical disclosure for each note |
||
Juan Jenny Li works as
a
chemistry professional in Novo
Nordisk’s Research and
Development Centre in Beijing.
| 56 | CONSOLIDATED FINANCIAL STATEMENTS |
Income
statement
and Statement of comprehensive
income for the year ended 31 December
| DKK million |
 Note |
2013
|
2012
|
2011
|
||||
|
|
|
|
|
|
|
|
|
|
| Income statement | ||||||||
| Net sales | 2.1, 2.2 | 83,572 | 78,026 | 66,346 | ||||
| Cost of goods sold | 2.2, 2.3 | 14,140 | 13,465 | 12,589 | ||||
|
|
|
|
|
|
|
|
|
|
| Gross profit | 69,432 | 64,561 | 53,757 | |||||
| Sales and distribution costs | 2.2, 2.3 | 23,380 | 21,544 | 19,004 | ||||
| Research and development costs | 2.2, 2.3 | 11,733 | 10,897 | 9,628 | ||||
| Administrative costs | 2.2, 2.3 | 3,508 | 3,312 | 3,245 | ||||
| Licence income and other operating income, net | 2.2, 2.3, 5.6 | 682 | 666 | 494 | ||||
|
|
|
|
|
|
|
|
|
|
| Operating profit | 31,493 | 29,474 | 22,374 | |||||
| Financial income | 4.7 | 1,702 | 125 | 514 | ||||
| Financial expenses | 4.7 | 656 | 1,788 | 963 | ||||
|
|
|
|
|
|
|
|
|
|
| Profit before income taxes | 32,539 | 27,811 | 21,925 | |||||
| Income taxes | 2.4 | 7,355 | 6,379 | 4,828 | ||||
|
|
|
|
|
|
|
|
|
|
| Net profit for the year | 25,184 | 21,432 | 17,097 | |||||
|
|
|
|
|
|
|
|
|
|
| Earnings per share | ||||||||
| Basic earnings per share (DKK)1 | 4.1 | 9.40 | 7.82 | 6.05 | ||||
| Diluted earnings per share (DKK)1 | 4.1 | 9.35 | 7.77 | 6.00 | ||||
|
|
|
|
|
|
|
|
|
| DKK million |
Note |
2013
|
2012
|
2011
|
||||
|
|
|
|
|
|
|
|
|
|
| Statement of comprehensive income | ||||||||
| Net profit for the year | 25,184 | 21,432 | 17,097 | |||||
| Other comprehensive income: | ||||||||
| Items that will not be reclassified subsequently to the Income statement: | ||||||||
| Remeasurements of defined benefit plans |
3.7
|
54 | (281 | ) | – | |||
| Items that will be reclassified subsequently to the Income statement | ||||||||
| when specific conditions are met: | ||||||||
| Exchange rate adjustments of investments in subsidiaries | (435 | ) | (172 | ) | (173 | ) | ||
| Cash flow hedges, realisation of previously deferred (gains)/losses | (809 | ) | 1,182 | 658 | ||||
| Cash flow hedges, deferred gains/(losses) incurred during the period | 1,195 | 849 | (1,170 | ) | ||||
| Other items | 75 | 35 | (20 | ) | ||||
| Tax on other comprehensive income, income/(expense) |
2.4
|
(211 | ) | (587 | ) | 190 | ||
|
|
|
|
|
|
|
|
|
|
| Other comprehensive income for the year, net of tax | (131 | ) | 1,026 | (515 | ) | |||
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year | 25,053 | 22,458 | 16,582 | |||||
|
|
|
|
|
|
|
|
|
1. Comparative figures have been restated to reflect the change in trading unit from DKK 1 to DKK 0.20.
NOVO NORDISK ANNUAL REPORT 2013
|
CONSOLIDATED FINANCIAL
STATEMENTS
|
57
|
| DKK million |
Note |
2013
|
2012
|
|||
|
|
|
|
|
|
|
|
| Assets | ||||||
| Intangible assets | 3.1 | 1,615 | 1,495 | |||
| Property, plant and equipment | 3.2 | 21,882 | 21,539 | |||
| Deferred income tax assets | 2.4 | 4,231 | 2,244 | |||
| Other financial assets | 4.6 | 551 | 228 | |||
|
|
|
|
|
|
|
|
| Total non-current assets | 28,279 | 25,506 | ||||
|
|
|
|
|
|
|
|
| Inventories | 3.3 | 9,552 | 9,543 | |||
| Trade receivables | 3.4 | 10,907 | 9,639 | |||
| Tax receivables | 3,155 | 1,240 | ||||
| Other receivables and prepayments | 3.5 | 2,454 | 2,705 | |||
| Marketable securities | 4.2, 4.6 | 3,741 | 4,552 | |||
| Derivative financial instruments | 4.3 | 1,521 | 931 | |||
| Cash at bank and on hand | 4.2, 4.4 | 10,728 | 11,553 | |||
|
|
|
|
|
|
|
|
| Total current assets | 42,058 | 40,163 | ||||
|
|
|
|
|
|
|
|
| Total assets | 70,337 | 65,669 | ||||
|
|
|
|
|
|
|
|
| Equity and liabilities | ||||||
| Share capital | 4.1 | 550 | 560 | |||
| Treasury shares | 4.1 | (21 | ) | (17 | ) | |
| Retained earnings | 41,137 | 39,001 | ||||
| Other reserves | 903 | 1,088 | ||||
|
|
|
|
|
|
|
|
| Total equity | 42,569 | 40,632 | ||||
|
|
|
|
|
|
|
|
| Deferred income tax liabilities | 2.4 | 672 | 732 | |||
| Retirement benefit obligations | 3.7 | 688 | 760 | |||
| Provisions | 3.6 | 2,183 | 1,907 | |||
|
|
|
|
|
|
|
|
| Total non-current liabilities | 3,543 | 3,399 | ||||
|
|
|
|
|
|
|
|
| Current debt | 4.6 | 215 | 500 | |||
| Trade payables | 4.6 | 4,092 | 3,859 | |||
| Tax payables | 2,222 | 593 | ||||
| Other liabilities | 3.8 | 9,386 | 8,982 | |||
| Derivative financial instruments | 4.3 | – | 48 | |||
| Provisions | 3.6 | 8,310 | 7,656 | |||
|
|
|
|
|
|
|
|
| Total current liabilities | 24,225 | 21,638 | ||||
|
|
|
|
|
|
|
|
| Total liabilities | 27,768 | 25,037 | ||||
|
|
|
|
|
|
|
|
| Total equity and liabilities | 70,337 | 65,669 | ||||
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2013
| 58 | CONSOLIDATED FINANCIAL STATEMENTS |
Statement
of cash flows
for the year ended 31 December
| DKK million |
Note |
2013
|
2012
|
2011
|
||||
|
|
|
|
|
|
|
|
|
|
| Net profit for the year | 25,184 | 21,432 | 17,097 | |||||
| Adjustment for non-cash items | 5.3 | 10,738 | 11,253 | 9,117 | ||||
| Change in working capital | 4.5 | (265 | ) | 274 | 434 | |||
| Interest received | 131 | 207 | 332 | |||||
| Interest paid | (39 | ) | (61 | ) | (215 | ) | ||
| Income taxes paid | 2.4 | (9,807 | ) | (10,891 | ) | (5,391 | ) | |
|
|
|
|
|
|
|
|
|
|
| Net cash generated from operating activities | 25,942 | 22,214 | 21,374 | |||||
|
|
|
|
|
|
|
|
|
|
| Proceeds from sale of other financial assets | 29 | – | – | |||||
| Purchase of intangible assets and other financial assets | 3.1, 4.6 | (406 | ) | (250 | ) | (259 | ) | |
| Proceeds from sale of property, plant and equipment | 31 | 53 | 70 | |||||
| Purchase of property, plant and equipment | 3.2 | (3,238 | ) | (3,372 | ) | (3,073 | ) | |
| Net sale/(purchase) of marketable securities | 811 | (501 | ) | (197 | ) | |||
|
|
|
|
|
|
|
|
|
|
| Net cash used in investing activities | (2,773 | ) | (4,070 | ) | (3,459 | ) | ||
|
|
|
|
|
|
|
|
|
|
| Repayment of loans | – | (502 | ) | (507 | ) | |||
| Purchase of treasury shares, net | 4.1 | (13,924 | ) | (11,896 | ) | (10,595 | ) | |
| Dividends paid | 4.1 | (9,715 | ) | (7,742 | ) | (5,700 | ) | |
|
|
|
|
|
|
|
|
|
|
| Net cash used in financing activities | (23,639 | ) | (20,140 | ) | (16,802 | ) | ||
|
|
|
|
|
|
|
|
|
|
| Net cash generated from activities | (470 | ) | (1,996 | ) | 1,113 | |||
| Cash and cash equivalents at the beginning of the year | 11,053 | 13,057 | 11,960 | |||||
| Exchange gains/(losses) on cash and cash equivalents | (70 | ) | (8 | ) | (16 | ) | ||
|
|
|
|
|
|
|
|
|
|
| Cash and cash equivalents at the end of the year | 4.4 | 10,513 | 11,053 | 13,057 | ||||
|
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2013
|
CONSOLIDATED FINANCIAL
STATEMENTS
|
59
|
Statement
of changes in equity
at 31 December
| Other reserves | ||||||||||||||||
|
|
||||||||||||||||
| DKK million |
Share
capital |
Treasury
shares |
Retained
earnings |
Exchange
rate adjust- ment |
Cash
flow hedges |
Tax
and
other items |
Total
other reserves |
Total
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2013 | ||||||||||||||||
| Balance at the beginning of the year | 560 | (17 | ) | 39,001 | 226 | 847 | 15 | 1,088 | 40,632 | |||||||
| Net profit for the year | 25,184 | 25,184 | ||||||||||||||
| Other comprehensive income for the year | 54 | (435 | ) | 386 | (136 | ) | (185 | ) | (131 | ) | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year | 25,238 | (435 | ) | 386 | (136 | ) | (185 | ) | 25,053 | |||||||
| Transactions with owners: | ||||||||||||||||
| Dividends (note 4.1) | (9,715 | ) | (9,715 | ) | ||||||||||||
| Share-based payments (note 5.1) | 409 | 409 | ||||||||||||||
| Tax credit related to share option scheme | 114 | 114 | ||||||||||||||
| Purchase of treasury shares (note 4.1) | (15 | ) | (13,974 | ) | (13,989 | ) | ||||||||||
| Sale of treasury shares (note 4.1) | 1 | 64 | 65 | |||||||||||||
| Reduction of the B share capital (note 4.1) | (10 | ) | 10 | – | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at the end of the year | 550 | (21 | ) | 41,137 | (209 | ) | 1,233 | (121 | ) | 903 | 42,569 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2012 | ||||||||||||||||
| Balance at the beginning of the year | 580 | (24 | ) | 37,111 | 398 | (1,184 | ) | 567 | (219 | ) | 37,448 | |||||
| Net profit for the year | 21,432 | 21,432 | ||||||||||||||
| Other comprehensive income for the year | (281 | ) | (172 | ) | 2,031 | (552 | ) | 1,307 | 1,026 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year | 21,151 | (172 | ) | 2,031 | (552 | ) | 1,307 | 22,458 | ||||||||
| Transactions with owners: | ||||||||||||||||
| Dividends (note 4.1) | (7,742 | ) | (7,742 | ) | ||||||||||||
| Share-based payments (note 5.1) | 308 | 308 | ||||||||||||||
| Tax credit related to share option scheme | 56 | 56 | ||||||||||||||
| Purchase of treasury shares (note 4.1) | (15 | ) | (12,147 | ) | (12,162 | ) | ||||||||||
| Sale of treasury shares (note 4.1) | 2 | 264 | 266 | |||||||||||||
| Reduction of the B share capital (note 4.1) | (20 | ) | 20 | – | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at the end of the year | 560 | (17 | ) | 39,001 | 226 | 847 | 15 | 1,088 | 40,632 | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 2011 | ||||||||||||||||
| Balance at the beginning of the year | 600 | (28 | ) | 36,097 | 571 | (672 | ) | 397 | 296 | 36,965 | ||||||
| Net profit for the year | 17,097 | 17,097 | ||||||||||||||
| Other comprehensive income for the year | (173 | ) | (512 | ) | 170 | (515 | ) | (515 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total comprehensive income for the year | 17,097 | (173 | ) | (512 | ) | 170 | (515 | ) | 16,582 | |||||||
| Transactions with owners: | ||||||||||||||||
| Dividends (note 4.1) | (5,700 | ) | (5,700 | ) | ||||||||||||
| Share-based payments (note 5.1) | 319 | 319 | ||||||||||||||
| Purchase of treasury shares (note 4.1) | (18 | ) | (10,821 | ) | (10,839 | ) | ||||||||||
| Sale of treasury shares (note 4.1) | 2 | 242 | 244 | |||||||||||||
| Tax on sale of treasury shares | (123 | ) | (123 | ) | ||||||||||||
| Reduction of the B share capital (note 4.1) | (20 | ) | 20 | – | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Balance at the end of the year | 580 | (24 | ) | 37,111 | 398 | (1,184 | ) | 567 | (219 | ) | 37,448 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2013
| 60 | CONSOLIDATED FINANCIAL STATEMENTS |
Notes
Sections in the Consolidated financial statements
| Section 1 Basis of preparation | |
| Read this section to get an overview of the financial accounting policies in general and an overview of Management’s key accounting estimates. | |
| 1.1 | Summary of significant accounting policies, p 61 |
| 1.2 | Summary of key accounting estimates, p 62 |
| 1.3 | Changes in accounting policies and disclosures, p 62 |
| 1.4 | General accounting policies, p 62 |
| Section 2 Results for the year | |
| Read this section to get more details on the results for the year, including operating segments, taxes and employee costs. | |
| 2.1 | Net sales and sales deductions, p 63 |
| 2.2 | Segment information, p 65 |
| 2.3 | Employee costs, p 68 |
| 2.4 | Income and deferred income taxes, p 68 |
| Section 3 Operating assets and liabilities | |
| Read this section to get more details on the assets that form the basis for the activities of Novo Nordisk, and the related liabilities. | |
| 3.1 | Intangible assets, p 71 |
| 3.2 | Property, plant and equipment, p 72 |
| 3.3 | Inventories, p 73 |
| 3.4 | Trade receivables, p 73 |
| 3.5 | Other receivables and prepayments, p 74 |
| 3.6 | Provisions and contingent liabilities, p 74 |
| 3.7 | Retirement benefit obligations, p 76 |
| 3.8 | Other liabilities, p 77 |
| Section 4 Capital structure and financing items | |
| Read this section to gain an insight into the capital structure, cash flow and financing items. | |
| 4.1 | Share capital, distribution to shareholders and earnings per share, p 78 |
| 4.2 | Financial risks, p 79 |
| 4.3 | Derivative financial instruments, p 81 |
| 4.4 | Cash and cash equivalents, financial resources and free cash flow, p 83 |
| 4.5 | Change in working capital, p 83 |
| 4.6 | Financial assets and liabilities, p 84 |
| 4.7 | Financial income and expenses, p 85 |
| Section 5 Other disclosures | |
| Read this section for more details on the statutory notes that have secondary importance from the perspective of Novo Nordisk. | |
| 5.1 | Share-based payment schemes, p 86 |
| 5.2 | Management’s holdings of Novo Nordisk shares, p 88 |
| 5.3 | Adjustments for non-cash items, p 89 |
| 5.4 | Commitments, p 90 |
| 5.5 | Related party transactions, p 91 |
| 5.6 | Licence income and other operating income, net, p 91 |
| 5.7 | Fee to statutory auditors, p 91 |
| 5.8 | Companies in the Novo Nordisk Group, p 92 |
| 5.9 | Financial definitions, p 93 |
NOVO NORDISK ANNUAL REPORT 2013
|
CONSOLIDATED FINANCIAL
STATEMENTS
|
61
|
Section 1
Basis of preparation of the Consolidated financial
statements
|
All entities in the Novo Nordisk Group follow the same Group accounting policies. This section gives a summary of the significant accounting policies, Management’s key accounting estimates, new IFRS requirements and other accounting policies in general. A detailed description of accounting policies and key accounting estimates related to specific reported amounts is presented in each note to the relevant financial items. |
||
Novo
Nordisk presents its Consolidated financial statements on the basis of
the latest developments in international financial reporting and strives
for early adoption of EU-endorsed IFRS accounting standards.| 1.1 |
Summary of significant
accounting
policies |
The Consolidated financial statements included in this Annual Report have been prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB), in accordance with IFRS as endorsed by the European Union and also in accordance with additional Danish disclosure requirements for annual reports of listed companies.
Measurement basis
The Consolidated financial statements have
been prepared on the historical cost basis except for derivative financial instruments,
equity investments and marketable securities measured at fair value.
The principal accounting policies set out below have been applied consistently in the preparation of the Consolidated financial statements for all the years presented.
Principal accounting policies
Novo Nordisk’s accounting policies are
described in each of the individual notes to the Consolidated financial statements.
Considering all the accounting policies applied, Management regards the following
as the most significant accounting policies for the recognition and measurement
of reported amounts:
| • | Net sales and sales deductions
(notes 2.1 and 3.6) Revenue is only recognised when, in Management’s judgement, the significant risks and rewards of ownership have been transferred and when the Group does not retain managerial involvement in or effective control over the goods sold. To arrive at net sales, rebates and discounts to retail customers, government agencies, wholesalers, health insurance companies and managed healthcare organisations are deducted from gross sales. These deductions include estimates of unsettled obligations, requiring the use of judgement when estimating the effect of these sales deductions on gross sales for a reporting period. |
| • | Research and development
(note 3.1 and 3.2) Internal research costs are fully charged to the consolidated income statement in the period in which they are incurred, consistent with industry practice. Novo Nordisk considers that regulatory and other uncertainties inherent in the development of new products preclude the capitalisation of internal development costs as an intangible asset until marketing approval from the regulatory authority in a relevant major market is obtained or highly probable. The same principles are applied to plant and equipment with no alternative use developed as part of a research and development project. However, plant and equipment with alternative use or used for general research and development purposes is capitalised and depreciated over its estimated useful life as research and development costs. |
| For acquired in-process
research and development projects, the probability effect is reflected in
the cost of the asset, and the probability recognition criteria are therefore
always considered satisfied. As the cost of acquired in-process research
and development projects can often be measured reliably, these projects
fulfil the capitalisation criteria as intangible assets upon acquisition.
However, further internal development costs subsequent to acquisition are
treated in the same way as other internal development costs. |
|
| • | Derivative financial instruments
(note 4.3) Novo Nordisk hedges commercial exposures, with foreign exchange risk being the principal financial risk for the Group. The overall objective of foreign exchange risk management is to limit the short-term negative impact on net profit and cash flow from exchange rate fluctuations, thereby increasing the predictability of the financial results. The purpose of hedge accounting is to match the impact of the hedged item and the hedging instrument in the Consolidated income statement. Management has chosen to classify the result of hedging activities as part of financial items. Thus, as the majority of Novo Nordisk’s sales are in EUR, USD, JPY, CNY, GBP and CAD, net sales will be impacted by exchange rate fluctuations whereas the impact of exchange rate fluctuations on Profit before income taxes depends on the results of the hedging activities and the development in non-hedged currencies. |
In addition, the following other accounting policies are considered relevant to an understanding of the Consolidated financial statements:
| • | Income taxes (note 2.4) |
| • | Property, plant and equipment including impairment (note 3.2) |
| • | Inventories (note 3.3) |
| • | Trade receivables and allowance for doubtful trade receivables (note 3.4) |
| • | Provisions for legal disputes (note 3.6). |
Defining materiality
The Consolidated financial statements are
a result of processing large numbers of transactions and aggregating those
transactions into classes according to their nature or function. When aggregated,
the transactions are presented in classes of similar items in the Consolidated
financial statements. If a line item is not individually material, it is aggregated
with other items of a similar nature in the Consolidated financial statements
or in the notes.
There are substantial disclosure requirements throughout IFRS. Management provides specific disclosures required by IFRS unless the information is considered immaterial to the economic decision-making of the users of these financial statements or not applicable.
NOVO NORDISK ANNUAL REPORT 2013
| 62 | CONSOLIDATED FINANCIAL STATEMENTS |
| 1.2 |
Summary of key accounting
estimates |
The use of reasonable estimates is an essential part of the preparation of the Consolidated financial statements. Given the uncertainties inherent in Novo Nordisk’s business activities, Management must make certain estimates and judgements that affect the application of accounting policies and reported amounts of assets, liabilities, sales, costs, cash flows and related disclosures at the date(s) of the Consolidated financial statements.
Management bases its estimates on historical experience and various other assumptions that are held to be reasonable under the circumstances. The estimates and underlying assumptions are reviewed on an ongoing basis and, if necessary, changes are recognised in the period in which the estimate is revised. Management considers the carrying amounts recognised in relation to the key accounting estimates mentioned below to be reasonable and appropriate based on currently available information. However, the actual amounts may differ from the amounts estimated as more detailed information becomes available.
Management regards the following as the key accounting estimates and assumptions used in the preparation of the Consolidated financial statements:
| • | Sales deductions and provisions for sales rebates (notes 2.1 and 3.6) |
| • | Indirect production costs (note 3.3) |
| • | Allowance for doubtful trade receivables (note 3.4) |
| • | Income taxes (note 2.4) |
| • | Provisions for legal disputes (note 3.6). |
Please refer to the specific notes for further information on the key accounting estimates and assumptions applied.
| 1.3 |
Changes in accounting
policies
and disclosures |
Early adoption of new or amended
IFRSs
With effect from 1 January 2013, Novo Nordisk
has implemented the new standards IFRS 10 ‘Consolidated Financial Statements’,
IFRS 11 ‘Joint Arrangements’ and IFRS 12 ‘Disclosure of Interests
in Other Entities’. These new standards have no material impact on the
Consolidated financial statements in 2013, nor is a significant impact expected
on future periods.
Adoption of new or amended IFRSs
IAS 19R ‘Employee benefits’ effective
for annual periods beginning on or after 1 July 2012 was early adopted in 2012.
As retrospective application of these changes only had an immaterial impact
on each previous financial year, Management fully adopted the revised standard
in 2012 without restating previous years’ comparative amounts and disclosures.
Please refer to note 3.7 for a detailed description of the accounting policy
for retirement benefit obligations.
Furthermore, amendment to IAS 1 ‘Presentation of financial statements’, effective for annual periods beginning on or after 1 July 2012, was early adopted in 2012 with no material impact on the Consolidated financial statements. For a further description please refer to the Annual Report 2012.
Based on an assessment of new or amended and revised accounting standards and interpretations (‘IFRSs’) issued by IASB and IFRSs endorsed by the European Union effective on or after 1 January 2013, it has been assessed that the application of these new IFRSs has not had a material impact on the Consolidated financial statements in 2013 and Management does not anticipate any significant impact on future periods from the adoption of these new IFRSs.
New or amended IFRSs that have been
issued but have not yet come into effect and have not been early adopted
In addition to the above, IASB has issued a
number of new or amended and revised accounting standards and interpretations
that have not yet come into effect. The following standards are in general expected
to change current accounting regulation most significantly:
| • | IASB has issued IFRS 9 ‘Financial Instruments’, which awaits final effective date and EU endorsement. IFRS 9 is part of the IASB’s project to replace IAS 39, and the new standard will substantially change the classification and measurement of financial instruments and hedging requirements. Novo Nordisk has assessed the impact of the standard and determined that it will not have any significant impact on the Consolidated financial statements in its current wording. |
| • | IASB has issued re-exposure drafts on IAS 17 ‘Leasing’ and IAS 18 ‘Revenue’. The revised IAS 18 is expected to have only immaterial impact on the Consolidated financial statements. Depending on the wording of the final standard, the change in lease accounting is expected to require capitalisation of the majority of the Group’s operational lease contracts, representing less than 10% of total assets, with a minor impact on the Group’s assets, liabilities and financial ratios, and no significant impact on net profit. |
Changes in classification
With effect from 1 January 2013, Novo Nordisk
has changed the classification of uncertain tax positions. Previously these
were presented net as part of deferred tax liabilities. As of 2013 these are
presented gross as part of deferred tax assets, tax receivables and tax payables.
Refer to note 2.4 for further description.
| 1.4 |
General
accounting
policies |
Principles of consolidation
The Consolidated financial statements incorporate
the financial statements of Novo Nordisk A/S and entities controlled by Novo
Nordisk A/S. Control exists when Novo Nordisk own more than 50% of the voting
rights or has the power to govern the entity in some other way.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring their accounting policies into line with Novo Nordisk group policies. All intra-Group transactions, balances, income and expenses are eliminated in full when consolidated.
Translation of foreign currencies
Functional and presentation currency
Items included in the financial statements
of each of Novo Nordisk’s entities are measured using the currency of
the primary economic environment in which the entity operates (functional
currency). The Consolidated financial statements are presented in Danish kroner
(DKK), which is also the functional and presentation currency of the parent
company.
Translation of transactions and
balances
Foreign currency transactions are translated
into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement
of such trans actions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised
in the Income statement.
Translation differences on non-monetary items, such as financial assets classified as available for sale including equity investments, are recognised in Other comprehensive income.
Translation of Group companies
Financial statements of foreign subsidiaries
are translated into Danish kroner at the exchange rates prevailing at the end
of the reporting period for balance sheet items, and at average exchange rates
for income statement items.
All effects of exchange rate adjustment are recognised in the Income statement, with the exception of exchange rate adjustments of investments in subsidiaries arising from:
| • | the translation of foreign subsidiaries’ net assets at the beginning of the year at the exchange rates at the end of the reporting period |
| • | the translation of foreign subsidiaries’ statement of comprehensive income from average exchange rates to exchange rates at the end of the reporting period |
| • | the translation of non-current intra-Group receivables that are considered to be an addition to net investments in subsidiaries. |
These specific exchange rate adjustments are recognised in Other comprehensive income.
NOVO NORDISK ANNUAL REPORT 2013
|
CONSOLIDATED FINANCIAL
STATEMENTS
|
63
|
Section 2
Results for the year
|
Continued growth in the number of patients, a global commercial presence and innovative products drive Novo Nordisk’s growth in sales. Over the last five years, growth in operating profit has been higher than sales growth, resulting in an increasing operating margin. The gross margin expansion has primarily been driven by a positive product mix and a favourable pricing development. The operating margin expansion has also been supported by a modest development in administrative costs and economy of scale advantages within sales and marketing, whereas research and development costs have been growing in line with sales. Novo Nordisk continues to invest in innovation while contributing to society by paying corporate taxes in the countries where it operates. The Management review section ‘2013 performance and 2014 outlook’ on p 6 gives a detailed description of the results for the year. |
||
| 2.1 |
Net sales and
sales deductions |
Accounting
policies
Revenue from goods sold is recognised when
Novo Nordisk has transferred the significant risks and rewards to the buyer,
and the amount of revenue can be measured reliably.
Sales are measured at the fair value of the consideration received or receivable. When sales are recognised, Novo Nordisk also records estimates for a variety of sales deductions, including rebates, discounts, refunds,
incentives and product returns. Sales deductions are recognised as a reduction
of gross sales to arrive at net sales. Where contracts contain customer acceptance
provisions, Novo Nordisk recognises sales when the acceptance criteria are
satisfied.
Revenue recognition for new product launches is based on specific facts and circumstances relating to those products, including estimated demand and acceptance rates for well-established products with similar market characteristics. Where shipments of new products are made on a sale or return basis, without sufficient historical experience for estimating sales returns, revenue is only recorded when there is evidence of consumption or when the right of return has expired.
Overall sales performance
The sales performance for a five-year period
is presented below in respect of business performance and geographical areas:
Financial performance
|
DKK million
|
2013
|
2012
|
2011
|
2010
|
2009
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
||||||||||
|
Modern
insulins (insulin analogues)
|
38,153
|
34,821
|
28,765
|
26,601
|
21,471
|
|||||
|
Human
insulins
|
10,869
|
11,302
|
10,785
|
11,827
|
11,315
|
|||||
|
Victoza®
|
11,633
|
9,495
|
5,991
|
2,317
|
87
|
|||||
|
Protein-related
products
|
2,555
|
2,511
|
2,309
|
2,214
|
1,977
|
|||||
|
Oral
antidiabetic products (OAD)
|
2,246
|
2,758
|
2,575
|
2,751
|
2,652
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Diabetes
care total
|
65,456
|
60,887
|
50,425
|
45,710
|
37,502
|
|||||
|
|
||||||||||
|
NovoSeven®
|
9,256
|
8,933
|
8,347
|
8,030
|
7,072
|
|||||
|
Norditropin®
|
6,114
|
5,698
|
5,047
|
4,803
|
4,401
|
|||||
|
Other
biopharmaceuticals
|
2,746
|
2,508
|
2,527
|
2,233
|
2,103
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Biopharmaceuticals
total
|
18,116
|
17,139
|
15,921
|
15,066
|
13,576
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales by
business segment
|
83,572
|
78,026
|
66,346
|
60,776 | 51,078 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
39,024
|
34,220
|
26,586
|
23,609 | 18,279 | |||||
|
Europe
|
20,063
|
19,707
|
19,168
|
18,664 | 17,540 | |||||
|
International
Operations
|
12,007
|
11,080
|
9,367
|
8,335 | 6,835 | |||||
|
Japan
& Korea
|
5,317
|
6,617
|
6,223
|
5,660 | 4,888 | |||||
|
Region
China
|
7,161
|
6,402
|
5,002
|
4,508 | 3,536 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales by
geographical segment
|
83,572
|
78,026
|
66,346
|
60,776 | 51,078 | |||||
|
|
|
|
|
|
|
|
|
|
|
NOVO NORDISK ANNUAL REPORT 2013
| 64 | CONSOLIDATED FINANCIAL STATEMENTS |
| 2.1 |
Net sales and
sales deductions
(continued) |
Key
accounting estimates – Sales deductions
Sales discounts and sales rebates are predominantly
issued in Region North America. In this region, significant sales rebates
are paid in connection with US public healthcare insurance programmes, namely
Medicare and Medicaid, as well as rebates to managed healthcare plans. The
most significant discounts are offered under contracts with institutions,
mostly hospitals and government agencies. In addition, political pressure
to contain healthcare costs has led several other countries to impose significant
price reductions on pharmaceutical products. As such, concerted austerity
measures have been implemented by governments in countries in Region Europe,
while government-mandated price cuts have been introduced in Region China,
Japan and major countries in Region International Operations.
US Medicaid and Medicare rebates
Medicaid and Medicare rebates have been calculated
using a combination of historical experience, product and population growth,
price increases, the impact of contracting strategies and specific terms in
the individual agreements. For Medicaid, the calculation of rebates also involves
interpretation of relevant regulations that are subject to changes in interpretative
guidance from government authorities. Although accruals are made for Medicaid
and Medicare rebates at the time sales are recorded, the actual rebates related
to the specific sale will typically be invoiced to Novo Nordisk up to nine months
later. Due to the time lag, the rebate adjustments to sales in any particular
period may incorporate adjustments of accruals for prior periods.
US managed healthcare rebates
Rebates are offered to a number of managed
healthcare plans. These rebate programmes allow the customer to receive a rebate
after attaining certain performance parameters relating to formulary status
and pre-established market share milestones relative to competitors. Rebates
are estimated according to the specific terms in each agreement, historical
experience, anticipated channel mix, product growth rates and market share information.
Novo Nordisk adjusts the provision periodically to reflect actual sales performance.
US wholesaler charge-backs
Wholesaler charge-backs relate to contractual
arrangements between Novo Nordisk and indirect customers in the US, whereby
products are sold at contract prices lower than the list price originally charged
to wholesalers. A wholesaler charge-back represents the difference between the
invoice price to the wholesaler and the indirect customer’s contract price.
Provisions are calculated for estimated charge-backs using a combination of
factors such as historical experience, current wholesaler inventory levels,
contract terms and the value of claims received but not yet processed. Wholesaler
charge-backs are generally settled within 10 to 30 days of the liability being
incurred.
Discounts, sales returns and other
rebates
Other discounts are provided to wholesalers,
hospitals, pharmacies etc, and are usually linked to sales volume or provided
as cash discounts. Sales returns are related to damaged or expired products.
Accruals are calculated based on historical data, and recorded as a reduction
in gross sales at the time the related sales are recorded.
Arrangements with certain healthcare providers may require Novo Nordisk to make refunds to the healthcare providers if anticipated treatment outcomes do not meet predefined targets.
Gross-to-net sales reconciliation
| DKK million |
2013
|
2012
|
2011
|
|||
|
|
|
|
|
|
|
|
| Gross sales |
115,906
|
103,948
|
84,386
|
|||
|
|
|
|
|
|
|
|
| US Medicaid and Medicare rebates |
(9,959
|
)
|
(7,519
|
)
|
(5,075
|
)
|
| US managed healthcare rebates |
(5,481
|
)
|
(4,390
|
)
|
(2,551
|
)
|
| US wholesaler charge-backs |
(10,126
|
)
|
(8,196
|
)
|
(5,894
|
)
|
| US discounts and sales returns |
(2,978
|
)
|
(2,620
|
)
|
(1,886
|
)
|
| Non-US rebates, discounts and sales returns |
(3,790
|
)
|
(3,197
|
)
|
(2,634
|
)
|
|
|
|
|
|
|
|
|
| Total gross-to-net sales adjustments |
(32,334
|
)
|
(25,922
|
)
|
(18,040
|
)
|
|
|
|
|
|
|
|
|
| Net sales |
83,572
|
78,026 | 66,346 | |||
|
|
|
|
|
|
|
Provisions for sales rebates are adjusted to actual amounts as rebates and discounts are processed. Please refer to note 3.6 for further information on sales-related provisions.
NOVO NORDISK ANNUAL REPORT 2013
|
CONSOLIDATED FINANCIAL
STATEMENTS
|
65
|
| 2.2 |
Segment
information |
Accounting
policies
Operating segments are reported in a manner
consistent with the internal reporting provided to Management and the Board
of Directors.
Business segments
Novo Nordisk operates in two business segments based on therapies: Diabetes care and Biopharmaceuticals.
The Diabetes care business segment includes research, development, manufacturing and marketing of products within the areas of insulin, GLP-1 and related delivery systems, oral antidiabetic products (OAD) and obesity.
The Biopharmaceuticals business segment includes research, development, manufacturing and marketing of products within the areas of haemophilia, growth hormone therapy, hormone replacement therapy, inflammation therapy and other therapy areas.
Segment performance is evaluated on the basis of operating profit consistent with the Consolidated financial statements. Financial income and expenses and income taxes are managed at Group level and are not allocated to business segments.
There are no sales or other transactions between the business segments. Costs have been split between business segments according to a specific allocation with the addition of a minor number of corporate overhead costs allocated systematically between the segments. Licence income and other operating income has been allocated to the two segments based on the same principle. Segment assets comprise the assets that are applied directly to the activities of the segment, including intangible assets, property, plant and equipment, other financial assets, inventories, trade receivables, and other receivables and prepayments.
No single customer represents more than 10% of the total sales and no operating segments have been aggregated to form the reported business segments.
Business segments
| DKK million |
2013
|
2012
|
2011
|
2013
|
2012
|
2011
|
2013
|
2012
|
2011
|
|||||||||
|
|
|
|
|
|
|
|||||||||||||
| Segment sales |
Diabetes care
|
Biopharmaceuticals |
Total
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NovoRapid® / NovoLog® |
16,848
|
15,693
|
12,804
|
|||||||||||||||
| NovoMix® / NovoLog® Mix |
9,759
|
9,342
|
8,278
|
|||||||||||||||
| Levemir® |
11,546
|
9,786
|
7,683
|
|||||||||||||||
| Total modern insulins |
38,153
|
34,821
|
28,765
|
|||||||||||||||
| Human insulins |
10,869
|
11,302
|
10,785
|
|||||||||||||||
| Victoza® |
11,633
|
9,495
|
5,991
|
|||||||||||||||
| Protein-related products |
2,555
|
2,511
|
2,309
|
|||||||||||||||
| Oral antidiabetic products (OAD) |
2,246
|
2,758
|
2,575
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Diabetes care total sales |
65,456
|
60,887
|
50,425
|
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| NovoSeven® | 9,256 |
8,933
|
8,347 | |||||||||||||||
| Norditropin® | 6,114 |
5,698
|
5,047 | |||||||||||||||
| Other products | 2,746 |
2,508
|
2,527 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Biopharmaceuticals total sales | 18,116 |
17,139
|
15,921 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Segment key figures | ||||||||||||||||||
| Total net sales |
65,456
|
60,887
|
50,425
|
18,116 |
17,139
|
15,921 | 83,572 | 78,026 | 66,346 | |||||||||
| Change in DKK (%) |
7.5%
|
20.7%
|
10.3%
|
5.7% |
7.7%
|
5.7% | 7.1% | 17.6% | 9.2% | |||||||||
| Change in local currencies (%) |
12.0%
|
14.5%
|
12.6%
|
11.5% |
2.4%
|
7.6% | 11.9% | 11.6% | 11.4% | |||||||||
| Cost of goods sold |
11,909
|
11,435
|
10,762
|
2,231 |
2,030
|
1,827 | 14,140 | 13,465 | 12,589 | |||||||||
| Sales and distribution costs |
20,584
|
18,894
|
16,476
|
2,796 |
2,650
|
2,528 | 23,380 | 21,544 | 19,004 | |||||||||
| Research and development costs |
7,786
|
7,322
|
6,402
|
3,947 |
3,575
|
3,226 | 11,733 | 10,897 | 9,628 | |||||||||
| Administrative costs |
2,767
|
2,604
|
2,485
|
741 |
708
|
760 | 3,508 | 3,312 | 3,245 | |||||||||
| Licence income and other operating income, net |
510
|
464
|
285
|
172 |
202
|
209 | 682 | 666 | 494 | |||||||||
| Operating profit |
22,920
|
21,096
|
14,585
|
8,573 |
8,378
|
7,789 | 31,493 | 29,474 | 22,374 | |||||||||
| Operating margin |
35.0%
|
34.6%
|
28.9%
|
47.3% |
48.9%
|
48.9% | 37.7% | 37.8% | 33.7% | |||||||||
| Depreciation, amortisation and impairment losses expensed |
2,209
|
2,167
|
2,051
|
590 |
526
|
686 | 2,799 | 2,693 | 2,737 | |||||||||
| Additions to Intangible assets and Property, plant and equipment |
2,651
|
2,800
|
2,654
|
990 |
770
|
678 | 3,641 | 3,570 | 3,332 | |||||||||
| Assets allocated to business segments |
36,436
|
36,030
|
34,853
|
10,525 |
9,119
|
8,998 | 46,961 | 45,149 | 43,851 | |||||||||
| Assets not allocated to business segments1 | 23,376 | 20,520 | 20,847 | |||||||||||||||
| Total assets | 70,337 | 65,669 | 64,698 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 1. | The part of total assets that remains unallocated to either of the two business segments includes Cash at bank and on hand, Marketable securities, Derivative financial instruments deferred tax assets and tax receivables. |
NOVO NORDISK ANNUAL REPORT 2013
| 66 | CONSOLIDATED FINANCIAL STATEMENTS |
| 2.2 |
Segment information
(continued) |
Information about geographical areas
Novo Nordisk operates in five geographical regions:
| • | North America: the US and Canada |
| • | Europe: the EU, EFTA, Albania, Bosnia-Hercegovina, Macedonia, Serbia, Montenegro and Kosovo |
| • | Japan & Korea: Japan and Korea |
| • | Region China: China, Hong Kong and Taiwan |
| • | International Operations: all other countries. |
Sales are attributed to geographical regions according to the location of the customer. Allocation of property, plant and equipment, trade receivables, allowance for trade receivables and total assets are based on the location of the assets.
The country of domicile is Denmark, which is part of Region Europe. Denmark is immaterial to Novo Nordisk’s activities in terms of geographical size and the operational business segments. More than 99.4% of total sales are realised outside Denmark. Sales to external customers attributed to the US are collectively the most material to the Group. The US is the only country where sales contribute more than 10% of total sales. Sales to the US represent more than 90% of sales in Region North America.
For patent expiry in key markets, please refer to note 2.5 in the social statements, where the various marketed products are listed.
Geographical areas
|
DKK million
|
2013
|
2012
|
2011
|
2013
|
2012
|
2011
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
|
Europe
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales by business segment:
|
||||||||||||
|
NovoRapid®
/ NovoLog®
|
9,953
|
9,033
|
6,934
|
3,819
|
3,707
|
3,464
|
||||||
|
NovoMix®
/ NovoLog® Mix
|
2,694
|
2,488
|
2,088
|
2,450
|
2,544
|
2,623
|
||||||
|
Levemir®
|
6,823
|
5,290
|
3,711
|
2,909
|
2,833
|
2,577
|
||||||
|
Modern
insulins (insulin analogues)
|
19,470
|
16,811
|
12,733
|
9,178
|
9,084
|
8,664
|
||||||
|
Human
insulins
|
1,976
|
1,959
|
1,762
|
2,427
|
2,642
|
3,032
|
||||||
|
Victoza®
|
7,537
|
5,930
|
3,716
|
2,896
|
2,427
|
1,620
|
||||||
|
Other
diabetes care
|
1,590
|
1,998
|
1,705
|
885
|
965
|
1,210
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diabetes
care total
|
30,573
|
26,698
|
19,916
|
15,386
|
15,118
|
14,526
|
||||||
|
|
||||||||||||
|
NovoSeven®
|
4,459
|
4,397
|
3,951
|
2,294
|
2,206
|
2,310
|
||||||
|
Norditropin®
|
2,273
|
1,721
|
1,394
|
1,729
|
1,741
|
1,705
|
||||||
|
Other
biopharmaceuticals
|
1,719
|
1,404
|
1,325
|
654
|
642
|
627
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biopharmaceuticals
total
|
8,451
|
7,522
|
6,670
|
4,677
|
4,589
|
4,642
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales by business
and geographical segment
|
39,024
|
34,220
|
26,586
|
20,063
|
19,707
|
19,168
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying sales growth
in local currencies1
|
17.8%
|
19.2%
|
17.9%
|
2.5%
|
2.0%
|
2.4%
|
||||||
|
Currency effect (local
currency impact)
|
(3.8%
|
) |
9.5%
|
(5.3%
|
) |
(0.7%
|
) |
0.8%
|
0.3%
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales growth
as reported
|
14.0%
|
28.7%
|
12.6%
|
1.8%
|
2.8%
|
2.7%
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
1,571
|
1,500
|
1,329
|
16,801
|
16,200
|
15,681
|
||||||
|
Trade receivables
|
3,076
|
2,278
|
2,081
|
3,779
|
3,688
|
3,652
|
||||||
|
Allowance for doubtful
trade receivables
|
(20
|
) |
(18
|
) |
(22
|
) |
(245
|
) |
(239
|
) |
(333
|
) |
|
Total assets
|
7,057
|
5,867
|
5,465
|
51,205
|
47,663
|
47,202
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1. Additional non-IFRS measure; please refer to p 93 for definition.
NOVO NORDISK ANNUAL REPORT 2013
|
CONSOLIDATED FINANCIAL
STATEMENTS
|
67
|
| 2.2 |
Segment information
(continued) |
Geographical areas
|
DKK million
|
2013
|
2012
|
2011
|
2013
|
2012
|
2011
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
International Operations |
Japan & Korea
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales by business segment:
|
||||||||||||
|
NovoRapid®
/ NovoLog®
|
1,639
|
1,408
|
1,100
|
951
|
1,175
|
1,057
|
||||||
|
NovoMix®
/ NovoLog® Mix
|
1,875
|
1,708
|
1,482
|
789
|
1,028
|
970
|
||||||
|
Levemir®
|
1,290
|
1,106
|
942
|
288
|
386
|
363
|
||||||
|
Modern
insulins (insulin analogues)
|
4,804
|
4,222
|
3,524
|
2,028
|
2,589
|
2,390
|
||||||
|
Human
insulins
|
2,954
|
3,073
|
2,581
|
490
|
768
|
960
|
||||||
|
Victoza®
|
741
|
613
|
322
|
331
|
455
|
327
|
||||||
|
Other
diabetes care
|
692
|
632
|
583
|
471
|
493
|
430
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diabetes
care total
|
9,191
|
8,540
|
7,010
|
3,320
|
4,305
|
4,107
|
||||||
|
|
||||||||||||
|
NovoSeven®
|
1,716
|
1,526
|
1,485
|
629
|
646
|
482
|
||||||
|
Norditropin®
|
853
|
780
|
651
|
1,246
|
1,442
|
1,285
|
||||||
|
Other
biopharmaceuticals
|
247
|
234
|
221
|
122
|
224
|
349
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Biopharmaceuticals
total
|
2,816
|
2,540
|
2,357
|
1,997
|
2,312
|
2,116
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales by business
and geographical segment
|
12,007
|
11,080 | 9,367 | 5,317 | 6,617 | 6,223 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Underlying sales growth
in local currencies1
|
17.0% | 16.2% | 17.1% | (0.1% | ) | (1.5% | ) | 5.1% | ||||
|
Currency effect (local
currency impact)
|
(8.6% | ) | 2.1% | (4.7% | ) | (19.5% | ) | 7.8% | 4.8% | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total sales growth
as reported
|
8.4% | 18.3% | 12.4% | (19.6% | ) | 6.3% | 9.9% | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
1,292 | 1,508 | 1,672 | 140 | 174 | 207 | ||||||
|
Trade receivables
|
2,196 | 2,177 | 2,052 | 269 | 335 | 377 | ||||||
|
Allowance for doubtful
trade receivables
|
(716 | ) | (710 | ) | (535 | ) | (8 | ) | (3 | ) | (2 | ) |
|
Total assets
|
5,945 | 6,660 | 6,419 | 1,022 | 989 | 1,388 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| DKK million |
2013
|
2012
|
2011
|
2013
|
2012
|
2011
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Region China | Total sum of the five regions | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Sales by business segment: | ||||||||||||
|
NovoRapid®
/ NovoLog®
|
486
|
370
|
249
|
16,848
|
15,693
|
12,804
|
||||||
|
NovoMix®
/ NovoLog® Mix
|
1,951
|
1,574
|
1,115
|
9,759
|
9,342
|
8,278
|
||||||
|
Levemir®
|
236
|
171
|
90
|
11,546
|
9,786
|
7,683
|
||||||
|
Modern
insulins (insulin analogues)
|
2,673
|
2,115
|
1,454
|
38,153
|
34,821
|
28,765
|
||||||
|
Human
insulins
|
3,022
|
2,860
|
2,450
|
10,869
|
11,302
|
10,785
|
||||||
|
Victoza®
|
128
|
70
|
6
|
11,633
|
9,495
|
< | ||||||